BULGARIAN ECONOMIC REVIEW
/ November 12-18, 2005/

Sofia, November 13 - Fourteen leading Bulgarian construction entrepreneurs set up a club to advertise the country as an attractive place for investing in real estate and to promote Bulgarian projects on external markets, the founders said in a press release. The club members are currently implementing projects worth 1,000 million euros in aggregate. The new organization will seek to provide independent and objective information about the domestic real estate market, assist the participation of leading Bulgarian construction companies in international investment forums, exhibitions and seminars, build and maintain contacts with Bulgarian embassies around the world, provide external market policy training to local business persons, and maintain adequate communication with foreign investors. The club will order and finance independent market studies in regions of investment interest to members of the organization.

October Customs Revenues at BGN 503 Mln

Sofia, November 14 - The National Customs Agency (NCA) said on Monday it collected 503, 485, 921 leva in revenues in October 2005, 30.19 per cent up from a year earlier (the lev exchanges for 0.51 euros). NCA revenues in January-October 2005 exceeded the January-October 2004 level by more than 1,000 million leva. Average monthly revenues in the first ten months of 2005 exceeded those in 2004 by more than 100 million leva. October 2005 revenues included 33,945,788 leva in customs duty and fees, 439,450,226 leva in value added tax, 29,547,855 leva in excise duty, and 542,052 leva in penalties and fines. January-October 2005 revenues totalled 4,322,726,150 leva, which is 99.24 per cent of the annual target.

Launch of Revenue Agency Is Foremost Priority for New Chief Tax Director

Sofia, November 14 - When she was presented to journalists on Monday, Bulgaria's new Chief Tax Director, Maria Mourgina, said that in her work she will prioritize the planned launch of the National Revenue Agency (NRA). Mourgina is also Executive Director of the NRA, which is to start functioning on January 1, 2006, after five years of preparatory work. The new institution will combine the administration of taxes and social security payments into a single body. Mourgina said the NRA's creation will eliminate the conditions for corruption in the system. One of the problems is that the building of the NRA's information system has been delayed, she said. In order to meet the January 1 deadline, initially the NRA will use the existing computer software of the tax administration and the National Social Security Institute. She said a Tax and Social Insurance Procedure Code will definitely be adopted, but the process may be delayed. It is extremely important that the Code pass in Parliament by the end of this month, according to her. There is clear political support for the NRA's launch on January 1, and the Code must be approved before that. Mourgina conceded that the transformation of the revenue administration may lead to an initial decline in proceeds, but
she finds this normal for such a big reform. "We will do everything within our powers to prevent that," she said. The construction of the NRA offices in Sofia has not been completed yet, due to a delay in the project's design and financing. Therefore, in its early months the NRA will be housed in tax administration premises. The new offices are expected to be completed by the end of 2007.

World Bank Reports Lacklustre Results for Creation of Productive Jobs in Bulgaria

Sofia, November 14 - The World Bank reported lacklustre results for Bulgaria in the creation of productive jobs during the transition from a centrally planned to a market economy. A report which was presented on Monday said that in the early 2000s, employment expanded only in Sofia, and not in any other region. The World Bank identified as an area of particular concern youth unemployment, since one out of close to four young people is unemployed. Youth unemployment in 2004 was 27 per cent. Long-term unemployment still is of particular concern - it accounts for 60 per cent of total unemployment, according to the report. Titled "Enhancing Job Opportunities in Eastern Europe and the Former Soviet Union", the report analyses employment outcomes in 27 transition countries in the last 15 years. Arup Banerji, the report's supervisor and sector manager in the Human Development Economics Department of the Bank's Europe and Central Asia region, is quoted in a news release as saying that "unless the employment outlook improves, the substantial poverty reduction in the region since 1998 could come to a halt, which would undermine political support for reform." The World Bank experts concluded that "many workers displaced by structural shifts failed to find new jobs, and quite a few others have either been out of a job for over a year, or are in low-productivity occupations. In some of the new member states of the European Union, as well as in some acceding countries such as Bulgaria, the unemployment rate tends to be in double digits". In the Commonwealth of Independent States countries, the jobs problem lies more in the quality of jobs, which are less productive and don't pay as much, the report says. It urges the transition countries to boost their investment climates in ways that stimulate firms to invest and create productive jobs. It also calls for steps to lower the cost of labour mobility by developing the housing and mortgage markets, as well as improving access to lifelong learning opportunities. The World Bank believes that if more and better jobs are to be created in Central and Eastern Europe, "it is essential to lower the costs of starting businesses, ease registration of property, and strengthen contract enforcement. Reforms to pension and social security systems are also required, as a way of lowering taxes on labour". As to Bulgaria, the World Bank noted that recent reforms were easing the registration of companies and were likely to encourage new companies to enter, thus creating more jobs. The cut in social insurance contributions by 6 per cent as of 2006 "is expected to encourage job creation, improve contribution compliance and curtail the grey sector of the economy", the news release said.

24 Companies Apply for Enhancement of Water Supply in Potential Tourist Destinations

Sofia, November 14 - A total of 24 offers have been filed within a project on enhancement of the water supply of regions with potential for the promotion of tourism, the Ministry of Regional Development and Public Works told BTA on Monday. The project is financed under the Phare Programme, Financial Memorandum 2003. Water supply and sewage systems are to be enhanced in 10 municipalities: Simitli, Razlog, Boboshevo, Dospat, Sevlievo, Dryanovo, Godech, Vurshets, Tsarevo and Veliko Turnovo. Existing water supply and sewage systems will also be reconstructed and rehabilitated under the project in order to
reduce losses and connect waste waters to treatment plants. The new construction will involve building up of additional water sources and local reservoirs with view of ensuring adequate water quantity and pressure within the network.

Bulgarian Water Sector Needs EUR 6,900 Mln Investment

Varna, on the Black Sea, November 17 - The investments necessary for the water sector in Bulgaria total 6,900 million euro, Sudipto Sarkar of the World Bank said Thursday in Varna. The announcement was made during a scientific and practical conference on municipal management practices in pre-accession period for accelerated economic growth, presided over by Sarkar. Sudipto Sarkar, Lead Specialist, joined the Bank as a Young Professional in 1993 and worked on a number of infrastructure and environment projects in many countries in the Europe and Central Asia (ECA) Region of the Bank. He explained that broken down, the sum per capita amounts to 900 euro. The money should be used in three directions: one is to provide round-the-clock water supply in regions where such is lacking, Sarkar said and added that in his opinion 40 per cent of the sum will go for waste water. The World Bank representative underscored the dire need of rehabilitation in the water sector. Water fees should correspond to the costs, btu they should also be bearable for the population, Sarkar explained. According to him, current fees are absolutely acceptable on a short-term basis, but there is potential for their growth. Sarkar explained that some 0.5 euro are currently being paid per cu m of water and presented calculations, according to which in 2014 the fee may reach 2.50 euro per cu m.

GloBul Reports Profit of BGN 32 Mln for Third Quarter of 2005

Sofia, November 14 - The telecommunications company GloBul reported a profit of 32 million leva for the July - September 2005 compared to a loss of 120 million leva for the like period of last year, the company's press centre said on Monday. In the period under review operational profits stood at 157 million leva, 57 per cent up as from the like period of the previous year, according to a report, drafted in line with the International Accounting Standards. Customers increased by 49.5 per cent up to 2,156,262 as from July - September 2004. By the end of the third quarter of this year the users of pre-paid services numbered 1,441,720 while subscribers under a monthly contract were 714,542. The GloBul services covered 96 per cent of the country's territory and 99.4 per cent of its population. GloBul has signed roaming agreements with 278 operators in 127 countries.


Finance Minister Oresharski, Agriculture Minister Kabil Sign Seventh Agreement under SAPARD

Sofia, November 15 - Finance Minister Plamen Oresharski and Agriculture and Forestry Minister Nihat Kabil on Tuesday signed the seventh agreement under SAPARD between Bulgaria and the European Commission (EC), which modifies their 2004 Annual Financial Agreement. Jose Manuel Silva Rodriguez, Director-General for Agriculture and
Rural Development at the EC Directorate General in Brussels. Under the Tuesday agreement, the European Union undertakes to increase the 2004 money allocation for Bulgaria from 67,560,000 euros to 68,010,000 euros. Bulgaria has been working under the SAPARD programme since the middle of 2001. With the entry into force of the latest agreement, the amount of all financial agreements concluded under SAPARD will total 560 million leva. In addition to the EC financial commitment, Bulgaria provides national co-financing of the programme representing 25 per cent of the sum total of assistance, or 187 million leva. The signing of a second financial agreement for 2004 is an important indicator of Bulgaria's will to put more money in agriculture and the development of rural areas in order to attain the goals set in the National Agriculture and Rural Development Plan (NARDP) for 2000 - 2006, the Finance Ministry said in its press release. The amount available under the agreements with ultimate beneficiaries covers 86 per cent of the sum total under the annual financial agreements with the EC and the national co-financing allocation. The 2006 National Budget Bill, which Parliament is debating at the moment, makes provisions for the funds required to co-finance agriculture and rural development projects under SAPARD next year. According to the budget framework agreed for Bulgaria for the first three years of its European Union membership, the budget designed for the growth of rural areas is 733 million euros, an amount that is four times larger than the funds received under SAPARD so far, the press release said. The experience gained in implementation of the programme on a decentralized basis will be particularly useful in the management of EU financial instruments, which Bulgaria will employ as part of the Common Agricultural Policy in its capacity as a full member of the Community, the Finance Ministry said.


Bulgaria, Egypt Have Much Greater Opportunities for Cooperation - Egyptian Ambassador

Pleven, North Central Bulgaria, November 15 - Bulgaria and Egypt have much greater opportunities for economic and trade cooperation, Egyptian Ambassador to Bulgaria Heba Salah El-Din Elmarassi said Tuesday in Pleven. She pointed out that annual trade between the two countries reaches 40 million dollars, while this year is expected to see a growth of at least 20 per cent. Bulgaria and Egypt are preparing to launch a joint Bulgarian-Egyptian economic commission from the beginning of 2006, Elmarassi added. The Egyptian Ambassador explained that, in her opinion, there are greta opportunities for expanding cooperation between Bulgaria and Egypt in the field of tourism, the exchange of students and particularly in culture. Elmarassi said that her country is preparing an Egypt Week in Bulgaria, which will be held in the fall of 2006. There will be exhibitions, cultural collections, as well as films that will present the contemporary culture of Egypt. Pleven Mayor Naiden Zelenogorski presented Ambassador Elmarassi with the Pleven Golden Honorary Plaquette and acquainted her with the cultural and historical development of the city.


National Bank of Bulgaria, Two Austrian Financial Institutions Sign Memorandum of
Understanding

Sofia, November 15 - Ivan Iskrov, Governor of the National Bank of Bulgaria (BNB), Alfred Lejsek, Deputy Director General at the Austrian Finance Ministry, and Kurt Pribil, Executive Director at the Austrian Financial Market Authority, on Tuesday signed a Memorandum of Understanding among the three institutions, BNB told BTA. Members of the Bulgarian delegation, who are visiting Austria led by Iskrov, are BNB Deputy Governor Emilia Milanova, who is in charge of the Banking Supervision Department, Banking Supervision Department Director Peter Andronov, and International Relations and European Integration Department Daniela Bobeva, the BNB press release said. The Memorandum of Understanding is not the only one Bulgaria has signed with foreign supervisory institutions. Its purpose is to regulate cooperation in banking supervision. By signing it, BNB, the Austrian Ministry of Finance and the Financial Market Authority undertake to exchange information, to help the parties perform their supervisory functions and ensure reliable and stable operation of the two countries' financial systems. The document establishes a procedure and regulates the access of the respective supervisory authorities to branches and subsidiaries of the commercial banks under their jurisdiction that operate on the territory of either of the parties for the purposes of inspection. Signing the Memorandum, the supervisory authorities of Bulgaria and Austria express their desire and readiness for cooperation in the area of banking supervision based on mutual trust and understanding, BNB said in its press release.

Informatica Corporation Enters Bulgaria

Sofia, November 15 - Informatica Corporation, which works in enterprise data integration, is about to enter Bulgaria, public relations and advertising agency APRA said.
The company is entering the Bulgarian market through its official representative Global Consulting Ltd. Informatica's products for continuous database integration are used by over
2,200 companies worldwide, including leaders in finance, telecommunications, health care and state institutions. Informatica's clients include 83 of the world's top 100 companies, 37 of Europe's top 50 companies and 20 of the top 24 telcom operators in the world.

Bulgarian Tour Operator Gets Award at World Travel Market in London

Sofia, November 15 - Balkan Holidays of Bulgaria got an award as best tour operator in Central and Eastern Europe for 2005 at the World Travel Market in London, the MInistry of Culture said. Bulgaria is taking part in the prestigious tourist exhibition, which will be on until November 17, for the 25th time. Great Britain is a target market for Bulgaria that has a considerable potential and consumer demand for variegated tourist products. In 2004, Bulgaria had 259,092 British visitors, by 62.60 per cent up from the like period of the previous year. According to incomplete data, 285,001 Britons visited Bulgaria in January-August 2005, or 35.85 per cent up from the like period of last year. This year 30 British tour operators have included Вulgaria in their travel catalogues.

Bank Biochim, Hebros Bank Members of HVB Group Open European Finance Centre in Sofia

Sofia, November 16 - HVB Bank Biochim and Hebros Bank, both members of HVB Group, opened late Tuesday evening a European Finance Centre in Sofia. Deputy Prime Minister and Foreign Minister Ivailo Kalfin attended the opening ceremony. The Centre will provide consultations to companies and local powers in the field of funding of projects under programmes of the EU and national funding programmes. Such European Finance Centres of the banks in the HVB Group have already been opened in all new EU member states in Central and Eastern Europe. Kalfin congratulated the two banks for being the first to open
the initiative where financial institutions assist the business and local self-government in utilizing EU funds. He said the cabinet appreciates the help of the banking sector in this
respect. Kalfin presented HVB Bank Biochim and Hebros Bank Executive Director Peter Harold with a symbolic key "to open the door to EU funds". Harold said the banks decided to set up the facility so as to prepare their partners for the challenges and opportunities which Bulgaria's membership in the EU will give them. Harold said this will realize the rule of the five Ps - preliminary preparation presupposes perfect presentation. The European Finance Centre provides overall solutions for co-financing under the EU and consultations on project
management. The experts working in the Centre can provide assistance for approval of additional loans for continuation of projects implemented under the EU, for investment loans,
obtaining of bank guarantees, deposits and escrow accounts, among others.

Government Approves National Biodiversity Preservation Plan for 2005-2010

Sofia, November 16 - At a regular meeting Wednesday the government approved a National Biodiversity Preservation Plan for the 2005-1010 period, the government information service said. The government also discussed and approved a report on a National Biodiversity Preservation Plan for 1999-2004. The plan has been implemented thematically and financially, to the total cost of 44.355 million leva or 8.2 per cent more than planned.
Biodiversity loss in Bulgaria should stop by 2010, the plan for the next five years states. It includes 157 concrete activities for whose implementation 119,015,000 leva are necessary. A total of 29,631,000 leva or 24.9 per cent of the necessary funds will be provided from foreign sources.

First Shipload of Cargo Processed at New Terminal of Bourgas Port

Bourgas, on the Black Sea, November 16 - The first shipload of cargo to arrive at the new terminal - 2A - of the Port of Bourgas built under a project for the port's extension,
has been processed successfully, the press office of the Paort said Wednesday. The ocean-going vessel, Swift Fortune, carrying 73 t of coal, arrived early on Wednesday morning.
While the cargo of ship was being processed, the contractor for the extension of the port did all kinds of tests and adjustments before handing over the equipment to the Port of Bourgas for normal operation, says the press release. The terminal was built with financial support from the Japanese Government.

Maritza East 1 TPP to See Implementation of EUR 1,000 Mln Project

Sofia, November 16 - The government gave Wednesday its agreement that the World Bank Group's Multilateral Investment Guarantee Agency (MIGA) issue a guarantee in favour of the investor and the financing institutions of the project for the construction of a substitution plant at Maritza East 1 TPP, the government information service said. The Maritza East 1 project includes the construction of a new substituting 670 MW unit and desulphurisation plants for more than 1,000 million euro. Seventy per cent of these are debt
financing by CALYON, ING Bank, BNP Paribas and the European Bank for Reconstruction and Development. The remaining 30 per cent are own funds of the investor. In the beginning of the year the government adopted a letter of support for the project, which will be implemented by US energy company AES Corporation. A similar guarantee has also been received on three projects for rehabilitation of Maritza East 3 TPP. Since its inception in 1988, MIGA has issued nearly 800 guarantees worth more than 14,700 million dollars for projects in 91 developing countries.

Bulgargaz Restructuring Model Presented to Parliamentary Committee on Energy

Sofia, November 16 - Bulgargaz Executive Director Kiril Gegov on Wednesday presented to the Committee on Energy with the National Assembly the activities and the model of restructuring of Bulgargaz in compliance with the requirements of the European Union and the European Gas Directive. According to the EU requirements, companies like Bulgargaz should be divided into two - a carrying and a trading company, Gegov said. "We have made the necessary preparations, including a road map that specifies the timeframe of dividing the company, which can be done in nine months' time," he said observing, however,
that such goals involving division of the company and creation of conditions for competition could be attained only if one of the following conditions were fulfilled: the gas carrying system should be linked to the system of another EU Member State, and no local gas supplier should deliver more than 70 per cent of the product. Neither condition is honoured in Bulgaria, Gegov said. In his words, even if the company splits into two, the second goal would not be attained. "Until the end of 2010 we will receive about 90 per cent of the gas from one supplier, and our gas carrying system is not linked to any other system in a EU Member State," Gegov said. In January-September 2005, gas consumption rose by over 17
per cent compared with the like period of 2004: from 2,220 million cu m to 3,592 million cu m. The amount of gas transited by Bulgaria to neighbouring countries increased from 10,668 million cu m in 2004 to 12,505 million cu m in 2005. According to Gegov, the major problems to be resolved are related to the modernization and reconstruction of the existing
facilities and looking for opportunities to increase the amount of transited gas. Preparations are made for the building of a gas pipeline from Doupnitsa to Tsaribrod, which will be connected with Serbia's gas carrying system. In Gegov's view, the pipeline could be built in about two years' time. He recalled that an optic line of 24 optic fibres had been laid down from the Romanian to the Turkish border. After the Bulgarian Telecommunications Company, Bulgargaz owns the biggest optic line, Gegov said adding the operation of the line generated additional revenue.

Vestitel BG Signs Contract for Delivery of Equipment with Chinese Telecommunication Giant

Sofia, November 16 (BTAS) - Vestitel BG, a subsidiary of Overgaz Inc., and China's telecommunication giant ZTE on November 18, 2005 will sign the first part of a contract for delivery of equipment amounting to 25 million euros , the Overgaz press centre told BTA. The ceremony will be opened by Overgaz Executive Director Sasho Donchev. The document will be initialled by Rossitsa Vassileva, Vestitel BG Executive Director, and ZTE Executive Director for Southeast Europe James Wang. The equipment will be used to implement a project that is first of its kind in Bulgaria: a gas distribution network including an optic cable, which will provide high-speed Internet services, telephony and interactive digital television for customers. Vestitel BG is the first operator in this country offering the option of individual arrangement of programs, to determine themselves the time and order of watching them, and the new service "video on request" that makes it possible to watch the desired films without going to the video rental shop.

France's Montupet to Build Aluminium Car Parts Plant in Rousse

Rousse, on the Danube, November 16 - French company Montupet S.A. will launch construction of a plant for aluminium car parts for engines, chassis, wheel rims and brake systems in Rousse next spring, and the first deliveries for customers will be shipped in autumn 2006, it emerged Wednesday at a working meeting between Rousse Mayor Bozhidar Yotov and Denis Luquillo of the French company. The annual output of aluminium components will reach 5 million kilogrammes, and the presumable turnover will approximate 20 million euro. The plant will be completely finished in three years' time, with the various sectors being commissioned in stages. The number of new jobs created by the project will rise from 350 initially to 1,200-plus once construction is over. This will make the Rousse plant the largest in the Montupet group and its key production unit in Europe. Of an aggregate investment of some 70 million leva, 20 million will be committed in the first stage of
construction. The Bulgarian Government, Rousse Municipality and Montupet S.A. will sign a trilateral agreement on construction of a plant for aluminium car parts in Rousse next month. "Montupet attaches great importance to the implementation of this strategic project," Luquillo explained.

Varna Signs Cooperative Agreement with Italy's Liguria Region

Varna, on the Black Sea, November 14 - Varna Region concluded a cooperative agreement with Italy's Liguria Region on Monday. Franco Aprile, President of export promotion company Liguria International, said the Italian side has an interest in cooperating with Varna in the fields of mechanical engineering, electronics, and marine waste treatment.
The company also views shipbuilding, port services and maritime insurance as very promising areas of future cooperation. Liguria International will set up an office in Varna by March 2006, Aprile said. The agreement was signed by Varna Region Vice Governor Alexander Farashev and by Federico Di Roberto, Diplomatic Adviser to Liguria Region President Claudio Burlando. Italian Ambassador to Bulgaria Giovan Battista Campagnola said the two countries have a shared interest in developing European Corridor VIII. Ambassador Campagnola confirmed earlier indications that Italy's Enel wishes to share in the Belene nuclear power plant project in Bulgaria.

Schenker to Invest 7.5 Million Euros in Construction of State-of-the-art Terminal in Bulgaria

Sofia, November 17 - Schenker Bulgaria starts construction of a logistics terminal in Bulgaria. The new facility will absorb investments to the tune of 7.5 million leva, General
Manager Minko Vasilevski told reporters on Thursday. Vasilevski said that the umbrella company - the Schenker concern, part of Deutsche Bahn, has okayed the construction of
the terminal which will be equipped with the latest technologies in the field of logistics. The terminal will be on an area of 5 ha, 2,000 square meters of which will be taken up by a re-load facility and 3,000 square meters by warehouses and offices. The deal for the purchase of the land is expected to be finalized by the end of the year. Construction should start in the spring of 2006 and be completed by the end of the year. Vasilevski said that the forthcoming membership of Bulgaria in the EU presents big challenges to the forwarding industry. The
ensuing lifting of the borders with Romania and Greece will do away with hauliers permits and customs formalities which will shorten cargo transit times and reduce prices by 10 per cent. About 80 per cent of the work for customs processing of cargo will no longer be necessary, which, however, means that about 5,000 customs agents will loose their jobs, Vasilevski said.

Magnolia Hotel at Albena Wins Neckermann Primo Award

Albena Resort, on the Black Sea, November 17 - Magnolia Hotel at the Albena Black Sea resort won the Primo Prize at the Frankfurt International Tourism Exhibition, the
Albena AD joint stock company said in a press release Thursday. It won the award competing with 100 nominated hotels from all parts of the world. The hotels were ranked by Neckermann's clients. The Award is accompanied by a new certificate which will be added in the catalogue of the tour operator for the new season, the press release says. Neckermann has established partnership with 650 hotels in a number of states. Among Albena's rivals were hotels in Italy, Spain, Portugal, Mexico, Venezuela, Turkey, Tunisia and other countries, the press release adds. Magnolia Hotel provides "all inclusive" services. It has 280 beds, a restaurant, a snack bar, a swimming pool with a park and a tennis court.