Bulgaria's Tobacco Deal Fails

Business | March 31, 2003, Monday // 00:00

Bulgartabac should not be sold under the existing circumstances, and the privatisation procedure should be terminated, the parliamentary groups of the ruling party Simeon II National Movement and its junior coalition partner, the predominantly ethnic Turkish Movement for Rights and Freedoms (MRF), decided March 31.

The same argument has been defended in the report of the Privatisation Agency to the Cabinet, parts of which have been presented to the MPs by Deputy Prime Minister Nikolay Vassilev.

Parliamentary Speaker Ognyan Gerdzhikov said that the buyer has stepped back on its bank guarantees for financing the deal. He pointed out that Deutsche Bank has also failed to meet the incumbents' requirement to refrain from divesting Bulgartabac equity over a period of five years after the deal is signed.

It is a nationally responsible decision. It was clear that there should not be a deal at any rate and it turned out that the price we had to pay is unfavourable for Bulgaria, Gerdzhiikov said.

In the middle of March Bulgaria's Parliament approved the Cabinet's decision for naming EUR 110 M bid of Deutsche Bank-owned Tobacco Capital Partners a winner for 80% stake in Bulgaria's tobacco monopoly Bulgartabac.

The deal is not profitable, the state cannot accept the conditions set by the buyer, Valeri Dimitrov, chairman of the parliamentary economic committee told the Bulgarian National Radio.

In his words all possibilities for a compromise has been exhausted, which is the reason why the group has advised against inking that deal.

According to Dimitrov a new competition for Bulgartabac will be announced, since none of the other bidders meet the set requirements.

The other bidders are unreliable and insecure, Dimitrov said.

Iliya Vassilev, head of the Privatization Agency said that a new procedure will be opened for the privatisation of Bulgartabac.

The issue of holding politicians responsible for the failure of the deal has not been discussed at the meeting of the parliamentary groups.

The Cabinet is expected to discuss and approve the report of the Privatization Agency and terminate officially the privatization procedure.

In the middle of last week left-wing Coalition for Bulgaria and right-wing United Democratic Forces called on the ruling majority to stop the privatisation of Bulgartabac.

UDF claimed the deal is doomed to failure, while the left-wing opposition says that the deal must be finalized after the Constitutional Court rules on the cases that seek to revoke the amendments to the Privatisation Act.

A day later the strategy for tobacco production by 2007 was adopted under which the Cabinet will fix minimum purchase prices for local tobacco crop until Bulgaria's accession to the European Union. The practice of fixing minimum purchase prices for the local tobacco crop was among the contentious issues that snagged sale talks for Bulgartabac.

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