Bulgarian Telegraph Agency (BTA), 96-12-13

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

EMBASSY OF BULGARIA - WASHINGTON D.C.

BTA - BULGARIAN TELEGRAPH AGENCY

13 December, 1996

CONTENTS

[01] PRESIDENT ELECT STOYANOV MEETS U.S. ECONOMIST RAHN

[02] BULGARIA SHOULD JOIN EU AND NATO TO SURVIVE, PRESIDENT-ELECT STOYANOV SAYS

[03] EU SUPPORTS BULGARIA'S REFORM EFFORT

[04] COUNCIL OF MINISTERS' DECISIONS

[05] BLACK SEA ENERGY FORUM

[06] BULGARIA AT W.T.O. CONFERENCE

[07] DEFENCE MINISTRY, GENERAL STAFF WRESTLE WITH LOGISTIC DIFFICULTIES

[08] 1996 BUDGET UPDATED AGAIN

[09] PARLIAMENTARY FOREIGN POLICY COMMITTEE CHAIRMAN MEETS E.U. AMBASSADOR

[10] OCTOPUS PROJECT AGAINST CORRUPTION AND ORGANISED CRIME IN TRANSITION COUNTRIES

[11] BULGARIA'S ENTRY INTO NATO SPELLS RISKS, RUSSIAN GENERAL SAYS

[01] PRESIDENT ELECT STOYANOV MEETS U.S. ECONOMIST RAHN

Mr Stoyanov reiterated to Dr Rahn his view of the need of introducing a currency board in Bulgaria provided there is a national consensus on it, according to a member of the President's team who attended the meeting. The idea is to avoid hyperinflation through a currency board, Mr Stoyanov said. He also believes that the problems of economic policy in Bulgaria should be addressed pragmatically, without ideologization, and that the Bulgarian public should be persuaded that a currency board is introduced by its own decision. "We must put our own house in order, and this is where we need the help of good friends. So far we have been unable to make people believe that we have political will to put our own house in order, but this is what we have to do now," the President elect also observed. Dr Rahn told reporters after the meeting that Bulgaria has a potential which can be realized if it opts for the right economic policy.

Dr Rahn arrived here yesterday at the invitation of Elitbank, one of the nine banks which the central banks placed under special supervision as insolvency risks in September 1996. Press reports have mentioned Dr Rahn as likely member of a prospective currency board in Bulgaria.

Richard Rahn co-authored a programme for economic reforms in Bulgaria, which was proposed in 1990 to the then incumbent government of Andrei Loukanov. One of the measures which Dr Rahn then suggested was a currency reform.

[02] BULGARIA SHOULD JOIN EU AND NATO TO SURVIVE, PRESIDENT-ELECT STOYANOV SAYS

In his lecture Mr Stoyanov advanced the thesis about Bulgaria's association with the EU and NATO as a means of its survival and overcoming the crisis. We cannot overcome the crisis on our own, and even if we can, it will be stupid not to use foreign assistance, he said.

The rules of the currency board should be put into action by a political class which enjoys sufficient public confidence so that there is enough room for it to dwindle, Mr Stoyanov said. In his view the currency board should not be introduced rashly and without the necessary preparations.

[03] EU SUPPORTS BULGARIA'S REFORM EFFORT

Bokova emphasized Bulgaria's political resolution to pursue its policy of reform and outlined the policies which must be implemented to achieve macroeconomic stability, as well as the difficulties experienced by the country now.

Brauer said the European Commission is showing understanding to the social consequences of the financial policies Bulgaria intends to carry out. In line with this the EU decided to extend ECU 20 million for the launch of a social programme in Bulgaria. He also stressed the EU is ready to support Bulgaria's efforts to carry out reforms not only as a contribution to the assistance offered by the international financial community, but also in view of the fact that Bulgaria is an associated country and has applied for full membership in the Union, the Foreign Ministry told BTA.

[04] COUNCIL OF MINISTERS' DECISIONS

Tariffs on some agricultural and industrial imports were increased to protect local manufacturers. Import duties on textiles, some types of footwear, domestic appliances and apparatus, lighting fixtures, some types of tractors and bicycles were increased to 10 per cent from 5 per cent. The increase does not apply to imports from countries with which Bulgaria has signed free trade agreements, Sofroniev said. The increase will not have a significant effect on prices, he said.

The Cabinet cut duties on imported raw and prime materials, which are not made or extracted in Bulgaria, such as ores, ferrous and non-ferrous scrap metal, coal, raw hides, raw materials for the textile industry, pulp and timber. Lower duties will be levied on chemicals and mineral fertilizers without Bulgarian analogues, as well as raw and prime materials for paints and lacquers, rubber, pharmaceuticals, textiles and electronics.

The new tariff rates enter into force on January 1, 1997.

Foreign-registered vehicles crossing Bulgaria will pay road tolls in dollars, according to the amended tariff schedule. Tolls on incoming vehicles were set at 10 dollars for motor cars, 60 dollars for coaches with more than eight seats (excluding the driver's seat), 70 dollars for trucks with than two axes, and 100 dollars for trucks with three or more axes. Motor cars will pay a toll of 10 cents/km and trucks with three or more axes will pay 40 cents/km. Tolls will be 50 per cent lower for vehicles using three- and four-lane highways.

The amendments to the tariff rates were coupled with a decree on the rules of origin of goods. Thus Bulgaria fulfilled a commitment made on its accession to the World Trade Organization.

The Council of Ministers discussed the 1997 privatization programme. It envisages privatizing large key enterprises, attracting foreign partners for the technological modernization of production and improving the market position of key industries. The programme also sets a priority on the privatization of cash-strapped enterprises and companies slated for rehabilitation or liquidation, with a view to retaining jobs. Attached to the programme are lists of enterprises which will be privatized as specified. There is a chapter on mass privatization. The programme will be discussed at future Cabinet meetings.

At a closed-door meeting on Thursday the Cabinet discussed a report by Deputy Prime Minister Doncho Konakchiev on the privatization of a 25 per cent stake in the Bulgarian Telecommunications Company. The selection of a investment bank consultant on the deal was discussed, Konakchiev said.

Six out of 16 investment banks applying for the consultancy were shortlisted: Deutsche Morgan Grenfell, Merrill Lynch, CBS Warburg, Goldman Sachs, Nat West Markets and BZW. The final choice will be made on the basis of further details on the banks' experience in telecoms deals in 1993-96, the volume and nature of the deals and their experience as government consultants, Konakchiev said. The banks are to provide this information by December 20 and to submit their offers along these criteria by January 31, 1997.

The Cabinet approved a programme for justice system reform proposed by Justice Minister Mladen Chervenyakov. He said the government had three draft amendments to the Codes of Civil and Criminal Procedure and the Supreme Administrative Court Act.

Chervenyakov said the reform would eliminate adjournments of hearings without good reason and the numerous pending suits which numbered 131,000 in early 1995. The programme covers the lawmaking model, organizational measures for its implementation and the required equipment. The objective is to improve the struture and organization of the judiciary.

The programme proposes that prosecutors account for their performance to the Justice Ministry every year as was the usual practice until 1947.

[05] BLACK SEA ENERGY FORUM

Representatives of the eleven members of the Black Sea Regional Enegry Centre and of the European Commission are discussing the opportunity and conditions for linking power grids to the energy system of Europe.

Mr Bornard presented some projects for connecting the Maghreb countries to Europe via the Morocco-Spain AC interconnection, the work on which is nearing completion; for the reconstruction of ex- Yugoslavia's network and its reintegration with the UCPTE system; and for the setting up of a new power system connected with the Middle East, bringing together Egypt, Jordan, Syria, Turkey and, if peace moves ahead, Israel, Lebanon and the Palestinian autonomous territories.

Having acquired the technical level needed for interconnection with the UCPTE, Poland, the Czech Republic, Slovakia and Hungary were connected to the UCPTE grids in October 1995; the former German democratic Republic was linked to them a week earlier, Mr Bornard said.

"Bulgaria's power grid, its geographical location and the existing tie- lines are good prerequisites for energy exchange among the countries in the western part of the Black Sea region in a free market environment," Boris Pavlov of the National Electric Company of Bulgaria said in his report. "The main goal is to achieve parallel operation of the Balkan countries with UCPTE and to establish a free energy market in the region," Mr Pavlov stated.

[06] BULGARIA AT W.T.O. CONFERENCE

The Bulgarian Minister made a brief review of the negotiations on Bulgaria's accession to the WTO and said that the country's economy is strongly dependent on its foreign trade, therefore it would benefit much from a policy of liberalization. "Bulgaria has assumed a number of commitments during the negotiations which will lead to further liberalization of the Bulgarian market," he said. Minister paparizov said that as a member of the WTO, Bulgaria would make the necessary changes in its legislation and amdinistrative structures to meet in time its commitments.

The Bulgarian delegation to the WTO meeting expressed the hope that the most difficult problems related to information services, telecommunications and operative standards would be resolved through a constructive dialigue.

[07] DEFENCE MINISTRY, GENERAL STAFF WRESTLE WITH LOGISTIC DIFFICULTIES

In the 1997 draft defence budget, the General Staff requests outlays for the repair of at least 50 per cent of the defective military equipment, General Pehlivanov said. The exercises and training of the personnel in 1997 will be held as planned. Asked about the possible introduction of a currency board in Bulgaria, Mr Penchev and General Pehlivanov said it is too early to speak of its influence on army support, before the exact parameters of the board have been fixed.

[08] 1996 BUDGET UPDATED AGAIN

The 438,932.6 million leva expenditures are increased to 654,238 million, including a 125,305 million leva increase of operating expenses (to 514, 294.6 million leva). A total of 47,843,500,000 leva are set aside for external debt payments (7,000 million leva up from the initial figure) and 308,465,200,000 leva (up by 119,367,000,000) for internal debt payments. The budget deficit is increased by 125,200 million to fetch 206,000 million leva. The initial version of the budget set the deficit at 7.4% of the GDP.

The budget update was prompted by the sizable interest payments from the public purse as a result of the financial instability in the country over the recent months, the skyrocketing exchange rate and high interest rate in the second half of 1996, say the motives for the update. The major factors that brought about the increase of interest on the internal debt are the high base rates, poor liquidity of commercial banks and the increased turnover of government securities. The sizable external debt interest payments are attributable to the steep appreciation of the US dollar against the lev to an average exchange rate of 254.7 leva/USD 1 instead of the 150 leva/USD 1 target in the second half.

The bulk of the increased budget deficit will be financed with a 115,000 million leva credit from the central bank. The MPs extended by 5 years the credit maturity and it will be repayable over 15 years with a 5-year grace period.

[09] PARLIAMENTARY FOREIGN POLICY COMMITTEE CHAIRMAN MEETS E.U. AMBASSADOR

Kamov said he was informed by the EU Ambassador about humanitarian aid extended recently to Bulgaria and the discussions at the EU headquarters in Brussels on the hurdles for the economic reform, structural adjustment in agriculture and privatization in Bulgaria. Asked by this BTA reporter if he thinks the above issues will still be on the agenda in April when the sitting of the Bulgaria-EU mixed parliamentary committee is due, Kamov said he hopes to see tangible positive changes by that time: a much better political and economic situation and a clear programme for the steps Bulgaria will take in the future.

[10] OCTOPUS PROJECT AGAINST CORRUPTION AND ORGANISED CRIME IN TRANSITION COUNTRIES

The participants will analyse the problems related to corruption and organised crime in the transition states as well as the (mainly legislative) measures which the governments have undertaken so far. The meeting will discuss the proposals of five experts of the Council of Ministers for legislative measures in each of the 16 states, which will be sent to the competent authorities. The results from the conference will be followed between February and September next year through visits and councils in support of the state bodies, in charge of the legislative measures against corruption and organised crime. The concluding meeting on the OCTOPUS project, which was launched in June this year, will be in October, 1997 in Strasbourg.

This is the first modest attempt to counteract corruption and organised crime in the countries from Central and Eastern Europe. In case the project produces positive results, it may be developed into a more ambitious and comprehensive programme, said Hans-Jurgen Bartsch, head of Division of Crime Problems with the Council of Europe.

In their addresses Minister Chervenyakov, Mr Bartsch and the representative of the Commission of the European Communities John Penny, head of PHARE Democracy Programme, emphasized that no country can handle alone these problems and that only coordinated actions may prove effective.

"It is clear that an isolated "clean hands" operation is not sufficient. Today we need systematic actions at all levels which we can undertake together," Minister Chervenyakov said. He voiced hope that the conference in Sofia will be a step forward to the consistent actions of the European states for developing and adopting a common concept for prevention and control of corruption and organised crime.

"A lot can be done to establish better contacts and coordination among the specialized units for corruption and organised crime control in the 16 states, as well as with the specialized international bodies, especially in the field of information supply," Bulgarian Justice Minister said. He added that more can be done also for the training and the exchange of experience among the specialized bodies at national, regional and international levels. Minister Chervenyakov suggested that the conference discusses an idea for developing a code of the public servant, lobbying rules, for the role of the mass media and of the business circles in the combat against corruption and organised crime.

Minister Chervenyakov recalled the idea of the Bulgarian Ministry of Justice to develop a common programme and strategy for counteracting crime and crime-generating factors in the Balkans. "The idea was approved by the Balkan ministers of justice and steps have already been undertaken for its realization," he added.

The Bulgarian Justice Minister identified as one of the important measures against the growing crime in Bulgaria the signing of the agreement for joint actions of the Parliament, the Government and the Judiciary in drafting a national programme for crime prevention and control. The Ministry of the Interior launched a programme for combat against the growing terrorism and banditism rates in the countries and motivated itself with the unprecedented crime rates over the past few years, which endanger the public order and the home security which has been escalating at times to serious public tensions. About 1 million crimes have been perpetrated in Bulgaria over the last five years and some 500 murders have been committed in the past two or three years. The number of robberies has dropped, however the number of armed robberies has markedly grown. Some 200 explosions are registered every year.

The conference will be held behind closed doors and will finish on Saturday.

[11] BULGARIA'S ENTRY INTO NATO SPELLS RISKS, RUSSIAN GENERAL SAYS

In General Zaitsev's view, Bulgaria's possible integration into NATO rather spells risks and will lead to the dividion of Europe. The security of the continent should be a common cause, shared equally by all countries, both small and big, the General said.

Later the delegation had meetings with 1,200 commanders and servicemen at the Georgi Benkovski Air Force School in Dolna Mitropoliya (near Pleven) and at the Hristo Botev reserve Officers School in Pleven.

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