BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 4 - 15 JANUARY 2010 )
Sections/headline briefs:
MACROECONOMY:
· 2010 – another tough year for Bulgarian businesses
· Four conditions for economic growth in 2010
· Sofia hurries up with waste plants tenders
· 9 bidders hope to begin building Sofia waste plant by 2011
· Bulgaria finished the year with the lowest deficit in the entire EU
· Bulgaria registers 0,5% inflation in December 2009
· Bulgarians keep over 24 billion in banks
· Foreign reserves increase by 1.6% last year
· Absorbing 70% of the EU funds will be a success
· Electronics sales slide by up to 40% in holidays
· Bulgaria’s new car market steps back five years in 2009
· Luxury cars slip softer
· AEI to convert second 737-300 for Bulgaria's Cargo Air
· Varna shipyard to launch 4 vessels this year
· Bulgaria to halt only new clean energy projects
INVESTMENTS:
· Mexicans and Japanese to invest in Bulgaria
· Electrawind to firm up presence in Bulgaria, Romania
· Bulgaria moots ban on renewables projects on fertile land
· Consortium to invest EUR 14.5 M in gas and oil exploration
· Austrian EVN builds solar power plant in Bulgaria
· Enemona to invest EUR 109.9 M by 2012
COMPANIES:
· Italian Mapei buys Ruse production plant despite crisis
· Bulgarian metal firms hail 2010 with 30% drop in output
· Foreign workers ditch beleaguered Besttechnica
· Pharmaceutical company Sopharma raises sales by 29% y/y in December
· Discount chains to dominate Bulgarian market in 2010
· German Lidl said to eye Plus business in Bulgaria, Romania
· Stomana Industry buys port of Sviloza
· Eight companies submit bids for promoting Bulgarian tourism in Russia, Germany, Britain
THE CRISIS:
· RGE Monitor: Bulgaria to remain in recession in 2010
· Three keys to overcoming the Crisis
· Bulgaria's industrial production down by 11% year-on-year
· Two-way trade between Bulgaria and Germany down by 22%
· Bulgaria - D&B Country Risk Indicator
Articles:
MACROECONOMY:
2010 – another tough year for Bulgarian businesses
Some of the benchmark sectors of the Bulgarian economy are facing another uphill struggle in 2010, with improvement not expected before the second half of the year, according to a poll of business representatives by Dnevnik. Analysts are also quite cautious, pointing to scarce resources, the lack of foreign investment and rocketing unemployment seen climbing to some 11% as the toughest challenges. Construction and tourism, two of the key sectors in Bulgaria, are bracing themselves for hard times. “The forecast is bleak – no building, no volumes, on orders,” said Ivan Boykov, executive director of the Bulgarian Construction Chamber. The big hopes are pinned on public procurements, but infrastructure projects will not be enough to plug the gap of dormant private sector investment. The Confederation of Employers and Industrials in Bulgaria (CEIBG) is seeing recovery in agriculture and renewable energy. The sun may shine back on the pharmaceutical and food industries but the outlook for machine building is pessimistic. Bulgaria’s banking sector is much more upbeat than other sectors. “I expect lending will pick up by 7-8% in 2010,” said Stiliyan Vatev, executive director of United Bulgarian bank (UBB). “Towards the middle of the year, lending rates will start to be positively impacted by the measures we expect the government will implement. Any further increases in the cost of deposits are already short of economic logic, which will hold or cut loan rates,” said Asen Yagodin, the head of Postbank. Entrepreneurs’ expectations are echoed by average Bulgarians. A survey by Alpha Research showed that 44.4 percent of the respondents hope Bulgaria will overcome the downturn in 2010 thanks mostly to European aid and a rebound in consumer spending. This is the second strongest expectation (even with a slim 1% margin) after putting on trial fraudsters and criminals, a key element of favourable business environment.
Four conditions for economic growth in 2010
Author: Georgi Angelov, Open Society
Almost to the very end of the 2009 the prognoses for the development of the Bulgarian economy have been going from bad to worse. A change, though, was sensed in the end of the autumn. The Bulgarian Government managed to avoid huge budget deficit, which was sure to hit the country hard. Of course, it would have been better if we had had a balanced budget for 2009 and keep clear of delayed payments (hopefully these will not happen in 2010). This change for the better was immediately noticed by foreign observers - the Standard and Poor`s agency changed the country`s credit rating from negative to neutral, thus demonstrating trust in the country`s stability. The constant allegations that Bulgaria would not be able to do without a loan from the IMF stopped. The interests on bank credits are no longer growing but are slowly and steadily going down. The prognoses for 2010 began seeming less gloomy. To sum up, in the nearest future Bulgaria has to meet four key prerequisites to keep afloat and even do better:
1. To ensure and keep fiscal stability;
2. To step up entrance to the Eurozone and join the ERM-2;
3. To pursue reforms that will create new jobs, lower social insurance premiums;
4. To improve the business and investment climate, i.e. remove all bureaucratic and institutional barriers that hamper entrepreneurship. This includes further and more efficient reforms in the judicial system, crackdown on organized crime and corruption and effective absorption of the EU funds. And, last but not least, ensure long-term reforms in healthcare, education, pension system, etc.
Sofia hurries up with waste plants tenders
Sofia municipality is seeking a cut in the process to select companies to build the new waste handling facilities of the Bulgarian capital. Deputy mayor Maria Boyadjiiska said contractors for the waste processing plant and the green and food waste composting installation could be named in March and April, respectively. The original deadlines are both set in May. only a week ago the municipal authorities said there will be an extensive selection process. “We’re speeding up orders as we’re already six month behind schedule,” Boyadjiiska, laying the blame at the door of the former government, which she claimed had intentionally delayed the project. Due to the lack of modern waste handling capacities, the European Commission (EC) initiated an infringement procedure against Bulgaria. The boxes of bids for the composting facility were opened yesterday. Six companies will vie for the project with an indicative price of BGN 41 million. Most of them have also submitted offers for the waste processing facility near Yana village.
9 bidders hope to begin building Sofia waste plant by 2011
The construction of the much anticipated waste processing plant near Sofia is slated to begin by the end of 2010.The news was announced Monday by Sofia’s City Hall at the official opening of the offers of the 9 candidates who took part in the public tender for the plant’s construction.The selection procedure will conclude in June-July and the beginning of the construction by the year’s end will depend on the lack of appeals on the part of the bidders and the preparation of a working project for the installations.The construction must be completed in two years, meaning the plant could start functioning by the middle of 2012. The preliminary schedule provided a 2011 deadline and choice of the company to build it in 2009, but the delay is due to a prolonged public tender to select a construction control company, which is yet to be concluded.In the next 5 months the Committee will rank the offers by verifying the companies’ documentation and evaluating their technology proposals. The price offers will be opened last while they will have equal importance with the management expenses, according to the City Hall.The construction cost is estimated at BGN 229 M. The 9 companies, wishing to construct the plant near the village of Yana, adjacent to Sofia, are joint Bulgarian and foreign firms from Austria, Germany, Greece, Belgium, Poland, Spain and Italy because one of the requirements is that the candidates have experience in constructing similar installations.The only purely Bulgarian company is “Holding Patishta” controlled by one of the richest Bulgarians, Vasil Bozhkov. They stated they will use subcontractors with such experience, which is acceptable by the City Hall.
Bulgaria finished the year with the lowest deficit in the entire EU
Bulgaria Finance Minsiter, Simeon Djankov, has stated that he believes Bulgaria will come out of the financial crisis it is currently suffering in spring.Djankov said that despite the fact that Bulgaria’s economy will start to improve in the spring there will still be a difficult few months after, BNT reported.“From a fiscal perspective, based on preliminary data, Bulgaria finished the year with the lowest deficit in the entire European Union,” added Djankov. He continued that the current aim is to push the economy forward by collecting taxes and providing due payments to farmers and building firms.Regarding tourism he predicted the sector would have a better year in 2010 than last year but he said the construction sector would have a tough year and that 2011-2014 would not see much improvement for the building industry.Djankov stated that unemployment is expected to continue to grow all year, reaching just under 11% by the end of the 2010 even with a new center-right GERB government drive to create jobs.He concluded by saying that the government will create a firm policy to make Bulgaria a “center for foreign investment” and he suggested that banks will start providing businesses with more credit in a few months.
Bulgaria registers 0,5% inflation in December 2009
Bulgaria’s had 0,5% inflation in December 2009, according to latest data provided by the National Statistical Institute.The average annual inflation for January-December 2009 is estimated at 2,8% compared to the same period of 2008.The greatest inflation in December 2009 was in Bulgaria’s food products sector – 1,1%, and clothes and shoes – 1%; all other sectors saw inflation of under 1%.The National Statistical Institute has also announced that the it has developed and made available on its website a calculator for estimating “personal inflation”. It allows the consumers to calculate the price increases of the goods and services they use.
Bulgarians keep over 24 billion in banks
The Bulgarians keep record-breaking sums in bank deposits in times of crisis. The deposits of the Bulgarians have reached 24,1 billion levs (1euro=1.955levs) end-November, 2009, shows the analysis of investor.bg based on the data of the Bulgarian National Bank (BNB). Within a month alone, the deposits of the Bulgarians increased by 227 million levs or by 0.95%, while for the last 12 months the growth is by 2.3 billion levs or 10,63%. As a rule, in times of crisis, people save more money and cut down on their expenditures.The deposit interests in November went down to the eight-month bottom of 6.75%. The annual growth of the deposits of the Bulgarians from 10,63% is by about 4 percentage points higher than the average interest of the deposits which shows that banks have attracted fresh funds different from the ones accumulated from interests. The deposits of companies and state institutions increased for a year by 1.41%, or 258 million levs to reach 18,6 billion euro. only in November 2009, deposits registered a drop of 0.39%, or by 73 million levs less.
Foreign reserves increase by 1.6% last year
The foreign reserves decreased marginally by 0.01% m/m (EUR 1.26mn) to EUR 12.92bn as of end-December, according to data of the central bank. Their level was by 1.6% higher as compared to one year earlier after annual declines in the nine previous months. The increase was however due mainly to the steady improvement in the deposit of the banking department throughout the whole year, helped as well by the IMF contributions under the programme for allocating funds to member states to contain the adverse effects from the world financial and economic crisis in August and the special one-off SDR distribution in September. In December, the deposit of the government fell by 5.2% m/m to 28.3% of the total as compared to nearly 30% in the previous two months and 29.3% a year earlier. The holdings of the commercial banks added 0.6% m/m but decreased by 2.2% y/y. Money in circulation has positive effect during the month as well. The ratio of foreign reserves to short-term debt improved to 99.8% as of end-October from revised 97.6% a month earlier and 97% at end-2008 but is still much weaker as compared to more than 120% as of end 2007 and about 300% in 2002-2004.
Absorbing 70% of the EU funds will be a success
Andrey Kovachev leads the Bulgarian delegation in the EPP PG in the European Parliament.
Mr. Kovachev, the Lisbon Treaty has been a fact in the EU but the ordinary citizens hardly understand the significance of this fact. What do you think will be the results of its adoption for them?
The Lisbon Treaty is a treaty for reforms in the European Union. It was obligatory in order the EU could continue functioning efficiently, transparently and closer to the citizens. This is its main task ? to make people understand why it is important to live in this community and not as separate states. The Treaty of Lisbon is an act of interweaving of common policies and means for the EU to grow into a leading power in the world. For Bulgaria in particular as well as for any other member state the Treaty allows intensification of the role played by the local parliaments.This will facilitate decision-making at the low levels. The local parliaments are allowed to sanction European institutions if a certain decision of the EU does not correspond to their principles. For example, if two-thirds of the member states show a yellow card, the EU has to reconsider its decisions. If after some decision, taken by the institutions, over 1 million EU citizens sign against it then the EU has to rethink its position.We request from the EPP to have a permanent secretary in Bulgarian parliament to ensure a stable connection between the Bulgarian and the EU institutions.
What is forthcoming in Bulgaria as a EU member state?
Bulgaria takes part in the common EU strategy about the countries of the Danube region. For Bulgaria this is a good possibility for the economic development of the municipalities along the Danube - financing of projects connected with river tourism and protecting the environment. We have discussed the possibilities with the mayors from the region and they have to present projects eligible for the strategy. This initiative was proposed by Germany. We are planning to organize a conference on the vision of the region in some of the Bulgarian towns along the river. And I would like to ask The Standart to be media partner of this initiative.
Electronics sales slide by up to 40% in holidays
The sales of electronic equipment in Bulgaria plummeted by between 10% and 40% in December in the different segments, as the calculations for the total fall range from 15% to 30% year-on-year, according to retailers' data. The figures tie up with the most pessimistic preliminary expectations that saw some 30% decline in all electronic goods, from white and brown goods to toys. Compared with a year ago, we are seeing a drastic drop in sales of more than 30% during the festive period, said Plamen Stoykov, managing partner of Zora. Technopolis president, Bozhidar Kolev, pegged the slowdown at 15%, saying retailers were bracing up for a sharper fall before the Christmas shopping spree. Retailers plan to bet on discounts in the coming months when trade will be slacker. In a time of crisis, it is very hard to do something to really stir up the market, said Stoykov. He identified lucrative offers and the wide range as the only options at the moment. His view was echoed by Kolev, who pointed to new products as the other strategy to woo customers. Retailers predict consumers will be more cautious and turnover will be lower in the first months of the year. I am seriously pessimistic about market developments by September but I hope the economy will start to come back to life,Stoykov said. Kolev expects the first green shoots of recovery could sprout in the second half of the year.
Bulgaria’s new car market steps back five years in 2009
The economic turmoil raging across the globe has pushed sales of new cars, buses, lorries and motorcycles in Bulgaria back to 2004 levels in 2009 as a paltry 26,813 deals were struck. The latest figures by the Association of Car Manufacturers and Their Authorized Representatives for Bulgaria (ACM) showed that sales have slumped almost 54% from 2008, when 57,927 units were sold. Unprecedented, mouth-watering promotions also failed to salvage the year even though buyers were offered up to 50% off the price tag of vehicles in stock. But the industry claims special offers have prevented an even more drastic decline. Dampened demand is attributed to economic uncertainty, the tight credit, stagnation in many sectors that are among the car industry’s major customers such as construction, trade and real estate transactions. “The global economic crisis has eroded sales worldwide, but Bulgaria has suffered even harder as we’re not a manufacturer and therefore there were no government stimulus mechanisms in place to jumpstart new car sales,” Vihren Goranchev, Opel South East Europe sales and marketing head for Bulgaria, told Dnevnik. As dealerships struggled to reduce backlogs, they slashed prices amid fierce competition, seriously undermining profits, he explained. According to ACM data, sales of lorries have been pounded hardest, with deal numbers contracting fourfold to 932 from 3,880 for last year. The downturn also brought some reshuffle in market positions as Opel slipped back to third, overtaken by Toyota and the runner-up Volkswagen.
Luxury cars slip softer
Luxury brands on the Bulgarian auto market have seen a smaller decline than combined sales, show figures of the Association of Car Manufacturers and Their Authorized Representatives for Bulgaria (ACM). Between January and December 2009, local dealerships sold 2,055 Audi, BMW, Cadillac, Jaguar, Mercedes, Lexus and Volvo units versus 3,976 a year before, down 47%. At the same time, the general auto market shrank by a steeper 54% for the same period. Porsche and Infinity are not members of ACM. Audi was the best performer with a 34% drop in transactions to 577. The brand landed for the first time at the luxury segment top spot, leapfrogging the runner-up BMW by three deals.
AEI to convert second 737-300 for Bulgaria's Cargo Air
Bulgaria's Cargo Air has selected Aeronautical Engineers Incorporated (AEI) to convert a second Boeing 737-300 as work at AEI picks up following a slow 2009.AEI announced today that Cargo Air has selected the firm to convert a second 737-300. Cargo Air, a Sofia-based charter and wet-lease carrier, now operates a single 737-300SF which was re-delivered by AEI in 2008.AEI VP sales and marketing Robert Convey says Cargo Air's second 737-300 is now at the conversion company's Miami facility and will start undergoing the passenger-to-cargo conversion process later this month. The aircraft, previously operated by Canjet Airlines, is scheduled for re-delivery to Cargo Air in April. Convey says the aircraft was purchased by Cargo Air at the end of 2009. It carries serial number MSN 23970 and was built in 1987.Cargo Air general manager Petar Cenkov says AEI's recent securing of a 737 conversion license from Boeing was a key factor in the carrier selecting AEI for the new conversion. He says the other factor was that AEI offers nine full pallets on the main deck of a 737."This is the only conversion that offers nine full positions and our customers are willing to pay a premium for this additional space," Cenkov says in an AEI-issued statement.Convey tells ATI that Cargo Air operates its existing 737-300SF, which was previously operated by US Airways, under a wet-lease contract for TNT throughout central Europe. He says the carrier plans to initially use the second aircraft for charters.Cargo Air first selected the 737-300 in 2007 to replace its fleet of Antonov An-12s, An-26s, An-124s and Ilyushin Il-76s. Cargo Air, which previously operated under the name Vega Airlines, now only operates the one 737-300.AEI has the capacity to convert four 737s simultaneously but went all of 2009 without any re-deliveries as demand for conversions plummeted globally with the steep drop in cargo traffic. Convey says the market has since picked up and AEI now estimates it will convert 12 737s this year, including six in the first half.The first re-delivery is scheduled for later this month to Turkey's MNG Airlines, which contracted AEI in October to covert one 737-400. Convey says another 737-400 for MNG has just arrived in Miami and will soon undergo conversion alongside the Cargo Air 737-300.He adds contracts to convert four more 737s are expected to be finalised by February and deals are also now in the works covering 10 additional aircraft."There's confidence in the industry for sure," Convey says.
Varna shipyard to launch 4 vessels this year
In January 2010, the Varna Shipyard will launch four new vessels, the chairman of the Bulyard Korabostroitelna Industrial Management Board, Dimiter Zhelev, told BTA. Zhelev admitted that the crisis has affected the shipbuilding industry worldwide and the contracts for new vessels are dwindling. Zhelev attended the official dedication of a new ship, Marciana, built in Varna under a contract placed by a private company. The construction of the ship's hull began on February 22, 2009. The Marciana is a 9,800 t multipurpose cargo vessel sailing under the flag of Malta.The government can seriously support the industry if the plans for a setting up a fund to assist shipbuilding are fulfilled, Zhelev said. In his view, legislative changes are required to "make the Bulgarian flag convenient for shipowners who now use foreign flags." The parameters of tonnage and bunkering fees, as well as open-sea charters should be clearly defined. At the moment, the Varna shipyard employs about 1,000 people and there will not be layoffs, Zhelev said.
Bulgaria to halt only new clean energy projects
Bulgaria will temporarily suspend applications for renewable energy projects until the industry’s national plan has been adopted, environment minister Nona Karadjova said. Speaking at a meeting with the Confederation of Employers and Industrialists in Bulgaria (CEIBG) that gathered 150 green energy developers, she provided no timescale for the freeze but said it is scheduled for the “near term”. Energy minister Traycho Traykov said the national plan -- which should gauge Bulgaria’s renewable energy potential by regions, outlining zones included in the Natura 2000 Network of protected species habitat sites -- could be penned by June or August 2010. Velizar Kiryakov, chairman of the association of eco energy producers, proposed halting only construction within the Natura area. CEIBG suggested the suspension period should be reduced to two or three months. “We’ve reached a consensus with businesses that the sector is in chaos,” Karadjova said. CEIBG blamed the bad shape of the market on the absence of a clear government policy and development strategy. The group called for implementing transparent approval rules so that applications submitted by speculators could be blocked. It also said projects that have failed to obtain building right and enough land should be rejected. CEIBG said projects should be plugged to the grid following one-year measurement of wind speed. Developers could be also required to pay a deposit to secure grid capacity. The organisation argued that only 10-15 percent of the submitted applications would fulfill the proposed requirements. The Energy Ministry has said it has received applications for 112 wind farms with a combined capacity of 8,950 MW and 33 applications for photovoltaic (PV) solar parks that could deliver 1,878 MW if built. However, only 17 grid-connection contracts have been signed.
INVESTMENTS:
Mexicans and Japanese to invest in Bulgaria
Companies from China, Japan, Europe, the US and even Mexico are interested to invest in Bulgaria, said vice Prime Minister Simeon Djankov in an interview with the Bulgarian National Television. In the last two months he has had meetings with potential investors. The foreign companies are interested mainly in electronics, machine building for light industry and manufacturing of automobile parts, added minister Djankov.
Finance Minister Simeon Djankov explained that the liability of the state to Bulgarian business in 2007, 2008 and 2009 is less than 800 M leva (1 euro = 1,95 leva). In November 2009 the government started the payments on its debts and this process will continue until March 2010. Minister Djankov thinks the next 2-3 years will be hard for the Bulgarian construction business, while export-oriented companies in food processing and heavy industry might manage better in 2010 than during the economic crisis. The finance sector will have a hard year, too, and tourism will have better results this year than in 2009, minister Djankov thinks. In his opinion, until the end of 2010 unemployment rate in Bulgaria will be a little bit over 11%.
Electrawind to firm up presence in Bulgaria, Romania
Belgian wind farm operator Electrawinds NV will pump EUR 500 million in renewable energy projects in Bulgaria and Romania, SeeNews reported. The firm already has wind farms under construction in both countries, planning to break ground on solar power plants by the end of the year. Electrawinds has two Bulgarian projects including a EUR 60 million wind farm near Bourgas with a nameplate capacity of 70 MW by 2012, rising to 100 MW by 2013, the company’s business development director Jan Dewulf told SeeNews in an interview. The second wind farm, near Shabla, should be up and running by the spring. It has an estimated cost of EUR 50 million.
Bulgaria moots ban on renewables projects on fertile land
Wind and solar power projects will be locked out from fertile land in Bulgaria, according to a new bill that is about to be coordinated with the ministries of environment and economy, Dnevnik has learnt. The proposed changes form part of a moratorium on clean energy development pushed by the eco ministry until a development strategy is put together about the sector by 2020. In evidence of the keen interest in wind and photovoltaic (PV) solar generation, the farming ministry said more than 700 requests have been submitted for a change in land status to clear the way for renewable energy projects. Around 700 wind farm proposals were given the go-ahead in Kaliakra, northeastern Bulgaria, as at September 2000, according to the environment ministry. Some 800 projects are in the pipeline in the northeast. More than 900 small-scale hydro power plants are slated for construction within the Natura 2000 Network of protected species habitat sites. According to the proposal obtained by Dnevnik, the government plans to suspend green energy projects that have secured building permits but construction is yet to begin. Furthermore, no applications will be accepted and reviewed. The moratorium will exclude rooftop solar systems as well as hydro power projects on polluted or industrial land. The economy ministry said the idea is yet to be discussed by the ministers of economy and environment as well as businesses.
Consortium to invest EUR 14.5 M in gas and oil exploration
The cabinet allowed a consortium of three companies, Overgas Inc, Balkan Explorers Bulgaria Ltd, JKX Bulgaria Ltd, to explore the oil and natural gas reserves in a field of total area of 1,787 square kilometres in the north-eastern part of the country near Provadia. The investments are expected to reach EUR 14.5mn. The permit will be valid for three years. The country’s biggest natural gas retailer Overgas will control 64% of the consortium while the other two companies will hold 18% each. Balkan Explorer Bulgaria and JKX Bulgaria are subsidiaries of the UK-based Aurelian Oil & Gas and JKX Oil & Gas respectively.
Austrian EVN builds solar power plant in Bulgaria
The Austrian company EVN has built a solar power park near Bulgaria's southern city of Sliven, the company reports.EVN provides electric power to the Plovdiv Region and southeastern Bulgaria.The investment is EUR 3 M. The park with a 863 kWp capacity is located near the village of Blatets, in the Sliven municipality.In mid-December, EVN put in testing operation the first part of the park with a 178,2 kWp capacity, and is set to test two more groups of photovoltaic elements.The testing will continue until the end of February when the park will be set into full operational mode.
Enemona to invest EUR 109.9 M by 2012
The local energy equipment and engineering firm Enemona plans to invest BGN 215mn (EUR 109.9mn) by 2012. The largest project is the BGN 120mn biomass cogeneration unit in the northern town of Nikopol located on the Danube River . As recalled, the plant will have 15 MW electricity generation capacity and will be able to produce 9.37 MW of steam annually for industrial purposes and hot water for district heating (11.20 MW annual heat output). Enemona projects that total sales are to expand from BGN 195mn this year to BGN 236mn next year and BGN 285mn in 2011. The company has prepared also an optimistic scenario with sales of BGN 400mn in 2012. The net profit is forecast at BGN 15.3mn this year, BGN 17.9mn next year and BGN 26mn in 2012. Enemona expects to attract BGN 30mn from a preference shares issue. It will place 5.97mn preference shares at unit price of BGN 9.92. The subscription is expected at 50%.
COMPANIES:
Italian Mapei buys Ruse production plant despite crisis
The Milan-based international company Mapei has announced an expansion in its Bulgarian operations with the purchase of a production plant in the northern city of Ruse.The plant has been bought from Orgachim, a Bulgarian company specializing in the manufacture of varnishes and paints. The Ruse plant, more than 15 000 square meters in area, is for production of ceramic tile adhesives and thermal insulation systems."This acquisition is oriented to allow Mapei to strengthen its presence not only in Bulgaria but also in Romania, where the Group is currently operating through its local commercial subsidiary, Mapei Romania," announced Veronica Squinzi, Global Business Development Director of Mapei Group."Our investment also proves that, despite the slump in the construction industry that has been caused by the economic crisis, the Mapei Group keeps looking at the countries of Eastern Europe in order to maximize any attractive opportunities from new and growing markets," he added.As a result of this acquisition, Mapei Group currently owns 56 production plants in 25 countries around the world. Mapei has already had a presence in Bulgaria for a long time through several local distributors.Mapei Bulgaria will be managed by Plamen Petrov, newly appointed General Manager, who will capitalize on his consolidated experience in the Bulgarian construction market to maximize development of the company. Production in the plant will run at full capacity, starting in 2010.
Bulgarian metal firms hail 2010 with 30% drop in output
Bulgarian metal manufacturers rounded off 2009 with 30% slimmer production compared with 2008 levels, said Anton Petrov, board chairman of the Bulgarian Association of the Metallurgical Industry (BAMI).The heavy metal industry is bearing the brunt of the crisis that caused an up to 50% slide. “Forecasts about the Bulgarian economy are very hard to make but I’m optimistic,” he said. The green shoots of recovery sprouting across Europe will help heal the Bulgarian metal industry, which exports the vast bulk of its produce, he explained. Dampened demand has caused manufacturers to scale down outputs at the moment. The toughest challenges for the sector remain threadbare infrastructure coupled with little transparency in the price formation of the main raw materials such as natural gas and electricity, BAMI said. Gas prices in Bulgaria rose by 10.45% to BGN 413.24 per 1,000 cubic metres as of January 1, 2010. The Council of Ministers said in an ordinance voted on December 31 that the prices could be revised in three months.“The [metal] industry will continue to fulfill a social function, covering the losses of state-run gas firm Bulgargaz after the heating season is over,” according to BAMI.
Foreign workers ditch beleaguered Besttechnica
The thinner paychecks forced 20 Thai fitters, welders and machine operators to quit from Bulgarian machine building firm Besttechnica, state-run radio BNR reported. The foreign workers were hired at the end of May 2009 to plug the holes in Bulgaria’s workforce. Back then, the company sustained full production capacity in the face of the downturn, with executives vaunting an average wage of BGN 1,200. Besttechnica board member Emil Raychev told Dnevnik that 13 of the Thai workers have been dismissed in the very first two weeks since coming to the company as they lacked the necessary qualification. The contracts of the seven people that stayed on board expired in September. “Three of them said they had family problems and wanted to go home, and the rest decided to follow suit,” Raychev explained. A further 50 people left the company after salaries started to come with a two- or three-month delay, he admitted. The company’s ordeal started after two big orders fell through in the spring. “We rely heavily on the large-scale infrastructure projects but negotiations lag too much and often foreign companies are picked subcontractors, raising project costs,” Raychev said.
Pharmaceutical company Sopharma raises sales by 29% y/y in December
The sales of the country’s leading pharmaceutical producer Sopharma rose by 29% y/y in December, including 95% y/y expansion of the foreign market and 22% contraction of the domestic sales, a note on the website of the local bourse reads. Total sales growth accelerated from 25% y/y in November. In the full-year readings total sales have risen by 12%. Exports grew by 16% and the sales on the domestic market added 4% last year. The net consolidated profit of Sopharma rose by 86.4% to BGN 32.5mn (EUR 16.6mn) in Jan-Sep on 4.2% sales expansion to BGN 340.9mn. According to its latest forecast, the drugmaker expects to double its profit and raise sales by 8% last year. It posted BGN 19.2mn net profit and BGN 187.5mn sales in 2008.
Discount chains to dominate Bulgarian market in 2010
In 2010 the discount chains are expected to establish a dominant position on the Bulgarian retail market, particularly in the food trade, according to an analysis of the consultancy company Colliers International. Three discount food chains are already operational in Bulgaria: Kaufland, Plus and Penny Market. All of them have been adhering to the strategy of setting a foothold on the markets of the small towns and only then entering larger population centres. Kaufland has already opened 26 hypermarkets while the other two chains are planning to double their stores in 2010. Their competitor, Lidl, is also going to unveil its first hypermarkets next year.The global economic situation is favourable for the flourishing of discount chains given that households are seeking ways to optimize their expenditures. The business of discount chains in Bulgaria is not so active as in other countries of Central and Eastern Europe. This offers a good opportunity to utilize the untapped potential.Another tendency will also be observed in 2010: world-famous trademarks, Zara, Bershka, Massimo Dutti, Stradivarius & Pull of the Spanish Inditex Group, as well as Sephora, Humanic and GAP will open their first stores in Bulgaria.
German Lidl said to eye Plus business in Bulgaria, Romania
Lidl discount chain, owned by Germany's retail group Schwarz Group, has reportedly indicated interest in acquiring the Bulgarian business of its German competitor Plus retail chain.Tengelmann, the parent company of Plus, has confirmed that they in negotiations to sell its operations in both countries, according to the specialized edition FoodBizDaily.No final decision has been taken yet.Currently Plus operates 16 stores in Bulgaria. Lidl plans to launch its business in the country in spring 2010.Apart from Bulgaria, Lidl is also planning to acquire Plus retail network in Romania, (which currently consists of nearly 80 sites) with further launch of another 20 outlets.Last year Lidl announced its intention to open 50 nearly new stores in Romania, in early in 2010. This will allow the company to become a leader in the Romanian discount market within a few months, with a total number of stores more than 150.In 2007 and 2008 Plus sold its business in most European countries. For the last several years the chain has been active in Austria, Romania and Bulgaria, with divisions in those countries in May 2008 united under the name of Plus Eastern Europe.According to realtors the economic crisis in the past year has proved fertile for the discount retailers stepping on Bulgarian soil in recent months and the country will see their boom in 2010.Three food discount chains are currently operating in Bulgaria; Kaufland, Penny Market and Plus.Kaufland is a part of the Swartz Group which also owns Lidl. It is a soft discounter that entered the Bulgarian market in 2006 in Plovdiv. Now it is strongly positioned on the market with more than 26 hypermarkets.Plus (part of Tengelman) and Penny Market (Rewe Group) are two other German soft discounters with an aggressive growth strategy for Bulgaria.
Stomana Industry buys port of Sviloza
Bulgarian steel mill Stomana Industry, part of Greek metallurgical group Viohalco, joined forces with Germany’s Peter Preimesser GmbH & Co. KG to purchase the port of Sviloza, the country’s sole sulphate bleached hardwood pulp producer. No financial details were disclosed. The port will remain a separate entity within the group and will be named Port Vidin Nord. The steel mill holds 90% in the company, with the remainder in the hands of the German firm. “We had to buy the port to secure certain independence in handling our cargo,” Viohalco’s regional manager for Bulgaria, Anton Petrov, said. “Of course, port operations are not part of our business but we have to do it because of Bulgaria’s poor infrastructure,” he explained. Petrov revealed some EUR 7 million or 10 million will be spent on an overhaul of the port to tailor it to Stomana Industry’s needs. Stomana Industry has purchased a further 50 decares land in line with plans to expand the newly-acquired facility.
Eight companies submit bids for promoting Bulgarian tourism in Russia, Germany, Britain
Eight companies: two from Russia, two from Germany and four from Bulgaria, submitted bids for promoting Bulgaria as a tourist destination in Russia, Germany and Britain, the Economy, Energy and Tourism Ministry said in a press release. The bids in the public procurement were opened on Monday. Some of the bids are for the individual markets in the three countries, and some, for all of them. The public procurement, estimated at 6,467,000 leva, is financed from the Regional Development Operational Programme.
THE CRISIS:
RGE Monitor: Bulgaria to remain in recession in 2010
Anemic demand on the global markets, coupled with only vague foreign capital inflows will hold back Bulgaria and Romania from economic growth for 2010, consultancy RGE Monitor predicted in a new report quoted by Deutsche Welle. Bulgaria will face challenges regarding both the sluggish foreign markets and the currency board mechanisms pegging the lev to the euro. The consultants expect Bulgaria’s GDP to contract by between 1% and 2% for 2010 thanks to heavy dependence on exports and the currency board that keeps the lev high as neighbouring currencies are losing weight. Loan defaults and soaring unemployment will pile up pressure on the Bulgarian economy, according to the report. The ballooning external debt could be another stumbling block for economic growth as well as a possible repeat of last January’s disruption in gas supplies from Russia via Ukraine. RGE Monitor predicted Bulgaria, Romania and the Baltic countries will have a tougher time pulling themselves out of the economic doldrums. Bulgaria’s economy will only shrink by some 2% this year, Deutsche Welle quoted as saying Ted Ahlers, Eastern and Central Europe head at the World Bank.
Three keys to overcoming the Crisis
Author: Ilko Yotzev, President of "BioPower"
Bulgaria holds three keys with which the state can "unlock" its way out of the financial crisis: a dialogue with the business, fresh European funds and new technologies. I hope that I'm wrong, but in my opinion, the crisis will grow deeper. There are two hard years ahead of us. The quantities of sold energy are an important indicator when it comes to the condition of a country's economy. In 2009, a record-breaking drop of power consumption was registered in Bulgaria; the Bulgarian business bought least energy in the last 10 years and this was not a result of the effectiveness measures. Promising projects, financed by the European Union, should be drafted. The municipalities and the government have started working effectively for the creation of such projects. The restorable energy sources are one of the options for business stabilization. Such systems could be introduced in some 300 municipalities in Bulgaria, which will decrease the country's dependence on imported fuels.
Bulgaria's industrial production down by 11% year-on-year
Bulgaria’s industrial production declined by 10,8% in November 2009 compared to the same month of 2008.This is according to preliminary data provided Monday by the National Statistical Institute.The drop in Bulgaria’s processing industry is 14%, and the production and distribution of electricity, heating power and natural gas is down by 8,1%. In contrast, Bulgaria’s extracting industry registered a growth of 13,5%.Compared to the values for October 2009, in November 2009 Bulgaria’s composite industrial production index registered a growth of 1,2%. The growth in electricity, heating power, and natural gas production is 13,6% while the extracting industry is down by 3,5%, and the processing industry – by 1,7%.According to preliminary data, in November 2009 the turnover of the companies in Bulgaria’s industrial sector decreased by 13,2% year-on-year. The decline in the production of electricity, heating power, and natural gas is 18,4%, and in processing industry – 12,8%; at the same time, the extracting industry has registered a growth of 13,3%.Compared to October 2009, in November, the total turnover of the companies in Bulgaria’s industrial sector grew by 0,7%. The energy sector has seen a turnover growth of 17,2%, while the processing industry is down by 3,7%.
Two-way trade between Bulgaria and Germany down by 22%
Commodity exchange between Bulgaria and Germany dropped by 22 per cent in the first nine months of 2009, said Mitko Vassilev, Head of the German-Bulgarian Chamber of Industry and Commerce. He was addressing a working lunch of the Chamber members with Economy, Energy and Tourism Minister Traicho Traikov.Vassilev specified that German exports to Bulgaria were down by over 30 per cent and German imports from Bulgaria by 28.5 per cent. German investments in Bulgaria almost halved during the season.He said further that Prime Minister Boyko Borissov will visit Germany on January 25 and 26 and his delegation will include the Economy Minister.On his part, Minister Traikov told representatives of the German business circles that amendments to the Public Procurement Act are being contemplated. The draft amendments envisage removal ofthe requirement towards companies' managerial agents to present conviction status certificates.During the current year there will be considerable differences in the functioning of Operational Programme Competitiveness in terms of volumes of contracting, extended funds and working styles, the Economy Minister stated.Two hundred million euro under the JEREMIE instrument will be used mostly for risk financing and, to a more limited extent, for credit lines, he went on to say. The concept envisages establishment of three sub-funds: of smaller investments, of investment in companies in a stage of growth and a sub-fund involving credit financing.Minister Traikov said that the Bulgarian Development Bank is about to be transferred under the jurisdiction of the Ministry of Economy, Energy and Tourism.
Bulgaria - D&B Country Risk Indicator
Publication: D&B - Country Risk Line Report
Provider: Dun & Bradstreet
In late December 2009, Finance Minister Simeon Djankov revealed that Bulgaria will record the lowest budget deficit of any EU country in 2009 at 0.75% of GDP. Djankov previously released details of the government’s plan to target a 0.7% of GDP deficit in 2010. While this tight budget for 2010 will help to bolster the credibility of the fixed exchange rate against the euro, it will also mean that fiscal policy will be unable to provide much support to the struggling economy. With only weak economic growth of 0.5% likely in 2010, tight credit availability, low levels of foreign investment and monetary policy constrained by the currency board arrangement that fixes the lev to the euro at a rate of BGN1.96:EUR, the operating environment will remain tough for many businesses. Consequently, we expect an increase in the number of bad debts and bankruptcies, which tend to lag the economic cycle. More positively, fiscal discipline and very low government debt (at around 15% of GDP compared with an EU average of more than 60% of GDP) bode well for the economic outlook beyond the present downturn. Djankov also announced that Bulgaria would apply to join the EU’s Exchange Rate Mechanism (ERM II) in March 2010, with the aim of adopting the euro in 2013. Countries hoping to adopt the euro must spend two years within ERM II to demonstrate a certain degree of exchange rate stability. Given that Bulgaria has successfully maintained a fixed exchange rate against the euro since 1997, this criterion is unlikely to pose a problem. Thanks to the currency board and fiscal discipline, the criteria on the government deficit, public debt and long-term interest rates should not pose many problems either. The main hurdle will be inflation; while price pressures are currently subdued due to the economic downturn, inflation rates have consistently exceeded those in the euro area. As such, the government’s goal of adopting the euro by 2013 is somewhat optimistic; we believe that 2015 is a more realistic target date. Euro adoption would bring a number of benefits to Bulgaria and businesses operating within the country.
Most notably, the euro would eliminate (the admittedly already low) exchange rate risk vis-a-vis other eurozone countries, with which Bulgaria’s economy is highly intertwined. This could result in lower interest rates and increase trade with the other euro-zone countries by lowering transaction costs for businesses. The main downside of joining a currency area is the loss of autonomy over monetary policy: a country that adopts a common currency can no longer respond to economic shocks through a competitive devaluation of its own currency or cut interest rates. That said, Bulgaria effectively relinquished its monetary autonomy in 1997 by adopting a currency board.
The 'DB' risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a two year time horizon. The 'DB' risk indicator is a composite index of four over-arching country risk categories: Political risk - internal and external security situation, policy competency and consistency, and other such factors that determine whether a country fosters an enabling business environment;Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic corruption, and other such factors that determine whether the business environment facilitates the conduct of commercial transactions;External risk - the current account balance, capital flows, FX reserves, size of external debt and all such factors that determine whether a country can generate enough FX to meet its trade and foreign investment liabilities;Macroeconomic risk - the inflation rate, government balance, money supply growth and all such macroeconomic factors that determine whether a country is able to deliver sustainable economic growth to provide further expansion in business opportunities.The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (a-d), with an 'a' designation representing slightly less risk than a 'b' designation and so on. only the DB7 indicator is not divided into quartiles.