Metro Cash&Carry, the German company that started modern retail in Romania in 1996 announced it would close the store in Braila in March, saying that the development of the local economy was not as expected. Others to have left Braila are Carrefour, the PIC hypermarket, and the Armonia mall, while automotive wiring company Yazaki arrived with plans to hire 1,500 people in a sector paying minimum wage.
“Foreign investors stick to the wage level in the area and are not willing to raise it, even though it would help stimulate trade on medium-term and some of this money would go back to them,” says Raluca Penes, HR Coordinator with service outsourcing company HR Smartree Romania.
Ten counties generate 70% of the total revenue of the companies in Romania, while big business is almost non-existent in 15 others. Braila, the county that Metro Cash&Carry left after spending EUR15 million to EUR20 million to open a 8,500 square meter store in 2010, ranks 28th on Romania’s business map, as its companies generate only 7.5 billion lei (EUR1.65 billion) revenue together. In comparison, in the neighboring county of Galati, ArcelorMittal Galati steel mill alone generates half of that.
“Romania’s economy differs from one region to another, and investors are no longer going to the economically underdeveloped areas. It’s a vicious circle: as long as there are no investments in the area, many people go to more developed cities, driving attractiveness and strength of trade down, which in turn drives other potential investors away,” says Smartree’s Raluca Penes.
The largest employer in Braila last year was the County Emergency Hospital, while the shipyard operated by the Vard group was the only private investor with more than 1,000 employees.
The largest private sector employers in the county include textile industry companies Braiconf, Solo Textil and Blazer, but that industry pays some of the lowest wages in the economy. Employees of such plants make RON1,500 in net amount per month, RON400 below the average wage.
“Consumer economy depends on incomes. To be able to spend, consumers need to have high incomes. About 70% of Romanians’ income goes toward clothing and sustenance. The solution is to have a negotiation of the parties, to have the wages go up, but only if productivity improves, as well,” says Sorin Faur, HR Director of audit and tax consulting firm BDO Balkans.
In the absence of a strong county economy, driven by plants, services centers, foreign and entrepreneurial investment, retail gets much lower spending, which makes large stores unprofitable. Metro officials said in their reply explaining the reason for the closing of the Braila store that neither the marketing campaigns, nor the events and special offers were able to offset the difficult economy and the decline of the market and of the local economy.
(English version by Loredana Fratila-Cristescu)