BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 2 – 9 OCTOBER 2009 )
Sections/headline briefs:
MACROECONOMY:
· Sofia hosted first Bulgaria-Taiwan business forum
· World Bank, EBRD, EIB: Credit crunch risk threatens Eastern Europe
· Experts: Bulgaria absorbs EU funds too slowly
INVESTMENTS:
· Wind farm boom in time of crisis
· SE Europe’s largest wind farm starts working in Bulgaria
· Italy Enel start wind electricity production in Bulgaria
· Solarpro unveils PV panels plant in Silistra
· Eastern Europe the focus for "Green Revolution II" investors
· Germany's Plus to open 25 discount stores a year
· Mercator opens first store in Bulgaria
· Penny Market to open 20 stores in Bulgaria by end-2009
· Plovdiv to unveil waste treatment plant
COMPANIES:
· Lotos grows franchise chain
· Lidl buys EUR 2.3 M plot in Bulgarian town of Plovdiv
· CBA opens its 32nd supermarket in Bulgaria
· SAAB: Holding pattern
· Google to launch local search in Bulgaria
· Bulgaria Lead and Zinc Complex Jsc gets permit for new plant
· Aviation firms work for foreign market
THE CRISIS:
· Bulgaria's metallurgy sees 30% decline since start of crisis
· Over 4 000 Bulgarian farmers face bankruptcy
· Bulgaria construction investments collapse by 67% in 1st half of 2009
· Bulgaria casinos, gambling affected by crisis
· Machine building industry calls for rescue
· PPP seen as efficient anti-crisis measure
· Bulgaria’s furniture sector braces for 40% drop in sales
· Deutsche Bank research: Warning on bank loan defaults in Bulgaria and Romania
Articles:
MACROECONOMY:
Sofia hosted first Bulgaria-Taiwan business forum
Reading Taiwanese IT and renewable energy companies participated in the first Bulgaria-Taiwan business forum, which took place in Sofia last Friday.The event was organized by the Bulgarian Chamber of Commerce and Industry together with the Chinese International Economic Cooperation Association.One Taiwanese firm has expressed interest in investing EUR 1,5 M into a new metal pipes plant in Bulgaria, the Pari Daily reported. The company officers have already visited the cities of Varna, Burgas, and Ruse as potential investment spots but is also considering locations in the neighboring countries.The majority of the Taiwanese firms represented at the forum are more interested in trading with Bulgarian partners.Ching-Yung Lo, the Director of the economic department of Taiwan’s Representation in Greece, was elected Chair of the business forum.
World Bank, EBRD, EIB: Credit crunch risk threatens Eastern Europe
Major economic institutions have warned Monday that there is an increasing risk of a credit crunch in Central and Eastern Europe.The World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) made a joint statement at a conference in Istanbul, Turkey"There are increasing risks of a major credit crunch in the region", the banks said."I think it's a warning from the international banks that they (investors) should be really aware of the risks that persist there. There is certainly strong potential for the financial crisis in Eastern Europe to get worse in the next six months. The potential for bad loans is still rather large“, Ralf Wiegert, an Frankfurt-based economist with IHS Global Insight stated.The three international lenders said banks in Central and Eastern Europe should tackle bad loans and "undertake loan restructuring on a commercial basis and recapitalize as needed."The institutions, which launched an initiative to rescue the region in February, said they had so far made available EUR 16,3 B in assistance to the region.Some countries in Central and Eastern Europe have been particularly badly affected by the global economic crisis. The IMF expects the region's economy to shrink by 5,0% in 2009 and grow 1,8% in 2010.
Experts: Bulgaria absorbs EU funds too slowly
"If the current rates of absorbing EU funds are kept, Bulgaria will be able to absorb only 18% of the EU funds envisaged till the end of 2013," forecast Petar Stoyanov, manager of Projects and Programmes Management Institute. He took part in a round table on the interaction between private and public sector. Two years after the start of the seven operational programmes in Bulgaria that provide financing for the period between 2007 and 2013, only 131 million euro or less than 2% of the planned 7 billion euro have reached the Bulgarian business, according to data from the Bulgarian Ministry of Finance on the implementation of programmes as of September 1, 2009.
INVESTMENTS:
Wind farm boom in time of crisis
Despite the deepening crisis Bulgaria remains a magnet for investors in renewable energy sources. Eight of the 13 projects certified by InvestBulgaria Agency this year are for renewable energy. Six are for construction of wind farms, two for photovoltaic power plants and one for production of solar panels. The total investments in these projects exceed BGN 1.230 billion. That is a real boom compared to 2008, when only one wind farm project was certified. The projects approved by InvestBulgaria Agency do not exhaust the list of such investments. Between 2008 and mid-2009 the National Electric Company received request for plugging wind and solar power plants for 8,400 mW to the national grid. We are overburdened with requests for investments in wind and solar power plants, Kostadinka Todorova of the energy ministry told the Pari daily. The interest in such projects this year has not subsided, on the contrary, it has increased. one of the reasons for that is that there are considerable incentives for such projects in Bulgaria. There is no bank that would refuse a loan for renewable energy projects, the chairman of the Association of Renewable Energy Producers, Velizar Kiryakov, said. Due to the crisis, however, banks have become more exacting and now investors have to provide at least 15 or 20% of the financing, compared with 5 to 7% before. That is why the big projects in Bulgaria are carried out by companies like AES and Enel.
SE Europe’s largest wind farm starts working in Bulgaria
Bulgaria’s PM Boyko Borissov will cut the ribbon of SE Europe’s largest wind farm near the northern coastal town of Kavarna. “U.S. company AES has invested 270 million euro in the wind farm that spreads over 60 sq. km and its 52 wind power generators produce 156 MW of electricity,” Kavarna Mayor Tsonko Tsonev told The Standart. Austria’s EVN is going to build the third largest wind farm in the municipality of Kavarna with a capacity of 50 MW. Japan’s Kaliakra Wind Power, constructed by Mitsubishi, has been working for over a year now. Wind farms with a total capacity of about 1,000 MW are to be built in the municipality of Kavarna, Mr. Tsonev said.
Italy Enel start wind electricity production in Bulgaria
The Italian energy company Enel officially put into operation on Monday its first wind farm in Bulgaria.The farm that is located at Kamen Bryag in the municipality of Kavarna has been contructed and manages by Enel Green Power, the company of the Enel Group established to develop and manage renewable energy operations. The new powers can generate more than 56 million kWh of energy. With 21 mW of installed capacity it will supply electricity to 19 000 households. The project will save 50 000 tons of carbon dioxide emissions a year, the company said.In the wind farm there are 7 turbines for 3 mW each. Another wind farm for 21 mW is under construction in Shabla. The company plans to put it into operation by end of 2009.
Solarpro unveils PV panels plant in Silistra
Solarpro, a subsidiary of Bulgarian miner Kaolin, part of Alfa Finance Holding, will cut the ribbon on Monday on its photovoltaic (PV) panels manufacturing capacity in the Danube town of Silistra. The company will be handed two top-investor certificates for its planned panel capacity expansion and the construction of a solar plant in Yankovo in the northeastern Shoumen area. The documents allow for fast-track administration and other state support to the projects. Solarpro, which brought on stream its first PV panels production line in March, intends to add a second and a third, bringing the aggregate capacity to at least 18 MW by the end of 2010. The existing infrastructure allows for a capacity boost to 200 MW. The plant in Silistra is the biggest solar panels manufacturing capacity in the Balkans and the only one in Bulgaria, paving the way for the company's leadership in thin-film silicon PV modules production in Europe. The capacity expansion will create 41 jobs pushing the payroll up to 256 by the end of next year. The facility will lie at the heart of a future regional cluster for clear energy technologies and production.
Eastern Europe the focus for "Green Revolution II" investors
Publication: bne Article, Nicholas Watson in Geneva
It isn't often you sit down with a fund manager and begin the interview by discussing their new film. But then John Coast Sullenger, managing director of GAIA Capital Advisors, is a fund manager who's following a very distinct investment theme: that there's a global food crisis and investors can profit from the new "Green Revolution" that will need to occur to solve this problem. After the trauma of the financial crisis and the resulting economic crisis, people are heartedly sick of that word. Yet the food crisis that was exercising the minds of the world's policymakers and investors toward the end of 2007 never went away, but has been merely overshadowed by the two more well-publicised ones. That food crisis saw prices for grain set an all-time high on the Paris commodities exchange in September 2007, causing a spike in food prices and inflation that forced countries like Russia, Kazakhstan and Ukraine to impose price controls on basic foodstuffs to prevent food riots from spreading. It was against this backdrop that Sullenger and his investment firm decided to sponsor the documentary film, "Last Supper for Malthus", directed by Klaus Pas and produced by Turbulence Films, which explores the drivers behind the food crisis and some solutions of how to solve it. The film's premiere was on September 21 and it will be screened at various film festivals over the coming months. "We were inspired to produce this documentary because the issue surrounding the food crisis, the drivers behind it, are quite complex and remain misunderstood by the population at large," says Sullenger. "We sponsored the production of this film with the main objective to create awareness about the key drivers of food crisis, but do it in a way that is both captivating and entertaining." The film took over 12 months of research, interviews and filming, conducted around the world in places like Brazil, Ukraine, India, China, the US and Liberia. "We wanted to produce a reference work that assembles different points of view from the right – industrialists and financial people – but also from the left-orientated groups like anti-GMO groups. The film has no particular bias, it's very objective [and] we think we achieved something quite compelling and innovative," Sullenger says. That said, the film's highlighting of the fundamentals behind the food crisis also serves to get across the investment theme behind the Geneva-based GAIA Capital's World Agri Fund, a $15m open-end fund which invests in listed and pre-IPO global agriculture-related companies. on the demand side, there are the two factors of population growth and wealth effects - diets are evolving to include more animal proteins. Given there are now almost a billion people who go to bed hungry every night, clearly the world needs to produce more food. "If we continue to consume grain like we have over the last five years, the stocks/use ratio will continue to decline. So instead of having 100 days of consumption in stock, we will see that go down to 50 days or even 30 days. We are in a very delicate situation and production needs to increase," Sullenger says. However, on the supply side, the amount of extra arable land in the world that can be put into production is only another 3%, so the only way to increase production is to raise the amount of crop produced per hectare. This can be achieved through another so-called "Green Revolution", the post-war change in agriculture practices that allowed food production to keep pace with worldwide population growth. "Today, we stand on the brink of new Green Revolution that we think must come from pure necessity to produce more for the growing population. And that revolution will bring capital to new technologies, bring capital into all the inputs of production – pesticides, tractors, fungicides, modern equipement, infrastructure.... We want exposure to all those industries, everything that's related to agriculture," says Coast. So in blue-chip stocks, that would include companies like Monsanto, John Deere and Syngenta; in mid caps, Hanfeng Evergreen and Kernel Group; in small caps, Astarta-Kyiv and Black Earth Farming. "Our universe consists of over 1,00 companies that have exposure to agriculture," Sullenger says.
Cheaper in the east
In terms of geography, GAIA finds Eastern Europe a particularly interesting area, because it's one of the few areas on earth where there's a large availability of arable land that's under-producing or not in production - a legacy of the Soviet collective farm system, which left farms in a very poor state of repair and lacking capital and expertise. "Talking about Eastern Europe, Russia and Ukraine, it's very similar to where Latin America, specifically Brazil and Argentina, was 15 years ago, so growth opportunities are tremendous," he says. "Those who invested early in Brazil and Argentina reaped huge rewards." As an example, he adds, the harvest yields in Eastern Europe average around 2 tonnes of grain per hectare, despite having some of the most fertile land in the world - the black earth, or Chernozem, soil belts found in Eastern Europe and North America have extremely high humus content - so it is a question of a lack of modern inputs and capital today. "The harvest yields in this region can triple in the next 10 years or so - this is a significant growth opportunity!" Additionally, investors can take advantage of the predicted land grab by Middle Eastern and Asian governments looking to secure food supplies (in a neat mirror image of the West's quest to securing energy supplies). In Argentina, the cost of farmland is about $8,000 per hectare, whereas in Russia it's less than $800. The reason for the huge discrepancy in valuations is that in Russia there isn't the same availability of service providers. "If you're a farmer in Russia, you have to own the equipment, you can't rely on outsourced harvesting or the price is simply too high. You have to also own the storage capacity, otherwise you'll get very bad pricing at the farm gate. These are just a couple of issue investors have to deal with in that region," says Sullenger. Elsewhere in the former Soviet Union, GAIA is also looking at Kazakhstan, however investing in the near term would be hard because there are so few listed companies to get exposure. "We're aware of [Kazakstan's potential] and in contact with certain companies there which have the potential to be listed in future, so we may buy them pre-IPO," he says.
Germany's Plus to open 25 discount stores a year
German chain Plus is opening six discount stores in Bulgaria on October 8. Another 20 outlets will be launched by this year's end. There is potential for the chain to expand to 130 stores, so our plans are to open 25 new shops every year, Plus Bulgaria managing director Rainer Wendelberger said. The company has already bought more than 70 plots for construction.
Mercator opens first store in Bulgaria
Slovenian chain for fast-moving consumer goods Mercator opened its first store in Bulgaria. The hypermarket is located on an area of 3,000 sq. m in Stara Zagora. The investment amounts to EUR 3 million. The store offers 15,000 foods and non-foods. The Slovenia chain plans to open another six hypermarkets by the end of 2010. As much as EUR 40 million will be invested in them.
Penny Market to open 20 stores in Bulgaria by end-2009
German diversified discount retail chain Penny Market is poised to open its first stores in the country by the end of 2009, country manager Vassil Fechko said on October 7, during the inauguration ceremony of the Penny Market logistics centre near Sofia, as quoted by Dnevnik daily.Penny Market would open as many as 20 to 30 stores in the country by December 2009, followed by a comparable number in 2010. The first stores to open doors for customers will be in Sofia, Botevgrad, Vratsa, and Nova Zagora."Investments until December 2009 alone will reach 100 million euro, while the projected value of investment over the first five years is about 250 million euro," Fechko said.Penny Market, a division of retail giant Rewe, is based in Germany, operating in nine countries in Central and Eastern Europe. Rewe Group is already represented in Bulgaria through discount retail chain Billa.
Plovdiv to unveil waste treatment plant
The local government of Bulgaria's second largest city Plovdiv will cut the ribbon on Thursday for a waste treatment facility near Shishmantsi, said mayor Slavcho Atanassov. The project saw a significant delay which has inflated its costs. Construction started in 2003 and was scheduled for completion in 2005. The plant with an initial price tag of BGN 18 million (USD 13.5m/EUR 9.2m) swallowed BGN 40 million. The balance of BGN 32 million came from the state and municipal budget. The facility will run 72-hour trials after the October 8 opening ceremony. The plant is the first waste treatment capacity in the country that will also benefit the capital city, which hopes to incinerate its baled rubbish at the plant.
COMPANIES:
Lotos grows franchise chain
Dimitrovgrad-based meat processing firm Lotos will grow a chain of franchise stores across the country. The company has unveiled its maiden outlet in Dianabad district in the capital. The firm will open ten stores of 40 to 150 sq m in Sofia by the end of the year and will have fresh meat stands in big supermarkets. Lotos has been using the franchise scheme since May 2008. The investment of BGN 30,000 into a 70 sq m m store is equally split among Lotos and the franchisee.
Lidl buys EUR 2.3 M plot in Bulgarian town of Plovdiv
Bulgarian real estate fund FairPlay Properties and Lidl Bulgaria signed a deal on the sale of a 22 000 sq m plot in the Bulgarian city of Plovdiv on September 30 2009. Lidl Bulgaria is the local arm of German hard discounter Lidl, part of Schwarzgruppe. The transaction had a price tag of 2.3 million euro before value-added tax. The plot would accommodate a Lidl supermarket and was part of the chain's local expansion efforts. The retailer has been actively growing its Bulgarian network with new outlets in Lovech, Pazadjik, Pleven and Silistra currently under construction. The Plovdiv plot is part of FairPlay's Retail Park Trakia developmen, which is planned in the city's residential area by the same name. Fairplay said the park would house a hypermarket of a renown European non-food chain, though the company refused to name the chain. Sources told Dnevnik that the property fund was in talks with several big retailers but pen had not put to paper yet. FairPlay would use the proceeds of the sale to reduce its credit exposure, executive director Manyu Moravenov said. After the Plovdiv deal, Fairplay has repaid 5.4 million euro in principals since the start of 2009.
CBA opens its 32nd supermarket in Bulgaria
CBA Asset Management AD, a public company for fast-moving consumer goods, will open its 32nd supermarket in Dryanovo on October 22. Its total floorage will be 720 sq. m. At present the chain operates 31 stores in ten Bulgarian towns. The company consolidated the results of its four subsidiaries. CBA's shares were last traded on September 28, 2009 at a price of BGN 1.13 per piece.
SAAB: Holding pattern
Publication: The Sofia Echo, byClive Leviev-Sawyer
Any arms industry insider will tell you that the process of government decisions about fighter aircraft acquisitions is a gruelling, long-haul journey.Bulgaria has in place – theoretically, given that it dates from the government-before-last, from before the economic crisis and from four defence ministers ago – a call for 16 fighters to replace its ageing Soviet-era air force jets. on top of that, under the Borissov Government, most of, if not all, Defence Ministry acquisitions are effectively on hold.Sweden’s SAAB, producer of the Gripen fighter, is one, up against US rivals. SAAB AB’s campaign director for Bulgaria, Daniel Boestad, tells The Sofia Echo, asked to comment on the state of play within the context of the economic crisis, that while there would be very few countries that would take this kind of decision in this kind of situation, it is important because buying this type of equipment is "a marriage for 40-years-plus".Even in current circumstances, it is important to keep dialogue going, he says. South and Central Eastern Europe is important to the company which, Boestad says, has very strong support from the Swedish government (British aerospace company BAE Systems is a minority shareholder in SAAB AB). He emphasises that the company is always very flexible about the financial parameters of deals – "that’s one of our strong points, and when I say ‘ours’, not only the company but I mean Sweden".Financial solutions such as deferred payments and very long payment plans can be offered, to fit a country’s budget. This was true even outside times of crisis, Boestad says.Croatia and Romania have imminent need of new aircraft too, and Croatia recently has requested information from SAAB as well as its competitors. The company is also pursuing business in Serbia and Slovakia.Originally, Bulgaria’s acquisition timeframe was some time between 2005 and 2015. "We have had very good dialogue with all governments," Boestad said. In August 2006, the company responded to Bulgaria’s request for information but while there had been some dialogue, not much had happened formally since then.The company is allowing for some time as the new Government deals with multiple tasks as it prepares for discussions with them about the acquisition process."I think that we have a strong case because as long as there is a requirement for an air force, I think that our product will fit the minimalistic budget."
The other selling points are that SAAB Gripen’s product is "very, very good", the newest generation and fully Nato compatible, as well as the industrial co-operation that comes as part of the package. In Hungary, for example, the offset commitments had been finalised, five years ahead of schedule, Boestad said. The programme was also ahead of schedule in the Czech Republic, he said.Deciding offset details with governments was a process that was flexible because governments were invited to say in which areas they would like to see growth, Boestad said.
Google to launch local search in Bulgaria
Major Web mogul Google Inc is planning to make available in Bulgaria its local search for shops and services, the so-called Google Maps, Pari Daily reported.The debut has been scheduled in two months.According to the report provider of the service called Google Local Business Center will be Golden Pages, one of the most comprehensive classified directory in Bulgaria.The company declined to comment the report.
Bulgaria Lead and Zinc Complex Jsc gets permit for new plant
The leading Bulgarian non-ferrous metals producers, Lead and Zinc Complex Jsc (LZC), has received permission for modernization and expansion of its facilities.LZC has been granted a permit for building a new plant in the southern city of Kardzhali where its manufacturing operations are based.The execution of the projects provides for increasing the zinc production capacity by 40%, and reaching the highest zinc mark of 99,995. The new plant is expected to be constructed by the end of 2011.The project also involves modernization of the production with new environment-friendly technology which has already been purchased, and is worth EUR 40 M.Bulgaria’s former Environment Minister, Dzhevdet Chakurov, from the DPS (Movement for Rights and Freedoms) party refused to grant a permit for LZC’s expansion for three years.The majority owner of the LZC Jsc is Intertrust Holding, which is owned by the Bulgarian millionaire, Valentin Zahariev.In January 2009, Zahariev said his company would file a suit against the government over the blockage of the LZC investment. He has been quoted by the Dnevnik Daily as saying the reasons for the delay were probably political.
Aviation firms work for foreign market
The big carriers that provide the full range of aviation services will find it increasingly difficult to survive in the current crisis, the chairman of the Bulgarian Airlines Association (ABA), Svetoslav Stanulov, told the Pari daily. Transport should be separated from aircraft service and staff training. That will allow spin-offs to generate their own revenue. Airlines that manage to develop such holding structures have the chance to strengthen their positions, both on the domestic and the foreign markets, Stanulov added. The same structure could be successfully implemented in railways.
Currently 60% of the aviation companies' business is services for foreign clients, because the Bulgarian market is small. There are six aircraft repair facilities and four or five pilot training centres that cannot utilise their full capacity. Another problem is the shortage of airfields for practice. The existing airfields are far from the training centres and cannot be used efficiently. The poor coordination among different institutions makes it extremely difficult for schools to build their own bases. The Bulgarian aviation sector has managed to renovate its aircraft fleet for the past three years, despite the safeguard clause and the economic crisis, Stanulov pointed out. Nevertheless, a comprehensive policy for development of the sector needs to be designed. A special body needs to work out such a policy and provide coordination between businesses and government.
THE CRISIS:
Bulgaria's metallurgy sees 30% decline since start of crisis
Bulgaria’s metallurgy sector has seen a slump of about 30% since the fall of 2008 when the economic crisis kicked in.This data has been provided by the Bulgarian financial newspaper Pari Daily, which points out that Kremikovtzi is the only metallurgy plant in bankruptcy but that is for reasons such as mismanagement and unrelated to the crisis.Because of the plant’s problems, Kremikovtzi’s production dropped from 1,2 million tons in 2007 to 489 000 tons in 2008. The steel plant in the city of Pernik, Stomana Industry Jsc increased its production by 150 000 tons in 2008 to reach 840 000 tons.The total output of Stomana Industry, Promet Steel – Burgas, and Helios Metalurg – Plovdiv declined by 11% in 2008 compared to 2007.For the first time in 2008, however, Bulgaria’s ferrous metallurgy has a negative trade balance of BGN 865 M.At the same time, the country’s non-ferrous metallurgy registered a positive trade balance of BGN 2,747 B in 2008. Thus, in 2008 Bulgaria’s metallurgy sector in total had a positive trade balance of BGN 1,973 B.
Over 4 000 Bulgarian farmers face bankruptcy
Over 4 000 Bulgarian farmers face bankruptcy due to the low milk purchase prices, the Milk Producers Association in the city of Stara Zagora alarms. The current milk purchase prices of BGN 0,60 per liter do not allow farmers to buy food for the animals, pay the electric and water bills, the salaries of the people helping them and meet their household expenses, the milk producers say Sunday.The farmers further complain that the EU SAPARD agriculture funds do not reach them, because they end with the big companies and demand BGN 0,30 in State subsidy for a liter of milk.
Bulgaria construction investments collapse by 67% in 1st half of 2009
The investments in Bulgaria’s construction sector declined by the staggering 67,4% in the first six months of 2009 compared to the same period of 2008.This data has been announced Friday by the Bulgarian Construction Chamber. The total income of the Bulgarian construction firms in the first half of 2009 declined by 15,3% compared to January-June, 2008.The decline is rather steep in the construction of buildings, while the construction of infrastructure and engineering projects has retained its pre-crisis levels.Bulgaria’s Regional Development Minister, Rosen Plevneliev, said that of the total of 231 300 workers employed in the constitution sector in 2008, some 35 800 are expected to lose their jobs by the end of 2009.The large construction firms are expected to lay off about 10% of their workers, the medium-sized – about 18%, and the small ones – about 30%.Plevneliev also said that 1 550 construction firms might be shut down altogether by not extending their registration with the Central Constitution Register at the end of 2009. A total of 5 860 firms are included in the register, and about 12 000 firms in Bulgaria include “construction” in their matter of activities.The Minister has vowed to speed up the public works and infrastructure projects to be funded with EU money in order to create employment for the construction sector in times of a raging economic crisis.
Bulgaria casinos, gambling affected by crisis
The Bulgarian gaming sector has registered a 50% decline in turnovers since the beginning of the year, showed data by the industry association. The slimming turnovers directly affect sales of gaming and gambling gear with sales of slot machines plunging deepest, commented Ivan Tsankarski, board member of Casino Technologies. The industry is in a deep hole, said sector players attending a second annual Balkan Entertainment and Gaming Expo. The event gathering gaming industry vendors, operators, manufacturers and experts will run until October 8 in Sofia. The sales of gaming equipment have collapsed by over 60%, said producer Fortex New without giving concrete numbers. The sector paid BGN 112 million in taxes last year. A total of 22 casinos are registered in the country along with 23 bingo halls and 975 gambling machines halls. Sixty halls have closed over licence expiry since January 2009 and the same number suspended operations. While the crisis emptied consumers' pockets and tightened access to funding, many companies went under. Apart from scanty clientele, the sector is suffering a staff shortfall as a growing number of gaming and gambling personnel join criminal groups. While fiscal control is high at slot machines, preventing scams, the online bets and games are posing major threats as they are difficult to track. Five companies import gaming equipment in Bulgaria, said one of the importers, Microintellect. Casino Technology and EGT are the major casino outfit manufacturers commanding 80% of the market with a 5% slice going to Fortex New. The crisis has spurred second-hand and rented gaming equipment and pirate software, mainly from China, dealing another blow to the industry.
Machine building industry calls for rescue
The state should pay the social security contributions of export-oriented machine building companies for six months, the industry said. The Branch Chamber of Machine Building has sent a letter to finance minister Simeon Dyankov, urging him to summon the Council for Tripartite Cooperation and discuss measures to help enterprises in the sector keep their qualified workforce.
PPP seen as efficient anti-crisis measure
Public-private partnership (PPP) should become an efficient anti-crisis measure and a way out of the recession. This opinion was expressed by the participants in a round table on international platforms in the area of PPP. They emphasised the lack of a PPP law in Bulgaria and the need for measures encouraging businesses to participate in such projects. PPP could play an important role in EU funds absorption.
Bulgaria’s furniture sector braces for 40% drop in sales
Battered by a sharp deterioration in domestic demand, Bulgaria’s furniture manufacturers are facing an up to 40% slide in sales, according to Kalin Simeonov, chairman of the wood processing and furniture chamber. Speaking at the World of Furniture exhibition running at Sofia’s Inter Expo Center, he said that furniture demand has shrank by 50% since the end of 2008, when the market was still alive and kicking. Unlike wood processors, which were hit by the crisis as early as mid-2008, furniture makers pulled off a 5% increase in sales for the year, hoping to dodge a decline in 2009. A survey by local pollster Barometer showed that the furniture industry could have scaled up its output by 15% if the crisis had not erupted, building on robust demand propped by blossoming construction and mortgage home purchases. Thus, while around 70 percent of company executives had lined up fresh investment in end-2008, now many have put their plans on the rocks, Simeonov said. But as furniture makers see no signs of an upcoming rebound, the wood processing industry is experiencing tepid growth. Struck by the downturn in mid-2008 when the market grinded to a complete standstill, the sector posted a slight recovery in the recent months. Companies based in the southern Rodopi region say foreign demand is perking up, with orders tricking in from Greece, Israel and Iraq, among other markets.
Deutsche Bank research: Warning on bank loan defaults in Bulgaria and Romania
Bulgaria and Romania will undergo a significant deterioration of assets over the next 12 months, with bank loan defaults creeping up to about 15 to 20 per cent of the sector’s total portfolio, according to a new report by Deutsche Bank Research (DBR), the research arm of the German banking heavyweight.Looking at the economies of Central and Eastern Europe, the Baltic nations, Russia, Ukraine and Kazakhstan, the analysts predicted that non-performing loans would peak in 2010, expecting the deterioration to continue at least until mid-2010 in Eastern Europe.Stress tests by Bulgarian National Bank (BNB) estimated that bad loans could make up 16.5 per cent of the total by the end of the year, triggering write down costs of between 1.944 billion and 3.305 billion leva. The system capital adequacy ratio of 17.6 per cent could drop to the 14.5 per cent to 11.6 per cent range, comfortably high above the eight per cent regulatory requirement for the EU and the US.Stress tests on the CEE banks reveal that banks’ solvency would shrink near or even beneath the regulatory requirement in case of a sharp deterioration in the quality of assets, according to DBR. Loan defaults will peak at between 10 and 50 per cent for the different countries.The report ties up with a recent analysis by UniCredit Group, which forecast that loan defaults in Eastern Europe will hit their worst in 2010. However, the institution pointed out that the currency board mechanism pegging the lev to the euro is guarding Bulgarian banks against steep rises in loan defaults.Bad and restructured loans accounted for BGN 2.75 billion in end-August, or 7.4 per cent of all corporate and household loans, overdrafts excluded.