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News from Bulgaria / Apr 16, 96

From: bulgaria@access1.digex.net (Embassy of Bulgaria)

Bulgarian Telegraph Agency Directory

EMBASSY OF BULGARIA - WASHINGTON DC

BTA - BULGARIAN TELEGRAPH AGENCY

16 April, 1996


CONTENTS

  • [01] PRESIDENT ZHELEV: FASCISM AND COMMUNISM ARE TRAGEDIES

  • [02] GOVERNMENT SENDS LETTER OF INTENT ON RESTRUCTURING OF ECONOMY

  • [03] DANISH FOREIGN MINISTER PETERSEN ENDS OFFICIAL VISIT

  • [04] CITIBANK N.A. TO HELP ALONG BULGARIAN TRANSITION

  • [05] POLISH PRESIDENT KWASNIEWSKI VISITS

  • [06] INVESTMENT OPPORTUNITIES EXPOSITION opened by P.M. VIDENOV AND E.B.R.D. PRESIDENT DE LAROSIERE

  • [07] SEMINAR ON INVESTMENT OPPORTUNITIES

  • [08] TAX RELIEF PLAN

  • [09] BANKING SYSTEM

  • [10] ADDRESS BY HANS-DIETRICH GENSCHER


  • [01] PRESIDENT ZHELEV: FASCISM AND COMMUNISM ARE TRAGEDIES

    Sofia, April 12 (BTA) - I share Francois Furet's main idea that there are two pathologies of thought which characterize the history of the human kind after World War One: the pathology of the universal, embodied by communism, and the pathology of the specific, embodied by fascism. Like Professor Furet, I am convinced that the link between fascism and communism is at the centre of the tragedies of the 20th century, President Zhelyu Zhelev said today at the opening ceremony of the international scientific conference on 'Historical Studies of Communist Era'. The forum, which is attended by sociologists, political analysts, philosophers and jurists of Bulgaria, France, Russia, Hungary and the Czech Republic, will devote its attention to Furet's book 'The Past of an Illusion: An Essay on the Communist Idea of the 20th Century'.

    Communism is a complete totalitarian system which covers the economy as well. This is why the transition to democracy is more difficult. The transition involves violation as did the imposing of communism, Zhelev said. According to him, the interests of large groups of people clash in the transition period as the old nomenklatura seeks to transform its political power into economic power.

    [02] GOVERNMENT SENDS LETTER OF INTENT ON RESTRUCTURING OF ECONOMY

    Sofia, April 12 (BTA) - The Government sent a letter of intent on the restructuring of the Bulgarian economy and the banking sector to the International Monetary Fund and the World Bank, Deputy Prime Minister and Minister of Economic Development Roumen Gechev told a briefing here today. The document package sets time limits for the Cabinet's actions. Yesterday, the Government authorized Gechev to send the letter of intent to the IMF and the World Bank.

    [03] DANISH FOREIGN MINISTER PETERSEN ENDS OFFICIAL VISIT

    Sofia, April 12 (BTA) - Danish Foreign Minister Niels Helveg Petersen today departed from Bulgaria after his two-day official visit here. I hail Bulgaria's initiative to boost the cooperation between the Balkans and Western Europe, Petersen told a news conference before his departure today.

    The talks focused on the regional security, Bulgarian Foreign Minister Pirinski said. According to Pirinski, Bulgaria and European Union (EU) member Denmark have the same position as regards the issue. The expansion of NATO and the EU is not just one step but a process which gives raise to conditions and structures for European security, Pirinski said. According to him, the EU and the Organization for Security and Cooperation in Europe are the key institutions which play a major role in this process.

    I am grateful for Denmark's permanent support for the Bulgarian cause and its firm stand in favour of an equal treatment of associated countries in their future entry into the EU, President Zhelev told the Danish Foreign Minister, quoted by Presidential Foreign Policy Adviser Kamen Velichkov.

    Meeting Bulgarian Prime Minister Zhan Videnov, Niels Helveg Petersen said he appreciated highly the Bulgarian government's efforts for integration into the European structures and intensification of Bulgarian-Danish ties. The cabinet Press Office quoted the Danish Foreign Ministers as saying he acknowledges what the government has done for the normalization of the economic situation in Bulgaria, which he said gives Denmark yet another reason to insist that this country be admitted to the EU.

    [04] CITIBANK N.A. TO HELP ALONG BULGARIAN TRANSITION

    Sofia, April 13 (BTA) - 'Bulgaria is negotiating seriously with the International Monetary Fund (IMF) and the World Bank and hopes to receive the loans it needs for the rehabilitation of its banking system,' William Rhodes, Vice President of Citibank, told a news conference today. In his view, it is essential that Bulgaria continue its foreign debt service payments in parallel to the reform in banking.

    'The Bulgarian Government assured us it had taken the necessary steps to bring the economic situation under control, and that the funds needed to make its debt service payments in July 1996 had been already raised,' William Rhodes said. He said the IMF and the World Bank would take this fact into consideration in concluding loan arrangements with Bulgaria, stressing that practical results were of primary importance for the successful outcome of the negotiations. 'We maintain close contacts with several Bulgarian banks,' the Citibank Vice President said. According to him, Citibank is studying the conditions in Bulgaria and if they prove to be good, it may open an office in it.

    [05] POLISH PRESIDENT KWASNIEWSKI VISITS

    Sofia, April 13 (BTA) - President Alexander Kwasniewski of Poland, who is on a working visit to Sofia to attend the annual meeting of the EBRD, had meetings with Bulgarian President Zhelyu Zhelev and Prime Minister Zhan Videnov.

    In statements for journalists after the meeting, Zhelev and Kwasniewski pointed their countries' desire to strengthen their relations. Bulgaria and Poland have good opportunities to cooperate in tourism, industrial production, free trade, culture and sports, they said. At the meeting of President Kwasniewski with PM Videnov an agreement was reached to activate intergovernmental contacts and open negotiations on the establishment of a Bulgarian-Polish free trade area by the middle of 1996. The Bulgarian PM said that Bulgaria's bid to join the Central European Initiative and the Central European Free Trade Agreement is fully supported by Poland.

    'We share identical views on foreign policy problems,' President Zhelev told journalists after the meeting with his Polish counterpart. He said that Bulgaria and Poland have identical views on the full integration of the East European countries in the European Union by guaranteeing them equal starting positions.

    President Zhelev stated he was pleased to learn that President Kwasniewski shares the same negative view on the recreation of a new Soviet Union in any form whatsoever. 'I was pleased to learn that that President Kwasniewski is firmly for Poland's admission to NATO and for NATO's eastward expansion. Our views on the manner in which NATO should expand are absolutely the same. We believe that no other state be it a big or a small one, should impose conditions on candidates for NATO membership. Joining this organization is the sovereign decision of each individual country,' the Bulgarian President said.

    'We see the enlargement of NATO and the EU as steps towards European integration. This should be a single Europe without any divisions or barriers in which there are no enemies but partners conducting cooperation,' Polish President Kwasniewski said. In his opinion, the integration should also become a broad highway to the partners in the East - Belarus, the Baltic republics, Russia. 'I think that the expansion of NATO is a continuation of the change that began in 1989,' Kwasniewski told a news conference given at the end of his visit and pointed that Poland would do everything possible to become a member of NATO. He laid special stress on Bulgaria's role in the processes of European integration..

    [06] INVESTMENT OPPORTUNITIES EXPOSITION opened by P.M. VIDENOV AND E.B.R.D. PRESIDENT DE LAROSIERE

    Sofia, April 13 (BTA) - Today an exposition named 'Opportunities for Investment and Partnership in Bulgaria' gathered for the first time participants and guests who had come for the annual meeting of the European Bank for Reconstruction and Development (EBRD) on April 15-16.

    The exposition was opened by Prime Minister Zhan Videnov and EBRD President Jacques de Larosiere. The ceremony was attended by ministers of the economic team of the Cabinet, the presidents of the Bulgarian Chamber for Commerce and Industry and the Bulgarian Industrial Association, representatives of the Bulgarian business elite, diplomats, international institutions officials and guests invited to the EBRD annual meeting.

    'This exposition is a message to the governments of your countries, to the international financial institutions and to investors,' PM Zhan Videnov said in his address in English. 'Despite the hardships of transition, Bulgaria is opened for economic cooperation, and it is a promising and trustworthy partner, ' Videnov said. 'The EBRD presence here is seen as recognition for the strenuous efforts of the Bulgarian Government to modernize the country's economy and achieve economic growth,' the Prime Minister stated. He pointed that the holding of the EBRD annual meeting in Sofia is an excellent opportunity to show the potential of the Bulgarian economy and demonstrate the favourable conditions for partnership and investment that were created. 'For the first time Bulgaria offers opportunities for investment in 260 priority projects worth over 2,000 million dollars in industry, the energy sector, telecommunications and environment,' Videnov said. Prime Minister Videnov laid stress on Bulgaria's goodneighbourly relations with the countries in the region which enhance the advantages of its geopolitical position.

    In most of his speech EBRD President Jacques de Larosiere dwelt on the importance of the bank's annual meeting in Sofia for the progress of the investment projects of the countries in the region. 'Our hosts are given a rare opportunity to attract investments,' he said. According to him, the intentions and actions of the Bulgarian Government in the area of privatization will be of particular importance in stimulating investments.

    'Bulgaria offers vast opportunities for foreign investors because of the good qualities of its industry, but it should create a favourable climate to attract foreign investments,' de Larosiere said in an interview. 'What the country needs in this respect is simple rules of the game, well organized administration and less bureaucratic procedures,' he stressed. 'The Bulgarian privatization model works well, though the process was a bit delayed,' the EBRD President said. 'Mass privatization does not provide subsidiary capital for the enterprises, that is why it is important to combine it with cash privatization,' he stated. 'The Bank is also a private investor and at Bulgaria's disposal in this respect,' de Larosiere said.

    'We have been active in Bulgaria as far as infrastructure projects are concerned, particularly in the energy sector,' de Larosiere recalled. 'We will be glad to concentrate on telecommunications,' he said. 'However, at least two-thirds of the EBRD operations should be conducted with the private sector because the ratio of 60 to 40 between the private and the public sectors has not been achieved yet,' he observed. 'We are interested in some public infrastructure projects, but we should do more in the private sector to shift the balance in its favour,' the EBRD President said.

    [07] SEMINAR ON INVESTMENT OPPORTUNITIES

    'Bulgaria is an undeveloped market and you can be the first on it. It has very good human resources and strategic location which are the main advantages for foreign investors,' Olivier Descamps, Director for Bulgaria, Albania, Macedonia and Slovenia at the European Bank for Reconstruction and Development, said at today's seminar on the investment opportunities in Bulgaria. The seminar preceded the EBRD annual meeting to be held on April 15-16 in Sofia. 'The EBRD will continue to implement projects in Bulgaria's infrastructure, the energy sector, telecommunications, the rehabilitation of banking and other areas,' Descamps said. However, the bulk of funds will go mainly to the private sector in future. Until now the balance was in favour of the public sector: 90 percent of the EBRD projects were designed for it. Besides, the EBRD will take part in mass privatization by establishing a post-privatization fund with a capital of Ecu 45 million. The Bank had approved 16 projects for Bulgaria worth Ecu 692 million by the end of December 1995.

    'Investment can and should be made in Bulgaria, all you need is just to know how,' Colin Andrews, Vice President of the Bulgarian- Irish mining company BIMAC said. The company was declared foreign investor of the year for 1995. BIMAC has been on the Bulgarian market since 1991. According to Vice President Andres, it has invested USD 23.5 million so far. It plans to invest USD 12 million in 1996, and another USD 90 million in 1997-2000. He said he was satisfied with the relevant Bulgarian legislation adding that there were problems with its enforcement.

    The branch of Caresbac, an American fund for the promotion of entrepreneurship, has made 15 investments of USD 50,000 to USD 250,000 each since 1994, a news conference was told today. The fund finances small and medium-sized private enterprises in Bulgaria that operate mainly in agriculture and the food processing industry. Caresbac plans to open a regional office in Varna or Dobrich (Northeastern Bulgaria) this year. The fund will end its operation in 2009 when its profit will be either donated or reinvested in Bulgarian private companies.

    [08] TAX RELIEF PLAN

    The Bulgarian Government will make a substantial change in the taxation of privatized enterprises, participants in the annual meeting of the European Bank for Reconstruction and Development, which opens on April 15, were told. All enterprises sold by cash or mass privatization methods to local and foreign investors will be granted tax reliefs. 'A company will be exempt from profit tax for a period of three years, commencing at the moment when 66 percent of its assets go private,' Vesselin Blagoev, Executive Director of the Privatization Agency, told BTA. In the next two years the tax imposed on its profits will be 50 percent. Privatized companies will have to meet some additional requirements: to prove that they are eligible for being granted tax reliefs every year and increase their turnover by 10 percent compared to the previous year. There is yet another requirement: a privatized company should reinvest 50 percent of its profit in the enterprise during the 5-year tax-exempt period. Tax exemption is granted if the company fulfills all commitments assumed under the privatization contract. 'These measures will substantially improve the conditions for investing in the Bulgarian privatization programme,' Vesselin Blagoev said in a statement.

    [09] BANKING SYSTEM

    In reply to a BTA question about the plans of the Cabinet concerning the rehabilitation of banking, Ivan Angelov, Prime Minister Zhan Videnov's economic adviser, said that the Government had considered a project for the recovery of banking and the real economy sector which was approved on April 8, 1996. On April 11 the Government sent two letters to the International Monetary Fund and the World Bank, informing them about its intentions. 'It is planned to liquidate about 100 enterprises which account for 17 percent of the 1995 economic losses. Rehabilitation measures will be implemented at 58 companies and enterprises which account for 60 percent of losses,' Angelov said. The programme for the rehabilitation of banking includes a package of measures such as the establishment of an agency to collect non-performing debts (this is one of the World Bank's requirements Bulgaria should meet to get loans), putting an end to the decapitalization of banks and starting their recapitalization. According to Angelov, state banks will be consolidated by decision of the Bank Consolidation Company, while the consolidation of private banks will be achieved by raising the amount of the required minimum capital. Measures will be applied to improve the effectiveness of banking supervision and curb corruption,' Angelov stated.

    'Highly qualified and cheap labour hand is the major advantage attracting foreign investors to Central and eastern Europe. Though the efficiency is lower, productions costs in the region are 30-40 percent cheaper than in the West,' Guy de Seliers, Vice President of the European Bank for Reconstruction and Development, said. Within the framework of the EBRD annual meeting which opens in Sofia tomorrow, he presented the requirements of investors seeking partnership with companies of the countries in transition. They are based on a study conducted by the EBRD which covered 150 large companies investing in Central and Eastern Europe.

    Macroeconomic instability spells the most serious risk for investors. They are also afraid of political risks, in particular of the results of the presidential elections in Russia, Guy de Seliers said. He expressed his conviction that businesses would continue to develop irrespective of policies, because whoever comes to power, they should reckon with the economic realities. 'Political instability is something to worry about but it cannot be a major obstacle,' the EBRD Vice President believes.

    In Russia and the republics of the Commonwealth of Independent States six investment units produce one value added unit, and in the countries of Central and Eastern Europe 45 investment units produce one value added unit. A factor attracting investors is the 30-percent growth of the aggregate domestic product in the region in 1995 compared to 1994. Infrastructure has the greatest need of investments - roads, railways, telecommunications, industrial production and financial institutions.

    [10] ADDRESS BY HANS-DIETRICH GENSCHER

    'A European Union of 12 or 15 countries cannot ensure lasting security and prosperity in Europe - its eastward and southeastward enlargement is the historical responsibility of the Union,' Hans- Dietrich Genscher, one of Germany's most prominent contemporary politicians, said addressing an exclusive audience in Sofia today. The German former foreign minister and member of the government for over 20 years visited Sofia briefly at the invitation of Deutschebank. He read a lecture on 'The European Union - Prospects for Central, Southeastern and Eastern Europe' to guests and participants in the annual meeting of the European Bank for Reconstruction and Development.

    'The development of the transition to democracy in Eastern and Central Europe confirmed confirmed the gloomy predictions: the process is difficult and the problems are painful,' the guest stated right at the beginning. The conflict in the former Yugoslavia showed how difficult solutions can be. 'After the peaceful revolutions in that part of the continent, the European Union member-states provided aid worth about Ecu 5,400 million , but it is clear that cooperation should go on,' the lecturer said. Since 1989 imports from the EU-associated countries have increased by 200 percent, and exports to them have risen by 300 percent. However, it is of paramount importance to speed up structural reforms. Efforts should be redoubled to build modern telecommunication systems, roads, railways and, as a next step, to create a single energy union for production and exploitation.

    'To make the process of integration a continuous one, the associated countries should be given access to the meetings of the Council of Europe; they should even have the right to vote,' Genscher believes. 'The role of NATO is to maintain stability,' he said citing NATO's peacekeeping mission in Bosnia. 'But Russia and the associated countries should not be seen only as receivers of aid - they are our strategic partners,' the lecturer said. The European Union should back more actively Russia's bid for full membership in G-7. 'Europe should take decisive action to keep the peace and preserve the prosperity of the whole continent. We should take the opportunity and do it now because we will not always stand such a chance,' Genscher said in conclusion.

    Bulgarian Prime Minister Zhan Videnov thanked Hans-Dietrich Genscher for having spoken in support of a rapid integration of the associated countries in the political structures of the European Union. 'Single Europe is a serious challenge both to the West and to the East,' Videnov said. After the lecture the Bulgarian Prime Minister and Hans-Dietrich Genscher had a private meeting.

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