| Privatization and Debt Conversion|
and Private Sector Development in Bulgaria
In 1995, CSD
was able to keep the privatization debate alive and continued to assist
the policy-making process. The project aimed at achieving three main objectives,
- Assist the enacting of specific legislative actions
and pilot privatization projects in order to accelerate privatization;
- Enhance the understanding and support for privatization
and private business development among policy-makers, the business community
and the general public;
- Address the lack of information on privatization available
to the public and to policy-makers.
of the project were presented in a policy paper which set forth a number
of recommendations to policy-makers concerning the techniques of mass
and market-based privatization, municipal privatization, post-privatization
control of enterprises and debt-for-equity swap mechanisms.
Representative Public Opinion Survey
in March 1995, the survey's main objectives were to measure public attitudes
towards different forms of privatization, the population's readiness to
participate in the mass privatization program, and to reinforce CSD's
watchdog role. It allowed CSD to track the evolution of public attitudes
towards privatization, comparing results with the data collected during
earlier surveys. The survey data were also an important basis for the
development of the project policy recommendations. The data were provided
both to the media and to the Center for Mass Privatization, thus assisting
the government in improving its program and contributing to public education
on these issues.
Post-Privatization Behavior of Enterprises: Second Phase
was included in the project because mass media and the state authorities
had no information about the behavior of enterprises after the conclusion
of privatization transactions. The political and administrative debates
typically focus on the conditions of the transactions rather than on the
results of privatization transactions, or the behavior of privatized enterprises
in the difficult macroeconomic environment.
provided information with respect to the financial performance of privatized
enterprises. The collected data clearly indicated a speedy recovery and
restructuring of the enterprises, expansion of their activity following
privatization, positive effects of privatization on employment and labor
organization. The principal conclusions of the survey analysis revealed
a remarkably good financial condition and flexible market behavior of
the privatized enterprises.
formulated on the basis of the study included the institutionalization
and regulation of post-privatization monitoring, and the exercise of closer
control over commitments to privatization contracts. As a result, the
Privatization Agency undertook several studies finding that some of the
buyers were not entirely fulfilling their obligations. The final paper
on post-privatization behavior of enterprises was also presented at the
Meeting of the OECD
Advisory Group on Privatization in March 1995.
of this research was to outline the main tendencies in private sector
development at the outset of the reforms and during the transition to
a market economy, and to provide the rationale for some basic policy recommendations
in this field.
out its analysis of some 450,000 officially registered private sector
enterprises and created a comprehensive body of information on the Bulgarian
private sector. The analysis included the structure and size of the private
sector by branches, legal status
distribution. It also focused on the regulatory and legislative framework
of private sector development and analyzed its efficiency. The research
results were incorporated into a widely distributed report.
Education and Promotion
was held on March 28. It was attended by experts from the Council of Ministers,
the branch ministries, the Privatization Agency and independent consultants.
Discussions centered around the government's mass privatization program
presented by the experts from the Center for Mass Privatization as well
as the conditions for participation in this process, both of investment
funds and of the general public.
conclusions were summarized and provided, together with recommendations
concerning the initial stage of mass privatization, to the Parliamentary
Economic Committee and the Subcommittee on Privatization, to the Center
for Mass Privatization at the Council of Ministers, and the Ministry of
of the Project Activities
As CSD deems
encouraging public debate a key aspect of its research and advocacy activities,
careful consideration was given to publicizing the results of the project.
The various project activities received wide coverage in a total of 51
newspaper articles and 13 broadcasts on radio and television. This prompted
broad public discussion, and contributed to general public education on
privatization issues. A number of privatization success stories were also
published and widely advertised, helping to generate public support for
back to top
II. Privatization on a
Dual Track: Mass and Market Based Privatization in Bulgaria
research, analysis, and public discussion are essential to ensuring that
mass privatization is conducted effectively, transparently and competitively.
At the same time, it is essential that independent institutions like CSD
continue their research and advocacy work for market-based privatization
- a form of privatization that should be intensified at the same time
as the mass privatization plan is implemented.
into consideration, CSD determined the main objective of this project:
to assist the efforts of government institutions in the preparation and
implementation of mass privatization and to assist the acceleration of
In 1995, the
research team's interest continued to focus on the issues of municipal
privatization with the goal of replicating the positive results accomplished
in the joint project with the Bansko municipality concluded in the previous
year. An important practical achievement of the project was the assistance
provided to the Dobrich municipality. CSD experts participated in a town
hall meeting, and provided comments on procedures associated with the
different stages of the mass privatization process. The experts also provided know-how to local government
officials and the local business community on the establishment of a regional
A series of
sociological surveys on mass privatization and economic reforms, carried
out within the framework of the project, allowed CSD to accumulate crucial
data for both research and monitoring purposes. The results of the surveys
were also used to raise public
support for privatization, as well as to heighten public awareness in
Management of Investment Funds I
course took place in Prague on August 18 through September 4. It was attended
by 20 participants. The pending start of mass privatization and the lack
of qualified experts to work in investment funds preconditioned the organization
of this training program. The idea for a similar course was first proposed
by the Privatization Project of the Central European University, whose
representatives contacted CSD in view of its long-standing experience
and education in matters of privatization. The training course participants
included representatives of investments funds, commercial banks, consulting
companies and the Privatization Agency.
Management of Investment Funds II
course took place in Velingrad, Bulgaria on November 26 through December
7. The program focused on the following issues:
- Investment fund regulations in Bulgaria;
- Company analysis;
- Industry analysis;
- Financial instruments and markets;
- Portfolio design;
- Workshops with Czech investment funds;
- Corporate governance.
received from the participants indicated a high degree of evaluation for
the organization and the content of the courses.
Contacts and Networking
on the Legal Framework of Mass Privatization in Bulgaria
of this workshop, held on October 3, was to analyze some problematic aspects,
deficiencies and inconsistencies in the legal framework of mass privatization,
and to recommend options and solutions for its improvement. The workshop
was attended by experts from the Center for Mass
Privatization, Council of Ministers advisors, and experts from the branch
ministries. Some consultancies, investment funds and companies, researchers
and journalists showed interest in the workshop discussions.
As a result
of the workshop, a document entitled Mass Privatization Starts Amidst
Apprehension was developed. It set out recommendations for amendments
to the legal framework of mass privatization regarding the issuing of
shares by privatization funds and the prospective
development alternatives for privatization funds. The document was presented
to the Parliamentary Economic Committee, the Center for Mass Privatization,
the Ministry of Economic Development and the Privatization Agency. The
key impact of this part of the project was that its recommendations were
incorporated in the final version of the Privatization Funds Act adopted
by the National Assembly in December 1995.
and Foreign Investment Monitor
In July 1995,
CSD renewed the regular publication of the Monitor of Privatization and
Foreign Investment. Its distribution was broadened in comparison with
the previous years. This allowed the project to provide a watchdog or
oversight mechanism to maintain the public
awareness of how the privatization process is proceeding, and to let officials
know that an independent think tank was tracking their performance and
of the Project Activities
coverage was designed to reach two major groups: policy-makers, experts,
and the business community, on the one hand, and the general public, on
the other. With the purpose of reaching the first group, a number of articles
on the legal framework and procedures of mass privatization, foreign debt
conversion, and other professional topics were published in selected newspapers.
Another set of articles of a more general nature were published in newspapers with wide circulation
ensuring coverage of about 50-70% of the country's population
aged 18 years and over.
back to top
III. Debt Conversion Program:
Guidelines for Bulgaria
the initial phases of the Debt Conversion project and the reevaluation
of its priorities, in 1995 the project team continued working on the elaboration
of the final product which consists of a detailed DES program for Bulgaria.
This program established practical procedures for implementing DES mechanisms
and transferring ownership rights, along with rules and criteria for the
selection of applicants and certification of ownership of external debt
bonds by buyers.
was coordinated by Dr. Mariana Todorova, a leading Bulgarian economic
expert, currently with the Economic Development Institute of the World
to the Ministry of Economic Development on Debt Conversion Related Issues
Drawn up on the basis of in-depth critical analysis
of the experience of government institutions in charge of debt conversion,
this paper provided valuable suggestions and recommendations supported
by concrete arguments. The recommendations were approved by Mr. Entzislav
Harmandjiev, Deputy Minister of Economic Development.
to the Ministry of Economic Development and the Foreign Investment Agency
assistance to the Ministry of Economic Development and the Foreign Investment
Agency in the preparation of an information package on the terms and conditions
for the use of Bulgarian Brady bonds in privatization. The material
was among the official documents presented by the Bulgarian delegation
at the Annual Meeting of the EBRD on April 8-11, in London.
on Privatization and Debt Conversion in Bulgaria
of commercial banks, the Bulgarian National Bank, the Privatization Agency,
USAID, the Ministry of Finance, Members of Parliament, independent analysts
and experts participated in this event held on April 25. The workshop
was the concluding public presentation of the results of the project.
The economic team of CSD presented for open discussion the main results
and findings of several months of research. The exchange of views and
opinions among the participants was extremely helpful for the project
team in drafting the policy recommendations and the final study on debt
conversion in Bulgaria.
and Dissemination of the Final
study of the debt conversion project incorporated the results of the comprehensive
efforts of researchers. Its main objective was to propose a fully-fledged
debt conversion strategy, envisaged as an integral part of the overall
national privatization program. It provided a thorough assessment of the
Bulgarian debt-for-equity swap model as well as a detailed analysis of
the regulatory framework and institutional arrangements for debt conversion.
document was presented to government agencies involved in the management
of Bulgaria's external debt and the process of privatization. It was sent
out to over 100 correspondent institutes of the International Center for
Economic Growth around the world.
An occasional paper on The
Use of Bulgarian Foreign Debt Bonds in Privatization was prepared
by Sophia Kassidova and Iliya Avramov, Research Fellows at CSD. The paper
analyzes the experience in privatization deals where Bulgarian Brady bonds
are employed as a payment instrument. It also contains a detailed analysis
of the dynamics of the price of Bulgarian Brady bonds.
back to top
IV. Southern Tier Business
Association Training Program
course was held on May 21-27, 1995 in Bistritza, Bulgaria, by the Center
for International Private Enterprise (CIPE), Washington, DC, with the
assistance of CSD. Representatives of business associations and chambers
of commerce from five countries of south eastern Europe - Albania, Bulgaria,
Croatia, Macedonia and Romania - in which CIPE has projects, participated
in the training course. The lectures were presented by experienced American
experts and consultants with knowledge on the incorporation and functioning
of business associations.
course of the program, the trainees attended lectures and participated
in practical exercises on subjects such as strategic planning and programs
of work, membership development, sources of non-dues income, public policy
advocacy and government relations, communication techniques, the role
of business associations in a democratic society, and small business development.
pointed out that they considered it particularly important that such a
course was organized for representatives of the countries in the region
since market institutions, including business associations in south eastern
Europe, were less developed by comparison with those in central Europe.
back to top
V. International Business Club
Business Club (IBC) is a joint initiative of CSD and the Ministry of Trade.
It was formally inaugurated on June 17, 1993 by Mr. Valentin Karabashev,
Deputy Prime Minister and Minister of Trade, in the presence of ambassadors,
diplomats and trade envoys to Bulgaria, along with bankers and managers
of local and international companies. The principal objective of IBC is
to encourage business contacts, to popularize business opportunities in
Bulgaria, and to promote favorable development in trade and foreign investment.
IBC organizes regular breakfast meetings to which it invites prominent
figures from the government, financial institutions, and private businesses
as guest speakers.
speakers and topics of the IBC meetings in 1995 were:
Dr. Dimitar Stefanov, Chairman of the Supervisory Board
of the Privatization Agency: "The Privatization Program of the
Dr. Roumen Getchev, Deputy Prime Minister and Minister
of Economic Development: "The Foreign Investment Policy of the
Mr. Dimitar Kostov, Minister of Finance: "Budgetary
and Financial Policy of the Bulgarian Government";
Mr. Mladen Tchervenyakov, Minister of Justice: "Legislative
Priorities of the Government and the Problem of Law Enforcement";
Mr. Atanas Paparizov, Chairman of the National Assembly
Economic Committee: "Bulgaria's Current Foreign Trade Policy".
Members of 42 diplomatic and trade missions to Bulgaria, along with
10 international organizations and foreign companies based in Sofia.
Bulgarian businessmen and bankers are regular visitors as well.