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Summer holidays are approaching and we are all looking forward to some time ofleisure, travel and tourism. Not surprisingly, this is the focus of the current issue ofour magazine.

Yet there is another reason to discuss such topics in more depth. Both travel andtourism are important sectors of our economy. These industries create income andjobs. They contribute enormously to the state coffers by generating hefty taxablerevenue. At the same time they stimulate the necessary development in other eco-nomic sectors such as infrastructure, construction, agriculture, transport and con-sumer goods manufacturing. It is quite understandable that AmCham Bulgaria andits magazine have been monitoring closely the successes and failures in thesesectors.

Bulgaria has a great tourist potential, which will only grow with the coming EUaccession. The tourist sector will be developed to its full capacity, boosting busi-ness success, tax revenues and adding jobs.

Bulgaria's beautiful nature, varied geography and rich history are major assets,crafting our country's unique appeal: the Black Sea coast, the profuse wildlife,flush greenery and haunting beauty of the mountains, the old monasteries andchurches, the ancient historic sights. Excellent hotels, restaurants and shops havebeen developed by the seaside and in mountain resorts, offering a pleasant staywith plenty of entertainment. The country's reputation across the world has beenbuilt upon the warmth of its welcome to guests. The recently approved official logoof Bulgaria gives a nice symbolic representation of our hospitality.

However, what has always been considered a fault is the lack or insufficiency ofeffective advertising and publicity for the wonderful opportunities this country hasto offer. Were foreign travelers better informed when they plan their routes, theywould be more interested in visiting Bulgaria. Curiosity should be provoked andnurtured, targeting not only potential foreign vacationers' but also with respect tobusiness opportunities in our country.

Trying to make up for the paucity of information about Bulgaria's riches, AmChamMagazine turned out to be very helpful in this direction. It's the 50th issue you areholding in your hands now - quite a record but also a promise. Given our history,we all hope that with the team efforts of the AmCham staff and publisher thismagazine will continue as one of the best-edited and most information-ladenmonthlies in the country.

Best regards,Executive DirectorValentin Georgiev

Dear Members and Friends,

Dear Readers,

You are holdingissue #50 ofA m C h a mB u l g a r i aMagazine. Thisround number isthe reason we donot have the usual 52 pages, but 50plus 2 instead. The issue also hasexactly 50 headlines, sub-heads andinternal headlines in the texts (and ifyou look at the article on Page12"What business wants," devoted to theEU and tax reform, you'll notice it omitsthe habitual sub-head which wouldhave upped the number to 51 spoilingthe spirit of our jubilation).

If that all smacks of empty numerolo-gy, here is a more substantial reason tocheer: the number of foreigners visitingBulgaria has increased by 50 percentduring the first three months of 2004compared with 2003. Way to go. Youwill learn all about it from our analysisof the tourism industry on pages 16-21.

My sincere hope is, however, that theprice per barrel on world's oil marketswon't reach $50 on the occasion ofAmCham Bulgaria Magazine's 50thissue, even though it may be a fittingtribute to our effort in keeping youinformed. The article on petroleumprices "Paying up at the pump" onPage 13 quotes experts who predict$45-$47 in a month or two. We findthat price high enough and would notwant to see it getting any steeper justto satisfy one magazine's vanity. Afterall, your business is more important tous, and high oil prices are usually slow-ing down the economy.

Off with the tongue-in-cheek tone thatthe occasion provoked. In all honesty,we cannot thank you enough for read-ing us and advertising with us. Stickwith AmCham Bulgaria Magazine foranother 50.

Yours truly,Milen MarchevEditor-in-Chief

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A m e r i c a n C h a m b e r o f C o m m e r c e i n B u l g a r i a

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SEASIDE 2004:Bulgaria, the TouristPhenomenon

SEASIDE 2004:Bulgaria, the TouristPhenomenon

Oil Prices Shock

Armed Forces Upgrade to Yeild Over 1 billion Levain Offsets

Macedonia:Par ties,Leaders,Expire Dates

Am Cham News& Events

issue 5050 + 2pages

Oil Prices Shock

Armed Forces Upgrade to YeildOver 1 Billion Levain Offsets

Macedonia:Par ties,Leaders,Expire Dates

Am Cham News& Events

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3M (East) AG . AA KRES EOOD . ABB Bulgaria Ltd. . AbC.R.O. - Bulgaria EAD. Abela Airport Services Ltd. . Abrotea Bulgaria AD . Accor Services Bulgaria .Acsior . ACT Soft Ltd. . Address Bulgaria Holding JSCo.- A real estate company .ADIS Ltd. . AES Corporation . AFA OOD . Ahrend Profesionalni Interiery S.R.O.. AIG Bulgaria . AIG Life Bulgaria . AIMS Human Capital . Alexandrov Ltd. .Allan Collautt Associates, Inc. . Allied Pickfords Bulgaria . American Bar Association- CEELI . American College of Sofia . American Construction Products JSC .American University in Bulgaria (AUBG) . Amylum Bulgaria EAD . Anglo-AmericanSchool of Sofia . Anton Preslavski, Liebert Hiross . APIS - BULGARIA Ltd. . APOLOLtd. . Aries Commerce . Association of Bulgarian Broadcasters - ABBRO . ATEngineering 2000 Ltd. . AUDITING COMPANY VERSI & PARTNERS OOD . AvendiLtd. . AVON Cosmetics Bulgaria Ltd. . BALKAN ES TEAM Ltd. . Balkan NewsCorporation Plc. . Balkan Star . BalkanData / Lefkowitz & Co. . BanqueInternationale pour le Commerce et le Developpement (BICD) . Baxter AG . BayerBulgaria . BearingPoint LLC . BG Radio . Bodyguard-Fire-K Ltd. . BorislavBoyanov & Co. . Bristol-Myers Squibb . BTC-NET Ltd. . Bulgarian AmericanEnterprise Fund . Bulgarian Charities Aid Foundation (BCAF) . Bulgarian Post Bank. Business Links . Business Media Group . Business Park Sofia EOOD .Business to Business . CA IB Bulinvest . CableTel . Carlson Wagonlit Travel .Cefin Bulgaria EOOD . Center for the Study of Democracy . Cilag AG International(Johnson & Johnson) . Cisco Systems Bulgaria . Citibank, N.A.- Sofia Branch .City University . Coca Cola H.B.C Bulgaria SA . Coca-Cola Bulgaria EOOD . COL-LIERS International . Combi Trans Bulgaria Ltd. . Compass Translation Services .ConsulTeam Recruitment and Selection Ltd. . Contex Drouzhba Ltd. . CorstjensWorlwide Movers Group . CPM International Ltd. . Cresta Marketing S.A. . Curtis/ Balkan Ltd. . David Hampson, Grenville . DeConi M&A . Deloitte & Touche .DHL International (Bulgaria) Ltd. . Diageo Bulgaria Ltd . DIMON Bulgaria . Djingov,Gouginski, Kyuchukov, & Velichkov . Domaine Boyar AD . Dow Europe GmbHRepresentation Office . Dr. Emil Benatov & Partners . Effekten Und Finanz - BulgariaEAD . Electron Progress AD . Eli Lilly and Company . Elido . Elieff Center forEducation and Culture of the American University in Bulgaria . Ellen Ruth Greenberg,Ph.D., Dr. I.S. Greenberg Medical Center . Elta consult AD associated partner of CBRichard Ellis for Bulgaria . Emerson Process Management AG . EncouragementBank AD . Engineeringservice Sofia Ltd. . EQUEST EAD . ERATO HOLDING PLC. Ernst & Young Bulgaria . EURO RSCG New Europe Sofia . Expo Team Ltd. .First Global Health Corporation . Flying Cargo Bulgaria Ltd. - Licensee of FedEx .Force Delta Ltd. . Forem Consulting Bulgaria . General Electric International .Genmark Automation Bulgaria . GEO - CAR Ltd. . Glaxo SmithKline . Goleminov& Goleminov . Group 4 Securitas (Bulgaria) Ltd. . Hayhurst Robinson . HEBROSBank AD . Hewlett-Packard Bulgaria EOOD . Hilton Sofia . Honeywell EOOD .Horizon . IBM Bulgaria . Ideal Standard Bulgaria . In Time Ltd. . Infoguard -Stefan Nedkov . ING Bank Sofia Branch . Interamerican Bulgaria Ins.Co .Interbrands Marketing & Distribution Inc. EOOD . Interpartners Plc. . IP ConsultingLtd. . ISI Emerging Markets (Internet Securities, Inc.) . Junior Achievement Bulgaria. Kamenitza AD . Kamor Auto Ltd. . Kolbis International Transfer Corporation .KPMG Bulgaria . Kraft Foods Bulgaria . Lexim Sofia Ltd. . Lindner Bulgaria OOD. Lirex BG Ltd. . Lowe Swing Communications . M & M Air Cargo Service BG Ltd. M3 Communications Group, Inc. A Hil & Knowlton Associate . Maersk Bulgaria Ltd.. Magnetic Head Technologies . Management Systems International . Maritza EastIII Power Company AD . Marsh EOOD . McDonald's Bulgaria Ltd. . Merck Sharp& Dohme IDEA Inc. . Michael Delia, European Bank for Reconstruction andDevelopment (EBRD) . Microsoft Bulgaria . Miltech Ltd. . MobilTel AD . MotoPfohe Ltd. . Motorola Bulgaria EAD . National DISTRIBUTORS . NDB Ltd. . NDTEquipment Supplies LTD . Net Is Ltd. . NET IS SAT Ltd. . Neumann International. New Europe Corporate Advisory Ltd . Nexcom Bulgaria EAD . Nokia BulgariaEOOD . Oracle East Central Europe Limited - Branch Bulgaria . Orbit Ltd. . PainD'or Ltd. . Pfizer H.C.P. Corporation, Representation Office Bulgaria . PioneerSemena Bulgaria EOOD . Popov Legal Office . PricewaterhouseCoopers . PrimaSoft Ltd. . Procter & Gamble Bulgaria . ProSoft . Radisson SAS Grand Hotel .Rising Force Co., Ltd. . Rockwell/Intelpack . RTC Mobikom . S&D ChemicalsBulgaria . S&T Bulgaria . Sante International OOD . Schering - Plough CentralEast - Bulgaria . SEAF Management Bulgaria EOOD . Sheraton Sofia Hotel Balkan. Sherita M Ltd. . Sienit Ltd. . Smartcom-Bulgaria AD . Sofia Echo Media Ltd.. Stefan Dimitrov, Norman Management Co. Ltd. . Student Labour Office . Sun SpreeHolidays . TechnoLogica . The Atlantic Club of Bulgaria . The Executive Centre .Tissue Bank Osteocenter Bulgaria EAD . TM Auto Ltd. . TMF . TumbleweedCommunications EOOD . Unimasters Logistics Group AD . Unisys Bulgaria Branch .Urban 3000 Ltd. . Via Expo Ltd. . Videolux Ltd. . VOCA Consult Ltd. .Westinghouse Energy Systems Bulgaria Branch . WizCom Ltd. . Wrigley BulgariaEOOD . Wyeth-Whitehall Export . Xerox Bulgaria Ltd. . Zlati Dinev Studio

Board of Directors

of the American Chamber of Commerce in Bulgaria

President Kenneth M. Lefkowitz BalkanData/Lefkowitz & Co.

Vice President Stefan Dimitrov Allied Pickfords

Treasurer Dennis Fiehler Bulgarian American Enterprise Fund

Borislav Boyanov Borislav Boyanov & Co.David Hampson Individual MemberJanet Heckman CITIBANKRoumen Mihailov 3M (East) AGFriedrich Niemann Hilton SofiaGeorgi Randelov IBM BulgariaMaria Shishkova AIMS Human CapitalElitsa Tsaneva Ideal StandardMaria Vranovska Eli Lilly

Ex-Officio Member Reginald Miller US Commercial Attache

Executive Director Valentin Georgiev

Contentsa m c h a m e v e n t s

Bulgarian market to benefit if Sofia and Bucharest enter EU together . . . . . . . . . . . . . . .

Political advantages and challenges of enlargement . . . . . . . . . . . . . . . . .4

e c o n o m y

Tough business news fromBrussels . . . . . . . . . .8By Yuliana Boncheva

Transitional arrangement negotiated by the EU entrants in the competition field . . . . . . .9

What a business wants . . . . . . . . . . . . . . . . .12

Paying up at the pump . . . . . . . . . . . . . . . . . .13By Boryana Semkova

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Bulgaria, the Tourist Phenomenon . . . . . . . . . . . . . . . . . . . . . . . . . .By Marina Tsvetkova

The notorious saga of "Black Sea bombings raids"? . . . . . . . . . . . . . .21

i n f r a s r u c t u r e

Beautiful Bulgaria Project Finances 35 Municipalities . . . . . . . . . . . . . . .22

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Pharmaceutical Sector Prepares for Rapid Expansion . . . . . . . . . . . . . . . . . . .24

Macedonia: Parties, Leaders,Expire Dates . . . . . . . 26By Boyko Vassilev

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New Frontiers in E-security . . . . . . . . . . . . . . .29

l e g i s l a t i o n

Reforming Public Procurement in Bulgaria . . . . . . . . . . . . . . . . .32

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AmCham Bulgaria Magazine is a primary

forum for political and economic analyses,

news, viewpoints as well as for the presenta-

tion of new business opportunities. The arti-

cles in the AmCham Bulgaria Magazine

express the opinions of the authors and do

not necessarily reflect the position of the

American Chamber of Commerce in

Bulgaria.

Publisher

American Chamber of Commerce in Bulgaria

Business Park Sofia, Mladost 4 Area

Building 2, Floor 6, Sofia 1715, Bulgaria

e-mail: amcham@amcham.bg

www.amcham.bg

Editor-in-Chief

Milen Marchev

Deputy Editor-in-Chief:

Christopher Karadjov

Senior Editor:

Irina Bacheva

Layout & Design

Milen Marchev

Printed by: BAGRA Ltd, www.bagra.net

Writers:

Boiko Vasilev, Diana Popova, Kalina

Garelova, Marina Tzvetkova, Petio Tsekov,

Peter Gavrilov, Yuliana Boncheva

Advertising

AmCham Bulgaria:

Nadejda Vakareeva, nadia@amcham.bg

AmCham Bulgaria Magazine:

Milen Marchev, marchev@cit.bg

The AmCham Bulgaria

Magazine reaches a broad audi-

ence of AmCham members,

leading US, Bulgarian and inter-

national companies, US and

Bulgarian decision-makers, all

AmChams around the world.

Subscription is free of charge. If

you would like to subscribe to

AmCham Bulgaria publications,

please contact the AmCham

Bulgaria office.

a m c h a m e v e n t s

Bulgaria needs exposure of its culture, products and human potential abroad, advise U.S. management gurus Dale Miller and Earl Sedlik . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Interview by Irina Bacheva

n e w s

Armed forces modernization projects with obligatory 70% offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .By Irina Bacheva

Company records hassle to ease in 2005 . . . . . . . . . . . . . . . . . . . . . . . . .41

m e m b e r n e w s

Microsoft celebrates its 5-th anniversary in Bulgaria . . . . . . . . . . . . . . . . . . .42

Hebrosbank to use 6 million Euro from EBRD, EU to help develop SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . .44

French Accor to Invest EUR 12 million in Bulgaria . . . . . . . . . . . . . . . . . . . .44

Sport Hour with IVECO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

Ahrend and Allsteel sign North American sales partnership . . . . . . . . . . . . . .45

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AmCham Tennis Tournament 2004: The winner is Balkan Star . . . . . . . . . . . . . . . . . . . . . . . .

n e w m e m b e r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

MobilTel AD

Neumann International

The Executive Centre

AUDITING COMPANY VERSI & PARTNERS OOD

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Do you care about Cannes? . . . . . . . . . . . . . . . . .50

h u m o r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52

Security Issues

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As a guest speaker at the AmChambusiness luncheon, May 13, H.E. Mr.Dimitris Kourkoulas incited a broad dis-cussion among business circles andAmCham members on Bulgaria's readi-ness for EU membership; NATO and EUexpansion; economic benefits in theenlarged Union. Mr. Kourkoulas assuredEuropean Commission is firm on theentry date for Bulgaria and Romania to

become EU members on Jan. 1, 2007.

"It would be better for Bulgaria to enterthe EU together with Romania as far asthe latter is a transit door to theEuropean market to and from Bulgaria",Kourkoulas stressed. He added theentry rules for Bulgaria and Romaniaare clear and the same as applied tothe other EU candidate countries.

Answering a question about NATOrecent enlargement, US military bases inBulgaria and upcoming EU accession,the Head of European CommissionDelegation assured it is hardly possibleto spur a contradiction in the Bulgarianpolicymaking.

According to Kourkoulas, the accessionof Bulgaria to NATO as well as other

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In a political context, EU enlargement is a historic step towardsthe long cherished goal, on both sides of the Atlantic, of aEurope that is "whole, free and at peace", as articulated bysuccessive US Presidents. After decades during which the divi-sion of Europe in two opposing blocks posed one of the mostserious security threats to the United States, the Westernalliance and world peace, the unification of Europe by peace-ful means, by a process of co-operation, is a major strategicachievement for the US as well as Europe. EU enlargementensures that the democratic transition in Central and EasternEurope is irreversible. By projecting security and political sta-bility east and south, the EU serves not only its own securityand geopolitical interests, but those of the United States andother third countries, too.

The enlarged EU, in the context of the EU's developingCommon Foreign and Security Policy and European SecurityStrategy, will also enable Europe to become an even moreeffective international partner in tackling regional and globalproblems of mutual concern, such as tackling terrorism, prolif-eration of weapons of mass destruction and international crime.

While on a political level enlargement thus brought clear ben-efits both to the EU itself and to its global partners, during thenext few years, the enlarged European Union will also facemany challenges and its policies will have to undergo deep and

e x c e r p t s

Political advantages and challenges

Bulgarian market to benefit if Sofia andBucharest enter EUtogether H.E. Mr. Dimitris Kourkoulas: Public administration needs further reforms and

fight against corruption is necessary

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substantial changes.

In this respect, I would just like to mention in particular twochallenges: Firstly, the successful completion of the EU insti-tutional reform process, and secondly, avoiding the emergenceof a gap between the enlarged EU and its new neighbourstates. In order to tackle the latter challenge, the EuropeanCommission has proposed a New Neighbourhood Policy. Thegoal is to share with our neighbours from Russia to Moroccothe stability, security and prosperity we have created within theenlarged Union. In a sense, this is another concept of enlarge-ment - enlargement without sharing our institutions.

Bulgaria is strategically of high importance for the EuropeanUnion and for political and economic stability in theBalkans. The EU expects that Bulgaria will contribute to theshaping of a political strategy of the EU towards the Balkancountries, which will represent an important part of the new"Wider Europe" concept. Bulgaria is an important strategicpartner for the EU in this region.

Latest developments in EU-Bulgaria

relations and state of play of

accession preparations

Let me now say some words on the timeframe ofBulgaria's accession perspective and on

of enlargement

Kenneth Lefkowitz , AmCham President, at the open gates of Sheraton's Serdica hall, together with H.E. Mr. Dimitris Kourkoulas

to page 6

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East Europeancountries will con-

tribute also to the accession in the EU.There is no doubt the EU membership isfar much complicated in terms of apply-ing legislation, but NATO membershipmeans political and economic stability,and will attract foreign investmentsbeforehand, said Kourkoulas.

The EU diplomat believes the economicadvantages of an enlarged EuropeanUnion for its global partners are obvious.The enlarged EU represents a largerand more open market with a single setof rules, a more trade friendly regulato-ry environment with high standards, andit speaks with a single voice in its bilat-eral and multilateral trade relations.

Although the negotiations are progressingwell, Kourkoulas stressed that Bulgariastill has some reform work to do. Sofiashould work in areas not directly relatedto negotiations such as judiciary, publicadministration, the fight against corrup-tion, child protection, Roma minority inte-gration as well as structural reform. Theprivatization and restructuring of networkindustries, labor market flexibility andbusiness climate improvement wereamong the other mentioned spheres thatneed further efforts. ■

the state of play of accession preparations. After the deci-sion of the Brussels European Council last December towelcome Bulgaria as a member of the Union in January2007, if the country is ready, Bulgaria's future EU member-ship has become very concrete. The Brussels EuropeanCouncil also established the timetable for the completion ofthe negotiations (before the end of 2004) and the signatureof the Accession Treaty (as early as possible in 2005).Bulgaria is well on track with its preparations for accession,and I am confident that with the necessary political deter-mination it will be able to meet the demands of EU mem-bership on time.

With 26 Chapters already provisionally closed, there are noparticular problems with the negotiations. The remaining 4Chapters are Competition, Agriculture, Regional Policy andCoordination of Structural Instruments as well as Financialand Budgetary Provisions.

As was the case for the 10 countries acceding to the Unionon 1 May, an essential task in preparing the ground for thecompletion of the negotiations with Bulgaria (as well asRomania) was to establish a coherent financial framework

for the two countries. When in mid March EU MemberStates approved the Commission proposal for the FinancialPackage for Bulgaria and Romania for the period 2007-2009,this was excellent news. The financial package is both gen-erous and realistic and provided a sound basis for the pre-sentation by the Commission of draft EU common positionson the negotiation chapters with financial implication, i.e.Agriculture, Regional Development and Budgetary provisions.The approval of the package implies that Bulgaria (andRomania) will receive more funds from the EU budget rela-tive to their GDP (around 7% of GDP) and per capita thanany other country (EU 25) in the history of the EuropeanUnion.

The allocation for Bulgaria for the 3 year period amounts toEUR 4 bn 250 mn. It is estimated that from 2007 to 2009about EUR 3 bn will actually be absorbed by the Bulgarianeconomy (provided the country has prepared well for suchabsorption). The rest of the funds will not be lost but willremain to be disbursed in the following years. The EU fundswill be used predominantly for the agricultural sector andrural development (about 1.5 billion) and for the Structuraland Cohesion Funds (EUR 2.3 bn). ■

Mr. Ivan Stancioff /center/, CEO of Cresta Marketing raised the question about Bulgarian and Romanian EU

membership

Political advantages and ...

AmCham members asked questions on Bulgaria's readiness for EU membership; NATO and EU expansion;

economic benefits in the enlarged Union

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In early May the Bulgarian governmentsprang an unpleasant surprise on tax-payers. The excuse was, again,Brussels. The European Commissionhas insisted that Bulgaria shouldurgently amend the Corporate IncomeTaxation Act and limit the differentforms of state incentives for business.

The latest consultations between theBulgarian government and theEuropean Commission made it clearthat some state aid measures, includ-ing tax incentives, are incompatiblewith the European regulations andshould either be abolished or adjusted."We didn't keep on the right side of thelaw with regard to the State Aids Act,according to which each support whichaccords privilege to one enterprise atthe expense of another one, undercutsfair competition," a Ministry of Financerepresentative said.

Each grant of privileges or stimuli to aparticular region, sector or companyis considered a state aid in theEuropean Union. Stamen Tassev,deputy finance minister, said that theinterests of many companies whichnow enjoy tax relief will be affected bythe strict implementation of EU rules. Italso became clear that the Ministry ofFinance has only a rough idea aboutthe value of the relief which the busi-nesses in Bulgaria now have, andabout the effect of tightening of theregime.

Members of parliament displayedbewilderment and indignation at thenews. Now the parliament will have toabate 'fresh' tax reliefs initiated by thegovernment and adopted in the pastfew years. For example, the newlyestablished regime for zero profit tax inmunicipalities with high unemploymentwill be tightened drastically. For thelast few years a lot of companieschose to do business in such regionsbecause of tax relief. Another forth-coming restriction associated with the

requirements for rescheduling of taxeswill undoubtedly lead to a sequence ofbankruptcies.

The firms which get tax reimbursementare obliged to invest their savedresources under new, stricter condi-tions. Ministers and financial expertsexplained to the National Assemblythat Bulgaria has to agree to the newconditions, however hard they may be.Otherwise the country will not be ableto conclude the negotiations with theEU by the time fixed, especially theCompetition Chapter negotiations, andwill put off its admission to the EU.

Nina Chilova, a ruling party MP, askedwhy the government had proposed taxincentives which run counter to theexisting practice in the EU in the firstplace. Brussels insists that we shouldrevise our legislation and harmonize itwith the European law right awayinstead of waiting until the year 2007,offered as a matter of explanation

Tough business news from Brussels European Commission requires urgent limitations on tax holidays

Prime Minister Simeon Saxe-Coburg Gotha, Minister of Finance Milen Velchev and the Minister of European

Affairs Meglena -Kuneva - the three Bulgarian officials from the current government deeply involved in the

EU negotiation process.

By Yuliana Boncheva

Companies from Bulgarian clothing industry are situated

for corporate tax. Those companies will be among the firs

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Atanas Katsarchev, advisor to thefinance minister. He said that Bulgariahas to hurry because the EuropeanCommission had gained "painful expe-rience" by accepting the ten new coun-tries into the EU on May 1. It becameclear that they had not carried outtheir engagements to adjust their lawsand now they are facing sanctions.That is why Brussels will inspect theBulgarian legislation very closely inadvance.

The worst news is that the EuropeanCommission requires a thorough aboli-tion of preferences in the followingsectors: coal mining, steel industry, carmanufacturing, shipbuilding and pro-duction of synthetic fibers. These arethe so-called "sensitive sectors" for theEU, where rivalry is intense.

The concerned businesses had tolearn from the media rather than fromgovernment officials directly what willhappen to them.

Which preferences will be

restricted

The changes will affect one of thenewest stimuli to the business inBulgaria - the zero rate for corporatetax in regions with high unemployment.To claim reimbursement of the total taxon profits in the municipalities with

high unemployment firms will have tofulfill much stricter requirements fromnow on.

The remitted taxes should be investedin buildings and equipment, know-how,licenses and patents, and the value ofthese assets should be at least twicethe remitted amount. The assetsacquired through such investmentsshould remain possession of the firmfor at least five years.

These new requirements will not applyto enterprises which have received lessthan 200,000 Leva in state financialbacking over the last three years. TheMinistry of Finance explained that veryfew firms enjoy this type of tax reliefand the total amount of the remittedtaxes is only about 1 million Leva peryear. So, most of the beneficiaries ofthe preference will not suffer from thistightening of the regime, the ministryexperts said.

From now on the firms will have torequire permission for admissibilityfrom the Commission for Protection ofCompetition in order to make use oftax benefits for solid investmentsexceeding 75 million Leva.

At present when new jobs are opened,the security payments decrease thetaxable financial result. This reliefbecomes difficult if another form ofstate aid is used, for example forinvestments. In addition to this, in orderto make use of the relief, the newlyemployed should have been registeredas unemployed and should keep theirjobs for at least three years. This reliefshould be abolished altogether in coalmining, the steel industry, transporta-tion and shipbuilding trades.

The firms which execute priorityinvestment projects under the abol-ished Foreign Investments Act will alsosuffer from the tax repairs. The statehas undertaken an engagement toreimburse 30 percent of their tax onprofit for a period of 10 years. Thestimulus will be in force until 2007, butnow this measure has to be terminat-ed before the end of the period. It willbe valid until 2006 only.

The government seeks a new way tocompensate the companies victims ofso-called wind of change. Ministry of

The European Commission andBulgaria are still holding negotia-tions on the Competition Chapter ofthe acquis, which began in March2001. Sofia may draw on the experi-ence and tenacity of the stateswhich have been a part of the EUsince May 1, 2004.

The entrants succeeded to agree aseries of concessions and transitionperiods, so that the abatement andtermination of the "incompatible"state aids - direct subsidies, tax hol-idays, and the likes - can be carriedout gradually and be less damagingto their economies. Some transitionperiods extend to 2011.

Brussels is urging Bulgaria to curball forms of state incentives forcompanies even before it joins theEuropean Union in 2007. Is this anact of fair play on the part of theEU? And will the Bulgarian govern-ment again stomach the all-too-highEuropean requirements with itshabitual conformity?

Sofia has already raised white flag,if we judge by the words of FinanceMinister Adviser AtanassKatsarchev, who said, "Unfortunately,we are not in the position to say inwhich sectors there should be pref-erences."

Following are the transition periodsagreed by the newly admitted EUmembers:

The biggest concessions wereachieved in connection with statesubsidies. Various arrangementshave been reached for transforma-tion of these subsidies into regionalinvestment aid. The Czech Republic,for instance, has to restructure itssteel industry by December 31,2006.

Hungary succeeded to obtain most

Transitional arrangement negotiated by the EU entrants in the competition field

regions with high unemployment because of the zero rate

ffected by the EU tax changes requirements

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Finance data show that the curtailmentof the preference will affect five firms:M-Tel, Metro, Prista Oil, Shell andStilmet. The Ministry of Finance nowoffers a rebate of 58 percent insteadof 30 percent for 2006. The companiesinsist that the reimbursed tax shouldbe at least 64 percent. However, thispercentage exceeds the limitationimposed by the European Commission- stating that a tax deduction should beunder 60 percent.

Troubled enterprises will not benefitfrom state aid, including reimbursementof corporate tax. They will be recon-structed and strengthened instead.Extension and rescheduling of tax lia-bilities will only take place after thecandidate presents a security whichcovers both the principal and the inter-ests.

The extension and rescheduling of taxliabilities of financially embarrassedenterprises will be banned. Troubledenterprises will be considered firms

which have been at a loss for the pasttwo years, whose sale receipts aremore than 50 percent lower thanthose for the previous year, and thenet value of their assets is a negative.Thus a lot of firms will be doomed tobankruptcy.

Banks will also get the taste of EU-style austerity. The term for carry-overof losses is reduced from 10 to fiveyears for them. In this way they will betreated on par with the rest of thecompanies.

The National Assembly has to definethe criteria for issuing permissions forassessment of VAT on goods importedunder a special order, as well as therequirements to those who claimreliefs. This is a positive change, sinceso far such decisions have been takenat the Finance Minister's own discre-tion. It is also a positive change thatallows not only foreign but also localcompanies to operate in the free eco-nomic zones. ■

concessions. Budapest will abolishthe tax holidays for small and medi-um enterprises by the end of 2011;phase out fiscal aid for off-shorecompanies by the end of 2005;phase out incompatible fiscal aidgranted by local authorities by theend of 2007; convert incompatiblefiscal aid for large companies intoregional investment aid. The conver-sion of incompatible fiscal aid forlarge companies into regional invest-ment aid is to follow a complex for-mula. The aid will be limited to amaximum of 75 percent of the eligi-ble investment costs if the companystarted the investment under thescheme before January 1, 2000,and to 50 percent if the companystarted the investment after thatdate. In the automotive industry theaid is further limited, and set at 40percent of the maximum aid ceiling(e.g., where the regional aid ceilingfor other types of investment is 75percent, the formula gives 40 per-cent x 75 percent = 30 percent forthe sector).

Poland has a transition period torestructure its steel industry, whichhas to be completed by December31, 2006. The country has to termi-nate the provision of incompatiblefinancial aid for small enterprises bythe end of 2011 and for mediumenterprises, by the end of 2010. Atransition period was also agreed forconversion of incompatible financialaid for large companies into regionalinvestment aid: the aid will be limitedto a maximum of 75 percent of theeligible investment costs if the com-pany has obtained its permit beforeJanuary 1, 2000, and to 50 percentif the company has obtained it afterthat date. In the motor vehicle indus-try, the aid is further limited and setat 30 percent of the eligible costs.

Malta also agreed considerable tran-sition periods. They are as follows:phasing out incompatible financialaid to small and medium enterprisesby the end of 2011; conversion ofincompatible fiscal aid for largecompanies into regional investmentaid (the aid will be limited to a max-imum of 75 percent of the eligibleinvestment costs if the company has

Country 1998 1999 2000 2001 2002

EU-15

Austria 1.04075 1.01656 0.995166 1.0121 1.01583

Belgium 1.03006 1.02622 1.00314 0.988758 0.982414

U K 0.701482 0.70331 0.688622 0.686344 0.681802

Germany 1.11342 1.09613 1.06841 1.07374 1.06797

Greece 0.736387 0.743377 0.745268 0.763848 0.757344

Denmark 9.45389 9.18486 9.15142 9.18928 9.36701

Ireland 0.966916 1.00619 1.03789 1.08385 1.09658

Spain 0.813059 0.800549 0.808001 0.824876 0.829035

Italy 0.887775 0.883737 0.879577 0.900828 0.917512

Luxembourg 1.11957 1.07311 1.07629 1.09788 1.10472

Netherlands 1.00784 1.01087 1.00662 1.0111 1.02686

Portugal 0.715965 0.709011 0.708271 0.723928 0.732898

Finland 1.07583 1.07253 1.06588 1.07384 1.09752

France 1.0278 1.01339 0.996174 0.990156 0.987225

Sweden 10.4875 10.2031 10.0073 10.2777 10.4355

Bulgaria 0.560522 0.566259 0.589502 0.617685 0.646195

PURCHASING POWER PARITIES AT THE GDP LEVEL

(1 PPS = ... national currency/euro fixed for Euro-zone countries)

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obtained the entitlement for the taxexemption before January 1, 2000,and to 50 percent if the companyhas obtained the entitlement for thetax exemption after January 1,2000); aid for restructuring of theshipbuilding sector until the end of2007; phasing out operating aidunder the Business Promotion Actby the end of 2008; adjusting themarket in the import, stocking andwholesale marketing of petroleumproducts in compliance with the EUrequirements by the end of 2005.

The European Commission and thenew EU members agreed on a sep-arate scheme of state subsidies forenvironmental protection. Transitionalarrangements were agreed for invest-ments that relate to standards forwhich a transitional period has beengranted under the EnvironmentChapter. The aid is limited to theregional aid ceiling with a 15 percentsupplement for small and mediumenterprises. For existing installationsfor pollution prevention and control(IPPC) covered by a transitional peri-od the aid amounts to 30 percentuntil the end of 2010. For IPPC-relat-ed investment not covered by a tran-sitional period under the EnvironmentChapter, the level of 30 percent aidintensity was accepted until October31, 2007. For large combustionplants, an aid intensity of 50 percentwas agreed for investments madeduring the transition period.

Slovakia has a transition period toconvert incompatible fiscal aid pro-vided to one beneficiary in the auto-motive manufacturing sector intoregional investment aid (the aid willbe limited to a maximum of 30 per-cent of the eligible investmentcosts). Incompatible fiscal aidextended to one beneficiary in thesteel industry has to be discontinuedat the end of 2009 or when the aidreaches a pre-determined amount.The objective of the aid is to facili-tate the rationalization of excessstaffing levels, the resulting totalcost being comparable to the aid.

Estonia, Latvia, Lithuania andSlovenia have no transition periodsunder the Competition Chapter. ■

The Bulgarian Chamber of Commerceand Industry (BCCI) presented theviews of its members about a suc-cessful tax reform during a round tablecalled Taxes 2005.

The biggest problems of entrepreneursseemed to related to the VAT.Businesses insist that the term forreimbursement of the tax credit shouldbe reduced from 45 to 15 days, as it isin the European Union.

The BCCI insists on the introduction ofa mandatory ceiling of 5,000 Leva forregistration under the VAT Act and onconsidering the possibilities for volun-tary registration, where no minimumturnover is required.

The mandatory VAT registration ofdairy and bread producers will be a

measure to cope with the "gray" sectorand the unfair competition betweennon-registered producers and regis-tered producers, who diligently paytheir taxes.

The business community has notabandoned its idea for a differentiatedVAT rate. The application of lowerrates for milk, bread and flour, books,medicines, newspapers and magazineswill also bring Bulgaria closer to theEU, where VAT abatements for certainsectors are a common practice.

The BCCI believes the profit tax rateshould be 10 percent. The governmenthas promised that the corporateincome tax will be 15 percent in 2005.The Chamber supports the idea pro-moted by some economists for a sin-gle income tax rate. ■

What a business wants

Bojidar Bojinov, President of the Bulgarian Chamber of Commerce and Industry and the Minister of Labor

and Social Policy Christina Christova are permanently involved in the negotiations with the government

about the EU requirements.

World oil prices have struck a record high since the beginning of2004, driven by low stocks, geopolitical tensions and conflicts insome of the large producer countries. Rising demand in Chinaand big importers like the USA struggling to increase strategicstocks have also influenced the prices.

Earlier in 2004, encouraged by growing economic expansion, theOrganization of Petroleum Exporting Countries (OPEC) decidedto cut supply by 1 million barrels per day, bpd (1 barrel = 158.9liters) from April 1. The reduction in production from 23.5 millionbpd was aimed at preempting any weakening in prices, ahead oftraditionally lower demand in the second quarter of the year.

But prices then did not surge to the shocking $40 per barrel.Instead, this happened in early May, after a series of incidents atoil facilities in the Middle East and continued tension in the region.

The upward trend, which started in 2001, turned out sustainableand currently prices are nearly 50 percent (about $10 per bar-rel) higher than they were three years ago. In real terms, todayoil is even more expensive than it was after the 1986 priceshock. Citigroup analysts believe that in the heat of the summeroil will reach $44.5 to $45 per barrel because of the traditional-ly higher consumption. Investors are skeptic about Saudi Arabia'spromises that it will unilaterally boost its output to quell tensionon the oil market and their mistrust is backed up by shippingexperts, who say they cannot see the world's biggest producerand exporter preparing itself to increase supplies. The

key issue to long-term investors

is whether oil prices will stabilize at the current higher levels.Most analysts think that the world should already forget aboutcheap oil, for the simple reason that the development of new oilfields will be much more expensive than it has been for the past20 years.

As a general rule, development first begins from the cheapest-to-plug deposits, in the United States and the Middle East. Thedecrease in world reserves could only be overcome by meansof advanced technologies, and they will inevitably push pro-duction costs up. It is an undisputed fact that many of the oilwells in the Middle East have been almost spent. Some wellsin Oman, for instance, already yield 85 percent water and a

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The world economy is not insured

against a new petroleum shock and oil

prices will increase one way or another

By Boryana Semkova

Trader works in the S&P futures pit at the

Chciago Mercantile Exchange June 1,

2004. U.S. stock-index futures declined

amid concern that rising energy prices may

stif le economic growth. OPEC producers

said they feared an expected deal to hoist

crude output limits may fail to quell an

escalating world oil price scare.

REU

TER

S/J

ohn G

ress

Paying up at the pump

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mere 15 percent in oil. Thus cheap oil will be more oftenreplaced by expensive oil.

It is important to estimate to what extent the world is dependenton the Middle East reserves. Many observers suppose theRussian reserves are much richer than proven so far. But evenif the Russian reserves are larger than expected, even if newdeposits are found, even if the technology for pumping purer oilsis improved, nobody can change the fact that most of thereserves are located in the Middle East.

For the past 10 years the world crude oil reserves have increased4 percent, while consumption has risen 12.5 percent. Given thecurrent production level of 75.5 million bpd, a new field withabout a billion-barrel capacity has to be discovered every 13days to replace the spent reserves. The reserves discovered inthe 1990s amounted to 37 billion barrels, while consumptionstood at 253 billion barrels.

What about consumption? Both in North American and in Europe,demand for oil and oil products somewhat declined immediatelyafter the oil shock of the 1980s, but has since been growing,though slowly. Consumption in the Asian-Pacific region isincreasing at higher rates. Some 30 or 40 years ago oil con-sumption there was much lower than in Europe. Now demandhas grown. To a large extent that is due to the economic boomin China and India. Few doubt that

the prices of black gold will be rising

and the only question is by how much. Oil prices hit record lev-els in dollar terms in May 2004. Compared to the second half of2003, Brent North Sea crude oil appreciated between the begin-ning of the year and the first ten days of May by 18.5 percent indollar terms, 12 percent in Euros and 6.3 percent in Britishpounds. In the case of U.S. WTI petroleum, the increase in dollarterms over the same period was 22 percent, 15 percent in Euros.

If inflation is taken into account, however, things look quite dif-ferent. According to Deutsche Bank calculations, the prices of oilhave to reach some $50 to $55 per barrel to equal the peakprices of the 1990s in absolute dollars. Adjusted for inflation, toreach the records of 1973 and 1989, oil prices today have toexceed $60 and $100 dollars per barrel, respectively.

OPEC is considering raising its price band from the unrealistic$22 to $28 per barrel at present to $30 or $38 per barrel. Theprice band concerns the so-called OPEC basket, which includesseven crude oils produced by OPEC members. Since the mostcommented oils - Brent North Sea and U.S. WTI - are by rule $1to $3 more expensive than the OPEC basket, the decision wouldonly result in the cartel's catching up with current market pricesin its upper band. A score of

intertwined negative consequences

and concerns over the high oil prices will be troubling the worldeconomy. Their impact on inflation in the Eurozone will hardlyallow the European Central Bank to cut its interest rates, even ifit wants to. A reduction in the ECB interest would help decreasethe Euro/dollar rate and make European exports more attractive.The pressure on the U.S. trade deficit would be increasing, which

would make the dollar weaker and weaker. At the same time thegreenback would further pump up the prices of dollar-denomi-nated oil. China's inflation and balance of payments would alsobe hurt, the more so that the trade balance of the Asian gianthas all at once shown a deficit.

The negative concerns also include the unpredictability ofOPEC's actions, which can always reduce its output ceiling.OPEC succeeds to dictate the conditions on the world oil mar-ket by periodically negotiating its production quota and limitingoutput. The agreement of the quota is the result of a balancebetween contradicting interests of the organization's members,namely, their desire to increase dollar revenues for their budgets,concerns that the high prices may limit demand and thus offsetthe effect of the more expensive oil, fears lest they should yielda market share to the independent producers and infuriate theirpowerful Western economic allies. Insecurity is also fueled bythe situation in Venezuela, Nigeria and Iraq. The worst fears areconnected with possible disruption to Middle East supplies byterrorist attacks.

The steady increase in oil prices from $25 per barrel three yearsago to $40 now will bring about a decline in the world's grossdomestic product (GDP) by 0.5 percent, or $225 billion, in thefirst year of high prices, an analysis of the International EnergyAgency (IEA) contended recently. The world's combined GDPwas $49 trillion in 2003.

The same analysis forecast that the GDP of Organization forEconomic Cooperation and Development (OECD) countries willdrop 0.4 percent, unemployment will rise, inflation will surge by0.5 percent. High prices will reduce GDP in the Eurozone by0.5 percent and boost inflation by 0.5 percent. Event in Japan,whose economy is relatively less oil-intensive, GDP will edgedown 0.4 percent in the first year of steady oil increase.Thanks to its own production, which covers 40 percent of con-sumption, the United States economy, which is the world'sbiggest importer, will suffer less in the short term. The IEA cal-culates a 0.3-percent decrease in the U.S. GDP in the firstyear of high prices.

Further on, the high oil prices will be most detrimental to thedeveloping economies, which are highly dependent on oil importsand use the black gold much less efficiently than the industrial-ized countries. The IEA expects that as a result of the high pricesthe GDP of the Asian countries will fall by an average of 0.8 per-cent, while the drop in the GDP of the most poor and indebtedcountries may range between 1.6 percent and 3 percent. ■

Prices of crude oil at NYMEX for last 12 months

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No analysis dedicated to Bulgarian tourism over the last sev-eral years fails to include some emotional messages aboutthe generosity of nature in the homeland of the mythicalsinger Orpheus and legendary slave rebel Spartacus. Bulgariaboasts some 300 sunny days a year, more than 600 mineralspas, sandy sea beaches and inviting mountains. The coun-try is located on a token 2 percent of Europe's territory, butit attracts tourists from all over the world.

These analyses also add some strictly economic interpreta-tions of the tourist phenomenon "Bulgaria," which sound muchdrier. Experts unanimously define the country as the "preferreddestination" for a huge number of foreigners. At the same time,the country keeps on setting new records in terms of numberof visitors, increased revenue to the budget, influx of invest-ments and additional employment for the local workforce.

It is not necessary to read between the lines in order to iden-

tify the points of intersection of the two aspects of Bulgaria'stourist business. It is also hardly necessary any more to resortto well-worn phrases, referring to tourism as the economy'slife vest, as a priority sector or a pillar of national economy.

Tourism is a genuine solution for this country, branch expertssay over and over again. Searching for the correct solution tothe problems must be ranked high on the daily agenda ofpoliticians and businessmen.

The achievements

in figures

"Tourism in Bulgaria is doomed to success," former NevadaGovernor Bob Miller told the participants in the FirstInternational Conference "Bulgaria - the Dream Country" inearly 2002. Gov. Miller added that his forecast would cometrue only with the genuine cooperation between the tourist

Bulgaria, the TouristPhenomenon

The tourism industry has been breaking a record after a record. Few doubt that

the sector, considered a main pillar of country's economy, is destined for suc-

cess - yet a lot needs to be done to avoid blowing off such a great chance

Lydia Shuleva,

Deputy Prime Minister and Minister of Economy:

"Bulgaria is not simply a dream country. It is a country where dreams start coming true. TheOlympic Games have placed Bulgaria in the focus of tourist travels this year. We have a lot todisplay. I am convinced that the Bulgarian companies will face the challenge with success andwill offer high-quality services and interesting experiences to the guests of the Olympics."

By Marina Tsvetkova

industry and the government. The incumbent cabinet, he said,is dedicated to developing tourism as a priority sector. "If thathappens, then I will have to book a hotel room months inadvance as all the hotels will be occupied," the former gov-ernor joked.

A year after that, the results reported by Bulgaria's touristsector despite unfavorable developments in the world econo-my were more than encouraging.

Revenue from international tourism stood in 2003 at $1.62 bil-lion, according to data released by the Ministry of Economy.This was by 21 percent more than the 2002 revenues andamounts to 13 percent of Bulgaria's GDP. Revenues exceed-ed the $1.5 billion target set in the forecasts of governmentfinancial experts. The data seem especially encouraging giventhe background of worldwide slump in travel, which reported

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Country of origin Total Tourism Personal Business Others Transit

Total 6 240 932 3 531 567 28 656 215 760 271 880 2 193 069

Austria 67 423 23 215 606 7 514 2 566 33 522

Belgium 52 733 32 176 175 2 834 286 17 262

United Kingdom 173 765 159 341 684 9 841 909 2 990

Germany 631 448 534 582 1 981 16 536 6 210 72 139

Greece 644 512 547 700 962 24 551 14 149 57 150

Denmark 47 434 42 708 95 1 323 260 3 048

Israel 72 883 69 055 318 2 925 225 360

Ireland 7 300 6 249 57 795 72 127

Spain 10 625 6 871 226 2 482 331 715

Italy 46 465 24 582 688 15 430 1 664 4 101

Canada 6 826 4 368 435 907 146 970

Luxembourg 2 552 2 378 11 96 29 38

The former YugoslavRep. of Macedonia

886 939 672 385 141 1 716 20 484 192 213

Netherlands 80 131 21 726 340 4 149 1 054 52 862

Norway 17 972 15 605 77 628 97 1 565

Poland 193 989 61 819 290 2 757 4 592 124 531

Portugal 2 270 1 489 25 491 88 177

Romania 606 572 76 645 563 7 989 19 888 501 487

Russian Fed. 153 994 121 332 1 889 9 224 17 836 3 713

Slovakia 144 476 63 912 83 1 029 3 974 75 478

USA 45 874 31 126 1 473 8 690 1 254 3 331

Turkey 607 914 33 007 10 361 42 528 68 336 453 682

Ukraine 104 380 42 385 865 3 959 39 647 17 524

Hungary 205 085 21 848 150 2 916 6 586 173 585

Finland 50 139 48 833 83 722 68 433

France 49 795 35 766 644 7 557 676 5 152

Czech Rep. 142 096 78 392 262 2 493 4 370 56 579

Switzerland 18 180 14 405 191 2 174 191 1 219

Sweden 79 026 70 461 314 1 669 211 6 371

Yugoslavia, FR (Serbiaand Montenegro)

887 298 591 781 610 6 197 15 508 273 202

Other countries 200 836 75 425 4 057 23 638 40 173 57 543

VISITS TO BULGARIA, BY OBJECTIVE OF TRIP AND BY COUNTRY OF ORIGIN, IN 2003

Source: National Statistics Institute, March 2004

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a 1.2 percent drop as a result of 9/11 and the SARS epi-demic.

Bulgaria is emerging as the fastest developing destination onthe Old Continent. The statistical data of the EuropeanCommission on Tourism ranked Romania, with 14 percentincrease, Iceland, with 12.1 percent, and Italy, with 7.9 percent,after Bulgaria, which topped of the list in terms of tourismgrowth. Net revenue from the sector in 2003 stood at $886.8million. Some 4.047 million foreigners visited Bulgaria lastyear, which is 17.9 percent more than in 2002. Of them, 3.5million came to Bulgaria for rest and vacation, which wasagain by 18 percent more than during the previous year.

Greece is Bulgaria's major tourist market. Bulgaria was visitedby more than 547,000 Greek tourists, up by 40 percent com-pared to 2002. Next comes Germany, with 534,000 visitors,and Macedonia, with more than 228,000 tourists. Great Britaintook the fourth place with more than 159,000 tourists, followedby Russia with 121,000. Bulgaria emerged as the most attrac-tive destination for tourist from the European Union, whosenumber increased by some 25 percent to 30 percent. Thenumber of tourists from the EU member states in 2003 stoodat 1.6 million, with another 500,000 who visited Bulgaria dur-ing the first two months of 2004. The number of Westerntourist who visited Bulgaria in January and February 2004 roseby 52.11 percent compared to the same period of last year.There was a dramatic increase of 43 percent, year-on-year, ofthe number of British tourist who visited Bulgaria in 2003.

After a certain backlash in the number of tourists from EasternEurope reported over the last several years, Bulgarian resortsare gradually reclaiming their positions on these markets aswell. The number of Russian tourist rose by 22 percent, ofCzech by 62 percent, and of Slovak by more than 50 percent.

Experts attribute the vigorous development of tourist businessmainly to the performance of the private sector, where mostinvestments were made. Some 20 percent of the $2.3 billioninvested by Bulgarian entrepreneurs in 2003 was concentrat-ed in tourism. More than $250 million were invested over thelast three years in the most popular seaside resort, SunnyBeach. Fifteen new hotels and an aqua park will be launchedthis year in Sunny Beach, and some 300,000 tourists areexpected there this year.

The construction of the specific infrastructure substantiallyimproves the quality of tourist services. Close to 30 millionEuro was invested in the renewed ski center of Bansko. Thenew gondola lift, completed in late 2003, is one of the com-ponents of this project. The lift has the capacity to carry2,000 passengers per hour from an elevation of 900 m to1,600 m. The 6-kilometer trip takes about 20 minutes andbrings tourists to the heart of the majestic Pirin mountain, rightat the base of one of its tallest peaks.

"Tourism is among the priority sectors on the agenda of ourgovernment, and I am glad to say that this sector has provenin practical terms its major importance for Bulgaria's econo-my in 2003," Deputy Minister of Economy Dimiter Hadjinikolovsaid. He sees the tourism as the top export sector, with $1.6billion in revenue from international tourism alone. Besides,

the sector reports some 400,000 jobs directly or indirectlyrelated to tourism.

"Bulgaria's tourist product is competitive and complies withmodern European requirements," Hadjinikolov said.

National statistics has it that sea tourism has the largest sharewith some 80 percent. The government policy is aimed at thedevelopment of special types of tourism, namely cultural, his-torical, rural and ecological. Two PHARE programs are cur-rently being implemented in this sphere. One of the programsis dedicated to assuring access to tourist sites, namely byrestoring the fourth-class road network connecting small touristcenters. The other program is dedicated to the development ofcultural tourism. The funds, allocated to these programs, orsome 30 million Euro, must be invested by the end of 2004.

A national strategy for the development of eco-tourism inBulgaria was adopted last year. Eco-tourism is treated as asupplement and as a venue for cooperation with other specialtypes of tourism. The strategy is backed up by a fund forfinancing of projects, as the executive considers this aspectas the future for Bulgaria's tourism. At the same time howev-er the politicians emphasize that they do not underestimatethe importance of sea tourism and of the ski centers, whichhave started to establish themselves as a viable part of thedemanding European market.

Recommendation of the business

Tourist sector experts in Bulgaria claim that no formal surveyand analysis of international trends have ever been made on

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a national level. No national concept and strategy for touristadvertising exist. No comprehensive communication and PRpolicy targets the individual market segments on behalf ofBulgaria's tourist industry.

The owners of the 2,500 private hotels in Bulgaria seem tobe funding advertising by themselves, using a patchwork ofhome-made communication strategies. It is still not clear howthese individual efforts fit into the general perception of ourcountry.

Thus, foreigners may continue to see Bulgaria only as a sea-side destination which offers tourists delicious grills andyoghurt. This will hardly be sufficient to establish a clear andaccurate idea about Bulgaria as an attractive tourist destina-tion. Industry experts have recommended that the state shouldallocate at least 2 million Leva annually for tourist advertising.Substantial funds will be necessary also for the promotion ofBulgaria's tourist products among foreigners residing in thecountry, who are considered to be an underused resource ofpotential customers.

The infrastructure, the security

and the image are the negatives

of Bulgaria's tourism,

said the Chairman of the Bulgarian Hotels and RestaurantsAssociation (BHRA) Blagoi Ragin. He said also that Bulgaria'sunique nature and renewed tourist facilities are its most visi-ble advantages. Yet the country's infrastructure lags behindthe tourism boom of recent years. It is unreasonable to expectthat a 20-percent annual rate of increase of the number of

beds can be sustained by 15-plus-year old roads, Ragin said.The fact that Western vacationers cannot reach our resortsby car is among the reasons to avoid Bulgaria. That is whythe Bulgarian Hotels and Restaurants Association will pressthe government to urgently award concession for the mainhighways and airports.

The quality of tourist services persists as the most seriousoutstanding issue for Bulgaria's tourism. Most of the foreignsector experts note when they visit Bulgaria that the level ofservices is low, with the exception of the hotels in Sofia whichare included in large world-wide hotel chains. It is puzzling toobserve how substantial investments are made in a modernmaterial and technical base, and then it turns out that thelevel of services, whose management requires a substantiallysmaller volume of investments, fails to reach a competitivestandard.

Forecasts under the sign of Athens'2004

Tourism analysts predict that tourist travels will restore theirvolume worldwide. Most 2004 forecasts target a 5 percentgrowth of the tourist industry worldwide, with growth in theAmericas (North, Central and South) expected at 5 percent,in Europe at about 3 percent, in Africa and t he Middle Eastat about 6 percent, and in Asia and the Pacific - at 10 per-cent (provided that the SRAS epidemic is not repeated).

The Olympic Games in Athens are seen as the most impor-tant event that will boost travels to and from Europe in 2004.

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This event is expected to have a positive effect on travels inthe Balkan states, and especially in Greece's neighbors.

The Ministry of Economy said in an analysis that before, dur-ing and immediately after the Olympic Games Bulgaria shouldexpect a rise of transits through its territory both as a resultof redirecting some of the charter flights for the Games toBulgarian, Turkish and Romanian airports, and due to theincreased road traffic from countries separated by a day ortwo by road from Athens.

Some 3,000 participants in the Olympic Games with 1,000 or2,000 coaches from places with climates differing from theBalkans have been arriving for acclimatization and training inBulgaria. Some of them will come more than once.

Previous Olympics experience indicates that some 80 percentof those attending the games proceed to visit the neighborsof the host country. That is why Bulgaria expects to attract anadditional 200,000 tourists. Most of these tourists will comefrom outside Europe as they are expected to use the oppor-

tunity to visit the Balkans as well. Another group of potentialguests, who have never before visited this part of the conti-nent, might come from European states.

It is also probable that during the Games some of the touristsmay decide to take a rest in a more relaxed environment, out-side the hectic euphoria of Athens. These might be middle-aged people, who like to travel but do not have a very spe-cial affinity for the sports per se. It could even be Greek cit-izens, escaping the brouhaha in their home country.

Discounting any impact from the 2004 Olympic Games inGreece, experts predict a 14 percent to 15 percent increasein the number of foreign tourists in Bulgaria this year. The200,000 Olympics-related visits will add an additional 4.8 per-cent to 5 percent to this annual growth and provide some 120million Euro in tourist revenue. The overall tourism growth ratefor 2004, under favourable circumstances, is expected toreach some 18 percent to 20 percent, which in real termswould mean that about 4.2 million foreign tourists will have vis-ited Bulgaria by December. ■

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It turned out that barely days before thestart of the summer season the resortsalong the Black Sea shore look like con-struction sites after a huge explosion.The attractive phaetons in the GoldenSands, Sunny Beach, Dyuni, Vlas andelsewhere have been replaced by con-voys of heavy-duty trucks and earthmovers. Tourists are forced to peer atheaps of waste and construction mate-rials instead of admiring the vastness ofthe sand dunes.

German and British tourists, makingdesperate efforts to negotiate the alleysat the Black Sea resorts, have started tosuspect that this is all within the largelyadvertised Bulgarian hospitality.

The explanation of the "bombing raids"on Bulgaria' Black Sea shore is actual-ly utterly prosaic - investors, both largeand small, have embarked on an ambi-tious building program of new hotels,restaurants and attractions. Things wentso far that local administrations wereforced to ban construction works atunfinished sites. Otherwise, you don'thave to be much of an industry insiderto predict a flight of tourist from theBlack Sea.

Construction at the sea shore generatesunhappy tourists, Deputy Minister ofEconomy Dimiter Hadjinikolov said.Besides, foreign tour operators employ asafety system to protect themselvesagainst complaints and indemnityclaims. The provisions of the contractsfor package tours imply that the touroperator is obliged to inform the clientfour weeks before the beginning of thetrip about the situation at the targetresort. The individual tourist has theoption then to choose a vacation else-where without paying any penalty. Thefact that the hotels at the Golden Sandsare far from being fully occupied now isevidence that many people have doneexactly that and have decided to travelto Turkey, Egypt or Spain instead.

Consolidated statistics about the lossesincurred by Bulgaria's tourism will beavailable after two or three months, theMinistry of Economy announced. Theyremind the textbook rule that a happy

tourist brings in seven to nine more,while an unhappy guest makes 15 to 30people reconsider their bookings. That iswhy some experts have already startedquestioning the forecasts of a 10 per-cent to 12 percent growth of tourists inthe summer season. Most of the prob-lems are concentrated in the GoldenSands, where between 10 and 12 newhotels are at the stage of touch-upworks, such as landscaping or verticalplanning. Another five or six hotels,whose construction has reached the ini-tial phase of finishing works - Zornitsa,Golden Beach, Hermitage among them -still display gray concrete slabs, unfin-ished roofs, and other construction

innards.

"Some investors fail to understand thedamages they inflict on tourism. First,they ruin the image of Golden Sands,second they ruin the image of the VarnaAirport, and third - they ruin the imageof Bulgaria, which is the fundamentalissue," Hadjinikolov said. "A foreigntourist, who has been on a vacation insuch an environment, would hardly sayafter returning home, that Golden Sandslooks like a construction site, he wouldsimply say "Well, they build in Bulgaria".Neither will a travel bureau try to runinto trouble by sending tourists to suchan unsightly destination." ■

The notorious saga of "Black Sea bombings raids"?

i n f r a s r u c t u r e

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Beautiful Bulgaria (BB) project willfinance new projects in 35 municipali-ties in 2004. Ministry of Labor andSocial Policy, United NationsDevelopment Programme (UNDP) andmunicipalities held a signing ceremonyfor the project expansion.

The signed memoranda were presentedto the district governors of Montana,Silistra and Sliven, where the largestnumber of jobs will be created throughBB projects this year. The total budgetof the project for 2004 is 24 million leva.Some 278 subprojects will be imple-mented, 86 of which are social homes.The projects were selected out of 705proposals submitted by 146 municipali-ties and 20 other organizations andinstitutions.

Throughout the year the project aims tofind jobs for 8,600 unemployed. Parallelto the job creation efforts, the BB focus-es on improving employability throughvocational training courses, qualificationand re-qualification, enriching people'schoices and chances on the labor mar-ket. The expected number of unem-ployed to be trained in 2004 is 2,600.

In 2004 Beautiful Bulgaria's priority com-ponents will be social infrastructure and

regeneration of the urban environment.

The social infrastructure component isnew. It is oriented toward improving theliving conditions of disadvantagedgroups. A model of protected homes willbe introduced to the communities of vul-nerable people.

The regeneration of the urban environ-ment component includes refurbishmentof public buildings of architectural and

historical value, parks and squareslocated in city downtowns. A total of 197sites will be renovated under this com-ponent in 2004, of which 113 are build-ings listed as monuments of culture.

Beautiful Bulgaria will also continue itstraditional activities of renovation andrefurbishment of public buildings andtourist sites, as well as organizing voca-tional training courses for the unem-ployed. ■

Beautiful Bulgaria ProjectFinances 35 Municipalities

The Municipality building in Silistra (above) and the downtown Sliven (photo top of the page) are among

the Beautiful Bulgaria project objectivities.

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The pharmaceutical industry is one ofthe important sectors in the economyhaving significant potential to boost thecountry's exports, capitalising on existingcompetitive advantages in terms of well-educated and cheap labour force alongwith good sale experience on the formerSoviet Union market. Substantial restruc-turing in the drug industry, dominated bythe privatisation of the two major drugproducers in Bulgaria in 1999 -Balkanpharma and Sopharma, con-tributed to the recent expansion of thedomestic pharmaceuticals market. Thesales of domestic and foreign pharma-ceuticals production on the local marketgrew by 53% since 2000 to BGN 622mnin 2003. The largest portion of this sig-nificant rise can be attributed to theincreased consumption of imported drugswhich in 2003 represented some 66% ofthe domestic market. The smaller shareof the domestic companies' productionrealized on the Bulgarian market resultedfrom their strong export orientation. As anillustration, the third largest drug manu-facturing company Biovet exports 98% ofits output in about 50 countries.

Pharmaceutical Sales (EUR mn)

Source: Bulgarian Drug Agency

The recent investments in the pharmasector aided the domestic producers tomeet the standards of the good manu-facturing practices (GMP) for most oftheir product lines and to get betterpositioning for expanding abroad. OverEUR 100mn have been invested in thesector in the first 3 quarters of 2003. All

four major players on the pharmaceuti-cal market -- Balkanpharma, Sopharma,Biovet and Commercial League -- haveimplemented investment strategiesaimed at introducing GMP into theirmanufacturing facilities.

Balkanpharma received the investor ofthe year award in 2002 for its USD 25mninvestment in its three plants in Dupnitza,Troyan and Razgrad. Sopharma's invest-ment strategy amounted to BGN 19mn.Biovet is the leading company in the ani-mal health care products and is alsoGMP certified. Commercial League isidentified as the most successfulBulgarian company for specialized mar-keting and a leading distributor in EasternEurope in a Financial Times report. Apartfrom the Distribution Practice certificatethe company has obtained, it also plansthe construction of an FDA (FederalDrugs Administration) approved facility forUSD 70mn worth of investment.

Restructuring and

development attracted

investor interest

Revenues, EUR mn, 2003

Source: Company reports

Balkanpharma, now renamed to Actavis,is the largest pharmaceutical producerin Bulgaria, owned by the Iceland's sec-ond biggest company Pharmaco Group.As a part of their new corporate strate-gy aimed at becoming one of the lead-ers in the world market for genericpharmaceuticals, Pharmaco Group andits subsidiaries changed all their brandnames to Actavis. Balkanpharma pro-duced 10bn pills in 2003, representingthe largest share of the company's man-ufacturing capacities which stood at a

total of 14bn pills. Balkanpharma con-tributed about EUR 136mn forPharmaco's EUR 350mn sales in 2003and thus proves to be the most impor-tant branch of the Proup.

Sopharma is the second largest phar-maceutical company owned by the localElpharma consortium. It is among thetop 10 most profitable companies tradedon the Bulgarian Stock Exchange(BSE). Sopharma's revenues in 2003came at BGN 116mn with profit at BGN10mn. About 30% of the company salescome from abroad - Russia and Polandare its major export destinations.

Biovet manufactures animal health careproducts and its major stakeholder isthe Bulgarian Pharmaceutical Company.The company has been privatised in2000 and has a 400-year history. Asalmost all of its production is exportedto the EU market, only about 35% ofsales are accounted for domestically.About 15% of the company equity istraded on BSE. The company hasrecorded BGN 55mn revenues in 2003.

Commercial League is a pharmaceuti-cals distribution company that operateson the market since 1991 and importsthe products of more than 80 compa-nies in the world. The company suppliesabout 4,000 pharmacies and 200 hospi-tals, thus holding a 45% share of themedicines distribution market. It claimsto be the only company in the region ofEastern Europe that operates under therequirements of the good distributionpractice of the EU. Commercial Leaguerecently expanded on the productionsegment through its investment inTchaikapharm. Commercial League hasestablished subsidiaries in Macedonia,US, and Switzerland and is described asone of the most successful companiesin Bulgaria. ■

Balkanpharma 136 Sopharma 59 Biovet 28

Pharmaceutical SectorPrepares for Rapid ExpansionPrivatisation of pharmaceutical companies turns into success story

This article is based on extracts from ISI Emerging MarketsIntelliNews publications Bulgaria This Week and BulgariaCountry Report. For more detailed information please contactISI Emerging Markets office in Sofia at +359 2 8160404 orrkanazireva@securities.com.

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2002

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Im por t Loc al Pr odcu tion

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The unemployment rate dropped by 0.5pps m/m and 1.7ppsy/y to 13.17% as of the end of April, according to data of thestate employment agency. However, the margin of annualimprovement is gradually declining since September last yeardespite the signs of accelerated economic growth. On the pos-itive side, the number of job offers made by private companieshas grown by 27.6% y/y in April accounting for 60% of all jobannouncements recorded by the state employment agency.State-financed employment programmes were also contributingfor the net job creation but their role is declining in compari-son with the private sector. The number of long-term unem-ployed, seeking jobs fore more than 1 year, slid by 13% y/y asof end-April but its share remained high at 52.4% of the total.

Structure of labor supply and demand

Source: State employment agency, IntelliNews estimates fory/y changes

Monthly unemployment (%)

The unemployment rate of the state employment agency prac-tically measures the changes in the stock of jobless registra-tions with the regional labour offices, as the size of the labourforce is updated only once in few years in accordance with theestimates on the economically active part of the population.The data thus fails to take into account all factors influencingthe labour supply and the share of the economically activepart of the population. The labour force has been stayingunchanged at 3.7mn (47% of the population) since January2001 while the population has decreased by 1% for the sameperiod. The calculations thus tend to underestimate the unem-ployment rate due both to the decreasing and ageing of thepopulation but the impact is largely offset by the 6-monthincrease in the retirement age enforced each year since 2000.On the other hand, the figures do not take into account sea-sonal upward shifts in the number of economically active per-sons in the summer months and informal occupations forsome of the registered unemployed. All in all, the unemploy-

ment index of the state employment agency has been slightlyhigher (0.7pps) relative to the ILO-based quarterly surveys ofthe national statistical institute last year. Interestingly enough,the ILO-based indicator estimates the labour force at an aver-age of 3.28mn last year or 11% lower compared with the dataof the state employment agency. All those observations sug-gest that the monthly statistics are not quite accurate on theside of labour supply but give a relatively good picture on theunemployment rate due to symmetric errors both in the nomi-nator and denominator of the index.

Social benefits and labour supply

While the figures of the state employment agency place theeconomic activity in the country at levels comparable with theEU, the ILO surveys show that the labour supply is relativelylow with the size of the labour force accounting for around42% of the population last year. A recently released study ofthe USAID labour market project for Bulgaria finds out that thelabour supply is pulled down by very generous social com-pensations for some of the low-income groups. The study con-cludes that many of the families with 2 or more children canget higher disposable incomes from social benefits comparedto the income when one or two of the parents start low-qual-ified work. As far as many of the unemployed are concentrat-ed in low-income regions and can apply only for low-qualifiedjobs, the system of social benefits is seriously reducing the jobseeking motivation for a relatively large share of the unem-ployed and provides good explanation for the large share oflong-term jobless registration. The so-called reservation wage,the pay that could motivate a person to start a job, is risingwith the number of children in the family. As a result, a largeshare of Roma families falling in this group is practically moti-vated by the social system to stay outside the labour force.The study recommends deep restructuring in the system ofsocial insurance benefits and income taxation in ways thatwould increase the economic activity, especially for familieswith more than 2 children. Although not explicitly stated by theUSAID project, the analysis could be seen as a form of sup-port for the plan of the finance ministry to introduce a familytaxation system that would provide preferences for larger fam-ilies but only in cases that they can generate incomes differ-ent from social benefits.

Quarterly unemployment, period-average since Jan/2003

12%

18%

24%

03/00

09/00

03/01

09/01

03/02

09/02

03/03

09/03

03/04

L abour bureau

IL O survey

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16

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01 03 05 07 09 11

2002 2003 2004

������ ���� ����Number of unemployed 487,814 -11.6%

- Long-term (more than 1 year) 255,820 -13.0%

- Newly registered 38,264 12.4%

Job offers in April 27,871 16.2%

- Private sector 16,600 27.6%

- State employment programs 7,931 4.8%

- Other 3,340 -2.0%

MACRO FOCUS: Labour Market ImprovesDespite Pending Rigidities

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It seems like we all have seen it before. A rightist party stepsdown from power; its leader resigns but preserves his influ-ence. He is replaced by the most popular among his formerministers. The relations between the old and the new leaderstart getting colder. And it is election time, again, the newleader decides to take the risk but fails, and from that momenton no one can do anything to prevent hysteria and collapse…

I will stop here, because most probably you have alreadyguessed - yes, indeed, I intentionally used one of the well-wornjournalistic intros. But of course, you are cleverer than I amand hence you have also guessed that the story is not takingplace in Bulgaria but in Macedonia. That the story tells aboutInternal Macedonian Revolutionary Organization-DemocraticParty for Macedonian National Unity, or VMRO-DPMNE, aboutthe party's former leader Ljubco Georgievski and its currentleader, Nikola Gruevski (who introduced a purely Balkan nov-elty that has never ceased to astound the Westerners, name-ly that only nice guys with a high rating have a chance of beingappointed as finance ministers, guys like Bozidar Djelic inSerbia, for instance). The story tells also about the failure suf-fered by VMRO-DPMNE at the presidential elections despitethe nomination of Sashko Kedev, who had the potential to bringsome fresh air, and about the clashes inside the majorMacedonian political faction, which in line with the regional tra-ditions evolved into a bar brawl.

Why did Sashko Kedev fail to become a President ofMacedonia? Was it because he was simply a cardiologist fromShtip, a political nobody without any experience in the biggame instead of a weathered party combatant? Is it probable

that his virgin political record was actually his genuine politicaladvantage? Was his failure programmed by the fact that hehad to compete with the then Prime Minister, BrankoCrvenkovski? Or was it because the elections were his onlygenuine chance? Was it because he failed to demonstrate howhis party had ruled for some time shortly before that? Or per-haps his party's term in power turned out to be his major dis-advantage? These questions should be asked only if theywould be answered. However, in the spirit of the well-wornjournalistic presentations (logically trailing the well-worn intros),I have no answer to these questions. And I seriously doubt thatthese questions should be asked at all, judging by the extend-ed efforts of the rightist political players in neighbouringBulgaria to ask the same questions and fine possible answers.After all, any stupid family scandal always starts with the words"And why did you…".

It is more important that something is happening with VMRO-DPMNE today, that things are happening and perhaps will con-tinue to happen. The party that left its imprint on Macedonia'stransition is facing the danger of disintegrating again (whichwould not be a surprising development for anyone following thehistory of VMRO), and become marginalized or directly vanishfrom the political scene.

It has always seemed to me that VMRO-DPMNE actually incor-porates two parties, let us call them provisionally

the patriots and the modernizers.

This distinction should be made for the sake of the purity of

Macedonia: Par ties,Leaders, Expire Dates…

Former Yougoslav Republic after the presidential election

By Boyko Vassilev

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the analysis, I do not mean that the patriots cannot be mod-ernizers or that - may the Lord save my soul - the modern-izers are not patriots. Each of the types however is clearlyidentified. The patriots are intensely interested in the nation-al identity based on Macedonist, anti-Serbian or even pro-Bulgarian foundations (some of the patriots go as far as tomerge these identities, which are in some aspects mutuallyexclusive). For them, VMRO-DPMNE means the preservationof kin and tradition, a departure from the Yugoslavian, anemphasis on the unique, a suspicion towards the Albaniansand even towards the West and most of all towards America.VMRO, in their view, is perhaps similar to the Croatian HDZin its early years when national upsurge stood above every-thing else.

The modernizers, on the contrary, see the major priorityelsewhere. Breaking away from Yugoslavia is not so mach adivorce from Serbian nationalism but from communism, withauthoritarian rule and with dominating leftist thinking. Themodernizers are not worried about the nation and its dramabut about economic growth and integration to the West. Theyare more globalistic than original, they are attracted to thecivil society, to Europe and the USA. They do not considerthe Albanians much of a problem. The modernizers arepragmatic, perhaps excessively rational, they refuse to dwellin history and prefer to make business or NGOs. The youngBulgarian Union of Democratic Forces (UDF) - the UDF of

the early 90-s when the streets reverberated with the exal-tation of the "U - S - A" - is perhaps the closet possible ana-log to the modernizers within VMRO-DPMNE today.

Former prime ministers Nikola Kljusev and LjubcoGeorgievski, the former minister of culture, Dimiter Dimitrov,the former ministers of the interior, Dosta Dimovska andLjube Boshkovski could be easily identified as patriots, whileNikola Gruevski, Sashko Kedev, as well as former customs,agencies and media bosses could be as easily identified asmodernizers. It is easy to discern both the fundamental dif-ferences and the bone of contention between the two:

Who should be blamed for the

Macedonian war?

The treacherous West, with its support for the Albanians, orthe Macedonians and the Albanians themselves? And it istill easier to predict the possible answers.

Following this logical design would bring other things out ofmemory. For instance, the consensual concept of the "good"West and of the "good" Albanians developed by both patri-ots and modernizers within and without VMRO-DPMNE in1998, which bought them a spectacular victory in the par-liamentary elections. Another example would be the Kosovocrisis (when hundreds of thousands of Albanian refugees

Branko Crvenkovski gives an oath as Macedonian President during an inaugu-

ration ceremony in Skopje May 12, 2004. Pro-Western political veteran Branko

Crvenkovski was sworn in as president of Macedonia on Wednesday, pledging

to build on the ethnic reconciliation his late predecessor was hailed for. The Social

Democrat, a two-time prime minister at the age of 41, won the presidential elec-

tion at the end of April to succeed Boris Trajkovski, the "peacemaker" head of state

who died in a plane crash in February.

Sasko Kedev (L), presidential candidate of the largest Macedonian opposition

party VMRO DPMNE (Interior Macedonian Revolution Party, Democratic

Party for Macedonian National Unity) casts his vote beside his wife Dijana (R)

in the second round of the Macedonian Presidential election, in Skopje April 28,

2004. Macedonians went to the polls to elect a new president on Wednesday,

with pro-Western Prime Minister Branko Crvenkovski the frontrunner to succeed

Boris Trajkovski, who died in a plane crash in February.

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flooded Macedonia), as well as the hostilities withinMacedonia itself. The then prime minister, LjubcoGeorgievski, started losing his nerve and resorting to forcein response to violence while becoming openly anti-Western.And the ultimate example - the only personality that couldkeep patriots and modernizers together, although oftenslammed by both, was the former Macedonian presidentBoris Trajkovski, who was killed in an air crash and whosedeath drove the Macedonian right into a deadlock.

Is VMRO-DPMNE on the verge of splitting along thosedemarcation lines? Let us hope that it is not - the identityof the contemporary East European right is never clarifiedby splits. Is the threat of splitting at the roots of the currentcrisis within VMRO-DPMNE? Surprisingly, I will definitely say"no".

Because, if we look to

the left side

of Macedonia's political scene, we would see similar devel-opments in progress, although they would be somewhat soft-ened by the victory of Branko Crvenkovski and by the factthat the government of the Social Democratic Union ofMacedonia (SDSM by its Macedonian acronym) has alreadysurvived through the better part of its mandate. Here again,there are two factions competing for influence over the partyand the cabinet - the group of the conservatives and thegroup of pragmatics. These two groups could also bereferred to as the "seniors" and the "juniors". However, the

role of the right-hand patriots has been assumed by the oldguard from Yugoslavian times, loves, affiliations and depen-dencies, personified by Tito Petkovski (sometimes personalnames can really be self-explanatory). The "old guard" ischallenged by the young pragmatics close to PresidentCrvenkovski and Vlado Buckovski who have swallowed coop-eration with the West, accepted liberal economy and democ-racy and have even managed to resist the temptation tobuild their policies from now on on attacks against Bulgaria,and went even further by urging for good relations and byrefusing to play the Bulgarian card in two successive elec-toral campaigns.

So, the bottom line seems to indicate that internal partisansplits set the course of Macedonia's policy. This is probablytrue, although it stems out of nothing else but commonsense. It is exactly at this point that I, in the spirit of well-worn journalistic conclusions (following the well-worn introsand presentations) will table my major thesis.

According to me, the most important symptom ofMacedonia's political disease are

"the one-man parties".

VMRO-DPMNE was born and gained its influence as"Ljubco's party". SDSM on its turn was "Branko's party", asits spiritual mentor, Kiro Gligorov, ascended to the supra-par-tisan post as president at quite an early stage of the party'shistory. Besides, there are the parties of Risto Penev, ofGoshev, of Xhaferi and of Ahmeti … are we missing some-body?

We could term this the "post-Yugoslavian party syndrome"and try to subject the connoisseurs to a test by asking themwhether they could name out of hand, for instance, the par-ties referred to as that of Kostunica, of Djindjic, Draskovic,Batic, Obradovic, and of Ilic. The "post-Yugoslavian partysyndrome" strikes more often at the right of the politicalspectrum than on the left; it makes parties disappear andtriumph with the downfalls and the triumphs of their leaders.This syndrome corrupts, fragments, marginalizes, and trans-forms political structures into sole-proprietor companies, itsconverts the lack of clear ideas into an advantage and per-manently repulses people away from reforms and reformers.Besides - and perhaps this is the most important - the syn-drome may be contagious and strike other Balkan states aswell.

For all these reasons, the two major Macedonia parties arefacing a major challenge. They must demonstrate that theycan survive without their two young, bearded, charismaticand willful leaders Branko and Ljubco at the party helms,despite the fact that one of them went up to become a pres-ident, while the other was knighted as an honorary chair-man.

We seem to have already accepted that political leaders inthe Slavs' portion of the Balkans never manage to surviveinto a political longevity. It is however far from healthful toresign to the short life of local political parties. Politics andhistory detest shirt-lived creations. ■

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Supporters of the of the biggest Macedonian ruling party SDSM (Social

Democratic Union of Macedonia) celebrate the victory of Branko Crvenkovski.

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i t n e w s

The number of Internet users doubledover the last two years, and currentlymore than a million Bulgarians accessthe world-wide web on a regular basis.These data represent an excerpt froma series of optimistic surveys on thedevelopment of the Internet marketthat indicate that by 2007, whenBulgaria expects to join the EU, theportion of the population with accessto Internet will rise to 30 percent.

Another tendency has emerged thatwill become apparent in the nearfuture - global e-security will deterio-rate with the rising numbers of theonline community members.Maintaining some semblance of orderin the global computer network andresisting hackers' attacks will requirean increasing amount of assets.

Office employees hunched at themonitors in their cubicles or regularfolks in front of their home computeralike see the HACKER as a queer andfrightening figure. The term itself actu-ally refers broadly to a personengaged in illegal actions in theInternet. Everybody who uses a com-puter has had some encounter with"hacking," from spam e-mail, to virus-es and files disappearing from officeservers. The increasing number ofhacker attacks and the spread ofviruses and spam represent just thetop of the iceberg, which is spoilingthe days of computer security experts.A diminishing scope of skills isrequired to create a virus of the typeof SoBig, whose new and mutatingprogeny gridlock the Internet trafficand crash servers worldwide. Virusand program codes, which may beused to monitor and intercept trafficand messages may be downloadedfrom a number of ware-servers (a por-tion of the web space used to publishopen-source programs used for fur-ther programming or as the basis forthe development of software).

The legend of Bulgarian

hackers

When Bulgarians and Internet are men-tioned in one sentence, a standard reac-tion is to claim that the most viciousviruses have been generated in thiscountry, and that it was in Bulgaria thatthe first ever penetration into a secureserver was reported. In fact, theprowess of Bulgarian Internet breakersis more of a myth than a genuine fact.It is true that several viruses spread fromBulgaria at the dawn of the world com-puter network, the notorious DarkAvenger of the early 1990s amongthem. The large-scale introduction ofcomputers in countries like China andIndia, however, has demoted Bulgaria tothe bottom of virus breeder rankings.

An entirely different trend actuallyoccurred - the experience and reputa-tion, even overblown, of Bulgarian pro-grammers with viruses sent them to thetop of the antivirus software program-mers' circles.

The first people in Bulgaria who becameknown as hackers were the members of

a Varna-based teenage group, who hadthe bad luck to get caught in 1998(when only about 50,000 Bulgarians hadInternet access) after they had gone ashopping spree with stolen credit cards.The media was quick to start callingthem hackers, and the public notion of ahacker today has changed only slightly -a young person at or below the age of20, who penetrates networks and per-sonal computers illegally just for the funof it or with the objective to hone hisskills, and occasionally goes shoppingwith stolen credit cards.

This cliche is getting further and furtheraway from the truth - the hacker (orsimply the thief) may not be in Bulgariaat all but somewhere in Nigeria orIndonesia, known to be the countries oforigin of e-mails with "requests" for therepatriation of a substantial amount ofmoney or with proposals for large ship-ments of goods to be paid for by a cred-it card. It is a fact that the credit cardsmarket in Bulgaria is still underdevel-oped. VISA and Mastercard issued byBulgarian banks have major restrictionson their use, so that a relatively smallamount can be stolen electronically.

New Frontiers in E-securit y Are Bulgarian hackers really among the world's most menacing and what to

expect of our growing dependence on the Internet

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The number of encrypted servers inBulgaria is still modest, and theseservers are not very attractive for attacksanyway. In addition, there are hardly any"customers" in Bulgaria willing to pay forthe penetration of a specific network.That is why, although ranked among thebest in the world, Bulgarian hackerstoday are more likely to have fun bybreaking e-mail passwords and penetrat-ing private networks, engaging in pettymischief like deleting files or postingfunny messages, rather than inflictingactual damage upon someone.

Hacking of one of the most popularsearch engines in Bulgaria, Dir.bg, somethree or four years ago is a perfectexample of such a mischief. The URLaddress of the search engine containeda greeting from the group of hackersinstead of the traditional contents. Theproblem was resolved by the Dir.bgadministrators in 24 hours.

Who is to blame for the

breaks in the network

A major portion of hackers' breaks and

frauds are generally the result of negli-gence or lack of caution when sendingconfidential information. A typical exam-ple is the fraud reported by the BBC inGreat Britain, where thieves stole morethan $2 million from accounts of naivecustomers. The criminals mailed toholders of bank accounts messagesabout a system break and requesteddata and passwords allegedly neededfor a status check. A lot of peopleresponded as expected by the criminals,only to find that somebody had drainedtheir accounts. Most of the viruses thatare self-installed into computers are pro-grammed exclusively to monitor useroperations and record passwords andcard numbers when entered. Besides,these viruses allow accessing the dataand the assets of a computer by unau-thorized users.

The advance of electronic trade result-ed in a rise of cyber frauds, accordingto a report released by VeriSign, thecompany managing the .com and .netdomains. VeriSign rules identify as apenetration attempt any interceptedscanning and pinging of open computer

ports. Even so, there is little argumentthat the number of frauds by using mir-ror sites to mislead users shoppingonline and the orders made under afalse identity or using stolen cards, isincreasing. According to VeriSign, e-shops identified in 2003 as suspiciousand respectively denied servicing some7 percent of the orders originating fromsuspicious places or placed by cus-tomers with a suspicious identity.

Good news for

programmers

Increased Internet security threats haveresulted in a different development - net-work and security experts are nowamong those professions that are inhigh demand, with six-figure annualsalaries. Many companies realize thateven the best security system needshuman supervision as most cyberattacks are launched "manually" and atnight when alertness is at its lowest.

The responsibility for the boom of virusattacks and system breaks may be atleast partially attributed to software pro-

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ducers, whose products contain "bugs"utilized by many viruses. Microsoftreleased in 2003 several patches intend-ed to fix bugs in Outlook that weredescribed as critical for security. Thatsame year alone, Microsoft announced51 different problems in its softwareproducts, describing 20 of them asespecially important and releasingpatches.

Bulgarian real estate companies report-edly became victims when their siteswere tampered with, most probably totarnish their image.

Worms - the new menace

Network Associates conducted a surveyindicating that 22 percent of the smalland medium enterprises in Europe havebeen idled for various periods of timeafter problems with viruses and attacksthat had not been resolved successfully.The highest hit rate was reported in Italyand France, where 30 percent to 50percent of the companies were affect-ed. Each virus attack costs on average5,000 Euro to a company, and things are

getting worse, Network Associates said.

Internet is emerging as the conduit foran ever-increasing traffic. Critical appli-cations like telephony and fax connec-tions are more and more relayed throughthe world-wide web. That is why theeffects of spamming and viruses may becompared to the effect of an outburst orplague in the Middle Ages - the dam-ages are tremendous. If this tendencypersists, then equipment in vital systemslike electric utilities' control rooms, air-ports, nuclear power plants might startcrashing with frightening regularity.

The attack of the MyDoom worm maybe compared to a large-scale offensive -more than one million computers wereinfected within six days in January 2004.Experts are still unable to emerge out ofthe shock that a file with size between20K and 30K could cause damagesworth billions of dollars. The worms per-form like a new generation mass-destruction bomb. The first of the kindwas created back in 1988, when Internetwas still little more than a scientificexperiment shared by the military and a

bunch of universities. Since then howev-er, similar to all other technologies, theknow-how for writing virus codes hasevolved and the new Internet threats aregetting unpleasantly sophisticated.

Yet another threat is the increasingreliance on wireless connection to theInternet. In the United States and acrossthe European Union, libraries and cafechains such as Starbucks are offeringplaces where you can sit down with yourlaptop and do the so-called wi-fi, gettingonline using a wireless modem (a tinyplug-in in your laptop, in fact). Soundsgreat, but it also opens new possibilitiesfor someone intercepting your data, any-thing from e-mails to your secret lover toyour banking information.

But, as the New York Times recentlyremarked, although wireless networkingoffers more methods of entry to out-siders than wired networking, it is also alot of fun. So if we don't want to give upon all our web-generated fun, we shouldlearn to be more cautious and sophisti-cated when going online. At least that'swhat good hackers do. ■

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"The new Public Procurement Law is a critical step in Bulgaria'smarch toward European Union membership," Debra McFarland,Mission Director of the United States Agency for InternationalDevelopment, stated. Ms McFarland went on to say that the lawprovides the legislative and administrative framework for a goodsystem that will improve service, facilitate evaluation and rendercorruption more difficult.

Bulgaria's National Assembly recently passed the PublicProcurement Law (PPL), which takes effect on October 1, 2004."The new law will create a clear, accountable and transparentsystem, which will in turn lead to a better and more stable busi-ness environment in the country," according to EvgeniaKoldanova, Deputy Minister of Economy.

"A public procurement system is alive," said USAID procurementexpert Gaetan Gobeil at the conference. Mr. Gobeil's point wasthat public procurement is an ever changing dynamic organismthat requires regular review in order to provide the public with thegreatest value for their tax money. Efficient public procurementpractices lead to good roads, better schools, efficient powerplants, and more effective government services. A modern pub-lic procurement law provides the business community with betteraccess to bid and award information for government sponsoredprojects, which contributes to building confidence among citi-zens that public funds are being spent in a more transparent,timely and fair manner.

The new law will be implemented through the Public ProcurementAgency (PPA) of the Ministry of Economy. The PPA is the reg-ulatory body charged with overseeing the evaluation, award, andexecution of public procurement contracts, operating and main-taining the Public Procurement Register and establishing theCourt of Arbitration.

The new Public Procurement Agency was officially presented atthe National Conference on "The Effectiveness of the PublicProcurement System in Bulgaria" held in Sofia in April. Theevent was sponsored by United States Agency for InternationalDevelopment (USAID) and the Ministry of Economy. Over 120representatives that included high-level officials from 18 min-istries, members of Parliament's Economic Policy Committee,NGOs, business associations, representatives from theDelegation of the European Commission to Bulgaria, and theWorld Bank attended the conference.

USAID's Role

For the past two years, USAID's Open Government Initiative (OGI)project has been working hard for the successful implementationof an effective public procurement system in Bulgaria. They havedone this by working with key stakeholders in the public procure-ment process via working groups at the national and municipal lev-els. The working groups are comprised of representatives fromministries, the business organizations, municipal contracting offi-cers, and leading Bulgarian and international procurement experts

According to Marc Cassidy, OGI Director, "Our focus was not onthe law but on the implementation of the law and its secondarylegislation." In terms of public procurement, USAID/OGI projecthas skillfully coordinated the expertise of local and internation-al consultants resulting in the development of Bulgaria's firstever standardized tender documents for supplies, works andservices which are compliant with the new law, and to the extentpossible, harmonized with EU directives. Adoption of these ten-der documents by the new PPA will be key to ensuring a moretransparent and efficient procurements system. OGI plans onworking with the new PPA, business associations like AmericanChamber of Commerce and perhaps in local universities to traintrainers in the use of the tender documents in order to expandand sustain their use. The project will also continue to con-tribute to the development of secondary legislation to the PPL.In addition, when appropriate, OGI will provide other forms oftechnical assistance in coordination with other internationaldonors.

Introducing the New Executive Director of

the Public Procurement Agency

According to official reports from the Ministry of Economy,Miglena Pavlova was named Executive Director of the new PublicProcurement Agency. She graduated from the University ofNational and World Economy with a degree in accounting andaudit control, specializing in finance, tax, audit, currencyexchange and customs control. She began her professionalcareer at the University as a senior assistant in the Departmentof Financial Control. During 2002-2003, she was a member ofan independent commission, created by Parliament to audit thebudget and annual financial reports for the National Audit Office.Before coming to the PPA, Ms. Pavlova worked as a CertifiedPublic Accountant for a private consulting firm. She speaksRussian, English, and French.

She will now head a central agency that many believe is need-ed in Bulgaria to ensure that the awarding of contracts and thespending of public funds will be governed fairly and efficiently.

Reforming Public Procurementin Bulgaria

Marc Cassidy, Director of Open Government Initiative project, Debra

McFarland, USAID Bulgaria Director, and Evgenia Koldanova, Deputy

Minister of Economy (from left to right) , opened the National Conference "The

Effectiveness of the Public Procurement System in Bulgaria"

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The PPA will employ 30 people and will be broken into threedepartments: Financial and Economic Administration; Monitoring,Analysis and Methodologies of public procurement; ElectronicRegister. It will be up to Ms. Pavlova and her new administrationto build trust for a system believed to be rife with corruption andbeneficial only to a chosen few.

Arbitration Will Save Time

"Litigation takes too long under the current system and court rul-ings often come too late," states Valeri Dimitrov, ParliamentaryChair of the Economic Policy Committee. This is particularlydamaging to small and medium sized businesses in Bulgaria. Thenew law addresses this through a specific timeframe for appealsand a clarification of jurisdictional matters. The law will also limitcourt appeals by stipulating that procurement decisions be heardby the District Courts and not the Supreme Court.

Under the conditions of the new law, the PPA will oversee theestablishment of a Court of Arbitration. The primary function ofthe Arbitration Court is to resolve procurement disputes outside ofthe court system. This reform in the procurement system will like-ly speed-up and streamline the process of awarding and execut-ing public contracts by reducing the time it takes to resolve dis-putes if an award is contested. The list of experts who will makeup this panel will be created soon under the direction of the PPA.

Get Registered!

"The development of the Public Procurement Register (PPR) is anopportunity for the PPA to broaden its supplier options throughincreased competition and analysis of the database," stressesSilvana Lyubenova, Director of the European IntegrationDirectorate at the Ministry of Economy.

According to a participant in the Conference, "It is important thatthe PPA makes it clear to its supplier base that accreditation is amandatory requirement, that it is committed to the process andthat it will offer support to suppliers who have a misunderstand-

ing of the new rules and regulations."

"Despite these changes, I don't think the new law goes farenough. The business community needs open access to theRegister regarding who is authorized and who is issuing tendersand we need to be included in the evaluation and arbitrationprocesses. We feel we are being shut out of the loop and it'sfrustrating," says another business person.

The creation of the PPR will mark the establishment of an accred-ited supplier database that will lay the groundwork for futureimplementation of e-procurement and on-line bidding - both EUmandates. For potential suppliers to participate in the biddingprocess, they first must register with the PPA and meet minimumrequirements as set out under the law. This will be the first stepin the accreditation of suppliers that will serve as the clearing-house to the bidding process.

Secondary Legislation

Another hot topic for discussion is the development of secondarylegislation. It seems that the business community is as con-cerned with what the law does not cover as it is with what it does.The rules and procedures not specified in the new PPL will becovered in future regulations for the implementation of the law tobe drafted by the ministries of economy and foreign affairs.According to the law, all secondary legislation has to be ready byOctober 1 when the new law officially comes into effect.

What will the requirements be for contracts falling below the min-imum thresholds? What will be the minimum value of a contractthat will still require a tender offer? How will projects funded inter-nationally and matched with Bulgarian public funds (like PHARE,ISPA and other large infrastructure projects) be governed? Whichsovereign laws will prevail? These are just some of the unre-solved issues concerning the business community in Bulgaria.

The Working Groups, organized and trained by USAID's project,have already begun discussions and preparing concept papers onthe secondary legislation that will need to be promulgated toimplement the new PPL. This input from the Working Groups willfacilitate the drafters in producing the secondary legislation need-ed by the time the law comes into effect later this year. The newPPL still does not meet all of the requirements of the EuropeanUnion Directives for Public Procurement and will need additionalmodifications and secondary legislation to make it fully compliantin time for Bulgaria's accession into the EU in 2007.

Standardization and Harmonization

"The use of Standard Tender Documents or STDs will lead to adrastic reduction in the time needed to prepare and submit a ten-der. It is envisioned that many tenders could be completed in amatter of hours or days instead of months," according to interna-tional procurement experts Gaetan Gobeil and Ginette Jobidon.

The STDs were created by special Working Groups consistingof over 40 Bulgarian and international experts in the field ofpublic procurement. The STDs comply with the currentBulgarian law on Public Procurement and the Working Groupswill present their recommendations regarding the implementa-tion of the STDs to ensure that they will meet requirements of

● Creates the new Public Procurement Agency under theMinistry of Economy

● Raises the minimum thresholds to - 1.8 million leva forconstruction, 150,000 leva for deliverables and 90,000 levafor services. It is estimated that 70 % of the volume willbe under the thresholds, but only 25% of the total pro-curement value will be below the thresholds. The thresh-olds were increased nearly threefold to bring them in linewith EU requirements.

● Gives power to the local (district) courts to resolves dis-putes and not to the Supreme Court.

● Establishes the Court of Arbitration, which both partiesmust agree to before the contract can be awarded.

● Performance bonds reduced from 10% to 5% of thetotal value of the contract as a deposit against the per-formance of the supplier.

● Excludes certain industries from the public tenderprocess: telecommunications, concessions and pharma-ceutical companies producing immunization drugs

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the new law when it takes effect. The forms will be madeavailable on-line and accurately detail all attachments andinformation needed to properly complete and submit the ten-der.

While STDs are optional for the bidders under the current sys-tem, it is expected that they will be modified and become amandatory requirement for the bidding process under the newlaw. It is Mr. Goebeil's belief that the acceptance of these doc-uments by the PPA will lead to better offers from the privatesector, increased saving in public spending and greater trust inthe state system.

Addressing Corruption

"No system is perfect and there will always be some subjec-tivity involved and indicators for corruption will continue toexist, but they should not rule the decision process," says EvaRadeva, Public Procurement Manager at OGI.

Many local authorities have a regular and sometime closerelationship with their supplier base. As a result, some poten-tial suppliers have chosen not to work with the governmentmarket to avoid the complexity and difficulty of dealing withlocal authorities and the perceived 'closed-shop' nature of thesector. The business associations would like to see moretransparency in the system through the inclusion of theirmembers on the commission panel and to be more activelyinvolved in the awarding and evaluation process.

According to a procurement expert with a large manufacturingfirm in Sofia, "Nothing is really going to change until the govern-ment cracks down on those that break the law and profit illegal-ly from the procurement process."

Since all of the documentation is the same for every companyand for every bid, evaluation will be simpler, clearer, more effi-cient, and ideally more fair than under the current system. Thesystem is set-up so that if a bidder is not satisfied with the deci-sion made to award a contract, there is recourse back to the PPAto investigate the claim and substantiate its decision in a timelymanner or face court action.

Promoting Transparency

The most important point to understand about the public pro-curement system is that the government should always aim tomaximize value for money through a transparent and competitivebidding process. Public trust and strict adherence to the rules atall levels must be maintained throughout the procurementprocess to ensure the integrity of the system. It will lead toincreased value for money through greater participation by thesuppliers and more options for the contracting authorities.

As Gaetan Gobeil states, "The public procurement system is avery relevant issue for the public. In the end, it is the taxpayer'smoney the government is spending. Shouldn't the public carehow they are spending it? It is about the public's right to knowand the government's efforts in building trust in the system." ■

e v e n t s • m e m b e r n e w s • n e w m e m b e r s

Top U.S. managementscholars tutorBulgarian managers

AmCham Tennis Tournament 2004

Armed forces modernization projects with obligatory 70% offset

5 Years Microsoft in Bulgaria

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You have visited Bulgaria as manage-

ment lecturers several times. What

has changed in Bulgaria since your

last visit?

D.M.: We had the opportunity toobserve Bulgarian economic and socialdevelopments for the last 6-7 years. Mypersonal concern is that Bulgaria is stillunknown in the Western world. The sit-uation has changed slightly in the recentyears, but Bulgaria is still a mystery.Most of Western people do not evenknow where Bulgaria is, the UnitedStates to begin with. Moreover, I wasamazed to find out that with $7,439 mil-lion total Bulgarian export ( according tothe Ministry of Economy's preliminarydata), only $100 million goes to theUnited States. There is a tremendousdemand for Bulgarian products in theUnited States, but you cannot find any-thing, not even wine and the famousyoghurt.

E.S.: When we visit Bulgaria, we haveto explain where it is situated. Most ofour colleagues and friends know onlythat we are going to be close to Greece.One of the reasons is that during theIron Curtain times, the United States hadblacked out all of the information aboutEastern part of the world. Even nowa-days, we hear Bulgarian news veryrarely.

Who is responsible for the lack of

information?

D. M: In the United States, there is aspecial office at the state level to pre-sent Washington to the Eastern world. Ingeneral, it is a governmental responsibil-ity to expose the culture, the productsand possibilities of Bulgaria to America.You have so much to show. When Icame for the first time in Bulgaria, myfirst class of MBA students was out-standing and extraordinary, comparing toother students whom I met in Europe

and Asia. Bulgarians were stimulated,energized and very bright, especially thewomen, I might say. When I have comeback after several months teaching, thesame people had already reached excit-ing heights in their careers.

E.S.: The first impression from Bulgariais the intellectual power of the youngpeople. We have traveled the world andwe can distinguish between students.

How long have you been teaching in

Southeast Europe?

D. M. : Since 1997. The literacy rate inBulgaria is higher than in the USA. A32-year old Bulgarian is much bettereducated than a 32-year oldWashingtonian.

Talking about markets, do you think

that Bulgaria is on the road to a well-

developed market economy?

E.S.: The rare Bulgarian products andtheir integration on the marketimpressed us. It is a big signal to theUnited States that Bulgaria's marketeconomy is very strong. It is already aconsumer-driven economy. It woulddrive other industries and other suppli-ers to join in those channels. Moreover,AmCham recourses should help developpromotions on the both sides of theocean. In case AmCham knows theconnection between all the Bulgarianorganizations in the United States, it ispossible to start a movement here,establishing useful links. Therefore, weneed to get an awareness of the high-quality competitive products fromBulgaria. Another very strong possibilityfor Bulgaria is tourism. Your country hasthe potential to grow as the destinationnumber one. You have so many oppor-tunities at a very low cost. I am sure thatall members of AmCham Bulgaria rep-resent their interest and it is important

Bulgaria needs exposure of its culture,products and human potential abroad,advise U.S. management gurus DaleMiller and Earl Sedlik

Interview by Irina Bacheva

a b o u t t h e s p e a k e r s

Earl Sedlik, MBA, Harvard, led theBusiness Education for InternationalEconomic Development team. He is anexperienced academic CEO and busi-ness education curriculum developer.Mr. Sedlik coordinates from Seattlethe operational and marketing activi-ties which have established successfulprograms abroad. BEIED benefits fromhis in-depth understanding of manage-rial skills development.

Dale Miller, Ed.D., Stanford, servedas a president of several U.S. collegesduring his distinguished academiccareer. Over the last 10 years, Dr.Miller turned his remarkable energiesto elevate business education and sys-tems in Eastern Europe and China. Hedelivers well-received skill-develop-ment courses and workshops thatadvance individual managerial compe-tences.

we build this awareness in the UnitedStates.

D. M.: I would like to stress that theinternational trade creates more employ-ment. Outsourcing, for example. Indiancompanies in the United States are out-sourcing technology to India. If I have acomputer problem, I pick up the phoneand talk to an Indian specialist. Placingthe call center in India is much cheap-er. Given the high literacy rate inBulgaria, it would be natural to hook upwith a multinational company and tohandle outsourcing of technology. It ischeap and puts people to work. For thelast seven years, the awareness forBulgarian products and culture ofAmerican citizens has not changed. Ithink it is the responsibility of Bulgaria tomake that step.

What are the shortcomings of market-

ing and management in Southeastern

Europe? What are your recommenda-

tions for improvement in a nutshell?

E. S.: Before doing the topics of theseminar "Leading the transformation toorganizational success", we had made acomprehensive survey to ask the poten-tial attendees in Bulgaria about the sub-jects they feel useful. From our U.S.experience, you have to be constantlyvigilant and pay constant attention tointegrating the employees into the strat-egy you have chosen. The structure fol-lows strategy, which simply says thatbefore you organize a company you

have to make the strategy and to spreadthe functions between the employees.

All the employees have to be aware theyare part of that long-term strategy andthey participate in putting it together. Weare here because as this economyemerges the skill level of the managersand the executives should be enhanced.Our job is to enhance their skills.

D. M.: The credo of the architect FrankLloyd Wright is that forms follow struc-ture. As a manager, you do not start witha structure, but start by asking, "What Iam going to do inside?" and then youbuild a form around the inside content.

E. S.: We love the fact that in a freeand a price system the consumer is thedriving force. What we are teaching isthe awareness and sensitivity to con-sumer needs and fulfilling those needs.

The successful company is structuredupside down, not with the executive ontop, but with customer on top. What weare trying to teach is how to turn anorganization into consumer orientedone.

D. M.: Under the socialist system, therewas not competition and no need in try-ing to motivate people. Moreover, youcannot convince anybody you had agood quality product under that system.In the capitalist economy, you have tobe a step forward to your competitor. Itmeans the managers have to have newway to motivate their employees. In thissense, a very important thing is thestrategic planning. The apparent missionis to increase the awareness of theAmerican people of Bulgaria. How doyou get there? You must have a plan. Itinvolves the government, AmCham, affil-iates in the United States. ■

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Two distinguished U.S. management scholars, Dale Miller and Earl Sedlik led aseminar on May 19-20 devoted to educating Bulgarian managers in the bestpractices in the field. The seminar's motto - " Leading the transformation to orga-nizational success - Nurturing a dynamic focus to meet customer needs" - under-scored a list of topics arranged exclusively for the Bulgarian managers, who indi-cated their needs in preliminary queries. The event, presented by BusinessEducation for International Economic Development (BEIED) and AmChamBulgaria, attracted top executives from 40 multinational companies in Bulgaria;AmCham representatives from Romania. BEIED was established to meet theneeds of countries in Southeastern Europe for Western-style business education.

Top U.S. management scholars tutorBulgarian managers

BEIED professors posed for a picture together with AmCham Vice President, Stefan Dimitrov and ProSoft Manager Julian Genov

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Mr. Stoichev, what are the results of

the Strategic Defence Review?

The Strategic Defence Review wascompleted and the government passedthe respective document regarding itsparameters. The armed forces will bereduced to less than 40,000, but notimmediately. This will be a naturalprocess that will continue several years.The document determines the type andquantity of armaments in the BulgarianArmy. We shall revise structures at theMinistry of Defence to dismiss duplicat-ing functions and plan new functionswhere necessary. Currently, our mainobjective is the modernisation of thearmed forces between 2002 and 2015.At the Defence Forces Council ten daysago we decided to update the projectsfor the modernization of the armedforces by August, taking into accountseveral factors.

The first stage pertains to the objectivesof the armed forces for which wereceived recommendations from NATOheadquarters in 2003 and 62 of theseobjectives have already been adopted.They are related to Bulgaria's effectiveNATO membership, as it is important forthe Alliance to know what ability ourarmed forces have. This does not onlyinclude participation in peacekeepingmissions but also providing nationalsecurity in all its aspects. Besides, wehave to contribute to the collectivesecurity of the Alliance. From this pointof view, we decide what helicopters weshall have, what transport aircraft,corvettes, etc. This updating is directlyrelated to the decision of the Council of

Ministers to set aside 1.5 billion leva for11 priority projects involving the reorga-nization of the armed forces. The pro-jects are related to the modernization ofthe vehicle pool, the acquisition of newhelicopters, new multifunctional fighters,developing the system for observationand control of naval space, the acquisi-tion of second-hand ships, the con-struction of six corvettes, and the equip-ment of the forces that will take part inmissions abroad.

Will foreign companies be commis-

sioned with these 11 projects?

A large portion of the contracts will becarried out by foreign companies butBulgarian companies from the defencesector will also take part in the prepara-tion as main subcontractors in thedevelopment of the offset programmes.

What are the deadlines for execution

of the projects?

They are long-term, each one for two tofive years. It is not realistic to expectimmediate execution of projects worth1.5 billion leva. We have to prepare theprojects, conclude the contracts and

Exhibition Hemus 2004

proves Bulgarian military

industry has

opportunities

in strategic hi-tech,

says Kiril Stoychev,

director for armaments

and equipment policy

at the Ministry of

Defense

By Irina Bacheva

Kiril Stoychev, Director of Armaments and Equipment Policy Directorate, MoD Bulgaria

Armed Forces Upgrade to YieldOver 1 Billion Leva in Offsets

then commence with their implementa-tion.

Quite a number of Bulgarian military

firms were presented at the HEMUS

2004 6th International exhibition of

defense equipment. Will they take part

in these projects?

This was the largest exhibition of mili-tary equipment in the history of Hemus(sixth edition). More than 120 compa-nies from 20 states participated andvery good technologies were exhibited.The objective of the exhibition was topresent what Bulgarian and foreigncompanies can do and what the needsof the army are. Although the scope ofour industry is not large, that scope isin diversified strategic trends. NATOAssistant Secretary General forDefence Investment Marshall S.Billingslea visited Plovdiv and gave topmarks to the products of Optics -Panagyurishte, optic products for nightand day vision and all products of thisrange. Marshall Billingslea alsoassessed highly the Institute of MetalScience with the Bulgarian Academyof Sciences. The forces for specialoperations also impressed him. High-ranking representatives from Greece,Turkey, Romania, the USA, Great

Britain, France and Jordan presentedsome 100 reports on R&D at the fair.The aim of the conference was toshow our guests what Bulgaria hasachieved in the military industry andwith whom to seek contact for ourneeds of developing high tech. Theforeign companies were very pleasedand well-known companies asLockheed Martin, BAE Systems,Daimler Chrysler, Raytheon, Elbit,Harris took part in the fair.

Will Bulgaria be able to take part in

NATO projects in which Bulgarian and

international defence industry compa-

nies will cooperate? Under what pro-

cedure will this be done?

There is a so-called NATO IndustrialAdvisory Group at NATO headquarters.Marshall S. Billingslea told us directlythat if we want to take part in NATO pro-jects we have to present our opportuni-ties within the framework of this group.

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NATO Assistant Secretary General for Defence Investment Marshall S. Billingslea at Samel-90 stand. The

company is among the leading Bulgarian companies in the armament equipment

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The Bulgarian defence industry isalready participating in one of the pro-jects but I would not like to mention itsname. It is worth several billion dollarsand the opportunities of the Bulgariancompanies and their participation arecurrently being analysed. It is the objec-tive of the newly established Defenceand Industrial Policy Department at theMinistry of Defence to present the bestof Bulgarian industry in Brussels. What Imean is presentation of concreteachievements of companies that are ofhigh international standard, not simplypresentation of companies.

Would you mention several competing

companies?

There are several companies in the fieldof communication and information sys-tems that could draw attention inBrussels. These are Samel-90 Samokov,Electron Progress, Electron Consortium,Cherno More Varna, Bitova ElektronikaVeliko Tarnovo, the first three being thebest.

How frequently does the NATO

Industrial Advisory Group hold meet-

ings?

Such a meeting is held every year anduntil now Bulgaria participated with min-

isterial representatives. The currentidea, however, is to give Bulgarian com-panies the opportunity to take part andpresent their products. This year wehad a very happy coincidence of threeevents: the defence fair, the decision ofthe government to set aside 1.5 billionleva, which is a precedent, and the visitof Marshall S. Billingslea. He saw forhimself that the Bulgarian defenceindustry does have what to show NATOand that the government is seriouslycommitted. In addition, he is also awarethat we can also help with very appro-priate means in the struggle against ter-rorism.

What are your forecasts for the con-

clusion of offset deals?

The sum of 1.5 billion leva is set asideby a decision of the Bulgarian govern-ment dating May 27 under a seriouscondition - offset is mandatory for allprojects within this sum. Deputy PrimeMinister Lydia Shouleva will be respon-sible for indirect offset, i.e. the sharethat will go in the economy. Direct offsetwill go directly to the Ministry ofDefence and the Bulgarian Army. Ourrequirement is set at minimum 70 percent offset. Not a single project will belaunched if criteria for offset policy andprecise technical parameters are not

developed. These issues will beresolved at the Ministry of Defence andthe Ministry of Economy. The objectiveof offset is precisely that - our money,given to foreign companies for arma-ment, returns to the economy in theform of investments, know-how and newtechnologies.

Will we conclude deals for older arma-

ment, like the practice in Poland and

the Czech Republic?

Yes, this is also a practice in EasternEurope, but it is my opinion that suchdeals should be approached with greatcare and they should be an exception.There is no case where someone hasprofited from such a deal. More carefulcalculations could show that this is notto an advantage.

Will Bulgarian companies have a sec-

ond chance to take part in the

restoration of Iraq?

We have concluded a memorandumwith the Union of Employers for coop-eration in the field of offset pro-grammes. I am convinced that the dutyfree zone that is being established isthe first step that will bring concreteresults. This is an absolute chance forBulgarian companies. ■

Lidia Shuleva, Vice Premier and Nikolay Svinarov, Minister of Defense, visited AmCham stand at the Hemus exhibition

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The existing procedures for court registration of commercialcorporations will be changed to establish a mandatory durationfor the procedure, said Deputy Justice Minister SevdalinBozhikov during a discussion on the Commercial Law reforms.The new rules may be implemented as soon as early 2005.

In a move to ease the current registration procedure, Mr.Bozhikov now proposes a seven-day deadline for the entry ofa new company into the court register. At present this takes30 days on the average.

The deputy justice minister also said that judges who fail tocomply with the mandatory deadline could face disciplinarymeasures and, if the Judiciary Act is amended accordingly,could incur a civil liability if the delayed registration has result-ed in damages.

The amendments to Council of Ministers’ Ordinance 14, whichregulates the keeping of entry registers, will be discussed inOctober. The document was adopted in 1991 and amended in1997, 2000 and 2001. The new set of changes will includeapplication templates and will regulate the terms of theapproval procedure.

USAID presented some of its proposals for the reform of com-mercial registration in Bulgaria. The agency has recommend-ed pooling the commercial register with the register of specialpledges into a National Electronic Register subordinated to theJustice Ministry. The concept for new registration proceedingshas to be ready by the end of July, after which financing willbe sought.

The new registrar should maintain a national-level database oftaxation, statistical and social security information flows as wellas annual corporate reports, USAID representatives said.

Scott Jacobs, the managing director of Jacobs & Associatesand a judicial reform consultant, said recently that Bulgariacould build a modern, centralized electronic registry with fullInternet database access, a national network of registrationoffices at the cost of about 2.6 million Euro to 3 million Euro.Start-up costs are estimated to be in the range of 2 millionEuro to 2.5 million Euro. The initial funding will set up the newsystem, with up to two years needed before it reaches fullfunctionality.

Mr. Jacobs presented an analysis of the costs and benefits ofthe main options for reforming the Bulgarian business register."In case if Bulgaria wants to be competitive on the Europeanmarket, it has to follow the best European practices in provid-ing services to businesses," Mr. Jacobs said. "Effective busi-

ness registration is directly related to creating a favorable envi-ronment for investment and business development."

The envisioned alternatives to the current procedure includethe following options:

1) Registration is still done by judges, but standardized formsare introduced in all courts, or

2) Registration is still done by judges, standardized forms areintroduced in all courts and a central electronic register isestablished, or

3) the courts create a separate registration unit staffed bytrained clerks who work for a centralized, electronic courtregistry, or

4) The business registry is taken out of the court system andcombined with other existing registries into a national elec-tronic registry, or

5) Registration is contracted out to an outside organization.

In a similar forum in February 2004, the business representa-tives and the magistrates split up in their proposals for com-mercial registration system. AmCham Bulgaria representativesmaintained it would be better to take the commercial registerout of the court system. The magistrates countered with theargument that if an institution is established outside the courtsto deal with company registrations, this will bring on many busi-ness security concerns and will precipitate corruption.

"It is not only the question of altering institutions, but changingstyle, capacities, even the ideology of the business register,"Mr. Jacobs said. "I would not focus on the institutional changeas the only important change needed." ■

Company records hassle to ease in 2005 Judiciary to choose between options for modernizing business registration

By Irina Bacheva

Scott Jacobs, the managing director of Jacobs & Associates

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Microsoft celebrates its 5-th anniversary in Bulgaria

Facts in Number

● More than $3 million investments in localizationof Microsoft software on Bulgarian language.

● Sponsorship of community affairs projects formore than $500 000.

● $500 000 commitment to Bulgarian educationunder the five years' Microsoft "Partners inLearning" initiative, which started in 2003.

● More than 800 Microsoft Certified Specialists. ● 70 Microsoft Certified Partners.● 5 Microsoft Gold Certified Partners. ● 6 Microsoft Business Solutions Partners.● 3 Microsoft Learning Solutions Partners. ● 6 Microsoft Office Specialist training centers.● 41 Microsoft IT Academies.

Academic and education background

● Initiation of the Charter "IT in Education - the indispensable invest-ment in the future of Bulgaria". The Charter is signed by the Ministryof Education and Science, over 30 universities, the BulgarianAcademy of Science, branch organizations, secondary schools andindividuals.

● Letter of Understanding and agreement with the Ministry ofEducation and Science envisaging also home usage rights ofMicrosoft Windows and Microsoft Office for all Bulgarian teachers inthe whole public education sector (schools, collages, universities andresearch institutions).

● Start of the "Partners in Learning" initiative to assist real improvementin access to Information Technologies for schools, teachers and stu-dents and massive penetration of ICT in curricula and learning.

● 4 "Microsoft Research-University Relations" funded projects inBulgarian universities equaling $58 000.

● Donation of computer lab with 8 work places and 2 servers, softwareand books to Sofia University "St. Kliment Ohridski", Faculty ofMathematics and Informatics.

● Pilot project in 7th "Sveti Sedmochislenitsi" comprehensive school ofSofia for early computer education of pupils from 1st to 4th grade.Training of teachers and equipping with software and hardware ofcomputer literacy education lab having 7 work places and one serv-er.

● Establishment of Educators Leadership Forum of Bulgaria includinghigh-ranking governmental representatives, university rectors, publicopinion makers and branch organizations' heads.

Microsoft Bulgaria unveiled a specially built Microsoft sun-dial in front of the

National Palace of Culture in Sofia on the occasion of it's 5th anniversary.

Neil Holloway, vice president of Microsoft for EMEA (right) and

Teodor Milev, General manager of Microsoft Bulgaria on the special

press conference in front of National Palace of Culture in Sofia on the

occasion of the 5th anniversary of Microsoft Bulgaria.

Community, government

and institutions

● Microsoft Bulgaria is member of BAIT, BIBA,AmCham, BBLF, AFCEA, Junior Achievement,member of "John Atanasov" initiative committee tothe Presidency of Bulgaria.

● Funding and realizing of the first e-Governmentpilot project together with National Social SecurityInstitute, Civil Registration and AdministrativeServices, Information Services AD and partners.

● Establishment of two re-qualification and addition-al qualification centers with 40 computerized workplaces and 2 servers for the use of current militarypersonnel and those leaving the army in regard torestructuring of the Bulgarian army.

● Donation of software, computer and communica-tion equipment to 4 specialized schools for hear-ing and visually impaired children under the pro-gram "Young Minds in Motion". In addition havebeen equipped 2 computer labs in the Ministry ofEducation and Science and in the BulgarianAcademy of Science.

Customers and partners

● Agreement with BAIT for providing the companies from the IT sectorwith facilitated access to Microsoft products and technologies.

● Memorandum with Bulgarian Industrial Association providingBulgarian businesses with facilitated access to Microsoft software.

● Launch of the first Microsoft products localized in Bulgarian lan-guage - Windows XP and Office XP.

● Localized version of Microsoft Business Solutions - Navision.● Launch of the Bulgarian Office 2003, four months after the official

launch of the English version of the product. PR award of the"Bulgarian PR Association" for the launch activities for Office 2003.

● Establishment of toll free number 0800-15555 for customer informa-tion and technical support.

Over 30,000 Bulgarian entrepreneurshave created or expanded existing busi-nesses securing financing fromHebrosbank, the country's ninth-largestbank. This figure is set to increase fur-ther with the help of a 6 million Euroloan from the EBRD under a jointarrangement with the European Unionsupporting small and medium-sizedenterprises (SMEs) across Central andEastern Europe.

The EBRD loan is complemented withsome 388,000 Euro from the EU, ear-marked for staff training to ensure theproper utilization of the disbursement.These amounts are part of theEU/EBRD SME finance facility, a pro-gram to promote SME growth and devel-opment in the new EU member states. Italso covers Bulgaria and Romania.

John Chomel-Doe, EBRD's director forBulgaria, said Hebrosbank is an impor-tant partner because of its strategy tosupport the SME sector. One of themain challenges entrepreneurs face in

countries from Central Europe to CentralAsia is proper financing of their projects.In its 27 countries of operation, EBRD

uses partners like Hebrosbank to helpthousands of entrepreneurs gain accessto capital.

"By supporting SMEs in Bulgaria we aretogether supporting the growth of thecountry's private sector and, ultimately,its economy," said Mr Chomel-Doe.

Hebrosbank's stated vision for 2004 is tobe the best service provider for SMEsand retail customers. A recent customersatisfaction survey indicated the bank ison target to achieving this goal, saidGautam Vir, Hebrosbank's CEO.

The SME facility was launched in 1999under the PHARE program and is themain channel for the EU's financial andtechnical cooperation with the EUaccession countries. It is to encouragethe growth and development of SMEs byproviding access to loans, leasing andequity finance from local financial inter-mediaries. The budget earmarked forthe PHARE program as a whole is about1.5 billion Euro a year. ■

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French hotel chain operator Accor is to invest between EUR 10 million and 12million initially in Bulgaria, in a hotel of the Ibis chain in Sofia, the president andthe founder of the company, Gerard Pelisson said.

The hotel will have around 200 rooms at a total of 6,000 sq m. It will target themiddle-price category. The company is now conducting surveys to find the mostconvenient places in the capital.

According to vice premier Lidia Shuleva, Bulgaria can offer 1,500 mineral springswith different healing qualities which is of great advantage to the spa companies.

Accor is specially interested in this sector, Pelisson added. Accor, which operatesthe hotel chains Ibis and Sofitel, is the European leader and among the world'slargest in hotels and services. The group operates 4,000 hotels in 140 countriesand its staff exceeds 150,000 worldwide. The company opens around 250 newhotels annually. ■

Hebrosbank to use 6million Euro from EBRD,EU to help develop SMEs

French Accor to Invest EUR 12 million in Bulgaria

H.E. Jeremy Hill, British Ambassador to Bulgaria speaks during press conference of Hebros and EBRD

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From 15 May 2004 within five Saturdaysto 10 July, the IVECO RepresentativeOffice in Bulgaria is organizing sportevents in 8 of the biggest cities in thecountry.

IVECO S.p. A Bulgaria wishes to unitepeople with sport as way of life. In thebusiest city centers of Sofia, Plovdiv,Stara Zagora, Burgas, Varna, Ruse,Shumen and Pleven different wayssports activities, spare time spendingwill be presented.

The dates 15, 29 of May; 12, 26 of Juneand 10 of July are settled as the events'dates and coordinated with theMunicipalities. The happenings areopened for a wide audience and aim atcreating the habit to go in for sport.Organizing such events is a practice ofIVECO staff.

The demonstrations will continue anhour and some of the best trainers andcompetitors in the area of tae-bo, aero-bics and step-aerobics, east martial artand latino dancing will take part. Thepopular tae-bo trainer Alfredo Tores isinvited for the event in Sofia. He will givean open lesson in South Park.

People from Ruse will have the chanceto see "Freedom", the best dance groupin town and region. In Plovdiv the public

will watch martial arts lesson next to thefountain in front of the municipality.

In Varna and Burgas, which are townswith sport traditions, tae-bo and aero-bics trainers will attract attention withthe brand new exercises at the mainentrance of sea gardens. Shumen andStara Zagora stake on their latinoschools.

People need to turn to the sport today,

when it is an alternative for differentways of time spending. That is themessage of Iveco, rather different fromthe computer games and sedentaryway of life. "Go in for sport with IVECO"is an idea of Vladimir Knejevich,General Manager IVECO S.p.ABulgaria. The campaign is organized bythe regional dealers of the company.Cefin Bulgaria participates in the orga-nization of the events in Sofia, Plevenand Ruse. ■

Spor t Hour with IVECO

Koninklijke Ahrend NV, an internationalmanufacturer of architect-designedoffice furniture and Allsteel, one ofAmerica's largest manufacturers ofquality contract furnishings for officeand institutional markets, have signeda distribution and sales agreement forAllsteel to distribute and serviceAhrend products in the United Statesand Canada.

Ahrend products will be distributed ini-tially through Allsteel's Chicago andNew York market of contract dealers

effective August 2004 with plans tobroaden into other geographical mar-kets soon after. According to Ahrendand Allsteel, this alliance offers hugebenefits for customers and specifierssuch as architects and designers. Byvirtue of this agreement, Ahrend andAllsteel will share corporate 'national'accounts in North America, productand market knowledge, and marketdevelopments.

Allsteel will carry selected Ahrendproduct families that it terms "ideal" for

U.S. design specifiers and corporateclients. These products will be intro-duced at the international furnituretrade fair NeoCon in Chicago mid-June: Friso Kramer's design classicMehes; A500 modular desking andconference systems; A22 conferencetables; the A230 task chair; A350executive chair; and a category ofseating which Ahrend calls "multifunc-tional," the A460 chair. Ahrend hasmodified a number of products, includ-ing its succesful A500 series, toAmerican formats. ■

Ahrend and Allsteel sign North American sales partnership

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In a stiff competition for the AmCham Cup at the TennisTournament 2004 Balkan Star team placed first. 41 playersformed 12 teams, doing their best in rigid competition for theAmCham Cup. At the semi-finals placed Balkan Star, Erato,Mobikom, Allied Pickfords.

Balkan Star and Erato were the finalists of the tournament.After a long and hard battle with Erato company at the tenniscourts of Gorna Bania "Gloria Palas", Niklay Iliev and SlaviTakev (Balkan Star) won the games respectively againstChristo Angelov and Konstantin Topalov (Erato).

The third annual AmCham tennis tournament was held at theTennis Club Gloria Palace in Gorna Bania. The main sponsorwas Oracle, while KRES, Pain D'or, Coca Cola and Domain Boyarwere supporting sponsors. Except the cup winners, special indi-vidual prizes were given to Nadia Simova, Mobikom (Best LadyPlayer); Vladimir Nedialkov, Motorola (Most Courageous Player);Julian Stoyanov, Oracle (Most efficient players)

Tennis has become an addiction for AmCham members. Thecurrent tournament proved that most of the players practicedhard for the upcoming battle. It is out of doubt that next springthe competition will be even harder. Erato commited to spon-sor next year event in Haskovo. ■

Nadia Simova, Mobikom /Best Lady Player individual prize/ caught the audi-

ence with professional playing.

The game between Erato and

Balkan Star teams proved hard.

AmCham Tennis Tournament 2004: The

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a m c h a m e v e n t s

winner is Balkan Star

Philip Kitoff (center), Marketing and PR Manager of

Balkan Star, thanks his team for taking the first tour-

nament place and AmCham competition organizer.

Christo Angelov, Erato proved to be a strong player in the games with

Mobikom and Balkan Star. Slavi Takev, Balkan Star, in hard battle with Erato players

Christo Angelov, Erato, receives the second place cup from Klod Kolaro, Oracle Manager for Bulgaria. Oracle is among the main sponsors of the tournament.

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MobilTel is active in the field ofmobile communications andoffers to its customers a fullrange of GSM services allover theworld. Founded in 1994, MobilTel

is a full member of the UMTS Forum and the EuropeanTelecommunication Standard Institute ETSI. During the yearsMobilTel has persistently followed its mission to provide a fullrange of high quality mobile services.

Contact info:

Mr Eric Huygen, CEOMr. Michael Foley, CCO

MobilTel1, Kukush str.

1309 Sofia, BulgariaTel.: +359 88 8500031Fax: +359 88 8500032

www.mtel.bg

Neumann International has repre-sentative offices throughoutEurope, from Paris to Moscow, andfrom Amsterdam to Istanbul. Thestress is on the word

"International", because Neumann is already the market leadernot just in Austria, but in Central and Eastern Europe as a whole.

In the battle for the best talents, our consultants have to fishin a very small pool, and finding the right candidates dependson their professionalism and specialist expertise. We go a stepbeyond the "Think global - act local" principle. We are not justglobally networked, we are strongly anchored in local markets- because we know that top-class Executive Search servicescannot be operated from just one location. The idea behindour Sector Practices is that of combining the insights of gen-eralists and specialists. They give our clients access to expertsin a wide range of industries. Our know-how is your competi-tive edge today - and our drive to keep on improving will beyour lead tomorrow.

Contact info:

Mr. Evgeny Vassilev, Executive1, Lege St. 1000 Sofia

phone: 985 4444 Fax: 985 4440

E-mail: office@neumann-inter.com Web Address: www.neumann-inter.com

The Executive Centre at 2aSaborna Street is Sofia's firstServiced Office business, providinga temporary or long-term officesolution for businesses setting up in

Bulgaria.

Clients can rent secure, world class, office suites for a day ora year, for one person or fifty, at an inclusive rate whichincludes furniture, all utility fees and reception services, anduse of fully equipped conference rooms, high speed internet,office equipment and multi-lingual secretarial and business

support services.

The Executive Centre eliminates the financial risk and man-agement time associated with setting up, staffing and runninga traditional office and allows clients to concentrate on mak-ing their business a success.

The group is Asia's largest Serviced Office business with 12properties covering the region. Clients include over one hun-dred Fortune 500 companies. The Executive Centre Sofia isthe first in an expansion plan that includes major cities acrossEurope.

The Executive Centre is represented by Giles Blanchard,Director, Europe and Borislava Tzvetkova, General Manager.

Contact info:

2 A Saborna Str. 1000 Sofia

Tel: +359 (0)2 926 4111Email: sofia@executivecentre.com

www.executivecentre.com

AUDITING COMPANY VERSI &

PARTNERS OOD (hereafterVersi) is established in 1997 asa company of certified publicaccountants. The company

doubles its equity in 2002 when auditing company VERSIEOOD joined with its staff and clients.

Versi exercises the following activities:● Independent financial audit of companies' financial reports ● Preparation of annual financial reports and organization of

accounting reporting under the Accounting Law.● Current accounting reporting ● Financial and tax consultations ● Holding training courses and seminars on international

accounting and auditing standards

The team, comprised of highly qualified professionals is com-mitted to create solutions for the client's business growth.

It has 12 years of experience of the auditors with some of themost successful international and local companies, operatingin energy sector, heavy and light industry, insurance, financialsector, public health services, non-profit organizations, gam-bling and movie industry.

Contact info:

25, Tzar Boris III Blvd. floor 31612, Sofia

Tel.:951 60 90, 951 64 11Mrs. Tatyana Vaneva, Manager

e-mail: versi@versi-bg.comwww.versi-bg.com

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Do you care about Cannes? Should you? The world's premierefilm festival closed it's 57th event - still loved and hated, praisedand damned. It has survived Hitler, riots, and Brigitte Bardot. Thisyear it faced Bush-bashing and Quentin Tarantino.

Michael Moore's Fahrenheit 9/11 has ended weeks of hype byscooping the Palme d'Or, the coveted top prize at the CannesFilm Festival 2004. Moore's film about the World Trade Centerattacks and the alleged links between the Bush and Bin Ladenfamilies has been the source of endless controversy. But thatdidn't stop the jury, headed by Quentin Tarantino, from awardingit full honors It's the first time a documentary has won the prizesince Jacques Cousteau's The Silent World in 1956. QuentinTarantino said at the post-awards press conference that "I knewall this politics crap would be brought up. We all agreed thatFahrenheit 9/11 was the best movie of the competition."

Other winners included the Korean thriller Old Boy, which wonthe Grand Prix - aka runner-up prize; Maggie Cheung, namedbest actress for her performance in Clean; 14-year-old YuuyaYagira received the best actor award for his role in HirokazuKore-eda's Nobody Knows; and Tony Gatlif claimed best direc-tor for his work on Exils.

So, controversial, glam sham or arty snooze? A suck-up toStateside cinema or sop to chin-stroking cinephiles? A bit ofboth, naturally. And this is surely its appeal: recognizing that it'sperfectly possible to enjoy The Seventh Seal and TheMagnificent Seven. The high and low brow squished together.Yes, it's about selling - the Cannes Market is unrivaled in theindustry - but it's also about celebration.

A fair few filmmakers and critics can't stand it, but it's remainedrelevant and (mostly) interesting for more than 60 years.

And France has the Venice Film Festival to thank. And fascism.Well, sort of. Throughout the 30s, Venice was the filmmakers'festival. Then, in 1939, Jean Renoir's classic La Grande Illusionmissed out on top gong to German and Italian productions.The decision was plainly political (one of the joint-winners wasdirected by Mussolini's son) and the outraged French pulledout, launching their own festival at Cannes later that sameyear. It lasted one night, before Hitler strolled into Poland andthe world was at war (it was only a film festival, Adolf!).

Post-war, Cannes came to life again. But barely. The inaugur-al festival included contributions from Billy Wilder and DavidLean, but in 1948 and 1950 the bash was canceled due to lackof cash. (In 1968 it closed after a couple of days because ofstrikes sweeping the country - Jean-Luc Godard and FrancoisTruffaut literally clung on to the big screen curtains to preventfilms being shown.) But in the 50s, the festival started to fly,with the Palme d'Or created (in tribute to the town's iconictrees) to replace previous prize the Grand Prix International.Delbert Mann would be the first director to receive it, in 1955,for the Bronx-set relationship drama Marty.

Other palm wavers include William Wyler, Federico Fellini, LuisBunuel, Luchino Visconti, Richard Lester, MichelangeloAntonioni, Lindsay Anderson, Robert Altman, Francis FordCoppola (twice), Martin Scorsese, Akira Kurosawa, Bob Fosse,Wim Wenders, Roland Joffe...

Then came sex, lies and videotape, with Steven Soderbergh'slow-budget debut underlining the enduring appeal of thisFrench festival to Hollywood wannabes. The speccy first-timefilmmaker arrived a nobody in 1989. He walked out a star -Palme d'Or in tow. And independent American cinema wasresuscitated.

Jane Campion became the first female director to grab thegong, with The Piano in 1993 (shared with Chen Kaige'sFarewell My Concubine). Tarantino triumphed with Pulp Fictionthe following year. And Mike Leigh - whose Vera Drake wasexpected to compete this May, but either wasn't entered ordidn't make the cut - became the last purely British winnerwith Secrets And Lies in 1996 (Roman Polanski's 2002 champThe Pianist was part-financed from the UK).

So, should you care? As much as you can care about film,yes. It's silly and stunt-fueled, and dumb and exciting. As thehype has it: sun, sea, sex, and cinema. At its best it appearsirresistible - La Dolce Vita as directed by John Waters: vibrant,trashy, teasing, camp. Art making out with entertainment.Which is what movies should be. ■

Do you care about Cannes?A controversial documentary wins the Palme d'Or 2004. Some adore it, some

hate it, but the French film festival is the biggest event in the movie industry

for the last 60-years.Based on bbc.co.uk

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It's an inauspicious start to the greatest film festival on the

planet. 40,000 people are cramming their way into Cannes

over the next two days and they all seem to be on my aero-

plane. There is minor compensation at Nice airport. The

first genuine star is spotted. Or rather an unmistakable

freckly bald patch. For most fans that's often as good as

it gets. It's Gene Hackman and he's wearing an eight foot

bouncer off one shoulder and three camera crews off the

other. He can barely breathe. The writhing heap of suits

staggers uncertainly towards the exit.

Why do stars brave this feeding frenzy at all I ask my sus-

piciously grim taxi driver. He ignores the question, so busy

is he fielding irate phone calls with one hand and gesticu-

lating wildly with the other. He's loaded and primed for a

vintage blast of road rage. It duly comes. A VW Golf makes

a bid for freedom in a lane reserved for oncoming traffic

and takes the wing mirror and most of the paint off the car

in front. My taxi driver is stunned into silent admiration. He

tries the same trick and we're duly pulled and fined for dan-

gerous driving by the Cannes police.

The flics[police] love the festival. It's their proverbial fifteen

minutes of fame and they're eager to share it with every-

one. They'll close whole streets at the drop of a cake tin

hat. If Dale Winton needed to use a public convenience

they wouldn't think twice about grid-locking the entire

southern coast. Cannes has that otherworldly effect on

people. It's an obsession. Berlin is too chilly. Venice is too

relaxed. Edinburgh is a haystack. And London is too cool,

spread out, and high-minded to care. In Cannes, boutiques

wrap up your presents with celluloid bows. Pavements are

splashed by famous hand prints. And everyone looks or

acts vaguely famous or important.

Aah La Croisette, the most cherished strip of tarmac and

palm trees this side of Hollywood Boulevard. It's here

where you get your first genuine taste of Cannes. Yachts

the size of skyscrapers squat in the bay.Outside the Palais

des Festivals crowds gather like clumps of moss, clinging

to the railings, or tottering on aluminium step ladders. With

square yards of metal caging keeping the rabble at scream-

ing distance, this part of the Croisette resembles a zoo.

Here, three times a day, the talent dribbles up the scarlet

carpet to the town's most prestigious cinema between two

bellowing ranks of dinner-jacketed paparazzi. The proces-

sion of glitterati and million dollar paunches is a moveable,

if hardly moving, feast. Everyone knows the score. Stars

sell films. ■■

Walking down the CroisetteAm Cham Magazine was kindly invited

by Stella Artois at the 57th Cannes

Film Festival

Photos by Milen Marchev

The first genuine star is spotted. Actor Will Smith during the promotion of the

new animated movie Shark Tale, where he is the voice of the shark Oskar.

The f lics[police] love the festival.

Yachts the size of skyscrapers squat in the Cannes bay. Sea Dream I - one of the

two Stella Artois screen yachts where all the Interbrew gests were accommodated.

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To: All staff, Los Alamos National LaboratoryFrom: Secretary of Energy

Dear staff members:

Due to an unfortunate overreaction by the RepublicanCongress to our minor difficulties in the security area, we'rebeing forced to tighten up just a bit.

Effective Monday:

1.The brown paper bag in which we store the computerdisk drives that contain the nation's nuclear secrets will

no longer be left on the picnic table at the staff commissaryduring lunch hour. It will be stored in "the vault." I know thisis an inconvenience to many of you, but it's a sad sign ofthe times.

2.The three-letter security code for accessing "the vault"will no longer be "B-O-B." To confuse would-be spies,

that security code will be reversed. Please don't tell any-body.

3.Visiting scientists and graduate students from Libya,North Korea and mainland China will no longer be

allowed to wander the hallways without proper identification.Beginning Monday, they will be required to wear a stick- onlapel tag that clearly states, "Hello, My Name Is . . " Thestickers will be available at the front desk.

4.The computer network used for scientific calculationswill no longer be hyper-linked via the Internet to such

Web sites as www.moammar.com, www.swedechicks.com, orwww.hackers-r-us.com. Links to all Disney sites will bemaintained, however.

5.Researchers bearing a security clearance of Level 5and higher will no longer be permitted to exchange

updates on their work be posting advanced-physics formu-las on the men's room walls.

6.On "Bowling Night," please check your briefcases andlaptop computers at the front counter of the Bowl-a-

Drome instead of leaving them in the cloakroom. Mr.Badonov, the front-counter supervisor, has promised to "keepun eye on zem" for us.

7.Staff members will no longer be allowed to take homesmall amounts of plutonium, iridium or uranium for use

in those "little weekend projects around the house." Thatincludes you parents who are helping the kids with their sci-ence fair projects.

8.Thermonuclear devices may no longer be checked outfor "recreational use." We've not yet decided if excep-

tions will be made for Halloween, the Fourth of July or New

Year's Eve. We'll keep you posted.

9.Employees may no longer "borrow" the AA batteriesfrom the burglar alarm system to power their Game

Boys and compact-disc players during working hours.

10.And, finally, when reporting for work each day, allemployees must enter through the front door. Raoul,

the janitor, will no longer admit employees who tap threetimes on the side door to avoid clocking in late. I know thiscrackdown might seem punitive and oppressive to many ofyou, but it is our sworn duty to protect the valuable nation-al secrets that have been entrusted to our care.

Remember: Security isn't a part-time job-it's an imperative-- all 37 1/2 hours of the week!

Sincerely,Bill

Security issues

A new survey by William M. Mercer Inc. reports that, of286 employers polled in the US, 29 percent encouragehumor as part of their work culture while 8 percent actu-ally have a stated policy of using fun to help cut work-place stress and attract and retain employees in today'stight job market. So, here are some funny quotes:

"Life is tough. Three out of three people die, so shut upand deal."

Ring Lardner

"An expert is somebody who is more than 50 miles fromhome, has no responsibility for implementing the advice hegives, and shows slides."

Edwin Meese

"Change Management: The process of paying outsiders tocreate the pain that will motivate insiders to change, there-by transferring the change from the company's coffers intothose of the consultants."

Eileen C. Shapiro, Fad Surfing in the Boardroom

"You will appear to be a visionary planner if you decen-tralize everything which is centralized and centralizeeverything which is decentralized."

Dogbert's Big Book of Business

"I don't want any yes-men around me. I want everybody totell me the truth even if it costs them their jobs."

Sam Goldwyn

QUOTES