issue 89 may 2008

Analysis: Higher Interest Rates Surprise Bank Clients Market is Moving Forward Despite the Setbacks Sector Overview: Healthcare, Pharmacy, Medical Equipment TheThe CabinetCabinet RedecorationRedecoration

American Chamber of Commerce in

Business Park , Mladost 4 Area, Building 2, Floor 6, 1766 Sofia Tel.: (359 2) 9742 743 Fax: (359 2) 9742 741 homepage: www.amcham.bg e-mail: [email protected]

editorial

Dear Reader,

As a rule, I try to avoid company functions, corporate celebrations and public anniversaries. I am not particularly enamored with the idea of standing in a crowd balancing a glass with the 'wine of the moment' in one hand and a 25- cent-sized bite of salmon on rye bread. Of course, I have little choice in this matter, because I have to be seen at such occasions often.

At the end of April, I was invited to the 17th anniversary of 24 Hours daily, since I spent six years in this newspaper, starting with its founding in 1991. The cele- bration was held on the same day the parliament voted for the changes in the Stanishev Cabinet. You would be amazed to know how strong was the repre- sentation by high-level government officials at the cocktail. The president with the first lady, the prime minister himself, ministers, leaders of parliamentary groups, regular MPs attended the party. The notable exception, naturally, was Roumen Petkov, the now ex-minister of the interior, who will not be seen much in public for a while.

Larger news organizations, such as 24 Hours, Trud, bTV, BNT, Nova TV, by default enjoy the attention of senior government officials. Parvanov, Stanishev and the rest usually find the time to attend most parties given by these publications and broadcast networks. But on April 24, 2008, the 24 Hours premises resembled a parliament more than news offices. Ministers and MPs outnumbered journalists.

You would ask, Why? Well, for starters, the fire of the latest political scandals and the related government shuffle was stoked by the media to a large degree. Politicians were reminded during the last month or so of the almost forgotten power of newspapers and broadcast stations to fail governments, change presidents and fire generals.

In the "Ministry of the Interior scandal," Bulgarian media played a pivotal role. They were helped by those politi- cians, who were so kind - and conscientious - as to provide the journalists the documents and secret minutes, revealeding the disgrace at higher levels of power. If the media have not taken this matter to heart, they would not have spent tons of ink and hours of air time exposing the problems at the ministry, including contacts with organized crime and incompetence. This avalanche of reporting eventually led to the reaction by Prime Minister Stanishev and his political allies.

He could have gotten away easily, and Bulgaria could have continued making a bad impression in Brussels and AmCham Bulgaria Magazine May 2008 Washington with its rampant mafia, corruption and other problems. We could have lost even more of the already undermined EU trust with respect to the (mis)use of Euro-funds. We could have even become the first ever coun- try to lose its hard-earned membership card.

With the government shuffle and agreements among Stanishev, Saxe-Coburg-Gotha and Dogan, such undesirable developments became a not-so-immediate possibility. It seems almost certain now that this Cabinet and the tri- partite coalition will reach the end of the parliamentary mandate, which at least provides stability and better busi- ness environment in Bulgaria. page 1 The new ministers will need about two-three months to get acclimated. Then comes the summer break for the parliament… then it is Christmas… then get ready for the regular elections, to be held next year.

Until then, you can bet that Bulgaria's top politicians will attend all media events diligently, because they saw the power of news media in action.

Milen Marchev Editor-in-Chief contents

issue 89 may 2008

AmCham Bulgaria Magazine is a primary forum for political and economic analyses, news, viewpoints as well as for the presentation of new business oppor- tunities. The articles in the AmCham Bulgaria Magazine express the opinions of the authors and do not necessarily reflect the position of the American Chamber of Commerce in Bulgaria.

Publisher Writers: American Chamber of Commerce in Bulgaria Boyko Vassilev, Marina Tzvetkova, Business Park Sofia, Mladost 4 Area Mina Georgieva, Panayot Angarev, Building 2, Floor 6, Sofia 1766, Bulgaria Yuliana Boncheva Tel.: +359 (2) 9742 743 Fax: +359 (2) 9742 741 Advertising e-mail: [email protected] AmCham Bulgaria: www.amcham.bg Nadejda Vakareeva, [email protected] AmCham Bulgaria Magazine: Editor-in-Chief Milen Marchev, [email protected] Milen Marchev

Deputy Editor-in-Chief: The AmCham Bulgaria Magazine reaches a broad audience Christopher Karadjov of AmCham members, leading US, Bulgarian and internation- al companies, US and Bulgarian decision-makers, all Senior Editor: AmChams around the world. Irina Bacheva Subscription is free of charge. If you would like to subscribe to AmCham Bulgaria publications, please contact the ISSN 1312-935X AmCham Bulgaria office.

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Board of Directors of the American Chamber of Commerce in Bulgaria President Mr. Borislav Boyanov Borislav Boyanov & Co. Vice President Mr. Anthony Hassiotis Contents Vice President Mr. Kenneth M. Lefkowitz New Europe Corporate Advisory Treasurer Tanya Kosseva-Boshova Landmark Property Bulgaria cover story Cabinet Changes: The Mountain Members Ms. Olga Borissova Ellief Center, AUBG Gave Birth to a Mouse ...... 4 Mr. George Georgiev Motorola Bulgaria Mr. Thomas Higgins Balkan Accession Fund In and Out ...... 12 Mr. Andon Ichev General Electric Mr. Stefan Ivanov Citibank N.A. By Boyko Vassilev Ms. Dana Leff AbCRO Bulgaria Mr. Chris Thompson Consultant sector overview Ms. Elitsa Tsaneva Ideal Standard Bulgaria Financing Healthcare Services ...... 14 Ex-Officio Member Mr. James Rigassio US Senior Commercial Attache Bulgaria Lags Behind Its Neighbors Executive Director Valentin Georgiev in Healthcare Investment ...... 16 By Irina Bacheva 3M (East) AG . AA KRES EOOD . ABB Bulgaria EOOD . Abbott Laboratories S.A. . AbCRO - Bulgaria . Accor Services Bulgaria . ACO Building Elements Ltd. . ACSIOR Ltd. . ADIS Ltd. . Advance International Transport (Balkan) EAD . AES Corporation . AFA OOD . AIG Bulgaria Insurance & Reinsurance Company Medical Equipment Market Development Trends . . .18 EAD . AIG Life Bulgaria . AIMS Human Capital . Alcoa Packaging Bulgaria . Alexander Hughes Bulgaria OOD . ALEXANDROV GROUP CORPORATION . Alfred C.Toepfer International . Alliance One Tobacco Orphan Drugs Explained ...... 20 Bulgaria . Allied Pickfords Bulgaria . Alter Ego Company OOD . American College of Sofia . American English Academy . American Resarch Center in Sofia . American University in Bulgaria (AUBG) . Anglo- American School of Sofia . Anton Preslavski, Liebert Hiross . APIS - BULGARIA Ltd. . APOLO Ltd. . Aries Pharmaceutical manufacturers: Commerce . Ashtrom International Ltd. . Association Integra-BDS . Astra Zeneca UK Ltd. . Astral Holidays AD . AT Engineering 2000 Ltd. . Auditing Company Versi and Partners Ltd. . AVON Cosmetics Bulgaria Ltd. Bulgarian Drugs Cheaper than Rest of EU, . BAE Systems International Ltd. . Balkan Accession Fund . Balkan News Corporation Plc. . Balkan Star Costs for Patients Higher ...... 21 Automotive EOOD . Baxter AG . Bayer Bulgaria EOOD . BC Serdon . Berlitz Schools of Languages . BG Radio . BMG Ltd. . Bodyguard-Fire-K Ltd. . Borislav Boyanov & Co. . Braykov's Legal Office . British American Tobacco . Brown Forman Beverages Worldwide Sofia Branch LLC . Bulgaria Platinum Group finance EAD . Bulgarian American Enterprise Fund . Bulgarian Charities Aid Foundation (BCAF) . Bulgarian Land Development EAD . Bulgarian Telecommunications Company AD . Business Media Group . Business Park Higher Interest Rates Surprise Bank Clients ...... 22 Sofia EOOD . CallPoint New Europe AD . Candole Partners EOOD . Car Rental Bulgaria Ltd. . Carlsberg By Mina Georgieva Bulgaria AD . Cefin Bulgaria EOOD (IVECO dealer) . Center for the Study of Democracy . CENTURY 21 Bulgaria . Chelopech Mining EAD . Chris Thompson, Independent Consultant . Cisco Systems Bulgaria . Citibank N.A.- Sofia Branch . City University of Seattle . Cleves EOOD . CMS Cameron McKenna EOOD analysis . Coca-Cola HBC Bulgaria AD . Coface Bulgaria Management Services EOOD . Colgate-Palmolive Adria . COLLIERS International . ConsulTeam Recruitment and Selection Ltd. . Cook Communications . Real Estate Market is Moving Forward Corstjens Worlwide Movers Group . CPM Consultancy Sllc . Curtis / Balkan Ltd. . D&IC (Dun and Bradstreet Despite the Setbacks ...... 28 Representative) . DeConi International . Deloitte Bulgaria OOD . DENIMAR Ltd. . Devin AD . DHL Express Bulgaria Ltd. . Diageo Bulgaria Ltd . Diamed Ltd. . Dimitrov, Petrov & Co. . Djingov, Gouginski, Kyutchukov, & Velichkov . DLA Piper Weiss-Tessbach Branch Sofia . Dobrev, Kinkin & Lyutskanov Law Firm . Modern Industrial and Logistics Parks Domaine Boyar International AD . Dr. Emil Benatov & Partners . Dr. I.S. Greenberg Medical Center, Ellen Ruth Greenberg, Ph.D. . DuPont de Nemours International S.A. . DynCorp International LLC . Economedia AD . Are Underway in Sofia ...... 30 Effekten Und Finanz - Sofia AD . Ekotoi - Service Ltd. . Electron Progress EAD . Eli Lilly and Company . Elido (Lamel Ltd.) . Elmec Sport Bulgaria EOOD . Elta consult AD associated partner of CB Richard Ellis for By MBL Bulgaria . Emerson Process Management AG . Emporiki Bank Bulgaria EAD . Encouragement Bank AD . Enel Maritza East 3 AD . Enemona SA . Engineeringservice Sofia Ltd. . Environmental Quality Management, csr corner Inc. . Epsilon Interactive International . Equest EAD . ERATO HOLDING Plc . Ernst & Young Bulgaria . European Bank for Reconstruction and Development (EBRD) . Flying Cargo Bulgaria Ltd. - Licensee of FedEx . AstraZeneca Bulgaria Goes Strong Force Delta Ltd. . Forem Consulting Bulgaria . Fortel Engineering LTD. . Forton International JSCo . Foster Wheeler Energia Polska, Branch Office Bulgaria . Foundation for Local Government Reform . G4S Security with Annual Initiatives ...... 32 Services Bulgaria JSC . General Electric International . General Security ltd. . Genmark Automation Bulgaria Plc. . GlaxoSmithKline . Global Benefits Group GBGI CEE LLC Representrative Office . Goodyear Dunlop USAID Marks Earth Day with Planting Trees in the Tires Romania . Grand Hotel Sofia . Grenville Bulgaria . Grey Worldwide Bulgaria EOOD . Hewlett- Packard Bulgaria Ltd. . Hilton Sofia . Holiday Inn Sofia . Honeywell EOOD . Hotel Yastrebets Wellness Sofia’s South Park ...... 32 & SPA . IBM Bulgaria . IBS Bulgaria Ltd. . Ideal Standard Bulgaria . Immo Industry Bulgaria . In Time Ltd. . Industrial Holding Bulgaria . ING Bank Sofia Branch . Interbrands Marketing & Distribution Inc. OOD Motorola Dedicates Children's . Interdean . International University College . Investbank Plc. . IP Consulting Ltd. . ISI Emerging Markets (Internet Securities, Inc.) . Johnson & Johnson Doo. . Johnson Controls Electronics Bulgaria . Junior Playground in Mladost ...... 33 Achievement Bulgaria . Kaliakra AD . Kamenitza AD . Kamor Auto EOOD . Katilin Popov Enforcement Officers . Kempinski Hotel Grand Arena Bansko . Kimimpex Trade and Leasing Ltd. (2be) . Kolbis International Transfer Corporation . KPMG Bulgaria . Kraft Foods Bulgaria . LANDMARK Property Bulgaria . Lexim news Sofia Ltd. . Lindner Immobilien Management EOOD . Lirex BG Ltd. . Lowe Swing Communications . M AmCham Bulgaria Magazine May 2008 & M Air Cargo Service Bulgaria Ltd. . M3 Communications Group, Inc. A Hill & Knowlton Associate . Magnetic Banks Finance Energy Efficiency, Renewable Sources Head Technologies . Maria Vranovska, MD, MBA . Marsh EOOD . MARTERN EOOD . Mathnasium Projects ...... 34 (Rossimat Ltd.) . MBL Ltd. . McDonald's Bulgaria Ltd. . Mellon Bulgaria EAD . Merck Sharp & Dohme Bulgaria . Mercurius-Sofia . Metropolitan Hotel Sofia . Microsoft Bulgaria . Miltech Ltd. . Mmd, Corporate, Public Affairs & Public Relations Consultants . Mobiltel EAD . Monbat Plc. . Moody International American Corner at Ltd. . Moten Sport . Moto-Pfohe Ltd. . Motorola Bulgaria EAD . National DISTRIBUTORS . NATO Defense College Anciens' Association . NDT Equipment Supplies Ltd. . Neochimiki Bulgaria S.A. . Neterra Sofia City Library Expands ...... 35 Communications . Neumann International AG . New Europe Corporate Advisory . New Europe Directories Bulgaria . Nexcom Bulgaria EAD . On Bulgaria Ltd. . Opet/Aygaz Bulgaria EAD . Oracle East Central member news Europe Limited - Branch Bulgaria . Orbit Ltd. . Orkikem Ltd. . OSG Records Management . Outsource Partners International . Ozone Laboratories Bulgaria . PANDA - IP Ltd. . Penev & Partners Law Offices . Wilson Learning Bulgaria Discusses Penkov, Markov & Partners OOD . Pfizer Luxembourg SARL, Representation Office Bulgaria . Philip Morris Bulgaria EOOD Pioneer Semena Bulgaria EOOD Bulgaria AD Plesio Computers Jsc . . . . page Leadership Issues ...... 36 Popov Legal Office . Postbank (Eurobank EFG Bulgaria AD) . PostPath . Praktiker EOOD . Pratt & Whitney . PricewaterhouseCoopers . Procter & Gamble Bulgaria . ProSoft . PSG Payroll Services Ltd. 3 new members ...... 36 . Radisson SAS Grand Hotel . Reader's Digest EOOD . Regus Bulgaria Ltd. . Renault Nissan Bulgaria SRL . Rising Force Co., Ltd. . Rockwell/Intelpack . S&T Bulgaria . Sanofi - Aventis Bulgaria EOOD . Metropolitan Hotel Sofia Scandinavia Motors Ltd. . Schenker EOOD . Schering - Plough Central East - Bulgaria . SEAF Management Bulgaria EOOD . Sheraton Sofia Hotel Balkan . Sherita M Ltd. . Siemens EOOD . Sienit Ltd. . SigmaBleyzer Investment Group LLC - Representative Office . SKE Bulgaria EOOD . Sofstroy AD . Soravia member news Bulgaria Ltd. . Stanton Chase International Bulgaria . Stefan Dimitrov, Norman Realestate Co. Ltd. . Symix EFG Securities Bulgaria Launches Investment and Bulgaria OOD . TechnoLogica EOOD . TeleLink EAD . The Coca-Cola Company Bulgaria . Tishman Management Company Ltd. . Tissue Bank Osteocenter Bulgaria EAD . TMF . Totema Engineering . Trans Brokerage Services in Bulgaria ...... 38 Company Ltd. . TravelStoreMaker.com . Tumbleweed ® Communications Corporation EOOD . UniCredit Bulbank . Unimasters Logistics Plc . Unique Estates . Unisys Bulgaria Branch . United Bulgarian Bank . United Consulting Ltd. . United Healthcare Bulgaria Group of Companies . United Medical Communications Company Offers Free Diagnostic and Planning for . Vaptsarov Holding AD . Vector Management Bulgaria EOOD . Videolux Holding / Technopolis . VIP Mobile Communication Needs ...... 40 Security Ltd. . VISA Europe . VM Finance Group . VSK Kentavar Ltd. . Welcome to Bulgaria . Westinghouse Energy Systems Bulgaria Branch . World Courier Bulgaria . WorleyParsons Europe Energy Services Ltd. . Wrigley Bulgaria EOOD . Xerox Bulgaria Ltd. . Yavlena EOOD . Zlati Dinev Studio in part- nership with Outerbridge/Morgan . cover story Cabinet Changes: The Mountain Gave Birth to a Mouse Stanishev, Simeon II and Dogan will stay at power until their default expiration date

Newly appointed ministers taking a vow in front of the Parliament.

A year before the expiration of the gov- The MRF leader Ahmed Dogan, who top post at the Interior Ministry and after ernment mandate, the National Assembly made a rare appearance in the all persons deemed suitable for the post approved by 155 votes the personal Parliament to attend the cabinet reshuf- refused to accept. Mikov will take over changes in the cabinet of the tripartite fle, said the changes were late to come the post until recently occupied by coalition between the Bulgarian Socialist but were nevertheless necessary. Most Rumen Petkov, who in turn may take over Party (BSP), the National Movement of the new members of the cabinet the parliamentary faction chairmanship Simeon II (NMS) and the Movement for declined any comments to the media after his parliamentary credentials are Rights and Freedoms (MRF). 74 mem- while at the National Assembly. The only restored. Mikov's appointment is consid- bers of parliament voted against. exception was Deputy Prime Minister for ered as one of the serious personal and European Funds Meglena Plugchieva, structural changes initiated within the New ministers Meglena Plugchieva, who said that there will be no duplicate cabinet of Prime Minister Stanishev, Mikhail Mikov, Nikolay Tsonev, Valery functions between her and European which he had announced he was going Tsvetanov and Evgeniy Zhelev were Affairs Minister Gergana Grancharova. At to make. sworn in office by taking the oath to the end of the parliamentary session, the abide by the Constitution. Emel Etem parliamentary faction of the Coalition for The other major surprise in the cabinet took the oath together with the new cab- Bulgaria anonymously elected the current changes came with the nomination of 4 inet members, as her former agency was BSP spokesman, Angel Naidenov, as the Nikolay Tsonev for the top post at the transformed into the Ministry of acting parliamentary faction chairman to Ministry of Defense. The MRF cadre Emergency Situations. The parliament succeed Mikhail Mikov at this post. Valery Tsvetanov will head the approved one more structural change, Agricultural Ministry, and Dr. Evgeniy transforming the former Ministry of The BSP decided to bet on the leader of Zhelev from BSP will head the Ministry of Agriculture and Forestry into Ministry of the leftist parliamentary faction, Mikhail Healthcare. A new deputy prime minister Agriculture and Foods. The only outgoing Mikov, a lawyer by education, to take was also appointed - Meglena minister, who failed to attend the cere- over as minister of the interior, after the Plugchieva of BSP will be in charge of

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria mony, was former Minister of the Interior tripartite coalition found itself in a dead- the money from the European funds. The Rumen Petkov. lock while deciding on candidates for the changes in the cabinet were made cover story

U.S. Ambassador John Beyrle: The structural changes in the cabinet are much more important than the personal ones The structural changes in the cabinet are much more important than the per- sonal ones. The reform of the Ministry of the Interior is even more important. We are convinced that there is a political will in the government to make these reforms now. The United States is ready to work together in the process of reforms, which has already started. As partners and friends to Bulgaria, we are ready to assist the new ministers in their work. according to the 2:1:1 scheme, with BSP mandates. He was elected as chairman Meglena Plugchieva (right) is the new Deputy changing two of its ministers - Rumen of the parliamentary faction in the Prime Minister without portfolio in charge of the Petkov and Radoslav Gaidarski, NMS - incumbent parliament with the personal EU funds Vesselin Bliznakov, and MRF - Nihat support of Sergei Stanishev. At the peak Gottingen and the Institute of Forestry Kabil. Before the vote in the Parliament, of the scandal Angel Alexandrov - Policy with the Freiburg University. As of the new ministers were approved on April Rumen Ovcharov, when everybody October 1997, she served as Bulgaria's 22 during a meeting of the Coalition expected a fiery session of the Sofia representative to Rhineland-Pfalz federal Council. The names were formally organization of the BSP, it was Mikhail state in Germany. She was a partner and announced by the prime minister and Mikov who stood up for the party leader manager of Tremula OOD from 1998 to leader of the BSP Sergei Stanishev at a to deflect the attacks of Ovcharov's sup- 2001. She was a member of the BSP meeting of the party's Supreme Council. porters. Besides his close relations with Supreme Council in charge of agrarian the prime minister, Mikov maintains good and international policies. Plugchieva The Ministry of the Interior terms with the president as well. At the was also elected to one of the previous is close to both the prime start of his career, Mikov was supported parliaments. minister and the president by the then BSP leader and incumbent President . When A businessman takes over Mikhail Mikov, a lawyer, has been a mem- Parvanov headed the BSP parliamentary the army ber of parliament for three consecutive faction, Mikov was his deputy. Nikolay Tsonev, until now executive An ambassador in charge director of the Social Affairs Agency of the European money with the Ministry of Defense, was appointed at the top of the same min- Incumbent Ambassador of Bulgaria to Germany Meglena Plugchieva will be responsible for coordinating all funds released within the framework of various European programs. Before that Plugchieva served as a deputy minister of agriculture in the Saxe Coburg-Gotha cabinet. She is seen as being close to President Parvanov. She has graduated the Forestry Technical University in Sofia, MP Mihail Mikov replaced Roumen Petkov as with a degree in forestry, and has spe- Nikolai Tsonev takes over from Vesselin Bliznakov Interior Minister cialized at the Forestry Institute in as Minister of Defence AmCham Bulgaria Magazine May 2008

page 5 cover story

istry to succeed Vesselin Bliznakov. date as President. Zhelev ran for mayor Tsonev has stated in his personal prop- of Stara Zagora again at the last local erty declaration that by 2002, when he elections last autumn, when - despite was appointed to the Ministry of the broad coalition that backed him - he Defence agency, he had 191 shares in lost the run-off to the GERB candidate the Nilana OOD company, according to Stelin Tanchev. a report published by the Sega daily two years ago. Tsonev was appointed by the The new healthcare minister has Saxe Coburg-Gotha cabinet, when the graduated human medicine at the Ministry of Defense was headed by High Institute of Medicine in Plovdiv. Nikolay Svinarov, now member of parlia- He completed also a course in ment from the Bulgarian National Healthcare Management in 1997, Movement (BNM). organized by the U.S. Agency for International Development (USAID). Nilana OOD is the major supplier of He worked at the intensive care unit bread and bakery products to the army. Valeri Tsvetanov is the new Minister of Agriculture of a hospital in Stara Zagora between The tenders held by the Ministry of and Food Supply in the place of Nihat Kabil 1985 and 1995. He headed the Defense for awarding public procure- nated because "of his major experience Regional Hospital in Stara Zagora in ment contracts have always been virtu- in utilizing European funds". The official 1997. Zhelev is also a member of the ally non-transparent, which has often CV, presented by the government press Board of Managers of the National resulted in corruption suspicions. A 31- office, however, lists only positions held Health Insurance Fund. percent share in Nilana OOD is held by at research institutes. a Panama-based company, Amtec Stanishev checked the Group Inc. Tsonev has declared that he Healthcare goes to an nominees' background also holds shares in the companies orthopedist Czech Consult OOD, Bulpaper OOD Sergei Stanishev announced that he and Pacpaper OOD. He has also The Chairman of the Agency for had asked for individual references for declared a 50-percent stake in three Bulgarian Expatriates and former mayor each of the nominees from the National separate apartments, and owns portions of the city of Stara Zagora Dr. Evgeniy Agency for State Security, referred to as of three land lots. Zhelev will take over from Professor Bulgaria's FBI, in order to be sure that Radoslav Gaydarski the post of Minister besides being professionals, they are He refrained from declaring the amount of Healthcare. During his mandate as also persons, acceptable to the public. of his savings in cash. Tsonev is well mayor, Zhelev was the target of several known for a refined style and expensive assassination attempts. "The Ministry of the Interior scandal has cigars. He organized six tours to undermined the confidence in the coali- Thailand for top officials at the Ministry tion and in the cabinet as a whole, that of Defense and senior military offices at is why, in the current situation, it was the General Staff in 2005. The Agency necessary to initiate specific measures he used to manage also controls the at the Ministry of the Interior," Stanishev seaside and mountain resort bases of told the members of his party's the Ministry of Defense. Reportedly, Supreme Council. Stanishev added that Tsonev asked some two years ago the working groups have been discussing permission of the then Minister ways to streamline the executive Bliznakov to build a new seaside hotel, branch. but was rebuffed. The Coalition Council will again meet to The MRF surprise decide exactly how to proceed with the reforms at the other levels of govern- The MRF has decided to part with Nihat ment. "The number of deputy ministers Kabil and instead nominated Valery and of deputy regional governors will be Tsvetanov, an almost unknown former Evgenii Zhelev succeeded Radoslav Gaidarski as reduced. There was a lot of mistrust MRF contender for the parliament from Minister of Health among the members of the coalition, at 6 Sofia. The MRF nominee for minister of the time when it was formed, and this agriculture is an associate of the "Nikola Zhelev was appointed about a month resulted in a large number of deputy Pushkarov" Soil Sciences Institute. ago by President Georgi Parvanov as a ministers and deputy regional governors, Tsvetanov is virtually unknown both to regional policies adviser. At the same the prime minister said. the media and to people engaged in time, he was appointed as chairman of agriculture. Tsvetanov was on the list of the Agency for Bulgarian Expatriates. The reactions MRF candidates from the 25th Sofia The close links between Parvanov and Electoral District for the last elections Zhelev emerged when Zhelev was "The former head of the parliamentary

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria held in 2005. According to prime minis- included in the group of mayors, who faction of the Coalition for Bulgaria is ter Stanishev, the researcher was nomi- supported Parvanov for his second man- a good choice for the vacated post and

cover story

The Political Council of the ruling coalition during a discussion over the changes in the cabinet. Top players from BSP, MRF and NMS will meet again in order to discuss the implementation of the governance priorities until the end of the term in office, the macroeconomic framework of the budget and the health reform.

has a lot of political confidence," said should be dedicated to solving these that the opposition was right in its BSP spokesman Angel Naidenov. issues. The appointment of specific claims aired during the last three Besides, Mikhail Mikov is said to be persons to specific post does not by years," added Bakalov. According to trusted by the European institutions. itself solve problems, which are linked him, the forthcoming EU report on Naidenov added that the cabinet reform to whether there will be early elec- Bulgaria will not be good. is most important for Bulgarian citizens tions or not. The early elections and step towards restoring their confi- depend on whether political parties The deputy chairman of the parliamen- dence. are interested in such a step, and sec- tary group of the Democrats for Strong ondly, whether the early elections Bulgaria (DSB) Vesselin Metodiev also Others assessed these personnel would also be enough to solve the expressed his surprise with the behav- changes as belated and cosmetic, and issues that are on the public agenda: iour of the tripartite coalition. "It is as being far from matching the expec- these issues are related to the crisis clear for us, the opposition, that the tations of both people at large and in the state system and the emerging cabinet is missing a lot of chances for Brussels. "At first glance, I think that economic crisis - these are the major Bulgaria," he said. "It is missing these the new ministers have neither the challenges," Ralchev added. chances, just as they missed them in capability nor the philosophy to initiat- terms of both internal policy: they "lost" ed the required changes in their sec- "I was not surprised by the government the inflation, people are not offered a tors," said the leader of the Union of changes," said Yordan Bakalov, chair- better life, and in terms of foreign poli- Democratic Forces (UDF) Plamen man of the parliamentary faction of the cy, the money coming from Brussels Yurukov. The Ataka party urged their United Democratic Forces. "I was sur- were stopped." colleagues from the right to leave par- prised by the fact that the prime minis- liament in protest and insist on early ter failed to keep his promise for struc- According to Metodiev, the cabinet elections. tural changes in the cabinet. The only changes do not send any positive sig- thing that happened was to change nal to the country or to the partner in "The individuals, who will take over the some of the cabinet members." the EU, and that is why, he said, the 8 ministerial seats, will not resolve the chances for a positive EU report are issue with the crisis situation in this "The personal changes, proposed by less than 50 percent. country," said Borislav Ralchev, head the prime minister, amount to nothing of the parliamentary faction of the more than introducing new persons and The cabinet changes are "an imitation Bulgarian New Democracy. "It is obvi- of an overhaul," said Ataka leader ous, that - regardless of who will be contain no message of a Volen Siderov. This is the behavior of appointed at the new posts - the cri- new policy people who see no way out and have sis of the state system, the crisis of neither new ideas nor the human

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria the political system remains on the towards and towards the EU resource, Siderov added. "Together agenda of the society and all efforts in terms of corruption. This indicates with the rest of the opposition parties

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we shall boycott the parliament as it is clear that we are not to serve solely as world media reaction parliamentary audience to a majority. That is why we urge for early parlia- Die Presse mentary elections to be held as soon as possible," he said. Siderov claimed The mountain braced itself and gave birth to a mouse: this is how the decisions that the incumbents suffer from a sin- of the three coalition parties in Bulgaria for cabinet changes can be described, gle idee fixe - to hold on to power for Austrian daily "Die Presse" commented. The ministries of the interior, healthcare, another year. This country needs radi- agriculture and defence have new ministers. Besides, a new post for a deputy cal reforms and not the replacement of prime minister was created to take charge of the funds released by the European one person by another, and reforms Union, the daily reported. It reminds that the scandal broke out after it emerged can be made only by parties and lead- that the Minister of the Interior Rumen Petkov, has had contacts with representa- ers, who have never been in power, he tives of the criminal world. said. EuroNews TV "This is an admission of the political failure of the tripartite coalition," said "The changes are aimed at combating corruption and organized crime, raving in the co-chairman of the Bulgarian the country. For about a month, the European Commission has been pressing Popular Union Stefan Sofianski. Bulgaria to destroy the criminal networks", the TV wrote and reported about the According to him, the cabinet changes creation of a new deputy prime minister post, whose task will be to supervise the had to lead towards a fundamental proper utilization of European funds. change and towards the formation of a professional cabinet. The chances for The French newspapers Le Point and L'Express, the TV5 and France 24 TV chan- early elections are increasing, although nels, the Swiss dailies 24 Heurs, Le Temps, and Tribune de Geneve, the Belgian the opposition is not sufficiently con- radio RTL Info and the Luxemburg RTL also reported on their web sites on the gov- solidated to be able to exert pressure, ernment changes in Bulgaria. but the non-confidence vote managed to press the cabinet into action, Der Standart Sofianski added. The ruling majority in Bulgaria is facing a restructuring after the EU temporarily All three BSP political appointees are suspended its financial assistance extended within three pre-accession programs symbolic figures, with their own political - 300 million Euro from ISPA, 75 million Euro from PHARE and 82 million Euro in biographies, and indicate that the BSP subsidies for farmers from SAPARD. Bulgaria was criticized for lacking in readiness is priming for an offensive in response to cooperate in clarifying alleged corruption cases. Observers claim that this atti- to the political attacks it was forced to tude was caused by intertwined interests of subsidies recipients and high-level absorb, said political analyst Antonii state officials. For instance, the 2006 case for an alleged misuse of 7.5 million Galabov. The political strategy of the Euro received within the SAPARD program is still far from being completed. The two other coalition partners is to nomi- main suspect is Lyudmil Stoikov, a businessman, who, according to media reports, nate persons without a background, he was among the sponsors of the election campaign of President Georgi Parvanov. added. The cabinet has announced 16 specific measures to eliminate corruption practices, Cabinet approval fell including the appointment of independent financial inspectors, improved training of below 15 percent, officials and more transparency regarding the allocation of subsidies.

and at the same time the relatively sta- 2005, which came in an environment reminded that the BSP government was ble governing majority in parliament is of a growing mistrust towards the rocked recently by corruption scandals. sufficient for overcoming any no-confi- incumbents, AFP wrote, quoting a sur- dence vote. With this parliamentary vey conducted by Gallup, which indi- Reuters reported that Bulgaria's prime majority the procedures for terminating cates that 71 percent of the respon- minister fired three cabinet ministers in the mandate have a low chance of dents said they do not trust the order to avoid the loss of millions of success, Galabov said. Socialists. Although Bulgarians remain Euro from the because the most ardent Europhiles in the EU, of the failure of the authorities to tame 10 Bulgaria initiated cabinet changes in a token 22 percent now, 16 months sweeping corruption and organized order to calm Europe down, AFP wrote. after the country's accession to the crime. As a new EU member state, The objective of Prime Minister EU, say their have optimistic expecta- Bulgaria is under a strong pressure Stanishev is to save the image of his tions AFP wrote. both at home and in Brussels to country with the European partners urgently show visible results from its after the corruption scandals, and to Bulgaria's Prime Minister Stanishev combat against bribes and organized make combat against organized crime reshuffled his government by changing crime before the publication of the cru- more efficient. This was the second three key ministers and appointed a cial report on its progress, which may

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria round of cabinet changes after the tri- new deputy prime minister, the well recommend sanctions against partite cabinet was formed in August Associated Press reported. The agency Sofia, Reuters wrote. ■

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ty to external criticism. The second, the desire of some circles in the EU to In and Out make a problem out of Bulgaria's case that will delay the further enlargement of Sofia shootings echo through Europe the Union. By Boyko Vassilev "A campaign is being waged against us." "Anti-Bulgarian circles are sparking crit- icism." "The bad news is not coming from our friends."

These are not Cold War complaints. These are statements by democratic Bulgarian politicians commenting on the numerous western writings against dif- ferent Bulgarian shortcomings: starting from the horrible conditions in the home for disabled and abandoned children in the village of Mogilino (BBC's documen- tary literally shook Europe and triggered stormy reactions), and ending with the high-profile killings in Sofia.

Not that Bulgarian politicians have embarked on a battle with the West, on the contrary. The problem is that some of them still find it hard to understand that trains that arrive on time do not make the news: no prominent journalist would come to Sofia only to write about the brightly lit domes of St. Alexander Bulgarian President Georgi Parvanov, prime minister Sergei Stanshev having a glass of Champagne with Jose Nevski cathedral. Others, deluded by Manuel Barroso, President of the European Commission, who was awarded in Sofia with Bulgaria's highest the local realities, believe that journal- state order "Stara Planina" - first degree. During his official meetings in Bulgaria President Barosso remind- ism is mere propaganda: good or bad, ed to the local government officials that the country has a lot of promises to keep. depending on whether the country is Didn't I tell you so? Didn't I tell you that soil, the problem rose like dough in "amicable" or not. These two groups was exactly what was going to happen? which the housewife had put the whole belong to the naive. The problem, yeast in the house by mistake. though, is in the third group: the politi- The sentence that every child hates to cally sly. hear and everyone involved in politics The stories followed one after the other: likes. Didn't I tell you that Bulgaria and The Times of London, The Financial All the people in the third group know is Romania would not be good members Times (twice), The Economist. "One res- that Brussels is responsible for the bad of the European Union? ignation is not enough to clean up news and we, Bulgarians, for the good Bulgaria," The Economist pointed out, news. Even during the transition period That is what yesterday's and today's citing EU officials worried that anything they justified each tough decision with opponents of European integration trum- they shared with Bulgarian counterparts the fact that pet. Their words are echoed by news- would be leaked to gangsters. The papers and magazines, parliaments and Financial Times directly suggested that "Brussels wants it," governments. Bulgaria should be while each benefit was explained like No doubt the bad smell came from deprived of a vote in this: "Despite Brussels, we won a victo- Bulgaria. The peculiar rendezvous of Brussels. ry." The chronic inability of the 12 interior minister Rumen Petkov, his long Bulgarian political elite to take responsi- awaited resignation, the murder of Not to mention German investigative bility has increased tenfold, as did their Georgi Stoev, a well-known author of journalist Jurgen Roth, who revealed habitual aptitude for washing their hands books about the mafia, the 120 unre- striking facts about Bulgarian politicians with Brussels, which is so common in solved gangland-style killings, the flirting and businessmen being in collusion with Europe. When the EU membership of police with criminals, the scandals the mafia. What was behind all that? came, things got even worse: the hard about the EU funds, cabinet shuffles The disturbing facts beside, there are everyday life was interpreted as an epic and the strong organized crime - that two profound reasons. battle with Eurocrats, while natural com-

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria would have made the headlines in and promises like the rendering of the name about any EU country. But on Bulgarian The first is Bulgarians' painful sensibili- "euro" in Bulgarian on the euro ban- cover story

knotes were presented as glamorous corruption (We told you about corrup- victories. "We are doing our best but the tion before the enlargement, didn't world does not understand us," can we?), misappropriation of European often be heard in Sofia. funds.

The strangest thing of all is that these What can we do now? winds are coming from a country that communicated with the EU rationally Suspend EU funding until they correct and without unnecessary egotism. themselves? Impose a safeguard clause Unlike Turkey, Bulgaria did not have an (which, by the way, is a move without imperial attitude in the negotiations; much practical value but quite symboli- unlike Serbia, Bulgaria did not maintain cal: a slap in the face of the current that the EU should beg it to become Bulgarian government and endorsement member; unlike Macedonia, Bulgaria did of the next one)? Well, we cannot get not repeat: "I speak directly to the big as far as depriving them of a vote. We European powers and I do not care cannot expel them either. But we can about the small ones and their preju- stop admitting others like them into the dices." EU.

Just the opposite, Bulgaria showed That is why, paradoxically or not, the equal respect for Luxembourg and main consumers of the bad news from France, and Germany and prop- Sofia can be located in Tirana, Skopje, erly sought the support of each mem- Belgrade and Istanbul. All dramatic ber of the Community. Nevertheless, events in Bulgaria bring grist to the mill slight provincial suspiciousness was of Euroskeptics and flood neighbors' directed towards the traditional Former Minister of Interior Rumen Petkov - the rea- yards. Moreover, Europe does not have Bulgarian tolerance and openness to son why Bulgaria grabbed so much negative atten- the will to risk, lose and sacrifice itself the world. tion from the Western media. in order to provide help and guidance - low press of the West: Bild constantly what the USA did for it sixty years ago. It is true that avoiding painful self-analy- persuaded the Germans how weird the I do not want to sound accusatory: the ses is a traditional Balkan feature. But it two countries were, while The Sun peri- European leaders are innocent about is also least pronounced in Bulgarians. odically kindled the fear that hundreds this. If they had listened to public opin- Therefore, Bulgarian politicians should of thousands of greedy emigrants would ion, they would not have gone even as remember the typical national virtues eat up all jobs in the United Kingdom. In far as here. and get used to criticism: take it easy the eyes of the tabloids the hypothetical and learn from it. Instead of following hordes of Bulgarians and Romanians So, it will be a win-win situation if the example of Baj (Uncle) Ganyo, the displaced even the proverbial Polish Bulgarian premier Sergey Stanishev complex-ridden literary character, who plumber and made him look like a rich acts decisively until the end of his term. ridicules and rejects Europe, they Japanese tourist. If the European Commission is quickly should follow the example of his author, given arguments to calm down the Aleko Konstantinov, a real aristocrat in Didn't we tell you? Now Euroskeptics in the political class and spirit, a European and even environ- you see? They really are the media. If the Bulgarian public opin- mentalist of the young Bulgarian cul- like THIS. ion stops feeling uneasy about criticism ture. It is high time flirting with vulgarity coming from abroad. became obsolete. But all this has a more distant goal. The AmCham Bulgaria Magazine May 2008 enlargement continues: today Croatia is But since we do not live in a perfect But as I said, there are two reasons for on the agenda, tomorrow, Albania, world we have to say: Sorry, Tirana! the problem and the second one is West Macedonia and Bosnia, the day after Sorry, Skopje! Sorry Ankara! You have to Europe itself. Different powers within the tomorrow, even Serbia, and then… then pay twice the efforts of Bulgaria, three EU did not want Bulgaria and Romania comes the Turkish giant and probably times the efforts of Slovakia and Poland in. Christian democrats, conservatives, the Ukrainians. Those who do not want and ten times the efforts of Greece. nationalists, the extreme Right and the the EU founding states to remain a That is life: the first in time is often first page extreme Left, even the Green were majority in the sea of newcomers, in right. Didn't we tell you? I am in 13 skeptical about enlargement and they all speak of the failure of the enlargement already, the others are not my problem. had their arguments and fears. Some process from now. Sometimes what you think to be unjust countries and governments Didn't we tell you? In the very first may have some supreme justification. needed to be persuaded month as EU member Romania was All we can do now is reassure ourselves for long. shaken by a government crisis, sched- that we paid in advance our big luck uled an election, missed another one with the EU in some other historical The biggest opponent of Sofia and and turned chaos into a daily political ways. And that today we will deserve it Bucharest was the yellow and semi-yel- routine. And now Bulgaria: murders, with actions. ■ sector overview Financing Healthcare Services

Budget expenditures for healthcare drop State Healthcare Budget, BGN mn to 3.9% of GDP in 2007; projections for 2008 set at 4.2% 2007 2008 Total allocations 2,217 2,606 The state budget expenditures for healthcare services and % of GDP 3.9% 4.2% drug reimbursements dropped to 3.9% of GDP in 2007 from Current expenditures 2,007 2,368 4.2-4.3% in previous years as a result of inflation effects that raised the nominal GDP value at a much faster rate Investments 94 94 than the state planned expenditures. The budget for 2008 Reserve 115 144 projects a rebound to 4.2% of GDP but similar inflation effects are likely to keep the ratio at about 4% or 4.1% at Source: Bulgarian Ministry of Finance best. The state thus played a restrictive role on the seg- ment of state subsidised drugs of the pharmaceutical mar- National Health Insurance Fund (NHIF), BGN mn ket despite the reported expenditure hikes in nominal terms. 2007 2008 % y/y Revenue 1,182 1,474 24.7 The state budget expenditures in the healthcare sector are Expenditure 1,465 1,681 14.7 allocated through the National Health Insurance Fund (NHIF) and direct transfers from the central budget to insti- Current expenditures 1,348 1,533 13.7 tutions providing health services. The Fund is financed by Investments 2 4 100.0 mandatory contributions mainly but also relies on transfers from the central budget for covering temporary deficits. Reserve 115 144 25.3 The Fund is also allocating part of its receipts to a reserve Balance -283 -207 -26.9 account. The revenues of NHIF are expected to increase by 24.7% y/y to BGN 1.5bn (EUR 753.6mn) in 2008, up Source: NHIF from BGN 1.2bn (EUR 604.6mn) in 2007. Expenditures of could be directed to private insurance funds that will com- NHIF will grow by 14.7% to BGN 1.7bn and will comprise pete on equal terms with the National Health Insurance BGN 295.5mn for drugs and medical equipment for home Fund or will form a second market pillar financed by treatment. Further BGN 785.6mn will be allocated for free mandatory contributions to health services that are not hospital care, including BGN 5.7mn for mother care. The fully covered by the state. The latter option looks like the deficit of NHIF covered by the government budget is esti- more realistic scenario given that the government led by mated to narrow by 26.9% y/y to BGN 206.7mn in 2008, the leftist party BSP is somewhat uncommitted to breaking compared to BGN 282.7mn in the previous year. the monopoly of the National Health Insurance Fund. The third pillar of voluntary health insurance funds is already Government plans to raise health insur- functioning and growing quickly although from a very low ance contributions base. Most of the healthcare market is however regulated by NHIF and significant improvements in the sector cannot The ruling coalition has reached a preliminary agreement be expected until its monopoly remains in place. The health to raise the health insurance contribution from 6% to 8% or ministry is meanwhile working for adoption of a national 9% of the gross personal income as of mid-2008. The health strategy and a supplementing action plan aimed at income base per person is however capped at BGN 2,000 introducing private-public partnerships, transfers of activi- 14 per month as of 2008 regardless of the actual income ties to private companies, and privatisation of smaller hos- while the minimum payments are differentiated by labour pitals that could be restructured into other health or social categories and industries. Part of the additional revenues institutions at a later stage.

This article is based on extracts from ISI Emerging Markets IntelliNews publications: Bulgaria This Week and Bulgaria Country Report. For more detailed information please contact ISI Emerging Markets office in Sofia at +359 2 8160404 AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria or [email protected] sector overview

Private Health Insurance Funds Zakrila Health Insurance collected 41% of the revenues in Jan-Nov 2007, followed by Voluntary Insurance Network The role of private health insurance funds remains quite Zdrave with 14.9%, and Mediko 21 with 10.7%, according to weak in the country although the number of companies data of the financial supervision commission. In March operating on the market is relatively high. The financial 2008, the local investment holding Doverie has acquired supervision commission has licensed 16 companies for 90% of Mediko 21 and will most likely merge the entity with managing voluntary health insurance contributions by the country's fifth largest health insurance fund Doverie, March 2008 and 14 of them have appeared in the regular which is also controlled by the holding. The new entity will statistics for premiums revenues collected by November have a market share of nearly 17% and will become the 2007. Preliminary estimates show that the value of premi- second largest player in the health insurance business um revenues in the sector reached about BGN 25-27mn while the share of the trop three players will widen to more (EUR 13-14mn) in 2007 (BGN 22.6mn or EUR 11.6mn offi- than 70% after the merger. cially reported by the financial supervision commission for Jan-Nov 2007). This is quite a small value in relation to the The private health insurance funds expect total annual rev- annual state budget and contributes by less than 0.1% to enues in the tune of BGN 500mn to BGN 600mn in future the country's gross domestic product. Alternatively, the but the growth rate will be strongly dependant on the scope small size of the private health insurance market could be of liberalisation in the first pillar of state administered seen in comparison with general insurance companies, health insurance contributions or introduction of mandato- which have attracted premiums for more than BGN 1.1bn in ry contributions to private funds. In case that the govern- 2007. Nevertheless, the private health insurance funds are ment decides to fully remove the legally defined monopoly operating at high profit margins as the total amount of of the National Health Insurance Fund, the business of pri- reported payments are just slightly above 50% of the pre- vate health insurers could expand to much higher values in mium revenues, according to data reported by the financial the long run. But the government is likely to follow the supervision commission. This explains the strong investor more conservative model of partial liberalisation that will interest and the resulting large number of health insurance give private funds only a very limited access to mandato- funds. The business is however heavily concentrated in ry insurance contributions in accordance with the three-pil- three players generating more than 65% of the revenues lar system already enforced in the field of pension insur- from insurance premiums. The market leader Generali ance. ■ AmCham Bulgaria Magazine May 2008

page 15 sector overview Bulgaria Lags Behind Its Neighbors in Healthcare Investment Interview with Dr. Thomas Habenreich, regional vice president for EU integra- tion, Siemens EOOD Medical Solutions By Irina Bacheva - Siemens is offering particular medical equipment to Bulgarian hospitals, including computer tomography (CT) and magnetic resonance (MR). How are you positioned on the market having in mind the limited resources of the hos- pitals?

- In general, the percentage of GDP for healthcare in Bulgaria is the lowest in the EU, and as a result the market is very weak. I should say that the medical equipment that we sell is spread with approximately 50 percent to public hospitals, and 40 per- cent are bought by private institutions. As a whole, only 30 per- cent of the sold systems are the new ones. All the others are second-hand equipment, and the technological quality is far from up to date. The outcome is that the diagnostic report for the patients is not the one that should be. The reimbursement rate for CT scan is 29 Euro, and for that price it is not possi- ble to buy new equipment. For example, in Romania, the imag- ing centers have reimbursements of 60 Euro. This is also not Since 2005 to present Thomas A. Habenreich has been enough, but at least they are able to afford better equipment serving in Siemens AG Austria Regional Group at the posi- than here in Bulgaria. All the other Balkan countries have much tion of European Union Integration Manager of South East better reimbursement rates compared to Bulgaria. The only Business Region Medical Solutions and Managing Director reimbursement rate that seems to fit the standards is the one of Medical Solutions, Bulgaria. for cardio angiography. He is responsible for the reorganization of Medical - Have you discussed these issues with the national insti- Solutions group in Bulgaria. Mr. Habenreich established tutions? contacts into respective positions in the Ministries of countries dealing with European Union integration, sup- - We had conversations at all political levels that the system ported and advised on creation of the countires' National should improve. Here is the example. The Bulgarian Ministry of Development Plans for Healthcare and the supporting pro- Healthcare has a budget of 33 million Euro to invest in the grammes. Prior to Bulgaria he was a business develop- whole sector, including repairs of hospitals. This is one-tenth of ment manager of Customer Solutions Group MED USA what an average EU country allocates for the sector. Of course, from 2002 to 2004. There he helped for the successful Bulgaria is restricted by the currency board, but healthcare is implementation of the new business unit "Global Solutions" definitely underfunded, and this is a serious issue. Another in the MED USA sales organization. He started his career problem is non-compliance with the EU regulations, because in Siemens as a product specialist in 1985 and continued they stipulate for a larger share of GDP for healthcare. It ends to serve at the company up until to 2002 at senior man- up with a disastrous quality. Of course, there are some positive agement positions. examples, but these are only a handful. Bulgarian medical uni- 16 versities work with 10-12 years old equipment. Mr. Habenreich graduated physics, geophysics, mathemat- ics and philosophy at the University of Vienna. He is a All in all, the missing sense of quality is not always related to Member of the Austrian Architect and Civil Engineer money. We had discussions with politicians and decision mak- Association. Thomas describes his hobbies in literature ers in Sofia Municipality, elaborating on the idea to develop a and classic music, especially Russian composers, and - program of postgraduate education for one to two years of 30- as a contrast - Mozart, Vivaldi and baroque music. He has to 35-year-old doctors. EU funding is available to support the high interest in ancient cultures, sociologies and buildings. program with up to 85 percent. Do you know what one of the Further activities contain driving motorcycle, hiking and AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria comments was? "We are not interested in that, because they biking. would like afterwards to have more and newer equipment." It is sector overview

a strange way of thinking to me, because the doctors would In Bulgaria the waiting times on good-quality centers are very have liked such an opportunity. long - one has at least six weeks waiting time.

- What kind of diseases is your equipment crucial for? - Changes in the Bulgarian healthcare system envisage more active role of the private healthcare funds? Would - Mainly it is for diagnosing cancer, brain diseases, orthopedics, that help? and internal medicine. For example, we assume that somebody has cancer. The modern medicine deals with combinations of - Despite the problems, Bulgaria has a very good starting sit- surgery, chemical, and radiation treatment. The treatment is uation. There is a centralized system, with the National made through a particle accelerator, and Bulgaria has only two Healthcare Fund. I am familiar with these previous discussions of them, when it should have between 15 and 20. This treat- about five, six or seven private funds. If the Fund has the right ment takes about three weeks and to have some results you setup with the perfect payment services, everything is fine. do not have to stop it. The one in Plovdiv is constantly under repair because they cannot -or do not want to - afford the costs It is not so important whether you take money from a tax of spare parts, so patients from all over Bulgaria have to come income or from a separate payment from the employees. The to Sofia, and the system is much overloaded. The next issue essential thing is that the Fund has to be pre-funded efficiently is to follow whether the treated patient is recovering properly, and with enough money. As an extra service for the patients, which is also hard to do. there could be additional private funds. It is not very wise instead of a public fund to create a private one. It is making - Can you offer equipment at preferential prices for the hos- the money for someone else. The coverage of money the hos- pitals? pitals gets from different funds has to be enough. If the fund- ing is not enough, there is no difference whether it is private- - Siemens has always had a market-driven pricing. It fits more ly or publicly underfunded. Currently, the problem is that the than perfectly the Bulgarian market, but at the end, not the National Fund does not give enough money to the hospitals. pricing is the issue here. Siemens is a direct seller and it is not The problem is not with tipping nurses or doctors with a kilo entering in any suspicious arrangements, because the compa- of coffee or chocolates after the treatment, but the problem is ny has strict compliance policy. That is why sometimes the when Bulgarians are forced to give money in an envelope company decides not to bid - we have lost more than one ten- before a medical treatment in case they have already paid der, although we offered the cheapest systems. Nobody could money to the public fund. ■ tell the Siemens equipment is worse than the others', we are a technological as well as market leader with up to 70-percent market share in Western countries.

- Based on your observations on the Balkan market in the field, would you compare it with the Bulgarian one?

- I would like to compare it with Romania, Croatia, Slovenia, because some ways of thinking could be familiar. In all of these countries the investments in healthcare started much earlier and became important for the politicians, and the awareness in the public on these issues is much higher. It is not very clear to me whether Bulgarians do not care what is going on with the system, or they think nothing can be changed.

- They are just disappointed with the system... AmCham Bulgaria Magazine May 2008

- The disappointment is the same in Romania. There are a lot more private centers, because the National Healthcare Fund there pays a little bit more, and this is a political issue. The problems can be resolved within the circles of the deciding community - doctors and politicians. One of the old American sayings fits well - you get what you pay for. In Serbia and page Romania there are much better reimbursement rates, and the 17 treatment and the service is better. We have a private investor in Romania who bought new top of the line equipment without any contract with the local National Healthcare Fund. He has two to three Bulgarian patients coming from Bulgaria in a sin- gle day to Bucharest for these examinations. On one hand, there are enough Romanians ready and willing to pay for qual- ity, and on the other hand, a Romanian business-oriented med- ical doctor insisting on perfect quality, and getting money for it, which is fair. sector overview Medical Equipment Market Development Trends

The Health Sector Reform Project sup- ports the government of Bulgaria in implementing a fundamental reform in its health sector. The health sector reform has several components, the first one being reform and sustainabil- ity of the primary and ambulatory care sector. It provides practice equipment for primary health care, funds physi- cian office information systems, pro- vides training in general practitioner (GP) practice management, funds an information campaign, finances a health reform investment program to provide low-interest to physi- cians, and funds a labor adjustment strategy.

The second component targets reform of the hospital system, including fund- ing hospital information systems, financing a health reform investment program, reduction of number of hos- pitals, optimizing their functionality and funding a labor adjustment strategy.

The third component aims at assisting the National Health Insurance Fund management systems. almost 8 percent (in terms of number (NHIF) to establish the technological of packages) and 11.8 percent (in infrastructure to operate the insurance Recent data released by IMS Bulgaria terms of value) of the entire pharma system, including the hardware and indicate that 80 percent of the market market, continuous OTC segment software systems needed as well as share is split among four big pharma- growth of the pharmacies' market, the training and technical assistance ceutical players, namely Higia, Phoenix growth of the food supplements mar- required. The fourth component is aim- BG/Libra, Sopharma Trading and Sting ket, continued dominance of research- ing at strengthening the management followed by Farkol, Commercial League based drug manufacturers' products and institutional capacity of the health and Arishop (BMS products). The (58.6 percent vs. 41.4 percent for ministry, the NHIF, and the health sys- share of the "administered market" (by generic manufacturers according to tem generally. Ministry of Health and National Health IMS 2007 data), slight increase of the Insurance Fund) is still critical average package price in pharmacies The health sector reform strategy is accounting for about 35 percent of the driven by out-of-pocket purchases and translated into demand of invasive and entire pharma market in Bulgaria. reduced government-controlled seg- 18 noninvasive surgery equipment, ultra- Beginning of 2007 all major represen- ment in the public tenders for expen- sound equipment, in-vitro diagnostic tative offices started conversion and sive drugs and NHIF reimbursement. equipment, urology equipment, labora- restructuring into corporate bodies tory and testing equipment, diagnostic which translated into direct participa- It is very likely the Bulgarian pharma imaging equipment, equipment for tion of pharma manufacturers in ten- market in 2008 will witness further haemodilysis, tissue and blood bank ders which now act mainly as whole- growth of above 10 percent (this is the related equipment, veterinary turn key salers. optimistic forecast vs. 5 percent as the project equipment, hospital care equip- pessimistic forecast) although budget

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria ment, information systems, modern In general 2007 data compared to allocation for healthcare is 3.9 percent patient monitoring systems, hospital 2006 evidences shows growth of of the GDP (the lowest in EU). ■

sector overview Orphan Drugs Explained

Orphan drugs are medicinal products intended for diagnosis, prevention or treatment of life-threatening or very serious dis- eases, or conditions that are classified as rare. A disease or condition is defined as rare in Europe when it affects less than 1 in 2000 citizens (Orphan Drug Regulation 141/2000). Rare dis- eases affect a total of some 30 million European Union citizens.

Rare diseases are usually chronic, progressive, degenerative, and sometimes life-threatening. These are often disabling as the quality of life of patients is often compromised by the lack or loss of autonomy and associated with significant level of pain and suffering for the patient and his family along with the psychological burden accompanying the condition itself. Rare diseases have been estimated to count a number between 6,000 and 8,000 with 75 percent of them affecting children. Some 30 percent of rare disease patients are affected before the age of 5.

Approximately 80 percent of rare diseases have been identified to have genetic origins. Others are result of bacterial or viral infections, allergies and environmental causes, or are degener- ative and proliferative. tive advice and fast track authorization procedures. The term "orphan drugs" has been associated with the general concept that the pharmaceutical industry has scarce interest The regulation has a positive effect on the development of under regular market conditions in research, development and orphan drugs by the pharmaceutical industry. To accelerate the launch of products intended only for a limited number of pace of orphan drug development studies and joint initiatives patients suffering from very rare conditions. The idea has been have been undertaken on both sides of the Atlantic (U.S. Food that expenses spent for the development of such a product and Drug Administration and EMEA). would not be returned by the anticipated sales of the product. Regardless of the incentives, orphan medicinal products are For this reason, a special policy has been established. On 27 subject to national laws governing pricing, reimbursement and April 2000, Regulation (EC) No 141/20002 of the European distribution. Different national policies across the Community Parliament and of the Council entered into force. The EU orphan help to explain differences in the access to treatment for legislation aims at providing incentives for the research, devel- patients in different EU Member States or in different regions opment and marketing of orphan medicinal products that the within the same country. Although Directive 89/105/EEC11 lays pharmaceutical industry would be "unwilling" to develop under down precise deadlines for national decisions on pricing and regular market conditions. reimbursement, orphan medicinal products for which a market- ing authorization has been granted are not available in several To be eligible for incentives, orphan medicinal products are iden- member states beyond the mentioned deadlines. In addition, tified through a procedure of designation laid down in Article 3 when orphan medicinal products are made available in a mem- of the regulation reviewed by Committee for Orphan Medicinal ber state, it is difficult to determine their real accessibility Products (COMP) of European Medicines Agency (EMEA). The because the delivery of these medicines, often in hospitals, is orphan drug designation can be requested at any stage of drug not well recorded. development presenting sufficient scientific evidence. European patients' organizations have indeed reported very dif- The orphan medicinal product designation assigns orphan sta- ferent levels of access to treatment across the European Union. 20 tus based on a defined number of criteria. The EU has chosen a policy for the research, development and placing on the mar- Due to the rarity of the conditions for which orphan medicines ket of orphan medicinal products primarily based on direct are intended for, it is very difficult to establish an appropriate incentives granted by the Community, but also by encouraging price level, especially if they target a condition for which there member states to adopt similar and/or complementary mea- is no alternative treatment. According to a research report the sures at national level. The main community incentives are, cost of treating a patient with an orphan medicinal product among others, a 10-year European market exclusivity and incen- seems, in most cases, not to be higher than that of other treat- tives to support development of Orphan Drugs. Member states ments with the same therapeutic target.

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria measures (initiatives at national level) include fiscal incentives, national research projects, fee reductions, scientific/administra- According to a survey, the price setting of orphan drugs seems sector overview

Pharmaceutical manufacturers: Bulgarian Drugs Cheaper than Rest of EU, Costs for Patients Higher Bulgarians make the biggest co-pay- have decided to discontinue the import According to ARPharM, the VAT should ments for drugs within the EU despite of more than 220 medicaments. The be cut and the co-payment from the the fact that it has the community's low- Bulgarian public institutions (National state should increase if Bulgarians are est prices, shows an Eurostat survey Health Insurance Fund and the health to have adequate access to contempo- presented in April by the Association of care ministry) cover only 44 percent of rary treatment options. Some 60 million Research-Based Pharmaceutical drug costs compared with 69 percent in Leva of the 300-million-Leva NHIF bud- Manufacturers in Bulgaria (ARPharM). Slovenia, 54 percent in Romania, 85 get for reimbursable drugs this year will The reason for the disparity is the lack percent in Greece and 62 percent in be re-pocketed by the state under the of commitment by the state: Bulgaria is Hungary. At the same time, Bulgaria VAT system. If the rate comes down by the only EU member where the govern- levies the highest VAT rate on medi- 10 percent, that would free 30 million ment covers less than half of prescrip- cines, 20 percent. The drug pricing pol- Leva for the purchase of additional tion drug costs. At the same time, the icy enforced by the Bulgarian govern- drugs. The association is also unhappy government is trying to artificially reduce ment is a disservice to the manufactur- with the low health spending which is drug prices, obliging manufacturers and ers and the patients alike said the asso- only 5.2 percent of the nation's GDP importers to maintain the lowest prices ciation. The shortage of public sending versus an EU average of 7.4 percent. in comparison with eight other reference is also forcing the NHIF to limit the num- Some 25 percent of these allocations markets. ber of patients under various programs, are spent on drugs, which breaks down creating waiting lists for the treatment of to 80 Leva per capita. The analogous Faced with overregulation on such a hepatitis B and C, sterility and other sum in the rest of Eastern Europe is 100 scale, the members of the association medical conditions. Euro per capita. ■

to be highly influenced by the following four factors:

● Efficacy - The higher efficiency the medicine demonstrates, the higher price it is supposed to cost;

● Clinical benefits - The clinical aspects determine the clinical benefits of a drug: efficacy and safety. The drug efficacy in combination with the other clinical benefits determines the viable drug price range;

● Research and development costs - The research and devel- opment costs determine the minimum price limit of the drug;

● The prevalence of the disease - It is generally accepted that a lower prevalence will be accompanied with a higher price. AmCham Bulgaria Magazine May 2008

Most EU member states have either one competent national authority or several decentralized authorities that publish refer- ence guidelines for pricing and reimbursement negotiations for medicines. Criteria for evaluating price level and reimbursement may include the prices practiced in other European countries, the extent of investment by the company and the level of inno- vation, the medical benefit and the level of cost-effectiveness. page 21 Decision No 1350/2007/EC of the European Parliament and of the Council of Oct. 23, 2007, establishing a second programme of Community action in the field of health (2008-13) in the Annex to its Article 2 Aim and objectives settles the overall EU concept for the mentioned period: "Promote action on the pre- vention of major diseases of particular significance in view of the overall burden of diseases in the Community, and on rare diseases, where Community action by tackling their determi- nants can provide significant added value to national efforts." ■ finance Higher Interest Rates Surprise Bank Clients Numbers of mortgage credit seekers decline, and monthly instalments rise By Mina Georgieva

The building of Bulgarian National Bank, where the new higher interest rates were announced

Mortgage crediting gathered momentum along with the it easier for clients without funds of their own but still ready dynamic rise of real estate prices in Bulgaria over the last to obtain the required amount as a bank . several years. The largest appreciation of real estate, by as much as 30 percent, was recorded during the first year of At the same time Bulgaria's EU membership. This year, however, experts pre- dict a slowdown of price growth to a tame 10 to 15 percent. interest on began to rise as well.

Bankers predict that this The wave of appreciation of credits, caused by the global financial crisis, has already reached Bulgaria. Almost simul- will slow down the "pulse rate" of the taneously several large banks started to raise, or plan to 22 mortgage market raise, the interest on credits, mainly on mortgage and con- sumer credits. For the time being the effects of the more The average amount of mortgage credits stood at 39,000 expensive resources, available to Bulgarian financial institu- Euro in February 2007, compared to 46,000 Euro in January tions from their mother companies abroad, will boost interest 2008, according to statistical data. Mortgage credits are for final clients by 0.25 percent to 0.5 percent, according to directly linked to real estate prices, as Bulgarians continue to a survey by the Dnevnik daily. search for a higher financing, expressed as a percentage of a transaction, and hence property prices directly influences Eurobank EFG Bulgaria (Post Bank and DZI Bank) raised the

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria the growth of credits. Several banks are already offering up interest rate on housing credits by 0.25 percent in mid- to 100 percent of financing in real estate deals. This makes March. The rate of increase matches the rate of increase of finance

the base interest rate of the bank and is applied to both new and already effective credits. This move was matched by DSK Bank in early April. The United Bulgarian Bank raised by 0.5 percent the interest rate on "old" and on new con- sumer and mortgage credits as of March 1. Piraeus Bank is also expected to revise its credit terms, but for the time being no specific date has been set.

The forecasts for a reversal in the interest policies of the banks, which, until last autumn competed by lowering the price of credits, stated to appear more and more often in late 2007 and early 2008. Most bankers warned that the more expensive external resources will affect interest rates in Kalin Hristov, adviser to the BNB governor, said that credit interest rate hikes Bulgaria and banks will have no way out of the common will not affect businesses and private citizens. euro-zone trends. The EURIBOR index, which reflects the price of the assets traded between banks in the euro-zone, credits will be only token, up to 5 Leva, while some of the started to rise as early as August last year. debtors may have to face an increase of 50 Leva to 120 Leva. For some of the other banks in Bulgaria the appreciation of credits is tied to the rise of the SOFIBOR (for Leva-denomi- In view of the fact that debtors continue to pay, out of habit, nated credits) and EURIBOR (for Euro-denominated credits), the previous amount of monthly instalments, it is realistic to which - increased by a surcharge - form the final interest rate expect that after some time they will accrue a substantial paid by the client. The contracts offered by these financial punitive interest on accumulated arrears. The CreditCentre institutions contain the provision that the change in the base recommends to banks' clients to seek ways to refinance the interest rate will affect the price of the loan. At UniCredit already effective credits as a possibility to reduce future pay- Bulbank for instance any increase of the indices by 1 per- ments. The refinancing of a 50,000-Leva credit, received cent results in a 1-percent increase of the credit interest. three years ago allows clients to effectively reduce the impact There are no campaign-style inertest rates hikes but in all of increased interest rates by more than 18,000 Leva. cases the appreciation of the available resource the interest on loans is increased as well. Basically, the interest rates accrued on most types of long-term credits, like mortgage credits, are pegged to the changes in EURIBOR and SOFI- Housing Credits in BOR in order to reflect the changes occurring on interna- tional markets, on which banks rely for resources. Euro Are Preferable The increase of interest rates over the last several months First Investment Bank (FIB), EIBank, MKB Unionbank and on housing loans denominated in Bulgarian Leva has Investbank plan no interest rate hikes, for the time being. FIB already started to affect clients as they will have to pay was one of the first banks, back in September last year, to higher monthly instalments coming April. Some of the increase loan prices, after the Bulgarian National Bank (BNB) banks' clients, who have bought new housing through a raised the level of compulsory minimum provisions. "We plan Leva-denominated credit, will have to pay instalments no interest rate adjustments at this stage as the resources increased by as much as 100 Leva, according to experts. we are using are not acquired on the international market," At the same time, interest rates on Euro-denominated EIBank announced. The owner of the bank, 's KBC, loans remained virtually the same. That is why experts offers acceptable financing parameters. EIBank has raised by counsel to seek for credits in euro. However, clients, who AmCham Bulgaria Magazine May 2008 less than 0.5 percent the interest rate applied on only one of have decided to buy property by a Euro-denominated its consumer BGN-denominated credits, which was last credit, must realize that the loans will have to be repaid in adjusted two years ago. Investbank announced that although euro as well. For this purpose, the client will have to open they do not plan any appreciation of credits, everything would and Euro account in order to service the outstanding loan. depend on the market situation and on the current risk assessment. Bulgarian banks operate internationally in euro, as this is the most widely used and stable currency, that is why The CreditCentre financial broker announced that because of interest rates on Euro-denominated credits remain page higher interest rates on credits fueled by higher interest rates, unchanged, experts say. Besides, they recommend to peo- 23 more than 70 percent of ple seeking loans to assess properly their income. It would be best to avoid monthly instalments, exceeding 50 per- people with outstanding credits cent of the household income. will have to pay higher monthly instalments as of April. The According to CreditCentre data, 70 percent of all credits highest increase will affect Leva-denominated loans. Clients have been obtained in euro, with people at the age of 25 with effective credits will have to bear the highest hikes, and to 35 being the most active credit seekers. for some of them this will be the third interest rate increase, CreditCentre sources said. The difference for some of the finance

The complex and expensive procedure remains the major problem for refinancing of effective credits. Still, it is expect- Standard & Poor's: Emerging ed that more and more clients will seek refinancing of loans by renegotiating the loan terms. European Economies Are

The reduced liquidity of international financial markets and Most Vulnerable if the Global the measures initiated by the BNB have forced the banks to Credit Squeeze Tightens search sources of financing during the last several months. Some of the banks, including DSK Bank, Raiffeisenbank, First Eastern European sovereigns are the emerging markets Investment Bank, Post Bank and ProCredit Bank, have most vulnerable if the global credit squeeze tightens, says already announced steeper or more moderate interest rate Standard & Poor's Ratings Services in its latest report. hikes. The fact that the banks make promotional offers for deposits for periods of two to six months indicates that the The individual risks, which the countries in the region face, objective is to assure a short-term resource for basic bank are determined by their dependency on the influx of for- operations. eign capital used to finance their external imbalances and to avoid a crisis in their balance of payments, the report Credit interest rates started to increase last September, and said. The conclusions contained in the report are sup- developments on the international financial markets will most ported by the Liquidity Vulnerability Index, calculated by probably add one more percentage point. According to Dimiter Standard & Poor's. According to this index, Bulgaria is Chobanov, Chief Economist at the Marker Economy Institute, ranked eighth among the most vulnerable economies. The the companies working on viable projects bringing revenue and ranking, which covers 40 states, is dominated by Eastern assuring profit, will not be pressed by higher interest rates, and Central European economies, with Lebanon being the while businesses, which are barely covering the overheads, may be forced into stagnation. The financial results and the only exception as the second most vulnerable state in banks' portfolios do not reveal, currently, any sector of the case of a crisis deterioration. Chile is at the other end of economy as facing obvious problems. It is however possible the list, as it is considered as the most stable economy that some of the companies in the agriculture sector, which due to its stable balance of payments. suffered losses due to low harvest, to be affected this year. "We believe Eastern European sovereigns are the most Kalin Hristov, adviser to the BNB governor, said that credit exposed, while Asian and Latin American sovereigns, with interest rate hikes will not affect businesses and private citi- their trade surpluses and large foreign exchange reserves, zens - the profit reported by the private sector is approxi- are generally better insulated against the dearth of finan- mately 10 billion Leva, and salaries have registered a steep cial flows that may be in store if the global economy growth throughout 2007. Although the growth rate this year declines more sharply," said Standard & Poor's credit ana- will be lower, people will have more funds available due to the lyst Moritz Kraemer. lower income tax rate in effect since the beginning of this year - 10 percent. Banks will not raise the interest on cred- This was the latest warning circulated by the rating its to a level that would prevent people and companies from agency. Several months ago, shortly after the first global servicing their debts, said DSK Bank CEO Violina Marinova. financial tremors, Standard & Poor's published an analy- sis, in which it warned that emerging economies with large The average monthly insurance income is among the para- current account deficit are facing higher risks. The rating meters that reflect best the actual income increase. It rose agency forecast was that these economies will feel the from 369.74 Leva in January to 429 Leva in November 2007 worst impact of the crisis in 2008-2009. The agency (December 2007 data are still not available). warned early last month again all regional economies with large external imbalances, and specifically highlighted There are certain discrepancies in the forecasts regarding the , and Iceland. credits, on which the interest rates will be increased. According to Assen Yagodin and other bankers, it is most Ten economies facing the highest risk level probable that higher interest rates will affect mortgage cred- (according to Standard & Poor's Liquidity Vulnerability its (as these rates saw a steep decline in 2007 because of Index) strong competition among banks) and corporate credits. Kalin State ...... Index Hristov also said that interest rates will rise first of all for con- Iceland ...... 2.04 24 sumer credits and for credits to small and medium enterpris- Lebanon ...... 1.61 es. Besides, Yagodin said, the inevitable suppression of the Romania ...... 1.59 rate of increase of credits will result in improved risk man- Latvia ...... 1.51 agement capabilities. Bankers overall claim that any bank, Turkey ...... 1.16 which manages to preserve its profit growth rate in 2008, will Kazakhstan ...... 1.11 have done its job properly. Hungary ...... 0.97 Bulgaria ...... 0.92 High interest rates cool down credits Poland ...... 0.92

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria Lithuania ...... 0.89 It is unavoidable that higher interest rates will discourage finance

some of the credit seekers. However, there are other factors as well. People are starting to pay back the credits they obtained a year or two ago. Some of these credits had a zero interest for the first year. But the bonus year is already over and payments are already due. That is why there will be people, who will have no free capacity to obtain new loans, as they have exhausted to the full their capability to service outstanding liabilities. That is why it is expected that there will be slow-down in the rate, at which banks extend new credits.

It remains to be seen whether the mother companies of these banks in Western Europe will be affected by global problems. There should be no increase in the defaults cred- its, unless interest rates are increased by at least another 2 or 3 percentage points. Only after that some of the debtors will not be able to service their debts, and there will be a notable deterioration of the credit portfolios. Still, the level of deterioration is again expected to be quite low.

When searching for a credit, one should always answer one more question - Euro- or Leva-denominated credit.

At first glance, it seems that the two options are identical because of the fact that the effective currency board arrangement implies a constant Leva/Euro exchange rate. The Euro in Bulgaria is fixed at 1.95583 Leva. This fact, as well as Bulgaria's membership in the EU, makes it easy to Levon Hampartsumian, Chairman of the MB and CEO, Bulbank- UniCredit manage a Euro-denominated credit. Group claims that there is no risk for the Euro-Leva exchange rate.

At the same time the fixed exchange rate reduces the risk of rate levels, but also in the future trends, as most of the cred- depreciation or appreciation of the national currency, which - its are classified as long-term. respectively - could bring benefits or damages to debtors. This, the initial issue - Euro or Leva - is reduced to compar- Besides, as far as the currency board arrangement remains ing the credit terms and to select the credit option that best in effect in Bulgaria, and the monetary policy remains serves the individual interests of the loan seeker. restricted, the central banks has only a few options at its dis- posal to exert influence on money supply. There is one more One of the major advantages of the Euro-denominated cred- aspect to obtaining a long-term credit. It is expected that its (mortgage credits) is the lower interest rate. The differ- finally all credits will be transformed to Euro, as Bulgaria aims ence between the interest rates on Euro and Leva denomi- to join the Euro-zone. nated loans is as high as 1 percentage point with some of the banks. No Euro-Leva exchange-rate related risk exists, AmCham Bulgaria Magazine May 2008 The higher interest rates on Leva-denominated loans is to a major extend attributed to the higher key Leva interest rate said UniCredit Bulbank CEO Levon Hampartsumian. The in Bulgaria, which stood at 4.75 percent in February, after ris- exact date when Bulgaria will join the Euro-zone is still ing by 1.22 percentage points in a year. For comparison, the unknown, but after three to five years all credits will be in level of the short-term interest rates in the Euro-zone is 4 Euro, he said. percent adjusted to an annual basis. There are many companies, whose business is oriented to page Another reason is that the availability of Leva resources is Europe, and their profits are obtained in euro. For such 25 relatively restricted, mainly due to the measures initiated by clients Euro-denominated credits will have more advantages the Bulgarian National Bank last year with the objective to than obtaining a credit in Leva and converting the funds into increase compulsory provisions and thus reduce credit oper- Euro. ations. These are not standard credit products, however, and the On the background of a substantial increase of credit inter- question would be improper, as it leads to generalizations. est rates, generally speaking, the interest on credits in euro That is why the alternative - Euro or Leva - should be sub- rose by less than those on credits on Bulgarian Leva. A divided into sub-alternatives in order to assess the better debtor, however, is interested not only in the current interest option in each individual case. ■ Coface Downgrades Several Other Countries' Ratings

Coface - a leader in credit risk manage- payment behavior. Coface is watching 165 ment, is an international organization provid- countries around the world. The rating is ing country ratings by constantly monitoring organised in seven levels - ¿1, ¿2, ¿3, ¿4, ¬, their economies' development. — and D, in the direction of increased risk.

After watch - listing the USA with "negative The Coface methodology for country ratings outlook" in 2007, in January and February is based on threefold expertise: of 2008 Coface's assessment on the pay- ment behaviour of American companies ● Macro-economic - (financial and political further deteriorated and the US rating was indicators), downgraded to A2. Neighbouring coun- tries were also affected: both Canada's ● Expertise on business environment (the and Mexico's A1 and A3 ratings (respec- score is based on internal and external tively) have been watch-listed with nega- sources) tive outlook. ● Microeconomic expertise that draws on Japan was also watch-listed with negative Coface databases (covering 44 million outlook. companies worldwide and 50 years expe- rience). Bulgaria's rating was downgraded from ¿4 to ¿4v; the previous update was made in About Coface Bulgaria January 2007, when the rating was upgrad- ed from B^ to A4. Coface Bulgaria is part of the international network of COFACE - a world leader in infor- Bulgaria has been watch-listed because of mation and receivables management, cred- the increased vulnerability to external eco- it insurance and factoring. Coface Bulgaria nomic shock. The large current account has successful experience in risk manage- deficit has resulted in a strong dependence ment and since 1994 has established itself as on foreign investment and an increase in pri- market leader in Bulgaria and Central and vate foreign debt. This deficit seems hard to Eastern Europe. maintain given the context of a fixed curren- cy exchange rate and foreign direct invest- Worldwide, COFACE provides services to ment that is expected to decrease in the 120, 000 customers of all nationalities, sectors coming years. However, an actual down- and company size. 45% of the world's Top grading of the country's rating is not expect- 500 corporations use COFACE services. The ed. Company has an AA rating Fitch, ¿¿ S&P and ¿‡3 Moody's. In 2006, the company Coface has watch-listed other countries in had a turnover of 1,343,000,000 euro the region, too. Romania's rating was down- graded from ¿4 to A4v as early as COFACE established the first worldwide September 2007. Increased risk outlooks information, rating and insurance system. Its were also reported last year for Lithuania, information database covers 50 million com- Latvia and Estonia. panies.

The Coface rating reflects outlooks in three COFACE is - a subsidiary of Natixis, whose major aspects: business climate, economic capital at the end of 2006, at CRD/Basel II and financial perspectives and companies' norms, was 11.6 billion euro.

analysis Real Estate Market is Moving Forward Despite the Setbacks The Global Credit Crunch Will Rather Eliminate Laics Than Stop the Progress, Experts Claim

A lot of participants from Bulgaria and Balkan region attended the forum. Among them were representatives of top real estate companies like ProLogis (Romania), and TriGranit (Serbia and Montenegro).

The real estate financial experts and investors in Bulgaria are Central Europe - also commented. The focus is now shifting still optimistic about the credit crunch, which started with the from projects generally receiving loans to long-term invest- slump of the markets of high-risk mortgage loans in the U.S. ments. "It will be difficult to have the same profits typical of and spread through the real estate sectors in countries like the past months once again, but everything depends on qual- Great Britain and . Moreover, the crisis is said to have a ity", Mr. Spiro explained. healthy influence over the real estate industry in Bulgaria rather than cause issues. "Investors will agree on compromising with the profits provid- ed they deal with quality projects," Krasimir Katev - Board 28 Mr. Martin Gikov, Head of the Real Estate and Finance Director at consultant company Prime Capital Management Department at Unicredit Bulbank (the largest financial institu- and former Deputy Minister of Finance - said. "They have to tion in Bulgaria), assumes that restricted financing is likely to face the new conditions - lower profits at the expense of high- come to a halt or delay certain projects: "Banks have become er quality", he pointed out. more cautious when financing projects and now seem to pay great attention to quality, construction and design", he The crisis showed that real estate investments in the CEE explained during the Balkan real estate conference BalREc. region have pursued short-term profits and potential opportu- nities for development of projects have rarely been paid due

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria "The credit crunch has a purging effect on the real estate attention, Mr. Spiro explained. He reckons that some projects market", Nikolas Spiro - Head of Investment Department, DTZ will not resist the financial pressure but the quality ones will analysis

surely withstand the tighter credit conditions. ondary market. Professionals will seek possible solutions like refinancing and loans renegotiations for example", Santev Restricted access to credits for real estate purchases and said. investments lays down the question whether all properties and land for sale will find buyers and whether a balloon hasn't He considers that the credit crunch will gradually start to fade been inflated on the Bulgarian real estate market which might out at the end of the year. However, other economists are not break next year. "We may speak of balloons in some sectors so optimistic. Krasimir Katev forecasts that we are now enter- and some locations," Mr. Katev commented. In his opinion this ing the crisis's second stage, which will probably be longer is best seen in the prices of land and projects. "The turbulent and the main driver is said to be the slowdown of U.S. econ- has led to land owners' great expec- omy. Mr. Katev thinks that if the crisis had broken in two years tations. They push prices up but this will change", the time when the real estate supply in Bulgaria is expected to be Managing Director of Prime Capital Management foresees. more abundant, the problems would have been considerably more. Nikolas Spiro thinks there is no balloon on the commercial property market in Bulgaria. Nevertheless, holiday properties Nikolas Spiro does not expect the credit issues to come to an are the ones to be greatly affected. "A large part of the Black end soon either. Nevertheless, he is still optimistic about the Sea Coast apartments are a mixture of low quality, high price development of the financial markets as the crisis is slightly and low returns", Emanuel Santev, Head of Real Estate felt outside the Wall Street region. "The US government is tak- Department at Hypo Alpe-Adria-Leasing holding, confirmed. ing great pains in retaining the high consumption level of the "There will be developers who will change their projects", he country", Spiro commented. We need to take into account that added. the American buyer is not the only strong consumer in the global economy anymore. Countries like China, Russia and However, he thinks there is no serious risk for the real estate India have turned into really attractive markets for retailers market in Bulgaria. "Even if we have the worst possible sce- during the past years. "Let us see to what extent the credit nario and the poor percentage of credits increases, no bank crunch will affect Europe which has proved to be rather sta- will be willing to leave all acquired apartments on the sec- ble so far", Nikolas Spiro said. ■ AmCham Bulgaria Magazine May 2008

page 29

From left: Emanuil Santev, Director Hypo Alpe-Adria-Leasing Dept., Martin Gikov, Manager Real Estate Financing, UniCredit Bulbank, Ivo Prokopiev, Chairman and CEO, Alfa Finance Holding, Nikolas Spiro, Director Investment Team SEE, DTZ, and Krassimir Katev, Chair MB, Prime Capital. analysis Modern Industrial and Logistics Parks Are Underway in Sofia By MBL

The industrial real estate market in Bulgaria continues to be undersupplied and primarily formed by owner-occupied and Inventory (Selected Industrial Submarkets) build-to-suit inventory. The share of speculative developments will increase in the near future though, as several projects for East Industrial modern industrial and logistics parks are already underway in Sofia, Plovdiv, and Varna. Eastern Outlying

Sofia North Industrial

Sofia market accounts for the largest amount of industrial NW Industrial facilities in Bulgaria. The total inventory of newly-built, refur- 0 50 100 150 200 250 300 350 400 bished, and renovated properties is estimated around Thousands m2 1,300,000 m2 by the end of Q1 2008. This number includes warehouse, manufacturing, and flex properties. Warehouse buildings account for approximately 50% of the overall gross building area, followed by flex with 30% and manufacturing with Asking Rental Rates (Bulk Warehouse Space) 20%. Non owner-occupied facilities are estimated at 200,000 m2 accounting approximately for 15% of the total inventory. Sofia New deliveries in the second half of 2007 did not have a sig- nificant impact on the rental market as only few were specu- lative developments. Sofia Airport remains the most attractive Varna area for warehouse developments and accounts for the high-

est concentration of newly built industrial facilities. Almost 45% Plovdiv of the total modern stock in Sofia and the region is located

within 6.5 km from the airport. 01234567 EUR/m2 /month Development activity is taking place in the industrial zones of some small towns and villages around Sofia like Mirovyane, William Hughes already occupy modern production and ware- Krivina, Kazichene, Ravno Pole, Novi Iskar and Elin Pelin, as house facilities in these zones. Many new developments are well as in old inner city industrial zones and main transport also concentrated along Karlovsko Shosse Blvd and Golyamo arteries. Sofia Airport Center developed by Tishman Konarsko Shosse Blvd. International is the biggest ongoing development. Plans for a couple of other large-scale schemes have been announced The Belgian industrial real estate developer Immo Industry both, to the East and to the West of the capital. Group announced plans to develop an industrial park near the village of Skutare to the Northeast of the city. The develop- East Industrial submarket, which includes industrial zones ment will be built on a 145,000 m2 plot and will feature approx- Slatina and Gara Iskar, as well as developments in Druzhba, imately 80,000 m2 warehouse/industrial space that will be Poligona, 7-mi kilometer and Sofia Airport area is the single offered on built-to-suit basis. The project is scheduled for com- largest submarket in terms of inventory with almost 380,000 pletion in 2010. m2 of new industrial space (predominantly warehouses). 30 Varna Plovdiv The industrial segment in Varna is also developing very well. Plovdiv, the second biggest industrial market in Bulgaria is The total size of new and refurbished industrial facilities is experiencing a steady growth. The inventory of new industrial estimated at 300,000 m2 with owner-occupied buildings facilities is increasing. The new industrial zones Maritza and accounting for almost the entire inventory. However, Logistics Rakovski are entirely formed by new facilities and account for Park Varna will change this balance by delivering a total of approximately 30% of the new industrial space in Plovdiv and 80,000 m2 of rental space upon completion. In addition, there

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria the region, which is estimated at 650,000 m2. Companies like are plans for the development of an industrial zone near the Socotab, Liebherr, Schneider Electric, Bosch, Kaufland, and town of Beloslav 22 km from Varna. analysis

However, due to the limited availability of new space some Price Range for Industrial Zoned Land (Selected Locations) landlords have slightly increased their asking rents for proper-

Sofia Airport area ties in secondary condition. Sofia is the most expensive mar-

Gara Iskar ket with levels ranging between EUR 3.5 - 6, followed by Varna

Kazichene/Krivina with EUR 3 - 5, and Plovdiv with EUR 3 - 4.5.

Voenna Rampa/Iliyantzi

Vrazhdebna Land Prices

Ravno Pole Asking prices for industrial zoned land vary greatly and Elin Pelin reached unsustainable levels in some submarkets. We believe Plovdiv that the following set of fundamentals will drive land prices Varna down in the long-run: 0 100 200 300 400 500 600 EUR/m2 Increased supply - the amendments of the Sofia General Demand Urban Plan will bring new zones, suitable for industrial devel- opments. Moreover, many land pre-developers are bringing Demand for industrial space in Q1 2008 remained strong and their regulated land plots on the market; exceeded the available supply. Many companies continued to pursue build-to-suit transactions as preferred solution for their Deleveraging - the deteriorating situation of the financial mar- needs. The demand was mainly driven by FMCG retailers and kets leads to a process of deleveraging and risk reassessment. distributors, 3PL providers, and distributors of construction The limited access to capital will drive out some developers materials. Interestingly, tenants are reluctant to enter into long- and investors and will diminish the demand for yielding assets term leases as they expect rent levels to decrease in the near and thus for land; future when availability is expected to go up as more new pro- jects hit the market. Infrastructure - Bulgaria and Sofia in particular have serious problems with the availability and quality of utilities and infra- Rental Rates structure. The cost of resolving these issues is very high and is threatening the profitability of almost every project. This puts Rental rates have been stable for the past couple of years. a downward pressure on land prices. ■ AmCham Bulgaria Magazine May 2008

page 31 csr corner

AstraZeneca Bulgaria Goes Strong with Annual Initiatives Each year AstraZeneca Bulgaria deliv- Cash, products and non- Orchestra young musicians. ers annual CSR program, as part of the financial donations company’s long-term commitment to We launched HOPE project with the community initiatives for improving Astra Zeneca is the only company that world-famous Bulgarian musician health and quality of life, education and started a partnership to support Theodosii Spasov. The company grant- leadership development, corporate gov- Bulgarian artists who need non-reim- ed the Young Talent Debut Award at the ernance and business ethics. bursed medication needs and life-saving Bulgarian Artists Union Annual Awards operations. The company helped chil- Ceremony Healthcare awareness dren in need of life-saving interventions Education and leadership Since 1999 the company has been We met hospitals' need of modern campaigning to raise breast cancer equipment thus helping them reach For the third year the company spon- awareness by initiating the first pilot higher standards of care for the benefit sored a Master Class in screening in Bulgaria, patronized by of patients. For a fourth year we con- Pharmacy/Healthcare, delivered to stu- First Lady Zorka Parvanova, 1,000 tributed by product donation to a chil- dents by industry leaders. For the sixth women screened in high risk regions. dren charity patronized by the Bulgarian year it granted in partnership with the With the National Cancer Registry, we president. We ensured one year of can- Swedish Embassy a Mini Nobel Award held the first Bulgarian breast cancer cer treatment for 96 patients. in Medicine to an young graduate, week: 18,000 women were examined, which offered a specialization at and in 90 of the cases there were Community sponsorships - Karolinska hospital, and visit malignant findings. Astra Zeneca Promoting sport/arts/cul- AstraZeneca R&D division in Sodertalje. fundraised and donated new mammog- ture For the fourth year the company grant- raphy equipment. ed AstraZeneca Young Minds scholar- For a second year the company spon- ships, supporting for the first time A charity catwalk was co-organized with sored World Sport Aerobics Cup Round socially deprived students. the Patient Society. Women who had and International Youth Championship. survived breast cancer were invited as It has built kids playground at the Sofia For its CSR activities, AstraZeneca models to demonstrate their courage Zoo, inaugurated by Sofia Mayor Boyko Bulgaria has received a number of and beauty. The program was recog- Borisov. In partnership with the U.K. prestigious awards - Investor in nized by the prestigious Marketing for a Embassy, Astra Zeneca supported the Community, Cause-related Marketing, Cause Award, acknowledging the com- "Motherland" cultural project, promoting Bulgarian National Investment Agency mitment of Astra Zeneca to fighting Bulgarian folklore in the light of EU Award and Best CSR Program in breast cancer in the past seven years. accession, featuring New Symphony Europe. ■

USAID Marks Earth Day with Planting Trees At a ceremony on April 22, the day of inter- national celebrations of Earth Day, the U.S. Agency for International Development (USAID) commemorated the donation of more than 500 newly planted trees and improved infrastructure in the South Park of Sofia. Ambassador Beyrle, Sofia Mayor Boiko Borissov, USAID Mission Director Michael Fritz, and Ginka Kapitanova, 32 Executive Director of the Foundation for Local Government Reform, spoke at the event and unveiled a stone marking the donation.

USAID collaborated on the park improve- ment initiative with Sofia Municipality, as part of a series of activities to mark the

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria completion of USAID programs in Bulgaria. csr corner

Motorola Dedicates Children's Playground in Mladost A new children's playground opened on April 15 in Mladost 4 between blocks 446 and 447, some 200 meters away from the Business Park Sofia. It was designed, built and donated by Motorola Bulgaria EAD, as part of the company's corporate social responsibil- ity program.

The event was attended by the mayor of Mladost Region Petko Djulgerov, the management of Business Park Sofia and locals.

Motorola has a tradition to dedicate one The mayor of Mladost region Petko Dulgerov (right) shakes hands with George Gueorguiev, Country man- day in October to services, benefiting ager of Motorola Bulgaria. society by Motorola employees perfor- mance in different activities like enter- tainment and gifts for children from social home, orphanage, repair and maintenance of their buildings, planting trees etc.

On the global day of service Oct. 10, 2007, trees were planted in the area of Mladost municipality, which was only the first phase of a project "Garden and Children Playground."

Motorola strongly believes it will give the children a nice place to play. The com- pany will contribute to keeping the green balance in Sofia. ■ The new playground is waiting for the children. in the Sofia’s South Park In addition to planting 570 trees, USAID assisted in installing seven new light poles, AmCham Bulgaria Magazine May 2008 repairing three existing light poles, and installing ten new benches in the park. USAID is also supporting the Bulgarian Environmental Partnership Foundation (BEPF) in an initiative to raise funds for fur- ther park improvements. USAID also worked in partnership with the Community page Foundations in Stara Zagora, Chepalare, 33 and Yambol to replant trees destroyed by forest fires in the summer of 2007. Approximately 100,000 trees will be planted by these local organizations. USAID has ABOVE: Ambassador Beyrle planting one of the 570 newly planted trees in the South Park of Sofia. worked in Bulgaria since 1991, investing ON LEFT: Sofia Mayor Boyko Borisov, Michael Fritz, Mission Director to Bulgaria for the U.S. Agency more than $600 million in programs to sup- for International Development and the U.S. Ambassador to Sofia John Beyrle and Ginka Kapitanova, port Bulgaria's transition to a democracy Executive Director of the Foundation for Local Government Reform. and market economy. ■ news

Banks Finance Energy Efficiency, Renewable Sources Projects

Photovoltaic solar panels are the most popular renewable sources currently at use in Bulgaria. Rising oil prices and energy supply wor- In addition to the low interest rates, the banks and to develop energy efficiency ries have increased the worldwide companies get free technical assistance products. The volume of investment has awareness in the search of alternative during application procedures and fulfill- to be between 30,000 Leva and 3 mil- energy supplies, independent of fossil ment of the project. If the project is suc- lion Leva. The equity contribution of the fuels. By 2020, in accordance with the cessful, the firms get back 15 percent project developer is at least 10 percent new European Directive as of January of the project amount, said Ivan in the case of co-financing through the 2008, 20 percent of the energy supply Hinovski, director with the consultancy Fund and a commercial bank, and at in Europe should come from renewable company Encon Services. He estimated least 25 percent in the case of Fund energy. Greenhouse gas emissions that it would be three times cheaper for financing only. Project must apply should be reduced by a fifth, too. the firms to spend money on energy- proven energy saving technologies. saving activities, instead of building of The European Bank for Reconstruction additional power installations. The credit The types of projects include: rehabilita- and Development (EBRD) has issued in line will not cover projects of companies tion of buildings, heating insulation, April a new 20-million-Euro credit line in gambling, real estate, banks, insur- small co-generation systems. The Fund for Bulgaria for increasing energy effi- ance companies, as well as weapons is financing projects under the EU ciency. The credits are granted to two trade. Operational Programs: OP Regional Bulgarian banks: UniCredit Bulbank and Development with the Ministry of United Bulgarian Bank. The first EBRD credit line for renewable Regional Development and Public resources was contracted in 2004 with Works; Rural Development Program with The banks will contact private firms and the Bulgarian Government and it was for the Ministry of Agriculture and Food provide crediting at preferential interest 105 million Euro. The projects for Supply, Potential Beneficiaries: 34 rates for energy efficiency projects. The financing were co-generating installa- Municipalities; OP Competitiveness with program will be accomplished in 2009, tions, thermal isolation systems; heating the Ministry of Economy and Energy and it is expected that 40 projects will and steam systems; mini water thermal Potential Beneficiaries: SME, Industry. be financed, with the maximum financ- power plants, wind and geothermal During the application process, the ing reaching 2.5 million Euro. The cred- energy. client has to find pre-financing (bridge- its will be granted to companies able to financing) and to present a letter of reach a 20-percent reduction in energy Grant funding is also provided by the intent from a financing institution. expenditures and greenhouse gas emis- Bulgarian Energy Efficiency Fund. The

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria sions, and a minimum standard of 10 fund has a revolving mechanism and its Additionally, SMEs in Bulgaria will percent return on investments. purpose is to establish partnerships with receive more than 31 million Euro in news

energy efficiency grant funding from the ● Environment and so far this potential has been Ministry of Economy and Energy, said ● Credit lines of Bulgarian trade banks underutilized. According to NEK's esti- Nina Radeva, deputy minister. The state of projects for energy efficiency and mates, achieving 16 percent of the total subsidies will finance SME projects in renewable resources with EBRD sup- energy consumption from RES implies a two main directions: solar energy and port need for 1,450 MW installed wind biothermal energy utilization, and capacity. Currently there are 10 projects increasing of energy efficiency through In the energy efficiency field, Cibola of significant scale (30 MW) announced suitable facilities. does project feasibility studies, provides by credible developers. consultancy to the selection of the tech- The EBRD Business Advisory Service nology and suppliers of equipment, There is a growing demand for renewable Program (BAS) operates a network to offers administrative and law support, energy worldwide and in Bulgaria, said assist a development of SMEs in South project financing, and technical assis- Lefkowitz, and there are several factors Eastern Europe. In Bulgaria, the pro- tance in project implementation. for that. In the first place, it is the climate gram offers grant of up to 50 percent of change, in the second it is the intensify- the total net cost of a project to a max- A recent international energy forum held ing pressure on global energy resources, imum of 10,000 Euro, said Zhulieta in Sofia allowed experts and businesses and in the third, competitiveness. Hubenova of the Program for Financing shared ideas about the state of renew- of Consultancy Services. So far, 300 able energy sources in Bulgaria. According to NEK's forecasts, the wind projects have been approved with 1.5 Currently, the share of the produced and solar energy will take the growth million Euro subsidies for projects main- energy from such sources is 9.4 per- lead, as the estimated need for addi- ly outside the capital. The applicants cent in Bulgaria, and by 2020 it has to tional renewables-based capacities is of may submit their projects constantly, reach 16 percent, said Velizar Kiriakov, 839 MW until 2010. There are unexploit- there are no deadlines. To qualify for chairman of the association of eco- ed opportunities because only several assistance, a company has to operate in energy producers. The EU quota for small wind farms currently operate in the business sectors of agriculture, con- Bulgaria demands that RES have to the country. struction, real estate, tobacco, or food account for 11 percent of gross power processing. consumption in Bulgaria after 2010 and In Bulgaria, the total installed hydro- 16 percent after 2020. capacity as of end of 2006 is 2,795 Cibola, one of the biggest consultancy MW, and 943 MW in the form of companies for the EU structural funds in Investor and consultant Kenneth pumped-storage. There are 40.25 MW Bulgaria, works with priority on the fol- Lefkowitz, managing partner of NECA, for future privatization upon clarifying lowing EU operational programs: shared some information on the RES asset ownership issues, and an oppor- potential in Bulgaria. According to his tunity to consolidate the numerous ● Regional development (2007-2013) estimates, the country has wind-power micro hydro-development projects also ● Human Resources Development capacity potential of 2,200-3,400 MW, exists. ■ American Corner at Sofia City Library Expands The new American Corner of the Sofia City Library, located at 4A Slaveykov Square, is the new showcase of American culture in downtown Sofia. The Corner was first launched in June 2007 by AmCham Bulgaria Magazine May 2008 First Lady Laura Bush and Bulgarian First Lady Zorka Parvanova.

On April 23 it opened a larger room, with the help of the U.S. Embassy, the AmCham Bulgaria, and especially AmCham members the Bulgarian-American Enterprise Fund (BAEF), AT Engineering 2000, Ideal Standard, and Orbit. There is an exhibit on 21 Bulgarian Americans, young and old, famous and lesser known, who have made a difference in the arts, science, page 35 medicine and technology in the United States. Keen readers from the children's reading-room pose for a photo together with the official guests US Ambassador John Beyrle (second from right) and Mayor of The U.S. Embassy in Bulgaria and Sofia City Library worked Sofia Boyko Borissov. hard to have the new facility renovated and ready to meet its library collection. Since 2003, the Embassy of the United first guests on April 23, the World Book and Copyright Day. States to Bulgaria has launched a number of initiatives to bring They were not alone in their efforts - friends and partners on more current and reliable information about the United States two continents helped on the way. In the United States, mem- to Bulgarians. These include American Corners, American bers of North Modesto Rotary Club and Friends of the Shelves at regional libraries, the Internet and outreach pro- Stanislaus Country Library kindly donated many books for the grams to schools, universities and libraries. ■ member news Wilson Learning Bulgaria Discusses Leadership Issues

Leading global executive development company Wilson torical outlook of the state of the banking system in the Learning held a business breakfast April 15 dedicated to country over the last 20 years, saying that real commercial some of the key leadership challenges in the banking and banking skills have been developed during the second half financial industry related to talent management, perfor- of the period. mance improvement, identification of high potential and other burning topics of interest. Anthony Hassiotis, CEO of Eurobank EFG Bulgaria AD, who was the other guest speaker, kept referring to common The event was supported by the Hellenic Business Council sense while he outlined the ways to tackle the current situ- in Bulgaria, Stanton Chase, the Sheraton Hotel, and ation. Both he and Hampartzoumian said that the ability to Ashley&Holmes Sofia. Among the participants were the top retain key employees affects the environment in an organi- managers of AIG Life Bulgaria, , Bulgarian zation hence its importance for maintaining customer satis- National Bank, Citibank, Emporiki Bank, Eurobank EFG faction and the overall positive image of the organization as Bulgaria AD, ING Bank Bulgaria, United Bulgarian Bank. well. Ethics and thrust were given prominence as key ele- ments in the business in both guest speakers' presentations. The honored guest audience was welcomed by Artemis Hassiotis shared that, from a CEO's point of view, the prior- Mitropoulos, partner for international development, Wilson ities of customer retention and cost reduction have yielded Learning Bulgaria, and Elizabeth Dimova, general manager to the necessity to find the right people for the right posi- of the company. Mitropoulos stressed the importance of tion. According to Hassiotis, employees should be given the quality leadership, saying that according to a Wilson chance to succeed within their framework and there should Learning survey, work performance is influenced by job sat- be objective criteria for assessment of this success. isfaction for 39 percent of the employees - thus very often employees leave managers not organizations. Dimova pre- Alexander Vitalis, head of network division, Eurobank EFG sented the company's vision for the improvement and Bulgaria AD, added to that the importance of personal exam- advancement of leadership skills and introduced one of the ple. Very often the middle management breaks the link in most prominent executives in the industry and a guest communication between experienced leaders and their speaker at the event - Levon Hampartzoumian, CEO of employees, in the opinion of Emil Georgiev, human resources UniCredit Bulbank. director, Eurobank EFG Bulgaria AD. He added that staff development still does not have a good tradition in Bulgaria. He pointed out that there is a lack of high-profile profes- sionals, now that there are so many newcomers on the mar- Most of the professionals agreed that they face almost identi- ket, and therefore the sector provides for one of the most cal problems at the current level of development of the indus- competitive environments in the country. Today the problem try. The general feeling was that it is a good idea for senior is not only how to attract the best managers and leaders, managers from the industry to gather more often and discuss but also how to retain them. Hampartzoumian provided a his- and look for solutions more openly and sincerely.■

new members

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member news EFG Securities Bulgaria Launches Investment and Brokerage Services in Bulgaria

From left: Anthony Hassiotis, CEO of Postbank; Assen Yagodin, executive director; Dimitris Apistoulas, director of regional equity brokerage, Eurobank EFG Securities Investment Firm S.A.; Dimitris Hatzis, director of regional , EFG Telesis Finance S.A.

EFG Securities Bulgaria presented in April its investment and this activity into an independent company," said Assen Yagodin, brokerage activities. EFG Securities Bulgaria, which was grant- Executive Director and member of the Board of Directors at ed a full licence to provide investment intermediary services in Postbank. "In 2007, Banker weekly designated Postbank as December 2007, is the successor of Eurobank EFG Bulgaria Best Investment Intermediary for Q4 2007, ranking it first AD in its function of an investment intermediary. This month, among banks in terms of the number of stock exchange trans- the bank will celebrate 10 successful years of investment-relat- actions and second in terms managing debt and equity ed services. issues," pointed out Yagodin.

"The establishment of the new company EFG Securities EFG Securities will focus its efforts and expertise on two major Bulgaria, a member of Eurobank EFG Group, once again sub- domains: capital markets, and stock exchange brokerage and stantiates the long-term strategy of the Group and its willing- trading. "Our main goal is to enhance our standing as a man- ness to contribute to the active development of the Bulgarian ager of capital market transactions, including debt and equity market," said Anthony Hassiotis, CEO and a member of the financing, as well as corporate advisory and M&A services, Board of Directors of Postbank. "The establishment of an while focusing on big infrastructure and energy projects," said 38 investment and brokerage company was provoked by our Dragomir Velikov, executive director of EFG Securities desire to offer new services with superior quality to our clients, Bulgaria. by the means of making use of Eurobank EFG Securities Investment Firm S.A's accumulated knowledge and established In 2007, Postbank ranked first among banks in terms of total standing on the global markets for brokerage services; and of number of COBOS system users. It also ranked as the No. 2 EFG Telesis Finance S.A's expertise and prominent position in manager of bond issues on Bulgarian market with over 35 mil- the investment banking sphere," Hassiotis added. lion Euro in seven issues. In 2007, the bank also held the sec- ond position in terms of number of ECM transactions on

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria "Postbank's long and constructive experience as an investment Bulgarian market with six transactions for total of 98 million intermediary is an excellent foundation for the consolidation of Leva. ■

member news Company Offers Free Diagnostic and Planning for Mobile Communication Needs

Fed up with countless offers and com- parison tables to choose from?

No worries - 2be, a leading chain for mobile technologies and accessories, has announced its findings that correct- ly chosen profiles and plans for corpo- rate clients can reduce their mobile ser- vices' costs up to 40 percent. To achieve this reduction you will need an exact analysis of the mobile use and needs and a comparison of all services the mobile operators offer on the mar- ket.

Why bother diving into this adventure alone when a specialized team of cor- porate service experts will do it for you - for free. And it is good to know that some times size does not matter - each company with a tax identification num- ber is treated as a corporate client regardless of the number of SIM cards used and is given special treatment.

Some of 2be's corporate services larg- er clients are BILLA Bulgaria, Allianz Bulgaria, Regional Police Directions and Administrations, KPMG, Ministry of State Administration and Administrative Reform, and many others, along with the small businesses and individual traders, for which we prepared optimization plans. The ones that prefer to purchase their mobile on a corporate scheme are Kamenitsa AD, Zagorka AD, Danone, mobile communications sector and the bonuses vary among all things you can Carlsberg, Amilum Razgrad and again - response form the customers is excep- possibly imagine: additional packages, thousands of small entrepreneurial tionally good. prepaid timings to other telecom opera- structures. tors, to the same operator, prepaid tim- Some time ago it would have sounded ings inside the group or a group com- This is only possible because finally the unbelievable but now the client receives pletely free of charge, a discount on the one-stop-shop concept is available to adequate advice and consultation on the whole fee, a discount on the entire 40 business consumers of communication phone or e-mail and when necessary in client's invoice, free of charge phones services in Bulgaria. Still 2be is the only his very office. All the products (SIM or phones with special prices or even company that has potential to offer this. cards, phones, lap-tops etc.) are sup- office equipment. This all concept to In this way the business can have plied to client's office personally by the leave someone doing the annoying job access to comparative analysis of all sales force or with courier service - the for you gets an even sweeter flavor the services offered by the telecom client is not obliged to send staff to end- against the news of number inter- providers without even going out of the less meetings in a number of offices or changeability. How the mobile operators office. The corporate client service and stores. will respond to potential corporate

AmCham Bulgaria Magazine May 2008 May Magazine AmCham Bulgaria the VIP treatment introduced by banks request for group switches of numbers several years ago, now is a fact in Last but not the least, the business is yet to be seen. ■