불가리아 주요 경제뉴스 (10 - 17 June 2011)

 

BULGARIAN ECONOMIC TOP NEWS DIGEST

WEEKLY REPORT (10 - 17 June 2011)

 

Sections/headline briefs:

 

MACROECONOMY:

Ø  Bulgaria Chronically Lags Behind in Eurofund Absorption - Study

Ø  Bulgarian inflation rises to 4.8% in May

Ø  Bulgarian Govt Moves to Found Mega-Structure for Infrastructure

 

 

INVESTMENTS:

Ø  Foreign Direct Investment in Bulgaria in January-April 2011 Down by EUR 62.5 Mln

Ø  INTERVIEW - EBRD To Invest over 350 Mln Euro in SEE Renewable Energy Projects in 2011

 

 

COMPANIES AND INDUSTRIES:

Ø  Bulgarian Medicines Market Doubled for Last 5 Years

Ø  Philip Morris, BAT Dump Bulgaria's Cigarette Maker Sale - Report

Ø  EurOmax Finds New Gold Zones Near Bulgaria's Trun

Ø  New coffee chain to open in Sofia

Ø  Bulgarian Govt Grants Chevron Massive Shale Gas Exploration Concession

 

 

 

 

 

 

Articles:

 

MACROECONOMY:

Bulgaria Chronically Lags Behind in Eurofund Absorption - Study

A KPMG study lists Bulgaria the worst among 10 EU member states in terms of contracting and absorbing European funds, 2007-11. At 37% of funds contracted, Bulgaria is last and well below the EU average of  53%. For the Administrative Capacity and Technical Assistance operational programmes though, Bulgaria is at the EU average level. Overall for rate of contracting, the champions are Latvia with 76% of funds andLithuania  with 68%. In terms of funds absorbed, next to last with 10% of funds absorbed, followed only by Romania with only 7%. The top member here again is Latvia with 30% of European funds absorbed, followed by Lithuania and Slovenia. The KPMG study shows Bulgaria as being particularly bad in absorbing funds forscience and innovation, health and energy project, for which the country has not contracted a single Euro up to March 2011.

 

Bulgarian inflation rises to 4.8% in May

Inflation in Bulgaria rose to 4.8 percent in May on a 12-month basis, up from 4.6 percent in April, driven by rising food, alcohol and tobacco prices, offical data showed on Tuesday. on a monthly basis, Bulgaria's consumer price index (CPI) remained unchanged in May from April, the national statistical institute said in a statement. Using the European Union's harmonised index of consumer prices (HICP), which is the European Central Bank's inflation yardstick, the 12-month inflation rate rose fractionally to 3.4 percent in May from 3.3 percent in April. The International Monetary Fund recently trimmed its inflation forecast for Bulgaria this year to an annual average of 4.2 percent from 4.8 percent previously. The IMF expects inflation to slow even further to 3.0 percent in 2012, amid easing pressure from fuel and food prices.

 

Bulgarian Govt Moves to Found Mega-Structure for Infrastructure

Bulgaria's government is certain to set up a state-owned mega-company to be in charge of large-scale infrastructure projects, a somewhat controversial brainchild ofRegional Development Minister Rosen Plevneliev. The new infrastructure company will be called State Company "Strategic Infrastructure Projects". It is to be established as on Thursday, the Bulgarian Parliament adopted amendments to the Road Traffic Act, which include provisions for its setting up. The mega-structure will be place in charge of "strategic infrastructure projects", namely the Struma Highway (running from Sofia to the border with Greece; expected completion date - 2014), the Hemus Highway (running from Sofia to Varna through Northern Bulgaria; expected completion date unknown), or theCherno More (i.e. Black Sea) Highway (running between Varna and Burgas on the Black Sea coast; expected completion date unknown). Unlike the Trakiya Highway (running from Sofia to Varna via Southern Bulgaria; expected completion date – 2012), the Maritsa Highway (running from the Trakiya Highway to the border with Turkey; expected completion date – 2013) and the just completed Lyulin Highway (running from Sofia to the Struma Highway), Struma, Hemus, and Cherno More have been lagging behind. According to the MPs of the ruling center-right party GERB, Plevneliev's proposal is supposed to accelerate the realization of these major infrastructure projects, and to lead to a more efficient absorption of EU funds, especially under EU's "Transport" operational program. Bulgaria's Strategic Infrastructure Projects company will have a status of a state enterprise under the Commercial Act. Opposition MPs such as former Socialist Transport Minister Petar Mutafchiev have criticized the establishment of the new company arguing that it will be eating away at the functions of the existing Road Infrastructure Agency. The previous head of the Agency, Bozhidar Yotov, resigned from his post over disagreement with Regional Development Minister Rosen Plevneliev, including over the establishment of the new statement company for the three above-mentioned highways. According to preliminary estimates, the planning of the Struma, Hemus, and Cherno More highways will cost EUR 160 M, while their construction will total over EUR 4 B. The Struma Highway, whose construction is well under way, alone will cost EUR 1.1 B.

 

INVESTMENTS:

 

Foreign Direct Investment in Bulgaria in January-April 2011 Down by EUR 62.5 Mln

Foreign direct investment in Bulgaria between January and April 2011 decreased by 62.5 million euro (0.2 per cent of GDP), compared with an increase by 378.9 million euro (1.1 per cent of GDP) in January-April 2010, the Bulgarian National Bank said on Wednesday, citing early estimates. The fall was due to net payments on intercompany credits in accordance with the loan repayment schedules of enterprises. The share capital attracted over the period amounted to 234.7 million euro, down by 56.2 million euro. Foreign investment in real estate totalled 52.1 million leva, up from 49.9 million leva. The largest parts of net foreign direct investment came from Austria (116 million euro), Cyprus (46 million euro), and Spain (35.7 million euro). Net payments to Germany, Britain and Japan amounted, respectively, to 108.6 million, 108.3 million and 50.3 million euro. The negative flows were due to net payments on intercompany credits in accordance with the loan repayment schedules of enterprises. Bulgarian direct investment abroad during the four-month period amounted to 24.5 million euro, down from 38.8 million euro a year earlier.

 

INTERVIEW - EBRD To Invest over 350 Mln Euro in SEE Renewable Energy Projects in 2011

The European Bank for Reconstruction and Development plans to invest over 350 million euro ($503.3 million) in renewable energy projects in Southeast Europe in 2011, a senior banker said. There is substantial interest in renewable energy projects in Southeast Europe (SEE) with potential developments under discussion throughout the region, Ian Brown, senior adviser in the power and energy team at the European Bank for Reconstruction and Development (EBRD), told SeeNews in an emailed interview. Recent projects financed by the EBRD in the region include hydro power plants in Bulgaria, Macedonia and Albania, and wind power projects in Bulgaria and Romania. The EBRD has to date provided funding of 168 million euro for renewable energy projects in SEE with a combined project value of 491 million euro and a total capacity of more than 250 megawatts (MW).

The largest renewables projects that have reached the stage of preliminary management approval in the region include the 70 MW Boskov Most hydro power plant in Macedonia, the 68 MW Ombla hydro power plant in Croatia, and a package of small hydro power plants being refurbished and constructed by Serbia's power utility, EPS, as well as potential investment in biomass in Romania, the official said. Wind energy project concepts reviewed by the multilateral lender include the Mozura wind farm in Montenegro, and a number of wind farms in Romania, including the 50 MW Smardan wind farm. The EBRD is working on potential wind projects throughout the Western Balkans but the regulatory framework in these countries is still under development and so no projects are yet ready for construction and financing, Brown said.

An overview of the electricity market in SEE released in late 2010 by energy trading and investment group EFT indicates the region needs 12,100 MW of new thermal capacity, 3,000 MW of new hydro capacity and 1,400 MW of new capacity from renewable sources by 2020. The value of this investment, according to current prices, is about 33.8 billion euro, EFT said. According to data from the pan-European electricity transmission operator, ENTSO-E, quoted by EFT, the SEE countries consumed 282.25 terawatthours of electricity in 2010. Of this amount, 55% was produced in thermal power plants, 27% in hydro power plants, 16% in nuclear plants and 1.0% from renewable sources. Although the countries in the Western Balkans are not yet facing mandatory renewable energy targets as do European Union member states - though this may change in the near future if the Western Balkans countries adopt the EU's recent renewable directive, there is no doubt that in this part of SEE investment in renewable energy will need to increase since it is currently at a low level, Brown said.

The EBRD remains ready to back large-scale hydro power projects in the SEE, an area of project financing that is proving a tough challenge for the countries in the region, especially the former Yugoslav republics. These projects simply have to meet the relevant EBRD rules and, in particular, the environmental and social requirements, Brown said. These large projects are complex to fund for a number of reasons, including the environmental issues they raise, the need to acquire land and often build new access roads and the very large capital investment acquired." Although each project is specific, all large energy developments need a transparent predictable regulatory regime, a functioning regional market - where there is access to electricity transmission capacity, and cost reflective energy tariffs, the official said.

Overall, Brown singled out the lack of a fully-functioning regional energy market as the single biggest barrier to investment. Such a marketplace would allow projects to access a much larger group of potential customers." Commenting on the significance for investment in renewables in SEE of the heavily-subsidised electricity pricing in the region, Brown said energy prices that are below full cost recovery levels act as a barrier to investment in both energy supply and in energy efficiency investments on the demand side. Specifically in relation to the renewables, the absence of fully cost-reflective tariffs increases the apparent price gap between existing conventional generation and new renewable generation."

The EBRD has been and remains very active in policy dialogue with the corresponding governments and regulators throughout the SEE region to identify any regulatory or legal barriers to renewable energy use and development and to help them to remove these obstacles. The bank has provided substantial technical cooperation funds for the governments, utility companies and regulators in the Western Balkans specifically to help them in addressing legal and regulatory issues in order to help develop renewable energy sector and improve energy efficiency, Brown said. An example of this has been the studies financed in Croatia, Serbia, Montenegro, and Bosnia, aimed at helping electricity transmission companies to establish how much wind energy they can safely accept onto their respective national systems, and how this could be increased in the future."

 

 

COMPANIES AND INDUSTRIES:

 

Bulgarian Medicines Market Doubled for Last 5 Years

Bulgarians have bought medicines worth some BGN 2 B for 2010, according to information released at a pharmaceutical forum Saturday. This is double the amount for 2005 and marks a 14% growth with respect to 2009. on average, every Bulgarian has spent some BGN 300 on pharmaceuticals for last year. Prof. Nikolay Danchev from the Medical University in Sofia commented that this trend is due both to the greater availability of various drugs, as well as to greater morbidity for some diseases. According to the data, in 2010 Bulgarians have spend on average BGN 50 for non-prescription drugs, chiefly anti-flu and cold medicines, as well as vitamins an mineral supplements. The drugs most purchased among the group issued with prescription have been those against ulcers, diarrhea, heart disease and cancer. 20 to 30% of medicines purchased by Bulgarians are nevertheless estimated to have remained unused by them.

Philip Morris, BAT Dump Bulgaria's Cigarette Maker Sale - Report

Philip Morris and British American Tobacco, the two biggest companies, which purchased public procurement documents for acquiring a majority stake in Bulgaria's cigarette maker Bulgartabac, have no intentions to bid, reports say. The two companies have bought documents just with the aim of collecting information, they have no plans to bid in the tender, Dnevnik daily reported, citing insiders. Ten companies, including four top-notch investors, purchased tender documentation for the sale of 79.83% of the tobacco group by the deadline on Thursday, the government's asset-selling body said in a statement on Friday.

The four major companies are British American Tobacco, Japan Tobacco International, Philip Morris Bulgaria and South Korea's KT&G Corporation. The other six candidates are Bulgarian law firms Kambourov & Partners and Dzhingov, Guginski, Kiuchukov and Velichkov; Bulgarian-based King's Tobacco; Austrian-based CB Family Office Service and BT Invest GmbH, and US-based Science Capital management LLC. A majority stake - 79,83% - in Bulgaria's state cigarette producer BulgartabacHolding, whose management has been harshly criticized in recent years, was put on sale on April 26 after years of procrastination. The long-delayed procedure was officially given the go-ahead by the agency forprivatization and post-privatization control through an announcement in the State Gazette on May 10. The agency invited strategic and financial investors to buy tender documents by June 10. The bidder with the highest offer will be selected for buyer. No initial price has been set. The buyer of Bulgartabac is expected to be known in September. The consultant for the Bulgartabac sale, Citigroup Global Markets Ltd, was picked by the Bulgarian government in February 2010.

Two of the less profitable plants of Bulgartabac holding - in the cities of Plovdiv and Stara Zagora - were sold in 2009 through the Sofia Stock Exchange - for BGN 31 M and BGN 18 M respectively. The holding currently owns the two larger and more consolidated factories in Sofiaand Blagoevgrad as well as a number of commercial brands.

EurOmax Finds New Gold Zones Near Bulgaria's Trun

The Canadian EurOmax Resources company has discovered new goldzones near the southwestern Bulgarian town of Trun during its drill program. Results include 87 meters at 2.14 grams per tonne gold (285 feet at 0.063 oz per ton gold) in diamond drill hole MTC1174, the first hole to test the region's Ruy target, a 600 x 400 meter gold-in-soil anomaly. "Initial results from our 2011 Drill Program at Trun are very encouraging," Dr. Quinton Hennigh, technical advisor to the company, has commented, according to a press release. "We are drill testing six robust new gold targets this year and already seeing promising results, especially from the Ruy target. Drilling is still underway on additional targets, and we are very optimistic that we will continue to see more positive results from this very large gold project." Gold mineralization at Trun is associated with large granite and syenite stocks that intrude a broad anticline of metamorphic rocks. According to EurOmax, the geologic setting and styles of mineralization display similarities to that of certain gold deposits in the Tintina Gold Belt of the Yukon and Alaska including the Ft. Knox gold deposit, Alaska and the Eagle gold deposit, Dublin Gulch, Yukon.

New coffee chain to open in Sofia

Via Cafe, a newly-established coffee chain owned by a Bulgaria-registered company, will open doors in the Polygraphia Office Centre in the capital Sofia at the end of the summer season, Forton International, which is the exclusive rent agent for the space in the complex, said on June 13 2011. The first coffee house of the chain will span 173 sq m on the ground floor of the business centre, which is located on the Tsarigradsko Chaussee Boulevard. The cafe will also offer products of Turkey's desserts chain Caucasus. By the end of 2011, Via Cafe's owner plans to open more restaurants of the chain in Sofia and outside the capital, Forton said. Currently, there are about 10 coffee chains operating in the country, including Italian onda, US Starbucks, Bulgarian Coffee House, UK Costa caffee, Polish Coffeeheaven, UK Coffee Republic, McCafe and Greek Flocafe. The size of the market cornered by these chains is estimated at 16 million leva a year by Euromonitor.

Bulgarian Govt Grants Chevron Massive Shale Gas Exploration Concession

Bulgaria's Cabinet has formally decided to award a large-scale concession for shale gas exploration to US energy giant Chevron. The decision was formalized by the Borisov government on Wednesday after at the end of May 2011 Bulgarian Economy, Energy, and Tourism Minister Traicho Traikovannounced that US energy giant Chevron landed the shale gas explorationconcession with a whopping offer of EUR 30 M, snatching it from British companyBNK Petroleum, which remained second in the tender. The exploration plot in question is near the town of Novi Pazar in Northeastern Bulgaria, and the Bulgarian government had set a minimum price of only EUR 200 000 for the five year. Traikov himself has expressed his satisfaction that Chevron's EUR 30 M will be poured directly into Bulgaria's state budget. According to the estimates of the bidders, the deposit near Novi Pazar contains between 300 billion and 1 trillion cubic meters of shale gas. In Traikov's words, Bulgaria's shale gas deposits should be able to guarantee its domestic consumption of natural gas for the next 1000 years. Under Bulgarian government concession, Chevron is supposed to draft a working program for its exploration worth EUR 50 M, Bulgaria's Economy Ministerannounced on Wednesday after the Cabinet meeting. In order to start the exploration of the shale gas deposits near Novi Pazar,Chevron will have to pay the Bulgarian state EUR 30 M, and all risks remain for the US corporation – including whether sufficient quantities of shale gas will be discovered or whether a potential extraction will received a positive environmental assessment, Traikov explained. He has explicitly made clear his satisfaction with the tender for the Novi Pazar shale gas exploration concession stating that the selected investor is first-class, and that the tender itself was transparent. Bidders can submit offers until the end of June 2011 for two other shale gasexploration tenders held by the Bulgarian government. US company Chevron made clear its interest in Bulgaria's unexplored but potentially substantial shale gas deposit over the past two years. The perfecting of the technology for extraction from horizontal layers in the USA and Canada has allowed extraction in North America.

 

 

 

Reported by:

Georgi Iliev

KOTRA Sofia

Korea Trade-Investment Promotion Agency

Commercial Section of the Embassy of the Republic of Korea