II. HOW THE LAW WAS SHAPED
A. The creation of privatization Law
B. The privatization Law - its spirit
C. The letter of the Law
III. THE BEGINNING OF PRIVATIZATION IN BULGARIA
A. The "baby" phase
B. The early "teens"
C. Developing new approaches to privatization
IV. ASSESSMENT OF RESULTS TO-DATE
A. Privatized enterprises
B. Problems and solutions
C. New goals and new ways
1. Privatization Agency INFORMATION BULLETIN, nn: 1 to 12, 1993,
Febr-Dec; and nn: 1 to 4. 1994, Jan to April
2. Bobeva D. & Bozkov A. (1993) Privatization and foreign
investment in Bulgaria. Bank of Austria
3. Gechev R. (1993) Opportunities for foreign investment in
Bulgaria. Privatization Agency
4. Ivanov D. (1993) Models and reality in the economic reforms in
Eastern Europe. 20th Annual Conference of the Academy of
International Business, University of Glamorgan, South Wales, 5-6
5. Kovachev I. (1993) How to make privatization work and how to
make it work for good. Seminar "Privatization and Economic Reform
in Bulgaria", Center for International Private Enterprise,
Washington, D.C., USA, 3-4 June
6. Pamouktchiev H. (1993) Privatization and creation of a new
investment climate in Bulgaria. Privatization Agency
7. Purvoulov S. (1994) Privatization. Invest in Bulgaria. Foreign
Investment Commission, Council of Ministers
8. Slavenkov B. (1993) Privatization Agency takes part in a
strategy to undermine the government. 168 hours, May 26, p.
THE PRIVATIZATION OF "GAS CONCRETE" LTD. - SOFIA, BULGARIA
On February 11, 1994 was signed the sale contract for "GAS
CONCRETE" Ltd. - Sofia between the PRIVATIZATION AGENCY,
represented by Mrs. Reneta Indjova, Executive Director and the
European group for construction materials "YTONG"Ltd., represented
by Mr. Diter Goeres, Technical Director.
"YTONG"-Holding Ltd., headquarters in Munich, Germany is the main
company of 26 associated companies and has in possession 20 plants
in 15 European countries. The production capacity in 1993 was over
3,732 million cubic meters YTONG-products for housing and
industrial construction, with an annual output of DM 887million. At
the present time YTONG owns affiliates and plants not only in
Western Europe - from Germany to Portugal, but it also does in
Croatia, Czechia and Hungary. The set up of YTONG company,
Bulgaria, becomes reality after the buying of "GAS CONCRETE" Ltd.
The deal is continuation of the consistent policy of
"YTONG"-Holding Ltd. in doing expansion of its activities out of
Western Europe, specifically after the last political changes in
The enterprise "GAS CONCRETE" Ltd. is located in the Northern part
of Sofia plain by the Plant for Steel-Concrete Constructions in
Kremikovtzi. The construction works started in 1986, and in 1992
partly began its exploitation. The registration of "GAS CONCRETE"
like Sole Proprietorship Trade Company dated back from June 4,
1993. The product manufactured is gas-concrete blocks used like
building elements, and the enterprise's capacity is 60 000 cubic
meters per year. From this quantity 93% are designated for the
local market and 7% for export. The realized turnover for 1992 is
Leva 21,4 million. The technological equipment includes complex
technological line "HEBEL", manufactured in Germany and Hungary in
1986. The total number of working places is 127. The enterprise is
situated on the total area of 59 100 sq. m, the built-up area is 27
804 sq. m, and the gross area is 29 294 sq.m. It disposes with its
own water sources for industrial goals and purifying station for
doing treatment of drinking and wastewater. The manufacture
technology is free of waste and is not a source of ecological
Subject of the present deal is 80% of the equities of "GAS
CONCRETE" Ltd. at the price of DM 4 million. The buyer takes all
the debts of the company. Upon the contract, additional investment
is provided to be made to the amount of DM 5,6 million and this on
the scheme for a period of 5 years as follows: first year - DM 1,38
million; second year - DM 1,88 million; third year - DM 1,68
million; fourth year - DM 0,38 million; fifth year - DM 0,28
million. At least 100 working places will be preserved during the
first two years and minimum 75 during the next three years. The
payment will be executed right after the notarial certification of
THE PRIVATIZATION OF "SVINEKOMPLEX KARAPELIT" STATE COMPANY -
On February 9, 1994 was signed the sale contract for
"KARAPELIT" SC - Karapelit village, Varna region, between the
PRIVATIZATION AGENCY , represented by Mrs. Reneta Indjova,
Executive Director, "ELTEKS MEAT COMPANY" Ltd., represented by Mr
Aleksi Kostov, Manager, and "EVROSVIN" Ltd., represented by Mr.
Anton Donchev, Manager.
"ELTEKS MEAT COMPANY" Ltd. was registered on October 12, 1993 in
Sofia. The company is legal successor of "ELTEKS" Ltd. Its scope of
activities is: home and foreign trade, meat production, meat
processing and meat trade, meat products and live-stock. The
company has developed its own national strategy for the agriculture
and livestock breeding, provided for a closed cycle: grain
production and fodder production, stock-breeding, meat production
and meat processing, forwarding, home and abroad realization, high
operative agrochemical and veterinarian-medical service.
"EVROSVIN" Ltd. was registered on October 22, 1993 in the town of
Dobrich. Scope of activities: agricultural production, treatment
and realization of the production.
"SVINEKOMPLEX KARAPELIT" SC, Karapelit village, Varna region, has
subject of activity manufacture of fattened swine, meet and meet
products. The pig breeding complex was put in exploitation in 1974.
It is situated 5 km. in the North of Karapelit village, Dobrich
municipality, on total area of 329 000 sq. m. All the land is state
property. The built-up area is 112 000 sq. m. The production
capacity of the pig breeding complex is 70 000 swine per year. The
equipment for the production and processing of meat has capacity up
to 95 swine daily. Some of the advantages are fodder base vicinity
and the presence of waste water purifying station. The realized
turnover for 1992 is about Leva 83 million. At the present time,
195 persons with the necessary qualification and professional
experience are occupied in the pig breeding complex.
Subject of the present deal is 100% of the company's property on
the price of Leva 7,1 million. The payment will be executed within
7 days. The buyer undertakes all the company's debts on total value
of Leva 153 million. Upon the contract, the subject of activity
will be preserved for a period of 5 years at least. Not less than
195 working places will be preserved for 3 years term. The minimum
additional investment which has to be done for 3 years is Leva 5
million. The scheme is as follows: until the end of 1994 - 3
million for building a station for utilization of slaughterhouse
waste and reconstruction buildings for suckling sows; till the end
of 1995 - 1 million for modernizing a waste water purifying
station; till the end of 1996 - 1 million for modernizing of waste
water purifying station.
THE PRIVATIZATION OF "KAMENITZA" LTD.,
On November 25, 1993 was signed the sale contract
for "Kamenitza" Ltd., Plovdiv, between the PRIVATIZATION AGENCY,
represented by Mrs. Reneta Indjova, Executive Director and BRAU UND
BRUNNEN Ltd., represented by Mr. Michael Brenscheidt, Executive
"Brau und Brunnen", headquarters in Dortmund, Germany, is a
holding company of several firms. The group manufactures beer,
mineral water, soft drinks The company was organized in 1972 from
the merger of "Dortmunder Union-Brauerei" Co (founded in 1873) and
"Schultheiss-Brauerei" Co (founded in 1842).The company acqured its
present name in 1988. It has been German national manufacturer not
so long ago. In the last few years it has become multinational
"Kamenitza" Ltd., Plovdiv, has been one of the first breweries in
the country. Established in 1897 from the general partnership "Frik
& Sultzer" by that time it manufactured beer using manually. Later
on the technological process has been developed effecting the
progressive output increase. In December, 1947 the enterprise was
nationalized and attached to State Monopoly of Alcohol. From 1952
"Kamenitza" was placed at the disposal of State Economic Union
"Bulgarian beer". In 1991 the enterprise was registered as
The enterprise activity range is manufacture of malt, beer, carbon
dioxide, heat-supply, agricultural production, bottling line,
barter and business transactions within and out of the country.
"Kamenitza" Ltd. has in disposal the following main and
differentiated production units:
- Production ground, Plovdiv;
- Beer bottling plant, Smolian;
- Grain elevators (silos), Debar district, Parvomai;
- Warehouse, Filipovo district, Plovdiv.
The available machinery, equipment and installations are
designated for a complete technological cycle of production. The
technological equipment is composed by: boiling installation,
Czechoslovakia (1982); 4 bottling lines, Bulgaria (1983);
fermentation containers, Bulgaria (1988), Belgium (1987), Germany
(1983); malzerei, Bulgaria, Czechoslovakia (1968); air coolers,
Bulgaria (1983); KEG beer filling apparatus (1986). The industrial
estate has in total area of 83 970 sqm., and built-up area of 51
The nomenclature of manufactured products is like follows: lager
beer 10% - ordinary, light beer 10.5% - special, "Rombus" beer
11.5% - special, brand beer - de luxe. The enterprise project
capacity is 40 million litres per year. The output for 1992 was
32,7 million litres of beer on value in BGL about 95 million. 99%
from this share meets the needs of the local market and the other 1
% is for export.
The enterprise staff has the required qualification
and professional experience, and in total is 415 people, taken to
June 30, 1993.
Subject of the present deal is 67% of the shares of "Kamenitza"
Ltd., after the exclusion of Smolian plant, on value DM 4,112
million where the deferred payment will be concluded till December
30, 1993, Upon the contract the buyer engages himself to make
additional investment to the amount of at least DM 3,888 million.
This scheme is to be concluded in terms of 2 years. The present
economic activity will be kept leastwise for 3 years. Beer under
the trade name of "Kamenitza" will be produced in terms of at least
3 years where the output has to be not less than 50% from the whole
manufacture of the enterprise. The working places' number will be
maintained at 300 at least for 3 years. The last clause says that
in leastwise 3 years the enterprise will keep doing supply to the
factory in Smolian with orders made under normal business
THE PRIVATIZATION OF "HIDROPROBIVNA TECHNICA" Ltd. -
On February 10, 1994 was signed the sale contract
for "HIDROPROBIVNA TECHNICA" Ltd, Russe, between the PRIVATIZATION
AGENCY, represented by Mrs. Reneta Indjova, Executive Director and
"Breakers A/S" Co, represented by Mr. Haim Zabludovich, Chairman
and Mr. Gunar Peterson, Director.
"Lifton International A/S" is a part of economic group which on
its turn owns plants in Denmark, England, USA and agencies in more
than 28 countries all over the world. The plants manufacture
machines and equipments mainly for the construction sector. "Lifton
International A/S" bought out in 1993 the British manufacturer of
micro-excavators "Powerfab". "Breakers A/S" Co, headquarters in
Aalborg, Denmark is property of "Lifton International A/S".
"Breakers A/S" is a world leader in the manufacture and sale of
hand-held breakers and hydraulic powerpacks. Its plant in Denmark
manufactures hand-held breakers from 15kg to 30kg. The buy out of
"Hidroprobivna Technica" SPLtd. will widen up strategically the
whole manufacture programme of "Lifton International A/S" through
increasing the nomenclature of manufacture.
The enterprise "Hidroprobivna Technica", Russe was created in 1987
with subject of activities: scientific-applied and manufacture
activity in the field of hydraulic drilling technics and
perforating technics. On August 5, 1991 it was restructured in sole
proprietor limited liability company. The manufactured output
consists in different kinds of hydraulic breakers with weight from
80 to 1500 kg and hit energy from 80 to 5000 J. The production
capacity is 9 hydraulic breakers monthly. The turnover for 1992 is
about Leva 4,56 million where 15% of the output is destined for the
local market and 85% for export. The technological equipment
includes metalworking machines manufactured in CIS, Swtzerland and
Bulgaria. The working places are 47. The built up area is 2 039 sq.
m, the gross area is 2 213 sq. m, and the total area is 12 863 sq.
Subject of the present deal are 429 shares which represent 97% of
the company's capital at the price of 350 000 US$. The payment will
be done up to 7 days after the contract is being signed. It is
stipulated in the contract that the buyer will cover all the
company's obligations to the amount of Leva 4,28 million. 44
working places will be retained for a term of 3 years. It is
provided additional investment of 350 000 US$ to be made on a
scheme during the next 3 years.
THE PRIVATIZATION OF NEKTAR LTD. -
On December 2, 1993 in the town of Silistra the Sale Contract of
NEKTAR Ltd. was signed between the Privatization Agency,
represented by Mrs. Reneta Indjova, Executive Director and DRUSTUR
COMMERCE HOLDING Ltd., represented by Mrs. Dimitrichka Borisova,
Owner and Manager of the company.
DRUSTUR COMMERCE HOLDING Ltd., with headquarters in the town of
Silistra, carries out commercial and production activities. The
company has lasting commercial interest in NEKTAR Ltd. production
as it has provided fuel and commercial representation in the
country and abroad under contract so far. It is the owner of other
enterprises situated in the same region, which principal operation
is related to that of NEKTAR. Furthermore the company is a
shareholder in local trade companies, in which foreigners
participate and has won firm raw materials position in the greater
part of the country. Therefore its activities and business contacts
open up a chance for considerable extension of NEKTAR business.
NEKTAR Ltd. is the successor of the Vacuum drying factory,
established in 1959. It was the first producer of tomato paste in
Bulgaria. In 1965 it merged with NEKTAR state cannery and
BULGARPLOD NEKTAR was formed.
At present the company is situated on an area of 105 decares and
its production range includes some 50 types of cans: tomato paste,
bottled fruits, nectars, tinned vegetables, fruit desserts, fruit
pulps, cooked food, tinned mixture of meat and vegetables and
concentrate for soft drinks. A number of technological improvements
were carried out in the course of the years. In 1970 the first
aseptic farm in the country was created there. In 1985 one of the
most up-to date lines for production of thick juices and nectars
was put into operation, the bottling equipment of which was
produced in Germany. In 1984 Italian lines for tomato paste and
peeled tomatoes production were introduced as well as some
technological lines for production of tinned vegetables, bottled
fruits and nectars and for washing of jars and bottles. In 1992 a
line for soft drinks concentrate production and two lines for
twisting of twist-off jars were put into operation. The enterprise
has its own heating plant, a pump that provides industrial water
and a station for wastewater purification.
The- employees are highly skilled and have professional experience
of many years. At the end of 1992 their number was 280.
The maximum capacity of the company is 10 300 tones per annum 6
000 tones of which are thick juices, 1 500 tones - bottled fruits,
1 800 tones - tomato paste, 1 000 tones - marmalade and jam. The
turnover for 1992 is 40 million BG levs, while the turnover
expected for 1993 is 120 million BG levs. 33% of the production
meets the domestic market requirements and the rest of it is
exported to Turkey, Italy, Germany, the member countries of the
former Soviet Union and the Arabian countries.
Subject of the present transaction is 60 % of NEKTAR LTD. shares
valuated at 43.8 million BG levs. According to the Contract, the
Buyer will have the right to buy the remaining shares in addition,
i.e. after the rate of employees' preferential participation and
the rate of claim set up by a Co-operative farm in liquidation and
the persons having rights under art. 18 of the Law on
Transformation and Privatization of State and Municipal Companies
are determined. He undertakes to bear the company debts to
contractors, to Silistra Regional Co-operative Union and to the
employees. The term, within which the price should be paid is 30
days after signing of the Contract. The supplementary obligations
are: preservation of 260 places of work within a period of at least
5 years; preservation of the principal operation within the same
period of time;
additional investment for machinery, equipment and raw materials
to the amount of the equal BG levs value of 3 million US$ under a
scheme for a five years term, too.
THE PRIVATIZATION OF "REPUBLIKA" LTD. - SVOGE,
On November 15, 1993 was signed the sale contract
for "REPUBLIKA" Ltd - Svoge between the PRIVATIZATION AGENCY,
represented by Mrs. Reneta Indjova, Executive Director and KRAFT
JACOBS SUCHARD, represented by Mr. Bernhard Huber, Vice President
for Central and Eastern Europe.
The American Philip Morris Organization has three main centers of
activity, Food, Tobacco and Beer. The food sector is split into KGF
North America and KGF International. Within KGF International KRAFT
JACOBS SUCHARD, based in Zurich, plays a prominent role.
KRAFT JACOBS SUCHARD has three core categories. The first one (14%
of the total production) is cheese with leading market positions in
Italy, Spain and the United Kingdom and strong positions in Germany
and Belgium as well.
The second category (32% of the production), which is popular in
Bulgaria, is coffee. KRAFT JACOBS SUCHARD is leading European
producer of Roast and Ground Coffee with No1 positions in Germany,
France, Sweden, Austria and Denmark and strong soluble coffee
positions in most European countries.
The third category (31% of the production) has connection with the
above-mentioned transaction and is popular in Bulgaria, too. That
is confectionery - the famous Toblerone, Milka, Lacta, etc. with
leading chocolate positions in Austria, Belgium, Denmark, France,
Norway and Sweden and solid No2 positions in Germany and
It is important to note, that food is becoming increasingly
important category for Philip Morris. In 1992, KRAFT JACOBS SUCHARD
represented one sixth of total Philip Morris revenue and a seventh
of total Philip Morris employees. KRAFT JACOBS SUCHARD has revenues
of approximately $ 9,0 billion.
The confectionery plant "Republika"Ltd is the oldest manufacturer
of confectionery in Bulgaria. The plant was launched in 1905 in
Sofia by brothers Peev and subsequently in 1924 was moved in the
town of Svoge.
At present "Republika"Ltd is located on two grounds. The first one
is situated in the town of Svoge and covers area of 61,7 decares.
Here is the manufacturing of chocolate in blocks, candies, wafers,
other deserts and sweets. The location of the second one is in the
railway station Tompson. This ground is spread on 5,85 decares. It
is specialized in the manufacturing of biscuits and jam rolls.
The annual output of the company for 1992 is 9492 tons chocolate
and sugar goods. For the first eight months of 1993 the output is
4768 tons and according to the expectation until the end of the
year it will be 8500 tons. This production satisfies from 32 to 35
% of the wafer and biscuit market in our country now.
The technological equipment includes C & M machinery
(Italy), Loesh machinery (Germany), Dutch line for biscuits and
packing machinery "Aucouturier" from France. The total number of
the production lines is 22.
"Republika"l_td has stable, educated and experienced labour force:
810 workers in total and 714 of them are directly involved in the
Subject of the present deal is the enterprise in Svoge only
(without the workshop in Tompson). In 1992 the ownership of
brothers Peev was reinstated. Now their property is no longer part
of the company's estate. "Republika" Ltd - Svoge keeps using the
lands of brothers Peev on the basis of leasing contract. The
investor acquires shares which represent 80 % of the state
participation for 2 000 000 US$. Upon the contract the buyer
engages himself to make additional investment to the amount of at
least 10 000 000 US$ (thereof 6 000 000 for investment and 4 000
000 for circulating capital). This scheme is to be concluded in
terms of 5 years. The working places' number will be kept for at
least 2 years. Highly qualified assistance in the engineering and
technological activity, management, marketing and improving the
staff qualification by training in other factories of KGF in
Western Europe will be provided, too. Likewise a transfer of
technologies, social and infrastructural improvements, renewal of
the existing utility buildings and equipment will be made.
THE PRIVATIZATION OF SVOBODA - KRISTAL LTD. -
KAMENO, BOURGAS DISTRICT
On December 6, 1993 was signed the Sale Contract for
SVOBODA - KRISTAL Ltd. -KAMENO, between the Privatization Agency,
represented by Mrs. RENETA INDJOVA -Executive Director, and BARTEX
Ltd. - represented by Mr. VASSIL TACHEV -Manager.
BARTEX Ltd. was established in 1990 with headquarters initially in
Dragoman, and since 1992 in Sofia, with main activities: foodstuff
wholesale, food production, catering, retail trade. BARTEX Ltd.
represents a constituent part of the financial group "
The major scope of activities of SVOBODA KRISTAL Ltd. covers:
purchase and processing of sugar beet, sugar and molasses
production, business activity in Bulgaria and abroad. The
headquarters of the company are in the town of Kameno - 10 km to
the West of Bourgas.
The sugar plant in Kameno was established in 1912 and it was put
into operation in 1914 under the name " Anonymous Sugar and
Refining Joint-Stock Company in Bulgaria". The company was founded
with French capital and headquarters in Paris.
In 1933 it went bankrupt, and its proprietors became "Tracia
Cooperative Sugar" and the Union of Bulgarian Agricultural
Cooperatives. In 1945, a Production Cooperative Association
"Cooperative Sugar", based in Kameno, was established, which
affiliated the sugar plant, too. In 1948, after some mutual
transferrings of state and cooperative property, the sugar plant
became totally state-owned one.
The first serious enlargement and reconstruction of the plant was
made in 1959-1960, where the capacity grew up from 800 to 2,000 t.
sugar beet/24 hrs. The second enlargement was made in 1975-78,
where the capacity grew up to 5,000 t/24 hrs. The machinery and
equipment are from Germany, Poland and Bulgaria. In 1992 the
processed sugar beet was 44,000 t., produced molasses - 4,5251,
cossettes - 20,000 t., pulp - 8901. The project capacity is up to
80,000 t white crystal sugar. The total area of the real estate is
835,000 sq.m., and built up area - 294,000 sq.m.
The staff has a good qualification and professional experience,
and numbers 355 persons taken to 30.06.93.
Subject of the present transaction is 80% of the capital of
SVOBODA-KRISTAL at the price of 140,436,000 Iv. According to the
contract, the Buyer shall be entitled to buy out the rest of
shares, after specifying the workers' preferential participation,
and the represented restitution claims. The Buyer undertakes to
preserve the company's line of business for a minimum of 7 years.
The number of the existing at the moment work places should be
preserved, where in 1994 it should be enhanced to 360 prs. at
least, in 1995 - to 390 prs., in 1996 - to 400 prs.
The purpose of this document is to present the
changes in the privatization process in Bulgaria and to show how
they have been brought about by the pressure of the economic
The privatization framework in Bulgaria was formed on the basis of
theoretical approach, wish for political differentiation and narrow
economic interests. This unfortunate combination did not reflect
the specificity of the situation and could not long resist the
economic needs of a country in restructuring. What followed was a
long, slow and painful process of trial and error that could have
been avoided if economic logic had more place in the first
The paper shortly reminds the characteristics of the law and the
conditions that shaped it.
It describes the 2 years of privatization practice in Bulgaria and
the emergence of legal, political, social, and economic factors,
preventing fast and easy "market" privatization. Especially when no
(mature) "market" exists!
Government efforts to bring life to privatization by introducing
small step-by-step changes in response to the pressure of economic
reality and increasing socio-political tensions are
This finally entailed a general change of the whole law, including
the introduction of mass (voucher) privatization concept and new
privatization strategy. Privatization goals were clarified, their
priorities determined and privatization place in the general
economic reform was reconsidered. This in turn led to further
changes and so the process reengineered itself in a new viable
form, as a component of a deliberate policy to support and direct
the structural adjustment.
Because of the limited volume of the paper, it is necessary to say
what is not discussed. It is taken for granted that the private
nature of an enterprise is synonymous with its more efficient
functioning. The option of restructuring before privatization is
skipped too. The focus is mainly on big privatization as managed by
the Privatization Agency.
A chronological approach is used in order to show how the problems
appearing with almost each deal were addressed and entailed
necessary changes. "Leaming-by-doing" is useful but not when done
by a government organization on taxpayer's money. Most of the
difficulties were predicted and could have been escaped if economic
reasoning was not to be replaced by the tirade of political
rhetoric, naive pseudotheoretical debate, and incompetent
decision-makers. This led to a reflective management, often slow
and hesitant in its reactions.
Another clarification relates to the sources of information. The
Agency's "Information Bulletins" and "press-releases" are used. The
few other quoted materials are widely-recognized articles, marking
changes in the direction and form of privatization in Bulgaria.
II. HOW THE LAE WAS SHAPED
Transformation of state property into a private one
started before the adoption of Privatization Law. In 1990 the
Parliament passed a law on commercialization (corporization) of
Bulgarian state-owned enterprises into joint-stock or limited
liability companies. The New Trade Act, the Law on Banks and
Credit, the Law on Foreign Investment, the Law on Competition
Protection, etc. supported the process.
Appearance of private ownership was, for instance, recorded in
banking - usually through formal procedure for increase of the
capital base. These deals were stopped because were undertaken in
no transparent way.
Another mechanism was the sell of property of the former
cooperatives under the Ownership and Use of Farmland Act, adopted
in 1991 and revisioned in 1992. It included buildings, machinery,
small factories. By the end of 1993 cooperative property sold
reached 3 bin Bulgarian levs and 35% of the available farmland was
restored to the former owners.
But most significantly, it was the restitution that firstly
reshape Bulgaria. Restitution laws guaranteed the return of
property to their owners before the nationalization in 1947.
Restitution created the first broader group of private owners in
A. The creation of privatization law
In 1991, the Council of Ministers issued Decree No 16 for the
establishment of Privatization Agency. However it was not able to
do much work. Some drafts of regulations were prepared. 58
privatization objects, of which the largest were 4 petrol stations,
were sold through public auctions in 1991.
Elections in the end of same year, installed into power the
government of UDF and MRF. Economic ministers favored a monetary
policy, restitution and "market" privatization. Because of the
higher priorities of the first two, privatization was not among the
laws to be passed immediately by the new Parliament.
Under increasing international pressure, and with the help of the
WB, finally in April 1992 a Law on Transformation and Privatization
of State and Municipal Enterprises was approved.
It was claimed this delay allowed the law to be thoroughly
prepared, the shortcomings and successes of other countries to be
analyzed and taken into account .
Why market privatization?
Because if you make market reforms and are on the road to a market
economy - goes this basic thesis - then privatization should also
be a "market" one. Whatever that means! Such reasoning could be
found in hundreds of articles and papers in that time [for instance
IB 1'93]. It "distinguished" Bulgaria from the other advanced East
European partners, which accepted some kind of "mass"
The second reason was the Socialist party and other parties on the
left - which have lost the election - defended voucher
privatization (as well as more socially oriented market reforms).
Thus it became a matter of political distinctiveness where right
meant market privatization and the opposite. Unnecessary political
differentiation with immense consequences.
Only recently, after long persuasion by experts and witnessing the
successful drive of the present Government towards implementation
of a mass model, did the UDF start to accept the idea and even to
offer its modifications.
Last, but not least, was the interest of some small groups to slow
privatization so to have more time to accumulate capital and become
significant players later [IB 1'93, p.3].
B. The privatization Law - its spirit
So, "capital" privatization, "i.e. sale, but not free-of-charge
distribution of state property, was accepted because of the
understanding that the ownership of the enterprises has to be
transferred in the hands of persons with possibilities to provide
for their effective operation through fresh investment and
contemporary management" . (Job that many believe could be done
by investment funds in mass privatization too.)
Another characteristics with serious implications, was the
decentralization of the process.
Enterprises, whose balance sheet assets value was less than 10
million levs, were to be privatized by the relevant branch
The Privatization Agency was to privatize state enterprises with
balance sheet value of long-term assets above 10 million levs.
Municipal enterprises, regardless of their size, were to be
privatized by municipal councils under similar procedures.
(Remarkably, banks were to be privatized differently, through a
Bank Consolidation Committee, a process that is yet to start. But
by mid-1993, private capital in state banks reached 17%.)
The law was complemented by a set of by-laws passed by the Council
of Ministers in the autumn of 1992. The more important ordinances
determined conditions for arranging tenders and auctions, valuation
of firms, and preferences to employees.
C. The letter of the law
1. Privatization included the following methods:
- direct negotiations with potential buyers;
- publicly invited tender;
- public auction;
- public sale of shares;
- up to 25 year lease, with a clause for consecutive
- management contract with a clause for consecutive
- sale on leasing with retaining the ownership.
Debt-equity swaps and liquidation were envisaged
too. Only Bulgarian citizens may use deferred payment.
2. The only preference that the Law on
Transformation and Privatization of State and Municipal Enterprises
included explicitly was for the staff of the privatized firm. It
was entitled to buy up to 20 % of the shares or stock of their
enterprise at 50 % of the price the (outside) buyer paid to the
This preference however, was usually not utilized to its full
extent due to a restriction in the Law: the (50 %) discount per
employee couldn't exceed his annual income. The bigger the firm,
the lower the possible discount.
Employees' shares (or stock) didn't bear voting rights during the
first 3 years.
Employees could also buy the whole enterprise. For this purpose,
they had to participate in a tender or auction. If they won, they
got a decrease of 30 % of the final price.
Foreign investors were a second targeted group, but in a more
3. The Law actually institutionalized new, "second"
Privatization Agency. It was responsible for
- organization and monitoring of
- development of national annual Privatization
- privatization of state enterprises with fixed
assets above BGL 10 million;
- licensing the valuators.
A firm in which the state held at least 50 %, could
sell or rent out long-term assets for maximum of 5 % of its balance
sheet value. Otherwise it had to go to the Agency. The Agency also
gave consent when joint ventures were proposed by state companies.
After a formal decision for privatization, the Agency could
prohibit any acts with the property of the enterprise.
The Agency's managing bodies were the Supervisory
Board (SB) and the Executive Director. Six members of the SB were
selected by the Parliament directly. The Government appointed the
remaining 5 members. The endeavor to make the Agency more
independent from the Government entailed also some paragraphs in
the law, which later prevented the new Government to change "its" 5
people easily. Anyway, the Agency was accountable to the Council of
The SB appointed the Executive Director and approved his deputies
and the head of departments.
The structure of the Agency comprised 2 divisions headed by the 2
"Operative organization of privatization", embodying
"Privatization transactions" Dept. and "Financial" Dept.; and
"Privatization programs & methods" division, including "Licensing"
Dept., "Privatization methods" Dept., "Programs & analyzes" Dept,
and "Information Services".
The "Legal" Dept. and "Public relations & Marketing" Dept.
together with the Secretariat and Administration were supervised by
The Agency set up regional offices in 11 big cities to implement
its policy, assist the preparation of privatization program, and
interact with the management of local enterprises, banks,
Meanwhile, Municipal Councils gradually started to establish
specialized offices. In Sofia, a Municipal Privatization Agency was
set up (Sofia was the second biggest owner in the country after the
4. Privatization was to be carry out on the basis of
an annual program. It was elaborated by the Agency, then considered
at the Council of Ministers. The latter had to present it to the
Parliament for final approval, simultaneously with the budget.
This program identified the minimum privatization objectives for
the respective year, the minimum number of state enterprises as
well as the priority sectors. It also provided for the expected
amount of incomes from privatization; contained a list of sectors
whose privatization was not allowed for the period of validity of
the program, and finally set down general guidelines for the
A firm could be considered for privatization after a
proposal from either the:
a/ Privatization Agency
b/ Branch ministries
c/ Management of the firm
d/ Majority of employees.
5. A typical procedure pattern was soon established
by the Agency:
a/ Initiative for privatization;
b/ A privatization project prepared, either by the Agency, other
state or municipal body,
the management of an enterprise, or an investor:
c/ Formal decision for privatization, taken by the Agency, or the
ministry; usually containing the specific privatization technique
to be used: often completed with the most time-consuming part: the
legal analysis of the object:
d/ The decision announced publicly;
e/ Official valuation of the firm, done by independent valuators,
licensed by the PA, and
selected on a competitive basis;
f/ Negotiations with potential buyers; registration of persons
with right to participate
under preferential terms;
g/ Execution and approval of the deal.
6. Valuation of firms was to define the initial
selling price of shares, the initial price at tenders or the offer
price at public bidding or negotiations. It was done by Bulgarian
or foreign natural or legal persons, licenced by the Agency. They
were selected after a formal competition following the decision for
privatization and its legal analysis. (The latter had to clarify
the property status of enterprise's assets, to guarantee the rights
of buyers and prevent eventual subsequent claims by third
III. THE BEGINNING OF PRIVATIZATION IN
A. The "baby" phase
In July 1992, the members of the SB were elected. A month later
they appointed the Executive Director.
Soon the "Program Declaration" was published. It outlined the
"goals, intentions and obligation of the Agency before the nation".
Remarkably, the only numerical target was set surprisingly low: the
"purpose was to privatize 25 % of the enterprises in the sphere of
Agency's competence in the next 3.5 years".
According to the Agency's estimation, only 30 % of the 3000 state
enterprises in that time had assets above 10 mln. levs. That meant
the Agency intended to privatize only about 250 firms until the end
of 1995. Bearing also in mind that many state firms would probably
go bankrupt, then obviously this goal was very modest! (Today
however, SB's prediction looks differently...)
The Agency was gradually establishing itself,
positions were filled (after most people from the "first" Agency
were dismissed). Presently, the Agency employs around 170 persons,
including its regional staff.
The actual work started in October 1992. Courses for appraisers
were organized, first licenses were given: training for the staff
in basic market principles, finance, and privatization were held:
business trips abroad were undertaken by the management to learn
from the experience of other countries.
A limited program for the last months of 1992 was prepared and
privatization procedures were open for 6 big firms [IB 1'93, p.2]
The branch ministries were also setting up their specialized
departments and developing links between themselves.
World consultants and accountants came. They used funds from
USAid, Phare, British Know-how Fund, for sector analyses and
restructuring projects in sectors like cement, building materials,
tourism, pharmaceuticals, cosmetics, electronics, tobacco. The
German TREUHAND even set up a representative office in Sofia.
The first annual privatization program, covering 300 enterprises
was designed. Most firms were included on the base of "spontaneous
proposals without preliminary analysis" [IB 1'93, p.5].
B. The early "teens"
At the end of 1992, political situation in Bulgaria changed and
new Government came to power. It proclaimed itself as government of
privatization. Soon, the Agency was considered moving slowly and
indecisively - it was almost a year after the law was passed and no
deal was completed. First changes became inevitable.
1. In March 1993, the Government issued Decree No 64
[IB 3'93], amending Agency's organizational structure.
A specialized department was established to handle marketing and
attract foreign investment, in recognition of the lack of adequate
A "Projects" Dept. spinned-off from the "Transactions" Dept.
"Post-Privatization Control" Dept. was created to monitor the
execution of concluded deals.
Heads of the "Transactions", "Projects", "Public Relations" and
"Methods" departments were replaced by their deputies. An
"introvert" corporate culture started to develop with management
posts given to insiders rather than bringing new drive and
expertise from outside.
This structure better reflected the environment and changes of
emphasis, but some duplications and internal tensions were induced,
2. Frustrated by the lack of deals, the new Government changed
also people from its 5-men quota in the SB of the Agency. The law
however, allowed members of the SB to be replaced (before end of
terms) only in case of great misconduct.
The fired members appealed to the High Court and won, so later
they returned. Then the Government dismissed them immediately,
winning few months till the next court procedures last. The court
returned the 5 men again, and the whole cycle was repeated 3-4
In March 1994, the Government accepted the "return". However, it
prepared a lot of amendments to the law, one of them concerning its
right to replace people in the SB.
3. Finally, on May 12, 1993, the first privatization deal was
signed. The Belgian company "Amylum", bought 80 % in "Maize
Products" Ltd, Razgrad. "Bankers Trust" consulted the deal. "Ernst
& Young" did the appraisal. "Amylum" paid US$ 20 mln. and engaged
to invest another US$ 20 mln. in the next 5 years. Workers could
only purchase 1% under preferential terms. United Bulgarian Bank
took the remaining 19 % shares in exchange for debt.
Immediately, a fierce debate on the valuation started. Even if not
quite justified then, having in mind the pressure to do deal at any
price, this question was becoming more and more important with each
next deal, contradicting the Government "thirst" for cash, public
expectations, Agency thirst for more deals (but not necessarily at
high price), and valuations done by foreign valuators, often
leading to lower estimations particularly when the Discounted Cash
Flow method was used .
4. On June 8, 1993, the American company "Design Review
International" agreed to buy the electronic company "Magnetic
Heads" in Razlog. It had to pay US$ 1.6 mln for 80 % of the
company, leaving 20 % to workers. Additional clauses obliged DRI to
make further investments, to retain and increase the number of
It was not all rosy, however. The Nevada company failed to meet
the deadline for transfering the money and the deal was over...
C. Developing new approaches to
There were no deals in the next months. It became obvious that the
pace of Bulgarian privatization would differ from that in other
countries. Government was often asked how many deals has it done.
It was difficult to hail 10 deals when others had done hundreds.
Through different methods!
Some inconsistent policies were tried, mainly to broad management
and employees participation. It was neither the right time, nor the
right decision .
Then the Government came up with
- mass privatization and
- new privatization strategy.
The second to attract more foreign investment, the
first to make it quickly, on a massive scale.
The Prime Minister presented a project of mass privatization
roughly similar to the Czech "voucher" model. Then a second team,
led by the Chairman of the SB of the Agency (later its director)
called for the Polish model, through the establishment of 10
state-owned holdings, each responsible for privatization of 30
assigned by the Government state enterprises.
The two projects spurred another wave of debate on the pro's and
cons of mass privatization and so the real implementation was
The Director of the Agency, and some of his deputies opposed mass
privatization. In August 1993, the Director was replaced.
The chairman of the SB was appointed instead as the new Executive
Director. The hope was that she would be able to accelerate the
market privatization and would not oppose the mass one...
IV. ASSESSMENT OF RESULTS TO-DATE
A. Privatized enterprises
What followed was not very different from the previous picture. In
the 9 months between October 1993 and June 1994 only 9 big deals
The first one on 15 November 1993, when KRAFT JACOBS SUCHARD
acquired 80% shares in the confectionary factory REPUBLIKA Ltd
Svoge for US$ 2 mln. The deal marked the new policy of the Agency
for less use of foreign consultants.
On 25 November 1993 the German BRAU UND BRUNNEN Ltd. agreed to pay
DM 4.1 mln. for 67 % in the brewery "Kamenitza" Ltd., Plovdiv. In
its hurry to conclude the deal, the Agency was not perfect with the
legal analysis and debt details so this became the second cancelled
On 2 December 1993, for the first time a Bulgarian company -
DRUSTUR COMMERCE HOLDING Ltd - took part in privatization of 60 %
of the fruit and vegetable can producer NEKTAR Ltd Silistra. In
June 1994 the privatized factory was on the verge of bankruptcy
because the debt problem was not clearly negotiated.
Two deals in February 1994 with foreign investors could not be
legally confirmed because the privatization program was still not
approved by the Parliament.The German YTONG Ltd acquired GAS
CONCRETE Ltd Sofia, manufacturer of gas-concrete blocks. The Agency
had to agree to a cutting of the working places.
On 28 March 1994. the staff of the textile factory "Style" Ltd
bought the company for 18 mln. levs and took over debts of 11
In March 1994, the Agency tried to use for the first time also
public sale of shares of Grand Hotel Varna. A promising method was
doomed to a bad start because of poor management decisions:
The Agency decided the valuation of the hotel by Price Waterhouse
was too low and ordered a second one, by a Bulgarian small company.
Not surprisingly, they came up with twice as high price by adding
"intangible" assets to a level equal with the fixed ones. The price
of the hotel became US$ 30 mln.. This gimmick was to be kept secret
from the Bulgarian public.
It was also decided most of the hotel stock would be up for sale
through block bidding to one group. 5 % of the shares however, were
to be sold initially to the public in hope the latter would
oversubscribe and pay more than the face value. Thus the main buyer
would have to raise the price too.
A third mistake was the Agency circumvented the law and appointed
without competition a new small Bulgarian private company to manage
the emission. The contract was not perfect either, so the Agency
never received the service anticipated.
All this, plus stopped in the middle marketing campaign, led to
poor buying by the public. There had been people, fooled to pay
much higher prices, but the subscription was not sold, and the
price remained at its nominal 100 levs.
Only then the Agency went ahead with its usual procedure of direct
negotiations and accepted the offer of Bulgarian "Multigroup" for
49 % of the shares, at 111 levs per share.
In May 1994, the Agency surprisingly renewed the contract for the
"Magnetic Heads" factory in Razlog with the same buyer. Tthis time
for only US$ 1. Explanations that DRI would take also over the debt
were relying more on short memories since the first "version"
included similar clause.
In June 1994 "Nestle" bought the chokolade factory in Sofia after
a procedure continuing for year and a half.
At the end of the same month, a Bulgarian company took over the
building & construction company "Sikonko" (only few months earlier
its place in the program was questioned).
By mid 1994, 130 deals have been concluded by different
authorities. Depending on whether one counts only the direct price
or also the debt covered and the additional investment, between US$
40 mln. and 80 mln. were involved.
B. Problems and solutions
Despite expectations for rapid privatization, the process has not
managed to make up for the delay. Is the Agency moving slow?
Looking from outside, one can immediately answer "yes". Two years
after the Law was passed only 11 big deals were finished by the
Knowing the situation from inside would make a difference. Not to
justify the undeniable failure, but to clarify the reasons for this
regretful (lack of) result.
1. It is revealing to compare the national Privatization Agency
with the Sofia Municipal Privatization Agency. The latter was set
up in January 1993 and similarly it took 9 months until the first
deal was signed. Then followed a real burst of sales. Some experts
even indicated the program might soon hit a plateau. But it is
still picking up steam.
Ministry of Trade also made more than 50 deals for 366 mln. of
levs plus additional investment and debt covered up to 1 bin.
a/ There is a need for an "incubation" period: management to be
appointed, staff, premises, initial program, procedures, marketing,
b/ "Market" privatization needs market. In the case
of small and municipal privatization, there were plenty of
entrepreneurs, prepared to engage relatively less money to acquire
small shops, restaurants, supermarkets. There was no such market
for the big industrial enterprises.
The potential buyers in privatization are:
- Foreign investors;
- Domestic private companies;
Only the first group, and to a limited extend the
second one, were in position to afford serious participation in a
On the other hand, all these groups were encountering a bunch of
Privatization taw and strategy had to recognize such a mismatch
and do something about both the supply and demand side. This
happened but only gradually, through a painful, slow, loss-making
2. The "supply side" was shaped by the changed macroeconomic
framework. An economy, working for the former East bloc,
encountered immense difficulties to redirect itself. State-owned
enterprises were affected by the crisis and the sharply increased
interest rate, which caused a quick growth of their indebtedness.
Reduction of export markets as well as the continuing need for
loans placed those enterprises in a vicious circle. Particularly
affected were sectors like heavy machinery, electronics, where
modern capacities were developed at the cost of numerous loans.
The Agency was trying to be more flexible in shaping and
"packaging" the "product". This reflected previous problems in
establishing the share of privatized enterprises in other
companies, the accumulation of unfinished products, existence of
non-durable assets and separate nonproducing parts of enterprises,
which were not of interest to buyers.
Particularly important was the annual privatization program. The
first programs used to be mere compilation of enterprises' names
selected on an accidental basis. They were never approved. The
"Programs & Analyses" Dept. could not cope, lacking competence. On
the other hand, this allowed the Agency to amend the programs
often, in a "demand-driven" approach. It recognized the investor as
a major initiator of privatization and started to accommodate
investors' interests. An investor can:
- Submit a proposal directly to the responsible
- Go indirectly through the management of enterprises
where he has interest.
By the end of 1993, privatization procedures for 357
enterprises and separate units had started. Municipalities added
another 100 enterprises. The 1994 program included 315 firms and
175 parts thereof.
It also outlined "priority" sectors. They were determined on the
base of declared interest of potential buyers in: food and
beverages; textile: tourism; transport. There are no attached
specific preferential terms to "priority" sectors however. Which is
not quite the case with sectors forbidden for privatization, such
as: military industries; oil and electricity companies;
On the other hand, picking up obviously attractive sectors was
never going to be enough for a successful privatization because of
the many vested interests. The Agency entered troubled waters when
decided to focus on tourism. Tourism is considered a strategic
sector for the Bulgarian economy so it was natural to expect little
support for Agency's effort there. Instead of playing "political"
games however, the Agency directors preferred to declare an open
war by including the most exclusive hotels in the program. Such
tactic did not pay off and a lot of efforts, time and money were
3. The Government played its role in improving the "product" and
after a long debate, a mechanism was developed at the end of 1993,
to excuse the bad debts that enterprises had accumulated prior to
31 December 1990. 9 state-owned banks, holders of the debts,
received low interest bearing bonds.This operation not only
improved the balance sheets of many state firms but also affected
the "demand side" by allowing the bonds to be used as "quasi-money"
in privatization. Bonds denominated in Bulgarian levs, totaling US$
500 mln., can be bought from the 9 banks for a price lower than
bond's nominal of 1000 levs and be used in privatization at their
face value. Dollar denominated bonds, totaling US$ 1.8 bin,
participate with their market price. Banks could participate
directly in privatization too.
4. Further step towards improvement of the "demand side" was the
agreement with the London Club of private creditors for
restructuring of Bulgaria's foreign debt, signed at the end of
1993. Another agreement allowed rescheduling of Bulgarian debt to
the Paris Club. Part of the deals included option for
One of the paradoxes of Bulgarian privatization is that foreign
investors, anticipated to be major players, never appeared to the
extent expected. Explaining why is issue for another paper. In
order to suit them however, a lot of changes were introduced.
At the end of 1993, after lobbying by the Agency, the land on
which an enterprise was placed was also included in its balance
sheet. So foreign investors could get ownership over land. Thus
overwhelming legal and restitutional problems were eased.
They also received the right to preferential buy-out of the shares
not purchased by the employees.
In March 1994, the Government issued a Decree No.44 [IB 4'94], for
establishment of a special "revolving" privatization fund to ease
the participation of Bulgarian citizens in privatization. The
finance would come from international funds. Its advantages are the
lower interest rate and the use of the bought shares as
5. Bulgarian law on privatization entailed an institutional war
between the Agency and the ministries.
It was initiated by the imposed limits on branch ministries to
privatize bigger companies. Inflation quickly made the 10 mln. levs
threshold impractical, leaving the ministries with only a few small
firms to privatize. The Agency recognized the problem and proposed
a change in the law, which was accepted in June 1994. The threshold
was increased from BGL 10 mln. to BGL 70 mln., thus leaving the
Agency with 700 biggest enterprises.
The tension however continued over the dilemma which state
institution represented state ownership rights in a state-owned
enterprise during privatization. The Agency generally lost this
But most negative problems stemmed from an artificial division
responsibility of the Privatization Agency, and joint ventures
which were left as responsibility of the branch ministries.
Naturally, the Agency was insisting on privatization and the
ministries were trying to set up JV with the same best
enterprises.The economic reality placed the ministries in better
position. In case of a JV, the investor puts, say, US$ 1 mln. in 51
% of the new venture in which the Bulgarian partner usually aports
its fixed assets. Thus the US$ 1 mln. stays in the JV. In case of
privatization, however, the same US$ 1 mln. actually go to the
state and the privatized enterprise can't use that money. To cope,
the Agency had to apply a new strategy, leading in the same
direction: it admitted the buyer to engage in future investments in
the enterprise rather than to pay higher price (that goes to the
state). Such an approach resembles the logic behind a JV, and
actually legitimated the already observed trend of relatively
diminishing price. (When extrapolated, its natural end is a "mass"
6. Privatization procedure is heavy and slow. Depending on the
enterprise privatized: its type and size, the technique chosen,
etc., the whole privatization cycle may last months, with wilder
deviations possible. More of the deals became possible because were
started year and more ago.
Initially the Agency used to make the steps and tackled the
problems one by one. Later it was pressed to change from a
"sequential" to a "parallel processing". Still, it is at least 4-5
months for a transaction to be concluded.
In most transactions the Agency stuck to negotiations with
potential buyers. This is easy to explain, but reflected badly on
the time a deal took, the price Government got, the image of the
Agency and privatization in general.
Transparency was proclaimed a pillar of privatization policy in
Bulgaria [IB 1'93, p. 15]. But it was quietly forgotten.
In his article: "Improving the work of the Privatization Agency -
a guarantee for success of privatization in Bulgaria" [IB 5'93,
p.2] the then Chairman of the SB Mr Georgiev called again for more
transparency, openness, information to the public. Instead, the
directors tried to persuade the public that it was better (for
whom?) if deals remained secret. The Agency became object of heavy
critiques from the press, which used every suitable case to expose
Agency's people mismanagement and incompetence.
Different views on privatization ways and management led many
experienced people to leave the Agency, incl. few heads of
departments and chief experts with PhD degrees. Following the
introvert culture and confirming a new trend, they were superseded
by female colleagues. Presently women fill the Executive Director
slot, the Deputy Director position and 8 Heads of Departments.
Together with 5 men heads of departments.
C. New goals and new ways
In order to meet the growing public anxiety, depressed demand of
privatized assets, number of practical implementation problems, and
lack of clarity in policies, a broad reassessment of privatization
place in the general economic reform, privatization strategy,
program and methods was done. Privatization goals were clarified
and their priorities restated :
a/ Creation of a large group of private owners;
b/ Integration of the economy into the world economic
c/ Creation of competitive enterprises which, in a long run will
contribute more revenue
and welfare than the direct cash flow to the budget from selling
d/ Attempts to maximize the revenue to the budget subject to the
limitations mentioned above.
A complex process, privatization involves a lot of
people and groups, with contradictory interests. Their
harmonization becomes crucial, hence, the need to recognize and
have in mind the interplay of those interests. The Agency,
struggling to promote privatization and foreign investments,
responses to these objective factors. It accepts :
- Trade-off of future investment for cash;
- Trade off of jobs for cash;
- Direct negotiations with the buyer (thus giving him
strong bargaining power).
By working on the country image, improving
enterprises' situation, and giving more opportunities to
individuals, domestic companies and foreign investors,
privatization could speed up a bit. But as it gets deeper into the
program, the portfolio gets more difficult since the easier assets
are unload and the market may not be deep enough to absorb large
portfolios prepared for divestment.
Therefore it would be the mass privatization, approved together
with other changes in the Privatization Law in June 1994, to make
for the lost 2 years. It will accelerate the process and mainly,
will allow Bulgarian citizens to participate in the acquisition of
enterprises, created with their own labour, on an equal and honest
The program includes around 500 enterprises. 2 limiting
constraints like market and marshaling enough technical expertise
to be able to bring complex assets to market (in vendable form)
would be overcome. It is anticipated the combination of market and
mass model will help privatization of over 65 % of the state
enterprises within 3 years.
Privatization was initially expected to turnaround the economy in
a couple of years. Because of many reasons: unclear concept, lack
of human resource, institutional war, bad debts problem, modest
role of foreign investors, etc., it never became the revolution
some hoped for. It sparked however a lot of evolutionary changes
that swept the economy around and gradually put it in the way
towards a new effective structure.
Further investments are provided for the
period 1994-2000 under a scheme, amounting totally 357,398,000 Iv.,
for production development, packing machinery, confectionary
production, reconstruction, modernizing, assembling and