Bulgarian Telegraph Agency (BTA), 97-03-10

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

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

10 March, 1997

CONTENTS

[01] US BACKS PRESIDENT STOYANOV'S EFFORTS

[02] BULGARIAN POLITICIANS SEEK US ASSISTANCE

[03] MLN. USD EXPECTED FROM THE WORLD BANK

[04] CABINET TO IMPROVE INVESTMENT CLIMATE

[05] HUMANITARIAN AID

[06] MACEDONIAN FOREIGN MINISTER PROPOSES DUAL FORMULA IN LANGUAGE DISPUTE

[07] BUSINESS NEWS BRIEFS

[08] BULGARIA AT BERLIN ECO FORUM

[09] JEFFREY SACHS: CURRENCY BOARD IS NO MAGIC WAND

[10] EU AMBASSADOR: WE ARE THINKING HOW TO HELP

[01] US BACKS PRESIDENT STOYANOV'S EFFORTS

Agov said during his visit the sides fully agreed on NATO's expansion and Bulgaria's place in this process. His expectations are that as a result of his talks and the further efforts of the interim administration and President Stoyanov, in early July in Madrid where new NATO membership applications will be considered, Bulgaria will get clear encouraging signals for its place in the European security system.

An issue on which Agov see a progress is Bulgaria's efforts to collect its receivables from countries subject to international sanctions. He believes the Bulgarian and US administrations are converging their stands on the solution to the problem. As for the Iraqi debt to Bulgaria, Agov fears its settlement will be a long process depending most of all on the promotion of confidence between Bulgaria, the United States and other major states.

Agov said he met US Deputy Secretary of State Rudolf Perina, Richard Schifter and Daniel Freed, special advisers to President Clinton, the latter undertaking to convey President Stoyanov's message to the US President. Agov said Freed is expected to visit Bulgaria in two weeks' time as member of a high-ranking US delegation.

[02] BULGARIAN POLITICIANS SEEK US ASSISTANCE

Stoyan Denchev (Movement for Rights and Freedoms), Elena Poptodorova (Bulgarian Socialist Party) and Ventsislav Dimitrov (Popular Union) met with congressmen, members of the US administration and senior World Bank officials. They discussed the political and economic crisis in Bulgaria, opportunities for humanitarian assistance and investment support, the Bulgarian Embassy in Washington said.

The Bulgarian politicians reaffirmed the existence of a consensus in the country in support of urgent steps for market-oriented structural reforms. These efforts were backed by Kenneth Lay, Director of the Southeastern Europe department of the World Bank.

The group also met with the leaders of the Bulgarian-US Business Centre and the Bulgarian-US Friendship Society. Former US ambassadors to Bulgaria Robert Barry, Sol Polanski, Hugh Kenneth Hill and William Montgomery expressed concern about the plight of the Bulgarian people and readiness to lobby with the government and the American public in support of initiatives intended to help Bulgaria, the embassy also said.

Influential US Senator John McCain expressed willingness to visit Bulgaria and study on the spot its economic problems and opportunities to promote Bulgarian-US relations.

National Security Council Assistant Director for Eastern European Affairs Dan Fried informed the Bulgarian delegation that he and Defence Under Secretary for Policy Walter Slocombe will soon visit the country.

[03] MLN. USD EXPECTED FROM THE WORLD BANK

The World Bank has drafted a program for assisting Bulgaria in 1997. The funds under this program will be intended to overcome the shortage of prime necessities and support the structural reform in this country, said Selowsky.

The financial institution will extend three loans. The first one will be discussed by the Bank's Board of Governors already in April. It is 40 million USD and is designed to help the import of important goods as wheat, medicines, etc. The second loan - 80 million USD will promote the building up of a social safety net and the improving of the social insurance system in this country. The third loan, amounting to 170 million US dollars, is intended for the restructuring of the industry and the banking sector. It will be extended in two tranches: in June and December. The total amount includes 90 million US dollars from previous loans for agriculture which have not been utilized, Selowsky said. These funds will be directed to the social field.

The World Bank program could be carried out only in case Bulgaria has a steady macroeconomic framework, according to Marcelo Selowsky. This framework is related to the agreement with the International Monetary Fund and will depend on the implementation of the government program on economic stabilization: liberalization of prices, enhancing the social safety network, acceleration of privatization and cutting the losses of state- financed enterprises.

Most important Bulgaria now is to contain inflation, increase exports and provide a social safety net for people with low incomes, the World Bank representatives stated. In their view the system of pricing should be fully liberalized which on its part bring normalization of the commodity market. The World Bank officials believe that subsidies should be addressed to the households rather than to the enterprises. They noted that Bulgaria's economy should be depoliticized through privatization. The introduction of a currency board in this country will improve financial discipline and will stimulate the inflow of foreign investments.

[04] CABINET TO IMPROVE INVESTMENT CLIMATE

Mr. Bozhkov spoke to the foreign businessmen about the Government's new investment policy. "It is unrealistic to talk of long- term intentions of a caretaker cabinet," he emphasized, but expressed the hope that the next government will follow up the new policy.

The caretaker cabinet will not be seeking to change entirely the investment environment but will initiate an improvement of the legal framework. Steps will be taken to speed up privatization, Mr. Bozhkov assured his audience. A two-step sealed bidding procedure is being worked out. Along with that, the Government will do everything possible to simplify privatization procedures and make them more transparent. The preparation of a new edition of the "White Paper on Foreign Investments in Bulgaria" was also discussed at the meeting.

Next week the cabinet will be ready with its price liberalization programme, Mr. Bozhkov said. As he put it, certain prices will approximate the free prices on the international market. Fuel prices will be deregulated within 45 days, the Deputy Prime Minister said.

"We are also liberalizing the price of labour," Mr. Bozhkov said, answering a question. The social safety net, which is being built with the help of 80 million US dollars from the World Bank and ECU 20 million from the EU, is intended to ensure people's survival but cannot be extended to everybody, he noted.

The new President of the Foreign Investment Agency Ilian Vassilev (former executive director of BIBA) assured the foreign businessmen that he will readily listen to their ideas and suggestions. "The previous governments have promised a lot but have done nothing," Mr. Vassilev said. He believes the problems are in the legal framework and the Agency's unvarying priority will be to improve gradually the statutory instruments and to remove the obstacles.

"To lend credibility and meaning to the new policy, small and specific steps must be taken immediately, and the privileges provided by the Encouragement and Protection of Foreign Investments Act should be reviewed and activated," Mr. Vassilev said, speaking on National Radio the same day. He argued that the Profits Tax Act has to be amended and the aliens' residence regulations and terms should be revised.

[05] HUMANITARIAN AID

The worst hit by the crisis in Bulgaria is not the rural population but intellectuals in urban areas, Gefera Shawl and Anupria Gupta of the UN found during a fact-finding mission in this country, the Podkrepa Labour Confederation said in a press release Friday. Also on Friday, Podkrepa said that German trade unions have expressed readiness to send three truckloads of dry foods, medicines, soaps and underwear in humanitarian aid for Bulgaria.

[06] MACEDONIAN FOREIGN MINISTER PROPOSES DUAL FORMULA IN LANGUAGE DISPUTE

[07] BUSINESS NEWS BRIEFS

No Bulgarian company has bought a dossier for bidding in the privatization of the Himko chemical plant of Vratsa, said Executive Director Kiril Petkov. If no prospective Bulgarian buyers turn up till March 11, rumours that the Multigroup economic conglomerate, the biggest in this country, will bid for none of the lucrative bits of the Bulgarian industry, will prove right, said Petkov. The dispute between Multigroup and Himko for a 1, 000 million leva-worth concession contract is still open. The Supreme Court of Cassation is expected to rule on the matter. Among the candidates for shares in Himko are the Korean Daewoo and Norsk Hydro of Norway that has been operating in Bulgaria for a year now and is trying to make a breakthrough on the market for nitrogen fertilizers.

An exhibition of cosmetics "Aromas'97" was held in Sofia on April 5 through 9. The agenda included presentation of hair styles styled with products of Wella, Avon, Pharmavita and Antoinette. Experts of Vichy gave consultations. Clothing designer Maria Ivancheva and hat designer Irina Sardareva were guests to the exhibition.

Mota 6 was the only Bulgarian producer participating in the event. It presented its Colagena line including 18 products: shampoos, conditioners, cleansing creams and lotions among other.

[08] BULGARIA AT BERLIN ECO FORUM

Bulgaria is aware that biodiversity should be preserves and be accessible to all; its preservation cannot be a task of separate countries and is an obligation of the international community, the Minister said in an address to the forum. Bulgaria's stand was reflected in the Berlin declaration that was adopted by all participants in the conference. The document formulates the general and country-specific principles of harmonizing the interests in nature preservation and development of tourism.

Within the framework of the conference Environment Minister Filipov met his German counterpart Angela Merkel. They agreed that by the end of this month Bulgaria send Germany a package of draft projects. The package can include both projects for technical assistance under the Transform 97 programme of the German government and private investment projects. The draft projects will be given priority by the German side, which will enable working groups of the two countries to meet in Sofia in April to decide which projects will be given a green light.

[09] JEFFREY SACHS: CURRENCY BOARD IS NO MAGIC WAND

Prof. Sachs believes Bulgaria's readiness and will to take decisive reform action is doubtless. He said the country should carefully consider the issues before reaching an agreement with the IMF and the World Bank: the question is not simply to accept what is being offered but get the assistance it needs.

When negotiating with the IMF, the Bulgarian officials should make sure that apart from the short-term effects of stabilization of the financial system the long-term development of the economy is also considered, said Prof. Sachs. The West will be as generous as its own interests dictate and Bulgaria should fight for the things it needs and be firm in the negotiations to show exactly what its needs are, he added.

It is necessary to take complex decisions to help the enterprise sector and the banking sector, the interviewee said. The currency board scenario should be considered very carefully because it is not a solution in itself. The domestic currency could be fixed without a currency board, which might prove to be a better option, said he.

In a lecture in Sofia on Saturday Prof. Sachs recommended that Bulgaria introduce a relaxed customs regime for exporters, Bulgarian and foreign alike, and measures to facilitate export. It should also seek ways to attract foreign investors. Prof. Sachs is sure there will no Marshall Plan for countries like Bulgaria, but there should be assistance and serious negotiations. Bulgaria does not have a lobby in the international community and should rely on it own efforts, according to him.

With or without a currency board and a stabilization fund, Bulgaria needs tangible assistance, said Prof. Sachs pledging to do his best to make this clear to the world. The interviewee believes a certain stabilization could be expected as early as this year but life is sure to remain hard.

[10] EU AMBASSADOR: WE ARE THINKING HOW TO HELP

Speaking to the Nedelya 150 weekly talk-show of the National Radio Sunday, O'Sullivan said the system the EU is trying to establish, provides a good framework for handling the problems. He also said the EU is willing to show that it is supportive of the efforts of the President, the interim administration, and of all Bulgarians to improve the situation.

Ambassador O'Sullivan said the EU has been looking for quite some time how to support Bulgaria and decided to help the poor. The EU is extending an assistance of ECU 20 million that will be distributed among 500,000 poor families.

It emerged during President Peter Stoyanov's visit to Brussels in late January that the European Commission will help Bulgaria within the context of its Europe Agreement. During the President's visit, the sides identified the problems and decided to address them with the assistance of other financial institutions, including the IMF and the World Bank, the EU Ambassador said.

A G-24 meeting due in March will prepare a meeting in Brussels in April at which specific commitments for assistance to Bulgaria are expected. EU Commissioner for Central and Eastern Europe Hans van den Broek, scheduled visit Bulgaria on March 17-18, is planning to further his contacts with Bulgaria and other countries in the region in connection with these countries EU membership efforts. O'Sullivan believes if Bulgaria carries out successfully its reform task, it will not need any help.

He said the difficulties facing Bulgaria are not primarily due to the shortage of money but to lack of a far-sighted approach in the restructuring of the economy. He said a complex sector such as the agriculture requires a comprehensive attitude. Taking more loans from the IMF, the World Bank and the EU ultimately result in a heavier burden. Therefore the country should also consider other instruments for solving the problems, Ambassador O'Sullivan said.

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