Peter Frank: “By the year end we will start feeling that things are not getting worse”

Peter Frank used to be the host of the only English speaking TV business programme in Romania, “The Frank Show” on The Money Channel. With a vast international experience in banking and media, he is someone who can approach Romania from a different point of view. For this reason, I asked him to share his thoughts with all of us regarding Romania, its economic potential and ofcourse its Real Estate market.

Having a vast experience around the world, what level of maturity do you identify in Romanian economy nowadays?

Romania remains, in many ways, an economy that has yet to mature.  The mechanics on a national level are in place, a functioning central bank, statistical measurements, the access to capital markets, financial and business regulation.  However, the effectiveness of these, even at their best, remains imbalanced, in large part, because of infrastructure deficiencies, a prominent gray economy, and corruption, among other things.

For economic controls and initiatives to be effective in managing and assisting the economy as a whole, a coherent and integrated business environment — including the collection of tax revenue, timely government payments with a trustworthy bidding process, transparent business relations, and a predictable and efficient judicial system — is necessary.  Unfortunately, those do not yet fully exist here.

Competition in many sectors is still lacking, creating pricing imbalances.  The nation’s infrastructure, to allow greater movement of imports and exports, needs to improve.  A more business friendly atmosphere, making it easier to establish and function as a corporation, needs to be developed.  That said, it can be a great place to do business.  The local idiosyncrasies, however, can make doing business here much more difficult than necessary.

Do you see things getting better soon? What is your prediction for this year and 2011?

Unfortunately, not very soon.  In terms of specific macroeconomic projections, there are plenty out there.  I am not an economist by training so I will not try to predict precise figures or timing.  Based on various reports, though, I do expect economic growth here to resume this year.  Romania’s export markets, while sputtering, are growing.  And Romania remains in a good position to profit from businesses looking to expand into developing markets.

But recessions typically end slowly, not necessarily as measured by GDP, but as measured by employment and consumer confidence.  Both of those are needed for the public’s “sense” of recovery to arrive.  I do not expect to see that until 2011.

So while the nation’s domestic output is likely to turn around, unemployment should not increase significantly this year, and business profits will likely stop falling, a general feeling that things are “getting better” will likely not occur this year.  I think we will see by the end of this year the feeling that things are not “getting worse.”

What is your implication with the Real Estate market? Are you satisfied by the level of services you found?

The real estate industry is notoriously difficult to predict.  There are too many segments within the sector to generalize with any comfort.  Light industrial, heavy commercial, Class A business, single-family and multifamily housing, resort, luxury, etc.  It is as much a study in psychology as it is in business.  Certainly, supply and demand are components.  But so is the buyer’s sense of confidence in the future and the value imputed into the real estate asset.

From my experience, the value of real estate, after a significant fall in prices as we’ve seen here, takes many years to recover.  It can take a decade to recover fully, back to the levels before the collapse.  But the real estate market can resume quickly, especially in certain sectors, as investors see opportunities and sellers recognize they are sitting on property that is not likely to appreciate significantly within their desired time horizon.

All of this, however, is dependent on financing and, as this recession came about because of a financial crisis stemming from real estate speculation, the availability of financing will likely to continue to be problematic.  Simply said, I expect some areas of the real estate market to recover nicely, relatively soon, while most will continue to seek stability in the near- to medium-term.

If I would ask you 4 short practical proposals, so as to improve our daily business environment, what would you suggest?

1. Strategy – Companies should reconsider what they do and how they operate.  While the future is even more unpredictable these days, detailed 1-year, 2-year, and 5-year strategies should be established.
2. Structure – Companies should recognize that a structure built during a rapidly growing economy is not the same structure needed during a recession or a slow-growth period.  Company owners and executives should also recognize that those who built a company are not usually the best at “rebuilding” it.
3. Market – Companies should analyze today’s marketplace and recognize the changes that have occurred in the past year.  Products and especially services need to be realigned in recognition of today’s market and changed consumer attitudes.
4. Implementation and fulfillment – The previous three steps are merely preliminary to this final, and most important, step.  An attitude of corporate alignment to a goal, as well as measuring results on a continuing basis, needs to be instilled.  It is not enough to launch a project, it needs to be managed and steered continually.

Who is who:

Peter Frank, most recently editor and presenter of The Frank Show in Romania, served for a dozen years as a Senior VP and Executive VP within Bank of America and MBNA America Bank.  He left in 2008 after working in Strategic Partnerships and Business Development of new strategies and products in the US, Europe, and Mexico.  Prior to that, he spent more than 10 years as a financial journalist, where he was Business and Financial News Editor at The Baltimore Sun and The Wilmington News Journal, and reported on Business and Financial news for The New York Times.  Peter currently lives in Bucharest.