Банкеръ Weekly



Intentions often reveal fear. When more than a month ago ministers started talking that it won't be such a trouble if we don't receive invitation to join NATO, it became clear that pessimism is sifting through the event of the year. Now the hectic pursuit and discussion of possible measures to revive our economy show that fears are growing about our economic stability as well.In the last couple of weeks inofficial information revealed series of ideas to unleash the investment process which would have sound strange and even ominous only a year ago. Does this mean bad economic forecasting or any other interests?At first the Movement for Rights and Freedoms (MRF) offered amnesty of capitals which would bring about USD1BN back in the country. The idea met controversial reactions, yet finally it turned out that no written suggestion of the kind exists. The MRF's leader mentioned another strange idea, said to be Deputy PM Nikolay Vassilev's - part of our foreign currency reserve to be placed in an investment fund, in which interested foreign investors would participate as well. This news didn't last for long, either. It turned out that the money in question is around BGN100MN from the fiscal reserve which (as explained by Finance Minister Milen Velchev) is to be invested in stakes and shares of enterprises on the priciple of EBRD's post-privatisation fund. It was the Eurobank that offered the establishment of such a structure for venture capital which can also issue bonds in Bulgarian levs. The IMF Mission Leader for Bulgaria Jerald Schiff quickly discarded the project as an attempt for nationalization of the economy. Which only means that this will be the next failed idea in a row.And this is not the last of the Bulgarian challenges towards IMF's conservative policy. After the ruling parties discussed the 2003 draft budget, the idea for a zero tax on profit reappeared. However, this major promise which the National Movement Simeon II (NMSII) gave before the elections was ignored a year ago because of the disapprovement of the IMF (or at least this was the explanation given at that time). Now the zero tax in case of reinvestment is offered again, but in a different version - only for investments in regions with high unemployemnt.The ministers also provide a reserve alternative, says Ahmed Dogan - they plan the establishment of an insurance fund which would stimulate investments in priority branches or in priority regions. The ministers also discussed other possibilities, such as the establishment of industrial zones and the creation of an innovation fund. There is nothing new in these ideas - neither the currency reserve, nor the insurance fund, nor the priority branches. Yet a year ago Emil Kyulev, then leader of the Vazrazhdane business club, proposed to use the money accumulated on accounts with the Bulgarian National Bank. This is not the first discussion about the possible state guarantees to investment projects. These guarantees are a method for attracting banks and pension funds to invest their free resources in the so-called real economy. The new investment tendency implies, however, that hopes for quick growth are fading away. Probably the rulers fear that unemployment may explode and that there may be fewer revenues to the budget. Considering the overall economic stagnation, the disappointing offers submitted for the privatisation of the Bulgarian Telecommunication Company (BTC) may give a start to all kinds of shocking proposals aiming to stimulate investments. As the Sofia Mayor Stefan Sofiansky used to say last spring, working in a difficult situation is like working on the edge of risk.The word risk is the key to making an estimation of the numerous encouraging proposals. It is doubtless that there is more money in the fiscal reserve than it is necessary. (The same is also valid for the banks.) There is also no doubt that business is in an urgent need of fresh investments. But will the problem be solved by removing the same money from the budget to the real economy? Obviously, it doesn't mean that the money will be distributed more efficiently. It only means that the risk will be transferred to the State. Considering the source of these ideas, it is not difficult to guess who will profit most by this transfer.

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