Банкеръ Weekly



BULGARIA HAS FEW CHANCES TO BE ACKNOWLEDGED AS A FUNCTIONING MARKET ECONOMY THIS YEARThe European Commission (EC) will most probably not acknowledge Bulgaria as a functioning market economy in its regular report on Bulgaria's progress, the BANKER weekly learned. According to inofficial information, it will be written in the document this year that Bulgaria's economy is quite near the cherished border and in the medium term would be able to endure the competition on the common EU market. This is practically a reiteration of the conclusion, made by Romano Prodi's team in 2001. According to excellently informed sources, the full acknowledgement of Bulgaria as a functioning market economy will be postponed for 2003, when the country is to close the negotiations on all the 30 chapters.The official analysis of the fulfillment of political and economic criteria for EU-membership by the candidate-countries will be presented in the European Parliamant in less than two weeks - on October 9. The procedure will be a month earlier than usual this year because of the forthcoming important meeting of the EC in Coppenhagen in December, where the decision for the EU enlargement by ten new members is to be made. Therefore, the 15 EU members demanded more time in order to get acquainted with EC evaluations. Thus, on John Lennon's birthday it will become known if Bulgaria's EU cause will have a chance or if the consequtive hole in the yellow submarine of our governors will open. The Delegation of the EC in Bulgaria and the Foreign Ministry are zealously guarding the answer to the question if there is a functioning market economy in Bulgaria. Nevertheless, the Minister of European Integration Meglena Kuneva said in front of the BANKER that she expected a positive evaluation, but all the same retained her right to comment in the beginning of October. Similar hopes were expressed by President Georgi Purvanov during the European Investment Forum in Zalcburg, held in mid-September.Unlike the Foreign Minsitry, the Ministry of Economy is much more inclined to talk. With his habitual optimism the Deputy Premier and Minister of Economy Nikolay Vassilev has been for a long time warming up the mass media and the public about the forthcoming success. The former official of Lazard Bank anchors his faith on the persistent macroeconomic stability, the 4.3% growth of GDP for the first half of 2002 as compared to the same period of last year, and the increased share of bank credits to the private sector, amounting to 39.2 per cent. Mr. Vassilev probably has sufficient reasons to be optimistic, but it is a fact that there are also small pebbles, which could overturn the cart. For example, the promised foreign investments of USD1BN for this year are still in the sphere of dreams. According to BNB data, only 242.9MN has entered the country in the first six months of 2002.No doubt, the privatisation of Biochim Commercial Bank will be entered in the plus side when drafting the final report of the EC experts. It is curious, however, how the other big deal for this year - the divestment of the tobacco monopoly Bulgartabc - would be characterized. The sale of 80% of the holding's capital to Tobacco Capital Partners was cancelled by the Supreme Administrative Court in mid-September. The BANKER weekly possesses information that the last report from Brussles is dated September 18, a day after the magistrates' ruling on the Bulgartabac case. The EC cannot but notice that the widely advertised revocation of 70 registration and licensing regimes and the relief of another 120 administrative restrictions is still just a project. It is not difficult in this situation to predict that we'll be criticized this year again about the difficulties which investors still encounter when starting their business in Bulgaria.The amendments to the Commercial Code, regarding the facilitation of procedures when adjudicating companies bankrupt, are also far away from the National Assembly's plenary hall. The market of land and the constitutional changes that could rev it up are in the same initial stage as twelve months ago.Bulgaria already has a functioning market economy, although it's not operating well Krassen Stanchev, Director of the Institute on Market Economy said for the BANKER weekly. His stance is that the country cannot boast of good macroeconomic indicators, but the governors do not pay sufficient attention to the long-term risks, connected with the reform of pension and health insurance. According to Mr. Stanchev, it's quite alarming that the currency board stability depends mostly on the agreement with the International Monetary Fund. He is adamant that some bills, such as the one that is currently being drafted by the Interior Ministry - for confiscation of property, acquired by income from criminal activities - contradict all principles for protection of property rights in the EU.Georgi Ganev from the Centre for Liberal Studies commented that acknowledging Bulgaria as a functioning market economy won't influence essentially the negotiation process, as Bulgaria managed to close in 2002 all chapters, connected with the unified internal market. According to him, it is more interesting in what term Bulgaria will become competitive on the common EU market. Forecasts about that can be hardly optimistic, having in mind the statement of the EU Enlargment Commissioner Guenter Verheugen during his last visit to Sofia in May, 2002. Then he straightly said that Bulgaria's economy would collapse if the country is immediately accepted as EU-member. The former chief Bulgarian negotiator with the EU Alexander Bozhkov points out that EC's decision will be purely political and it will be indicative of EC's attitude to Sofia. Bulgaria's economy will become competitive after we gain access to the structural funds, Mr. Bozhkov explained.Although decisive, the market economy criterion won't be the only one, to be scrutinized in the report. No doubt, the criticisms to the effective legislative system shall not be so sharp as those of the President of the US Committee on NATO Enlargement Bruce Jackson, made during the week. But even the more diplomatic tone, they usually use in the EU, would hardly relieve us of the awareness that the Bulgarian Themis is miles away from the EU requirements. The acceptance of a strategy for a reform in the legislative system in the beginning of 2002 and the amendments to the Judiciary Act, litigated at the Constitutional Court, would hardly wash away the shame from the endless scandals between the Investigation Service, the Court, the Prosecutor's Office, and the executive power. The Government will be probably praised about its attempts to tighten control over the spent finances from the EU after the approval of a strategy for utilizing the structural funds. But Bulgarian officials might again blush with shame this autumn when they read about the trifling percentage of utilized pre-accession financial assistance, which is through their fault. But no matter what the EU commissioners write in the report, it won't eliminate the bitterness from Brussels refusal to commit to a specific date for Bulgaria's admission into the EU.

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