COUNCIL OF Brussels, 11 November 2004 THE EUROPEAN UNION
14546/04
PECOS 79
COVER NOTE from : General Secretariat of the Council date of receipt : 8 November 2004 to : Central and Southeast Europe Working Party Subject: BULGARIA - Agreed minutes of the EU-Bulgaria Sub-Committee No 3 on Trade, Industry and ECSC Products Sofia, 11 May 2004
Delegations will find attached the above mentioned document, as received from the Commission services.
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14546/04 1 DG E I EN
AGREED MINUTES ON 9TH MEETING OF SUB-COMMITTEE 3 BULGARIA-EU “TRADE, INDUSTRY AND ECSC PRODUCTS”
MAY 11-TH 2004, SOFIA
The 9th meeting of the Sub-Committee 3 Bulgaria-EU “Trade, Industry and ECSC” was held on May 11th 2004 in Sofia. The meeting was co-chaired by the Deputy Minister of Economy Mr. Dimiter Ivanovski on behalf of the Government of the Republic of Bulgaria and by Ms. Bridget Czarnota on behalf of the European Commission – DG Enlargement.
1. Opening and adoption of the Agenda Both sides agreed on the agenda without any remarks (annexed).
2. Enterprise and SME policy1 2.1. General policy 2.1.1. Latest development of Industrial Policy. Measures to improve the overall business environment and stimulate investments. The Bulgarian delegation presented the latest developments in the Bulgarian industrial policy. The Bulgarian economy ranks among the fastest developing economies for 2003. The real growth of GDP is 4.3 % (according to preliminary data from National Statistical Institute). The significant reduction of unemployment in the country is another major achievement for the Bulgarian economy during the last year. The average unemployment percentage in 2003 is 13.5% compared to 17.8% in 2002. The inflation rate in Bulgaria is one of the lowest compared to all other EU acceding countries. The average inflation rate for 2003 is 2.3%. The stable prices decrease the risk for businesses and provide opportunities for long term planning and completion of huge capital projects with prolonged life cycle where higher value added is applied and thus contribute for acceleration of the economic growth. The positive signals for development of the Bulgarian economy have led to an increase of FDI flow in the country. The FDI in 2003 account for USD 1.4 billion compared to USD 812 million in 2002. These investments represent a direct foreign contribution for the growth of GDP. The Bulgarian government continues to apply measures for improvement of the business climate and investment promotion. The Government has taken proactive measures for involving the business in the process of economic policy development and decision-making. A Council for Economic Growth was created in order to involve closely the representatives of the Government and Business in cooperative and continuous efforts to promote the long-term, sustainable economic growth of the country. The Council is formally an advisory body to the Council of Ministers, and as such it establishes private-
1 All competition/state aid issues were dealt with at the sub-committee 2 meeting ‘Internal Market’ on 5 May 2004 in Brussels and therefore not covered in this meeting.
1 2 public dialogue on the national economic policy. The exchange of opinions and recommendations in the Council ensures that a wide scope of views will be taken into account with best solutions for the main economic issues, which will provide sustainable economic growth. The Council discusses the concepts of the proposed legislative changes and presents opinion on a wide range of issues that have been raised. At the beginning of 2004 the Ministry of Economy adopted an Action plan for informing the business entities about the commitments undertaken in the process of negotiation for accession of Bulgaria to the European Union as well as preparation of the entrepreneurship for implementation of the EC requirements. The privatization in the major sectors of the Bulgarian economy is almost completed. As of March 31, 2004 stakes and shares of 5030 state owned enterprises have been sold: - 2779 entire enterprises and 2251 self-contained facilities. The privatized assets of the state-owned enterprises represent 56.47 % and respectively 85.52 % of the sum of assets due to be privatized in the medium term. As of March 31, 2004, the State still keeps shares and stocks in 1089 companies, including ‘majority packages’ (over 50 %) in 207 companies (mainly doing specific services or production) and ‘minority’ or ‘residual packages’ in about 882 companies. Out of which 337 minority packages are taken apart for satisfying restitution claims’. The privatization of majority packages’ is being done through offering them in public auctions or open public tenders for cash payments or on the BSE. Currently the Privatization Agency is working on the sale of 174 ‘majority packages’. The government continues its efforts to privatized the remaining big structures. In December 2003, the National Assembly adopted a new Strategy for privatization of Bulgartabac Holding which envisages an internal restructuring of the holding during the privatization process by establishing separate commercial entities out of the subsidiary companies and organizing international auctions for each one of them. Companies that are not viable will be sold last or liquidated. The privatization procedure in accordance with the new Strategy has already started. The sale contract for 65 % of the Bulgarian Telecommunication Company (BTC EAD) between the Privatization agency and Viva Ventures holding, Austria was signed on February 20, 2004. BNP Paribas was appointed as a project’s development consultant for the sale of seven electricity distribution companies. The Council of Ministers and the National Assembly approved the sale strategy for these companies. Three bids have been announced for the sale of the seven companies grouped in three packages on territory basis. Up to 67 % of the companies’ assets are offered for sale. Five offers were submitted by leading companies in this field. Finalisation of the deals is expected by the end of September 2004. The strategy for the sale of the Bulgarian River Shipping Company and Navigation Maritime Bulgaria (BMF) as well as evaluations and memorandums of the companies were presented to the selected consultancy firm - Price Waterhouse Coopers. Currently the strategy is in process of coordination among responsible institutions. Conditions and methodologies for the sale of the Bulgarian River Shipping Company and Navigation Maritime Bulgaria are to be decided in the last quarter of 2004. The sale of the Navigation Maritime Bulgaria depends on the development of the sales procedure of the Varna shipyard, which is part of the Navigation Maritime Bulgaria assets. In case of successful privatization, the assets of the Shipyard are to be excluded from the balance sheets of the Commercial Fleet and the respective information memorandum. The transaction was concluded on March 31, 2004, but one of the auction participants has logged a complaint with the Supreme Administrative Court and the respective payment was not remitted. The Privatization Agency has granted permission for the transfer of the Varna Shipyard assets to a new company.
3 Out of the 35 water power plants slated for privatization, 20 have been sold. Terrain - concessions are expected for two of the plants, which can only be sold afterwards. Update of terrain documents or clarification of restitution claims are in progress, as regards the remaining projects. Another 5 hydroelectric power plants, not included in the initial list, have been sold as well. Another 20 more hydroelectric power plants are undergoing sale procedure. The Privatization Agency is working on 14 projects for privatization of central heating companies. Three central heating companies were sold at centralized public auctions in the first quarter of 2004. The implementation of a successful tax policy is the main instrument for improvement of the overall business environment and investment promotion under the conditions of macroeconomic stability. The downward trend in the burdens of taxation and social security, as well as the simplification of the tax system and its effective administration will continue within the framework of a low budget deficit. The following legal amendments have been effected: changes in the tax levy on incomes of physical persons, changes in the corporate tax levy, introducing a single tax levy on corporate profits, changes in excise duty, amendments to the VAT Act, enhancement of the state tax control and check-ups as well as implementation of new measures towards defaulting tax payers. The attraction of enlarged volume of investments – domestic and foreign - is of great importance for the Bulgarian economy’s competitiveness and economic growth. Companies, which are traditionally present in the country, continue to be the most significant source of FDI in Bulgaria – a positive sign of increased investors’ confidence in the business environment in the country. Privatization revenues in 2003 are only USD 360 mln, which includes the purchase of DSK Bank from OTP, Hungary. In 2003 and 2004 the Bulgarian Government undertook legal initiatives for promotion of investments. On April 23, 2004 the Bulgarian Parliament adopted the Investment Promotion Act (in the form of Draft Amendments to the to Law on Foreign Investments). The comments and the proposals of the European Commission have been taken into consideration and are incorporated in the Draft Law. The scope of the law has been expanded, so that the investment conditions in the country are made uniform in respect of local and foreign persons. The amendments to the law eliminate the division of investments into “foreign” and “local”, where investment promotion measures are applied. The Foreign Investment Agency shall be transformed into an executive Agency subordinated to the Minister of Economy and responsible only for implementation of the investment policy. All its current responsibilities, related to policy-making will be clearly mandated to the Minister of Economy. The investment incentives provided for under the Investment Promotion Act will depend on the category of the investor, defined according to the size of the project. The Law does not provide for any financial measures or tax incentives. All tax incentives are regulated by the Bulgarian tax legislation. The increase in competitiveness of the Bulgarian industry and the improvement of the capacity to cope with the competition in the EU market are only possible through creation, introduction and dissemination of innovations, in order to ensure a competitive edge in the international market and satisfy in advance the new demands of domestic and international consumers. A draft of the Innovation Strategy of the Republic of Bulgaria has been prepared. It is going to be submitted to the Council of Ministers for review. The Innovation Strategy aims at: increasing the competitiveness of Bulgarian industry, development of competitive knowledge-based industry through promotion of applied research, high technologies and innovations, stimulation of the internal and external integration of scientific research institutes and their interaction with the business, development of new mechanisms for promotion of applied research and its introduction in the industry and for financing market-oriented research through private capital.
4 As specified in the strategy, the financial instrument for its implementation will be a National Innovation Fund. This fund will support innovation projects with potential economic impact in the country. The projects have to be developed by scientific bodies in co-operation with the companies. Beneficiaries will be all prospective, innovative, industrial companies, aimed at introducing new technologies, expanding their markets and participating in international projects, whose objectives correspond to the goals of the Fund. The Bulgarian side informed that the level of unemployment differs from region to region in the country. For example, while the unemployment rate is about 3%-4% in Sofia, it goes over 20% in the north-eastern and north-western parts of the country. The Ministry of Regional Development and the Ministry of Economy adopted a strategy for considerable improvement of this indicator. The Ministry of Economy, the Ministry of Agriculture and Forestry and the Ministry of Environment and Waters are responsible for providing information to the business community in the country on Industrial Policy, Ecology, Health and other issues resulting from the Bulgaria-EU negotiating process.
2.1.2. Latest development in EU Industrial Policy Manufacturing industry still plays a key role in Europe’s prosperity. It is, however, facing challenges and there is a real concern about the risk that the Union is facing a process of deindustrialisation. This Communication follows a previous document of December 2002 on ‘Industrial Policy in an Enlarged Europe’, which laid out some of the foundations that should underpin the Union’s industrial policy, as well as the Communication of November 2003 ‘Some Key Issues in Europe’s Competitiveness – Towards an Integrated Approach’, which also carried out a first analysis of the problem of deindustrialisation. This had followed a request of the European Council, which had echoed these concerns. The analysis carried out by the Commission indicates that there is no proof of a generalised process of deindustrialisation. That said, European industry is having to face up to a process of structural change which is beneficial overall and which should be encouraged, in particular by policies that facilitate the development and the use of knowledge. From this point of view, Europe’s disappointing performances, notably in terms of productivity, research and innovation, are worrying. This is corroborated by the fact that the delocalisation of industrial activities appears no longer to be limited only to traditional sectors with a high labour density, but are beginning to be observed in intermediate sectors – which constituted the established strengths of European industry – or even in some high-technology sectors, where there are indications of a delocalisation of some research activities, or in the services sector. India and China are the main beneficiaries of these movements. Economic internationalisation offers opportunities, however, to Europe’s industry as long as industrial policy supports the necessary evolutions. From this point of view, the forthcoming enlargement of the EU offers important opportunities to European business, not only as a result of the extension of the internal market but also because it offers the possibility of reorganising value chains across the continent, making the most of the competitive advantages of the New Member States. Nevertheless, the benefits for these countries of their relatively low labour costs will be temporary. The transition to a knowledge economy will be vital and a certain regulatory prudence will be necessary to avoid putting a strain on the industrial competitiveness of these countries. Faced with this diagnosis, the Commission intends to mobilise industrial policy to accompany the process of industrial change. This implies three types of actions. Firstly, the European Union must continue its efforts in regulating better, and to create a regulatory framework that is favourable to industry. Therefore, in the framework of the integrated impact
5 assessment of Commission proposals and initiatives, which covers the three pillars of sustainable development, the evaluation of competitiveness aspects needs to be deepened. Also efforts need to be made to evaluate regulation’s cumulative impact, for example, on certain sectors. These efforts should not be limited to the Commission alone: they should commit also the other Community institutions and the Member States. Secondly, the synergies between different Community policies having an impact on industry’s competitiveness need to be better exploited. The Commission has identified a number of specific initiatives, in 5 different domains, which could improve these synergies, and particularly the capacity of European industry to confront the problems of structural change. In the domain of knowledge, it is, in particular, innovation, research, training and competition policies which have a key role to play. Similarly, the functioning of markets can still be improved, whether it is in addressing the shortfalls of the internal market or in eliminating some tax obstacles to its full use by business. Cohesion policy, and in particular regional policy and employment policy can also contribute actively to the process of structural change, specifically by promoting the development and the spread of knowledge. As for sustainable development, this has a positive contribution to make to industrial competitiveness, notably through the development of a policy of sustainable production. Finally, the international dimension of industrial policy must be further advanced, in particular to improve the access of Community companies to the markets of third countries, and to export the regulatory approaches that have been successfully implemented by the Union inside the single market. Thirdly, the Union must continue to develop the sectoral dimension of industrial policy. This implies analysing the effectiveness at a sectoral level of policy instruments which are of a horizontal nature, with a view to evaluating their relevance and to propose, if necessary, the appropriate adjustments. The Communication presents the sectoral initiatives that have already begun over the last few months and announces several new initiatives in sectors such as the car industry or mechanical engineering. The competitiveness of Europe depends, to a large extent, on its industry. But the Community institutions and the Member States must contribute to creating a favourable environment for business. The combination of the activities announced should help Europe’s industry, in particular in the new Member States, to meet successfully the challenges of structural change and to contribute, therefore, to meeting the objectives that the European Union set itself four years ago at the Lisbon European Council.
2.1.3. SME Policy and SME sector developments. State of play. The Bulgarian delegation presented the major changes in SME policy development. The Agency for Small and Medium-sized Enterprises, currently a state agency, will soon be transformed into an implementing agency under the Minister of Economy, and will be merged with the Bulgarian Trade Promotion Agency. It is expected that in early autumn the Agency will be fully functional. The new framework will enable better policy co-ordination and more focused policy. The Bulgarian delegation referred to the ‘National strategy for SME promotion and entrepreneurship’, which first drafted in 2002 is now under revision by the Ministry of Economy. It also mentioned the ‘Annual Programme’ for the implementation of the strategy, which will help to be more focussed and more practical and which will help to overcome problems and delays experienced in this sector in the past. The Bulgarian delegation indicated that the Annual SME Report was likely to be available by the end of May 2004 and that the Innovation Strategy was likely to be approved in June. According to the Bulgarian industrial association the proportion of newly registered companies in 2003 was 4.3%. However, this figure should be examined very carefully as the register holds over a
6 million companies. The active companies are estimated at around 20%. The debate over the company register is ongoing. Currently companies’ registration is done by the courts and the information is not available online. Even so, registering a company is much easier than liquidating one. One of the proposed changes is to transfer the company register to an independent authority and bring it online. There is also an action plan for informing businesses about new responsibilities related to EU membership, and one of the main tasks of the ASME is to provide such information through publications and seminars. The Innovation strategy is an important part of the national policy. It has been drafted and publicly debated. The expectation is that the Council of Ministers will approve it soon. All measures included are in line with the state-aids legislation. The National Innovation Fund, which will be created after the adoption of the strategy, will be administered by the new Agency for Promotion of Entrepreneurship. EC delegation enquired about the representation of small businesses in the Council for Economic growth and about the new law on business representation. The Bulgarian delegation answered that all businesses are represented in the Council for Economic Growth. For example the Bulgarian Industrial Association with its branch chambers represents both big and small business. The law on business representation is proposed by members of Parliament and the text is still in preliminary discussions. The EC delegation acknowledged that some progress has been made in the SME sector in Bulgaria. More detailed statistics on the small and medium-sized enterprises, possibly by sectors, is still needed. The Bulgarian side agreed to send the 2003 Annual Report on SME, as soon as it is ready in order to provide complete statistical data for the SME sector. The Commission asked the Bulgarian delegation to provide more and regular information on developments in the SME sector and on the regulatory environment. The Commission also underlined the need to improve the companies register and online information for business.
2.1.4. Institutional framework and administrative capacity, including the respective responsibilities of the Ministry of Economy and the SME agency and other business-related agencies and support for export. The leading principle is that the Ministry of Economy defines policy in the different domains and supervises the agencies. It is responsible for co-ordination and the Agencies take responsibility for implementation. There are ongoing efforts to improve the institutional framework and to strengthen the administrative capacity for formulating, co-ordinating and implementing the industrial policy. A new Statutory Order of the Ministry of Economy was adopted by Council of Ministers Decree N 243/31.10.2003, which came into effect on November 4, 2003. The purpose of this change was to improve the Ministry’s administrative structure, as well as to define and allocate the responsibilities between the Ministry of Economy and its executive agencies. New Directorates (Enterprise Policy Directorate, Investment Policy Directorate, and General Economic Policy Directorate) were established due to the necessity to differentiate clearly the responsibilities and tasks between the Ministry of Economy and its agencies in formulating and implementing the SME policy, entrepreneurship, investment, export promotion, etc. After the final adoption of two draft laws: Amendments to the Law on SME and Amendments to the Foreign Investment Act, the process of differentiating and defining the tasks and obligations between the Ministry of Economy and its executive agencies will be completed. In 2003 the Bulgarian Trade Promotion Agency and the Bulgarian Export Insurance Agency continued their activities, aimed at business assistance and export promotion.
7 In 2003 the Bulgarian Trade Promotion Agency (BTPA) has pointed its attention towards strengthening the country’s overall trade performance through close co-operation with the Bulgarian business society and its key stakeholders, to ensure a holistic approach on how to enter into and expand Bulgarian business interests in foreign markets.
2.2. Participation in the EC Multi-annual Programme for Enterprise and Entrepreneurship for SME. Since May 2002 candidate countries participate in working groups on best procedure projects on how to organize and exchange best practices. Bulgaria is taking part in the following 2003 projects : Obstacles to growth: recruiting the first employee; Guarantees and mutual guarantees; European e-skills forum; Indicators of regulatory quality; Ex-post evaluation of EC legislation and its burden on business. The 2004 work programme has been approved in December last year and is available on the DG Enterprise web site. Actions have been introduced during the year, based on the priorities identified in the Action plan for entrepreneurship, but now EC is preparing an amendment to the 2004 work programme, which will be adopted by the end of this month. There will be nine new projects - promoting SME and craft enterprises in the area of standardization; SME access to public procurement; User’s guide to Community regulation in bio-technology; Support to the Dutch presidency conference on corporate social responsibility; Evaluative study to design common approach to the monitoring and evaluation of SME related actions; Streamlining and simplification of environment-related regulatory requirements; Implementation of the Regulation for European co-operative society; Best practices in accessing early stage financing and effects of taxes in terms of the retention of earnings and increase of whole equity. The Bulgarian delegation informed that the Agency for Economic Analyses and Forecasts at the Ministry of Finance can carry out a micro economic impact assessment for business regulation.
2.3. The European Charter for Small and Medium-sized enterprises. Bulgaria, along with other EU candidate countries, endorsed the European Charter for small enterprises in Maribor, Slovenia, in April 2002. It also agreed to take part in the reporting on the implementation of the Charter. Three EU priority areas have been chosen – education for entrepreneurship, especially secondary education; better regulation, especially bankruptcy law and impact assessment; and skills shortages, especially measures to overcome the lack of skilled technicians and engineers. For them it was decided to hold each year bilateral meetings in half of the countries, while the remaining ones will be done by written reports. For the candidate countries there will be no change and they will have to prepare written reports every year. The questionnaire for this year report has been sent to the SME Agency and a bilateral meeting will be organized in Bulgaria in July.
2.4. Recent developments in EU enterprise policy. The EC delegation presented three documents: the Action Plan: the European agenda for entrepreneurship, the Support programme for entrepreneurship and enterprise competitiveness for the period 2006-2010, and Delivering Lisbon: Reforms for the enlarged Union. The Action Plan the European agenda for entrepreneurship focuses on five main areas:
8 o Fuelling entrepreneurial mindsets o Encouraging more people to become entrepreneurs o Gearing entrepreneurs for growth and competitiveness o Improving the flow of finance o Creating a more SME-friendly regulatory and administrative framework. At present, the Community implements a Multiannual Programme for Enterprise and Entrepreneurship, and in particular for small and medium-sized enterprises (MAP). It will expire on the 31st December 2005. In 2004, the Commission plans to present to the Council and the European Parliament a proposal for a successor programme to the MAP: the Support programme for entrepreneurship and enterprise competitiveness for the period 2006-2010. The scope of the current MAP will be broaden by adding activities in the fields of innovation, industrial policy and competitiveness to create a comprehensive programme. An area called “entrepreneurial innovation” will contribute to a climate favourable to new business ideas and innovative approaches. Another focus will be helping SMEs and innovative companies in their early and mid stage of development to access appropriate financing instruments. In the area of financial guarantees, a new securitisation instrument could remove loan portfolios from bank’s balance sheets by packaging and selling them to institutional investors. Delivering Lisbon: Reforms for the enlarged Union: the Commission sets priorities for catching up with Lisbon agenda. The Union is still far from achieving the objectives set at the Lisbon European Council. Employment and productivity do not make a sufficient contribution to European growth. There are several reasons for this: the low employment rate of workers aged between 55 and 64, inadequate take-up and use of information and communication technologies, and the lack of investment in knowledge sectors (research, innovation, education and training). Furthermore, the internal market is still too fragmented, in terms of both services and intra- Community trade. The performance of the Member States in transposing the directives related to the Lisbon strategy area is also mediocre (an average of 58% across the Union). Finally, performance in terms of the environment, social cohesion and sustainable development is also insufficient. On the basis of this assessment, the Commission has called on the European Council to take the necessary decisions in the three priority areas, namely: o Improving investments in knowledge and networks; o Strengthening the competitiveness of the European economy; o Promoting active ageing by encouraging older workers to remain in the workforce. The Members states should embark on the modernisation of their health care systems to make them more efficient and financially viable.
2.5. Tourism 2.5.1. Latest developments in Bulgaria’s tourism sector The Bulgarian delegation presented detailed information on this item. In 2003 the international tourism in Bulgaria reaffirmed its position as the top export sector of the national economy. Around 99% of the Bulgarian tourism properties are privately owned. The investments led to upgrading of the hotel base category, increasing the quality of tourist services and diversification of the additional tourist services.
9 According to the border statistics, in 2003 Bulgaria was visited by 6,2 mln. foreign nationals. The number of tourists from the EU countries shows the biggest growth. As compared to 2002, the number of EU tourists for leisure and recreation purposes in 2003 increases by 25,3%, reaching a market share of 44.12%. According to preliminary data, in 2003 the international tourism revenues exceed USD 1,62 bln. (+21.6% against 2002). Thus they will constitute over 15,3% of the national export of commodities and services. In order to enhance the competitiveness of the tourism product, the efforts are continuously directed at utilizing the rich natural resources of the country for developing cultural, religious, balneological, rural, eco and other types of tourism. In parallel to the diversification of the national tourism product, Bulgaria is exploring options for improving its territorial and seasonal distribution. In compliance with this policy a number of projects were launched, including the pre-accession funds (PHARE Programme). Regarding the Commission interest about the measures that are currently undertaken in the tourist sector, the Bulgarian delegation informed about the preparation of a national tourism strategy integrating all aspects of the developments in this sector, including also the aged group of tourists and the special forms of tourism activities. Bulgaria explained that following adoption of the amendments, the National Tourism Strategy adopted in 2003 would be further revised. In February 2004 a National Eco-tourism Strategy was adopted. The Bulgarian delegation presented detailed information on the improvements of the Tourism Act. The amendments to it will upgrade the quality of Bulgarian tourism product by categorization of beaches and ski tracks. In view of better protection of tourist services users, special regulations will stipulate the rules for the activities, exercised by tour guides, ski coaches, mountain guides and tourist animators. With the adoption of the new Tourism Act, the licensing regime for activities of tour operators and tourist agents will be transformed into registration regime. Within one month after the promulgation of the Act in State Gazette, an Executive Tourism Agency will be established under the Minister of Economy. The existing Executive Agency for National Tourism Promotion and Information will merge into the new institution. Its key tasks will be related to providing administrative services to persons, performing tourism activities, promoting our tourism product and conducting the Government’s policy in the tourism sector. The benefits of eco-tourism as promising sub-sector, which would help to diversify tourism in Bulgaria were highlighted in this context. Furthermore, Bulgaria explained that dual pricing practices were diminishing with 60% of tourist sites already having addressed the issue.
2.5.2. Latest developments in EU tourism policy The European Commission presented information on Internet guide for the Tourism sector - that contains information on various EU programmes, schemes, funds, initiatives and actions of interest to the tourism sector. It is available at http://europa.eu.int/comm/enterprise/services/tourism/policy- areas/eu_schemes.htm
3. Steel 3.1. Steel trade developments The safeguard measure on imports into the EU of certain steel products, including hot rolled coils, was terminated as from 7 December 2003 with the Commission Regulation No 2142/2003. However the imports in the EU of hot rolled coils originating in Bulgaria are still subject to an antidumping measure. The Bulgarian side requested the European Commission to reconsider the application of this measure, which it considers as being in contradiction with the main trade
10 principle of non-discrimination and with the provisions of Article 9 (5) of the Council Regulation No 384/96 about the protection against dumping imports of goods originating in countries non members of the EU. On 18 December 2003 the European Commission submitted a proposal to the Council of Ministers for a Council Regulation repealing the measure on imports of hot rolled coils originating in Bulgaria. The proposal envisaged the termination of the anti-dumping measure to be applied retroactively as from 20 March 2004. It was expected that the Council would take the decision in a month, i.e. by 18 January 2004, but this has not taken place. The Commission recalled that it had proposed the termination of the antidumping measures against Bulgaria on 18 December 2003 but that the Council had so far not acted.
Bulgaria briefly presented developments in its trade in steel with the EU. In 2003, Bulgarian exports to the EU increased by 1.3% since 2002, reaching a total of $377 million (note: impossible to compare with COM statistics, which are in tonnes). Hot rolled coils are the main steel export item, account for over 60% of Bulgaria’s total exports. Concerning trade developments, COM recalled that both EU imports from, and EU exports to Bulgaria had increased in 2003. Yet, the trade balance remains largely in favour of Bulgaria.
3.2. Latest developments on steel sector restructuring. In accordance with the Additional Protocol to the Europe Agreement for Association regarding the extension of the period, envisaged in Article 9 (4) of Protocol 2 to the Europe Agreement, the Republic of Bulgaria may exceptionally provide state aid for the restructuring of the steel industry following the conditions thereein. The Bulgarian side prepared and in March 2004 presented to the European Commission a National programme for restructuring and development of steel industry of the Republic of Bulgaria till 2007. This Programme is done in compliance with the Terms of Reference agreed in advance with the European Commission and with the cooperation and participation of the chosen by the EC consultancy firm, namely EuroStrategy Consultants Ltd. The Programme concerns the three main Bulgarian steel companies. · Kremikovtzi AD - producing electric and converter steel, hot-rolled and cold-rolled sheet and section steel. · Stomana Industry AD - producing electric steel, hot-rolled sheet, plate and long products. · Promet Steel AD- producing hot-rolled products. The Bulgarian side highly appreciates the importance of the Programme, approved by the Council of Ministers of the Republic of Bulgaria with a Decision of March 24, 2004. The Programme was adopted on the March 17, 2004 by Protocol from the Ministry of Economy, the Branch Chamber of Ferrous and Non-ferrous Metallurgy and the three steel companies, which are obliged to present reports on its implementation. The EC presented its conclusions on the programme to the relevant Council working groups in April 2004. The conditions attached to its implementation have been considered within the framework of the accession negotiations as part of Chapter 6 “Competition”. The Decision of the Council agreeing on the conclusions of the European Commission and conditions attached to the implementation of the plan is under agreement. Information on changes in the management of Kremikovtzi AD will be included in the implementation reports of the National programme for restructuring and development of steel industry of the Republic of Bulgaria till 2007.
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4. Coal2 4.1. Latest developments on restructuring and privatization of the coal mine sector. Future plans for development of the coal-mining sector. The Bulgarian side provided an update of the current state of restructuring process of the coal- mining sector and referred to its position paper. The Bulgarian side informed, that during the last year it continued to apply the principles for restructuring laid down in the Energy Strategy of the country, which could be summarized as follows: · Liquidation of inefficient and prospectless coal mining facilities; · Privatization of the ones that are viable and have future potential. The regime of state aid is regulated in the Law on State Aid, which is in force since 20.06.2002. By Ordinance of the Council of Ministers No 160 of 23.07.2003 were adopted Rules for its application, which regulate in detail the conditions for compatibility of state aid with the law. A considerable part of the Rules is devoted to state aid in the coal-mining sector. Implementing the law, the Commission for Protection of Competition passed its judgement on the compatibility with the law of the aid to be provided to the coal mining companies in 2004. The Strategy for development of the energy sector in the country envisages the state aid for restructuring of coal mining facilities to be discontinued by the end of 2005. The funds for technical liquidation and reclamation of the environment will be granted till the elimination of the negative environmental impact of the coal mining activities. With a view to not allowing cross subsidies, the funds for these activities are granted and accounted for in pursuance of a special Regulation of the Ministry of Finance. The Ministry of Finance and the Ministry of Energy and Energy Resources perform the control on the expedient use of the funds. In 2004 the coal-mining sector will continue developing in compliance with the principles for restructuring laid down in the Energy Strategy of the country. The main activities are enlisted in the Programme for restructuring of the companies from the coal mining sector, privatization, financial recovery and closure of inefficient coal mining facilities, which was developed by the Ministry of Energy and Energy Resources with the active involvement of all the companies. This Programme has been agreed with the Trade unions at national level. It includes a detailed list of restructuring measures for each of the companies over the period till 2007, the time frame for implementing the measures, as well as the persons responsible for their implementation. The philosophy of the restructuring measures is based on liquidation of the inefficient and prospectless coal mining facilities and privatization of the viable ones, which have future potential. It is urgent for Bulgaria to rapidly submit the results of the studies assigned to determine the category of coal produced in coal-mining companies receiving State aid, with a view to implementing Regulation 1407/2002.
5. Trade issues 5.1 EU – Bulgaria mutual trade developments The Bulgarian side described briefly the detailed information provided on the development of trade between Bulgaria and EU.
2 Coal sector issues have already been dealt with in more detail at the sub-committee 6 ‘Transport, Environment, Energy’ on 26-27 April 2004 in Brussels.
12 EU is the main trade partner of Bulgaria and Bulgaria is the 35-th trade partner of the EU. The enlargement of trade and economic cooperation between Bulgaria and the EU lead to the increase of the turnover realized with the EU member states. The turnover with the EU in 2003 amounts to USD 9532,3 million, which is 52,4% of the total Bulgarian turnover. Compared to the previous year there is an increase of the turnover of 35,4%. The exports amounts to USD 4211,2 million or 56,6% of the total exports. The exports increase with 35,1% compared with the export in 2002. The imports is USD 5321,1 million or 49,5% of the total imports. The increase of the imports amounts to 35,6%. The balance in mutual trade is negative for Bulgaria and is USD 1109,9 million. The negative balance increased with USD 300,7 million or 37,2%. The leading trade partners among the Member States are Germany (12,8% of the total turnover), Italy (11,8%), Greece (8,2%), France (5,4%). The leading trade partners in the export are Italy (14% of the total Bulgarian export), Germany (10,8%), Greece (10,4%), Belgium (6,1%). The leading trade partners in the import are Germany (14,3% of the total Bulgarian import), Italy (10,2%), Greece (6,6%), France (5,6%). The agricultural products form 7,8%, and the industrial products – 92,2% of the exports and respectively 4,5% and 95,5% of the imports. The leading industrial goods in exports to the EU are: shirts, blouses, jerseys, pullovers, etc. (10,2% of the exports of industrial products to the EU); unrefined copper and articles thereof (8,8%); women’s or girls’ suits, ensembles, jackets, etc. (6,1%); flat-rolled iron (5,3%); men’s suits, ensembles, jackets, etc. (5,2%); parts of footwear (2,5%); petroleum oils (2,3%). The 15 leading industrial goods represent 50,2% of the exports of industrial products to the EU. In the agricultural exports the biggest is the share of: sunflower seeds (11% of the exports of agricultural products to the EU); sheep and goat meat (8,4%); wines (7,4%); tobacco (7,3%); meat or edible offal of bovine animals (7,1%); plants and parts of plants (4,8%); wheat (4,3%). The 15 leading agricultural products represent 77,8% of the agricultural exports to the EU. In the imports industrial products from the EU prevail: automobiles (9,1% of the import of industrial products from the EU); pharmaceuticals (3%); motor vehicles for the transport of goods (2,4%); blouses and shirts (2%); tractors (1,4%); transmission apparatus for radiotelephony (1,3%). The 15 leading industrial goods represent 29,4% of the industrial imports from the EU. In the agricultural imports the leading goods are: food preparations (9,2% of the import of agricultural products from the EU); vegetable or animal fats and oils (4,8%); meat of swine (4,7%); preparations for animal feeding (4,2%); ethyl alcohol (3,9%); citrus fruits (3,6%); meat or edible offal (3,4%). The leading 15 goods form 53,5% of the agricultural imports from the EU. The EU side noted that EU and Bulgarian statistics were fairly similar, contrary to previous years. They show a regular growth of our bilateral trade, even though the trade balance remains largely in favour of the EU. COM underlined that Bulgaria’s trade deficit with the EU had regularly increased since 1999. Aggregated statistics of the EU-15 and the 10 new member states in 2003 show that Bulgaria’s trade deficit with the EU-25 exceeded €1.1 billion.
5.2. Exchange of information on Free Trade Agreements. The Republic of Bulgaria has concluded and applies bilateral Free Trade Agreements with Turkey, FYROM, Israel, Lithuania, Estonia, Latvia and Albania. Its FTA with Moldova is expected to be signed on 20 May and the one with Serbia and Montenegro will enter into force on 1 June. The FTA with Bosnia and Herzegovina was signed in October 2003.
13 The FTAs with the three Baltic States have been denounced upon accession of Estonia, Latvia and Lithuania to the EU on May 1, 2004. The EU delegation informed, that practically all FTAs with third countries are now updated for enlargement. EU also concluded agreements on increased tariff quotas with Mexico, South Africa, Chile and Croatia.
5.3. Harmonization of tariff policy of the Republic of Bulgaria with the one of the EU. In the context of its accession negotiations, Bulgaria has committed to adopt and implement the Common Commercial Policy of the EU, including the Tariff Policy, as of the date of accession. The bound rates that Bulgaria negotiated in WTO are to a large extend compatible to or higher than the EU rates. Bulgaria takes into consideration the necessity, during the multilateral negotiations in the WTO not to bind its duties at considerable reduced level. At the same time Bulgaria will aim at adoption of the type of the duties applied by the EU – ad valorem, specific and combined duties. The EU side thanked Bulgaria for abiding by its commitment to maintain tariffs until accession, and recalled that this policy makes sense both from a WTO perspective and from a bilateral perspective.
5.4. Conclusion and renegotiation/termination of bilateral agreements. As it was stated, the Republic of Bulgaria has already declared its readiness to adopt the common principles of the EU Common Commercial Policy as from the date of accession to the EU and follows the principles of the Common Commercial Policy when negotiating Agreements with third countries. The Bulgarian delegation confirmed that it has started reviewing its trade and investment agreements with a view to rendering them compatible with EU membership obligations, and that it would shortly request consultations with the Commission (DG “Trade”). The EU side confirmed that Bulgaria will need to analyse all its international trade agreements, both preferential and non- preferential, in order to establish their compatibility with the EU acquis. This exercise will be time and resource consuming and should therefore start on time. The Republic of Bulgaria actively participated in the trilateral meetings between the EU, USA and the acceding and candidate countries where the possibilities for removing the incompatibilities with the acquis of the Bilateral Investment Treaties with the USA have been discussed.
5.5. Dual use goods. The Bulgarian delegation informed, that the Republic of Bulgaria keeps updated and fully aligns its legislation in the field of the foreign trade activity in dual-use goods and technologies with the respective EU legislation. With a Decree No 69/31 March 2004 the Council of Ministers of the Republic of Bulgaria adopted an updated List of arms and dual-use goods and technologies, which is in full compliance with the relevant amendments provided with the Council Regulation 149/2003. The EU side recalled that, upon its accession to the EU, Bulgaria would need to repeal the parts of its legislation on trade in dual-use goods which concerns export controls; in order to facilitate this task, Bulgaria should “construct” its dual-use legislation in a way which is easily amendable.
6. Date of next meeting and any other business. The next meeting should take place in Brussels in 2005 in accordance with the Timetable of the multi-disciplinary Sub-Committees EU-Bulgaria (to be determined).
14 Both sides mentioned the need of further regular or ad-hoc exchange of continuous detailed information, when appropriate, on all items in relation to the scope and term of reference of the Sub-Committee № 3 “Trade, Industry and ECSC”.
Mr. Dimiter Ivanovski (co-chairperson)
Ministry of Economy, Bulgaria
Mr. Nikolay Trifonov (co-secretary)
Ministry of Foreign Affairs, Bulgaria
Ms. Bridget Czarnota (co-chairperson)
European Commission
Mr. Bert Kuby (co-secretary)
European Commission
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List of Annexes
1. List of participants
2. Agenda of the meeting
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15 Annex No. 1.
NINTH MEETING OF THE EU-BULGARIA MULTI-DISCIPLINARY SUB-COMMITTEE No 3 ON TRADE, INDUSTRY and ECSC Products
TUESDAY, 11 MAY 2004, SOFIA (Ministry of Foreign Affairs, 2, Alexander Zhendov Str., room No.101)
DELEGATION OF THE EUROPEAN COMMISSION
Ms. Bridget Czarnota – DG Enlargement, co-chairperson of the Sub-Committee Mr. Bert Kuby – DG Enlargement, co-secretary of the Sub-Committee Ms. Evelyne Hania – DG Enterprise, Enterprise policy issues Ms. Maud Labat – DG Trade, Bilateral trade relations Mr. Hermann Hagspiel – Delegation of the European Commission to Bulgaria, private sector development, banking
OTHER REPRESENTATIVES
Mr. Jens Kraus-Massé - German Embassy in Sofia, Counsellor, Head of Section for Economy and Economic Co-operation Ms.Eftychia G. Bacopoulou - Embassy of Greece in Sofia, First secretary, Economic and Commercial Affairs
BULGARIAN DELEGATION
Mr. Dimiter Ivanovski - Deputy Minister of Economy, co-chairperson of the Sub-Committee Mr. Nikolay Trifonov - Ministry of Foreign Affairs, co-secretary of the Sub-Committee Mr. Eli Anavi - Ministry of Economy, Director Enterprise Policy Mr. Ivo Marinov - Ministry of Economy, Director National Tourism Policy Ms. Tania Ignatova - Ministry of Economy, Director Investment Policy Ms. Diana Najdenova - Ministry of Economy, Director Foreign Economic and Trade Policy Ms. Silvana Lubenova - Ministry of Economy, Director European Integration Ms. Detelina Krasteva - Ministry of Economy, Counsellor Ms. Ani Davidkova - Ministry of Economy, State expert Ms. Evgenija Nikolova - Ministry of Economy Mr. Ivaylo Grancharov - Ministry of Economy Ms. Maria Velkova - Ministry of Economy Mr. Dimiter Katev - Ministry of Energy and Energy Resourses, State expert Ms. Nelly Tzvetkova - Ministry of Energy and Energy Resourses Mr. Angel Despotov - Agency for Small and Medium-sized Enterprises, Chairman Ms. Keti Kojnakova - Agency for Small and Medium-sized Enterprises Mr. Atanas Traykov – Bulgarian Foreign Investment Agency, Vice Chairman Ms. Ekaterina Koltchakova - Privatization Agency Ms. Boriana Mintcheva - Bulgarian Trade Promotion Agency
16 Annex No. 2.
AGENDA FOR THE NINTH MEETING OF THE EU-BULGARIA MULTI-DISCIPLINARY SUB-COMMITTEE No 3 ON TRADE, INDUSTRY and ECSC Products
TUESDAY, 11 MAY 2004, SOFIA (Ministry of Foreign Affairs, 2, Alexander Zhendov Str., room No.101)
Opening and Adoption of the Agenda
The meeting will be co-chaired and introduced by:
- Mr Dimiter Ivanovski (Deputy Minister of Economy, Head of the Bulgarian Delegation to Sub-Committee 3)
- Ms Bridget Czarnota (European Commission, DG Enlargement, Head of Bulgaria Team)
Enterprise and SME Policy
2.1. General policy (BG lead)
2.1.1. – Latest development of Industrial Policy. Measures to improve the overall business environment and stimulate investments. (BG lead) Simplification of the legislative and administrative environment. Latest developments on restructuring and privatization. Liquidation and insolvency procedures.
2.1.2. - Latest development in EU Industrial Policy (DG ENTR lead) Accompanying Industrial Change: An Industrial Policy for the enlarged Union
2.1.3. – SME Policy and SME sector developments State of play. (BG lead)
2.1.4. - Institutional framework and administrative capacity, including the respective responsibilities of the Ministry of Economy and the SME agency and other business-related agencies and support for export. (BG lead)
2.2. Participation in the EC Multi-annual Programme for Enterprise and Entrepreneurship for SME. (DG ENTR lead)
2.3. The European Charter for Small and Medium-sized enterprises. (DG ENTR lead)
2.4. Recent developments in EU enterprise policy. (DG ENTR lead) · Action plan: The European agenda for entrepreneurship; · Support programme for entrepreneurship and enterprise competitiveness 2006-2010; · Delivering Lisbon: Reforms for the enlarged Union;
2.5. Tourism
17 2.5.1 Latest developments in Bulgaria’s tourism sector. (BG lead) 2.5.2 Latest developments in EU tourism policy (DG ENTR lead) - Basic orientations for the Sustainability of European Tourism - Report on Community measures affecting Tourism - Internet guide for the Tourism sector
3. Steel
3.1. Steel trade developments. (DG TRADE and BG lead)
3.2. Latest developments on steel sector restructuring. (BG lead)
4. Coal
4.1. Latest developments on restructuring and privatization of the coal mine sector. Future plans for development of the coal mining sector. (BG lead)
5. Trade Issues (DG TRADE and BG lead)
5.1.EU-Bulgaria mutual trade developments.
5.2.Exchange of information on Free Trade Agreements.
5.3.Harmonisation of tariff policy of the Republic of Bulgaria with the one of the EU.
5.4.Conclusion and renegotiation/termination of bilateral agreements.
5.5.Dual use goods.
6. Date of next meeting and any other business.
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