Mariyana Kukusheva: Bulgaria Unable to React to Russian Food Ban
An interview of Novinite.com with Mariyana Kukusheva, head of the Federation of Bakers and Confectioners in Bulgaria, about the impact that Russia's decision to restrict food imports from the EU is having on Bulgaria.
Ms Kukusheva, if we look at the aftermath of Russia’s ban of European food products and its repercussions on Bulgaria, have you already noticed any reactions among the producers from your sector and also among food producers as a whole?
Currently there is nothing freshening: the proposal from the European Commission is just an idea that the agricultural production, namely fruits and vegetables, should be bought up and distributed among schools, social homes, etc. This is the usual example of a wonderful charity action which is possible, which has been checked in any case and is practicable in Europe, but in Bulgaria there is only silence on the issue for several reasons. The uncertainty arises from the fact that Bulgarian suppliers are generally not united into significant trade organizations – neither in clusters nor in cooperations, and this causes a major inconvenience. Of course, the model of communications established in Europe is impossible in Bulgaria. We do not have a law on trade organizations, we do not have any experience in alliances, we do not have partnership and trust among each other. There is also another obstacle. You know that Europe introduced a long time ago VAT exemptions for donated goods. In Bulgaria ever this measure has not been adopted so far. All this is part of the administrative hindrances that such an initiative could beet. Up to now, Bulgarian suppliers are still seeking alternative routes, of course via neighboring and non-EU states.
Are producers currently receiving any aid from the government or has there been at least an adequate response hinting at later support?
Presently there are no indicators for a possible financial aid, since an internal compensation on behalf of Bulgaria and the Bulgarian budget is impossible for well-known reasons. [The interim government is not authorized to make budget amendments.] Nor do we have any mechanism for compensations envisaged – neither in the state budget, nor in the Rural Development Program or in the Common Agricultural Policy. Besides the exact unit to measure the compensations for European suppliers, among whom we are, is so far unclear.
In other words, is the share of EU compensations Bulgaria will get yet unknown?
You are absolutely right. First, the share of Bulgaria has not yet been calculated. It is still just a concept and is based on statistical data from 2013. Secondly, no administrative cluster is currently in charge of processing and presenting unexecuted contracts upon request. Thirdly, at the moment we are still in an “off-switch” state and don’t know what to do. Of course, this is where I should say that I am not having in mind any specific business entities. Commenting on the embargo we are speaking of an issue related to long-term trade and political relations between partners which need a strategy to develop and to overcome obstacles. This is what states with a real market economy do. The issue of the indirect repercussions of the stalled exports to Russia from European suppliers different from the Bulgarian ones, meaning the entry of European goods into Bulgaria at dumping prices, is already a reality, and it mainly unfolds through the big retail chains. I should also say that dumping prices are not non-market prices, but do not correspond to the cost price of products made in Bulgaria.
If a scenario unfolds in which Russia’s counter-sanctions last more than a year and producers are forced to respond, which alternative routes do you consider feasible?
Naturally, there are no strictly determined channels, since businesses are free to choose and implement what they consider to be the best decisions. My opinion, however, is that the Bulgarian production stand the best chances in countries neighboring ours which are also not EU members. I am talking about Serbia, Macedonia and Greece.
Do you expect that food prices could soar if restrictions remain for a longer time?
Right now I don’t. There would be no reason, since supply would increase and consumers will buy agricultural products at lower prices. The indirect consequence will be nevertheless felt just in a month, and it will have various directions. Firstly, jobs will be cut. Secondly, transfers to the state budget will go down. Thirdly, company indebtedness will grow.
What about the ban’s effect on the investment climate?
The investment climate in the sectors of production and processing of agricultural production is marked by a low confidence index. For a long time there have been no predictability, vision and strategy to develop the processing industry in Bulgaria. With these factors in sight, nothing more specific should be expected now.
You mentioned retail chains. A few months ago you said that the government of Plamen Oresharski was the only one that started to carry out an adequate and coherent policy aimed at establishing balanced relations between small producers and retail chains. Do you expect any changes within the interim government or they won’t be under way before the autumn, when there is an elected government?
During the government of Plamen Oresharski, as you know, some changes were introduced into the Consumer Protection Act. The President nevertheless imposed a veto on the adopted bill with certain motives. At a second reading at the Economic Committee the motives were reviewed, and a partners’ agreement was reached with the team sent by the retail chains. The reality is that there was no quorum at the National Assembly, and this draft bill is now pending a vote in the next Parliament. The issue of how to protect Bulgaria's production and small and medium enterprises is crucial for the economic development. It is not a political one, this is the issue of the century, because one cannot be an equal member of any union, the EU included, without having a developing, modern, and competitive economy. The economy, for its part, cannot be developed if domestic consumption and the living standards of consumers do not rise. Consumers themselves are exclusively dependent on the domestic production of any industry and any sector in a given state. We therefore expect that the subject “In Defense of the Bulgarian [products]” will be on the agenda for the next Parliament.
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