Special Coverage of the Conference “U.S. - Joint Training Facilities: Commercial Opportunities and Business Partnerships”

issue 71 july 2006

4th4th ofof JulyJuly inin SofiaSofia

Analysis: Bulgaria’s Joblessness Ebbs ● Budget Gains Support Tax Reduction Plans Interviews: William Mills of the U.S. Army Corps of Engineers ● EU Affairs Minister Meglena Kuneva Events: Government's Action Plan Presented to AmCham General Assembly

American Chamber of Commerce in Bulgaria

Business Park , Mladost 4 Area, Building 2, Floor 6, 1715 Sofia Tel.: (359 2) 9769 565 Fax: (359 2) 9769 569 homepage: www.amcham.bg e-mail: [email protected] editorial

A Very Special Editorial

A picture of a child surrounded by blooming flowers. Next to it - a photo capturing the partnership between a Defense Minister and an Ambassador. What is the relation between the two you might ask? It is quite clear - the photos document the two most important events in the last months for the American Chamber of Commerce in Bulgaria - the members' celebration of Independence Day and the conference organized by the Chamber: "U.S. - Bulgaria Joint Training Facilities: Commercial Opportunities and Business Partnerships". These two events demonstrate in a ● in the true friendly spirit of the relations between confident way the direction where the American the two countries, culminating in the celebration Chamber of Commerce is headed - towards strength- event of Independence Day in Sofia. ening the partnership between Bulgaria and USA at This is the reason why instead of the introductory all possible levels: words or the editorial of the executive director or the ● in the business field, our main priority; editor-in-chief, there are 5 photographs that speak of ● in the field of beneficial collaboration between the the important actions undertaken by the American two countries as NATO Chamber of Commerce in Bulgaria. A picture is worth

members (the reason we did the conference); a thousand words. Enjoy. AmCham Bulgaria Magazine July 2006

page 1 contents

issue 71 july 2006

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 1715, Bulgaria Yuliana Boncheva e-mail: [email protected] www.amcham.bg Advertising AmCham Bulgaria: Editor-in-Chief Nadejda Vakareeva, [email protected] Milen Marchev AmCham Bulgaria Magazine: Milen Marchev, [email protected] Deputy Editor-in-Chief: Christopher Karadjov The AmCham Bulgaria Magazine reaches a broad audience Senior Editor: of AmCham members, leading US, Bulgarian and internation- Irina Bacheva al companies, US and Bulgarian decision-makers, all AmChams around the world. Layout, Design & Printing: Subscription is free of charge. If you would like to subscribe Milen Marchev to AmCham Bulgaria publications, please contact the AmCham Bulgaria office.

iF YOUR AD WERE pLACED HERE, AMCHAM ADVERTISING RATES

BACK COVER ...... 1330 BGN YOUR MESSAGE SECOND COVER ...... 1220 BGN THIRD COVER ...... 1180 BGN • WOULD BE CONVEYED TO THE LEADING US, INTERNATIONAL AND TWO PAGES SPREAD ...... 1440 BGN BULGARIAN COMPANIES OPERATING WITHIN BULGARIA; FULL PAGE ...... 960 BGN HALF PAGE ...... 780 BGN • WOULD REACH THE DESKS OF SENIOR EXECUTIVES AND DECISION-MAKERS QUARTER PAGE ...... 580 BGN WHODEMANDHIGHQUALITYPRODUCTSANDSERVICES; LOGO ...... 350 BGN INSERT ...... 840 BGN • WOULD TRAVEL ACROSS THE EUROPEAN CONTINENT AS WELL AS THE UNITED STATES, TAKING FULL ADVANTAGE OF THE INTERNATIONAL NET- DISCOUNTS: WORK OF AMERICAN CHAMBERS OF COMMERCE;

2 AMCHAM MEMBERS ...... 20% • WOULD SERVE AS AN IDEAL NETWORKING OPPORTUNITY FOR POTENTIAL ADVERTISING AGENCIES ...... 15% FOREIGN INVESTORS AND BUSINESSMEN VISITING BULGARIA. MAX VOLUME DISCOUNT ...... 10%

THE RIGHT MESSAGE TO THE RIGHT AUDIENCE. For more details please contact: AmCham Bulgaria Office – Nadia Vakareeva, phone: 976 95 65, e-mail: [email protected] AmCham Bulgaria Magazine – Milen Marchev, phone: 846 88 32, e-mail: [email protected] AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria amcham bulgaria

Board of Directors of the American Chamber of Commerce in Bulgaria President Mr. Borislav Boyanov Borislav Boyanov & Co. Vice President Mr. Stefan Dimitrov Allied Pickfords Bulgaria Contents Second Vice President Mr. David Hampson Grenville Financial Treasurer Mr. Anthony Hassiotis Bulgarian Postbank partnership AmCham conference Allows Military, Members Mr. Kenneth M. Lefkowitz New Europe Corporate Advisory Businesses, Government Reps to Mingle ...... 4 Mrs. Olga Borissova AUBG, Director European Programs Mrs. Tanya Kosseva Landmark Bulgarian Companies Invited to Mr. George Randelov IBM Bulgaria Jump on U.S. Military Construction Bids ...... 8 Mrs. Elitsa Tsaneva Ideal Standard Bulgaria Mrs. Maria Vranovska Eli Lilly and Company By Irina Bacheva Ms. Evgenia Stoichkova Coca-Cola Bulgaria Experts Lecture AmCham Members on Military Mr. Christopher Thompson Bearing Point, CLRP Ex-Officio Member Mr. James Rigassio US Senior Commercial Officer Contracts 101 ...... 13 Executive Director: Valentin Georgiev

US Plans to Invest up to 3M (East) AG . AA KRES EOOD . ABB Bulgaria Ltd. . AbCRO - Bulgaria . Accor $62 Million in Novo Selo ...... 16 Services Bulgaria . ACSIOR . ADIS Ltd. . Advance International Transport (Balkan) EAD . AES Corporation . AFA OOD . AGS Bulgaria Ltd. . AIG Bulgaria Insurance & By Panayot Angarev . . . Reinsurance Company EAD. AIG Life Bulgaria AIMS. Human Capital ALEXANDROV. GROUP CORPORATION. Allan Collautt Associates,. Inc. Allied Pickfords Bulgaria Alter. celebration Ego Company OOD American. College of Sofia American Construction. Products JSC AmCham's July Fourth: American English. Academy American University .in Bulgaria (AUBG) Anglo-American. School. of Sofia Anton Preslavski, Liebert. Hiross APIS - .BULGARIA Ltd. APOLO Ltd.. Mixing Music, Good Food, Hi-Tech Gadgets, Argento Human Resource Solutions Aries Commerce. Ashtrom International. AD Rope Fun and World Cup Drama ...... 20 Association of Bulgarian Broadcasters. - ABBRO . AT Engineering 2000 Ltd. . Auditing Company Versi and Partners. Ltd. Avendi. Ltd. AVON. Cosmetics Bulgaria .Ltd. Balkan News .Corporation Plc.. Balkan Star. Baxter AG Bayer Bulgaria. EOOD BearingPoint,. analysis Inc. BG Radio .BMG Ltd. Bodyguard-Fire-K. Ltd. Borislav Boyanov & Co. Budget Gains Support Tax Reduction Plans ...... 24 Braykov's Legal. Office Bristol-Myers. Squibb Brown Forman Beverages. Worldwide Sofia Branch LLC BULBANK. Bulgarian American. Enterprise Fund Bulgarian Charities Aid Bulgaria’s Joblessness Ebbs ...... 26 .Foundation (BCAF) Bulgarian. Post Bank Bulgarian .Telecommunications .Company EAD. Business Media Group. Business .Park Sofia EOOD CA IB Bulinvest .CableTel By Mina Georgieva Car Rental Bulgaria Ltd. . Carlsberg Cefin Bulgaria. EOOD (IVECO dealer) .Center for the Study of Democracy. Chelopech. Mining EAD Cisco. Systems Bulgaria Citibank Bulgaria May Turn Into Tax Heaven ...... 28 N.A.- Sofia Branch City University Clockwork Ltd. CMS Cameron McKenna EOOD . Coca-Cola Bulgaria EOOD . Coca-Cola HBC Bulgaria SA . COLLIERS International . By Yuliana Boncheva ConsulTeam Recruitment and Selection Ltd. . Cook Communications . Corstjens Worlwide Movers Group . CPM International Ltd. . Curtis / Balkan Ltd. . DeConi M&A . Deloitte events Bulgaria EOOD . DHL Express Bulgaria Ltd. . Diageo Bulgaria Ltd . Diamed Ltd. . Dimitrov, Petrov & Kalaidjiev . DIMON Bulgaria . Djingov, Gouginski, Kyutchukov, & Velichkov The "Economist Intelligence Unit": . Dobrev, Kinkin & Lyutskanov Law Firm . Domaine Boyar AD . Dr. Emil Benatov & Partners Currency Board in Bulgaria is Under Threat ...... 33 . Dr. I.S. Greenberg Medical Center, Ellen Ruth Greenberg, Ph.D. . DynCorp International LLC . Effekten Und Finanz - Sofia AD . Electron Progress AD . Eli Lilly and Company . Elido (Lamel Ltd.) . Elmek Sport Bulgaria EOOD . Elta consult AD associated partner of CB amcham interview Richard Ellis for Bulgaria . Emerson Process Management AG . Encouragement Bank AD Meglena Kuneva: Bulgaria Must Have Its . Engineeringservice Sofia Ltd. . Equest EAD . ERATO HOLDING PLC . Ernst & Young Bulgaria . Expo Team Ltd. . Flying Cargo Bulgaria Ltd. - Licensee of FedEx . Force Delta Eurocommissioner on Jan. 1, 2007 ...... 35 Ltd. . Forem Consulting Bulgaria . Forton International JSCo . General Electric By Marina Tsvetkova International . Genmark Automation Bulgaria . GiTy Bulgaria ltd. . GlaxoSmithKline . Goodyear Dunlop Tires Bulgaria . Grand Hotel Sofia . Grenville . Grey Worldwide Bulgaria EOOD . Group 4 Securitas (Bulgaria) OOD . Hewlett-Packard Bulgaria Ltd. . Hilton Sofia amcham events . . . . Honeywell. EOOD Horizon . HVB Bank Biochim AD and HEBROS. Bank AD. IBM Minister Kuneva Presents Bulgaria Ideal Standard. Bulgaria Industrial .Holding Bulgaria In Time Ltd.. Infoguard Government's Action Plan to - Stefan Nedkov ING Bank Sofia. Branch . Intel Czech Tradings,. Inc. Interbrands. Marketing & Distribution Inc. OOD Interdean . Investbank Plc. IP Consulting. Ltd. AmCham General Assembly ...... 37 ISI Emerging Markets .(Internet Securities,. Inc.) Johnson. & Johnson Doo.. Junior Achievement Bulgaria Kaliakra. AD AD Kamor Auto. Ltd. Kempinski. news Hotel Grand Arena Bansko. Kolbis International Transfer Corporation. KPMG Bulgaria. Kraft Foods Bulgaria. LANDMARK. Properties Bulgaria Lexim. Sofia Ltd. Lindner Marshall Fellows Visit Bulgaria ...... 42 Bulgaria OOD Lirex BG Ltd. Lowe Swing Communications M & M Air Cargo Service AmCham Bulgaria Magazine July 2006 BG OOD . M3 Communications Group, Inc. A Hil & Knowlton Associate . Maersk Bulgaria By Irina Bacheva Ltd. . Magnetic Head Technologies . Maritza East III Power Company AD . Marsh EOOD . MARTERN EOOD . McDonald's Bulgaria Ltd. . Merck Sharp & Dohme IDEA Inc. . new members ...... 44 Meridian Hotels Bulgaria OOD . Microsoft Bulgaria . Miltech Ltd. . Mmd, Corporate, Public The American Research Center in Sofia Affairs & Public Relations Consultants . Mobiltel EAD . Monbat Plc. . Moten Sport . Moto Pfohe Ltd. . Motorola Bulgaria EAD . National DISTRIBUTORS . NATO Defense College Anciens' Association . NDT Equipment Supplies LTD . Net Is Ltd. . Neterra Carlsberg Communications . Neumann International AG . New Europe Corporate Advisory Ltd. . Nexcom Bulgaria EAD . Nu Image Bulgaria EOOD . Opet Aygaz Bulgaria EAD . Oracle Industrial Holding Bulgaria East Central Europe Limited - Branch Bulgaria . Orbit Ltd. . Orkikem Ltd. . OSG Records Management . Parsons E&C Bulgaria Limited . Pfizer H.C.P. Corporation, Representation member news Office Bulgaria . Philip Morris International Inc. . Pioneer Semena Bulgaria EOOD . page Popov Legal Office . PostPath Inc. . Pratt & Whitney . PricewaterhouseCoopers . 3 Bank Austria Sells Croatian Subsidiary ...... 45 Prima Soft Ltd. . Procter & Gamble Bulgaria . ProSoft . PSG Payroll Services Ltd. . Radisson SAS Grand Hotel . Rising Force Co., Ltd. . Rockwell/Intelpack . S&T Bulgaria Visa Card Usage Grows Dramatically ...... 45 . Sante International OOD . Schering - Plough Central East - Bulgaria . SEAF Management Bulgaria EOOD . Seplex Law Offices . Sheraton Sofia Hotel Balkan . Sherita M Ltd. . amcham events Sienit Ltd. . SigmaBleyzer Investment Group LLC - Representative Office . Soravia Bulgaria Ltd. . Stefan Dimitrov, Norman Management Co. Ltd. . Symix Bulgaria . TechnoLogica AmCham Tennis Tournament Turns Five ...... 46 EOOD . TeleLink AD . Tero Halmari, European Bank for Reconstruction and Development (EBRD) . The American Research Center in Sofia . The Atlantic Club of Bulgaria . The holydays Executive Centre . Tishman Management Company Ltd. . Tissue Bank Osteocenter Bulgaria EAD . TM Auto Ltd. . TMF . Tumbleweed Communications EOOD . Unimasters Logistics Hilton Launches Global Group AD . Unisys Bulgaria Branch . United Consulting Ltd. . Urban 2000 Ltd. . Vaptsarov Joint Stock Company . Vector Management Bulgaria EOOD . Videolux Holding / Summer Sale Campaign ...... 48 Technopolis . VIP Security Ltd. . VISA International Service Association . VSK Kentavar Ltd. . Westinghouse Energy Systems Bulgaria Branch . Wrigley Bulgaria EOOD . Xerox Bulgaria Ltd. . Yavlena Ltd. . Zlati Dinev Studio in partnership with Outerbridge/Morgan . partnership AmCham conference Allows Military, Businesses, Government Reps to Mingle

Experts from the U.S. Army Contracting Command - Europe (USACCE) together with Bulgarian high military officials as well as Bulgarian government ministers, MPs, mayors, regional governors, and U.S. diplomats helped create a clearer vision of trade and business opportunities arising from the joint training facilities. The conference entitled 'U.S. - Bulgaria Joint Training Facilities: Commercial Opportunities and Business Partnerships' was designed to teach contracting procedures to foreign and Bulgarian firms interested in upcoming business opportunities in Bulgaria. AmCham worked in cooperation with the U.S. Commercial Service in Bulgaria to organize the event.

From Left: Vesselin Bliznakov, Bulgaria's Minister of Defense, , Bulgaria's Minister of Foreign Affairs, Georgi Parvanov, President of Republic of Bulgaria, Borislav Boyanov, President of AmCham Bulgaria, US Ambassador to Bulgaria John Beyrle and Zlatan Stoykov, Chief of General Staff of Bulgarian Army.

Some 400 participants, among them Electric, 3M, Sienit Ltd., Terem, SKE and the U.S. Command in Europe, AmCham members, corporations from Group, TFI International, KBR, Panda- including the establishment of a rotating US and Europe, Bulgarian companies, IP, Kamenitza, Moody International brigade stationed in Bulgaria and NGO-s and law offices, registered for Group, ITT, Neterra Communications, Romania, address the new global risks the forum which turned out to be the Intelpack, Aviogroup 2002 Ltd., Bilfinger and threats to the security as well as venue for networking and matchmaking. Berger AG, Technologica, UNISYS, Bulgaria's interests and the need for a Among the participants were: Ernst & Vaptzarov, VSK Kentavar, PAE stronger cooperation with the United 4 Young, Raytheon, Motorola, AT Government Services etc. States. Engineering, Boeing, Bulbank, Coca Cola, Citigroup, Marsh, Schenker, The issue of the shared military bases "Up until now," Borislav Boyanov went Washington Group International, in Bulgaria comes within the context of on to say, "One of the most frequently Electron Progress, Force Delta, Red the bilateral strategic partnership asked questions is how the Bulgarian Devil Catering, Right Rental, Liberty between the United States and Bulgaria defense benefits from the joint training Food Services, Technopolis, Lockheed signed in April 2006, AmCham facilities with the United States. The Martin Aeronautics Co, Northrop President Borislav Boyanov said in his answer is that what the Bulgarian

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria Grumman, Parsons Corporation, IBM, opening remarks. The proposals for defense needs is modern technology, DynCorp, SOS International, General transformation of the military forces equipment and training." partnership

In his address to the conference the Bulgarian President Georgi Parvanov pointed that the main benefit from the shared bases will not be only in the economic and investment impact to the local economy but primarily in strength- ening the common fight against global terrorism. He acknowledged the American Chamber of Commerce role of the mediator in completion of joint US-Bulgarian projects for the training facilities. The President mentioned the excellent opportunities for the Bulgarian producers, distributors and service providers when learning and cooperat- ing with companies that bring new stan- dards and high quality of a new busi- ness culture. The establishment and uti- lizing of the joint training facilities means long term bilateral work, mutual trust and respect where interests of the parties meet, Parvanov added. U.S. bases as an area for fair competition President Georgi Purvanov: "I am an optimist that in a transparent and open dialogue with our American U.S. Ambassador to Bulgaria John partners we will build new culture of relationship based on consensus, national interests and mutual benefit". Beyrle reiterated in his opening remarks railroads, and other infrastructure in the vices - if their offers are competitive that the bases are and will remain a areas leading to and surrounding the and of good value. For Bulgarian com- Bulgarian operation with Bulgarian com- bases, and local hires of Bulgarians to panies to win contracts, they will need manders, flying the Bulgarian flag. The perform many different jobs at and to understand the contracting system shared facilities at Novo Selo, Bezmer, around the bases; plus the impact of and the needs of the U.S. military. Aytos and Graf Ignatievo, where having several thousand American sol- American and Bulgarian forces will diers in the country with money to That is what this conference hoped to come together, will be the most visible spend," Beyrle said. accomplish by introducing U.S. Army and active symbol of a military partner- procedures and giving networking ship dedicated to improving our ability He further explained that the U.S. mili- opportunities to future partners, sub- to respond to the challenges of this tary contracting system is transparent, contractors and suppliers, the envoy- young century. and invites bids from qualified bidders said. in different countries. The Defense "We foresee upgrades in the range of Cooperation Agreement states clearly "We want to see Bulgarians win con- tens of millions of dollars. Added to that the United States should use tracts - we want to see Bulgarians work this will be the improvements to roads, Bulgarian suppliers for goods and ser- at the bases. But to do that, Bulgarian AmCham Bulgaria Magazine July 2006

page 5 partnership

companies will have to be smart and competitive," Ambassador Beyrle said. Promoting improved business culture

As a business lunch speaker, Ambassador Beyrle talked about the new Bulgarian-American partnership in business and security, a new era in the relationship between the Unites States and Bulgaria. The new symbol as he said was at the joint military exercises where MiGs flown by Bulgarian pilots flew side by side with F-15s flown by American pilots. Now he witnesses how American and Bulgarian companies can work side by side.

"American companies come here because of Bulgarian talent and exper- tise, its potential growth, and because they see Bulgaria as a gateway to the European Market. American companies bring not only capital, they also bring Minister Bliznakov meets the US Army contracting officers Marcia Coleman, Maj. Rusty Mizelle and Maj. new technologies, the best manage- Bill Campbel. ment techniques, a strong commitment to good business ethics, and a culture compatibility. the benefit of training and working of corporate civic responsibility. together with one of the best equipped American investment makes Bulgarian "In our discussions with the U.S. part- and trained military forces in the world, more competitive in the European and ners we agreed that locals are to be which is another factor contributing to global markets." contracted for deliveries, but only in the overall security of Bulgaria and the case their offers are compatible," region" - General Stoykov concluded. The Ambassador made a couple of Bliznakov pointed out. suggestions for a better business cli- The US and Bulgarian companies took mate: more transparent and less capri- High technologies active participation at the conference. cious privatization process; greater con- introduced Networking and company presentations sultation with businesses in the plan- were the core of the activities at the ning of government regulations; fair and The minister of defense has suggested event. Raytheon and Motorola present- equal treatment of all foreign investors. that the international tenders will ed products and technologies that were improve the infrastructure of the region used in last years military exercises in Addressing the audience on the shared and the military exercises. Bulgaria and Bulgaria. Company representatives facilities, Vice Prime Minister and the United States already have a good were at hand to demonstrate the Minister of Foreign Affairs Ivaylo Kalfin experience in joint military exercises respective hi-tech products they have said it is an obligation of politicians to like the ones held in the last three contracted to the U.S. military. create possibilities, and the businesses years, Bliznakov said. The air bases in Washington Group International, should seize them and search for more. Graf Ignatievo and Aytos will remain Schenker, Electron Progeress and It is already time for concrete projects Bulgarian property, where both the U.S. Terem shared their expertise in out- and concrete tasks to do after the bilat- military and Bulgarian Ministry of sourcing of military commercial func- eral agreement between the United Defense will make investments. tions. The financial sector represented States and Bulgaria has been signed. by Citibank, Marsh and Bulbank pre- The training staff at the bases, training sented the financial and insurance of 6 Bulgaria's Minister of Defense Vesselin process itself and logistics are the most business operations of the joint training Bliznakov announced that the first U.S. important factors for successful joint facilities, while Ernst & Young gave the military units are expected to start arriv- exercises, said concurrently Col. foreign participants a profound consul- ing in Bulgaria by the end of 2007. Up Michael Smith of G3 Plans Division with tation for starting business activities in until that time, U.S. experts will help the U.S. Joint Chiefs of Staff, and Gen. Bulgaria. The companies were able to Bulgarian companies navigate the U.S. Zlatan Stoykov, chief of the General meet the mayors of the municipalities Army contracting procedures. Minister Staff of Bulgarian Army. where the joint training facilities are Bliznakov said the agreement envisages located and have first hand information

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria a regime of strong partnership with the "Thanks to NATO and these shared on the opportunities for doing business United States and better operational facilities, the Bulgarian military will have with local partners. ■ partnership Bulgarian Companies Invited to Jump on U.S. Military Construction Bids U.S. Army pays only after the work is done, warns William Mills of the U.S. Army Corps of Engineers By Irina Bacheva - Based on your contacts with Bulgarian companies, do you think they have enough expertise to be competi- tive with European companies in build- ing infrastructure of facilities?

- The companies that I have talked to are being very proactive in trying to learn our processes and networking. They have been networking with American firms or other firms that know U.S. procedures, and I think they had really taken a good step forward. Bulgarian companies will be ready to be involved and either get a con- tract alone or as part of a team. I don't think there is anything really complicated about what we are building. It is like a lit- tle town. You have a sewer system, other facilities; it is nothing like building a rock- et ship. Mostly I have talked to engineer- Mr. William Mills has been the Chief of Contracting for the Army Corps of ing and construction type companies, Engineers, Europe District, since August, 2000. As the Chief of Contracting, Mr. maybe some environmental ones. Mills is responsible for planning, directing and execution of a comprehensive acquisition program for construction and services in support of the United States - Could you mention names? Armed Services and supporting Agencies across the European theater, parts of the Middle East and Africa. His office obligates roughly $400 Million in contract - At this point I would not do that. I have awards annually. been collecting data and I have many names that I will put into our database, so Mr. Mills served as the Chief of Contracting for the United States Army Corps that once we get our solicitation ready, of Engineers, Charleston District, prior to his current assignment. He served as which basically says, "Would you like to the Chief of Services Branch and the Chief of Cost and Pricing for the United propose?" Only then I will be able to send States Army Contracting Command Korea in Seoul. Mr. Mills began his career it to those people. as Outstanding Scholar intern with the United States Air Force Space and Missle Systems Center in Los Angeles, California, where he acted as a Contract - Has the process of solicitation start- Specialist for the purchase of multi-million dollar satellite systems and launch ed already? vehicles.

- No, no, it has not. But the best step that Mr. Mills was born in Tucson, Arizona. He graduated from the University of I think the Bulgarian contractors can do Arizona with a Bachelors degree in Philosophy. He holds a Masters degree in 8 is to be early and make sure that they Journalism from the University of Southern California and a Masters degree in are registered and are familiar with the Technology Management from the University of Texas at Austin. website www.FedBizOpps.gov. Anything that we do will be advertised there. I pany. From that form the respective com- - Right. They can also register for other mean tenders, where the site would say, pany sends us back a proposal. This ini- areas, not just Bulgaria and not just for "We are looking for people who are inter- tial step is very important because the joint training facilities. If the company is ested in building so and so in such and company name is put into our local data- interested in doing work in Iraq or such place." Then you respond to us and base… Afghanistan, they can apply. There is

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria say, "I would like a copy of the solicita- no limitation to where they can do tion," which later on is mailed to the com- - Potential contractors? work. partnership

- On this website, will you inform about tion. So when you have completed a cer- of writing "experience," we'll use "similar schedules of the tenders, and other tain amount of work, we will pay you for job." So all the contractor will have to do details? that work. Because it will be difficult for is fill in, "I built apartment buildings," or any contractor in the world to finance something like that. Then it will continue - Let us say when you will have to request upfront a $40-million contract. with past performance, contacts, and per- to get the solicitation. When a company sons I can call for references. contacts us, we would send a big pack- - What kind of percentage do you age. Once we have the requirements finance or it depends on the project? - At this level you want to have this done and we send out on this website, feedback from Bulgarian companies, you request what is called solicitation, - It depends on the project and on the providing this information to them? which basically is a big package that time. But we can not pay you until some- includes all of our requirements. We call thing has been done. So I can't give you - We want to make contact with compa- all those clauses, which are special the money first and then let you start nies. We want them to understand what requirements of the U.S. government. You working. You have to start working and we are going to be looking when we have to meet the requirements, the laws then once you have completed some- award a proposal. In the selection and so forth of the U.S. government. thing, I can pay you. That's a little bit dif- process, we look at the price and it is ferent from some other places because very important, but we also have to be - Of the U.S. government agencies? some other places will finance for you, very confident that the company can do they will give you the money beforehand, the job. This is a fixed price contract, - Well, partially. It is basically called the but the U.S. government doesn't do that. which means we will agree on a price Federal Acquisition Regulation. That and then I expect that product to be given includes many clauses that have to do - Are the Bulgarian companies ready to to me at that price. We do not negotiate with general things. It can be safety, understand these procedures quickly? anymore. Sometimes people do not country code laws. Then there is a bid understand that thing. They think, "Well, schedule. The potential company won't - I think they will be. The best thing they we can go back and say we need more be just asked how much does it cost to can do is maybe even request a solicita- money." Not so in a fixed-price contract, build the whole facility. What we'll do is tion from some other project, so they see because unless there is something that break it down and inquire how much the what it looks like. you could not have known about, we will mobilization cost will be, which means not negotiate. I mean, if you started to dig bringing their equipment up to the site. - A similar project? down and all of a sudden you hit the We do what is called 'progress payment.' ocean, something that nobody would have We do not pay a contractor before work - A similar or even just anything so that thought of happens, that may be a rea- is completed. So the contractor has to they see what it looks like, like construc- son consider changing the price. But only finance the work for up to a certain tion project we are advertising some- in the case it is something really unex- amount of time. Maybe for 30 days, or 45 where. You don't have to bid. You can just pected. days. ask for the solicitation in order to look at it and get some experience. So that is - Can consortiums or partnerships - So between 30 days and nine months one possibility and I think the networking apply, for example a Bulgarian compa- the company could receive financing? is helping. Here I have noticed a lot of ny partners with a foreign company companies talking with each other. and both of them apply for this proce- - Well, it depends because what we'll do dure? is set this up. Once you finish a stage, And the other thing is: we will not make say, mobilization, then you can submit an it difficult. On the contrary, linguistically - Yes. It is possible but there are different invoice and we will pay you for that por- we will ease the documentation, instead ways to do it. There are limited partner- AmCham Bulgaria Magazine July 2006

page 9 partnership

ships, joint ventures, which would repre- which are going to bid? Mizelle, the PE construction management sent one legal entity. One can do a sub- chief of USAREUR, said it will not be until contract as well as a part of a teaming - Yes, they have shown interest. I know the 2008 budget that the money would be networking. The Bulgarian companies will that there are other European firms that approved. But there will be things that will be competitive, on the first place because may be interested in some American be done, which is part of the planning, of the price. There is no way that an firms. But I have been very impressed part of the designing, and part of the envi- American company can bring American with the Bulgarian firms that I have talked ronmental work. So there will be activities work force over here and compete price to. going on prior to the main construction. wise with Bulgarians. So they will have to work with a Bulgarian firm to get the labor. - Construction ones? - You also have Romania, which is starting the same procedures. How are - You mean, the labor cost is lower? - The construction ones, I am sure peo- Romanian companies meeting U.S. ple have experience. The most important standards? Are they skillful and do they - The labor costs will be much higher if thing people have to realize that when we have expertise? they use anyone other than Bulgarians. give the job, it is based on that proposal. The other is supplies. They need con- So it has to be written well. I mean it has - Yes, there are very skilled contractors tacts, local supplies, because if you bring to tell why you are the best person for the both in Bulgaria and Romania. And I think construction materials, especially sand or job. And then you also have to be good they will be able to compete well. But gravel or something like that, and you price wise. again, I have to see the actual documen- bring that from the United States, it will tation before I can make that assessment. cost… this is crazy, you know. So the - In fact, you are starting to complete Bulgarian companies will be necessary. the documents now? - Thank you very much. Would like to And the other thing what we build has to add something, your impressions from meet Bulgarian codes. The codes that - We are still developing the actual our country? you have: construction codes, electrical requirements. Which is exactly what are codes, things like that. So the Americans we going to buy. How the buildings will be - Well, first I would just say that AmCham will need to have Bulgarian expertise in situated, how many troops they will sup- Bulgaria did an excellent job setting up how to meet those codes. port. And the biggest thing for us is the this first-class conference. And Sofia is a money. The money has to be approved beautiful city, too. I hope I have a chance - There are also European companies through the U.S. Congress. Major Rusty to go see it. ■

10

Government and business officials talk about the strategic partnerships. From left: General Nikola Kolev, US Ambassador John Beyrle, AmCham President

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria Borislav Boyanov, Onur Kirazci, Motorola Bulgaria Country Manager and Ron Landenberg, Director, Communication Systems Operations, Motorola. partnership Experts Lecture AmCham Members on Military Contracts 101 U.S. Army reps, financial specialists explain intricacies of supply procurement and outsourcing

A variety of representatives from the U.S. Army Corps of Engineers, military con- tracting specialists, insurance brokers and bankers explained to AmCham members the procedures and opportunities for securing a government contract with the U.S. military.

William Mills, chief for contracting for the Europe District of the U.S. Army Corps of Engineers, presented the work of the Corps of Engineers before the partici- pants in the conference. The structure fully secures the design and construction Col. Michael Smith, Chief, G3, US Army Europe, Randy Gordon, Program Director, Raytheon and General of military facilities. The Corps provides Zlatan Stoykov, Chief of General Staff of Bulgarian Army in discussion of improving the military capabili- planning, design and management of pro- ties through joint exercises jects.

"We are intermediaries between compa- nies and the U.S. government in the award of contracts," Mills explained.

Although the Corps offers logistics as well, Mills explained that such services were not expected of them as for as their activity in Bulgaria is cencerned. In his words, the procedure of evaluation of candidate contractors by the specialists of the Corps includes several stages. Minister of Defense Veselin Bliznakov pointed that the Bulgarian companies have good chances in the US Army procurement process but only if their offers are competitive. Candidates first submit offers in which they specify a price, past performance, AmCham Bulgaria Magazine July 2006 and persons to be contacted for recom- mendations. A key element of the offer is the care for work safety. Probably the option to work with subcontractors will also be taken into consideration, Mills explained.

page The second stage is the evaluation of 13 proposals. The team that deals with the evaluation is split into two: one reviews the technical part, the other, the financial part. The first team does not know the price proposal, because the bid may have been intentionally lowered, Mills said. Col. Roger Gerber, Deputy Chief, GR2, US Army Europe, meets friends from before: Ralitza Mateeva, Unisys He added that at the last stage, the teams Federal Government Group and Brig. General Boyko Milanov, Chief of Logistics J4, General Staff of the sit together and determine the best offer Bulgarian Army amcham events

Around 400 participants, Bulgarian and US government officials, high ranking military officers, AmCham members, US and Europe corporations and Bulgarian com- panies took part in the forum. with the best price. Companies will be He also discussed the views of the U.S. He cited a series of projects throughout needed in Bulgaria for the construction of Army on outsourcing of military activities the world and WGI's good cooperation facilities for 1,500 to 3,000 military per- with commercial character. In his words, with the U.S. Army Corps of Engineers: sonnel, Mills said. Additionally, contracts the shared facilities should be led by very demolition of missiles in Russia; con- will be closed for environment monitoring. small teams, while their service should be struction of a temporary U.S. embassy in The third type of contracts envisaged in awarded to the private sector. This is Kenya for only six months; prevention of Bulgaria will be closed for a term of up where we are headed to. We need your the proliferation of weapons of mass to three years and will concern the help, because that will help us train bet- destruction; repair of the electricity grid in exploitation and maintenance of the facil- ter, said he, addressing the representa- Afghanistan; construction of bases and ities. tives of Bulgarian and U.S. businesses. an international medical center in Egypt; As an example he mentioned Iraq and building ammo storehouses in Cyprus. Mills advised that Bulgarian companies Afghanistan, where this practice is already should register quickly, because some yielding good results. In Bulgaria, WGI will look for contracts for works will be awarded very soon. Such design and construction, Gaines said. for instance will be the preparation of an The views of the U.S. Army were further Contractors are required to conform with environment impact assessment before elaborated on by Jeffrey Gaines, busi- the project budget; they have to be stable the construction of the bases begins. ness development manager with companies and present bank guarantees. Washington Group International (WGI). Col. Roger Gerber, deputy chief for Global Basing and Restructure, U.S. Army Europe, encouraged U.S. companies to set up joint ventures with Bulgarian part- ners. "We want these contracts to reflect a partnership," Gerber said.

He presented the views of the Command about the transformation of the U.S. Army in the next few years, 14 concerning in part the construction of shared facilities.

"Our transformation agrees with NATO's. Our aim is to create mobile combat groups, said he and added that the train- ing of the U.S. military in Bulgaria was considered an important part of the trans-

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria formation of the European Command," Ernst&Young legal advisor Anelia Dinova from Dineva&Rusev law firm and Jim Rigassio, Senior Col. Gerber said. Commercial Officer, US Embassy in Sofia explain the investment climate in Bulgaria. amcham events

"No matter which company wins the con- tract, I expect that the bigger part of the project financing will go to the Bulgarian economy," Gaines said. He advised Bulgarian companies to have their own financing for at least 30 or 40 days of work should they win a given construction project. Then they will have their costs refunded on the basis of invoices.

The whole construction process will be supervised by specialists of the company.

Lyubomir Punchev, head of retail bank- ing at Bulbank, presented the ways in which the bank can provide financial support to businesses emerging in con- nection with the joint training activities. President Georgi Purvanov shares with AmCham Executive Director Valentin Georgiev that the American He reviewed the most common credit Chamber of Commerce should actively facilitate the joint US-Bulgaria projects in the very strategic sector of and bank products for small businesses security. and presented an offer for financing for- eign citizens willing to buy real property in Bulgaria.

Krassimir Stankov, general manager for Bulgaria and Macedonia at Marsh, pre- sented the activities of the company, leader in the field of insurance.

Peter Sullivan, director of Public Sector Group, CEEMEA, Citigroup, presented the opportunities for establishment of public- private partnerships for the construction of the bases. He cited a Citigroup-con- sulted project that involved the setting up a joint venture between Britain's Carillion and U.S. Kellogg Brown and Root (KBR) for the construction of a military base in Major General Rumen Tzokov, Deputy Chief of General Staff for Resources of the Bulgarian Army expects more the United Kingdom. ■ opportunities for Bulgarian military to improve its capabilities and its interoperability as a member of NATO Steps to register in the Central Contractor Registration The company has to obtain a DUNS Number. form that can be downloaded from the website of the Military Standardization, Quality and Codification Requests to receive a number are submitted at AmCham Bulgaria Magazine July 2006 www.dnb.com Directorate at the Ministry of Defense at www.mod.bg/bg/ docs/ZayavkaNCage.doc ● In the upper right corner there is a drop menu with a list ● The completed document and a cover letter of request are of countries sent to the Head of the Directorate, Col. Dimitar Dimitrov, ● When you press the arrow, choose Eastern Europe at 34 Totleben Blvd, Sofia 1606. ● You are automatically redirected to the D&B Emerging Markets Center Registration in the Central Contractor Registration ● In the bottom right corner there is a yellow-box link to the ● The registration is made at www.ccr.gov page registration form 15 ● A link in the upper left corner redirects you to the regis- ● A small window pops up where you have to select Bulgaria tration page ● That redirects you to the request form to be filled in with ● information about yourself and your company A window pops up reminding you that a DUNS Number is ● D&B sends you the number by email within the framework required for the registration of a week. ● Since you have obtained it already, press Continue ● You reach a page where you are asked to input your Obtaining a NATO CAGE Code DUNS Number ● The candidates for such a code are required to fill in a ● Press Submit and follow the instructions partnership US Plans to Invest up to $62 Million in Novo Selo By Panayot Angarev

Between $46 million and $62 million is the amount that the U.S. Army plans to invest in the Novo Selo training range, said Maj. Rusty Mizelle, construction management chief with the U.S. Army in Europe, during the Am-Cham-sponsored confer- ence U.S.-Bulgaria Joint Training Facilities: Commercial Opportunities and Business Partnerships. Novo Selo is one of four bases that the United States and Bulgaria agreed in April to share. The other bases are Bezmer, Graf Ignatievo, and Aytos.

More than 200 Bulgarian and foreign companies took part in the forum. All in all, the participants were around 400 among them: Bulgarian President Georgi Parvanov; U.S. Ambassador to Bulgaria John Beyrle; Defense Minister Vesselin Bliznakov; Chief of General Staff of the Bulgarian Army Gen. Zlatan Stoykov; officers from the U.S. Army Contracting Command - Europe (USACCE) in Wiesbaden.

The amount planned to be invested by the U.S. Armed Forces will have to be approved by the Army Command and the Congress, Maj. Mizelle explained, and it will be included in the budget for next year. The first major procurement contracts will be tendered next summer. Some $40 million - $50 million will be earmarked for construction of buildings in 2008-2009. Another $5 million - $10 million will be spent on road infra- structure. The amount to be allocated for maintenance of buildings and roads every year will be $600,000 - $800,000 and $300,000 - $500,000 respectively. Asked to explain why investments are envisaged for the training range only, Maj. Mizelle said that that would be the main facility to be used by the U.S. Army. In his words, Bezmer will be used mainly for rotation of military units.

The first tenders are expected to be launched in September 2007, after the budget is voted, said Maj. Mizelle and added Picture of the training Range in Novo Selo, one of the four that the investment plans would have to be approved by the military facilities subject of the Defense Cooperation governments of Bulgaria and the United States. The Agreement between Bulgaria and the United States. The Construction Management Division is responsible for the plan- agreement was signed on April 28, 2006. It covers the ning of engineering and the whole lifecycle of the bases. The bases of Bezmer, Novo Selo, Graf Ignatievo and Aytos, U.S. European Command has handed down an instruction to and sets forth the framework for cooperation between make the best of the capabilities of potential local suppliers Bulgarian and foreign companies and the U.S. Army in in the upcoming procedures for the procurement of goods and the supply of goods and services. According to the doc- services for the four Bulgarian-US facilities, major Mizelle ument, the U.S. Army can close contracts for delivery of 16 pointed out. The U.S. military will not come to Bulgaria with goods and services in Bulgaria, including construction. their families, because they will be training here. The bases During the negotiations the Bulgarian party gave permis- will be training facilities, he added. sion to the Pentagon to choose from any source of pro- curement but posed the condition that the "United States The main contractor for supplies to the U.S. Army in Europe shall utilize local Bulgarian physical persons and legal is the Contracting Command (USACCE) in Wiesbaden, entities as suppliers of articles and services to the extent Germany. Contacts between companies and the Command feasible for the performance of a contract when the bids are established through the so-called contracting offices, of such suppliers are competitive, and constitute the best AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria where working officers agree the concrete contracts. The value." contracting office that will be responsible for Bulgaria and partnership

Romania is that in Grafenwoehr, Germany, said Marcia Coleman of USACCE's Procurement Management. Supplies and services needed for the Novo Selo train- ing range: USACCE provides various types of services to the U.S. Army: ● fire brigade ● support operations (in Afghanistan and Iraq), deployment, furniture ● training, operative support, base operations and securing liv- dust control ● ing standards. The Command closes different types of con- cooling and heating ● tracts: at fixed prices, for an unlimited period of time, deliver- snow and ice removal ● solid waste recycling ies on order that require proposals, Coleman said. The ser- ● food supplies vices USACCE provides include: general and specialized deliv- ● drivers and traffic controllers eries and services (hospital aid, fuels and lubricants, com- ● vehicles munications), ground maintenance (guard services), vehicle ● transportation distribution hub rental, engineering services. ● supply support ● office To be admitted to the tender procedures, Bulgarian compa- ● tank washing unit nies have to register with the Central Contractor Registration. ● hazardous materials storage Prior to that, they have to obtain two numbers: the so-called DUNS number and NATO CAGE (Commercial and amount - up to $5 million - are mandatorily awarded through Government Entity) code. The Data Universal Numbering an open tender, which requires written bids to be submitted. System (DUNS) has been developed and is maintained by Dun & Bradstreet (D&B), which started it in 1963 for credit For micro-purchases the U.S. government prefers the use of services purposes. It was later accepted as a standard by the Visa payment cards. The procedure is known as Government- , the United States and the United Wide Commercial Purchase Card Program (GPC). The card Nations. is used much the same way as using a credit card. According to Marcia Coleman, the use of the card reduces bureaucra- The number consists of nine digits assigned by the company. cy. For the purpose, the staff at the regional offices are sup- By receiving the number, the supplier company is included in plied with such cards, so that purchases can be made D&B's database. The registration to get the number is made promptly. Ms Coleman pointed out that Bulgarian businesses online on Dun & Bradstreet Number's website at: could work with Visa cards. http://www.dnb.com or at this toll-free (when calling from the United States) phone number: (800) 333-0505. The maximum The award of contracts valued up to $100,000 can be made waiting time for receiving the number is 48 hours via email. by phone when suppliers are entered in the Central Contractor Registration. Telephone price quotes are obtained from sev- NATO CAGE is a unique five-digit number. It is issued by the eral companies to find the best price that can be received by Military Standardization, Quality and Codification Directorate telephone or in writing. Once announced, the price is the at the Ministry of Defense at www.mod.bg/bg/dir_vskk.html. basis on which negotiations are held with the Army. The con- Candidates fill in a form at www.mod.bg/bg/docs/ tract is closed after the winning supplier sends written con- ZayavkaNCAGE.doc and send a cover letter of request to be firmation. granted a code. The registration with the Central Contractor Registration is made online at www.ccr.gov in English. The The third type of procedure is used for contracts exceeding registration is free of charge and has to be renewed annual- $100,000 in value. Potential suppliers are asked to reply to a ly. After obtaining registration, companies have to submit request for proposal in writing. Depending on the proposals, information to the Contracting Office in order to be listed as representatives of the contracting office can hold negotiations potential suppliers. with suppliers or directly award the contract to the company with the best offer. AmCham Bulgaria Magazine July 2006 The Wiesbaden Contracting Center often advises that the specialized tender websites should be checked regularly: "The best value does not always mean the best price, that is Federal Business Opportunity (FegBizOpps) at www.fedbi- why a complex evaluation of the offers is made" said William zopps.gov, Acquisition Business Web Site (ASFI) at acquisi- Mills, chief for contracting for the Europe District of the U.S. tion.army.mil/asfi/, the Wiesbaden Contracting Center (USAC- Army Corps of Engineers. Evaluating officers are not interest- CE) at www.usacce.army.mil/wcc/VENDOR/BidBoard, the U.S. ed in the price only, but also in the past performance of com- Contracting Command at www.usacce.army.mil. Once panies and they often ask for references. Offers are evaluat- page announced, the tender information is sent to the supply ed by two independent teams on the basis of the technical 19 offices, so that it can be viewed by suppliers. It contains parameters and the price of proposals. instructions, forms to be filled in, and information about the contract itself. "Competition is crucial. We try to find the best we can for our money. It is important how companies will guarantee the qual- The U.S. Army uses three procedures to award contracts. ity of the services offered. Even if a company fails, it can Purchases valued at $2,500 or less can be made with the so- learn a lot. It is good for candidates to ask for a follow-up called purchase card; the award of commercial services report after the procedure is completed, so that they can find worth up to $100,000 requires a framework agreement follow- their mistakes and see how they can improve," USACCE's ing the collection of quotes by phone; contracts above that Marcia Coleman pointed out. ■ celebration AmCham's July Fourth: Mixing Music, Good Food, Hi-Tech Gadgets, Rope Fun and Whether BTC terraces or Jeep lane, Shumensko highway or Kamenitza avenue: all roads lead to the great AmCham party. World Cup Drama

Late Night Messiah's debut was a great surprise hit of the party.

Some 2,000 guests - AmCham members "July Fourth is not only an American hol- The AmCham Independence Day 20 and families, U.S. Embassy employees, iday but for every nation that treasures Celebration meant fun, music, special U.S. citizens in Bulgaria, politicians, the ideals of freedom, democracy and moments, lots' of presents, delicious celebrities, many children - enjoyed the responsibility," the U.S. envoy said. "And meals, beer and coca cola, entertain- traditional 12th Independence Day Bulgaria, which shares the same ideal ment at all parts of Lozenetz resi- Community party celebration at the celebrates with us." dence richly decorated with red, blue Lozenetz Residence. and white balloons. White summer After the ambassador's greetings, hats and red covers of BTC, Vivatel's U.S. Ambassador to Bulgaria John Georgi Robev Choir Society carried a key holders and phone cases, Jeep

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria Beyrle welcomed in crisp Bulgarian all rousing rendition of American and kerchiefs and Frisbees were every- guests and friends in attendance. Bulgarian national anthems. where. celebration

Who would not like to join the company of As usual: US Marines are the most the BTC Promo Team? desirable company for a photo.

About 2000 guests came to the AmCham party at the Lozenets Residence in Sofia. AmCham Bulgaria Magazine July 2006

A little rest after the party and charging the bat- teries for the football game that is about to follow.

page 21

Ambassador Beyrle tries the Fender guitar that will go for charity pur- poses on the next big American holiday: The Thanksgiving Dinner celebration

We have Coke, We The Balkan Star Kids have Fun, We have Corner: Are you ready Fountain in the Sun. to conquer the world?

Maybe the next Off-road champion. Baby Boom at the AmCham Party!

22 BTC advised ahead of time all guests to where children exercised their muscles Petar Bachvarov-Uti, a famous bring their Wi-Fi gadgets to the venue, and balance descending on a rope. Bulgarian chief, who chaired the jury. so everybody could use independently and unrestrictedly the excellent BTC Wi- Once again the party had David To show off their cooking skills came Fi Hot Spot. Hampson as a master of the ceremony, Nova TV's Nicky Kanchev, the charm- and once again Fender provided the ing pop singer Dessy Tenekedjieva, Kids were the happiest of all guests, music for the party this time with the and Svetoslav Didkov. The bTV tandem with many spots to play and have fun. performance of Eridan Band. A sumptu- Robin Kafaliev and Nevena Bozukova

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria Jeep-sponsored Kids Corner had the ous barbeque contest was carried out took the first prize for best-tasting busiest time with a big line for contest under the professional guidance of meal. Famous actor Georgi Mamalev celebration

turned out to be the most attractive this year. The company provided a off of the World Cup on a multimedia chef, too, while Tenekedjieva took the white Stratocaster to be signed by digni- screen in the middle of the residence's award for the most sophisticated usage taries during the celebration, which will garden. of Jack Daniel’s whiskey in the food be auctioned for charity at AmCham's processing. Yet another celebrity, actor traditional Thanksgiving dinner in The American-style traditional family Chocho Popyordanov, tried hard with November. They also supplied the sur- party was generously supported by the preparation of his dish; however, he prise hit of the party, music by Late Bulgarian Telecommunications had more success with the Jack Night Messiah, a newly formed band of Company, Vivatel, Dodge, Chrysler, Jeep, Daniel’s beautiful promo team than in AmCham members. Fender, Jack Daniel’s, Dundee Precious, the kitchen. 3M, Ideal Standard, Ernst&Young, Fireworks and the traditional cake Citigroup, McDonald’s, Hilton, Coca Cola, Rising Force, exclusive distributor of the brought a formal end to the party. But it Kamenitza, Stella Artois, Pain D'or, Pop legendary Fender guitar in Bulgaria, did not end for real, because the guests Weaver, Tuborg, Shumensko, , announced Fender's 60th anniversary stayed on to watch the third-place play- Amstel Beer. ■

Your Excellency, would you join "Georgi Robev" Choir Society for the national anthem. Casting with Chocho Popyordanov for the AmCham/Jack Daniel’s never ending fun series. AmCham Bulgaria Magazine July 2006

page 23

The charming singer Dessy Tenekidjieva, the bTV great tandem Robin Kafaliev and Nevena Bozukova and the ever smiling Georgi Mamalev applaud Uti Bachvarov - the chef that does more talking than cooking. analysis

Budget Gains Support Tax Reduction Plans Strong fiscal revenues turned the gener- activities that would cut the surplus to the vides another encouraging argument, as al budget surplus to BGN 1.2bn (EUR targeted 3% of GDP or slightly higher. the actual receipts from mandatory social 0.63bn) in Jan-May or 2.7% of the pro- contributions in Jan-May are reported jected full-year GDP, according to data of well above the government estimates. the finance ministry. The balance widened by 23.6% y/y in nominal terms Government debt, reserve paced by inflation tax effects, steady position improves economic growth, and relatively tight expenditure policies. Total revenues The fiscal reserve of the government improved by real 1.6% y/y in Jan-May surged by EUR 170mn (7.1%) in May to from a drop by 0.8% y/y in Jan-Apr. Tax EUR 2.56bn at the end of the month, receipts marked a steeper hike of 4.3% according to data of the finance ministry. y/y in Jan-May taking off from 1.7% y/y The change in May mirrored the general in Jan-Apr. Government takes cautious budget surplus as well as the fluctuations stance on tax reduction plans in the government deposit for the same Consolidated budget, year-to-date, period. The central bank weekly statistics (Jan/00 - May/06) Despite the good revenue collection in for June showed that the government May, the finance ministry remains deposit added nearly EUR 100mn in the reserved to the options for cutting off period June 1 until June 23 to indicate taxes next year. Top officials of the further expansion in the overall fiscal finance ministry have stated for the press reserve. Compared to a year ago, the fis- that the several options for tax cuts are cal reserve indicated a small decline of considered for next year but the final pro- 3.7% as of end-May due to significant posal to the parliament will be decided in buybacks of Brady bonds, which were October after taking into account the fully retired in July last year, and pre-pay- budget performance for Jan-Sep. As ments to international financial institu- Budget expenditures fell by real 0.4% y/y pointed by finance minister Plamen tions. The share of public debts in the in Jan-May as social adjustment plans Oresharski, the government will most projected full-year GDP stood at 27.5% lagged behind the higher than projected likely propose lower mandatory contribu- as of end-May marking no change in inflation of 8.1% y/y in Jan-May. The tions to the state pension fund and a fur- relation to a month earlier. In absolute expectations for the budget performance ther decrease in the corporate profit tax terms, the debt stock dropped insignifi- in the remaining months of the year are rate to 12% from 15% and/or a small cut cantly by EUR 18mn in a month to EUR even more favourable given that seasonal in the low-income personal tax brackets. 6.4bn. As compared to a year earlier, the boosts from the summer resorts will keep In case of weak fiscal performance, the public debt continued to demonstrate tax revenues growing at a high rate. High tax relief could be limited to only one tax strong improvement on the back of regu- inflation will undoubtedly raise pressure item. It is important to note that past tax lar repayments and early retirement of for additional social compensations at the relieves have brought positive effects on both tradable securities and loans from end of the year but the government is the fiscal compliance and efficiency that international financial institutions. The likely to approve exceptional one-off could motivate the government and the debt ration dropped by 11pps y/y in rela- transfers only in case of sufficient over lawmakers to proceed forward with the tion to GDP and 14.4% y/y in nominal performance. All in all, the fiscal indica- bold pre-election pledges seen in the euro terms. The stock of external liabili- tors are quite optimistic and the finance pre-election programmes of all parties. ties scored even a steeper fall by 19.7% ministry has no problems in meeting the The corporate profit tax for instance was y/y while domestic liabilities followed the targeted budget surplus of 3% of GDP gradually reduced to 15% last year from pace of the overall economic growth. ■ this year even if excessive social 32.5% in 2000 while the revenues demands were partially met. Simple dropped only marginally to 2.5% of GDP Fiscal liquidity, EUR bn extrapolation estimates show that the full- and some of the intermediate rate cuts year budget surplus would reach 5-6% of were accompanied by revenue hikes. As GDP if the budget expenditure plan is far as the profit tax has a low weight in 24 strictly followed. However, the practice the overall budget revenues, its downward from the past will lure the government to correction would be a safe option for the approve end-year wage and pension government and will at the same time bonuses as well as additional social look very attractive for investors. The transfers to healthcare and other social payroll tax reduction from this year pro-

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 AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria ISI Emerging Markets office in Sofia at +359 2 8160404 or [email protected] analysis Bulgaria’s Joblessness Ebbs Yet Bulgarians are as pessimistic as ever about their quality of life By Mina Georgieva "For Bulgarians, poverty is a more serious threat than AIDS and nuclear weapons. The most urgent problem they have to deal with is how to survive economically."

This was the major conclusion regarding Bulgaria in a survey of 44 countries within the large multi-national research project Pew Global Attitudes, chaired by former U.S. Secretary of State Madeleine Albright. Bulgarian citizens were described as the most dissatisfied nation among the nations covered by the survey - some 50 percent of all Bulgarians claimed that their life worsened over the last five years. At the same time, the social and economic changes have a negative effect on their personal life situations.

Unemployment in May 2006 fell below the 10-percent level, to 9.59 percent, which was the lowest since 1991, reported the government. According to Minister of Labor and Social Affairs Emilia Maslarova, 2006 will be the year with the highest employment growth rate and with the highest decline in unem- ployment. There is, however, one more side to the success reported by the cabinet: traditionally, with the advance of the summer season, employers seek to employ additional person- Unemployed Bulgarians are signing documents for financial help in one of the labor offices in Sofia. The local government will spend in 2006 a total of 204 mil- nel. The other factors are the lower social security burden, the lion Leva of budget funds for various programs aimed at reducing unemployment. enhanced interest of foreign investors and the general stabi- lization of Bulgaria's economy. Bulgaria. Reduced costs of starting a new business, stream- lined real estate registration and a further strengthening of the The National Statistics Institute reported in a survey of the compulsory compliance with effective contracts were highlight- workforce that the economic activities of the population inten- ed by the World bank as its major recommendations, aimed at sify and that employment has been increasing, most notably in creating more and better new jobs in Central and Eastern the first quarter of 2006. Higher employment European states.

was attributed exclusively Unlike Bulgaria, most of the states in the "old" Europe suffer to the private sector. from a "voluntary" unemployment, while their generous social systems provide financial support to work-age Europeans Average unemployment in Bulgaria for 2005 stood at 11.46 searching for suitable job opportunities. Unemployed Britons percent, down from an average of 12.67 percent in 2004. It is are even provided with cellular phones in order to be more worth noting that the average unemployment rate in the Euro- mobile while searching for a job. In Germany, one should do zone and in the European Union, according to Eurostat data, some work in order to qualify for subsidies. stood at 8.6 and 8.7 percent in 2005, respectively. For a sec- ond year in a row, Bulgaria reports a lower unemployment than The situation in the new EU member states is somewhat dif- in Poland (17.7 percent), and Slovakia (15.9 percent). ferent, as their social security systems are overburdened and have a large number of unemployed dependants. Bulgaria's Employment Agency has announced that there are a total of 323,791 free jobs in its registers. Some 200,000 are According to a report on employment in Europe released late in the enterprise sector, which is the primary labor market and last year, despite the low economic growth rate employment private employers have generated 78 percent of the jobs. growth in the EU has almost doubled while unemployment rate 26 has stabilized at about 9 percent. The conclusions that could be made on the basis of these sta- tistical data are that the reduced number of unemployed might The European states have placed the emphasis on engaging be attributed also to the various programs launched by the people in some form of work - training, investments in skills ministry of labor and social affairs, which however do not guar- and qualification, personalized professional training. Major suc- antee a long-term employment. At the same time, the supply cess has been achieved in the sphere of the employment of of new jobs in the enterprise sector seems to be insufficient. young people in the Netherlands, Denmark, Ireland, Sweden and Belgium.

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria A report prepared by the World Bank late last year indicates that there are still untapped opportunities in generating jobs in It becomes clear that EU member states that have invested in analysis

proactive labor market policies experience shorter periods of described in the National Action Plan on Employment for 2006. unemployment, vacant jobs are filled in more quickly, training The major objective of the government headed by Sergei costs are higher and better focused, while salaries are mere Stanishev will be to boost employment from 56.2 percent to 58 adequate to the actual market environment. These states have percent, which is equivalent to an increase of 1.8 percentage also a higher level of flexible working conditions, for instance points in 2006 alone. At the same time unemployment is partial working-day employment or employment for a fixed expected to fall from 11.4 percent in 2005 to less than 11 per- period of time. cent. A total of 240,000 new jobs are to be created.

At the same time, Bulgaria's experience in combating the A number of measures have been planned for attaining this plague called "unemployment" abounds in objective. For a start, 2 million Leva will be spent on teach- ing 2,500 elderly unemployed Roma to read and write. funny examples Training is scheduled to continue for five months. The price for the course is set at 360 Leva, but expenses rise as the In July last year, 434 unemployed actors earned wages by participants are entitled to an additional 3 Leva per day. More working for the social ministry's Melpomene program, which is money will be allocated this year to employers as well, if they something like a labor exchange for jobs in theatres. Another agree to join the programs of the Ministry of Labor and 107 unemployed close to retirement found jobs within the Social Affairs for providing professional training to young peo- "Retirement Assistance" program, which allowed them to earn ple. The amount allocated for training was increased to 500 some of the retirement "points" they were missing. Actually, this Leva per person, up from 450 Leva. A new bonus is intro- proactive program has helped 3,014 close-to-retirement-age duced - a 30 Leva monthly supplement to the salary earned persons over the last several years. by an unemployed who has managed to find a job without the assistance of the state, which will be paid for the first 12 A total of 1,160 unemployed were hired by the 13 poorest months only. municipalities, which have been allocated subsidized jobs. Another 353 persons were involved in the program Harvest The program titled From Social Assistance to Providing Jobs Protection 2005, aimed at unemployed and redundant former will be implemented on a limited basis. It will cover around policemen and military personnel. A total of 870 unemployed 42,000 persons and has a budget of about 99 million Leva. were involved in the program aimed at protecting the harvest. The total expenses made within this program for the last three The largest number, 878 unemployed, were hired as assistants years are estimated at 385 million Leva. The program was to people with disabilities. Thus, the state found jobs in July launched back in 2002 as a pilot project, aimed at providing last year for a total of 105,230 persons, enrolled in various some income to working-age unemployed, who have to cope incentive programs. only with social bonuses.

The Bulgarian government will spend in The measures initiated by employers are also a component of 2006 a total of 204 million Leva subsidized employment. There are plans to cover social insur- ance installments or the minimum working salary for creating of budget funds for various programs aimed at reducing unem- jobs for unemployed young people, for disabled persons, for ployment. Together with the external financing, the total orphans, single parents, for persons released from jail after amount will rise to 390 Leva million. The measures are having served their sentences, for permanently unemployed AmCham Bulgaria Magazine July 2006

page 27 analysis

and for other groups with limited abilities to compete on the labor market. A total of 58 million Leva have been allocated for the program. Bulgaria Unemployed people trying to start their own micro-businesses will be provided with a start-up capital of up to 2,000 Leva, as well as with training and consultancy. The subsidy allocated to unemployed enrolled in employment programs will be May Turn increased from 150 Leva to 160 Leva, the funds for profes- sional qualification released as a credit related to the line of business and/or training management will be increased from 900 Leva to 1,000 Leva, and the bonus for employing an Into Tax unemployed family member without remuneration will be raised from 600 Leva to 640 Leva. New programs will be launched within the framework of the Heaven Social Investment Fund, Beautiful Bulgaria, Training and Employment of Teachers, and the national Program for Training The government approved the budget and Professional Qualification Roma, and other projects. framework for the first three years of Bulgaria's EU membership The World Bank has By Yuliana Boncheva criticized Bulgaria for lack of substantial The 26th EU member state may emerge as a tax heaven. Or progress, at least - a step away from heaven. If the profit tax rate is reduced to 12 percent, Bulgaria will compete even with Ireland because the number of the employed increased only in Sofia for low effective tax rates. and nowhere else. According to the World Bank, the high unemployment rate among young people - estimated at 25 to The reduction of the tax burden for the business is not the only 33 percent - is a source of serious concerns. Unemployment incentive that the budget can offer taxpayers. After the insur- among the young people in 2004 stood at 27 percent. The per- ance burden was substantially reduced as of the beginning of manently unemployed, who are estimated at about 60 percent 2006 - by 6 percentage points, a new reduction is now on the of the total number of unemployed, is another major issue. agenda. Favorable changes are planned also regarding per- World Bank experts claim that many workers in Bulgaria, made sonal income taxes. redundant because of structural changes, as well as many other, have either been without a job for more than a year or The cabinet really seems on its way to reduce the corporate are engaged in low-pay activities. ■ tax rate again as early as Jan. 1, 2007. These intentions are among the most impressive items of a formal document, statistics titled Three-year Budget Forecast for the Period from 2007 to 2009, which was recently approved by the 's workforce stood at 3.255 million at the end of Prime Minister Sergei Stanishev. The forecasts were made the first quarter of 2006, which is equivalent to 48.9 per- with the firm conviction that next year Bulgaria will finally bid cent of the total population above the age of 15, accord- farewell to its candidate-state status and will join the ing to data released by the national Statistics Institute. European Union on Jan. 1, 2007. Men dominate the workforce, and their number was set at 1.563 million, or 53.2 percent, compared to 1.377 million The ministers approved a three-year framework without a lot women, or 46.8 percent of the total. The gander employ- of noise and even refrained from boasting of their tax inten- ment coefficient stood at 49 percent and 39.7 percent, tions. Deputy finance minister Georgi Kadiev was the only respectively, for men and women. Employment in cities is senior government official, who readily commented on the much higher - at 49.5 percent - compared to villages - budget framework, albeit with a lot of "ifs." 31.6 percent. He said: "We can lower the corporate tax rate, we may More than half of the employed persons - 1.710 million, reduce pension installments, and we may even lower the per- 28 are employed in the services sector. Industry employs sonal income tax rates as well, he said when speaking about 1.025 million, and agriculture - 204,500. The number of the possible options." unemployed at the end of the first quarter of 2006 stood at 315,200, which is equivalent to 9.7 percent of the work- Perhaps in order to leave some emergency exits open, force. The number of unemployed men stood at 164,700, Kadiev added, "I would not be surprised if all three options and of women - at 150,600. The gender unemployment will be enacted, but there is a scenario, which does not fore- rates were 9.5 percent and 9.9 percent, respectively. see any of these changes." Unemployment in villages stood at 14.4 percent, compared

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria to 8.3 percent in the cities. Kadiev's boss was even more circumspect. Finance Minister prefers written statements rather than analysis

speeches. He has clearly described in details the way he Tax rate for the period 1998 - 2006 sees the development of the economy and the money trends during the 2007-2009 period. And although Oresharski him- self described his policies as conservative, he has proposed, in the budget forecast, to reduce the rate of the taxes paid by companies to 12 percent. For comparison, five or six years ago the corporate tax rate in Bulgaria stood at above 30 percent (see chart right).

The manager of state finances is in no hurry to advertise his tax rate plans because of a simple reason - he is waiting for the budget "harvest" at the end of the year. The impact of the radical changes, in effect since the beginning of the year, on the revenues to the treasury will become apparent in the Source: Ministry of Finance fall. The National Revenue Agency was launched on Jan. 1 to replace the old tax administration. The start seems so far also seen a step forward. to be successful, but a comprehensive analysis and assess- ment would require more time. The impact of the reduced As a result of these bonuses made by the treasury, taxpay- social security installments and the introduction of family ers should retain some 600 million Leva more than before. bonuses in the income tax scheme in the beginning of 2006 The generosity of the budget should be, naturally, rewarded - will also have to be measured next fall, before any final deci- these 600 million Leva are a prerequisite for an increase of sion is made regarding further steps. investments, for raising competitiveness of local production and services, for the emergence of more and more compa- The Foundation nies out of the grey sector, and for a genuine increase of incomes. Bulgaria has been engaged in a stage-by-stage tax reform for several years. The changes are aimed at two objectives The budget forecasts for 2007-2009 clearly indicated that the - to simplify taxation and reduce tax rates without affecting government does not intend to admit any serious deviations treasury revenue. The business community was welcomed from its tax policies. The conservative approach was attrib- into 2005 by a substantial tax reduction - the corporate tax uted mainly to the deteriorating current account performance was reduced from 19.5 percent to 15 percent, and the tax within the balance of payments. The cabinet has scheduled on dividends was cut from 15 percent to 7 percent. The several major tasks for next year. The top priority is to reduce reduced social insurance rates by 6 percentage points, from the budget revenue loss. 29 percent to 23 percent, as of the beginning of this year followed the same direction. The ratio between the social The finance minister is convinced he has to refrain from insurance installments paid by the employer and the major incentives to taxpayers, as the first year of Bulgaria's employee was changed from 70/30 for 2005 to 65/35 for EU membership is associated with risks and the budget rev- 2006. This also eased some of the burden off the busi- enue is far from being assured. As of Jan. 1, 2007, two of nesses. The introduction of the family income taxation was Bulgaria's current borders will "vanish" - this country will AmCham Bulgaria Magazine July 2006

page 29 analysis

Bulgaria has made remarkable progress but has yet to undertake decisive steps in key political areas to become eligible for EU membership in 2007, visiting European Regional Policy Commissioner Danuta Hubner said in Sofia. She pointed to the fact that Bulgaria could take full advantage of EU membership benefits provided that the Bulgarian authorities managed to complete reforms and accession preparations on time. Ms. Hubner held meetings with President Georgi Parvanov, Prime Minister Sergei Stanishev, Finance Minister Plamen Oresharski, European Affairs Minister Meglena Kuneva and other cabinet ministers related to the EU's Structural Funds. During her Sofia visit Ms. Hubner attended also the signing of two agreements on grants through the European Commission's Solidarity Fund worth EUR 20. 35 M for the disaster stricken regions in the 2005 flooding in Bulgaria. become an inner section of the common European space, grants. However, here again things stumble on a lean nation- which will spread into Romania to the north and into Greece al budget with a small potential for such co-financing. to the south. That means that revenues from VAT, customs duties, etc., will drop. That is why the government is adamantly against any drastic moves in the "taxes" sphere in order to assure a sustained The Framework influx to the treasury. Actually, the most significant change - the reduction of the corporate tax rate from 15 to 12 percent As early as next January, Bulgaria will have to pay 620 mil- does not imply a serious risk, as this tax is not among the lion Leva out of its budget as membership fee. At the same major revenue items and besides its reduction is expected to 30 time, it is still far from sure that Bulgaria will be able to set have serious secondary effects - it will stimulate the emer- off this substantial amount out of the subsidies allocated gence economy out of the "grey" zone and will provide incen- from the European funds. Bulgaria has a strong appetite for tives to entrepreneurs and to investors in Bulgaria. the EU million, but is also suffering from bottlenecks like the absence of quality projects and insufficiently qualified admin- The tax framework is as follows: istration to absorb the EU funding. 1. The VAT rate will be left at its present level - 20 per- cent. There is one more sensitive issue - even if Bulgaria manages 2. The corporate tax rate will be reduced from the cur-

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria to flood Brussels with perfectly prepared projects, it will have rent 15 percent to 12 percent. to assure its own share of financing in order to obtain the EU 3. The increase of the excise duties rates will continue analysis

The economy in figures 2004 - 2008 grey zone as a result of the low tax rate; 2004 2005 2006 2007 2008 ● improved collection by the tax administration; ● the provision of tax incentives to companies, which invest 1. Real GDP growth 5.7 5.5 5.3 5.8 6.2 in high unemployment areas - a zero tax rate on the rein- 2. Current account vested profit. balance -5.8 -1 1. 8 -12.4 -1 1. 8 -10.4 (percent of GDP) The calculations made by the finance ministry indicate that 3. Average 6.2 5.0 7.7 4.4 2.8 the reduction of the corporate tax rate from 15 to 12 percent annual inflation for the period 2007-2009 will leave at the disposal of the 4. Unemployment 12.0 10.1 9.0 8.8 8.8 businesses some additional 140 million Leva. 5. Gross state foreign debt 33% 24% 19% 17 % 16% The revenue from company taxes (including the tax on divi- (percent of GDP) dends and the income tax) for the 2007-2009 period is esti- 6. Direct foreign mated at 1.067 billion Leva for 2007, 1.230 billion Leva for investments 2728 178 9 2351 2709 3010 2008, and at 1.333 billion Leva for 2009. (in million Euro) As a result of the application of the EU directives corporate to rise towards the minimum EU levels. taxation, the tax regime applicable to dividends and liquida- 4. Health insurance installments will remain at their cur- tion shares will be changed as of Jan. 1, 2007. As a result, rent level of 6 percent. the tax on dividends and incomes will be reduced.

It is expected that from 2007 to 2009 the economy will have Taxation of wages, an annual growth of 6 percent. The optimism of the cabinet royalties and dividends is based on the expected effects of the accession to the EU in 2007. The direct payments from the Euro-funds and the The three-year forecast document provides the introduction, higher revenue are seen as the main engines of economic as early as next year, of a new schedule of income taxes for growth. The share of investments will rise from 28.6 percent natural persons. The current average rate - for monthly in 2006 to 31 percent in 2009. The expected average annu- incomes between 250 Leva and 600 Leva - will be eliminat- al inflation for the 2007-2009 period is estimated at 3-4 per- ed. Thus, there will only be two tax levels, and the rate for cent, mainly because no major rises of regulated prices are incomes higher than the tax-free minimum will be relatively expected. low - 20 percent for incomes up to 600 Leva, and 24 per- cent for incomes higher than 600 Leva. The current effective The Corporate Taxes threshold of 180 Leva per month will be raised to 200 Leva in 2007. This level will be raised again to 220 Leva for 2008 The budget revenue schedule for the first three years of and 2009. The impact of the new tax rate schedule on the Bulgaria's EU membership is based on: treasury is estimated at a minus 90 million Leva. This amount will be left to the tax payers. ● reduction of the corporate tax rate from 15 to 12 percent; ● the emergence of a large number of companies out of the According to the amendments to the legislation on the tax on AmCham Bulgaria Magazine July 2006

page 31 analysis

the income of natural persons, which will come into effect on 0.001 Leva to 0.0012 Leva per 1 kWh; Jan. 1, 2007, the rate of dividend tax is set at 7 percent - ● coal and coke for industrial purposes - from 0.30 Leva to regardless of whether the company paying the dividend is 0.40 Leva per 1 GJ; local or foreign. Currently the state collects 7 percent for div- ● coal and coke for household heating - from 0.15 Leva to idends paid by a Bulgarian company, and 12 percent, if the 0.20 Leva per 1 GJ. dividend is paid by a foreign company. A new increase of the excise duties is scheduled The scope of the income relieved of tax will be expanded also for 2009: next year by the income from interest on deposits in banks ● unleaded gasoline - 660 Leva per 1,000 liters; and mutual funds in EU member states. The interest paid by ● gas oil and kerosene - 565 Leva per 1,000 liters; local banks to foreign persons will also be exempt from tax, ● electricity used for industrial purposes - 0.0014 Leva per 1 while, currently, foreigners are obliged to pay 15 percent at kWh; the source, in compliance with the effective Corporate ● coal and coke for industrial purposes - 0.50 Leva per 1 GJ; Income Tax Act. ● coal and coke for household heating - 0.25 Leva per 1 GJ.

The installment paid for voluntary pension and health insur- The excise duties on cigarettes, beer and alcoholic bever- ance will be relieved from tax at the "input" - they reduce the ages will not be increased in 2007. The excise duties on amount, which is taxable. The ceiling of the tax relieve will these commodities were already drastically increased at the be set at 10 percent of the taxable base. An additional ceil- beginning of this year. The government intentionally raised ing will be introduced - the amount of tax relief shall not sharply the excise duties rates quite a long time in advance exceed 1,440 Leva per year. The good news is that the pref- of the initial schedule, agreed for reaching the European lev- erences for voluntary installments will be applied to the els. Thus, the inflation wave due to the appreciation of ciga- income from all sources, including income from rents, from rettes and alcohol subsided earlier. At the same time, the the sale of property etc. steep appreciation of gasoline, diesel oil and coal is still to come. The elimination of the final tax on the amount withdrawn from the voluntary insurance funds is another positive change. Most of the figures quoted in the budget forecast for 2007- Currently, these amounts are subject to a 12 percent tax. 2009 still have to be supported by the relevant legislation. The cabinet has already submitted or is preparing for sub- Excise duties race mission, and the parliament will have to approve, most of the fundamental tax-related legislation, which define the future of Companies and households in Bulgaria will have to prepare both the taxpayers and the treasury. their budgets for the most unpleasant changes that will inevitably make life more expensive over the next three years In that respect, next fall will be quite a hot one for Bulgaria. - the rising excise duties. Sofia has assumed to Brussels the The peak of tension will come with the final report of the commitment, for the sake of fair competition, to gradually European Commission, which will specify the date of increase the excise duties rates to the minimum European Bulgaria's accession to the EU. For the time being, the com- levels. According to the schedule agreed with the EU, the bat against organized crime and corruption remain the hottest excise duties on liquid fuels will rise as follows: zones. Any potential problems in the future could hardly be associated to macro-economic performance. 2007 г. ● unleaded gasoline - an increase from 530 Leva to 585 Bulgaria is already a stable and predictable state, which is Leva per 1,000 liters; capable of drafting its financial road map for the next three ● gas oil and kerosene - from 430 Leva to 485 Leva per years. As the budget forecasts imply, the only source of 1,000 liters; macro-economic concern would be associated to the high current account deficit - in the immediate future, the outgo- For the first time this year, Bulgaria will have to include elec- ing flows of foreign currency used for the import of products tricity, coal and coke in the list of excise commodities and and services will outpace the incoming flows generated by services. This has to be done for the simple reason that exports. As far as the other performance indicators are con- these items are subject to excise duties in the EU. Initially, cerned, Bulgaria has reached such a level of stability that it the rates will not be frighteningly high: is already eligible for Euro-zone membership. In terms of ● electricity used for industrial purposes - 0.001 Leva per 1 budget deficit Bulgaria "beats" Germany and Italy, as for sev- 32 kWh; eral years already it ends the fiscal year with a surplus in the ● coal and coke for industrial purposes - 0.30 Leva per 1 GJ; treasury. And although it is forced to raise excise duties on ● coal and coke for household purposes - 0.15 Leva per 1 cigarettes, whiskeys and gasoline, in order to match GJ. European levels, Sofia reports lower inflation rates than ● new increase of the excise duties is scheduled for 2008: Athens and Madrid. ● unleaded gasoline - an increase from 585 Leva to 635 Leva per 1,000 liters; Maybe these reasons, despite the critical remarks and claims ● gas oil and kerosene - from 485 Leva to 535 Leva per for concern, Bulgaria believes that the next Christmas will be

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria 1000 liters; the last it will celebrate as a EU candidate, and that on Jan. ● electricity used for industrial purposes - an increase from 1, 2007 it will celebrate as a member of the EU family. ■ events

The "Economist Intelligence Unit": Currency Board in Bulgaria is Under Threat The British "Economist" magazine accession to the euro-zone in 2010 are expects the Bulgarian government to both under question as well, experts manage to complete the required claim. These forecasts were linked to changes in order to assure the country's the growing current account deficit. accession to the European Union in Besides, the current EUR/BGN 2007. This forecast was released during exchange rate is moving away from its an international forum in Athens orga- real value. Bulgaria's currency will nized by the magazine, held under the appreciate by 6.2 percent in 2006, and logo "Greece, Bulgaria and Romania: with another 3.7 percent in 2007. This Business and Investments -Strengthening will come as a result of the "weak" euro Relations at the Threshold of European throughout last year and of the per- Accession". The magazine predicts also spective for a further depreciation of the that the tripartite coalition will not be able US dollar in 2006-2007. to live through its full mandate, the reported. In the political section of the report,

The "Economist" expects that Bulgaria's the "Economist Intelligence GDP growth rate this year will be higher Unit" predicts the than targeted and will reach 4.6 per- emergence of risks for the Bulgarian prime minister Sergei Stanishev during cent, but also that the inflation will be survival of the cabinet his speech at the Athens summit, organized by The higher. These two indicators will be Economist. influenced by higher incomes and high- formed by the ruling tri-partite coalition er consumption, as well as by the one- between the Bulgarian Socialist Party The participants in the forum were time increase in the prices of foodstuffs, (BSP), the National Movement Simeon II addressed by a video-conference link and of some of the taxes and fees. The (NMS) and the Movement for Rights and from Brussels by European Enlargement magazine warned that, although it is not Freedoms (MRF). The early parliamen- Commissioner Olie Rehn. He stressed highly probable, Bulgaria's accession to tary elections would be the best opportu- that the accession of Bulgaria and the EU might be postponed for 2008. nity for Sofia's "popular and independent" Romania will be a success both for the mayor Boiko Borissov to achieve his two states and for the European Union. The survival of the currency board expected intention to enter into national arrangement in Bulgaria, and Bulgaria's politics via his Citizens for European Olie Rehn highlighted the major Development of Bulgaria (or GERB, advancements made by the two states projects according to its Bulgarian acronym)". over the last several years and stressed that the reforms in the judiciary and the Bulgaria's government formally supported the two oil pipeline projects passing combat against corruption must persist through Bulgaria's territory - Bourgas - Alexandropoulis and Bourgas - Vljore, as this is the way to attract foreign AmCham Bulgaria Magazine July 2006 Bulgaria's Minister of Regional Development Assen Gagauzov said during the investors to the region. The European Athens forum. Regardless of which of the two projects will be commissioned first, Commissioner added that a lot of efforts the market development logic implies that the second project will also be com- have been made to have pleted some time later. That is why the cabinet issued letters expressing the Government's support to both projects, Gagauzov said. The cabinet will assist Bulgaria and Romania in the establishment of a universal entry and unified technical infrastructure in on the final stretch the Bay of Bourgas in order to meet the requirements of both pipelines, the min- to membership, page ister added. The current assessment of all interested parties and companies 33 reveal that the Bourgas - Alexandropoulis project is economically feasible and that major legislative reforms have been its implementation must start immediately, in order to have the pipeline commis- made and that the two states are per- sioned by 2010. Bulgaria's strategy for the development of the national infra- forming like stable partners with a lot of structure by 2015 includes the construction of more than 700 km of highways perspective. and the modernization of thousands of sections along the trans-European trans- port corridors, Minister Gagauzov said. The program provides for the construc- Bulgaria and Romania are moving in the tion of the Trakia, Lyulin, Maritsa, Struma, Hemus and Cherno More highways right direction, but they still have prob- over the next several years lems to resolve, said the head of Department "Enlargement" at the events

European Commission, Timo Suma. how, which will improve living standards. With the accession of the two countries, Meglena Kuneva reminded that Bulgaria forecasts a specific situation will emerge within has demonstrated a sustainable eco- the European Union - there will be only nomic growth over the last several The specialized economics and winners in this race, Rehn and Suma years, while unemployment decreased finance publication, the "Economist", said. by one third. announced that the demographic crisis is a major problem for Bulgaria's Minister of European Affairs, Bulgaria's GDP growth rate for the first Bulgaria. Demographic trends are a Meglena Kuneva, and her Romanian six months of 2006 may rise to 6.5 per- source of concern and have a direct counterpart, Anca Daniela Boagiu, took cent, and the annual GDP growth rate is impact on the funds allocated to part in the discussion on "Bulgaria and expected at 6 percent, Bulgaria's pensions. "The pension fund may Romania in the European Union - at the Finance Minister Plamen Oresharski collapse", warned Jochan Hawi, threshold of European accession: prior- said. He was adamant that unemploy- member of the economic informa- ities in the sphere of security and for- ment will continue to go down. May tion gathering unit of the magazine, eign policy". 2006 unemployment was a record low at at a news conference held in 9.6 percent, the Finance Minister said. Athens. The average monthly In her address, Minister Kuneva said He highlighted the international oil income will rise to 50 percent of the that Bulgaria is eager to join the EU. prices and the foreign investments as EU average not earlier than 20 "The words "yes" and "no" are really the major factor for the increase of the years from now, economic experts short, but they come as a result of a current account deficit. According to claim. However, the expectations are long and serious work. My country is him, foreign investors are not participat- that the annual inflation in Bulgaria capable of assuming its obligations", ing any more in privatization, and invest will start to decrease by 2008. Kuneva said. their money in "green-field" projects and buy mainly imported machines and ever very probable that a decision will The Minister of European Affairs equipment. These developments open be taken later this year to reduce the stressed that the accession to the the current account gap, Oresharski profit tax from the current 15 percent to Community will emerge as an incentive said. 12 percent. According to Oresharski, the for Bulgaria to become more competi- rise of inflation in 2006 is attributed tive and more flexible. Bulgaria will open He said that the value-added tax will not mainly to the higher excise duties, intro- its markets for new capitals and know- be reduced under 20 percent. It is how- duced earlier this year. ■

34 AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria amcham interview

Meglena Kuneva: Bulgaria Must Have Its Eurocommissioner on Jan. 1, 2007 By Marina Tsvetkova - Mrs. Kuneva, what will be, accord- ing to you, the major achievement in Meglena Kuneva was born in 1957. She the implementation of the Action Plan was awarded PhD in Law in 1984 and from now until the September report specialized in a number of universities of the European Commission? abroad: International Relations and Environmental Law at Georgetown - The implementation of any item on University, Washington, USA, 1995 and the Action Plan will be important. 1999-2000; Human Rights at Human Actually we started to work on the Rights Institute, Turku, Finnland, 1993; Action Plan a long time before the May Environmental Law at Oxford, UK, 1996. Monitoring Report was published, and most of the measures constitute an As a senior legal advisor at the integral part of the annual Action Plan. Bulgarian Council of Ministers, 1990- The allocation of the most important 2001, she participated in the drafting of measures to the operative plan that has a series of Bulgarian laws in to be completed by September would Environment, Access to Information, etc. allow us to highlight the policies that would merit a positive assessment. Mrs. Kuneva was elected Member of Parliament in the 39th National I am talking about "policy types." Assembly, in June 2001, and appointed Deputy Minister and Bulgaria's Chief Corruption, for instance, is a major Negotiator with the EU at the Ministry of Foreign Affairs, August 2001. issue. But nobody is pressing us to have it done with within two months. She was appointed Minister of European Affairs and Bulgaria's Chief Negotiator Streamlining public registers is another with the EU and a special representative of the Bulgarian government at the important issue - we must have regis- Convention for the Future of Europe, May 2002. ters not only of the property, but also a commercial register, a register of the Fluent in English, French and Russian. Married, with one son. public procurement contracts etc. It must be made clear that the public and owned by high-ranking civil servants ment to the constitution, as implied the state have the relevant mechanisms was also a very important development. by the ongoing public debate? at their disposal to reveal possible cor- Now everybody has access to the AmCham Bulgaria Magazine July 2006 ruption attempts. If we speak about internet sites, containing information - In all instances, these are the legisla- organized crime and coordination of about the property statements deposit- tive amendments, related to the most efforts, it must be unambiguous that ed by the members of the cabinet and problematic spheres as identified in the the prosecutor, as the master of the by the deputy ministers; some of the EU's monitoring report. When talking criminal procedures, is capable of such top magistrates have also revealed their about corruptions at the top tiers, about coordination and that the Ministry of properties and I hope that the rest will organized crime and money laundering, the Interior has the required potential to do the same. we have to account for the existing page assure the disclosure. The Action Plan links between these phenomena. That 35 demonstrates the firm commitment of I would add that we interpret the Action is why the government has decided to the ruling coalition to implement irre- Plan as an effort to pass a "confidence approach these issues in a compre- versible reforms. The fact that the vote" for Bulgaria, as a predictable and hensive and unified manner. The act Action Plan was supported by the par- a reliable partner, by the European on the public access to data related to liament, including by parliamentarians institutions and the European citizens. the property status of persons at high outside the ruling majority, was a devel- posts stipulates that the National opment of an enormous importance. - What are the primary legislative Revenue Agency is obliged to check amendments related to the Action the correctness of the data as submit- For me, the disclosure of the property Plan? Will there be a fourth amend- ted by the respective person. The amcham interview

amendments to the law on the financ- mature way as far as European inte- "The optimist sees an opportunity in ing of political parties aim at the gration is concerned… any difficulty, while the pessimist looks removal of the so-called donations in for difficulties in any opportunity." In kind. A bill on lobbying is currently - What I meant is that we have to tune that aspect, I would say I am an opti- being debated. Amendments were our thinking and understanding to the mist; still, membership will affect indi- made in the effective money laundering wavelength of modern Europe. When I viduals in a different way. The fact that legislation, so that the authorized insti- insist on transparency I mean a specif- 73 percent of all Bulgarians expect the tutions would be granted easier access ic way of thinking. Transparency will European Union discipline the politi- to proprietary bank information in case reduce the void between the authorities cians is a direct evidence of the trust of suspected money laundering and the voters; it will reduce the con- of the people in the effects of the EU attempts. These amendments are also frontation between "them" and "us" and membership. aimed at eliminating potential sources bring public support to state-level deci- for financing of terrorism. sions. Transparency provides the links As far as the state as a whole and its within the society; it guarantees the preparedness for membership are con- The reform of the judiciary system dialogue and the motivation. Actually, cerned, I would give an example with continues to be in the focus of all the fact that European integration the direct foreign investments - they efforts. The new bill on the judiciary changes all candidate countries irre- rose during the first five months of will stipulate both the independence versibly is the characteristic highlighted 2006 by 50 percent compared to the and the accountability of the judiciary most often by analysts. same period of last year. This is also system. The new law will also contain an expression of trust. According to provisions related to the assessment of European integration provides a new experts, Sofia alone is targeted for the professional qualification of magis- definition of effective governance - not investments, estimated at one billion trates. We expect that by September at by the natural concept of "power" but Euro. According to IMF estimates, the latest the National Assembly will as the commitment of the ruling power Bulgaria's economy has the potential to approve also the new Civil Procedures to abide the existing rules. Abiding the generate an average annual growth of Code. law, on an international level, currently 6 percent. Bulgaria's credit rating was creates a unique link between domes- upgraded eight times over the last five As far as the constitution is con- tic and international policies. I have years. That means that we already cerned, I think that things are gradual- already had the opportunity to express speak about the system of Bulgaria's ly coming into focus. There was series my conviction that Bulgaria must sup- European membership coordinates as of very fruitful meetings between port the transparency initiative, an environment of opportunities - for Bulgarian parliamentary deputies and launched by new capital influx, for new ideas, and European experts. All MP-s demon- , which is currently a subject new efficient practices. strate an exceptionally high level of of debates within the European Union. goodwill, as it is up to them to initiate - What about your personal plans? the best final solution. For me person- - Are you optimistic that Bulgaria's Your name is mentioned as the ally the best-case scenario would be accession to the EU on Jan. 1, 2007, Bulgarian Eurocommissioner, and to proceed with constitutional amend- will match the expectations of even as president… ments after a broad consensus Bulgarians? Will Bulgaria be ready to between incumbents and oppositions absorb the initial impact of the mem- - I have work to do and I have to do it is reached. bership? in the best possible way. There is one definite thing I work for - to have a - You have said many times that - Let me reply with the magnificent def- Bulgarian Eurocommissioner as of Jan. institutions must think and act in a inition of optimism given by Churchill: 1, 2007. ■

36 AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria amcham events Minister Kuneva Presents Government's Action Plan to AmCham General Assembly

EU Affairs Minister Meglena Kuneva addressed the AmCham General Assembly on June 20, presenting for the first time in public the main points of Bulgarian govern- ment's so-called Action Plan, particularly measures against corruption and organized crime, money laundering and judi- cial system reform.

Around 100 guests attended the event, among them six U.S. representatives of the Marshall Memorial Fellowship Program, AmCham members, guests and media.

"The plan was submitted to the EU member states, to the EU Commission and the Bulgarian government is open to any kind of explanations and whatever questions the busi- nesses might have," Kuneva said. The minister assured that the plan follows the already existing government strategy on EU accession, but putting "before the brackets" the most important of Bulgarian obligations, which would be the easiest way to reach the EU Commission. Kuneva stressed the limited time left to address all the shortcomings.

She reiterated that the most important topic now is the one of transparency and high-level corruption. In minister Kuneva's words, these crimes should be chased in the most resolute ways. Excerpts: EU Affairs Minister at AmCham "The measures envisaged in the When it comes to corruption, it is wor- Posts. The scope of amendments inter Action Plan are designed to address thy to note that the corruption is a alia includes an introduction of an issues of serious concern in the last crime. And the crime is to be dealt with obligation of the National Revenue Monitoring Report of the European by the respective authorities, namely Agency to verify the authenticity of dec- Commission, such as organised police, prosecution and finally the larations, filed with the National Agency crime, money laundering and high court. Obviously that is true, but so far of Audit and a free access to the dec- AmCham Bulgaria Magazine July 2006 level corruption. The latest are close- has not made substantial progress in larations published on the Internet ly related and hardly to exist sepa- the matter. The Bulgarian government based register. rately… went further and decided to elaborate new pieces of legislation dealing with The Law on Political Parties - the The main approach of the Bulgarian matters closely related to transparency amendments to this law aim at improv- government was to elaborate a com- and accountability. Such measures will ing the transparency and accountability plex of measures in order to tackle play as a deterrent for corruption, or in of the political parties' financing. page systematically the problematic areas other words - effective instruments for 37 bearing in mind their inter-connection. prevention… Both mentioned laws are related to the Following the famous American school accountability and transparency of per- of thought in public management, all We already have drafts on Laws on sons holding the highest public offices the responsible authorities were taken amendments to following pieces of leg- and a public revelation of financial on board. All the measures the gov- islation: sources of the political parties. ernment has come up with are broad- ly discussed with the experts of the The Law on Public Possession of A draft Law on Lobbying is under European Commission… Persons Holding the Highest State Continues at page 38 amcham events

AmCham leadership and members, among them Anthony Hassiotis, CEO, Bulgarian Postbank, /left/ and Borislav Boyanov, /right/, listen to the presentation of minister Kuneva. "We need an active Attorney General's Office and active Commission but also internally, about the achievements investigators. This is more or less oriented towards the and results of the Action Plan. Her second question was executive branch," she said. about the so-called yellow area, which outlines the con- cerns EU has with the accession process. Minister Kuneva addressed several other issues during the Q&A session. Olga Borissova of AUBG asked how minister Minister Kuneva said it is really important to put the tough- Kuneva is going to communicate not only to the European est problems in focus, and the government has made some

Continues from page 37 of the European Union. These amend- counter corruption. Therefore, the gov- preparation and it is to be passed to ments led to an almost complete har- ernment will focus in the next months the National Assembly. Other two monization of the national legislation on the measures related to the evalu- pieces of legislation, namely the Low with international anti-corruption instru- ation of the implementation of the new on Credit Institutions and Law on ments. The Criminal Code amend- Criminal Procedure Code and identifi- Money Laundering aim at strengthen- ments, for example, introduced criminal cation of the areas of concern… ing the investigation of the organised liability for a larger number of corrup- crime by broadening the circle of tion-related practices such as trade in We all know that democracy breathes authorised institutions entitled to have influence, bribery of a foreign official through the judiciary branch. an access to the bank secret when etc. Therefore, the reform in the judiciary is there are doubts as to organized crim- in our focus. Our efforts are concen- inal activities or money laundering. The new Criminal Procedure Code in trated now on the removal of the ambi- These amendments are designed also effect as of April 2006 provides for guities in the constitution regarding the to eliminate the sources of financing implementation of new techniques for respect of judicial independence and the terrorism. collecting evidence in criminal pro- the adoption of a new Law on 38 ceedings such as investigation by an Judiciary. Criteria for evaluation of the Results against corruption depend agent under cover, controlled supply quality of the magistrates will be imple- mainly on the quality and effective and confidential deal. mented in the new Law on Judiciary. enforcement of the relevant criminal legislation. In recent years a great The unsatisfactory results in detecting Another important feature of the new number of amendments have been and punishing corruption, however, Law on Judiciary which I would like to made to the Criminal Law and demonstrate that simply harmonizing highlight here, without going into Procedure that helped considerably the laws with international legal instru- details, is the review of the general

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria update and align it with the standards ments is not enough to effectively principle for competitive examination. amcham events

progress already. For instance, the Ministry of Transport has finished harmonizing nine out of 12 regulations for the motor vehicles. According to the minister, one of the prob- lems is lack skills in the administration to communicate achievements with the audience.

Laurence Marshland, general manager of Chelopech Mining addressed the issues regarding the high level cor- ruption and lack of transparency in the government. He said that his company had received first-class investor cer- tificate and the Chelopech projects had been approved by the Council of Ministers, but was still waiting for the per- mit of the Ministry of the Environment. Marshland asked Olga Borissova, Director European Programs AUBG and AmCham board mem- how serious international capital will be attracted to ber, asked on how minister Kuneva is going to communicate not only to the Bulgaria given the amount of red tape. The minister for- European Commission but also internally, about the achievements and results of the Action Plan. warded the answer to the Ministry of the Environment in this specific case and pointed out that the Inspectorate within the Council of Ministers could remedy the situation.

Kenneth Lefkowitz, chair of AmCham's PA committee, raised the issue of ongoing negotiations on the treaty for avoidance of double taxation with the U.S. government, as well as the adopted changes in some Bulgarian laws. He proposed to the minister to coordinate the already existing changes with the ones the Ministry of Finance is preparing in some other related laws on crediting.

Chris Thompson of Bearing Point asked about lobbying regulations and whether they would take an Anglo-Saxon or traditional European format. He suggested that AmCham's PA committee make recommendations to the government and participate in the dialogue with the gov- ernment on lobbying and judicial reform. The minister Kenneth Lefkowitz, NECA Manager and Chair of AmCham PA Committee, answered that after the last EU monitoring report it is more raised the issue of ongoing negotiations on the Double Tax Treaty with US and than desirable that the business associations participate in the adopted changes in some Bulgarian laws as bank law, laws on social and this dialogue. ■ tax insurance.

The aim of the review is to make this Code is ready and we expect the the European Union will amount at 864 principle applicable only for entry into Parliament to adopt it latest by billion Euro. This is an enormous sum Judicial system. The new law will also September. The Code will be accom- and its efficient absorption requires full address the issue of the career path of panied by set of criteria for evaluation transparency. The absolute transparen- the magistrates and implementation of and monitoring of its implementation cy is the accent of the Action Plan unified criteria for evaluation. To this and an education plan that will make it because the way of spending the funds end, new body with competence of easier for the implementing bodies to of the European Union can be seen monitoring and evaluation will be get acquainted with it in due time. also a great project of the civil society. AmCham Bulgaria Magazine July 2006 established. In Europe money has always been a Until the end of June the government byword for a merited result of a hard Integrity of the judiciary is closely will adopt the education plan which will work. related to the management of court guarantee better implementation of the cases. Therefore our aim is to make new Administrative Procedure Code. It Therefore, political will and the promises sure that Judiciary is equipped with a will be accompanied with set of crite- are not enough. We will focus our efforts set of rules that guarantee that random ria for evaluation of its implementation. in undertaking efficient measures to page distribution of court cases is in place guarantee proper management of the 41 and functions properly. To this end Transparency is becoming a major major instruments for social cohesion until June 30 we will have the analysis theme in the European policy. A great and regional development of the EU. and evaluation of the current system, deal of attention now is paid to the The Action Plan can have different on the base of which the government transparency in distribution and absorp- names and can be interpreted in so will introduce changes addressing the tion of the funds of the European many different ways. I choose to name existing shortcomings. union, especially Structural and it as the Agenda of Bulgarian adminis- Cohesion Funds. For the period 2007- tration written in European language. No The draft of the new Civil Procedures 2013 the total of the Structural funds of more, no less." ■ news Marshall Fellows Visit Bulgaria By Irina Bacheva A delegation of six American fellows from the U.S. Marshall Memorial Fellowship program visited Sofia June 16-21, 2006. The delegation met with representatives of state institutions, NGOs, business associations and media. The ultimate aim was to gath- er more information about Bulgarian political, economic and social life.

Marshall Memorial Fellowship (MMF) program provides a unique opportunity for young policy and opinion leaders from the United States to gain in-depth understanding of societies, institutions, and peoples across the Atlantic. Among the topics concerned in fellows' personal appointments and group discussions were Bulgaria's foreign policy, the preparation for EU accession, sus- tainable economic development, candidacy for the 2014 Winter Olympics, issues of the judicial system and minority rights. During The US delegation was headed by Carie Horn, an associate with the law firm their stay, fellows met high level officials, journalists, experts, Kaplan&Becker. members of parliament and Bulgarian Marshall fellows. The del- Terrance Carroll, state representative in Colorado; Todd Lloyd, egation was headed by Carrie Horn, an associate with the law vice president for education with Ohio Grantmakers Forum; Kim firm of Kleinfeld Kaplan & Becker, where she practices law relat- Morreale, partner at Stricklin Morreale. ed to product liability, insurance coverage, and food and drug issues. Founded in 1972 through a gift from Germany as a permanent memorial to Marshall Plan Assistance, the German Marshall She said that Sofia was the fourth city the fellows are visiting, Fund (GMF) is dedicated to promoting greater cooperation and since the program started in Bratislava, moving on through understanding between the United States and Europe. After the Hamburg and Madrid. In each city the delegation met with politi- Berlin Wall fell in 1989, GMF rapidly expanded its work in Central cians and made individual appointments. Horn was impressed of and Eastern Europe and played an instrumental role during the the openness of all of the government officials and representa- 1990s in assisting with the transition to democracy in this region. tives she had met in Europe. "Bulgaria has a lot in common with Today, as an independent U.S. public policy and grantmaking Slovakia in dealing with transition issues and issues of EU inte- institution, GMF continue to foster cooperation between the gration but Bratislava may be a few years farther in its progres- United States and Europe on the most pressing transatlantic sion. In Bulgaria there is a nice realism and understanding of issues, both inside and outside Europe's changing borders. GMF where the country is and where it is going to be. We met with also continues to strengthen democratic institutions in the spirit the Foreign minister Ivaylo Kalfin, with representatives of political of the Marshall Plan. parties in the parliament. The theme of EU integration was our common subject during the meetings," Carrie Horn said. The Marshall Memorial Fellowship was created by the German Marshall Fund in 1982 to introduce a new generation of She is consulting US and foreign companies on legal issues and European leaders to America's institutions, politics, and people. also providing information on the countries where she has been In 1999, GMF launched a companion program to expose future during the study visit. Kleinfeld Kaplan & Becker representats U.S. leaders to a changing and expanding Europe. The MMF pharmaceutical manufacturers and medical device companies program attracts the best and the brightest from all sectors, regulated by a broad range of health and safety regulatory agen- including politics, media, business, and nongovernmental organi- cies at the federal and state levels. Horn acts as counsel on pro zations. Fellows come from across the United States and from bono family matters in DC Superior Court, and volunteers 20 European countries (Albania, Bosnia and Herzegovina, through Habitat for Humanity, as well as raises money and sup- Bulgaria, Croatia, the Czech Republic, Denmark, Germany, pors local organizations through athletic competition in running Greece, France, Hungary, Italy, Macedonia, the Netherlands, and cycling events. "My plans are to speak about my experience Poland, Portugal, Romania, , Montenegro - including and about the similarities and differences of the countries where Kosovo - the Slovak Republic, Spain, and Turkey). GMF works we were during this trip. The shared information might be useful with partners in more than 60 cities on both sides of the Atlantic 42 for potential investors in Bulgaria and in the region. GMF collects to make the MMF program possible. data of publications and articles of former fellows. We get together often as alumni in different cities across the world and The Bulgarian component of the MMF program was launched in continues to network and talk to each other and engage in this 1998. Every year four Bulgarian fellows travel to the United trans-continental relationship," Horn said. States. During an extensive three-to-four weeks program, they explore a range of domestic and international policy issues In addition to Horn, the delegation represented a diverse group through briefings, site visits, cultural activities and personal of professionals: Robert Ashe, intergovernmental affairs manager appointment with local counterparts. Currently, the MMF alumni

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria for the City of Atlanta; Alyssa Ayres, deputy director of the Center are more than 1,500 all over Europe and the United States. Thirty for Advanced Study of India at the Univeristy of Pennsylvania; five of them are Bulgarians. ■ new members

The American Research Center in Sofia Shumen - Carlsberg Bulgaria demonstrated its leading position (ARCS) is a non-profit organization dedicated to as investor N 1 among the brewing branch of the country. facilitating academic research in Bulgaria for North American scholars. ARCS will foster col- Nowadays, there are 500 employees at Carlsberg Bulgaria. laboration between North American scholars This number includes: and those in Southeast European countries (Albania, Bulgaria, Macedonia, Romania, Serbia, and Montenegro). The intellec- Employees at the two breweries in Shumen and Blagoevgrad; tual community thus realized should become a significant resource for objective discussion of longstanding ethnic and Trade force all over the country; national problems in the region. The team in Sofia located office - Departments of Marketing, Specific goals of ARCS will include research in the humanities HR, Purchasing, Finance. and social sciences from prehistory through the modern age. Classes in the modern Balkan languages will complement lin- Contact: guistic research. ARCS will provide fellowships and organize Alexander Grancharov CEO conferences, colloquia and tours of significant archaeological Carlsberg Bulgaria and historical sites. "Mladost" h.e., 1 "Business Park" Str., build. 3, fl. 2, Sofia Tel: 9179260 ARCS will also maintain close communication with other E-mail: [email protected] American Overseas Research Centers, such as the American School of Classical Studies at Athens and the American Industrial Holding Bulgaria /IHB/ is one of the Research Institute in Turkey. This should enable scholars to largest Bulgarian industrial groups. IHB is a public better avail themselves of the possibilities for comparative limited company managing investment portfolio of study in Southeast Europe, the Mediterranean and the Near companies from several industries. East. IHB group includes companies in the field of mar- Contact: itime business - shipbuilding, ship repair, port activ- Prof. Kevin Clinton, Director ities, ship operation; river cruises; machine building American Research Center in Sofia - metal cutting machines /universal and CNC lath- 42A, Maria Louisa Blvd. es, band saws, electrical machines /asynchronous and syn- 1202, Sofia chronous electric motors, electric generators/ and foundry E-mail: [email protected] production; furniture production; industrial project manage- Tel. 983 42 42 ment. http://www.einaudi.cornell.edu/arcs/ IHB is listed on Bulgarian Stock Exchange - Sofia. IHB is lead- ing A segment of the stock exchange and BG 40 - index of the most liquid traded companies on the BSE-Sofia. Carlsberg is one of the leading brewing com- panies in the world. It produces 9 billion liters As at June 2006, IHB has over 63 500 natural and 100 legal beer per year, equal to 65 million 0,33ml bot- persons, possessing respectively 39 % and 61 % from the vot- tles every day. Carlsberg sells beer in 150 countries worldwide ing shares. Foreign investors own 47 % from the voting shares. and there are nearly 30 000 employees of the company, locat- ed in 45 countries. The history of "Carlsberg Bulgaria" dates Our vision: IHB is the biggest industrial holding in Bulgaria. IHB back to the remote 1882, when in the town of Shumen was continuously supports its subsidiaries to become best per- set the beginning of one of the oldest breweries in Bulgaria - formers in their business activities and encourages its employ- "Shumensko pivo". A lot of time had to pass before 2002, when ees to improve their individual skills. Due to its prosperous sub- "Shumensko pivo" became a part of the big Carlsberg family. sidiaries, IHB generates high shareholder value. It is therefore In Sep 2004 the two breweries MERGED under the common attractive for investors and reflects the sound image of a solid name of Carlsberg Bulgaria. Carlsberg is a strong leading and sustainable company. player in the beer market of the country and is the fastest growing brewery in Bulgaria. The product portfolio of the com- Contact: pany offers a variety of first-class beers: "Shumensko", the Daneta Zheleva CEO 44 oldest of a kind in the country "Shumensko red", "Pirinsko", as Industrial Holding Bulgaria well as the international brands of the Carlsberg company - 47 Vassil Levski Blvd., 1000 Sofia, Bulgaria "Tuborg" and "Carlsberg". "Tuborg" IS locally produced from Tel: (359 2) 980 71 01, 981 55 06 May, 2004, at the Shumen brewery. "Carlsberg" is only on Fax: (359 2) 980 70 72 import. E-mail: [email protected]; [email protected] Last 2205 year, the company made serious investments in "Pirinsko" brewery, located in the town of Blagoevgrad. The

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria brewery went thorough full reconstruction and modernization. Together with the investments in the other brewery - in member news

Bank Austria Sells Croatian Subsidiary Bank Austria Creditanstalt (BA-CA), a member of the UniCredit Splitska Banka has total assets of 3.2 billion Euro, 112 branch- Group, completed the sale of its Croatian banking subsidiary es and 1,112 employees. In 2005, the bank served more than HVB Splitska Banka to the French banking group Societe 460,000 corporate and retail customers. Generale. The price of the transaction was reported to be around one billion Euro. The sale of the bank was necessary After the sale of Splitska Banka, BA-CA will assume the respon- due to merger control requirements of the Croatian law. sibility for UniCredit's subsidiary in Croatia, Zagrebacka Banka. Investment banks CA IB and Credit Suisse acted as advisers to With total assets of 8.9 billion Euro and a market share of 24 per- BA-CA in the sale process. cent, Zagrebacka Banka is the number one bank in Croatia. ■ Visa Card Usage Grows Dramatically The usage of Visa cards among $56.2 million with 588,546 Visa card handling their daily cash flow thereby Bulgarians grew over twofold in a year, transactions during March 2005 - March contributing to business profitability." the company reported, as Bulgarians 2006. seem to rely increasingly on their Visa At end of March 2006, there were cards for faster and safer payments. The Catalin Cretu, vice president for Romania 653,866 Visa cards in Bulgaria, an total amount of expenditures put on Visa and Bulgaria of Visa International, said: increase of 88 percent compared with cards exceeded $255 million between "These figures show that the number of the same period the year before. The March 2005 and March 2006 - an transactions at merchant outlets number of Visa Electron cards continues increase of 130 percent, compared to increased significantly which means that to register a steady increase 82 percent the same period in 2004-2005. The total Bulgarians are increasingly using their compared to the same period last year, number of transactions reached 3.7 mil- Visa cards for their daily purchases. with 561,282 Visa Electron cards in cir- lion, up 153 percent. Merchants have obviously benefited culation in Bulgaria. The second most from placing POS in their sales outlets, popular Visa card brand on the market, The increases in the value and frequen- as an increased number of customers the Visa Classic, marked a more signifi- cy of purchases made at retail outlets are using them to make purchases with cant increase of 133 percent in compar- with Visa cards continued at a remark- their cards. The Visa brand provides ison with last year, exceeding a total of able pace, too. Bulgarians spent over safety and efficiency for merchants in 85,000 cards in circulation. ■ AmCham Bulgaria Magazine July 2006

page 45 amcham events

AmCham Tennis Tournament Turns Five Despite the summer weather's whims Some proven AmCham tennis players, Kamburov&Partners at the quarterfinal, that delayed the start of the AmCham such as the team of Balkan Star (Philip but was stopped by the players of Gloria Tennis Tournament by a few days, the Kitoff, Nikolay Iliev, Villy Zahariev), and Palace. competition came out with 12 teams Citigroup Bulgaria, BNT and Gloria doing their best at the Gloria Palace Palace, reached the semi-finals. AmCham members who demonstrated Club. their skills were in the teams of 3M, For the first time in AmCham tourna- Cefin, Carrental, Motorola Bulgaria and Gloria Palace Club and Citigroup ments, the all-journalists teams of VSK Kentavar. Two lawyers' offices par- Bulgaria became the team finalists, with Bulgarian National TV and Capital ticipated in the race for the first time: Gloria Palace team coming on top in a Weekly participated in the race. Assen Georgiev, Todorov&Co and head-to-head battle on June 15. Grigorov and Evgeni Mandadjiev (BNT) Kamburov&Partners. Citigroup Bulgaria team of Lyubomir proved they are keen players who hard- Marinov, Grigori Ananiev, Dimitar Dimitrov ly miss a weekend to improve their rack- The AmCham team is grateful to all and Tsvetan Lazhanski placed second. et prowess. BNT won against sponsors who made the race possible,

46

Assen Grigorov from BNT in action. For the first time in AmCham tournament Philip Kitoff during the game. The semifinals were reached by proven

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria journalist teams of Bulgarian National TV and the one of Capital Weekly also AmCham tennis players: team of Balkan Star: Philip Kitoff, Nickolay Iliev, participated in the race. Villy Zahariev amcham events

mostly Thorn Spring and Sport Shops Chain SLS. Awards were provided by Radisson SAS Grand Hotel, Grand Hotel Sofia and Sport Shops Chain SLS.

All lady players - Tzvetelina Nikolova, Kamburov&Partners, Eleonora Guncheva, Capital Weekly, VSK Kentavar's team Mariana Pecheyan and Irina Yordanova - received special prizes at the tournament's conclusion.

AmCham team is grateful to all spon- sors who made the race possible, mostly Thorn Spring and Sport Shops Chain SLS. Awards were provided by Radisson SAS Grand Hotel, Grand Hotel Sofia and Sport Shops Chain The teams of Gloria Palace Club and Citigroup Bulgaria were the finalists. In the race Gloria Palace team SLS. ■ appeared to be the best player.

Dimitar Dimitrov and Lyubomir Marinov, Citigroup Bulgaria team, placed second. Krassimir Dimitrov, 3M in action. AmCham Bulgaria Magazine July 2006

page 47

Tennis has become an addiction not only for AmCham members but also for keen tennis players that joined the Tsvetelina Nikolova, Kamburov&Partners, a law AmCham tournament office that participated for the first time in the race. holydays

Hilton Launches Global Summer Sale Campaign

Hilton International, the world's best known hotel brand, launched in early June its first global summer sale cam- paign targeting leisure travelers across Europe, Africa, Middle East and Asia- Pacific.

The campaign aims to boost leisure occupancy at Hilton hotels between July 1 and Sep. 3, 2006. Reaching a broad leisure market, the Hilton sum- mer sale will be promoted through mul- tiple channels in key global source markets and will focus on online mar- keting, email marketing, national media advertising, partner promotions, and pan-European direct mail and in-hotel promotions.

Tony Orme, director for leisure prod- ucts and promotions with Hilton International, said; "It is the first time a consistent global proposition to our customers as part of a fully integrated campaign for Summer Leisure Breaks has been introduced. We identified the opportunity to develop one campaign that provides cost efficiencies and a simplified offer by reviewing our demand calendars and need periods in different markets."

Online activity is central to the cam- paign incorporating dedicated pages on central- and local-market websites, search engine optimization and ban- ner advertising. Partner marketing will also be optimized and includes activi- ty via Hilton HHonors partner market- ing channels and with Sixt in Germany; Air France in Western Europe; Alitalia and Europcar across the Mediterranean; HSBC in Eastern Europe and American Express in the Nordic region. 48 Booking under the summer sale cam- paign is available Sep. 1, 2006 at over 150 destinations and 200 hotels. A three-day advance booking is required. For more information, visit:

www.hilton.com/summersaleeurope

AmCham Bulgaria Magazine July 2006 July Magazine AmCham Bulgaria www.hilton.co.uk/summersale www.hilton.de/summersale ■