Thursday, September 18, 2014

Transylvania Draws Charles, Blue Bloods Back to Romania

http://www.businessweek.com

Like Transylvania itself, Alexander Roy-Chowdhury’s centuries-old estate in the Carpathian mountains of central Romania is a work in progress.

The Austria-born Hungarian aristocrat is toiling to give the Mikes estate, once confiscated by the communists, a new life and create jobs in the village of Zabala, where horse-drawn hay carts ply the roads and the closest supermarket is miles away. He started selling lumber and has opened a pension on the estate, an hour’s drive through woods and fields from Prince Charles’s own rural property. Still, one building remains gutted and red tape stymies the 33-year-old economist.

“Despite the difficult circumstances, we’re trying to build up a sustainable tourism and forestry business and create an environment that keeps the young people here,” said Roy-Chowdhury as his two young daughters ran around the pension lobby chattering in German.

A trek through Transylvania, best known abroad for the legend of Dracula, is often like time travel to the 19th century. Almost 25 years after communism ended, aristocrats from as far away as London, including the heir to the British throne, are being drawn to its dark forests and rolling hills to bring long-term investment to one of the European Union’s poorest regions.

Development of infrastructure and availability of skilled labor are paramount to attract investors to Transylvania, an area that’s home to a sizable Hungarian minority and is an important farming region, says Neil Shearing, chief emerging-market economist at Capital Economics Ltd.
‘More Attractive’

“Romania seems to be regaining a lot of its competitiveness in the wake of the global economic crisis, however major investments still tend to be clustered around Bucharest,” Shearing said. “Being one of the poorest countries in the EU, Romania has a greater scope to catch up than some of its more developed neighbors.”

Foreign direct investment to Romania is concentrated on Bucharest and its environs. While the capital city attracted 61 percent of all such investments in 2012, central and western parts received about 8 percent each, according to the latest data published by the Romanian central bank.

FDI “has been picking up in the past three years” in Romania, “although the overall volume of around 2 billion euros per year is still a fraction of what it used to be before the” 2008 global economic crisis, said Vlad Muscalu, an economist at ING Bank Romania.
Driven Out

The communist regime that fell at the end of 1989 drove away thousands of local aristocrats from their homes in the spring of 1949, often ambushing them in the dead of night. The mother of Roy-Chowdhury, a noblewoman of the Mikes family, fled to Austria, where she eventually married a Bengali prince and raised two sons.

Now, on top of battling the state for full restitution, the scions of Transylvanian aristocracy returning to their ancestral homeland are finding a herculean task in redeveloping properties nestled amid poverty-stricken areas.

While Romania, the EU’s second-poorest member, has 2013 gross domestic product worth $184 billion, according to Eurostat figures, the county of Covasna, home to the Zabala village in Transylvania, had economic output of 1 billion euros ($1.3 billion), the lowest of all listed counties by the EU’s statistics office.
Rural Unemployment

Unemployment in rural central Romania, including Transylvania, stood at 9.7 percent in 2013, according to Eurostat, compared with a 7.3 percent national average.

The tourism industry is one way to begin an economic renaissance, returning aristocrats say, as intrepid visitors are more interested in the still-quaint, still-rural experience the region offers.

Strolling hand-in-hand under the ancient trees of the Mikes estate one August weekend, Alex Popa was enjoying the green scene with his girlfriend.

“I promised her I’ll take her to a castle,” the 33-year-old Bucharest architect said. “We feel we’ve traveled back in time to an era long gone.”

About 100 kilometers (62 miles) from Zabala, along pot-holed roads crawling with horse carts, is the Kalnoky Castle in Miclosoara, where Prince Charles has become a regular visitor.

The 25th generation of the Kalnoky family, whose members included a prime minister of the Austro-Hungarian empire, returned to Transylvania to manage the family’s 16th Century manor and guest houses catering to mostly Austrian and German tourists.
‘Untouched Nature’

“People come for the untouched nature,” said Monika Soos, who helps manage the restored guest houses. “Prince Charles’s interest in the region and his friendship with Count Kalnoky is also a magnet for tourists.”

Prince Charles, who occasionally shows up on the streets of Miclosoara, owns properties in Valea Zalanului, a village of about 150 inhabitants surrounded by dense forest with meadows and mineral springs, and in the former Saxon village of Viscri, all open to tourists.

Directly across the road from Kalnoky Castle, Andras Gero leaned against a rickety wooden fence surrounding his patch-work home. As he talked, his wife swept out the dirt-floor shack and yellowed sheets flapped on sagging lines in the breeze.

Despite the outward poverty of his village, Gero said he and neighbors take the visits by the Prince of Wales in stride.

“It’s no big deal,” he said. “Everybody goes around doing their business. He’s just a regular person, like you or me, only with a much higher rank.”
Legal Troubles

Returning nobility often find themselves tangled in legal disputes with the state over restitution. Roy-Chowdhury and his brother, Gregor, who left behind an investment banking job in London to return to Zabala, are still fighting to reclaim about 80 percent of their ancient family holdings.

“Being an aristocrat doesn’t mean you have the means to do business, it’s more a mentality, an attitude,” Alexander said. “Restitution has to be finalized or the issue of ownership remains questionable and a country with a questionable ownership environment is not very appealing for foreign investors.”

To contact the reporters on this story: Edith Balazs in Budapest at ebalazs1@bloomberg.net; James M. Gomez in Prague at jagomez@bloomberg.net

To contact the editors responsible for this story: Gelu Sulugiuc at gsulugiuc@bloomberg.net Andrea Dudik

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