불가리아 주요경제뉴스 (25 JANUARY – 1 FEBRUARY 2008 )

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT ( 25 JANUARY – 1 FEBRUARY 2008 )

 

 

Sections/headline briefs:

 

 

MACROECONOMY:

 

·        Bulgaria & Japan to boost economic cooperation

·        Bulgaria discusses economic relations with Poland at business forum

·        Bulgarian president hails country's achievements in 2007

·        Prime Minister: "Bulgaria should become regional centre for transit and distribution of resources"

·        Concession to save Kozloduy Nuke

·        Reopening of reactors 3 and 4 to solve energy crisis on the Balkans

·        Bulgaria stops exporting electricity to Greece

·        Bulgaria opposes EU efforts to split power utilities

·        Bulgaria expects to triple tourism revenues by 2013

·        Metro network to cover Sofia by 2015

·        Inflation to remain below 5% in 2008

·        Bulgaria's commodity exchanges more than double turnover to �290.4 M in 2007

·        Customs Agency revenues exceed annual target

·        On-line advertising market in Bulgaria in 2007 estimated at BGN 12 M

·        Bulgarian sugar market unpredictable

·        Germany in a rush for Bulgarian eco-food

·        Raiffeisen Research: Bulgaria currency board stable

·        Bulgaria's account rating reduced

 

 

 

 

 

 

 

 

 

INVESTMENTS:

 

·        Bulgaria's second largest city with new industrial zone

·        Allianz ready to invest in 'South Stream'

·        Business demands incentives for local investors

·         Austrians to finance three energy projects in Bulgaria

·        Balkan Solar company eyes power production permit

·        Hellenic Petroleum to invest �77M in local expansion

·        Hus to invest �3.5M in warehouse, products

·        Extrapack invests in �13 M plant for flexo-printed bags

·        BGN 8M business centre to be built in Petrich

·        Sun City to build 15-storey business centre in Bourgas

·        Interior ministry to invest �161M in border control

 

 

COMPANIES:

 

·        Sony Ericsson to launch Call Center in Bulgaria

·        Colliers Bulgaria with unique project near Bansko

·        Kremikovtsi turns into an apple of discord

·        Pramod Mittal selling hollow company

·        Trace Group orders new equipment for � 2.2M

·        Carlsberg Bulgaria is the biggest investor in the branch for 2007

·        Sopharma Trading's profit up 201% Y/Y in 2007

 

 

ANALYSIS:

 

·        The Economist: Pipedreams

·        Europe demands more control on subsidies

·        Credit Crunch spreads East

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Articles:

 

 

MACROECONOMY:

 

Bulgaria & Japan to boost economic cooperation

The new Japanese ambassador in Bulgaria His Excellency Tsuneharo Takeda will visit the Bulgarian industrial association. During the meeting the possibilities for fostering the bilateral economic cooperation between Bulgaria and Japan will be discussed, informed from BIA. Mr. Takeda will be received by the chairman of BIA Bojidar Danev and the vice-chairman Georgi Shivarov. The overall amount of the Japanese loans for Bulgaria is $840 M. The loans are in the fields of economy, culture and social activities. Mr. Takeda expressed hope that in 2008 the Japanese government will decide on a 230 M EUR loan for the development of the projects for construction of new container terminals at Bourgas and Varna harbors.The Bulgarian side should co-finance the projects with 70 M EUR. After the last official meeting between Takeda and the deputy prime minister Ivaylo Kalfin, the Japanese ambassador informed that with regard to the 50 years of the renewal of the diplomatic relations and 90 years of the setting of official relations between Bulgaria and Japan, in 2009 there will be several exhibitions of the golden Thracian treasure in his country.

Bulgaria discusses economic relations with Poland at business forum

Bulgaria's Foreign Minister Ivaylo Kalfin is to open Friday a business forum as the main topic to be discussed will be the strengthening of the country's economic relations with Poland.The event is to take place in the Chamber of Commerce and Industry in the town of Haskovo.Diplomats, businessmen, representatives of trade organizations, regional rulers and mayors will be among the participants in the conference.

Bulgarian president hails country's achievements in 2007

Speaking at a reception for foreign ambassadors accredited to Bulgaria, President Georgi Purvanov said on Tuesday 29 January that 2007 was "a successful European year for Bulgaria". Bulgaria has been successful in coping with the tasks arising from its agreements with the EU, including the recommendations concerning areas in which the country was lagging behind, the president said. He noted that his country began to contribute successfully to the work of European institutions and the debate on the EU's entire agenda and had an active position in preparing the Reform Treaty. "Bulgaria will continue to conduct an active European policy in the still difficult region of Southeastern Europe. We will remain an active factor of security and stability in all spheres," he said. The past year confirmed the conclusion that Bulgaria's relations with the United States are better than ever before, he said. "As a NATO member state, Bulgaria has proven repeatedly that it intends to play an active role in overcoming new challenges. Bulgaria is a predictable and consistent partner, an ally who can be counted on, both in the Balkans and through participation in more distant missions as those in Iraq and Afghanistan," he said. "My country is returning to the traditions of the more distant past when we were very open to the Black Sea region culturally and economically. This will probably be one of our foreign policy goals in the following few years," Purvanov said. The concept of developing contacts with countries east of Bulgaria is centred on mutual confidence, pragmatism and business partnership which is beneficial to both parties, he said. "All our institutions gave many signs of opening to many of our good friends of the past in Asia, America, Africa and the Middle East. This is a line which we will develop in future," Purvanov said. Apostolic Nuncio Giuseppe Leanza, the doyen of the diplomatic corps in Sofia, congratulated the Bulgarian institutions on their efforts to lead the country to higher national and international goals. He recalled the Latin saying that unity is strength. Present-day Bulgaria is a stable democratic country which is developing economically, is committed to a long process of reforms, and respects the dignity of the individual and human rights, Leanza said. Bulgaria is making ever stronger efforts to implement infrastructure projects and to modernize key public sectors, and will certainly succeed thanks to its strong political will, he said. He underscored the country's reliability as an international partner and a member of NATO and the EU, its contribution as a factor of regional stability and its cultural contribution to the EU. "At the end of its first year of full membership, it can be said that Bulgaria is successfully integrated in the EU," Leanza said, noting the country's active role in the work of the EU. The Apostolic Nuncio expressed his deep satisfaction with the successful outcome of what he described as "the dramatic case" of the Bulgarian medical workers in Libya. The positive solution became possible thanks to the patience and the great diplomatic efforts of the president's administration and the government and the active support of the international community.

Prime Minister: "Bulgaria should become regional centre for transit and distribution of resources"

"Bulgaria should seek to capitalize on its geographical location and become a regional centre for transit and distribution of resources which come from various sources and are directed to EU member states," Prime Minister Sergei Stanishev said in Parliament on Friday. "The transit of various routes via Bulgaria strengthens our sovereignty and our national security because both the producing countries and the consumer countries have an interest in Bulgaria's stability and successful development. It is wrong to assume that the building of the pipelines Nabucco, South Stream or any other via Bulgaria makes the country more dependent. Far from that, we are becoming a real factor on Europe's energy map," Stanishev said. The Prime Minister said Bulgarian-Russian relations should not be viewed from an ideological perspective, based on the opposition between russophiles and russophobes. "We need to be bulgarophiles, to defend our interests before all our partners and get rid of our inferiority complex and the assumption that nothing depends on Bulgaria. We have nothing to worry about of what was accomplished during President Putin's visit," he said. "As a member state of the EU and NATO, Bulgaria has clear foreign policy priorities. We have an important role to play as a stabilizing factor in the Balkans. This, however, does not mean that we should not develop our relations with other partners, such as Russia, India or China," the Prime Minister said. According to him, all agreements signed during President Putin's recent visit to Bulgaria are in accordance with European priorities and European legislation. This has been written down
in the agreement on the South Stream gas pipeline, which provides for a possibility to respond to any changes in European energy norms. Bulgaria and Russia did not sign a protocol on the supply of nuclear fuel because the Russian side did not agree on a provision which Bulgaria wanted to include, pertaining to this country's commitments to the EU, Stanishev said. The Bourgas-Alexandroupolis oil pipeline will be built according to the highest European environmental standards, he said. "It is hard to understand the lamentations of former ministers who were directly concerned with the closure of Units 3 and 4 of the Kozloduy Nuclear Power Plant. Due to their decisions, we are now wondering how to ensure the energy balance and how to secure electricity exports," Stanishev said. He noted that the future Belene nuclear power plant will ensure considerable independence from Russian energy supplies and will produce clean energy. The three energy agreements signed during President Putin's visit constitute an important step forward in achieving energy security and in placing Bulgaria on Europe's energy map, the Prime Minister said. These three agreements will generate 5,500 million euro in direct investments in the Bulgarian economy. The agreements are to be ratified by Parliament. The legislators can either approve or reject them, Stanishev noted. The sides agreed on setting up an expert group to verify the list of Bulgarian archives in Moscow, the access to these archives and their possible return to Bulgaria. The issue about Russia's debt to Bulgaria was also raised, and President Putin promised to work for a prompt settlement, Stanishev said. According to him, the debt amounts to 38 million US dollars.
During President Putin's visit to Bulgaria, Bulgarian companies were invited to share in the construction of facilities in Sochi, Russia, where Winter Olympics are to be held, Stanishev said.

Concession to save Kozloduy Nuke

Bulgarian PM Sergey Stanishev recently announced that Bulgaria was ready to grant a concession over the decommissioned units 3 and 4 of Kozloduy Nuclear Power Plant (NPP) to a foreign operator. This weekend, the nuke's Managing Director Ivan Genov said in a statement that the interests of a possible concession were not targeted at the non-operational units alone, but at the entire power plant. In his opinion, however, a concession should be used as a last resort for rescuing the decommissioned reactors. Through the I Want Light campaign, Bulgaria will try to achieve its foremost objective, namely the reopening of units 3 and 4.

Reopening of reactors 3 and 4 to solve energy crisis on the Balkans

A possible reopening of power units 3 and 4 of NPP Kozloduy can save the Balkans from the energy crisis, reads a declaration of the Bulgarian Chamber of the Energy Engineers in support of the reopening of the decommissioned reactors. There are no ostensible technical reasons for the premature decommissioning of power units 3 and 4 and their reopening is the only option we have to overcome the energy crisis on the Balkans, until new capacities are put in exploitation, the declaration reads further. Energy experts have calculated that US $300 million had been invested in the modernization of power units 3 and 4 of NPP Kozloduy before their shutdown. The reactors' safety and reliability has been proven through numerous inspections by the IAEA, a peer review by WANO and an inspection by the EU Nuclear Issues Group.

Bulgaria stops exporting electricity to Greece

Bulgaria is likely to completely stop exporting electricity for Greece as early as the coming summer, because the electricity production capacities of Bulgaria will be hardly enough for the needs of the Bulgarians. We may very well forget about exporting electricity next year, explained Bulgarian leading energy experts to EU Consumer Protection Commissioner Meglena Kuneva. She talked for an hour and a half with the Bulgarian delegation, led by Bulgaria's Deputy Economy Minister Yordan Dimov, Kozloduy NPP Director Ivan Genov and Bulatom chairman Bogomil Manchev.  
 Commissioner Kuneva reminded that Bulgaria had taken certain responsibilities by signing agreements with the EU. She was explicit that Bulgaria should prove the safety of the units. MEPS from all parties gathered in the EU Parliament yesterday for the start of the We Want Light campaign. Toma Tomov's documentary Revive Kozloduy was presented at a special discussion on the reopening of the two units. "Giving up your cheapest energy source is an absolute nonsense," says in the movie John Ritch, Director General of the World Nuclear Association. He appealed to Europe to mend its mistake.

Bulgaria opposes EU efforts to split power utilities

Bulgaria is among the eight countries that oppose the European Commission's plans to split up national power utilities, separating distribution from production, and backed an alternative plan in a letter to energy commissioner Andris Piebalgs, as reported by Reuters.France and Germany lead the resistance to the European executive's project, securing the support of Austria, Bulgaria, Greece, Luxembourg, Latvia and Slovakia."Neither the impact assessment, nor the policy debate of the last months have been able to dissipate these serious concerns already expressed..., and therefore we remain firmly opposed to this measure," according to the letter, as quoted by Reuters.The Commission favours breaking up integrated production and distribution businesses altogether, which it calls unbundling, and is likely to be backed by the UK, Italy and Spain, who already have such legislation in place.The European executive believes that by doing so it would spur competition in the sector, which in turn would reduce electricity prices across the 27-member bloc.In their letter on January 30, the eight dissenting countries have outlined their own proposal on the issue.The Commission thinks insufficient competition inside member states and the absence of a European power market is hindering investment in new plants and networks and maintaining artificially high electricity prices in the region.

Bulgaria expects to triple tourism revenues by 2013

Bulgaria's tourism revenues are to triple by 2013, said Stanislav Novakov, chairman of the State Tourism Agency, during the presentation of the national strategy for development of the sector for the 2008 – 2013 period. The strategy stipulates gross revenue in the amount of 6 bln euros from tourism by 2013. 2007 revenue is projected at 2.4 bln euros, which is expected to grow to 3 bln euros this year. In order to achieve better results, the strategy implies offering of products with higher value added, with the aim of attracting well-off, as well as introduction of new tourist products. The implementation of the strategy will consume some some 250 mln euros in the next five years. The funds will be sought via the operation program Regional Development, under the priority “Sustainable Tourism Development.” By 2013 the relative share of additional services will reach 60% of the revenue, and main services will account for 40%. Last year the proportion was vice versa – 40% for additional services and 60% for main. The strategy has to be coordinated with several Ministries, and then adopted by the Council of Ministers. The National Tourist Council will discuss the plan at a meeting on January 30. The chairman Mrs. Anelia Krsushkova said the paper was important with regards to Bulgaria's application for EU funding on tourism projects. Bulgaria's main problem is that domestic tourism is not a very developed sector and there are numerous areas in the country, which are still unable to offer quality products. Moreover, our country ranks 56th in terms of infrastructure development and 44th on potential resources for tourism development. Bulgaria does not have a recognizable image as a tourist destination in the world. Another weak point is that it is very much dependent on sea tourism. Ecological issues and excessive construction in resorts are also recognized as problems.

Metro network to cover Sofia by 2015

 

Sofia's underground railway network will be expanded significantly over the next seven years, mayor Boyko Borissov said. The last stage of the project is slated for completion until 2015. When the stage is completed, the metro network will connect the Knyazhevo and Levski residential districts and will continue to Kremikovtsi. Borissov considers the metro a key element in solving Sofia's traffic problems. The first stage of the metro network expansion will see the setting up of a line linking the Lyulin and Obelya districts with Mladost. The construction of a line between Nadezhda and Lozenets will start in 2008. The stretch should be completed by 2012 and a year later the extension from Mladost to the Sofia airport should be made. Construction works on the third stage of the expansion, which will see the setting up of a line between Knyazhevo and Kremikovtsi, should start in 2014. The line should reach the Levski residential district by 2015.

 

Inflation to remain below 5% in 2008

 

Inflation in Bulgaria in 2008 will not exceed 5%, Industry Watch forecast in a report titled 'Ready for Business 2008'. The service prices for end consumers in Bulgaria will continue increasing faster than in the Eurozone, due to the bigger nominal rise in labour costs, the analysts point out.The administered prices - mainly in the utility sector - may surprise Bulgarian households, the report reads. Inflation in Bulgaria is influenced mainly by the prices of natural gas and electricity.The wages in the mass labour segments will keep on rising quickly in 2008. The forecast concerns medium-level positions that require certain skills but no special qualification. Such segments make up about three quarters of employment in Bulgaria, the analysis shows. The prices of real estate will go up more slowly than in 2007, due to the slight rise in mortgage credit interest rates and the increased supply in the biggest cities.

Bulgaria's commodity exchanges more than double turnover to �290.4 M in 2007

Bulgaria's three licensed commodity exchanges reported combined turnover of 567.6 million levs ($429.4 million/290.4 million euro) for 2007, up from 220 million levs in 2006, the state-run commission in charge of commodity exchanges said on Monday. This type of market trade has strengthened its positions. More and more people, particularly foreign investors, are looking for markets where they could forecast their prices so these markets will be successful for sure," the chairman of the commission, Hristo Milenkov, told SeeNews. The commodity exchange in the capital Sofia reported the highest turnover of 471.5 million levs, followed by the bourses in the Danube city of Ruse with 71.5 million levs and in Bulgaria's second largest city of Plovdiv with 24.7 million levs, the commission said in a statement. Milenkov said he hoped bourse turnover will keep rising in the current year. However, this means introducing new traded commodities and new forms of trading," Milenkov said. online trading would make the market more competitive and attractive, and some energy related commodities could be included in the business of the exchanges, he added without elaborating. Food prices would fall with the new harvest in 2008, after rising in 2007, Milenkov said. Poor harvest and gloomy expectations led to the leap in food prices in August 2007", he added. Sunflower oil price surged by 78% in 2007, data of the commission indicated. Not only the poor harvest in countries exporting sunflower, including Bulgaria, has lifted prices, the use of sunflower seed for making biofuels also contributed to the rise in prices, Milenkov said. Domestic sunflower oil prices nearly doubled to 2,300 levs per tonne in December from 1,280 levs ($968 /655 euro) per tonne at the beginning of 2007, data from the Sofia Commodity Exchange showed. Unfavourable weather conditions - a winter with no snow, followed by an unusually dry spring and a summer heatwave - damaged grain crops in most of southeast Europe last year. Bulgarian farmers harvested 545,000 tonnes of sunflower in 2007, down some 54% from the previous year.

Customs Agency revenues exceed annual target

 

Revenues from VAT, customs duty, excise duty and fines collected by the National Customs Agency (NCA) in 2007 totalled 7,031,015,232 leva, which represents 101.5 per cent of the annual target set by the Finance Ministry, NCA Director Asen Asenov told a news conference on Tuesday.Revenues in 2007 exceeded the 2006 level by 24 million leva.In 2007, the NCA collected 3,511,620,852 leva in VAT, 3,315,421,673 leva in excise duty, 193,013,339 in customs duty and some 11 million leva in fines.

On-line advertising market in Bulgaria in 2007 estimated at BGN 12 M nett

 

The Bulgarian market of on-line advertising in 2007 totalled about 12 million leva nett, which is 60 per cent more than in 2006 when it totalled 7.5 million leva nett, Investor BG told a news conference Tuesday. Investor BG expects that the share of on-line advertising in Bulgaria in the next couple of years will vary between 5 and 10 per cent; currently it stands at 3 per cent, Investor BG Executive Director Ivailo Lakov said. The company has also calculated that at the end of 2008 the on-line advertising market in this country will generate 18 million leva nett. A study conducted by Investor BG shows that the most actively advertised companies in the Internet are the telecommunications companies, the biggest players among whom are the Bulgarian Telecommunications Company Group and the M-tel mobile operator.

Bulgarian sugar market unpredictable

 

The region of Veliko Tarnovo is a traditional producer of sugar beet in Bulgaria. For the past few years, however, the areas sown with the crop have been constantly decreasing. There is no strategy for development of beet growing, nor is there information about Bulgaria's quota for import of raw cane sugar. Besides, the price of cane sugar has been rising in recent years, due to its use in the production of biofuels. If the trend is preserved, the import of raw cane sugar for refining will most probably drop. That will affect the canning industry, the owner of Lachita, Ivaylo Lyubenov, said. The Veliko Tarnovo-based company is one of the biggest confectionery producers in Bulgaria. Sugar consumers in Veliko Tarnovo, however, are privileged. Thanks to the mills in Gorna Oryahovitsa and Rousse, there is no sugar shortage in the region and the price is by some 3 leva/tonne lower than in southern Bulgaria.Another price shock will affect seriously the big companies in the sector. We will have to either reduce production or drastically raise the prices of our products, Ivaylo Lyubenov pointed out. The last time sugar prices doubled Lachita preserved its prices almost unchanged at the expense of its profit. However, the bigger producers will not survive a second such hike, because many of them have made considerable investments in production capacities that meet the European requirements.

Germany in a rush for Bulgarian eco-food

German market of bio-products is constantly expanding during the last few years. Consumption of Bulgarian food, produced in ecologically clean regions becomes more and more popular, Bulgarian Ambassador in Berlin, Meglena Plugchieva, has announced.The big chance of Bulgarian eco-food producers is the fact, Bulgarian bio-clean products are demanded mostly by people at the age between 50 and 64 years; the same group presents 27% of solvent population, which is the biggest share, the Bulgarian diplomat added. Small chains, specialized in sale of healthful food are one of the chances for Bulgarian producers. But the only way for Bulgarian farmers to reach the solvent German market is to unite, was categorical Ralf Hasse, honorable council of Bulgaria in Magdeburg.Bulgarian state has to establish nets for common presentation of the farmers and their production, the German added.At the moment Bulgarian farming is small, doesn't use modern technologies and can't compete with the big EU farms.

 

Raiffeisen Research: Bulgaria currency board stable

The currency board arrangement operated in Bulgaria would remain stable even in the case of a sweeping conversion to euro on the part of Bulgarian households, analytical unit Raiffeisen Research said in its Bulgaria Currency Board Special overview. The Bulgarian currency board was designed in a way that foreign currency reserves equal much more than 100% of the monetary base, as they also cover the government's deposit with the central bank and the deposit of the central bank's banking department (the latter being set aside as a safeguard against systematic liquidity problems). According to the latest data as of the end of 2007, foreign exchange (FX) reserves grew 33.7% year-on-year to 11.94 bln euro. The monetary base thus accounted for 60.8% of the official foreign reserve, said Raiffeisen Research. This ratio was traditionally even lower until September 2007, when the central bank increased the minimum reserve ratio by 4 percentage points to 12% effective September 1. Thus, the share of the monetary base that represents banks' reserves with the central bank increased substantially after the hike. In fact, even if the entire BGN-denominated portion of the broader money supply aggregate - M2, is considered, the foreign currency reserve still covers 90.6% of it (end of Dec '07, 99.3% end of Nov '07). This means that hypothetically, if the money in circulation, the bank deposits with the central bank and all of the local currency denominated deposits were to be converted into euro (in case of panic) the official reserve would still suffice to meet this demand. Hence, the stock of foreign currency reserves is more than adequate not only compared to the level of reserve money, but also to the broader money supply aggregate (M2), said Raiffeisen Research. The last few years have all ended with fiscal surpluses and 2007 should not be an exception. In November, the government's year-to-date surplus reached 7.1% of the projected GDP due to the over-collection of tax revenues, which far exceeded original projections. Despite some extra spending of 2.5% of GDP in December, the full-year surplus is likely to exceed the government's latest target of 3%. For 2008, the cabinet is again targeting a 3% surplus and, considering the government's traditionally conservative planning of revenues, the 3% goal may be overshot again this year. Considering last year's substantial inflation (12.5% at year-end, 8.4% average) and the upward revision of inflation expectations for 2008, the probability that Bulgaria will enter ERM II soon has decreased considerably, said Raiffeisen Research. Although inflation is not a formal criterion for ERM II entry, European Commission and European Central Bank officials are widely speculated to informally consider it. According to speculation, line EC and ECB parties are unwilling to let Bulgaria enter ERM II before the country has clear prospects of reducing inflation to a level closer to the Maastricht criterion. Thus, while a 2008-2009 target for ERM II entry and a 2011-2012 target for euro adoption seemed too pessimistic a year, said Raiffeisen Research.

Bulgaria's account rating reduced

Fitch Ratings cut the outlook on Bulgaria, Estonia, Latvia and Romania's long-term foreign and local currency issuer default ratings to negative from stable.'Current account deficits in the Baltic States, Bulgaria and Romania have risen to levels that look disconcertingly stretched by current global or historical standards,' Fitch said.The rating agency estimates 2007 current account deficits at 25 pct of GDP in Latvia, 19.5 pct in Bulgaria, 16 pct in Estonia, 14 pct in Romania and 13.7 pct in Lithuania. Though substantial current account deficits, external financing requirements and rapid credit growth have been long-standing rating weaknesses, Fitch said its concerns have heightened over the past year as macroeconomic imbalances have widened and, in some cases, remain on a deteriorating trend.Against this backdrop, the global credit crunch represents a significant negative shock, Fitch noted. In addition, inflation has risen sharply, weaker euro area GDP growth will adversely affect exports, while delays to euro adoption timetables exacerbate external financial risks.External deficits that were easy to fund in times of abundant liquidity and risk appetite may be harder to finance following the global credit shock. Fitch therefore believes the outlook for the region has, therefore, weakened and rating dynamics have shifted, but added that it expects that the resolution of outlooks will be largely driven by country-specific developments.The negative outlooks reflect the heightened downside risk of an abrupt slowdown in capital inflows and a costly macroeconomic adjustment, it said. The agency affirmed the long-term foreign and local currency IDRs, short-term foreign currency IDR and country ceilings on all four countries.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENTS:

 

 

Bulgaria's second largest city with new industrial zone

 

Investors have bought agricultural land worth more than BGN 5 M several kilometers east of the city of Plovdiv, and are creating a new industrial zone there.The construction of two large-scale projects is scheduled to begin in February on the plot, which is located on the territory of the village of Skutare. The Bulgarian company Bigla III has acquired some 280 decares of land, and will be constructing a massive logistics center. The Belgian firm Immo also plans to build a logistics center at the site. In addition, the Israeli company Zwielaufer Laor Delta Construction has bought a plot of 230 decares nearby, and will be building a luxury residential complex with detached houses.

Allianz ready to invest in 'South Stream'

Pension and insurance funds are ready to fund the big infrastructure projects in Bulgaria. This is claimed in a declaration of “Allianz Bulgaria” to prime minister Stanishev, informed yesterday the chairman of the group Dimitar Zhelev, cited by “Trud” newspaper.Currently, the funds accumulate an enormous financial resources. The forecasts for this year are the assets of the pension funds to reach 1.6 bln EUR.This is money of the Bulgarian citizens, which could be invested in our economy instead of abroad, pointed out Zhelev.The suggestion is the pension companies to be allowed to invest 15% of their assets in projects approved by the government. Among such projects are “South stream” and “Nabucco” gas pipelines, Bourgas-Alexandroupolis oil pipeline and NPP “Belene”, which will provide maximum profitability at a minimal risk.

Business demands incentives for local investors

The state should provide incentives to Bulgarian investors similar to those offered to foreign investors in the country, the Association of the Organisations of Bulgarian Employers (AOBE) suggests. Investments of Bulgarian companies amount to EUR 13-15 billion annually, while foreign investments total EUR 5 billion. Foreign companies investing in Bulgaria are offered a number of incentives and this is not the case with Bulgarian investors, Bozhidar Bozhinov, deputy chairman of the Bulgarian Chamber of Commerce and Industry (BCCI). Entrepreneurs demanded that the business should be given support when providing co-funding under the EU programmes. They also insisted that the funding they have provided should be considered as expenses. Employers also insisted for tax breaks for investments in underdeveloped regions, as well as for additional incentives for staff training. The business also demanded that social security contributions should be reduced.

Austrians to finance three energy projects in Bulgaria

During a seminar on “Energy efficiency” in the University of Rousse it became clear that Austrian companies will offer till May energy-saving technologies to three Bulgarian companies, informed ruseinfo.net.The Austrian government will fund up to 75% of the projects costs. 25% will be contribution of the Bulgarian companies.The seminar is organized under the project “Reduction of the harmful emissions through creation of a network of companies and research institutes”, financed by the Austrian government under the program “Cooperation in innovations and scientific researches with Central and Eastern Europe”. The project coordinator is the Technology university in Graz in cooperation with the University of Rousse and the University of Rieka in Croatia. Partners in the project are 3 small and medium enterprises in the regions of Rousse and Rieka and 4 Austrian companies. The Bulgarian companies are “Vinprom”- Rousse, Hotel “Splendid” and “Aura Fashion”.The projects aims to research the application of renewable energy sources technologies in three final customers in Bulgaria – a hotel (tourism), company for production of wine (food and beverages) and a textile company.

Balkan Solar company eyes power production permit

 

Local company Balkan Solar has asked the Bulgarian power regulator to issue a 35-year licence for the operation of a 25MW photo-voltaic power generation capacity. The State Energy and Water Regulatory Commission is likely to review the application next week. The solar modules will be installed in Godech, Pernik and the village of Divotino, all in Western Bulgaria. The equipment will be supplied by Greece's Solar Technologies. The solar park will take shape in two stages. The investor will first install 32,000 modules in the Pernik area and 4,600 modules in Godech by the end of 2009. A further 120,700 solar modules will be added during the second stage. Corporate Commercial Bank will extend the necessary financing after Balkan Solar receives the preliminary licence. Balkan Solar is majority-owned by IP Maccap, a Maccap company. It is building small-size hydro power plants and developing a biodiesel project in Greece and co-generation projects in Germany, Moldova and Macedonia. Balkan Energy, another Maccap company, is developing a wind farm project near Dobrich. Maccap subsidiary Balkan Utilities is a licensed power trader.

 

Hellenic Petroleum to invest �77M in local expansion

 

In line with earlier announcements, the Greek fuel supplier Hellenic Petroleum Group unveiled more detailed plans to invest BGN 150mn (EUR 76.7mn) over a period of 4 years to double its distribution network in Bulgaria to about 100 pump stations. The locally registered subsidiary Eko Elda will open 12 to 15 new units by the end of this year. The expansion plan incorporates both green-field investments and acquisitions but does not envisage franchising agreements. Eko Elda is among the candidates to take over the 17 petrol stations of the Turkish Opet Aygaz.

Hus to invest �3.5M in warehouse, products

Plovdiv-based Hus, which is an exclusive representative of Turkey's Assan Panel, will invest nearly EUR 3.5 million in a new warehouse and products for the local market in 2008. We plan to build a warehouse and logistic facility with a total area of 20,000 sq. m in Bourgas, which will cost some EUR 1.5 million, Ivaylo Georgiev, a department head at Hus, told the Pari daily. Another EUR 2 million will be invested in the purchase of the most demanded sandwich panels for Bulgarian clients. The insulation material is widely used in the construction of industrial and commercial buildings.Hus has production, warehouse and trade facilities in Plovdiv, Sofia, Rousse, Lom, Bourgas and Varna with a total area exceeding 50,000 sq. m. Its core business includes import of and trade in roofing sheets, pipes, T-section profiles etc. Hus's turnover for 2007 exceeded BGN 200 million.

Extrapack invests in �13 M plant for flexo-printed bags

Extrapack, the Bulgarian producer of logo-printed plastic bags and industrial packaging, said it is building a new flexo-printing facility on a 3.0 ha plot near the village of Ledenik, in the Veliko Tarnovo area. The 13 mln euro plant should be operational by mid-2009, said manager and owner Milen Georgiev. The facility will have 17,000 sq m of built-up area and will be manned by 250-300 staff. At the moment, Extrapack employs 500 staff at production locations in Sofia and Veliko Tarnovo. The company is Bulgaria's only producer of 100% biodegradable plastic bags that employ a technology licensed from Canada's EPI Environmental Products. The Veliko Tarnovo plant manufactures 15 to 20 tons of biodegradable plastic bags. It posted sales of 30 mln levs in 2007, up 6 mln levs from a year earlier. Exports account for 24% of output.

BGN 8M business centre to be built in Petrich

Bulgaria's Bonima will build a large business centre in the town of Petrich. The company will invest BGN 8 million own and attracted funds in the project. Bonima was included in Top 10 of Pari daily's Gepard ranking of the most dynamic companies in the region of Blagoevgrad. A part of the premises will be offered for rent, the remaining space will be put for sale for EUR 600 to 800 per sq. m. Austrian chain Billa will be among the big tenants.The complex is located in downtown Petrich. The building will have a total area of 10,000 sq. m and an underground parking lot. The first two storeys will accommodate shops and offices, the last two storeys will consist of 16 apartments each. The centre will be ready by the end of 2009.

Sun City to build 15-storey business centre in Bourgas

Building company Sun City will start construction works on a new 15-storey business centre in Bourgas. The luxurious Sun City Centre will be built on a 4,165-sq. m plot overlooking one of the city's major boulevards, Demokratsia. The total investments in the project are estimated to amount to EUR 25 million, Snezhina Pashova, deputy manager of Sun City, said. The new building will feature four underground floors with parking space for 400 vehicles, a supermarket, a dry cleaners, three floors with a total of 58 outlets, as well as a floor accommodating leisure and recreation facilities. Ten of the 15 floors will accommodate a total of 7,046 sq. m of office space. The project has great potential to be financially effective, according to the company. There is a shortage of business and commercial space with good location in Bourgas, according to investors. Sun City has also launched a second project in Bourgas, which will see the setting up of a mall in the city. It will be built on a 1.3-ha plot in Meden Rudnik, Bourgas' largest residential district.

Interior ministry to invest �161M in border control

Interior minister Rumen Petkov reports that the ministry will invest EUR 161mn in two years for security projects on the land border with non-EU countries Turkey , Macedonia , and Serbia . The funds will be spent for purchase of monitoring and control systems. The ministry will buy one or two airplanes that could be also used for detecting forest fires near the borderlines in southern and western areas of the country.

 

COMPANIES:

 

Sony Ericsson to launch Call Center in Bulgaria

Sony Ericsson are opening call centre in Bulgaria at the beginning of February announced expert.bg. The centre will manage phone calls and requests as well as provide clients of the company with written and oral assistance on wide range of topics.Clients will receive information about prices and availability, functions of the devices, connectivity, compatibility, problem solving, fun and download, guaranty and all kind of information about the different products.The phone number you should dial is 0800 18 778. The services are open 9 to 17 every single day from Monday to Friday.Customer care is one of the most important aspects of the corporative policy of Sony Ericsson. That is why the company keep on investing in improvement of customer services.

Colliers Bulgaria with unique project near Bansko

Colliers International Bulgaria opens White Fir Resort ski and spa apartment lodge, informed from the company. This will be the first apartment lodge in Europe from this kind, which will be managed by Colliers and the only such development in Bulgaria to be run by an international property consultancy. White Fir Resort was developed by London-based MSI Developments. It is situated in Razlog city (Pirin Mountain), just 10 minutes far from Bansko ski resortThe project includes boutique-style spa facilities, an indoor pool, jacuzzi, sauna, and steam bath, lobby bar and restaurant. White Fir Resort is the finest development of its kind so far in Bulgaria and we are delighted to offer these convenient apartments to holiday makers. I am confident that international visitors will be attracted to White Fir by the quality of management we are providing, which is the best for any such development in the country, commented Nicholas Yovanides, regional director of Property Management for Colliers International Southeast Europe.

Kremikovtsi turns into an apple of discord

The events around the sale of Kremikovtsi steel plant quite reminds one of the ancient Greek myth about the Apple of Discord. Both politicians and businessmen entered into quite a conflict over the deal. Amid Bulgarian Minister of Economy Petar Dimitrov's guarantees that Ukrainian oligarch Kostyantyn Zhevago has promised to pour cash into the modernization of the plant, PM Sergey Stanishev announced there was no need to rush the deal. He said there was yet another company interested in acquiring the plant: the US American Steel. This, he said, he had learned from US Ambassador to Bulgaria John Beyrle himself. on the other hand Kremikovtsi Executive Director Aleksander Tomov asserted that should the sale fail, he would take the plant's management in his hands and begin completely rejecting the owner's bidding. Meanwhile Sofia City Mayor Boyko Borissov made it public that the European Commission is launching a penal procedure against Bulgaria over Kremikovtsi's breaching the balance in the environment. This rendered Pramod Mittal, the Indian owner of the plant, who had come in person to see minister Dimitrov, speechless. 

 

 

Pramod Mittal selling hollow company

 

Kremikovtzi's new owner will find a hollow company. According to official data, Bulgaria's biggest metallurgical plant posted a BGN 958.95 million loss for the first nine months of 2007. Since the company was acquired by India's Global Steel of Pramod Mittal two years ago, it has generated BGN 752.5 million losses.According to knowledgeable sources, however, Kremikovtzi's liabilities are much bigger. A check-up may show that its debts reach as much as BGN 2 billion, a former representative of the company's management who declined to be named said. A similar amount was mentioned by the former owner, Valentin Zahariev. Kremikovtzi is one of the few steel plants in the world which - despite the high metal prices - operates at a loss, he pointed out. Since 1999 the price of steel has jumped four-fold. According to Zahariev, if the company is managed property, it can make a profit of USD 10 million a month. In 2004 we earned a profit of nearly BGN 130 million a month, the conditions now are much more favourable, he added. At the same time Mittal has sold out some of the company's assets.It is almost certain that within a few days Kremikovtzi will become property of Konstantin Jevago, a 34-year-old Ukrainian MP and billionaire, the executive director of the steel plant, Alexander Tomov, said on Friday. If the deal materialises, the new owner will inherit a viability plan and an environmental programme, which require EUR 140 million investments.

 

Trace Group orders new equipment for � 2.2M

 

Stara Zagora-based road construction company Trace Group Hold has signed a contract with Wirtgen Bulgaria for the purchase of equipment for more than EUR 2.2 million. The machinery is expected to be delivered in April 2008. It includes five Voegele road paving machines, 21 HAMM road rollers and a Wirtgen road milling machine. The move was prompted by the expansion of the asphalt mix output capacity of the company.

Carlsberg Bulgaria is the biggest investor in the branch for 2007

22% sales increase had marked Carlsberg Bulgaria for 2007 compared to the previous year, with common sale growth of the market with 9%. The comparing shows that Carlsberg company generates the main growth on the market in the passed year.The Brewery Union official statistics say that the Bulgarian firm continues its sale increase reaching almost 25%.Like several years before, main reasons for the good results is the growth of Shumensko beer sales - 21% more compared to 2006.In the last 5 years Shumensko increased its production 4 times. Impressive growth also realized Pirinsko beer - 17,4% and Tuborg - 22%.Carlsberg Bulgaria also leads the classification for biggest investor in the branch for 2007.Until now the company had invested 31 million BGN (15 million EUR) in production works in the factories in Shumen and Blagoevgrad cities, transport and equipment.

 

Sopharma Trading's profit up 201% Y/Y in 2007

Sopharma Trading booked BGN 753,000 profit for 2007, an increase of 201% compared to the BGN 250,000 netted for 2006. Sopharma Trading raked in BGN 259.4 million sales revenue for 2007, up 90% year on year. The company ranked second in terms of share of the medicines market during the year. The administrative costs of Sopharma Trading totalled BGN 2.3 million for the period January to December 2007, up by BGN 134,000 year on year. Sopharma Trading forecasts BGN 317 million sales and BGN 3 million profit for 2008. The secondary trade in Sopharma Trading's stock started on Wednesday on the Bulgarian Stock Exchange (BSE). The stock ended the day at BGN 5.01 per share. The company plans to keep its free float at around 15%. Sopharma Trading was established in 2005 through the merger of five medicine distributors owned by Sopharma AD.

 

 

ANALYSIS:

The Economist: Pipedreams

Europeans may not always like it, but America still matters most for their security. As Kosovo edges towards independence, NATO ponders further expansion and Russia rips Europe's threadbare energy policy to rags, every debate involves America. And the mood is gloomy. "Russia is getting stronger; we are getting weaker", concludes one European political leader. That is alarmingly clear in Serbia, where a pro-Russian nationalist, Tomislav Nikolic, came out ahead in the first round of the presidential election on January 20th. Serbia has just signed an energy pact to distribute Russian gas exports to Europe; in return a Russian company (the oil arm of Gazprom, the state-run gas giant) is to get a controlling share in Serbia's national oil monopoly.Europeans flinch at the idea of Kosovo, the mostly ethnic-Albanian province of Serbia, declaring independence immediately-something the Russians strongly oppose. The Americans fear that more delay risks violence by impatient Kosovars or by Serb provocateurs. Some Europeans plead for a few weeks longer, perhaps to allow yet more talks with Serbia after its presidential election, or simply to get more European waverers such as Spain and Romania to back European Union recognition of an independent Kosovo. Serbia is one of what some analysts call "swing states", places where Russia and the West are vying for influence. Others include Ukraine, Georgia, Azerbaijan and Moldova-and even a few EU members such as Latvia and Bulgaria. President Vladimir Putin of Russia, accompanied by his likely successor, Dmitry Medvedev, recently signed a deal with Bulgaria to build a new pipeline across the Black Sea. Called South Stream, this will pipe Russian gas direct to Europe, bypassing transit countries such as Ukraine and Poland. In this, it matches Nord Stream, a similar bypass under the Baltic. South Stream may stymie a rival EU effort, Nabucco, which was meant to bring gas from the Caspian and Central Asia to western Europe through the Balkans. Nabucco would be the only pipeline from the region not to cross Russian territory, giving Europe the hope of more diversified gas supplies. Nabucco's prospects already looked shaky: gas for it must come from either a trans-Caspian pipeline (which Russia has blocked) or Iran (which America dislikes). If South Stream were built, it would make Nabucco uneconomic. Pipelines and dependence on Russian gas are not the only sources of controversy. American and European diplomats are also wrestling with the question of NATO expansion, which may feature at the alliance's summit in Bucharest in April. The leading candidate is Croatia. Albania and Macedonia are less prepared, but bringing them in might be seen as one way of countering instability caused by Serbia's hostility to Kosovo's independence. That leaves Ukraine, whose new government says it wants eventually to join NATO, and Georgia, which tarnished its democratic credentials in a crackdown on opposition protests in November. Offering either country a membership action plan-a staging post to joining the alliance-would enrage Russia. But holding back might be seen as giving the Kremlin a veto over its neighbours' security arrangements. The hunt is on for something else to offer instead.Largely silent is the EU, whose members appear more concerned over institutional reform and emissions targets than geopolitical issues. That worries the Americans. They seem to have settled a row with Poland over a planned missile-defence base. But not much else is going right. Ron Asmus, a former American diplomat now at the German Marshall Fund, a think-tank, frets publicly about a "rollback" of the West's influence in eastern Europe. He is not the only one.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe demands more control on subsidies

Author: Banker Daily

The first European financial aid for land cultivation in Bulgaria began quite artistically. The first tranche of EU subsidies for the Bulgarian farmers was launched publicly on January 23 through the SEBRA electronic system for bank payments. Hours after that 37,008 agricultural producers should have received in their personal bank accounts a total of BGN155,638,241.71. That was practically the first payment made by the Payment Agency with the Agriculture Fund, accredited in end-2007. The transferred amounts include the money for direct payments from the EU and the additional national subsidies. Farmers get BGN10.3 per decare plus BGN4.1 from the State. Thus, BGN115MN from the European funds and BGN40MN-plus from the Treasury have been initially poured into our agriculture. Within 10-12 days the other prompt farmers will also get in their bank accounts the money they are entitled to from Europe for 2007, but Agriculture Fund insiders did not specify how many producers will be the lucky ones. In an interview for the BANKER weekly in the beginning of November 2007 Deputy Agriculture Minister Svetla Buchvarova pointed out that the land which could be used for agricultural purposes was 51 million decares. Simple calculations show that as 11,114,877 decares are financially assisted now, the remaining almost 40 million decares won't get any subsidies at all. These plots are either uncultivated or have been declared as tilled by more than one farmer. And according to European regulation, when two people pretend to cultivate one and the same plot, it is excluded from those entitled to subsidies until the argument is settled. "We made 5,000 checks on the spot and it turned out that about 12% of the farmers had declared double the amount of plots they really till", said Nikolay Marinov, Deputy Executive Director of the Agriculture Fund. In 2007 some 5% of the declared plots had to be checked, but after establishing so many incorrect data, the European Commission demanded us to check 25% of the applications for subsidies this year. The most striking case is that of a farmer who has declared 417-times more land than he really cultivates. If tilled plots have been incorrectly declared the Payment Agency calculates fines on the area by which the farmer has applied for a subsidy, Mr. Marinov explained. The gravest sanction is if over 50% of the really cultivated areas have been declared, depriving the offender of subsidies for three years in succession. Bulgarians, however, are inventive and they immediately transfer their contracts to another name, usually a relative, suspects Mr. Marinov who is responsible for the technical inspectorate with the Agriculture Fund. Judging from the Agriculture Fund's report, the highest subsidy under the first tranche went to Petrov-Tsenko Petrov company, cultivating plots in the regions of Vratsa and Lovech - BGN699,737.45, Zhiten Krai in Bourgas - BGN590,541.57, and MOTOR 93 in Silistra - BGN408,565.76. The smallest sums - BGN51.93 each - have been transferred to three farmers from Sliven, Stara Zagora and Plovdiv. In order to be able to absorb the EU money a large-scale explanatory campaign among agricultural producers will begin as of March 1. The aim is to file correct applications for subsidizing, even for very small plots of land.

 

 

 

 

 

 

 

Credit Crunch spreads East

Author: Stefan Wagstyl, Financial Times

 

The turmoil in financial markets is turning into a nerve-racking test for the economies of central and eastern Europe and the former Soviet Union. Economists have said the fast-growing region faces a slowdown following the financial shockwaves reverberating around the globe.But the precise impact is uncertain, especially on weaker economies. Even in the stronger countries there may be hidden dangers lurking within particular companies, notably banks, as the Societe Generale debacle has highlighted."These countries will be hit," said Pradeep Mitra, the World Bank's chief economist for the region. "There is no way out of it."They are fundamentally strong enough to resist . . . but some are more vulnerable than others."The differences are registering in the financial markets. As investors reconsider their strategies, they are becoming more risk averse. Some have turned against emerging markets, including the ex-communist region. Others are discriminating more between countries. According to the European Bank for Reconstruction and Development, financing costs for less developed countries in the former Soviet Union and the Balkans have risen since last summer by far more than in the advanced states of central Europe.As the chart shows, the spread on five-year credit default swaps (a measure of risk) has widened by 26 basis points for the Czech Republic since last June and by 44 basis points for Poland. But for Serbia and Ukraine the increase is 151 basis points; for Kazakhstan it is 218 basis points.Erik Berglof, the bank's chief economist, said: "There has been a repricing of risk," with credit costs rising most sharply in countries that are perceived to be the most vulnerable to external shocks.The bank has trimmed its forecast for the region's 2008 gross domestic product growth from 6.1 per cent to between 5 and 5.5 per cent.Given the recent unprecedented credit-fuelled growth surge, this slowdown could be welcome in countries trying to cope with inflationary pressures, including Ukraine, Kazakhstan and Russia, and those facing labour shortages, such as Poland.The benefits could be even greater in economies facing yawning current account deficits, notably the Baltic states, Romania, Serbia and Bulgaria. As Leszek Balcerowicz, the former Polish central bank governor, told a business conference this month: "We should welcome some amount of a slowdown, especially in the Baltic states, which have been growing the fastest . . . We don't have the information that would make us predict a hard landing. Based on the current information a soft landing in the countries which have been growing fastest is more likely."EBRD economists argue that even though the Baltic states and some other countries have large imbalances by global standards, they are less vulnerable than other emerging economies because they benefit from the extra economic security offered by European Union membership. Investors assume greater risks than elsewhere because membership brings clear development perspectives and outside financial scrutiny.However, things could still go wrong, either at the national or corporate level. Hungary offers a salutory warning of a country that ran into economic difficulties in spite of earlier establishing itself as a front-runner in economic reform. Successive governments allowed fiscal deficits to balloon to above 9 per cent of GDP in 2006 before Ferenc Gyurcsбny, the prime minister, bit the bullet and ordered sharp cuts that have slowed GDP growth, with the loss of public sector jobs and more unemployment.In the past year, attention has focused on the Baltics because of their particularly high inflation rates, headed by Latvia, with 14.1 per cent at the year end, the EU's highest. But they may be less vulnerable to shocks than they appear because they began to see trouble well before the global credit crunch and have taken action. As Ilmars Rimsevics, the Latvian central bank governor, said: "We have been tested constantly for the past 12 months."The Balkans are also a concern. Bulgaria has the largest deficit, at over 20 per cent of GDP for 2007. Romania's inflation rate is lower than its two neighbours but economists worry its fiscal policies are looser - and may be relaxed further with parliamentary elections due this year. International investors have voted with their wallets and driven the currency down 20 per cent against the euro from last year's peak.Farther east, the oil-rich governments of Russia and Kazakhstan run huge current account and budget surpluses and have public reserves to protect their financial institutions. But their international borrowing costs are rising and their stock markets suffering in the global battering.Ukraine, an energy importer, may be more vulnerable. Even though it has kept its current account and budget deficits under control, it may struggle to cool the economy. A weak government may not be able to impose belt-tightening policies. Meanwhile, in spite of reforms, the large energy sector remains opaque and could provide cover for concealing bad debts. As elsewhere, the unknown threats to financial stability could be at least as dangerous as the threats that economists already have under watch.