Банкеръ Weekly



On March 6, 1998, a loan agreement was closed in Tokyo between the governments of Japan and Bulgaria. The credit of JPY14.312BN, intended for expanding the port of Bourgas, was released by the former Overseas Economic Cooperation Fund (OECF), which has been transformed into Japanese bank for International Cooperation (JBIC). Bulgarian co-financing amounting to JPY4.77BN was projected as well. The loan was launched for a term of 30 years at a 2.7% annual interest, including a 10-year grace period.The project is for the construction of a new terminal for handling bulk cargoes far our at the sea, delivery of loading equipment for the new facility, a new canal, and a new mole.The Japanese company Pacific Consultants International (PCI) was picked out as chief consultant on the project, and the Japanese consortium Penta Ocean - Mitsubishi Corporation was contracted to implement the project. A tender was held for a supplier of the loading equipment and a consortium between the companies F.A. Bergtechnik and Batex (which are within the Austrian holding group Voest Alpine) was nominated. However, they have not been approved by the creditor JBIC yet.For two months now there have been violent emotions regarding the cheapest loan, guaranteed by the State - for the expansion and modernization of the Bourgas Port. There were talks about renegotiating the loan's terms; an international financial scandal could be smelt in the air. The Minister of Transport and Telecommunications Plamen Petrov appointed a special commission, chaired by his deputy responsible for financial issues Zlatolina Moukova, to investigate the matter and say waht should be done. The commission is ready with its stance now.The commotion started in the beginning of September when someone whispered into Minister petrov's ear that the project for the expansion of the Bourgas Port was about to fail. Doubts arose if teh country would be able to repay the loan as information showed that the cargoes passing through the port were constantly decreasing, and as a result proceeds from fees weer drastically falling down. Mr. Petrov was presented data, according which the credit from Japan could be repaid in 90 years (instead of the agreed 30) if things were remained as they were. Experts found that no marketing study about the future cargo-flows had been done; there was neither a list of the regular clients of the port, nor a forecast about protential clients which the port would evelntually attract after its expansion. Nothing was mentioned about the development of the competitive ports in the region, such as Varna, Konstanca, and Thessaloniki.Minister Petrov did not need much time to be convinced that all that was not far from the truth. In addition, he received proof that the project would be JPY19.082BN more expensive than estimated before due to the recently approved evaluation about the impact of the construction on the environment. So, the consultants who prepared the project were accused of not complying with the Convention for Protecting the Cleanliness of the Black Sea.According to Ms. Moukova, there is a potential problem regarding the project's implementation: The commission's aim was to make an inquiry and draft more realistic estimates about the proceeds and liabilities. We'll present the facts, established by the commission to the Finance Ministry. We'll ask our colleagues to discuss the entire financial part of the project and prepare together a programme for financing and loan repayment. After all, the project is guaranteed by the State and should be controlled by the Ministry of Finance. But the project should not be considered from a financial point of view only. Its social and economic role should be estimated as well, e.g. ecology, working positions, etc. Financing on the part of the State should be evaluated on that basis.According to Ms. Moukova, the Finance Ministry has so far refused to project in the 2002 draft budget any co-financing whatsoever on the part of Bulgaria. Negotiations with the Ministry of Finance should eb held on that matter.

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