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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: 112 - (26/09/06)

Looming elections for the presidency
Bulgaria is due to enter the EU in January, although there are still four of the 25 existing members who have yet to ratify its accession (and Romania's), including Germany. Assuming it happens, who is president at the time is going to be of more than symbolic significance. Presidential elections are looming this autumn.
Bulgaria's Cabinet approved expenditure for the preparation and carrying out of the first stage of the presidential elections on October 22nd. The funds needed would remain below 22 million leva, State Administration Minister Nikolai Vassilev said. The sum could be optimised and reduced further, Vassilev said.
For the first time voters would use one integral ballot. The ballot boxes would be transparent and manufactured for the first time in Bulgaria. Voters would be able to cast a ballot in 12 000 polling stations throughout the country.
Tariffs and fees for the broadcast of electoral materials were also determined. Each candidate would have to pay for the television and radio commercials to be presented during the campaign period. 
An army general, a politician, a former constitutional judge, a director and a new-born leader of a nationalist party are the five presidential candidates known so far besides incumbent President Georgi Purvanov, the front-runner, and Nedelcho Beronov, leading the opposition candidates.

Petrov pitches in
But there is a newcomer to the scene who could upset the generally-held expectations. Army general Lyuben Petrov is probably the most arresting of the candidates who, with his three years as chief of staff of the Bulgarian army (1991-94), really fulfils the ideal of the strong man in uniform. Two big moments in Petrov's public life have given him a definite profile. After long years spent as a devoted member of the Bulgarian Socialist Party (BSP), the successor to the Bulgarian Communist Party, Petrov suddenly decided to form his own political movement and on August 7th 2006, officially announced the creation of the People's Patriotic Alliance (PPA).
Petrov then said his aim was to fight for "a more human and just system of human existence," and that the PPA was going to lead a more left-wing policy in the political spectrum occupied by the BSP.
What the PPA really looks like can be seen by the people behind it. The list contains 11 citizens and political organisations from the left and ultra-left wings. Among these organisations is Nova Zora, which is part of the circle closest to Volen Siderov's ultra-nationalist Ataka party. Former BSP and Ataka MPs and the Movement for Protection the Rights of Pensioners and the Socially Disadvantaged also put their signatures in support of the PPA.
A movement led by Ivan Slavkov, son-in-law of communist dictator Todor Zhivkov, added its name to the list of PPA founders. Slavkov is the former head of the Bulgarian Olympic Committee, who last year was captured on tape discussing corruption. 
It was not a surprise that the PPA's messages recalled Ataka's from last year, when Ataka won a surprising fourth position in Parliament. "We will fight against poverty and corruption in Bulgaria," Petrov said. 
The PPA was quickly described by the media as a formation that would try to steal the nationalistic vote from Siderov and Ataka. Conspiracy theories even suggested that the BSP was behind the PPA in an attempt to disorganise Ataka supporters and secure a clear victory for Purvanov in the elections. Apparently to prove these theories right, on August 23rd Petrov officially announced his candidacy for president, marking the second important moment of his political life. 
The general listed three priorities. He promised that once elected, he would initiate a referendum against the closure of Kozluduy nuclear power plant, ask Parliament to discuss a ban on the joint Bulgaria-US army bases in Bulgaria, and encourage the immediate withdrawal of Bulgarian troops from Iraq.
The PPA released a declaration that said the party was for "regulative functions of the state against the current market chaos in the economy" and "revision of the shady privatisation deals," and against "selling land to citizens from non-EU countries." To add some more colour to the situation, Petrov said his candidate for vice president would be actress Neli Topalova, mainly known in Bulgaria from the many TV series dubbed with her voice. 
Facing the real threat of losing his supporters, Ataka's Volen Siderov hinted that he would try to win the presidency. Ataka won 21 seats out of the 240-seat Parliament in July 2005 and proved a powerful force that forced the established political parties to reconsider their supporters seriously. However, the lack of experienced Ataka MPs, the several splits within the party that ended with ugly scandals, the expulsions of several MPs, and, most of all, the spring incident with Siderov on the Trakia highway when he allegedly waved a pistol in the face of a young man and his ill grandfather banished much of Ataka's charm.
This resulted in a vacuum that now may be filled by Petrov's PPA. Three days after Petrov announced his candidacy, Ataka answered by naming Siderov for its presidential candidate.
Who will attract more votes from the Bulgarians with nationalist feelings only the elections will show, but Siderov has found his rival. Especially since all the other political parties avoid even mentioning the word nationalism, fearing that this would contradict the values of the European Union they all vow to share.

The more moderate Markov
A more moderate rival of Siderov, or at least in terms of aiming at the disappointed people from the established parties, would be a description of Georgi Markov, leader of the party Order, Law and Justice (OLJ). Markov, former judge in the Constitutional Court, is a prominent political figure in Bulgaria. He was among the most passionate supporters of democracy, an anticommunist and one of the founders of the Union of Democratic Forces. He was even rumoured to be the joint right-wing candidate for the elections.
Since this role has been more or less taken by Beronov, Markov decided to go out on his own and on August 27th, OLJ said that Markov would run for president together with the unknown Maria Ivanova, "mother of four and owner of an international company."
Markov's candidacy is not a surprise, since only three of the eight right-wing parties represented in Parliament support Beronov. However, with Markov's candidacy, the right-wing risks fractioning the right-wing vote into pieces, which might result in neither Beronov nor Markov reaching the second stage of the elections, where undoubtedly Purvanov will await a rival.

A regional contender. Kostov
The director Kamen Kostov from the central city of Stara Zagora is somewhat of a regular bidder. His nomination was announced on August 23rd. 
Kostov has worked as a director at Bulgarian National Television. Kostov tried to run for president in previous elections, but his initiative committee failed to present the required number of signatures. As did Petrov, Kostov listed three priorities: to win, to follow the real agenda of Bulgarian society and to change political thinking. "I will work for the Bulgarian national cause, more powers for the president and for a presidential republic," Kostov said.

The irredentist champion for United Bulgaria
Nationalist Bulgarians do not accept the independence of Macedonia, a part of which was part of the Greater Bulgaria of yore before the First World War. They lost it in the Balkan wars of 1912-13 when the Ottomans were finally expelled.
On August 29th a fifth candidate entered the race for nationalistic voters. Grigor Velev, leader of the recently established United Bulgaria party said he would run, and listed three priorities: to return territories from Serbia to Bulgaria, to grant Bulgarian citizenship to all Macedonian citizens who wanted it, and to bring one million Bulgarians back from Ukraine. 
So far everyone except for Purvanov and Beronov are betting on the nationalistic card, which might turn this election into the battle for the nationalistic vote. A vote that is very unlikely to secure a win in the first stage, but very likely to contribute to the second-stage results of Purvanov or Beronov. 
The outcome will be most revealing of the true sentiments of the Bulgarian people.

Bulgarian route for Russian pipeline to Greece
By the end of the year Bulgaria, Russia and Greece would sign the first agreement for the construction of the Bourgas-Alexandroupolis oil pipeline project. The decision was taken during a meeting in Athens on September 4th. Bulgarian President, Georgi Purvanov, his Russian counterpart, Vladimir Putin, and Greek prime minister, Konstantinos Karamanlis, took part in the summit, Darik Radio reported. 
A joint declaration on co-operation in the sphere of energy was presented after the meeting. Russia, Bulgaria and Greece expressed their interest in the speeding of the Bourgas-Alexandroupolis project execution and in the creation of new natural gas networks. 
Purvanov said that another delay in the project was going to be fatal due to the start of various other energy projects. A specific term for the execution of the project was agreed upon and needed to be followed, Purvanov said. 
Putin said that Bulgaria and Greece realised the strategic importance of the project as a mechanism for controlling European energy policies. 
Specific details were not presented after the summit. The leaders said the political parameters of the deal were negotiated and the technical issues would be left to experts in the energy field. The three countries' energy ministers are to meet before the end of the year.

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The following gives a recent German perspective on Bulgaria's EU entry. There are those with misgivings in Germany about admitting Bulgaria and Romania, given their notoriously poor record on crime and corruption and the possibility of them spreading within the EU by uncontrolled immigration. 

Germany is still almost certain to ratify their entry. It is too late to issue a ban or delay now:-

Bulgaria "to continue fight against crime after EU membership" 
Deutsche Presse Agentur
Bulgarian Foreign Minister, Ivailo Kalfin, expressed confidence recently that his country will join Romania in becoming the 26th and 27th members of the European Union in January next year, ruling out any special conditions on them joining the Brussels-based bloc. "In the European Union there are not different types of membership," Kalfin told Deutsche Presse-Agentur dpa in Berlin. Bulgaria was going to be "a fully-fledged member," he said. 
Kalfin was visiting Berlin as part of a trip to Germany in the build-up to the release of the European Commission's final report on Bulgaria's EU candidacy, which has been hit by concerns about the country's fight against crime and corruption. "It is a fight that will continue after (EU) membership," he said. 
Germany is one of only a handful of the EU's members that have still not ratified Bulgaria's ascension treaty, which is a key part of the nation's move towards joining the Brussels-based bloc. Already 21 of the EU's 25 member states have signed the treaty with Bulgarian Prime Minister Sergey Stanishev, who earlier this week was also in Brussels to lobby for the nation's membership application to receive the final green light. 
But Kalfin acknowledged that crime and corruption in Bulgaria remained a key concern of the EU, which has set safeguards to ensure that the nation meets standards in the fight against crime. "We have reformed the judicial system," he said, adding that the nation was now seeing the beginning of the results of the reforms to fight organised crime with high-ranking officials being prosecuted and investigations underway. 
"I am optimistic," he said about Bulgaria avoiding a delay in joining the EU in January as planned with the foreign minister insisting that any further issues could be resolved together with the other EU members once Sofia has been formally admitted as a member. Kalfin said that a delay by one year to January 2008 would undercut the momentum that has been built up in the country behind membership would be very discouraging for the Bulgarian public, where support for joining the EU is running at about 70 per cent. As a result, he said, there is considerable pressure on the government to ensure that Bulgaria joins the EU on time in January. "It is very important to keep up this momentum," he said. 
Parts of Western Europe have moved as part of the last EU enlargement in May 2004 to protect their labour markets from cheap workers flooding in from the new EU member states in Central Europe. But Kalfin said that he did not see any threat of Bulgarian workers following the example of other EU newcomers and seeking to move to other parts of the EU. 
He said that it was in the interests of Bulgaria to keep the well trained members of the country rather than letting them emigrate.

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BANKING

OTP Bank bids for DZI Bank

Hungary's OTP Bank is up against Belgium's KVC, Italy's Banca Intesa, Greece's Alpha Bank and Eurobank and Austria's Raiffeisenbank and Volksbanken in a bid for Bulgaria's DZI Bank, Sofia News Agency reported.
DZI Bank, Bulgaria's 11th biggest bank in terms of assets, reported a net profit of 416,000 Euro in the first half of 2006. The bank, which operates a country-wide network of 21 branches, manages assets worth 562 million levs. OTP deputy CEO, Laszlo Wolf, said in August that the bank was interested in buying DZI in order to strengthen its position in Bulgaria. OTP already owns Bulgaria's biggest retail bank, DSK, which it bought in a privatisation deal in 2003 for 311.1m Euro. Other sources put the exchange-listed bank's market capitalisation at 178m Euro. The bank's share price has risen 63 per cent since the start of the year because of speculation of a buyout offer. Up for sale is 70 per cent of the bank's shares held by Vesela Kyulev, the widow of Emil Kyulev, who acquired the shares in 2002 when he bought the DZI financial group in a privatisation deal.

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CREDIT RATINGS

S&P ranks Globul as country's top company

Credit rating provider Standard and Poor's (S&P) announced that Globul, Bulgaria's second mobile operator, was the country's most successful company, New Europe reported.
S&P provides rankings for the top 50 Bulgarian companies twice a year. Globul is part of the Greek mobile group Cosmote. It competes against market leader Mobiltel, backed by Telekom Austria. Last year Globul made a net profit of 51.4m levs, while operating profit was up by 54 per cent year-on-year to 536m levs. Since its inception, the company has invested a total of 1.1bn levs. At end-March 2005, Globul had 2.5m customers.

Moody's assigns Investbank rating

Moody's Investors Service assigned B3/not-prime long and short-term foreign currency deposit ratings to Bulgaria's Commercial Bank Investbank (iBank), New Europe reported recently.
The B3/not-prime deposit ratings reflect the bank's stand-alone creditworthiness based on its intrinsic franchise strength. Although the strategic shareholders are ready to provide capital support for the bank's growth, Moody's has not imputed external support in the deposit ratings. All ratings carry stable outlooks. Moody also placed E+ financial strength rating which reflects the bank's small business franchise on Bulgaria's competitive banking market, its high credit concentration levels and its vulnerability to development risks in the evolving Bulgarian banking market. The rating also captures the bank's good credit quality and good liquidity levels. Simultaneously, the rating is constrained by iBnak's weak earning power reflecting its low interest rate margins in the Bulgarian context and the relatively expensive operating structure. Moody relates that at a lower base, the bank witnessed strong business and balance sheet growth and a step forward. iBank intention to change its strategic focus away from corporate banking and into retail banking sector give rise to challenges with regards to managing growth which may become a concern, said Moody's.
According to Moody's, the management of iBank will face the challenge to expand the funding base and grow the stable deposit base in order to support the bank's growth.
The rating agency also cites possible challenges in ensuring that the bank's internal systems, procedures and controls are adequate and are commensurate with every stage in its development.
In this context, the bank does not enjoy the support of any foreign shareholder bank, that other competitions enjoy, so the bank has to develop its internal systems based on its own resources.
The planned 10 million levs capital increase will support the bank's ratings while failure to successfully increase capital levels promptly will limit the bank's capacity to grow. Any further deterioration of regulatory capitalisation will be viewed as a negative rating driver, said Moody's.

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ENERGY

Russian govt to back local bidder for Belene NPP

Russia's government recently announced that it would provide financial support to local company, Atomstroyexport, if it wins the bid for construction of Bulgaria's second nuclear power plant (NPP) in Belene on the Danube, Sofia News Agency reported.
President of JSC Atomstroyexport, Serguey Shmatko, said in Sofia that the Russian government was preparing a decree of financial support for the Belene project.
Atomstroyexport is ready to buy the redundant equipment delivered to the site of the plant before the project was put on hold in the early 1990s, Shmatko said. Russia and Bulgaria agreed to set a commission to review the issues related to the reuse of the mothballed equipment, he was cited by the press as saying. Shmatko remained silent on what would be the impact of the buyout on the cost at which the company is proposing to complete the Belene project.
Atomstroyexport is planning to use the Belene equipment in the building of the fourth unit of the Kalinin NPP in Russia. Shmatko said that the Belene project is considered successful by the banks approached by the company, and that this reflects a sound financial aid for Belene. Atomstroyexport's head explained that Russia's Federal Atomic Energy Agency (RFAEA) is the company's main shareholders, as it replaced Gazprombank in May of 2006.
The Bulgarian side recently said it was not happy with the financial package of the Atomstroyexport offer and that of the competing Czech outfit Skoda Alliance, noting that the proposed cost target is very close to that for building a new NPP from scratch.
However, later, Atomstroyexport sweetened some parameters of is bid to build the Belene NPP following its rival Skoda's update documentation. The revisions in the construction price were prompted by murmurs from Sofia that the Energy Minister, Rumen Ovcharov was disappointed by Atomstroyexport's and Skoda's offers.
Responding to the request of the advisory commission for a revision of the cost and time estimates, the Russian company offered to finish the first of the two reactors in 4.6 years and to hand over the second in 5.6 years. If the NPP is built from scratch, the first reactor could be completed in seven years, Atomstroyexport said. Skoda Alliance has cut from 10 to six years the hand-over time-frame for the second reactor, saying there was no room for further cuts.
The Russian offer is tied to the delivery of fresh nuclear fuel for the lifespan of the Belene NPP, said Vitalii Antipov from the Russian nuclear fuel manufacturer Tvel. The same company could feature as the fuel supplier in the Skoda proposal. Atomstroyexport has announced that Carsib, a consortium of France's Areva Group and Siemens Power Generation Group, will be subcontracted to deliver the electrical systems and the industrial accident management systems.
Belene, which is expected to commission its first nuclear unit in 2013-2015, will be Bulgaria's main nuclear power producer, after most of the reactors at the Kozloduy plant will be closed under EU pressure. Experts stated that two billion Euro would be required to build the new nuclear facility. The project has been continually delayed after its launch in 1986 because of financial problems and pressure from environmentalists. 

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FOOD & DRINK

Coca Cola's success prompts restructuring

Following healthy half-year profits, Coca Cola Hellenic Bottling Company will restructure its operations in Bulgaria by the beginning of 2007, Sofia News Agency reported.
Having announced profits up 19 per cent on the same period the previous year, the company's Bulgarian unit will phase out production at its bottling plant in Plovdiv, transferring operations to its Konstinbrod factory, which is in the wider Sofia area and closer to the capital.
"The restructure was part of an ongoing spate of initiatives that have also been seen in Nigeria, Greece and Ireland, Gregg Quine of Coca Cola HBC said. According to the company's financial report, the changes have already seen 37m Euro of restructuring costs being partially offset by the sale of one of its plants in Dublin for around 15m Euro. This has helped profits for the year so far to reach 276m Euro, an 11 per cent rise over 2005.
"We have managed to largely offset the raw material cost pressures and increased investment in our sales force and market initiatives, mainly through revenue growth management execution and our supply chain cost efficiencies, resulting in only a slight decline of our margins," Managing Director of Coca Cola HBC, Doris Constantinou, said in the financial report.
The group's full year finances are expected to improve over last year's results, with overall volume growth expected to increase from eight to nine per cent.
"We remain confident our strategic and operational focus will enable us to achieve our full year guidance," Constantinou added in response to the report.
The administrative units in the city that deal with distribution, marketing and finance will remain where they are, the report added. Coca Cola HBC currently has four factories in Bulgaria in Sofia, Kostinbrod, Targovishte and Plovdiv, as well as 11 distribution centres. Coca Cola HBC has invested over 170m Euro together with Coca Cola Company.

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MINERALS & METALS

Steel plant to help protect environment

The massive Kremikovtsi steel complex plans to invest US$71m in environment protection facilities and cleaning filters in the next five years, Steel Mill CEO, Vilas V Jamnis said at a conference, Sofia News Agency reported.
Under the complex licence issued to the company, over 321m Bulgarian levs will be invested in the company by 2011 to comply with the European Union environmental legislation and norms. The investments envisaged for 2006 stand at 32.248m levs, for 2007 at 56.96 levs, for 2008 at 43.04m levs, for 2009 at 44.45m levs, for 2010 at 65.15m levs and for 2011 at 68.430m levs. Kremikovtsi's total sum to be invested into the plant until 2012 is US$350m. Kremikovtsi CEO, Vilas Jamnis will surely match up to international environmental standards, having in mind the approaching accession of Bulgaria into the European Union. The funds will be invested in steel mill technological upgrade, its compliance with requirements and production capacities stabilisation, the company added. The Regional Environment and Waters Inspectorate of Sofia on August 21st said the technical and technological status of Kremikovtsi's gas cleaning systems is inefficient and the system's performance is getting worse. This leads to poor quality of exhaust gas emissions and the air being polluted above the norm, environment experts said.

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PRECIOUS METALS

Martern discovers gold deposit in Southwestern region

Major gold deposits were located close to the town of Trun in Southwestern Martern, in Bulgaria, Mining company Martern, the Bulgarian arm of Canada's Euromax Resources Limited, said, New Europe reported.
Martern Chief Executive, John Menzies, said that drilling has revealed a concentration of 440g/tonne, but it will be years before the amount of gold that could be extracted is determined accurately, Sofia News Agency reported. A total of 700,000 samples taken from the area have shown large amounts of the precious metal in the surface layer.
The sample tests were conducted on cutting-edge prospecting technology, involving the study of 65 segments in every sample. Nadezhda is the name of the gold field, which measures 1,500 metres by 70 metres. The metal is relatively pure, alternating with quartz, with very low sulphur content (below 0.5 per cent), Mezies said. Martern has been carrying out research in the region for some time. In case the initial analysis was confirmed, the gold deposit in the Trun region is among the most significant discovered over the last 100 years. The project's chief geologist, Georgi Vakarelski, was amazed by the finding. "After 30 years as a geologist at numerous Balkan sites, this is my first time seeing such amounts of visible gold," Vakarelski said.
The expert was stunned by the fact that neither the Romans nor the Thracian gold diggers had uncovered the deposit. The finding was announced only a day after Emil Minev, a representative of the Bulgarian Academy of Sciences, said that significant gold deposits were located in the Pernik region. A new geological exploration made was used to analyse the presence of the precious metal in the Trun region. If the development of the deposit is economically feasible, then Martern intends to apply for an exploration permit.
Additional testing is needed to confirm the initial result before any exploration starts. The company plans to offer the Bulgarian government a concession royalty equal to two to three per cent of the gross value of the gold metal content in the extracted ore. If the concession permit is granted, the deposit will be explored by Teck Cominco, which has a joint venture for the Trun licence with Euromax. Martern works in five Bulgarian regions: Ogosta, Breznik, Rakitovo, Trun and Popintsi.
The Popintsi exploration had to be abandoned after the project met with strong resistance from the local population and environmental organisations. The company is ready to invest 400-500 million Euro if it starts mining the deposits it is currently exploring.

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TOURISM

Tourism set to develop at a higher pace

Bulgarian tourism will develop at a high pace but will lose tourists from the main market, the latest report by the independent Centre for Economic Development (CED) said, Sofia News Agency reported.
For instance tourists from Germany and UK will continue to decrease.
The information on the downsizing in the holidaymaker's figures from the two markets was confirmed by the largest German tour operators, which saw a serious drop in the number of bookings, 15 per cent as compared to last year. Even the World Tourism Organisation predicted that Bulgarian tourism would not have good results. The country's tourism will tend to be oriented towards groups of low-income European holiday makers.
Bulgaria is expected to double the number of its foreign holidaymakers. The period under review in the CED report has seen the introduction of some good practices in expanding the variety of tourist products, as well as in offering new forms of tourism - dental, wine, creation of specialised spa centres for sea-water and seaweed treatment and others. CED experts believe that the development of such forms is a good alternative to the mass and inexpensive summer and winter tourism in Bulgaria.
The National Statistical Institute (NSI) reported that more than 2.7 million foreigners visited Bulgaria in the first six months of 2006. NSI confirmed an increase in the number of German and UK tourists. About 100,000 Germans visited Bulgaria in the first half of 2005, while their number in the corresponding period of 2006 was more than 192,000 of which more than 146,000 were tourists. The NSI data show that Bulgaria is a leading tourist destination among the Balkan countries.
More than 257,000 Greek tourists came to Bulgaria from January through June this year while 209,000 people from Macedonia came to Bulgaria as holiday makers in the first half of the year. Among the neighbouring Balkan countries, Bulgaria attracted the least number of tourists from Turkey. Only about 15,000 Turks have declared since early 2006 coming here for a holiday. Most of the total of almost 224,000 Turkish citizens that crossed Bulgaria's border in the first half of 2006 were only transit passengers.

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