BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 14 – 21 MAY 2010 )
Sections/headline briefs:
MACROECONOMY:
· Bulgaria PM favors German investors for nuclear project
· Study says Bulgaria gets 75 per cent of energy sources from Russia
· Ambassador Warlick: US interested in Bulgarian energy sector
· Serbia says to eye participation in Bulgaria's nuclear project
· RES plan due by June
· Forton's Q1 Bulgarian economic outlook
· EBRD downgrades Bulgaria GDP forecast to minus 1.2%
· Bulgaria invites tender to digitise natl TV, radio channels
· Turkish resorts become good destination for Bulgarian wines
- Bulgarian wine export boasts 50% increase in Q1 2010
- Bulgarian cigarettes make a breakthrough on Russian market
- 4 waste recovery scheme operators recycled 124,886 t of waste in 2009
· Bulgaria becomes shopping center
· Bulgaria, Tunisia to boost trade
INVESTMENTS:
· Naturkraft opens 836.7 kWp solar park near Sliven
· Austria's EVN invests EUR 6 M in solar park in Bulgaria
· Bulgaria woos investors with subsidies for priority projects
· IKEA to start construction of first Bulgarian store in June
· Foreign investors pull out capital from Bulgaria
COMPANIES:
· United Arab Emirates national carrier takes off to Bulgaria
· US hotel giant Marriott steps on Balkans
· UK Dunlop to fund scandalous Bulgarian Shanghai display
· Bulgaria's top cable providers merge into Blizoo
· Greek company with lowest bid for new Trakiya highway stretch
· Final fate of Bulgaria`s Kremikovtzi steel plant looms
THE CRISIS:
· Bulgaria records sharpest car sales decline in Europe in April
MACROECONOMY:
Bulgaria PM favors German investors for nuclear project
Bulgaria has all permits and could begin the construction of its second Nuclear Power Plant (NPP) in the Danube town of Belene as early as tomorrow, Prime Minister, Boyko Borisov says.Borisov spoke during his meeting Monday with the Prime Minister of the German Province of Baden-Württemberg, Stefan Mapus, pointing out the NPP could turn into one of the most significant, major projects in the Balkans and in Europe.Borisov reiterated his desire to find a European investor, adding a German company would be his personal top choice.Two months ago, the PM declared the project is going to become part of the European energy system, but will be frozen until the government finds a new investor and funds to complete it. The investor is to replace the German energy company RWE, which withdrew last fall.The plant was originally to be built by Russian company Atomstroiexport for EUR 4 B. The firm had signed a contract with the previous, Socialist-led government. According to publications in Czech media, Atomstroiexport have hired US attorneys to help them sue Bulgaria.In April, Borisov turned down a EUR 2 B loan offer made by Moscow for a stake in the plant, and reiterated the cabinet will seek a full investor to finish the project.Borisov and Mapus discussed the new EU strategy for the development of the Danube region and ways to deepen ties between Germany and Bulgaria. The Bulgarian PM pointed out the strict fiscal policies of his cabinet and its efforts to fight corruption in the country.Borisov invited Mapus to visit Bulgaria and informed German Chancellor, Angela Merkel, is to travel to Sofia in October.
Study says Bulgaria gets 75 per cent of energy sources from Russia
Provider: BBC Monitoring
Bulgaria still has highly-monopolistic energy markets at all levels, the Centre for the Study of Democracy (CSD) found in an analysis of the energy industry. Prices are regulated on the basis of reference values or formulas, which is a sign of low levels of competition in the energy industry, the analysts found. Although the electricity and gas markets are subject to the EU liberalization directives, a mere 20 per cent of the market has been liberalized. Electricity prices in Bulgaria still are among the lowest in Europe at market currency exchange rates, which is often cited as the reason for the ineffective use of electricity by households, especially for heating. However, on the basis of purchasing power parity Bulgaria has some of the highest electricity prices in the EU.Bulgaria is a member of the Energy Community supported by the EU, which aims to promote regional cooperation in the Balkans and in the Black-Sea region. This cooperation, however, is overshadowed by geopolitical problems, such as Turkey's negotiations on EU membership and Russia's aggressive energy strategy, CSD said. In such an environment Bulgaria cannot afford not to participate in energy geopolitics due to its nearly full dependence on natural gas imports from Russia through a single pipeline, which has forced Sofia to seek an answer to these dilemmas. Bulgaria imports some 75 per cent of its primary energy sources from Russia, CSD said.
Ambassador Warlick: US interested in Bulgarian energy sector
The US might be able to supply nuclear fuel to Bulgaria's Nuclear Power Plant (NPP) “Kozloduy” and the 2nd NPP “Belene,” which is still in project stage.The information was reported by the US Ambassador to Bulgaria, James Warlik, who gave an interview Wednesday morning for the Bulgarian National Television, BNT.The Ambassador confirmed his country's strong interest towards Bulgaria's energy sector, especially towards solar and nuclear energy, but pointed out “Belene” and all other energy projects must be thoroughly analyzed.Warlick further explained the fact Bulgaria is looking hard for foreign investors for the project to build a second NPP in the Danube town of Belene and cannot find any shows the project is not attractive, but said the situation can change and advised the cabinet to prepare an energy strategy.The Ambassador stressed on the importance of the country diversifying its energy sources, similarly to the US which do not want to count only on the Middle East for supplies, adding America is not against Bulgaria's good relations with Russia, including in the energy sector, as long as they do not lead to dependence.
Serbia says to eye participation in Bulgaria's nuclear project
Serbia's energy minister has confirmed reports that the country is considering participation in Bulgaria's second nuclear power plant, which has stalled over lack of funding."The Bulgarian prime minister officially made an offer for Serbia to participate in financing construction of the Belene plant," Energy Minister Petar Skundric told an energy conference. "We haven't made the decision yet, but we are interested."In his words the project would show that the country, which has an embargo on nuclear power plants until 2015 put in place following the Chernobyl disaster, is able to hadle such projects.“It would be a good reference for us and allow us to respect the embargo," Skundric said. "It would also contribute to regional stability and cooperation."The minister disclosed that the question about a loan to finance Serbia's role in the project has been discussed during his recent visit to China, but said no deal has been concluded.Earlier in the month Bulgaria's Prime Minister Boyko Borisov said Serbia has expressed interest in a 5% stake in the project, which in his words would turn it into "a Balkan, European project."The government has also reportedly unsuccessfully courted Romania as it angles for a new chief investor in its second nuclear power plant Belene to replace the German energy company RWE, which withdrew last autumn.Bulgaria suspended the construction of its second nuclear power plant until it finds a new investor and funds to complete the project at Belene, on the Danube, 180 kilometres northeast of the capital Sofia.The plant was originally to be built by Russian company Atomstroiexport for EUR 4 B. The firm had signed a contract with the previous, Socialist-led government, swept from power by Borisov's conservative GERB party swept in last year's July elections.Borisov rejected a EUR 2 B offer made by Moscow for a stake in the plant and said Bulgaria will seek a European investor to finish its second nuclear plant.
RES plan due by June
Bulgaria’s national action plan on renewable energy development will be drawn up and submitted with Brussels by the end of June, it was announced at a solar photovoltaic (PV) and thermal energy conference in Sofia yesterday. The action plan should designate suitable areas that can accommodate clean energy projects. Bulgaria’s Ministry of Economy should come up with the new Renewable Energy Bill this summer. The industry pins its hopes on the new legislation to resolve the pressing issue of the unfixed feed-in tariffs and cumbersome grid-connection procedures.
Forton's Q1 Bulgarian economic outlook
Bulgaria's GDP fell by 5% in 2009 and recorded its steepest decline in the last quarter of 2009. However, the first months of 2010 already indicate nascent signs of recovery, according to Forton's Bulgarian Economic review for the first quarter of 2010.Bulgaria is still one of the few countries from Central & Eastern Europe yet to show an improvement in GDP growth. The major reasons for the late recovery are the fixed exchange rate, tight fiscal policy and the unfavorable structure of exports and FDI. Nevertheless, the first two months of the year indicate tentative signs of recovery mainly stemming from increased exports. Thus, the economic forecasts have been significantly improved. The IMF increased its forecast for GDP growth rate in 2010 from decline of 2.5% to increase of 0.2%. The government is also expected to raise its forecast from 0.3% to 1% GDP growth rate for 2010.The positive side of the otherwise deteriorating economic conditions is the decrease of external imbalances. Bulgaria has to change its growth pattern if it is to resume its economic development on a sustainable basis. The economy has to partially shift its focus from domestic demand to higher value-added export industries. It is clear which industries are already shrinking but unfortunately it is not that obvious which sectors will become the new engines of growth.In the period January - February 2010, the current account deficit was 82% lower than the deficit in the same period in 2009. It amounted to 155 million euro (0.5% of GDP) compared to 865 million euro (2.6% of GDP) for the period January - February in 2009. The decrease in trade balance (by 350 million euro) was the main factor behind the decline in the current account. Exports amounted to 1.9 billion euro for the first two months of 2010 against 1.7 billion euro for the same period in 2009.Imports amounted to 2 billion euro compared to 2.4 billion euro in January - February 2009. Thus, the trade deficit was 311 million euro (0.9% of GDP) for the reporting period against 694 million euro (2% of GDP) for the same period last year.Bulgaria's structure of imports and exports reveals a lot about its economy. The country's export mix is skewed towards low value-added and labor intensive sectors. That is why, approximately 43% of national exports are raw materials in 2009. Bulgaria also imports a lot raw materials and fuels since it is a resource-poor country. However, it imports much more investment goods than it exports them.Bulgaria trades predominantly with its EU partners. However, compared to its CEE peers it is relatively less dependent on trade with Western Europe and more dependent on trade with its Balkan neighbors. Since most Balkan countries are behind the curve of economic recovery elsewhere in Europe, Bulgaria will slightly lag behind the CEE counties.FDI in the first two months of 2010 almost evaporated and amounted to just euro 28 million against 555 million euro for the same period in 2009. These figures are preliminary and usually revised significantly upward. Foreign direct investments decreased by 52% in 2009 in line with the effects of the global economic crisis. Real estate and construction were among the most overheated sectors and experienced the largest decline in FDI. Real estate attracted euro 653 million in 2009 against almost euro 2 billion in 2009.Bulgaria's balance of payments has experienced a significant deterioration since Q4 2008 in terms of the overall balance. However, the current account deficit decreased significantly mainly due to the larger decrease of imports than the decline in exports. It declined from the worrying 24% of GDP in 2008 to a more sensible level of 9.4% of GDP in 2009. The often stated ratio of FDI over current account balance may lead to the wrong conclusion that FDI must cover the current account if the balance of payments is to be positive.As of February 2010, the capital and financial accounts deficit amounted to 982 million euro against almost 297 million euro in February 2009. A major reason behind the stark decrease of the financial account is the decrease of minimum reserve requirements by the Bulgarian National Bank, which allowed substantial repayment of obligations by Bulgaria's banks to their European counterparts as well as the lower foreign direct investments. Up to February 2010, the overall balance of payments is - 850 million euro against negative balance of 886 million euro in February 2009. Thus, Bulgaria's foreign exchange reserves declined by the same amount.Bulgaria has a favorable fiscal policy including flat corporate tax rate of 10% (equal to the lowest level in Europe) and it is 0% for regions with high unemployment. Promotion measures are also the VAT exemptions on equipment imports for investment projects over EUR 5 million, the right of acquisition of land and property through a Bulgarian registered company with up to 100% foreign ownership, as well as treaties for avoidance of double taxation with 61 countries.Since October 2008, the overall business climate has been generally deteriorating. The total business climate in March 2010 decreased by 0.9% in comparison to the business climate in the previous month. It deteriorated in all sectors with the exception of the service sector. The decline in the industrial sector is 1.6% but managers are slightly more optimistic for the next six months.The business climate in construction decreased by just 0.4%, while the retail sector registered the steepest decline of 3.2%. The only sector that registered improvement in sentiment was the service sector with increase of 2.2%. Managers in this sector have more optimistic expectations for the next three months and even predict increase in employment.After years of high inflation due to the booming economy and credit expansion, inflation precipitously fell to just 0.6% in 2009 as a direct result of the sharp contraction of economic activity. The accumulated inflation for the first three months of 2010 was 1.4%.The unemployment rate rose sharply in 2009 and reached the level of unemployment in 2006 of 9.1%. It continued to increase rapidly in 2010 and reached 10.3% in February. However, it fell to 10.1% in March. As of February 2010, the unemployment rate in both the Eurozone and the EU is 10.The employment rate is equally important but often overlooked indicator. It is the ratio of employed people over the working - age population. As of Q4 2009, the employment rate (ages 15 - 64) in Bulgaria is 61.2% against 64.3% in Q4 2008.Both retail sales and private consumption plummeted by 8.8% and 6.2% respectively in 2009.Restricted credit conditions, rising unemployment as well as general consumer cautiousness all contribute to the subdued demand.Bulgaria's budget deficit for 2009 was revised from 1.8% to 3.9%. The new government uncovered annexes that require more than one billion Euros of additional expenditures.Nevertheless, Bulgaria remains one of the countries with the lowest budget deficit in the EU. The consolidated budget cash deficit for the first two months of 2010 amounted to almost 715 million euro due to lower revenues, higher social security expenditures and belated payments to businesses.Bulgaria has experienced steady decrease in its external public debt since 2002 in accordance with the prudent fiscal policy required under the currency board arrangement. Thus, it enjoys one of the lowest public debt to GDP ratios in the EU. However, the private external debt increased dramatically as the Bulgarian economy became more dependent on foreign financing to sustain its GDP growth rate. The short - term external debt has also been increasing until 2008 but dropped to 35.5% of GDP in February 2010.The housing sector deteriorated in line with the worsening state of the Bulgarian economy since it is a huge sector and its condition is directly influenced by the state of the economy. In Q1 2010, home prices declined by 2.3% compared to Q4 2009. The cumulative decline in home prices since Q4 2008 is 31%.
EBRD downgrades Bulgaria GDP forecast to minus 1.2%
The European Bank for Reconstruction and Development (EBRD) upgraded its forecast for economic growth of the countries in Central and Eastern Europe(CEE) from 3.3% to 3.7% for 2010.The new data was announced at the 2010 EBRD Business Forum which is being held on the occasion of the Nineteenth Annual Meeting of the EBRD Board of Governors in Zagreb, Croatia, Friday and Saturday.Eric Bergloff, Senior EBRD economist says the CEE countries are recovering from the crisis, but are still unstable and face new risks stemming from the fiscal pressure and fiscal instability of Western Europe.In the light of the general positive trend, the fiscal forecast for Bulgaria, however, is worsening – while in January 2010, EBRD said they expect Bulgaria’s Gross Domestic Product (GDP) to remain unchanged, their new forecast if for a 1.2% fall over the effects of the global and Greek crisis.The EBD upgrade for CEE is due to positive growth in Hungary, Russia, Turkey, and Poland.CEE countries are benefiting from the increased export to Western Europe and increased influx of short-term investments.The Zagreb Business Forum aims at assessing the latest political, economic and social changes, and business opportunities in Croatia and across the EBRD region of operations.
Bulgaria invites tender to digitise natl TV, radio channels
Bulgaria’s Communication Regulation Commission (CRC) has invited a tender to construct the multiplex that will mix the digital signal of the Bulgarian National Television (BNR) and the Bulgarian National Radio (BNR).The project will enable the two broadcasters to transmit digitally on a national scale.The competition is being held in line with EU regulations that force channels to abolish analogous broadcasting by the end of 2012.Candidates for the Bulgarian tender are required to have turnover of over BGN 5 million for 2009 and be no TV channel owners.Seven companies have already expressed interest in the competition. The list includes the Bulgarian Telecommunications Company (BTC), which is in the process of selling its unit operating its radio and television transmission network. Thanks to an investment estimated by BTC at some EUR 125 million, the National Unit Radio and TV Stations (NURTS) is able to transmit digital signal. The BTC is selling half of NURTS to Cyprus-based Mancelord Limited. The CRC is due to come up with a stance on the transaction next week, with the Commission for Protection Commission (CPC) expected to make a statement in early June.The other candidates are cell operator Mobiltel, Bulsatcom, Krida Art and General Satellite Corporation. The winner will get a 15-year permit to transmit up to four networks by BNT and BNR.
Turkish resorts become good destination for Bulgarian wines
Turkish resorts are turning into a good destination for Bulgarian wines. In Q1 2010, Bulgaria has exported 42,106 liters of Bulgarian wine to Turkey, Director of the Executive Agency of Wine and Vine Krasimir Koev said in interview to Focus News Agency. The tendency for export of Bulgarian wine to Turkey is new, as so far our country has not exported any wine to neighboring Turkey. ,,Tourist resorts at the seaside are visited mainly by Western tourists, who prefer to have such wines in their all inclusive packages. Tourists prefer drinking wine together with the Turkish Yeni Rak? pineapple drink. Turkey is not very popular for its wine. Since Turkey has turned to our market for wine, then it means that it is satisfied with the price and quality of our products," Koev commented further. Since the turn of the year, there is serious increase in the export of Bulgarian wine. According to latest data, the Executive Agency of Wine and Vine reports 46% increase in the export, as the wine exported so far runs to 6,100,559 liters and is worth EUR 5,370,364.
Bulgarian wine export boasts 50% increase in Q1 2010
The export of Bulgarian wines has registered a 50% growth during the first quarter of 2010 compared to the same period of 2009.The data was reported Tuesday by the Customs Agency and the Agriculture Ministry.The volume of the exported wine is estimated at over 6 million liters, which is a 46% increase year on year. The value of the export is EUR 5.3 M.The largest market for Bulgarian wines is Russia where 5.3 million liters have been exported in the first three months of 2010, valued at EUR 4.6 M, which is a 161% increase compared to the first quarter of 2009 when 2 million liters were exported.
Bulgarian cigarettes make a breakthrough on Russian market
The big specialized exhibition of tobaccos and tobacco products Tabak Expo 2010 had a great success in Moscow last week. This year, in spite of the global crisis the exposition gathered over 80 leading manufacturers of tobacco products and accessories from Russia, the USA, Great Britain, Italy, Germany, India, Ukraine, etc. For the first time, Bulgarian producer of cigarettes Kings Tobacco found a place in the exposition. The tobacco producers demonstrated the latest world tendencies in the tobacco sector and exchanged experience. Kings Tobacco got offers for big export quantities for the men’s blend King to countries from the former Soviet Union. King Tobacco and its products are the first representatives of Bulgaria at the prestigious tobacco exposition; they regained Bulgaria’s fame for a traditional producer of cigarettes with European quality.
4 waste recovery scheme operators recycled 124,886 tonnes of waste in 2009
In 2009 four packaging waste recovery scheme operators collected separately and handed over for recycling 124,886 t of packaging waste, according to data in the audit reports of the annual results of the four operators: Bulecopack, Ecobulpack, Ecopack Bulgaria and RePack. The four have an aggregate market share of 92 per cent.In 2009 the companies members of the four organizations declared 253,755 t of packaging released on the Bulgarian market. The recovered quantities constitute 49.22 per cent of the total of the declared quantities of packaging; the percentage is a little more than the 46 per cent target for 2009 laid down in the Waste Management Act.According to data of the four operators, the systems for separate waste collection cover 181 municipalities with a population of 5,913,000. A total of 25 separating lines operate in different regions of the country.For the separate waste collection system to be effective, sanctions, as well as incentives, need to be put in place for the people who do not use it, according to the four operators.More than 90 per cent of the population knows what waste goes into which of the different colour containers for separate waste collection but no more than 10 per cent follow the rules, said Ivan Mihov, Executive Director of RePack.According to Ecopack Executive Director Todor Bourgoudjiev, the success of the separate waste collection in Bulgaria depends on three factors: people's culture, the control of the public bodies, and the fact that scavengers trawl waste for valuable packagings.Milen Dimitrov, Managerial Agent of Ecobulpack, said that the existing household waste charge demotivates people to dispose their waste separately. The charge is calculated on the basis of tax assessment of the respective property - this is the practice in Bulgaria and Ukraine only, while in Western Europe it is paid on the basis of the quantity of waste.
Bulgaria becomes shopping center
Sofia and Bulgaria will turn into a shopping center, stated Bulgaria’s minister of regional development and public works Rossen Plevneliev at the Balkan Real Estate Conference BalREc. “In Bulgaria the prices of many goods are lower than in most of the EU member states. For example, alcohol and cigarettes as well as clothes are much cheaper in Bulgaria compared to the rest EU states. In the next couple of years, Bulgaria’s cabinet is ready to invest about 150 million euro for the improvement of infrastructure and urban development of the bigger Bulgarian cities,” Minister Plevneliev stated. Thus, Bulgarian cities will become more attractive for foreign investors. The areas where Bulgaria could be promoted are outsourcing, IT sector, infrastructure projects. In the next 6 months certain proposals for legislative and financial stimuli for business will be forwarded.
Bulgaria, Tunisia to boost trade
Bulgaria and Tunisia have signed a number of agreements to drive cooperation in tourism, bolster ties between small and medium-sized enterprises and waive visas for travelers with diplomatic and other special passports. Bulgarian economy minister Traycho Traykov said Bulgaria could become Tunisia’s “fifth gate” for EU exports. “Tunisian investments in Bulgaria are currently the equivalent of an apartment in central Sofia,” according to the minister. Official statistics place Tunisia at number 34 in Bulgaria’s exports and 72 in imports for 2009. Trade between the two countries slumped by 64% year-on-year to USD 83.9 million last year.
INVESTMENTS:
Naturkraft opens 836.7 kWp solar park near Sliven
Local Naturkraft, part of Austrian energy group EVN, opened a photovoltaic park with total production capacity of 836.7 kWp. The facility consists of three generators. It is located on a 2.3 hectares land plot near the village of Blatets in the municipality of Sliven in the southern part of the country. The park has been functioning at full capacity since the beginning of March and has already generated 342,000 KWh of power. The photovoltaic park has prevented the emissions of 222 tons of carbon dioxide since it started operations. The investment is estimated at BGN 6mn (EUR 3.1mn).
Austria's EVN invests EUR 6 M in solar park in Bulgaria
Austrian power utility EVN said on Thursday it has invested 6 million euro ($7.4 million) in a pilot solar park project near the southeastern Bulgarian city of Sliven.The solar park consists of three groups of photovoltaic elements with a combined capacity of 836.7 kilowatt-peak units (kWp), the company said in a statement.The solar park has successfully been operating at full capacity since March 2010 and has so far produced 342,000 kilowatthours (kWh) of electricity, the statement read.In Bulgaria, EVN operates as a electricity distributor supplying power to some 1.6 million customers in the country's second largest city of Plovdiv and in southeast Bulgaria.The company is also interested in running water supply systems and in building wastewater treatment plants. Recently it remained the sole foreign investor in the construction of a long-delayed hydropower cascade on the Gorna Arda river.
Bulgaria woos investors with subsidies for priority projects
New rules for applying the Law for Encouraging Investments were proposed on Friday by the Bulgarian Minister of Economy, Energy and Tourism, Traycho Traykov.Traykov told BNR that his proposal, which is available on the Ministry's website, provides for the first time the opportunity for state subsidies for priority investments – up to 10% for the processing industry sector, and up to 50% for research and development activities.“This is the main focus in our innovation strategy and in the EU strategy as a whole. We want to increase significantly the percentage of added value which comes from innovation activities. At the moment it is two times lower than the average EU value for it,” Traykov said.The Minister added that whenever fresh investments come to Bulgaria, they are always late because there is a constant need for them.Traykov explained that the Economy Ministry is focused on good infrastructure, quality of the work force, and the judicial system.“Here comes the crucial role of the InvestBulgaria Agency that the Ministry is working with. Along with their constant work, there is a very serious on-going European financed project for proactive investment marketing,” Traykov said. “At last, we have the incentives we can give foreign investors.”Bulgaria’s central bank announced in April that the foreign direct investments showed a staggering 95% drop in the first two months of 2010.According to preliminary data of the Bulgarian National Bank, the net FDI in Bulgaria in January and February of 2010 was only EUR 28 M (0.1% of the GDP).In the same period of 2009, the foreign direct investments in Bulgaria amounted to EUR 555 M (1.6% of the GDP).
IKEA to start construction of first Bulgarian store in June
Construction works on the first IKEA hypermarket in Bulgaria will officially be launched on June 3 this year.This has been announced by Vassilis Fourlis, Chairman of the Board of Directors of Fourlis Group, IKEA's franchise holder for the region, who invited media to the groundbreaking event. The ceremony will be attended by Prime Minister Boyko Borisov.The hypermarket will be located at the intersection of Sofia Ring Road with Bistrishko Shosse Boulevard and will spread over 28 000 square meters.The project is expected to create 800 new jobs.During his visit to Greece at the end of last year, Bulgaria's Regional Development and Public Works Minister Rosen Plevneliev announced that IKEA will have its first Bulgarian store in 2011. The company has announced plans to build two more stores in the country - in Varna and Plovdiv.The Swedish company IKEA, renowned for its cheap range of flat-pack furniture, has 301 stores in 37 countries.
Foreign investors pull out capital from Bulgaria
For the first time since the economy imploded, foreign capital withdrawal surpassed fresh investment into the Bulgarian economy.Foreign direct investment (FDI) for the first quarter of 2010 shrank by EUR 21.9 million, which speaks for 0.1% of GDP, according to preliminary data by the Bulgarian National Bank (BNB).The estimates could be revised at a later stage.For the corresponding period of 2009, Bulgaria’s FDI added up to EUR 926 million, or 2.7% of GDP.March’s withdrawal of EUR 168.8 million erases the modest surpluses made in January and February.Theoretically, the shrinkage could be attributed to payment of intercompany debt to foreign headquarters, profit distribution or write-downs from previous periods.Financier Lyubomir Hristov said the figures objectively reflect the processes that are underway in the Bulgarian economy. He doubted the decline was caused by write-offs as this would have been specified in the statistics.His opinion was echoed by parliamentary budget committee deputy chief Aliosman Imamov, who said that unless write-downs have been specified, it is a matter of capital withdrawal.The negative FDI means that even though it is closing, Bulgaria’s current account gap is not covered through foreign capital any more.When the Bulgarian economy was blossoming, it was the boom in FDI that bridged the widening gap between domestic demand for imported goods and services and the capacity of the Bulgarian economy to be competitive to foreign markets though exports.In summer 2008, when fears of a spillover from the financial market nervousness in Western Europe and the US started to creep up, analysts highlighted the fact that FDI no longer fully covered the current account deficit.Bulgaria’s current account gap was a negative EUR 489 million for the first quarter of the year, a threefold decrease from the same period of 2009.
COMPANIES:
United Arab Emirates national carrier takes off to Bulgaria
Etihad Airways, the national airline of the United Arab Emirates, has launched the sale of tickets for flights to Bulgaria and Romania following the signing of a new codeshare agreement with Greece's Olympic Air.The new deal, which comes into effect on Tuesday, 18 May 2010, will also give air travellers in Greece greater and easier access to the Abu Dhabi-based airline’s network of 61 destinations.Under the deal, Etihad will place its two-letter ‘EY’ code on services operated by Olympic Air between Athens and Rhodes and Thessaloniki in Greece, the Romanian capital Bucharest, and capital of Bulgaria, Sofia.In turn, Olympic Air will place its ‘OA’ code on Etihad’s flights between Athens and Abu Dhabi and in due time on flights to Johannesburg, Cape Town, Sydney and Melbourne.“Etihad continues to expand its codeshare strategy across the world. These codeshare agreements are a key element of our goal to expand into new markets, in a measured way,” said James Hogan, Etihad Airways’ Chief Executive Officer.“We look forward to strengthening the Etihad customer base in Greece by including the Olympic Air code on our flights from Athens to Abu Dhabi, which have been performing strongly.”Etihad commenced services between Abu Dhabi and Athens in June 2009 operating three flights per week, which was increased to daily from January 2010. The flights were launched at the same time as Etihad began flights to Larnaca in Cyprus.
US hotel giant Marriott steps on Balkans
The US hotel chain Marriott is entering the Balkan market with its first, 180-room, hotel in the Macedonian capital Skopje to open doors in 2013.Marriott has been eyeing the Bulgarian market as well. Last year a company representative visited Bulgaria and looked at several facilities in downtown Sofia and near the airport, but there are no contracts on the table yet.At the time, the Marriott management said they are interested in Bulgaria, but cannot reveal details about the negotiations over confidential information, adding they might enter the local market with 3 of their brands - Marriott Hotels, Renaissance Hotels and Courtyard.According to the Bulgarian “Dnevnik,” citing own sources, the first two brands will open hotels in Sofia while Courtyard, which has lower prices, is planned for the cities of Plovdiv and Varna.In the last years, Marriott, together with Starwood Hotels and Resorts, owner of Sheraton, Luxury Collection, and Westin, are the leaders of achieved revenues in the hotel business. Both have announced plans for large-scale expansion in Europe.
UK Dunlop to fund scandalous Bulgarian Shanghai display
The British tire maker Dunlop Inc. is willing to sponsor the controversial Bulgarian exhibit at the Expo Shanghai 2010, the International Plovdiv Fair Association reports.The Association, which is in charge of organizing Bulgaria's representation in Shanghai announced several weeks ago that the management of the world Expo 2010 in Shanghai gave Bulgaria an ultimatum to provide additional financing by May 14 otherwise the country's pavilion will have to be closed. From the BGN 1.3 M slated by the Bulgarian Economy Ministry, and another BGN nearly 1 M received from China as assistance, only a mere BGN 19 000 remain. This will make impossible maintaining the pavilion until the end of the expo – October 31, 2010.Economy Minister, Traicho Traikov, countered the Association had not provided an account for the expenditure and the State does not have any more funding. He, however, declared, closing the pavilion is not an option and promised some sort of State help.Georgi Gergov, who is the majority shareholder of the Fair, explained later the State would not provide additional financing but will send more employees to help with the display.According to the Association, the Dunlop management learned about the situation from media publications and offered to help, pointing out they are hoping for “collaboration.”Bulgaria has a pavilion of 324 sq. m., focusing on the link between the present and the past, Bulgaria's cultural and historical heritage and present-day way of life. The building is shared by several countries. Pictures from the Bulgarian participation have been difficult to find, but eyewitnesses say the Bulgarian pavilion and display are nondescript and plain compared to others, even from the Balkan region. The 4 employees sent there as guides do not speak Chinese. An investigative report of Bulgaria's weekly “Capital” revealed numerous violations in how the funding was spent beginning from the selection of the design and its author to the way Bulgaria is represented in Shanghai.The Expo 2010 in Shanghai, China entitled “Better Life, Better City” takes place between May 1 and October 31, 2010 with participants from over 200 countries.
Bulgaria's top cable providers merge into Blizoo
Bulgaria's top cable providers Eurocom and CableTel, which merged earlier in the year after their acquisition by investment fund EQT V, have been rebranded as Blizoo, the Sofia News Agency reports. Sweden-based private equity firm EQT acquired two of Bulgaria's major cable TV and internet operators in a EUR 210 million deal at the end of October 2009 and merged them to form the country's biggest cable operator. Under the deals, EQT through its EQT V fund acquired 100 percent of Eurocom from US private equity firm Warburg Pincus and 70 percent of privately-owned CableTel. CableTel's other shareholder Ron Finley remained a minority shareholder by rolling over his 30 percent shareholding in CableTel into the merged company and investing further equity. EQT has previously developed Swedish cable TV operators StjarnTV and Com Hem into triple-play providers. At present, EQT also owns German cable TV operator Kabel BW.
Greek company with lowest bid for new Trakiya highway stretch
Greek company Aktor is the most likely winner of the tender for the construction of the Trakiya highway stretch that will link the Bulgarian cities of Nova Zagora and Yambol.The Bulgarian Transport Agency opened Wednesday all 11 bids for the construction of a new section of Bulgaria's Black sea highway.The offer of the Athens-based company is BGN 111.644 M for the entire strip of 36 km, which is surprising low when compared to the expected cost of the project of BGN 216 M.Aktor is one of the biggest Greek building companies. According to information published on its website, the company has constructed 80% of Athens's Olympic sites for the 2004 Summer Olympics, including the Olympic stadium and village as well as the International TV and Radio Center.The consortium of the Bulgarian 'Balkanstroy' and the Croatian 'Constructor' came up with the second lowest bid of BGN 121.797 M.The construction of the new Nova Zagora – Yambol section is set to start on August 2, 2010.The Bulgarian consortium submitted the lowest bid - BGN 137,86 M – in competition with three other approved applicants. 4 000 jobs will be created by the project in the Stara Zagora region.Construction works are scheduled to be completed in 25 months. The price of the construction is estimated at about BGN 138 M, 30-35 % of the funds will be made available by the end of the year.The project will be funded entirely by the state budget until Brussels approves funding under the Operational ‘Transport’ Program.
Final fate of Bulgaria`s Kremikovtzi steel plant looms
Publication: SBB - Steel Business Briefing
The final fate of bankrupt Bulgarian steel plant Kremikovtzi is to be decided in the next two weeks, with the most likely scenario being the liquidation of the company and sale of its assets, local steel industry sources tell Steel Business Briefing.The Sofia City Court rejected the final version of Kremikovtzi’s recovery plan in February, after Bulgaria’s finance ministry refused to approve the rescheduling, over the next eight years, of the repayment of debts owed by the plant to state-owned companies, a prerequisite for the plan to be presented to creditors.A final decision by the court on Kremikovtzi’s future is expected in the next two weeks and local traders believe the outcome will not be positive. “I expect the mill to be closed down completely,” one trader tells SBB. “It is currently operating without the right environmental permits and I do not believe that any provider of foreign capital would be willing to invest in Kremi, if you consider that the plant needs maybe BGN1bn to resume operations within acceptable standards,” he adds. Kremikovtzi was given a market valuation of BGN837.2m by consultancy firm Amrita Consulting House last September, less than half the amount of the company’s estimated debts. Kremikovtzi is currently only operating its continuous caster and producing around 10,000 tonnes/month of coil at its hot strip mill, traders tell SBB. If it is closed for good, Bulgaria will need to import 100% of its HRC requirements. The company could not be reached for comment by press deadline.
THE CRISIS:
Bulgaria records sharpest car sales decline in Europe in April
The economic and financial situation remains the biggest challenge for car and commercial vehicle makers in 2010, and while declines in sales were observed across the continent, the sharpest decline was observed in Bulgaria, European Automobile Manufacturers' Association, ACEA, said in a media statement.Only 1201 vehicles were purchased in April 2010 in Bulgaria, or 50.8 per cent fewer than figures from April last year, which was the worst in Europe.In the first quarter, Bulgaria accounted for the third steepest decline after Romania with 56 per cent, and Hungary with 52.0 per cent. A total of 4557 vehicles were sold in Bulgaria in Q1, as opposed to 8543 in the first quarter of last year.Ireland, meanwhile, registered a 95 per cent rise for April, while Portugal, with 59.1 per cent, has the best statistics for the first quarter.And while any relevant forecasts remain difficult to make, it is clear that 2010 will again be a very challenging year for the industry, as the overall economy is far from at recovery levels. According to a statement on the ACEA website, the industry nevertheless continues to invest heavily in research and development, in particular in the field of low-emission technologies, underlining its commitment to sustainable mobility.