News from Bulgaria, 96-09-24

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

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

24 September, 1996

CONTENTS

[01] CONSULTATIONS OF BULGARIAN DELEGATION TO U.N. GENERAL ASSEMBLY

[02] GERMAN CREDIT INSTITUTION OFFERS BULGARIA COOPERATION

[03] BULGARIA WANTS LARGER METAL EXPORTS TO E.U.

[04] FOREIGN COMPANIES INTERESTED IN BULGARIA'S OIL FIELDS

[05] TEMPLATES TAKEN FROM GENERATING UNIT ONE OF KOZLODOUI N-PLANT

[06] PLOVDIV INTERNATIONAL AUTUMN FAIR OPENS

[07] NINE BANKS UNDER SPECIAL SUPERVISION BASE RATE AT 300%

[08] GOVERNMENT BACKS CENTRAL BANK STEPS TO REHABILITATE FINANCIAL SECTOR

[09] TRADE UNIONS WANT NEW GOVERNMENT, NEW EXTERNAL DEBT NEGOTIATIONS

[01] CONSULTATIONS OF BULGARIAN DELEGATION TO U.N. GENERAL ASSEMBLY

The officials exchanged views on a number of key issues of the session's agenda, including the reform of the UN and the Security Council, the situation in Bosnia and Herzegovina, in the Middle East and other regions, the socioeconomic sphere, human rights and arms control.

Members of the Bulgarian government delegation Georgi Dimitrov and Raiko Raichev spoke about Bulgaria's priorities in the current session, which include the achievement of lasting security, stability and cooperation in Southeastern Europe, the intensification of UN's work and programmes for the promotion of regional cooperation in the trade and economic field, infrastructure, investment, the environment, human aspects of development, combatting organized crime, drug trafficking, and terrorism.

The Bulgarian officials outlined the results of the Sofia meeting of the foreign ministers of Southeastern Europe and the prospects for the further promotion of cooperation on the Balkans. Members of the Bulgarian delegation asked for support and help in drafting of a resolution of the UN General Assembly on providing aid to the third countries affected by the UN sanctions against former Yugoslavia, which Bulgaria plans to submit to the 51st session.

Dimitrov and Raichev met with UN Under-Secretary-General for Administration and Management Affairs Benon Sevan. The Bulgarian officials familiarized Sevan with Bulgaria's priorities in the current session, this country's policy for the promotion of the process of security, stability and cooperation in Southeastern Europe and its prospects after the July meeting of foreign ministers of Southeast Europe in Sofia. Participants in the meeting discussed the opportunities for attracting the support for this process of UN's bodies and organizations. The discussion paid special attention to the ways to compensate the losses third countries sustained as a result of enforcing the UN sanctions against former Yugoslavia and Iraq.

Members of the Bulgarian delegation met with UN Under-Secretary- General for Public Information Samir Sanbar. The officials discussed a number of issues in the cooperation between Bulgaria and the UN in the field of information, as well as about the forthcoming opening of UN Information Service in the Sts Cyril and Methodius National Library in Sofia. Chairman of the UN information committee Ivan Maximov attended the meeting.

[02] GERMAN CREDIT INSTITUTION OFFERS BULGARIA COOPERATION

[03] BULGARIA WANTS LARGER METAL EXPORTS TO E.U.

In late 1995 the EU reduced Bulgaria's quota for steel exports from 75,000 to 50,000 tonnes a year because this country sold its steel at knock-out prices. Trade Ministry figures show Bulgaria exported 38,000 tonnes of ferrous metals by September 1.

Prices and double control of the licensing of Bulgarian exporters of metal and scrap to the EU will also be on the agenda of Wednesday's meeting, "Standart News" says today. The EU wants to increase the scrap quota from 50,000 to 75,000 tonnes in 1996. In 1997 Bulgaria is to export 150,000 tonnes of scrap metal to the EU.

[04] FOREIGN COMPANIES INTERESTED IN BULGARIA'S OIL FIELDS

Geology Committee Chairman Simeon Kalaidjiev said on September 13 that Texaco will carry out a second drilling at the gas field at Galata (near the Black sea port of Varna) it discovered in 1993, while Enterprise Oil is conducting technical preparations to drill near Cape Kaliakra, the northern Black Sea coast.

The Romanian platform Atlas, which already arrived in Varna, will conduct the drillings. The drillings will be made to confirm the productivity of the gas field, Texaco manager for Bulgaria Steven Marshall said recently.

Prompted by the start of Texaco's drillings, the press last week ran reports accusing the U.S. company of espionage of Bulgarian military installation on the northern Black Sea coast. "Treading into this delicate field where state interests mingle with the private capital, does no good in the process of attracting investment," Kalaidjiev said in a statement for BTA on September 20. He said that the two companies start the drillings after receiving all necessary permits from the authorized state bodies.

In the summer of 1996 the Cabinet approved a decision postulating that the licences for oil and gas extraction in the Black Sea shelf are granted in accordance with the Concessions Act.

Already in the first years following the start of the political reform in 1989, foreign companies expressed their willingness to prospect and operate oil fields in Bulgaria. Especially strong interest was shown for drillings in the Black Sea shelf.

The tenders for licensing of oil and gas prospecting and extraction in the Black Sea ended in 1991. Eight foreign companies were granted such licences: Texaco, Union Pacific, and Balkan Explorers of the United States, British Gas and Enterprise Oil of Britain, and the Italian Edison Gas and the Austrian OMV firms. The coastal area from Shabla, on the northern Black Sea to Ahtopol, on the southern coast, has been divided into a number of sectors. Bulgaria holds a 50 per cent stake in all sectors. Under the contracts, the foreign companies finance the prospecting.

The foreign companies started drilling in their sections in 1993, after the Environment Ministry approved their environmental impact assessments and emergency plans in the instance of oil spills.

Only Texaco's drillings near Galata have so far proved successful: in 1993 the company discovered natural gas. Union Pacific waived its rights in late 1993; its stake was given to Balkan Explorers.

In late 1993, new tenders for licensing of prospecting in other sections in the Black Sea, to the east of the coast line and deeper in the shelf, were opened. However, they were postponed due to the absence of candidates. Despite the lack of candidates, in 1994, Geology Committee Deputy Chairman Hristo Gabovski stated officially that international marketing analyses put Bulgaria on 42th place in the world in terms of foreign investors' interest in its oil fields.

After unsuccessful drillings for gas and oil Edisson Gas withdrew in early 1995; its 25 per cent stake was taken by Enterprise Oil. Data of the Committee of Geology and Mineral Resources show that foreign investment in oil production in Bulgaria totalled USD 150 million over the past five years, against USD 4 to 5 million allocated from the state budget.

[05] TEMPLATES TAKEN FROM GENERATING UNIT ONE OF KOZLODOUI N-PLANT

The templates were placed in a special container for radioactive substances in which they will be transported this week to the Korchatov Institute in Moscow. The links will be tested at the Bulgarian Institute of Metallography, the press office said.

Westinghouse experts will continue their work at Generating Unit One, taking prints from where the templates have been cut and lapping the metal.

Generating Unit One is the oldest unit of the plant and has been operating since 1974. It was switched off in May 1996 under an agreement between the Bulgarian government and representatives of the European Union for taking the templates. If the tests are favourable, the reactor will be switched on again and continue operation till the year 2004. Preliminary estimates show that losses from the stopping of the unit will exceed US$ 17 million. The EU is expected to compensate part of these losses having promised to extend ECU 10 million (US$ 12 million) within the framework of PHARE.

[06] PLOVDIV INTERNATIONAL AUTUMN FAIR OPENS

Minister of Trade and Foreign Economic Cooperation Atanas Paparizov stressed on Bulgaria's relations with the European Union, Russia, the East European countries and the Middle East.

Participating in this year's edition of the Fair are 1,624 companies from 38 countries. Of them 775 are Bulgaria ( accounting for some 48 percent of all the participants). The participating Bulgarian companies operate mainly in the sphere of production. Sixty-four percent of the Bulgarian firms are state-owned and the rest are private.

The foreign companies attending amount to 849. Companies of Vietnam and Singapore did not make an entry into the Plovdiv Fair. Merchants and producers from Canada, the Netherlands and Hong Kong are taking part in the exhibition for the first time. The countries with the largest number of participants are Germany, Austria, Italy, Turkey, the Czech Republic, Russia, Greece, Switzerland, France, USA and Sweden.

Parliamentary Chairman Blagovest Sendov, Plovdiv Regional Governor Petko Tsarev, presidential nominee Alexander Tomov, Irina Bokova, vice-presidential candidate of the Together for Bulgaria association, MPs, diplomats and businessmen were present at the Fair's opening.

[07] NINE BANKS UNDER SPECIAL SUPERVISION BASE RATE AT 300%

TSBank, Balkanbank, the Economic Bank, Business Bank, Elitbank, Slavyani Commercial Bank, Mollov Commercial Bank, Yambol Commercial Bank and Dobroudja Commercial Bank will be subject to special supervision, says a press release of the National Bank of Bulgaria (BNB, the central bank) circulated after an extraordinary sitting of its Governing Board. The same sitting decided that the base rate be increased to 300% as of Tuesday, September 24.

Some of the banks and particularly the two state-owned ones, Balkanbank and the Economic Bank, are at different stages of negotiations for increasing their capital including through foreign investment. Placing them under special supervision will help curb the uncontrollable outflow of resources from them, says the BNB press release.

The package of central bank measures comes to meet the commitment the BNB has taken jointly with the government before the International Monetary Fund with the signing of the fourth stand-by agreement, and seeks to restore the financial stability and confidence through rehabilitation and structural adjustment of the banking system, the press release also says.

The central bank further says the new base rate is aimed at reversing the expectations for high inflation and depreciating domestic currency. Commercial banks are now expected to increase the interest rate payable on one-month deposits.

This is the fifth hike of the base interest rate this year. In early February the BNB increased the base rate for the first time from 34 to 42%. It went up again in March, April and May, 1996 when it reached a record high of 108%.

The base rate hike is a temporary measure and will probably last not more than two or three weeks, former finance minister and Central Cooperative Bank chief Stoyan Alexandrov told "Daily News". He said that unpopular measures are justifiable under certain circumstances when the BNB is expected to place several banks under special supervision. "It is necessary for the financial institutions, unaffected by the BNB measures, to be relatively stable and to restore public confidence in them," Alexandrov added.

The BNB is continuing its stabilization course as recommended by the IMF, said former BNB vice governor Emil Hursev. He said that the time for such measures had already passed, that they will have a temporary effect and longterm negative consequences. At this base rate the Bulgarian lev will cease to be a means for realizing major financial operations, the inflation rate will catch up with the base interest rate and 90% of the creditees will be unable to service the credits they have taken. The midterm and longterm effect of the latest hike in the base interest rate will be naturalization of trade, substitution of the national currency and economic stagnation.

Immediately after their sitting the members of the BNB Governing Board met the floor leaders of all parliamentary groups. They agreed that the hike of the base rate necessitates a new 1996 budget update and adoption of legal measures to protect the savings of the public.

The announcement of the increase of the base rate today brought down the US dollar/lev exchange rate by an average of 3.50 leva.

[08] GOVERNMENT BACKS CENTRAL BANK STEPS TO REHABILITATE FINANCIAL SECTOR

Videnov said the BNB decision to place nine state-run and private banks under special supervision puts the entire banking system to a difficult test. For this reason the Government will support all remaining state-run banks, according to the Premier. He reiterated the Government will guarantee personal deposits. This will be done using money from privatization deals, some of which were approved yesterday. These deals will generate over $1,000 million in revenue by year-end, Videnov said.

The Prime Minister also said the Government supports the idea that payment of deposits should start only after the respective bank is declared bankrupt. As early as this week the Government will move to Parliament amendments to the bankruptcy law that would speed up the procedure as much as possible.

The Government will redouble its efforts to strengthen financial controls, law and order, said the Prime Minister. He hopes the judiciary will also do their best to severely punish financial criminals.

In conclusion, Zhan Videnov expressed a hope the measures would stabilize Bulgaria's standing with international financial institutions and ensure the necessary contacts during the annual forum of the international financial community in Washington later this month.

[09] TRADE UNIONS WANT NEW GOVERNMENT, NEW EXTERNAL DEBT NEGOTIATIONS

CITUB insists that Bulgaria negotiate for rescheduling its external debt so as to have the major payments due after the year 2000; privatize 60% of state-owned enterprises by the end of 1997 through cash privatization and management and employee buy-outs; and take urgent measures for restructuring the enterprise and banking sector providing guarantees for the savings of the public.

CITUB also want a new government that will enjoy people's confidence and the support of Parliament and trade unions.

The CITUB leadership appointed a national striking committee to set a day for the launch of a nation-wide strike. The CITUB leadership also decided to send an appeal to international trade union and public organizations asking their urgent help for saving those Bulgarians who were most badly hit by the crisis.

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