BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 27 MARCH – 3 APRIL 2009 )
Sections/headline briefs:
MACROECONOMY:
· Bulgarian business climate improves
· Bulgarian achieves budget surplus despite crisis
· GS Research: Sun to shine on Bulgarian economy in 2011
· EBRD extends credit for investment in sustainable energy
· Bulgarian business insists on IMF loan
· Output of Bulgaria’s top 100 industrial plants inches up 2.5% Y/Y in 2008
· Good cooperation between Russia and Bulgaria
· Bulgaria’s energy minister back to Moscow for Belene NPP
· Non-EU work immigrants not welcome in Bulgaria anymore
· Bulgaria expects €7.9 billion in annual tourism revenue by 2013
· Sofia to pay back the Japanese loan for the subway till 2011
INVESTMENTS:
· Austrian companies invest € 260 M in renewable energy in Bulgaria
· € 100 M to be invested in plant processing waste into electricity in Devnya
· Bulgaria's Key Development to build € 20.5 M industrial park in Danube Port of Lom
· €10 M to be invested in Bulgarian potato production
· Varna Business Park expands
· Japan Ambassador: Japan will delay its investments in Bulgaria due to the world financial crisis
· Bulgaria is still attractive place for investment according to DBIHK survey
COMPANIES:
· Coca-Cola, M-tel named Bulgaria’s best brands
· Bulgarian Moststroi predicts BGN 50 million revenue for 2009
· Israeli Egged plans expansion on Bulgarian mass transit market
· Sofia Carrefour to open in February 2010
· German IT firm to grow business in Bulgarian Varna
· Petrol Holding looks for Russian partner
· Bulgaria set to open state run nanotechnology center
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
· Companies register loss in 2008
· Bulgaria’s metal industry shrinks 30% for a quarter
· Bulgarian agriculture on the threshold of an economic collapse
· Brussels allots another €50 M for Bulgarian agriculture
· Crisis affects the state budget
· German do-it-yourself chain Praktiker halts expansion
· IH Bulgaria unveils anticrisis plan
· Mall investors in Bulgarian Rousse undaunted by crisis
ANALYSIS:
· Belene nuke may soon run short of luck
· Quo vadis, Bulgaria?
Articles:
MACROECONOMY:
Bulgarian business climate improves
The overall indicator for the Bulgarian business climate marks an increase with 2.8 points in March compared to February 2009 after the registered decreases in the last few months. Except for the industry where the decrease is continuing, in all other sectors – construction, retail trade, mark relatively good grades of the business climate.
Industry
In March 2009 the complex indicator “business climate in industry” continues to drop down for a 5th successive month and loses 2.1 points from its level in Feburary. The percentage of entrepreneurs with negative thinking for the current and the expected business condition of the enterprises grows. The research in March shows that the production activity continues to shrink and the expectations of the managers for the next three months are in the same direction. In the last month, the securing of the production with orders from Bulgaria and abroad is worsening. The insecure economic environment and the limited internal and external market remain the main factors troubling the activities of the industrial enterprises in March and the related to them problems grow compared to February. Regarding the sales prices for the first time in March the enterprises which envisage reduction in the prices are more than those which plan a price increase in the next months. The result is a negative balance indicator (-3.7%).
Construction
The economic situation in the field of construction marks a positive change in March. The complex indicator “business climate” increased with 4.3 points compared to the previous month because of the better assessments of the managers for the current business condition of the enterprises and the more optimistic expectations for six months ahead. The forecast of the construction entrepreneurs for construction activities in the next three months are also in positive direction. The construction managers continue to point the insecure economic environment and the financial problems as main difficulties faced by their companies.
Retails
The complex indicator “business climate in retails” increased with 7.9 points compared to February which is due to the increased optimism of the retail traders regarding the expected business condition of the enterprises in the next six months. According to data from the business research the volume of the sales in the last month has decreased considerably but the expectations for the next three months are for it to stop dropping down. At the same time the expectations for the level of orders to the suppliers in the next three months are more favorable. Regarding the factors which are impeding the retails activities, the insecure economic environment is pointed first followed by the insufficient demand and the competition in the field. The sales prices in the retails are expected to remain unchanged.
Services
In March the “business climate in the field of services” indicator has climbed up with 5.8 points over its level in February. There is a certain decrease in the pessimism of the managers regarding the current and the expected future condition of the enterprises in the next six months. According to the managers the demand for services continues to diminish. However, the forecast for the next three months is positive. Regarding the personnel the companies inform that have reduced it and they expect the reduction to continue in the next months. The insecure economic environment increases its negative effect in March and is first among the factors, which hurdle the enterprises’ activities. Competition in the branch is the second biggest problem for them. In March the balance of the expectations for the prices in the service sector remains negative.
Bulgarian achieves budget surplus despite crisis
Bulgaria has gathered a budget surplus of EUR300 million since the beginning of 2009 until February, despite the crisis and fallen revenues, Minister of Finance, Plamen Oresharski, announced on Thursday. "Revenues have fallen down, but so far we don't have a reason to be worried. The surplus of 3% of GDP that is set in the budget for 2009 is still achievable', said Oresharski. A detailed report on revenue gathering in the country is to be released in a few days. In the end of February Bulgaria has a budget surplus of EUR300 million, half of which is from the national budget, while the rest is European funds. Revenues however are falling, as VAT gathering, which is usually half of the revenue total, has been declining.
GS Research: Sun to shine on Bulgarian economy in 2011
The chiefs of Bulgaria’s leading companies paint bleak pictures about the local economy this year but to a certain extent see their own businesses as safe havens, revealed a survey of local analysts GS Research. The managers polled by the consortium said the Bulgarian economy will be back on the road to growth in early 2011, echoing much of the forecasts made by the Organisation for Economic Co-operation and Development (OECD), which forecast the global economy will stem the downturn next year at the earliest. A large majority of Bulgarian bosses expect 2009 to be quite tough for both their businesses and the economy as a whole. The major challenges they will be faced with include financing, keeping customers and sales levels, the stability of the financial system and scaling back expenses. The outlook is brighter for next year, with almost half of the polled saying 2010 will see the final phase of the global economic deterioration. Many do not expect there would be any major changes for the better even in 2010. Almost all managers predicted they will beat the crisis in 2011 but one-third said the Bulgarian economy will be still struggling at that time. Tourism, machine building and construction managers remained the most pessimistic about their own companies. Banking and insurance chiefs were the most optimistic of all. Agriculture business leaders think things will stay more or less the same between 2009 and 2011.
EBRD extends credit for investment in sustainable energy
Energy Efficiency and Renewable Energy Credit Line Framework of the European Bank for Reconstruction and Development (EBRD) for financing energy projects, the consultant on the project, EnCon Services, said in a press release. The new extension of the credit line will be announced officially on Tuesday.The credit line was established in 2004 implementing a joint initiative of the Bulgarian government, the EBRD and the Kozloduy International Decommissioning and Support Fund. The purpose is to support investment in projects for mitigating the consequences of the Kozloduy units closure through energy efficiency and the use of green energy resources.From April 2004 to December 31, 2008 the credit line, managed by seven local banks, led to very good results - loan agreements totaling 81.6 million euro were signed for financing 117 projects, the energy saved annually came up to 868 GWh, and carbon dioxide emissions dropped by 552.360 tonnes, EnCon Services said. The projects replaced power facilities producing 126 MWe and added renewable energy resources of 65 MWe. The green energy resources are enough to satisfy the meet energy consumption of about 280,000 households, EnCon Services said..The second extension of the EBRD credit expire son June 30, 2011 and will ensure a portfolio of 55 million euro for the four participating Bulgarian banks. The money is lent for energy efficiency projects to private investors.
Bulgarian business insists on IMF loan
Bulgaria have to immediately sign a prevention agreement with the International Monetary Fund (IMF), the Confederation of Employer and Industrialist in Bulgaria (CEIBG) insists.Although, currently Bulgaria does not require out-of-state funding, it needs those money in case of emergency, when no money from the fiscal reserve should be used, CEIBG's chair, Ivo Prokopiev, said."Such an agreement will be a guaranty for the irreversible financial discipline, and will make Bulgaria's Euro Zone acceptance negotiations with the European Central Bank easier", Prokopiev explained.Bulgaria's fiscal reserve should remain as high as possible, and even a minimum level, under which the reserve must not fall, must be set. CEIBG also demands the establishment of a anti crisis buffer. They suggest the spending in the public field to be reduce between 10-20%.
Output of Bulgaria’s top 100 industrial plants inches up 2.5% Y/Y in 2008
The output of Bulgaria’s 100 largest industrial enterprises moved up by 2.5% year-on-year in 2008, without factoring in the effect of revised production prices, showed the analysis of the Bulgarian credit rating agency. Export fell by 3.5% and the relative share of exports in total sales shrank to 53.9% in 2008 from 55.5% in 2007. Payroll (people hired under labour contracts) contracted by half a percentage, raising the average size of paid remuneration per employee by 19.1%.The added value of production was 2.5% lower than in 2007. Labour productivity fell by the same margin. Three-month data show results in the final quarter of 2008 were lowest with output down by 18% from the third quarter and export revenues and productivity losing 22% and 45%, respectively.
Good cooperation between Russia and Bulgaria
Relationships between Bulgaria and Russia nowadays are based on cooperation and mutual benefit, Valerii Draganov, member of Russian parliament, said for Pari. In 2008, Bulgaria's import of goods from Russia rose by 38% to USD 4.5 billion and the export of Bulgaria to Russia amounted to USD 600 million. Cooperation is very active in the areas of energy, transport, and investing. Russian investments in Bulgaria reached USD 550 million.
Bulgaria’s energy minister back to Moscow for Belene NPP
The Bulgarian energy minister Petar Dimitrov heads for Moscow for the second time within three weeks for a preliminary meeting on the Bulgarian-Russian economic committee, he told the state-run Bulgarian National radio (BNR). Dimitrov will meet with Russian deputy prime minister Sergei Sobyanin to talk on legislation, energy, military licences and properties of the two countries. The visit will precede the arrival of the Bulgarian prime minister Sergei Stanishev on April 26-27, when he will open an exhibition as part of the Year of Bulgaria in Russia. However, sources told Dnevnik that Dimitrov will resume talks on financing of the Belene nuclear power plant project after the global financial meltdown prevented BNP Paribas, which was supposed to bankroll the scheme, from securing loan-financing. Bulgaria demanded that Russia take part in the funding about ten days ago, when Dimitrov met his Russian counterpart Sergei Shmatko, a former chief of AtomStroyExport, the Russian company appointed to build the nuclear facility. The national power grid operator NEK confirmed talks are underway over a EUR 3.8 million loan. Galina Tosheva, executive director of the Bulgarian Energy Holding, which groups the country’s core state-run energy assets, said last week NEK is seeking a corporate loan but terms were fuzzy. She said the funding scheme will mirror that for the overhaul of units 5 and 6 of the Kozloduy nuke, where Roseximbank provided part of the funding and NEK acted as guarantor on the loan. Such an agreement, however, must be ratified by Parliament. Another option is for the Russian side to lend the money to AtomStroyExport.Alternatively, the Bulgarian energy ministry might increase the BGN 600 million state guarantees on the project. Speaking to BNR, Dimitrov denied he will meet with senior Gazprom officials to discuss new supply deals. Bulgargaz executive director Dimitar Gogov said recently pen could be put to paper as early as June.
Non-EU work immigrants not welcome in Bulgaria anymore
All the workers from countries that are not in the European Union are not welcome in Bulgaria anymore, Bulgarian Minister of Social Policy, Emiliya Maslarova, said at a press conference on Sunday. Many migrant workers from Turkey, Moldova, Ukraine, Macedonians and Vietnamese had been coming to Bulgaria and taking the jobs left open by Bulgarians, said Maslarova, quoted by DeltaNews. According to official data in the ministry these workers have been around 1,500. They had been hired in the construction sector as well as the textile industry and heavy manufacture. 'No we're facing an incoming crisis and every job is important', said deputy minister Dimitar Dimitrov. Experts also consider freeing these jobs a possible measure for facing the upcoming economic collapse that is expected to make a lot of Bulgarian emigrants come back home.
Bulgaria expects €7.9 billion in annual tourism revenue by 2013
Bulgaria expects to attract 7.9 billion euro ($10.48 billion) in tourism revenue annually by 2013, up from 2.8 billion euro it attracted in 2008, the government's tourism agency said on Thursday. The country plans to invest in the development of culture, wellness, rural, sport, hunting and golf tourism, the agency said in its revised tourism development strategy report. In January 2008 the agency said it expects Bulgaria's annual tourism revenue to reach 6.0 billion euro in 2013. Tourism is an important source of revenue for the economy of the Black Sea state, famous for its skiing and summer resorts. The sector generates about 10% of Bulgaria's gross domestic product. Tourism revenue helps the country partly finance its rising current account deficit.
Sofia to pay back the Japanese loan for the subway till 2011
The period for payment of the funds under the Guarantee agreement between the governments of Bulgaria and Japan according to the loan contract for extension of Sofia’s subway between the Japanese bank for international cooperation and Sofia municipality will be prolonged with two year. This announced the government press service, cited by Focus agency. The loan contract for 12 894 000 000 Japanese yens was signed in 2002. The funding is for the construction of the section between 7th and 9th metro stations.The prolongation of the period allowed for the successful completion of the project. The forecast term is by the end of the year. The final payment to the implementer should be done not earlier than a year after the project’s completion.
INVESTMENTS:
Austrian companies invest € 260 M in renewable energy in Bulgaria
Austrian companies will invest EUR 260 M until 2011 in Bulgaria for renewable energy projects.Dr. Michael Angerer, a commercial adviser in the Austrian Embassy in Bulgaria, announced this Monday, as cited by the Pari Daily.Austrian renewable energy projects have already started in Bulgaria. A total of 120 MW facilities will be constructed until 2010.Austrian investors show interest towards the Gorna Arda Dam (Upper Arda), Angerer said. Besides EVN, who have already announced its intentions, OMV has also wanted to take part in the project, he added.Austrian companies will be presented during the Fifth International Exhibition on Energy Efficiency and Renewable Energy Sources for South-East Europe which will take place April 6-8 in Bulgaria's capital Sofia. Twelve Countries will have representatives at the fair. It aims to stress on the possibilities of alternative fuel sources, and renewable energy production.
€ 100 M to be invested in plant processing waste into electricity in Devnya
A plant processing household waste into heat energy and electricity will be built on the premises of the Polimeri chemical plant in Devnya, near Varna. The initial investment in the project will be some 100 million euro. The unique technology is applied mostly in the Scandinavian countries, Nikolai Banev, Chairman of the Bulgarian Industrial Group which comprises Polimeri, told journalists at the BTA National Press Club on Tuesday.The installation which makes it possible to utilize household waste will be built together with the Swedish company Usitall, Banev said. The plant will process 400,000 tonnes of waste annually, and the electricity which will be generated will be used for the purposes of Polimeri, which is the third largest consumer of electricity in Bulgaria.The energy of four tonnes of household waste is equal to one tonne of oil, said Usitall CEO Stellan Jacobsson. The technology which will be used meets fully the environmental requirements of European legislation, he said. The Swedish company has engaged in waste processing since 1956 and has implemented projects across the world. Jacobsson explained that at the basis of the modern technology is the processing of that part of household waste which has an organic origin. This part of the whole is a renewable energy source, which can be used for the development of local industry. In Sweden, 85 per cent of waste is organic waste, he said.
Bulgaria's Key Development to build € 20.5 M industrial park in Danube Port of Lom
Bulgarian construction company Key Development will invest 40 million levs ($27.29 million/20.52 million euro) in a 24 hectare industrial park in the Danube port of Lom, in northwestern Bulgaria, local daily Standart reported on Monday. The construction of an industrial park has kicked off on the site of the shuttered sugar plant in Lom, Standart (www.standartnews.com) said, quoting the executive director of Key Development, Krasimir Krastev. The industrial park, due for completion by 2010, will accommodate a solar energy installation, a production unit for solar panels, a tyre recycling factory and a logistics center. A total of 100 jobs will be opened in the industrial park with 500 workers employed during its construction. Bulgaria, which joined the European Union in 2007, should generate at least 11% of its electricity from renewable sources by 2010 and 16% by 2020 under agreements with the bloc. The country has generated five to eight percent of its electricity from renewable sources, mainly water, in the past years.
€10 M to be invested in Bulgarian potato production
Intersnack Bulgaria will invest 10 million euro in support of the Bulgarian production of potatoes and sunflower in 2009. 9 million euro will be invested in a plant for chips production in Ihtiman and 1 million euro – in promotion of the Bulgarian potato and sunflower producers. Some days ago two farmers from the village of Zhivkovo received a 10 000 euro bonus for extra potato yield – 1200 tones from 500 decares, which is with 600 tones more than the initially negotiated. The two farmers plan to invest the bonus in the construction of addition depository. It will for their own yield as well as for the production of other farmers and partners. “The problem of most of the Bulgarian potato producers is the insufficiency of storehouses. The expenses for their construction are significant, while the state and European subsidies are not enough. We asked for help Intersnack and currently we work under one of their programs for potato production”, commented Dimitrov. Intersnack Bulgaria plans to annually give awards for results in the potato production. only last year the company has used 8 thousand tones of potatoes in the production of chips from the brands CHIO CHIPS and Chipi Chips, from which 7 thousand tones were produced in Bulgaria.
Varna Business Park expands
AFI Europe from Israel opened its third office building in Varna Business Park, executive director said. This is the biggest investment of the company in Bulgaria. The project includes the construction of a total of 200,000 sq. m for over EUR 200 million. The new building offers 30,000 sq. m office space, which is being rented by big international and regional companies like Siemens, Schneider, E.ON, Porsche Bulgaria, etc.
Japan Ambassador: Japan will delay its investments in Bulgaria due to the world financial crisis
Tsuneharu Takeda, ambassador of Japan to Sofia, savoured homemade banitsa (traditional Bulgarian pastry), bread and yogurt in the home of sumo star Kaloyan Mahlyanov (Kotooshu) in the Village of Djulyunitsa near Veliko Tarnovo. The ambassador's visit was on the occasion of the official opening of the renovated kindergarten, where Kotooshu grew up. The renovation costs of over 60,00 euros were covered by the Japanese embassy. HE Tsuneharu Takeda looked around the building equipped with new window frames and heating system. Japan will delay its investments in Bulgaria due to the world financial crisis but will not give up its investment policy, said the ambassador.
Bulgaria is still attractive place for investment according to DBIHK survey
German investors in Bulgaria are happy with their choice. 2009 will be a difficult year, but Bulgaria is still an attractive place for investment, shows an annual survey by the German-Bulgarian Chamber of Industry and Commerce (DBIHK) among German investors here on businesses climate in March.The results of the survey, carried out by the DBIHK, were released Tuesday by DBIHK CEO Mitko Vassilev at the BTA National
Press Club.The electronic survey has been conducted among 54 companies. Of these, 45 per cent work in the area of services, 25 per cent in industry, 17 per cent in trade and 13 per cent in construction. The DBIHK has been carrying out surveys among its members as well as other investors since 2005.With a total score of 2.5, respondents rank Bulgaria as top investment destination, ahead of Germany and the Czech Republic,each receiving a score of 2.6. The survey showed that four in five companies would choose Bulgaria again as investment destination.Companies assessed positively low taxes, Bulgaria's membership in the EU, as well as low labour costs. According to the survey,infrastructure and corruption remain an issue for investors.German companies have rated payment ethics of their Bulgarian partners at just 3.5. Last year's rating was 2.8.The survey suggests that the economic standing of German companies in Bulgaria has worsened significantly. Just 22 per cent assess that their current situation as positive. A year earlier 64 per cent did. Businesses in the area of services are more optimistic compared to construction and industry businesses.Forecasts for 2009 are cautious. Some 72 per cent fear that the economic situation in Bulgaria will worsen and as little as 2 per cent forecast improvement. Respondents are more optimistic for the future of their own businesses. Some 22 per cent are confident that sales would increase despite worsened economic conditions and 37 per cent fear that turnover would shrink.Data show that companies' investment plans are cautious. Some 43 per cent plan to cut on investment compared to previous year and 14 per cent plan to increase it. In 2007, 57 per cent of companies planned on increasing investment, and 49 per cent in 2008. Some 43 per cent expect their profit to shrink and 17 per cent project higher profit.As little as 5 per cent forecast growth in exports to Germany and a third expect a drop.Some 28 per cent of respondents fear that they may have to lay off staff, whereas 22 per cent expect to hire more people.In 2008, trade between Bulgaria and Germany stood at 4,100 million euro, up by 9.7 per cent. Bulgarian exports stood at 1,400 million euro and German imports at 2,700 million euro.
COMPANIES:
Coca-Cola, M-tel named Bulgaria’s best brands
Cellphone operator M-tel and Coca-Cola cemented their place as Bulgaria’s best domestic and global brand, respectively. The top 10 features also Google, Nescafe, broadcaster bTV, Adidas, Sony, Nokia, etc. The winners in the second Superbrands ranking of consumer products were picked by a jury and an online poll among consumers. The online poll was conducted among 10,000 people from across the country, of whom 68 percent were women and 32 percent men. Some of the factors that guided consumers’ choice were the friends’ opinion, the good advertising campaign and the brand’s positive image in the media.
Bulgarian Moststroi predicts BGN 50 million revenue for 2009
Bulgarian bridge construction company Moststroi AD envisages 50 million leva revenue generated from construction, installation and maintenance projects for 2009, an official statement from the company revealed, as presented through a bulletin by Investor.bg. The forecast is based on calculations accumulated from confirmed orders and projects that have received approval and are pending to commence construction.Last year, Moststroi predicted revenue worth 47 million leva, while it actually realised non-consolidated revenue of slightly more than 22.7 million leva."Last year's negative economic influences affected all companies in the sector, Moststroi included. Complications therefore emerged with processing structural funds from the European Commission. Numerous infrastructure projects were either halted, or scrapped altogether, hence the company did not realise its revenue figures," said a Moststroi spokesman, as quoted by Investor.bg. Moststroi has direct investments in the capital involving six other companies in this particular industry branch.The net unconsolidated profit for 2008 amounted to 143 000 leva, a substantial increase over the net profit for 2007, which was 5153 leva.Currently, Moststroi's shares are down 5.6 per cent in value, valued at 2.35 leva.
Israeli Egged plans expansion on Bulgarian mass transit market
Israeli transport firm Egged plans to enlarge its footprint on the Bulgarian public transport market by launching inter-village and inter-city transport services, Egged Bulgaria executive director, Todor Nikolov, told news outfit econ.bg, which is media partner of a conference on public-private partnerships held today in Sofia.At the forum, Nikolov presented a joint initiative of Egged and the Danube municipality of Rousse. Last July, Egged rolled out air-conditioned trolley buses and three months later the company and the municipality set up a new transport venture. In early 2009 Egged held partnership talks with the northern municipality of Pleven, expressing interest in the privatisation of the Pleven bus transport operator. Furthermore, Egged has not given up plans to step in the southern city of Plovdiv as well. Nikolov highlighted the benefits from the joint efforts of private firms and local governments. Private partners can expand corporate positions and introduce new know-how, while the municipality can transfer its everyday management commitments to private corporations, he noted. Finally, the Egged Bulgaria chief called on investors to be the active part in the bilateral process to make the public-private partnership model more efficient.
Sofia Carrefour to open in February 2010
Europe's biggest retailer, French chain Carrefour, is now officially in Bulgaria, having opened its first hypermarket in Bourgas earlier in March. Although it has eight projects in development now, the next opening is almost a year away, the head of the retailer's Bulgarian subsidiary told weekly Stroitelstvo Gradut in an interview."The first hypermarket in Sofia is scheduled to open for business in February 2010, and it will be the second one in operation in Bulgaria," Carrefour Bulgaria executive director Jean Antoine said.Carrefour has two sites under development in Sofia and one in Varna, which was in an advanced stage, he said. "In Stara Zagora, we are also far in and now we are finalising the projects for the construction of retail centres in Pleven, Dobrich and Rousse."Some of them would be significantly smaller than the 13 000 sq m store in Bourgas, Antoine said, giving the example of Pleven, where the floor area will be 2000 sq m.The Sofia hypermarket that will open in February 2010 is the one on the Tsarigradsko Chaussee, chosen for its prime location. "During peak hours there are more than 100 000 vehicles passing past our store in every direction. It was logical to establish ourselves there, as location is always vital," Antoine said.Logical was also the decision to start operations in the country: "Bulgaria is a developing country with a strong potential in the future and the fact that it has become a member of the European Union further contributed to our decision." The market was potentially big enough to allow several big chains to co-exist, he said.
German IT firm to grow business in Bulgarian Varna
German IT giant Zentrum Mikroelektronik Dresden AG (ZMD) plans to expand its Bulgarian operations through its Varna-based subsidiary ZMD Eastern Europe, the company’s manager Tilo von Selchow said in the Black Sea city. Having set foot on the market around a year ago, now the company plans to bolster investment and double its headcount, he explained. ZMD’s Varna unit employs 18, who develop integrated systems, testing and application software. Anelia Pergot, head of the company’s local office, said ZMD plans to turn its Varna unit into its east European hub. It will aim to supply advanced electric appliances to countries such as Serbia, Slovenia, Macedonia, Ukraine, Romania and Turkey. ZMD Eastern Europe could even produce tailor-made appliances for specific customers, she said. The company plans to team up on the Bulgarian market with some of the biggest high-tech companies in the microelectronic industry. It already has attracted interest from US-based Cadence Design Systems, an electronic design automation (EDA) software and engineering services company. ZMD could build a high-tech park to accommodate other players in the industry, a project that would need close cooperation with the regional authorities, Pergot explained. ZMD currently has more than 250 people on the payroll, including 100 engineers involved in product development. It runs design and R&D units in Dresden, Stuttgart and the USA.
Petrol Holding looks for Russian partner
Petrol Holding - one of the largest petrol products wholesalers in Bulgaria - searches for a Russian partner to realize a large-scale project. The offer for collaboration was made yesterday at the first Bulgarian-Russian investment forum, whose official media partner is The Standart. "The Bulgarian conglomerate wants to enter a partnership with a Russian company for the construction of a multifunctional complex," Nikola Krastev from Petrol Holding announced in his presentation. The project includes the building of a stadium with 30,000 seats, a sports hall for 3,500 people, a shopping center, three residential towers with 1000 apartments, a five-star hotel, congress halls, two office towers, a parking lot for 2,500 cars, parks and gardens. The complex will spread over 140,000 square meters, its built-up area stands at 600,000 square meters. It is expected that the grandiose project's implementation will cost some 400-600 million euro.Bulgaria's former ambassador to Moscow Ilian Vassilev is the organizer of the forum. "Taking into consideration Bulgaria's law taxes, the EU membership and the monetary fund which guarantees the stability of the Bulgarian currency, it turns into an attractive country for Russian investments," Vassilev stressed at the opening of the conference.
Bulgaria set to open state run nanotechnology center
Bulgaria's cabinet decided to set up a state-owned company dealing in nanotechnology, after discussions late Thursday in Sofia.The venture will be called the Bulgarian Centre of Nanotechnology JSC and its capitalization will amount to EUR 25 M."The creation of this company is a significant step towards building a research and industrial capacity in the fields of nanotechnology, nanomaterials, nanoproduction and micromachinery, which, undoubtedly, is going to have a positive overall effect on the economy of our country," read the Bulgarian government's statement regarding the founding of the company.It is expected that by 2015, nanotechnology will be generating revenues of USD 2,95 T worldwide. It was also announced that IBM Bulgaria will be a major partner in Bulgaria's nanotechnology projects.Nanotechnology is the study of the control of matter on an atomic and molecular scale. Generally it deals with structures of the size 100 nanometers or smaller, and involves developing materials or devices within that size.
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
Companies register loss in 2008
Pirinhart, the ex-manufacturer of pulp, reported a 86% drop of the sales to BGN 170,000 in 2008 and a BGN 1.10 million loss. Last year, the firm changed the type of its activity and turned to tourism and real estates. Sales revenues of Peshtoremont AD registered a 9.3-fold growth in 2008 to BGN 372,000. Expenses for the activity show ten-fold increase on an annual basis to BGN 376,000. For the last year, the company reports a loss of BGN 4,000 compared to a BGN 2,000 loss a year earlier.
Bulgaria’s metal industry shrinks 30% for a quarter
The production of ferrous and non-ferrous metals in Bulgaria has slumped by around 20-30% since the start of the year from the same period of 2007, said Politimi Paunova, executive director of the industry association. The slowdown was triggered by ebbing orders in the midst of the global economic downturn and thinner gas supplies at the beginning of the year. Promet Steel and Helios Metalurg in the southern city of Plovdiv halted operations altogether during the gas war between Russia and Ukraine, while supplies to Pernik-based Stomana Industry were reduced to only a trickle. Preliminary figures of the Bulgarian Association of the Metallurgical Industry revealed that cast iron output fell almost threefold to 440,300 tonnes. “With Kremikovtzi Bulgaria’s sole cast iron producer, this should not be a surprise, and things are expected to grow worse this year,” said Paunova. Pipes manufacturer Interpipe, part of Intertrust Holding, has suspended operations at the moment. Precis Inter Holding, the Rousse-based producer of electric-welded steel and aluminum pipes and tubes, has also slashed output. “The companies’ future in the first half of the year remains unclear,” commented Anton Petrov, board chairman of the association. He said the global market is experiencing a 40% glut and the tight race for orders is a normal thing. Low metal prices compound the woes of the industry.“A real positive development could be expected in the fourth quarter at the earliest,” Petrov predicted. In a few signs that the clouds could be lifting, metal prices have started to inch up and stockpiles are falling. But both processes are slow, and a recovery could be expected in two years, according to Petrov. one firm to power ahead in the face of the downturn is the Pirdop-based copper smelter Cumerio Med, which on Wednesday renamed Aurubis Bulgaria.
Bulgarian agriculture on the threshold of an economic collapse
The agriculture is on the threshold of an economic collapse. This warned the Association of the agricultural producers in Bulgaria. In a letter to the minister of agriculture and food Valeri Tsvetanov the association explains that it is necessary a clear account to be given of the current situation in which the farmers work and the consequences which inevitably will appear from the delay in the payments till June 2009. The spring is the busiest period of the year in the agricultural production cycle. Spraying and fertilization of the winter wheat and respectively fertilization, spraying and sowing of the spring wheat need to be urgently made. The farmers have planned their payment to be done with the promised to them in December subsidies. In the conditions of a deepening financial crisis, the successive delay in the subsidies payment for the 2008 campaign, which subsidies were promised to the producers in December last year and the refusal of the banks to give credits, is more than worrying. According the chairman of the Association Ivaylo Todorov a problem is arising with the funding of the approved projects under the Program for rural development. The banks are refusing to credit these projects, which will lead to their non-fulfillment, claimed Todorov. In this situation the agriculture as a whole is put at the threshold of an economic collapse, which alas will be felt by the government and unfortunately everyone else, warned the association. only just in July and August, when the danger of the reduced probably by half harvest of the autumn wheat and the lack of spring wheat, which to be harvested, will be a fact.
Brussels allots another €50 M for Bulgarian agriculture
Brussels will support Bulgarian agriculture with 40-50 million euro. The EU has alocated 1.5 billion euro especially for Europe's rural regions.The sum will be absorbed in the period 2010-2013. There is an option to extend the absorption till 2015.Petya Stavreva is the Bulgarian representative in the commission in charge of the allocation of additional funds.
Crisis affects the state budget
Shrinking of production, the companies' investments and the lowering of people's expenses as a result of the financial crisis considerably endanger the revenues to the Bulgarian budget. Takings from VAT for the first two months of 2009 were 1.25 billion levs which is only 13.5% of the annual plan, the takings this year are by 60.3 million levs or 4.6% less than for the same period last year, according to data from the Ministry of Finance. The reason is the drastic decrease of import - by about 40% and the lower prices of fuels and raw materials at the international markets, the analysts in the Ministry reported. As a result of the crisis the import of raw materials for the processing industry has considerably decreased. The final result is that over the last two months all tax revenues to the fisc have increased by only 1.2% or 3.36 billion levs. If tax collection goes on at the same rates there is a real risk that the planned income to the budget will be not be implemented. Nevertheless, in the end of February the budget surplus was 587.7 million levs.
German do-it-yourself chain Praktiker halts expansion
German do-it-yourself (DIY) chain Praktiker will halt any further international expansion in light of the economic crunch, which has caused a substantial business slowdown in 2008, the company said in its annual report, as quoted by Reuters.The chain operates about 420 stores in nine European countries, according to information on its website, including nine in Bulgaria."Against the backdrop of the current recession, which has also arrived at the DIY sector, we are getting prepared for a distinct temporary slowdown of our activities in Germany and abroad," chief executive Wolfgang Werner was quoted as saying.This follows the announcement, on January 9 2009, that Praktiker will close the year with a one per cent drop in sales compared to the previous year, under preliminary estimates.In 2008, Praktiker opened five stores in Romania, bringing the total number to 25. It only added a single outlet in Bulgaria, where third-quarter sales jumped higher than anywhere else.The immediate future strategy for the company, according to Wolfgang Werner, is to achieve "reasonable earnings even in the event of receding sales' volumes". The company said that "sales and earnings would improve in 2010 if the economy recovered by then".Praktiker, in an indication that it is feeling the effects of the recession, is the first German retailer to introduce shorter working hours. "This means that we take a break in our internationalisation strategy," Werner was quoted as sayiing.Praktiker said in had noticed particularly weak demand for gardening products so far this year due to unfavourable weather conditions. It did not say how first-quarter sales were doing. Praktiker shares have slumped by more than 50 percent since the start of 2009, reaching 3.75 euro.
IH Bulgaria unveils anticrisis plan
The management of Industrial Holding Bulgaria (IH Bulgaria) (BSE:4ID) has worked out a rescue package for some of its subsidiaries to offset dwindling orders and production cut in 2009, the group said in a report filed to the local stock exchange. The group has downsized the workforce of its metal-cutting units but Elprom ZEM. If the downtrend persists, the holding company will cut the payroll by up to 15% through May 2009. Its other units have shown no signs of lower production and services so far. Bulyard Shipbuilding Industry and Elprom ZEM are somewhat sheltered from the crisis due to long-term contracts they have previously signed and are currently working on. Nevertheless, IH Bulgaria has trimmed the headcount of Bulyard and reduced working hours of 330 administrative jobs for a three-month period. The group does not expect material reduction in cargo traffic at KRZ Port Burgas despite the global downtrend as the port operator has a small market share. The industrial group has focused efforts to complete the Burgas port upgrade which will double the port capacity and allow for handling of new types of freight. IH Bulgaria is pending a permit from the regional development ministry to start the project. IH Bulgaria booked an audited non-consolidated profit of BGN 8.39 million (USD 5.7m/EUR 4.3m) for 2008, up a staggering 125% from 2007, driven by hefty dividend and interest incomes of BGN 6.3 million and BGN 3.5 million, respectively. Over the past 12 months IH Bulgaria's capitalisation has lost 84.16% to BGN 56.1 million.
Mall investors in Bulgarian Rousse undaunted by crisis
The global financial meltdown has not spoiled big-box shopping scheme plans of investors in the Bulgarian town of Rousse, on the Danube, with three out of four mall projects underway due to open doors by the end of the year and the spring of 2010, news outfit econ.bg reported on Thursday citing local newspaper Forum. The construction of the fourth retail centre, Mall Galeria, has been halted for an indefinite period. Dunav Mall is the first to welcome shoppers by the end of 2009. The funding of EUR 15 million (USD 19.9m) is secured by an Austrian firm and the investor is local company Marmeg. The main contractor Intis has completed the rough construction and is putting the finishing touches to the wiring and the facade. The EUR 30-million Mega Mall of Megachim is also scheduled to open doors by the end of the year. The shopping centre will have a floor space of some 50,000 sq m and a 400-car park.The city’s landmark scheme, Mall Rousse, will devour EUR 100 million. Rough construction will kick off by the autumn and the retail centre is due by the spring of 2010. The complex will feature office and retail space, 10-hall multiplex cinema, swimming pools and entertainment facilities.
ANALYSIS:
Belene nuke may soon run short of luck
Publication: Banker Weekly English
Provider: Financial Information Agency Ltd.
The project for Bulgaria's second nuclear power plant in Belene has so far had a streak of good luck. As far as the attitude of the Government is concerned, now and in the future, this project could be at the head of their list of key priorities. In fact, the drive behind all that is not as important as the suggestion that everybody likes Belene. However, do we really need the second nuke and will there be somebody to buy the electricity it will be producing? These are questions nobody has answered yet. Following the populist policy of the Saxe-Cobourg-Gotha Cabinet the idea for building a second nuclear plant in the country soon started developing. Until now it has eaten up hundreds of millions of euros. What is curious is that the sole source for financing of the future power giant are Bulgarian citizens, known to be the poorest people in the European Union. In practice the funds spent on the project so far either came form taxes Bulgarians pay or from the increased power prices. Our children and grandchildren will pay for the nuke, too. The loans for the construction will have to be repaid and although that they are just EUR250 million for the time being (as extended by BNP Paribas) they will soon soar by another EUR600 million. This was the sum that Energy Minister Petar Dimitrov asked from Russia during his visit to Moscow last week, as Banker weekly found out. Not that Russia is flooded with money but what we need for the nuclear power plant will be found. The Russians are very much aware of the fact that their nuclear sector could expand to the European Union only if this project succeeds. Brussels, however, may upset Bulgaria's plans if it decides that the BGN300 million allocated to the plant by the country's budget at the end of 2008 may be considered state aid. If this happens, it can put a stop to the project's luck. The project would then be frozen again, as it happened in 1990, irrespective of the fact that the sum invested then reached USD1.0 billion (which is almost the case now). If the Government were forbidden to allocate more millions from the budjet, there would be no other possible solutions than to suspend the project. NEK's German shareholder, RWE, does not want to put money in the construction until the project is being "financially finished". The latter, though, is not likely to take place neither this year, nor in the near future. The indications for a second suspension are real and the troubles are not only financial ones. After the Vranch earthquake in 1974, measuring 7.4 on the Richter's scale, it became clear that the nuke's foundations will have to posses an anti-earthquake foundation able to withstand an earthquake measuring 9 on the Richter's scale. These are the modern requirements adopted by the International Atomic Energy Agency (IAEA) which the European Union respects. But as Bogomil Manchev, manager of Risk Engineering company which is involved in the project, recently told Banker weekly, the new project will use the old anti-earthquake layer that can combat an earthquake with a magnitude of between 7.0 and 7.5 on the Richter's scale.
Quo vadis, Bulgaria?
Publication: The Sofia Echo
Bulgaria’s Cabinet is showing no signs yet of giving in to calls to alter its approach to fighting the economic slowdown, and steadfastly refuses to contemplate an international bailout package, even though Sofia is increasingly seen as the next Eastern European country to need outside assistance.The arguments trotted out by the Cabinet are the same as months ago, when the ruling coalition adopted the 2009 Budget - healthy foreign currency reserves and a Budget surplus offered a big enough buffer against the downturn, while increased Government spending on infrastructure would offset flagging domestic demand.The Government’s optimism is not shared abroad. German business daily Handelsblatt said on March 30 that Bulgaria was increasingly seen as the next candidate to go bankrupt, quoting figures from the Vienna Institute for International Economic Studies (WIIW) that Bulgaria’s gross domestic debt had reached 112 per cent of gross domestic product (GDP).Two countries with higher debt burdens - Hungary and Latvia - have already agreed bailout packages with the International Monetary Fund (IMF) and are expected to see their economies shrink in 2009.Bulgarian National Bank data show gross debt declining from 109.7 per cent of GDP in November 2008 to 99.4 per cent in January. The Government and state-guaranteed debt was only 11 per cent of GDP. Analysts have said that it gave the Cabinet the freedom to negotiate with the IMF without worrying about debt becoming exorbitant.The pressure could come from the short-term foreign debt, which stood at 36 per cent of GDP at end-January. The central bank did not provide an exact figure, but 2008 GDP was 34.1 billion euro.
IMF projections
The IMF’s latest mission to Bulgaria, which carried out a regular "health check" of the economy, known as the Article 4 review, cut the Fund’s economic growth forecast for Bulgaria in half to one per cent.The 2009 Budget is drafted with a target of 4.7 per cent growth, which the Cabinet does not plan to revise, although Finance Minister Plamen Oresharski has since conceded that economic growth in the two to 2.5 per cent range was a more realistic goal. Government spending was based on the more conservative assumption of 2.1 per cent growth, which reflected the caution of Bulgarian policy makers, the IMF mission said in its report.IMF’s one per cent growth scenario assumed that the economy would still receive 10.9 per cent of GDP in net capital inflows, a sharp drop from the 31.8 per cent in 2008 and 38 per cent in 2007.Should net capital inflows dry out completely, domestic demand, and investment would shrink sharply."While the impact on growth would partly be offset by an improvement of the current account, overall the economy could shrink by three per cent in 2009 and another one per cent in 2010," the report said.Unless Bulgaria applied "corrective measures", instead of the targeted surplus of two per cent of GDP, the Budget would end with a deficit of 2.4 per cent, the IMF said.
Warning signs
Bulgaria’s statistics board is not expected to release preliminary GDP growth figures for the first quarter until early May, but Budget revenue figures have already thrown up some red flags.After January figures showed an increase of nine per cent in tax revenue collection, compared to the same month of 2008, February data rendered a much gloomier picture. A shortfall of 14 per cent meant that for the first two months of the year, tax revenue was 0.14 per cent short of the targeted amount.The drop was caused mainly by the 22.5 per cent decline in value added tax (VAT) collected, which the Finance Ministry blamed on the sharp fall in imports. For the first two months of the year, VAT revenue was 4.6 per cent down compared to the same period of 2008.VAT is the single biggest source of revenue for the Budget, accounting for about half of all tax revenue and almost 45 per cent of the Budget revenue targeted by the Finance Ministry this year. Opposition parties, business associations and analysts have said that a big chunk of the planned Government spending was wasteful, but the Cabinet has so far resisted calls to revise the Budget. Should the fears of lower Budget revenue prove founded, the only quick fix on the revenue side would be for the Government to raise the VAT rate, a measure that was already being quietly contemplated behind the scenes, Bulgarian business weekly Kapital reported on March 28.