News from Bulgaria / May 16, 96

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

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

16 May, 1996

CONTENTS

[01] PARLIAMENT RATIFIES PROTOCOL to EUROPE AGREEMENT

[02] BULGARIA-E.U. ECONOMIC SUBCOMMITTEE SET UP

[03] TEN NEW BULGARIAN AMBASSADORS APPOINTED

[04] BULGARIA - HUNGARY: TRADE GRADUALLY PICKS UP

[05] SOCIAL PARTNERS DISCUSS PROPOSALS FOR STRUCTURAL REFORM

[06] TAX PREFERENCES IN BULGARIAN-RUSSIAN TRADE

[07] GRAIN CRISIS

[08] COAL MINING TO ADAPT TO MARKET ECONOMY

[09] FOREIGN INVESTORS IN BULGARIA TO SHARE PERSONNEL

[01] PARLIAMENT RATIFIES PROTOCOL to EUROPE AGREEMENT

The Protocol, signed on April 22 in Brussels revises and complements Protocol No 1 to the Europe Agreement on textile articles and clothes. The amendments are necessitated by the agreements which Bulgaria and the European Union reached for the acceleration and liberalization of reciprocal trade in textile articles.

[02] BULGARIA-E.U. ECONOMIC SUBCOMMITTEE SET UP

Earlier today a Bulgaria-EU Economic Subcommittee was set up at a meeting between Gancho Ganchev, Deputy Minister of Industry and Economic Development, and Giovanny Ravasio, Director General of DG II (Economic and Financial Affairs) of the European Commission.

Macroeconomic policy, public finance, social protection and the restructuring of the financial sector and the real economy will be the main areas of cooperation within the Subcommittee, Gechev said. Ravasio added that the short-term areas of cooperation are information exchange on the progress of reform and support to Bulgaria's macroeconomic stabilization by the EU. Medium-term cooperation will focus on the preparation for Bulgaria's integration in the EU.

Today's meeting has given us a first opportunity to discuss recent economic developments and prospects in Bulgaria, said a press release on the meeting. Bulgaria's economic performance in the past two years has had some positive aspects: a return to economic growth, a reduction in unemployment and a slowdown in inflation. However, these undoubtedly positive developments contrast with less satisfactory progress in structural reform. "This latter factor is, in our view, the fundamental reason for the recent fall in the value of the lev," Ravasio said. Unless strong and decisive action to address the problems of the banking and enterprise sectors is taken, Bulgaria will be unable to achieve sustained macroeconomic stability in his view.

An analytical study of Bulgaria's economic problems will be prepared within six months. According to Ravasio, it cannot be said now when Bulgaria will join the EU. "This question should be answered by Bulgaria," Gechev said. This, according to him, will become possible when Bulgaria's economic indicators approximate the average European indicators and its legislation is harmonized with European legislation.

[03] TEN NEW BULGARIAN AMBASSADORS APPOINTED

The President's Press Office cabled the list of recalled and appointed ambassadors to BTA. Bulgarian ambassadors to the Czech Republic, Poland and Hungary, Boyan Nichev, Yani Milchakov and Vesselin Filev are replaced respectively by Ognyan Gurkov, Alexander Dimitrov and Hristo Halachev. Ambassador to Switzerland Elena Kircheva, Ambassador to Portugal Vladimir Filipov, Ambassador to Lebanon Krustyo Krustev and Ambassador to the Republic of Korea Boiko Mirchev are recalled and they are replaced respectively by Todor Vulchev, Nikola Kaloudov, Ventsislav Kunev and Dimiter Ikonomov.

Newly appointed ambassadors to the Federal Republic of Yugoslavia, Bosnia and Herzegovina and the Netherlands are respectively Filip Ishpekov, Marko Markov and Kamen Velichkov.

[04] BULGARIA - HUNGARY: TRADE GRADUALLY PICKS UP

Bulgaria also marked the 1,100 anniversary of the Hungarian state by a reading of Sandor Petofi's poetry in Shoumen (Northeastern Bulgaria), where he had lived for several years, and an exhibition of Hungarian archive documents at the Sts Cyril and Methodius National Library. There are elements in Hungarian tales closely related to Bulgarian history, the Hungarian Ambassador said. He recalled that the two countries happened to be at wars, but more often they were allies and helped each other. During the Middle Ages Bulgaria and Hungary were bastions against Turkish invasion, Tamas Tik stated.

Following the decline in economic cooperation in 1993 as a result of the Yugoembargo, trade between Bulgaria and Hungary has started to pick up. In 1994 commodity exchange equalled 55 million US dollars and in 1995 it reached 60 million US dollars. But while Hungarian export to Bulgaria increasingly grows, Bulgarian export to Hungary is on the decrease. This tendency has been prompted mainly by the reduced production in leading Bulgarian industrial branches as metallurgy and chemical industry. Bulgarian exports to Hungary went down five percent in 1995 and in January-March 1996 it decreased even more drastically, by 38 percent.

According to the Hungarian commercial representation, bilateral deals are still accidental and almost half of the traded commodities change annually. Goods that are traditionally on the two countries' export lists are chemicals, medicines, hoisting devices, non-ferrous metals and foodstuffs. One of the main reasons for the slow growth of bilateral trade is Bulgaria's outstanding debt to Hungary of some 86 million transferable roubles' worth. Asked by a Daily News reporter, how this problem will be settled, Mr Tik said that in his view the debt does not present a problem to bilateral relations, because the amount is not very considerable. At the same time, however, the debt exerts an indirect influence on bilateral trade and the swifter settlement of this problem is in the interest of Bulgaria.

A large number of intergovernmental and interdepartmental documents were signed in the past two years: agreement on mutual protection of investments, on avoidance of double taxation, conventions on plant and veterinary protection. Negotiations are expected to start soon at the level of experts for the drafting of a free trade agreement. At present some 500 Hungarian companies have business contacts with Bulgarian ones, 21 have subsidiaries in Bulgaria or participate in joint ventures and 13 have representation offices here.

[05] SOCIAL PARTNERS DISCUSS PROPOSALS FOR STRUCTURAL REFORM

On Thursday the Cabinet will discuss proposals by Justice Minister Mladen Chervenyakov and Finance Minister Dimiter Kostov, concerning the "isolation" of seventy more enterprises which can be rehabilitated after working out an arrangement with the state-owned banks. There will be no personnel cuts there, Konakchiev said.

The loss-makers generated a total loss of 13,642 million leva in 1995, 28 per cent of production sector losses, Konakchiev said, quoting figures released by the Council of Ministers. Their workforce numbers 25,383 persons, some of whom will keep their jobs, he said.

Decisions are to be made about both groups of enterprises. They will be taken on a case-by-case basis after consultations with the local social partners, Konakchiev and Social Affairs Minister Mincho Koralski said. The Cabinet will not keep its moves secret or privatize enterprises under the counter, they said, denying allegations by the most influential trade unions - the Confederation of Independent Trade Unions in Bulgaria (CITUB) and Podkrepa.

The Cabinet ministers said none of the 64 enterprises subject to liquidation is profitable. CITUB Vice President Ivan Neikov claimed the opposite. Podkrepa Vice President Dimiter Manolov said Bulgarian taxpayers would pay the price whichever option was chosen.

The cabinet decision to close down 64 enterprises was not given publicity and was taken without consultations with managers and the trade unions, CITUB said in a memorandum sent to the Government today. Although it is in favour of structural reform, CITUB will oppose this administrative approach and forcible liquidation as an end in itself, which will affect directly or indirectly 250,000 jobs, the document said. CITUB insists that various compensations be paid to laid off workers under the supervision of a public agency. By September 30 the Cabinet should launch alternative employment programmes, ensuring 180,000 jobs for five years.

In 1995 the two largest trade unions - CITUB and Podkrepa - strongly criticized the Cabinet's social policy and walked off the National Tripartite Council many times. Since last summer CITUB and Podkrepa, which signed a cooperation agreement in May 1995, have become increasingly critical of the government and especially of its economic and social policy. The Community of Free Trade Union Organizations in Bulgaria, admitted to the Tripartite Council by the Socialist Government, supported them with reservations. The employers' organization focused on rather narrow issues.

[06] TAX PREFERENCES IN BULGARIAN-RUSSIAN TRADE

Atanas Paparizov visited the Russian capital for the Bulgaria In Russia exhibition that opened there on May 13. Before his departure for Moscow, he voiced expectations that the sides will agree on preferential treatment in trade. He said Bulgaria is now enlisted by Russia among the developed countries and the customs duties it pays are equal to those payable by Russia's western partners. Sofia insists to be included in the developing countries group.

Bulgaria offers export of commodities in exchange for Russian gas, as this country is not in the capacity to pay with hard currency, "24 Chassa" writes quoting Paparizov. The differences between the Bulgarian and Russian statistics prevented the Russian partners from submitting to the Bulgarian Trade Minister a list of goods to be imported in Bulgaria at reduced customs duties in exchange for a preferential treatment for Bulgarian imports to Russia, "24 Chassa" says.

Meeting the CEO of the Russian Atomenergo, Paparizov urged for a speedy completion of the project for upgrading four of the power unit of Bulgaria's Kozlodoui N-plant, so that Bulgaria can start seeking a lender for a 400 million dollar loan to finance the operation, says this daily. The sides have agreed that third country partners will be attracted for the upgrading operations, says "Standart News". Power Unit One of Kozlodoui will be switched off as of today - a month ahead of schedule - for safety tests of the reactor's metal casing.

[07] GRAIN CRISIS

[08] COAL MINING TO ADAPT TO MARKET ECONOMY

Mr George Covalsey, EC director in charge of energy issues outlined the trends in the already launched restructuring process. Between 1990 and 1995 a total of 77 mines were closed the countries in transition and another 150 have been earmarked for closing in the next five years. Some 400,000 employees have lost their jobs and another 200,000 or more are facing the same fate.

The only means of restructuring the coal mining in Bulgaria is to make it competitive, the criteria being of electricity and heat power production at competitive prices, Chairman of the Energy Committee Konstantin Roussinov told the news conference. Asked which coal mines will be closed down, he specified no names. In his view additional investment will help create more efficient conditions for coal production in most of the mines. The opencast coal mining is the most efficient type of coal production. According to Mr Roussinov the Pernik mines (Western Bulgaria) will operate and will expand its output by 30 per cent. The meeting will approve proposals to the governments of the participating states. The programme on the last day, Friday, includes a visit to the energy complex Maritsa Iztok.

[09] FOREIGN INVESTORS IN BULGARIA TO SHARE PERSONNEL

The National Union of Personnel Managers and Experts, together with the Ministry of Labour and Social Affairs, the Ministry of Industry and the Bulgarian Industrial Association organised an international seminar on "Personnel Management in Companies Investing in Bulgaria," which will be held at the National Palace of Culture in Sofia on May 20-24.

Directors and general managers of companies, among which Philips-Bulgaria, Clarina (Coca-cola), Rover-Bulgaria, Ernst & Young - Bulgaria, Danone - Bulgaria (yoghourt manufacturer) will share their experience in the employment and management of labour in Bulgaria.

Major Bulgarian companies and enterprizes, including Bulgartabac Holding, Agromachinaimpex and others will also take part in the discussions and will share their experience in personnel management in the process of formation of market and payment mechanisms in Bulgaria. "Bulgaria is often mentioned as a country which offers not too favourable conditions for foreign investments from the point of view of legislation and tax preferences, however this country offers very good labour conditions in terms of availability and qualification of labour force," Secretary General of the Ministry of Labour and Social Affairs Katya Vladimirova said at a news conference today. She explained that due to the current conditions of transition, the job centres offer large work force of various qualification and it is namely the wide choice of labour that attracts the investors. The job centres also offer free of charge personnel training on order by foreign companies with the only condition that the trained personnel will be employed by these companies.

"We must however regretfully point out that another factor which attracts the foreign investors here is the cheap labour force, which is already comparable to the conditions on the Asian labour market," Mrs Vladimirova said. After the seminar the participants will be invited to visit the Personnel and Training Departments at Coca-Cola and Nestle works in Thessaloniki.

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