BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 23 - 30 JULY 2010 )
Sections/headline briefs:
MACROECONOMY:
· China Development Bank to help Serbia invest in Belene NPP
· Bulgarian yoghurt to expand market share in Asia
- Bulgaria-Japan economic cooperation to expand from yogurt to electric cars
· Bulgaria to privatize state construction companies
INVESTMENTS:
· AES contemplates building a $400M solar park in Bulgaria
· Sofiyska Voda invests BGN 325 000 in water-mains
· Bulgarian trade representatives asked to lure foreign investors
· German investors suggest 101 law amendments to Bulgarian PM
COMPANIES:
· Vorskla Steel declares interest in owning Bulgaria's obsolete mill
· Romanian companies mull over moving to Bulgaria
· Spain's Grupo Ortiz, Electra set up JV for Bulgaria market
· Lufthansa Technik expands in Bulgaria
MACROECONOMY:
China Development Bank to help Serbia invest in Belene NPP
The China Development Bank has expressed interest in financing Serbia's investment participation in Bulgaria's Belene NPP project, reported Serbian news agency Blic Monday.“We talked about the Belene NPP project in Bulgaria, we are interested, and definite steps forward were achieved,” vice-governor of the China Development Bank Gai Jian is reported as saying.He also stated that the Chinese bank is interested in investing in further “strategic” energy projects in Serbia, including the country's infrastructure and joint Serbian-Chinese projects.Gao Jian had talks with Serbian energy minister Petar Škundrić, who said that Serbia is also interested if the country gets terms better terms on the loan than usually received.The China Development Bank vice-president assured that China and Serbia are friendly nations and will be working together for the economic furthering of both countries' interests.In May Serbian media reported for the first time that Serbia and China could possibly make a joint investment in Bulgaria's Belene NPP project.Bulgarian PM Boyko Borisov received a proposal for Serbian participation in Bulgaria's projected second NPP when on an official visit to Serbia end of April.
Bulgarian yoghurt to expand market share in Asia
Bulgarian yoghurt can enter new markets in the Asian region, it became clear last week after a meeting between Deputy Economy Minister Evgeni Angelov and senior management of Japanese consortium Meiji Dairies Corporation. Led by company President Shigetaro Asano, the Japanese delegation visited Bulgaria to meet with partners from LB Bulgaricum and the economic ministry. "The cooperation between the two companies is one of the most positive partnerships as a whole in the Bulgarian economy," said Evgeni Angelov. According to his words, the top priority for LB Bulgaricum is to defend more aggressively the positions of the state company. "Our ambitions are to work with Meiji on as many markets as possible - where our interests coincide," he said. Some 60 percent of the yoghurt consumed in Japan is Bulgarian, and nearly 40 million Japanese buy it, said some time ago, Ambassador of Japan to Bulgaria Tsuneharu Takeda. Meiji Company imports lactic acid bacteria to Japan and produces Bulgarian yoghurt for the local market. Products based on Bulgarian lactic acid bacteria occupy nearly 40 percent of the market of yogurt in Japan. Meiji has a license agreement with LB that expires in 2020 and for nearly 40 years it has been a strategic partner of the Bulgarian manufacturing company. LB Bulgaricum is the only state company in the dairy sector in Bulgaria. The company has two manufacturing plants - in Sofia and Vidin, as well as a modern centre for scientific research, which stores a collection of over 1,000 lactic acid bacteria and more than 100 different combinations of starter cultures.
Bulgaria-Japan economic cooperation to expand from yogurt to electric cars
Japanese companies have expressed interest in the joint production of electric cars with Bulgarian firms, according to Bulgarian Economy Minister Traicho Traikov.Traikov has met in Sofia with a delegation of Nippon Keidanren, the Japan Business Federation, whose visit to Bulgaria was organized by the Bulgarian Chamber of Commerce and Industry (BCCI). During his recent visit to China, the Bulgarian Economy Minister announced Chinese companies were also interested in partnership with Bulgaria for the manufacturing of electric cars.“We are really hoping that Japanese companies that are actively interested in the European market will consider Bulgaria as a manufacturing base,” Traikov told the 33Japanese businessmen, who included the two Co-Chairmen of the Keidanren Committee on Europe - Yokoyama Shinichi, who is also Chairman of the Sumitomo Life Insurancecompany, and Kobayashi Yoshimitsu, who is also the Chairman of the Mitsubishi Chemical Holdings corporation.According to data presented during the meeting, a total of 500 million cartoons of Bulgarianyogurt with the unique bacteria lactobacillus bulgaricus were sold in Japan in 2009.The Bulgarian yogurt is the most famous Bulgarian food product. At a meeting between the Bulgarian Minister of Foods and the Japan's Ambassador to Bulgaria, Tsuneharu Takeda, in November 2009, it was made clear that the Bulgarian yogurt holds about 60% of the Japanese food market, which means that around 40 million Japanese consume the Bulgarian product.LB Bulgaricum, a state-owned Bulgarian company, holds the patent for the production of Bulgarian yogurt with the lactobacillus bulgaricus bacteria. It receives EUR 5 M annually under patent rights from the production of Bulgarian yogurt in Japan.The Nippon Keindanren delegation included Shigetaro Asano, the head of the Meiji Dairies Corporation, which has been producing Bulgarian yogurt in Japan since 1973. Another topic discussed during the meeting of the Bulgarian Economy Minister with the leading Japanese businessmen included measures to increase the number of Japanese tourists coming to Bulgaria. According to Traikov, the opening of a Bulgarian tourism bureau in Japan would lead to a 60% increase. He has advised Japanese travelers to combine their trips to Greece and Turkey with stops in Bulgaria.The visit of the Nippon Keidanren business delegation to Bulgaria is combined with visits to Romania and Slovakia, whose aim is to explore the possibilities for intensifying the commerical relations between Japan and the newest EU member states.
Bulgaria to privatize state construction companies
Bulgaria's Minister of Regional Development, Rosen Plevneliev, announced the State construction companies must be privatized in order to avoid conflict of interests.Plevneliev gave Monday an account of his work during the first year of the term of the cabinet of his center-right Citizens for European Development of Bulgaria (GERB) party.The companies in question are “Construction and Renovation,” “Technoexportstroy,” and “Highways.”The Minister explained it is certain the first two will be sold, but the cabinet and his experts are still undecided on the third one.The sale of the 3 companies was planned during the term of Plevneliev's predecessor,Asen Gagauzov, but real steps in this direction are yet to me made. Plevneliev said he is focusing on the much needed construction of highways in the country and informed that out of the BGN 280 M owed by the State to construction businesses BGN 190 M have already been paid.
INVESTMENTS:
AES contemplates building a $400M solar park in Bulgaria
The American company AES is contemplating on building a 80 MW solar park in Bulgaria costing a total of $400 million, according to the United States ambassador James Warlick, the Bulgarian news agency (BTA) reported on July 28 2010. Reportedly, Warlick himself introduced the project along with some of the AES representatives. According to the ambassador, the American firm has been expecting a development regarding the project for six months - an investment which would otherwise cost the Bulgarian Government nothing. Warlick stressed that the country repeatedly said it seeks energy diversification and foreign investments, indicating that given the circumstances, the American company will not hesitate to invest in the sector if Bulgaria is interested. However, the ambassador has called for an amendment in the bill for renewable energy, which would guarantee that energy would be purchased at fixed prices for a period of 20 years upon the project's completion, Dnevnik daily said.At the end of June 2010, the Bulgarian Government presented its plan for the development of renewable energy sources' sector, but for the moment the aforementioned did not include any new projects delegated by regions or otherwise, meaning, no new facilities are allowed to be constructed, the report said. Thus, the Bulgarian market appears to be hampered, for the moment.Bulgaria is undergoing a boom in the renewable energy sector, but experts in the field have warned the Gvernment that the environment might suffer as a consequence. Additionally, farmers have complained that the construction of renewable energy plants, such as wind farms, are stealing away from vital arable land which would otherwise be cultivated.This is the second time in the space of a fortnight in which Warlick has personally introduced an American company wishing to invest in the country.On July 13, it was revealed that Chevron and Integrity Towers Inc, two United States companies, will compete for the right to extract shale gas in Bulgaria. The development came in the wake of Bulgarian Prime Minister Boiko Borisov holding a meeting with experts from United States fuel company Chevron and Warlick, who briefed him on prospects for shale gas extraction in Bulgaria. Chevron is interested in exploring for natural gas in shale deposits at two sites, whereas Integrity Towers wants to drill in no less than five locations in the north-east, media reports said . Any potential exploration of shale gas in Bulgarian territorial waters, however, will have to be conducted with the coordination of the Ministry of Environment.
Sofiyska Voda invests BGN 325 000 in water-mains
Sofiyska Voda, the water supply and management company of the capital, launched the replacement of three water-conduit systems in the district of Mladost last week. The company was recently taken over by the French Veolia. The investment project is for BGN325,000 and its purpose is to improve the water network in the area as well as the quality of services for over 25 thousand households. The three water-mains are located along Alexander Malinov Boulevard (near the Metropolitan Hotel) and the local roadway of Tsarigradsko Shosse Avenue. The deadline for the execution of construction works is 20 working days and representatives of the company promise that immediately after that their customers living in Mladost 1 and Polygona districts will feel the improved water quality. Indirect benefits from the reconstruction will be felt by all customers in the northeastern areas of the capital, said company officials. The works, however, will cause additional inconvenience to the already handicapped traffic along Alexander Malinov Boulevard.
Bulgarian trade representatives asked to lure foreign investors
Increase of direct foreign investments and of export are defined as the two main tasks for Bulgaria's trade attaches abroad by Economy and Energy Minister, Traicho Traikov.The Minister presented Thursday the new rules for the application process, the work and the assessment of the performance of the trade representatives and opportunities for their staff development.Traikov spoke during a meeting with economy experts and advisors, saying from now on those representatives will be appointed for a 3-year term instead of the current 1-year in order to halt the practice to bring outside people into the system, who then leave to work for the corporate business. Upon expiration of the 3-year term, it can be extended by another 12 months.Those whose term expires will be asked to return to Bulgaria and work for the Economy Ministry for at least 2 years, before being given the opportunity for a new assignment abroad. If the performance assessment is unsatisfactory, the particular representative can be recalled early.The job announcement, application and competition process will first be posted only for the employees of the Ministry, and external applicants will be sought only if the internal ones are not suitable.The changes aim at better rotation of personnel, more predictability, clear assessment criteria all along with reducing by 10% the 2010 budget slated for these representatives.Bulgaria recently reduced the number of its trade representatives abroad from 63 to 58 by cutting posts in Brazil, Los Angeles, the Hague and Portugal, but new ones will be opened in Israel and South Korea. The country now has representatives in 41 countries in Europe, Russia and the former Soviet Republics, in Asia, the Middle East, North America and in Northern Africa.
German investors suggest 101 law amendments to Bulgarian PM
Members of the German-Bulgarian Chamber of Commerce and Industry (DBIHK) have handed the Bulgarian Prime Minister Boyko Borisov a list with 101 ideas for legislationamendments.The list with recommendations to change a total of 24 Bulgarian laws was presented to Borisov Thursday by Bertram Rollmann, President of the German-Bulgarian Chamber of Commerce and Industry (Deutsch-Bulgarische Industrie- und Handelskammer) during a working breakfast, which also included Bulgaria’s Regional Development Minister Rosen Plevneliev and German Ambassador to Bulgaria Matthias Hoepfner.The 101 recommendations are mostly based on a comparison of the legislations in Bulgaria and Germany, and have been described as a response to Borisov call upon the German businessmen to support the realization of crucial reforms in the country. They refer mostly to tax, commercial, labor, and civic law as well as the regulation of the energy market and public procurement procedures.The German-Bulgarian Chamber of Commerce and Industry suggests that the Bulgarian Constitution should be changed in order to allow physical and judicial persons to appeal directly to the Constitutional Court with respect to laws that violate their rights and freedoms. At present, this is allowed only to the President, the Ombudsman, the Council of Ministers, the Chief Prosecutor, the judges from the Supreme Court of Cassation and the Supreme Administrative Court, and a group of at least 40 MPs.
COMPANIES:
Vorskla Steel declares interest in owning Bulgaria's obsolete mill
The CEO of Vorskla Steel Bulgaria, Viktor Demyanyuk, declared at a press conference Wednesday that the company is still interested in purchasing the Bulgarian obsolete steal mill Kremikovzi.The Ukrainian Vorskla Steal, related to billionaire, Konstantin Zhevago, will take part in the public tender for the mill's sale despite the fact the latter is “a jalopy with the price of a Mercedes,” according to Demyanyuk.The CEO insists his company, which has been declared insolvent, has money for the purchase, but wants first to check thoroughly the real condition and state of Kremikovzi in order to make sure he can have a return on the investment and the mill can really produce something that can be sold on the world market.The asking price is BGN 565 517 510 M.Demyanyuk says he already has a recovery plan for the mill; had conducted preliminary talks with the companies to which the behemoth owes money and they were ready to accept differed payments.The CEO further presented documents evidencing embezzlement, Value Added Tax (VAT) draining schemes at Kremikovzi, and the illegal sale of electric power to other companies for prices 25% higher than the market ones.Demyanyuk was firm “Vorskla Steel” was chased away from the mill on purpose with the sole goal to declare it bankrupt.Earlier Wednesday, Bulgaria announced the site and the assets of its largest steelmakerKremikovtzi will be offered for sale in the middle of September, four months after the behemoth was sent into liquidation.
Romanian companies mull over moving to Bulgaria
Romanian companies have announced their intentions of moving their businesses toBulgaria due to the tax policies in Bucharest, the Romanian “Ziarull Financiar” reports. “The new measures, taken on a daily basis by the government, do not surprise me. I want to move Interagro's headquarters to Bulgaria in September. We will translate all documents in Bulgarian by then and we will look for a new building. I would rather pay the 10% flat tax and all the other taxes to the Bulgarian state and pay only land and property taxes here,” said Ioan Niculae, owner of "Interagro", the third biggest Romanian corporation. Niculae has also expressed his frustration with the approach of the Romanian secret services towards the business.“I do not want to be under surveillance day and night only because I am a Romanian entrepreneur,' he said. Interagro has ended 2009 with EUR 315 M in turnover, which is a drop by 70% in comparison to 2008 when the company announced EUR 538 M in turnover.The company has also declared EUR 13,7 M losses after announcing EUR 16,7 M profit in 2008.According to “Ziarull Financiar”, managers of local subsidiaries of foreign companies are also disappointed.“If the government continues to act in such a chaotic and amateur manner, it will lose my trust in the Romanian economy's stability,” said Cristian Cornea, general manager of the local subsidiary of the Polish group “Can-Pack”, which owns an aluminum packaging plant in Bucharest with a EUR 40 M turnover.Similar concerns have been expressed by Alin Ursu, director of “Angelli Spumante & Aperitive”, soft drinks producer with a EUR 14 M turnover for 2009. “We are in the hands of the politicians. What has been done for us so far is catastrophic,” Ursu said, pointing out that the increase of the VAT has led to a 10% drop in the number of trade holdings. He has also noted that the increase of the excise had a negative effect on the sales as well. Florin Pogonaru, President of the Association of Businessmen in Romania (AOAR), has stated that the basic conditions for a good business field are stability and predictability.“Our Bulgarian neighbors have reached this. Their taxes do not change and the investors can see that,” Pogonaru said.
Spain's Grupo Ortiz, Electra set up JV for Bulgaria market
Spain's energy group Electra Holding announced it has joined forces with Madrid-based construction firm Grupo Ortiz to work on infrastructure projects in Bulgaria and other countries in Eastern Europe.The construction company will hold a majority stake in the newly formed joint venture company, which is called OrtizElectra and plans to run in tenders for the construction of railways and purifying stations.In April energy holding Electra announced it plans to build a 100 MW wind power park in the central part of Bulgaria and has already bought 5000 decares of land.Electra started its activities in Bulgaria at the end of 2009 and said it had earmarked a total EUR 650 M for the acquisition and development of renewable energy projects in the country.The investment is to be made over the next four years.Electra operates wind parks with a total capacity of 480 MW in southern Bulgaria, two units for electricity production from biomass with a total capacity of 19 MW and a factory for biofuel with a capacity of 30,000 tons per year.Grupo Ortiz provides construction services in major infrastructure projects in road, railway and air transport, as well as in industrial and business park projects.
Lufthansa Technik expands in Bulgaria
Lufthansa Technik Sofia, a joint venture between Germany’s Lufthansa Technik and the Bulgarian Aviation Group, announced it will invest in the construction of new facilities for aircraft overhaul and maintenance near Sofia Airport.The company, which has served so far 40 planes of more than 20 airlines in Europe, the Middle East and Northern Africa, said it has been flooded by orders and will accept no more by the end of 2011.Another 35 aircraft will be serviced over the next 17 months.The maintenance, repair, and overhaul complex located at the airport of the Bulgarian capital Sofia was opened in October 2008.Together with the Bulgarian Aviation Group, which owns 20% stake in the enterprise,Lufthansa Technik has invested more than BGN 50 M in the modernization of the maintenance facility and the training of the workers.All types of planes of the series Airbus A320 and Boeing 737 are serviced in the repair complex, which has a total area of 6 000 square meters and allows the simultaneous servicing of two planes.Lufthansa Technik has four other similar facilities Schoenefeld Maintenance Centre in Berlin, Lufthansa Technik Malta, Shannon Airspace in Ireland, and Lufthansa TechnikBudapest.