By Noreen Lucey

Two months worth of Foreign Direct Investment to round up this time round as we missed out July and it is once again Romania and Poland leading the way.

This is by no means a complete picture of all FDI in the region and we invite you to send us news of any we may have missed. To do so, simply email investments@propertysecrets.net.

Romania

A Chinese firm is ready to put EUR 150 m in the 'Nokia Village' at Tetarom III Industrial Park near Jucu, Cluj county, to build a sub-assemblies producing factory. The firm, which has started talks with local officials, is a significant company from China, which will produce subassemblies and create 6,000 new jobs.
Negotiations are under way with another four firms from Hungary, Finland and Germany, which are also suppliers for Nokia. It is believed the Chinese producer is also interested in another 250 m investment in Cluj county and details are expected to be released next month.

Nokia has received the required authorization for its future Romanian factory. Construction work will start immediately and production operations will begin probably in the first half of next year. The new production facility will be situated in Jucu industrial park, Cluj County. The project, planned to be implemented gradually, will create around 500 new jobs by the end of this year. Employee numbers are anticipated to reach 3,500 when the plant is operational, the company's announcement details. At the end of March, Nokia announced its intention to build a EUR 60 m new production unit in Jucu.

The Belgian-American consortium New-Energy is going to build a EUR 60 m bio-ethanol production unit in the western Romanian town of Nadlac. Construction work will begin in spring next year.

Carrefour Romania will launch its fifth outlet in Bucharest and the eighth in the country. This is the first store in the capital's center, nearby Piata Unirii, while the other four are in Bucharest suburbs. Carrefour plans to open another three stores in the country in 2007, namely two in Iasi and one in Cluj-Napoca, which will require an investment volume of some EUR 60 m. In the coming two-three years, Carrefour aims to launch at least one store in each city with a population over 150,000 residents.

German-based Messer Group GmbH has announced its intention to build a EUR 20 m air separation plant producing nitrogen, oxygen and argon in Resita, Romania. The facility, to be operational by 2009 represents Messer's first production unit in Romania.

The Bank of Cyprus has opened a branch in Bucharest, following its strategy to expand into Eastern Europe, starting with the Balkans, Russia and Ukraine. The bank announced the Bucharest branch will target the business community, specifying that it intends to open 10 new branches a year in the country. The next cities, according to the Bank of Cyprus plan, are Timisoara and Constanta.

The US car parts producer Delphi will put EUR 120 m in a greenfield plant in Iasi. The company is extending the production capacity in Romania according to the initial growth fund and increasing portfolios of clients. The new production facility will have a total area of 40,000 sq. m and will assume control and command systems for diesel motors. The US company is owner of two production units in Romania, located in western cities, with 9,000 employees.

Pirelli & C SpA announced it is investing EUR 25 m in a plant in Romania to produce anti-particulate filters for new diesel vehicle exhaust systems. This third Romanian facility is part of an overall EUR 235 m investment in the country, including tyres and steel cords, where plants are already put into operation.

Currently, construction has been started on a third plant of the group in Romania, focusing first on producing a large series of anti-particulate filters for new vehicles. The plant is scheduled to start in the second half of next year, with two production lines, despite its location at Gorj, close to the Serb border. The capacity of the plant in south-west Romania is 500,000 diesel filters and will require 400 employees.

Contractor Bechtel aims to finish the first section of the Autostrada Transilvania motorway by the end of 2008, ahead of schedule of the 2010 target. "The Turda to Gilau section, in Cluj county, will be first open for use," says Bechtel Romania corporate affairs director Bogdan Sgarcitu. "We will try to do this by the end of 2008."The company will aim to open the section from Cluj-Napoca up to the border in Bors by the end of 2010. The last section to be ready will be between Targu Mures and Brasov and the whole motorway should be active by the end of 2013. The Government is yet to decide whether it will become a toll motorway or free for use, but Prime Minister Tariceanu has voiced favour for a payment system.

Saudi Arabian general contractor Al-Arrab Consulting Company has bought out transformer and locomotive producer Electroputere Craiova. The Privatisation Authority (AVAS) will sell 62.82 per cent of Romanian company Electroputere Craiova, following the negotiation of contractual clauses. According to AVAS, Al Arrab Contracting Company is experienced in railway construction, industrial machines production, and construction works operations. The company said its main fields are construction, design, building and equipment in the real estate sector.

Four other firms showed interest in the privatisation of the Craiova-based company: A5 Invest Caransebes and Grup Feroviar Roman from Romania, Vienna International Holding from Austria and Peeker Atomic Energy System, USA.

With an investment of 500 million Euro, oil and gas giant Petrom will enter the power generation market. Petrom will establish a gas fired power plant on the premises of its Petrobrazi refinery in Ploiesti, Prahova county, with a capacity of 860 MW. "The power market will be subject to major structural changes, especially in countries where aged capacities are to be replaced by new, cleaner less carbon intense technologies," says Werner Schinhan, deputy CEO of Petrom.

"Considering this environment, to enter the power market is an excellent opportunity for Petrom." The power plant will be supplied with natural gas through a pipeline by Romanian gas transmission company, Transgaz. About 20 per cent of the power plant capacity will be used to supply Petrom's own consumption and the firm will distribute the rest to the national gas network. Construction is planned to begin in 2008 and full production capacity of the plant is likely to be delivered by the end of 2010.

The European Union has approved Romania's National Strategic Reference Plan (CSNR), which means 19.67 billion Euro will be allocate to Romania in the 2007-2013 period, in structural funds. CSNR aims at using structural instruments to reduce economic discrepancies between Romania and EU member states by generating a GDP growth of 15 to 20 per cent by 2015. Priorities include developing basic infrastructure to reach European standards, increasing competitiveness, developing Romania's human capital, consolidating an effective administrative capacity and promoting a balanced regional development. Romania is now negotiating operational programmes to implement these objectives with the EU, the first of which expected approval by the end of this month.

UK-US giant Cadbury Schweppes has bought 93.32 per cent of Romanian firm Kandia-Excelent. The assets of Kandia-Excelent at the end of 2006 were about 47 million Euro. Market estimates put the price for the company at between 90 and 100 million Euro, but the sweet multinational would not confirm this figure. Asked whether the global group will produce its international products in Romania, a spokesman told The Diplomat: "It is too soon to say about Cadbury products, we're focused on the Kandia-Excelent business today."

Renault said it plans to invest 100 million Euro over the next two years in Renault Technologies Romania (RTR), a new engineering division that will develop vehicles and equipment to be produced or sold in central and eastern Europe. RTR will operate across three sites in Romania: a design office in Bucharest; the Pitesti production plant and a future test centre to be launched in the second half of 2009.

Budget Hungarian-Polish low-cost airline Wizz Air will launch a new flight from London Luton airport to the mid-Transylvanian city of Targu Mures, starting October. There will be three flights a week, compared to the eight weekly routes now between London and Bucharest. From Targu Mures, Wizz Air currently operates flights to Rome, Barcelona and Budapest.

British-based low-cost flight operator EasyJet has launched a local service in Romania. The first flights EasyJet will fly from Bucharest are for the Milan route, and the first flight is scheduled to take place this September, to Milan Malpensa airport.

Friendly & Joy (F&J) owned Sinoroma Industry has opened a cigarette factory in Parscov, Buzau county, following a 36 million Euro investment. F&J already produces low-cost cigarette brands such as Golden Monkey and Dubliss in Parscov, but the new production facility is constructed in partnership with China Tobacco. F&J is also active in Romania in the wood processing, home appliances and food and textiles industries.

German-based car components manufacturer Draxlmaier said it will invest 30 million Euro in its production facilities in Romania this year. From this, 17 million Euro will go into upgrading technical facilities while the rest will be invested in developing plots of land, buildings, equipments and employee training. The German firm owns production facilities in Codlea in Brasov county, Satu Mare, Timisoara, Hunedoara and Pitesti, Arges county, employing almost 19,000 people.

Poland

In the January - May period, Poland attracted $6.4bn worth of foreign direct investment (FDI) according to the Polish Information and Foreign Investment Agency (PAIiIZ). This was a record amount of FDI for the period. During the period, PAIiIZ facilitated 31 foreign investment projects, which are expected to create 10,500 jobs. Investors from the US topped the list, with others from Japan and Germany coming a close second. The majority of investments were in "high-tech" sectors: electronics, automotive and service centres.

The beneficiaries of the financial programs from EU structural funds have received over PLN 15.8 billion through the end of June, according to Grazyna Gesicka, the Minister of Regional Development. At a press conference, Gesicka presented a report prepared by the Ministry describing the execution of the cohesion policy by Poland and the leveling out of various economic indicators in comparison to EU indicators.

"There's progress. It's clear that among the countries that have recently entered the EU, Poland is steadily improving its economic results," she stated. "Poland will develop the most rapidly between the years 2010-2014, when the cumulative effects of realising the National Development Plan and the National Cohesive Strategy together with all the changes resulting from EU accession, come into place."

Gesicka mentioned that four years ago the level of GDP per capita was 47% of the EU average, whereas now it has reached a level of 51.3%.

According to the latest ranking of The Federation of European Employers (FedEE), Poland is the most attractive location for investment among the 31 countries of Europe. Apart from Poland, the top five is include Denmark, Great Britain, Slovenia and Switzerland. Poland received a rating of +6 in the FedEE rankings, ahead of all its competitors in the region: the Czech Rep., Hungary and Slovakia.

"Poland has the most competitive workers in Europe - when taking into account the total costs of work in comparison to the quality of work," PAIiIZ President Pawel Wojciechowski commented on the findings of the report. "We continue to have great reserves of highly qualified staff systematically raising their levels of qualifications. It's this raising of qualifications and professional mobilisation that are the best ways of fighting against unemployment," Wojciechowski said.

The FedEE rankings embraced the 27 EU countries and also Iceland, Norway, Switzerland and Turkey. In the survey 15 different factors were taken into account, including: the availability of labour, human resources, relations on the labour market and its elasticity, inflation and the work costs. Poland's strongest assets were seen as the availability of a young work force, the presence of women on the labour market and the availability of temporary workers. FedEE is a leading employer's organisation in Europe founded with the help of the EU Commission.

Poland's average wage was up 8.9% in Q2 2007 to PLN 2,644.34, stats office GUS announced. It is as a result of faster wage growth in the corporate sector, but also an effect of rises in the public sector, including health care system. A 30% raise in healthcare is planned for this year, which will certainly have an impact on wage increase.

Lease transactions involving around 640,000 sq m took place on the Polish warehouse market in the first half of this year, compared with 900,000 sq m for the whole of 2006, according to global real estate consultant Cushman & Wakefield. The biggest rises in demand for warehouse space were in Poznań, Upper Silesia and the Warsaw area. Demand was generated mainly by logistics operators and retailers. Poland's modern warehouse stock currently stands at a total 3.15 million sq m, showing 43 percent year-on-year growth, with a further 1 million sq m under construction. The most active warehouse construction regions are Warsaw (290,000 sq m under construction), Upper Silesia (250,000 sq m), central Poland (180,000 sq m), and Poznań (170,000 sq m).

DEKA Immobilien Investment GmbH has signed an agreement for the acquisition of the 43,000 sq m Forum Gliwice shopping center in Gliwice, southern Poland. The center developed by Quinlan Private Golub and Braaten & Pedersen opened June 28. Due to its location in the center of Gliwice, internal design and attractive tenant mix complemented with entertainment possibilities, the mall commands a strong position as a regional shopping center. It is leased to well-known international and national retailers such as Carrefour, Cinema City, Reinhold, H&M, Zara, Cubus, KappAhl, Reserved, Carry, RTV Euro AGD and Deichmann.

Portugal's Jeronimo Martins, which owns the Biedronka grocery store chain in Poland, expects to open 120 stores annually between 2007-2009. "The plans for years 2007-2009 include opening 120 shops annually. The plans are revised at the end of each year. It seems that plans for 2007 will be met," CEO Pedro Pereira da Silva said. The company also plans to open a distribution centre in the second half of this year.

Norway and Poland have agreed to build a new natural gas pipeline. Poland wants to diversify its sources of energy to reduce dependence on Russian supplies. "We have reached agreement on how to finance a pipeline from Norway to Poland," Norway's Prime Minister Jens Stolteberg said. The two leaders added that an agreement on Polish companies' participation in the project was also reached.

Portuguese real estate developer Gerium plans to invest EUR 350mn in Poland within several years, company representatives said Thursday. "Gerium alongside with its partners plans ambitious enterprises in Poland," Gerium owner Jose Eduardo Goncalves Des Reis told reporters. "Apart from Krakow other interesting cities are Poznan, Wroclaw and Warsaw." Poland is the only EU state, apart from Portugal where Gerium decided to invest, he added.

Italy's Indesit will build a new washing machine and dishwasher plant in Radomsk. The value of the investment is to be about EUR 80m EUR, and is expected to employ up to 1,500 people. The factory will be set up in the Lodz Special Economic Zone and production is to start in the spring of 2008. Indesit Company Poland is one of the largest employers in the Lodz province. The company currently employs 2,500 people at two plants producing refrigerators and stoves. To date the value of Indesit's investments in Poland has been EUR 120m.

German investor MTU Aero Engines will invest EUR 50 m in a new factory in the city of Rzeszow. Initially, the company will employ about 100 people. The new branch will be concerned with development, production, and the repair of engine parts. The building of the plant, on a 7 hectare plot, is to begin this autumn, production is to begin early in 2009. By 2012, 400 workers will be employed there.

Bulgaria

Slovenian retailer Mercator Poslovni Sistemi d.d. intends to enter the Romanian and Bulgarian markets by 2010, and to open at least 15 new stores in the Balkans during the next two years, Ziga Debeljak, company's CEO reports, quoted by Bloomberg. Mercator's short term plans includes store openings in Croatia, Serbia and Bosnia-Herzegovina, while in the next two years, the company plans to have 1,000 stores in the region by entering Montenegrian, Macedonian, Albanian, Bulgarian and Romanian markets. Ziga Debeljak adds, the retail sector in Bulgaria and Romania is still very fragmented but growing fast.

The Russian Capital City Council intends to build an aqua park and an Olympic size stadium in the Bulgarian resort Kamchia. The sports complex will include a year round skating rink as well. Russian developers plan also construction of a yacht

A network of 20 retail centers targeting secondary cities with a population between 20,000 and 50,000 inhabitants will be developed by the local based companies City Point and Business BG Group, Emil Dobrev, manager of Business BG Group announced, quoted by Pari Newspaper. About EUR 50 m will be invested in the first five projects, located in Rousse, Dobrich, Sliven, Botevgrad, and Svilengrad, with construction scheduled for the beginning of 2008harbor. The total size of the project is estimated to be EUR 100 m.

Bulgarian subsidiary of the German Metro Cash & Carry, laid the foundation stone of its eighth unit in Bulgaria. The projected store of 7,000 sq. m retail area is located on a 53,000 sq. m lot in the country's central city Veliko Tarnovo. The total investment planned reaches EUR 15 m.

Austrian Cuubuss will become one of the largest investors in Rousse, with its EUR 150 m project for a new shopping and entertainment center in Bulgarian Danube city.

Austrian BauMax has started building a 12,000 sq. m outlet in the central Bulgarian city of Stara Zagora. The investment is expected to reach EUR 10 m. By the end of 2008, BauMax plans to launch four new outlets in other Bulgarian cities.

Latvia

Riga's international airport is set to start the first round of construction in spring 2008 as it moves ahead with its 200 million lat (284.58 million euro) expansion plan, said airport board chairman Krisjanis Peters on July 26. Most of the money will be borrowed from banks, added Peters, who are keen to participate in the development project. The entire reconstruction and expansion effort is planned in four phases.

Other

Ryanair has announced new routes to the following destinations from Dublin: Basel in Switzerland, Marrakech in Morocco, Budapest. The other routes are expected to include Prague in the Czech Republic and Katowice and Szczecin in Poland.

Commentary

The two giants of FDI this month were, again, Romania and Poland.

Cluj county in Romania is seeing significant investment from companies that are suppliers to Nokia, and a major investment of 250 EUR is expected from a Chinese company, yet unnamed. Nokia are also building a plant in Cluj County which will benefit from the support of supplier companies. Supporting this investment to the country and this area in particular is the completion of the Autostrada Transilvania motorway by the end of next year. This is evidence that the country is attracting huge amounts of FDI by expanding and improving infrastructure. Low cost airlines such as Wizz Air and Easyjet have also announced new routes into the country.

Poland again this month is attracting huge amounts of FDI and breaking records in the process. The country attracted $6.4bn worth of foreign direct investment (FDI) and 31 foreign investment projects in the first 6 months of the year according to the Polish Information and Foreign Investment Agency (PAIiIZ). This was a record amount of FDI for the period.