The 17th year

• Interview with Lucian Anghel, the chairman of the board of the Bucharest Stock Exchange

Reporter: What effects are you expecting from the decision to abandon the advance payment of taxes on capital gains?

Lucian Anghel: The arguments in favor of that measure are very simple. The state as well as the investors stand to gain if the value of the shares increases. Any measure which leads to an increase in the value of the stocks, rather than decrease it, is beneficial for the state, because it gets to tax at 16% something that is far more valuable. The people in the Ministry of Finance have also understood the need to eliminate the five tax returns for stock market investments, which is part of our strategy - the elimination of taxation. They have also understood that the measure, in the form in which it had been proposed, would have resulted in the reduction of state budget revenues.

The new draft amendment to the Fiscal Code resulted from our mutual interest. The willingness of the Ministry of Finance to cooperate has made me very happy. It became clear that, if you do have some credible, solid arguments, the officials of the government will listen to you and if you are right, they are willing to make decisions which favor business and eliminate bureaucracy.

Reporter: Complaints on the manner in which the stock market gets taxed have been around for a long time, ever since the provisions which are currently in effect were proposed for the first time.

Lucian Anghel: Yes. But we had an opportunity at the present time, because the Fiscal Code is being changed. In this regard, I have nothing but praise for the pro-business attitude of state secretary Liviu Voinea and for team in the Ministry of Finance. It is a big step forward for the stock market. On the other hand, we also have to understand the budget restrictions for the year 2012. Because of this, the amendments will come into effect starting on January 1st, 2013. Until then, there will be two more returns to file, but this will not affect the public offerings - Transgaz, Romgaz, Hidroelectrica - because taxation is only implemented when you sell.

Reporter: Basically, this encourages long term investment.

Lucian Anghel: Correct. And this was also a subject of discussion. And it is basically a measure in favor of the stock market, which investors have been pining for since July 2010. It is a step forward.

Reporter: The delegate minister for the business environment Lucian Isar opened the trading session at the London Stock Exchange on May 17th. Despite the public statements that the privatization program will continue, the selection of the intermediaries for Nuclearelectrica was suspended. What guarantee can we get that we can rely on the Transgaz offering of June?

Lucian Anghel: It is a great honor for the country that a Romanian would open the trading session of the London Stock Exchange. The event in London had several aspects. There were talks concerning the implementation of the partnership between the BSE and the London Stock Exchange. There are many things I would like to tell you about after they occur, but there are many projects that we are working together on with the London Stock Exchange.

Over there, all the major investments banks got together for a meeting with Minister Lucian Isar. The Minister reaffirmed the commitment of the Romanian government to stick with the privatization program and to do everything in our power to meet the deadlines.

I think however, that everything that will depend on the state will be done, meaning that if there were any delay, it would be recouped. To the investors, it is essential that Romania stand by this message sent by Minister Lucian Isar, because credibility is very hard to build, and can be lost very easily. If you aren't credible, investors don't want to meet with you any more.

What is very important is that the commitment to privatize Romgaz and Hidroelectrica has been reaffirmed. I would prefer not to comment on Nuclearelectrica, because I do not have all the necessary information yet.

Reporter: On numerous occasions, the governments failed to keep their promises.

Lucian Anghel: That is why it is all the more essential to bolster the confidence of the international investors.

It is very important that Romania has become a topic of conversation internationally. We have an ambitious program of IPOs, perhaps one of the most ambitious programs in the region. You won't see many countries with such ambitious programs to increase the transparency of companies by selling minority stakes.

Reporter: There was also an event scheduled in the US around this time.

Lucian Anghel: We have postponed the event which was to be held in America until the autumn of this year.

Reporter: But I understand a delegation left to the US nevertheless.

Lucian Anghel: In fact, we did send a delegation to the United States and we have hosted an event, but it was of a far smaller scope than what was initially planned.

It was agreed that we would find a far auspicious moment to present Romania to the American investors. It has been postponed until autumn, we need to find the right moment and to invite the relevant speakers. Right now, things were difficult. The event was basically coming just after the validation of the new government by the Parliament. When sending the invitations it was very hard to guarantee that you could bring get members of the new government as speakers.

Reporter: What was this smaller scale event which took place like?

Lucian Anghel: It consisted of several meetings with certain investors. What is important is that we will continue to host such international events, to present the domestic capital market. I expressly want to talk about the event in Sofia. According to our strategy of becoming a "hub" regional, we have created the possibility for Bulgarian companies to come to Romania and to raise capital. Given that the Romanian market is about ten times bigger than the Bulgarian one, we are trying to bring Bulgarian companies to the BSE. We have thus created the possibility of a Bulgarian company which wants to raise funding from the stock market, to have an alternative to Warsaw. We are starting to become a regional alternative for the Bulgarian companies.

We will host a day of the Bulgarian stock market in Romania.

That's what a regional hub means.

We are trying to bring companies, we are also trying to bring brokers and pension funds from Bulgaria to invest on our stock market.

A few Bulgarian brokers even expressed interest in the companies we have in Romania, and we may even have a few Bulgarian brokers coming in to trade here.

It is very interesting that Bulgarian pension funds, a country which is three times smaller than Bulgaria, have over 2 billion Euros in assets, similar to what the Romanian funds have.

Reporter: Yes, but the pension reform began earlier over there...

Lucian Anghel: 2 or 3 years earlier. Nevertheless, their funds are the same as ours with a population which is three times smaller. We hope that we will be able to provide them with investment opportunities on the Romanian Stock Exchange.

Also present in Sofia were the CEO of the Vienna Stock Exchange and an official of the Warsaw Stock Exchange. It was an event where it wasn't just Vienna and Warsaw that presented themselves to the pension funds. We did so too.

Also, we are still reviewing the possibility of a dual Romanian-Bulgarian index.

Reporter: There has been talk about it for almost a year.

Lucian Anghel: We are going to implement it. That is because some investors look at our two countries as a whole.

Reporter: It would seem you have been quite active internationally. Has the idea of the BSE being acquired, or of acquiring other smaller exchanges itself come up during these meetings? The privatization of the Sofia Stock Exchange is coming up.

Lucian Anghel: In Bulgaria, the state has set up a minimum turnover requirement for bidders, which we do not meet. There are a few exchanges in the world (which are required to be privately owned), which meet the requirements for buying the Stock Exchange of Sofia. They are very few, and we don't meet those requirements.

But we knew that. Months ago, we had talks with the Bulgarian officials, to assess the situation, before conducting an analysis.

It wasn't a surprise.

As for the takeover of the BSE, and before even being elected, I maintained, and I will continue to stand by that opinion, that we must first focus on developing the domestic stock market and that this will take us a few years, then we can see what options we have. We have intense international activity, which is very important, because we are trying to attract foreign investors, but you should know that we are also trying to support the growth of the stock market by taking action domestically. That includes the talks with the Ministry of Public Finance for the amendment of the Fiscal Code, the preparation of the IPOs. I can't give you too many details, but we have several activities taking place to prepare for these things.

Reporter: When presenting the strategy of the new Board of the BSE, you said that the representatives of the Bucharest Stock Exchange would visit one private company every week in order to attract new issuers. Has this happened?

Lucian Anghel: I can tell you that there have been talks. We began with a review by sectors. We have sent letters to companies in various sectors, which are, let's say, somewhat eligible. After Transelectrica, there were even cases of companies which came to talk to us of their own accord. At the moment, we are talking to several companies which are active in Romania. I can't give you any names, we are talking to several Romanian brands, but which would need at least 12-18 months before the listing. Before taking something public, you need to prepare several things: investor relations, transparency requirements, marketing, market positioning, the message you send. There are many things that need to be put together. It is a process which takes time. I know that everybody wants to see miracles overnight. I've used this analogy before and I like it a lot: A woman can give birth to a child in nine months, but nine women won't give birth to a child within a month. There are some processes which take time and which we want to have running perfectly. We do not want to start of with companies which would be a major failure. This would throw doubts over the entire process of raising funding through the stock market.

Reporter: I take it we are not expecting new listings in the private sector this year.

Lucian Anghel: I can't say we aren't expecting any. We hope, we work together with the stock market experts, but I don't want to raise the expectations very high.

Reporter: When can we expect the new CEO?

Lucian Anghel: As soon as possible.

Reporter: Thank you!