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bulgaria

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  BULGARIA

REPUBLICAN REFERENCE

Area(sq.k.m)
110,600

Population
7,707,495

Capital
Sofia

Currency
Lev

President
Petar Stoyanov

Private sector
% of GDP

40%

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Background:
Bulgaria earned its independence from the Ottoman Empire in 1878, but having fought on the losing side in both World Wars, it fell within the Soviet sphere of influence and became a People's Republic in 1946. Communist domination ended in 1990, when Bulgaria held its first multi-party election since World War II and began the contentious process of moving toward political democracy and a market economy while combating inflation, unemployment, corruption, and crime. Today, reforms and democratisation keep Bulgaria on a path toward eventual integration into NATO and the EU - with which it began accession negotiations in 2000.

Update No: 063 - (23/07/02)

Bulgaria had a new government in the spring of last year. At first it had a honeymoon period. The previous administration had had big plusses to its credit as far as foreign institutions and EU officials were concerned, but was very unpopular at home. Its reforms involved curbing welfare spending and keeping monetary policy tight.
The previous government was also increasingly encroaching on democratic checks and balances. For instance it closed down the parliamentary library and information service so that opposition MPs could not find out about the government performance. This sort of thing smacked of the behaviour of the former communists.
The growth of GDP in the 2000s has been respectable, 5.8% in 2000 and 4.1% in 2001 with a prospective 3.5% in 2002. But this has not translated into new jobs and rising wages. Most people remain very poor, yet without the safety net of communism.

Simeon II's star wanes
In last year's elections people were not, however, nostalgic for communism so much as the pre-communist past. For they elected in as premier no less a figure than their former king, Simeon II, who came to the throne as a boy in 1943, only to be evicted by the communists two years later as the Soviet tanks came to the country.
Simeon became a successful businessman in Madrid when he grew up. But that is not necessarily the right preparation for his present job, although it is rather difficult to discern what is. He has made a splash in foreign affairs, his interlocutors no doubt experiencing a frisson from meeting an ex-monarch, a Saxe-Coburg Gotha no less, descended from Queen Victoria. But all the harmless snobbery has not brought economic results at home. People are disillusioned with his government already and new elections could be held within the year.This could be precipitated by the defection of the coalition partner to his National Movement, apart from the issue of better rights for ethnic minorities, in particular the 10% Turkish minority. Or Simeon could just do the decent thing and heed the adverse polls.

FDI needed
What Bulgaria needs is something akin to the foreign direct investment (FDI0 that is transforming Hungary, the Czech Republic and Poland. It has attracted little more than US$1bn, compared with Hungary's US$27bn for instance. In 2000 FDI was US$150m and in 2001 US$160m.
A positive sign here is that the Swiss seem to be showing an interest in Bulgaria, which is of course a country with far lower wages, but with people of high educational standards Indeed, Bulgarian computer buffs and technical experts in several fields are at a premium on the European high-tech larbour market. The Swiss know this and this year Swiss investment in Bulgaria has topped US$100m since its inception 12 years ago.

Stability Pact funding
Another form of investment than FDI is official institutional finance. Sofia recently hosted the Stability Pact Working Table II on Economic Reconstruction, Development and Cooperation. In the course of the conference it was agreed that 18.7% of the US$3.46bn Euros allocated under the pact would go to Bulgaria, the second largest of its allocations after Romania on 25%. This will be expended on five big infrastructural projects, the largest of which is the reconstruction of Sofia Airport, for which US$210m is being set aside.
Bulgaria could become a regional electricity distribution centre in southeastern Europe. It could also become a transit country for oil and gas from the Caspian Sea.

Russian connections
Simeon scored one success by going to Moscow and chumming up with Putin The Russian are no so unpopular in Bulgaria as in the rest of Central Europe. For in addtion to the 'liberation' of 1945 there was the genuine liberation of the country from Turkish rule in 1878, in which the Russians played a major part.
Bulgaria is likely to remain a major transit country for exports of Russian gas to Europe. Russian interest is likely to be very strong in the Bulgarian Energy Ministry's decision to sell off seven power distribution companies by July 2003. An international consultant was to be chosen in June to prepare a strategy for the sale. The sale of Bulgartabac, the tobacco firm is also of especial interest to the Russians, already with claims upon it. 

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AVIATION

Runway system projects attract six bidders

Six offers were placed for the project to build a new runway system and adjacent equipment at Sofia Airport, by the deadline on June 18th, novinite.com reported. 
The offers are from the Kuwaiti Consolidated Contractors Company (CCC); the joint venture SARCO, including Germany's Ed.Zueblin AG and the Bulgarian Moststroy; a joint venture including the Turkish Associated Construction Company W.L.L; the Austrian STRABAG AG together with the Bulgarian Granit; a joint venture including Italy's Italstrade, the Bulgarian company Putstoi-92 and Germany's Ferrostaal. 
The last offer was from the Kuwaiti Mohammed Abdoulmohsin Al-Kharafi & Sons for General Trading. On May 28th the deadline was extended by three weeks because of the great interest shown by bidders. 
The whole project for constructing the new airport at Sofia must be concluded by 2005. The offers will be assessed by an interdepartmental committee, including representatives of the donors under the project.

Foreign investors eye Balkan Airlines 

According to Bulgaria's Transport Minister, European and Middle East investors are interested in flag carrier, Balkan Airlines. A definite investor will be known in two or three months. 
Italy's company, Air One, and air carrier Emirates have expressed interest in the indebted company. Last fall Prime Minister Saxe-Coburg and Economy Minister, Nikolay Vassilev, announced Emirates was a possible investor in Balkan Airlines. Air One and Simest, the Italian financial institution for the development and promotion of Italian businesses abroad, indicated their interest in doing business with Balkan Airlines in late 2001.

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DEFENCE INDUSTRY

Bulgarian firms will be subcontractors in destruction of missiles 

All components of the Bulgarian SS-23 missiles will be destroyed in Bulgaria except for the liquid fuel, for which there is a special facility in Romania, Defence Minister Nikolay Svinarov told the press 13th June before a regular government meeting BTA web site has reported. Bulgarian companies will be involved as subcontractors. 
Parliament has ratified a Memorandum of Understanding between the US and the Bulgarian governments for support in the destruction and demilitarisation of Bulgarian missile systems and their components and materials, as well as classified attachments to the Memorandum. The Memorandum says that the US government will aid the Bulgarian government in the destruction and demilitarisation of SS-23, Scud and FROG missiles, and the materials, equipment and components thereof. 
The preparation of an ordinance under the Public Procurement Act to apply to Defence Ministry contracts has reached an advanced stage and is likely to be adopted shortly. At the moment some 80 per cent of Defence Ministry contracts are awarded under this law. The new ordinance does not seek to reduce the share but to create clearer rules, said Svinarov. Some 20 per cent of the contracts connected with national security will be governed by Article 6 of the Public Procurement Act which lists the cases where the law does not apply.

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FINANCIAL NEWS

Bulgarian GDP grows 3.2 per cent in first quarter of 2002

Bulgaria's Gross Domestic Product (GDP) grew 3.2 per cent in the first quarter of 2002, the National Statistical Institute said on 21st June, BTA web site has reported. The GDP nominal value for the period was US$3.10bn, or US$390 per capita. 
At 5.99bn leva, the gross value added (GVA) recorded a 4.3 per cent increase. The public sector contributed 29.1 per cent of GVA, and the private sector 70.9 per cent. In real terms, the private sector showed a 10.4 per cent growth while the public sector declined by 8.3 per cent. 
Bulgaria ran a 576.1m-leva trade deficit in January-March 2002. Export dropped 4.4 per cent, while import rose by 1.2 per cent.

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FOOD & DRINK

Carlsberg Breweries will acquire stake in Shumensko Pivo 

59.4% of the shares of the Bulgarian brewer Shumensko Pivo are to be bought from Ferroal Ltd by the Danish brewing group Carlsberg Breweries . The price of the deal has not been revealed yet, CEE News has reported. 
It is specified in the agreement, approved by the Bulgarian authorities, that Ferroal shall remain minor shareholder in Shumensko pivo. 
The Bulgarian brewery, located in Shumen, near the Black Sea, holds almost 8% of the domestic market, the total amount of which is estimated at 4.5m hectolitres. The turnover of Shumensko Pivo during 2001 amounted to BGN 7.75m. The company employs 338 people.

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FOREIGN INVESTMENT

Swiss investments follow positive course

Bulgaria is included in the priority lists of two Swiss organisations, namely the Swiss Import Promotion Organisation and Swiss Organisation for Facilitating Investments (SOFI), Deputy Prime Minister, Nikolai Vassilev, said on return from Switzerland, quoted by BTA News Agency.
Vassilev attended the World Economic Forum summit in Coburg-Gotha. Before that he visited Zurich and Geneva. Vassilev expects that mainly Swiss mechanical engineering companies will show interest in Bulgria. "We will be happy to have about US$50-100m in Swiss annual investments into Bulgaria," Vassilev said at a specially organised Bulgarian-Swiss business forum in Zurich which was attended by what he described as a record-high number of companies, 68. Investment began to flow into Bulgaria 12 years ago, and at the end of last year had reached US$106m. In the first four months of 2002 Swiss investments totalled US$12m and in April alone it was US$8m, thus recording an upward tendency.

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INFORMATION TECHNOLOGY

Microsoft invests US$1m for Bulgarian training project

Microsoft Bulgaria will invest some US$1m in the setting up of a national network for training of 30,000 state employees, Executive Director of the company, Teodor Milev, announced in the framework of the 'Day of the Open Doors' organised by Microsoft Bulgaria, novinite.com reported.
As stated by the company's spokesman, the company has initiated a programme for higher qualification and training with information technologies for the state administration ,with the help of local partners of Microsoft Bulgaria.
It is must be noted that the investment is in connection with the contract ratified between Microsoft and the Bulgarian government. The contract, signed last February, enables the state administration to use the Bulgarian version of MS Windows and MS office XP.
"The contract is extremely advantageous for the state administration since the price is discounted by over 50% from the market price and the payments are rescheduled in three years," Milev commented.

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NUCLEAR ENERGY

Kozlodui plant produces alternative energy fuels

Nuclear power plant, Kozlodui, has the capability to produce hydrogen, which can be used instead of the traditional auto fuels, said Georgi Geoshev, the deputy chairman for the Bulgarian Nuclear Association, Bulgaria online reported
The N-plant produces hydrogen for its own needs at the moment. However, for commercial production, investment of US$500,000 are necessary, Goeshev explained. Leading auto companies are starting the serial production of engines which are fuelled by hydrogen, which became clear at the international Yearly Energetic Forum held in Varna. According to experts, a litre of liquid hydrogen is cheaper than a litre of petrol.

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TRANSPORT

Bulgaria hopes Macedonia will agree to memorandum on corridor VIII project 

The Macedonian government has yet to present official consent in writing on the signing of a memorandum of understanding between the governments of Bulgaria and Macedonia, regarding the project on the European Transport Corridor VIII. The railway between the two countries is part of the corridor, Bulgarian Transport and Communications Minister, Plamen Petrov, said, speaking to reporters after 3rd July meeting of the Council for Economic Growth. Petrov expressed the hope that the Macedonian side will soon send the consent, BTA web site has reported. 
Bulgaria, as well as Albania and Italy, have so far expressed a wish to sign the memorandum, Petrov said. The document's signing by all parties will mean that the projects connected with corridor VIII can apply for funding from international donors, the transport and communications minister said. 
Bulgaria needs to build 2.5 km of railway to reach the Macedonian border. What is more, the country has to modernize the railway between Sofia and Gyueshevo, which will cost about 120 million euros. Macedonia for its part lacks infrastructure which,
Petrov said, could be built only with funds from the Stability Pact and the EU. 
The future of the energy sector and amendments to the Commercial Code were other topics of the meeting, Deputy Prime Minister and Economy Minister, Nikolay Vasilev, said. At its next meeting, the council will discuss amendments to the Labour Code, he said.

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