“Domestic capital is a small thing. We don’t even dare look (at a plant the size of Europharm Brasov i.e.). Investments are really big,” said businessman Florin Andronescu, who has invested in computer and electronics retailer Flanco and consumer finance company Credisson over the years, which he then sold. He is now serving as business developer of Sanador, one of the largest medical service providers in Romania, owned by his wife, Doris Andronescu.
He answered a question ZF asked about Europharm, the pharmaceutical plant with EUR100 million revenue and 236 employees that UK’s GSK decided to close.
GSK failed to find a buyer for its production facility. Other plants like Tnuva (dairy), Nokia (mobile phones), and Ursus Cluj (beer) were closed, too, in the past years.
“We are talking a different league here. Investments are huge and only corporations can afford them,” he added.
Several businesspeople commented for ZF about the closure of the Europharm plant in Brasov, the first large drug production facility that will be closed in Romania.
“Any sign of an investor withdrawing, especially if it’s a large investor, is a negative signal. The weight of this name causes concern across the entire pharmaceutical industry,” Florin Andronescu said.
He believes that the Romanian economy cannot afford the luxury to lose any investment, but unlike other countries such as Ireland, where the government negotiates with investors and gives them incentives, Romania does no such thing.
The authorities are merely shrugging when asked about the issue.
ZF attempted to reach a number of public authorities on Tuesday to see if they knew about the situation in Brasov, but only the Health Ministry sent an official statement by press time.
The government, the Economy Ministry, the Brasov County Council and Brasov City Hall either could not be reached or made no comment by press time.
The Health Ministry statement said GSK had notified it of the decision to close the plant in Brasov, made for purely economic reasons because, as the company said, of the excess capacity in GSK’s oral solids global production network. It also said the company reassured the health minister that the 236 employees affected by the decision would receive severance packages up until the end of 2015. “The Health Ministry may not interfere in the application of the business plan or of the decisions made by private companies,” the Ministry said at the end of its press office statement e-mailed to ZF.
George Scripcaru, Brasov mayor, told ZF in March he was aware of the Europharm situation (GSK was still trying to find a buyer at that time) and that he had met with the plant officials twice, who had explained to him that the decision had to do with the international market.
Hundreds of plants have closed in Romania over the last few years, leaving a significant part of the economy to the mercy of imports, but in most cases the authorities shrugged, saying those were private business decisions that could not be influenced.
Local entrepreneurs say there is hardly anything they can do in such situations and investments are too big for them to be able to get involved. A potential bank loan for such an acquisition is too great a risk, businessman Florin Andronescu said.
“Things are no longer as they were ten years ago, when you were driven by a rising economy. A businessperson can do things very quickly in a business-friendly environment, where they are offered a relaxation area, which is not happening in Romania. The right business environment is an environment where a businessperson feels good. How many times do rules change in mid-game in our country? You need some courage bordering on madness.”
Dragos Damian, chief executive officer of drug producer Terapia Ranbaxy, said in his turn that the business environment in the industry has unacceptably deteriorated over the last three years, becoming uninteresting for investors.
“The unjustified escalation of industrial and commercial costs (salaries, utilities, raw materials), the methodology of calculating drug prices, long receivable collection terms, the lack of a real communication with the authorities, fraud, disregard and wastefulness, the recent obligation to pay the over 20% clawback tax and the demand for discounts of up to 25% on channels (the so-called ‘shelf tax’) make drug business hard to manage on short term and unsustainable on long term.”
Other business sector representatives do not think GSK’s decision is such a big deal.
“It’s a pity, as an action in itself, and about the people, but it’s not such a big deal. There are investments in progress, Romania is looking very good macroeconomy-wise. It’s a decision that has to with the group’s policy,” Mihai Marcu, MedLife chairman, said.
Ioana Filipescu, managing director of Raiffeisen Investment, says GSK’s decision is sending out a bad signal but will not make too great an impact.
“It won’t make any impact besides the loss of jobs. GSK was not that big in terms of drug production.”
Europharm is the second largest local drug producer, with EUR100 million revenue (in 2012, as there are no official data available for 2013), after Terapia Ranbaxy. GSK bought Europharm from businessman Mihai Miron in late nineties, who showed an interest in the facility in Brasov. Miron could not be reached for comment by press time on Tuesday.
(English version by Loredana Fratila-Cristescu)