Bulgarian Telegraph Agency (BTA), 96-11-29

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From: Embassy of Bulgaria <bulgaria@access1.digex.net>

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

28 & 29 November, 1996

CONTENTS

[01] OUTGOING FOREIGN MINISTER REPORTS ON DIPLOMACYS 1995-1996 PERFORMANCE

[02] BULGARIA IS FOR STRENGTHENING BIOLOGICAL WEAPONS CONVENTION

[03] PRESIDENT ZHELEV ON CURRENCY BOARD

[04] PRESIDENT ZHELEV ON CURRENCY BOARD

[05] PARLIAMENT AMENDS FOREIGN INVESTMENT ACT

[06] COMMENTS ON THE AMENDMENTS

[07] B.I.B.A. WANTS AMENDMENTS TO FOREIGN INVESTMENTS LAW

[08] EBRD SETS FORTH ITS 1996-97 STRATEGY FOR BULGARIA

[09] U.S. ASTRONAUTS IN BULGARIA

[10] EUROPEAN HUMAN RIGHTS COMMISSION SAYS PROSECUTION VIOLATED LOUKANOV'S RIGHTS

[11] 20,000 CHILDREN EXPLOITED IN BULGARIA IN 1996, SPECIAL SURVEY SHOWS

[01] OUTGOING FOREIGN MINISTER REPORTS ON DIPLOMACYS 1995-1996 PERFORMANCE

Mr Pirinski said that the Ministry provided diplomatic support to the national security in several directions: Bulgaria's European orientation, participation in the Euro-Atlantic security structures, stabilization of the Balkans and development of Balkan cooperation, pursue activity of Bulgaria in international organisations and of its bilateral relations with European states, with Russia, with the CIS states, with the US and with prioritized states from other regions.

In connection with Bulgaria's participation in the Euro- Atlantic security structures, Mr Pirinski pointed out the Ministry's operation on the Partnership for Peace programme and on the intensified dialogue with NATO in close cooperation with the Defence Ministry.

The Minister also dwelled on Bulgaria's contacts with the Western European Union, where it is an associate partner. He mentioned Bulgaria's contribution in the working out of the general concept on the foundations of European security and the practical initiatives in connection with participation of the Bulgarian Army in joint peace-keeping operations.

Concerning the cooperation with the Organisation for Security and Cooperation in Europe (OSCE) the outgoing Foreign Minister spoke about the country's participation in the discussions on the model European security architecture in the 21st c. and in the review of the Treaty on Conventional Armed Forces in Europe.

Summing up the initiatives for stabilization in the Balkans, the Minister drew the attention to Bulgaria's policy towards the conflict in former Yugoslavia until the signing of the peace accords: cooperation for a peaceful, just resolution of the conflict with political, rather than with military means and maintaining the position for non- commitment, direct or indirect, in military operations. Speaking about Balkan cooperation, Pirinski focused on the Balkan meeting of foreign ministers held in Sofia which concluded with the adoption of the Sofia Declaration. "The preparations and the organisation of the meeting showed clearly the significant potential of the Bulgarian diplomacy" Minister Pirinski said.

"For countries like Bulgaria, politics and economics are closely related - policy can ensure a broader access to external markets, to sources of investment and technological aid," Pirinski said summarizing the activities of the Foreign Ministry to accommodate the Bulgarian economic interests. Pirinski, a qualified economist, recalled the seminar on the role of the trans-European infrastructure for the stability and security in the Black Sea region held under the aegis of the OSCE, the cooperation of Bulgaria, Albania and Macedonia in projects financed with the assistance of the United States, last week's conference of the transport ministers of the countries participating in Black Sea Economic Cooperation (BSEC) and the Central European Initiative (CEI) which ended with signing a memorandum on the establishment of a Transregional for Transport Infrastructure in Sofia, and Bulgaria's accession to the World Trade Organization and the Wassenaar Arrangement.

Pirinski, who is handing over to First Deputy Foreign Minister Irina Bokova tomorrow, pointed out the necessity to adopt a diplomatic service act; a bill to this effect was submitted to Parliament. "The right balance between the political leadership of diplomacy and the independence of the diplomatic and technical staff," Pirinski pointed out.

[02] BULGARIA IS FOR STRENGTHENING BIOLOGICAL WEAPONS CONVENTION

[03] PRESIDENT ZHELEV ON CURRENCY BOARD

"I earnestly hope that when the Fund composes its technical mission for the introduction of a currency board, it will take into consideration the reasons for the failure of its current arrangement with Bulgaria," the President notes. "The Bulgarian public in principle pins great hopes on the introduction of a currency board as a prerequisite for a way out of the crisis. In this emergency situation for Bulgaria, the application of the board requires solid international support and above all the support of the IMF," President Zhelev writes. "The board, however, must take into consideration the specific conditions in Bulgaria: a huge foreign debt, disrupted and mistrusted banking system and political instability caused by the exhausted confidence in the Government," Dr Zhelev writes.

Reacting to the letter in an express release this evening, the National Assembly press centre qualified Mr. Zhelevs letter as "unprecedented and scandalous". It recalls that National Assembly Chairman Sendov has initiated consultations which have helped achieve great progress over the last few weeks. "It is a fact that the participants in the discussion did not produce substantial statesmen's or economist's arguments against the idea of a currency board. The supplanting of the currency board question by the question of support or no support for the Council of Ministers and the Governing Board of the National Bank of Bulgaria is a gross misrepresentation," the parliamentary press centre said. "With such unprecedented disrespect for Bulgaria's national interests on the part of its own head of state," the Chairman of the National Assembly feels duty- bound to inform Mr Camdessus by personal communication today of the readiness of the Government and the National Bank of Bulgaria to draft the bills for the introduction of a currency board before the end of the year and of Parliament's readiness to take an affirmative or negative vote on these bills even in the first days of 1997, the press release says.

[04] PRESIDENT ZHELEV ON CURRENCY BOARD

"In this connection yesterday I addressed him again with an urgent request for the IMF to clearly declare in what conditions and under what government Bulgaria will receive real support," Zhelev said. Yesterday and today the ruling Left and National Assembly Chairman Blagovest Sendov criticized the President for exceeding his powers with his demarche.

The IMF proposal to introduce a currency board in Bulgaria was discussed and approved at a very high level in the IMF, having secured the agreement of the Fund's leading nations. In essence it is a clear assessment of the failure of Bulgaria's government model, Zhelev said. Bulgaria's fate was pre-decided with the knowledge and participation of government and central bank officials during meetings in Washington last October, the address also said. "Instead of immediately starting work with the other state institutions to formulate an official stand of this extremely important issue, the government demonstrated an absolute reluctance to act," said the President. He believes that the lack of a consensus among the institutions undermines the confidence in Bulgaria and aggravates its international isolation.

Dr. Zhelev said the consultations he has held with a broad circle of representatives of political forces and the central bank, showed that in spite of the differences, the currency board mechanism is unanimously seen an imminent step in the conditions of the unprecedented crisis in which the country was plunged. It is vital to immediately start preparing a package of legislative and economic measures for the introduction of the currency board. The successful implementation of this mechanism requires timely and responsible management decisions and actions, Dr. Zhelev says further.

No matter what government introduces and implements the currency board mechanism, the political forces must reach a common understanding on the package of measures to guarantee that the decision will be put into practice, said the President. "When the future of Bulgaria is at stake, it is inadmissible to use this major issue for settling inter-party problems and designing petty political schemes," he stressed.

"In these hard times, I address you with the full responsibility of my position. In the end of my term, I am not going to wage battles against the government or any political force. It is my obligation, though, to stress the extreme significance of this moment. The decision and action Bulgaria is to take are the last chance to save the democratization of the country and pave the way for its progress," the President said in conclusion.

Dr. Zhelev's statement prompted an immediate response from the government. It issued a statement saying, "The President's allegations for participation of government and central bank representatives in what is described as pre-deciding on the introduction of a currency board in Washington in October are untrue. It is a decision that will be taken in Bulgaria, by the Bulgarian Parliament. The Bulgarian government is doing the necessary work to clarify all parameters of this financial mechanism ".

[05] PARLIAMENT AMENDS FOREIGN INVESTMENT ACT

The Foreign Investment Promotion and Protection Act will replace the old Business of Foreign Persons and Foreign Investment Protection Act. For investment to qualify as foreign investment, i.e. to be eligible for preferences under the act, it should be to the amount of at least USD 50, 000 or their equivalent in Bulgarian leva or other currency. The bill's sponsors say that the texts defining the term "foreign investment" have been written in accordance with the legislation of the member states in the OECD and the IMF.

The amendments give equal rights to Bulgarian and foreign investors, but stil limits foreign investors' rights to acquire land. "A foreign person shall not acquire right to land ownership. Companies with foreign capital shall not acquire rights on ownership of farm land," the act says. The MPs rejected the proposal of opposition MP S.Louchnikov for the ban to apply only to companies with more than 50% foreign capital.

Under the law, contributions in kind in partnerships with foreign capital shall be exempt form customs duty and VAT only when they are worth over USD 100,000. This provision will allow the duty-free import of machines, equipment, patents and knowhow, among other. They, however, will be charged with taxes if sold within five years after the contribution was made.

Another provision guarantees foreign investors that in case their rights are restricted as a result of amendments to the Bulgarian legislation, the regulations in effect at the time of registration of their capital

Foreign investment in Bulgaria in the 1991-96 period totalled 716 million US dollars, including 14 million in 1991, 50 million in 1992, 127 million in 1993, 220 million in 1994, 104 million in 1995 and 201 million by October 1, 1996.

[06] COMMENTS ON THE AMENDMENTS

Kiril Zhelev, MP of the Left and Chairman of the parliamentary Budgetary and Finance Committee: The law eliminates some of the gaps in the Bulgarian foreign investment legislation. It provides for the exemption of contributions in kind from customs duties, VAT and other taxes. This step is hailed by all foreign investors.

Ventsislav Dimitrov, MP of the opposition Popular Union and Deputy Chairman of the Budgetary and Finance Committee: The amendments step down from the principles underlying the initial version of the law. It should be called a law on restricting, and not promoting, foreign investment.

Daniela Bobeva, chief of the Foreign Investment Agency: One of the major reasons for the negligible volume of investment is the implementation of the law, not the law itself. Another reason is the instability in Bulgaria, both political and legislative. The macroeconomic situation, Bulgaria's image and credit rating, too, are having an adverse effect.

Hristos Katsanis, Regional Executive Director of Global Finance, President of the Bulgarian International Business Association: The draft amendments are a step in the right direction. However, big companies should not be overemphasized. I believe it is important to boost cooperation with small and medium-sized companies of the European Union and particularly the Balkans.

[07] B.I.B.A. WANTS AMENDMENTS TO FOREIGN INVESTMENTS LAW

BIBA members say the amendments to the Business of Foreign Persons and Foreign Investment Protection Act are a step in the right direction. The organization praised the proposal to exempt imported equipment from customs and excise duties. The foreign companies, however, insist that bureaucratic procedures on the registration of a partnership be reduced. According to foreign investors, the amendments proposed are an important but inadequate condition for the inflow of foreign investments in Bulgaria. In their view the threshold for giving preferences to investors has been lifted too high. At present privileges are granted only for making investments of more than 5 million US dollars' worth. The requirement for a minimum base capital of 50,000 US dollars set in the amendments will not allow Bulgarian participants in joint ventures to have the controlling interest. Foreign investors also want to be granted the right of purchasing arable land in Bulgaria which is not allowed under the existing legislation.

Foreign businessmen approve the forthcoming establishment of a currency board in this country. Each measure which would exert favourable influence on the currency and lending policies and contribute to curtail inflation and the base interest rate is good for the country, Mr Katsanis said. However, this measure is not a panacea and cannot resolve all the country's problems.

[08] EBRD SETS FORTH ITS 1996-97 STRATEGY FOR BULGARIA

The EBRD will concentrate its efforts on extending preand post- privatisation support for specific projects, said Mr Deschamps. He said the Bank will seek to increase its effectiveness through four key elements. One is support of large and high-profile privatisation deals involving a foreign strategic partner. These involve mostly western sponsors considering investments above ECU 300 million, of which the EBRD would finance about one-third in total. Support of the Mass Privatisation Programme is another element and will be accomplished through the establishment of a postprivatisation fund and the provision of technical assistance targeted at the newly developing capital market.

Indirect targeting of small and medium-sized enterprises (SMEs) is the third element of EBRD's objectives for 1997. The Bank will continue to work towards the restructuring and recapitalisation of local financial institutions that can address the financing needs of SMEs. EBRD will also provide early-stage support by assisting and guiding both domestic and foreign sponsors early on in the privatisation process.

The EBRD strategy for 1997 includes support in the financial sector. The focus for 1997 will be on implementing the privatisation scheme for the United Bulgarian Bank, and on consolidating the existing projects approved and executed in 1994-1996.

The EBRD is particularly interested in the energy sector, said the EBRD official. The EBRD is supporting investments on the supply and demand sides in the power sector, which are linked to commitments to accelerate closure of the older units of the Kozlodoui nuclear power plant. The EBRD may selectively finance infrastructure, said Mr Deschamps. The EBRD's flagship operation in this sector is expected to be Sofia Water Utility Investment and Restructuring Programme. The bank currently has one telecommunications operation in Bulgaria, which consists of an ECU 32 million sovereign guarantee loan facility extended to the Bulgarian Telecommunications Company (BTC) for the development of a digital overlay network. The EBRD intents to be involved in the forthcoming privatisation of the BTC either directly or by providing financing to the newly privatised entity for the further development of the telecommunications network.

[09] U.S. ASTRONAUTS IN BULGARIA

Prof. Bonev said that Bulgaria has been invited to participate in a project for a new space station launched jointly by NASA, the Russian Space Agency and the European Space Agency. NASA and other Western agencies for space research will finance the Bulgarian participation in the project. Prof. Bonev also said that for the first time in December Bulgaria will adopt a national programme for space research. It will be a five-year programme with guidelines for the next 15 years.

[10] EUROPEAN HUMAN RIGHTS COMMISSION SAYS PROSECUTION VIOLATED LOUKANOV'S RIGHTS

The case of Loukanov vs. Bulgaria was heard by a 12-member panel of the European Human Rights Court in Strasbourg. There is no data or documents proving the claim of the Prosecutor General's Office that Loukanov exceeded his powers and committed a crime by being involved in the decision to grant assistance to Third World countries in 1986-1989, in his capacity as deputy prime minister, according to the European Human Rights Commission. The full amount of the assistance was used for the purpose for which it was intended and was not rechanneled; Bulgaria did not violate UN quotas determining the ratio between aid for developing countries and the GDP of the donor nation, the commission said in its statement.

It is obvious that Loukanov was arrested for actions which did not constitute a crime, his lawyer Ina Loulcheva said. She rejected as unsubstantiated the prosecution's charges that the allocation of assistance violated Bulgarian law and involved mismanagement of public funds.

Loukanov insisted on an out-of-court settlement, lawyer Loulcheva said after the meeting. The prosecution's stands during the negotiation, however, prevented such an arrangement. An out-of-court settlement would have cost the state several times less. Loukanov never claimed damages, said Loulcheva. The court will come up with a ruling after two closeddoor sittings. It is expected to be announced in February 1997. If damages are awarded, they will be collected by Loukanov's heirs.

[11] 20,000 CHILDREN EXPLOITED IN BULGARIA IN 1996, SPECIAL SURVEY SHOWS

Children are most often employed in agriculture, tourism, trade and construction. Private construction companies are reported as hiring students during their summer holiday on a regular basis. Inexperienced children are the most frequent victims of accidents on construction sites, the Labour Inspectorate said. 10 such accidents were reported last year alone.

This year the 28 regional branches of the General Labour Inspectorate issued work permits to 2,714 children under 15 and 463 of those were for employment at private companies. The permits specify explicitly the type of work they apply for. In case the employers force the children to do work not specified in the permit, they are punishable by fine of up to 10,000 leva. In case the offence is repeated, the employer may be brought to the court. Under the Bulgarian laws, the under-15 children may only work in the sphere of art and the contract of employment should be signed with the parents and not directly with the child. Nearly 100,000 Bulgarian children work without a contract of employment, shows a report of the Association on the Condition of Children in Bulgaria.

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