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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: 110 - (27/07/06)

Unpopular government again
Governments in Bulgaria, as in most former communist countries in Central Europe, become very unpopular pretty quickly. They make promises of improvements at electoral time, on which they cannot possibly deliver, in order to win. Then comes the inevitable disillusionment - inevitable in transition economies. Bulgaria's economy is doing petty well - but not soon enough for most.
A Gallup poll shows, for example, that in July the Bulgarian Cabinet received the trust of only 20 per cent of the Bulgarians having the right to vote. 
A large numbers of the supporters of parties in the ruling tripartite coalition cannot accept the alliance of the Bulgarian Socialist Party (BSP), National Movement Simeon II (NMSII) and Movement for Rights and Freedoms (MRF, which was cobbled together last year after the defeat of the previous government, led by the former king, Simeon II.
Things are not so bad for the premier personally. Nearly 33 per cent of the Bulgarians trust Prime Minister Sergei Stanishev, which ranks him fifth among the politicians with the highest rating. According to people Stanishev managed well in the current difficult political situation. This explains the 13 per cent difference in the rating of the prime minister and Cabinet.
Politicians with better standing than Stanishev include President Georgi Purvanov, Sofia Mayor Boiko Borissov, Prosecutor-General Boris Velchev and Culture Minister Stefan Danailov. 
Purvanov maintained his chances for a second term in office. Nearly 32 per cent of all Bulgarians said they were willing to vote for Purvanov in the upcoming presidential elections.
BSP remains the most preferred political formation, followed by Borissov's Citizens for the European Development of Bulgaria and the MRF.

Bulgarian Agrarian Lady Tipped to Run for President
An unusual development for Bulgaria is that for the first time a woman has entered the race for the presidency.
Bulgaria's right-wing agrarians have nominated their leader to run for president in the country's autumn elections. The council of the Bulgarian Agrarian National Union - People's Union (BANU-PU) held a meeting on July 21 to voice concerns over the fruitless efforts of the right-wing to pick a joint candidate.
Ms Mozer told journalists that she is yet to decide whether to accept the nomination. 
The agrarians were the only ones not to disclose their nominee for this autumn's presidential vote at the latest meeting of the Bulgarian rightists on July 19, when they once again failed to break the stalemate.
The rightists, who stand a slim chance only if they run together, have been torn to shreds by controversies and ego fights in trying to agree on a marriage of convenience.
Four have been discussed so far as eligible nominees - Nedelcho Beronov, Vesselin Metodiev, Sergey Ignatov and the leader of the Union of Democratic Forces (UDF), Petar Stoyanov.

The crux of the problem
Prime Minister Stanishev has much riding on the outcome of the elections for President to be held in the second half of the year.
If incumbent head of state Georgi Purvanov fails to win a second term of office, Stanishev will lose a powerfully-placed sponsor, the man who was his predecessor as leader of the Bulgarian Socialist Party (BSP). Defeat for Purvanov would also be a reverse for the BSP and by implication, for Stanishev's leadership of the party. Whether Purvanov stands as the party's official candidate, or as an "independent" who happens to be backed by the BSP, the risk of liability for Stanishev remains the same.
At the same time, the unofficial campaigning is putting strain on the tripartite governing coalition, made up of the BSP, the National Movement Simeon II, and the Movement for Rights and Freedoms. Perhaps with a view to reducing its vulnerability to criticism because of its participation in the current Cabinet, the NMSII has been emitting signals about leaving the coalition. A July 7 report in Bulgarian-language weekly 168 Chassa said that NMSII leader Simeon Saxe-Coburg had already approved a statement about leaving the coalition. On the same day, mass-circulation daily Trud quoted NMSII MP Atanas Shterev as saying that if an analysis showed more negative marks for the Cabinet than positive ones, the NMSII would quit the Cabinet.
Whether the NMSII genuinely intends leaving the Cabinet, or is merely shadow-boxing, remains to be seen. What does appear clear is that the NMSII, the current coalition's immediate predecessor in government, intends opposing Purvanov, either by putting up its own candidate or - although this appears a somewhat unlikely scenario - joining in support for a joint centre-right presidential candidate, a figure that continues to be elusive.
In the past week, Stanishev made his first overt campaign call on behalf of Purvanov, when the BSP leader met party local leaders. Stanishev urged mayors who had been elected on tickets of the Coalition for Bulgaria (the left-wing group dominated by the BSP) to campaign for Purvanov. 
The MRF, the party led by Ahmed Dogan and supported mainly by Bulgarians of ethnic Turkish descent, this past week declared its support for Purvanov winning a second term. 
MRF deputy leader Yordan Tsonev described Purvanov as a successful President.
"He has placed national interests above partisan interests, and has the proper stature of a head of state. There is no reason why the MRF should not place its confidence in him again," Tsonev was quoted as saying in Bulgarian-language media reports. 
This raises the scenario that in the last months before January 2007, the provisional date for Bulgaria to join the European Union, two out of the three coalition partners in the Cabinet formed to deliver Bulgaria into the EU will be doing electoral battle with the third. A distracting battle, but not necessarily a crippling one.
Although it remains unclear who his opponents will be and although he continues to lead in the polls even against theoretical opponents, Purvanov has no reason to be complacent.
Polls in the past two weeks have given him leads variously of seven to 10 percentage points over Sofia mayor Boiko Borissov. Assertions that Borissov will or will not stand for President are being made in media and political circles with equal vehemence. Even if he does not stand, Borissov is well placed to influence the outcome of the election, and it is certain thus far that he will not be backing Purvanov.
Amid the undeclared war for the Presidency, negative campaigns in the media continue apace. A declining trend in Purvanov's ratings has been linked in media reports to allegations that he was an agent for the communist-era political police, the State Security, a charge for which no documentary evidence has been produced and which Purvanov denies.
Borissov, in turn, was the focus of media reports this past weekend alleging that, contrary to law, he retained posts in two private companies. Borissov rejected the allegations, showing documents proving that he had quit the companies in 2001 when he was appointed to his previous public office, that of chief secretary of the Interior Ministry. More bizarrely, Borissov responded to his critics in the Democrats for a Strong Bulgaria, the right-wing party led by former prime minister Ivan Kostov, by implying that they wanted him dead.
"Gargamel (a nickname for Kostov) and his smurfs have been studying my route and watching my house," Borissov told Bulgarian news agency BTA on July 8. Kostov responded that the DSB wanted Borissov safe and sound and solving the problems of Sofia.
The Borissov story went away fairly quickly when Purvanov grabbed the headlines by, at a forum on July 11 about pensions, calling on the Government to come up with an action plan for 2007 to 2009 that would see pensions increased. Purvanov, who in the 2001 presidential election campaign vowed that he would be a "social president" called for an energetic social and economic policy to stop the impoverishment of Bulgarians. His statements earned him extensive and uncritical print and broadcast coverage, no bad thing for a future candidate in a country where the population is ageing.
On the right wing, the situation remained unclear. Kostov's DSB has pushed forward Constitutional Court president Nedelcho Berenov (78) as its nominee for a joint right-wing candidate, after stridently opposing the centre-right Union of Democratic Forces' nomination of its own leader, Petar Stoyanov. Stoyanov lost to Purvanov in 2001, a few months after Kostov led the UDF, then a much larger political force which included both Stoyanov and Kostov as members, to defeat in the parliamentary elections.
Kostov described Berenov as having "doubtless qualities as a unifier". Whether unity would be achieved remained an open question, given media reports that the UDF was now considering nominating Sofia city councillor Vladimir Kisyov as president.
Even if the right-wing come up with a joint candidate, the nominee would face a tough challenge, if a report in daily newspaper Duma, a journal closely aligned to the BSP, is to be believed. On the basis of polls by ASSA-M and Afis, Duma reported on July 11 that 20 per cent of UDF supporters and six per cent of DSB supporters would support the re-election of Purvanov as President. An entertaining assertion, but one that takes no account of, among other things, who the other candidate would be.

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AVIATION

Fraport wins concession to operate two airports 


Fraport, the company that runs Frankfurt Airport, announced on June 20th that it had won concessions to upgrade and operate two Bulgarian airports and was keen to buy a central London airport, Deutsche Presse-Agentur (dpa) reported. 
It said a contract would be signed within the next month to run the airports at Varna and Burgas on the Black Sea coast for the next 35 years. 
Under the 35-year concession agreement, the picked candidate will invest 403 million Euro for the modernisation of the two airports. Some 215 million Euro will be invested in Burgas Airport and 188 million Euro will be used for the modernisation of Varna Airport. The concessionaire will make a payment of three million Euro and is expected to pay annual fees of 19.2 per cent of the total revenues. 
The deal should be finalised within a month, and the concession deal will come into force less than two months afterwards. According to schedules, the government should end the renovation work on the partial enlargement of the two terminals as they have been experiencing difficulties in operating the large number of flights. The Bulgarian investment involves Fraport as the consortium leader with a 60-percent share alongside BM Star of Bulgaria. 
The cabinet chose Fraport and BG Star after the Supreme Administrative Court overruled the selection of Copenhagen Airports. An inspection revealed that Copenhagen Airport failed to meet one of the requirements for previous experience in operating airports in more than two different countries. In May, Fraport and BM Star increased its offer from 16.8 to 19.2 percent of the money gathered from taxes or airport services, depending on which figure was higher.
Fraport and BM Star announced in a press release that they are pleased by the cabinet's decision and both guaranteed to improve the conditions at the two airports. Each airport handled 1.55 million passengers last year, mainly vacationers from Western Europe on their way to Black Sea beaches. Fraport says it has investments in a total of 60 airports worldwide. 
A Fraport spokesman confirmed there was also interest in buying London City Airport, a short-runway field used mainly by airlines catering for business travellers. 
"We are considering whether that project fits our strategy," he said. Irish investor Dermot Desmond is reportedly seeking a buyer for London City Airport, which was opened in 1987 and is centrally located, but much smaller than the Heathrow, Stansted, Gatwick or Luton airports which also serve London. Reports say the asking price for London City Airport which has won passengers because of its fast turnaround times is 920 million Euro.

Interest in privatising Bulgaria Air 

Both Bulgarian and foreign investors have already declared their interest in the privatisation of the national air carrier Bulgaria Air, the head of the State Privatisation Agency, Todor Nikolov, announced on June 8th, Sofia News Agency reported. 
Recently the Privatisation Agency announced the two-stage process for the selection of Bulgaria Air's new owner. The investor would get the entire capital of the company, apart from a single share. 
Bulgarian air carrier, Hemus Air, was the company expressing the highest interest in Bulgaria Air. "We were the airline that helped the state in the establishing of 'Bulgaria Air' and now we are officially declaring our interest in its privatisation," Hemus Air Executive Director, Dimitar Pavlov, was quoted by the news agency as saying. Pavlov said that Hemus Air included further development of the company, thus making a consolidation of the aviation business in Bulgaria. 
It would also help the establishment of a European company by offering 20 modern planes and over 30 destinations to its clients. However, as Hemus Air does not boast the necessary revenues of 150 million Euro, Pavlov was ready to use both options including strategic and financial investors. 
Earlier, Austrian Airlines and York Management Investment said they may be interested in the process, Nikolov said. So far, Austrian Airlines has not confirmed its interest. The state-owned company succeeded the bankrupt Balkan Airlines in late 2002. 
Russian company, Ilyushin Finance, is among the potential buyers of Bulgaria Air. Illyushin Finance press officer, Andrei Lipovetski, confirmed that the finance and investment company was interested in the privatisation of the Bulgarian carrier, mediapool.bg reported. 
The bank and finance group National Reserve Corporation (NRC) of Russian oligarch, Aleksandr Lebedev, is a shareholder in Ilyushin Finance. NRC Lebedev owns 30 per cent of the Russian carrier Aeroflot, shares in Gazprom and RAO EES energy company. Illyushin Finance was researching the chance to buy Bulgaria Air, Lipovetski was cited as saying. One of the shareholders in the company was interested in the Bulgarian carrier, but Lipovetski kept the names under cover. Illyushin Finance's main aim is to carry out operational and financial leasing programmes involving Russian aviation technology, it was reported. Bulgaria Air flies to 19 destinations: London, Paris, Rome, Amsterdam, Brussels, Madrid, Lisbon, Milan and Frankfurt. Bulgaria Air recently added three new destinations to its time-table in a bid to enlarge its share on the local market. 

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ECONOMIC COOPERATION

New economic cooperation programme with Serbia 

The joint Bulgarian-Serbian programme committee held its first session in the municipal palace of culture in town of Pernik, Bulgaria, with the aim to develop an operational programme for trans-border cooperation between Bulgaria and Serbia for the period 2007-2013, the Ministry of Regional Development and Public Works said, Sofia News Agency reported. 
Bulgaria's Deputy Minister of Regional Development and Public Works, Iskra Mihaylova, and Serbia's Deputy Minister for Foreign Economic Relations, Gorana Lazarevich, participated in the session. The programme's funds that will be allotted for the whole period for both states will amount to about 28 million Euro and will be provided by the European Regional Development Fund and the Instrument for Pre-accession Assistance. Deputy regional development minister, Iskra Mihailova, said that the new programme was a way of improving living standards in both Bulgaria and Serbia and the relations between the two neighbours. The programme for trans-border cooperation between Bulgaria and Serbia is an instrument to develop good neighbourly relations between the two states and marks a new stage in Bulgaria's efforts related to its preparation for EU membership. The development and implementation of projects under the programme will aid the social and economic progress in border regions, as well as the preservation of cultural heritage and traditions. A single committee in Bulgaria, including representatives from both countries, will manage the common Bulgarian-Serbian budget of the programme. 
The programme will be executed with the help of the Bulgarian Regional Development Ministry and the Serbian International Economic Relations Ministry. Serbian International Economic Relations Minister, Gordana Lazarevic, approved the common funding system. The governments should develop more similar projects, she said. Recently, Serbia did not have sufficient means to cooperate effectively with Bulgaria, but now the two countries could work on projects of common interest, Lazarevic said. Previous business projects were hindered by the complicated money transfer procedures. The new common fund would increase the success rate of common projects, Lazarevic added.

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ENERGY

Major thermal plant construction approved 

US company AES announced an investment of 1.08 billion Euro for the construction of the new 670 megawatt lignite-fired power plant in Bulgaria, Sofia news agency reported recently.
The plant will be constructed under the terms of a turnkey contract with Alstom, and is expected to begin operations in 2009. Alstom will use its clean combustion technologies and provide two pulverised coal boilers of 335 megawatts each, two steam turbines, two generators and the balance of the plant. 
Bulgaria Economy and Energy Minister, Rumen Ovcharov, turned the first sod of this new thermal power station (TPP) in the town of Galabovo, Southeast Bulgaria, in the region of Stara Zagora, the news agency reported. AES agreed to build the plant, which is one of its biggest ever projects and Bulgaria's largest foreign investment deal to date, at the Maritsa East power complex in 2001.
However, the plan stalled when AES was unable to secure funding. It is noted this will be the first large-scale power plant to be built in the country in more than 20 years. 
According to officials, the Maritsa East-1 project is the biggest Greenfield investment in Central and Eastern Europe. The new pair of 335 megawatt thermal units will each use lignite coal from the "Mines Maritsa East." The Bulgarian government has negotiated a 14 per cent decrease in the price of the energy to be produced there. Upon completion, the base load facility will serve as a source of electricity for Bulgaria and Southeastern Europe. It is supported by a 15-year power purchase agreement with the national electricity utility in Bulgaria and with the state owned mining company, Maritsa East Mines. 
More than 2,000 people are due to take part in the building works and some 10,000 jobs will be created. AES projects own funding of 30 per cent of the project and the rest of 70 per cent in debt financing from a group of banks led by ING, Calyon and BNP Paribas. The European Bank for Reconstruction and Development (EBRD) is also expected to finance the project with another 150 million Euro. German and French export credit agencies and the Multilateral Investment Guarantee Agency of the World Bank are providing debt insurance coverage to the lenders for a portion of the debt. 
The new power facility is seen as a replacement for the two decommissioned units of the Kozloduy nuclear power plant. "Bulgaria is the kind of market where we want to do business," AES President and Chief Executive Officer Paul Hanrahan was quoted as saying by the Sofia news agency. He said that the new plant will help supply Bulgaria's growing electricity needs and maintain the country's position as an energy hub for the region. "Maritza East 1 will be the newest, most efficient and cleanest fossil fuel power plant in Bulgaria," US Ambassador to Bulgaria, John Beyrle, was quoted as saying by the agency. 
The investment is a sign given by the United States that Bulgaria is an appropriate place for investments, with a developing economy and qualified and motivated workforce. In the first quarter of 2006 direct investments doubled, and, with the AES project, will reach, according to Ovcharov, 3,000 million Euro. "This project is proof that the Bulgarian economy is developing and the country is heading towards its European future," Ovcharov concluded. 

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EU ENTRY

World Bank supports EU entry 

Bulgarian Prime Minister, Sergey Stanishev, met with World Bank Vice President for Europe and Central Asia, Shigeo Katsu, on June 26th to discuss Bulgaria's EU entry, Sofia News Agency reported. 
Katsu's visit to Bulgaria was interpreted as a gesture of support of the country's aspirations to enter the European Union on January 1st 2007. World Bank Country Director for Bulgaria, Anand Seth, and resident representative, Florian Fichtl, also attended the meeting. 
During the talks, Katsu said that the World Bank (WB) supported Bulgaria's upcoming EU membership and would assist the country in its integration efforts. He said that Bulgaria has come close to EU membership due to its tangible progress, but needs to undergo a difficult period of intensive preparations. The WB hopes that the experience amassed during the 15 years of its relations with Bulgaria will benefit the countries which follow behind on the path to EU membership. 
On June 13th the WB's board of executive directors approved a new Country Partnership Strategy for Bulgaria for the period 2007-2009. The strategy said Bulgaria's first years as an EU member would be important for increasing economic competitiveness and business developments. It is a key document that details the WB's support to Bulgaria to achieve its goal of sustainable growth and successful EU membership. The Strategy provides the basis for the WB's operations in the country-lending, analytical work and technical assistance. 
The new strategy envisages a lending programme of up to US$300 million per year in loans annually. Stanishev said that the strategy is quite flexible. "It can be adapted very quickly to suit any new tasks and challenges facing the country," he said. According to Stanishev, the Strategy is focused on several important areas, taking into account Bulgaria's expected accession to the EU in 2007 and the importance of the first few years of membership for the country's development, the convergence of its economy with the European economy, the strengthening of its competitiveness and its evolution towards a knowledge-based economy. 
The programme covers, among other areas, infrastructure and social development, including health care and education. The WB would be both a source of funding for Bulgarian projects and a reliable partner as an influential international finance institution together with all other institutions in its group partner, Stanishev said. 
Katsu said that the bank believed Bulgaria would be able to deal with the changes it would experience after joining the EU. "In this sense, we will count on its support for the implementation of joint projects in the framework of the Partnership Strategy and on its expertise and analysis concerning the state of the Bulgarian economy, the business environment and the reforms needed in various sectors." Moreover, Katsu also presented the WB's new country manager for Bulgaria, Florian Fichtl.

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FOREIGN INVESTMENT

More investments in industrial zones 

InvestBulgaria Agency Executive Director, Stoyan Stalev, invited Bulgarian and foreign investors to allocate more money for the development of industrial zones, Sofia News Agency reported. 
The announcement came during a meeting of the Bulgarian Business Leaders Forum (BBLF). Stalev said the country has sufficient industrial land plots for this purpose and there is an opportunity to utilise money from the EU structural funds for setting up such zones. 
Another form of profitable investment was innovation centres to promote Bulgarian qualified workers who received training in Europe, Stalev said. Bulgaria has a potential to make qualified labour popular in Europe, as some 30,000 Bulgarians are currently studying in EU countries. For example, in Germany some 12,000 Bulgarian students are studying. German chambers of commerce have already included Bulgarian students' addresses in their sites so that investors are able to establish contacts with them, Stalev explained. 
Other projects discussed during the meeting included opportunities for developing the automobile industry in the country. Bulgaria is surrounded by countries which manufacture cars. Bulgaria should use the experience of neighbouring countries and attract investors for developing plants for automobile parts production. Thus, the investment sectors of the country will be diversified. Currently, only 25 per cent of the investments are in production. Energy is another attractive sector to foreign investors. Stalev also said that the Bourgas-Alexandropoulos oil pipeline and NABUCCO gas pipeline are a main priority of the cabinet.

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