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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: 104 - (01/01/06)

The predicates of the predicament of the Bulgars
The Bulgars are a curious lot. They have been ruled by many peoples, from the south, the east and the north. Rome, Byzantium, Istanbul, Muscovy. They were not very fond of any of them.
There is a further point of the compass that they would really like to be ruled from - they predicate that salvation lies in the West. They are desperately keen to join the European band-wagon (the EU), which they are due to do in 2007.

Out of corruption 
One of the things that they could do very well without, for which they are renowned, is corruption, 
Bulgaria and Romania vowed to step up their fight against corruption after the European Union warned that the former communist countries risked having their entry delayed if fraud, bribery and organized crime were not brought under control. 
But Olli Rehn, EU expansion commissioner, stressed that promises were not enough and said it was far from certain whether the two countries would join on time in January 2007. He said that Bulgaria had not prosecuted a single high-level political corruption case during the past year and that graft continued to plague Romanian life. 
The EU's aggressive stance against Bulgaria and Romania underscored concerns about opening the EU's doors to lawlessness from countries with judiciaries that have not completely reformed institutions left over from their communist pasts. 
The next four countries in line to join - Romania, Bulgaria, Croatia and Turkey - all have more entrenched corruption than the 10 newest members did before joining in May, according to Transparency International, an anticorruption watchdog whose reports the European Commission uses to assess corruption in candidate countries. 
In progress reports that will serve as guides when EU governments decide in April whether to admit Romania and Bulgaria, the commission emphasized the countries' slow pace of judicial reform, a worrying backlog of cases in their court systems, and far-too-rampant organized crime and human trafficking. 
Meanwhile, it asked them to speed up implementation of laws in areas ranging from environmental projection to justice and home affairs. 
Romania, which Transparency International has ranked as the most corrupt of the countries invited to join the EU and the 25 already in the bloc, has been stepping up its efforts to fight corruption. Within days of entering government last year, the Romanian prime minister, Calin Popescu-Tariceanu, a liberal reformer and former businessman, pushed to make all forms of tax evasion a crime. He also appointed a respected human rights activist as justice minister. 
Still, EU officials say the country has failed to get its corruption problem under control. Its Anticorruption Prosecutor's Office recently warned that the Romanian secret service was still tapping journalists' phones 15 years after the fall of communism. Meanwhile, the judiciary has been marred by cases of bribery, partly because judges and government bureaucrats have among the lowest salaries in Europe. 
In Bulgaria, where salaries are comparable to those in Romania, the judicial system is considered one of the least effective and most corrupt branches of state administration. The position of prosecutor general remains unaccountable, while many criminals still are not brought to justice. More than 60 organized crime figures have been publicly assassinated in the last several years, without any arrests.

                                                ****

The following, therefore, has to be said:- 

A killing complicates Bulgaria's EU hopes 
By Matthew Brunwasser in The International Herald Tribune

Emil Kyulev, one of the richest men in Bulgaria, was being driven to work in Sofia in his BMW sports utility vehicle on Oct. 26 when, shortly after 9:00 a.m., according to the police, he was shot and killed by a man hiding in the bushes.
A few kilometres away, at the moment Kyulev was slain, Bulgaria's justice and interior ministers were meeting the press to play down a European Union report expressing "serious concerns" about organized crime in the country. The problem, the report noted, "so far has not been a priority on the political agenda."
Interior Minister, Rumen Petkov, said the criticism, issued the previous day, was "not a surprise." Then, as officials learned of the killing, the press conference was abruptly cut short.
The Kyulev killing has heightened anxieties about Bulgaria's top political priority: EU membership on Jan. 1, 2007. Under a treaty signed in April, accession can be delayed by one year if Bulgaria is found "manifestly unable to fulfil the requirements of membership."
The slaying has also focused international attention on one of the weakest Bulgarian institutions: the judiciary.
Five weeks after Kyulev was killed, no one has been charged. There is no known motive for the crime, although speculation has mounted over his business relations with "dirty capital."
Kyulev was the head of DZI Group, the biggest insurance and banking firm in the country, with more than 12,000 employees and 500 million, or $585 million, in assets. He was close to all the major political parties and served as an economic adviser to President Georgi Purvanov. 
His murder was particularly shocking because he did not fit the profile of the smugglers, extortionists and drug dealers who have been slain in a boom of organized crime-related deaths.
There have been 157 contract killings in public places in Bulgaria since 2000, Petkov said. There have been no convictions.
Because Kyulev was so close to the political elite, Prime Minister Sergei Stanishev called his shooting a "real threat" to Bulgaria and its aim of joining the EU.
The EU enlargement commissioner, Olli Rehn, has criticized Bulgaria more than once for never having convicted a senior official for corruption, and has warned the country over dragging its feet on judicial reform. In one notable instance, a new Criminal Code, which was written in the spring, was enacted in October only 20 minutes before Rehn visited the Parliament in Sofia.
"Significant efforts are needed to effectively combat organized crime and corruption, especially at high level," Rehn told an EU-Bulgarian joint parliamentary committee in Brussels on Monday.
In the aftermath of the Kyulev killing, the government here declared extraordinary measures, flooding the streets with police officers and masked special forces soldiers who stopped and searched luxury cars.
Officials repeated their calls for a new law to expand police powers. More than 800 people with criminal records were arrested.
Many Bulgarians are sceptical of such measures, saying they have been tried before without success.
An Interior Ministry spokesman, Yavor Simov, said that changes needed to stem organized crime have been put in place.
"In Bulgaria," he said, things "will continue this way until all these groups are uncovered, broken and destroyed in every way allowed by the full force of the law."
But even the full force of the law has been unable to break through a wall of inertia among poorly paid functionaries - monthly wages in Bulgaria average about $200 - who face public antagonism and often lack the motivation to tackle endemic corruption.
The judicial system in particular is widely perceived as corrupt, inefficient and bureaucratically isolated from the reality of everyday life.
To improve the function of the judiciary, the EU wrote in its report, "major challenges remain." Yet reform of the judiciary is critical to make progress on crime, experts say.
"The problem is the performance of the judicial system, not the scale of organized crime," said Ognyan Minchev of the Institute for Regional and International Studies, a research organization that is based in Sofia.
Misha Glenny, a former BBC correspondent in the Balkans who is writing a book on transnational crime and globalisation, says the scale of organized crime is often a matter of perception. He cites Italy as an example of a country with organized crime and corruption that, because it is a relatively wealthy society, can absorb it better than a poor society.
In Bulgaria, whatever the real scale, organized crime has taken on mythic proportions in the national psyche. Murders happen on the streets of the capital during the daytime. Gangsters have nicknames like The Beak, The Gorilla and The Doctor. Some killings appear to have been modelled on Hollywood films.
One of the most audacious and bloody was the slaying of Milcho (Brother Mile) Dimitrov last year, when five men carrying shotguns - the press reported that they were dressed as masked policemen - invaded the courtyard of the Slavia restaurant, a gangster hangout owned by Dimitrov, and killed him and five bodyguards.
The killing of Dimitar (Little Mitko) Hristov at a caf in Sofia also grabbed national attention. Hristov and two accomplices were reportedly killed by gunmen disguised as Orthodox priests or monks, complete with fake beards.
Whether this gangster tradition will affect the EU once Bulgaria becomes a member is disputed by analysts.
"The EU is the most affluent market in human history," Glenny said. 
He said that Balkan organized-crime groups were well equipped to supply the bloc's 400 million consumers - "many of whom choose to spend their money taking narcotics, sleeping with prostitutes and smoking untaxed cigarettes." 
After it became easier for Bulgarian citizens to enter the Schengen passport-free travel zone in 2001, EU countries noted an upsurge of crime by Bulgarians, who were able to travel freely for the first time. 
A report issued last year by Europol, an EU police body, said that Bulgarian organized crime groups had "established themselves particularly in trafficking in women for sexual exploitation, various counterfeiting activities, especially euro counterfeiting, and debit-card fraud."
Klaus Jansen, president of the Criminal Investigators Union in Germany, expects the problem to get worse. 
"If Bulgaria joins the EU without implementing a modern security apparatus," Jansen said, "you will definitely see a huge increase in Bulgaria-based organized-crime activity."
Petrus van Duyne, a criminologist at Tilburg University in the Netherlands, takes a different view. 
"Organized crime is not an entity - it's a way of doing business," he said, adding that he did not expect EU membership to contribute to a westward movement of Bulgarian organized crime or its markets.
Upon Bulgarian accession to the EU, said Philip Gounev, who has researched organized crime at the Center for the Study of Democracy in Sofia, organized crime groups "would no longer be able to use the weakness of our state administration."
Haralan Alexandrov, a social anthropologist at the New Bulgarian University, puts the onus on the Bulgarian government to find a solution. 
"People in Bulgaria are ashamed and angry, and becoming more cynical, giving up any attempt to envision a better future," he said.
"This can be solved if institutions start to function more or less normally, not because the EU tells them to, but for the benefit of Bulgarians."

Poor infrastructure hinders tourism growth
According to the European Bank for Reconstruction and Development (EBRD), excessive development and lack of infrastructure at the national and municipal level have hindered the successful development of tourism in Bulgaria, Bulgarian News Agency reported.
During a real estate and investment forum in Sofia, Ilaria Benucci, director Property and Tourism team at EBRD said that a similar problem also exists in Romania, Croatia and Montenegro. He said, "Bulgaria is a booming tourism market, which is happening now." Some of the most promising opportunities for the development of Bulgaria's tourism market are a booming industry, a rising number of flights, increasing the number of tourists from the EU, and developing new and affordable destinations. EBRD forecasts a double-digit growth in 2007 and afterwards.
Meanwhile, Bulgaria's Parliament passed amendments to the tourism law on a second reading. Under this law, the prices of all tourist services in Bulgaria are set to be equal for Bulgarians and foreign visitors by the end of this year. The different prices for Bulgarians and foreign tourists was according to the European Union a discrimination and Bulgaria was asked to make some changes in its legislation, before joining the Union in 2007.
The reforms come as a result from the European Commission's demands on the Free Movement of Goods and Services chapter. Under the new rules, violators will be imposed fines ranging from 1,000 levs to 15,000 levs. However, the new tourism law will be critical for most Bulgarian tourists, who have enjoyed lower prices up until now. Under the new amendments a special State tourism Agency will be established within the council of ministers.
Bulgaria is a popular tourist destination among the Poles. Poland is highly interested in Bulgarian tourism. The number of Polish holiday-makers in Bulgaria is expected to exceed last year's number of 100,000 said the first secretary at the trade department of the Polish Embassy to Bulgaria in Varna. Poles are satisfied with the compatibility of quality-price offered to them in Bulgaria, he added.
Tourists from the largest Central European country prefer sea resorts on Bulgaria's Black Sea coast and frequent winter tourism sites at Slovakia and Austria, the Polish diplomat explained.
Trade turnover between Bulgaria and Poland marked a considerable growth of 49.3 per cent in the first half of the year compared to the same period last year reaching US$200.8m.

Bulgarian prime minister visits Sweden
Bulgaria will become a member of the European Union on January 1 2007, predicted Goran Persson, prime minister of Sweden, on December 6. He made the statement at the start of Bulgarian Prime Minister, Sergei Stanishev's, two-day visit to Sweden, where he attended a series of high-ranked meetings. 
Stanishev, on his first official visit to the country, thanked Persson for his support for Bulgaria's efforts towards EU membership.
The two prime ministers talked about areas in which economic co-operation between the two countries could be stimulated and Swedish investments in Bulgaria enhanced.
After Persson, Stanishev met with Per Westerberg, first deputy speaker of the Swedish Parliament, who said that all political parties in the Swedish parliament had agreed on the ratification of Bulgaria and Romania's accession treaty with the EU. Westerberg also expressed his conviction that within six months, the ratification will be realised.
"Swedish MPs support the enlargement of the EU," he said. 
Stanishev also met with Sweden's minister of foreign affairs, Laila Freivalds, whom he reassured that Bulgaria would continue the reforms needed for full EU membership.
On her behalf, Freivalds said that Bulgaria had a significant role in the stability of the Balkans.
Later the same day, in the presence of Stanishev, the Bulgarian Ministry of Economy and Energy and the Swedish ministry of industry, employment and communications signed a declaration of intent.
The visit continued with a lecture delivered by Stanishev, entitled 'Bulgaria Prior to its Accession to the European Union.' The Stockholm Institute of Transition Economics and Stockholm International Peace Research Institute organised the event. The lecture was delivered to eminent representatives of the diplomatic and academic circles in Stockholm.
"The EU is the most successful project of the 20th century, and the Union's enlargement is part of it," he said. "Bulgaria does not regard itself as a consumer, but as an active member of the EU from January 1 2007."
Stanishev's visit included a meeting with representative of leading Swedish companies in the fields of energy, communications and the banking sector, such as SEB (Skandinaviska Enskilda Banken), Investor AB, Nordic Investment Bank, Swedfund, Carl Bennet AB, Swedish Export Credit Agency, SAAB Industrial Cooperation, Volvo, Scania and Ericsson.
Among the issues discussed was Bulgaria's preparation for EU membership, bilateral trade, possibilities for Swedish investments in Bulgaria and the business climate in the country. Stanishev touted Bulgaria's friendly investment climate, particularly due to its approaching EU membership.
Overall, Stanishev's visit to Stockholm aimed to contribute to the development of trade and economic relations and to encourage Swedish investments in Bulgaria, as well as to increase trade volume and intensify tourist exchange between the two countries. Stanishev's programme also included an audience with the King of Sweden, Carl XVI Gustaf.
 

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AVIATION 

New Sofia Airport terminal to be ready in summer 2006 


Once its new passenger terminal and runway go into operation in summer 2006, Sofia Airport will be able to handle 20 aircraft movements of all classes and 2,200 passengers per hour in rush hours, or up to 2.6 million passengers a year, plus 26,000 tonnes of cargo annually, authorities announced after Transport Minister, Petar Moutafchiev, visited the construction site, Sofia News Agency reported.
The Sofia Airport Reconstruction, Development and Extension Project is worth 210 million Euro. The European Investment Bank will provide a 60 million Euro loan, with 38.1 million Euro from the Kuwait Fund for Arab Economic Development, a 50 million Euro grant from the EU ISPA and Phare programmes and the rest is Bulgarian co-financing.
February 2006 was the deadline for the completion of the strip, but the construction will not be ready in time. The deadline for completion of the new runway has been extended by another four or five months, Sofia Airport executive director, Kalin Barzov, told Sofia news agency.
Barzov explained that the airstrip's composition was completed and 2,500 metres of the strip has been constructed during the past three months. It will be 3,600 metres long and the airplanes would lift off a kilometre sooner compared to the old strip.
Barzov stressed that the new runway has been moved 500 metres eastward, which will reduce noise and environmental pollution. 
The facility will have state-of-the-art surfacing and a new ICAO Category III approach system that will allow landings and take-offs even in a dense fog.
Danish company Bruel & Kjaer & Sound & Vibration Measurements A/S has been selected to supply and install a system for aviation noise and flight paths monitoring.
The new airport terminal and its accompanying infrastructure are also almost finished and would be operational before the airstrip, in early summer 2006.
Barzov said that the old airport would continue to run in parallel to the new one as aircraft traffic is expected to rise, especially from charters and low-cost flights. 
This winter alone, charter operations are expected to increase by 40 per cent from last year and the summer charters will be some 30 per cent more. Secondly the old airport would continue to operate in order to have a back-up for emergency landings.
Moutafchiev said that no agreement has been signed on an extension of the terminal construction deadline with the Austrian contractor Strabag. He recalled that in a letter dated July 11, 2005, Strabag asked the transport ministry for two intermediate extensions of the deadline for completion of work.

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BANKING

Unicredito buys 25% stake in DZI Bank
 

Unicredito Italiano SpA, owner of Bulgaria's Bulbank has acquired a 25 per cent stake in Bulgaria's eighth-largest bank, DZI Bank, and 13.05 per cent of the insurance company DZI AD, Sofia News Agency reported, citing a note issued by the Sofia stock exchange. 
The purchase was carried out indirectly, according to the note. According to the Bulgarian Stock Exchange, both transfers of shares were made to the Central Depository on November 17th. With this acquisition the Italian banking group takes the reins of 21.7 per cent of the Bulgarian bank market, also being owner of Hebros bank and HVB Bank Biochim. DZI became the country's largest financial group after the merger of its banking and insurance units. The murder of DZI's CEO, Emil Kyulev, on October 26 has renewed the interest of some big investors to buy this prosperous business. 

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ENERGY

Bulgaria may become electricity importer 


Czech state-run power producer CEZ Regional Manager for Bulgaria, Tomas Huner, recently warned that Bulgaria may lose its position as electricity exporter and become an importer as a result of unreasonable price policy. He said that both electricity distributors and producers face regulation problems, as the utilities are not being repaired and are not utilised to their full capacity, Sofia News Agency reported. 
Huner stressed that price increases should be gradual and not only favouring natural gas and the central heating. The company even organised a special meeting to mark the first anniversary since it acquired 67 per cent in three Bulgarian power distributors for 281.5 million Euro. The Western Bulgaria power utility pool includes Sofia City, Sofia District and the town of Pleven. It was also announced that the three CEZ-owned power distributors in Bulgaria have reduced electrical energy losses by about 10 per cent for the first nine months of the year. 

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FOREIGN INVESTMENT

EBRD to invest a quarter billion Euro next year
 

The European Bank for Reconstruction and Development (EBRD) executive for southeastern Europe, Olivier Descamps, said that the EBRD will retain the existing level of investment in Bulgaria and has earmarked 250 million Euro for projects in the country next year, New Europe reported.
The bank will concentrate primarily on projects concerning the infrastructure energy industry, private sector and local self-government. The money will be provided if the investment is deployed through concession arrangements and public-private partnerships, following transparent and open procedures, said Descamps. The EBRD is the largest single investor in Bulgaria, having committed more than 1.1 billion Euro in 57 projects. EBRD plans participation in the electricity distribution companies, railway transport and the national electricity transmission company. 
Descamps said that EBRD will become a shareholder in two Bulgarian electricity distribution companies owned by Austria's EVN and Germany's E.ON. The privatisation contracts for the power distributors allow the bank to acquire up to 12 per cent of the share capital. 
The acquisition of the equity stakes in the power distributors is one of several projects that EBRD will implement in Bulgaria. If the state-owned railway company follows through with the plans to spin off cargo and passenger haulage into separate companies, EBRD is ready to invest 50 to 100 million Euro in the restructuring of the railway system. 
In early December, EBRD signed a loan agreement for the disbursement of 157 million Euro for the rehabilitation of thermal power plant Maritsa Iztok 1. 
EBRD also plans to invest 40 million Euro in Varna and Bourgas airports after the litigation of the concession procedure for the two facilities is resolved, added Descamps.
As part of its package, the bank will also provide 18 million Euro to Bulgarian pulp producer Svilosa AD to help double its production capacity and strengthen its position as a regional leader in the pulp sector. The Nordic Investment Bank is expected to lend the remaining 10 million Euro. The loan will also support substantial energy efficiency investments enabling Svilosa to make significant energy savings. This loan is in line with EBRD's new strategy for Bulgaria which will provide long-term financing to help domestic companies become more competitive, and to meet EU environmental requirements. 
This project should demonstrate that local companies with consolidated transparent corporate structures and who work in accordance with sound corporate governance principles can and should be considered for 10-year financing, said Descamps.
The loan is expected to support the revival of the company by doubling production at the mill and help develop regional trade through exports to countries including Turkey and Greece. The loan will maintain local employment as the company expands, and local suppliers such as the wood harvesting companies will benefit too.

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TRANSPORT

Danube Bridge 2 boasts construction permit
 

Deputy Regional Development Minister, Savin Kovachev, handed the second Danube River Bridge construction permit to Transport Minister, Petar Mutafchiev, Sofia News Agency recently reported. 
This move opened doors for the beginning of the construction works in 2007. The European Commission has already given its approval to the short list with the construction companies of the Danube Bridge 2. Bulgaria should contract a constructor for its second Danube River bridge by July 2006. The facility should be ready by the end of 2009, connecting the Bulgarian town of Vidin, in the northwest of the country, and Romania's Kalafat. About 236 million Euro will be invested in Danube Bridge 2. It was recalled that Romania and Bulgaria signed the agreement for the project in March 2000, but the lack of funding hampered the immediate realisation. 

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