The Recycler Issue 317

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FEATURE Business booming in Bucharest? continued Economic Forum, centred around Global Competitiveness, put Romania in the bottom ten out of 128 countries surveyed for their road infrastructure, and a better, but still unimpressive, 79th out of 138 for railways. Efforts were made to modernise the railways in recent years, with Toko’s Victor Matache telling The Recycler that between 2009 and 2012, “great progress was made in infrastructure development by allocating funds for investment, and spending these funds. Developing road infrastructure, promoting democratic reforms in the judiciary, modernising banking legislation, and supporting the free initiative has allowed a sustainable development of the private sector.” “The banking system has been strengthened, many production facilities and technical support have been set up by multinational companies and, last but not least, the private sector with Romanian capital has developed,” Matache reflected. “It was a period of sustainable economic growth.” However, since that golden, albeit short, epoch, the return to power of the Social Democratic Party (PSD), the successor to the former Communist Party, has resulted in “a period of investment stagnation and proliferation of corruption,” in which “the economy has stalled due to a lack of investment and misappropriation of public funds,” according to Matache. This ongoing corruption is a much more sinister problem for Romania than its creaking train tracks, with The Guardian claiming it has “long been considered one of the most corrupt nations in the EU.” Two years ago, a government decree that was set to decriminalise low-level corruption provoked massive protests across the country, until it was ultimately cancelled in an emergency decision from the national court of appeal. Before this, tens of thousands had taken to the streets in condemnation of the Romanian government’s actions, which the influential Orthodox Church had said would allow corrupt politicians to escape punishment. In an ironic summary of the problem, the leader of the governing party, Liviu Dragnea, has been barred from becoming Prime Minister due to his previous convictions for vote-rigging. Such a flashpoint caused considerable distrust in the government, with President Klaus Iohannis saying at the time that his faith was in the protestors, not the ruling party, and calling for “European values” to prevail. Victor Matache blamed corruption in the country on “the effects of the long communist propaganda on the one hand, and the poorly understood freedom on the other hand,” offering a counterpoint to the beneficial Communist legacy of the country’s education system. “The most serious form of corruption is that of the political class, a phenomenon that manifests itself with all its adverse consequences,” Matache continued. “Many politicians have made their participation in the ‘political life of the country’ a profession to enrich themselves. Over the last thirty years, the evolution of the economy has been dictated by the interests of the political class in power.” 2019 has brought a fresh set of challenges to the country, in the form of the increasingly-prevalent bank tax. Such a levy was first seen in Europe after its introduction in Hungary in 2010, and the idea has since caught on in Poland, Slovakia, and now, Romania. Applied properly, a tax on the assets of the banking sector could in some scenarios be justified, but in the case of that introduced by the ruling PSD, it has been described by Euromoney as “fundamentally inequitable and misconceived,” “unjust,” and “shortsighted to the point of stupidity.” The tax is being introduced as a way of controlling interest rates, which are kept artificially high, according to the country’s Finance Minister, Eugen Teodorovici, who has nicknamed it “a tax on greed.” But Euromoney’s Lucy Fitzgeorge- Parker attests that the inflation currently witnessed in the country is in actuality due to the PSD’s “increasingly freespending ways,” warning that in the last few years, the government’s “openhandedness” with pension increases, wage rises, and energy subsidies has put it “in danger of breaching the EU’s 3 percent budget deficit cap this year.” In 2018, the Financial Times also linked Romania’s “record economic growth” with a worrying rise in inflation, as it reported that the central bank was raising interest rates by 0.25 percent, to 2 percent, the first such rise in a decade. While recognising that such a move was an endorsement of “the strength of the economic recovery in central and eastern Europe,” the Financial Times also claimed it reflected “fears of overheating” within the Romanian economy. Central bank governor Mugur Isarescu, however, said at the time that although they were expecting inflation to increase, it was due to recede again by the end of the year. “We increased the key rate because of inflation and because we want to anchor inflationary expectations from the start,” Isarescu said. “If you fail to act in due time, expectations don’t tend to be anchored and we wanted to avoid that.” It is this anchoring of expectations that has perhaps proved the biggest stumbling block for Romania, and the PSD, as it makes its way from ‘sick man of Europe’ to a flourishing modern economy. There remains a risk that, buoyed with the success of recent years, the ruling party will simultaneously take its foot off the gas and its hand off the tiller, leading to a series of reckless decisions – such as the bank tax – which could reverse all the positivity of the last ten years. Fitzgeorge-Parker identifies this as a natural endpoint of what she terms the government’s “greed,” and warns that the PSD “wants to have its populist cake, eat it and make the banks pay for it – whatever the cost to the economy.” Toko’s Matache was pessimistic about the country’s economic prospects going forwards, stating that the economy “is unstable, in decline and without sustainable perspectives of revival.” He further identified the increase in taxation, business interest rates, the inflation rate (“the highest in Europe”), and the “rapid” deterioration of the national currency exchange rate as “the most significant signs of the economic downturn.” “We are in fact in a very difficult and unpredictable economic environment,” said Matache. “It is a great challenge to develop a sustainable business in Romania today.” It seems that although the boom of the last decade has brought vastly increased prosperity to the country, a plethora of problems remain rooted. Until these issues are remedied, the country looks set to struggle to maintain the economic advances of recent years; it is achieving stability, as well as prosperity, that remains the biggest challenge for the new, modern Romania. R 38 THE RECYCLER • ISSUE 317 • APRIL 2019
FEATURE UK Printer & Copier Market According to Statista.com the UK is the fourth largest market in the world so we have been looking at the data and getting feedback from partners in the independent reseller and reuse (remanufacturing) channel. The numbers The UK market for new printer and copier sales is the fourth largest in the global market but has a year on year decline of 1%. (source: statista.com) In the same period reused printer and copier sales is growing and is forecast to reach €24 million in 2019 and continue to grow through 2021(source: The Recycler.com) The market channels The OEM channel - OEM owned or independently owned, but aligned to one or more OEM brands. The challenge of a slowly, but year on year, declining market and increased pressure from OEMs to increase margins and profitability. At the New sales figures include OEM and newbuild THE RECYCLER • ISSUE 317 • APRIL 2019 same time independent dealers have been proactive in offering better deals to traditional OEM customers. The Reuse channel – Despite the year on year market contraction, the sales of Reuse product is growing and is expected to reach €24 million in 2019 and continue to grow through 2021. The growth is mainly driven by independent copier dealers and IT/VAR companies looking to source premium reuse products to compete with OEM business in the secondary MPS sector. The independent channel – In September 2018 there were approximately 250 dealers. Up 3% on 2015. Most of the dealers are SME’s and ten percent are micro businesses of less than 10 employees. When it comes to reuse, there is a shift away from volume towards margin and value. The is a greater emphasis on reusing OEM cores, premium components to deliver a high quality and stable product. As opposed to the highvolume low margin model that does not deliver value and is difficult to compete with imported new build products. The low popularity for HP among the Reuse community is that the HP brand sector is fiercely competitive and margins are low or non-existent and other brands are more popular. Popular Reuse Brands • Kyocera Mita • Konica Minolta • Ricoh • Canon • Lexmark • Sharp • Utax • Develop • Olivetti • Brother • HP • Xerox Market view Several dealers and remanufacturers we spoke with felt that there are good aftermarket opportunities and specifically in the reuse sector, especially those focused on remanufacturing. OEMs like Konica Minolta Develop and Lexmark are offering “Cartridge Return Programmes” and are refilling their own empties so the message of “Return & Reuse” is one that OEMs and Reuse businesses are seeking growth opportunities with. All agreed that quality is the key for successful placement of Reuse products and when you win this business you are invariably taking OEM business. New build and other imported products operate in the budget segment and do not have a Reuse ethos. This is the biggest threat to the marketplace and impacts on OEM and the Reuse community equally. The Bob (Bored of Brexit) effect Bob (or bored of Brexit) will impact on the UK market, but in the absence of a negotiated exit it the new sales market could contract 2% -3% above the year on year decline of 1%. Sales of reuse printers, copiers and consumables could increase Brexit R 39
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