BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 30 MAY – 6 JUNE 2008 )
Sections/headline briefs:
MACROECONOMY:
· Hyundai opens its largest service center in EU
· Putin makes Bulgaria a natural gas dispathcher
· Bulgaria can offer transit for Caspian oil & gas
· Bulgaria in Top 10 of countries reformers
· Fitch Ratings: Inflation will blow up Bulgaria's economy
· S&P sends a warning to Bulgaria
· Bulgarians took over �2,5 B loans for one year
· EBRD adopts new strategy on Bulgaria
· Information and communications technology sector provides 8.4% of Bulgaria's GDP
· Bulgaria awaits record-breaking wheat harvest
· Record amount of rose oil production this year
· Bulgaria leads food price rises in EU with 25.4% annual increase in April
· Spike in cargo traffic via Varna port
· Import-reliant Bulgarian businesses propped up by domestic market
· Bulgarian business hungry for waiters and construction workers
· New highway to be constructed in Bulgaria's Rhodope Mountains
INVESTMENTS:
· Bulgaria ranks 17th in foreign investments in Ernst&Young investment appeal rating
· Greek steel giant to invest �400 M in Bulgaria
· Spanish, Bulgarian companies team up in �400 M real estate project in Sofia
· �70 M investment in biggest office center in Bulgaria
· Nestlé invests �10 M to launch production of new chocolate bar in Bulgaria
· Ruse to develop second industrial park
· Largest doors factory in Balkans to open in Bulgaria's Elin Pelin
· Japanese backer for wind power plant
· Norway's Scatec plans 30 MW solar park in Bulgaria by early 2009
· Two new units to be constructed for 'Bobov Dol' TPP
· Zagorka to invest �14 M in production
· Bulgarian Litos-iBuild to put �6.5 M in Pazardjik Mall
· US investors in Bulgaria to pay lower taxes
COMPANIES:
· Nokia Siemens wins optical network order in Bulgaria
· Morgan Stanely buys 8.1% in Bulgaria's Bulgartabac, 5.0% in tobacco plant Blagoebgrad BT
ANALYSIS:
· EIU: Bulgaria country outlook
· Lack of energy hits Eastern Europe
· Bulgaria - the naughtiest child of the EU family
Articles:
MACROECONOMY:
Hyundai opens its largest service center in EU
The South Korean concern Hyundai opened Monday in the Bulgarian capital Sofia its largest sales, service and distribution center in the European Union. The investment in the new complex amounted to EUR 13 M. It was built by Hyundai's exclusive importer for Bulgaria Industrial Commerce, and is located on the Sofia beltway close to Business Park Sofia. The total all-out area of the sales and service complex is 13 000 square meters. It has two levels, and will provide for faster and better servicing, which the owners hope would serve to increase the sales of the South Korean auto brand with 50%. The servicing capacity of the new Hyundai center is 3500 cars per month, and it will employ a total of 120 people. The Sofia Mayor Boyko Borisov, the Ambassador of the Republic of Korea Kim Myong Jin, and the Hyundai President for Central and Northern Europe Yung Kuyn Oh were special guests at the opening.
Putin makes Bulgaria a natural gas dispathcher
Zagreb was a major energy policy center this weekend, as the city gathered Prime Ministers and Heads of State from fifteen countries, who discussed the most pressing problems in the sector. The forum was also attended by Russian President Vladimir Putin.
In his speech he touched on some major energy issues, such as the construction of underground gas storage facilities in several Balkan countries and the construction of an energy ring including the electricity transmission networks of Eastern and Western energy companies, following the adoption of uniform electricity transmission standards.
"Russia will participate in the construction of new energy-generating facilities in the Balkan countries and the privatization of operating ones," President Putin said. on the sidelines of the forum Russia's Head of State had a meeting with Bulgaria's PM Georgi Parvanov, which lasted for over an hour.After the meeting it transpired that, according to Mr. Putin, Bulgaria might supersede Austria as a major distribution center of natural gas and energy resources for Europe. From this statement it is clear that Putin intends to promote Bulgaria as a key distributor of energy supplies from Russia to the EU. Putin and Parvanov discussed a new energy project called South Stream, which will ensure the transit of Russian natural gas to italy through Bulgaria. The northern coastal city of Varna will be the Bulgarian center of the project, which, experts say, is worth over ten billion US dollars, and its construction will take at least three years. It is still to become clear whether Bulgaria will participate in the South Stream.According to President Parvanov, the Bulgarian state institutions should discuss technical and financial aspects of the project and then take a decision. The European Commission regards the project positively. Russian energy monopolist Gazprom signed a contract with the Italian energy company ENI for the construction of the new pipeline under the Black Sea.
Bulgaria can offer transit for Caspian oil & gas
Bulgaria could offer all required conditions for the transit of Caspian energy resources towards European users, the Bulgarian Economics and Energy Minister Peter Dimitrov declared during the ‘Caspian petrol and gas' conference in Azerbaijan capital Baku. Dimitrov pointed out in his speech Azerbaijan is certain, transparent and secure economical partner for Bulgaria. The both countries are connected by traditional and beneficial relations.The Bulgarian Minister reminded our country already takes part in key energy projects of the oil pipelines ‘Bourgas - Alexandroupolis' and ‘Bourgas - Vliora' and the gas conducts ‘Nabucco' and ‘South Stream'.The 15 jubilee International 'Caspian Oil & Gas' Exhibition and Conferencein Baku is attended by ministers and leaders of Russia, USA, EU countries, Israel, Kazahstan, Turkey and Georgia. During the visit of Azerbaijan Parliament chairman Oktai Asadov in Bulgaria was contracted the establishing of common expert work group in the energy sphere.
Bulgaria in Top 10 of countries reformers
On official ceremony in New York, USA Bulgaria was accepted in the Reformers Club of the World Bank. Members in this club are the countries that during the last years had made serious changes for facilitating the business.According to research of the Bank for that how is making business in almost 200 countries, Bulgaria stands among the 10th biggest reformers, mainly due the tax decrease.Bulgaria's Financial Minister Plamen Oresharski commented that the nomination Bulgaria gets is due the efforts of the three last governments.The nomination is for entire business circles in Bulgaria. The state ranks between the 10th most advanced countries in 2007.Now we can feel the development compared to the ‘90s, but somehow we want to see it happening faster, the Minister explained.Our country should keep the same directions, as accelerating the reforms in relation with cleaning of regulatory regimes, bureaucracy and better infrastructure, Oresharski stated categorically.
Fitch Ratings: Inflation will blow up Bulgaria's economy
High inflation may blow up Bulgarian economy, Fitch Ratings Ltd warned, cited by the British Daily Telegraph. According to their chart, Bulgaria occupies fourth place among the world's most vulnerable to undermining of their macroeconomic stability by inflation countries. Before Bulgaria are only Jamaica, Ukraine and Kazakhstan. Then come Surinam, Latvia, Lithuania, Ghana Vietnam and Sri Lanka. The crediting expansion threatens the economic growth of all Eastern European countries from the Baltic to the Black Sea and beyond, analysts claim. The shock inflation rise is mainly due to increased food prices. Daily Telegraph also cited the opinion of Morgan Stanley's Chief Global Fixed Income Economist Joachim Fels, who pointed at easy credit as the main culprit for the high inflation rates. The inability to hold inflation back puts macroeconomic stability at risk. Countries with emerging markets, like Bulgaria, are for now in control of the situation by harnessing their buffer systems such as sustaining a large budget surplus against inflation, the commentary points out.
S&P sends a warning to Bulgaria
Standard & Poors, International Rating Services, has confirmed the upgraded credit rating of Bulgaria. The long-term rating of the country remains BBB+, while the short-term one is A-2. The country's prospects are qualified as 'bright,' investor.bg reports.
The rating is a reflection of prudent fiscal policy of the Bulgarian government, stable prospects for economic growth and EU membership, according to Marko Mrsnik, S&P analyst. In his opinion, these positive trends to a certain extent are neutralized by high foreign trade deficit and inflation rate. S&P consider that the political support to the currency board and budget surplus of 3 percent of the GDP will remain unchanged. They also believe that the current account deficit will shrink because of the restrictions on loans growth, which will result in consumption and investments reduction. Direct foreign investments are also expected to decrease.Should the government allow a long-term high inflation or instability of the sovereign currency rate (that would delay the accession to the Eurozone) the country's credit ratings may be lowered, S&P warns.
Bulgarians took over �2,5 B loans for one year
For a period of one year Bulgarians took 5,213 billion BGN (2,5 billion EUR) new loans. This was announced after data of Bulgarian National Bank (BNB). The growth in loans (residential, mortgage and consumers) for citizens and households by the end of April 2008 is 56%.The mortgage credits are overtaking the consumer ones, and if three years ago their part was 26,5% from the allocated for citizens and households loans, currently is almost 46%.The annual jump of consumer loans by the end of April this year is more than 52%, and those of firms - over 56%.The mortgage credits in Bulgaria by the end of the spring month are slowly increasing - 61%, compared to the 77% growth last year.
EBRD adopts new strategy on Bulgaria
The European Bank for Reconstruction and Development (EBRD) adopted a new three-year strategy on Bulgaria, the bank said in a statement.Its top priorities throughout 2010 would be assistance to the private sector, infrastructure, the energy sector and projects aimed at boosting the competitiveness of the country’s economy. Projects would also assist Bulgarian institutions and businesses to maximise benefits of EU membership, the statement read.Regarding the private sector, the EBRD is ready to provide financing for boosting companies’ competitiveness, export potential and regional expansion.So far, the bank has extended loans worth 1.5 billion euro using its own funds and has mobilised total funding of 5.9 billion euro for 118 projects in Bulgaria.
Information and communications technology sector provides 8.4% of Bulgaria's GDP
The Information and Communications Technology (ICT) sector provides 8.4 per cent of Bulgaria's GDP, and is the second fastest growing sector after tourism, the head of the State Agency for IT and Communications (SAITC) Plamen Vachkov said on Tuesday during a round table on Public-Private Partnerships (PPPs) in ICT. The 6.2 per cent increase of the economy provides potential for the development of ICT, however legal obstacles hinder this. The limited funding for the development of such projects has led to the need for PPPs, Vachkov said. The Electronic Government Act comes into force on June 12, and the State Administration Ministry and SAITC need to ensure the security and stability of IT systems and the problem of administrative compatibility.Deputy Economy Minister Yavor Kuyumdjiev said that Bulgaria had the fifth largest economic growth in Europe, with total stock turnover of 56,500 million leva (29,000 million euro). Bulgaria needs alternatives such as PPPs to achieve more effective public investment of public funds.UNDP Resident Representative to Bulgaria Henry Jackelen said that the most important thing is to have constant dialog between government and businesses. The PPPs need a long-term vision, and the ICT sector might lead the way for PPPs in Bulgaria as a whole.The National Program for the Accelerated Development of Information Society will be approved by government and begin to function this month, Neli Stoyanova of SAITC said. Its budget has been drastically reduced, so optimal spending will be needed, BTA reported.
Bulgaria awaits record-breaking wheat harvest
A record-breaking wheat crop of 5,000-6,000 kg per hectare is expected this summer in Bulgaria's Dobrich region, local farmers said. However, the price of grain will be somewhat lower than the expected BGN 400 per tonne. According to preliminary purchase contracts, the price of grain is between BGN 260 and BGN 270 per tonne. Claims for prices such as last year's are unfounded, because the harvest in the Black Sea region, and particularly in the Ukraine, will also be very good, businessman Ivan Gochev said. Bulgaria has the advantage that harvesting here starts a month earlier than in the Ukraine, he said. The price of rapeseed will exceed BGN 700 per tonne, which is 100% higher than last year's.
Record amount of rose oil production this year
Bankrupts of rose producers predict the manufacturers of rose oil because of the expected overproduction of rose oil and the practical lack of market for the production this year. Round 4 tones and a half rose oil are expected from the almost 40, 000 decares rose missives. Hardy 1 third of the producted amount could be realized on practice on the world market. The rose - picking in the Rose Valley of Kazanlak is almost over. The purchase price of a kilogram picked rose blossoms is 0.70 BGN (0.35 EUR).
Bulgaria leads food price rises in EU with 25.4% annual increase in April
Bulgaria recorded the highest annual rise in food prices in April, 25.4%, among all European Union member states, the bloc's statistics office reported. In April 2008, the annual increase in food prices in the EU was 7.1%, compared with 3.6% for overall inflation, as measured by the all-items harmonised index of consumer prices (HICP), Eurostat said in a statement released on Monday. In the euro area, the annual rise in food prices was 6.2%, compared with 3.3% for overall inflation. Romania, which joined the EU together with Bulgaria in 2007, and Slovenia, which entered the eurozone the same year, also were above the average level with annual increases of 12.4% and 12.2%, respectively. The impact of food prices on overall annual inflation depends on both the weight of food in the all-items HICP and the annual price changes for food, and therefore differs significantly between member states, Eurostat said. The largest upward impacts from food prices on overall annual inflation in April 2008 were found in Bulgaria, +3.4 percentage points, and Romania +1.9 percentage points. The smallest upward impacts were recorded in Portugal, +0.1 percentage points, and Luxembourg, +0.2 percentage points. Bulgaria's consumer prices rose 0.9% month-on-month in April, compared to a monthly rise of 0.8% in March, the National Statistics Office data showed. Inflation accellerated to 14.6% year-on-year in April from 14.2% in March calculated under the national consumer price index. Bulgaria, which aims to enter the eurozone early in the next decade. The country's high inflation is seen as a major obstacle to adopting the euro.
Spike in cargo traffic via Varna port
The ongoing strike at the Greek port of Thessaloniki has diverted a massive amount of containerised cargo through Bulgarian Black Sea port of Varna, boosting Jan-May traffic to 60,000 TEU. That compares with 104,000 TEU handled for the entire '07. Containerised cargo traffic in the Black Sea basin is estimated to reach 12-14 mln TEU by '14, the launch target for the new containerised cargo terminals at the Varna and Burgas ports.
Import-reliant Bulgarian businesses propped up by domestic market
Bulgarian manufacturers are heavily dependent on the import of resources and input materials while banking for their sales on the domestic market where the state is perceived as their main business partner, shows a World Bank survey of the Bulgarian economy in 2007. The data was compiled on the basis of a questionnaire filled out by the managers of 633 enterprises. only 12.2% of Bulgarian businesses have export operations while over 70.1% ship input materials and resources from abroad. Most of the local businesses are kept afloat by the domestic consumer. Among the main obstacles to doing business here identified in the survey is the gray economy, political volatility, corruption an inadequately trained staff. The survey found that more traditional factors responsible for a sound business environment - credit lines, tax policy, labor market and regulations, create much less fuss for the local business community. The overview exposes the reliance of the Bulgarian economy on easy credit. Over 40% of Bulgarian companies use banks to finance their investments versus 17% for the region and 16% for all countries in the survey; more than 46% use banks to finance expenses (25.3% for the region and 27.8 for all countries). At the same time, only 6.9% of firms identified access to finance as a major constraints versus 17% for the region and 29.4% for all countries. Over 70% of Bulgarian firms use material inputs and/or supplies of foreign origin, found the survey. That compares with 52.8% in the region and 58.4% in all countries. The licensing regulations are also a drag on local business. It takes 48 days on average to obtain an operating licence in Bulgaria and 134 days to secure a construction-related permit versus 30 and 64 days in all countries. To obtain a electric connection Bulgarian businesses have to wait on average 85 days and 30 days for a phone line versus roughly 17 for the region. Over 17% of senior management time is spent in dealing with requirements of government regulation in Bulgaria versus 5.6% for the region. Over 19% of polled companies said they were expected to give gifts to secure a government contract while over 16% said they were expected to pay informal payment to public officials to get things done. on average, Bulgarian businesses have only 38 permanent/full time employees versus more than 84 for the region and the rest of the countries in the survey.
Bulgarian business hungry for waiters and construction workers
"Bulgaria's labor market is starving for waiters, construction and metal workers," warned the Chairman of the Bulgarian Industrial Association (BIA) Bojidar Danev yesterday. There are 3000 vacancies in construction sector, 3500 in tourism, and 1200 in the machine-building industry. He also said, "The key problem of the country's business is the acute shortage of skilled workers." "The myth of the well-educated-and-studious Bulgarian has burst like a soap bubble," Mr. Danev added. Employers are constantly seeking people and offer excellent payment, yet qualified workmen are in short supply.
One of his illustrative examples was a company from Velingrad, producing protective clothing for high-tech items manufacturing. The company's management board, having made an export contract, did their utmost to find qualified hands but to no avail. And on top of that they had to pay fines because they could not meet all the criteria for hiring employees stipulated in the privatization contract. Thus, the company now faces bankruptcy. Chairman of Podkrepa Labour Confederation Dr. Konstantin Trenchev commented it was high time the state came up with a strategy for attracting educated people of Bulgarian origin from Ukraine, Moldova, Macedonia, and Serbia. Otherwise Pakistani workers would flood the labour market and contribute to wage dumping.
New highway to be constructed in Bulgaria's Rhodope Mountains
The construction of a new highway in the Rhodope Mountains located in Bulgaria's southernmost districts is going to start within months. The news was announced Monday by the Deputy Minister of Regional Development and Public Works Dimcho Mihalevski before the Bulgarian Information Agency BTA reported.The new highway will start from the southwest town of Gotse Delchev, and will end at the southeast city of Kurdzhali, going through the towns of Dospat, Borino, Devin, Smolyan, and Madan.This will shorten the route between the western and the eastern part of the Rhodope Mountains, which currently goes around the mountain.Mihalevski announced the construction of the highway was expected to start in January 2009, and that the government was presently negotiating with potential Greek partners, who were to provide EUR 30 M of funding. The Bulgarian government was going to provide EUR 50 M of funding under the Regional Development operative program. Meanwhile, the second phase of the construction of the international road Kurdzhali - Makaza - Komotini (Greece) was expected to take place, according to Mihalevsky.
INVESTMENTS:
Bulgaria ranks 17th in foreign investments in Ernst&Young investment appeal rating
Bulgaria still holds position N 17 in the world in foreign investments for 2007, shows a research among the business leaders conducted by Ernst & Young and presented to the World Investment Conference in La Baule, France. In 2007, Bulgaria attracted 63 projects which is by 7% less compared to 2006. The research places China on the 1st place in foreign investments. Eastern and Western Europe lag behind China. The number of projects with participation of foreign investments in Europe went up by 15%, reaching 3,712 projects in 2007. Opening of job vacancies has gone down by 18%.
Greek steel giant to invest �400 M in Bulgaria
The Greek corporation Sidenor SA is ready to invest 400 million euro into the Bulgarian ferrous metals industry over the next 5 years. Sidenor reps have already presented their investment program to the Bulgarian government and are in high hopes they will be granted permission to buy available greenhouse quotas under the Kyoto Protocol. Sidenor SA is part of the Greek holding company Viohalco S.A. and owner of the Pernik-based Stomana Idustry S.A., where yesterday a brand new roll steel plant was inaugurated. If Sidenor manages to obtain the necessary greenhouse quotas from the government, they will set up a joint venture along with the American Newcor Inc. The new company will have Sidenor as a majority stakeholder with 66 percent and Newcor will dispose of the remaining 34 percent. Ever since they set foot on the Bulgarian market in 2001, Sidenor have invested 130 million euro in Stomana Industry. From an inoperational giant portioned out for sale, Stomana is now a lucrative company with the potential and ambition to become Bulgaria's number one. By launching operations at the newest mill, which is the largest on the Balkans and one of the three most advanced in technological respect in the world, production will increase to 1.4 million tons of steel per annum. The new steel plant will manufacture one the most diverse assortments of stock in the world. The average annual turnover of Stomana Industry is 1 billion levs (1 euro = 1.95 levs). Setting the new plant in motion will raise the turnover to 2.3 billion levs.
Spanish, Bulgarian companies team up in �400 M real estate project in Sofia
Spanish real estate company Urbas Guadahermosa has teamed up with Bulgaria's Techno Residential Park in a 400 million euro ($618 million) investment in a mixed-use compound in Sofia, the project consultant said on Wednesday. The two companies teamed up and raised the investment due to increased trade and office area. Trade and office spaces have a higher production cost than residential spaces," Krasimir Dimitrov, managing partner in the project consultant company Source, told SeeNews by phone. Urbas Guadahermosa and Techno Residential Park have a 50% stake each in the investment, Source said in a statement. The project, Five Towers of Sofia, with built-up area of 525,000 square metres (sq. m.), will have 120,000 sq. m. of offices, a 40,000 sq. m. trade zone and a 360,000 sq. m. residential area. The construction of the compound is expected to start in the last quarter of this year and to be completed in the last quarter of 2012. Urbas Guadahermosa acquired the land plot for the project for 60 million euro in February last year. The real estate market in Bulgaria has thrived in recent years with investors drawn by expectations for high yields after the country's accession into the European Union in 2007.
�70 M investment in biggest office center in Bulgaria
70 million EUR will be the cost of the biggest office center in Bulgaria - the European Trade Center. The construction works are presently planned to be finished in January 2010. The large project has mobilized big part of the sector's capacity. By the project's data round 60% of the constructing and engineering resource of Sofia is occupied with the center's realizing. 14 cranes are presently working on the building site. The European Trade Center is located on the busiest boulevard in Sofia - ‘Tsarigradsko Shose' and includes the highest office building in construction process in Bulgaria for the moment. The new center will be build using a serial of ‘green technologies', lowering the energy expends and optimizing the functional environment in the center. The roofs will be planted. The center is being built in a common comnplex with ‘Carefour Tsarigradsko Mall' and will offer individual projecting of office surfaces.
Nestlé invests �10 M to launch production of new chocolate bar in Bulgaria
The local factory of Swiss nutrition, health and wellness company Nestlé has been picked to develop and start the production of a new chocolate product for export. Work on the new recipe commenced in 2005 and has so far absorbed around 10 mln euro. The investment resource was spent to retool the Bulgarian factory and buy new production equipment. The new product will extend the KitKat chocolate bar range. KitKat Senses, a chocolate bar with wafer and hazelnut filling, was the biggest investment project in Nestlé's chocolate confectionery division in 2007. KitKat Senses is already available on the UK market and should reach chocolate lovers in France and Germany by the end of 2008. The company plans to make 9,000 tons of KitKat Senses bars annually. Nestlé first started the manufacture of the KitKat range in Bulgaria in 2002. It invested 4.3 mln euro to launch the local production of KitKat Chunky.
Ruse to develop second industrial park
The mayor of Ruse, on the Danube river, has asked the municipal council to approve the allocation of a 34.4 ha site currently partially owned by municipal company Parkstroy for the development of the city's second industrial park. The proximity of the site to convenient transportation links - the Sofia-Ruse road, and power sources makes it especially attractive to potential investors, said the local government. Ruse's first industrial park, with an area of 63.7 ha, already accommodates tenants like French auto components maker Montupet and Keros Ceramica, a Spanish maker of ceramic products.
Largest doors factory in Balkans to open in Bulgaria's Elin Pelin
The first sod of what is planned to become the largest doors factory on the Balkan Peninsula was turned Tuesday in the Bulgarian town of Elin Pelin located close to the capital Sofia. The Solid 55 Ltd Company is investing about EUR 30 M in the factory, which will have a production area of 14 500 square meters, and will employ 100 local people. The factory is expected to be open in a year. The Manager of Solid 55 Ltd Ivan Akov announced that the investment was 100% Bulgarian-owned and was not carried out in cooperation with any foreign partners. The new plant is expected to produce 200-250 doors per day while working 30 days per month. Solid 55 Ltd has been offering its products in Bulgaria and abroad for the last 18 years. It is among the leading companies for producing doors in the country.
Japanese backer for wind power plant
Mitsubishi Heavy Industries (Japan) and its local partner, Inos 1, have announced that they plan to launch power generation activities at their 35-mw wind park in the Black Sea district of Kavarna in June. The joint venture, Kaliakra Wind Power, has said that it hopes to receive a permit to link the wind farm to the national power grid in June. The company plans to sell electricity to the country’s grid operator, the National Electricity Company (NEC), under a long-term contract. Kaliakra Wind Power has invested �53m to build the wind farm, above preliminary estimates of �47m. The Japan Bank for International Co-operation and Mizuho Bank (Japan) have secured US$50m of financing for the project through certificates to reduce carbon dioxide emissions. The wind farm is expected to reduce carbon emissions in Bulgaria by around 80,000 tonnes per year, which will be purchased by the Japanese Carbon Fund under an inter-governmental agreement. Kaliakra Wind Power announced plans to build the wind farm in 2006, and the project received a first-class investment certificate (BEE Jul 3rd 2006). According to NEC, around 80 wind power generators have been installed near the Black Sea coast, and several planned investments in the area could eventually raise wind power generation to 600–700 mw. NEC has said that it plans to build two new electricity transfer lines in the area to transfer wind-generated electricity supplies to the national grid.
Norway's Scatec plans 30 MW solar park in Bulgaria by early 2009
Norwegian solar power technology firm Scatec plans to build a 30 megawatt (MW) solar park in Bulgaria by the end of this year or in early 2009, a company official said on Tuesday. This year it could be as much as 50% (of the planned installed capacity)," Scatec Vice President Communications, Sven Rost, told SeeNews, Scatec is in the process of identifying suitable sites for installation of solar panels and contracting the land either through direct purchase, or through cooperation with a local partner. However, the company's plans are heavily dependent on the availability of solar panels on the global market, where demand currently exceeds supply. This is why the agreement with Itochu is of interest, because Itochu is a major Japanese trading house and they are able to provide with solar panels, so that we could install more this year," said Rost. Itochu said last week it has bought 10% of Scatec for 1.3 billion yen ($12.4 million/80 million euro), seeking to get a share in the development of solar facilities in Europe. It already has a stake in Scatec's group company Norsun that is building a plant for monocrystalline silicon wafers used in solar cells. The Japanese firm is planning to invest some 100 billion yen in a 100 MW solar park in Bulgaria by 2010, which would be one of the biggest such facilities worldwide, according to Japanese business daily Nikkei. Scatec is also developing projects in the Czech Republic and Germany. Itochu would join Scatec in the installation of solar parks in the Czech Republic for about 10 billion yen this year, Nikkei reported. The current situation in the market limits the company's plans to its present projects, but further expansion in Southeast Europe is not ruled out as a possibility, said Rost. He declined to elaborate on investment plans, only saying they depended on global supply of solar panels.
Two new units to be constructed for 'Bobov Dol' TPP
2 new thermo- electric units will be built in ‘Bobov Dol' TPP in Bulgaria. This is the plan of one of the two companies - candidates for the big investment.‘There will be invested in sylph cleaning installations for the already existing 3 units. We need the new two units to reach the acceptable power of 1,000 megawatts' the company's owner Nikofor Vangelov declared. The renewing of the mines ‘Bobov dol' is also in process and the investments are big, added the executive director of ‘Bobov dol' TPP company.
Zagorka to invest �14 M in production
Bulgaria's Zagorka brewery plans to invest EUR 14 million in raising its production capacity, the company said. At the end of March, a new warehouse with an area of 2,100 sq. m was launched. Four fermentation vessels were installed. Since the purchase of 80% of Zagorka for USD 21.7 million by Heineken N.V. and Coca-Cola Hellenic Bottling Company in 1994, the brewery has invested more than EUR 90 million in modernisation and production enhancement projects. The pre-tax profit of Zagorka for 2007 was EUR 8.2 million. In that year, the company sold almost 1.7 hectolitres of beer on the Bulgarian market, general manager Jan Derck van Karnebeek said.
Bulgarian Litos-iBuild to put �6.5 M in Pazardjik Mall
Bulgarian company Litos-iBuild will pump 6.5 mln euro ($10 mln) into the construction of a shopping mall in the southern Bulgarian town of Pazardjik, manager Ivo Kolushev said on June 03, 2008. The project will be bankrolled by local Investbank. The mall will stand on a 1,661 sq m plot on the western edge of the town and will have a floor space of 5,844 sq m. The investor bought the plot last year at a municipal tender for 840,000 levs ($663,000/430,000 euro). The underground floor of the shopping centre will accommodate a supermarket of a Sofia chain Kolushev refused to name until pen is put to paper. The aboveground storeys will host over 120 shops, which will be rented out. The mall will also have an entertainment centre and a children’s playground. The project will be managed by Petar Dudolenski, who runs big-box shopping centres in Sofia, Varna, Plovdiv and Ruse. The construction works are due to finish by the autumn of 2009.
US investors in Bulgaria to pay lower taxes
The US companies and private persons who make investments in Bulgaria will pay lower taxes. This is provided in the agreement for dual taxation avoiding between Bulgaria and the USA. US President George W. Bush has sent a letter to the Senate, in which he asks the senators to ratify the agreement, so that it can come into force, as the Bulgarian MPs already passed the document.The dual taxation avoiding agreement provides a five-percent tax on the interests and the royalties paid by Bulgarian firms to US companies. The same tax will be levied on the dividend, paid by Bulgarian companies to US shareholders. The US pension funds, which have decided to invest in Bulgaria, will also take advantage of taxation preferences - the interests and dividends paid by Bulgarian firms to US pension funds will be tax exempt.The agreement also regulates the exchange of information between the taxation and investigating authorities in Bulgaria and USA.
COMPANIES:
Nokia Siemens wins optical network order in Bulgaria
Nokia Siemens Networks announced on June 3 it had won an order from Neterra for an optical backbone network, informed from Reuters. The network will enable the Bulgarian carrier to offer broadband Internet services to corporate clients.Nokia Siemens Networks, the 50-50 joint venture of Nokia and Siemens did not disclose the value of the order, but said it would be completed by July 2008.
Morgan Stanely buys 8.1% in Bulgaria's Bulgartabac, 5.0% in tobacco plant Blagoebgrad BT
U.S. investment bank Morgan Stanley has bought an 8.1% stake in Bulgaria's tobacco holding Bulgartabac, slated for privatisation, and a 5.0% stake in its subsidiary, tobacco plant Blagoevgrad BT, data of Bulgaria's central depository showed. Morgan Stanley bought the stakes from the London branch of Swiss bank UBS, according to data of the central depository's weekly bulletin, released on Monday. Morgan Stanley held the respective stakes in the two companies on May 28, according to the bulletin. Trading in Bulgartabac, which is one of the most illiquid stocks on the local equity market, made some 90% of the total turnover on the bourse in Sofia on May 26 when some 597,000 shares in Bulgartabac and some 136,000 shares in Blagoevgrad BT were traded. Shares in Bulgartabac ended 5.5% lower then at 28.25 levs and Blagoevgrad BT ended flat at 85 levs. Bulgartabac was last traded on Monday when two shares changed hands ending 6.9% higher at 30 levs ($22.72/14.44 euro). Blagoevgrad BT closed 6.5% higher at 90.5 levs on Tuesday in a volume of just three shares. Bulgartabac, 80% state-owned, comprises 14 subsidiaries in Bulgaria and several idled units abroad. The holding group, a former cigarette monopoly, is facing tough competition from international rivals, which entered the local market after Bulgaria joined the European Union in January last year. In March, Economy Minister Petar Dimitrov said four international majors have expressed interest in the privatisation of Bulgartabac, without providing details. The cabinet plans to sell the company by the end of this year.
ANALYSIS:
EIU: Bulgaria country outlook
Publication: EIU Economy - Outlook
OUTLOOK FOR 2008-2009
- Relations between the ruling Bulgarian Socialist Party (BSP) and its main coalition partner, the National Movement for Stability and Progress (NMSP), will remain problematic in 2008-09.
- The NMSP's leader, Simeon Saxe-Coburg, remains committed to the ruling coalition, but the risk of further fragmentation hangs over the party.
- The Citizens for European Development of Bulgaria (CEDB) party seems certain to lead the challenge to the BSP by rightist parties, and will continue to try to force an early election.
- Although there are rising calls for populist increases in government spending, no government is likely to jeopardise the policy anchor that is provided by the currency board system and plans for euro adoption.
- After a sharp acceleration in the fourth quarter, real GDP growth reached 6.2% in 2007 as a whole. A slight deceleration in domestic demand will see real GDP growth slow to an annual average of 5.7% in 2008-09.
- The current-account deficit will be of concern to policymakers in 2008-09. The Economist Intelligence Unit forecasts that it will fall only gradually as a proportion of GDP in 2008-09, having reached over 20% of GDP in 2007.
DOMESTIC POLITICS: Relations between the Bulgarian Socialist Party (BSP) and its main partner in the ruling coalition, the centrist National Movement for Stability and Progress (NMSP; formerly the Simeon II National Movement), are likely to remain problematic until the next election, which is due in mid-2009. The position of the NMSP has been under scrutiny in view of the party's declining popularity, its participation in a leftist-led government, as well as its poor performance in elections for the European Parliament and municipal councils in 2007. These strains have culminated in the departure of 17 NMSP deputies, some of whom were expelled, and all of whom have joined the newly formed Bulgarian New Democracy (BND) parliamentary faction. The BND has emerged as a vocal critic of the government, and is supporting efforts to bring unity and a coherent strategy to the centre-right parties in Bulgaria. The NMSP's leader, Simeon Saxe-Coburg, remains committed to the ruling coalition, but the risk of further fragmentation hangs over the party.
INTERNATIONAL RELATIONS: Following the European Commission's second post-accession "benchmarking" report in early 2008, in which Bulgaria was urged to make immediate improvements to the system for administering EU funds, the Commission announced that �450m (US$655m) in programme assistance had been suspended. By creating a new role in the cabinet for overseeing the management of EU assistance, Bulgaria has attempted to show that it takes the problem seriously. However, Bulgaria remains under immediate pressure to investigate and prosecute cases of corruption concerning EU funds. Although the suspension of funds may delay the implementation of some important projects related to infrastructure, institution-building and agricultural development, over the longer term it will force the authorities to demonstrate greater commitment to the kind of changes demanded by the Commission, such as judicial reform, and delivering more tangible results on the fight against corruption and organised crime.
POLICY TRENDS: As monetary policy is constrained by the currency board, the burden of restraining domestic demand falls on fiscal policy. The main risk to public finances over the forecast period is that populist spending measures might undermine fiscal austerity and threaten economic stability. The large fiscal surpluses recorded in the past will tempt some politicians to demand higher social spending in the future. The government is under pressure to reduce taxation, and took a step in this direction by introducing a flat-tax structure with effect from the beginning of 2008. Growing spending demands could lead to lower fiscal surpluses over the forecast period. However, no government, whether it is led by the BSP or by the CEDB, is likely to jeopardise the policy anchor provided by Bulgaria's currency board system as the country prepares for euro adoption (which we expect to take place in 2013).
INTERNATIONAL ASSUMPTIONS: The turmoil in international financial markets has raised the risk of an abrupt contraction in global liquidity that would have a strong negative impact on investors' appetite for emerging-market risk. Although the pace of growth in the world economy will moderate in 2008-09, the weaker contribution by developed countries to world production will be partly offset by continuing strong growth in emerging markets. Nevertheless, Bulgaria’s large external financing requirement makes it vulnerable to changes in the availability of external liquidity, and this is a significant downside risk to economic growth in the country. Global supply constraints and resilient demand will prevent oil prices from falling appreciably. We have revised our oil price forecasts sharply upwards, and now expect the average price of dated Brent Blend crude to be above US$100/barrel in 2008-09. The US dollar will weaken against the euro in 2008, but will begin to strengthen from 2009 onwards.
ECONOMIC GROWTH: Real GDP growth accelerated to 6.9% year on year in the fourth quarter of 2007, largely owing to expansion in the construction sector and to continued growth in industry and services. The robustness of expansion in the secondary and tertiary sectors is helping to compensate for the devastating impact on crop yields wrought by extreme weather conditions in the middle of 2007. Preliminary data for the first quarter of 2008 reveal a further pick-up in retail sales, but only moderate growth in industrial output. Moreover, tighter credit conditions in the fourth quarter of 2007 may begin to have an impact on the contribution of private consumption to growth in the first quarter of 2008.
INFLATION: According to the national methodology, Bulgaria's average inflation rate was 9.8% in 2007, owing to the persistent after-effects of a sharp rise in food prices in August; the EU's harmonised index of consumer prices (HICP) measure of inflation was lower, as it assigns a lower weight to the food category. This latest bout of inflation, which has continued into 2008, has been the worst since the destabilising inflationary episode of the late 1990s, and primarily reflects the impact on agricultural yields of extreme weather conditions, as well as increases in global food prices. Assuming that these conditions return to normal, we expect disinflationary momentum to resume in the second half of 2008. Inflation should continue to fall in 2009, provided that wages policy is kept under control. Nevertheless, slow dissipation of the effects of inflationary shocks from previous years, owing to wage indexation, will probably keep inflation too high in 2008-09 to allow Bulgaria to join the euro zone until 2012 at the earliest. Other risks to price stability relate to sharp, EU-mandated rises in tobacco duties, and increases in household energy costs.
EXCHANGE RATES: The currency board arrangement is expected to remain in place over the forecast period, with the lev fixed to the euro at the current rate of Lv1.95583:�1. High inflation and a strengthening of the euro will cause the real exchange rate of the lev to appreciate in 2008. Risks to the lev's exchange rate are low in the short term, but would rise in the medium term if the external financing requirement became much more difficult to cover, or if euro zone entry was delayed significantly. The fixed exchange rate could also come under pressure if external competitiveness were to be eroded by high levels of inflation and growth in unit labour costs.
EXTERNAL SECTOR: The increase in the merchandise trade deficit has been the main factor behind the rise in the current-account gap in recent years (the current-account deficit rose to almost 22% of GDP in 2007). However, based on an expectation of better export performance and diminishing returns on capital investment in the coming years, we expect the current-account deficit to fall modestly as a proportion of GDP in 2008-09. Investment-related imports continue to grow robustly. Foreign direct investment (FDI), boosted by foreign property purchases and increasing greenfield investment, will continue to flow into the country, with inter-company lending set to remain an important source of external finance for foreign-owned companies in Bulgaria. Provided that adequate fiscal reserves are maintained, reform of the business environment continues and the global economic environment does not deteriorate sharply, we do not envisage any problems in financing the current-account deficit, even though FDI will begin to fall during the forecast period.
Lack of energy hits Eastern Europe
Authors: Stefan Wagstyl, Thomas Escritt, Kester Eddy, Theo Troev and Neil MacDonald, Financial Times
In a remote corner of Hungary close to the Ukrainian border engineers are starting work on construction of the biggest power station in the former communist states of south-east Europe since the fall of the Berlin Wall. The first pair of 400MW units at the Ђ1.5bn ($2.3bn, Ј1.2bn) plant at Nyнrtass are due on stream in 2011, with another four due for completion in 2013."Hungary suffers from a severe energy shortage as a result of a large stock of older, low-efficiency power stations," says Istvan Goczi, chief executive of Emfesz, a power distributor. "The modern 2,400MW power station we are building on the Ukrainian border will help bridge this gap and also allow us to export to the Balkans, turning Hungary into a net energy exporter."The region's overloaded energy network is causing widespread problems. Hungarian companies complain about the high cost of electricity, while there are frequent black-outs in Albania, the region's poorest state, and newly independent Kosovo. Macedonia also suffers sporadic interruptions.In Bucharest, Romania's capital and the sixth largest city in the EU, water supply pumps and air conditioners cut out at awkward moments."We face a growing [regional] electricity shortage," says Vuk Hamovic, chairman of EFT, the largest electricity trader in the former Yugoslav states. A study published last year by KPMG, the management consultancy, concludes that "major investments" are needed in generation, transmission, distribution and energy efficiency.South-east Europe and Hungary emerged from communism with a big electricity sector built to serve the heavy industry that slumped after 1989, leaving a surplus. But since 2000 surging growth has pushed demand above socialist-era levels. Meanwhile, the European Union forced Bulgaria to reduce output at the Kozluduy nuclear power station, one of the region's largest generators."The closure of these four nukes brought all the problems out into the open," says Pandita Parshad, director of energy utilities at the European Bank for Reconstruction and Development.Under the European Energy Community Treaty, signed in 2005 by the EU and the states of south-east Europe, countries are encouraged to supply each other with electricity in times of need, with Romania and Bulgaria the principal exporters. In practice, legal arguments and a lack of cross-border connections, compounded in the former Yugoslav states by the legacy of war, mean international electricity trade does not cover all local shortfalls.Recent mild winters have helped utilities to cope. But the pressure is relentless: economists forecast annual consumption increases of 3 per cent, assuming the region's economies continue to expand at the current rate of 5-6 per cent. Distribution is mostly privatised - except in Serbia - but governments retain significant control of generating capacity in most countries, ranging from 50 per cent in Bulgaria to more than 90 per cent in former Yugoslav states. Relations between regulators, generators, distributors and consumers are far from smooth The region's governments are reforming the power industry to encourage private investors. Investment has been growing steadily and has seen modest gas-fired plants being built in Hungary, improvements at the Maritsa East coal and electricity complex in Bulgaria, and a 700MW reactor coming on stream last year at Romania's Cernavoda.EU-supported investment is also going into crossborder transmission lines.But the bigger projects are still in the pipeline. In Romania, a consortium including the state nuclear company and foreign utilities was formed this year to build two more 750MW reactors at Cernavoda.In Bulgaria, the authorities plan a two-reactor nuclear plant at Belene, near the Romanian border, in a Ђ4bn ($6.2bn, Ј3.1bn) project to be built by Russia.
Bulgaria - the naughtiest child of the EU family
Author: Emiliyan Lilov, Deutsche Welle
Bulgaria shows an inclination to deviate from the accepted norms of behaviour in the EU. Does it mean that this country has a structural problem to adapt to the common norms in the EU? Let's take for example the latest accusations against Sofia of misappropriation of EU funds. First and foremost, I would like to specify that this malpractice is not peculiar to Bulgaria alone. Many other EU member states have the same problem. A few days ago, three officials at a firm based in Sicily got arrested, because they drained about 2 million euro from the EU funds for agriculture and rural development using fake invoices. Bulgaria's problem is that first here these malpractices are more common than in the other EU member states and second - that the attention of the other member states is currently focused on Bulgaria and they notice everything that is done or, respectively, is not done, in Bulgaria as regards the prevention of EU funds misappropriation. And it is these systematic malpractices that give grounds to the suspicions that Bulgaria tends to deviated from the EU norms of behaviour. The fact that these frauds occur on such an early stage of Bulgaria's EU membership suggests that the country might have some sort of a structural problem, which prevents it from successfully adapting to the new conditions and accept the EU norms of conduct, especially on an institutional and interinstitutional level. Last week I took the liberty to name Bulgaria "Brussels's wayward child". Still, it is the parents who are always responsible for the mischief done by their kids. Brussels' mistake is rooted in the fact that having adopted Bulgaria on trust, it loosened its grip right after. This respectively led to the loosening of Sofia's motivation to solve the problem that before the accession it at least was trying to conceal, if anything.
There is one more significant argument for the strong pressure on Sofia - the Bulgarian politicians, the ruling class, in a way the whole of the political class are different than anywhere else in Europe. If we take a glance behind the curtains we will witness an oligarchic structure of organized interests that exerts a tremendous influence on the political class and that lives in harmonic symbiosis with it. It is namely these organized groupings and individual oligarchic and corporate interests that now refuse to adapt to the norms of behaviour required by Brussels and all European capitals, which, I am sure, are now deeply sorry for having made the compromise with Bulgaria. Bulgaria turned out to be a poor student and one of the naughtiest children in the big European family.