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Economic Program - 1999

Launching the Corporate Governance Initiative (CGI)

1999 Highlights

I. The Corporate Governance Initiative (CGI) – New Standards

The Corporate Governance Initiative (CGI) was officially launched in April 1999. CGI is a coalition of Bulgarian NGOs aimed facilitating the adoption of relevant corporate governance standards and procedures that would ensure transparency and accountability in the economy. The coalition was established by Association of Industrial Capital, Association of Voluntary Pension Funds, Center for Economic Development, Center for the Study of Democracy, Investors’ Union, Securities Holders Association. Activities of the CGI in the second half of 1999 have been supported by CIPE and have been focused on the development and the public endorsement of a Policy Recommendation Paper on corporate governance.

Immediately after the official launch of the CGI a Task Force including about 10 experts from state institutions and NGOs was formed to draft the Policy Recommendation Paper. The main objective of this document is to outline a consistent set of policy and legislative measures (action agenda) that would help develop the institutional and market infrastructure of corporate governance.

The next step in the CGI process was the Policy Workshop. It was conducted on July 13, 1999 at CSD and brought together approximately 50 participants at the expert level (members of the CGI Steering Committee, the CGI Task Force, Bulgarian and foreign experts, and representatives of state and international institutions). The main function of the Policy Workshop was to solicit expert comments and suggestions on the corporate governance development agenda and also to bring forth the specific viewpoints of the major stakeholders. The draft Policy Paper was presented by Professor Bistra Boeva, member of the Securities and Stock Exchange Commission, Head of the CGI Task Force. Workshop participants made a lot of suggestions focused on the guaranteeing equal treatment of all shareholders, the responsibilities and motivation of boards, corporate governance problems of the holdings (former privatization funds), and on the management of the residual share of state ownership.

The CGI Policy Forum was conducted on November 30, 1999. More than 60 representatives of public and private institutions, international organizations, businessmen, academics, and journalists attended the Forum. At the Forum the final version of the Policy Recommendation Paper on corporate governance was presented and publicly adopted thus reflecting the consensus reached among of the principal institutions and stakeholders.

On the Policy Forum many participants noted that most of the recommendations in the Policy Paper will be implemented in the Draft Law on Securities to be adopted by the National Assembly. Representatives of the international investment community showed considerable interest in the corporate governance problems in Bulgaria. Foreign participants voiced their support for the Corporate Governance Initiative, and made valuable suggestions, concerning the forthcoming implementation of the Policy Paper.

At the First Investment Forum for South-Eastern Europe, October 19-20, 1999, Sofia CGI was invited to participate in the plenary session: “State and Corporate Governance. Cooperation between Public and Private Sector.” CGI members presented the paper “Corporate Governance and Control in Joint-Stock Companies in Bulgaria” and distributed it in 500 copies among the Investment Forum participants.

In order to widely disseminate CGI findings and recommendations the Center for the Study of Democracy has prepared the draft version of a Glossary of Terms on Corporate Governance and Capital Markets. It contains approximately 300 entries and has been reviewed by leading Bulgarian experts in the area of corporate governance. CGI members have prepared a set of training materials, which will be used during lectures and specialized seminars on corporate governance at the University of National and World Economy (Sofia), the Economic Department of Sofia University, and the Economic University (Varna). The main topics to be discussed at the seminars with students include: Equal Treatment of Shareholders; Protection of Shareholders’ Rights; Disclosure of Information; Board Responsibilities; Capital Market and Corporate Governance; Regulations on Residual State Ownership.

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Social Consequences of the Implementation of the Currency Board in Bulgaria

The major goal of this one-year project implemented jointly with the Sociological Program of CSD (Vitosha Research) was to develop a system of indicators to assess the impact of the Currency Board on the social protection of the population. The specific research approach included several components: 1) identifying the specific implications of the Currency Board on the social protection system by analysing the existing statistical and regulatory information for in the past ten years. 2) to test the findings and working hypotheses of the preliminary analysis by submitting them for discussion at public events and workshops, dedicated to this topic, and 3) to explore expert opinions using focus groups as an analytic tool; 4) to use a national representative survey in order to quantitatively estimate the specific impacts of the currency board.

The findings of the project helped to identify the most vulnerable social groups, for whom rigid financial discipline and government spending reduction have meant declined personal incomes and lower living standards (long-term unemployed, low-income pensioners, uncompleted and large families). Options are being sought to improve the status of these groups and facilitate their integration. Obviously, in the conditions of a currency board, the ways for improvement of the social status of the population have to be found only within the available limited financial resources. There is a need for more effective distribution of the available funds, strict adherence to the principles of social solidarity and balance between the social security contributions and the benefits received. The introduction of the Currency Board in Bulgaria has only speeded up the delayed reform of the social sector and helped adjust it to the modern standards.

The final report prepared under the project was presented at the conference “Social Consequences of the Currency Board” (June 24, 1999). The conference initiated a broad public discussion focused on research finding and conclusions. Conference participants recognised the practical value of the study for the adjustment of social reforms to the new economic realities.

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. CSD Monitor

In 1999 two issues of the CSD Monitor were published in English and Bulgarian. The Monitor covers all major CSD activities and events: research and advocacy in the field of corporate governance; establishment of the Legal Reform Initiative; drafting legislation on e-commerce and digital signature; accession to European Union issues; book donation, etc. The publication has been widely distributed to Members of Parliament, government officials, media, municipalities, and international donors.

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IV. International Business Club Meetings

Since its establishment in 1993 the International Business Club (IBC) has provided opportunities for high-ranking public officials and policy makers to meet senior foreign diplomats, trade envoys and representatives of the business community. An extensive exchange of views and comments on topical political and economic issues has taken place during the four meetings IBC organised in 1999:

- March 16, 1999. Guest speakers were Mr. Stefan Sofianski, Mayor of Sofia and Mr. Antonio Vigilante, UNDP Representative, on Priority Investment Projects of Sofia Municipality.

- May 27, 1999. Guest speakers were Mr. Martin Zaimov, Deputy Governor of the Bulgarian National Bank and Mr. Stoyan Alexandrov , Chairman, Association of Commercial Banks, on the Denomination of Bulgarian Lev and its Impact on the Economic Development of the Country.

- July 9, 1999. Guest speakers were Mr. Ventsislav Varbanov, Minister of Agriculture, Forests and Land Reform and Mr. John Grant, Mission Director USAID on the Main Priorities of Land Reform and Agricultural Development in Bulgaria.

- November 30, 1999. Guest speakers were Mr. Mario Tagarinski, Minister of Public Administration and Mr. Richard Stagg, Ambassador of the UK, on the Reform in the Public Administration in Bulgaria.

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