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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: 061 - (23/05/02)

Bulgaria is not a country that usually attracts much attention. The connotations associated with its name are either that of the Soviet world's idea of a holiday paradise, Balkan beaches and comforts for the masses, or that of sinister secret services killing diplomats abroad with poisoned umbrellas or attempting to kill the Pope with Turkish terrorist proxies.
The Bulgars, who are painfully aware of this, have made a bid to raise the profile of their country abroad by electing their former King, Simeon II, as premier of the country. He is related to all the remaining monarchs of Europe, outside Scandinavia. They have either done a very foolhardy or a very clever thing.
In fact Simeon is a 65-year-old businessman, who is well in tune with the modern world. He has surrounded himself with top technocrats, many of them trained in the US. One thing that communism did was educate the population. Bulgaria has much higher standards of numeracy and literacy at an early stage than in the West.

Foreign investment
What Bulgaria needs is foreign investment. To date it has only attracted something like US$1bn, way below what one would expect for a nation of ten million in an excellent strategic location at the crossroads of the Black Sea littoral nations, of which it is one, and Western Europe. An infusion of foreign investment could do wonders. In early March Bulgaria engaged in a Third Round Table with foreign investors, with Prime Minister, Simeon Saxe-Coburg-Gotha, opening the discussion. He was himself a businessman for decades in Madrid, so that he knows the ropes.
US and European business people, present were optimistic. The IMF is approving a US$299m loan to support the economy, including a renewed effort of privatisation. The fund will be distributed in nine tranches over two years. US$40m will be available immediately. The successful fight against inflation has been based on a currency board arrangement.

Privatisation to the fore
The Privatisation Agency (PA) is preparing for sale some 40 ventures. As posted in the country's Standart daily, the tenders will be announced after the new Privatisation Act is enforced. It has been already approved by government, and the president must undersign it. The first to be denationalised are the state-owned giants Bulgartabac, BG Telecom and DZI (State Insurance Institute), PA Chief Apostol told the press.
DZI is absolutely ready for the sell-off; the appraisal of the company has been endorsed. Currently, the MPs are discussing the strategy for Bulgartabac. The bids for the three ventures will be submitted six weeks after the tenders are announced in the State Gazette. At the moment, the PA experts are working on privatisation packages for VMZ Sopot, Eliseina copper smelter, Kamet, and St. Constantine and Elena resort. 

Cleaning up the act
Bulgaria has become a key conduit for drugs and money-laundering, especially from the former Soviet world. Its local mafia are in cahoots with their Russian counterparts and the needs of Europe's security would certainly be enhanced if Bulgaria was brought into its structures.
Bulgaria's early entry into NATO now looks on the cards, not only to facilitate the anti-terrorist cause, but to consolidate peace in Macedonia, where in the aftermath of the attack on the US the impetus for a new settlement between rebel Albanians and the majority was redoubled in strength. Bulgaria is a neighbour and indeed almost the same country, speaking the same language and having the same ethnicity. It could provide secure bases for NATO operations in the whole Balkan region.

Simeon to the fore
Simeon has promised results by August 2003, the 60th anniversary of his own accession in 1943, which indicates that he has not quite abandoned monarchical ambitions. It is to be hoped that he does not attempt to bribe his way to a throne, which could jeopardise an anti-inflation policy that has brought inflation down to single figures on an annual basis.
The new regime has the alibi of the sluggish world economy to fall back upon if things are slow to improve. Simeon has an excellent young reform team to organise a recovery and probably a more extended honeymoon period than he originally thought to bring improvements to his people's lives.

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AGRICULTURE

Increase of agro funds in the offing

Subsidies for agriculture should reach two per cent of GDP by the time Bulgaria joins the European Union, Agriculture Minister Mehmed Kikme told MPs of the Simeon II National Movement and the Movement for Rights and Freedoms, quoted by online.bg. He acquainted them with the draft strategy for financial support of agriculture until 2005.
Next year the subsidy for agricultural producers will be 160 million Bulgarian levs, which is 0.5 per cent of GDP. The main financial instruments will be investment credits, investment subsidies and current subsidies. Minister Dikme forecast that the subsidies for the basic goods would be preserved but the production quota would be increased, as well as the scope of agricultural activities supported by the state.
Direct payments will be provided according to the amount of farming produce, not according to the area cultivated, as it is now. The new strategy envisages that in 2004 the Tobacco Fund will become a part of the Agriculture Fund.

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AVIATION

Air One in joint activities with BA


Italian private airline, Air One, has shown its interest for joint activities with Bulgaria's flagship carrier, Balkan Airlines. 
Top officials from Air One met recently with Deputy Transport Minister, Milcho Mladenov, and Balkan's receivers Olga Milenkova and Hristo Mollov to discuss cooperation possibilities. Balkan airlines announced that Air One will present a plan for cooperation by the middle of May. Details on the type of cooperation, which are expected to focus on joint operation of Balkan's international destinations, were not disclosed.
Rome-based Air One, operates a fleet of 18 Boeing 737 aircraft and currently focuses on domestic flights to 19 Italian cities. No other foreign airline has so far expressed an interest in joint operations with indebted Balkan Airlines.

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BANKING

Roseximbank bids for Biochim Bank

Roseximbank has started conducting due diligence at state-owned and soon to be privatised Biochim Bank. Rozeximbank in consortium with Russia's Mezhprombank will bid for the 99.6 per cent stake which was offered for sale, New Europe has reported.
The deadline for submitting offers for Biochimbank, Bulgaria's fourth largest bank, has been extended to May 15th, the Bank Consolidation Company announced in mid-April, cited by novinite.com. 
The term was extended by one month to give the candidates more time for due diligence. Bulgaria set a minimum price of 95m levs for Biochim and said potential bidders should be licensed banks with five years experience or financial consortiums in which at least one shareholder should have been a bank in October, 2001. 
Among the bidders that have already conducted due diligence or are about to complete it are Bank Austria, a division of HB Group, a consortium of Bulgaria's Hbebrosbank, owned by Hong Kong investment fund iRegent, and British-based Charlemagne Capital fund and local Roseximbank in consortium with Russia's Mezhprombank as well as the Commercial Bank of Greece. 

OTP eyeing DSK sell-off

Hungary's OTP bank has shown strong interest in the sell-off of State Savings Bank (DSK), Director of the Bank Consolidation Company Neli Kordovska recently announced, quoted by novinite.com. BCC has already sent letters to potential consultant companies, including Deutsche Bank, JP Morgan and Morgan Stanley. The state has committed to cover the expenses of the selected intermediary and pay it in case the deal is successful. The bids are expected to be placed no later than the beginning of June.
The BCC have acquired a 100 per cent stake in DSK, after the Cabinet approved a conditional increase of BCC capital by transferring its 75 per cent in DSK. After the operation is completed BCC's capital will be raised by 52.5 million levs to 78 million levs. The sell-off of the State Savings Bank is to be completed by the middle of 2003. At the beginning of April it was reported that the EBRD was poised to acquire between 10-15 per cent in the bank for ten million levs by end-June. The bank is expected to place its offer by June 2002.

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ENERGY

LUKoil officials to visit Bulgaria over strategic partnership 

A delegation of Russia's oil giant, LUKoil, headed by its president Vagit Alekperov, will arrive in Bulgaria on May 29th, said LUKoil-Bulgaria chief, Valentin Zlataev, in an interview with the Platts agency. 
The delegation will stay for two days. It is expected to meet with the Bulgarian Prime Minister and Cabinet members on a possible strategic partnership. Zlataev neither confirmed nor denied information that the parties might touch upon the participation of LUKoil in pipeline construction from Burgas (Bulgaria) to Alexandroupolis (Greece). This pipeline will deliver from 10 to 25 million tons of oil from Russia and Caspian regions annually, Platts reported.

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FOREIGN LOANS

EBRD finances Sofia urban transport

The European Bank for Reconstruction and Development will improve bus and tram services in the Bulgarian capital, Sofia, with a €35m loan to the city that does not carry a sovereign guarantee. The loan, including €1m from commercial banks, will help refurbish Sofia's tram fleet, purchase new buses and hire consultants to help the city seek private-sector operators to run the system.
Gavin Anderson, the EBRD's Business Group Director for Infrastructure, said public-private partnerships under a well-regulated system encourages greater competition, increases customer service and ensures a higher quality and more cost-effective urban transport system. It is the fourth time in twelve months that the EBRD has supported an urban transport project. It has financed similar investments in the Yugoslav capital, Belgrade, as well as the Polish cities of Sopot and Gdansk.
The EBRD's secured loan will be for 10 years with an initial three-year grace period, whilst the commercial bank co-financing matures after eight years. This represents the longest loan maturity granted to the City of Sofia, which it will repay out of its general revenues.
The City of Sofia and the EBRD have a successful history of co-operation. In 2000, the EBRD assisted the city with the financing of its privatised water and wastewater services. The two parties are also working on a transaction to improve the city's district heating system.
This brings the EBRD's total number of projects in Bulgaria to 37, with a total Bank commitment of €639m.
For further information contact Ben Atkins, EBRD, tel: +44 207 338 7236 or e-mail atkinsb@ebrd.com.

Approval of NEK loan deal

The National Assembly recently ratified a guarantee agreement with the European Bank for Reconstruction and Development connected with a loan agreement for €41.1m between the National Electric Company (NEK) and the Bank, BTA News Agency has reported. The loan is to go towards financing Energy II, the project for rehabilitation and modernisation of the electricity transmission network.
The EBRD loan will be utilised over four years with a three-year grace period. The Energy II Project costs amount to €153m. NEK will use its own resources to finance the preparation of tender dossiers, local taxes, fees and tariffs connected with equipment supplies. The project includes creation of an integrated management information system, building high-voltage transmission lines, upgrading of substations, supply of equipment and software for the introduction of an automated electric meter reading system for commercial purposes.

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MINERALS & METALS

Bulgaria's pot of gold

Hereward Ventrues (HV), a UK-based company, is expected to continue its search for gold in the Rhodope Mountains following recently published drilling results, according to which findings of high grade gold in Rosino in southeast Bulgaria, were reported. "Without over-hyping, the results so far are excellent," company Managing Director, David Bramhill, was quoted as saying by the Sofia Echo daily.
"A lot still needs to be done. We're not saying we've got 750,000 ounces of gold, but we're well on the way to doing the work to confirm that," he stressed. Bulgaria has a 6,000-year mining history and treasures from Thracian and Roman times can now be seen in museums around the world.
Hereward Ventures and a handful of other exploration companies are using state data to determine their choice of permit areas. "The amount of information archived by the Bulgarian government is amazing," Bramhill said. The company has also taken advantage of highly qualified ex-state geologists, employing a team of 23 Bulgarians, and uses state-of-the-art technology such as satellite imagery and magnetic survey to locate drilling targets. 
Bulgaria appears to be an ideal country for the gold business. Current government regulations mean that companies pay a maximums of only five per cent royalties on any gold they mine, and the cost of gold extraction is well below the industry average of US$200 an ounce.

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NUCLEAR ENERGY

Nuclear committee chief views old reactors possible modernisation


President Georgi Purvanov's idea to decommission Units 1 and 2 of the Kozloduy Nuclear Power Plant, modernize them and recommission them is technically feasible, the Committee on the Use of Atomic Energy for Peaceful Purposes (CUAEPP) Chairman, Emil Vapirev,told a news conference 29th April, BTA web site has reported. 
The first two generating units of the N-plant have now been shut down for refuelling and routine maintenance. Urgent safety and decommissioning measures continue to be carried out on the two reactors. Units 1 and 2 are to be licensed shortly for one fuel year. This period will not have run out when they are decommissioned at the end of 2002, and one option is to store the fuel in ponds on the Kozloduy N-Plant site, said CUAEPP Deputy Chairman Borislav Stanimirov. 
Unit 1 has already been pressurized and is to be restarted in a couple of days. Unit 2 will be restarted at the end of May, Vapirev said. He stressed that when they are switched off at the end of 2002, the two reactors will be either mothballed or modernised. 
According to the CUAEPP chairman, at the presentation of Bulgaria's Second Annual Report on the implementation of the Convention on Nuclear Safety before the International Atomic Energy Agency in Vienna, France suggested that the dates for closure of the small reactors be fixed in the report. Bulgarian Energy and Energy Resources Minister Milko Kovachev rejected the proposal. 
At the presentation of the national reports in Vienna, Russia declared that it will not set a deadline for ending the operation of its nuclear reactors. Vapirev sees this as the right approach because the length of operation of the generating units should depend on their modernization.

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PHARMACEUTICALS

Pharmachim Holding sell off opens

The Privatisation Agency has opened the tender for the sale of 100 per cent of the capital of Pharmachim Holding and about 45 per cent of the capital of Chemical Pharmaceutical Research Institute.
The start price in the open bidding is set at nearly five million levs, the deposit for participation is 400,000. The whole price will be paid in cash. Pharmachim Holding offers a wide spectrum of microbiological products such as classical and new antibiotics, analgesics, antipyretics, gastrointestinal, cardiovascular, psychotropic and other substances for export.

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