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Update No: 065 - (26/09/02)

The Bulgarian government has been in office for a year and a half, long enough to assess its performance. The technocrats in charge of the administration under the premier, Simeon Saxe-Coburg Gotha, former King Simeon II, are active in promoting reform. But this has not made them popular.

The record to date
In a country in transition, the economy is always likely to have grave teething problems. In Bulgaria's case these are particularly severe. The previous government made progress and GDP grew by around 4% per annum. Yet nearly everybody felt frustrated. For it did not bring decisive improvements to their lives.
Hence why there has been a change of government. But the new regime is now as unpopular as its predecessor.
Its performance has been praised by Deputy Premier and Economy Minister Nikolay Vassilev, who says Bulgaria is "less rich than some countries of Central Europe but it is keeping abreast of the top achievers in terms of its reform pace."
Licensing requirements have been removed in more than 70 cases and relaxed in more than 120 cases. Land sales are now occurring and a real estate market index is now in place. Revisions of the Commercial Code will accelerate bankruptcy proceedings and defend creditors' interests.
The privatisation of electricity distribution companies is expected to start at the end of the year. The year 2002 is expected to be a record year in privatisation proceeds, with US$1bn coming in. If this should prove true, then it will double Bulgaria's stock of FDI at a stroke.
The trouble about all this up-beat talk is that it comes from the government itself. Self-praise is no praise at all. But with brilliant technocrats at the helm in Vassilev and others, results may be expected to roll in eventually.

The 'Greek plan'
Greece is coming to the rescue here with its long term strategy to be the dominant Balkan power. It will proffer 54.29m Euros to Bulgaria under its Balkan reconstruction programme. Some 80% will be expended on state-managed infrastructure projects and 20% on private ones.
The 'Greek plan' has been drawn up by the two sides' ministries and encompasses 16 state projects, major construction works and an as yet unspecified range of private initiatives.

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AGRICULTURE

Alternative agriculture gains 50m levs in funding

More than 50m Bulgarian levs will be released for the development of alternative agriculture in the Rhodope Mountain under a Programme for Alternative Agriculture Development, novinite.com has reported.
The farmers in the region are to apply for the funding at the district units of the Agriculture Fund.
As announced by the Agriculture Minister Dikme, over 10m levs will be released for the crop next year under the programme with 500,000 levs having already been provided. Minister Dikme expressed the opinion that the agriculture producers in the Rhodope Mountain must turn to other produce besides tobacco. The Fund finances the programme through investment programmes and credits. The budget of the Fund for investment credits is expected to exceed 100m levs.

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AUTOMOBILES

DaimlerChrysler to select partner from Veliko Turnovo

Only 8 out of the 20 applications in the Bulgarian town of Veliko Turnovo, for mutual production with DaimlerChrysler, complied with the preliminary conditions of the concern. Some of them were the plants of the military industry complex Arkus and Terem, as well as leading companies in the electronics industry in the region, 'Dnevnik Daily' reported.
Recently, DaimlerChrysler announced to the district administration, that it is researching the possibility of ordering production of certain detailed products and spare parts from enterprises in the town.
The main requirements of the German company, are Euro certificate ISO 9001, net production worth more than 100,000 levs, proper production premises as well as experience in export.
At the beginning of October the District Governor of Turnovo, Krasimir Genchev, will visit Stuttgart in order to present the director in charge of the international activity of the German concern, Matias Kleinert, with a list of companies which could do work for DaimlerChrysler. Kleinert visited Veliko Turnovo in May of this year.

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AVIATION

Sofia Airport project chugs along

The project for reconstruction of Sofia Airport is moving ahead according to schedule, Transport Minister, Plamen Petrov, said. The proposals for the terminal, the runway and Iskur River works were opened in June and August. 
The best candidates will be approved by negotiations with European Investment Bank officials planned for the beginning of September. According to the transport minister, the works in at least one of the reconstruction grounds, will kick off at the end September.

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BANKING

EBRD to become a Unionbank shareholder

The European Bank for Reconstruction and Development (EBRD will become a shareholder of the Bulgarian Unionbank on September 17th, Pari Daily quoted the credit institution as saying. Then the deal on the sale of 15% shares, concluded in May, will be endorsed. With the increase of the capital of Unionbank in July, the share is worth three million Euros. In mid-summer the shareholders of the Bulgarian bank decided to increase its capital from 13m levs to almost 15.5m levs. Becoming a shareholder, EBRD said its objective is to help Unionbank in strengthening its positions in the sector of small and medium enterprises. The London institution also intends to contribute to the consolidation of the banking sector in Bulgaria.

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FOREIGN ECONOMIC RELATIONS

Bulgarian, Iranian ministers hope to sign agreement on oil transit soon

Iran's Housing and Urban Development Minister Ali Abdolalizadeh has expressed the hope that Bulgaria and his country will sign an agreement on transiting Iranian oil to Europe via Bulgaria during a forthcoming visit to Iran by Bulgarian Energy and Energy Resources Minister, Milko Kovachev, BTA web site has reported. 
30th August was the last day of a four-day visit that Abdolalizadeh paid to Bulgaria at the invitation of Deputy Prime Minister and Regional Development and Public Works Minister, Kostadin Paskalev. At the Boyana Residence, the two ministers signed an agreement on long-term cooperation in construction. Under the agreement, Bulgarian and Iranian companies will work on joint projects in the two countries and in third countries. 
The agreement envisages establishment of a standing working group on construction that will monitor compliance with the obligations under bilateral agreements in construction, the buildings material industry and the construction industry. The working group is expected to hold its first meeting by mid-2003. 
The Iranian Minister said that his country is implementing bridge construction projects and is building the first railway in Afghanistan. He expressed the hope that Bulgarian construction companies will join these projects. 
Deputy Prime Minister Paskalev expects the Iranian Ministry of Petroleum to sign a memorandum on cooperation in energy with its Bulgarian counterpart department. 
The Bulgarian Building and Construction Chamber and Iran's Association of International Consultants and Contractors signed a protocol on the establishment of an association of Bulgarian and Iranian companies for cooperation in construction and the manufacture of construction materials.

Bulgarian premier, Macedonian president discuss transport corridor

Prime Minister Simeon Saxe-Coburg received Macedonian President Boris Trajkovski in his home, the Vrana Residence. The Macedonian state leader was returning from the Johannesburg summit via Sofia, BTA News Agency has reported. 
Trajkovski and Saxe-Coburg discussed the development of bilateral relations and possible ways to strengthen them, the Government Information and Public Relations Directorate said. 
The conversation focused on the importance to both countries of the construction of Corridor VIII. They stressed the importance of the Stability Pact to the region. 
Saxe-Coburg emphasized that he sets great store by the good neighbourly relations and cooperation between Bulgaria and Macedonia. Trajkovski talked about his impressions of the World Summit on Sustainable Development. 

Russia-Bulgaria trade nears US$700m in January-June 2002

Trade turnover between Russia and Bulgaria in the first six months of this year stood at US$698m, of which 94.4 per cent was exports from Russia, the press service of the Russian Economic Development and Trade Ministry said on 16th September.
In 2001, bilateral trade turnover was US$1,568m. Russian exports stood at US$1.45bn, and imports at US$119m, the ministry said in connection with Bulgarian President Georgi Purvanov's upcoming visit to Moscow scheduled for 19th September.
Russia accounts for 2.7 per cent of Bulgarian exports and 24.3 per cent of its imports. Bulgarian exports to Russia are dominated by medications, perfumes and cosmetics, some types of machinery and packing materials.
Russian exports to Bulgaria, 90 per cent which are energy resources (oil, gas, nuclear fuel, coal), remain large but fluctuate depending on changes in world energy prices, the ministry said.
It believes that the creation of joint tourist ventures could be a promising area of cooperation between the two countries.

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FOREIGN LOANS

Bulgaria, Germany sign 2003 economic aid agreement

Germany will grant 5m euros in support of Bulgaria's economy in 2003 under an agreement on financial cooperation in 2002, Deputy Prime Minister and Economy Minister Nikolay Vasilev told journalists on 4th September, BTA web site has reported. 
Vasilev and the German Ambassador in Bulgaria, Ursula Seiler-Albring, signed an agreement on financial cooperation between Bulgaria and Germany for 2001 under which Bulgaria is to receive a subsidy of 7.67m euros. Four million euros will go for credits to small and medium-size enterprises, almost two million for the construction of the Danube Bridge and some 1.5m euros for infrastructure, Vasilev said. 
Since 1998 Germany has granted Bulgaria 27.7m euros. Some 9.2m euros were extended for microcrediting and 9.5m euros have been extended within the framework of technological cooperation, the German Ambassador said. Vasilev said that until the end of the year the Government's efforts will be directed towards the development of small and medium-size business.
Ambassador Seiler-Albring said encouragement of medium-size business is the only way to bring about the recovery of the Bulgarian economy...

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INSURANCE

Privatisation agency approves DZI stake sale

The Bulgarian privatisation agency has approved the sale of a majority stake in the largest state insurer for 21.52m Euros to a local private company, the news site novinite.com said on August 20th. The Sofia Contract company, owned by banker Emil Kyulev, is to acquire 80% of DZI insurance, paying 30% in cash upon the signing of the deal and another 50% within 30 days. The remaining 20% would be deposited in an escrow account, the report said, without naming the planned date for the completion of the sale.
Sofia Contract would be committed to retain the DZI shares and all employees for a minimum of five years and invest 13.38m levs (US$6.76m).
It was the second try at DZI privatisation - the first collapsed in November last year, with the buyer offering US$20.5m for a 67% stake.

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PRIVATISATION

Bulgaria sells tobacco monopoly 

The consortium of Tobacco Capital Partners and Clar Innis BV was selected as preferred buyer for Bulgaria's tobacco monopoly, Bulgartabac. Apostol Apostolov, head of the privatisation agency announced the final ranking of the three bidders, who would go through to the final part of the privatisation procedure. The offer of Russia's Metabak, which came second in the preliminary ranking was excluded from the tender. Apostolov explained that Metabak did not submit satisfactory answers to half of the additional question of the privatisation agency, by on August 19th, New Europe has reported.
The Deutschebank-backed winning consortium offered 110m Euros for an 80 per cent stake in cigarette-maker Bulgartaback on July 22nd. The consortium also pledged to invest about 71m Euros in production over the next five years. Bulgartabac's businesses include 12 processing factories and nine cigarette factories. It also has five cigarette-making factories in Russia and one each in Ukraine, Romania and Yugoslavia. Bulgaria produces some 44,000 tonnes of tobacco a year.
In the final ranking, the consortium of Tobacco Capital partners and Clar Innis BV came first with 98.15 points, followed by Tobacco Holding with 91.63 points and Rosbulgartabak with 82.02 points. "I hope that the contract with the winner will be signed by the end of September at the latest," Apostolov said. 
The sale of Bulgaria's tobacco monopoly comes late, but is fully transparent, according to the Executive Director of the Market Economy Institute, Krassen Stanchev. "This is the fist transparent deal, offering equal rules for all participants," he said on the national radio. In his opinion, most of the privatisation deals in Bulgaria have been delayed by seven to eight years. The sale of Bulgaria's tobacco monopoly, Bulgartabac Holding, is a significant stride ahead in the privatisation programme of the Bulgarian government this year. That is a conclusion in the latest emerging market report of J.P. Morgan Chase & Co; the second-largest financial services firm in the US. The analysts note that the government selected a buyer, backed by Deutsche Bank. According to them, that is an important sign that the government is committed to sell telecom monopoly, BTC, and State Insurance Institute, DSK. The analysts say that the sale of the tobacco holding is the key for the restructuring of the Bulgarian economy. 
The deal is considered to be a major test for the Balkan country's reformist government and its efforts to attract foreign investment. The deal is critical for Bulgaria, which is struggling to meet tough budget guidelines mandated by the European Union. Bulgaria hopes to join the trade bloc in 2006

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TOURISM

Sheraton reports 2m lev profit in Jan-June

Sheraton Sofia Balkan JSC made profits for the first half of the year of 2.004m Bulgarian levs, which is 7.7% higher compared to the same period last year. This is shown by the report, presented by the metropolitan hotel to the stock exchange, half a month later than the law stipulates, Pari Daily reported. 
In 2001 profit of the company were 4.26m levs. The proceeds of Sheraton from January to June amount to 9m levs, less than the 9.9m levs a year earlier. The expenses fell too - from 7.076m levs to 6.441m. Three months ago the South Korean company Daewoo Engineering and Construction sold its package of 67% of the shares of the metropolitan hotel to a group of Greek investors. At present the main shareholder with 46.94%, is Grecotel SA through two Bulgarian companies, Access Bulgaria holds 13.41% and EFG Eurobank Ergasias 6.7%. Albena Invest Holding holds about 11% of the share of Sheraton Hotel, the other part of the capital is in the hands of Bulgarian and foreign physical and legal persons.

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