BULGARIA’S KEY OBJECTIVE: ECONOMIC GROWTH •Back on the growth track •Long-term sustainable and noninflationary growth until 2003 •Double digit growth prospect in optimistic scenario •Growth depends on new target market.
Download ReportTranscript BULGARIA’S KEY OBJECTIVE: ECONOMIC GROWTH •Back on the growth track •Long-term sustainable and noninflationary growth until 2003 •Double digit growth prospect in optimistic scenario •Growth depends on new target market.
Slide 1
BULGARIA’S KEY OBJECTIVE: ECONOMIC GROWTH
•Back on the growth
track
•Long-term
sustainable and noninflationary growth
until 2003
•Double digit growth
prospect in optimistic
scenario
•Growth depends on
new target market EU
•conceived by Neytcho Iltchev, August'99
GDP (% real growth)
8
1,8
3
3,5
4,5
4,8 5,1
1998
1999
2000
2,9
-1,5
-2
-7,3
-7
-12
-6,9
-10,1
-11,7
-17
1991
1992
1993
1994
1995
1996
1997
2001
Slide 2
LAND MARKS OF PROGRESS:
INFLATION LOW
•Inflation dropped to 90’
all time low -CPI (end of
year) measured inflation
1%
•1999 forecast at 6.3 %
due to increasing real
incomes
•Personal income
growth exceeds
inflation rates
End of the Year Inflation Rate %
700
600
500
578.6
473.7
400
200
100
0
1991
conceived by Neytcho Iltchev, August'99
310.8
300
121.9
79.4 63.9
1992
1993
32.9
1994
1995
1996
1997
1
6.3
1998
1999
6.1 5.4
2000
2001
Slide 3
INVESTMENT CLIMATE
• Attracting FDI is government priority
– Over 1998 an estimated of US$ 620 mln. FDI
– Greenfield investment, additional foreign investment in
companies with foreign participation USD 400 mln.
• Top investors
– Germany, Belgium, USA, Netherlands
• The industrial sector attracted some 50% of the
total FDI
– Trade and financial sector attracted 23.8% and 14.3%
respectively
conceived by Neytcho Iltchev, August'99
Slide 4
INVESTMENT POLICY
• Strategy - making transparent, predictable, clear
and fair legal framework for foreign investors
• Law on Ore and Mineral Resources and
Concessions Law
- Liberalized research and exploration - under
registration regime
- Only extraction is under concessions regime
• Foreign investment act - efforts to reduce middle
level bureaucracy at both state and municipal
level
conceived by Neytcho Iltchev, August'99
Slide 5
PROGRESSIVE TAX REDUCTION
• Value Added Tax
- reduced by 2 % as of 1.1.1999
• Personal Income Tax
- reduced basic rate by 3 %
• Highest tax rate on profit - 28 %
conceived by Neytcho Iltchev, August'99
Slide 6
STRUCTURAL REFORM PROGRESS
3500
3000
2500
2000
1500
1000
500
conceived by Neytcho Iltchev, August'99
J u l-9 8
A p r-9 8
J a n -9 8
O c t-9 7
J u l-9 7
A p r-9 7
J a n -9 7
O c t-9 6
J u l-9 6
A p r-9 6
0
J a n -9 6
• Privatisation
picked up
• Subsidies for
loss-making
enterprises cut
• Banking and
financial system Currency board
discipline
restored
• Liberalised
Foreign trade
regime
Slide 7
IRREVERSIBLE AND RAPID
PRIVATISATION AND REFORM
• Most visible and important component of the
structural reform - since 1997
• Government proceeds vigorously using several
approaches
– use of international agents (31 large enterprises =
15.5% long-term assets);
– industrial “pool” (79 “small” enterprises = 5.5% of longterm assets);
– direct cash sales; auctions and tenders;
– voucher privatization (5% long-term assets);
– public offering of shares; liquidation, etc,
conceived by Neytcho Iltchev, August'99
Slide 8
STEADY PROGRESS IN PRIVATIZATION
60
50
40
30
20
29,7
19,6
10
8,8
0
1996
1997
1998
1999
• Ambitious goal to
conclude the sale of key
industrial assets till 1999
• After some delay process
accelerating - more than
26% long-term assets
privatized through
international agents till the
end 1999
• Focussing on Liquidation
and Post-privatization
issues - since July 1999
Long-term assets transferred to Private
sector (percentage)
conceived by Neytcho Iltchev, August'99
Slide 9
PRIVATE PARTICIPATION IN THE
INDUSTRIAL CAPITAL, BY BRANCHES
(MARCH 1999)
Fe
rro
u
sM
et
al
lu
rg
y
N
on
-fe
ro
us
M
et
M
.
ac
hi
ne
-b
ui
El
ld
ec
in
tri
g
ca
l&
El
ec
tro
ni
c
C
he
m
ic
al
&
O
il
Li
gh
tI
nd
us
try
Fo
od
&
Be
ve
ra
ge
s
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Private participation
State participation
Slide 10
STRATEGY FOR BUILDING UP OF
COMPETITIVE CLUSTERS
Further market deregulation - telecom, energy, etc.
• High-tech parks - major
instrument of state policy
• Public - private partnership
alliances bringing together
capacities and resources of
science, research institutes,
private entrepreneurs,
investors and state
authorities
• SME sector involvement
• Financial incentives
•
•
•
•
aimed at fostering high-tech
sector led growth
State indirect and direct
financial support
Investment funds
Accelerated amortisation
State guarantees for credits
from financial institutions
conceived by Neytcho Iltchev, August'99
Slide 11
INTERNATIONAL ENERGY PROJECTS
Investors’ Agenda
•
•
•
•
•
•
•
•
•
Hydro Power Plants
1999-2004 Upper Arda Cascade
Thermal Power Plants
1999-2003 Substitute Capacity
Maritza-East - 1
1999-2002 Rehabilitation of
Maritza East - 3
2000-2005 Rehabilitation of
Varna Power Plant
conceived by Neytcho Iltchev, August'99
Slide 12
INTERNATIONAL TRANSPORT PROJECTS
The Investors’ Agenda
HIGHWAY PROJECTS
SEA/RIVER PORT PROJECTS
1999-2002 Motorway Maritza
2000-2005 Motorway Trakia
2001-2005 TEM - Sofia Ring
1999-2005 Port of Bourgas
Container terminal
New General Goods
Terminal
Crude Oil Terminal
AIRPORTS
1999- Airport of Sofia
Passenger Terminal,
Runway
Cargo Terminal
2000- Airport of Bourgas
Expansion
1999-2001 Port of Varna
Container Terminal
Grain Terminal
1999-2001 Port of Rousse
Container Terminal
Grain Terminal
Ferryboat and Ro-Ro
Terminal
Slide 13
WINE SECTOR - SUCCESSFUL
EXPANSION IN WESTERN MARKETS
• Steady increase of
exports to the EU
• Modernization of wine
industry is government
priority
• Improvements in
marketability of
Bulgarian exports
• Significant investment
opportunities
2000
560
Annual
Crushe
Exports
to EU
thousand hectolitters, 1998
conceived by Neytcho Iltchev, August'99
Slide 14
ANATOMY OF BULGARIAN WINE
CLUSTER
Grape stock
Fertilizer, pesticides,
herbicides
Grape harvesting
equipment
Ministry of Industry,
other government agencies
Wine
making equipment
Barrels and Bottles
Growers
and
vineyards
Wineries and
processing
facilities
Irrigation technology
Labels
Public relations
and advertising
Specialised publications
Bulgaria’s
agricultural
cluster
Educational, research, and
trade organisations
conceived by Neytcho Iltchev, August'99
Tourism,
restaurant and food
cluster
Slide 15
TEXTILE AND CLOTHING - TRADITIONS,
MODERNISATION AND ENLARGEMENT
• Traditional and large
industrial basis
• World liberalisation and
increased global
competition
• Rapid Privatisation
• First Positive Results new investment,
modernisation and
recovery in Vibrant
Private Sector
• Mid-term Strategy market enlargement in
Russia, Europe and North
America
• Cooperation with
Japanese companies in
the field of Sericulture
and Silk Industry, etc.
• Technology transfers
from Novak Corp.,
Marobeni, etc.
Slide 16
Weakened external environment and concerted effort
by Bulgarian and international community
• Kosovo crisis damages
• International community also
Bulgarian economy
needs to assist Bulgaria in
• Investment activity
face of difficult external
depressed, capital inflows
environment
diminished
• Raise of external financing
• IMF, World Bank, EBRD
cost
message “Business as usual
• Financial gap may increase
in Bulgaria”
for 1999
• No effect of long-term
• Bulgarian policy response investors - risk already
stronger commitment to
assessed in the past and
continue the adjustment and
managed
the reform
conceived by Neytcho Iltchev, August'99
Slide 17
For additional information
Neytcho Iltchev, Ph.D.
Senior Expert
Trade, Industrial and Investment Policy
Ministry of Economy
8 Slavyanska St., Sofia 1040
Tel. 003592 9842 7580, Fax.9878952
E-mail: [email protected],
[email protected].
http://www.geocities.com/neylegrand
BULGARIA’S KEY OBJECTIVE: ECONOMIC GROWTH
•Back on the growth
track
•Long-term
sustainable and noninflationary growth
until 2003
•Double digit growth
prospect in optimistic
scenario
•Growth depends on
new target market EU
•conceived by Neytcho Iltchev, August'99
GDP (% real growth)
8
1,8
3
3,5
4,5
4,8 5,1
1998
1999
2000
2,9
-1,5
-2
-7,3
-7
-12
-6,9
-10,1
-11,7
-17
1991
1992
1993
1994
1995
1996
1997
2001
Slide 2
LAND MARKS OF PROGRESS:
INFLATION LOW
•Inflation dropped to 90’
all time low -CPI (end of
year) measured inflation
1%
•1999 forecast at 6.3 %
due to increasing real
incomes
•Personal income
growth exceeds
inflation rates
End of the Year Inflation Rate %
700
600
500
578.6
473.7
400
200
100
0
1991
conceived by Neytcho Iltchev, August'99
310.8
300
121.9
79.4 63.9
1992
1993
32.9
1994
1995
1996
1997
1
6.3
1998
1999
6.1 5.4
2000
2001
Slide 3
INVESTMENT CLIMATE
• Attracting FDI is government priority
– Over 1998 an estimated of US$ 620 mln. FDI
– Greenfield investment, additional foreign investment in
companies with foreign participation USD 400 mln.
• Top investors
– Germany, Belgium, USA, Netherlands
• The industrial sector attracted some 50% of the
total FDI
– Trade and financial sector attracted 23.8% and 14.3%
respectively
conceived by Neytcho Iltchev, August'99
Slide 4
INVESTMENT POLICY
• Strategy - making transparent, predictable, clear
and fair legal framework for foreign investors
• Law on Ore and Mineral Resources and
Concessions Law
- Liberalized research and exploration - under
registration regime
- Only extraction is under concessions regime
• Foreign investment act - efforts to reduce middle
level bureaucracy at both state and municipal
level
conceived by Neytcho Iltchev, August'99
Slide 5
PROGRESSIVE TAX REDUCTION
• Value Added Tax
- reduced by 2 % as of 1.1.1999
• Personal Income Tax
- reduced basic rate by 3 %
• Highest tax rate on profit - 28 %
conceived by Neytcho Iltchev, August'99
Slide 6
STRUCTURAL REFORM PROGRESS
3500
3000
2500
2000
1500
1000
500
conceived by Neytcho Iltchev, August'99
J u l-9 8
A p r-9 8
J a n -9 8
O c t-9 7
J u l-9 7
A p r-9 7
J a n -9 7
O c t-9 6
J u l-9 6
A p r-9 6
0
J a n -9 6
• Privatisation
picked up
• Subsidies for
loss-making
enterprises cut
• Banking and
financial system Currency board
discipline
restored
• Liberalised
Foreign trade
regime
Slide 7
IRREVERSIBLE AND RAPID
PRIVATISATION AND REFORM
• Most visible and important component of the
structural reform - since 1997
• Government proceeds vigorously using several
approaches
– use of international agents (31 large enterprises =
15.5% long-term assets);
– industrial “pool” (79 “small” enterprises = 5.5% of longterm assets);
– direct cash sales; auctions and tenders;
– voucher privatization (5% long-term assets);
– public offering of shares; liquidation, etc,
conceived by Neytcho Iltchev, August'99
Slide 8
STEADY PROGRESS IN PRIVATIZATION
60
50
40
30
20
29,7
19,6
10
8,8
0
1996
1997
1998
1999
• Ambitious goal to
conclude the sale of key
industrial assets till 1999
• After some delay process
accelerating - more than
26% long-term assets
privatized through
international agents till the
end 1999
• Focussing on Liquidation
and Post-privatization
issues - since July 1999
Long-term assets transferred to Private
sector (percentage)
conceived by Neytcho Iltchev, August'99
Slide 9
PRIVATE PARTICIPATION IN THE
INDUSTRIAL CAPITAL, BY BRANCHES
(MARCH 1999)
Fe
rro
u
sM
et
al
lu
rg
y
N
on
-fe
ro
us
M
et
M
.
ac
hi
ne
-b
ui
El
ld
ec
in
tri
g
ca
l&
El
ec
tro
ni
c
C
he
m
ic
al
&
O
il
Li
gh
tI
nd
us
try
Fo
od
&
Be
ve
ra
ge
s
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Private participation
State participation
Slide 10
STRATEGY FOR BUILDING UP OF
COMPETITIVE CLUSTERS
Further market deregulation - telecom, energy, etc.
• High-tech parks - major
instrument of state policy
• Public - private partnership
alliances bringing together
capacities and resources of
science, research institutes,
private entrepreneurs,
investors and state
authorities
• SME sector involvement
• Financial incentives
•
•
•
•
aimed at fostering high-tech
sector led growth
State indirect and direct
financial support
Investment funds
Accelerated amortisation
State guarantees for credits
from financial institutions
conceived by Neytcho Iltchev, August'99
Slide 11
INTERNATIONAL ENERGY PROJECTS
Investors’ Agenda
•
•
•
•
•
•
•
•
•
Hydro Power Plants
1999-2004 Upper Arda Cascade
Thermal Power Plants
1999-2003 Substitute Capacity
Maritza-East - 1
1999-2002 Rehabilitation of
Maritza East - 3
2000-2005 Rehabilitation of
Varna Power Plant
conceived by Neytcho Iltchev, August'99
Slide 12
INTERNATIONAL TRANSPORT PROJECTS
The Investors’ Agenda
HIGHWAY PROJECTS
SEA/RIVER PORT PROJECTS
1999-2002 Motorway Maritza
2000-2005 Motorway Trakia
2001-2005 TEM - Sofia Ring
1999-2005 Port of Bourgas
Container terminal
New General Goods
Terminal
Crude Oil Terminal
AIRPORTS
1999- Airport of Sofia
Passenger Terminal,
Runway
Cargo Terminal
2000- Airport of Bourgas
Expansion
1999-2001 Port of Varna
Container Terminal
Grain Terminal
1999-2001 Port of Rousse
Container Terminal
Grain Terminal
Ferryboat and Ro-Ro
Terminal
Slide 13
WINE SECTOR - SUCCESSFUL
EXPANSION IN WESTERN MARKETS
• Steady increase of
exports to the EU
• Modernization of wine
industry is government
priority
• Improvements in
marketability of
Bulgarian exports
• Significant investment
opportunities
2000
560
Annual
Crushe
Exports
to EU
thousand hectolitters, 1998
conceived by Neytcho Iltchev, August'99
Slide 14
ANATOMY OF BULGARIAN WINE
CLUSTER
Grape stock
Fertilizer, pesticides,
herbicides
Grape harvesting
equipment
Ministry of Industry,
other government agencies
Wine
making equipment
Barrels and Bottles
Growers
and
vineyards
Wineries and
processing
facilities
Irrigation technology
Labels
Public relations
and advertising
Specialised publications
Bulgaria’s
agricultural
cluster
Educational, research, and
trade organisations
conceived by Neytcho Iltchev, August'99
Tourism,
restaurant and food
cluster
Slide 15
TEXTILE AND CLOTHING - TRADITIONS,
MODERNISATION AND ENLARGEMENT
• Traditional and large
industrial basis
• World liberalisation and
increased global
competition
• Rapid Privatisation
• First Positive Results new investment,
modernisation and
recovery in Vibrant
Private Sector
• Mid-term Strategy market enlargement in
Russia, Europe and North
America
• Cooperation with
Japanese companies in
the field of Sericulture
and Silk Industry, etc.
• Technology transfers
from Novak Corp.,
Marobeni, etc.
Slide 16
Weakened external environment and concerted effort
by Bulgarian and international community
• Kosovo crisis damages
• International community also
Bulgarian economy
needs to assist Bulgaria in
• Investment activity
face of difficult external
depressed, capital inflows
environment
diminished
• Raise of external financing
• IMF, World Bank, EBRD
cost
message “Business as usual
• Financial gap may increase
in Bulgaria”
for 1999
• No effect of long-term
• Bulgarian policy response investors - risk already
stronger commitment to
assessed in the past and
continue the adjustment and
managed
the reform
conceived by Neytcho Iltchev, August'99
Slide 17
For additional information
Neytcho Iltchev, Ph.D.
Senior Expert
Trade, Industrial and Investment Policy
Ministry of Economy
8 Slavyanska St., Sofia 1040
Tel. 003592 9842 7580, Fax.9878952
E-mail: [email protected],
[email protected].
http://www.geocities.com/neylegrand