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BULGARIA


  
  

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 19,859 15,608 13,600 69
         
GNI per capita
 US $ 2,130 1,790 1,650 106
Ranking is given out of 208 nations - (data from the World Bank)

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%
 



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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