By REUTERS
Two market reformers put in charge of the economy in Bulgaria's new government on Tuesday outlined a bold plan of speeding up reforms in one of the poorest European Union aspirants. They said measures would be taken to boost the fledgling capital market, restructure the country's $10 billion foreign debt, ease taxation to attract foreign investors and spur growth.
“A realistic time period is six to 12 months but we will start immediately," said Nikolai Vassilev, deputy prime minister and economy minister in the government of former King Simeon II sworn in earlier on Tuesday. The 31-year-old Western-educated emerging market analyst told Reuters the previous cabinet of the Union of Democratic Forces, while achieving financial stability and stable economic growth, did not pay enough attention to the capital market. “What we have at the stock exchange now are small stakes and small companies no one has ever heard of and no one cares about and no one has told the private sector that this is a viable alternative for financing, an alternative to a bank credit.”
“We are planning to do all those things immediately, we have the right people and the right strategy. If there is political will, results will be achieved very quickly.” Some 500 companies are listed on the bourse, but shares in only around a dozen change hands regularly in low volumes.
TRANSPARENT PRIVATISATION
Vassilev said privatisation would become more transparent and there would be fewer, if any, buyouts by managerial teams, often for a token sum or under favourable conditions. “Majority stakes in large companies will certainly go to strategic investors, hopefully foreign, but minority stakes will also be listed on the stock exchange. We are not great believers in the management-employers privatisation,” he said. Special attention will be paid to the planned sell-off of the BTC telecom monopoly, Bulgartabac tobacco monopoly and the liberalisation of the energy sector, one of the biggest recent concerns of the International Monetary Fund (IMF).
Another attraction for investors was a planned scrapping of taxes on reinvested profit and capital gains on company stocks, Vassilev said. The top level of income tax would gradually go down from the current 38% to 29.
FOREIGN INVESTMENT
Finance Minister Milen Velchev told Reuters separately he expected that quicker privatisation and tax easing would sharply boost foreign investment, vital for spurring economic growth and meeting EU accession requirements.
"We hope to attract above one billion dollars next year," said the 35-year-old financier, who has worked at Merrill Lynch in London.
Excessive red tape, inconsistent legislation, corruption, slow reforms and regional crises have kept Bulgaria with one of the lowest levels of foreign investment in Eastern Europe. From 1992 to 2000 it amounted to $4 billion. Velchev said the previous cabinet target of five percent economic growth this year was attainable. He expected a more robust performance in 2002 but said growth might be affected by economic slowdown in the EU, Bulgaria's major export destination. To comfort foreign investors that Bulgaria is not at risk, Simeon's government will seek a fresh agreement with the IMF and maintain the currency board, which pegs the lev to the euro, until Bulgaria joins the EU, Vassilev and Velchev said.
An $850 million three year loan deal with the IMF expired earlier this year and Vassilev said a new one would most probably be in the form of a stand-by arrangement. The two ministers also pledged active foreign debt management, including various schemes on restructuring. Vassilev said the cabinet would mull issuing a debut eurobond of 200-400 million euros ($174-348 million) this year.
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