News from Bulgaria / Apr 15, 96

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

Bulgarian Telegraph Agency Directory

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

15 April, 1996

CONTENTS

[01] EBRD MEETING OPENS

'We are encouraged by recent initiatives announced by the Bulgarian Government in favor of privatization and of the restructuring of the banking sector, and I trust they will open for strategic investors new and tangible opportunities for private investment and joint ventures, and therefore for additional financing by the EBRD in Bulgaria,' Mr. Jacques de Larosiere, President of the European Bank for Reconstruction and Development, said at the opening session of the 5th EBRD annual meeting.

'Operationally 1995 was a successful year for EBRD,' said Mr. de Larosiere. According to him, the Bank continued to implement its priorities effectively and strengthened its impact on the transition process. 'The private sector remained the primary focus of our activities,' the President said. 'Last year 71 percent of our signed commitments and 85 percent of Board approvals were in the private sector,' he stated further. According to Mr. de Larosiere, the Bank also expanded its use of equity, and equity investments accounted for 24 percent of the year's total Board approvals. 'Infrastructure remained prominent, particularly transport, energy and telecommunications. The geographical spread of the Bank's operations increased still further, first disbursement took place in Azerbaijan, Croatia, Georgia and Kyrgyzstan,' the EBRD President went on to say. 'A substantial increase in environment-related investments and the creation of a Municipal and Environmental Infrastructure team within the Banking Department were among the key developments at the EBRD in 1995,' said Mr. de Larosiere. According to him, four loan agreements totaling Ecu 60 million were signed during the year.

Operational and financial analysis of the Bank's capital stock showed that a capital increase would be necessary to sustain the Bank's projected growth beyond mid-1997 without interruption. 'The EBRD has already committed more than Ecu 6,000 million of its initial capital base, and approvals are expected to reach Ecu 10,000 million by mid-1996, with commitments projected to reach that level in 1997,' Mr. de Larosiere stated. 'Given the needs to be met and the difficulties inherent in the task, the Bank's assistance must continue. The adoption of the resolution on the capital increase will send a strong message that the international community is committed to helping our region build stable and open market-oriented economies,' he said.

Sofia, April 15 (BTA) The 5th annual meeting of the Board of Governors of the European Bank for Reconstruction and Development was officially opened today. The main purpose of the meeting is to consider an increase in the EBRD capital from Ecu 10,000 million to 20,000 million and expansion of its activities in the countries of Central and Eastern Europe (CEE). The capital increase the meeting is going to approve is a recognition for the role the Bank plays in the transition of the CEE countries, Mr. Lamberto Dini, Prime Minister of Italy and Chairman of the EBRD Board of Governors, said. In his capacity as Prime Minister of the state which now holds the presidency of the European Union, he gave assurances that the EU members had pledged to make the process of full integration of the associated countries a flexible and short one. A growth of 3.5-6 percent of the gross domestic product is observed in most CEE countries; the region has seen a big drop in inflation and a rapid expansion of the private sector, Mr. Dini said. The CEE countries should take the opportunity to achieve a greater economic growth and financial stabilization, he said. He drew attention to the need of tightening control over the EBRD resources while expanding its activities.

'The selection of Sofia as host to the meeting is an expression of the support provided by the EBRD and the European community for the progress Bulgaria has made in its transition to a market economy,' Mr. Zhan Videnov, Prime Minister of Bulgaria and honorary guest at the annual meeting, said in a keynote address. The EBRD has carried out 26 projects worth about 900 million US dollars in this country, he recalled. They concern infrastructure, the energy sector, telecommunications, banking, etc. The latest project, a memorandum on the implementation of which will be signed during the governors' annual meeting, is for the establishment of a post-privatization fund. The EBRD will contribute Ecu 45 million to the fund. Bulgaria approves the EBRD plans to double its capital, Mr. Videnov said. In his view, the increase in the bank's lending potential is to the interest of all members of the Bank because it will provide investment resources for continuing the sweeping reforms in Bulgaria and the other CEE countries.

Mr. Videnov familiarized the foreign guests with Bulgaria's economic results and the progress of reforms in 1995. The priority which the Government intends to meet is the acceleration of cash and mass privatization. Some of the country's strategic enterprises - the Sodi Chemical Works in Devnya (Northeastern Bulgaria), about 30 percent of the assets of the Bulgarian Telecommunication Company, the Varna Thermoelectric Power Station (Northeastern Bulgaria), transport enterprises and infrastructure entities - will be soon put up for privatization. The Government introduced a new profit tax bill exempting newly privatized and newly established enterprises from profit tax for a period of five years; Parliament passed it on first reading, the Bulgarian Prime Minister said.

'More than 100 state-owned enterprises which account for 20 percent of current losses will be liquidated this year,' Mr Videnov said. Programmes are being drawn for the rehabilitation of a great number of enterprises which hold almost 60 percent of non- performing debts. According to him, the first stage of their rehabilitation will cost some 300 million dollars. The Government approved a programme for the rehabilitation of banking, setting a deadline for the completion of each phase. The programme has already been sent to the International Monetary Fund. In Mr. Videnov's words, the first phase of the rehabilitation of banking will cost 500-550 million dollars. a report 'The Bulgarian Government is fully aware of its great political responsibility and it has the will to carry through reforms despite any hardships,' Mr. Videnov stated. He expressed his hope that the international community would support Bulgaria in its efforts to achieve this end.

Delegates and guests stood in one-minute silence in memory of the Americans killed in an airplane crash in Croatia on April 3, one of which was EBRD Director for USA Lee Jackson.

The annual meeting of the European Bank for Reconstruction and Development continued with statements by the governors representing the shareholders of the Bank. The governors are ministers of finance or heads of the central banks of the respective member-states. Dr. Juergen Stark, Secretary of State at the German Ministry of Finance and EBRD Governor for Germany, said that his country would back the proposal to increase the capital by contributions for the first and the last time. In future the funds for raising the capital of the Bank should come from its profits, Dr Stark stressed. Western donors feel politically and morally responsible for providing support to the countries in transition, he said.

The EBRD is a staunch partner of the European Union, Mr. Yves Thibault de Silguy, Governor for the EU, said. The EU signed agreements on the association of Central and Eastern European countries and their achieving positive economic growth with the help of the EBRD will facilitate their full integration in the Union, he said.

The United States also support the EBRD capital increase, US Governor David Lipton said adding he hoped it would be the first and last one effected in this way. Completing the transition in some countries does not mean they will be removed from the list of customers of the EBRD; it means just enhancing their financing from private sources, Mr. Lipton said. He recommended more attention to the Bank's environmental policy and more transparency in its operations.

Mr. Lamberto Dini, Chairman of the Board of Governors of the European Bank for Reconstruction and Development, announced that meeting for a second session today, the Bank's shareholders had approved to increase its capital from Ecu 10 million to Ecu 20 million.

The Bulgarian Government has taken steps to accelerate the structural reform, the rehabilitation of the banking system and privatization; it throws the door open to foreign investments, Mr. Roumen Gechev, Bulgarian Deputy Prime Minister and Minister of Economic Development, said. Today he acquainted the delegates to the annual meeting of the European Bank for Reconstruction and Development with the macroeconomic results of the country over the last year, stressing the growth in the gross domestic product, the drop in inflation and unemployment and the increase in export. Mr. Gechev told the participants in the meeting about the intention of the Government to stabilize the economy and achieve sustainable development. There is a clear sign the Bulgarian economy is emerging from the crisis, he stressed. According to Mr. Gechev, by the middle of the year there will be progress in the negotiation of arrangements to support structural reforms and the country's balance of payments with the international financial institutions.

[02] E.B.R.D. WILL WITHDRAW GRADUALLY FROM COUNTRIES THAT COMPLETED TRANSITION

Sofia, April 15 (BTA) - Speaking at a news conference after the first meeting of the European Bank for Reconstruction and Development today, Mr. Lamberto Dini, Prime Minister of Italy and Chairman of the Board of Governors of the Bank, laid stress on the admission of Bosnia and Herzegovina to the EBRD and the support for the policy implemented by EBRD President Jacques de Larosiere.

The most important resolution - on redoubling the capital of the Bank, was passed by consensus, Mr. Dini said. The EBRD governors stressed this was the first and last increase, pointing that it is seen as a recognition for the role of the Bank and its effectiveness.

We will establish a policy not to increase the capital further, Mr. Dini said. The EBRD governors considered a proposal to work out a programme for terminating the Bank's activities. The general feeling is that the Bank should be allowed to gradually reduce its presence in the more developed countries, Mr. Dini explained. However, no deadline could be set, this will be a gradual process as a result of which the Bank shall withdraw itself from economic sectors and countries in which the transition to market principles has been completed.

[03] E.B.R.D.: MEETINGS

Sofia, April 15 (BTA) - Bulgarian Prime Minister Zhan Videnov received Mr. Kayo Koch-Weiser, Executive Director of the World Bank, the Government Press Office said. Mr. Koch-Weiser praised the Bulgarian Government's efforts for the successful organization of the annual meeting of the European Bank for Reconstruction and development. He stressed the opportunities the annual meeting offers for the country's presentation to the international financial institutions and for attracting foreign investment.

Changes and the progress of economic reforms in Bulgaria are followed with great interest abroad, the World Bank Executive Director said. He stated that the World Bank was ready to support effectively the implementation of reforms, pointing that the determination of the Bulgarian Government to regain the confidence of the international financial institutions by taking action and achieving positive practical results would be of paramount importance in this respect. That confidence has been definitely shaken by the political instability under the previous governments, he said.

Prime Minister Videnov said that the priority task of the Government in 1995 and 1996 was to achieve macroeconomic stabilization, to carry out mass privatization and to restructure the real economy sector and banking. He stressed Bulgaria's resolution to meet its external and internal debt liabilities and make adequate provisions for its balance of payments.

Prime Minister Zhan Videnov received Mr. Ahmed Ali, President of the Islamic Development Bank (IDB); Mr. Ali is in Bulgaria for the EBRD annual meeting, the Government Press Office announced. Mr. Ali expressed the desire of IDB to conduct cooperation with Bulgarian institutions and companies and its readiness to finance projects. Bulgarian companies are welcome to participate in the IDB economic projects carried out in different parts of the world, he said. Mr. Ali praised the progress the Bulgarian Government had made in the area of economic reforms. This gives Bulgarian companies the opportunity to take part in the IDB trade programmes too, he said. The Bulgarian Prime Minister said Bulgaria would be interested to participate in the IDB projects and stressed this involvement would help promote the country's relations with the IDB member-countries.

[04] BULGARIAN FOREIGN MINISTRY'S STATEMENT (on Lebanon)

Sofia, April 14 (BTA) - Located near to the Middle East, Bulgaria is following the escalation of the conflict between Israel and Lebanon particular concern because it threatens the Middle east peace process. Bulgaria is for ending all hostilities and terrorist acts which expose the civilian population of the two countries to danger, it is said in a statement of the Bulgarian Foreign Ministry received at BTA.

Bulgaria will study carefully the possibilities of meeting the appeal of the Lebanese Government for humanitarian aid to the refugees, the document says. The Bulgarian Foreign Ministry hopes that with the assistance of the international community, the sides involved in the conflict will create conditions for ending the present confrontation, guaranteeing the sovereignty of Lebanon and applying Resolution 425 of the United Nations within the framework of the peace process in the area.