불가리아 주요경제뉴스 (26 SEPTEMBER – 3 OCTOBER 2008)

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (26 SEPTEMBER – 3 OCTOBER 2008)

 

 

 

Sections/headline briefs:

 

 

MACROECONOMY:

 

·        Bulgarian and Korean Justice Ministers sign legal cooperation agreements

·        PM Stanishev presents business, investment opportunities in Bulgaria at Boston forum

·        US ambassador Nancy McEldowney visits Plovdiv Fair

·        Price of natural gas to soar by 50% by January 2009

·        President: Ministers, MPs, PM must tell public why natgas prices are soaring

·        International Technical Fair opens in Plovdiv

·        Italian business sees fine opportunities for establishing joint ventures with Bulgarian partners

·        Plovdiv Fair awards gold to 40 products

·        Bulgarian-Azerbaijani Economic Cooperation Commission meets

·        Number of Russian citizens who bought real estates in Bulgaria has increased

·        English citizens interest toward Bulgaria’s real estate decreased

·        Bulgarian Stock Exchange with a record fall off

·        Former Finance Minister: Bulgaria's growth will slow down to 4-5% in 2009

·        The world financial crisis knocks food prices down

·        Europe to be flooded with advertisements about Bulgaria

·        EP Deputies: The next EC report will be hopeful

·        Everything for sale

·         EC slashes sprat quotas for Bulgaria

·        Grey sector in Bulgaria declining

 

 

 

 

INVESTMENTS:

 

·        PM Stanishev: Bulgaria's government works to attract US investors

·        Foreign Direct Investment in Bulgaria down by 14% Y/Y in Jan-July 2008

·        German company to pour BGN 21 M in car plant in Bulgaria

·        Lukoil to invest in eco systems

·        Bulgaria invites projects for wastewater treatment plants worth �260.8 M

·        Boom of municipal infrastructure projects

·        Israeli Melina to start work on Plovdiv shopping mall

·        New mega complex to pop up in Pomorie

·        Danish company tо build a wind generator park in Bulgaria

·        Balkancarstroy invests � 35.7M in wood processing plant

·        Billa has invested over BGN 230m in Bulgaria

 

 

COMPANIES:

 

·        New robotized line for mounting of electronic plates from Samsung launched Karat Electronics

·        Businesses brace up for tough year

·        News Corporation picks JP Morgan Chase to advise on bTV sale

·        French Renault Trucks opens representative office in Bulgaria

·        Dell expects 100% rise in its 2008 sales in Bulgaria

 

 

ANALYSIS:

 

·        Global financial impacts on Bulgaria’s economy

·        Bulgarian pragmatism overcomes world financial crisis

 

 

 

 

 

 

 

 

 

 

 

 

 

Articles:

 

 

MACROECONOMY:

 

 

Bulgarian and Korean Justice Ministers sign legal cooperation agreements

 

Bulgarian Justice Minister Miglena Tacheva and Republic of Korea Justice Minister Kim Kyung-han signed on Wednesday a mutual legal assistance in criminal matters treaty and an extradiction agreement between Bulgaria and Korea."The documents correspond to the legislation of both countries and I hope that they will successfully contribute to the development of our relationships," Tacheva said after the ceremony.According to Kim, the documents will no doubt contribute to the development of relationships in other spheres, such as the economic or the social one, rather than being only a cooperation instrument regarding criminal cases.

PM Stanishev presents business, investment opportunities in Bulgaria at Boston forum

 

The economic situation in Bulgaria and the advantages it has to offer as a destination for business and trade were highlighted in a speech by Prime Minister Sergei Stanishev at an investment forum in Harvard Club of Boston on Monday. Speaking to an audience of the financial and banking sector, information technologies and bio-technologies, trade and electronics, the Prime Minister also underscored some political arguments for chosing Bulgaria to invest, including the perfect shape of Bulgarian-American relations.He mentioned Bulgaria's strategic geographic location, stable economic growth and working market economy, the financial stability and upcoming accession to the euro-zone. Bulgaria moved six places forward in the world competitiveness ranking for 2007. Also, it has low level of costs for developing a business, and highly motivated and educated labour. Among the most lucrative sectors in the past ten years he mentioned the real estate industry, the financial sector, trade,construction, the energy industry and telecommunications.The Prime Minister also gave an address at the Kennedy School of Government of Harvard University, in which he dwelled on Bulgaria's role as a stabilizing factor in Southeast Europe and the Black Sea region. He looked into the problems that need to be solved to step up the Euro-Atlantic integration of the nations in the two regions. He spoke about the grown strategic importance of the Black Sea region and said it should not be considered in isolation because it could result in its encapsulation. The potential of this region to be a route for transitting natural gas to the European markets makes the issue of its stability vital for the long-term energy security of the EU and the US, Stanishev argued.Of Southeast Europe, he said it is particularly important for this region to take the resonsibility for its future in its own hands instead of relying solely on external factors to solve the conflicts and overcome the hurdles in the integration process. It was the last day of the US visit of Prime Minister Stanishev (from September 23) during which he attended the 63rd UN General Assembly Session and held a number of bilateral meetings. Later on in the day Stanishev and the delegation accompanying him left for Sofia.

US ambassador Nancy McEldowney visits Plovdiv Fair

The US Ambassador to Bulgaria Nancy McEldowney left the Plovdiv Fair with a "Caterpillar" loader. The charming lady visited the pavilions of several American companies and received as a gift a miniature model of the specialized machine.
"When I assumed the post I made the commitment to encourage the bilateral trade and economic relations between US and Bulgaria. I expect these relations to materialize and reach $1 billion", said the US diplomat.

Price of natural gas to soar by 50% by January 2009

Bulgarian Government is preparing to introduce shockingly high prices of natural gas. Today, its price goes up by 23,89% and on January 1, 2009 - by another 21,4%. Thus, in three months alone, the price of gas will go up by about fifty percent, representatives of the trade unions said after yesterday's sitting of the National Council for Tripartite Cooperation. In the afternoon, the State Energy and Water Regulatory Commission set the price of natural gas at 538,66 levs per 1,000 cubic meters (VAT excluded) from October 1 on. This is by 103,86 levs higher by the current price of gas, which is 434,80 levs per 1,000 cubic meters (VAT excluded). Bulgargaz profit is 0.5% per 1,000 cubic meters of gas. Experts say the new price of gas will guarantee the unproblematic functioning of Bulgargaz."The employers' organizations agreed to a two-step increase in the price of natural gas," Minister of Economy and Energy Petar Dimitrov said after the sitting of the Council."This increase in the price of natural gas will prove deadly to the business," representatives of the employers' organizations said in answer.
Prof. Konstantin Shushulov, Chairman of the State Energy and Waters Regulatory Commission, said the higher price of gas may cause the price of central heating to go up by over 12%. on Monday, the Commission submitted at the office of Deputy PM Ivaylo Kalfin a proposal for amendments to the Ordinance for Formation of the Price of Heating Energy, but its experts have not analyzed the options for a future increase in the price of gas, yet. "We will find mechanism to compensate the socially-handicapped," Minister Dimitrov said. Benefits may be allotted to the households consumers of natural gas.

President: Ministers, MPs, PM must tell public why natgas prices are soaring

"The government ministers, the MPs and personally the Prime Minister must answer the Bulgarian public, correctly and accurately, literally in the coming days, about the underlying causes of the surge of natural gas prices: are they set in the agreements signed, or do they come from the international economic situation, or are they the result of subjective reasons like bad governance," Bulgarian President Georgi Purvanov told journalists here on Monday. The head of State believes that a clear and reasoned forecast must be made to eliminate "all specific questions which are posed by certain business circles, many of them probably not quite well-intentioned," as he put it. "The nearly 30 per cent rise in the price of natural gas will have a negligible effect on inflation," Finance Minister Plamen Oresharski said, replying to a reporter's question. "There is absolutely no way for the State to subsidize Bulgargaz whether directly or indirectly," the Minister said. "This would constitute state aid according to the EU regulation and would be subject to return if granted." The structures of the Confederation of Independent Trade Unions in Bulgaria (CITUB) are on strike alert in connection with the forthcoming increase of the price of natural gas, CITUB Vice President Valentin Nikiforov said. A poll of 100,000 CITUB members showed that 23-24 per cent favour a one-hour or one-day warning strike over the gas hike, and nearly 52 per cent favour a national demonstration, Nikiforov said. CITUB President Zhelyazko Hristov said that the gas must go up by less than 30 per cent. "The State Energy and Water Regulatory Agency (SEWRC) has to elaborate a mechanism fostering competition in gas supply in Bulgaria," Milen Velchev MP of the Simeon II National Movement told journalists in Plovdiv. He explained that in this way, once there are multiple gas suppliers, Bulgarian consumers will have a choice and this will force suppliers to offer more affordable prices."The natural gas prices for the fourth quarter of 2008 will be fixed on September 30," SEWRC Chairman Konstantin Shoushoulov told journalists on Monday. The regulatory body was supposed to pronounce on the new price rise on Monday, but owing to the heightened public interest will make a decision after Tuesday's meeting of the National Council for Tripartite Cooperation at the Council of Ministers, Shoushoulov pointed out.

International Technical Fair opens in Plovdiv

The International Technical Fair Autumn 2008 was unveiled in Plovdiv by President Georgi Purvanov on Monday. Attending the official ceremony were cabinet ministers, diplomats, MPs, the Regional Governor and the Mayor of Plovdiv. The forum will last until October 4. Participating are 3,202 companies of 45 countries. Italy is a partner-country of this year's edition of the Technical Fair as 397 Italian companies are presented.
"I am impressed not only with the traditionally high interest in the exhibition areas but also with the new opportunities for advertising, the technological level of the materials, machines and facilities, produced by the Bulgarian companies and their future partners," Purvanov said at the opening.The Bulgarian economy is making progress; many goods things have been happening here, which sooner or later should be noticed both by the Bulgarians and by their partners, he added.

Italian business sees fine opportunities for establishing joint ventures with Bulgarian partners

 

There are fine opportunities at the moment for the establishment of joint ventures of Bulgarian and Italian companies, according to Paolo Buzeti, President of the Association of Construction Companies in Italy. He was speaking Tuesday at a roundtable on potential partnerships in the area of infrastructure, including transport, tourism, environment and real estate, held on the sidelines of the 64rh International Technical Fair in Plovdiv. Massimo Mamberti, Director General of the Italian Foreign Trade Institute which organized the event, stressed that the presence of Italian investors in Bulgaria strengthens by the year. He believes that this country draws investment interest with the future funding that will be available under the EU financial instruments, the 34 per cent growth in construction, the increase of areas designated for industrial projects and the start of the process of renovation of buildings of historical value. In conclusion, Italy's Deputy Minister of Productive Activities Adolfo Urso pledged his country's support for Bulgaria's successful integration with the EU. According to Stoyan Stalev, the director of the InvestBulgaria Agency, enlisted some advantages Bulgaria has to offer foreign investors. It has good legislation, solid macro-economic framework and a lasting policy of Europe's lowest taxes. Also, an impportant fact is that more than 45,000 Bulgarian students study in universities across the EU, said he.More than 2.8 billion euro has been invested in Bulgaria this year and the year's total is expected at 5 billion euro, Stalev added.

Plovdiv Fair awards gold to 40 products

 

A total of 40 products, including 20 of Bulgarian companies, were awarded gold medals and diplomas at the International Technical Fair Autumn 2008 in Plovdiv Wednesday. The largest number of awards, ten, went to the machine building sector, including five to Bulgarian producers. A total of 36 per cent of all 3,202 exhibitors operate in machine building. Six products, including three of Bulagrian companies, were distinguished in the energy and environment, water management section. Another five went to companies in the sphere of construction.Gold medals and diplomas were awarded to 15 companies from the information technology, transport and electronics sectors.

 Bulgarian-Azerbaijani Economic Cooperation Commission meets

 

Preliminary plenary meetings of the Bulgarian-Azerbaijani Intergovernmental Commission on Economic Cooperation began here on Monday, ahead of the formal opening of the Commission's 3rd Session on September 30.The Commission is co-chaired by Bulgarian Transport Minister Peter Moutafchiev and by Azerbaijani Deputy Prime Minister Abid Sharifov. Earlier in the day, the two attended the inauguration of the International Technical Fair in Plovdiv, Moutafchiev's Ministry said in a press release.The Commission will discuss the state and opportunities for promotion of cooperation in trade, industry, investments, small and medium-sized enterprises, transport, energy, information technology and communications, agriculture and tourism.The participants will also consider opportunities for joint initiatives and projects within the Black Sea Cross-Border Cooperation Programme 2007-2013.Bulgaria's President Georgi Purvanov will confer with Sharifov on Tuesday, the President's Press Secretariat said.

 

Number of Russian citizens who bought real estates in Bulgaria has increased

 

The important thing is that the number of tourists who had come to Bulgaria had increased and the number of Russian citizens who had bought real estates in Bulgaria had increased, which is good fort he economy, deputy Minister of Foreign Affairs Milen Keremendzhiev told FOCUS National Radio Network. Returnable visas can be issued not only in Russia but also in Serbia, he said. He said further that the real estate owners could get 3-year visas for them and their children who are under 21 years old after they show the notarial act and to stay for six month in Bulgaria in the frames of one year.

 

English citizens interest toward Bulgaria’s real estate decreased

 

English citizens interest toward Bulgaria’s real estate had decreased during the last year, editor of the English Frontier Times newspaper Henry Rowland told FOCUS Veliko Tarnovo Radio. He said that the big interest since before thee years was due to real estate prices in Bulgaria. Henry Rowland said that the interest decreased due to the loan problem in England,“Probably English citizens will be interested in the real estates in Bulgaria again,” he said.

 

 

Bulgarian Stock Exchange with a record fall off

The Bulgarian stock exchange (BSE) also opened with a record fall off. The leading indexes started with a collapse of somewhat over 7%, informed Money.bg.The shares of Moststroy, Evrohold, Lead-Zinc complex, Corporate trade bank are greatly decreasing. The turnover exceeds 1 million BGN (0.5 million EUR).A little afer 10 am the fall off of SOFIX is 5.70% to 800,87 points. BG40 decreased with 4.97% to 194.86 points. The fall off at BGREIT is 3.83% to 77.76 points. BGTR30 sank with 6.09% to 522.73 points. To remind, Wall Street witnessed a historic fall off this night after the House of representatives rejected the $700 billion rescue of the financial industry. The session in the United States finished with a loss of $ 1.2 trillion.

Former Finance Minister: Bulgaria's growth will slow down to 4-5% in 2009

 

Bulgaria's former Minister of Finance and current Member of Parliament Milen Velchev predicted that the country's economic growth would most likely slow down to 4-5% in 2009, as quoted by the Pari Daily.In his words, the global financial crisis would inevitably affect Bulgaria by raising the price of bank credits, which would bring a drastic reduction in their number.Yet, Velchev's party - the National Movement for Stability and Progress - believes Bulgaria would not be hit very hard by the world crisis because it was lagging behind the global financial processes.The NMSP of the former Bulgarian tsar and PM Simeon Saxe-Coburg will insist on increasing the country's budget surplus from the current 3% to 3,5% of the GDP in 2009 as a safety measure against the high payment deficit.The party is also considering proposing that the income tax be reduced from 10% to 8%.

The world financial crisis knocks food prices down

The world financial crisis knocks the prices of the basic food products in Bulgaria and around the world down. Since the beginning of the year bread grain on the Bulgarian market has decreased by more than 70% and vegetable oil by 13%, BNR announced.Vegetable oil is the product, which decreases in price the fastest since the beginning of the year. Compared to the peak price in January, when a bottle of vegetable oil cost 2,60 levs wholesale, the price now has decreased to 2,30 levs according to data by of the Stock Exchange.Bread wheat from the new harvest is sold at prices between 290 and 320 levs per ton, but no deals are concluded because of the producers' refusal to sell at a lower price given the flooded market as a result of the good harvest.The price of sugar is the only one that remains stable, now being sold at around 1,30 levs per kilogram wholesale.

Europe to be flooded with advertisements about Bulgaria

The Bulgarian State agency on tourism has started negotiations carriers for advertising the Bulgarian tourism on the T.I.R.s from the international transport. Thus successfully we can draw the attention, for example, over our golden treasures. This said the chair of the agency Aneliya Krushkova at a seminar in Velingrad, which marks the international day of tourism, informs “Yantra TODAY” newspaper. Till the end of the year the state tourist agency will start an advertisement campaign about Bulgaria on the boxes for milk, juice and bread. Thus while shopping in Western Europe 4 million consumers will be attracted to visit Bulgaria. The Indian tourists and the European pensioners could infuse funds in the Bulgarian tourism, said Aneliya Krushkova. 7 million Indian people travel abroad per year. Until 2020 they are expected to increase to 30 million. The problem with them is that 44% are vegetarians.100 million pensioners live in Europe. 40% of them have never traveled and these are potential tourists for us, claimed Krushkova. A growth of 17.03% of the tourists in this summer season reported the state agency on tourism. The forecast is that by the end of the year the growth will continue to 20%. This year's revenues in tourism are 1.454 billion euro, which is with 12.3% more than the last year, informed experts from the agency. To remind, according to Krassimir Gergov – chairman of the National board on tourism, 1-1.5% of the revenues in the field should be given for advertisement of Bulgaria as an attractive tourist destination. The price for a truck to be covered with the advertisement will be around 500 EUR, while the advertisement on foods will be around 30 000 EUR. 2.5 million euro is the annual budget of the agency for advertisement.

EP Deputies: The next EC report will be hopeful

We hope that the EC report this fall will contain hopeful data, the difficulties will be overcome and Bulgaria will start to receive money from structure and cohesion funds many times bigger than the per-accession funds. This was announced by the Chair of the Commission for regional development in the European parliament Herardo Galeotе, who is on a visit in Gorna Oryahovitza.His delegation visited the Day center for children and adults with disabilities and a purification station for waste water. The two objects are financed with money from the PHARE and ISPA programmes. We must continue defiantly and uncompromisingly the fight against corruption, Galeote added. He announced that the EU will give 1 billion Euro to Bulgaria each year up to 2013.Our desire is that Bulgaria manages to acquire these money so that it can use them for the economic development of the country and social prosperity of Bulgarians, Galeote said. The visit of his delegation continues in Varna.

Everything for sale

Everything in Bulgaria has been declared for sale - holiday complexes, office buildings, malls. The ghost of the world financial crisis makes the investors accept even not so profitable deals so as to return their investments and repay the bank loans, which are growing more and more expensive. "Those who have capital may strike some good deals, if the crisis widens," brokers say."The tendency for urgent sales first appeared in the seaside real estates and the luxurious residential complexes," Luchezar Iskrov, Chairman of the Real Estates national Association said. Some malls also changed their owners - the sale of Sofia's City Center was the last big deal.

 

EC slashes sprat quotas for Bulgaria

 

The European Commission (EC) has cut on Bulgaria’s sprat catch quota and at the same time turned down the country’s request for increased butt quotas for 2009.
Thus, following the government’s failure to convince the EC on the matter, our fishermen will be allowed to catch up to 12, 759 tons of sprat and 50 tons of butt in 2009.
The country’s butt haul permission expired 12 September and catch is not allowed by the end of this year, 24 Chasa Daily reports.

Grey sector in Bulgaria declining

Several trends in recent years prove that the grey sector in Bulgaria is in decline, National Revenue Agency Executive Director Maria Mourgina said Wednesday. She and Finance Minister Plamen Oresharski, Prosecutor General Boris Velchev and National Customs Agency Director Hristo Koulishev went to brief the National Assembly Budget and Finance Committee and Economic Policy Committee on the containment of the grey sector in the economy, her agency said. Mourgina said that one of the main reasons for these positive results is the agency strategy to stimulate voluntary execution and improvement of the services offered by NRA. The "revenue per official" indicator is indicative in this respect as it has increased 3.5-fold in the last five years. In just the last three years revenue per one NRA official increased nearly twofold. When the agency was launched in 2006 this indicators was an average 991.2 leva while in 2008 the sum amounts to 1,805 leva per official. According to Mourgina's report to the committee, the government policy of reducing taxation is another reason for this development. Corporate tax rate reduction from more than 30 per cent (in 1997) to 15 per cent (in 2005) led to a very small increase of the taxable profit:GDP ratio (from 13 to 14 per cent). A serious increase began only after 2006 when the ratio grew from 16 per cent (in 2006) to 33 per cent in 2008. This assertion is supported by the fact that the VAT taxable base with the tax itself reached from 42 per cent of end consumption in 1997 to 89 per cent in 2008. at preserving a relatively constant share of VAT-free goods and services in the years one could claim that the trend shown is definite proof of decline of the grey sector, Mourgina said. There is a grey sector, but it is in controlled quantities, Oresharski said in turn. He also noted that there is a trend for the grey economy to shrink. According to Velchev, it would be a very big mistake to rely on criminal regression as a measure to counteract the grey sector. Prevention that would guarantee that the people will pay taxes and social security contributions is what stakes should be set on. We do not admit it, but we don't have a Criminal Code for two-thirds of the crimes are prosecuted by the procedure of the Code of Criminal Procedure, bringing administrative penalties of up to 5,000 leva, Velchev said. We should be great optimists if we think we shall achieve prevention with such policy and will make someone give up crime because of the risk to be subject to penalty, he added. Customs Agency Director Koulishev pointed out that foreign currency in excess of 2,116,160 euro and 50,000 dollars, as well as 29 kg of gold objects have been detained in the fight against the grey economy in 2008. A total of 10 million cigarettes and 94,000 bottles of alcoholic beverages with counterfeit excise duty stamps were also intercepted in the same period, he added.

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENTS:

 

PM Stanishev: Bulgaria's government works to attract US investors

During the Bulgarian-American business forum at the Harvard in Boston Bulgaria's Prime Minister Sergey Stanishev stated his government was working to improve the business environment in the country in order to attract US investors. Stanishev announced the USA ranked eighth among the foreign investors in Bulgaria with about USD 1,254 B invested in the country in the period 1996-2007. He pointed out his government could not hope to attract foreign investors with tax cuts only, and that it was taking measures to reduce the bureaucracy because this would make it easier for foreign companies to invest in Bulgaria. According to the Prime Minister, Bulgaria's membership in the World Trade Organization (since 1996), in NATO (since 2004), and in the EU (since 2007) was a crucial factor for its successful economic and social development. He did stress, however, the importance of the human factor.

Foreign Direct Investment in Bulgaria down by 14% Y/Y in Jan-July 2008

The Foreign direct investment (FDI) in Bulgaria amounted to EUR 2,847 million (8.7% of GDP) in the period January – July 2008, compared to EUR 3,325 million (11.5% of GDP) for the corresponding period of 2007, preliminary data of the Bulgarian National Bank (BNB) show. The attracted Equity Capital (acquisition/disposal of shares and equities in cash and contributions in kind by non-residents in/from the capital and reserves of Bulgarian enterprises and receipts/payments from/for real estate deals in the country) for January – July 2008 amounted to EUR 2,029 million, which was 71.3% of the foreign direct investment. It increased by EUR 237.3 million compared to that attracted in the same period of 2007 (EUR 1792.1 million). The receipts from real estate investments of non-residents amounted to EUR 874.3 million compared to EUR 1,079.5 million for January – July 2007. The attracted equity capital on privatization deals with non-residents (that have acquired over 10% of the equity in a Bulgarian enterprise) reported in January – July 2008 did not increase, compared to an increase of EUR 1.4 million in January – July 2007. The attracted equity capital on non-privatization deals totaled EUR 2,029.4 million in the reporting period, compared to EUR 1,790.7 million for the same period in 2007. The other capital, net (the change in the net liabilities of the direct investment enterprise to the direct investor on financial loans, suppliers’ credits and debt securities) was positive, amounting to EUR 562.7 million in January – July 2008, compared to a net other capital amounting to EUR 1,324.3 million in the same period of 2007. It decreased by EUR 761.6 million compared to that attracted in the same period of 2007. According to preliminary data, the Reinvested Earnings2 (the share of non-residents in the undistributed earnings/ loss of the enterprise) in January – July 2008 are estimated at EUR 255.2 million compared to EUR 209.6 million in the same period of the previous year. They increased by EUR 45.6 million in comparison with the same period in the previous year. By country, the largest investments in Bulgaria for the reporting period were those of Austria (16.9% of the total foreign direct investment), the Netherlands (11.5%) and Germany (10.6%). Direct investment abroad increased by EUR 460 million in the period January – July 2008, compared to an increase of EUR 109.7 million in January – July 2007, preliminary data show. The equity capital invested abroad in 2008 amounted to EUR 443 million, compared to EUR 128.8 million in January – July 2007.

German company to pour BGN 21 M in car plant in Bulgaria

Witte Automotive Bulgaria, property of the Germany-headquartered Witte Automotive GmbH are going to pour 21 million levs (1 euro = 1.95 levs) into electronic and mechanic car parts production in a Rousse-based automotive plant. InvestBulgaria Agency officials said the investment would create 300-400 new jobs. Witte would also set up a high-tech parts development center for custom orders. The company's central manufacturing activities include production of technics for doors, seats and hoods. Automobile giants such as Ford, Volkswagen, Volvo, BMW, Audi, Daimler and Opel are but a few of Witte's clients.

Lukoil to invest in eco systems

In order to bring in the European standard Euro-5, Lukoil Neftochim Bourgas started the construction of two new production sites for diesel and petrol, the company announced. According to the requirements of the European Union, the standard becomes obligatory after January 1, 2009. Euro-5 determines the production of fuels with ultra low level of sulphur up to 10ppm. For this purpose two new reactors have been bought from Italy.

Bulgaria invites projects for wastewater treatment plants worth �260.8 M

 

Bulgaria's Environment Ministry on Monday invited bids for projects for wastewater treatment plants countrywide estimated to cost a combined 510 million levs ($374.3 million/260.8 million euro). Interested bidders are invited to submit their projects by December 15, the ministry said in a statement. on Monday, a consortium between Bulgaria's Building Development Holding and Spanish company Acciona Agua, the water treatment unit of Spanish construction and energy group Acciona, opened a wastewater treatment plant in the southern city of Pazardzhik worth 10.7 million euro. The plant will serve an area with more than 120,000 residents. The project was jointly financed by the state and the EU under its ISPA pre-accession programme. Wastewater treatment plants have been already built in many of the country's regions with high population density. The government estimates that Bulgaria, which joined the European Union in January 2007, needs 1.5 billion levs in investments to improve its outdated water supply network and a further 5.7 billion levs to improve its environmental infrastructure, including the quality of water and waste management, by 2015. Following its EU membership duties, Bulgaria is due to run a network of 55 regional depots countrywide. Twenty-one regional depots worth 290 million levs are yet to be built.

Boom of municipal infrastructure projects

The Ministry of Regional Development and Public Works for the first time reports boom of municipal infrastructure projects in Regional development operative programme. From the 73 applications for projects, contracts have been sighed with 28 beneficiaries for the sum of BGN 125 million. Other projects for BGN 120 million have been approved. For the first time the budget is spent and additional funding has to be sought.

 

 

 

Israeli Melina to start work on Plovdiv shopping mall

Israeli company Melina will break ground next week on its EUR 65 million Mall Markovo Tepe retail and business centre in the southern city of Plovdiv. The mall will go up on an 8,500 sq m in the heart of the city, close to the key shopping area. Turkish company Intertek was picked to develop the project while Forton International will be in charge of renting out the space. The centre will have a floor space of over 64,000 sq m of which some 22,000 sq m will be retail outlets. Floors one and two will house commercial space, and the third will have a crèche, a couple of cinema halls as well as bars and restaurants. Offices will occupy the fourth to sixth storeys, which will be reached by a separate entrance. The underground floor will accommodate a supermarket. The shopping mall will have a four-storey parking lot for some 650 vehicles, a spa and a fitness centre. once completed, the project will create more than 1,000 jobs. The investor has said it plans to build 12 large-scale power centres in Bulgaria’s regional cities and has already purchases land plots in Vratsa, Plovdiv, Vidin and Ruse, planning to go also in Dobrich, Burgas, Sliven, Yambol, Haskovo and Blagoevgrad.

New mega complex to pop up in Pomorie

As most investors are sending out negative signals about the seaside property market, a Russian company started a luxurious mega complex in the town of Pomorie, on the southern Black Sea coast. The Rich Daddy project will deliver about 20 flats on a 0.9 ha plot. The segment has never been tapped before and so the project is set to be a success, said project manager Velislav Petrov. Rich Daddy should be finished by mid-2010 comprising seven buildings with two restaurants, swimming pools and a three-floor spa centre offering more than 50 procedures. The complex will be managed by an international company. Off-plan apartament sales started a year ago at some EUR 1,800-1,900 per square metre. Petrov said some 30 percent of the flats have been sold, to Russians, Ukranians, Scandinavians, Spaniards and Bulgarians. Real estate agencies say flats in the most overbuilt areas sell for about EUR 500-600 per square metre. Properties in decent seaside locations are up for grabs for some EUR 1,000. But customers are unwilling to pay EUR 1,800-2,000 per square metre for first-rate complexes.

Danish company tо build a wind generator park in Bulgaria

A wind-generator park for 150 million euro will be built in Stara Planina above the village of Dulgi del, Georgi Damiyanovo municipality by the Danish company “Greentech”. This announced the mayor of the municipality Dilyan Dimitrov, cited by BNR.It is expected by the end of October the company to obtain the construction permit. The municipality and the investor have registered a joint company which to construct the park.The local administration participates with an apport installment of land. It has provided 57 places, 2 decares each, on the mountain ridge at an altitude of around 1500 m. In each of the places a wind generator will be constructed with a power of 4 MWh. The height of the pylon of a wind-generator will be 110 m, and the size of the propellers – 86 m. The municipality will receive annually 500 euro on generator plus 5% of the annual profit of the company – around 150 000 euro. It is expected the park to be built in 2 years and after that to be included in the Bulgarian energy system, informed Dimitrov. The mayor added that the investor will build new roads to the village of Dulgi del and in the mountain. The same Danish company will construct another wind-generator park again in Stara planina, but above the village of Chiprovtsi, Northwest Bulgaria.

Balkancarstroy invests � 35.7M in wood processing plant

 

The local construction company Balkancarstroy has invested BGN 70mn (EUR 35.7mn) in a wood processing plant near the western town of Razlog . The new company Technowood will produce 25% of all beams and panels needed for the construction sector in the country by the middle of next year. It plans also to cover 20% of the domestic market in terms of window-frames and interior doors. The plant employs 200 workers and is intending to open 250 new jobs by the end of next year. The annual production capacity of the factory stands at 50,000 cubic metres of timber.

Billa has invested over BGN 230m in Bulgaria

REWE German commercial group has invested over BGN 230 million in the construction of 33 Billa supermarkets in Bulgaria, the executive director of Billa Bulgaria Emil Stefanov said on occasion of the eighth anniversary of the chain. The number of people working for the company in the country is over 3,000. By the end of 2008 several new stores will be opened. The plan of the company is to open eight new supermarkets each year until their number reaches 75.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPANIES:

 

 

New robotized line for mounting of electronic plates from Samsung launched Karat Electronics

The Bulgarian company Karat Electronics launched its second robotized mounting line manufactured by the leading company Samsung. The robot is the heart of control zone with special antistatic floor under the European standard EN 61340-5-1. The room is also air conditioned and has a system for access control. The productivity of the line is 10-12000 components per hour or 50 millions yearly. With new equipment the quality and reliability are improved and the possibility of human errors is minimal, commented from Karat.

Businesses brace up for tough year

Bulgaria’s heavy industry companies are gearing up for a troubled year as the global market stagnation is pushing investors away, machine building and chemical managers told the International Plovdiv Fair trade show, which opened in the eponymous city. Machine builders were the first to suffer from the tumultuous markets, which dampened their sales gaining 10-12% a year by 2007. As economy minister Petar Dimitrov was praising “strong investors’ interest and wide presence” at the exhibition, companies were fretting over creeping energy costs and sought strategies to cushion off the upcoming blow. only 1,800 foreign exhibitors have signed up for this year’s fair compared to the record 2,300 last year.

News Corporation picks JP Morgan Chase to advise on bTV sale

News Corp., the media conglomerate owned by Rupert Murdoch, has appointed JP Morgan Chase to advise it on the sale of assets in three Eastern European countries, Bulgarian daily Dnevnik reported on September 26, quoting Dow Jones Newswires.The media giant hired Lehman Brothers to "ascertain the value and strategic options" of the stations it owns in Bulgaria, Latvia and Serbia in July. The collapse of Lehman Brothers has prompted Murdoch to seek a new advisor, even though its European mergers and acquisitions arm was not affected by the bankruptcy filing, Dnevnik said.Initial offers for the stations, including Bulgaria's market leader in terms of advertising revenue bTV, were expected in August, at which point investment funds Warburg Pincus, Advent International and GMT Communications Partner, as well as German media group RTL were reported to be interested in putting in bids.The next round of bidding was due to finish by end-October, but it was not immediately clear whether the change of consultants would affect the schedule of the sale, Dnevnik said.The Bulgarian broadcaster could fetch up to 1.1 billion euro, according to Dow Jones estimates from the summer, based on the fact that bTV's closest rival Nova Televizia, which has a market share half as big as bTV's, was sold to Scandinavian Modern Times Group (MTG) for 620 million euro.In the meantime, RTL's expansion in Eastern Europe continued earlier this week, when the German group acquired Alpha Media Group, the third-largest TV company in Greece, for 125.7 million euro.

French Renault Trucks opens representative office in Bulgaria

French heavy duty vehicle manufacturer Renault Trucks picked Bulgaria to unveil its first representative office in Eastern Europe, the firm said in a news release. The Volvo Group company topped the European market in terms of sales of vehicles of over 6 tons grabbing a 24.3% share for the five months of 2008. Renault Trucks set foot in Bulgaria in May by the purchase of a truck service centre on Sofias Samokovsko Shose boulevard from Torino Motors Industrial Vehicles, one of the local Iveco dealers. Further centre openings are due in Varna, Burgas and Plovdiv. New truck sales in Bulgaria jumped by over 59% year-on-year to 2,718 units in the eight months to August 2008 as the European market slumped by 13% year-on-year to 21,021 units in August. Germany, the UK and Bulgaria were the only markets to enjoy increases.

Dell expects 100% rise in its 2008 sales in Bulgaria

 

One of the largest computer producers in the world Dell expects 100%-increase in its sales in Bulgaria in 2008.This was announced by the company manager for Bulgaria and Romania Mihai Guran as cited by the Pari Daily.During the first six months of 2008 Dell sold about 8 600 laptops in Bulgaria, which is more than the total sales in 2007.In 2007 Dell ranked sixth in the number of laptops sold in Bulgaria with a market share of 5%. Guran expects its market share would be 7% in 2008.On Wednesday Dell presented in Sofia its new series of business laptops Latitude and Precision. The Dell CEO Michael Dell said since 1995 his company had sold more business laptops globally than any other producer.Together with release of its new laptop models, Dell is also launching a new website called Digital Nomads, which will serve to connect people from all over the world with new tasks and games.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANALYSIS:

 

 

Global financial impacts on Bulgaria’s economy

Author: IntelliNews Special Report, September 2008

 

 

The unfolding financial crisis in the US and its effects on the global economy have already brought significant losses to various segments of the Bulgarian economy but the lagged effects from the crisis could be even more dramatic. Investors on the stock markets, including more than 2 millions employees with mandatory contributions to pension funds, have suffered huge devaluations. Several segments of the real estate market have incurred losses or lower than projected return rates with serious repercussions on the construction sector and the volume of foreign investments in local properties. The inflow of net foreign direct investments (FDI) fell dramatically in 2008 and increased the risks of external liquidity shocks, as the share of shortterm foreign debt is about to exceed the value of international reserves for the first time since the setup of the currency board regime in 1997. This means that a sudden withdrawal of capitals, driven by speculative attacks against the currency board or liquidity problems on the side of external lenders, could seriously challenge the capacity of the central bank to maintain the fixed exchange rate against the euro. Moreover, the risks of external balance shocks will coincide with external demand restraints reflecting the global economic slowdown that will also weaken the country’s growth rate in 2009. The country is still likely to avoid the hard landing scenario under the IMF forecasts that the world economy will start to recover in 2009. The more likely soft landing scenario for Bulgaria will most likely pass through a weaker GDP growth of 3- 4% in 2009 from more than 6% in 2008 but this correction could be still very painful for many business segments. Policy makers should also cope with risks of politically driven expenditure boosts ahead of the general elections in Q3 2009 as well as institutional gaps that have led to a series of corruption scandals and freezing of EU funds.

 

Direct effects

 

Stock markets: The start of the financial crisis in the US in the second half of 2007 had almost immediate effects on the global stock markets and the Bulgarian Stock Exchange in particular. The market capitalisation of the Bulgarian Stock Exchange plunged more than 40% since end- 2007 to BGN 16.7bn (EUR 8.5bn) towards the end of September 2008. In absolute terms, the stocks traded on the stock exchange lost more than BGN 12bn of their value. Mutual funds with high exposure to stocks traded on local or foreign markets report similar write-downs of about 40% for the period.

 

Pension funds: As the local pension funds keep part of their investment portfolio in stocks, the average return rate on savings held in voluntary or mandatory pension funds moved to a negative territory of about 15% in late September in relation to the beginning of 2008 that is equal to write-downs in the tune of EUR 200mn spread on a large number of customers, as the contributions to the second-pillar pensions funds are mandatory for all employees born after 1959. Taking into account inflation effects, the real value of losses incurred on pension savings is about 30% y/y as of the end of September. Life insurers have also suffered from price corrections but the size of devaluation is quite small due to their low weight in the local economy and low exposure to risk assets.

 

Real estate markets: The global financial crisis has started with devaluation of real estate assets in the US that has quickly reduced the inflows of foreign investments to local properties. The price corrections are limited to vocational properties for now and part of the lost investments from UK citizens is offset by Russian capitals. Nevertheless, many large-scale real estate projects are already frozen and the rates of investment returns are falling to critical levels amid large stocks of unsold properties that will further pressure the market.

 

Cost of financing: Inter-bank interest rates have risen almost immediately after the start of the global financial crisis but not dramatic changes are observed in the price of commercial lending and saving deposits. As far as the commercial bank system in Europe is not seriously affected by the collapse of the US subprime mortgage market and investment banking, the impact on the local commercial credit market will be quite small. Moreover, the downward correction in commodity prices and consumer demand will help

disinflation moves that would increase the likelihood for ECB to cut policy interest rates to fight the risks of recession in the eurozone. However, large-scale investment projects or companies that rely on Eurobond issues or investment bank loans will face much higher financing costs. This will apply to major state-run projects such as the nuclear plant in Belene and the pipelines for transport of natural gas (Nabucco and South Stream).

 

Indirect effects

 

Growth Prospects: The global slowdown and the downturn on the country’s main export

markets in Italy, Germany, Turkey and Greece, will certainly hurt local exporters and the overall economic growth. IntelliNews, the editorial and research arm of ISI Emerging Markets, projects that the GDP growth will slow to 3-4% in 2009 from more than 6% in 2008. The growth rate in 2008 will remain technically unaffected by the global crisis due to one-off base effects in the agricultural sector that will offset the slowdown in the industrial and service sectors. The slowdown projections are already confirmed by the weakening pace of job creation in the summer months of 2008 and the steady deterioration in the business sentiment surveys of the statistical office.

 

External Balance: The annualised CA gap widened to nearly 25% of GDP as of July 2008 from 21.5% in 2007. The net inflow of FDI shrank to 70.6% of the CA deficit for the same period from more than 100% in the last several years. Given the global financial crisis and stagnating demand on main export markets, the CA deterioration poses very high risks on the country’s external liquidity. This makes the country’s external position quite vulnerable to sudden withdrawals of foreign capitals. The recent retreat in the international oil prices will provide a slight relief to the country’s external balance but the corresponding drop in import costs will be more or less offset by cheaper metal exports. on top of this, there are clear indications of inadequate policy responses to the rapidly deteriorating external balance, as the ruling parties have approved a large spending boost aimed at popularity gains ahead of the general elections in Q3 2009. Although the planned fiscal spree at the end of 2008 will not endanger the budget surplus target set at 3% of GDP, it is still inconsistent with the other main fiscal targets for CA deficit narrowing and low inflation. The country’s external liquidity will be thus exposed to extreme risks in case of large-scale capital flights that could be driven by either speculative attacks against the currency board regime or panic movements stemming from the global financial crisis.One of the most worrying indicators in the country’s external position is the steep rise in the stock of short-term external debt, which is about to exceed the stock of international reserves for the first time since the setup of the currency board regime in 1997. International reserves cover slightly more than 100% of the short-term external debt as of September to mark a dramatic change from more than 300% about 5 years ago. The figures for short-term liabilities include instruments with maturity of one and less than one year counted as of the date of settlement. This means that the short-term debt would be even higher if reported in outstanding repayment periods. on the positive side, most of the external financing is commissioned through local subsidiaries of EU-based commercial banks and there are no reasons for sudden withdrawals or speculative attacks as far as the local banking sector is boasting sound profit margins and a high-quality credit portfolio. The main liquidity risks for the economy could materialise only in case that the global financial crisis moves towards the commercial banking segment of continental Europe but this looks unlikely at this stage.

 

The way ahead

 

The country is about to avoid the hard landing scenario but it will also require an adequate policy response of limiting non-investment budget expenditures and encouraging domestic savings through further reduction in the overall burden of income taxes and mandatory social insurance contributions. Under the IMF forecast that the global economy will recover in 2009 even if the ongoing financial crisis has not reached the bottom yet, the Bulgarian economy is likely to pass through a soft landing scenario like most of the other emerging markets in Europe. This will most likely mean a slowdown in the GDP growth from more than 6% in 2008 to about 3-4% in 2009. But there are still risks of inadequate policy reactions like excess fiscal boosts driven by the forthcoming general elections in 2009.

 

 

 

 

 

 

 

 

Bulgarian pragmatism overcomes world financial crisis

Author: Standart Daily, after Deutsche Welle

The Bulgarian is a pragmatic, things in life are seen in their actual dimensions (central heating bills, electricity, water supply etc.) The Bulgarian steps firmly on the ground and does not muse about abstract ideas. The Bulgarian cannot stand being lectured and hates those who do it. The Bulgarian generally tends to sidestep anything that could lead into such complicated schemes. The Bulgarian has invented numerous means to escape them. one of these has become the symbol of the Bulgarian transition period - the "jarbank", an efficient method involving the majority of people making their savings in glass jars well hidden under beds and in cellars, a pragmatic method that did well in countering the huge banking and financial crisis that befell the country a dozen years ago. Today the whole world talks about the financial crisis and the pragmatic Bulgarian wonders how it would affect him and his family. And since the Bulgarian is a fan of the pragmatic solutions, he prefers traditional saving methods - money in a bank deposit. Unlike the American, the English or the German, the Bulgarian either does not know or is not interested in the existence of alternative financial schemes like trading shares or securities. That is why the Bulgaria puts all the money in a termed deposit. According to the statistics 95% of the Bulgarians' savings are in this form. Bulgaria has been often criticized for moving behind the other countries, in the banking sector included. Now, however, in the times of global financial crisis, the rudimental level of Bulgarian manners in banking appear as an advantage. Today, when millions of people from all over the world lose their money invested in varieties of financial instruments, the Bulgarians have no problems but to thinks of more pragmatic matters like central hearing, electricity and water supply bills.