BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 11 – 18 JUNE 2010 )
Sections/headline briefs:
MACROECONOMY:
· Bulgaria lures China to invest in joint industrial zone near Sofia
· Hong Kong billionaire acquires Bulgaria's Vivacom
· Law speeds up land expropriation for national projects
· Over EUR 1 BN in EU financing awaits Bulgarian businesses
· Bulgaria day opens at Shanghai Expo
· Bulgaria cancels tender for major railroad upgrade
· Major Bulgarian mountain tunnel to be built by 2020
· Ambassador of Russia: Plenty other states vie for Russia's energy projects in Bulgaria
INVESTMENTS:
· Austrian firm to pour EUR 50 M in Bulgarian furniture factory
· Food retailer Billa to open EUR 11.8 M logistics centre in Elin Pelin
· Bulgarian Minister demands free land for foreign investors
· Russian envoy overviews investments in Bulgaria
· Bulgaria with positive FDI in 2010 Q1, revised data shows
· FDI is up
· Bulgaria, India plan joint Hi-Tech parks
COMPANIES:
· Veolia Water will acquire the control pack of share of Sofia Water
· Turkish low-cost carrier Pegasus Airlines takes off to Sofia
· Swedish packaging maker Tetra Pak sees steady expansion on Bulgarian market
THE CRISIS:
· New car sales fall 42.4% y/y in Jan-May
· Crisis weakens banking system's stability
· Regional development Minister: Central, local government can pool efforts to cope with crisis
· Economic crisis beneficial for Bulgarian online trade
· Bulgaria's trade deficit shrinks in January-April 2010
MACROECONOMY:
Bulgaria lures China to invest in joint industrial zone near Sofia
Bulgaria has formally invited Chinese companies to participate in the creation of a joint industrial zone at Bozhurishte near Sofia.The project for the Bozhurishte Industrial Zone was formally presented Sunday by Bulgarian Economy Minister, Traicho Traikov, who is on a visit to China for the Bulgarian Day at the Shanghai Expo, June 14.“Bulgaria has a great potential to attract Chinese investments in the fields of telecommunications, IT, green energy, and electric cars equipment,“ Traikov stated.He met with Yan Cheng, Deputy Mayor of Shenzhen, a city of sub-provincial administrative status, which is the site of China's first ever free economic zone, in the populous southern Guangdong Province.The major topic of their talks were the opportunities for cooperation in high tech sectors.“Attracting investments and encouraging research, development and innovations are major priorities in the economic policies of the Bulgarian government,“ stated Traikov attributing the staggering economic growth of the Chinese economy in spite of the global economic crisis to the increasing share of innovations.“Bulgaria must use its chance to increase its competitiveness by attracting Chinese investments and industrial know-how,“ Traikov stated as cited by the Bulgarian Economy Ministry.In his words, Bulgaria could also attract Chinese investors in textile industry, infrastructure construction, food industry, agriculture, and tourism.Traikov has emphasized the project for a new industrial zone near Sofia at the town of Bozhurishte.The industrial zone was approved by the Bulgarian government over the past week but it was not advertised as a Bulgarian-Chinese project until Traikov's visit in China. It is unclear yet if any Chinese companies have expressed interest in the project.
Hong Kong billionaire acquires Bulgaria's Vivacom
The deal for the sale of Vivacom, Bulgaria's dominant telecoms provider, to Richard Li, chairman of Asian telco PCCW, is expected to be finalized in the short term, according to reports."Vivacom will be acquired by Hong Kong billionaire Richard Li within weeks," 24 Hours daily reported, citing unnamed insiders.According to the article the businessman paid a visit to Bulgaria on Wednesday and presented his investment plans at a meeting with Prime Minister Boyko Borisov. Li is believed to plan to pour EUR 500 M in the company over the next five years.Vivacom has declined comment.Li inherited control of Vivacom in March as part of the acquisition of AIG Investments, a unit of the troubled US insurance group which spans asset management and private equity investments. The unit was renamed Pinebridge Investments ahead of the takeover by Li's Pacific Century group.Earlier in the week foreign media reports said that Richard Li was in crisis talks with lenders and the Bulgarian government over Vivacom.Vivacom, which has about USD 2.40 B of debt, may breach its loan agreement as its profit was deemed insufficient compared with its borrowings, sources said.According to unconfirmed information the creditors, including RBS, Deutsche Bank and RZB, have approved the proposed restructuring of the debt and the finalization of the sale deal.Vivacom is currently owned by NEF Telecom Bulgaria, a unit of AIG Global Investment.US insurance giant AIG bought 90% of the company's shares in August 2007 for EUR 1,4 B, later launching an offer to buy out the remaining shares.Vivacom dominates the fixed-line segment with 2.9 million phone lines, which accounts for 97% of the market, but it has been losing customers at an alarming rate in recent years, due to the spread of mobile communications and alternative telecoms in the country.
Law speeds up land expropriation for national projects
Expropriation of land lots needed for the construction of major national infrastructure projects is about to accelerate considerably, after the Cabinet passed on Wednesday (June 9) a draft amendment to the State Property Act. "The proposed amendments relating to compulsory acquisition of private property for public needs, seek to ensure timely and unhindered implementation of national projects. The term national infrastructure is replaced by a broader one: national projects," says the official press release of the Council of Ministers. In fact, quite a few major projects have so far been delayed because of disputes over the price of land lots that are to be nationalised. A prerequisite for the start of the expropriation procedure of lands will be a detailed development plan that is approved or enacted and contains instruction for prior execution. An investor in a national project will have the opportunity to start building in somebody else's property upon a prior payment of compensation for the time from the writ of possession to the day the formal expropriation is approved. The precondition is to have a comprehensive zoning plan for the construction of national sites. The owner of the land lot may contest the amount of the fixed compensation and ask for additional sums. A change in determining the market value of properties is also envisaged and it will now take into account the average market prices of all deals, avoiding thus a possible arbitrary taking into consideration of only some of them. For speeding up the implementation of state projects, the Order of the Governor will be now published in the Official Gazette, and not as it has been until the present moment - to be communicated to the owners of expropriated lots under the Civil Procedure Code. The order must be published on a visible place in the building of the respective city hall. Another important change is that the appeal against the amount of the compensation due will not stop the execution of the expropriation procedure. Similar provisions exist now in the current Municipal Property Act. Besides, rented properties (that are public state property) will not be permitted to be sublet and shared under contracts with third parties. Due to limited availability of privately owned state housing units, it is envisaged that political parties should be denied to buy such properties.
Over EUR 1 BN in EU financing awaits Bulgarian businesses
It is hardly a secret that the absorption of EU funds in Bulgaria has not been going well at all. Some time ago Minister Tomislav Donchev calculated that for the three years of its membership in the European Union, Sofia has attracted just between 3 and 4 percent of the 7 billion in operational programmes earmarked for the country. Another proof of the country's inability to benefit from EU's financial assistance came on Tuesday (June 8), when Minister of Economy, Energy and Tourism, Traycho Traykov, announced that under the Competitiveness Operational Programme, whose budget is over EUR1 billion, only EUR32.8 million had actually been paid so far. What's more - over 90 percent of the payments had been made after July 2009. According to Mr. Traykov, for the first two years of the programme only EUR1.5 million had been absorbed, but the most curious thing is that of this sum just EUR200,000 had gone to the implementation of tangible projects. The remainder had been used to pay the salaries of officials working on the programme! However, the Ministry of Economy, Energy and Tourism has taken some steps to accelerate the absorption of EU funds. For example, guidelines for the preparation of documents and evaluation criteria for projects are already announced together with the opening of the procedures. Moreover, firms have seven days to correct inaccuracies in their proposals. It has also been decided the costs of consultancy services to be considered eligible for reimbursement by the operational programmes. According to Mr. Traykov the administrative capacity will soon be increased, while procedures - facilitated. In fact, there has been a call for projects under five schemes of the Competitiveness programme, but no offers from businesses have been submitted. According to data provided by the Ministry, businesses submitted projects only for one of the schemes - the creation and development of innovative start-up companies. It was announced two years ago and it has already received 103 proposals. No projects have been submitted under the procedure for establishing technology parks, although it has been opened for more than a year now. Since the beginning of January this year, companies have been invited to apply for implementation of innovative products, processes and services as well as for modernization of small and medium enterprises, but there have been no such initiatives so far. This scheme earmarks more than BGN100 million to companies with no more than 250 employees. A grant for a project here may vary between BGN50,000 and BGN2 million. This is a scheme that may be used to finance the expansion of enterprises' activities, introduction of new products and technologies, complete change in the manufacturing process and many more. The deadline for applications is 10 August. Early June saw the opening of the procedure for upgrading large companies - with over 250 employees and the funds provided for this scheme come to BGN58.6 million. The deadline for applications under this scheme is September 7 and documents can be sent to the offices of the Executive Agency for Small and Medium Enterprises in Blagoevgrad, Burgas, Varna, Vratsa, Pleven, Plovdiv, Rousse, Sofia, Stara Zagora, and Veliko Tarnovo , representatives of the Ministry of Economy said. The EU grants will cover half of the costs of projects for technological modernisation of production processes, the minimum amount of the assistance being BGN1 million, and the maximum - BGN4 million. The money can be used for purchases of new machinery and computer equipment, as well as for implementing modern production practices. It will also finance the costs of software products that improve the technological processes in enterprises. Meanwhile, information seminars on Competitiveness programme have been launched. They are free and open to all comers. They will be held in 21 cities for a total of one month. The first meeting was in Vratza on June 7. During the information days, speakers from the Ministry of Economy and the Executive Agency for Small and Medium Enterprises will get companies acquainted with the terms and conditions of applying for these grants.
Bulgaria day opens at Shanghai Expo
Bulgarian minister of economy Traicho Traikov opened Monday the official Bulgaria Day at Expo 2010 Shanghai, extending a hand for Chinese investors to Bulgaria.Traikov discussed tourism and green economics with Zhao Wen, vice-mayor of Shanghai, stressing on the multitude of opportunities for tourism in Bulgaria.“Tourism is not just trade – it's an experience,” said Traikov, adding that Bulgaria is working hard to make that experience as luring as possible.Traikov added that Bulgaria has an enormous potential for attracting Chinese investors in telecommunications, information technologies and green energy.He pointed out attracting investments and fostering R&D as chief priorities of the economic policy of the Bulgarian government. Traikov added that Bulgaria should take advantage of the considerable growth of Chinese economics at the time of a major world crisis.During his visit in China, energy minister Traykov will hold talks with high-ranking officials from Shanghai municipality and Zhejiang province, and is expected to sign a Memorandum for cooperation with the Department of Trade of Zhejiang province.The Bulgarian pavilion at Expo 2010 Shanghai has an area of 324 sq.m. and is situated in Zone C of the European pavilion. Its design combines radically modern elements with ideas from historic Lyuto's house in the Bulgarian town of Koprivshtica in a bid to relate the rich cultural history of the country. The theme of the Bulgarian participation at the Expo is “A City of Shared Heritage”.
Bulgaria cancels tender for major railroad upgrade
The unit of state railway company BDZ, Railroad Infrastructure, has cancelled the tender for the rehabilitation of the Plovdiv-Burgas railway, which is the first project to be financed under the EU operational programme transport, due to higher than expected value of the tendered bids. The indicative budget of the project is around BGN 330mn (EUR 168.8mn) VAT excl., shared between the EU (64%) and the national budget (36%). As a result of the tender procedure the selected participants in the separate positions have offered to execute the order for a total of BGN 426.2mn VAT excl., the company said in a statement. Eight bids were filed at the tender in February. Offers were submitted by Greece's Terna, Italy's Costruzioni Linee Via della Cooperazione (CLF), Czech OHL ZS, local consortium LV-TCB-Glavbolgarstroy, Austria's Swietelsky, France's TSO, a consortium between Italy's Salcef Costruzioni Edili e Ferroviarie and local Energoremont, as well as a consortium of local Trace Group Holding, CK-13 Holding and Italy's CMC Ferroviaria. The local tie-up LV-TCB-Glavbolgarstroy, TSO and the consortium led by Italy's Salcef were allowed to offer their prices at the second round of the tender.
Major Bulgarian mountain tunnel to be built by 2020
The much anticipated tunnel under the Shipka Pass in Central Bulgaria will be completed before 2020, according to Regional Development Minister Rosen Plevneliev.The Shipka Pass is located in the central part of the east-west stretching Balkan Mountain (“Stara Planina”), near the city of Gabrovo.The future tunnel, of which Bulgarian governments have talked for ages, is a major infrastructure project that is supposed to greatly facilitate the traffic and exchange between the northern and southern halves of the country.According to Plevneliev, Bulgaria will construct the tunnel whenever it finds an investor that will be willing to build it through a public-private partnership without state guarantees.If no such investor is found by 2013, the government will seek EU funding from the 2014-2020 financial framework for the Shipka Pass tunnel, the Minister explained in Gabrovo.The tunnel is supposed to become a crucial part of the Pan-European Transport Corridor No. 9 connecting Helsinki in Finland with the Greek Mediterranean port Alexandroupolis, going through Bulgaria’s Ruse and Gabrovo.Plevneliev also pointed out that the construction of a Gabrovo beltway has been envisaged for funding in the EU Operational Program Transport for 2010-2013. The new road is supposed to unload the heavy traffic from the streets of the city against which local residents have staged numerous protests.“The responsible position of the government would require creating prerequisites for the free movement of international traffic of people and goods through Bulgaria. Our country has been in isolation because it has no highways to Greece, no highways to Serbia, and only one bridge to Romania, which was built 55 years ago,” Plevneliev declared slamming previous governments for failing to pay any attention to the construction and expansion of roads.
Ambassador of Russia: Plenty other states vie for Russia's energy projects in Bulgaria
There are plenty of other partners interested in realizing joint energy projects with Russia if Bulgaria pulls out of the existing deals, according to Russian Ambassador in Sofia, Yury Isakov.“I would like to underscore that it should be clear that the energy projects are in the great interest of Bulgaria. Their realization will give Bulgaria new geopolitical advantages, will boost its image and significance as an economic, energy, and political player. This is axiomatic,” His Excellency stated Tuesday in the northeastern city of Shuman referring to the recently raised uncertainty about the fate of the two Russian-sponsored large-scale energy projects in Bulgaria: the Burgas-Alexandroupolis oil pipeline, the South Stream gas transit pipeline, and the Belene Nuclear Power Plant.Isakov’s statement comes several days after last Friday Bulgarian Prime Minister Boyko Borisov suggested that Bulgaria was freezing the Belene NPP construction till it finds a strategic foreign investor, and was giving up on the Burgas-Alexandroupolis oil pipeline because of its unprofitable and environmental risk. Borisov subsequently clarified that the Cabinet will make a final decision on the fate of the pipeline project only after an international environmental assessment is available.“Who is going to lose if the energy projects are not implemented? I will give you a small example. Not so long ago, Bulgaria was offered to participate in the Blue Stream gas transit pipeline. For about 1.5-2 years, Bulgaria did not provide understandable answers and did not show interest, and so we realized the project with our Turkish partners. I am leaving to you the answer to the question about who benefited and who lost from that,” explained Isakov, while also saying that he had not met any representatives of the Bulgarian government after the recent statements about the fate of the Belene NPP, which is to be constructed by the Russian state company Atomstroyexport, and the Burgas-Alexandroupolis oil pipeline, a joint Bulgarian-Greek-Russian venture.He did point out, however, that he had good working relations with Bulgarian PM Borisov and Economy and Energy Minister Traicho Traikov.His statement had a similar message to that of critics of the cautious policy of the Borisov government who fear that Russia might seek other regional partners for its energy initiatives in the Balkans; many have pointed to the start of Russian-Turkish negotiations over the construction of the Samsun-Ceyhan oil pipeline as an alternative to Burgas-Alexandroupolis.“We are living in a competitive world, and there is a proverb in Russia and here in Bulgaria, “No holy place will remain empty.” Do you understand? We will always find partners to realize our projects. Trust me, there are quite a few applicants,” the Russian Ambassador declared.Yet, he displayed confidence that the joint Bulgarian-Russian energy projects will be realized despite the delays.“We understand very well with that such large-scale energy projects as the ones planned in Bulgaria – and I am confident that they will happen – not everything can be immediately decided, there are always changes,” said Isakov.In his words, Russia understood Bulgaria’s position about seeking a strategic foreign investor for the Belene NPP, and was trying to help it in that respect. It was also understanding about the Bulgarian government’s position that a positive environmental assessment was needed to start the Burgas-Alexandroupolis project.He did argue, however, that the energy projects must be processed more quickly. “We have told our Bulgarian partners more than once that there are all kinds of reasons to accelerate our cooperation,” declared the Russian Ambassador.The contracts for the three Russian energy projects in Bulgaria were signed during then Russian President Vladimir Putin’s visit to Bulgaria in January 2008 but not a single one of them has seen the start of its construction yet.
INVESTMENTS:
Austrian firm to pour EUR 50 M in Bulgarian furniture factory
An Austrian company has announced plans to invest EUR 50 M in the furniture industry in Bulgaria in a joint venture with Russe-based Bulgaria Furniture & Office firm.The contract for setting up the joint venture is expected to be signed by the end of the year.Plans include building a factory in Russe and stores in most of the regional centers, to cover the whole country.“Our goal is to turn into the biggest producer of furniture and the biggest chain of shops on the Balkans, which will offer furniture for homes, offices and hotels,” Plamen Tsanev, owner of the company Bulgaria Furniture & Office, told local media.The new factory is expected to open 500 new jobs.
Food retailer Billa to open EUR 11.8 M logistics centre in Elin Pelin
The local arm of Austrian retail chain Billa will open a logistics centre in Elin Pelin, in the vicinities of the capital city of Sofia, on Wednesday next week (June 16), business and financial newswire Investor.bg reported. The investment in the facility is estimated at BGN 23mn (EUR 11.8mn). Billa manages the largest retail network at national level, running 71 supermarkets all over the country, 13 of which are located in Sofia. It is a member of REWE Group, one of Europe's leading retail and tourist concerns.
Bulgarian Minister demands free land for foreign investors
Bulgaria has millions of hectares of weed-grown land that it must donate to large investors for free in order to attract them, according to Regional Development Minister Rosen Plevneliev.“This is the only way to bring more investors who would create high-quality jobs here,” Plevneliev said explaining that the Bulgarian state must be selling 30 hectares for BGN 1 to the foreign companies which would be doing “serious business” in the country by building plants.He has further insisted on a new law for foreign investors. In his words, until recently Bulgaria had 75 “Class A” foreign investors, i.e. companies investing BGN 100-300 M, and supported them with a combined budget of BGN 15 M.“Each company got BGN 200 000 on average in state aid. This is just ridiculous,” the Regional Development Minister declared while also explaining that the foreign companies did not want state money but proactive government policies to solve their problems with the bureaucracy, permits, and land.“The state is sitting on millions of hectares of weedy land. The best we can do is to sell them for USD 1 to somebody who would build a factory making the Bulgarians richer,” said Plevneliev.Speaking in an interview for Novinite.com (Sofia News Agency) over the week, the new head of the InvestBulgaria Agency, Borislav Stefanov, said that the major benefits for foreign investors in Bulgaria had to do with providing land, and that Bulgaria needed proactive marketing in all economic spheres because not all investors wanted to build factories.
Russian envoy overviews investments in Bulgaria
Russian investments in real estate in Bulgaria exceed 1bn euros, although there is no precise statistical information about how many real-estate items in this country have been bought by Russians, the Russian ambassador to Bulgaria, Yuriy Isakov, said on Tuesday [15 June]. He delivered a lecture to students of the Free University of Varna.The diplomat said that trade between the two countries is within good parameters but there is a serious imbalance. Russia is a large and promising investor in Bulgaria, he said. He put Russian business investments in this country at 1.5bn euros.Relations in the field of energy are most important for the two countries, Ambassador Isakov said. He noted that the South Stream natural gas pipeline project, the Belene nuclear power plant project and the Burgas-Alexandroupolis oil pipeline project will turn Bulgaria into a major energy hub and will boost the country's geopolitical importance.He described Belene as a unique project for Europe. As for Burgas-Alexandroupolis, he said the Bulgarian government has not rejected it straightforwardly but is waiting for the environmental impact assessment - a position which Russia respects.South Stream is financially secured, unlike the Nabucco natural gas pipeline project, which is more of a virtual and political project, the ambassador said.A military-policy alliance should exist between Russia and the USA, he said. Moscow is concerned that over the last few months it has learned about the planned NATO missile defence system not from Washington or Sofia but from the media, Isakov said. He added that Russia is opposed to unilateral action in the field of missile defence.
Bulgaria with positive FDI in 2010 Q1, revised data shows
Bulgaria did not have a net outflow of foreign direct investments in the first quarter of 2010, according to revised data of the Bulgarian National Bank (BNB). A BNB announcement made Wednesday shows that Bulgaria ended the first quarter with a positive FDI balance of about EUR 130 M, reversing the data announced at the very end of May saying that the country saw a negative FDI balance of EUR 22 M. According to the previously released data, Bulgaria had a positive FDI balance of EUR 53 M in January, and EUR 94 M in February, while in March the FDI balance was a negative EUR 170 M. The revised information, however, shows EUR 63 M of foreign investments in January 2010, EUR 146 M in February, and negative EUR 78 M in March. What is more, according to preliminary data, in April, Bulgaria attracted a total of EUR 36.7 M in FDI, bringing the total for the first four months of the year to EUR 168.1 M (0.5% of GDP). Despite the reversal of the negative FDI balance, the data still shows a staggering 82.4% decline of foreign investment in Bulgaria in January-April 2010 compared to the same period of 2009 when the country attracted a total of EUR 955 M (2.8% of the GDP).“The attracted Equity Capital (acquisition/disposal of shares and equities in cash and contributions in kind by non-residents in/from the capital and reserves of Bulgarian enterprises and receipts/payments from/for real estate deals in the country) for January-April 2010 amounted to EUR 206.8 M. It decreased by EUR 493.7 M compared to that attracted in the same period of 2009 (EUR 700.5 M). The receipts from real estate investments of non-residents amounted to EUR 49.6 million compared to EUR 184.3 M for January-April 2009,“ the Bulgarian National Bank announced. By country, the largest foreign investors in Bulgaria for the period January-April 2010 were the Netherlands (EUR 579 M), Russia (EUR 48.6 M) and the USA (EUR 47 M). Net payments towards Austria, the Netherlands Antiles and Germany amounted respectively to EUR 367 million, EUR 102.7 million and EUR 87.6 million. The higher net receipts from the Netherlands and the higher net payments towards Austria were mainly due to usual operations with revolving intercompany credits.
FDI is up
Against previous gloomy figures about a downturn in foreign direct investment (FDI) in Bulgaria and independent commentary on the country slipping badly in job creation, senior Government officials are insisting that FDI is increasing and that they are preparing to campaign for more.In May, official figures showed that FDI in Bulgaria in the first quarter of 2010 came in at minus 21.9 million euro, a major decrease compared to FDI in Q1 2009, which was 926 million euro.A report released at the start of June by Ernst & Young said that investments in Bulgaria in 2009 had halved from a year earlier, and in 2009 Bulgaria slipped to 19th place in job creation in Europe, from eighth a year earlier. According to Ernst & Young, investors were losing interest in Central and Eastern Europe and shifting their capital to the developed economies in the West.But, speaking on June 7, InvestBulgaria agency chief Borislav Stefanov said that the number of firms that had invested in Bulgaria in Q1 2010 in fact had increased. Equity capital into Bulgaria had increased steadily in the first three months, having been two million euro in January, 30 million in February and 80 million in March, according to Stefanov.
His message was in line with that of Economy, Energy and Tourism Minister Traicho Traikov, who said a week earlier that the number of foreign juristic and natural persons investing in Bulgaria was on the rise. Traikov ascribed the decrease in FDI in Q1 2010 to routine transactions by companies to their offices in other countries and, he said, did not mean a loss of confidence in the Bulgarian economy.Speaking in an interview with Bulgarian-language mass-circulation daily 24 Chassa, Traikov said that he and his officials were working on getting 30 companies that they had targeted to increase their investments in Bulgaria."We plan to hold a dialogue with the largest investors in the coming weeks, which will culminate in a forum," Traikov said. "At the forum, we shall encourage reluctant investors to put money in this country and persuade companies that have decided to invest here to bring their investments forward."Stefanov said that in the third week of June, his agency would launch the first public procurement procedures as part of an EU-funded project to boost awareness of Bulgaria among foreign entrepreneurs and to encourage foreign investment in the country.The project to promote investment in Bulgaria will span three years and will include coming up with a marketing strategy for sectors that have the potential to attract foreign investment.Adding in further detail to previously reported plans to stimulate foreign investment, through steps such as amending investment promotion legislation and through marketing, Stefanov said that the measures could include increasing state grant assistance for projects in strategic priority industries.Amendments to the Investment Promotion Act would lengthen the list of industries that could get state assistance, especially in transport and logistics, he said.In addition to the comments made by Stefanov, at an Italian-Bulgarian forum on bilateral economic co-operation, it emerged that work also was being done elsewhere to stimulate investment. Earlier in June, Hungarian ambassador in Sofia Judith Lang said that her embassy was working on attracting investors by citing Bulgaria’s advantages in low taxes, skilled labour and relatively low pay.Separately, there was further confirmation that the capital city, Sofia, is absorbing the lion’s share of FDI. Speaking on June 7, deputy mayor Minko Gerdjikov said that in 2008, of 6.7 billion euro in FDI, 4.6 billion went to Sofia, while in 2009 as the crisis took hold, FDI dropped to 3.2 billion euro of which 2.2 billion went to Sofia. According to Gerdjikov, 38 per cent of Bulgaria’s GDP in 2009 was generated in Sofia.
Bulgaria, India plan joint Hi-Tech parks
The governments of Bulgaria and India are going to start working on an action plan for the setting up of joint hi-tech park projects.The decision was made at the fourth session of the Bulgarian-Indian Informationa and Communications Technology Forum which took place in the Bulgarian capital on June 14-15.The forum is chaired jointly by Bulgarian Deputy Transport Minister Parvan Rusinov, who is in charge of IT policies, and India's Deputy IT Minister Rakesh Singh.Bulgarian and Indian IT companies are not competitors on the global market because they have different advantages that they should pool together, according to the deputy ministers responsible for the IT sectors of the two countries.Rusinov and Singh have agreed that the establishment of hi-tech parks should be the priority of the bilateral IT cooperation.The action plan to be prepared by the two governments is going to explore projects of joint interest including the founding and management of IT incubators, and joint development of e-government applications, software, hardware, service, and long distance providing of server resources.The fourth session of the Bulgarian-Indian IT forum, which was hosted by the Bulgarian Ministry of Transport, Communications and IT, was also attended by representatives of the Bulgarian Association for Information Technologies (BAIT) and Bulgarian universities and scientific institutes.
COMPANIES:
Veolia Water will acquire the control pack of share of Sofia Water
International giant Veolia Water announced its plan for expanding its presence in Europe. Veolia Water will acquire the control pack of shares /58%/ of Sofia Water, ocus News Agency reports, quoting a press release of Veolia. Sofia Water is the company that controls the water supplies and services for Sofia, Bulgaria, which has a population of 1.3 million. Following its successful expansion in some of Central Europe's biggest capitals - Berlin, Prague, and Bucharest, entering the Bulgarian market will contribute to the advantages of Veolia, through its competitive programmes for improving the quality of service.
Turkish low-cost carrier Pegasus Airlines takes off to Sofia
Turkish low-cost carrier Pegasus Airlines will launch regular flights between Sofia and Istanbul in September.The flights will be serviced twice a day – at 6.00 am and 8.15 pm from Istanbul and 8.00 am and 10.15 pm from Sofia.The planes will depart from Sabiha Gokcen on the Asian shore of Istanbul.Pegasus is a low-cost private airline company, which services flights to 27 destination in Europe and Tel Aviv.The Turkish airlines, Turkey's flag carrier, conducts regular tariff flights to Bulgaria.
Swedish packaging maker Tetra Pak sees steady expansion on Bulgarian market
Swedish-based Tetra Pak plans to expand its market share in the segment of cardboard packaging with plastic caps for milk and juices by several percentage points each year, the company's regional manager for southeastern Europe Lars Holmquist said. According to Tetra Pak data, last year over 50% of the juices and almost 50% of the milk were in Tetra Pak packaging. The company reported an increase of 1.2% y/y of its revenues to EUR 8.95mn. The company's communications office for the region, Irene Gideon, pointed out the lack of recycling capacities and infrastructure domestically and vowed that Tetra Pak will work on the issue. The company was set up in 1951 and entered Bulgaria in 1995. For its local operations, Tetra Pak is importing the packaging materials from its units Hungary and Serbia, and is selling them to 10 major clients.The firm is also offering food packaging machines.
THE CRISIS:
New car sales fall 42.4% y/y in Jan-May
The number of new cars sold on the local market by members of the local car importer association fell by 42.4% y/y to 7,165 in Jan-May, association data showed. The decline narrowed from 44.3% y/y in Jan-Apr and also from the 53.7% y/y contraction in 2009. The number of passenger cars sold reached 6,891, down by 42.4% y/y. Toyota moved to the leading position with a market share of 10.1% in Jan-May, followed by last month's best-selling brand Peugeot (9.8%) and Ford (9.6%). The car dealers sold 274 buses and trucks in Jan-May, down by 40.9% y/y, in an improvement compared to the drops of 46% y/y in Jan-Apr and the more than 73% y/y in 2009. Iveco claimed a market share of 40.5%, followed by Mercedes (33.9%) and Mann (12.4%). The sales of motorcycles declined by 42.7% y/y to 114, almost 44% of which were Peugeot.
Crisis weakens banking system's stability
The banking system, too, began to yield to the pressure of the global financial crisis. In spite of the fact that at first glance it looks like an inaccessible castle "perched" on top of a rock washed by the stormy waves of angry seas, these waves seem to have visibly undermined the sound foundation of Bulgarian banks. The most obvious indicator for this is the profit generated by the sector. In March 2009, it was BGN271.27 million, while twelve months later it dropped to BGN169.55 million, a decrease of 37.5 percent. Seemingly this is not a significant problem, especially when this decrease is explained by the declining trend of interest rates on loans that are a major source of revenue for banks. But the reasons for the shrinking profits are much deeper. For example, banks now are trying to offset the drop in interest rates with higher fees and commissions. That is why at the end of March this year, banks' income from fees and commissions was by only BGN5.5 million less than it had been twelve months before. Therefore fees and commissions cannot be regarded as having storng influence on the deterioration of the sector's overall financial results. The same goes for their administrative costs, too. At the end of March 2009, they were BGN408.02 million, while a year later this figure went down to BGN399.77 million. For the same one-year period, however, the money (according to Decree №9 of the Central Bank for bank provisions) that banks have earmarked to cover losses from irregularly serviced credits grew by BGN124 million. And exactly this is the rub. The comparison between the profit deterioration in Bulgaria's banking sector - amounting to BGN101.72 million - and the increase in the expenditures for provisions (of BGN124 million), clearly shows this. But the actual problem, however, is the increase in the volume of overdue loans. Moreover, according to experts working in the field of financial risk assessment, many banks do make use of the simplified and quite flexible requirements of the National Bank for setting aside reserves. It is well known that many of the problematic loans are being renegotiated, restructured, and banks deploy various techniques to reduce the amount of provisions with which these overdue credits have to be covered. This is done mainly for corporate and home loans. The ultimate goal is to allow clients a longer period for repaying their obligations in smaller instalments. The advantage to the creditors is that this way they narrow their own costs to cover these problematic credits, thereby giving a more acceptable form of their own balance sheets and financial reports. In financial circles it is rumoured that the "saved" - or rather "hidden" - costs that have not been allocated for reserves, as they should have, exceed BGN55 million during the first three months of 2010. If we were to take this sum into account, the banks' financial results as at end-March would have shown a profit of only BGN114.55 million. Well, nevertheless this is a profit, say optimists. Its is true that the system is not working in the red, but this may be a temporary event. If the trend of increasing overdue loans continued to gain speed, it would be no surprise if in September banks post losses, even in the current liberal provisioning regime. And this would be very bad. At the backdrop of all this gloomy picture there is a piece of good news. And it is that the core of the banking sector is stable. It is formed by the top ten banks in Bulgaria in terms of balance sheet value. They control over 73 percent of the of assets in the sector and 79 percent of all deposits of individuals and companies. These are UniCredit Bulbank, DSK Bank, UBB, Raiffeisen (Bulgaria), Eurobank EFG Bulgaria, First Investment Bank,Piraeus Bank Bulgaria, Societe Generale Expressbank, Corporate Bank and EIBank. Probably it is visible that the list of largest banks includes the two institutions - Corporate Bank and EIBank - that have been systematically attacked by the media since the beginning of the year. These attacks and allegations have been highly speculative and apparently purposefully targeted. Among these banks are also the ones that have shown the best financial performance for the first quarter of the year. Since 1998, the BANKER weekly has been presenting a quarterly list of the best banks in Bulgaria. They are assessed according to five criteria - asset volume, equity capital size, profit, return on equity and return on assets ratios. The combination of these indicators shows the importance of the institution and its financial market stability and efficiency. only banks which rank among the top ten according to all five criteria can join the BANKER's elite club of credit institutions. For the first quarter of 2010 these were UniCredit Bulbank, DSK Bank, UBB, Piraeus Bank Bulgaria and Corporate Bank. Of course, to the already mentioned criteria it should be wise to add other ones, such as capital adequacy, growth of overdue loans, liquidity ratio plus a few other indicators of stability. However, the Central Bank does not publish information for each bank, and the calculation of such data on the basis of quarterly balance sheets would be unprofessional and unfair.
Regional development Minister: Central, local government can pool efforts to cope with crisis
Addressing a Meeting of the Presidents of Member Associations of NALAS (Network of Associations of Local Authorities of South-East Europe) on Monday, Regional Development Minister Rosen Plevneliev said that it is only with a concerted effort that central and local government can meet the challenges of the economic downturn. The meeting is organized by the National Association of Municipalities in the Republic of Bulgaria (NAMRB).Plevneliev said that the Bulgarian government heeds the voice of the local authorities, of which NAMRB is the exponent, and that many joint initiatives of the government and the Association can set an example. The cooperation agreement between the government and NAMRB, with commitments made by both parties, is transparent and makes things clear to the public.Plevneliev said a lot of effort was being put into the decentralization of the local authorities, inter alia, through a committee of representatives of municipalities and the Ministry of Regional Development and Public Works. The Committee has drawn up a detailed strategy that gives broader powers as well as more responsibilities to the local authorities, Plevneliev said. He called for further coordination between the authorities and for more active citizen participation in governance."We will have a stronger government and more democracy when public services are closer to people," Plevneliev said. "Bulgaria is piloting a Council of Europe project for innovation and technology relating to the local authorities, and the Fund for Local Authorities and Governments (FLAG) is also an effective mechanism for support for the municipalities." The minister also said there are vast opportunities for energy efficiency - an area fully supported with financing from the European Commission.Day one of the forum is devoted to the impact of the crisis on the municipalities of South-East Europe. The situation in Bulgaria, Serbia, Montenegro and Macedonia, among other countries, will be under discussion.Day Two of the meeting will focus on energy efficiency measures intended to cut expenditures at the local level.The closing topic on the agenda is the strengthening of the political independence of the associations of local authorities.The participants are expected to adopt a final declaration on the need of strong, independent and active associations of municipalities as a guarantee for sustainable local self-government.Addressing the meeting, Dora Yankova, Chair of the NAMRB Board of Directors, said expenditures should be optimized, adding that job cuts do not always save money. The municipalities are implementing energy-saving measures under the EU operational programmes, which will have an impact on the expenditures side of local budgets, she also said.NAMRB suggests a new law on local finances, under which the government would allow the municipalities to be more flexible in managing budget appropriations and revenue balances.The Association also suggests that the municipalities be offset for the fall in revenues due to the state policy of exemption from local taxes. NAMRB has drafted what it considers a more acceptable option for the reduction in state transfers to the municipalities.Yankova said that in 2009 municipal revenues dropped 14.8 per cent on 2008, and state transfers fell 10 per cent. The proposed cut in state transfers for 2010 is 15 per cent from January or 30 per cent from July, which would be a heavy blow on municipal budgets, Yankova said. NAMRB is also calling for a case-by-case approach to the reduction of the state transfers to each municipality.Talking to BTA, Yankova said the average reduction of the state transfer should be 10 per cent on an annual basis instead of 15 per cent as proposed by the Finance Ministry. While NAMRB has managed to convince Finance Minister Simeon Djankov and Parliamentary Budget Committee Chair Menda Stoyanova of the rationale behind this suggestion, a debate in Parliament is forthcoming.Yankova also said the municipal administration should be streamlined after the elective officials and mandatory civil servants are subtracted from the total.She said: "We want the municipalities to be divided into two groups: around 145 small municipalities (out of 264) and large municipalities. The small ones should get an 8 per cent cut in subsidies, and the large ones should get a 12 per cent cut, resulting in an average reduction of 10 per cent."Sofia's budget increased several fold in recent years due to the large foreign investments and the capacity of its labour force, said Deputy Mayor Minko Gerdjikov, who is responsible for financial matters.Sofia generates 38 per cent of Bulgaria's GDP. More than half of foreign investments in the last 20 years went to Sofia, which is attractive with its flexible, skilled working-age population of between 700,000 and 800,000, and some 8,000 people who graduate from universities every year, Gerdjikov said. The Netherlands, Austria, Greece, Germany and Cyprus are among the largest investors in Sofia.Speaking at a news conference at BTA in Pazardjik (South Central Bulgaria), National Assembly Deputy Chairman Georgi Pirinski said the cut in the state transfers and subsidies to municipalities proposed in a budget update bill will not lead to reasonable economies but will jeopardise municipal activities of prime importance to local people.He said he held information that seven municipalities of the Pazardjik Region would get an above-average cut in state subsidies, and those are the municipalities with the least potential to self-finance.
Economic crisis beneficial for Bulgarian online trade
The economic crisis has led to an increase in online shopping in Bulgaria, according to the Bulgarian Association for online Trade.Despite a considerable drop of shopping at conventional store, there has been a rise in sales on the internet, which are seen as more convenient and giving more options to consumer, according to a publication by Bulgarian daily Pari.According to the article, there are no certain statistics of the number of online retail shops operating in Bulgaria. Peter Vanchev, chair of the Association for online Trade, is quoted as saying that the great majority of them are small-scale affairs that don't meet the generally accepted criteria such as “serious infrastructure and staffing”.According to Vanchev, the economic crisis has proven beneficial for internet stores, because they are more convenient for users, they can give larger discounts, and can also save on storage.The biggest share of goods sold over the internet is that of books and consumer electronics. There is a trend for some conventional retailers to try to convince their customers to also buy online.An interesting trait of Bulgarian online shopping reported by the article is the fact that only an estimated 10% of online sales are carried out using electronic payment. The majority of customers prefer to play safe and pay on delivery.Despite official statistics specifying that only 2-3% of Bulgarians shop online, the Association's data suggest actual figures up to 20-30%, reaching even 80% for some social groups.
Bulgaria's trade deficit shrinks in January-April 2010
The export of Bulgarian companies in April has gone up by 36,7% year-on-year, theBulgarian National Bank announced.Thus, Bulgaria's April export reached EUR 1.14 B. At the same time, the country's importin the same month also increased but only by 12.6% year-on-year, reaching a total of EUR 1.46 B.In the first four months of 2010, Bulgaria's export went up by 18.9% year-on-year, reaching EUR 4.2 B, while the import decreased by 0.4%, and amounts to EUR 5.1 B.As a result, the Bulgarian trade deficit for the period January-April 2010 has shrunk to EUR 925.6 M, or 42.7% less than the amount for the first four months of 2009.This data appears as further evidence that the effects of the global economic crisis have helped Bulgaria improve its negative trade balance.According to BNB data, in the first quarter of 2010, Bulgaria's export to the countries in Europe and Asia increased, while its export to the USA went down. It also shows an increase in the imports from the new EU members and the Balkan countries, and a decrease in the imports from Europe, the USA, and Asia.Bulgaria's export amounted to EUR 920 M in January 2010, EUR 1.002 B in February, and EUR 1.120 B in March. The import was EUR 1.154 B, EUR 1.173 B, and EUR 1.505 B respectively.