BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 22 - 29 JANUARY 2010 )
Sections/headline briefs:
MACROECONOMY:
· EBRD brightens up 2010 outlook on Bulgarian economy
· WB projects 2% GDP decline this year
- Bulgaria Finance Ministry switches to forecasting GDP growth in 2010
· Bulgarian National Bank to join TARGET2 euro system
- Bulgaria faces losing up to 20% of EU environment cash pot
- EC says Bulgaria’s new Cabinet knew of EU funding trouble
· Gray economy forms 37% of Bulgaria GDP
· Bulgaria tightens rules for new clean energy projects
· Bulgaria's 'green' energy boom sparks fears
· Bulgaria to launch procedure for N-Plant investor by end-2010
· Bulgarian property market 2009
- Bulgaria to simplify customs clearance procedures
- Netherlands Ambassador: Bulgaria's interests are our interests
- PIRGROUP CEO: Don't expect Dutch behavior from Bulgarians
- Bulgaria 2nd in Russian wine imports
- Nabucco pipeline future will depend on positive demand
· Belene Project to Start with Russian Funds
· NSI: Business climate improves in construction and service sectors
INVESTMENTS:
· Bulgaria opens water concessions
· Dutch consortium to invest EUR 86 М in greenhouses in Varna
· Investment agency expects 10-15% FDI growth this year
COMPANIES:
· Swiss Silcotex opens plant in Bulgaria city of Pernik
· Foreign markets fish Bulgarian producers out of the ditch
· ABB to expand factory for low voltage equipment in Rakovski
THE CRISIS:
· Banks’ net profit declines 43.8% y/y last year
· Monetary board and flat tax guarantee stability during crisis
· Bulgaria seeks new economic model to face post-Crisis challenges
· Insurance sector contracts 4.2 %
· Wholesale trade collapses
· Crude steel production in Bulgaria fell 45% in 2009
Articles:
MACROECONOMY:
EBRD brightens up 2010 outlook on Bulgarian economy
The European Bank for Reconstruction and Development (EBRD) has raised its economic outlook for Bulgaria, seeing the country’s GDP edging 0.7% higher in 2010. This compares against the 1.5% contraction projected by the EBRD in October 2009. The correction is in line with the bank’s more favourable assessment about Europe’s developing economies, which it says are on track to post median growth of 3.3%, up from its 2.5% forecast made three months ago. Emerging markets in Europe and Central Asia where the bank invests are starting to recover, Bloomberg reported. The EBRD plans to back the rebound by a combined cash pot of EUR 8 billion during 2010. “The recovery in the region remains fragile, with large variations across countries. The gradual global recovery will support regional growth, but local factors will dampen it,” Erik Berglof, EBRD chief economist, said in a statement. EBRD has also significantly improved its expectations about Poland, Turkey, Russia and Kazakhstan, mostly thanks to the recovery in raw material prices and the pick-up in lending. The bank predicted each country in the region will experience GDP growth in 2011. on the flip side, Latvia, Lithuania and Estonia are headed for a steep decline in 2010 GDP.
WB projects 2% GDP decline this year
The World Bank (WB) projects that Bulgarian GDP will decline by 2% this year and will start recovering as of next year posting a growth rate of 3.6%, according to the newly released Global Economic Prospects. The institution has estimated that GDP has fallen by 6.5% last year. The previous forecast from June was for GDP decline of 1.5% last year and for 1.5% growth this year. The CA gap is to narrow to 5.2% of GDP this year and 4.9% next year from estimated 9.8% of GDP last year and 25.4% in 2008. The WB comments that Bulgaria is among the countries, in which the adverse effects of the crisis were the hardest: countries with large private foreign currency obligations and in which the economic growth relied heavily on foreign capital inflows. The peg to the euro would transmit to the country the policy of the ECB, which is anticipated to remain supportive of growth until 2011 but “incrementally withdraw stimulus measures (including reversal of policy interest rate cuts) as demand conditions permit”.
Bulgaria Finance Ministry switches to forecasting GDP growth in 2010
Bulgaria’s Finance Ministry has amended its forecast for a 2% decline of the economy in 2010 switching to expecting a 0,3% GDP growth.This forecast has been included in the Ministry’s Convergence Program for the period 2009-2012, which is to be submitted to the EU. The Convergence Program includes the parameters of the country’s fiscal policy in accordance with the recommendations of the Stability and Growth Pact, the Lisbon Treaty, and the Maastricht Criteria for accession to the Eurozone.Djankov has pointed out that the government is committed to maintaining a balanced budget in 2010-2011. In his words, this is crucial for the country’s accession to the ERM 2, the final step before the adoption of the euro. He promised that the cabinet was going to reduce the taxes if the balanced budget policies prove to be successful.“Our latest analyses show that thanks to our stable fiscal policies, and some of our other anti-crisis measures, especially combating contraband, we can now forecast an economic growth of 0,3%,” Djankov explained.He added that the optimistic scenario was for a growth of 1%, whereas the pessimistic one was the same the forecast written down in the 2010 State Budget Act – a 2% decline. He predicted, however, that Bulgaria’s GDP was probably going to go up by BGN 3-4 B in 2010.“Bulgaria is the only EU state with increased perspectives from the international credit rating agencies. If there is no deficit, it won’t be necessary to raise the taxes. Our excellent fiscal policies give us the chance to attract more foreign investments in the next three years,” Djankov said Wednesday after the weekly cabinet meeting.The Convergence Program of the Finance Ministry includes the reform steps to be made by the Borisov government in the next three years in order to help Bulgaria catch up economically with the wealthy EU states.It also accounts for the reforms carried out by the Borisov cabinet in the last months, and makes a commitment to preserve the currency peg until Bulgaria adopts the euro.“Our goal is to make Bulgaria an average EU nation as far as the income levels are concerned. My ambition is to make Bulgaria the country with the lowest taxes in the EU by the end of our term,” the Finance Minister declared.He made it clear that in February and March of 2010 the government was deliberately going to have monthly budget deficits in order to make some state expenditures which were not executed by the previous cabinet. Yet, by the end of 2010 it is going to strive to achieve a balanced budget.“We are striding at the fastest possible pace towards the ERM 2 and the Eurozone. In my view as the Finance Minister, there is no doubt that the best policies for Bulgaria is the swiftest possible accession to the Eurozone. There is a lot of work to be done from a political point of view. Bulgaria’s entry to the Eurozone must not be tied to what is happening in our neighboring countries, we have done enough by meeting Maastricht criteria,” Djankov said adding he had asked the business circles and NGOs to help Bulgaria achieve its top foreign policy priority – adopting the euro.The Convergence Program of the Finance Ministry envisages a total of 16 larger reforms including in the healthcare sector, in education, and the social sphere. The government is going to reduce gradually the interest payments in order to bring them below 1% of the GDP. The state guaranteed debt is also expected to decline further by reaching under 2% of the GDP.Djankov has stated that he expected to be able to reduce the value-added tax by 2% - down to 18% - with the 2011 state budget, and then by another 2% the following year.The other taxes will remain at their present level; only the social security payments will be reduced by 5% by the end of the government’s term in 2013. Thus, according to the Finance Minister, Bulgaria is going to become the country with the lowest taxes in the EU.He also announced that preliminary data showed that the National Revenue Agency ended 2009 with BGN 228 M more than it raised in 2008.“I think that we are yet to see the really big advantages of the reforms in the NRA and the Customs Agency in the coming six months,” the Minister said.He also pointed out that Bulgaria’s glass-making, food, and chemical industries were registering growth, and that the country’s export would probably be on the rise soon as a result of that.
Bulgarian National Bank to join TARGET2 euro system
The Bulgarian National Bank (BNB) has announced that it will join TARGET2*, a real-time gross settlement system (RTGS) for Euro transactions, on February 1, 2010. The system, master-minded by the European Central Bank, provides for real-time processing, settlement in central bank moneys, and immediate finality.BNB announced on Friday that this move represented a significant step for Bulgaria’s integration into the European financial market and settlement structure.The Bulgarian component, TARGET2-BG, includes the central banks, another 16 banks and an auxiliary system for settlements of up to EUR 50 000 that may be effected at a particular set time.When BNB actively joins the system, TARGET2 will incorporate 23 EU member staes, of which six – including Bulgaria - are countries outside the Eurozone.BNB stated that being part of TARGET2 would ensure state-of-the-art mechanisms for stability and non-interruption of business processes, as well as for monitoring and managing liquidity in Euro, plus cost efficiencies that would improve payment settlement processes and increases the speed and security of payments.The Bulgarian Finance Minister, Simeon Djankov, has announced, also on Friday that the government’s top priority of its foregn policy over the next six months is its application to join the exchange-rate mechanism, the two-year currency stability test prior to euro adoption in 2013. *TARGET2 - The Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) 2 system was launched in November 2007.
Bulgaria faces losing up to 20% of EU environment cash pot
Bulgarian prime minister Boyko Borissov Sunday said the country could see 15-20% of financing under the European Union’s Operational Programme 'Environment' slip through its fingers. The statement comes after the European Commission (EC) threatened to pull the plug for ecological projects unless the Bulgarian government adequately outlines by the end of January the set of measures implemented by the environment ministry to ensure affective spending of the financing. The warning was written in a letter by the Commission's director-general of the regional policy DG Dirk Ahner received in Sofia on January 13. Back in February 2009 and then again in May the same year, the Commission sent letters to the eco ministry, saying there was a problem in money absorption under the programme and demanding an explanation on some unfairly expensive water and sewerage contracts, said minister Nona Karadjova, who took office after right-of-centre party GERB swept into power with a landslide at the July 5 election. In June the government launched at Brussels’ request an inspection into projects estimated at roughly EUR 100 million funded under the operational programme. Karadjova said the two letters from the European Commission have been kept in secret as they were not registered at the ministry’s records and she only learnt about them later on. In end-October the ministry ordered municipalities to suspend payments under the programme until it revises all contracts that have been signed. The probe established that the price tags of 12 municipal water infrastructure projects were seriously above market prices and will be corrected, Karadjova said.The list includes the controversial project to build a water and sewerage system and a waste water treatment facility in Lyulyakovo village with a population of 2500 for a cost of BGN 40.5 million. Another five projects will be stopped completely. Payments could be shaved on the 157 contracts to provide technical assistance in preparing landfill site and water infrastructure projects estimated at some EUR 150 million put together. Today the ministry will send in Brussels a reply containing information about screening performed on projects and financial update proposals. Borissov dubbed “hiding” the letters “sabotage” by the former Cabinet. Speaking to Focus news agency, Denitsa Zlateva of the Bulgarian Socialist Party (BSP), former advisor of ex-minister of EU funds management Meglena Plugchieva, dismissed the accusation, saying “it’s strange that we should have sabotaged the operations of a new government in February when we didn’t know who’s going to come to power.”
EC says Bulgaria’s new Cabinet knew of EU funding trouble
The Bulgarian government has long been aware of the problems that have plagued the country’s water sector and the latest letter from the European Commission was only a reminder, said regional policy DG spokesman Dennis Abbott. His comments come after Bulgarian prime minister Boyko Borissov on Sunday announced the former Cabinet has concealed letters from Brussels warning of problems in the water sector. The spokesman said all has been clear at a technical level even if the problems with the slow absorption of European financing under the operational programmes has not been declared at a political level. Borissov said on Sunday the Stanishev Cabinet has sabotaged the country, stashing away letters warning Bulgaria might see millions of euros slip through its fingers. Abbot pointed out the European Commission would not benefit from pulling the plug on Bulgaria but must protect the interests of European taxpayers. Meanwhile, the environment ministry yesterday published two of the “hidden” letters. The move came in response to claims by former environment minister Djevdet Chakarov he has posted an announcement on the ministry’s website about the letter from Brussels back in February. The letter meant by the ex-minister is the Commission’s recommendation on the need of legislative changes needed so that water and sewerage companies could qualify as beneficiaries under the Environment operational programme. But later that same month, the Commission sent a second letter addressed to the finance ministry about abuses under the Ispa pre-accession programme. Bulgarian authorities have still not submitted a reply on the criticism regarding the ten projects to build landfills and waste water treatment plants. The second “hidden” letter, addressed to the environment ministry, was received in June 2009. The Commission is asking for explanation about the exorbitant costs under the Environment operational programme. Chakarov was supposed to reply by mid-July 2009. He has only submitted a “formal” reply, the ministry said. Karadjova sent a new explanation with the Commission only yesterday.
Gray economy forms 37% of Bulgaria GDP
Up to 37% of Bulgaria’s Gross Domestic Product (GDP) comes from the gray economy, according to a Visa Europe survey.The data was announced by Nikos Kabanopoulos, Vice President, and General Manager of the company for Greece, Cyprus and Bulgaria.According to Kabanopoulos, increasing payments via debit and credit cards is a method to help limit the gray economy.Visa Europe data shows that in 2009, the number of credit card payments increased by 47% year on year, amounting to EUR 429 M. The debit card payments are 83% up compared to 2008 or EUR 185 M.The number of issued debit cards is up 91% year on year. Bulgarians now own 2,1 million credit and debit cards.
Bulgaria tightens rules for new clean energy projects
Bulgaria’s Environment Ministry has advised its regional directorates to closely observe the applications rules on renewable energy development, deputy minister Evdokia Maneva told Dnevnik. She added the ministry is drafting guidelines for the directorates to add a requirement for confirmation by state-owned power utility NEK of the route pipelines linking capacities to the grid. Regional directorates will also have to gauge the environmental impact of developing renewable energy infrastructure. Wind energy investors will be required to conduct one-year wind speed measurement before they can apply for an environmental impact assessment. The aim is to make sure that the project is justified. Speaking to Dnevnik last week, environment minister Nona Karadjova said the government has decided to jettison plans for a temporary suspension of renewable energy development until Bulgaria draws up its action plan for the sector by 2020. The sudden change of mind came after ministry representatives met up with the Confederation of Employers and Industrialists in Bulgaria (CEIBG), which opposed the ban and called for more stringent regulations to sift projects out. The ministry said it could seek changes to the grid-connection ordinance to scrap rules stipulating that 5 MW capacities can be only hooked to the distribution network and add a requirement for investors to complete the power plant within a certain timeframe from signing the preliminary agreement.
Bulgaria's 'green' energy boom sparks fears
Bulgaria is undergoing a boom in the renewable energy sector that experts warn could see an influx of dodgy investment and actually end up doing more harm than good for the environment.And the government -- the main driver behind the boom -- is taking note.
This month it imposed a half-year moratorium on new "green" energy projects in a bid to sift out those with serious financing and prevent a vital Black Sea bird migration route from being built over with wind farms."Too many tickets have been sold for this show," Economy and Energy Minister Traicho Traykov told an investors' forum earlier this month."We need to get the sector in order," he said.The number of "green" energy projects in Bulgaria has exploded from almost nil just a few years ago to a proposed 12,000 megawatts (MW) from wind farms, solar energy parks and small hydropower stations, a government expert said.That figure is equal to Bulgaria's current installed capacity and would be impossible to handle by the grid.Experts agree that many of the planned projects will never actually come to fruition due to a lack of funding.The current boom originates in a European Union-wide agreement under which Bulgaria has said 16 percent of electricity consumption will come from renewable energy sources by 2020 compared with under eight percent now.The government has ordered the national electricity company and private utilities to connect all green-power capacity to the grid as soon as it is up and running and buy power generated in this way at fixed preferential prices.With such attractive incentives in place, investors -- many still smarting from the burst bubble in Bulgaria's construction sector -- appear to see the renewable energy sector as a sure-fire return on their money.Operators have already connected some 350 MW from wind turbines and solar batteries and signed preliminary contracts to connect a further 1,451 MW.This will practically fill the whole capacity of the network, said Georgy Mikov, executive director of national electricity company NEK.Moreover, NEK estimates show that about 2,000 MW of green sources would be sufficient for Bulgaria to meet its 16-percent green-power target by 2020.But the renewable energy producers themselves say no less than 5,000-6,000 MW would be necessary.The moratorium will give the government time to win approval for a national plan for the development of renewables by 2020, said energy minister Traykov.The government is particularly keen to reduce harm to the Black Sea Via Pontica bird migration route, a prime spot for the construction of wind parks.It also seeks to curb wind farm construction in protected nature zones and solar energy park installations on fertile farmland.The European Commission last year launched an infringement procedure against Bulgaria for allowing wind turbines on the Via Pontica route.The authorities also want to be able to select the more serious projects with secure financial backing from the mass of applications. one way would be to impose expiry deadlines on construction permits, experts suggested. If operators know which areas are designated for green-power development, they will be better able to upgrade the grid in that area and connect the new capacities, officials said. Environmental organisations are supporting the curbs, with Bulgarian group For The Nature and WWF Bulgaria saying in a statement: "We fully support the development of renewable energy but not at the expense of protected territory."
Bulgaria to launch procedure for N-Plant investor by end-2010
Bulgaria's new government will launch a procedure for new private investors for its majority stake in the planned Belene nuclear power plant.The procedure will begin by the end of the year, the economy and energy minister from the center-right GERB cabinet announced.Traicho Traikov, Bulgaria's Energy, Economy and Tourism Minister, made the announcement during the official visit of a Bulgarian delegation, headed by Prime Minister Boyko Borisov, to Germany.The minister said there is renewed interest by big German energy companies in Bulgarian projects, but declined to name them. Representatives of these companies will start negotiations in Sofia next week.Bulgaria's new centre-right government, which has put the 2,000 megawatt Belene under review due to rising costs, was forced to seek new investors after German utility RWE walked out of the project due to funding problems.Russia's state nuclear company Rosatom announced in December that it is ready to finance the multi-billion nuclear project in the Bulgarian Danube town of Belene, which has stalled over lack of funding.This was Russia's second offer to pour money into Bulgaria's second nuclear plant Belene after Russian Prime Minister, Vladimir Putin, gave the green light to a EUR 3,8 B loan at the end of May.Bulgaria's new government of the center-right GERB party has said however that it is not willing to provide any state guarantees for loans and is yet to decide whether to scrap or push ahead due to purely economic terms.RWE's departure from Bulgaria's new Belene nuclear plant put extra pressure on government to find new shareholders while it redefines the scope of investment it needs.The new governmen plans to cut its shares in the project from 51% to 20-30%, which will still allow the country to keep its blocking quota.Sofia has contracted Russia's Atomstroyexport along with France's Areva and Germany's Siemens, to build Belene.Belene's reactors are to be of the Russian VVER-1000 class, while the Western companies are providing instrumentation and control systems.
Bulgarian property market 2009
Almost 28% is the decrease in the number of deals on the property market in Bulgaria annually. This number is different in the different parts of the country but only Sofia and Varna have similar statistics. 72% of those who would like to buy a property in Sofia and Varna are prepared to pay not more than 40 000 Euros. In Plovdiv and Bourgas the buyers are prepared to pay not more than 25 000 Euros.In 2009, 42% of the buyers paid in cash and 37% of the sellers had financial difficulties, not necessary inability to pay their mortgages or bad credits. In 2009 most of the buyers bought newly built properties and only 12 % of them have bought prefabricated apartments. The most active buyers were between 26 and 35 years of age.
Bulgaria to simplify customs clearance procedures
Procedures for receiving goods from European Union countries and non-EU states in Bulgaria will be significantly simplified as of January 25 2010 a result of a pilot project between Bulgarian Posts and Customs Agency, Bulgarian-language Dnevnik daily said.
This project is a reaction to the public outcry caused by a story published on Dnevnik.bg website on January 8 2010 by Elenko Elenkov, who described what he had to go through when collecting a box of t-shirts that he had ordered from the US.The pilot project for now will concentrate on goods shipped to Sofia, as Sofia Customs processes about 60 per cent of all the goods arriving from abroad. It is the first step towards introducing a national centre for processing international shipments.As of January 25 2010, goods arriving from EU states will not go through the Customs Agency, as was the practice until now, but will be sent to the recipients' addresses or to their respective local post offices. There will be no charge for this.Goods that are worth less than 15 euro, for which VAT is not due, will be sent directly to recipients' local post offices. This includes goods sent as gifts worth no more than 45 euro.Goods which cost more than 15 euro but less than 150 euro, for which VAT is due, will be processed at one desk. Recipients of such goods no longer have to register for an Economic Operation Registration and Identification (EORI) number and the VAT gets automatically billed.Another new feature is the notice that recipients will get from the post office about the shipments addressed to them for collection. The notice will include information such as the type of the shipment, the VAT due and all other fees, and the country the parcel was sent from. Bulgarian Posts will also send a list of all the documents that recipients must present to the Customs Agency for the clearance procedure.
Netherlands Ambassador Karel van Kesteren: Bulgaria's interests are our interests
Exclusive interview of His Excellency Karel van Kesteren, Ambassador of the Netherlands to Bulgaria, for the Dutch Survey ("International Survey: Bulgaria-Netherlands") of Novinite.com (Sofia News Agency)
How would you describe briefly the major characteristics of the relations between the Netherlands and Bulgaria? How have diplomatic contacts between Bulgaria and the Netherlands changed since the GERB party came to power in the summer of 2009?
Bulgaria and the Netherlands are, first of all, partners within the European Union. Within the EU we work together in many areas, to promote our common objectives and ideals, for example in the area of justice.Although we have always kept good relations with Bulgarian governments, we are happy to note that the current GERB government is energetically undertaking ambitious – and necessary! – reforms in a variety of areas. I am confident that those reforms will improve the lives of Bulgarians and will broaden the scope of Bulgarian – Dutch relations, also with regard to investment and trade.
How do you assess the economic reforms that Bulgaria’s new center-right government of the GERB party is implementing? What will be their impact on the business climate?
We assess the economic policy of the Bulgarian government positively. The planned reforms regarding reduction of the administrative burden are needed to further improve the business climate and to attract foreign investments.I also applaud the steps by the government to combat corruption and fraud. This is important in terms of budget revenues and the ability of the state to finance key services, but I also want to emphasize the clear link between reforms of the judiciary and the business climate: if the rule of law is not secured, businesses, local as well as foreign, are not guaranteed there rights, for example when it comes to enforcing payments, and as I have also seen in other countries, that has a negative effect on economic development.
A group of EU member states, including the Netherlands, have been pressing Brussels for more sanctions against Bulgaria as well as neighboring Romania, which also joined in 2007, including the activation of safeguard clauses. Why have Dutch officials and politicians been some of the harshest critics of Bulgaria?
The Netherlands is a country with a tradition of openness to the world and of strong engagement with the European Union. This is logical, taking into account the open and international orientation of our country and our economy. What happens in the world, especially within the EU, therefore concerns us. Our countries pursue a common goal in the EU and we all work together to resolve common problems.Part of that process is to have an open and frank dialogue as EU partners. It is not a question of sanctions – the Netherlands government has not pressed for sanctions; what it has done is openly discuss the question of how best to ensure that we can all reap the benefits of our union in terms of prosperity and security.Your problems are our problems and the interests of people in the Netherlands coincide with the interests of Bulgarians, who as all Europeans are entitled to a well functioning justice system, efficient public services and a good business climate. That’s why the Netherlands has not been looking on idly, but has invested millions of euros in Bulgaria’s reforms and continues to do so to this day.
Do you view Bulgaria’s Schengen Area accession as linked to reforms? What specifically does Bulgaria need to focus on in its reform efforts in this respect?
The Dutch government has made it clear that reforms in the field of justice and home affairs need to be effected, as agreed with Bulgaria when it joined the EU and reconfirmed by the current government as one of their most important priorities. Positive and concrete results in this field will benefit the entire EU. There is no formal link between these reforms and the Schengen accession process, which is a process with its own set of criteria and technical prerequisites.But you will agree with me that there is a de-facto link: lack of progress in the reform of the justice system and/or the fight against corruption and organized crime would in practice make Schengen-entry more difficult, since abolishing border controls can only take place if there is sufficient confidence on both sides in the external border controls and the effectiveness of the fight against cross-border crime and corruption. If we are to have no borders between us, we need to be sure that no one is above the law in any of our countries.
In the period 1996-2008, the Netherlands was the second largest foreign investor surpassing countries such as Germany, UK, and USA. Why do you think Bulgaria has attracted such a significant amount of Dutch investment? In which sectors from Bulgaria's economy do Dutch companies show most interest?
When looking at such figures, one should bear in mind that many international companies have their European headquarters in the Netherlands. Their investments in Bulgaria therefore count as Dutch investments, somewhat inflating my country’s statistics.That is not to say, however, that home-grown Dutch companies are not an important source of investment in Bulgaria. on the wave of Bulgaria’s impressive economic growth over the years and its financial stability, Dutch companies have found in Bulgaria a land of opportunities, both in terms of production for abroad and as a local market for their products.Overall, Bulgaria’s economy is in rapid development, providing not only for investment opportunities, but also for Bulgarian demand for Dutch technologies that can offer cost-effective solutions. We see this in the field of agriculture, water and waste management, transport, logistics, chemicals, machines and energy efficiency. I am confident that if the government is successful in its reforms, Dutch investments will further increase.
Has the interest of Dutch SMEs in the Bulgarian market grown substantially after the country's accession to the European Union in 2007?
Small and Medium-sized enterprises are the backbone of the Dutch economy. At this moment, some 300 Dutch companies are present in Bulgaria and apart from the big ones like Shell, ING, Heineken, TNT and Unilever, these include many small and medium sized enterprises, many of them united in the Bulgarian-Dutch Business Club.Their number in Bulgaria has certainly increased since Bulgaria’s accession to the EU, but I think there is potential for much more trade and investment. As I just mentioned, successful further reforms regarding the business climate will certainly help realize this potential.I myself see it as one of my most important tasks to promote further trade and investments, i.a. by providing information to Dutch firms and by bringing them into contact with Bulgarian partners.
How does the difference in the culture and the mentality affect the way Dutch companies do business in Bulgaria?
There are of course important cultural differences between the Bulgarians and the Dutch. The Dutch are for instance known to be very direct and to the point, whereas some Bulgarians might find the Dutch approach undiplomatic, preferring to invest a little more in getting to know and trust each other.However, the Dutch could never have gained their worldwide reputation for being good businessmen, if they would not have shown great adaptability and reliability.Bulgarians have an impressive ability to keep looking for solutions for apparently insurmountable technical problems and a great flexibility in changing designs when the market developments so require. When I talk to Dutch and Bulgarian businessmen, invariably both sides are happy with each other and are learning from each other’s strong sides.
How would you evaluate the progress in Bulgaria’s social and agricultural landscape as a result of the collaboration between the two countries via the MATRA Program projects? For example, what has been the impact of the Center for trainings, researches, analyses, consultations and education that was established as a part of the project “TRACE - new wave of thinking about social transformation”, funded by the Dutch Foreign Ministry under the MATRA Program?
Since the beginning of the 1990s, the Netherlands has financed assistance programs of all kinds up to the tune of EUR 100 M. The MATRA program has been instrumental in this respect. MATRA stands for the Dutch word “MAatschappelijke TRAnsformatie”, which means social transformation.The program was established in 1994 in the wake of the demise of totalitarianism in Eastern Europe. Its stated goal: to assist in the transition to democracy based on the rule of law by supporting activities that stimulate the process of change both within governmental institutions and civil society.As a matter of fact, the MATRA program has given Bulgarians the opportunity to tap into Dutch experience and to receive valuable assistance in complicated matters related to the EU accession process. But it has also given the Netherlands the opportunity to get to know Bulgaria as it emerged from behind the iron curtain.I think it is safe to say that there is almost no sector which has not been affected by some form of MATRA (or one of its sister programs for the economic and agricultural sectors) assistance, and in its own modest way the MATRA program has contributed to the durable establishment of democracy in Bulgaria, as well as the country’s accession to the European Union.Even after accession, MATRA assistance is ongoing in fields of special concern such as justice and home affairs and social inclusion. The TRACE project is a good example of how the Netherlands and Bulgaria continue to cooperate and to exchange good practices by using Dutch knowledge and consolidating Bulgarian expertise in a sustainable way in order to provide support to the government plans for reforms regarding child welfare.
The Netherlands is among the world leaders as far as environment protection is concerned. What are the main mechanisms implemented? Can we say that the Dutch people are environmentally friendly in their daily life? How has this been achieved? What could be done in Bulgaria to generate similar attitude?
You have to look at the Netherlands more closely to understand our concern with the environment. The Netherlands has an area one third the size of Bulgaria, but with more than twice the amount of people. We simply don’t have the space to tolerate pollution.That may all help to explain why we have been one of the first countries to realize that continuously improving waste treatment mechanisms and environmental technologies are not a luxury, but a sheer necessity. Of course, our situation, with many people on a small territory, has also made us aware of the importance and beauty of nature and biodiversity as something worth protecting and cherishing.I think that is the essence. Bulgarians should realize that it is in their own interest to keep the environment clean and to cherish the natural beauty of your country, not because the EU or the Netherlands say you should, but because it is in your own and your children’s interest.I am proud therefore that the Netherlands and Bulgaria have a long history of cooperation in the field of nature protection regarding biodiversity, Natura 2000 and organic farming. But the Dutch experience in the field of waste treatment could also be of use to you.In the Netherlands, only 5% of the nearly 60 million tons of waste generated annually in the Netherlands is land filled. The rest is recycled or processed in an environmentally clean manner. Dutch companies would gladly share their know-how, just as the Netherlands and Bulgaria have had and still have fruitful cooperation in the field of emission’s reduction.
Dutch PM Jan Peter Balkenende was mentioned among the major bidders for the EU President position. Why was he suitable for the job, and why do you think he was not chosen by the EU leaders?
Prime Minister Balkenende was never a candidate, in spite of many news reports and speculations suggesting otherwise. European leaders, including Mr. Balkenende, opted for Mr. Van Rompuy, in whom we have full confidence.
In 2005, the Dutch voters were the first to reject the EU Constitutional Treaty, followed by the French. What are the attitudes of the government and people of the Netherlands towards the development of the EU under the Lisbon Treaty, which actually contains many of the features of the Constitutional Treaty but in a milder form? Are the Dutch apprehensive of “too much Europe”?
There have been many speculations about why the Dutch citizens rejected the Constitutional Treaty. More important in my view is that all sociological surveys show that a clear majority of the Dutch population is positive about the EU and thinks that many issues and global challenges can be more effectively tackled on a European level.Having said that, there seems to be a broad agreement – among citizens and political parties – that the EU should deal with the issues in which it has an added value and that other issues should be left to the member states.We are therefore happy to see that the Lisbon Treaty contains increased possibilities for citizens and national parliaments to act when they think the EU is tackling an issue in the wrong way.
Does Bulgaria have untapped potential? In what way?
I think Bulgaria has untapped potential in three areas:First of all, your natural beauty, cultural heritage and great food and wine are still relatively unknown in the Netherlands. Although beach- and snow- tourism has grown considerably in recent years, I think Bulgaria as a destination for nature and cultural holidays can be developed much further.Second, Bulgarian expertise regarding the region can be more effectively used on EU level. Partly, this is already happening. Since Bulgaria’s accession in 2007, we see an increasing pro-active Bulgarian position in EU forums.Thirdly, as I mentioned above, the Bulgarian economy has not developed its productive sectors yet to its full potential. If the reforms continue, I see very good possibilities in the agricultural sector – including organic agriculture – as well as in the manufacturing sector, e.g. for machinery production.
What was the most important tip about Bulgaria that your predecessor gave you?
My predecessor told me that he once used his bike to go to a meeting regarding traffic problems in the city hall, as it was the only way to arrive in time. This practical example helped to stimulate the discussion about creative solutions to the city’s traffic problems. For me, this story is symbolic for the role of an ambassador: we try to find small and concrete examples in our countries where we can contribute to practical solutions.
PIRGROUP CEO Isamar van Hilten: Don't expect Dutch behavior from Bulgarians
Interview with Isamar van Hilten, CEO of PIRGROUP, for the Dutch Survey ("International Survey: Bulgaria-Netherlands") of Novinite.com (Sofia News Agency).
Your have a rather impressive portfolio of providing corporate and other relocation services around much of Europe. What is the scope of your operations in Bulgaria?
First of all, thank you for the interest in our company. PIRGROUP BULGARIA EOOD was initially established to service our current client base. We work for many medium, large, to multinational companies in our other destinations.Often our HR contacts and networks ask for immigration and relocation information for Bulgaria. In order to serve them in the same professional manner they are used to in our other offices, we wanted to be formally represented in your country.Once our knowledge about all the local processes combined with a solid network of Bulgarian immigration, employment, real estate, medical etc. departments was in place our country manager was ready to support Bulgarian based clients as well. Today we are proud to offer Immigration, Classic Relocation and Culture Workshops in Bulgaria.
Are many people – including corporate executives and employees relocating to Bulgaria? Where do these mostly come from – i.e. from what countries and from what kinds of businesses?
Bulgaria is not yet a booming location for Expats and other International Professionals, – however having said that, we do see a steady grow in new arrivals. The international population in Bulgaria is very polarized, on the one hand we see young and eager foreigners arriving to work in the call centers, IT industry and Telecom support centers – often these modern nomads came to Bulgaria by their own request, are on the local payroll and live, work, socialize with the local communities. Action, adventure, exploring the world is part of their reasoning to work abroad; they come from the USA, all EU countries, India, Canada. The other segment of international professionals is the more traditional expat, who is assigned to Bulgaria, often joined by their family, requiring Western standard housing, schooling and medical facilities. This group of foreigners tends to come to Bulgaria for a 3 year period max, is here to establish a branch office or facilitate the joint venture with a local partner. These professionals are less driven by adventure but more by career opportunities; they also come from the USA, all EU countries, South Africa, India, Canada – but also Korean, Chinese, Taiwanese professionals have landed in Sofia.
What sort of difficulties have you encountered upon setting up your business operations in Bulgaria? How does the country fare in that respect compared to the other European states where you operate?
The PIRGROUP has been very fortunate, during our set up period we met and worked with great Bulgarian professionals in all kinds of industries. Our experience has been that Bulgarians are fantastic people to work with – once they get to know us and trust us. Advice, introduction and eagerness to work together have helped our company to explore the Bulgarian market before setting up shop.Regarding the existence and potential of a Bulgarian market for our services companies and their Human Resource departments are aware of the problems involved with transferring a foreign national – as they have had to deal with these complexities themselves – but the knowledge that there is an actual industry – let alone an Immigration and Relocation company in Bulgaria is often surprising news for our prospects.Our country manager’s role is still providing lots of education, training and explanations what PIRGROUP does and how it can benefit a company. In other words, the market potential is there once we have informed the companies that this Immigration & Relocation business exists. There is for example no Bulgarian word for Relocation Services. Today HR managers and secretaries still struggle for many unnecessary hours/days to file for documents themselves.In some other Eastern EU countries the knowledge and existence of the Immigration & Relocation industry is widespread. It makes it easier for both the International Professional and his new local HR manager to allocate budgets, set expectations and pick up the phone to hire our services. Experienced Expats often drive the local HR manager to hire a Relocation company, simply because they know what a tremendous cost and time savings they are.
According to your observations, what is the greatest challenge for foreigners adapting to the Bulgarian ways of living?
A big challenge is the mentality of the people. How do Bulgarians like working with, for, together foreigners in their own country. It is a culture shock to have to work according to, for example, German managers and their business styles.We have noticed an eagerness by Bulgarian female professionals to learn, pick up and benefit from this foreign expertise, management styles and know how. The ladies seem to be less threatened by the new and unusual- and realize to be able to get ahead with the new information available.As a foreign manager, it is important to understand who your team is, what their cultural background is in order to motivate, reward and work well with them. Then of course there are the typical difficulties- as in any country meaning: your language and alphabet, the social do-s and don’t-s, the food, the infrastructure, not having friends to make you feel at home.
How would you evaluate the level of services offered in Bulgaria to higher-ranking expats relocating because of their jobs – I mean medical services, education, etc.?
Depending upon one’s budgets, the international schools available to expats are good, as are the medical centers, shops, rental homes. However, when you are an international professional on the local payroll – and you need to live, eat, go to school like the locals do, it is difficult. For one, reading the signs to and in the medical center – you not even know where you doctor is located.
In what areas would you say Bulgaria needs to improve in order to become more welcoming to foreigners relocating there? In other words, what would you like to see happening in the country which would make you job easier?
To be honest, the fact that our job in your country is complex is an advantage. Without the help of a local relocation consultant the entire move and settling in process can be so hard on a person/family that they give up, return home and the expensive assignment fails. No company wants that to happen!I would prefer to broaden your question, to what would help Bulgaria to attract more foreign investment and foreign expertise, as this would lead to more business for us as well.In some countries, or for example even in the city of Amsterdam, the Netherlands our company has been hired by the economic development agency when they are in for a bid to attract a foreign company to set up their business in the city of Amsterdam (vs any other city).PIRGROUP’s services are paid for by the city to help the prospect relocate smoothly. In other words, the city recognizes the challenges the company will face when recruiting and relocating her foreign mangers to Amsterdam, that they (the city) pays for the support PIRGROUP then provides. Our services are seen as an incentive to select the new destination. I would love to join the Bulgarian Investment Team when they sell Bulgaria and provide us as an incentive!
Culture shock workshops are part of the services you offer. Have you had many of those for foreigners moving to Bulgaria? What is the major thing your company would teach a foreigner, for example, a Dutch person relocating to Bulgaria – how should they tackle the Bulgarian culture shock?
The best time to offer a Culture Workshop is after the person has been in Bulgaria for a few weeks. They have had some conflicts, misunderstandings, frustrations and realize something needs to change. What has to change is not known, but they are not happy, effective, successful, welcome etc in the new destination.During the workshop we start the focus on where they have come from, and what their current “backpack filled with life experiences holds”. once they understand the content and roots of their own backpack, we present the Bulgarian life, culture, habits, norms, believes.After this presentation we show the areas where one will most likely clash – it is then that the “aha, recognition” moments come up. The participants of the workshop are then able to give examples of what goes wrong, or is a struggle for them.The final part of the workshop will focus on how to prevent but also be aware and anticipate potential areas to turmoil. Hands on tools are presented. Participants are exhausted after a day of learning and experiencing – but all of them without a doubt leave the workshop feeling inspired to be able to conquer the next challenge!Some suggestions for a Dutch national to settle well in Bulgaria: Please do not want to change your new environment, but look how you can enjoy your new environment and investigate why certain things are so different. Discussions are fine, but do not expect your employees to voluntary come to you and tell you that you have made a mistake – Bulgarians are not Dutch, so do not expect Dutch behavior from them.Over time you can show them the benefits of using some Dutch behavior – as Bulgarians like to improve and benefit from things. Learn the language, and when single start dating a Bulgarian who does not speak English, this way you learn fast! Join a Bulgarian club instead of only the international or Dutch club.Pay a fair salary, and show respect by implementing (western) HR rules to your Bulgarian employees as well. Travel the country, ask your colleague for suggestions and share your enthusiasm about your trips with your local team. Everybody is proud of their country so hearing that a foreigner loved the roses in the Rose Valley, will give a smile of recognition.
You have lived all over the world. In your view, what is the most important thing in dealing with different cultures? Is there anything unique about being Dutch that makes it easier to cope interacting with various cultures?
Difficult question, for me the eagerness to learn and understand is the most important element. Essential is Respect for the other party and his/her background. When you do not understand something do not assume that the other is wrong, funny, or the food not tasty.All you experience is just something Different. Nothing less, nothing more. When truly interested in understanding this difference I have experienced success. My personality and work style is a combination of “Dutch No Nonsense, Latina Liveliness and American Ambition”. Maybe I will add something Bulgarian to this in the near future, as I still learn so much from my foreign teams every day!
Bulgaria 2nd in Russian wine imports
Bulgaria ranked second after France in terms of win imports to the Russian market in 2009, showed figures by the Russian alcoholic drinks market research centre. As consumers snapped up their purses in the grip of the downturn, French retailers sold 39.6 million litres of wine, whereas Bulgarian imports exceeded 33.8 million litres. The two sliced off a respective 18% and 15% of the Russian market. The third spot went to Moldavia, which shipped almost 27 million litres of wine to Russia, garnering some 12% of the market. However, the 2009 performance has deteriorated sharply from 2008 levels, said Natalia Kazakova, executive director of Bulgarian winemaker Vinprom Rousse and board member of the National Vine and Wine Chamber. Data by the Customs Agency estimates Official Russian exports at 27,500 tonnes. The statistics excludes volumes traded by Russian companies.
Nabucco pipeline future will depend on positive demand
The future of the Nabucco pipeline project is still not assured, an executive of Austrian energy giant OMV has told a conference on Wednesday.Between July and October 2010, an open season bidding process for capacity will be held. The future of the project will then be assessed against the resulting forecast demands."We will start the open season process this year, then we will get enough demand or not," Werner Auli, OMV's head of oil and gas, told a conference, adding that he was optimistic about the level of demand.However, pointing out that he represented a commercial organization, and not an institution, said the decision would be made on pragmatic business terms.If the demand turned out not to be sufficient, the project would be terminated, he said. "If not, Nabucco will not be built, this is very simple. We are a commercial company, we are not an institution. If the demand is not there, we will not build the pipeline," he stated.Besides OMV, Bulgaria's Bulgargaz, Turkey's Botas, Germany's RWE, Hungary's MOL and Romania's Transgaz are all partners in the EU-backed project, which would reduce European reliance on Russian gas supplies.The pipeline, skirting around Russian soil, would bring gas from the Middle East and the Caspian region to Europe.Russian gas pipeline export monopoly Gazprom also has a rival project, South Stream, with several international cooperation memoranda having already been signed.
Belene Project to Start with Russian Funds
"It is not excluded that Belene NPP project be launched with Russian resources. one of the options that are discussed is a preliminary financing by the Russian side," Bulgaria's Energy Minister Traicho Traikov informed before the Bulgarian National Radio (BNR) yesterday. Sofia and Moscow will keep small shares in the project, while the majority package will be offered to a private investor at a tender. Talks are held with German, Italian and French companies," Minister Traikov added. Minister Traikov also informed Bulgaria did not have to pay damages if the Bourgas-Alexandoupolis oil pipeline project is not realized. Earlier, media informed that Bulgaria should pay damages of 300 million euro if the project fails.
NSI: Business climate improves in construction and service sectors
Bulgarian entrepreneurs in the construction and services sectors are becoming more optimistic about future prospects, according to monthly data released on Thursday by the National Statistical Institute (NSI).Their increased confidence has helped to raise the "total business climate indicator" for January by 3,1%, when compared with the previous month of December 2009.The construction sector composite indicator rose by 9,7% in January, largely due to increased optimism about the business situation over the next six months - a rise of 18,8% in this factor.Expectations about construction activity over the next three months are also up, by 18,4% in January, and hopes for an extended improvement of new orders over the next six months are improved.During the next three months, however, constructors expect to continue to shed jobs, but at a reduced rate compared with past months.Major problems and limitations reported in the sector include shortage of finance and the uncertain economic environment, followed by insufficient demand at present, and a continuing concern about falling selling prices throughout the sector.The service sector also shows an overall increase in confidence in January, up by 5,9% compared with December. This is largely due to improved assessments of business prospects for the next six months.The demand for services has decreased over the last three months, along with associated personnel layoffs. But expectations for the next three months are a little more optimistic, in terms of employment.Competition within the services sector is cited as a factor limiting the activity of the sector, as is the general financial situation. Prices are expected to continue to fall slightly.The industrial sector overall remains flat, when compared with the previous month. Assessments of present business have worsened, but business managers are more optimistic when considering the next six months. They expect a continued reduction in employment, but with lower rates.Production activity predictions also remain pessimistic, as are those concerning the competitive situation in the sector, both domestically and in foreign markets. Insufficient demand in both these markets is a continuing concern, and an increase in selling prices is not predicted for the next three months.The retail goods sector remains static compared to December. The business situation at present is assessed as slightly more favorable, but expectations over the next six months remain pessimistic.Managers report a drop in sales over the last quarter, and expect the situation to remain unchanged in the short-term. Expectations of new orders also remain flat.As with the industrial sector, a drop in consumer demand, coupled with the uncertain financial climate, continue to limit activities to a more critical level than in December. Selling prices are predicted to remain at their present levels.
INVESTMENTS:
Bulgaria opens water concessions
Bulgaria’s regional development ministry will aim to attract investments to the country’s struggling water sector by signing concession contracts with water and sewerage operators, minister Rossen Plevneliev was quoted as saying by state-run news agency BTA. Plevneliev returned from a visit to Germany, where officials of the German Water Association (DWA) said the group could lend Bulgaria a helping hand in penning the rules for public-private partnerships. The rules should be drafted by the middle of the year. The government will target to plug the funding gap and the lack of financing under the European operational programmes to build and overhaul water and sewerage networks. An estimated EUR 3.5 billion to EUR 4 billion investment should be poured into the sector over the next years.
Dutch consortium to invest EUR 86 М in greenhouses in Varna
A Dutch consortium intends to invest EUR 86mn in greenhouses near the northern Black Sea city of Varna under a project named HortiGreenPower. The investors plan to cultivate, grow, process and trade premium vegetables on 60-hectares plot. They will sell the production on the local, the Central European and the CIS markets. The project consortium consists of Dutch-based specialised partner organisations in transport and logistics, construction and maintenance, cultivation and growing and trading and sales but looks for strong partnerships with local stakeholders and players.
Investment agency expects 10-15% FDI growth this year
Head of the state investment agency Stoyan Stalev expects that FDI may grow by 10-15% this year from some preliminary EUR 3bn last year. The FDI were EUR 6.8bn in 2008. Stalev informs that last year about EUR 1.2bn of the total were financial investments, including equity capital, and EUR 500mn were directed to real estate, construction, tourism, trade, and office areas. The share of manufacturing reached 25%. According to latest data of the central bank, FDI inflows reached EUR 2.63bn in Jan-Nov accounting for 7.8% of the expected full-year GDP as compared to 17.7% of GDP a year earlier. The net FDI inflows declined by 54.7% y/y to EUR 2.52bn in Jan-Nov. They covered the CA deficit at 98.7% in Jan-Nov as compared to 98.4% in Jan-Oct, improving from 72.5% a year earlier.
COMPANIES:
Swiss Silcotex opens plant in Bulgaria city of Pernik
The Swiss based company Silcotex opened a new plant in the Bulgarian city of Pernik, the Bulgarian news agency BTA reports.The company is specializing in the manufacturing of textile, plastic raw materials, automotive parts and components. The Pernik plant, valued at BGN 2,5 M, will produce liquid silicon gaskets used in automobile construction.The building of the plant began in November 2008, and it now has a two-story shop with 4 machines. 13 workers have already been hired. According to company plans, about 50 people will be employed at the factory after completion of all construction stages.
Foreign markets fish Bulgarian producers out of the ditch
Bulgaria’s exporting production companies are crawling out of recession but the pace is expected to be slack, company executives said as the first batch of annual reports came out. on the back of better sales abroad, exporting producers pulled off nice results for 2009. Car battery maker Monbat rounded off December with a rise in sales, the second successive month of improvement after one year in the red. Nonconsolidated revenue added up to BGN 13.75 million, up 10.76% year-on-year. The profit surged 50% to BGN 1.92 million. Stara Planina Hold also showed signs it is gaining the upper hand on the crisis by projecting 27% higher consolidated sales in January from the same month of 2008. If the forecast comes true, the company will see the first positive result in a year. Consolidated sales for 2009 shrank by 52.26% following a 60.64$ decline for the first half of the year on the corresponding period of 2008. Driven by foreign markets, cigarette maker Sofia BT staged a hefty upswing in sales. The company sold 1.15 billion more units to 6.47 billion. Foreign markets accounted for 55% of the total physical volume. While foreign markets are cited as an engine for growth, the low base in 2008, when the crisis had started to filter in, has also played a major part.
ABB to expand factory for low voltage equipment in Rakovski
The Italian arm of the power and automation technologies manufacturer ABB intends to expand the production at the newly built factory for low voltage equipment in the southern town of Rakovski , ABB country manager for Romania , Bulgaria and Moldova Peter Simon said in an interview for SeeNews . The manufacturer has already bought an adjacent land plot and will announce the size of the investment in March. Most probably the investor will build a unit for production of automation products. ABB has invested USD 20mn in its Rakovski unit providing jobs for 200 employees. The number of the staff is expected to increase to 500 by the end of the year, when the factory will reach full capacity. ABB Group runs also two production units in the south-western town of Petrich (also for low voltage equipment) and for high-voltage products in Sevlievo in central Bulgaria .
THE CRISIS:
Banks’ net profit declines 43.8% y/y last year
The aggregated net bank profit declined by 43.8% y/y to BGN 780mn (EUR 398.8mn) last year, according to information unveiled by central bank governor Ivan Iskrov. This means that bank profit amounted to BGN 79mn in December alone, up by 15.4% on annual basis. The latest available data of the central bank showed net profit contraction in the tune of 46.8% y/y to BGN 701mn in Jan-Nov. The credit growth was estimated at 4% last year (decelerating from some 30% in 2008 and above 60% in 2007) and the capital adequacy ratio was about 17% at the end of the year up from 14% a year earlier, according to Iskrov. The governor has earlier said that last year’s profits will be transferred to the capital of the lenders for a second year in a row.
Monetary board and flat tax guarantee stability during crisis
Author: Veliko Dimitrov, Market Economy Institute
As Bulgaria’s economy is relatively small and open, it can take advantage of some “universal” anti-crisis strategies. In this respect, our economy is very much influenced by the developments on the markets in EU and the USA. And we should follow the lead of the other economy when trying to find a way out of the crisis. I think that there is a limited set of options when I comes to economic crisis management, the most important of them being an accurate monitoring of the credit agencies’ outlooks on Bulgaria. Needless to say, the now functioning in Bulgaria currency board guarantees the stability of the economy, and this opinion is also shared by many Bulgarians. In this line of thoughts, Finance Minister Simeon Djankov’s decision not to change the currency board regulations was a good one. As to some new anti-crisis measures that the government might take, I think that this is hardly necessary, because the current ones have proved very efficient so far. In my opinion, Bulgaria’s economy has already started to slowly recover from the global financial crisis. The results over the next few months might be even more encouraging, provided that the government sticks to its current anti-crisis strategy.
Bulgaria seeks new economic model to face post-Crisis challenges
Bulgaria should find a new model for its economic development if it wants to position itself well in the post-crisis race of national economies, senior politicians and industry officials say. The crisis asks for yet another time the question 'Where are we?' Whether we remain in the periphery where we thrill expecting the next assessment from Brussels, or we have the ambition to take part in the formation of pan-European politics," President Georgi Parvanov said during public discussion Where To After the Crisis held in Sofia last week. European leaders will hold an informal meeting in Brussels on February 11 to discuss a strategy for the development of the European Union through 2020. The best thing would be the creation of a consensus national project or at least unity on the key priorities and policies of the country," said Parvanov, who initiated the discussion. The first major shortcoming of the Bulgarian economy is its domination by low-technology, servicing activities and intermediation, and production activities that have low energy and labour efficiency. Secondly, there are no clearly defined priorities and market niches in our economy. It is formed to a big extent spontaneously," Parvanov said. According to political and social scientist Prof. Petar-Emil Mitev the country now faces three major groups of problems. The first group combines unsolved problems of the transition period, delayed privatisation in some sectors, reforms in healthcare, education and science. The second group comprises problems inherited from the transition period like organized crime, increased illiteracy, aggressive illiteracy, promotion of get-rich-quick life models, social isolation of individuals and groups. And the third group of major problems is connected to Bulgaria's national strategy for its future place in Europe and the world and the way how the country will progress in the information century". Mitev said Bulgaria needs a national plan on what kind of economy it wants to have. We have not decided whether we want to develop the energy sector, to become an energy centre or this idea is just an adventure," he said. We need a vision what Bulgaria will be like after 20 or 30 years - a green Bulgaria, which will put its efforts into protecting its diversified nature [...] priority investing in ecological, village, scientific, sports and other kinds of bio-tourism, or a high-tech Bulgaria, which will invest in biotechnologies, nanotechnologies, recording devices, robotics, in the advanced scientific areas and the respective products?," Mitev added. President Parvanov also believes that the technological modernisation of the economy and the orientation of the Bulgarian economy to high-tech industrial production is of key importance. Investment in innovations, information and communication technologies, small and medium-sized enterprises, as well as energy and transport infrastructure construction, in technological centres and parks and in science should also be a top task for the country, Parvanov said. The prime goal of the government policy outlined by Economy, Energy and Tourism Minsiter Traycho Traykov at the conference will be to keep a stable and working economy, even at the price of short-term privations." The short-term measures include the maintaining of the stability of the currency board system, entering the Exchange Rate Mechanism (ERM II), the euro's two-year waiting room, the sale of state assets like Bulgartabac tobacco group and energy companies, boosting the competitiveness of local companies. In the long term, the government plans measures aimed at encouraging investments and competitiveness, entrepreneurship and innovations, business environment and administrative services. It also plans strategies for the energy and tourism sectors with key points including diversification and safety of supplies, development of low-carbon emissions economy, boosting energy efficiency and increasing the share of renewables in energy output. The strategy for the tourism sector will aim to position Bulgaria as a round-the-year tourism destination and the development of alternative types of tourism like cultural, historical, eco-, ethno-, spa and wellness tourism, Traykov said. The factors of extreme importance for Bulgaria are the economic stability, the continuation of structural reforms, the fight against corruption and crime, Central Bank Governor Ivan Iskrov told the conference. Even the talks for the [entry into the] Eurozone are connected with the image of the country," Iskrov said and added that there is need for a qualified administrative service and administrative reform. According to Kamen Kolev, deputy chairman of local lobby group Bulgarian Industrial Association, particular attention should be paid to the sectors producing for exports. Domestic demand is low, it will continue falling because of the unemployment and the drop in incomes. [] The number of consumers falls, they are not consumers anymore, which afflicts again the companies, they continue cutting costs and respectively the number of employed. So, this downward spiral would be very hard to overcome by relying on the domestic market," Kolev said. Former Bulgarian President Zhelyu Zhelev highlighted the importance of well developed transport and communication infrastructure between the countries of Southeast Europe and called for the speeding up of efforts in this direction. Bulgaria was in the past, to some extent, an energy centre. And we should not give up this ambition, it is a noble ambition. [] We should not give up from the oil and gas pipelines which should cross Bulgaria. These are opportunities which our country can further develop and profit on them," Zhelev said. He added the country should not neglect its nuclear energy sector and should put efforts in scientific research on the use of hydrogen as an energy resourse. Rising unemployment will be a key barrier to Bulgaria's future economic development, participants in the conference said. The main priorities of the future European strategy should be employment and economic growth but with a guarantee for effective social protection," Bulgarian Labour Minister Totyu Mladenov said. The development of human capital and policies supporting employment for everyone can help overcome the challenges related to climate change and social imbalances," Mladenov said. In this regard, boosting employment in low-carbon and high-tech production activities, improvement of the quality of jobs, intellectualisation of labour and increasing of social cohesion should find their place in the future strategy, Mladenov added. Referring to rising unemployment, the leader of Podkrepa trade union, Konstantin Trenchev, said it is a problem of paramount importance. Unemployment is the most important problem. I understand the employers, they have problems, they take it out on us, but who will work for them tomorrow?" [...] a doctor is healing first, then he thinks about cosmetic surgery," Trenchev, a physician himself, told the conference. Many doctors have tried to heal the patient Bulgaria. Let us finish the treatment first and then decide how to treat the consequences."
Insurance sector contracts 4.2 %
Bulgaria's general insurance contracted 1.5 per cent, life assurance 18.5 per cent, and the insurace sector as a whole 4.2 per cent in January-November 2009, year on year, the Financial Supervision Commission said in a press release on Monday.The gross premiums written for January-November 2009 amounted to 1,285,722,000 leva in general insurance and 196,748,000 leva in life assurance.Motor Own Damage Insurance (42.9 per cent) and Third Party Liability (27.4 per cent), or a total of 70.3 per cent of the premium income from direct general insurance in the sector, continue to take up the largest share in the aggergate portfolio of general insurance companies. Next comes Fire and Natural Disaster Insurance and Other Property Damage Insurance, which brought a premium income of 248,844,000 leva of 19.4 per cent of the aggregate premium income.The premium income increased most from the like period of 2008 in Motor Third Party Liability and in Fire and Natural Disaster Insurance, by 52,616,000 leva and 23,047,000 leva, respectively.
Wholesale trade collapses
Over the first two weeks of 2010, the wholesale trading of the major varieties of fruits and vegetables have shrunk by more than 30 percent. The most significantly affected were greenhouse vegetables, as well as imported Southern fruits and citruses. Part of the small-scale traders is considering closing down their warehouses at the end of the month since the poor turnovers will not help them pay even their rents. The situation stems from the shrinkage in consumption and the risk of trading with perishables. Prognoses say the companies dealing with fruits and vegetables will lose much and we may eventually have chain bankruptcies. The wholesale prices as at January 15, 2010 were lower as compared to other years, but yet the turnovers keep on flagging. According to data by the State Commission on Commodity Exchanges and Market-places, since the beginning of January 2010, greenhouse tomatoes have been sold for less than BGN2 per kilogramme, with the latest average prices ranking between BGN1.85 and 1.88 Bulgarian levs. Cucumbers are a bit more expensive with prices of between BGN2.44 and 2.46, mainly because they have longer sell-by date, especially the wrapped ones. For comparison, as of January 15, 2009, these prices stood at BGN1.98 for tomatoes and BGN3.02 for cucumbers. And although that since the beginning of the year exactly tomatoes have been what some major retail chains offered discounts for, demand for them remains week. Similar is the situation with the imported Southern and citrus fruits, too. Banana average wholesale price was BGN1.84 per one kilogramme as at January 15, 2010, compared to BGN1.95 and BGN1.97 for the same time in 2009 and 2008, respectively. These differences are almost the same for oranges and tangerines, too. The shrinkage in the demand for fruits and vegetables and the troubles the traders are now facing will last at least until March. During the first three months of the year, the Bulgarian households usually experience financial difficulties because of the big bills for heating they have to cover while, at the same time, expenditures on food keep on being the biggest item of their budgets and the only one to switch resources from in order to pay electricity and heating bills.
Crude steel production in Bulgaria fell 45% in 2009
Bulgarian crude steel production fell by 45% in 2009 compared with the previous year due to a steep fall in demand. This was brought on by the global economic crisis and the insolvency of the country’s main producer, Kremikovtzi, the Bulgarian Association of the Metallurgical Industry (BAMI) informs Steel Business Briefing.Bulgarian mills produced 725,700 tonnes of crude steel in 2009, down from 1.3mt in 2008. All output was produced through the EAF-route last year while in 2008 32% of production, 429,000t, came from the integrated route.Flats production sustained a particularly steep fall, tumbling by 64% year-on-year to 303,300t as operations at Kremikovtzi, the country’s main producer of flat products, were severely affected by bankruptcy. Longs output was less affected, decreasing by 29% from 2008 to 643,900t.Domestic sales of flat products were down by 57% y-on-y, totalling 133,300t, while 333,300t of long products were sold, a decrease of 20% from 2008. Exports last year decreased by 56% on 2008, totalling 559,000t. Around 41% of Bulgaria’s total exports in 2009 went to fellow European Union countries.