With EUR 5 billion in direct investments, French companies are among the largest investors in Romania, accounting for 9.1 percent of total FDI by 2011. A growing number of French small and medium sized firms (SMEs) are involved in industry and investors are now looking at agriculture, renewable energy and services as the sectors with growth potential.
Trade between Romania and France reached a historic high of EUR 6 billion last year, growing by 8.9 percent on 2010, show French customs figures. French exports rose by 13 percent year-on-year, while Romanian exports to France grew 5 percent last year, after soaring by 30 percent in 2010.
Industrial products were most sought after by France, with car exports surging in 2009 and 2010 by 77 percent and 54 percent, respectively.
The Euro zone’s woes seem to have impacted on Romania’s trade partner as well, as trade between the two countries fell by 4.9 percent in the first semester. France’s exports grew by 4.4 percent, while Romanian exports to France decreased by 13.2 percent in the same period.
Romania still has va va voom for French firms
There are over 7,000 companies with French capital in Romania, according to data from the trade registry. Out of these, around 3,500 are active and only 2,500 filed financial statements last year, said Bruno Roche, president of the French Chamber of Commerce, Industry and Agriculture in Romania (CCIFER).
He added that the combined turnover of these companies grew by 7 percent to over EUR 14 billion in 2010, according to a recent study. Around 118,000 people are employed by French firms.
Although Romania has registered a dramatic fall in foreign direct investment (FDI) since 2008, due to the global financial crisis, French companies are still keen to invest locally.
“Romania is the second biggest market in Central and Eastern Europe and serves as a competence reservoir in fields such as engineering and IT. This, plus a relatively low fiscality compared to neighboring countries and its strategic position in Europe, places it among the most favored destination for investors,” said Roche.
French companies are most active in trade, industry, services and construction, and there is a growing investment interest in agriculture and green energy and services, according to Roche.
He added that Romania still has tremendous development potential, which is also sustained by a competitive work force. The CCIFER president described the presence of French SMEs as “remarkable”, especially in the industry sectors. These firms are active in mechanics, the auto field and textiles.
Romania hosts large French companies that are active in banking, retail, energy and telecom. Fresh entries include the DIY store Leroy Merlin and the insurer AXA Asigurari. Credit Agricole Group came to Romania after taking over the subsidiaries of Emporiki Bank.
Heads of CCIFER member companies have a cautious stance on Romania’s economic outlook for the next few months, according to the results of a recent barometer on the economic situation carried out by the French Chamber of Commerce.
“This prudence is against the background of the economic and political context, as everyone is waiting for political stability and economic recovery,” said Roche. “Of course, French investors, just like the rest of the business community, are still very interested in the development of infrastructure and the absorption of EU funds.”
Car industry in growth gear
Earlier this month, carmaker Dacia, owned by Renault, launched the second generation of the Logan, Sandero and Sandero Stepway models. The company said that 60 percent of the development for the new models was done in Romania, involving several hundred people.
In Romania the French carmaker has its car engineering center Renault Technologie Roumanie (RTR), which employs some 2,500 engineers. It is the only center of this type in Eastern Europe and the Mediterranean area, and Renault’s largest engineering center outside France. It develops new products on the Logan platform in Bucharest and tests new vehicles in Titu. The latest models travelled 3 million kilometers on testing tracks in Titu. Renault provides technical support for the Dacia plant and its suppliers from Mioveni.
“Renault said it would invest EUR 400 million in Romania, but it has already reached EUR 2 billion. Our French partners were honest with Romania and with the hundreds of thousands of people who found jobs both in Mioveni and in the parallel industry,” said President Traian Basescu during the launch event, “They were honest to Romanian intelligence, allowing Romanian engineers to find a place to express themselves.”
The Dacia plant in Mioveni was upgraded to accommodate the new generation of vehicles, and is now manufacturing five models. The total investment in upgrading the Mioveni industrial platform amounted to EUR 250 million.
Automobile Dacia employs over 15,000 people and has a production capacity of 350,000 units. It operates a car and a chassis plant and reported a turnover of EUR 2.9 billion last year. Renault has invested over EUR 1.6 billion in Romania since 2000.
Renault produces its new Symbol model in Mioveni and plans to add a station wagon and a small truck next year, according to Constantin Stroe, vice-president of Dacia.
Innovation is le mot juste for telecom
Orange Romania, part of operator France Telecom, plans to start 4G services by yearend, pending the approval of authorities, and is set to provide this service at its highest efficiency starting April 2014, according to Jean-Francois Fallacher, CEO of Orange Romania.
The telecom operator will pay EUR 227 million for license taxes and will invest another EUR 100 million to clear spectrum in the 900 MHz frequency over the next two years.
“We will start with 4G in Bucharest and then extend it to the rest of the country. We will be launching mass-market services at affordable prices,” said Fallacher.
This October Orange made the first HD call in the world between Romania and the Republic of Moldova. The company achieved this after interconnecting the mobile networks with different infrastructure in the two countries.
The telecom operator is working closely with French lender BRD – Groupe Societe Generale on testing near field communication (NFC) in Romania, as part of a pilot project. The trial period will take between three and six months, and Orange plans to bring other banks into the project.
“As an operator, we want to provide an ecosystem to develop these services,” said Julien Ducarroz, chief commercial officer, business-to-consumer.
NFC is still in an early stage in Romania, because apart from the ecosystem, it needs further investments and handsets that are compatible with this technology, according to the CEO of Orange Romania.
Orange had over 10 million clients in Romania at the end of the first quarter.
Investment is fait accompli for retailers
French retailer Auchan plans to open a shopping mall in Brasov by the end of next year, which will be located on the grounds of the former Tractorul industrial platform. The retailer, which operates nine hypermarkets in Romania, will invest up to EUR 60 million in developing the first stage of the Coresi Shopping Center. This project includes an Auchan hypermarket, a shopping mall and 3,000 parking places.
Auchan Group recently set up a subsidiary of its property management division Immochan in Romania. Its property arm currently manages 320 commercial centers in 12 countries. Locally, Immochan will handle the development of two shopping galleries under the Auchan City concept. The shopping malls are located in Bucharest and should be opened by the end of 2013.
Elsewhere, French retailer Cora reached a network of 10 hypermarkets. This November it opened two hypermarkets in Bacau and a fourth one in Bucharest. The company registered a flat turnover of RON 1.37 billion (around EUR 312 million) last year.
Carrefour plans to open a new hypermarket in Bucharest, on the grounds of a future shopping center developed by New Europe Property Investments (NEPI). The French retailer runs eight supermarkets in Bucharest. In Romania, Carrefour has 24 hypermarkets, 59 hypermarkets and 8 proximity stores.
Energy remains on investors’ radar
French gas and electricity supplier GDF Suez announced earlier this year it would invest over EUR 100 million in the gas and wind sectors.
GDF Suez invested EUR 75 million in Romania last year, and the average investment volume in recent years stood between EUR 60 million and EUR 100 million, according to Eric Stab, chairman and CEO of GDF Suez Energy Romania.
The utility, which has some 1.3 million customers in the gas supply business, acquired a 48 MW wind park this February from a real estate developer. The farm is expected to start generating by year end.
GDF Suez raised EUR 55 million from a bond issue carried out on the Bucharest Stock Exchange in late October. The corporate bonds started trading on the domestic stock exchange in November.
French Filasa International plans to invest EUR 3 billion in building 2,000 MW of wind capacities which should become fully operational by 2017, according to Bernard Esquirol, general director of Filasa International.
The company is also looking to develop a 300 MW photo-voltaic farm, on a surface of 1,200 hectares.
Romania has attracted numerous foreign investors to the renewable sector, after approving last year a green certificate support scheme that incentivizes renewable energy production. Solar is currently granted six green certificates while wind gets two. One certificate is currently trading close to the ceiling price of EUR 55.
Counting the finance players
BRD-Groupe Societe Generale saw its net profit fall by 98 percent on nine months to RON 10 million (EUR 10 million), due to the soaring costs of risk, which added 58 percent to RON 1.1 billion (EUR 242 million).
BRD grew its loan book by 8.1 percent to RON 36.5 billion (EUR 8 billion), while deposits rose 5.4 percent to RON 31.6 billion (EUR 7 billion). Its assets amounted to RON 47.6 billion (EUR 10.4 billion).
AXA Life Insurance, the Romanian arm of the French insurer AXA Group, plans to invest RON 61 million (EUR 13.8 million) to open new offices, recruit consultants and increase its brand value. The insurer, which launched in Romania in 2011, reached 52 offices and 566 consultants this summer. It plans to expand to 58 offices and reach 800 consultants by year end.
AXA reported a 39 percent increase on gross written premiums to RON 15.2 million (EUR 3.5 million) in the first semester, sustained by higher revenues from new written premiums.