Bulgaria Smelling Anti-Tobacco

Novinite Insider » EDITORIAL | January 31, 2005, Monday // 00:00

By Ivelina Puhaleva

The saga with Bulgarian tobacco monopoly Bulgartabac Holding may prove to be the flintstone to enkindle a fierce political crisis and probably - but not quite likely - to threaten the government of Prime Minister Simeon Saxe-Coburg five months before general elections.

The privatisation of Bulgartabac Holding is over. There is no deal signed with British American Tobacco (BAT) and there shall not be any.

With these words of Economy Minister Lidia Shuleva from the parliamentary rostrum on Tuesday Sofia tolled the bell to announce the failure of the government to wrap up the sale of Bulgartabac Holding, one of landmark privatisation deals.

The drawn-out sale of the tightly state regulated holding has previously seen a collapse, when in 2002 the Movement for Rights and Freedoms disliked the potential buyer - the financial investor Deutsche Bank - and spoiled the sale of an 80% stake in the company refusing state control of raw tobacco prices until 2007.

Now the beginning of the end has been once again propelled by the minor coalition partner putting at stake the survival of the Cabinet, despite last year's decision of the government, including MRF's minister, to privatise Bulgartabac facilities one by one.

Analysts commented the mainly Turkish ethnic party, which has continuously played the balancing role in recent governments, might in this way voicelessly object the privatisation of a sector where most of its electoral constituency works.

The surprising withdraw of political support from the party, whose leader Ahmed Dogan has recently won a recognition as "Politician of the Years in Transit", stirred a wave of speculations they would horse-trade the political support for the tobacco deal expected to be a pinnacle in the four-year term of the incumbents.

When BAT bid for Bulgartabac's plants in the capital Sofia and the central city of Plovdiv last October and later enhanced its offer to include the Blagoevgrad factory in western Bulgaria, the MRF acted in perfect symphony with the Cabinet of Simeon Saxe-Coburg. Its Minister of Agriculture Mehmed Dikme, who is also in the Supervisory Council of Bulgartabac, had moved through all negotiations with BAT and had signed his approval of the negotiated parameters ... until last week.

Why and how Minister Dikme has withdrawn his signature it was not immediately made clear to the general public, although he claimed to have it done earlier in December. The news, however, did not break untill the end of January.

The MRF claims BAT does not fit into the tobacco privatisation strategy's definition of a strategic investor, but not a word more what exactly the Britons, currently operating in nearly 180 countries worldwide, have missed in their offer for the three most profitable and prospective plants. It is doubtful whether the MRF would stigmatize the deal so definitely, if BAT had wished to acquire some of the red-inked factories in their constituency regions, such as in Haskovo and Shumen.

Or we could simply tag the scandal as the wrong deal in the wrong time. Because the time comes of parliamentary elections, due this summer, and the pre-elections battle has already raged through the country.

A deal so sensitive as of national and strategic importance as is Bulgartabac Holding seems to have deteriorated to the scale of horse-trading on domestic level and eloquence practices rather than attracting major foreign investors.

"In the difficult political environment, which continues to worsen, we do not believe we can complete the transaction to a timescale that will ensure that we make a worthwhile return on our investment," reads the official press release of BAT pinpointing on the main reason of their withdrawal.

And time is really ticking away for local tobacco industry, a once traditional sector for Bulgaria. The price of EUR 200 M offered by BAT can soon be just a far-away dream, if this or any next government dears to try out again a sale of Bulgartabac Holding.


Until then, we can only hope that foreign investors will still be so brave to challenge the viability of Bulgarian business climate and that Bulgaria is not a precedent in the European Union to have forgotten the monopoly skeleton in the wardrobe.

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