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Books on Bulgaria
REPUBLICAN REFERENCE
Area(sq.k.m)
110,910
Population
7,517,973
Capital
Sofia
Currency
Lev
President
Georgi Purvanov
Private sector
% of GDP
40%
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Update No: 100 - (25/08/05)
Socialists win the elections
The elections to parliament on June 26th were won by the former communists, now
called Socialists, who took 31% of the vote. The outgoing National Movement of
former king, Simeon 11, obtained just under 20%, while the Muslim-based Movement
for Rights and Freedoms got 12.7%.
After trying unsuccessfully to form a new government with the latter alone, the
Socialists turned to the former plus the centrists to form a new coalition.
Centrists hope new government will usher Bulgaria into EU
Bulgaria's centrists, who signed a deal on August 16th to form a government with
the other two largest parties, hope the new cabinet will live to see 2007, when
the country is scheduled to join the European Union. "It would be a good
thing if the new government enjoys political longevity, but it is crucial that
it survives to usher the country into the European Union", Ognyan
Gerdzhikov from Simeon II National Movement and former parliamentary speaker
told the morning broadcast of Nova TV channel.
He slammed the opposition's allegations of unconstitutionality against the
Socialist prime minister-designate Sergey Stanishev. In his opinion unnecessary
tension will grip society if the opposition approaches the Constitutional court
at this moment.
Commenting on the statement of President Parvanov that "the procedure will
not take the upper hand over politics", Gerdzhikov said it was "legal
nihilism".
A day earlier the rightist United Democratic Forces (UtDF) vowed to approach the
Constitutional Court in case the Parliament approves a new socialists leader for
prime minister.
UtDF leader Nadezhda Mihaylova explained that under the Bulgarian Constitution
one person could not be handed a governing mandate twice. In her words the
president's decree is a "personal one."
Georgi Markov, a former Constitutional judge, also voiced his concerns that
Stanishev's new prime minister nomination is not acceptable under Bulgaria's
Constitution. Under a decision of the Constitutional Court of 1992, a person who
was elected prime minister, but whose draft cabinet was rejected cannot not
"sit again for the exam", irrespectively of the mandates, Markov told
Bulgarian National Radio.
There has been speculation that Simeon Saxe-Coburg relies on the instability of
the new government, as it would be easily blamed for a possible delay in
Bulgaria's accession, failure to cope with the damages done by the floods,
rising prices and falling investments. Saxe-Coburg is said to believe that the
government will be alive and kicking for no more than a year when he may join
the presidential race, running against the current President and former
Socialist leader Parvanov.
King's party defends coalition policy
He has his party behind him. The party of the former king defended the rightness
of their coalescing with the Socialist Party in Parliament. According to
Vladimir Donchev, a broad coalition did not mean a lack of political principles.
The so-called "multipolar model" is a union of parties who know how to
build bridges and overcome barriers, the deputy floor leader of Simeon II
National Movement (SIINM) said. "There are no eternal enemies in
politics," Donchev underlined.
He was apparently referring to SIINM's U-turn in their attitude towards the
Socialist Party. A few weeks ago, SIINM dumped a possible union with the SP, and
doomed their government draft to failure.
Then the centrist party revised their stance and embraced the SP and the
Movement for Rights and Freedoms (MRF) for a coalition. MRF are now bearing the
mandate for forming the next government. MRF were also the junior coalition
partner to SIINM in the outgoing government.
Sofianski Benevolent to Three-Force
Bulgaria's likely ruling coalition received best wishes from opponent Stefan
Sofianski in Parliament. "I hope that the new government will be
successful, because the lives of all Bulgarians are depending on that," the
right-winger said.
His coalition Bulgarian National Union (BNU) was poised to become the fourth
partner in the ruling coalition, but then abandoned the plan.
Thus the original three-force model was realized, only it took almost two months
to finally reach an agreement.
Magnificent record
Actually, the inclusion of the party of the former king into the new
coalition makes a lot of sense. Bulgaria made progress by leaps and bounds under
the able and pragmatic leadership of Prime Minister Simeon Saxe-Coburg (former
king Simeon 11). But being in power in Bulgaria invariably brings unpopularity.
Highly unpopular reforms are always necessary.
From the financial wilderness and political uncertainty of the past decade, the
reformist Saxe-Coburg-Gotha government has brought Bulgaria a long way in a few
years to its present healthy state, offering a stable and transparent economic
environment plus legal and operational framework oriented towards the needs of
business. In addition state-sponsored temporary job programmes and a rise in
private sector employment helped to cut unemployment from 17.21% in October 2001
to just about 11% now.
The overall readiness of the country on the verge of the European Union
accession on January 1st 2007 is evident from the European Commission's latest
progress report, eulogising Bulgaria's improvement in the political arena, its
economic fast track and adoption of EU laws.
Saxe-Coburg in a recent publication aptly pointed out, "Bulgaria today has
returned to the world stage. Our strategic geographical location, backed by a
strong and growing economy, allows us to punch above our weight in the Balkans,
in Europe and in our relationship with other continents and trading blocks.
Economic growth averaging five per cent for the past a few years, combined with
falling unemployment now down to 11.5%, inflation below 6% in 2004 and a stable
currency pegged to the Euro have earned us the approval of the international
financial institutions."
Within the last few years, Bulgaria has managed to come out of the shadows of
post-communist economic blues to experience brisk economic growth, rising
consumption levels and a sustainable stable market economy thus ensuring a
steadily increasing inflow of foreign capital investment.
Iskrov predicts 5.55% growth in Bulgaria's economy
Bulgaria central bank Governor, Ivan Iskrov, announced recently that
Bulgaria may succeed in maintaining this year's growth pace at last year's level
because rising consumer spending and exports overcome the impact of restrictions
on bank lending. The 24bn Euro economy grew 5.6% last year as it was driven by
soaring prices of metals and oil-products, its main exports, record foreign
investment and a lending boom, Sofia News Agency quoted Iskrov in an interview.
Measures to ease the pace of lending are unlikely to hamper this year's
expansion. He said he expects growth of between 5% and 5.5%. "We don't
expect restrictions on lending to curb growth. Emerging economies like ours
don't need artificial growth generated by massive borrowing. We are talking
about stability, predictability, sustainability and only after that about
growth," Iskrov said.
According to the central bank chief, Bulgaria has covered all Maastricht
criteria, apart from inflation, but given the restrictions of the currency
board, the central bank is not in a position to target inflation. The country
has a debt-to-GDP ratio of 34% by year-end as the economy grows and debt is
repaid, added Iskrov.
The government targets a budget surplus of 1% of GDP this year after achieving a
1.7% surplus last year. Year-end annual inflation if projected at 3.5% in 2005
from 4.3% in March. "The country will enter the Eurozone with the current
fixed exchange rate of 1.95583 lev per Euro, according to the central bank's
long-term strategy," Iskrov said. Lachezar Bogdanov, managing partner of
consulting firm Industry Watch in Sofia, said it is quite natural to expect
growth above 5% as output and exports continue to perform well this year.
Domestic and foreign investment is expected to grow 10%.
IMF approval leads to FDI
This is evident from the successful completion of the stand-by agreement
(SBA) with the International Monetary Fund (IMF) in spring 2004 and replacement
by another SBA running for two years from September 2004 - thus covering the EU
accession period until January 2007.
Interesting to note that the SBA has been of a "precautionary" nature
with money disbursed not automatically but only if it is actually needed. This
IMF approval also helps the country to attract foreign direct investment (FDI)
and keeps a restraint on governmental spending.
Moreover, with the EU accession being formalised, Bulgaria will be a net
recipient of EU funds and this will impact real economy and the policy forming
environment. With EU funds comes the stale outlook and the vibrant economic
development can be gauged by the fact that the credit rating of Bulgaria has
been increased 112 times in the past three years.
This resulted in Bulgaria notching the most attractive foreign direct investment
destination spot in eastern Europe and gobbling up nearly two billion Euro in
2004 alone. According to data available, with foreign investment accounting for
9.2% of its GDP, Bulgaria can boast of the highest FDI per-capita levels in the
region.
The pragmatic policies of Saxe-Coburg government brought this windfall of
foreign investment. Moody's credit rating agency listed reasons to invest in
Bulgaria as, "strategic location, skilled labour, excellent technical
qualifications, competitive cost, robust legal framework and expected EU
membership."
According to financial pundits the global outlook for FDI is bright. Pavel
Ezekiev, chairman of Invest Bulgaria Agency was quoted by local media as saying
that the government's strategy at the moment is to attract investments from
countries that have not made significant contributions to its local FDI. The
focus was cited as on the United States, Canada, United Kingdom, Ireland and
Sweden as well as on Spain and France.
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BONDS
United Bulgarian Bank places 80m bond
United Bulgarian Bank (UBB), 89.9 per cent owned by the National Bank of Greece,
so far has placed the biggest 80m bond in the country. The three-year bond has a
3.55 per cent fixed interest coupon payable semi-annually Standard reported.
This is UBB's sophomore three-year unsecured corporate bond after a 15m lev
paper issued in 2002.
The placement is managed by Raiffeisenbank (Bulgaria) EAD with Bulbank acting as
co-manager. In 2004 the bank floated a 40m levs mortgage bond to reach another
milestone on the domestic securities market.
Standard and Poor Ratings Services confirmed that UBB's credit rating is
identical to Bulgaria's.
The lead manager expects that the new UBB corporate bond will become the most
liquid debt instrument denominated in the local currency, with a benchmark
status on the local capital market attracting local and foreign investor
interest, Raiffeisenbank said in an official statement.
The bond is expected to be listed for secondary trade on the local bourse
shortly. The latest issue is part of the bank's plans for the placement of
securities with a combined value of 300 million levs, or their equivalent in
foreign currency, on both the local and the foreign market over the next five
years.
The bank's board of directors, depending on investor sentiment and market
conditions, will determine their parameters. Since early 2004 Raiffeisenbank
(Bulgaria) EAD has structured and lead managed 12 issues of corporate, mortgage
and municipal bonds with a total value of 101m Euro.
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ENERGY
Italy's Enel focuses on Belene nuclear plant
Italy's Enel, the majority owner of the Bulgarian Maritsa-Iztok third thermal
plant has recently participated in the bid for the Bobov Dol thermoelectric
power station. The representatives of Enel said that if the Bulgarian government
announced plans to attract a strategic investor in the compound's construction
then Enel will join in, Sofia News Agency reported.
Greek company, Public Power Corporation, outbid Enel with an offer to buy the
plant for 70.5m Euro. However, Bulgaria has halted the station's disputed
privatisation on the grounds that the offers are not paying enough.
Meanwhile, Italian weekly Panorama published an article explaining how Bulgaria
has been building a nuclear plant 200 kilometres away from its capital, while
European countries are distancing themselves from nuclear energy.
The weekly stated that Bulgaria and the other east-European countries produce
nuclear energy, hoping to it sell to the West. Western Europe will close 60 per
cent of its plants by 2012 while Germany alone will give up 19 per cent.
This indicated that the Bulgarian Belene plant would benefit to a large extent.
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FOREIGN INVESTMENT
Sofia signs deal with German investor
Bulgarian Economy Minister, Milko Kovachev, recently signed a deal with the
German Lindner Holding and its Bulgarian arm, business park Sofia EOOD, Sofia
news agency reported.
The contract concerns the implementation of the Germany company's investment
plan in Bulgaria and the construction of the business park technical
infrastructure.
Bulgaria's state budget will provide 13.6m levs of funds.The project's total
costs stand at over 150m levs.
On June 23, the council of ministers passed a decision to authorise Kovachev to
conclude the contract in the name of Bulgaria.
Being Investor First Class, certified by InvestBulgaria agency in November 2004
in compliance with the investment promotion legislation, business park Sofia
will be granted 3,960,000 levs by the state for the infrastructural improvement
and accomplishment of a key part of the ring road Okolovrastno Shausse, one of
the principal transport infrastructure facilities in Sofia, the InvestBulgaria
Agency Web site said.
Lindner Bulgaria will be given financial support for the construction of the
technical infrastructure networks, as well as water-supply and sewerage
infrastructure systems of the section of the road bordering on Business Park
Sofia.
Turkey's Sisecam boosts Bulgarian investments
Turkey's giant glass producer, Sisecam, recently signed a contract with
Bulgaria's outgoing economy minister, Milko Kovachev, Sofia News Agency
reported.
Sisecam which will increase the amount of its investments in Bulgaria, is
expected to construct a glassware factory ten metres under the ground in the
town of Targovishte, 318 kilometres northeast of Sofia. Sisecam plans to invest
a total of US$160m in the project, which encompasses the construction of two
plants - glassware and sheet glass, which will rise opposite the first plant.
Sisecam' total investments to Bulgaria will reach US$220m. The plant is expected
to start operations in 2006. The new glasswork manufacture is expected to create
some 1065 new jobs in the northern town of Targovishte, which is one of the most
severely hit by unemployment regions in the country. About 85 per cent of the
Bulgaria-made production will head for the EU market.
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TELECOMMUNICATIONS
Five telecom individual licences to be granted
Five additional individual licences for the provision of telecommunications will
be given through a public telecommunications network of the fixed radio service,
according to a supplement to the ordinance establishing the rules of procedure
and the technical parameters for operation of telecommunications networks of the
fixed radio service that the cabinet approved on July 7, the government
information said, Sofia News Agency reported.
The supplement removes the restriction to fixing the admissible band width in
granting licences for provision of telecommunications of the
"point-to-multipoint" type. This makes it possible to grant an
additional five individual licences for scarce resources if a competitive
procedure is announced: two licences for 21 MHz and three for 10.5 MHz. This
will affect favourably the development of the telecom market and the protection
of telecom service users' interests, a statement said. The provision of an
optimum number of licences will encourage the entry of more operators into the
market and the development of competition in the sector.
Telekom Austria takes over Bulgaria's Mobiltel
The Telekom Austria (TA) group with its mobile phone subsidy Mobilkom Austria
recently announced that it has completed a 100 per cent takeover of the
Bulgarian Mobiltel, Sofia News Agency reported.
The Bulgarian mobile phone market leader, valued at up to 1.6bn Euro (US$1.9bn),
was the biggest-ever foreign acquisition by an Austrian firm following the
signing of a share purchase agreement on June 1, a statement said. Mobiltel has
been acquired from a consortium of Austrian and international financial
investors. Prior to acquisition, Mobitel was the region's only dominant provider
not controlled by a western major.
Sellers in the huge deal were a consortium including Austrian businessmen,
Martin Schlaff, Josef Taus and Herbert Cordt, as well as seven private equity
companies involving the banks ABN Amro Capital, Citigroup Investments, and CVP.
"I am pleased to announce the conclusion of the acquisition of Mobiltel,
the largest Bulgarian telecommunications provider, and to welcome the company
into the Telekom Austria Group. This successful closing fills me with pride
especially because this is the largest acquisition ever carried out by an
Austrian company," said chairman of the Telekom Austria board, Heinz Sundt.
Preparations for integration of Mobiltel were started in February when, Mobikom
Austria, the wireless subsidiary of the Telekom Austria Group, formed a
strategic core team to ensure smooth ownership transition and integration of the
company into the wireless operations.
Following the closing of the deal Josef Vinatzer was appointed CEO of Mobiltel.
The Telekom Austria Group views Mobiltel as an excellent asset in a growth
market. The company has managed to build a strong customer base and to develop a
market position that fits the Telekom Austria group's profile.
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