the amcham new president€¦ · amcham bulgaria magazine april 2006 from the board of directors...
TRANSCRIPT
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
h o m e p a g e : w w w . a m c h a m . b g e - m a i l : a m c h a m @a m c h a m . b gBus in e s s Pa rk So f i a , M lados t 4 A re a , Bu i l d ing 2 , F lo o r 6 , 1 7 1 5 So f i a
Te l . : ( 3 5 9 2 ) 97 6 9 5 6 5 Fax : ( 3 5 9 2 ) 97 6 9 5 6 9
i s s u e 6 8a p r i l 2 0 0 6
Analysis:SOS: Inflation?
Milosevic, or How to Convict a Dictator
Inter view:Simon Anholt to Bulgaria:Change Face Now!
The AmChamNew President Is Borislav Boyanov
Fixing the Road
to Europe9 billion Euro needed for improving Bulgarian streets and highways
Fixing the Road
to Europe9 billion Euro needed for improving Bulgarian streets and highways
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Dear AmCham Members and Friends:
Now that we have accepted Ken Lefkowitz's request to leave the position of AmCham President,
we feel our duty to acknowledge with admiration his leadership and devoted work in the Chamber.
The accomplishments of the Chamber during Ken's tenure are so numerous and of such impor-
tance that it is difficult to single out one main achievement. We have organized a large number
of meetings, conferences, workshops, sports and fun events. We have been the first to provide a
broad forum of discussion on commercial opportunities arising from Bulgaria's NATO membership.
We have had a decisive role in re-launching the negotiations between the United States and
Bulgaria on the bilateral tax treaty - and Ken's involvement in that issue has been instrumental.
The interdisciplinary nature of our membership has led us to establish several committees that
provide continuing exchange of expertise and skills among members. We have introduced numer-
ous new initiatives on the upcoming Bulgaria's EU membership. Last but not least, our lobbying
and advocacy campaigns have developed greatly over the years, our high-level contacts have
increased, and we have been able to provide top-quality assistance and advice to our members.
Ken has set a daunting precedent with his devotion to the Chamber's mission. By all means, he
left a hard act to follow. The Board feels confident Ken's legacy will be upgraded, however, since
we have Borislav Boyanov as his able successor. Those who know Boris have no doubt that he
will endeavor to follow the tradition and further bolster American Chamber of Commerce's role
as a leading business association in the country. He will enjoy all our support in his new posi-
tion. Luckily enough, he has around him the enthusiastic AmCham team and the assistance of
Stefan Dimitrov and David Hampson as vice presidents, and Anthony Hassiotis as the treasurer.
A lot of work remains ahead for the Chamber, such as expanding and strengthening the mem-
bership, providing good services to our members, assisting and advising the government and the
business community with the upcoming challenges of the EU membership. We would welcome
your suggestions to the new President and the Executive Board on how to achieve these goals
and accomplish the Chamber's role in identifying and emulating the best business practices of
the United States, European Union and Bulgaria.
Best regards,
Board of Directors
American Chamber of Commerce in Bulgaria
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Publisher
American Chamber of Commerce in Bulgaria
Business Park Sofia, Mladost 4 Area
Building 2, Floor 6, Sofia 1715, Bulgaria
e-mail: [email protected]
www.amcham.bg
Editor-in-Chief
Milen Marchev
Deputy Editor-in-Chief:
Christopher Karadjov
Senior Editor:
Irina Bacheva
Layout, Design & Printing:
Milen Marchev
Writers:
Boyko Vassilev, Marina Tzvetkova,
Mina Georgieva, Panayot Angarev,
Yuliana Boncheva
Advertising
AmCham Bulgaria:
Nadejda Vakareeva, [email protected]
AmCham Bulgaria Magazine:
Milen Marchev, [email protected]
The AmCham Bulgaria Magazine reaches a broad audience
of AmCham members, leading US, Bulgarian and internation-
al 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.
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AmCham Bulgaria Magazine is a primary forum for political and economic analyses, news, viewpoints as well as for the presentation of new business oppor-
tunities. The articles 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.
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a m c h a m b u l g a r i a
3M (East) AG . AA KRES EOOD . ABB Bulgaria Ltd. . AbCRO - Bulgaria . AccorServices Bulgaria . ACSIOR . ADIS Ltd. . Advance International Transport (Balkan)EAD . AES Corporation . AFA OOD . AGS Bulgaria Ltd. . AIG Bulgaria Insurance& Reinsurance Company EAD . AIG Life Bulgaria . AIMS Human Capital . ALEXAN-DROV GROUP CORPORATION . Allan Collautt Associates, Inc. . Allied Pickfords Bulgaria. Alter Ego Company OOD . American College of Sofia . American ConstructionProducts JSC . American English Academy . American University in Bulgaria (AUBG) .Anglo-American School of Sofia . Anton Preslavski, Liebert Hiross . APIS - BULGARIALtd. . APOLO Ltd. . Argento Human Resource Solutions . Aries Commerce . AshtromInternational AD . Association of Bulgarian Broadcasters - ABBRO . AT Engineering 2000Ltd. . Auditing Company Versi and Partners Ltd. . Avendi Ltd. . AVON CosmeticsBulgaria Ltd. . Balkan News Corporation Plc. . Balkan Star . Baxter AG . BayerBulgaria EOOD . BearingPoint, Inc. . BG Radio . BMG Ltd. . Bodyguard-Fire-K Ltd.. Borislav Boyanov & Co. . Braykov's Legal Office . Bristol-Myers Squibb . BrownForman Beverages Worldwide Sofia Branch LLC . BULBANK . Bulgarian AmericanEnterprise Fund . Bulgarian Charities Aid Foundation (BCAF) . Bulgarian Post Bank .Bulgarian Telecommunications Company EAD . Business Media Group . Business ParkSofia EOOD . CA IB Bulinvest . CableTel . Car Rental Bulgaria Ltd. . Cefin BulgariaEOOD (IVECO dealer) . Center for the Study of Democracy . Chelopech Mining EAD .Cisco Systems Bulgaria . Citibank N.A.- Sofia Branch . City University . ClockworkLtd. . CMS Cameron McKenna EOOD . Coca-Cola Bulgaria EOOD . Coca-Cola HBCBulgaria SA . COLLIERS International . ConsulTeam Recruitment and Selection Ltd. .Cook Communications . Corstjens Worlwide Movers Group . CPM International Ltd. .Curtis / Balkan Ltd. . DeConi M&A . Deloitte Bulgaria EOOD . DHL Express BulgariaLtd. . Diageo Bulgaria Ltd . Diamed Ltd. . Dimitrov, Petrov & Kalaidjiev . DIMONBulgaria . Djingov, Gouginski, Kyutchukov, & Velichkov . Dobrev, Kinkin & Lyutskanov LawFirm . Domaine Boyar AD . Dr. Emil Benatov & Partners . Dr. I.S. Greenberg MedicalCenter, Ellen Ruth Greenberg, Ph.D. . DynCorp International LLC . Effekten Und Finanz -Sofia AD . Electron Progress AD . Eli Lilly and Company . Elido (Lamel Ltd.) . ElmekSport Bulgaria EOOD . Elta consult AD associated partner of CB Richard Ellis for Bulgaria. Emerson Process Management AG . Encouragement Bank AD . EngineeringserviceSofia Ltd. . Equest EAD . ERATO HOLDING PLC . Ernst & Young Bulgaria . ExpoTeam Ltd. . Flying Cargo Bulgaria Ltd. - Licensee of FedEx . Force Delta Ltd. . ForemConsulting Bulgaria . Forton International JSCo . General Electric International .Genmark Automation Bulgaria . GiTy Bulgaria ltd. . GlaxoSmithKline . Goodyear DunlopTires Bulgaria . Grand Hotel Sofia . Grenville . Grey Worldwide Bulgaria EOOD .Group 4 Securitas (Bulgaria) OOD . Hewlett-Packard Bulgaria Ltd. . Hilton Sofia .Honeywell EOOD . Horizon . HVB Bank Biochim AD and HEBROS Bank AD . IBMBulgaria . Ideal Standard Bulgaria . In Time Ltd. . Infoguard - Stefan Nedkov . INGBank Sofia Branch . Intel Czech Tradings, Inc. . Interbrands Marketing & Distribution Inc.OOD . Interdean . Investbank Plc. . IP Consulting Ltd. . ISI Emerging Markets(Internet Securities, Inc.) . Johnson & Johnson Doo. . Junior Achievement Bulgaria .Kaliakra AD . Kamenitza AD . Kamor Auto Ltd. . Kempinski Hotel Grand Arena Bansko. Kolbis International Transfer Corporation . KPMG Bulgaria . Kraft Foods Bulgaria .LANDMARK Properties Bulgaria . Lexim Sofia Ltd. . Lindner Bulgaria OOD . Lirex BGLtd. . Lowe Swing Communications . M & M Air Cargo Service BG OOD . M3Communications Group, Inc. A Hil & Knowlton Associate . Maersk Bulgaria Ltd. . MagneticHead Technologies . Maritza East III Power Company AD . Marsh EOOD . MARTERNEOOD . McDonald's Bulgaria Ltd. . Merck Sharp & Dohme IDEA Inc. . Meridian HotelsBulgaria OOD . Microsoft Bulgaria . Miltech Ltd. . Mmd, Corporate, Public Affairs &Public Relations Consultants . Mobiltel EAD . Monbat Plc. . Moten Sport . MotoPfohe Ltd. . Motorola Bulgaria EAD . National DISTRIBUTORS . NATO Defense CollegeAnciens' Association . NDT Equipment Supplies LTD . Net Is Ltd. . NeterraCommunications . Neumann International AG . New Europe Corporate Advisory Ltd. .Nexcom Bulgaria EAD . Opet Aygaz Bulgaria EAD . Oracle East Central Europe Limited- Branch Bulgaria . Orbit Ltd. . Orkikem Ltd. . OSG Records Management . PfizerH.C.P. Corporation, Representation Office Bulgaria . Pioneer Semena Bulgaria EOOD .Popov Legal Office . Pratt & Whitney . PricewaterhouseCoopers . Prima Soft Ltd. .Procter & Gamble Bulgaria . ProSoft . PSG Payroll Services Ltd. . Radisson SAS GrandHotel . Rising Force Co., Ltd. . Rockwell/Intelpack . S&T Bulgaria . SanteInternational OOD . Schering - Plough Central East - Bulgaria . SEAF ManagementBulgaria EOOD . Seplex Law Offices . Sheraton Sofia Hotel Balkan . Sherita M Ltd.. Sienit Ltd. . SigmaBleyzer Investment Group LLC - Representative Office . SoraviaBulgaria Ltd. . Stefan Dimitrov, Norman Management Co. Ltd. . TechnoLogica EOOD .TeleLink AD . Tero Halmari, European Bank for Reconstruction and Development (EBRD) .The Atlantic Club of Bulgaria . The Executive Centre . Tishman Management CompanyLtd. . Tissue Bank Osteocenter Bulgaria EAD . TM Auto Ltd. . TMF . TumbleweedCommunications EOOD . Unimasters Logistics Group AD . Unisys Bulgaria Branch .United Consulting Ltd. . Urban 2000 Ltd. . Vaptsarov Joint Stock Company . VectorManagement Bulgaria EOOD . Videolux Holding / Technopolis . VIP Security Ltd. . VISAInternational Service Association . VSK Kentavar Ltd. . Westinghouse Energy SystemsBulgaria Branch . Wrigley Bulgaria EOOD . Xerox Bulgaria Ltd. . Yavlena Ltd. . ZlatiDinev Studio in partnership with Outerbridge/Morgan .
Board of Directors of the American Chamber of Commerce in Bulgaria
President Mr. Borislav Boyanov Borislav Boyanov & Co.
Vice President Mr. Stefan Dimitrov Allied Pickfords Bulgaria
Second Vice President Mr. David Hampson Grenville Financial
Treasurer Mr. Anthony Hassiotis Bulgarian Postbank
Members Mr. Kenneth M. Lefkowitz New Europe Corporate Advisory
Mrs. Olga Borissova AUBG, Director European Programs
Mrs. Tanya Kosseva Landmark
Mr. George Randelov IBM Bulgaria
Mrs. Elitsa Tsaneva Ideal Standard Bulgaria
Mrs. Maria Vranovska Eli Lilly and Company
Ms. Evgenia Stoichkova Coca-Cola Bulgaria
Mr. Christopher Thompson Bearing Point, CLRP
Ex-Officio Member Mr. James Rigassio US Senior Commercial Officer
Executive Director: Valentin Georgiev
Contentsa m c h a m e v e n t s
Borislav Boyanov Elected President of AmCham Bulgaria . . . . . . . . . . . . . . . . . . . . .4
c o v e r s t o r y
Pothole Invasions . . . . . . . . . . . . . . . . . . . . . .6by Yuliana Boncheva
Freeway Construction Lags Behind . . . . . . . . . . .10By Yuliana Boncheva
e c o n o m y
SOS: Inflation? . . . . . . . . . . . . . . . . . . . . . . .16By Mina Georgieva
a n a l y s i s
Economic Growth Slows to 5.5% in 2005 Over Heavy Flood Damages . . . . . . . . . .18
t a x a t i o n
Bulgaria Reforms VAT, Income Tax Laws . . . . . . .20By Marina Georgieva
a n a l y s i s
Milosevic, or How to Convict a Dictator . . . . . . . .24By Boyko Vassilev
e c o n o m i s t c o n f e r e n c e s
Bulgaria's Business and Economic Outlook to 2010 . . . . . . . . . . . . . . . .28
a m c h a m i n t e r v i e w
Simon Anholt to Bulgaria:Change Face Now! . . . . .30By Irina Bacheva
e c o n o m i s t c o n f e r e n c e s
What Bulgaria Should Do to Attract ForeignInvestments . . . . . . . . . . . . . . . . . . . . . . . . .32By Anthony Hassiotis, AmCham Bulgaria Treasurer and Postbank CEO
l a w
Bulgaria to Remove Commercial Registration From the Courts . . . . . . . . . . . . . .34By Chris Thompson
m e m b e r n e w s
Bulgaria's "Golden" Factory . . . . . . . . . . . . . . .36By Marina Tzvetkova
a m c h a m e v e n t s
InvestBulgaria Agency to Facilitate Small Businesses . . . . . . . . . . . . . . .38By Irina Bacheva
c o m m i t t e e r e p o r t s
AmCham Healthcare Revives After a Brief Period of Intermission . . . . . . . . . . . . . .42
n e w m e m b e r s . . . . . . . . . . . . . . . . . . . .42Martern EOOD; VIP SECURITY Ltd.
i n t e r v i e w
Hilton Sofia Managers: Expect More Hilton Brand Hotels . . . . . . . . . . . . . . . . .44By Milen Marchev
l e i s u r e
BlackSeaRama Draws an Elite Set to Bulgaria . . . .46
m e m b e r n e w s
Bulgarian Snowboard Rider Triumphs at Europa Cup 2006 . . . . . . . . . . . . . .48
Radisson SAS to Add New Wing, Conference Center . . . . . . . . . . . . . . . . . . . . .48
EGF Leasing Expects to Continue Its Success . . . .48
Oracle manager: IT industry thrives in Bulgaria . . .49
m u s i c
All the Love From Sunrize . . . . . . . . . . . . . . . . .51
Fender 60th Bash In Tempe, Ariz. . . . . . . . . . . . .52
a m c h a m e v e n t s
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Dear members of the American Chamber of Commerce in
Bulgaria:
I would like to thank you and my fellow Board members for thehonor and the confidence you have placed in me by electingme as the President of the Chamber.
The American Chamber of Commerce in Bulgaria hasundoubtedly achieved a lot in its development over the pastthree years. Its President until now, Ken Lefkowitz, has playeda major role in this process and I would like to express ourgratitude to him for everything he has done for the Chamberand its members.
Bulgaria is going through a very sensitive stage in its history.At this time, the role of the American Chamber as an influen-tial representative of U.S., Bulgarian and international businessshould grow to a new level.
Certainly, this is tied to a more effective expansion of U.S.-Bulgarian economic relations. Utilizing the impressive capacityof the Chamber's 225 members and connections with theEuropean Council of American Chambers of Commerce,AmCham is capable of playing an important role in Bulgaria'spractical and successful accession to the European Union byacting as a lobbyist for this country's interests and a qualifiedpartner to the Bulgarian and international institutions in thismultilateral process.
Our aims for substantial improvement of business environmentand its regulatory framework are not an end in itself. Our striv-ing for a quality enhancement of the role of the AmericanChamber in Bulgaria is invariably connected with the directand active representation and defence of the legitimate inter-ests of AmCham members - whenever and however required,in conformity with the law, morality and the best business prac-tices.
AmCham members' qualifications, energy and commitment tothe public, together with the effective support provided by theU.S. Embassy and the U.S. Commercial Service, give meutmost confidence in our success.
Sincerely,
Borislav T. Boyanov,
President, AmCham Bulgaria
AmCham Bulgaria Board of Directors unanimously approvedBorislav Boyanov on April 13 to succeed Kenneth Lefkowitz asthe Chamber's president. In addition, the 11 present boardmembers elected David Hampson (Grenville Bulgaria) as thesecond vice-president of the Chamber. The first vice presidentis Stefan Dimitrov of Allied Pickfords.
Newly elected President Boyanov kindly thanked the boardmembers for the opportunity to serve Chamber's members ina new capacity. Ken Lefkowitz, who had requested to stepdown for personal reasons, will stay involved in AmCham activ-ities chairing the Public Affairs Committee, which deals withAmCham lobbying initiatives and has an important role in pro-tecting the interests of member businesses.
"During the term of Kenneth Lefkowitz, AmCham Bulgaria hasdeveloped many positive tracks in its policy which laid thebasis for quite a number of new initiatives in the organization,"said Executive Director Valentin Georgiev.
BorislavBoyanov ElectedPresident of AmChamBulgaria
From Right: Elitza Tsaneva, Ideal Standard, Olga Borissova, AUBG, Tanya
Kosseva, Landmark Properties and Borislav Boyanov discussed several new ini-
tiatives of AmCam at the board meeting April 13.
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Dear AmCham members:
I am very pleased to announce that the Board of Directors haselected Borislav Boyanov as our new President, and to handover the leadership of the Chamber to him. As many of youknow, both my family and my business have been growing,therefore I had to re-allocate my time commitments according-ly. I announced my pending resignation as President to theBoard two months ago, and a consensus developed veryquickly that Boris should step in to take my place. I wish himat least as successful a tenure as President as I had. I amconfident he is the right choice to lead the Chamber and todevelop it further as an institution.
My decision to step down, although stemming out of self-cen-tered reasons, is good for the Chamber in the end. Togetherwith the Board, the Executive Director, and the office team wehave achieved tremendous development over the past threeyears. This period has been more than adequate for me tocontribute what I could as a leader. So the time is right for afresh face and the fresh ideas that will keep the Chamberhealthy and growing.
I will continue to be involved actively in AmCham, as I have notresigned my board seat. Also, the Board has honored me withan appointment to chair the Public Affairs Committee, so I willtake over from Boris to lead the Chamber's policy and lobby-ing activities.
Let me thank all of you for your support for the Chamber overthe years. It has been an honor and a pleasure to serve asyour President. I look forward to our continued work togetherto improve the Bulgarian business environment and to promoteU.S.-Bulgarian business ties.
Warmest regards,
Ken Lefkowitz
Lefkowitz was elected a president on Jan. 17, 2003 after PhilipBay stepped down. At the beginning of his term, Lefkowitz saidthat the main goal during would be to deliver programs andactivities that add value to members. By all accounts, he hassucceeded in his objectives and provided professional leader-ship to the organization, board members reiterated at themeeting.
AmCham Bulgaria's first president in 1994 was RaymandMazurek. He was succeeded by Lewis Staples in 1996, andPenko Dinev became the president in 1997. In 1998, JohnPalmroth took over the presidency, followed by Philip Bay in2000.
The Chamber bylaws stipulate that the president is elected bythe Board of Directors from among its members. The presi-dent exercises supervision over the affairs and interests of theChamber and represents the Chamber in external relations. Inaddition, the president chairs all meetings of the Board andGeneral Assembly. With the approval of the Board, the presi-dent appoints advisors, staff, and chairpersons of all standingand special committees. ■
Ken Lefkowitz was
President of the AmCham
since 2003. He was ahead
of the chamber in 2005
when AmCham Bulgaria
celebrated its 10-th
Anniversary.
From Left: Maria Vranovska, Eli Lilly and Company, Evgenia Stoichkova,
Coca-Cola Bulgaria, Chris Thompson, Bearing Point, Valentin Georgiev and
David Hampson, second vice president of AmCham Bulgaria.
Borislav Boyanov has been an attorney-at-law with Sofia
Bar Association since 1984. He became the founder and
managing partner of Borislav Boyanov & Co. in 1990.
Boyanov is a recognized lawyer and public figure. Since
2000 he has been an honorary consul for Malta in
Bulgaria, and since 2002 he has been serving as
European patent and trademark attorney.
Boyanov is a graduate of the Law Department of Sofia
University "St. Kliment Ohridski." He specialized at the
Academy of American and International Law,
Southwestern Legal Foundation in Dallas, Texas. He is a
member of several professional organizations, including
Sofia Bar Association, Bulgarian Bar Association (1984),
and International Bar Association. Boyanov is the senior
vice-chair of the European Forum. He has been a board
member and a vice-president (since 2005) of Bulgarian
International Business Association.
t h e n e w p r e s i d e n t
Credit extended in …
asphalt
Sofia ate up 560 tons of asphalt in twodays. But its hunger could not be sat-isfied by a hundred times that. Thehuge quantities are needed to fill inthe potholes, which have turned into a"natural disaster" for the citizens of thelargest city in Bulgaria.
The budget has always been insuffi-cient during the last several years, andgradually the streets, boulevards andsquares started to deteriorate. Duringthe last winter, however, with the aid oflow temperatures and rains and snow,the potholes managed to virtually over-come the whole city. And since themoney is not enough again, SofiaMayor Boyko Borissov, embarked onurgent business negotiations with theLukOil Neftochim Oil Refinery for aloan extended in bitumen. Bitumen is
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Pothole Invasions Time is running out to do something about the failing roads of Bulgaria. Loans
in asphalt are a palliative solution, but few have better ideas about what to do
by Yuliana Boncheva
Do you know what is the commonality between Bulgaria's roads and Swiss
cheese? The holes, of course, any local driver will tell you.
The inhabitants of Orlandovtsi suburb are about to get listed in the Guinness
Book of Records with the unique First Bulgarian Army Boulevard. There are more
than 300 counted potholes, half of them up to 15 centimeters deep, on a one-
kilometer stretch.
In Shumen, a car driver with a sense of humor and collegiality, posted signs
reading '50 Leva' or '70 Leva' by the potholes along the busiest roads in the city
- a peculiar pricelist of what drivers will have to pay for repairs of the vehicle in
case they fail to avoid these traps.
The Black Sea city of Bourgas has even opened an internet site, with URL
www.burgasbezdupki.org, which accepts messages from citizens, describing dan-
gerous potholes and proposals for improving the state of the city road network.
The site contains also pictures of the victims of the broken roads.
Both Sofia and Bourgas are busy to draw a map of the most dangerous streets
in the cities.
Meanwhile, State Roads Agency, which is in charge of roads maintenance, has
counted more than two million potholes along the republican road network.
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an ingredient of the asphalt, needed inthe combat with potholed roads.
The president of the Russian GiantLukOil Vagit Alekperov, who visitedSofia, personally authorized the oilrefinery near Bourgas to extend acredit of 5,000 t of bitumen. The valueof the 'loan,' which was extended witha five-month grace period, is set at 3.5million Leva. The loan will be used toproduce close to 84,000 tons ofasphalt, which are needed to bringSofia into a more or less acceptablestate. LukOil has promised that thecapital city may be granted a newcredit in kind after the first one isrepaid.
The problem is that even with a milliontons of asphalt poured out, the city willremain pockmarked with patches,while potholes will continue to multiply.
The reasonable solution would be tocompletely replace the pavement atleast along the major streets andboulevards. But that would require areally huge investment. For the timebeing, the local authorities - the mayorand the Municipal Council - have noideas about how they could do it.
The whole country, and not only Sofia,has fallen victim to potholes, becauseof three reasons - lack of money, poororganization and inefficient control.The low budgets for the maintenanceof the road network are the standardexplanation provided by all responsibleparties. However, the situation isbecoming really unbearable and theauthorities must get their act togetherin order to stop the terror of the pot-
holed streets.
The end of endurance
The Bulgarians are known to be apatient people. But even they cannotendure the terror of the potholes anymore. More and more victims of thecraters gaping along roads, streets andsidewalks are searching for retributionin court. Plovdiv Municipality, forinstance, was convicted in 20 casesbecause of its improper maintenanceof streets and sidewalks.
The wrath against potholes gave birthto the Bourgas Transport Cluster. Thealliance established in the Black Seacity of Bourgas brought together repre-sentatives of transport companies,NGOs and angry citizens. Their top-priority claim is to immediately throwout the Thrace company because ofthe poor quality of the street repairs itwas contracted to do. The outcome ofthis "rebellion" is still unclear. The con-tract signed by the company expires atthe end of the year.
The municipality in Sofia is the defen-dant in more than 12 cases filed by cit-izens with broken limbs or damagedvehicles. The city boulevards are espe-cially treacherous as the potholes popup as mushrooms after rain, and pre-sent a challenge to even the mostcareful drivers. Still, Sofia drivers jokethat the potholes have trained them tosuch an extend that even a FormulaOne driver would be no match forthem.
The Ministry of Regional Developmentand City Planning has also wound up
in court - because of the disastrousstate of inter-city roads. More than 10drivers have filed cases against theministry within the last several monthsafter the crushing their cars in pot-holes along Hemus Highway inNorthern Bulgaria.
Dig at will
The lack of responsibility and controlis one of the reasons for the lunarlandscapes observed in Bulgariantowns and cities. It is difficult tobelieve, but any company may dig atrench to lay cables or pipes, and mayeasily forgo to repair the damages tothe road after their own work is com-pleted.
This seems to be the "rule" even inSofia. That is why Mayor Borissov hasproposed to the City Council to amendthe rules. Any company that would liketo dig for laying underground facilitiesshould deposit a guarantee. If thedamages are repaired on schedule andwith the proper quality, the money willbe paid back. Otherwise the munici-pality will take over the depositedamount and will transfer it to a differ-ent company, contracted to repair thedamages.
Collapse
The ill-fated Strabag company is theperfect example that whenever thecontrol is insufficient, even the prover-bial Austrian punctuality may fail.
A 100-meter stretch along the E-79road near Vidin, on the Danube col-lapsed in late March. The asphalt now
resembles a spider web of 30- to 40-centimeter-deep cracks.
The collapsed road was commissionedbarely five months ago. The AustrianStrabag and its Bulgarian subcontractor,Trafikoengineering, spent almost threeyears to build the road and finally com-missioned it three month behind sched-ule. The companies received 11 millionEuro for that job. The collapsed road isnow closed. The repair of the pavementwill take at least three to four months.
The building companies refused tocomment the gaffe with the collapsedroad. This was not the first incidentwith Strabag. Some 500 square metersof a suspended ceiling at the newSofia Airport collapsed on February 6.And immediately before that the newrunway, constructed also by Strabag,also failed.
The Bulgarian authorities started to hintvaguely at seeking possible indemni-ties. However, construction ministerAssen Gagauzov has been saying thatgood results require hard work and not
sanctions.
Raids
While Sofia's city government wasnegotiating bitumen deals with LukOil,Minister of Regional DevelopmentAssen Gagauzov was trying to con-vince the most powerful financial com-panies in the United States to invest inthe Bulgaria's freeways, which weredesigned during the socialist times andstill remain incomplete. He presented toCitigroup Public Finance and LehmanBrothers in New York the hottestinvestments points on Bulgaria's map -the infrastructure around the futureU.S. bases, the freeways, and thepipelines from Bourgas toAlexandropoulos (in Greece), and fromBourgas to Vlore (in Albania).
The minister highlighted the Strumafreeway, designed to reach out into themap of Greece, the Maritsa freeway -which will bear cars and truck speed-ing to Turkey, and the "sand-beach"Black Sea freeway, linking Varna andBourgas, as prominent road infrastruc-
ture projects.
That's all fine, but a billion Euro willhave to be found in order to completethe three freeways.
At the very same time - in early April -Deputy Minister of RegionalDevelopment Dimcho Mihalevski pre-sented the freeway projects to the topmanagers of Deutsche Bank in chargeof Central and East Europe. Mihalevskiemphasized Maritsa and Struma free-ways, and announced afterwards thatthe bank had proposed to the Bulgarianauthorities to provide consultancy fordrafting the file of the Maritsa freewayauction. The tender for appointing aconcessionaire for the freeway shouldbe launched by next fall. DeutscheBank has the relevant experience fromthe construction of freeways inHungary, Poland and Croatia.
It is a fact that Bulgaria needs a lot ofmoney and experienced partners witha broad outlook, in order to be suc-cessful in improving its road network.Time for that is running out. ■
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Road construction workers trying to repair the pathholse on "Tsarigradsko shosse" in Sofia in the beginning of April. The streets in the capital are in their worst con-
dition for the last 10 years.
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Mongolia recently asked Russia to comeand build some 1,500 km of roads. TheMongolian side offered to pay for theconstruction in mineral deposits.
Regrettably, Bulgaria does not have thenatural wealth of that Asian republic,which means that it is not in a positionto offer such a barter deal. HoweverSofia, unlike Ulan Bator, may siphonmoney from the European taxpayers.The generous European financial sup-port, naturally, has its pragmatic motiva-tion. Richer states in Europe are readyto pay as much as necessary in orderto have better-off and stable neighbors,not ghettos. This refers most of all tothe future EU member states - Bulgariaand Romania.
Bottlenecks along
European corridors
The roads in Bulgaria represent the"bottlenecks" along the European trans-port corridors, and create problems forthe international traffic of passengersand goods, the World Bank warned inan analysis, presented in Sofia thisFebruary. A token 16 percent of theroads in Bulgaria could be ranked asfirst-class. Freeways amount less than 2percent, according to the data from thereport, titled Bulgaria's road to the EU.The report was discussed at a roundtable at the Council of Ministers. Itstates that even the roads classified asfirst-class are actually in a poor condi-tion. A mere 35.5 percent of the roadnetwork could be ranked as good, thebank says. Two thirds of all roads inBulgaria need serious repairs and com-prehensive improvements.
The fact that the roads with internation-al importance most often cut rightthrough towns and villages is seen as amajor deficiency, as TIR trucks andlocal vehicles create problems for eachother.
Too, all major transport projects lag seri-ously behind schedule. The Strumafreeway, for instance, had to be readyfor the Olympic Games in Athens. Today,we still speak about it as something inthe future.
The issue of poor roads makesBulgaria stumble on its way to the EU,together with corruption and sluggishbureaucracy, emerged as a focal pointfor the Economist analysts. At the roundtable, Delia Met-Con, a senior consul-tant with the Economist IntelligenceUnit, made critical remarks aboutBulgaria's abandoning its infrastructureand added that in this way, the countrycreates the impression that it lagsbehind Romania.
That is why it is not surprising thatBrussels is ready to pour 2.1 billion Eurointo transport projects in Bulgaria overthe next seven years. The impressiveamount has been secured from the EUinfrastructure improvement funds - theCohesion Fund and the structural funds.The billions will be allocated mainly forupgrading those roads and railway linesthat cover the Bulgarian sections of thepan-European transport corridors.
The development of the European trans-port corridors takes into account theneed to facilitate transportation betweenSoutheast Europe and other regions inEurope, the Middle East, Asia and NorthAfrica.
The fact that five out of the 10 pan-European transport corridors - IV, VII,VIII, IХ and Х - cross Bulgarian territoryis both a positive and an obligating cir-cumstance. It requires enormous invest-ments in the physical integration of thenational into the European infrastructure.
There are 15 major road projects inBulgaria, which will be financed by theEuropean Union. Funds from Europe will
be used to finance the construction ofthe new Sofia airport, the second bridgeacross the Danube, and the Bourgasport. The European Union will alsofinance the expansion of the Sofia sub-way.
Along with being rather generous, thefree financial injections from the EU willnot be enough for all urgent and impor-tant transport facilities. That is whyBulgaria will have to secure supplemen-tary financing from the state budget,and some of the projects will be offeredto private companies on concession.
Billions for kilometers
Bulgaria will have to find an amount,which is colossal for its economiccapabilities -8.88 billion Euro, to beexact, in order to improve its transportinfrastructure - roads and railway lines.Some 3.48 billion Euro will be neededfor repairs of automobile routes and forthe construction of new road sections.Another 5.4 billion Euro will be neededto allow Bulgarian trains to travel at thespeed of European trains. These figures,as amazing as they might be for thescale of Bulgaria, were quoted severaldays ago by Minister of Transport PetarMutafchiev.
His government colleague AssenGagauzov, who is in charge of regionaldevelopment and town planning, listedthe construction of the six freeways asan ultimate priority in the governmentplan for improving the road infrastruc-ture.
It seems that Bulgaria will join theEuropean Union with several freeways,which are in the process of construc-tion, but still far from completion. Mostof the already commissioned high-speed sections were built a long timeago. The Trakia freeway, which will linkthe capital to the Black Sea, is the
Freeway ConstructionLags Behind Some 8.9 billion Euro are needed to unplug Bulgaria's traffic bottlenecks along
major European routes
By Yuliana Boncheva
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most advanced in terms of overalllength. After it is completed, reachingthe Black Sea beaches from Sofia willtake some three hours. But that willbecome true at the beginning of nextdecade at best.
First things first
Four of the six Bulgarian freeways willbe assigned on concession, the cabinetannounced in late March, when PrimeMinister Sergei Stanishev convened acoordinating council on infrastructureprojects of national importance. Thecouncil approved a report by TransportMinister Petar Mutafchiev on the devel-opment of the major road links in thiscountry.
The paper stipulates the investment of888 million Euro in road developmentover three years - from 2007 to 2009.Bulgaria will apply with projects for 593million Euro to the EU Cohesion Fund,which has allocated funds for the devel-opment of transport and for environmentprojects. The state budget will have topay another 294 million Euro for theseprojects.
The Lyulin freeway, the shortestBulgarian freeway which will bypass thecapital city, and the longest completedfreeway, Trakia, which crosses thesouthern half of Bulgaria from its west-ern border to the Black Sea, are in themost advanced stage and closer tocompletion than the rest. According toestimates, Lyulin with its 9.125 km willbe ready by 2009.
The government plans Trakia, Maritsa,Struma and Black Sea freeways to beconstructed by applying the public-pri-vate partnerships principle.
The high-speed Trakia
Bulgaria's southern freeway, which hasto allow a quick and comfortable jour-ney from Sofia to the Black Sea beach-es, is still far away from being complet-ed. Some 350 km have already beenbuilt, but the construction of the remain-ing 116 km turned to be a major task.The previous cabinet decided to transferthe rights over Trakia to a consortium offour Portuguese and Bulgarian compa-nies, which will have to complete thefreeway and have it commissioned.
The fact that the concession wasgranted without a public tender or anauction emerged as a major problem.The concession became the focus ofpublic controversies and accusation inlegal violations and corruption, and thetransaction finally was taken to thecourt of justice. The prosecution claimsthat the law, which requires a competi-tive procedure, has been violated. Thecourt still has to return its final verdict.Depending on the court's ruling, thecontract as drafted will become effec-tive, or a new procedure will belaunched in search of a suitable con-cessionaire.
Even if the transaction is not repealed,many of its controversial provisions willhave to be re-negotiated. And thatmeans many more months of delays.
In the best-case scenario, the freewaywill have to be ready by the end of2010. There are five sections that stillhave to be built. The 38-kilometer sec-tion from Orizovo to Stara Zagora is inthe process of completion by theRunway BG consortium of Bulgariancompanies. The 35-kilometer section
Construction works on Trakia Freeway near town of Karnobat (350 km east from Sofia) are on hold because the archeological excavations in the region.
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between Karnobat and Bourgas has tobe completed by the end of the yearand are constructed by the Turkishcompanies DOUS and EKO. The pricetag on this section was set at 138.7million Euro. Both projects are serious-ly behind schedule.
The three sections, which will be con-structed within a concession scheme,are still marked as white spots on themap: these are the sections fro StaraZagora to Nova Zagora (31.8 km), fromNova Zagora to Sliven/Yambol (35.3km), and from Sliven/Yambol toKarnobat (49 km). The construction ofthese 116 kilometers will cost 372 mil-lion Euro, according to current expertassessments.
Optimism about Maritsa
Calculations indicate that the construc-tion of the 114-kilometer freeway to theborder with Turkey may start as earlyas next year and may be completed bythe end of 2009. Currently, there is asingle 5-kilometer section of this free-way that has been commissioned.Another 112 km will have to be built,which will cost 361 million Euro, togeth-er with the land appropriation proce-dures. The construction of a 42-kilo-meter section between Harmanly andthe Kapitan Andreevo border crossingpoint will start this year.
Good news for Black Sea
Israeli and Austrian companies havedemonstrated their interest in the con-struction of the Black Sea freeway,Minister Assen Gagauzov has said. Asjudged by its name, this is the freewaythat will link the two major centersalong the coast, Varna and Bourgas.Currently, only an 8-kilometer section isunder construction, and there are still100 km to go. The project will needabout 400 million Euro, plus additionalcosts for terrain studies in order toidentify the final version of the route.
The fact that potential investors havealready started to make inquiries isencouraging, that is why a procedurefor granting a concession on the free-way may soon be launched. Still, theBlack Sea freeway will lag a long waybehind. According to the scheduledrafted by the government, it will haveto be completed in 2014-2017.
"Green" barriers
across Struma
The construction of the Struma free-way, which will provide for a quick ridefrom Sofia to the Greek border, isplanned to start in 2008 and be fin-ished by 2012. The freeway is a portionof the first-class European network andis marked as E-79. The Struma projectwill need some 600 million Euro.However, it will not be financed out ofEuropean funds. The state will look forprivate investors, as the Struma projectis the most suitable for establishing aconcession.
The section to the Kulata border cross-ing point is the most traffic intensive inBulgaria. Some 20,000 vehicles usethis section every day - this is suffi-cient for the freeway to be profitable ifa concession is established. SeveralGreek companies have already startedinquiries, Minister Gagauzov said.
There are, however, problems. Thefreeway must pass through the Kresnapass. And environmental organizationshave already announced that they willnot let asphalt and vehicles to cutthrough the beautiful landscape anddestroy the unique local flora andfauna. They propose instead to cutsome 15 km of the freeway at an alti-tude of 600 m, which means that theroad will have to pass through a seriesof tunnels, viaducts and platforms.Such a project, besides being techni-cally complex, would be unbearably
expensive. Even at its initial version theproject will cost some 650 million Euro.
Another problem plagues Struma free-way - the lack of an alternative route.The rugged terrain makes the task evenmore difficult. At the same time the exis-tence of a parallel route is a must -international standards imply that driversmust be given the choice to pay the tolland race along, or divert to a paralleltoll-free road.
For the time being, only a section closeto Sofia is under construction - the 19-kilometer stretch between Daskalovoand Dolna Dikanya. This section of theStruma freeway, by the way, had to becompleted even before the OlympicGames in Athens, as promised by for-mer minister of transport ValentinTserovski. His successor is now promis-ing that this stretch will be commis-sioned before the end of 2006. IfMinister Gagauzov delivers, skiers willbe able to reach Bansko from Sofia inan hour less during the next ski season.
The problematic Hemus
The freeway, which has been designedto link Sofia through Veliko Turnovo tothe Black Sea capital Varna, currentlyseems the most difficult for completion.The problem is that the traffic along theHemus is pretty low - some 5,000 to7,000 vehicles per day. Such a modesttraffic volume makes the whole projectunattractive for any private investors, asthe investment will not pay back unless
■ Completed■ Not completed
First-class European network and Bulgarian infrastructure
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there are a sufficiently large number ofdrivers to pay the toll fees.
At the same time the state, which isinterested in improving the road system,does not have the money. The comple-tion of the Hemus freeway will requiresome a billion Euro. For the time being,only 152 km of the free way have beencompleted, and another 305 km are stillwaiting, of which only the section fromBelokopitovo to Shumen is under - slow- construction. The 10-kilometer section,financed with 30 million Euro by thestate budget, must be completed by theend of 2010. After that, Bulgaria willhave to search for funding from theEuropean funds.
The longest section - the 263 km fromYablanitsa to Shumen, has not reachedeven the design stage. Instead, workshave been planned for a Hemus-relatedsection between Rousse and VelikoTurnovo, which is a portion of theEuropean transport corridor No. 9. Theexisting road will be widened by a lanein each direction and thus will cover the
criteria for freeways. The project tag isset at 250 million Euro. The deadline isstill far into the future - the end of 2013.
Lyulin is at the European
traffic lights
The construction of the mini-freeway isdesigned to easy the traffic fromNorthern Bulgaria through Sofia to thesouth to the border crossing intoGreece. The project has already set arecord in terms of delays. The authori-ties have failed for years to agree withthe villages around Sofia on how toroute these 20 kilometers of tarmac.Otherwise, the project could be com-pleted within three years. The construc-tion will cost some 150 million Euro, asthe price per kilometer is quite high dueto the complex terrain, which requiresthe construction of tunnels and viaducts.
Environmental organizations insist thatthe freeway must bypass the settlementsat a sufficiently large distance in order tospare them the inevitable consequencesof heavy traffic - tailpipe exhaust, noise
and vibrations. And the longer the route,the higher the costs, of course.
The Lyulin freeway is among the fewprojects, for which Bulgaria has man-aged to wrangle financing from the EU.That is why the European Commission,which is allocating the funds, will haveto approve every single step of the pro-ject. The route, which has been coordi-nated with the European Commission,must have three open tunnels, and morethan 25 bridges and viaducts. All thesemake the future freeway quite expen-sive. That is why Brussels has asked foran new environmental impact assess-ment. The situation is further aggravat-ed by a number of representatives ofthe villages - possibly future neighborsof the freeway, who have filed courtcases against the project.
The Sofia Bypass -
the ring way
The road designed to channel the trafficof vehicles, which try to avoid enteringSofia, will match the freeway criteria.
The construction of the section between Boyana andSimeonovo - two of the Sofia suburbs, located in the foothillsof Vitosha Mountain and famous for their beauty and exorbitantreal-estate prices - is planned to start later this year. The sec-tion is only 4.6 km long. More than 20 companies have appliedfor the project. The offers must be opened any moment now.
According to initial plans, construction was scheduled to startin May 2006 and to be completed by October 2008. However,the appropriation of the land adjacent to the road was delayed;hence the realistic construction starting date shifted toward thefall, sources from the Sofia municipality said. Two thirds of thebudget for this panorama freeway will cover the compensationfor expropriated real estate.
Conditional deadlines
The current schedule has it that the planning of a link betweenthe Lyulin and Trakia freeways must start this year. The designphase for the Black Sea project must be completed by thespring of 2007. Roads Agency, which is in charge of the main-tenance of inter-city road communications, says that Trakiaand Maritsa freeways may be completed within 2.5 years. Asfar as the Struma freeway is concerned, the Ministry ofEnvironment and Waters will have to identify a sufficiently"green" route option, so that the design of the project could beassigned. The construction of the Struma and Black Sea free-ways can be completed within three to four years. Prior tocommencing actual construction, however, the two projects willhave to pass through some time- and money-consuming pro-cedures. There are no preliminary studies for some of thehigh-speed sections, and the final routes have not been iden-tified. Other projects are being delayed by cumbersome appro-priation procedures regarding the land that will be "eaten up"by the new freeways.
Trakia and Maritsa freeways are the only projects that haveapproved plans and schedules, and have settled the compen-sation for real-estate owners.
Something more
A total of 352 km of roads must be repaired by 2008, accord-ing to the schedule, presented within the Transit Roads IVEuropean program.
Currently, the Roads Agency is drafting a large-scale programfor repairs of a total of 1,400 km of roads. These sections willbe rehabilitated and renewed with 500 million Euro, loaned bythe European Investment Bank. The schedule includes roadsof strategic importance, servicing mainly North-South interna-tional commodities and passengers flows.
Bulgaria expects that the World Bank will provide financialassistance with the repair of second- and third-class roads.Currently, Sofia is negotiating with the World Bank a 100- to125-million-Euro loan.
A seminar with the participation of the European Bank forReconstruction and Development (EBRD) will be held in Mayin Sofia. The EBRD and concessionaires from Western Europeare expected to share their experience in building freeways. ■
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"I assure you that until the introductionof the Euro in Bulgaria, the exchangerate of the Bulgarian lev to the Euro willremain unchanged at 1.95583, andBulgaria will continue to pay efforts topreserve that rate," Vice Premier IvayloKalfin said after his recent meeting withJean-Claude Trichet, president of theEuropean Central Bank (ECB).
At about the same time, the NationalStatistical Institute (NSI) reported a rapidincrease in inflation for February, 3 per-cent. Such a high rate has not been reg-istered since August 2000. For the firsttwo months of the year, life in Bulgariahas appreciated by 3.8 percent. Non-food prices rose by 7.6 percent; thebiggest increase among foods was reg-istered by sugar, 46 percent. Due to thehigher excise duty rates, cigarette pricessoared by 64 percent, while rakyaamong liquors went up by 3 percent. Ananalysis of Bank Austria Creditanstaltshows that
inflation is the
main challenge
for Bulgaria on the road to Euro adop-tion, which is planned to take place in2009.
Transport, healthcare, spirits and ciga-rettes are among the goods and ser-vices that differ the most from theEuropean price levels, Eurostat datashow. That gives grounds to concludethat the pre-accession harmonization ofprices is the main reason for inflation inBulgaria, BA-CA analysis pointed out.The analysts expect an average annualinflation rate of 6 percent for 2006.
ECB President Jean-Claude Trichet alsowarned the government financiers thatinflation is one of the factors Bulgariashould watch carefully. "The rate thisyear will probably exceed 6 percent,"commented Georgi Stoev, managingpartner at Industry Watch. He recalledthat new prices of water, electricity,heating and natural gas are expected in
the next few months. Bulgaria is depen-dent upon imported raw materials whoseprices are also growing on the foreignmarkets. According to Stoev, however,there is no reason for worry. There isEuro inflation, too, and the Lev ispegged to the single European currency.
Early in the year the Institute for MarketEconomics (IME) forecast a more sensi-ble price increase than projected by thegovernment. IME announced that itexpected a 7.5-percent inflation rate.The main factors pointed out by analystDimitar Chobanov were the continuinggrowth in money supply, high fuel prices,hike in excise duty on petrols, alcoholand cigarettes.
The government was "wrong" in its infla-tion projections for 2005, too. The bud-get was based on a 3.6-percent rise,but the actual rate turned out 6.5 per-cent. The problem with such a mistakenreckoning is that inflation eats upincomes.
Given the 3.8-percent appreciation ofgoods and services in the consumer bas-ket since the beginning of the year, the5-percent raise in pensions in Januaryhas been almost consumed by now.
About twice a year somebody publishesa report, claiming that
the Lev is seriously
overvalued to the Euro,
financier Emil Harsev says ironically. Thedocument lists the obligatory effects andharmful consequences: an increase ingoods prices, lower purchasing power,worsened conditions for trade (i.e. exportobstructions and encouraging of import).These are facts, but that is not news,says Harsev.
He explains the paradoxes of the "expen-sive Lev." On the one hand, goods appre-ciate, the Lev devaluates, that is, com-pared with the Euro it is overvalued. Onthe other hand, however, 1 Lev costs thesame 51.13 Eurocents. Therefore, bykeeping its rate to the Euro, the devaluat-ed lev has become more expensive. It ischeaper (in goods) and more expensive(in Euro) than before at same time. And itis getting more and more expensive everyday when the devaluation (inflation) of theLev is higher than the devaluation of theEuro. Consequently, it is becoming moreexpensive to produce one and the samecommodity in Bulgaria (all other physicalproduction costs remaining the same).That is the reason why the
Bulgarian economy is
losing competitive edge
Nevertheless, the idea that the
SOS: Inflation?Despite warnings of a possible unexpected hike in prices, the Lev/Euro
exchange rate will remain pegged until 2009, government says
By Mina Georgieva
Inflation
Total
exchange rate of the Lev should berevised is still in circulation. And that itsactual price at present is 0.33Eurocents, or 3 Leva per 1 Euro. YetBulgaria is under a currency boardarrangement and the buy/sell rate of theLev is 0.51 Eurocents. It was to rein ininflation, which had reached 210 percentwhen the currency board system wasintroduced in Bulgaria on July 1, 1997.That gave "stability" to money inBulgaria.
In practice the board eliminated themonetary sources of inflation, i.e. thepossibility to "print" money, because theemission of Bulgarian Leva is the resultof wider money demand by economicagents and does not depend on thecentral bank.
It is also a fact that inflation in Bulgariais higher than in the Euro zone. In thiscase, economic theory postulates thatthe actual price of the Lev is falling(about 40 percent since the middle of1997). But macroeconomists areadamant that such facts do not yieldthemselves to simple interpretations. Itcannot be concluded, for instance, thatthat the Lev exchange rate has to berevised.
According to the NSI on a GDP levelBulgaria is about 34 percent of the EU-15 prices and on the level of consumerprices it is about 50 percent of the EU-15, i.e., the exchange rate does notequalize the price levels and one Euroin Bulgaria still will buy you more goodsthan in Germany. This is a direct indi-cation that the Lev is undervalued. Of
course, there are things in Bulgaria thatare more expensive than in Germany,but the conclusion holds true for theaverage consumer basket.
Besides, the Bulgarian economy needsa lot of investment to catch up with theEU economies in terms of standard. Onthe other hand, due to the low level ofincomes in Bulgaria, it is hard to gener-ate enough savings to finance theinvestment.
What would be the result of a
possible devaluation
of the Lev?
Besides the fact that that would under-mine the macroeconomic stability(especially if the Lev is devalued by 50percent, which is too much), the directeffect would be a decrease in incomes.
That would hardly be popular andnobody would venture to make Bulgariamore competitive at the expense oflower incomes. What is more, Bulgariawants to join the EU. Such a processsupposes convergence of price levelsand a devaluation would delay thiscountry by years. And last but not least,since Bulgaria is a small open economyimporting lots of things, such movewould substantially increase inflation.
The same holds true for the assertionthat the Bulgarian Lev has to be deval-ued because of the high inflation: thatwould only result in still higher inflation.Overall, devaluation does not seem avery far-sighted idea. A currency is usu-ally devalued as a means of stimulatingthe economy, while the Bulgarian econ-omy hardly needs such stimuli, given itsmoderate growth rates (and even suspi-cions of overheating). ■
Deputy Prime Minister and Minister of Foreign Affairs of the Republic of Bulgaria Ivailo Kalfin (right) during his meeting with Jean-Claude Trichet, President of
the European Central Bank (left) held in Sofia.
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In raw numbers, Bulgaria's gross external debt is larger than in 1990, when
Bulgaria declared a moratorium on its payments to foreign creditors. Bulgarian
National Bank data show that the foreign debt amounts to more than 14.3 billion
Euro, but the country has no difficulties servicing its interest and principal pay-
ments to foreign lenders. The Bulgarian economy pays 5.71 billion Euro a year
on its external liabilities. This is the amount paid by the state, Bulgarian banks
and enterprises in 2005, according to BNB statistical data. The government ser-
viced 2.35 billion Euro foreign debt, commercial banks - 1.4 billion Euro, Bulgarian
private companies - 848 million euro, and 1.11 billion Euro was paid on inter-
company debts.
Despite these huge expenses, BNB's foreign currency reserves increased by 880
million Euro in 2005, from 6.49 billion Euro to 7.37 billion Euro. The gold reserve
"appreciated" by nearly 200 million Euro, entirely due to the increase in gold
prices on the world market.
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Preliminary data of the statistical institute indicate a real GDPgrowth of 5.5% last year relative to 5.7% in 2004. The figurescontain minor revisions in the previously reported data for Jan-Sep last year as well as an upward adjustment in the growthrate for 2004 to 5.7% from 5.6%. The slowdown is fully con-sistent with our projections and reflects adverse supply shocksstemming from continuous flood damages that have sunk theagricultural sector by 8.6% last year. On the other hand, thepace of expansion in the industrial and service businesses hasaccelerated to 7.3% y/y and 6.6% y/y, respectively. However, thelast two quarters of the year show significant deceleration inthe industrial and export indices but this is also related to flooddamages given that many companies have been forced to stopproduction for several days or weeks. In addition, the farm loss-es have pulled down the food industry, which has a relativelylarge weight in the overall economic and export performance.Industrial and export indicators have separately suffered exter-nal demand shocks on the steel market in Q3 last year whenthe country's major steel mill has closed part of its productioncapacities.
GDP per capita surges by 10% in euro
terms
Despite the economic slowdown in real terms, the GDP perfor-mance in nominal terms exceeds the government expectations,as the flood damages have raised agricultural prices and con-sequently the overall inflation rate above the official forecast.The GDP figure in current prices is reported at BGN 41,948bn(EUR 21,448bn) against initially forecast BGN 41,343mn andfollow-up revised forecast of BGN 41,614mn. Taking intoaccount the latest updates on the population, which hasdropped by 0.5% last year, the GDP per capita has increasedby 10.2% in nominal and euro terms to BGN 5,420 (EUR 2,771).
On the demand side of the economy, consumption and invest-ment growth rates have accelerated to 6.8% y/y and 19% y/y,respectively, paced by bank credit expansion, strong FDIinflows, and direct external lending to the corporate sector. Atthe same time, the foreign trade imbalance is rapidly deterio-rating amid slowing export growth and booming imports. Thegap has been already indicated by the earlier released balanceof payments' reports of the central bank and is largelyexplained by large financial inflows from abroad rather thantrending deterioration in the country's competitiveness.
Growth rate stands as moderate in region-
al standards
The cross-country comparison of the economic performance inCentral and Eastern Europe shows that Bulgaria's GDP growthstands somewhere in the middle of the ranking and the coun-try steps down from its image in 2004 as one of the fastest
GDP dynamics in constant prices (%, y/y)
2001 2002 2003 2004Q1/
05
Q2/
05
Q3/
05
Q4/
052005
Agriculture 0.3 5.5 -1.0 3.0 -1.9 -5.8 -6.9 -17.1 -8.6
Industry 4.1 4.6 6.8 5.8 11.0 9.2 3.8 5.9 7.3
Services 4.7 5.1 4.0 5.7 5.9 7.0 6.2 7.0 6.6
GDP 4.1 4.9 4.5 5.7 5.9 6.5 4.6 5.5 5.5
Consumption 4.4 3.6 6.6 5.1 7.0 5.9 8.9 5.5 6.8
Investment (excl.
inventories)
2 3 .
38.5 13.9 13.5 11.2 16.9
2 4 .
021.5 19.0
Exports of goods
and services10.0 7.0 8.0 13.0 9.2 12.0 1.1 8.9 7.2
Imports of goods
and services14.8 4.9 15.3 14.1 10.8 15.3 18.8 12.9 19.6
Source: National Statistical Institute, preliminary data for 2005
Economic Growth Slows to 5.5% in 2005 Over Heavy Flood Damages
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 [email protected]
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growing economies in the region. The economic expansion inBulgaria is far below the average of nearly 10% for the Balticcountries (Estonia, Latvia, Lithuania), roughly comparable withCE-4 (Czech Republic, Slovakia, Hungary, and Poland) andSoutheast Europe. This is still a relatively good performance inview of the one-off flood effects. Moreover, Bulgaria's has suc-ceeded to score a much better growth rate than its closest peerRomania, whose economy has been hit by similar natural dis-asters in 2005. But the economic performance is continuouslylagging behind the pace in the Baltic countries prompting thata number of business barriers, stemming mainly from weakadministrative capacity, terrible transport infrastructure and poorutilization of EU funds, keeps the local economy well behindthe Baltic tigers, which have started their reforms from similarliving standards as Bulgaria in late 90's.
Business expansion cuts unemployment
While the growth rates in late 90's have not resulted into netjob creations, the structural reforms launched in 1997 and thefollow-up increase in the inflow of foreign investments havebrought significant improvements on the labour market since2001. The ILO-defined unemployment rate has dropped to anannual average of 10.1% in 2005 from 12% in 2004 and near-ly 20% in 2001. The alternative indicator based on joblessclaims registered by the state labour bureaus has marked asimilar improvement to a year-average of 11.5% in 2005 from12.7% in 2004 and 18.1% in 2001. The first data releases for2006 confirm the stable annual rate of improvement on thelabour market and the unemployment rate is likely to fall well
below the 10% benchmark in the summer months when tourism,construction, and agricultural firms are opening a large numberof seasonal jobs. On the other hand, the share of labour par-ticipation remains quite low in the country due to the ageing ofthe population and isolation of certain minority groups. Theratios of employment and labour activity, measuring number ofemployed and members of the labour force to the populationin working age (over 15 years of age) have slightly improved to44.7% and 49.7% in 2005, respectively, but are far below thelong-term targets set under the EU's Lisbon agenda. As far asthe economic growth is rapidly reducing the jobless rate in thepast several years, some business sectors are already experi-encing problems in finding skilful workers that may bring morenotable increases in the labour remuneration packages and willfurther challenge the efficiency of the state-regulated educa-tion systems in short to medium terms. ■
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It seems that most "new" things inBulgaria's economic and administrativereform process are nothing but well-for-gotten "old" issues from the EU memberstates. At least that is the impressionyou may receive from the recentlyapproved draft for a new Value AddedTax (VAT) Act, which should be enactedas of January 2007.
The new law eliminates the terms"export" and "import," as after 2007Bulgaria will become a part of the com-mon European market. During the tran-sition to this regime, the average EUmember state lost between 15 and 30percent of its VAT revenue.
The draft stipulates that the VAT rate inBulgaria will remain at 20 percent in2007. The anchoring of the VAT rate didnot come as a surprise in the light ofthe fact that the treasury has scored amajor success in terms of VAT revenuesover the last several years. VATaccounts for about 56 percent of all taxrevenues. The 2003 VAT target wasexceeded by 4.7 percent, which meansthat the treasury received an additional137.5 million Leva. VAT revenues in 2004rose four times and exceeded the initialtarget by 540 million Leva. According topreliminary data, the VAT received inexcess of the annual target will top 1billion Leva.
Still,
reducing VAT to 18 percent
was a component of the election plat-forms of the three parties in the rulingcoalition - Bulgarian Socialist Party(BSP), National Movement Simeon II(NMS) and Movement for Rights andfreedoms (MRF). Late last year howev-er incumbent finance minister PlamenOresharski and his deputy GeorgiKadiev announced that it might be nec-essary to raise the VAT rate by two per-centage points during the second half of2006. They pegged such a move togrowing deficit in the balance of pay-
Bulgaria Reforms VAT,Income Tax Laws New VAT bill eliminates terms "imports" and "exports" ahead of joining the
common European market By Marina Georgieva
Bulgarian Deputy Minister of finance Georgi Kadiev (second from the the right) and Maria Murgina (first from the left), director of National Income Agency(NAP)
at the opening of the new NAP building in Varna. National Income Agency will be mainly engaged with the new tax reforms.
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ments. The idea behind the VAT raterise is that a higher rate would cooldown Bulgarians' shopping spree.According to statistics, they are buyingmore imported cars, TV sets, washingmachines and refrigerators at "luxury"prices than ever. Government financialexperts also said that the InternationalMonetary Fund had pressed for anincrease of the VAT rate.
Currently, the only VAT rate reductionapplies to hotel services, where theapplicable rate will be 7 percent. Forcomparison, such a low rate is currentlycharged only on tourist packages soldto foreigners. As of 2007, however, theVAT rate for hotel services will also riseup to 20 percent, which caused majortensions within the tourist branch. Hoteloperators claim that Bulgaria will lose itscompetitiveness.
Sources from the National Hotel man-agers' club commented that hotel ser-vices, namely overnight lodging arrange-ments, amount to a very small portion ofthe tourist package, which includes food,swimming pool, sauna and fitness facil-ities, excursions etc. That is why,
despite the cheaper beds, prices for for-eigner will rise because of the VATaccrued on the package prices. At thesame time, these sources claimed,Europe is courting its tourist industries.The indirect tax in Belgium, Greece,Spain, the Netherlands, France andLuxemburg is below 10 percent.
Bulgarian hotel managers and ownersmay envy even their Polish, Czech andLithuanian counterparts, as they chargeonly a 5-percent VAT. Portugal has thehighest VAT rate on tourist services - 12percent, and Cyprus is on the other endof the scale.
The new VAT bill prescribes that anycompany may register for VAT purposes.Compulsory VAT registration currentlyapplies only to companies with an annu-al turnover of more than 50,000 Leva.That is why small traders, who neverreach out above that threshold, were noteligible for VAT registration and were notallowed to use the available tax creditoptions. The new regulations providesmall companies with the chance todecide by themselves whether it is bet-ter for them to register or not.
The other news from the draft law isthat lawyers and notaries public will be
obliged to charge VAT
in their fees, which may result in moreexpensive legal services.
After Bulgaria's entry into the EU, theso-called by many killer tax will be paidalso on tickets for sports events and onincome from rents distributed by farmingcooperatives to their members. VAT willbe included in the price of textbooks. Atthe same time, there are plans to elimi-nate VAT-free imports of motor vehiclesfor disabled persons. The motive for thismeasure is that currently this option isoften used to avoid taxes by importingvehicles, which are fictitiously registeredin the name of persons with certifieddisabilities. Disabled persons will payVAT when they buy a new car as well.
As of 2007, the import of second-handvehicles from EU member states will notbe charged with VAT, but the tax will beimposed on vehicles from countries out-side the community. Still, VAT will bepaid for the purchase of any new car.
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And finally, the existing
VAT accounts will
be eliminated,
Altogether, after being criticized by thebusiness as a vexingly bureaucratic.Minister Oresharski's staff has calculat-ed that the balance in all VAT accountsamounts to 560 million Leva. Besides,70 percent of the companies, whichhave substantial sums in their VATaccounts, are small firms. Commercialbanks charge more than 1.3 million Levaper month for VAT account servicing.After the VAT account scheme isremoved, these sums will be returned tothe companies' cash flow, but the termfor tax credit refund will comply with thestandard procedure - 90 days. Currently,companies with VAT accounts are eligi-ble to a 45-day tax refund period.
The idea for the elimination of the VATaccounts has been debated by theexperts in the Finance Ministry for sometime. Now the idea was implemented inpractice by force of the provisions of thenew VAT bill.
The special settlement scheme wasintroduced in 2003, with the main objec-tive to shorten the VAT refund terms,while the revenue administration wouldbe able to monitor turnovers. One of thebenefits of the scheme was eliminatedby the provision of the new draft lawthat the tax credit is returned uncondi-tionally, if the buyer can present the rel-evant invoice. Now, however, refundingdepends on whether the seller willdeclare the received VAT, and only adedicated account could provide someguarantees that the credit will be paidback.
The principle of shared responsibility fordue but unpaid VAT at the other end ofthe deal was introduced with the objective
to counter tax fraud.
Similar hypotheses will be discussed bythe tax enforcers in case the salesseem to be fictitious or made at a priceway below the market average.
The Finance Ministry motivated its deci-sion to eliminate the VAT account also bythe fact that after Bulgaria's accession tothe EU the mechanism will create obsta-cles for foreign companies from countrieswhere such a settlement scheme hasnever been in use. European experts andinternational financial institutions havealso recommended to stop applying thisscheme as creating additional obstaclesto business. ■
t a x r e f o r m 2 0 0 7
The Ministry of Finance plans to introduce as of 2007 onlytwo tax rates charged on incomes of natural persons, 20 and24 percent. This will eliminate the current intermediate rate of22 percent. Most probably, there will be two types of annualtaxes - individual and "household." The "household" schemewill accrue based on the consolidated household income.Citizens will be able to decide by themselves whether to applyone or the other scheme.
Apart from the new income tax law, other reforms matchingthe effective European requirements are planned in the sphereof corporate taxes. The finance minister announced that adiscussion will be initiated on the possible reduction of the 15-percent profit tax or the introduction of an alternative frame-work for investments incentives while the current corporateprofit tax remains unchanged. Currently, the preferences seemto go in favour of the second option, which has been manytimes promised to the business, Oresharski said. The reduc-tion of the profit tax from 15 to 12 percent will reduce corpo-rate tax revenue by 160 million Leva, according to Ministry ofFinance estimates.
The World Bank has advised Bulgaria to reduce the insuranceburden on private persons and companies. Social insurancepayments were reduced by 6 percentage points in 2006,which saved employers some 630 million Leva. The idea ofthe Finance Ministry was to have this money spent on newjobs, on investments in new operations and on raising salaries.None of these effects however has been observed. At thesame time the deficit of the Pensions Fund of the NationalInsurance Institute (NOI), rose to 1.3 billion Leva. It is financedthrough budget funds, which means that the cost of pensionsis covered by the tax revenue. In practical terms, you robPeter to pay Paul. This situation distorts Bulgaria's socialsecurity model, as the initial intention to pay out old-agemoney out of insurance instalments was disrupted. ■
Bulgarian Minister of Finance Plamen Oresharski says, that will initiate a dis-
cussion on the possible reduction of the 15-percent profit tax.
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"The dead should be honored with silence," said NebojsaPopov, his voice trembling in the receiver. "But I cannot do that.I cannot stay silent about him. We must talk about Milosevic."
Popov was a party secretary of Slobodan Milosevic - thecareerist - in the old Yugoslavia. Later he became the mostdaring opponent of Slobodan Milosevic - the politician andleader - in the last Yugoslavia. A Belgrade sociologist, an out-standing intellectual and a true European, Popov would passfor a left-winger. But he avoids definitions: once people likehim liked Tito because of the openness to the world, and didnot like Tito because of the bureaucracy and limited freedomof speech. Later it became easier: Milosevic appeared andthey all turned against him.
"He created the machinery of death, he killed his politicalfather Ivan Stambolic, he brought the war."
Nebojsa Popov is now an editor of Republika Weekly, politicianof the Civil Union and veteran of all possible protests againstthe former regime. This time he speaks unusually quickly andemotionally. Five minutes are not enough for him to list all his101 arguments for the claim that Milosevic's doings deserveneither forgiveness, nor justification, even posthumously.
Slobodan Milosevic died in the Hague before he could be con-victed. What is the Serbs' conviction? Belgrade intellectualslike Nebojsa blame him that Bulgaria is now given as a model- a country which under Tito was only interesting to Serbs forits cheap cheese.
"He threw us 50 years back and we were at the door of UnitedEurope," Popov said.
Bosnian Serbs accuse Milosevic of treachery in 1995 and
Milosevic, or How toConvict a Dictator
By Boyko Vassilev
Sympathisers display photographs of late Serbia leader Slobodan Milosevic in the center of his hometown Pozarevac during his funeral procession some 50 kilometers
south east of Belgrade, Saturday March 18, 2006. Milosevic's remains arrived in his hometown for burial Saturday after a farewell ceremony in Belgrade that drew
at least 80,000 admirers in a strong show of nationalism in the Balkan republic.
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Kosovan Serbs, of treachery in 1999: "He tricked us into thatand then he failed us."
Many people still love him: some love him because theygained from the gray economy during his time; others,because they did not lose from the gray economy; and yet oth-ers, because they have already forgotten both his time and thegray economy. The citizens of Central and Eastern Europeknow very well how today you might like what you railedagainst yesterday. They know the disappointment of reforms,the clash with reality, the nostalgia about the past. What is notknown outside the former Yugoslavia is that the war increasedthese feelings tenfold.
The bravely aroused and then humiliatingly
injured national pride
is part of the heritage Milosevic left to the Serbs.
The Serbs met Slobo in the squares, ousted him in thesquares and accompanied him to his last resting place againin the squares. The 80,000 who went out into the Square ofthe Republic in Belgrade to cry for Milosevic vented their angerat the Hague court, at the United States and mainly at "traitorsat home."
The slogans did not surprise anybody: the late Slobo also likedto ponder anti-Serb conspiracy theories. But Nebojsa Popovdoes not accuse the people of immaturity or foolishness. Hesaid, "Everyone has right to an opinion, we are still divided."
People's love is a complex, transient passion. You know pop-ulism, the magic of the crowd and the Balkans, do you not?Then you should not be surprised that the former president ofSerbia and Yugoslavia left this world strongly loved and strong-ly hated at home.
But why Milosevic's conviction did not receive internationallegal recognition? Why was he not convicted? Was the timetoo short? Was the Hague court unable, or biased, or arro-gant? Why did the world not administer justice over the dicta-tor?
My answer is this: It did not do it because it could not. It didnot know how. A means has not yet been devised to deserved-ly sue dictators:
- Yes, Nuremberg and Tokyo showed us trials and convictions.But that only happened after capitulation, occupation, consen-sus of the victors and suicide of the chief executors;
- Yes, Ceausescu was sentenced to death and quickly shotafter that. But that is not humane;
- Yes, in 2000 Milosevic lost the elections. But before that hehad won them all (Hitler was also an election winner) and - ifthe squares were not flooded with people - he was ready witha rigged result in his favor;
- Yes, courts were organized for Rwanda, Pinochet,Honecker… But for one reason or another they all evaded
them.
Why a dictator cannot be convicted? Because the mistakesand crimes in politics are hard to prove and you can easily cir-cumvent the legal paragraphs. Just look at the Hague court.A witness comes and relates the following: "Special policecame into the village. They killed this and that man, stole thisand that and left."
First, is that what really happened? Were the victims civilian orarmed? And now comes
the most difficult part:
How to trace the link from the captain commanding the spe-cial police unit in question to Milosevic? And what does thathave to do with the really big mistakes of a leader, who isplunging his country into an abyss?
A few years back, I was staying with a farmer's family inIowa. We checked the combine engine, drove the pigs intothe sty and sat down to have a talk. The man was a smart,open guy who showed huge interest in my story aboutBosnia. The horrors of war left him speechless for a minuteand then he said: "There, you see, it is not like that here. Ifyou commit a crime, you pay for that. If you kill, you go tojail!" Some naive farmer, you will say. You will not be right.The man was deeply convinced that there is penalty forevery crime.
It seems to me that the ideology of the Hague court wasbuilt on this Anglo-Saxon myth: We are outraged by thecrimes, let us put the perpetrators on trial now!
But there are no such provisions in international law: "Forlying to the electorate: four years in prison. For stealing thewhole power at the Eight Plenum: seven years. For con-tributing to the break-out of a war: life sentence." There isno such thing. And, frankly speaking, I am sorry that thereis not. The large-scale crimes in former Yugoslavia deservea large-scale judicial revolution.
It is not only the international law that is having problemswith populist autocratic leaders. The United States is in alimbo, too. In Venezuela, Hugo Chavez calls Bush "a donkey"and the wild Latin-American Left applauds him. In Bolivia,Evo Morales rides the anti-American wave and is electedpresident. In Belarus, Alexander Lukashenko also winsanother election and mocks the attempt for a new West-inspired "color" revolution. Iran, Cuba and North Korea arealways on the agenda and their leaders remain provocative.
The problem for the United States is not in the vocabulary, butin the fact that that vocabulary wins elections. After Iraq,
the new global fashion in protests
is their anti-American style. Every local leader counters hisinternal opponents with the following argument: "Look at whatAmerica is doing! I am having problems because I do not yieldto them. As a matter of fact, who are you to criticize me? Areyou paid by foreign foundations?"
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When a few economic considerations of a local nature areadded (Venezuelan oil, Bolivian coca, Belarussian agricul-ture), it will become clear why Chavez, Morales andLukashenko are firmly seated in the saddle.
The opposition to the excess of power has always been anintellectual occupation. It can only be successful if it is com-bined with a populist strain, often caused by a crisis, war ordisaster. Though for a short time, a union needs to be estab-lished between liberals and populism - probably this is thetheory of the modern revolutionary success. How would oth-erwise people revolt against their own comfort?
Djordje Balasevic, a Serbian author of poems and ballads,sang ironically of Milosevic: "Slobodan! If the people areyours, why do you listen to the venal souls?"
In Bulgaria, Slobodan Milosevic's death provoked similar feel-ings. Those who hated America for one reason or another orwere discontented with the transition, seized the opportunityto lament for the former president and call the prosecutorsin the Hague "killers". While the "venal" souls - intellectuals,experts, connoisseurs - placed final Philippics against Sloboin the media. Neither the first understood the second, nor thesecond justified the first.
But in Bulgaria, that is an increasingly common practice, notonly in respect to Milosevic. Bulgarians did not remember(and yet they should!) that the disintegration and wars in for-mer Yugoslavia - though elevating Bulgarian geopolitically -
crushed it economically. Sofia outran Belgrade in integration,got chances in Macedonia, relieved itself of the shadow ofthe powerful and enticing federation to the west. But it alsogot
bad image, sanctions, mafia
and imported crime, which rendered pointless the initial impe-tus of the restored Bulgarian entrepreneurship and markedthe transition with poverty.
A Bulgarian nationalist seriously wanted to erect a memorialto Milosevic: for the chances he had allegedly given toBulgaria. I did not like that joke; besides, it was not true. Iwould feel more comfortable if the world (or why not Serbia?)had a way of punishing crimes.
Popov, the dissident sociologist, recalled Slavko Curuvija, thejournalists who was shot under strange circumstances. Herecalled Ivan Stambolic, Milosevic's political father, who waslater killed by the commandos of his ex-protege, after he waskidnapped in broad daylight in Belgrade.
I also followed my memories: the year was 1996, we weretalking with Stambolic, then laughing. "The camera is offnow," I decided to try for the last time, "What kind of a manwas Slobo?"
Stambolic said nothing, only rolled his eyes a little. I think hedid not know either. ■
Archive photo of former Yugoslav president Sl obodan Milosevic (C) is f lanked by two officers in the courtroom of the UN War Crimes Tribunal in The Hague. During
the trial Milosevic was representing himself at the hearing, where he was asked to answer charg es of war crimes committed during the 1998-99 Serbian crackdown
on ethnic Albanians. Milosevic was the first former head of state prosecuted in Hague.
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Over 100 delegates gathered in Sofia onMarch 21-22 at Economist Conferences'Sixth Business Roundtable with theGovernment of Bulgaria to discuss theprospects for business and investmentin Bulgaria with representatives of thegovernment and the Bulgarian NationalBank (BNB). Speakers that joined theRoundtable included the president,prime minister, finance minister, econo-my and energy minister, minister forregional development, transport minister,minister for European integration, deputyforeign minister and the BulgarianNational Bank governor.
"Bulgaria is recognised as a good placeto do business, but the government mustaddress ongoing weaknesses in thebusiness environment to spur greaterdomestic and foreign investment," saidDelia Meth-Cohn, Senior Consultant,Economist Intelligence Unit, CEEMEA
and chairperson of the conference.
Three major issues addressed at theRoundtable were Bulgaria's accessionto the EU, macroeconomic and policytrends, and attracting foreign directinvestment to Bulgaria.
"Bulgaria's current macroeconomic pic-ture is encouraging, although the largecurrent-account deficit will necessitatepolicy tightening, which could have neg-ative consequences for businesses,"said Matthew Shinkman, SeniorEconomist, CEE, Economist IntelligenceUnit after the Roundtable. Local busi-nesspeople agreed that Bulgaria hassignificant potential as an investmentdestination, but put forward a number ofkey concerns that they have, in particu-lar regarding weaknesses in the busi-ness environment, outdated infrastruc-ture, and Bulgaria's poor image in the
global investment community.
Both government and business repre-sentatives urged EU officials at theroundtable to approve Bulgaria's acces-sion in 2007. A one-year postponementin Bulgaria's EU membership, though, isa distinct possibility.
Delegates agreed that boosting invest-ment will be critical to Bulgaria's eco-nomic prospects, and several speakerspointed out significant improvements inthe business environment in recentyears. The corporate tax rate, at 15 per-cent, is among the lowest in Europe.The government has introduced a hostof tax breaks (accelerated depreciation,zero-percent profit tax in some munici-palities, reduction of the social securityburden on employers) in recent years tostimulate both domestic and foreigninvestment.
Bulgaria's Business andEconomic Outlook to 2010 Sixth Business Roundtable with the government of Bulgaria
Prime Minister Sergei Stanishev pledged the Bulgarian Government will actively work to increase the export of goods and services which creates problems for the cur-
rent account deficit.
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Delegates also identified several keyareas in which the current businessenvironment still acts as a constraint oninvestment. Both business and officialdelegates agreed that changes in regu-latory and legal frameworks have beentoo frequent, sometimes seeminglycapricious, and often poorly communi-cated. High costs and long delays in thejudicial system are also a problem,although one delegate highlighted effortsunderway by the American Chamber ofCommerce to develop a system foralternative dispute resolution (ADR).Delegates urged the government to pro-vide greater support for ICT develop-ment. Government and business repre-sentatives worried that low wages andlimited opportunities have contributed tobrain drain in both the public and privatesectors.
A broad agreement exists that Bulgariasuffers from an "image problem"-in par-ticular that the investor community'sperception of corruption and organisedcrime is worse than the reality on theground. There has been little attempt bythe authorities to address this issue, butit is a crucial one, as investment deci-
sions are often taken on a combinationof objective and subjective factors,including a country's image and attrac-tiveness as a place to live and work.
Economist Conferences organised the
Roundtable with the support of theAmerican Chamber of Commerce. Thenext Roundtable to assess progress onthe issues mentioned above, isplanned to take place in Sofia in oneyear's time. ■
Representatives of Microsoft and HP at the forum appealed to the government to support hi tech developments
with a strategy and investments. Sasha Bezuhanova (HP) and Theodor Milev (Microsoft) are convinced that
IT piracy creates huge loses for their companies.
- What was your advice to the government with respect
to the adoption of a national brand strategy for Bulgaria?
- My first and most important advice was not to wastemoney for advertising and marketing, because marketing,logo and slogans would not succeed in the changing ofthings. It is propaganda and waste of money. If somebodyhas an opinion about Bulgaria, it has been created for manyyears and you can not change it with a campaign. Bulgariahas to make a distinction between changing of images ofwhole country and selling products. What we have talkedwith the Prime Minister Sergei Stanishev was about theentire reputation of the country, which is partly abouttourism but more than that. It is about culture, politics, land-scape and business. The way you change the image of thecountry is basically through innovative policy making. Mywork is centered on the idea that there are some conceptsfrom the commercial sector, like branding, that can be use-ful for governments, but not everything.
- What is the vision of the Prime Minister?
- Prime Minister Stanishev said they are going to do some-thing about the image if Bulgaria, but he reiterated Bulgariadoes not have much money. My main message to Mr.Stanishev was that branding is free, it does not cost any-thing. I call it "policy-based branding" compared to "com-munication-based branding." The way South Africa changedits image was by dumping the apartheid system. The waySpain changed its image was by becoming a democraticcountry. They definitely created a long-term vision after theend of General Franco regime that was a consensusbetween the government and the big companies. Spain justre-created a modern version of what the country was beforeFranco.
The way Japan changed it image was by becoming a world-class manufacturer of consumer goods. The way Britainchanged its image was by having two very powerful andcharismatic leaders, Margaret Thatcher and Tony Blair.Ireland had a vision for a country becoming an investmentmagnet for the American companies. It was a very clearand nice vision that worked. It is the Celtic tiger they nowspeak of Ireland. These are the things that change the
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Simon Anholt is regarded as one of the world's leadingspecialists in the theory and practice of creating brandstrategies for countries, cities and regions. He is currentlythe British government's advisor on public diplomacy, andhe has advised the governments of Croatia, theNetherlands, Jamaica, Ecuador, New Zealand, Switzerland,the Czech Republic, Egypt, Sweden, Tanzania,Kazakhstan and Slovenia. In addition, he has advised theBritish Tourist Authority, the British Council, the GoetheInstitute, the World Travel and Tourism Council, the WorldBank, the United Nations, the World Intellectual PropertyOffice, the UN Commission on Trade andDevelopment/WTO's International Trade Centre, the WorldAssociation of Investment Promotion Agencies, the WorldTechnology Network, and many other bodies and organi-sations worldwide.
Mr Anholt is the author of the best-selling marketing bookAnother One Bites the Grass (John Wiley, 2000) and edi-tor of the quarterly journal Place Branding. He also guest-edited a special issue of the Journal of BrandManagement in 2004, on the subject of "Nation as Brand".
His book on the role of brands in economic development,Brand New Justice (Butterworth-Heinemann), was pub-lished in 2003 and is now in its second edition. His latestbook, Brand America, which charts the rise and fall ofAmerica's reputation, was published by Cyan Books inNovember 2004.
Simon Anholt to Bulgaria:
Change Face Now!"Turkey has a negative but stronger
image than your country," says the
government's advisor and author of
Brand New Justice and Place
Branding. Crafting a new reputation
does not cost much, but requires a
long-term commitment and vision
By Irina Bacheva
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images of the countries. Some of them seem to be beyondyour control, but there are a lot of little things you could doas well.
-What you are speaking of concerns a long period of
time. Does Bulgaria have this time?
- If Bulgaria just waits until its reputation catches up withthe reality, it would have the same image in 20 years time,I guarantee it. Countries like Bulgaria have to do whateverthey can and it is a duty of a responsible government tocreate a reputation that is fair, due and up to date. In pub-lic relations, it is not enough to do something good, and sim-ply publicize it. The good thing of the government would beputting it into place, which would be an enormous improve-ment.
What most countries do is to have a communication strate-gy, which only shows we are good by sending all the timepress releases, which are saying how good the country is.The audiences receive similar messages from 150 countriesall the time. The prime minister or the president could relymuch on the country's specific role, character and identity.If everything the government does causes innovations,investments, it is a real chance to create an image.
-Do you think there are some industries in Bulgaria that
could be developed as priorities in regard with your the-
ory?
-There are two reasons why you might want to focus on aparticular industry. One is because it would be good for theeconomy, the other is because it proves something what thecountry wants to be and you use different criteria by whichyou define what it is. If it is the first case it may be a bor-ing industry that does not say anything particular aboutBulgaria but it may be good for the country. The secondone it may not be a big industry, it may not be necessarilyvery important for the economy of the country but may beimportant for the image of the country. For example, cultur-al tourism can be much more powerful than the masstourism. Cultural tourism attracts much more influentialalthough much smaller market. It teaches them a lot ofimportant smaller things for the country which to dissemi-nate to other people.
- So it is up to the Prime Minister to mobilize the
resources?
-The most important thing is to create a national brandingteam which represents all the sectors. The approach that Iuse is something that I call 'Cabinet Plus.' You have thehead of state and head of government, all the ministers,chief executives of 4-5 principal companies and represen-tatives of civil society, like NGOs, religious leaders. There isa leader of the team that might be describing as a leaderof the country. That could be a past president, a personwho has a clear long term understanding of the identity ofthe country and the genius of the people, or that could bea poet. In several countries where I worked we have identi-fied one figure for culture or literature. National brand
means national identity; it is one and the same thing. Inorder to achieve a vision, a strategy, we first have to under-stand what the national identity is. Very often the poets andwriters know better, because the politicians think only aboutelections.
-Bulgaria has problems with good leadership, not only of
the country but in the companies, either small or big
ones.
-In that case Bulgaria needs to do two things: in short termit needs to import managers from outside, if that is reallytrue. In the longer term it needs to educate for a new gen-erations of leaders. The figure of a minister of education isvery important member of the team. Many transition and ex-Soviet countries have problems with leadership. The com-munism destroyed the nation brands and the leadershippotential. The consequences of that today are that Bulgariahas biggest image problem, if it has an image at all.
Many people do not know where Bulgaria is because itsidentity was deleted by the Soviet Union. This is the biggestcrime of communism - to delete the culture, identity andhistory. From the point of view of Western Europeans wenow just beginning to learn where Poland is, where is theCzech Republic, and we have a lot to learn. Speaking aboutTurkey, it has a much stronger identity than Bulgaria. Theproblem with Turkey is that it is famous for wrong reasons.Generally, it is perceived very negatively. In some cases itis easier to turn negative image into a positive one than toturn no image into an image.
-Is EU membership of Bulgaria going to help finding its
identity?
-No question at all. Of course, EU is incredibly importantfor the countries because it basically picks them up andputs them on a busier street. At the moment Bulgaria isquite 'backstreet,' that is part of its image problem. Whenit becomes a member of the EU it would suddenly finditself a big shopping mall, so it is almost physically chang-ing its location. That is extremely valuable for the acces-sion states. They know that they have their vision of futurebefore they are joining, otherwise it is very risky. The EU isa threat and an opportunity as well. Slovenia was thinkingit was doing branding, but all that they were doing wasmessing up with their logo for 10 years. The important thingis to know who you are and how to say it. Bulgaria's neg-ative, week image is a direct obstacle to its economic andsocial prosperity.
-Which are the other East European countries you are
advising?
-Croatia was my first client, after the United Kingdom. I washired by the Croatia's government in 2001 to advise themon the EU accession and the image issues commitment. Atthe moment I am working for Hungarian and Polish govern-ments and for Turkey, too. To be honest to you, the mostinteresting countries are the African ones, Botswana, in par-ticular. ■
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Bulgaria has done a lot to position itself as a location for for-eign investments in the Balkan region and it would be good tocontinue its efforts to strengthen its approach in order to cre-ate a winning strategy for attracting FDIs. If certain steps couldbe followed, then the process could become easier for allinvolved:
1. The economic stakeholders to identify sectors of the econ-omy where the country could have competitive advantages andhelp them develop. These include not only physical advantagessuch as location, resources and infrastructure but also empha-size on the human capital and its developments through train-ing and specialized higher education programs. Of course, weshould not forget that the market and the potential investorswill be the ultimate judge as to which sectors are indeedattractive here.
2. Once these sectors have been identified and their advan-tages outlined then, these should be properly communicatedto the business community both locally and abroad.
3. The government should welcome and encourage the rec-ommendations of the business community and enter into aconstructive dialogue with the business associations. A favor-able environment will thus be created through such an actionand it is an on-going process.
Our observations:
The government's aim is to attract more investments into thecountry. However, as these investments will come primarilyfrom the private sector (local or foreign), what the governmentcan do, is to make it easier for interested parties to do busi-ness in Bulgaria. Here are some of our observations on whatcould be done on the matter:
● Ensure retention of the stable political environment. In thepast, this was taken for granted. However, recent trends may
undermine this perception. Problems in the region, national-istic ideas and ethnic tension are not welcome by foreigninvestors as they may endanger the stable political environ-ment.
● Stable and predictable legal and regulatory environments.Although there is a profound legal framework in place, thereare still threats of frequent changes in the legislation bothas laws and as implementation regulations. EU membershipwill allow the legal framework to become more stable, pre-dictable and uniform. Frequent changes in the legal envi-ronment are not welcome by any investor - local or foreign.It is understandable that the evolution of the legal frameworkis needed for various reasons - either in order to adapt tothe EU legislation or just to adjust regulations to the needsof the economy. However, it is also true that the legal/regu-latory changes should not be made as unilateral decisionsof the parliament, government or a minister. Changes shouldbe discussed and even agreed upon with the businessesfrom the various interested sectors prior to any implementa-tion. What will ensure the success is also that any changesshould be given enough time to be implemented so that thebusinesses could plan in advance their strategies.Otherwise, businesses could be under constant threat that
WhatBulgariaShould Doto AttractForeignInvestments
By Anthony Hassiotis,
AmCham Bulgaria Treasurer and Postbank CEO
Mr. Anthony Hassiotis took over the position of Chief
Executive Officer of Bulgarian Post Bank in October 2004.
His previous employment include Chairman and CEO of the
General Bank of Greece in 2002. He used to work as a
Deputy Governor and Vice Chairman of the Board of
Directors of the Agricultural Bank of Greece in 2001,
Country Manager of Barclays Bank in Greece in 1999.
Since 1982 and for 17 consecutive years, he was employed
as an executive in key positions of Citibank in various coun-
tries (U.S.A., Saudi Arabia, Venezuela, Costa Rica, Greece).
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they invest money and human resources in areas and sec-tors where the authorities can change the rules at will.These unfavorable outcomes may lead to closures of oper-ations, loss of jobs and as a final result foreign companiesleaving to invest in other countries.
● Judiciary and settling of disputes. Though the framework isin place, there is still a need to ensure the proper and justdecisions of the court. Other alternative dispute resolutionspractices should also be promoted, such as mediation. Weare proud to announce the creation of AmCham MediationCenter. We have developed not only the procedures for set-tling commercial disputes between the companies but wehave also started training programs for the legal departmentsof the big companies such as bTC, Colliers, Metro, etc. Theaim is to train their in?house lawyers and managers to suc-cessfully settle potential disputes so that the crises could beaverted and disputes not go to court. At this point, we wantto congratulate the Government and acknowledge their goodefforts to help with judicial reform as well as with the regu-lation of administrative procedures, both of which are now inprocess of being reviewed.
● Review the process of transfer of funds. Transfer of profit inthe form of dividends is legally ensured. However, it will behelpful if the process could be smoother with less potentialand at times capricious interference. Furthermore, AmChamrelies very much on the government's initiative to end suc-cessfully and timely the negotiations with U.S. Treasury onthe U.S.-Bulgaria Treaty on Avoidance of Double Taxation.
● Business registry. The registration of companies outside thecourts could make the process more secure, expedient andless expensive. Phantom companies will be left out and reg-istration of new ones will be made impossible. Furthermore,judges will redirect their attention on more complex matterswithin their core functions.
● Infrastructure projects. Recently the government announcedplans for development of large transport infrastructure pro-jects in the period 2007-2013 including projects that wouldbe build through public-private partnerships and/or with thesupport of EU funds. Next step for the government and thelocal authorities should be to facilitate the creation of busi-
ness clusters alongside these projects, thus allowing busi-nesses to profit from the booming investment activities aswell as easy access to suppliers and markets.
Bulgaria and the Balkan region
● Location is the name of the game. Bulgaria must exploit itsposition between the old EU members /Greece and hope-fully Romania/ and potential new EU members - Croatia,Albania and Turkey which have started negotiations with EU.These counties are developing fast so Bulgaria can benefitfrom thriving political and economic relations.
● Bulgaria is more advanced in adopting EU rules. The coun-try is a very good student. However, sometimes it may adoptrules and practices that other EU countries have not appliedyet. It is possible that negotiated transition periods are shortand may not allow enough time for the local companies toadapt. That can be both good and bad. The key issue, how-ever, is whether society and the economy have the capaci-ty to absorb such advanced EU regulations in such a shorttime.
● Bulgaria should try to attract companies with long-termstrategy to stay in the country and not just opportunists thatcome for a quick profit before moving further east. Bulgariashould also try to attract companies that can profit from thecountry being an EU member and not by using the countryonly as a place of cheap labor.
● Bulgaria has achieved a lot in the last 11 years since it hasmade its application to join the EU. This is a model behav-ior that could be studied by other future EU members.Bulgaria is on the way to turn itself into a land of opportu-nities, a land where it is desirable to live and work.
With the proper cooperation between the government and theprivate sector, and with the right type of conditions, primarilyeconomic, political and legal/regulatory, it is a certainty that thecountry could attract even more FDIs. In turn, FDIs create jobsand opportunities that result in overall economic prosperity.And this is what the effort is all about - to make Bulgaria evenmore of a country where its people can live prosper, and enjoythe fruits of their homeland. ■
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Bulgaria's National Assembly approved on March 24 the Lawon the Commercial Register. This act takes the registration ofcommercial companies, partnerships, and sole entrepreneursout of the judicial system and consolidates it into a singleagency under the executive branch. This bill was developed byBulgarian experts with significant technical assistance from theBulgaria Commercial Law Reform Program (CLRP), funded bythe United States Agency for International Development(USAID). AmCham has long supported such a reform.
The new commercial register will be a welcome change forbusiness as Bulgaria prepares for accession into the EuropeanUnion. Recent European Council legislation requiring memberstates to make their respective commercial registers electron-ically accessible provided an excellent opportunity for Bulgariato overhaul its own system.
Bulgaria's current commercial registration system is organizedunder its judicial system, which operates 28 regional commer-cial registers in 28 district courts. With more than 100 differ-ent judges conducting the registrations, many divergent prac-tices prevail, even within a single regional register. Most of theregisters (and in particular the largest one, in Sofia City Court)are still dusty paper archives that are filled in by hand andstored on rows of shelves. Under such a system, the regis-tration process has become unnecessarily slow and opaque.Access to basic company information in these 28 regional reg-isters is not easy to obtain; it is not free; and is not neces-sarily reliable.
The basic points of interest in the Law on the CommercialRegister:
1) Centralized and Electronic. The register will be centralizedunder the Registration Agency within the Ministry of Justice.Registration filings may be made electronically at any of 28regional offices of the Registration Agency. Registration datawill go into a single electronic database. The law removes theneed to publish registrations in the State Gazette.
2) No Discretion. The requirements for registration are spec-ified in the law and its implementing regulations. The groundsfor rejecting a request for registration are exhaustively itemizedin the law, meaning that the registration official may not rejecta registration request that satisfies the requirements specifiedin the law and its implementing regulations.
3) Publicly Accessible. The register's database will be pub-licly accessible free of charge on the Internet.
4) Cost. The Registration Agency's fees for registration mustbe cost-based.
5) Effect. The law comes into force on October 1, 2006.Existing businesses will have a three-year period from this dateto register into the Registration Agency. Re-registration will befree of charge.
This reform encountered some significant resistance, as somelawmakers wanted to preserve the court-run registers. Theinternational donor community took a firm stance on creatinga centralized administrative system.
In early 2005, the Center for the Study of Democracy helpeddraft a Strategy for Creation of a Unified Register of LegalPersons and an Electronic Registration Center of the Republicof Bulgaria. The World Bank took interest in this strategy,making its adoption by the government a conditionality to itslatest Programmatic Adjustment Loan (PAL III). After the for-mation of the new government following the mid-2005 parlia-mentary elections, the International Monetary Fund includedpassage, by March 2006, of a law creating a centralized,administrative commercial register as prior action to its secondprogram review under its Stand-By Arrangement with the gov-ernment.
USAID dedicated significant resources to the reform, providingboth local and international expertise to encourage the devel-opment and passage of the law. The basic principles of thereform follow best international practices in business registra-tion suggested by CLRP's business registration reform expertScott Jacobs.
As with any fundamental reform, significant transition issuesare to be expected. The Registration Agency will have to takeover a large and fractionalized system and consolidate it intoone. The requirement of businesses and sole-entrepreneurs toregister under the new system within three years will, no doubt,be frustrating for some, particularly for those who fail to re-reg-ister within the required period.
Despite these transition issues, the new Law on theCommercial Register should provide a significantly improvedcommercial registration process - one that is faster, easier,cheaper and more transparent. The law awaits signature byBulgaria's president. Before the law goes into effect, CLRP willcontinue assisting the Ministry of Justice to prepare imple-mentation regulations and to educate the public and businessabout the reform. ■
Bulgaria to RemoveCommercial RegistrationFrom the Cour ts
By Chris Thompson
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Some 150,000 troy-ounce of gold will beproduced annually by the mine in the vil-lage of Chelopech, owned by theCanadian Dundee Precious Metals. Itwould be an obvious overstatement toclaim that Bulgaria is about to emerge asthe Alaska on the Balkans. One way oranother, however, this country will soonbecome the 'host" to a gold factory.
Dundee's project has already beenapproved by the first instance - theSupreme Environmental Expert Council(SEEC) with the Ministry of Environmentand Waters (MEW) voted, at two succes-sive sessions, in support of the invest-ment proposal. Dundee claims that theexpansion of the output at the Chelopechdeposit is a major step in the company'sdevelopment, which will celebrate its 50thanniversary this year. Besides, the newand modern technology, which will beintroduced in Bulgaria, will provide foranother 700 jobs and will initiate a large-scope environmental program in full com-pliance with the Bulgaria and with theEuropean legislation.
A Chelopech initiative committee wel-comed the decision of the SEEC. Theinhabitants of the village protect the pro-ject, as the unemployment in Chelopechis below 2 percent, and the average
salary is about 500 Leva per month, wellabove the country average. After a tem-porary closure of the mine in 1990, 90percent of all inhabitants of the village ofChelopech remained without work, whilecurrently the region is flourishing.
Data released by Dundee indicate that atotal of
911,000 tons of
gold-containing ore
was mined in 2005 at Chelopech. Thisamounts to a 40-percent increase com-
pared to 2004 (616,000 tons). Productionwas steadily growing throughout the wholeyear, and the ore was of a higher quality.The improvements at the enrichment fac-tory resulted in a record-high processingvolume of 852,000 tons of ore in 2005.
At the time Dundee Precious Metalsacquired the assets of the gold and cop-per mine at Chelopech, it was operatingat a loss. The mine employed an outdat-ed technology and had been accruingenvironmental liabilities for more than 25years. The Canadian company embarkedon an ambitious two-stage program todevelop the mining operation.
Dundee announced their plan in 2004 toinvest some 150 million in the implemen-tation of a project to expand the opera-tions at the mine. The project was target-ed at increasing the mine output to 3 mil-lion tons per year, at modernizing the pro-cessing of the concentrate and at intro-ducing a new technology for the produc-tion of final metals - gold and copper - onthe site.
Currently, an intensive program for the
rehabilitation of
the environment
from the damages incurred by previousoperations is being implemented byDundee at the Chelopech mine. TheCanadian company is investing also inprospecting. The objective is to find newdeposits and extend the exploitation life
Bulgaria's "Golden" Factor y By Marina Tzvetkova
In early 2005, Dundee Precious
Metals - through its two Bulgarian
companies - Chelopech Mining EAD
and Balkan Mineral and Mining EAD
- was awarded two first-class cer-
tificates for its investment projects.
Chelopech Mining EAD embarks on
the expansion and modernization of
ore mining and processing at
Chelopech. The new technologies
will close the process for the pro-
duction of final metals - gold and
copper. The second investment pro-
jects of the Canadian company is
related to the development of an
open mining operation and the con-
struction of a gold ore processing
plant in the region of Ada Tepe,
near Krumovgrad, for a total of
101.7 million Leva. This project will
provide permanent jobs for 250
employees.
In an opened letter dated February 1st 2006 to
Prime Minister Sergey Stanishev the American
Chamber of Commerce in Bulgaria, the Bulgarian
International Business Association (BIBA) and the
Employers Association of Bulgaria warned that a
USD 250 million project is unreasonably hampered
by the Bulgarian institutions, which is a bad sign
for foreign investors.
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of the mine. The company announced in2005 the finding of a new ore deposit. Itis currently continuing with prospecting atvarious sections within the lot subject tothe concession.
Dundee Precious Metals has alreadyannounced that the operation will main-tain a steady level of 750 direct-employ-ment jobs at Chelopech. Otherwise, theclosure of the mine would affect, directlyand indirectly, more than 3,000 people.Dundee has come up with the assess-ment that the failure of the investmentproject will result in some 700 millionLeva in taxes, fees and concession feesin 15 years. Besides, the decision ofmajor strategic investor to pull out would
serve as a negative signal for other for-eign investors as well. The experts whodrafted the so-called Impact on theEnvironment Report (or the OVOS report,according to the Bulgarian acronym),claimed that all necessary measures havebeen taken to avoid and reduce the neg-ative impact on the people and on theenvironment in the region. It is stated thatthe technology, employed by ChelopechMining (the daughter company owned byDundee Precious Metals) fully complieswith established world practices. The con-struction of the new tail pond will complywith the requirements set by the draftEuropean Commission Directive on themanagement of waste from mining oper-ations.
During its proceedings, the SEEC recom-mended that Chelopech Mining discussedthe possible forms for public control overthe implementation of the investment pro-posal. The company has signed anagreement for the establishment of a pub-lic control council, which shall monitor theimplementation of the measures to pro-tect the local population and to preservethe environment in the region.Representatives of all interested settle-ments in the region will be invited to takeseat at the council. The agreement alsoprovides for the establishment of a cumu-lative fund. At the end of each year,Chelopech Mining will credit to the fundassets, dedicated to the closure andreclamation of dump sites. ■
Chelopech Mining EAD has proposed a
well-known hydro-metallurgical process,
which consists of a set of technologi-
cal cycles employed successfully at
many similar sites all over the world.
This scheme combines arsenic to iron
and oxygen, thus forming the stable
compound known as ferry-arsenate.
This is the most stable arsenic-con-
taining compound. Ferry-arsenate will
be deposited at a new insulated tail
pond. The waste pulp from the produc-
tion of gold will be subjected to
destruction of cyanides, whereas their
concentration will be reduced to a level
below the 10 mg/l, as required by a
draft European Commission Directive
on the management of waste from min-
ing operations. With the introduction of
the new technologies the discharge of
water into the Topolnitsa river will be
stopped, as all technological water
quantities will be included into a closed
turnover cycle.
We are grateful for the support of the peo-
ple from Chelopech, Zlatitsa and Pirdop. We
are encouraged by the positive response
from NGOs, trade unions, the Bulgarian
International Business Association, the
American Chamber of Commerce and all
other institutions, which supported the project
for the expansion of the Chelopech Mining.
We express our gratitude to all of them.
I was invited in 2004 as a guest lecturer to
an international conference held by the EBRD. At that time, I
was very enthusiastic about the perspectives for Bulgaria - its
pending accession to the EU, the harmonization of the legis-
lation, the stable currency and the stable macro-economic
framework. This is a situation, which attracts foreign investment
from all over the world and which was a stimulus for us to be
enthusiastic about the future. Since the, we were awarded two
First Class certificates and invested some $50 million in
Chelopech. The company plans to invest another $150 million
in Chelopech and $75 million in Krumovgrad.
The company has drafted a feasibility study
and an analysis of the impact on the envi-
ronment for each of the projects. The con-
clusion is that the environmental impact of
the projects is well within the applicable
European environmental legislation; besides,
these projects are based on the best avail-
able technologies and were drafted in com-
pliance with much more stringent self-
imposed requirements - we used the European legislation as
the minimum required standard, which we had to take into
account.
We made a lot of improvements since we came to Chelopech,
and our workers and employees have also invested a lot of
efforts. All our plans for a successful development of the min-
ing operation depend on the implementation of our investment
project. ■
Jonathan Goodman, Dundee Precious Metals, Inc. president and CEO:
The new technology
Some 80 members of the AmericanChamber of Commerce in Bulgaria andother companies attended a businessluncheon on March 28 with StoyanStalev, CEO of InvestBulgaria agency.Stalev revealed his agency's plans toimprove the business climate in thecountry. He said that the duties for prod-ucts imported from non-EU countrieswill drop two to three times afterBulgaria joins the EU compared to pre-sent rates. Bulgaria will thus becomemore attractive for investment projects,which rely on materials imported fromnon-EU countries.
Stalev also said that Bulgaria offers thecheapest costs on the European labormarket. Labor costs in Bulgaria stood at$1.11 per hour in 2005, compared to$1.31 per hour in Romania, according tothe Economist Intelligence Unit.
In addition, the government is consider-ing legislative changes to facilitate theSME's business operations. Stalev saidthat the current Investment PromotionAct allows for state subsides for infra-structure only for big investment projectsof up to 35 million Euro. The agency willpush for changes in the Act so that thefinancial aid for road, electricity andwater supply projects could reachgroups of regional small companies,which will develop industrial zones. "Wehave to pay special attention to theindustry if we want an improvement inBulgaria's trade balance," Stalev added.
He pointed out for AmCham Magazinethat legislative changes in theInvestment Promotion Act should beexpected in the fall. Stalev said hebelieved that the draft bill would beworked out by the Council of Ministerssometime during the summer.
Another priority of the Agency is to
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InvestBulgaria Agencyto Facilitate SmallBusinesses Changes in the Investment Promotion Act expected by the fall
By Irina Bacheva
Prior to assuming his position as an Executive Director of InvestBulgaria Agency,
in the period 1998 - 2006 Mr. Stalev was Ambassador of the Republic of Bulgaria
to the Republic of Turkey. From 1991 until 1998 he was Ambassador of the coun-
try to Federal Republic of Germany. He was appointed Minister of Foreign Affairs
from February 1997 until May 1997. In the period 1981 - 1991 Mr. Stalev was
legal adviser to the President of the Republic of Bulgaria, Jelio Jelev.
From 1981 until 1991 he was a research fellow and senior research fellow at the
institute of State and Law with the Bulgarian Academy of Sciences. Stoyan Stalev
was born in Sofia in 1952. He graduated the German Language High School in
Sofia and the Law Faculty of St. Kliment Ohridski University of Sofia. He has a
Doctor's Degree in Law. Stoyan Stalev has an excellent command of German,
speaks English, French, Spanish and Russian. Married with two children.
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AmCham President Kenneth Lefkowitz, left, presents to the U.S. Ambassador John Beyrle the
AmCham Yearbook 2006. The U.S. Ambassador led the awarding ceremony of American
Standard for corporate contributions prior to the luncheon.
The first public speech of Mr Stoyan Stalev at the AmCham luncheon
was attended also by Gergana Grancharova, Deputy Minister of
Foreign Affairs.
From Left: Elitsa Tsaneva, Ideal Standard, David Modi, Vice President of American Standard Companies, Stoyan Stalev, InvestBulgaria Agency, George Randelov,
IBM and Chavdar Rissin, Citibank.
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Currently, Bulgaria's economic environment is considered
stable and predictable, with an annual average real GDP
growth of 4.9 percent and moderate inflation of 5.3 per-
cent for the past five years. Growing investment and
export have been the major contributors to the econom-
ic development. A challenge ahead is to maintain a high
real GDP growth and support it by an adequate level of
FDI and export.
The inflationary expectations for 2006-2007 are higher
than in previous years (a 7.2-percent average inflation for
2006 is the Agency for Economic Analysis and
Forecasting's prognosis). Apart from last year floods, the
reason behind it is the increase of the excise tax on fuels
and cigarettes as of the beginning of 2006. The decision
for a sharp increase in 2006 follows the intention of
Bulgaria to meet the EU inflation criterion in 2009.
For the last eight years, the foreign direct investment
inflow from greenfield and expansion projects in Bulgaria
has exceeded the income from privatization deals. In
2005, according to the preliminary data we have attract-
ed $2.3 billion. In 2004 Bulgaria was a leader in Eastern
Europe in terms of FDI to GDP and is expected to keep
its competitive position until 2007.
A more careful analysis of the investment inflow in the
past few years, however, reveals a disturbing trend of
prevalence of foreign investment in non-export-oriented
services. For example, in 2005 telecommunications and
finance received the lion's share of FDI - 25.7 percent
and 25.5 percent respectively. On the other hand manu-
facturing attracted just 8 percent of the foreign invest-
ment inflow. Of course, foreign investment in the telecom-
munications, banking, trade and real estate are important
for the general economic development of Bulgaria. But
we should take special care of our negative trade bal-
ance that could be significantly improved through invest-
ments in manufacturing projects, which in most cases,
due to the small size of the Bulgarian market, are export
oriented.
Analysts forecast that in 2006-2007 the share of
Bulgarian export in the GDP will increase by some 5 to
10 percent compared to 2005, but we will still lag behind
competitor countries like Hungary, Czech Republic and
Slovakia. Good news is that after the EU entry, customs
duties in Bulgaria will decrease two to three times for
speed up the deadlines for issuing oflicensing regimes for certain foreigninvestors who are willing to expand theirbusinesses in Bulgaria. These are thelicenses issued by the ministries of envi-ronment and waters, and regional devel-opment. Stoyan Stalev said that in com-parison with Poland, Czech Republicand Slovakia, Bulgaria's deadlines forlicenses are twice as long.
"We need to be more flexible and quick,but that should not interfere with thequality of the assessments made," hesaid for the AmCham Bulgaria Magazine.The agency will investigate the case withthe packaging taxes that annoyed foreignbusinesses in Bulgaria after the Ministryof the Environment and Waters decidedto set up a double packaging tax. Theissue was raised at the AmCham lunchby Evgenia Stoichkova, AmCham boardmember and market manager of CocaCola Bulgaria.
InvestBulgaria agency is expecting thatbusinesses will share the problems theyare experiencing in order to create anindex of such issues that are of greatconcern for companies operating inBulgaria. The agency is willing to coop-erate more actively with the BulgariaSME Promotion agency and the Agencyof Tourism in order to facilitate the small
and medium size businesses in thecountry, Stalev said.
"It is our desire to attract investors from
some European countries which arescarcely presented here, as France,Spain and the Scandinavian countries,concluded Stalev. ■
Excerpts
At the luncheon Evgenia Stoichkova, Market Manager of Coca-Cola Bulgaria and AmCham board member
raised the issue with the waste packaging tax which embarrasses the businesses in the country.
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goods from non-EU countries that will make Bulgaria
more attractive for investment projects relying on import-
ed materials from these countries.
One of the biggest impediments to the manufacturing
investment projects in the country and a major chal-
lenge on the doorstep of our EU membership is the
level of infrastructure development, especially the trans-
portation infrastructure, which in many parts of Bulgaria
is in poor condition. We should be very glad if we can
recommend municipalities of high unemployment to
investors, but in most cases these locations, although
competitive in terms of labor cost, fail to meet the vital
requirement for fast delivery time to the Western
European market. The Encouragement of Investment
Act provides for an opportunity for infrastructure subsidy
but only for investment projects above 35 million Euro.
Thus only a narrow group of projects benefit from this
incentive. It does not cover the small and medium busi-
nesses that account for over 60 percent of the gross
value added. In this regard InvestBulgaria agency con-
siders that a revision of the Encouragement of
Investment Act is needed in order to provide more effec-
tive infrastructure support not to individual investors but
to developing industrial zones.
Bulgaria offers the lowest labor cost in a European func-
tioning market economy. According to the Economist
Intelligence Unit, in 2005 labor cost per hour in Bulgaria
was $1.11 compared to $1.31 in Romania for example. At
the same time, the nominal wage growth rate in Bulgaria
is expected to stay between 6 and 7 percent annually,
which will keep the competitive position of Bulgaria well
beyond the EU accession.
In the long run, we should rather attract and retain invest-
ment projects that will not only reduce unemployment and
solve social problems, but also projects that bring higher
added value to the economy, contribute to the productivi-
ty growth and respectively increase the wage levels. In
order to achieve this challenging goal, we need to have a
sufficient pool of well educated labor force. This draws
our attention to another painful issue - the education sys-
tem, which needs to be improved in terms of updating the
curricula and bringing them in line with the employers'
needs. Know-how transfer and innovations should also be
encouraged by the government in order to increase labor
productivity, thus compensating for labor costs increases.
Prior to the business lunch meeting, U.S.Ambassador John Beyrle awarded DavidModi, vice president of American StandardCompanies, with the Corporate ExcellenceAward. The special award was given bythe U.S. Secretary of State for corporatecontributions, which in the case ofAmerican Standard was for its investmentand social policy in Bulgaria. AmbassadorBeyrle quoted Secretary of StateCondoleezza Rice who recently said, "Wevalue business as a powerful partner inpromoting accountable, non-corrupt gov-ernment, the rule of law, and transparen-cy that attracts trade and investment."
David Modi thanked Ambassador Beyrle fornominating the company. Modi said thatdespite its name, American Standard is aglobal company, manufacturing in 30 coun-tries on five continents with half of the rev-enues coming from outside the UnitedStates. The vice president thanked ElitzaTzaneva (right at the picture), general man-ager at Sevlievo, for her efforts to run theSevlievo plant and respond to every callfrom the United States regarding the devel-opments in the American Standard busi-ness. Modi added that the Sevlievo planthas remained vigorous, healthy and prof-itable company, "a crown jewel within theAmerican Standard family."
The Healthcare industries are amongtop 5 sectors of AmCham membershipand the re-establishment of theHealthcare Committee is crucial for ourmembers in the sector as it will be anactive contact point on all issues relatedto the healthcare system/reform and areliable partner of all stakeholders byproviding solutions for the improvementin public health and quality of health-care.
Dr. Maria Vranovska, Eli Lilly & Co. isthe new Chair of the re-establishedAmCham Healthcare Committee.
The Committee members agreed on thefollowing three division structure repre-senting the main sectors in theHealthcare industry: Pharmaceutical Division with DimitarStoynov, Pfizer as Vice-Chair; MedicalDevices Division - Dimitar Marinchev,Diamed as Vice-Chair and Medical
Services - Valeri Borissov, IBM as Vice-Chair.Among the key priorities in the abisiuousAgenda of the Committee are:
● Formulation of National Health Policyand National Drug Policy
● Harmonization of the local legislationand alignment with the Acquis:
- Amendments in the Drug Actand the related regulations
- Procurement Act- Patent law- Medical Devices Act- Health Insurance Act amend-ments
- NHIF ReimbursementRegulation
- Access of innovative prod-ucts to the market
- IPR protection enforcement● Investment and transparency in
healthcare and innovation● Healthcare reform and the implica-
tions for the business● IT system and e-Health● Patient empowerment
Regarding the challenges in front of thewhole sector in connection with theBulgarian EU accession, theCommittee is open for every companynot only for AmCham members in orderto encourage collaboration among thecompanies in the healthcare sectorenabling them to achieve commongoals and to generate ideas and pro-mote solutions of mutual interest in thefield of healthcare in Bulgaria. We willappriciate to receive any recommenda-tions and ideas related to theHealthcare Committee organization andwork.
For additional information please visitthe Committes section on AmChamwebsite www.amcha.bg or contactAmCham Office. ■
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AmCham Healthcare Revives After a Brief Period of Intermission
VIP SECURITY Ltd.
The security services offered by VIP SECU-
RITY Ltd are: Manned guarding; Cash-in-
Transit; Event security; Close protection;
Electronic security systems; Alarm
response & key holding; Corporate security
management systems.
VIP SECURITY is certified by LRQA in the following Quality
Management Systems standards: ISO 9001:2000;
EN ISO9001:2000; BS EN ISO 9001:2000
Contacts:
Atanas Simeonov
General Manager
Tel: 963 5277, 963 5288; Fax: 963 5299
E-mail: [email protected]
Address: 44, Gorski Patnik Str., Lozenets; 1407 Sofia
Martern EOOD is the wholly owned subsidiary
of EurOmax Resources Limited, a Canadian
listed natural resources company. We explore
for and produce oil and gas in Canada and in
SE Europe we are focused on the discovery
and development of gold and copper projects.
We established an office in Sofia in 2003 and executed our
first of five contracts with the Bulgarian Government for miner-
al exploration in April 2004. These contracts were awarded
through direct application and public tender. In addition we
made a gas discovery in southern Turkey.
We are a mining company and we are keenly aware of our
environmental responsibilities. We see our role in the Bulgarian
economy as converting natural capital - mineral deposits - into
human capital - jobs and infrastructure.
We will only do this in a fully sustainable manner - providing
value to our community now - without damaging the environ-
ment for future generations.
We are here in Bulgaria because we see the opportunity for
profit - we are a business - but we also see the opportunity to
contribute to the Bulgarian economy and business environment
in a positive manner.
What we have learned in the last few years is that success here
takes tenacity, honesty and an innovative approach - we sim-
ply can not do business in any other manner.
John Menzies
Managing Director
1, Sofronii Vrachanski Str., Fl.4
Sofia 1303
Tel. +359 2 985 3355
Fax +359 2 985 3356
Website: www.euromaxresouces.com
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Am Cham Bulgaria Magazine: Do you
find any major changes in the city
now that you are back in Sofia?
Zerunyan: Unfortunately, I have nothave enough time yet to explore thecity in detail. The most significantchanges I noticed after nearly 3.5years were the new airport terminalconstruction and the newly built shop-ping mall and cinema center behind theHilton. Otherwise, I am very happy tobe back again!
Niemann: Although I haven't been toSofia for only about eight months,many changes are visible, especiallythe construction, which is really huge inmany areas. On the one side I amhappy to see such a booming econo-my; on the other side it is a pity that
there is no structural approach to build-ing in this city. Apart from this, Sofia isstill as charming as ever, especially inthe downtown area with all its historicbuildings.
Am Cham Bulgaria Magazine:
Bulgarian real estate market is boom-
ing as we speak. Do you find this
reasonable?
Zerunyan: I think this was bound tohappen. As Bulgaria becomes a morestable and advanced economy, foreigninvestors will see it as a safe haven fortheir money and this inevitably has abooster effect on real estate prices.The current trend is normal and can bedescribed as reasonable so far. Withtime, there will be ups and downs, ofcourse, similar to those experienced in
other emerging markets. Generally, itwill be more up than down from now on.
Niemann: As I said, the constructionbusiness seems to be very strong andthis is good for the economy. However,I am very much afraid of the fact thatat a certain stage the bubble will burst,as it did in many other EasternEuropean cities. Real estate prices inSofia particularly have already movedout of range. It would be very wise forthe government and municipality toimplement stronger controls on what isbeing built and where.
Am Cham Bulgaria Magazine: A lot
of hotels are now being built in Sofia,
in sea and ski resorts. Do you think
there is enough business for all of
them?
Hilton Sofia Managers: Expect More Hilton Brand Hotels
By Milen Marchev
A meeting of Hilton International
general managers from Central,
Eastern Europe and Turkey took
place at Hilton Sofia on April 4 -
6, 2006. The meeting was hosted
by the Regional Vice-President
Didier Martin. Wolfgang Neumann,
president for Europe and Africa,
also attended. More than 30 area
specialists and hotel general man-
agers enjoyed the hospitality of
Hilton Sofia. The event became
an ideal platform to exchange
ideas about best practices in hotel
management. Following is a joint
interview with two former general
managers of Hilton Sofia Friedrich
Niemann and Armin Zerunyan,
and a current one, Jacques Brune.
Zerunyan was the general manag-
er of Hilton Sofia since the open-
ing of the hotel in August 2000
until February 2003. Niemann
headed Hilton in Bulgaria's capi-
tal from March 2003 until August
2005, and Brune is the present
general manager.
General Managers of Hilton Sofia during the meeting - from left to right: Friedrich Niemann, who set up the
Bulgarian Convention & Visitors Bureau, Armin Zerunyan, who opened the hotel in Bulgaria, and Jacques Brune
- the present GM, who came in Sofia from Hilton Cannes, France.
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Zerunyan: This is not easy to answer,because if I were to say there is notenough business, this would mean thatall new investors are doing somethingwrong, which I believe is not the case.Often new developments generate theirown potential. But that is also the trickypart, because businesses may notcome in as fast as the new hotels areshooting out of the ground. In somecases, the waiting time may get a bitlonger and hurt some investors, but inthe long term Bulgaria has a greattourism potential.
Niemann: One has to be very carefulin this respect. Yes, currently thedemand for accommodations isincreasing, mainly in Sofia, and also inthe major resorts. There is a big riskin overbuilding, however. If you look ata resort like Sunny Beach, for exam-ple, the number of hotels has growndramatically, while the demand has notcaught up with the supply. Too manyinvestors are expecting a very quickreturn on their investment and do notlook at the project over the long term.As long as the demand is growing, it ismore than appropriate to build addi-
tional facilities - a city like Sofiawould certainly cope with one or twoadditional five-star hotels. They haveto be planned and built smart, though,in terms of facilities, location and ser-vice.
Brune: In fact, you should queryevery single hotel if you want knowwhether they have enough business. Itseems that hotels are opening fastereverywhere before the improvement ofthe infrastructure takes place. Hotelbusiness is based on service, a lotmust be also done in training to besure that service is provided at theright level. Business must be seenfrom mid-term perspective and notonly from a short-term viewpoint. Oneof the best added values is the num-ber of return guests you have everyyear and the number of different ser-vices they use.
Am Cham Bulgaria Magazine: Where
should Hilton build its next hotel in
Bulgaria?
Zerunyan: I am not sure if our nexthotel should be a Hilton or one of our
other Hilton Family brands. I can imag-ine there might be opportunities forsome of our mid-market brands in themedium term.
Niemann: A very exciting question!Certainly, Hilton International is verymuch looking at the development inSoutheastern Europe and we alsowatch what the competition is doing.Personally, I see the city of Varna asbeing the most attractive destination forour quality type of hotel. Considering,however, all other brands we operate,there may certainly be opportunities forother brands in secondary destinationsthroughout the country. In general, I ampretty sure that we will have morehotels than just Hilton Sofia that rununder one of our brands within the nextfew years.
Brune: I hope that we will have one ofthe Hilton Family brands to join theHilton Sofia. In terms of location, manycould correspond to the different brandstyles we have in the portfolio, such asthe Hilton Garden Inn, for example. Themost difficult question, which I cannotanswer, is when. ■
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Prime Minister Sergey Stanishev and marketing guru SimonAnholt have essentially the same recipe for boosting Bulgaria'simage: Attract the people who matter in the world, and makethem stay in Bulgaria for some time.
That is what Stanishev said on his visit to BlackSeaRama Golf& Villages Resort in February 2006. Anholt concurs in the cur-rent issue of AmCham Bulgaria Magazine (Page 30).
BlackSeaRama features a Gary Player Signature 18-hole cham-pionship golf course and a villa resort in a gated community nearVarna on the Black Sea coast. Only 30 minutes from the Varnainternational airport, the modern, luxurious accommodations andbreathtaking sea views offer plenty to elite vacationers seeking apremier holiday retreat.
The development is exclusive and caters to a niche market ofgolfers, investors and holiday makers seeking a secure and up-market environment. BlackSeaRama is at the higher end of theproperty range offering five-star properties and first-rate facilitiesat a price that would need to be at least quadrupled if the loca-tion were Marbella. Bulgaria boasts one of the most rapidlyappreciating real estate markets in the world, which presents anexcellent investment opportunity.
BlackSeaRama is an ideally accessible area for holiday or sec-ond homes. Nearby Varna is well known for its extensive shop-ping facilities, theatres, restaurants, bars and many other touristattractions. Historic fishing port of Balchik, Aladzha RockMonastery, renowned Golden Sands, Riviera and Albena resortsare within an easy commute, presenting a whole range of possi-bilities for recreation and entertainment.
A variety of residential villa and villa communities options havebeen incorporated into the master plan of BlackSeaRama craft-ed by Wimberly Allison Tong & Goo. The golf course is in thenatural centre of a plateau area. Residences surround it, eachoffering prominent views of either the golf course or Black Sea.The resort's plan masterfully balances development and ameni-ties while maintaining the pristine views of the surrounding landand seascapes.
The first phase of the development is called The Bell Tower andconsists of 40 plots with two, three and four bedrooms. BellTower residents enjoy concessionary golf rates, use of the pri-vate communal pool as well as unrestricted use of tennis courts,a fitness centre and spa.
BlackSeaRama's most exclusive lots offer an unimpeded seaview on the very edge of the cliff. Five homes boast a sizeablefootprint with nearly 210 square meters of space each, four bed-rooms, and three bathrooms, with an optional pool.
Wimberly Allison Tong & Goo (WATG) has been designing desti-nations for nearly 60 years; places which delight their visitors andsatisfy their owners, too. The work of WATG spans 130 countriesand territories, and is highly acclaimed for excellence and cre-ativity.
Since the early 1980s, Gary Player Design has designed some40 premier golf courses throughout the United States and over200 worldwide. The mission of Gary Player Design is to conductthe business in the same manner in which Gary Player has con-ducted himself as a golfer and gentleman during his 50-yearcareer. For more information visit www.blacksearama.com ■
B l a c k S e a R a m a D r a w s an Elite Set to Bulgaria
The leasing company of Postbank - EFG Leasing - which
was established in early 2005, has just reported its first suc-
cessful year. EFG Leasing, 100-percent owned by the major-
ity holder of Postbank, Eurobank EFG, has gained a stable
market share and turned into one of the most dynamically
growing leasing companies in the country. During the last
year, at about 700 contracts were concluded at the total
value of BGN 120 million. Only for the last three months of
2005, the Company signed contracts at the value of BGN 70
million which, according to BNB official data, was estimated
19% of new agreements on financial leasing.
"In 2005 leasing market in Bulgaria registered substantial
growth due to increased competition, which made leasing
popular as a form of financing and diversification of product
ranges," said Paulina Dobreva, executive director of EFG
Leasing.
The fields of real estate, construction equipment, heavy
freight vehicles and light vehicles generated greatest leasing
interest in 2005. This year, growth is expected in the field of
industrial equipment due to the necessity of increase in pro-
duction capacity and the preparation for EU accession, said
Dobreva.
She added that EFG Leasing expects to continue gaining
market share in 2006. It plans to double its leasing portfolio
and turn into a leasing company preferred by corporate
clients, and a partner preferred by leasing equipment sup-
pliers. ■
Residor SAS will invest a total of EUR 10
million in the reconstruction and the ren-
ovation of the Radisson SAS hotel in
Sofia, Martin Kolb, general manager of
the hotel, said March 30. Construction
works will start in June and are sched-
uled to be completed in sixteen months.
An additional wing, which will accommo-
date 41 new rooms and a new modern
conference centre, will be built as part of
the project. Construction works will be
carried out in phases, which will allow the
hotel to operate throughout the renova-
tion. Bulgarian Construction Company will
be contracted to carry out the renovation
of the hotel. Proposals have already been
submitted but the company is yet to be
selected, Kolb said. ■
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EGF Leasing Expects to Continue Its Success
Radisson SAS to Add New Wing, Conference Center
Ms. Alexandra Jekova (Sani), 18 years old, won the Europa
Cup'2006 in Snowboardcross (SBX) at the last day of the
two-days heavy finals of the Europa Cup Championship in
Bansko this month. Sani (Moten Sport rider) started from
zero at the end of season 2005 in the World Cup SBX
Championship and now ended with 11-th, 6-th and 3-th
place in 2006 starts. All those results rank her as the most
successful Bulgarian snowboard rider ever. ■
Bulgarian Snowboard Rider Triumphs atEuropa Cup 2006
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In an interview for the AmCham Bulgaria Magazine, KlodKolaro, Oracle's country managing director, said that in gener-al the company is very happy with the progress of Oracle'sbusiness in Bulgaria.
The company established a local subsidiary in 2000, and sincethen has been enjoying an extremely high growth across alllines of businesses, Kolaro said. Sustainability of that positivetrend was largely dependent on the local partners, and forinstance, today there are around 35 independent software ven-dors. With them Oracle achieves great market coverage andability to penetrate almost all industry verticals that were iden-tified as priority targets for the company. In some of the indus-tries like financial services, telecommunications, and the pub-lic sector, Oracle achieved a significant market share in data-base management systems and middleware software, Kolarosaid.
"We can freely say that the business climate is very favorablefor the IT industry. Apart from macrocosmic stability, we have
been enjoying in the last 5 years, EU funds that are directedto EU enlargement countries further boosted the ICT industrygrowth," he added.
According to Oracle's manager, one of the problems in theBulgarian case is the country's ability to absorb EU funds. Thereason for that is the incompetence of some of the public sec-tor officials and decision makers, who are still IT-illiterate. Notto forget, corruption still remains one of the factors that couldhinder further progress in the IT sector, Kolaro said. ■
Oracle manager: IT industry thrivesin Bulgaria
Klod Kolaro, Oracle's country managing director speaks at the Oracle
Applications Forum in November 2005.
iF YOUR ADWERE pLACED HERE,
• WOULD BE CONVEYED TO THE LEADING US, INTERNATIONAL AND
BULGARIAN COMPANIES OPERATING WITHIN BULGARIA;
• WOULD REACH THE DESKS OF SENIOR EXECUTIVES AND DECISION-MAKERS
WHO DEMAND HIGH QUALITY PRODUCTS AND SERVICES;
• WOULD TRAVEL ACROSS THE EUROPEAN CONTINENT AS WELL AS THE
UNITED STATES, TAKING FULL ADVANTAGE OF THE INTERNATIONAL NET-WORK OF AMERICAN CHAMBERS OF COMMERCE;
• WOULD SERVE AS AN IDEAL NETWORKING OPPORTUNITY FOR POTENTIAL
FOREIGN INVESTORS AND BUSINESSMEN VISITING BULGARIA.
AMCHAMADVERTISING RATES
BACK COVER . . . . . . . . . . . . . . . . . . . . 1330 BGN
SECOND COVER . . . . . . . . . . . . . . . . 1220 BGN
THIRD COVER . . . . . . . . . . . . . . . . . . 1180 BGN
TWO PAGES SPREAD . . . . . . . . . . . . 1440 BGN
FULL PAGE . . . . . . . . . . . . . . . . . . . . . . . . 960 BGN
HALF PAGE . . . . . . . . . . . . . . . . . . . . . . . . 780 BGN
QUARTER PAGE . . . . . . . . . . . . . . . . . . . . 580 BGN
LOGO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 BGN
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DISCOUNTS:
AMCHAM MEMBERS . . . . . . . . . . . . . . . . . . 20%ADVERTISING AGENCIES . . . . . . . . . . . . . . 15%MAX VOLUME DISCOUNT . . . . . . . . . . . . 10%
For more details please contact:
AmCham Bulgaria Office – Nadia Vakareeva, phone: 976 95 65, e-mail: [email protected] AmCham Bulgaria Magazine – Milen Marchev, phone: 846 88 32, e-mail: [email protected]
YOUR MESSAGE
THE RIGHT MESSAGE TO THE RIGHT AUDIENCE.
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Love is right to say for this band'smusic. It's a music that feels to be bornout of love. Love that has waited manyyears to reveal itself in the first album ofthe band. At last, under the title "All theLove", it will reach all the Bulgarian fansand the guests of the country right afterEaster, on May 3.
The band Sunrize is constituted in 1992г. by George Marholev. It embarks onlong tours abroad, where, along with themultiple club concerts, the musicianscompose much of their songs.
After returning to Bulgaria, the bandengages in active club and concertactivity and becomes emblematic for theblues and rock sound in the country.The live performance is a priority in thegroup's conception for presenting theirmusical essence and that's what theirpopularity is due to.
With their authorial songs the band heldthe first place in many charts of radioand TV channels, and made the audi-ence in the biggest hall of the NationalPalace of Culture explode with theirtremendous ballad "Carry On", which isincluded in this album in two versions -English and Bulgarian. The last is aduet of George Marholev and the extra-ordinary, shining lady singer Amalia - acombination that leaves you breathless.
So does the whole album "All the love",combining elements of rock and pureblues. It contains 15 songs in Bulgarian
and in English. The producer of thealbum is George Marholev, who, alongwith the directors Dimitar Elenov andAlexander Varadinov has produced twovideo clips - one of the song "FloatingRestaurant" and the other of "All theLove" - the pilot song of the album. Bothvideos will be presented at the promo-tional concert, together with theirnewest songs and their favourite coverversions in unique interpretations.
The masterly performances of GeorgeMarholev's guitar, together with hisunique, dynamic voice and YassenDimitrov's lyrical vocals and Hammond
organ, supported by the dense bass ofStephan Marinov and the explicitness ofthe drums of Michail Roussev, are thebasic components that give perfectionto their product and are a reliable pathto the hearts of the audience. Throughthe musical means of expression andtheir image, Sunrize address their mes-sage for love and light. Appealing forspirituality among the people, they trans-fer their fascination and have a strongemotional influence, combined withsense of humor, profundity and strengthof thought.
The audience may sense all this on thelive concert in Sophia on May 3, at thepresentation of their album at theMladezhki Theatre "Nikolay Binev".Together with Amalia, the whole brasssection of the band Dirty Purchase, alady vocal trio and a hot lady percussionsection Sunrize will lay their stakes on thelive performance they are so good in, andthe audience will truly sense the purenessand the authenticity of the show.
With so many friends and musicianspresent, the whole musical project logi-cally bears the title All Access. Soeveryone is invited on May 3 atMladezhki Theatre "Nikolay Binev" at 8Dondukov Blvd. at 19.00. Be there. ■
Detelina Ivanova, Holly Rock Art
All the Love From Sunrize
George Marholev and singer Amalia.
Sunrize: Up left standing: Jassen Dimitrov, up right standing: Mihail Russev, sitting left: Stefan Marinov, sit-
ting right: George Marholev.
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Fender planned a very special DiamondAnniversary celebration right in its ownPhoenix-area backyard this spring, as itwelcomed a stellar lineup of artists andpresents an impressive array of Fenderexhibits for what turned out to be a pairof unforgettable outdoor concerts.
To celebrate 60 legendary years of musi-cal innovation, Fender had all but takenover the entertainment roster for the fourthannual Tempe Music Festival, March 31-April 1 at Tempe Beach Park in sunnyArizona. The Friday night show featuredthe way-beyond-legendary Jeff Beck, top-ping a bill that also included Texas guitarwizard Eric Johnson, savage guitar alienGreg Koch and eclectic acoustic magicianWilly Porter. At Saturday's show, theblueswailing John Mayer Trio undoubtedlyturned in a set hotter than Phoenixasphalt in July, plus performances by Trainand Vertical Horizon.
Visitors at the two-day festival were metwith a concentrated blast of full-onFender mojo that left players breathlessand those who don't wanting to learn.
The immense 60th Anniversary Villagefeatures the Fender/Jeep® SPIRIT OFROCK-N-ROLL® interactive exhibit,which was Fender's largest-ever displayand included a barrage of amplifiersand Custom Shop Master Builder sta-tions at which the public could watchFender's renowned Corona, Calif.-based craftsmen hand-build instru-ments, while legendary "pickup artists"Abigail Ybarra and Seymour Duncanhand-wind pickups side by side nearby!
An equally immense Fender storeoffered a wealth of company clothing,collectibles and other merchandise, andthe don't-miss GuitarMania® collectionof hand-painted 10-foot-tall fiberglassStratocaster® guitars.
The entire weekend - 2 days, 3 stages,30 bands - was a once-in-a-lifetimeopportunity to see some legendaryartists and craftsmen, hear some fan-tastic music, bask in the radiant glow ofall things Fender (to say nothing of thespringtime Arizona sun), and participatein the 60-year Diamond Anniversary ofa beloved American icon: Fender.
The list of artsist to celebrate on stagecontinued with: Arc Angels, AZZ IZZ,Zowie Bowie, Gin Blossoms, VerticalHorizon, Love & Special Sauce, Train,SRP/Cox Rox Garage Band Winner,John Mayer Trio, TBA, Operatic (featur-ing Jess Fritsch), Saville Row, School ofRock, Authority Zero, Alien Ant Farm,Lit, DeCapulet, Downward Dog, EpicMemory, 2 Tone Lizard Kings, CTS,Shallow Water. ■
Fender 60th Bash In Tempe, Ariz .Diamond Anniversary concert celebration features star-studded lineup
JEFF BECK
Born on June 24, 1944 in Wallington, England, guitar legend
Jeff Beck has been a staple of rock music for the past 30
years, performing with a number of bands in various genres
as well as maintaining his own successful solo career with his
beloved Stratocaster®.
After attending art school in London, Beck performed with
various local bands before a stint with the infamous
Screaming Lord Sutch led to Beck being asked to join the
Yardbirds in1965 (Replacing Eric Clapton.) At the end of 1966
Jeff Beck left the Yardbirds to begin a solo career, enlisting
vocalist Rod Stewart, bassist Ron Wood drummer Aynsley
Dunbar (soon replaced by Mickey Waller) and keyboardist
Nicky Hopkins for his Jeff Beck Group. The Group released
their debut LP, 1968's Truth followed by Beck-Ola in 1969. The
following year, after some line-up changes, he released Rough
and Ready in 1972 and Jeff Beck Group the following year. In
1973 Beck formed a new trio with former Vanilla
Fudge/Cactus members Tim Bogart (bass) and Carmine
Appice (drums).
In 1975 Beck made Blow By Blow, an instrumental jazz fusion
album produced by Beatles producer George Martin, followed
by 1976's Wired and 1980's There And Back.
After a five-year gap, Beck returned in 1985 with Flash,
recorded with session musicians. Flash became his most
commercially successful album in years, spawning the hit sin-
gle "People Get Ready" (sung by Rod Stewart) and the
Grammy-winning instrumental "Escape." After taking some
time off and appearing on Mick Jagger's 1987 album Primitive
Cool, Beck returned with his next project, Guitar Shop, which
won a Grammy for Best Rock. After touring with fellow guitar
great Stevie Ray Vaughan, Beck took another break, emerg-
ing briefly in 1992 to perform on the Roger Waters solo album,
Amused to Death, and record a soundtrack for the movie
Frankie's House. In 1993 Beck recorded another long-awaited
solo work, a tribute to Gene Vincent and the Blue Caps called
Crazy Legs.
In March 1999, Beck released his first album of original mate-
rial in more than a decade. Who Else!, a collection of 11 new
guitar compositions in styles ranging from techno to blues to
traditional Irish. Beck's latest album, You Had It Coming, came
out in 2001. The Jeff Beck Signature Stratocaster® reflects
the innovation and genius of a true legend.
In 2003, Beck released Jeff, a brand new collection of songs,
followed by a tour in 2004. On May 2nd 2004, Jeff was
awarded a lifetime achievement award by Fender®.
…to be continued…