Bulgaria Love/불가리아 뉴스

불가리아 주요 경제뉴스 ( 3 – 10 JULY 2009 )

KBEP 2009. 7. 10. 18:35


WEEKLY REPORT ( 3 – 10 JULY 2009 )


Sections/headline briefs:




·        The Economist: Bulgarians have elected a popular but unpredictable new leader

·        GERB signs with ICT organizations, there is a strategy

·        Business urges financial stability, reforms, good business climate

·        Economy expert: Budget revision is Bulgaria new government first task

·        Bulgaria should prepare basis for new economic growth

·        IMF: Bulgarian economy headed for 7% decline in 2009

·        Bulgaria’s export shrinks by 30%

·        Bad weather freezes ice cream business

·        50% less sales of cars in Bulgaria in first half of 2009

·        Cabinet allows sale of Targovishte airport

·        Belene NPP to be funded with private capitals

·        Bulgarian Svilocel to make cellulose from Chinese wood

·        Central Asia shippers interested in Varna-Port Kavkaz ferry




·        Agropolychim’s new factory project receives top investment certificate

·        Capital Partners: Investors completely distrust Romania and Bulgaria




·        Bulgarian electrical installation materials producer Elprom Elin looks for strategic investor

·        Net profit of Ideal Standard Vidima falls by 53% last year

·        Dunarit requested the SAC to allow the takeover of Terem Tsar Samuil

·        ЕVN Naturkraft negotiates acquisition of 5 MW solar energy park in Bulgaria







The Economist: Bulgarians have elected a popular but unpredictable new leader

Exasperated voters boot out a bad government and install an unknown one. That is the Bulgarian election in a nutshell, after the defeat of the Socialists (ex-communists) by a centre-right populist party led by Boyko Borisov, a cigar-chomping ex-bodyguard. Citizens for European Development of Bulgaria, known by its Bulgarian acronym of GERB, took 39.7% of the vote on July 5th, entering parliament and government for the first time.Few doubted that the Socialists would lose or that GERB would do well. Bulgaria's leaders have been the subject of humiliating criticism by the European Commission, worried about endemic corruption and links between organised crime and some bits of government. Mr Borisov has been a lively mayor of Sofia who has shaken up the capital's administration. But few expected voters' discontent to be so strong. Turnout was high, at 60%. Mr Borisov won support from change-hungry voters, even if they felt queasy about his headstrong personality and spotty past.Instead of needing to broker a coalition with the Socialists, Mr Borisov will now be able to govern with a smaller coalition partner. His most likely ally is a "blue coalition" of two centre-right parties. But Mr Borisov says he will talk to everybody, even Ataka, a racist far-right party that took 9% of the vote.Denouncing corruption is one thing. Extirpating it is quite another. Mr Borisov says he wants to investigate and jail his predecessors. But few expect quick results. Bulgaria's rich and powerful have shown remarkable agility in dodging the lethargic courts. Mr Borisov has already won plaudits by appointing outside professionals to his cabinet, including Simeon Djankov, an economist at the World Bank who will be the new finance minister. Mr Djankov will have to deal with plunging tax revenues, a GDP fall of perhaps 5% this year and a huge current-account deficit.A good way to start would be overhauling the country's shambolic public administration. Another idea would be to look into the overlaps between politics and business in the Movement for Rights and Freedoms, which represents the country's Turks. A fixture in government for some years, this party has been criticised by anti-sleaze campaigners, especially those concerned with the misuse of EU funds. The party's unabashed influence-peddling has increasingly scandalised Bulgarians. Its leader, Ahmed Dogan, has publicly boasted of his ability to channel state funds and wield political power.Such displays of arrogance dented the Socialists' image, as did worries about the pervasive hold of the communist-era secret services and rising Russian influence, notably in energy. The outgoing government's counterattack largely failed to dispel these concerns. It consisted mainly of tweaking the electoral law to penalise small parties and political independents, helped by a costly series of negative television ads. The coalition's unpopularity sent its other member, the liberal party of former King Simeon, out of parliament.In its place came a new party campaigning against corruption, Order, Law and Justice. Its leader, Yane Yanev, has a habit of producing classified information to back up his claims. That has prompted accusations, which he denies, that he is a front for the secret services. Bulgarian politicians may not yet be able to govern cleanly. But voters have certainly shown that they want it.

GERB signs with ICT organizations, there is a strategy

The political party GERB, which won Sanday elections, officially supported the idea for long-lasting partnership and expert help with IT business by signing a memorandum. This was a logical step after establishment of GERB expert commission, which created working document for applying ICT strategy during the period of 2009-2015. In the beginning of the year there was a round table where was decided to put the strategy in an action plan with exact dates and program. According to this document, the next Council of Ministers will create a Ministry of information and communication technologies. It has to develop the branch policy and to be responsible for full and effective application of ICT in the country governance.Signatures on the memorandum put Tsvetan Tsvetanov, GERB, Teodor Zahov, Association of electronic communications and BAIT, Petar Statev, Bulgarian ICT Cluster and Dimitar Ganev, Bulgarian WEB Association.

Business urges financial stability, reforms, good business climate

Bulgarian businesses want the Cabinet of right-of-centre political party GERB, which won Sunday’s general elections with a wider-than-expected majority of 39.7% of the votes, to recover the suspended EU funds, maintain macroeconomic stability, implement reforms and create a positive business environment, a poll by Dnevnik showed.Entrepreneurs, macroeconomists and industry organisation chiefs said each sector of the economy is plagued by its own specific problems triggered by the economic crisis or by a poor legislative framework but all have pinned their hopes on the new Cabinet.Companies do not expect that the government will heal their imperfections but rather provide support by adequate and targeted measures.The paltry budget resources and the heavy pressure on the budget should be no excuse for the new Cabinet to delay or scrap reforms, said Lachezar Bogdanov, macroeconomist with local think-tank Industry Watch.Businesses also called for an update of the budget to mitigate the risk of a public finance deficit and limited resources for emergency stimulus measures and long-term policies.Speaking to Reuters, Biser Boev, who the agency says is tipped by local media as the new economy minister, also advocated reforms and increased efficiency at the state administration.Until May, Boev served as general director of Economedia, the publisher Dnevnik daily and Capital weekly.

Economy expert: Budget revision is Bulgaria new government first task

The first task of the new Bulgarian government, and the Finance Minister will be to revise the 2009 budget in order to deal with the global financial crisis.Petar Ganev, from the Institute for Market Economics, explained that the the revision had to begin with cuts in spendings. He spoke Wednesday in an interview for Darik Radio.In his words, this must be done carefully and with priority, in a way that the social spendings are not affected."The most obvious expenses, which can be easily reduced, and which take a bit part of the budget, are the large investment project of the old government. It is one thing to build highways, which are supported by all the political parties, and it is completely different to poor money in big energy projects, and in state companies, and priority projects like golf courses. These are things that are not that important. Social expenses like pensions, health, and education do not have to be cut. They can be preserved", Ganev said.

Bulgaria should prepare basis for new economic growth

The difficult period of recession now should be used to provide the best possible basis for growth when the recession is over, according to leading economists from NGOs. They were asked to comment what steps the new government should take in the economic sphere.Bulgaria should compare not to the medium values in the rankings for business climate, competitiveness or economic freedom, but with the leading countries in these rankings and should try to approach them, experts believe. According to them, the fact that the government has not declared bankruptcy will give the country and the private sector a chance to overcome the period of decline faster.The incumbents should decide what measures and steps to take to stabilize the economy - that is why we voted and elected them, advice should not be offered from the outside, said Georgi Ganev, Programme Director of the Centre for Liberal Strategies.Whether the budget should be updated depends on how much it is problematic. one thing is certain: the reporting of the budget should become more transparent, Ganev said.There are no magical means to push the economy forward. The difficult period of recession should be used to provide the best possible basis for growth when the recession is over, he commented.According to Ganev, it is possible that the social and health security burden will be reduced. The philosophy of the GERB party obviously includes an approach in which a larger disposable income is left to the people as a means to take the impact of the recession, the economist commented. one of the priorities which GERB set forward in election debates and programs is that they would prefer to reduce the social and health security burden rather than VAT or any other direct taxes.Asked about the duration of the economic crisis, Ganev was positive that it depends entirely on the external markets. We should follow the forecasts about the Eurozone, the UK, the US, about Bulgaria's major trading partners such as Turkey. When they start going up, this will be instantly felt in Bulgaria, the economist said.Luchezar Bogdanov, Managing Associate at Industry Watch, said a number of state-owned enterprises should face far more rigorous restrictions and should be pressured either to improve their efficiency or to go bankrupt. The beginning should be set in the most problematic sectors: heat utilities, the Bulgarian State Railways, the Kremikovtsi iron and steel works, he said. The administration can be pressured to limit the expenses for wages and allowances. The capital expenses for some infrastructure projects may be frozen and postponed for next year, according to Bogdanov.It is important to send a clear signal that the new government will make every effort to preserve macroeconomic stability, which depends on the stability of the budget, the Industry Watch economist said.The policy of stabilization and assistance to some sectors comes only second. The more so because there are sectors which do not need any assistance.Public expenses should be reduced, on the one hand, because there is a crisis, and on the other hand, because some activities are not conducted well by the government, he said. When this begins to happen, there will be grounds to reduce the tax burden, and this will make Bulgaria a better place for making business and will facilitate the restoration of economic activity and growth, Bogdanov said.Bulgaria should be compared not to the average values in the rankings for business climate, competitiveness or economic climate, but with the leading countries in these rankings and should try to come closer to their level. This is the most simple approach to reforms, nothing more can be done in the following three or six months, Bogdanov said.Incomes in the public-financed sector will probably not be increased in the following 12 months, he said.The main focus should be improvement of efficiency and change of the model of functioning of the social security system, which should be linked to a reform in the manner of management of the state administration, the expert believes. Those employed in the public-financed sector who work well should be encouraged with better incomes, and those who are ineffective should be laid off, Bogdanov said.The Bulgarian economy will hardly overcome the recession in the second and third quarter of 2009, at least for the fact that growth as at the end of 2008 was very high and will be difficult to reach, Bogdanov further commented. If a good state policy is pursued, in the last quarter of 2009 and the first quarter of 2010 there is a chance that the economic decline will be stopped and even slight growth will be achieved, but it is more important that the Bulgarian economy adapts to the new global economic landscape, Bogdanov said. The new government should allow for this adaptation to happen as quickly as possible.It is important that Bulgarian enterprises see the niches in world consumer demand and begin to channel resources into these areas, Bogdanov said.

IMF: Bulgarian economy headed for 7% decline in 2009

In the grimmest economic forecast by a major foreign institution yet, Bas Bakker, head of the IMF mission for Bulgaria, said the country will see a contraction of 7% this year, easing to 2.5% in 2010. The projection is a sharp revision from the IMF’s April outlook for a 2% slump.Bakker’s announcement comes a day after the IMF lowered its outlook for the world’s gross domestic product (GDP) to a decline of 1.4% for 2008 from a previous projection of 1.3%, painting a brighter picture for 2010.The IMF’s April report came amid expectations that Bulgaria will slide into recession with a 3.5% drop in GDP. Shortly after the report’s release, the IMF updated its forecast to a 2% decline.“The fund has revised its forecast many times. It should be more careful when making such assessments and sending out such signals to citizens and businesses. It shouldn’t be updating its forecasts every month or two, churning out various figures. Can matters change for three months?” Garabed Minasyan, a professor at the Bulgarian Academy of Sciences (BAS) told Dnevnik. Other Bulgarian economists said a 7% contraction is not out of the way but is one of the most pessimistic scenarios. Bakker told Deutsche Welle that the European economy will recover slower than any other economy in the world, facing a slowdown in economic growth of 4.7% this year, which should ease to 0.1% in the next. Bulgaria’s Ministry of Finance expects GDP to stand at a nominal BGN 66.6 billion this year against the backdrop of a 3% recession a 2% inflation rate. Revenues are seen at some BGN 26.64 billion, excluding EU aid, which is BGN 3 billion less than the end-2008 forecast.

Bulgaria’s export shrinks by 30%

Bulgaria’s export has shrunk by 30% in the first four month of 2009, the National Statistical Institute (NSI) reported. The drop in Bulgaria’s export is due to the global financial and economic crisis that slowed down the development of the world economy. As a result of the global crisis, Bulgaria?s export in the first four months of 2009 amounts to only 6.83 billion levs (1euro=1.95levs). A positive result is the increase in the export of foods and livestock by 34% and is currently worth 737 million levs, NSI informed. The bigger part of this sum - 520 million levs, has been exported to the EU member states. Within the same period, Bulgaria exported by 19,6% more soft drinks and tobacco worth a total of 191 million levs. The overall import rates lower faster than export - by 32,7%, and for the first four months of 2009 reaches 10,51 billion levs (transportation costs and insurance including.) All this resulted in a gap of 3.67 billion levs in Bulgaria’s trade balance, which is over 2 billion less set against the same period of 2008.

Bad weather freezes ice cream business


For the ice cream business, the lack of sunshine turned out more serious than the global financial crisis, survey of the Pari daily among leading ice cream manufacturers shows. Because of the bad weather, the positive financial results from the beginning of the year have reduced to nothing and compared to the half-year of 2008, the companies the level of the first half-year of 2008As a whole, expectations until the end of the year are positive. Two are the main tendencies that unite the producers in the branch: consumers seek cheaper products and bigger packages for home use. The fact that consumers prefer to buy ready ice cream and not prepare it at home as was ten years ago, shows that the crisis is not that severe. This is supported by the opinion of Rostislav Mihaylov, owner of Royal TM. Royal TM produces ready to use powder mixtures for ice cream and cream. We offer 14 different kinds of powder ice cream, which is five-fold cheaper than the ready ice cream. Nevertheless, there is decrease of sales. It seems people do not feel the crisis so strongly and can afford to buy more expensive products, Rostislav Mihaylov, commented. Ice cream from machines on the streets is one of the cheapest types but the stricter hygiene requirements reduced the number of machines. Sales from fridge windows, however, are not expected to be seriously affected.


50% less sales of cars in Bulgaria in first half of 2009


The sales of new cars, trucks and busses in Bulgaria have fallen 50.8% for the first six months of 2009 compared to the same period of 2008, the Association of Car Makers in Bulgaria reported Wednesday. According to their data, there is a steady tendency of falling prices and even the most aggressive advertising and big promotions can’t turn it around. A total of 14,852 vehicles were sold between January and June 2009, while in 2008 they were 30,189. The sales of cars alone have dropped 48.89% while trucks and busses sell 75.23% less – only 542 vehicles. Toyota remains the leader in sales among car producers that are part of the association with 1612 sales (11.26% market share), followed by Volkswagen with 1532 and Peugeot with 1319.


Cabinet allows sale of Targovishte airport


The government has allowed the sale of the airport near the northern city of Targovishte.The facility belongs to Plovdiv Airport and has not been active since 1998.Targovishte Airport is located on a 943,388 sqm land plot and comprises two buildings.Local holding Alpha Finance controls 75% of Plovdiv Airport while the remaining part is owned by the transport ministry.


Belene NPP to be funded with private capitals


GERB is a staunch supporter of the Belene project, Bulgaria’s second nuclear power station on the Danube River. However, the party will back the project if it is funded with private capitals instead of state-guaranteed loans provided by the Russian banks, said Tsetska Tsacheva, a majority MP of GERB as quoted by BTA. State should not be a warrantor of the commercial associations, because it is not the business of the state to take up economic projects, Tsacheva explained. In her opinion, the second nuke is a very important project, both for Bulgaria as a whole and the region of Pleven (northern Bulgaria.) Its implementation would resolve a lion’s share of the economic issues of northern Bulgaria, demographic problems including, Tscheva believes. This is the reason why Belene nuke must be built. MEP of the GERB party Vladimir Uruchev also works towards the implementation of the project.


Bulgarian Svilocel to make cellulose from Chinese wood

Bulgarian cellulose maker Svilocel will launch a trial cellulose production using Chinese wood pulp, said owner Krasimir Dachev.To this end, a firm outside the chemical maker will plant 10 hectares with fast-growing Chinese trees along Iskar River to be used as raw material for the cellulose production. The Chinese “purple tree” species is used in furniture-making. It grows twice faster than the poplar, adding a centimetre a day. Svilocel will test the cellulose content and the ability of its existing equipment to process the wood. The cellulose factory idled production capacities in February in the aftermath of the global economic deterioration. In July its 700 workers will get the last monthly state aid of BGN 120 (USD 86/EUR 61) each for shifting to shorter working hours.Despite low visibility on any near-term market recovery, the plant has no alternative but to make first steps in August to restart production, Dachev said, adding upcoming meetings with British and Finnish trade partners would give more clarity on the funding.

Central Asia shippers interested in Varna-Port Kavkaz ferry

Shipping companies from Central Asia are showing great interest in the ferry between Bulgaria's Black Sea capital Varna and port Kavkaz.The information was reported by the Chairman of the Bulgaria Shipping, Transport and Logistics Association, Georgi Minchev.The ferry line line opened in the beginning of 2009 and would give opportunity to Central Asia shippers to access countries in Europe.Minchev spoke during a meeting dedicated to the ferry's further development. According to him, the main problem right now was the lack of a clear price policy and deadlines for the freight delivery, which was leading to the absurd situation of automobile transport being cheaper than the railway one.Minchev said that the goal would be to have a regular line once a month to become a weekly one later.According to the director of Bulgaria's "National Railway Infrastructure Company", Simeon Ananiev, Varna has the needed infrastructure and Customs services, but the fact that port Kavkaz lacks license to process excise cargo was the main difficulty for the shippers.Alexnader Korsakov, Director of the Russian Siberian-European Freight Company stated that port Kavkaz was beginning the construction of a customs warehouse for excise goods, which would solve the problem with the ferny line's further development, adding the project would be completed by the end of the year.Korsakov further said price negotiations with Bulgarian partners would not be an issue as long as there is regular freight.










Agropolychim’s new factory project receives top investment certificate


The local chemical producer Agropolychim, located in the north-eastern town of Devnia , received first class investment certificate for a BGN 18mn (EUR 9.2mn) project for construction of a new production unit. Agropolychim is one of the biggest producers of phosphoric and nitric fertilizers in Southeast Europe, exporting about 75% of its overall annual output mainly to Turkey , Greece and the US . The producer, controlled by the US Acid & Fertilizers LLC, launched recently an investment programme to modernise and upgrade production capacities. The total capital expenditures are to reach more than EUR 40mn.


Capital Partners: Investors completely distrust Romania and Bulgaria


Doru Lionachescu, managing partner of one of the biggest M&A and financing advisory firms on the Romanian market, Capital Partners, says the sentiment among investors is complete distrust in Romania and Bulgaria, and even though the deals are good, what is more important for them is the macroeconomic climate."The perception is that America is out of the crisis and is slowly heading towards economic growth. There is a clear differentiation on emerging markets, in that investors are betting on Asia en-masse, on India and China to be precise. This is where they see the future. And they won't even hear about Eastern Europe when it comes to emerging markets. They differentiate Poland and Czech Republic a bit, but when it comes to Romania and Bulgaria, they see them as doomed. The exact same sentiment as in 1999-2001. We have reverted to the way they saw us back then," Lionachescu told ZF.The consultancy firm currently has six ongoing mandates to sell and only one to buy, but the greater demand comes for actual financing or financial restructuring."Everyone wants to sell, but there are no buyers. If they are reasonable, they can get a price. The problem is how long it takes. You may end up with a buyer that demands a change of terms or half the price at the last minute," the investment banker explains.There have also been three or four cases since last October, when he advised his clients not to go any further because the terms were bad.As for financing, the companies are looking abroad for higher amounts of money and going to local banks for lower amounts.Demand for financial restructuring has also increased lately, coming in part from financial institutions, and in part from clients.The financing segment has kept Capital Partners' business to last year's level, in the first five months of the year."2009 is not a bad year for us, but that does not prevent me from seeing the disaster around," Lionachescu says.











Bulgarian electrical installation materials producer Elprom Elin looks for strategic investor


Elprom Elin, one of Bulgaria's largest producers of porcelain-based electrical installation products, is searching for a strategic investor that would help expand the company's market base and bring know-how, a senior executive at the firm's owner said."We are looking to run the company together with a strategic player or sell control of the enterprise to a sector company," Petar Alexandrov, executive director of Zlaten Lev Holding, told DealWatch in an interview."The main criteria for attracting the outside investor would be the value that could be added to our existing operations," he noted.
There is no deadline for attracting a strategic investor and the holding company will rely on in-house resources to conduct the process."We need fresh ideas for the development of the enterprise," the executive underlined.Elprom, which employs 140 people, posted revenues of EUR 1.1mn last year. The company, based in the northeast town of Kubrat, produces 300 different electrical parts and products based on porcelain and plastics.The firm exports over half of its production, mainly to Iran where the Elprom Elin brand is well-known and recognised.The company's equity was offered for mass sell-off under the country's voucher privatisation programme in 1996-97. At present, Zlaten Lev Holding owns a 93% stake in the enterprise.


Net profit of Ideal Standard Vidima falls by 53% last year

Bathroom fixtures manufacturer Ideal Standard Bulgaria posted a rise in sales for 2008 but closed the year with a loss. Sales added up to BGN 87.75 million, mainly thanks to the higher prices of sold produce. The company swung to an after-tax loss of BGN 1.66 million from a profit of BGN 1.425 million for 2007, citing higher raw material and energy prices coupled with increased labour costs. Ideal Standard Bulgaria was built from scratch in 1997, while Ideal Standard Vidima is the successor of the Vidima plant with two production sites, in Sevlievo and Gradnitsa. Ideal Standard Vidima registered a profit of BGN 16,000 for 2008, which is twice what it earned in the year before. The company’s management said output surged in the first half of the year but only to face slumping orders in the coming months, when the global economic crisis started to bite harder. Thus produced units increased by just 3.3% year-on-year. on a brighter note, the company achieved higher labour efficiency they hope to keep up this year. It plans to implement savings of up to EUR 4 million as well as reduce stockpiles of materials and unfinished produce in a bid to secure cash and offload unnecessary equipment.

Dunarit requested the SAC to allow the takeover of Terem Tsar Samuil


Bulgaria's military producer Dunarit, based in the Danube city of Ruse, has requested the state antitrust commission to allow the takeover of another plant from the branch: Terem Tsar Samuil, located in the town of Kostenets, 70 km eastwards from the capital city of Sofia. All interested parties are invited to send opinions in a week.Dunarit produces mainly explosives for defence purposes, as well as for the construction and mining sectors. In recent years, the company launched production of agricultural tools, medical, food equipment and household appliances, accounting for 20% of its total production. Terem Tsar Samuil is part of the state holding for repair of military equipment Terem and is specialised in ammunition destruction mainly. The company also is engaged in manufacturing agricultural machinery, industrial explosives, ammunition, etc.


ЕVN Naturkraft negotiates acquisition of 5 MW solar energy park in Bulgaria


Austria's ЕVN Naturkraft, part of EVN, is negotiating the acquisition of a 5 MW solar energy park and water power generators in southern Bulgaria.The takeovers are part of the strategy of the holding to run solar generators of at least 2 MW production capacity, a 50 MW wind energy park and water power plants of total capacity of 40 MW.Last year, EVN and the German energy company Enertrag jointly started the construction of a EUR 95mn wind-power park comprising 25 generators in Kavarna, in north-eastern Bulgaria.The wind-power park will have installed capacity of 50MW and a further 30MW are to be added later.It should be operational by the middle of next year and will produce 140,000 MWh of electricity annually covering the consumption of 40,000 households.Earlier this year, EVN and Austria's Alpine signed a memorandum with Turkish investors for the acquisition of their 30% stake in the project for construction of the 175MW hydropower complex Gorna Arda in south-eastern Bulgaria.In addition, EVN and Alpine will build a 2 MW solar park near the southern city of Sliven.