Slide s conclusion ROMANIA: Your eastern gate to enter European markets. Athanassios K. Mavros, Managing Director PLANNING

Transcription

1 Slide s conclusion ROMANIA: Your eastern gate to enter European markets Athanassios K. Mavros, Managing Director PLANNING 4, July

2 The 7 key-advantages of Romania Excellent location EU & NATO member Favourable tax & business environment Continuous economic growth Major FDI destination Capable & IT/IS literate HR Growing investments in infrastructure 2

3 Romania experiences continuous economic growth Romania Area: total: 237,500 sq km - Population: 22.3 mil -GDP($bil): 121,6(+7,7%) -GDPpercapita($th):7,4(+8,2%) - GDP growth: (est) : 5,6% -GNI($bil): GNIpercapita(US$):4,850 GDP allocation Services; 51,5% Agriculture; 10,5% Industry (besides manufacturing ); 12,4% Manufacturing ; 25,5%

4 Bucharest is the economic locomotive, but Center Avg net monthly earnings ( ) 181 Total expenditure ( -2005) 111 GDP (%) 12,21% Population (th.) Area (m2) % popul. in major cities 30,1% South East Avg net monthly earnings ( ) 192 Total expenditure ( -2005) 100 GDP (%) 11,93% Population (th.) Area (m2) % popul. in major cities 40,5% West Avg net monthly earnings ( ) 197 Total expenditure ( -2005) 110 GDP (%) 10,26% Population (th.) Area (m2) % popul. in major cities 32,9% Bucharest - Ilfov Avg net monthly earnings ( ) 267 Total expenditure ( -2005) 143 GDP (%) 19,51% Population (th.) Area (m2) % popul. in major cities 86,5%

5 all other regions share a similar economic balance North East North West Avg net monthly earnings ( ) 186 Total expenditure ( -2005) 111 GDP (%) 12,28% Population (th.) Area (m2) % popul. in major cities 33,6% Avg net monthly earnings ( ) 182 Total expenditure ( -2005) 100 GDP (%) 11,94% Population (th.) Area (m2) % popul. in major cities 24,3% South West Avg net monthly earnings ( ) 201 Total expenditure ( -2005) 95 GDP (%) 8,91% Population (th.) Area (m2) % popul. in major cities 29,6% South Muntenia Avg net monthly earnings ( ) 196 Total expenditure ( -2005) 98 GDP (%) 12,87% Population (th.) Area (m2) % popul. in major cities 21,7%

6 Bucharest is the most attractive investment destination

7 Free Trade Zones have been established to accommodate further business development CURTICI FREE ZONE Area: 90 th m2 On the railway corridor No 4 75 th m2 in Curtici town & 15 th m2 inside Arad international airport Nearby 3 road transport frontier connections GALATZI FREE ZONE Area: 136,98 th m2 of which 6,98 th m2 correspond to port platform In direct connection with railway line Access to Danube through 3 berths, gifted with loading unloading equipment SULINA FREE ZONE Area: 100,98 th m2 Complex infrastructure & Harbor endowment No road, air or rail connections Trade activities GIURGIU FREE ZONE Area:262,81 thm2 Limitedbywateron3sides Opening for commercial relation with Balkan Half Island & Middle East 580 m for loading unloading activities BRAILA FREE ZONE Area:114,42 thm2 Between Danube left bank and the protection embankment 3distinctsites COSTANTZA SOUTH FREE ZONE Area:134,6thm2 Transport infrastructure (maritime, river, rail & road, which provide connections from Central Europe, Mediterranean Basin, Near & Middle East BASARABI FREE ZONE Area: 11,4 th m2 of which 0,7 th m2 are aquatory BranchofCostantzaFZ

8 Benchmarking Romania as a logistics hub Quality of infrastructure Logistics Operational Environment Level of Competence of Professions Logistics Index Effectiveness & efficiency of processes Incidences / constraints Evolution over last years Country LPI Customs Infrastructure International Logistics Tracking & Domestic Timeliness shipments competence tracing logistics costs Greece Turkey Hungary Czech Republic Poland Romania Bulgaria Ukraine Bosnia and Herzegovina Macedonia, FYR Serbia and Montenegro Albania

9 Benchmarking Romania as a logistics hub Quality of Infrastructure Effectiveness & efficiency of process 100% 70% 60% 100% 50% 80% 60% 40% 20% 0% 20% Telecommunications infrastructure and services Fixed transport infrastructure (e.g. ports, roads, warehouses) Percent of respondents answering low/very low 40% 30% 20% 10% 0% Do traders demonstrating high levels of compliance receive expedited Customs clearance? Can Customs declarations be submitted and processed electronically? Is Customs clearance a transparent process? Are export shipments cleared and shipped as scheduled? Percent of respondents answering high/very high Are import shipments cleared and delivered as scheduled? Logistics Operational Environment Incidence / constraints 60% 50% 40% 35% 30% 25% 33,33% 20% 30% 20% 20% 15% 10% 10% 5% 0 0 0% Port/Airport charges are Overall, logistics costs (e.g. port charges, domestic transport, agent fees), are Warehousing service charges are Rail transport rates are Less than full truck load services rates are Percent of respondents answering high/very high Full truck load rates are 0% Solicitation of informal payments Criminal activities (e.g. stolen cargo) Major delays due to pre-shipment inspection Major delays due to compulsory warehousing Percent of respondents answering high/very high

10 Benchmarking Romania as a logistics hub Level of competence of professions 80% 80% 70% 60% 50% 60% 50% 60% 40% 30% 20% 25% 20% 10% 0% 0 0 Trade and Other border Customs Freight Consignees or Warehousing Air transport Rail transport Road transport Customs transport crossing-related agencies forwarders shippers and distribution service service service brokers related government operators providers providers providers associations agencies Percent of respondents answering high/very high 0 0 Evolution of factors over the past 3 years 80% 80% 80% 80% 80% 70% 60% 60% 60% 50% 40% 40% 30% 20% 20% 10% 0% Overall business environment Good governance and eradication of corruption Regulatory regime Availability of private sector services Quality of telecommunications infrastructure Percent of respondents answering better/much better Quality of transport infrastructure Other border crossing-related government agencies clearance procedures Customs clearance procedures

11 Benchmarking Romania as a logistics hub Romania Rate of physical inspection (%) 0.24 Customs clearance (days) 1.16 Lead time export, median case (days) 2.17 Lead time import, best case (days) 1.41 Lead time import, median case (days) 2.99 Number of border agencies exports 4 Number of border agencies imports 3.50 Possibility of a review procedure (%) 0.25 Typical charge for a 40-foot export container or a semi-trailer (US$) Typical charge for a 40-foot import container or a semi-trailer (US$)

12 Romania s infrastructure is not sufficient at present, but heavy investments are planned Romania's transport networks fall short of business needs. Improving the condition of the country's road and rail network is imperative if Romania is to become a strategic location at the crossroads of Europe and Asia. At present, the transportation costs accruing to foreign businesses are inordinately high. Romania is one of the largest potential beneficiaries (Euro535m) under plans by a consortium of international banks to lend Euro2.4bn for 27 infrastructure projects in Eastern Europe over the next few years--but improvement will come slowly.

13 Romania s infrastructure is not sufficient at present, but heavy investments are planned Romania is one of the largest potential beneficiaries (Euro535m) under plans by a consortium of international banks to lend Euro2.4bn for 27 infrastructure projects in Eastern Europe over the next few years--but improvement will come slowly.

14 Romania offers a favourable business environment Starting a Business The challenges of launching a business are shown below. Included are: the number of steps entrepreneurs can expect to go through to launch, the time it takes on average, and the cost and minimum capital required as a percentage of gross national income (GNI) per capita. Indicator Romania Region OECD Procedures (number) Duration (days) Cost (% GNI per capita) Paid in Min. Capital (% of GNI per capita) Dealing with Licenses Shown below are the procedures, time, and costs to build a warehouse, including obtaining necessary licenses and permits, completing required notifications and inspections, and obtaining utility connections. Indicator Romania Region OECD Procedures (number) Duration (days) Cost (% of income per capita) Employing Workers The difficulties that employers face in hiring and firing workers are shown below. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The Rigidity of Employment Index is an average of the three indices. Indicator Romania Region OECD Difficulty of Hiring Index Rigidity of Hours Index Difficulty of Firing Index Rigidity of Employment Index Nonwage labor cost (% of salary) Firing costs (weeks of wages)

15 Romania offers a favourable business environment Registering Property The ease with which businesses can secure rights to property is shown below. Included are the number of steps, time, and cost involved in registering property. Indicator Romania Region OECD Procedures (number) Duration (days) Cost (% of property value) Getting Credit Measures on credit information sharing and the legal rights of borrowers and lenders are shown below. The Legal Rights Index ranges from 0-10, with higher scores indicating that those laws are better designed to expand access to credit. The Credit Information Index measures the scope, access and quality of credit information available through public registries or private bureaus. It ranges from 0-6, with higher values indicating that more credit information is available from a public registry or private bureau. Indicator Romania Region OECD Legal Rights Index Credit Information Index Public registry coverage (% adults) Private bureau coverage (% adults) Protecting Investors The indicators below describe three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index), shareholders ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index) and Strength of Investor Protection Index. The indexes vary between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection. Indicator Romania Region OECD Disclosure Index Director Liability Index Shareholder Suits Index Investor Protection Index

16 Romania offers a favourable business environment Paying Taxes The data below shows the tax that a medium-size company must pay or withhold in a given year, as well as measures of the administrative burden in paying taxes. These measures include the number of payments an entrepreneur must make; the number of hours spent preparing, filing, and paying; and the percentage of their profits they must pay in taxes. Indicator Romania Region OECD Payments (number) Time (hours) Profit tax (%) Labor tax and contributions (%) Other taxes (%) Total tax rate (% profit) Trading Across Borders The costs and procedures involved in importing and exporting a standardized shipment of goods are detailed under this topic. Every official procedure involved is recorded -starting from the final contractual agreement between the two parties, and ending with the delivery of the goods. Indicator Romania Region OECD Documents for export (number) Time for export (days) Cost to export (US$ per container) 1,075 1, Documents for import (number) Time for import (days) Cost to import (US$ per container) 1,075 1, Enforcing Contracts The ease or difficulty of enforcing commercial contracts is measured below. This is determined by following the evolution of a payment dispute and tracking the time, cost, and number of procedures involved from the moment a plaintiff files the lawsuit until actual payment. Indicator Romania Region OECD Procedures (number) Duration (days) Cost (% of claim)

17 Skilled workforce for relatively low wages

18 Romanian retail environment 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% -5,0% Development of retail stores during 03/ / ,3% 24,0% 9,4% 4,9% 2,8% 3,5% -8,8% 0,1% CG Market's portion for each kind of retailer in Bucharest (in terms of sales) 2005 Small shops / Others 43% Hypermarket 21% Supermarket 20% -10,0% Hypermarkets Supermarkets Discount Grocery Grocery Grocery Kiosks Pharmacies stores Grocery stores below 20 sqm Grocery stores sqm Grocery stores over 40 sqm Cash & Carry 7% Discounters 9% CG Market's portion for each kind of retailer in Romania (in terms of sales) 2005 Hypermarket 4% Supermarket 16% Discounters 2% Cash & Carry 5% Small shops / Others 73%

19 Romanian retail environment

20 Romanian retail environment

21 Evolution of distribution structures over time Centralized distribution structure Growing importance of regional distribution Local distribution structure

22 Setting up a network Setting up a network is a procedure that includes financial, technical as well as social issues. The information to be taken into account during the design phase is the following : Company Information Products distributed. What products will be distributed / sold by the network. A company may choose only a part of its product spectrum to be distributed through the designed network. Products value. It concerns the average product value (in a group level, not in a SKU level) Target Group per product (group of products). We are interested in the target group of every group of products, in case of a diversification of regions Logistics characteristics of the products (volume, weight, transportation conditions) Desired customer service level

23 Setting up a network Geographical Information Geographical Regions. How is the country segmented? (Provinces /Counties, e.t.c.). Main Towns per Geographical Region. It concerns mostly the capitals of counties. In special cases smaller towns. Population Allocation per Geographical Region and within it. How is the country population allocated and secondarily how is the population allocated between the main towns. Infrastructure of the Transportation Network (Road and railway mostly- air and cargo secondarily). The infrastructure concerns characteristics such as : line mass, conjunction time, possible problems (snow frequency, ferry use, tolls cost), e.t.c.

24 Setting up a network Macroeconomic Information per Geographical Region and Main Town Income per capita Main Income Sources, e.g. for a consumer goods company, the tourism of every region (in volume and duration) is of special interest. Developmental Perspective of the country as a whole as well as of every geographical region Potential Investments expected on infrastructure (e.g. creation of a new highway)

25 Case study - Romania The company had 16 Distribution Centers. That resulted in : Dispersion of Stock Frequent presence of Stock Outs and low customer service level High Operational Costs due to high fixed costs and the large number of emloyees Low staff productivity due to low sales volume per Distribution Center

26 Case study - Romania The profile of the 16 Distribution Centers was the following : 80 % of the total sales was implemented by 7 Centers and 65% of the customers were serviced by 7 Centers. A/A BRANCH No of customers 1 BUCURESTI 4,870 2 BRAILA 2,091 3 CLUJ 1,635 4 BRASOV 1,520 5 CRAIOVA 1,790 6 COSTANCA 1,815 7 TIMISOARA 1,483 8 PLOIESTI 1,587 9 PITESTI 1, BACAU 1, IASI 1, ORADEA 1, SUCEAVA 1, SEBIU DEVA TERGU MURES 659 REST 3,728 TOTALS % of Sales 31.4% 7.0% 6.8% 6.2% 5.7% 5.1% 5.1% 4.4% 3.8% 3.5% 3.5% 3.1% 3.1% 0.9% 0.5% 0.4% 9.6 %

27 Case study - Romania PLANNING, following the methodology developed on setting up networks, proceeded in the reorganization of the Distribution and Sales Network. PLANNING proceeded in the evaluation of each Distribution Center regarding : Profitability (P&L in a DC level) Financial Potentials of the region covered by each center Potential coverage of non-profitable regions by Special Agents The existing structure of each DC was analysed and the resources needed for its operation were defined. In a company level PLANNING proceeded in evaluating: Organizational Structure and definition of its structure Product Spectrum and definition of loss making products as well as possible new products which should be placed in the product spectrum.

28 Case study - Romania The New Distribution Network is presented below : SALES & LOGISTICS CENTER (total 8) Oradea Cluj Bacau Iasi SALES CENTER (total 3) Timisoara Brasov Braila Craiova Bucharest Constanta The reorganization of the Distribution Network resulted in the direct improvement of the total financial results of the company by 40%.