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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: 103 - (28/11/05)

Grand coalition to form after weeks of delay
An uneasy situation has ended in Bulgaria. It was without a government for weeks following the June elections after several attempts by the Socialist Party of Bulgaria (BSP) to form an administration were rejected by the Bulgarian parliament. 
The Liberal Party of the former King Simeon II (NDSW), who still likes to style himself "Tsar Simeon II," lost 20 per cent of the vote compared to the elections four years ago. In view of these losses, Simeon was at first reluctant to participate in the new government, saying he would not join a cabinet led by the BSP. Eventually he said he would only agree to the formation of a grand coalition on condition he kept the premiership. But the BSP insisted on appointing its own man, Sergej Stanischew, to head the government.
After weeks of wrangling, a broad coalition is now set to form the next government. The coalition seeking to take over the reins of power in Sofia comprises the BSP, the Party of the Turkish Minority (DPS) and the NDSW. The premier is, indeed, Sergej Stanishew (BSP). 
The BSP, which had emerged from the Stalinist Communist Party, formed an electoral alliance with seven small parties and received 31 per cent of the vote, making it the strongest parliamentary faction. From the outset it had sought a coalition with the DPS, which emerged as the third-strongest party, and also wanted to include the NDSW in the government.
The attempt to form a minority government of the BSP and the DPS had failed at the end of July, even after making many concessions to the right-wing parties.
Finally, President Purvanov assigned the task of forming a government to the second-strongest parliamentary grouping, the NDSW, which has only 53 of the 240 seats in the parliament. But the attempts to form an alliance of the conservative and right-wing parties did not come off. Both the Democrats for a Strong Bulgaria (FCB), around the former government head Ivan Kostow, as well as the Bulgarian Peoples Union and the Union of Democratic Forces were sceptical of the NDSW and at loggerheads.
Under massive pressure, Stanishew and Saxe-Coburg Gotha then came to an agreement. If their negotiations had failed, it would have resulted in new parliamentary elections, which would have probably had negative consequences for both parties, making the formation of a government even more difficult. Moreover, Brussels had put pressure on the parties in Sofia to arrive at an agreement so as not to endanger the country's planned accession to the European Union in 2007.
The BSP has eight ministers in the new cabinet, the Tsar's party five and the DSP three. Plamen Orescharski, a non-partisan member of the new government who is one of the most hated figures in the country, takes over the finance ministry. At the beginning of the 1990s, as a member of the right-wing Kostow government, he was responsible for breaking up and privatising Bulgaria's state-owned industry, leading to the pauperisation of wide sections of the population.

The prerequisites for EU entry
"Continuity" is the watchword of all those involved in the new government. Above all, this means continuing with tight financial policies in order to ensure the country joins the EU in 2007. The government coalition demonstrated its character immediately on taking office by its attitude towards victims of the disastrous flooding which hit Bulgaria in the summer.
More than a quarter of the population were affected by devastating flooding at the beginning of August. According to conservative estimates, at least 20 were killed with damage estimated to be over US$630 million. Agricultural production was completely destroyed in several regions of the country. Tens of thousands faced utter devastation, with insufficient food and medicines. Only a few benefited from state assistance, receiving about 500 Euro.
As government circles have announced, the small assistance given to victims was at the expense of cuts elsewhere and reneging on election promises.
Finance Minister Oresharski used the disaster as an opportunity to announce an even harsher budget policy. He flatly opposed a proposal by the ministry for social affairs that donations made to help the afflicted areas enjoy tax exemption. Promises of a pension increase and 20 per cent wage increase for public service employees will not be implemented.
At the end of August, representatives of the International Monetary Fund (IMF) made clear in discussions with the new government that the budget discipline laid down by the IMF could not be relaxed if the country wants to keep to the criteria stipulated for its EU entry. Government representatives said they were ready to follow the demands of the IMF, according to which the present budget surplus of approximately 600 Euro million should remain untouched.
Like their predecessors, Stanischew together with foreign minister Kalfin and Meglena Kunewa, who was already minister for Europe under Simeon, visited Brussels immediately upon entering office. In talks with EU Commission President Jose Barroso and the German industrial commissioner Günther Verheugen, Stanischew promised that his government would do everything necessary in the remaining 16 months to catch up in those areas where it had fallen behind.
The progress report set to be published by the European Union commission in October should finally determine whether entry can take place in 2007, or one year later.
The authorities in Brussels are insisting that the legal system be fundamentally reformed and that deep-going changes be introduced in agriculture and other areas. Above all, Bulgaria's economy has not yet been sufficiently liberalised in the eyes of the EU commission. In the coming months, the government wants parliament to push through approximately 30 laws.
The trade unions are also being brought on board in order to realise these policies, which have been pursued by various governments for 15 years and are directed against the mass of the population. The government has already reached agreement with representatives of Bulgaria's two largest trade union federations concerning economic, labour and social policies, whereby the unions have given their blessing to further welfare cuts in the name of strengthening Bulgaria. Labour and Social Affairs Minister Emilija Maslarowa (BSP) said the agreement with the unions provides a sound basis for further cooperation with the IMF.

Political instability
From the outset, the broad alliance of bourgeois parties was marked by political instability. Conflicts are pre-programmed, which could also lead to the breaking up of the government coalition.
The first tensions already emerged during the appointment of 28 regional representatives. The NDSW accused its coalition partners of ensuring BSP and DPS were appointed in the larger and relatively wealthy districts, ensuring additional political and economic influence for the two parties.
Relations between Simeon's party and the DPS remain strained. There have been fierce disputes over the last four years, during which both parties had been in government. The DPS, the Turkish minority party, which since 1989 has been involved in each government, has strong links to Turkish businesses and represents their interests.
Orescharski's radical austerity measures have also encountered criticism among sections of the BSP. The finance minister flatly refuses to discuss the demand for a one-off bonus payment to public service employees, proposed by the BSP and the trade unions in order to deflect the threatened protests.
Political observers assume that in this situation Simeon's NDSW could possibly play the role of opposition within the government and torpedo some of the coalition's projects in order to boost Simeon's chances in next year's presidential elections.
The increasing political crisis gripping the country is not a purely Bulgarian phenomenon. Similar conditions prevail in neighbouring Romania, which likewise is seeking to join the EU in 2007. Post-communist measures in privatising industries, demanded by the IMF and the EU alike, are of course extremely painful in terms of creating big scale unemployment as over manned industries are shaken out. This is the trauma that has had to be endured in all the former communist states of Europe. Bulgaria and Romania delayed the inevitable as long as possible, but imminent EU membership is now the spur.

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AVIATION

Bulgaria Air gets extra slots at Frankfurt airport 


Bulgaria Air was awarded extra slots at Frankfurt Airport and will increase the weekly frequency of its flights to Germany. At the same time, Lufthansa will launch a new service from Dusseldorf to Sofia. This was agreed while coordinating the slots and schedules of foreign and Bulgarian airlines for the forthcoming IATA winter season at the directorate general of the Air Traffic Services Authority, the transport ministry said, Sofia News Agency reported. 
German airline Lufthansa will commenced regular Sofia-Dusseldorf-Sofia flights at the beginning of November. The Bulgarian air company and Italy's Alitalia have agreed on joint commercial activities during the flights from Sofia to Milan and Rome. The agreed prices are lucrative for the Bulgarian air carrier and the number of flight between the two countries will increase. The weekly flights between Bulgaria and Greece and Bulgaria and Italy will increase.

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BANKING

DZI Group to increase market share 

The supervisory and the managerial boards of DZI Bank recently affirmed in a press release plans to proceed with the development of the financial group's market share, New Europe reported.
DZI Bank stated that it occupied eighth position on the Bulgarian banking market as the assets of the bank stood at more than one billion levs. According to the statement, the DZI assets have increased by 300 million levs which is 44 per cent since the beginning of the year. This press release came after the Bulgarian Stock Exchange halted the trade with the securities of DZI Group, the largest financial group in the country, whose boss Emil Kyulev was gunned down in a central Sofia boulevard on October 26 in the morning, reported Bulgarian news agency. Kyulev recently entered the list of the 100 richest businessmen in Central and Eastern Europe by the Polish magazine Wprost. He was ranked the second richest man in Bulgaria. In spite of the murder, the bank stressed the professional managerial team ruling the institution and its strong determination to proceed with its expansion strategy. 

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CREDIT RATINGS

S&P upgrades Bulbank ratings to BB/A-2 

Standard & Poor's Ratings Services announced recently that it raised its long and short-term counterparty credit and certificate of deposit ratings on Bulgaria-based Bulbank A.D. (Bulbank) to BBB/ A-2 from BBB-/A-3, according to a press release. The outlook is stable, New Europe reported. 
"The rating action follows the upgrade of the Republic of Bulgaria to a foreign currency rating of BBB/Positive/A-3 from BBB-/Positive/A-3, and a local currency rating to BBB+/Stable/A-2 from BBB/ Positive/A-3," said Standard & Poor's credit analyst Alise Ross. Ross added that commercial initiatives established with UniCredito will produce results and reinforce Bulbank's franchise, financial performance, and credit quality, as reflected by the stable outlook. Future upward rating actions will depend on the resilience of Bulbank's franchise to the heightened competition in the banking sector and evolution of the Bulgarian operating environment as the economy matures. The ratings on Bulbank reflect strong support from its parent, Italy-based UniCredito, its solid position in the banking system, strong capitalisation and funding and good profitability. The ratings summarise Bulgarian economic and industry risks, Bulbank's underdeveloped commercial profile, and untested asset quality.

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ENERGY

UES, Bulgaria sign initial deal on Varna power plant 

RAO Unified Energy System of Russia (UES) and the Bulgarian government recently initialled an agreement on UES' intention to acquire Bulgaria's Varna heat and power plant, Margarita Nagoga, head of the energy holding's PR department, said, Interfax News Agency reported.
"This (agreement) does not imply the purchase, we're saying that we have passed fundamental decisions," she said. UES also signed a protocol with Bulgaria that will set up a list of issues concerning the further conditions for how the Varna plant will function and conditions for its eventual purchase, she said.

Power plant sold to Russian RAO UES 

The Bulgarian government recently cleared the long-delayed sale of a major coal-fired power plant to Russia's energy giant RAO Unified Energy Systems. In May, RAO UES won the tender for the thermal power plant in the Black Sea port of Varna, offering 578.8 million Euro. The deal was postponed several times on the ground that the Russian investor was not satisfied with a recent equipment delivery deal between the Varna utility and German producer Siemens AG, New Europe reported. 
Meanwhile, RAO UES has started talks with Enel Spa to share the ownership and the management of the owned site. The alliance talks that started with Enel could involve investments spreading from Bulgaria to Russia, the Italian daily La Repubblica said without citing sources. Both companies could also jointly bid for a Bulgarian nuclear power plant in the town of Belene, it added. A partnership between the two companies could give Enel access to Russia's power generation market, where UES is expected to sell some of its production capacity, the newspaper said. Earlier this month, Siemens EOOD, the Bulgaria unit of Siemens AG, announced an 11 million Euro deal with the Varna plant for equipment delivery over the next three years. On October 26, Siemens AG agreed to cancel the contract with the Bulgarian government in order to allow it to privatise the state-owned power plant. 

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EXPORTS

Greek exports to Bulgaria to reach 1bn Euro 

According to the temporary figures provided by the Greek National agency for the January-July 2005 period, the Greek exports to Bulgaria increased by 29.5 per cent compared to the same period in 2004 and reached 452.6 million Euro, Sofia News Agency reported. 
The Greek exports to Bulgaria are expected to reach one billion Euro this year establishing a trade surplus of 400 million Euro for Greece that the providing positive pace recorded in the January-July seven months period continues. During this period, Greek exports to Bulgaria recorded an increase of about 30 per cent. Meanwhile, imports from Bulgaria also rose 31.59 per cent to 333.8 million Euro. This year imports are predicted to be close to 600 million Euro bringing the volume of bilateral trade relations up to 1.6 billion Euro. Women's cotton clothing tops the Greek exports list even though the specific product recorded a decline compared to the same period in 2004 (32.3 million Euro.) 

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FOOD AND DRINK

Bulgaria's beer consumption up by 1.7%

Bulgarian beer makers sold 3.476m hectolitres in January-September, up 1.7% on the year-ago period, according to statistics of the Union of Brewers in Bulgaria, Bulgarian News Agency reported. 
The sales figures do not include the business of locally-owned beer makers like Ledenika and MM which are not UBB members. Despite the wet summer and the excise duty hike enforced since the beginning of the year, beer consumption this year is on track to record yet another peak. Bulgarians drank 61 litres of beer per capita in 2004, up from 56 litres in 2003 and 51 litres in 2002. In September, beer sales fell to 365,163 hectolitres from 563,226 hectolitres in the previous month. Kamenitza AD, part of the world's biggest brewer by volume InBev, leads the year-to-date sales. The company added recently 151,735 hectolitres to its year-to-date sales which now stand at 1.219m hectolitres.

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TELECOMMUNICATIONS

Cablenet, Trans Telecom win Class A wireless net

Bulgaria's Trans Telecom and Cable Net on October 12th won the tender for a 10-year wireless network licence with a bid of 5m levs, Bulgaria's telecommunications regulator recently told Sofia News Agency. 
Bulgarian leading mobile phone operator Mobiltel and the largest fixed-line telecom BTC withdrew their offers when the bidding price reached 4.444m levs. Bulgarian telecoms Nexcom and Carrier BG also took part in the bidding, with a starting price set at 1.344m levs for each licence. The point-to-multipoint telecommunication networks are used for transfer of voice and data, Internet access, fax, telex, video information and multimedia applications. The main advantage of such networks is that although wireless, they provide high quality connection comparable to a cable connection. Winners Trans Telecom and Cablenet will build a point-to-multipoint telecommunication network, enabling wireless connection to telephone, broadband Internet and other multimedia services.

Thousands opt for Bulgaria's Vivatel operator 

According to executive director, Richard Shearer, Vivatel already has thousands of clients. Vivatel activated its network on November 5 that also saw the sale of 5000 pre-paid call packages. Vivatel kicked in with an offer for 0.37 lev per minute for prepaid calls which is more than MTel's 0.33 levs and less than the Globul rate of 0.39. The initial purchase of Vivatel costs 20 levs. The call tariff is 0.444 leva a minute, tax included, and is valid for all phone networks in Bulgaria. An initial promotion provides that Vivatel will recover the expenses for all calls and messages on January 7 when subscribers will receive free call minutes for the value of the calls already made, Sofia News Agency reported. 
Vivatel already presented its pre-paid and business plans. Subscription for regular clients will be available soon, Shearer said. Vivatel will offer, for the first time in Bulgaria, pre-paid roaming with 346 operators in 138 countries. 

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TRANSPORT

Trakia motorway construction to start soon

Bulgarian Regional Development and Public Works Minister Asen Gagaouzov said that construction of the Trakia motorway will commence soon. "It is hardly like that construction of the Trakia Motorway will come to a start with this concessionaire and under this contract," Gagaouzov said before the Cabinet meeting on October 13th, reported Sofia News Agency.
On December 16th, 2004, the government awarded a 35-year concession for Trakia Motorway to a 51-49 Portuguese-Bulgarian consortium between three Portuguese companies (MSF-Moniz da Maia, Serra & Fortunato-Empreiteiros, S.A. of Lisbon; Lena Engenharia e Contrucoes, S.A. of Fatima; and Somague Concessoers e Servicos, S.A. of Sintra) and 2 Bulgarian companies (Avtomagistrali EAD and Technoexportstroy EAD) without an auction or competitive bidding.
This year on October 11th, the Supreme Administrative Court adjourned pronouncement on a protest by deputy prosecutor general and head of the Supreme Cassation Prosecution office Mityo Markov, who argued that the Council of Ministers decision awarding the concession clashes with provisions of substantive law and was rendered at variance with the purpose of the law, so it must be invalid.
Gagaouzov stressed that he wants the construction of the Trakia motorway to start soon and the decision is in the hands of the council of ministers to decide the type of contract for this project, whether it should be a new concession or national financing. On being asked about the amount of damages on the contract with the Portuguese consortium, Gagaouzov said that if it comes to paying any damages then the decision will be taken by the court.
At the upcoming meeting, the council of ministers will probably decide which key road sections are to be completed, in what way and within what timescale. The prime minister has been sent a report with a brief description of each section. Gagaouzov added that the cabinet will decided whether all the projects proposed by him or part of them will be financed. 

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