Банкеръ Weekly

Briefs

MARKET RESTRUCTURING COMING TO AN END

The restructuring of the building services market in Bulgaria will complete in 2006 and a new, not less complex process for the domestic construction business will begin. It will be determined to a great extent by the type and quality of the operating enterprises, most of which are small and medium-sized according to our notions, an according to European criteria, they are simply micro-firms.
According to non-conclusive data, more than 80% of the companies in our construction industry last year were small and medium sized. This percentage will probably exceed 95% according to European categorization. With their capacity and financial resources most of them do not stand a chance to survive on the market after Bulgaria's accession to the European Union (EU) when all rules and regulation of the community become effective in this country, too. In order to survive in the construction branch the firms will have to set aside money for at least two main things. Firstly, for certification under the ISO international quality standard system and for the other necessary certificates, depending on the sphere they work in. And secondly, for technological re-equipment and employment of personnel in order to be entitled to close contracts for building services. Otherwise, their only chance to survive by being included as sub-executors in big investment projects won't be realized. In view of the expected tightening of control on construction after 2007 and the serious European competition, these companies will be stopped from participating in smaller sites, too. Thus, the market will have a new, quite different configuration, and only partial repairing services will remain for the small-sized firms, operating on the verge of law. They can ensure some proceeds, but not a bright future.
With the European companies stepping into Bulgaria it is supposed that some of the prices in construction would go down. Imported construction materials are currently more expensive in our country than in the EU due to transport and other costs. But the situation will be different when a company which has won a tender for building a large site imports the necessary construction materials at wholesale price. Domestic building companies will be able to compete with the western ones only in terms of wages, paid for labour. But let's not forget that things regarding payment are quite vague and the truth will become known after 2007. The practice of paying in cash without respective documents, the accounting of costs that have not been really done, and other tricks of that kind will be rendered difficult if not discontinued altogether.

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