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CGI founding organizations have accumulated considerable experience covering various aspects of the reform of the legal and institutional infrastructure of the Bulgarian economy.

Through the assistance of CIPE and other donors the Center for the Study of Democracy has been supporting Bulgaria's economic reform program since October 1991. The projects conducted have covered areas like privatization, institutional and private sector development. Activities over the period have involved drafting legislation, preparing alternative analyses and policy recommendations based on research results, monitoring of public awareness and perceptions, public education, and widely reaching dissemination activities. The track record of CSD performance has strengthened its position and enhanced its contribution to the development of a pluralistic, democratic society in Bulgaria.

The status of CSD as an independent institution in a situation of diverse political and economic interests is especially important for the success of the CGI. As a non-partisan full service think-tank CSD could provide economic policy process monitoring and expertise. CSD is well prepared to implement the above approach relying on its track record and experience in coalition building, policy analysis of economic reforms, drafting legislation, and process monitoring.

In October 1996, CSD initiated a process aimed at producing a recommendation paper addressing the policy and legal constraints facing small and medium size enterprises (SMEs) in Bulgaria, and identifying a set of possible solutions designed to encourage the growth of this key sector of the economy. The main purpose of the paper was to set out a specific and comprehensive agenda for policy and legislative action as well as assistance in this area. The process was structured in a way to provide adequate expertise and the widest possible political support for the suggested agenda. A draft paper prepared by two task forces - legislative and policy - was presented and discussed at a policy workshop as a first stage of the process. With the workshop suggestions and comments incorporated into the document, at the second stage of the process it was adopted at forum of policy makers and parliamentarians, including the President-elect of Bulgaria, which was held in November 1996.

Building upon this successful format and experience, CSD carried out a similar initiative in 1997 aimed at producing a similar legislative/policy agenda for the development of capital markets in Bulgaria. The Policy Document prepared includes the legislative agenda for the institutional development of capital markets in Bulgaria and has identified three major problem areas: 1) development of a system to support market infrastructure; 2) supply and demand of securities, primary market development; 3) preparing the legal infrastructure for a self-regulatory environment. The publication was widely distributed in Bulgaria and abroad and also provided a useful reference for the Financial Times Seminar on the Development of Capital Markets in Bulgaria (October 23, 1997; Sofia).

The lack of information combined with upcoming rounds of privatization became the driving force behind decision of CSD to institute a program to promote key concepts in corporate governance. The program evolved into three concentrations that included the creation of a shareholders registry, widespread public education on corporate governance, and town hall meetings to introduce shareholder rights and privatization.

Together with from the Securities and Stock Exchange Commission, Center for Mass Privatization, and the Central Depository, CSD took active part in the development of the draft shareholder registry legislation. The draft registry was provide to the Council of Ministers, approved and recommended for use.

CSD's corporate governance program also included two other main initiatives public education and town hall meetings. The public education program comprised publishing and disseminating a series of three articles, entitled "How to Trade with Shares from Mass Privatization". These articles were disseminated through daily newspapers and CSD brochures, giving insights to the public on Bulgaria's investment culture. Town Hall Meetings targeted at the general public formed the basis for CSD's third corporate governance initiative. Meetings were held in cooperation with local government administrators and participating in the meetings were representatives from Center for Mass Privatization, Securities and Stock Exchange Commission, Central Depository, Bulgarian Stock Exchange, two newly privatized companies and privatization fund. Presentations during these meetings focused on regulating capital markets, trading shares, internal governance mechanisms, role of financial intermediaries, privatization and share ownership.

The most important achievements of the Center for Economic Development (CED) during 1998 are linked to the development of the capital market, pension reform, privatization, industrial development, particularly in the high-technology sector, and to the identification and analysis of sectors that could foster and sustain economic growth. On capital markets, the CED has coordinated the discussions and participated in the drafting of the Stock Exchange and Investment Company Act adopted by the Council of Ministers and past in first reading in Parliament. In addition, the CED formed a working group to draft a program for the development of the capital markets for the Council of Structural Reform. The CED has also been at the forefront of pension reform and a principal contributor to the Draft Law on Voluntary Supplementary Pension Insurance. On privatization, the CED developed a strategy to accelerate privatization that is now being implemented. In cooperation with CASE Institute, CED's Polish partner, and the Privatization Agency, the CED is monitoring the post-privatization status of enterprises. It has also coordinated the drafting of the high technology law and regulations for the development of high-tech parks.

In late March 1999, the Center for Economic Development organized a series of seminars on corporate governance that were also sponsored by CIPE. In preparation of training materials and to gain insight on participants' understanding and perceptions of corporate governance, the CED commissioned Vitosha Research with CSD to conduct a qualitative sociological survey (focus group discussions) in January 1999. Although the result of the seminar series have not been fully assessed, preliminary results indicate that:

  • there is an interest on behalf of the business community, capital market institutions and government to develop good governance standards and practices;
  • there is a need to develop documentation and training materials on corporate governance standards and practices in Bulgaria to educate and involve these target groups in the establishment of good governance principles and practices;
  • the development of an ethical and responsible corporate culture and policy are as important as legislative and judiciary reform.
  • Many of the external issues (legislative barriers) and internal issues (company governance structures, board composition and independence) affecting company performance and, essentially, preventing the development of good governance practices were discussed during the seminar series and will be documented in a book. The book will provide a background on the current corporate governance regimes existing in Bulgaria, identify problem areas and barriers to good governance, make recommendations for improvement and help identify training needs. Such documentation will be instrumental in the development of corporate governance guidelines and codes of best practices for Bulgaria.

The Securities Holders Association has contributed to the preparation of information materials for the two town hall meetings held in late 1998. Both its local offices in Pleven and Blagoevgrad have been actively represented at these events.

The Investors Union has been the first organization to support the Pilot Town Hall Meeting on corporate governance conducted by the Center for the Study of Democracy in May 1997. Dr. Nikola Hristovich, Chairman of the Union, has been invited to become member of the CED Advisory Board on Privatization and Corporate Governance Issues. Dr. Hristovich has been active in contributing a series of publication on corporate governance and the role of the Investors Union in privatization.

| Executive Summary | Activities | Objectives | Institutional Structure | Background | Resources |


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