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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: 068 - (01/01/03)

Return of the King
The ex-kings of Europe after the Second World War were a curious bunch. They ranged from Balkan monarchs and their relatives of very recent vintage, such as former kings of Greece, Serbia and Albania, or their offspring, as pretenders to a vanished throne to Bourbons in Iberia and France, to Romanovs in Russia and sundry figures in an assortment of communist countries. The only two who had ruled as monarchs and then been deposed were King Mikhael of Romania and King Simeon II of Bulgaria, who lost their thrones in 1944-45, and King Constantine of Greece, who lost his in 1976.
None have made a comeback as king except King Juan Carlos of Spain. But one has done something even more remarkable in a way and come back as his country's premier, Simeon II. He formed his National Movement party only months before its resounding victory in March 2001. He is now prime minister of a coalition government, comprising his own party and a Turkish minority party. But nearly two years in office have not been such a success as he rashly promised that they would be, offering a doubling of living standards in 800 days in time for the 60th anniversary of his accession to the throne as a child in late 1943. 
While he has renounced any ambition to mount the throne again, his appeal to the people was clearly based on his regal background, a clean record in exile abroard for over half a century and an undimmed love of his country. But all this has not been enough to perform a miracle.

Difficulties abound; but EU and NATO beckon
The ex-king knew that he was taking on a hard assignment, well aware of the scale of corruption among the elite and the desperate plight of the majority of the population, never prosperous under communism, but at least assured then of full employment and a rudimentary safety net in the welfare services.
Successive reformist governments since the end of communism in 1989 have pared down state control of the economy and cut back on state spending, especially on welfare services, to the approval of the IMF. But despite a solid growth record of four per cent annually in GDP of late, the economy is still characterised by endemic poverty for the vast majority, including the professional people, teachers, doctors, nurses and the like.
Simeon is offering early membership of the EU and NATO as the hope for a better future, that and continued IMF-backed reform, which promises foreign direct investment (FDI) and integration into Europe as the ultimate saviours. But all this takes time; and that is what he and his government do not possess.
NATO agreed to admit Bulgaria into the security organisation in the next wave by May 2004 at its November meeting in Prague. But the more vital matter of EU membership is still on the backburner. None of the countries of the Orthodox faith have been deemed acceptable for inclusion yet, the Baltic States, the Visegrad nations and Slovenia all being Protestant or Catholic Christians, not Orthodox like Bulgaria, Romania and others.

IMF remains staunch
The IMF is backing the government to the hilt, negotiating terms of disbursement of successive tranches of a US$300m two-year credit. But this is not helping the government deal with those put out of work, such as the 6,000 demonstrators calling for its dismissal in the streets of Sofia in November, after it had agreed to close two nuclear reactors to comply with EU requirements, the two outdated reactors at the Kosloduy power plant. They are but a small proportion of those who have lost their jobs due to modernisation. The rate of unemployment is over 10% and growing, while the dole is exiguous in the extreme.
It is hardly surprising that while 60% of Bulgarians polled recently were in favour of NATO membership, they back entry into the EU with far less enthusiasm, those against, 40%, exceeding those in favour, 36%.

Openings to the east and to the south
Bulgaria is the only energy-exporter in the Balkans and if it cannot bank on exporting power it will find its future imperilled. A saviour to hand is Russian and Caspian Sea oil which is to be transported along the about-to-be constructed trans-Balkan oil pipeline Burgas-Alexandroupolis, with the equal participation of Russia, Bulgaria and Greece.
An opening ceremony for the construction deal was held in Athens recently, attended by Simeon and Greek Premier Costas Simitis. Simitis emphasised the contribution that the venture should make to boosting Greek investment in Bulgaria, already at US$628m the largest slice of foreign investment there, which totals barely US$2bn. 
Turkey is another Balkan player, which is raising its profile in Bulgaria. Turkey is poised to become the largest trading partner of Bulgaria this year, if things go well, while Turkish investment is growing apace. Many Turkish firms have seen Bulgaria as a back-door entry into the EU if they eventually are unable to gain natural membership.
According to recent figures, there are more than 2,100 Turkish firms registered in Bulgaria, which comprise 25% of all the foreign firms operating in the country. This is compatible with Greek firms having the largest stake in value terms, because their Turkish equivalents are small or medium-sized by comparison. But they are very important for the economy as they are the most active entrepreneurs in the local market, being able to hire local Turks who know the ropes (10% of the population is Turkish), while creating jobs on a substantial scale for Turks and Bulgarians alike.
The Turks are particularly active in the construction industry, as in Russia, Central Asia and the Caucasus. Turkish firms have been given the right to participate in infrastructure projects supported by several programmes of the EU, such as Phare.

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Hyundai study for Sofia investments

Hyundai Motors Group launched a feasibility study in Bulgaria to decide whether it would opt for green field investment or a joint venture, reports New Europe. 
The South Korean giant has already chosen to invest in production of auto parts in Bulgaria through its daughter company Hyundai Mobis. "We prefer that Hyundai has chosen a wholly-owned car parts company in Bulgaria," Deputy Economy Minister, Milen Keremedchiev, said. He noted that the final decision would not be known till the end of the year.

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Contract with Kuwaiti JV for Sofia Airport reconstruction soon

Managers of the Kuwaiti joint venture, Mohammed Abdul-mohsin al-Kharafi & Sons - Admak General Contracting Co and Sofia Airport concluded successful negotiations for the reconstruction of Sofia airport in mid-November. After all necessary documents are prepared, the contract would be sealed, the Transport Ministry announced, New Europe has reported.
The ministry did not specify exactly what had been agreed between the two sides regarding the price that would be paid to the Kuwaiti join venture. The consortium won the international tender to construct the new runway system and the ancillary equipment this summer. Six offers were placed for the Sofia airport project by the June 18th deadline. The winning consortium offered to construct the new runway system and the equipment for US$62.6m with a discount of US$9.6m. An interdepartmental committee, including representatives of the donors under the project, assessed the offers. The whole project on construction of a new Sofia airport must be concluded in 2005.

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Bulgaria's acting development minister authorized to sign pipeline memorandum

The government mandated on 29th November acting Regional Development Minister, Hasan Hasan, to sign a memorandum on the Burgas-Alexandroupolis oil pipeline between Bulgaria, Greece and Russia, BTA web site has reported. 
The document will be signed in Athens on 3rd December. Hasan told a news conference that he expects construction to start in 2004. 
Through a golden share in the Bulgarian consortium to be set up for the implementation of the Burgas-Alexandroupolis project, the government will control the participation of Bulgarian companies, the use of Bulgarian materials and the environmental, transit and port charges, Hasan explained.
He recalled that the private companies which want to be part of the consortium, Bulgarian Operation Company, have not yet agreed on what stake each one of them wants. If they fail to do that by 15th January, the government itself will decide how the stakes will be distributed. 
The declared investment intentions of the participating companies are twice as much as the project value, said Hasan. Most of the committed investment is supported by bank guarantees. 
Hasan would confirm information leaked from the future consortium partners, that LUKOil Bulgaria claims a majority stake. He explained that the possibility for future transfer of stakes to other companies will be regulated by the agreement to be signed by Bulgaria, Greece and Russia.

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EBRD takes full ownership initiative in telecoms

The European Bank for Reconstruction and Development (EBRD) will invest 90m Bulgarian levs in GloBul next year, according to Banker Weekly reports. News of this move emerged after a recent business meeting between visiting EBRD President, Jean Lemierre, and President, Georgi Purvanov.
During the session, attended also by Finance Minister, Milen Velchev, and Energy Resources Minister, Milko Kovachev, Lemierre revealed the bank's plans of future involvement in Bulgarian business initiatives.
The GloBul investment, purportedly to be implemented in partnership with the International Financial Corporation (IFC), confirms the bank's interest in the development of the telecommunications sector in Bulgaria. What distinguishes this move from EBRD's former ones is that about 10m levs will be in stakes and 80m levs in loans, marking EBRD's first attempt to join the market as an owner. The investment will come as support for the 450m levs plan that was approved by CosmOTE, OTE's subsidiary that recently took over management of the operator. Citing GloBul sources, the company would use the resources to buy equipment and services to strengthen the country's network and turnover capital, and encourage competition in the sector.
The investment in GloBul is EBRD's largest investment in Bulgaria. Apart from the telecommunications sector, other sectors in which the bank reiterated its interest are the energy and financial sectors. Lemierre agreed to offer a 10m Euro credit line to United Bulgarian Bank (UBB). EBRD also reiterated its interest in the privatisation of the Bulgarian Telecommunications Company (BTC) and DSK Bank, as well as the rehabilitation of Maritsa Iztok 3.
Bulgarian media reports said the EBRD pledged to assist more actively in the utilisation of funds under the SAPARD and ISPA pre-accession programmes. Encouragement of small- and medium-sized enterprises and more active participation in municipal infrastructure projects and agriculture, are also among EBRD's plans. 

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Two nuclear reactors to be shut down by end of 2002

440-MW Units 1 and 2 of the Kozloduy nuclear plant will be decommissioned by the end of December 2002, said Deputy, Veselin Bliznakov. The deputy floor leader of the ruling Simeon II National Movement (SND), who is also chairman of the parliamentary energy committee, was speaking to the press on 30th November, BTA web site has reported. 
The government will make a formal decision about the decommissioning in implementation of the commitment Bulgaria has made in the 1999 memorandum with the EU, even though the two power units have service life until March-April 2003, Bliznakov said. 
He does not expect this move to affect the stability of the national energy system in the winter. 
Commenting on the likely effect on electricity prices, Bliznakov said that the staged increase of the rates by 2003 has been enshrined in the energy strategy and has no direct connection with the decommissioning of Unit 1 and 2. According to him, the government can't go on subsidizing electricity prices and they must be compliant with the EU requirements. 
Before the end of December the government will announce its decision about the frozen construction of a second nuclear plant at Belene, said Bliznakov. There are plans to build a 600-MW power plant there, for which US$1.2bn will be needed. Large foreign companies have committed long-term investment in the project. The new nuclear plant is expected to be built by 2008, according to Bliznakov. He expects this to make Bulgaria an energy centre in the Balkans even after the decommissioning of Unit 1 and 2 now and of Unit 3 and 4 in 2006.

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Navibulgar close to US$20m loan deal

Sofia Privatisation Agency (PA) is expected to issue a permit for the Navigation Maritime Bulgare (NaviBulgar) to draw a US$20m syndicated loan, the largest portion to be extended by Lloyds Bank, with one of the corporation's ships used as a collateral, NaviBulgar's board Chairman, Slaveiko Staikov, stated recently, clarifying that talks had yet to be finalised.
Since 50 per cent of the amount of one of the loans is paid, the mortgage over two of NaviBulgr's vessels will be lifted and they will restore their Bulgarian flag. As the company announced, reported by newsonlinebg, the US$20m loan is needed for the completion of the construction of the Trapezitsa and Dolly vessels by the Varna Shipyard. All tax evaluations of the Varna Shipyard's assets were due to be finalised in late November, which information is needed by NaviBulgar to calculate the municipal fee due for assuming ownership rights over the shipyard. 
More specifically, NaviBulgar needs to make a decision on whether to pay a two per cent fee on the amount of 35.5m Bulgarian lev bid at the tender for the Varna Shipyard, or to pay two per cent over the total taxation due. The insurance evaluations of the movable property have been completed. After the fees have been remitted, receiver Anelia Ananieva Srandeve, will allow NaviBulgar to assume ownership of the shipyard.

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