Romania 2009: Dangerous or safe destination for investments?

Thursday, May 21st, 2009

“Ei, ei… You… Mister… eeeeeeeei… with the beard… Youuuuu, with the yellow suit… Mister… Ei, you… Romanian guy”. These last two words made me turn my head and listen to the guy who was shouting behind me. I saw a gentleman running towards me, trying to bypass the hundreds of people who were coming out of the metro train. Syntagma station in Athens is the busiest of all and he was really struggling to catch up. I tried to move to his direction, but going against the crowd is more difficult, so I stopped and waited him.
“Nice to meet you mister” “Nice to meet you too. What is your name and how may I help you?” “My name is …, my business is … and I am someone who wanted to invest in Romania”. “Wise choice, congratulations” I told him and tried to end the discussion fast. But it was not meant to be… He fixed his tie and with a determined voice he almost demanded “Mister Ilias, I want to discuss with you about Romania, I hear so many stories and I got scared lately”. “You know, I have my programme and it is quite difficult, we could set up a meeting perhaps”. “No, please let us talk now, for 5 minutes. Syntagma square is full of coffee shops, let us go directly up, to “Ellinikon” cafe”. In less than 3 minutes we were there…

“Aren’t you afraid of Romania?”
If you want to enjoy Athens, without any rush for swimming etc, then May and September are your best months. The weather is warm but not “unbearable”, nature is glooming, people look like trying to leave back the winter’s rust. The ancient Greek optimism returns every year together with summer. This optimism… the feeling which makes people believe that in the end of the day, despite all the problems, they will find a way to survive in this world. The café was full of people, we barely found a seat for us (as I avoided mentioning to the waiter that I am friend with the owner).
“Ok, now I am all yours. But please let us hurry up, because my programme is really busy today. I usually come to Athens for one or two days, trying to have 10 or more meetings in the same day and then return back to Romania. How may I help you?” “Why you go to Romania?”. “Because I have chosen the country as the best place to work and the headquarters of my company are there”. “And aren’t you afraid?” “I am much more afraid in Greece”…

“I wanted to invest in Romania, but how can I do it when even Romanians blame their country?”
The gentleman across the table could be described as Greeks say “well positioned”. His light grey suit was quite expensive, his watch was a Rolex, he was well mannered and knew a lot about business. Even if this small adventure throughout the crowd made him sweat, he was still a very interesting company. Unfortunately I didn’t have time, up to the moment he started telling me the reason he wanted to talk to me. He had seen my photo “somewhere” (I asked “you saw it and under it was written WANTED DEAD OR ALIVE?” which made him laugh like crazy).
He has a cash flow of approximately 2 million euro and he was thinking about investing it in Romania. But lately the Greek media were terrifying him and when he went to Romania several bankers and other “important people from the market” described to him a country full of risks and uncertainty. A country where “9 in 10 foreigners lost their money and the lucky one who didn’t lose, left fast so as to remain with profits”. “When you don’t know anything at all about a country, you will trust the ones who are there before you, work for a big institution or they are successful by themselves”. “You can trust these people TOO, yes. But not only”.
“So most of the people I met in Bucharest warned me to be very careful, because it is extremely easy to lose my money. Even some of the Romanians I met told me that their country is a mess, a real hell for any foreigner”. “I understand what you mean. And you, coming from a well organized country like Greece, a paradise where everything functions perfectly, you felt uncomfortable”. “You make fun of me, mister? I wanted to invest in Romania, but how can I do it when even Romanians themselves blame their country? How can I trust the country, when I met either people who told me to run away, or people who told me that everything is perfect and their eyes were so greedy, that made me feel they were already counting the money they would steal from my pocket?”
“You can not change my opinion”
“Ok, mister …, I got your point. Then if Romania is a hell, why do we have this discussion?” “Because I heard about you and also I want to crosscheck the feedback I had. Not that you can make me change opinion, but still…” “So, to make it easy for both of us, let us assume that you are right. I wish you to find the best opportunities you are searching for somewhere else and let all the blind people like me to continue investing in Romania” I said and ordered the bill.
“Wait, wait, why do you want to go? Waaaaaait I said. What are you talking about? You will continue investing there, in that hell?” “Maybe I am masochist, who knows? For sure in 2009 and 2010 I will place 80% of my available sources there, following what all my big clients and funds are doing. But as you mentioned correctly, I am not able to change your opinion, so I am sure we are both busy and we should better end this discussion now”. “Sit down, sit down, damn you. What is that I don’t understand?”“A major missunderstanding”
“All these people describing to you the ultimate chaos… all these important members of the business society… why don’t they leave the country if the situation is so bad? The vast majority of the bankers doesn’t want to move from Romania, same like most of the entrepreneurs. Why?” “Maybe because they got used to the chaos and they say all these so as to protect me so as to avoid it”. “Correct. They are crazy and desperate to stay in hell, there is nothing positive keeping them, right?” “What do you try to say?”.
“Mister … , you have simply misunderstood something. All these stories can be absolutely correct, no doubt about it. Yes, Romania has many crooks, many problems to solve, many bad people. But this happens all around the world. Where will you go and you will not find bad people and crooks? In England? France? Germany? Poland? Italy? Greece?” “Don’t tell me for Greece, I am sick of people here. But explain to me, what is your point of view?”.“Uncontrollable greed, unbelievable criteria of investment”
“First of all, problems happen all around the world. Almost all possible exaggerations happened in Romania during 2007 and 2008”. “So what they told me is not a lie”. “On the contrary, I can tell you also another 1.000 stories like this, I have even published a book including some of them. But, you know… there is a major misunderstanding in all these…” “Which?” “It is one thing to complain for the problems of a place and it is something else, completely different, to sit down, check thoroughly the advantages and the defaults of each country in the area and then to decide where to invest.
If we decide to talk about business, we will talk about business. If we agree to talk about stories, we will focus on them. Plus when you hear someone who lost money, be suspicious… if you will dig a bit, behind the big words and tears, usually you will discover uncontrollable greed, unbelievable criteria of investment and someone who didn’t even want to pay good consultants (lawyers etc) to check the papers before an investment”.

“It is part of the strategy that every country has”
“Yes, companies have closed down, people were fired, ex patriots were sent back to their own country (as their companies could not afford their huge monthly package). Could you please name to me one part of the world where all these didn’t happen, except maybe Norway and the countries around?” “I don’t follow the world economy that much”. “So, the Greek media enjoy presenting the problems of the Balkans like this: “Someone made a report, predicting that there is a possibility for all the countries of Southeastern Europe to enter into trouble, with this %. And if this happens at this %, Romania will be influenced in that %. And this means that this number of Greek companies are in danger, as well as the banks etc”. Nothing specific, without a comparison based on real figures. Or… “20.000 people were fired” without mentioning that the unemployment rate is today around 5,6%, which Greece didn’t reach not even before Olympic games.
So, did anyone give you a specific example of a major Greek company collapsing because of Romania so far?” “No, but all the bankers told me to be careful and very skeptic”. “Congratulations to them. The periods we live are difficult and there are no easy solutions for anything. But also, didn’t they tell you that today Greeks are so bad informed, that they prefer to deposit their money in a major Greek bank with 1 - 2%, instead of depositing the same amount to the same Greek bank based in Romania with 7%? Don’t you understand that some things are part of the strategy each country has?” “Ok, but why to invest in Romania? It is dangerous…”
“During the crisis you can buy a AAA property, in a good price”
“Yes, Romania is full of dangers, the same ones you may find anywhere else, if you will not be careful. My brother lives in England and he can also tell you about how many thousands of foreign investors lost fortunes after buying a property during 2007 – 2008. You can lose money anywhere. People tell you about Romania because you asked them the problems of Romania. If you ask them about other countries, they may tell you that Romania today has tremendous advantages comparing to many other countries in Europe and especially in South Eastern area.
When we want to invest, we check the fundamentals of all the countries we target. Then we try to identify the potential of each country for the near future. At least this is what I do myself. Then we try to learn from the past, there were so many Real Estate crises, which give us plenty of lessons”. “And what would you learn from them?” “A simple rule: The good assets, in good locations, always give us smaller results, but they are a safer investment.
When the market is up, it is very difficult to trace and purchase a AAA property like this. It is expensive and usually not for sale. During the crisis, you have the possibility to buy it, in a good price too”. “And why do people sell assets like these?” “Because they need money and also because they also bought them in low values, so they can still exit with profits. Of course this does not mean that we will buy anything good in high price, especially during crisis, we only target opportunities”.

“Romania is the place to be, at least in my opinion”
“So, to cut the long story short. There is a major possibility that you may hear in the next months that Romania will have even bigger economic problems than today. They will pass sooner than in other countries. Imagine that Romania owes approximately 13% of the GDP, when Greece owes 97% and Italy almost 110%. In this country you will find an established Real Estate market, with serious portfolio of properties available, rules that are kept (an exception always confirms the rule) and thousands of people who suffered from their mistakes in the near past and a part of them learned how to do business in a better way. In case you will invest in Romania, you will place your money in a country inside European Union, waiting to absorb 30+ billion euro, with improving fundamentals, big and strategic enough, that it is very difficult for multinational companies and the European Union itself to abandon it, so as to be demolished”.
“So, is everything ok?” “On the contrary. There are problems, as I told you. For me the biggest one is the efficiency of the majority of the people, which has to be seriously improved. But for example, the problems in Greece are ten times more and almost impossible to solve. Bulgaria and Serbia are quite small etc. Romania is the place to be, at least in my opinion”.

“You need a team of experts, exactly as you have in your own country”
“And what kind of investment should I choose?” “It depends on your investment strategy”. “5 years, with an aggressive approach”. “Ok, then wherever you would invest, I would propose to keep a part of your money cash and from the rest to place 70-80% on very good properties, commercial spaces or lands in A locations, either in the capital or in a major city. I would “risk” the 20-30% on a longer term investment, not so central, but with a very low price, which will make it worth waiting it for. Today you can find great discounts in Romania and not only of course”.
“Yes, but for this you must have connections, lawyers, architects, so many things”. “You must simply create your personalized team of experts, as you have in your own country, in your example it is Greece. Don’t you have here a Real Estate consultant you collaborate with? A lawyer? An architect? An accountant? You will create the same team there too. This size of investment not only allows you to pay them, but obliges you to choose among the best and collaborate with them”.

“Romania can be very dangerous, if you behave as a stupid arrogant foreigner, who will just search for easy money, without checking everything thoroughly”
He didn’t let me pay the bill. “I should have ordered a fish then, I didn’t know…” I commented smiling. “So Romania is not dangerous…” he replied. “It can be very dangerous, if you behave as a stupid arrogant foreigner, who will just search for easy money, without checking everything thoroughly. If you will respect the country, it may give you great opportunities and interesting “safe” profits in the years to come, especially if you invest this year”. “And why Romanians don’t say this too?”. “Don’t blame them. Many of them simply don’t know international business. They think they live in hell, just because they didn’t live abroad. But I can also introduce you to thousands of other Romanians, who will explain to you why their country is a good place for investments”.
I don’t know if I convinced him, actually this is not my problem, I just say what I consider as the truth. He didn’t decide to have another trip in Romania yet. But I already had 4 calls by friends of his, asking me for properties to buy. In Romania of course…

PS. This real incident happened to me this month, May 2009. I present it to you, having the approval of the gentleman I had met.