Банкеръ Weekly



Many would find it strange, but the road to Bulgaria's full membership in the European Union starting in early 2007 goes by the Rakovski boulevard in Sofia. This is where the headquarters of the Ministry of Finance are based. And the work done by the subordinates of Minister Plamen Oresharski will determine to a great extent
how benevolent the European Commission will be
towards Bulgaria's application when it publishes its decisive report on the country next spring. As it is known, the budget ministry (in partnership with the Ministry of Internal Affairs, the Ministry of Justice, and the Ministry of Regional Development) were chosen to save three of a total of five problematic fields that were put in the so called red section of the Brussels monitoring analysis from the end of October. These are the sections about Free Circulation of Services (in which the financial ministry plays the leading role), Regional Policy (where responsibilities are shared with the regional department), as well as Justice and Internal Affairs in the part about the fight against corruption in customs and tax administrations. Although not mentioned among the sectors raising problems, there is still a lot to be done in the field of Customs Union, Tax Policy, and Financial Control. To be objective we should note that the European integration team led by Minister Oresharski is also among the best public administration performers, because it finished almost completely its work on three of the negotiation chapters for which the ministry is responsible - Free Circulation of Capitals, Economic and Monetary Union, and Budget and Financial Issues. Of course, the Bulgarian National Bank (BNB) and the Financial Supervision Commission should be honoured, too, as they are directly involved in the harmonisation of the Bulgarian legislation with the EU one in the above mentioned problematic zones.
When assessing the implementation of the country's commitments to the member states, one should take into account
the heavy normative heritage
that Plamen Oresharski found when he took the job from his predecessor Milen Velchev in mid-August. The previous National Assembly did not manage or rather did not want to vote the drafts for the new Tax Insurance Procedure Code, the future Insurance Code, the Excise Duties Act, as well as the amendments to the Gambling Act and the Law on Public Internal Financial Control. The fussing about endangered the start of operations of the National Revenues Agency and the transfer of excise duties collection competences on transactions inside the country from the tax office to the Customs Agency. The huge delay is pointed out as one of the reasons for the resignation of Nikolay Popov, head of the Chief Tax Directorate, that was accepted by the Minister of Finance on November 1. The clearing of old managers in the executive agencies at the budget department is not expected to end here. With or without new managers in the system, it is certain that a lot of work is to be done on the so called financial chapters in the coming months.
The situation looks gravest in
the Free Circulation of Services chapter
The critics to Sofia in that aspect in the latest monitoring report of the European Commission related mostly to the practical application of the amendments to the Foreigners Act and the Gambling Act, recently voted by the Parliament, which abolished some discriminative regulations towards individuals and companies from the community states. For example, the citizens of any of the 25 EU member countries who want to get Bulgarian residence permission will not be obliged to open ten jobs for Bulgarian people or invest USD100,000 in the local economy. It is strange that the restrictions were only cancelled at the start of the mandate of the present National Assembly, even though the draft which contains just one text remained in the parliamentary archives for more than a year. It took the legislative authorities approximately that long to liberalize the regime for licensing companies registered in EU member states to open a casino. The double prices offered to foreigners in Bulgarian Black Sea and mountain resorts have long been disturbing the commissioners, too. But the amendments to the Tourism Act that eliminate that practice were only approved when the Stanishev cabinet came to power. The delay led to reproofs in the monitoring report. On that occasion, an officer in the EC Enlargement General Direction who accompanied Oli Rehn in his recent visit to Sofia told a BANKER weekly reporter that he used to come to ski in the resort of Bansko but because of the double prices he now prefers to go to the Alps.
Another grave problem facing the administration that has to be solved soon is the low percentage of
Third Party Liability motor insurance policies
signed. According to the EC, it is now only 45%, whereas the country committed to reach 90% by the end of 2006. As the BANKER weekly wrote, the Insurance Code draft voted on first reading by the National Assembly stipulated that vehicles which have no Third Party Liability insurance signed will be banned from driving. In fact, after a meeting of representatives of the financial ministry, the Financial Supervision Commission and the Association of Insurers and the Traffic Police last week it was decided that the measure would be applied in advance.
The circulation of services is seriously competed, in terms of unfulfilled commitments, by the inefficient absorption of EU pre-joining assistance which is subject to the Regional Policy chapter. Statistical figures show that while the situation with the PHARE program looks comparatively well and the resources are being absorbed within 80-90% of the memoranda signed,
the situation regarding ISPA and SAPARD
is not good at all. According to data provided by the financial ministry, so far Bulgaria has only absorbed about 40% of the money launched by the EC under ISPA amounting to EUR734.201MN. The problems with SAPARD, about which the BANKER weekly wrote several times already, were reminded last week by Franz Fischler, former agricultural commissioner in the EU, who visited Bulgaria. According to EC experts, the Bulgarian administration is still too far from the time it will be accredited by Brussels to introduce the so called expanded decentralisation system for management of the EU money. The system allows that agreements be signed on the projects without the EC delegation taking part. Therefore, expectations that this might happen next July may not come true. The commissioners already had a chance to express their discontent with the lack of reliable coordination between the National Coordinator (the Ministry of Finance) and the respective intermediate units (the executive agencies). Not to mention that despite its numerous amendments the currently acting Public Procurement Act under which European funds biddings are held does not meet the requirements of the European Union completely.
Consciously or not, Plamen Oresharski and his deputies will also have to take up eradicating
the weeds of corruption
sliding down subordinate agencies such as the Chief Tax Directorate and the Customs Agency. The problem was admitted, although reluctantly, in front of journalists by the Deputy Minister Georgi Kadiev. The financier claimed a red yuppie told media representatives that giving and taking bribes in the institutions that he had been witnessing was a kind of a public secret and should not be hidden. In fact, there is no way to hide it, since cases of corruption emerge every day. As to the customs, the managers (whoever they are) will also have to take care of the practical application of the Customs Act regulations regarding the subsequent control, as well as of the accelerated completion of the BIMIS system.
It's entirely Parliament's job to implement the commitments under the Financial Control chapter, since recently the Council of Ministers approved three bills which will regulate the inspections for expedient
spending of budget resources
Special auditors will be appointed to all ministries and their activities will be coordinated by the particularly established directorate at the financial ministry. In turn, revisions will be carried out by experts from the Public Internal Financial Control Agency. Therefore, EU's requirement for clear distinction between the auditing and inspecting activities of the department will be met.
It seems much easier to fulfil the assignments regarding the Free Circulation of Capitals, Tax Policy, and Budget and Finance. The remarks of the EC are rather technical here and could be corrected timely.
The most curious moment in the Economic and Monetary Union chapter relates to the future cancellation of art. 26, paragraph 3 of the Law on State Budget Structure. It should make it impossible to finance temporary cash collapses in the budget with temporary advances (credits) from BNB. Moreover, legal control will be imposed on some of the BNB decisions which cannot be subject to appeal now.

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