A m e r i c a n C h a m b e r o f C o m m e r c e i n B u l g a r i a

h o m e p a g e : w w w . a m c h a m . b g e - m a i l : a m c h a m @a m c h a m . b gBus in e s s Pa rk So f i a , M lados t 4 A re a , Bu i l d ing 2 , F lo o r 6 , 1 7 6 6 So f i a

Te l . : ( 3 5 9 2 ) 97 4 2 7 4 3 Fax : ( 3 5 9 2 ) 97 4 2 7 41

i s s u e 8 4n o v e m b e r 2 0 0 7

Economy:State Budget 2008; ForeignInvestments; Energy Sector

Amcham news:The star t of meet-the-new-members Event Series

Analysis:Turkey and the Kurds; ForeignInvestment: New Capitals Flow

You will probably notice that in this issue of AmCham Bulgaria

Magazine we are not offering you an article on the 2007 mayoral

elections, as we had promised last month when we introduced the

main candidates.

I am almost certain that you would not have noticed this absence,

had I not mentioned it, and the reason is that the elections went by

in a completely predictable fashion. Boyko Borisov, the leader of the

newly formed GERB party, won in Sofia, and his associates took

Plovdiv, Bourgas, Vidin, Dobrich, Stara Zagora, Yambol and Sliven.

The ruling BSP got only Blagoevgrad, Varna, Lovech, Pernik and Smolian. The "democratic

forces" - or what remains of them - got a mayor in Pleven only.

In other words, a little over one-third of Bulgarian voters went to the polls and gave almost

the entire local power to the former secretary of the Ministry of the Interior. Boyko Borisov

himself - or "the General" as he is known for some reason - immediately declared that this

is a harbinger of early parliamentary elections. We at AmCham Bulgaria Magazine think that

the former policeman should be left to rule in Sofia, the former soccer star Yordan Lechkov,

and all their GERB colleagues - where voters put them. As for the elections, we shall see.

It is very unlikely that the triple coalition of Sergey Stanishev, Ahmed Dogan and Simeon II

will abandon power early. Even though the current government has a nominally leftist label,

its policies are rightist. The country keeps its pledges to EU and NATO partners, and the

teachers' strike is already over.

At the same time, the contender for Prime Minister's position Boyko Borisov has a lot to

accomplish before his GERB party is in good enough shape to win parliamentary elections.

In many instances, GERB supported popular candidates who were not necessarily party loy-

alists, thus winning even in areas with less-than-strong support for Borisov & Co.

Let us not forget that during parliamentary elections, BSP can mobilize a lot more of its vot-

ers, who were now probably discouraged by weak mayoral candidates. Not the least, to win

the next elections (extraordinary or regular ones, in 2009), GERB will most likely have to

form a coalition. The party, however, has no clear partners right now.

If anything threatens the current government, it is only the slower-than-expected growth of

Bulgarians' incomes compared with the fast adoption of European prices and standards.

I hope the cabinet has a plan for that. On my part, I upped the pay for the magazine's staff

writers as soon as I heard "Ode to Joy" at the beginning of this year.

Yours truly,

Milen Marchev

Editor-in-Chief

1p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

e d i t o r i a l

Dear Reader,

c o n t e n t s

2

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Publisher

American Chamber of Commerce in Bulgaria

Business Park Sofia, Mladost 4 Area

Building 2, Floor 6, Sofia 1766, Bulgaria

Tel.: +359 (2) 9742 743

Fax: +359 (2) 9742 741

e-mail: amcham@amcham.bg

www.amcham.bg

Editor-in-Chief

Milen Marchev

Deputy Editor-in-Chief:

Christopher Karadjov

Senior Editor:

Irina Bacheva

ISSN 1312-935X

Writers:

Boyko Vassilev, Marina Tzvetkova,

Mina Georgieva, Panayot Angarev,

Yuliana Boncheva

Advertising

AmCham Bulgaria:

Nadejda Vakareeva, nadia@amcham.bg

AmCham Bulgaria Magazine:

Milen Marchev, milen@milenmarchev.com

The AmCham Bulgaria Magazine reaches a broad audience

of AmCham members, leading US, Bulgarian and internation-

al companies, US and Bulgarian decision-makers, all

AmChams around the world.

Subscription is free of charge. If you would like to subscribe

to AmCham Bulgaria publications, please contact the

AmCham Bulgaria office.

i s s u e 8 4n o v e m b e r 2 0 0 7

AmCham Bulgaria Magazine is a primary forum for political and economic analyses, news, viewpoints as well as for the presentation of new business oppor-

tunities. The articles in the AmCham Bulgaria Magazine express the opinions of the authors and do not necessarily reflect the position of the American

Chamber of Commerce in Bulgaria.

3p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

a m c h a m b u l g a r i a

3M (East) AG . AA KRES EOOD . ABB Bulgaria Ltd. . Abbott Laboratories S.A. . AbCRO - Bulgaria. Accor Services Bulgaria . ACO Building Elements Ltd. . ACSIOR . ADIS Ltd. . AdvanceInternational Transport (Balkan) EAD . AES Corporation . AFA OOD . AIG Bulgaria Insurance &Reinsurance Company EAD . AIG Life Bulgaria . AIMS Human Capital . Alcoa Packaging Bulgaria .Alexander Hughes Bulgaria OOD . ALEXANDROV GROUP CORPORATION . Alfred C.Toepfer International. Alliance One Tobacco Bulgaria . Allied Pickfords Bulgaria . Alter Ego Company OOD . AmericanCollege of Sofia . American English Academy . American Resarch Center in Sofia . American Universityin Bulgaria (AUBG) . Anglo-American School of Sofia . Anton Preslavski, Liebert Hiross . APIS - BUL-GARIA Ltd. . APOLO Ltd. . Argento Human Resource Solutions . Aries Commerce . AssociationIntegra-BDS . Association of Bulgarian Broadcasters - ABBRO . Astral Holidays AD . Astra ZenecaUK Ltd. . AT Engineering 2000 Ltd. . Auditing Company Versi and Partners Ltd. . Avendi Ltd. . AVONCosmetics Bulgaria Ltd. . BAE Systems International Ltd. . Balkan Accession Fund . Balkan NewsCorporation Plc. . Balkan Star Automotive EOOD . Baxter AG . Bayer Bulgaria EOOD . BC Serdon. BearingPoint, Inc. . Berlitz Schools of Languages . BG Radio . BMG Ltd. . Bodyguard-Fire-K Ltd.. Borislav Boyanov & Co. . Braykov's Legal Office . Brown Forman Beverages Worldwide Sofia BranchLLC . British American Tobacco . Bulgaria Platinum Group . Bulgarian American Enterprise Fund .Bulgarian Charities Aid Foundation (BCAF) . Bulgarian Land Development EAD . Bulgarian PostBank .Bulgarian Telecommunications Company EAD . Business Media Group . Business Park Sofia EOOD .CallCenterBulgaria . Candole Partners EOOD . Car Rental Bulgaria Ltd. . Carlsberg Bulgaria AD .Cefin Bulgaria EOOD (IVECO dealer) . Center for the Study of Democracy . Central Hali AD . CEN-TURY 21 Bulgaria . Chelopech Mining EAD . Cisco Systems Bulgaria . Citibank N.A.- Sofia Branch .City University . Clockwork Ltd. . CMS Cameron McKenna EOOD . Coca-Cola Bulgaria EOOD .Coca-Cola HBC Bulgaria AD . Coface Bulgaria Credit Management Services EOOD . Colgate-PalmoliveAdria . COLLIERS International . ConsulTeam Recruitment and Selection Ltd. . Cook Communications. Corstjens Worlwide Movers Group . CPM Consultancy Sllc . Curtis / Balkan Ltd. . Data andInformation Consult . DeConi International . Deloitte Bulgaria EOOD . DENIMAR Ltd. . DHL ExpressBulgaria Ltd. . Diageo Bulgaria Ltd . Diamed Ltd. . Dimitrov, Petrov & Co. . Djingov, Gouginski,Kyutchukov, & Velichkov . DLA Piper Weiss-Tessbach Branch Sofia . Dobrev, Kinkin & Lyutskanov LawFirm . Domaine Boyar AD . Dr. Emil Benatov & Partners . Dr. I.S. Greenberg Medical Center, Ellen RuthGreenberg, Ph.D. . DuPont de Nemours International S.A. . DynCorp International LLC . EconomediaAD . Effekten Und Finanz - Sofia AD . Ekotoi - Service Ltd. . Electron Progress AD . Eli Lilly andCompany . Elido (Lamel Ltd.) . Elmec Sport Bulgaria Ltd. . Elta consult AD associated partner of CBRichard Ellis for Bulgaria . Emerson Process Management AG . Encouragement Bank AD . Enel MaritzaEast 3 AD . Enemona SA . Engineeringservice Sofia Ltd. . Environmental Quality Management, Inc. .Epsilon Interactive International . Equest EAD . ERATO HOLDING PLC . Ernst & Young Bulgaria .European Bank for Reconstruction and Development (EBRD) . Flying Cargo Bulgaria Ltd. - Licensee of FedEx. Force Delta Ltd. . Forem Consulting Bulgaria . Forton International JSCo . Foster Wheeler EnergiaPolska Sp. z o.o. (FWEP) . G4S Security Services Bulgaria JSC . General Electric International .General Security ltd. . Genmark Automation Bulgaria Plc. . GiTy Bulgaria ltd. . GlaxoSmithKline .Global Benefits Group GBGI CEE LLC Representrative Office . Goodyear Dunlop Tires Romania . GrandHotel Sofia . Grenville Bulgaria . Grey Worldwide Bulgaria EOOD . Hewlett-Packard Bulgaria Ltd. .Hilton Sofia . Holiday Inn Sofia . Honeywell EOOD . Hotel Yastrebets Wellness & SPA . IBM Bulgaria. IBS Bulgaria Ltd. . Ideal Standard Bulgaria . Immo Industry Group . In Time Ltd. . IndustrialHolding Bulgaria . ING Bank Sofia Branch . Interbrands Marketing & Distribution Inc. OOD . Interdean. International University . Investbank Plc. . IP Consulting Ltd. . ISI Emerging Markets (InternetSecurities, Inc.) . Johnson & Johnson Doo. . Johnson Controls Electronics Bulgaria . Junior AchievementBulgaria . Kaliakra AD . Kamenitza AD . Kamor Auto EOOD . Katilin Popov Enforcement Officers. Kempinski Hotel Grand Arena Bansko . Kolbis International Transfer Corporation . KPMG Bulgaria .Kraft Foods Bulgaria . LANDMARK Property Bulgaria . Lexim Sofia Ltd. . LIC Penkov, Markov & PartnersOOD . Lindner Bulgaria EOOD . Lirex BG Ltd. . Lowe Swing Communications . M & M Air CargoService BG OOD . M3 Communications Group, Inc. A Hil & Knowlton Associate . Maersk Bulgaria Ltd.. Magnetic Head Technologies . Maria Vranovska, MO, MBA . Marsh EOOD . MARTERN EOOD .Mathnasium Rossimat . McDonald's Bulgaria Ltd. . Mellon Bulgaria EAD . Merck Sharp & Dohme IDEAInc. . Mercurius-Sofia . Microsoft Bulgaria . Miltech Ltd. . Mmd, Corporate, Public Affairs & PublicRelations Consultants . Mobiltel EAD . Monbat Plc. . Moody International Ltd. . Moten Sport .Moto-Pfohe Ltd. . Motorola Bulgaria EAD . National DISTRIBUTORS . NATO Defense College Anciens'Association . NDT Equipment Supplies LTD . Neochimiki Bulgaria S.A. . Net Is Ltd. . NeterraCommunications . Neumann International AG . New Europe Corporate Advisory . New Europe DirectoriesBulgaria . Nexcom Bulgaria EAD . Nu Image Bulgaria . Opet Aygaz Bulgaria EAD . Oracle EastCentral Europe Limited - Branch Bulgaria . Orbit Ltd. . Orkikem Ltd. . OSG Records Management .Outsource Partners International . Ozone Laboratories Bulgaria . PANDA - IP Ltd. . Parsons E&C Bulgaria. Penev & Partners Law Offices . Pfizer Luxembourg SARL, Representation Office Bulgaria . Philip MorrisBulgaria EOOD . Piraeus Bank Bulgaria AD . Pioneer Semena Bulgaria EOOD . Plesio Computers Jsc. Popov Legal Office . PostPath . Praktiker EOOD . Pratt & Whitney . PricewaterhouseCoopers .Procter & Gamble Bulgaria . ProSoft . PSG Payroll Services Ltd. . Radisson SAS Grand Hotel .Reader's Digest EOOD . Regus Bulgaria Ltd. . Renault Nissan Bulgaria SRL . Rising Force Co., Ltd.. Rockwell/Intelpack . S&T Bulgaria . Schenker EOOD . Schering - Plough Central East - Bulgaria. Scandinavia Motors Ltd. . SEAF Management Bulgaria EOOD . Sheraton Sofia Hotel Balkan . SheritaM Ltd. . Siemens AG . Sienit Ltd. . SigmaBleyzer Investment Group LLC - Representative Office .Soravia Bulgaria Ltd. . Stanton Chase International Bulgaria . Stefan Dimitrov, Norman Realestate Co. Ltd.. Stoeva, Kuyumdjieva & Vitliemov Law Firm . Symix Bulgaria OOD . TechnoLogica EOOD . TeleLinkAD . The Atlantic Club of Bulgaria . Tishman Management Company Ltd. . Tissue Bank OsteocenterBulgaria EAD . TMF . Totema Engineering . Trans Company Ltd. . TravelStoreMaker.com .Tumbleweed Communications EOOD . UniCredit Bulbank . Unimasters Logistics Plc . Unique Estates. Unisys Bulgaria Branch . United Consulting Ltd. . United Healthcare Bulgaria Group of Companies .United Medical Communications . Urban 2000 Ltd. . Vaptsarov Joint Stock Company . VectorManagement Bulgaria EOOD . Videolux Holding / Technopolis . VIP Security Ltd. . VISA InternationalService Association . VSK Kentavar Ltd. . Welcome to Bulgaria . Westinghouse Energy Systems BulgariaBranch . World Courier Bulgaria . Wrigley Bulgaria EOOD . Xerox Bulgaria Ltd. . Yavlena Ltd. .Zlati Dinev Studio in partnership with Outerbridge/Morgan .

Board of Directors

of the American Chamber of Commerce in Bulgaria

President Mr. Borislav Boyanov Borislav Boyanov & Co.

First Vice President Mr. Anthony Hassiotis Bulgarian PostBank

Second Vice President Mr. George Randelov IBM Bulgaria

Treasurer Tanya Kosseva-Boshova Landmark Property Bulgaria

Members Ms. Olga Borissova Ellief Center, AUBG

Mr. Thomas Higgins Balkan Accession Fund

Mr. Andon Ichev General Electric

Mr. Stefan Ivanov Citibank N.A.

Mr. Kenneth M. Lefkowitz New Europe Corporate Advisory

Ms. Evgenia Stoichkova Coca-Cola Bulgaria

Mr. Chris Thompson Bearing Point, CLRP

Ms. Elitsa Tsaneva Ideal Standard Bulgaria

Ex-Officio Member Mr. James Rigassio US Senior Commercial Attache

Executive Director Valentin Georgiev

Contentsc o v e r s t o r y

USAID in Bulgaria Celebrates End of

17 Years of Assistance . . . . . . . . . . . . . . . . . . . 4

By Jennifer Croft

e c o n o m y

Budget 2008:

A Wonderful Time for Fiscal Promises . . . . . . . . . 10

By Marina GEORGIEVA

Foreign Investment: New Capitals Flow in 2008 . . . 14

By Marina Tsvetkova

s e c r e t s e r v i c e s

Government Starts Intelligence Shuffle . . . . . . . . 18

By Panayot Angarev

a n a l y s i s

Allies in Chains . . . . . . . . . . . . . . . . . . . . . . 20

By Boyko Vassilev

Energy Sector Faces New Threats

over EU Emission Allowances . . . . . . . . . . . . . . 22

p r o c u r e m e n t

Some $50 Million Will Be Spent in Bulgaria for

Contracting in 2008 . . . . . . . . . . . . . . . . . . . . 24

By Irina Bacheva

Mark Lumer, contracting officer,

U.S. Space & Missile Defense Command:

Bulgarian Companies Have an Edge in Servicing

U.S. Bases in Europe . . . . . . . . . . . . . . . . . . 26

Monika Schoeller, supervisory contract officer,

Defense Logistics Agency: U.S. agency looks for

Bulgarian suppliers . . . . . . . . . . . . . . . . . . . . 28

a m c h a m e v e n t s

AmCham Launches Meet-the-new-members

Event Series . . . . . . . . . . . . . . . . . . . . . . . . 30

Adding Bulgarian Taste to Brussels' Cooking . . . . 32

n e w s

Banking on Food . . . . . . . . . . . . . . . . . . . . . 34

Marina Brakalova, FORA Foundation

Chris Rebstock, Global FoodBanking Network

u s n e w s

U.S. Department of Commerce Environmental

Trade Mission Visits Bulgaria . . . . . . . . . . . . . 36

m e m b e r n e w s

Kabile Attracts hi-tech Archaeologists . . . . . . . . 38

By Shawn Ross & Adela Sobotkova

SE Europeans Accumulate Wealth,

Choose to Invest . . . . . . . . . . . . . . . . . . . . . . 39

Garnev, Karakitis Join Ernst&Young

in Bulgaria . . . . . . . . . . . . . . . . . . . . . . . . . 40

Kempinski Hotel Grand Arena Bansko Awarded as

Leading SPA Resort . . . . . . . . . . . . . . . . . . . 41

Motorola Plants Trees in Mladost . . . . . . . . . . . 41

n e w m e m b e r s . . . . . . . . . . . . . . . . . . . 42

Renault Nissan Bulgaria

m u s i c

Punk at 30: A Retrospective on the Filth,

the Fury and Fender . . . . . . . . . . . . . . . . . . . . 43

c o v e r s t o r y

4

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Who are the people who tell the story ofUnited States Government developmentassistance to Bulgaria?

They are the court clerks in courtsaround the country who are able to workmore transparently and effectivelythanks to case management software.

They are the ordinary citizens who savetime and nerves by receiving all munici-pal services in a convenient one-stopshop rather than visiting different offices.

They are the entrepreneurs who tookloans to build and expand their busi-nesses and hire more workers.

They are the new homeowners whoreceived mortgage loans from the

Bulgarian American Credit Bank.

They are the children in communitiessuch as Stara Zagora and Chelaparewhere community funds have success-fully forged partnerships with businessto renovate playgrounds and soccerfields.

They are Muslim and Christian childrenwho participate in after-school lessonsto learn about world religions and havefun celebrating each other's holidays.

They are the young graduates of theAmerican University in Bulgaria who arepursuing successful careers in the pub-lic and private sector.

The impact of seventeen years of assis-

tance and an investment of more than$600 million can be seen in manyaspects of Bulgarian society. U.S.assistance has played a key role inBulgaria's transformation since 1990into a well-functioning democracy andstable market economy.

Working closely with Bulgarian partnerorganizations, the Bulgarian govern-ment, and other international donors,USAID addressed priorities such aslocal governance, rule of law, financialsector reform, agricultural and privateenterprise development, humanitarianassistance, energy restructuring, ethniccooperation, civil society development,and anti-corruption. Following are themajor areas and achievements of U.S.development assistance to Bulgaria.

USAID in BulgariaCelebrates End of 17 Years of Assistance

By Jennifer Croft

U.S. Ambassador to Bulgaria John Beyrle, USAID Bulgaria Mission Director Michael T. Fritz and the Bulgarian Minister of State Administration Nikolay Vassilev

provided their personal and professional perspectives on key aspects of the U.S.-Bulgaria partnership during the meeting in Kempinski

5p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

c o v e r s t o r y

Democracy and

Governance

Early USAID support focused on devel-oping a pluralistic political party system,strong civil society, and independentmedia. One of the most important andsuccessful components of USAIDdemocracy promotion work in Bulgariawas support for local governancereform. In the later stages of its pro-gram, USAID turned its attention to ruleof law issues, anti-corruption, and judi-cial reform. Concrete results of theseactivities include:

● The establishment of a parliamentaryinternship program;

● The creation of 140 "one-stop shops"in municipalities to provide citizens

with easy access to information andservices. These centers serve two-thirds of the Bulgarian population;

● The increase by more than $100 mil-lion of municipal revenues between2000 and 2006;

● An Association of Community Fundswas established which has raised$800,000 for grassroots communityprojects such as hospital and schoolrenovations;

● Thirty-two courts achieved the statusof "model courts," implementing highstandards of transparency and effi-ciency;

● Private enforcement agents collectedmore than $60 million in enforceableclaims during the first year of the newprofession.

Economic Growth and

Restructuring

More than half of USAID funding inBulgaria was aimed at helping the coun-try develop its free-market economy.Initial assistance focused on privatiza-tion and reform of economic policies.Later, support shifted to stimulating pri-vate entrepreneurship with technical and

Organizations for democratic reform

and development

● The American University in Bulgaria

● The National Institute of Justice

● The National Association of

Municipalities in the Republic of

Bulgaria

● The Foundation for Local

Government Reform

● Nine Regional Associations of

Municipalities

● The Broadcast Training Center

● An active network of civic advo-

cates, including the Bulgarian

Center for Not-for-Profit Law, the

Bulgarian Institute for Legal

Initiatives, legal clinics, and the

Attorneys' Training Center

Organizations for economic reform

and development

● The Bulgarian American Credit

Bank

● Nachala and Ustoi micro-credit

organizations

● The Institute for Market Economics

● The Center for Energy Efficiency

(EnEffect)

● A network of Career Development

Centers (36 in 2007)

● A network of support organizations

including the Center for

Entrepreneurship and Executive

Development, the Bulgarian

Center for Training and

Development, Voca Consult, e-

FLAG, FLAG APEX, and the

Agency for Small and Medium

Enterprises

Environmental legacy

● A managed system of protected

areas, including two major national

parks and the Rila Monastery

Nature Park.

Key legacies of usaid in Bulgaria

USAID Acting Administrator Henrietta H. Fore

addresses the audience at the closing ceremony of the

USAID Mission to Bulgaria on October 10, 2007,

at Sofia's Kempinski Hotel.

c o v e r s t o r y

6

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

financial assistance. After the bankingcrisis in 1996, USAID stepped in to helpstrengthen financial institutions. USAIDwas also involved in reform of Bulgaria'spension system, and in restructuring ofthe outmoded energy sector. Starting in2003, USAID focused on improving pri-vate sector competitiveness in agricul-ture and other sectors. Concrete resultsof these activities include:

● More than 1,000 medium-sized stateowned firms were privatized by 1997.

● Modern laws on investment and taxa-tion were passed, and the governmentestablished key strategies to promoteinvestment and SME development;

● The Bulgarian American Credit Bankwas a pioneer in mortgage lending,providing mortgages for more than5,000 apartments;

● More than 53,000 loans worth $68million were made to micro-enterpris-es that supported more than 78,000jobs;

● Banking system assets have grown bymore than 500 percent since 1997;

● Energy efficiency projects in hospitalsresulted in average savings of 20 per-cent.

Quality of Life

USAID also supported various projectsto ease the social cost of Bulgaria'stransition. These included programs toreduce the impact of mass layoffs andunemployment, humanitarian crises, andenvironmental degradation. Examples ofthe results of these initiatives include:

● Approximately 130,000 jobs were

directly created as a result of USAIDprojects;

● Flood assistance in 2005 supportedmore than 10,000 victims;

● A network of 36 career centers in uni-versities provides career consultingservices to more than 170,000 stu-dents;

● The Bulgarian Government receivedassistance in managing protectedareas and developing the nationalparks system.

Training and Education

Training was an essential part of theUSAID approach in Bulgaria, leaving alegacy of knowledgeable and skilledprofessionals who participated in semi-nars, courses and study tours. Almost$60 million in U.S. funding supportedthe establishment and growth of theAmerican University in Bulgaria, a four-year liberal arts undergraduate institu-tion with the mission of educating futureleaders. The curriculum, based on theU.S. liberal arts model, is taught inEnglish.

Planting Seeds for Future

Progress

USAID is establishing two funding mech-anisms to continue reform work in keyareas. The main mechanism will be theAmerican for Bulgaria Foundation,established with the liquidated assets ofthe Bulgarian American Enterprise Fund(BAEF). The Foundation is expected tobecome operational in 2008. Anothermechanism, the Bulgaria Fund, wasestablished with the German MarshallFund and will give targeted grants toNGOs.

Closing Ceremony Marks a

New Stage in the U.S.-

Bulgaria Relationship

On October 10 in Sofia, Acting USAIDAdministrator and Director of ForeignAssistance Henrietta Fore joined morethan 400 guests in paying tribute toBulgaria's graduation from Support forEast European Democracy (SEED)development assistance, the closing ofthe USAID Mission in Bulgaria, and thecontinuing U.S.-Bulgarian partnership.The closing ceremony was attended byprominent representatives of Bulgariancivil society, media, business, govern-ment, the judiciary, and academia.

Microcredit from USAID has helped entrepreneurs such as Rositsa Atanasova (above) and Radka Zdravkova

(below) expand their businesses. Both women are clients of the USAID-supported Nachala Cooperative in

Stara Zagora.

c o v e r s t o r y

8

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Ambassador John Beyrle and Ministerof State Administration Nikolay Vassilevemphasized the progress Bulgaria hasmade, especially in the last ten years,and the substantial impact of the U.S.Government on reforms in the economy,judicial system, local governance, andother areas.

"Starting sometimes from just the sparkof an idea, we have built something ofimmense value that neither Americansnor Bulgarians could have accomplishedwithout the other's help and support,"Ambassador Beyrle remarked in hisspeech.

Three additional Bulgarian speakers,Rayna Gavrilova, Executive Director ofthe Trust for Civil Society in Central andEastern Europe, Stefan Ivanov, CountryOfficer for Citigroup in Bulgaria, andHristo Ivanov, attorney at the BulgarianInstitute for Legal Initiatives, providedtheir personal and professional perspec-tives on key aspects of the U.S.-Bulgariapartnership. The speakers focused onthe future potential of Bulgaria to be arole model for its neighbors in the west-ern Balkans, and the need to continuethe fight against corruption, organizedcrime and trafficking as well as to pro-tect Bulgaria's unique natural beauty.

As a symbol of the continued growth ofthe U.S.-Bulgaria partnership and itsachievements, each participant in theclosing ceremony received a certificatethat a tree will be planted in their namein Sofia's South Park. The USAIDMission and Sofia Municipality will orga-nize the official planting of approximate-

ly 500 trees in November.

Spreading the Message

about USAID in Bulgaria

In mid-September USAID launched apublic awareness campaign consistingof TV, radio, print and internet ads. Thegoal of the campaign is to raise aware-ness among the Bulgarian public aboutthe accomplishments of the U.S.-Bulgaria partnership. Broadcasting ofthe TV and radio spots was conductedby the Association of BulgarianBroadcasters (ABBRO), an advocacyorganization for independent media thatreceived early assistance from USAID.

A new publication was distributed at the

October 10 ceremony entitled USAID inBulgaria: 1990-2007, A Story ofPartnership and Progress. The 40-pagefull-color publication, available in Englishand Bulgarian, examines the key areasof USAID involvement and concreteresults of USAID assistance. It includessuccess stories, first-person testimoni-als, and photographs illustrating thework of USAID. ■

For more information about USAID inBulgaria, please visit http://bulgaria.usaid.gov. Copies of the publicationUSAID in Bulgaria: 1990-2007, A Storyof Partnership and Progress can beobtained by contacting Ms. VessiGoleminova at the USAID Mission, +359-2-939-5702, vgoleminova@usaid.gov.

A court clerk in Veliko Turnovo is able to perform her duties more efficiently thanks to equipment and soft-

ware provided by USAID as part of its program to strengthen the Bulgarian judiciary.

e c o n o m y

10

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

The leaders of the ruling coalition - Sergei Stanishev of theBulgarian Socialist Party (BSP), Simeon Saxe Coburg-Gotha ofthe National Movement Simeon II (NMS) and Ahmed Dogan ofthe Movement for Rights and Freedoms (MRF) approved thedraft budget for next year. The draft bill will have to beapproved by the National Assembly, after passing the amend-ments to the relevant tax laws. According to the Cabinet, the2008 budget

will raise the wellbeing of the people

and will make the economy more competitive.

The 2008 state budget will be strained to implement, as it stip-ulates a 25 percent increase in revenue compared to this year,Finance Minister Plamen Oresharski told journalists immedi-

ately after the 2008 budget bill was deposited with the NationalAssembly.

According to Oresharski, the budget aims at macro-economicstability and sustainable development. Due to the expectedhigh current account deficit of 21.9 percent by the end of nextyear, a budget surplus of 3 percent of the GDP has been tar-geted for next year. This, according to Oresharski, will guar-antee the actual coverage of the Bulgarian lev and the stabil-ity of the exchange rate.

The Finance Minister stressed also that the flat 10 percent tax,which will be levied as of next year, is the lowest in Europeand will help attracting foreign investments. The 2008 budgetbill stipulates a record high level of state investments - BGN4.25 billion, up from 2.8 billion in 2007. The bulk of these

Budget 2008:

A Wonder ful Time forFiscal Promises

By Marina GEORGIEVA

Bulgarian Prime Minister Sergey Stanishev talks with Simeon Saxe-Coburg Gotha and Ahmed Dogan over some final adjustments in the Budget 2008. The three

political leaders in the ruling coalition faced problems such as the National teachers strike and lack of money for some of the public sectors turned out to be the main

issues of the budget.

Pho

to b

y Pre

ssph

oto

BTA

11p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

e c o n o m y

investments are dedicated to infrastructure projects.

Education, healthcare, and the social

sphere

will be the financing priorities for the next year.

For instance, education will get an increase of BGN 470 mil-lion compared to the current fiscal year. More funds have beenallocated to science and research, in order to allow Bulgariato redirect its economy towards higher added-value productsand thus raise the competitiveness of Bulgaria's production.Substantial amounts have been allocated to infrastructure pro-jects as well, for instance co-financing scheme aimed atabsorbing the funds released by "Transport" and "Regionaldevelopment" European structural programs.

2008 is emerging as a difficult fiscal year, Plamen Oresharskiadmitted recently. His remark was perhaps motivated by thefact that this country will have to allocate co-financing fundsin order to successfully absorb the substantial funds releasedfor Bulgaria from the EU structural funds. Besides, the current

account deficit is expected to continue to grow next year andrise to about 22 percent of the GDP, which is the highest levelamong all EU member states. As an EU member, Bulgaria willalso have to pay its annual contribution. Still, a number ofspheres need a more substantial financing, but it depends onthe budget potential. Its successful implementation depends onthe high rate of reforms, designed to curb expenses and raisetreasury revenue. The targeted budget expense for 2008 is setat BGN 25 billion, or 40 percent of Bulgaria's GDP. It is stipu-lated that the revenues to the 2008 budget should exceedexpense by 3 percent of the GDP. Education and healthcarewill get 4.2 percent of the GDP each, and the social spherewill get a total of 12.2 percent. Defense will get 2.1 percent,and town planning 2.4 percent of the GDP.

One of the declared objectives of the 2008 budget is to raisethe living standard of people. Hence, a 10-percent increase ofbudget salaries is planned for July 1, with options for a furtherincrease, provided the individual institutions streamline theirexpenses. That is why the ruling coalition plans quick reformsin the public sector and the decrease by 12 percent of thenumber of public employees, which in turn will allow the rest

The maximum incurred income ceiling will be raised by 40

percent as of next year, which constitutes the most signifi-

cant change in the social budget. The logic of the social

budget however follows this year's guidelines. Employers

reacted unanimously: the steep increase from BGN 1400 to

BGN 2000 was interpreted as unfoundedly large, not moti-

vated and contradicting to previous agreements between the

social partners, the Confederation of Employers and

Industrialists in Bulgaria (CEIB) wrote in a position paper.

Besides, the minimum insured income threshold was

increased by less than 10 percent - from BGN 220 to BGN

240.

Maximum pension is set by law at 35 percent of the maxi-

mum insured income ceiling, which means that the maximum

pension must rise to BGN 700 in 2000. The maximum pen-

sion for next year however remains at its 2007 level - BGN

490, as the maximum insured income ceiling in the 2007

budget remained unchanged.

A total of BGN 7.6 billion have been allocated for social

insurance, social support and social care, which is by 13.4

percent (BGN 900 million) more than 2007. This amounts to

31.7 percent of the total expenses, which makes these allo-

cations the largest for next year.

A new rule will be applied as of January 1, 2008, which stip-

ulates that people with a full working ability shall not be enti-

tled to unemployment benefits for more than 18 months. If

they fail to find employment by themselves, they will be

enrolled into literacy and professional qualification programs,

while the state will play them a minimal wage and social

insurance. The Social Affairs Ministry has allocated BGN 190

million out of its budget for subsidized employment and qual-

ification programs.

A total of BGN 5.3 billion is allocated for pensions in 2008,

which is by BGN 900 more than this year. This increase is

attributed to a two-step increase of pensions this year by a

total percentage above the budget target. The 2008 budget

bill again stipulates that the government will apply the so

called Swiss rule to pension adjustments - which means that

the increase will be determined by equal weight by inflation

and by the increase of the average insured income level.

This rule however was not applied both in 2006 and 2007.

According to this rule, pensions must be increased by 9.1

percent as of July 1, 2008.

The unemployment benefits threshold remains unchanged

from 2007 - BGN 90, while the ceiling is raised by BGN 10

to BGN 190. The same amount will be paid to mothers car-

ing for their children until the age of 2.

The budget bill does not stipulate further steps to alleviate

the social insurance burden, after the last 3-perceny

decrease in effect as of October 1. Employers' organizations

propose a record 13 percent decrease in the middle of 2008.

Thus, pension insurance payments would fall to the level of

the income tax, 10 percent. CEIB claims that this measure

would bring out in the open major portion of the income,

which is currently not covered by insurance installments. The

ratio between the installments made by the employers and

the employees becomes 60:40, compared to 65:35 for 2006

and 2007.

Insured top income will be drastically increased

e c o n o m y

12

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

to get higher salaries. Pensions will be increased by 9.5 per-cent as of July 1 as well. A flat tax rate of 10 percent will beintroduced as of 2008 for natural persons' income, but the tax-free minimum will be eliminated. This measure will leave moremoney in the hands of people and will offset to a certainextend the appreciation of a number of goods and services.Appreciation is expected to continue next year as well, mainlydue to the increase excise duties on energy.

Business will also keep more funds in

2008.

It is a well-known fact that Bulgaria has the lowest profit taxin the whole of Europe - 10 percent, which is one of the pre-conditions for attracting more foreign investments to this coun-try. Value-added tax will remain at 20 percent next year. In linewith its EU membership, Bulgaria is obliged to raise the exciseduties on fuels to the EU level. Excise duties on unleadedgasoline, fuel oil, coal, and of electricity for commercial pur-poses will be increased next year. This will increase budgetrevenue, but at the same time will boost prices of many prod-ucts and services.

In order to attain the minimal required EU levels, the exciseduties on cigarettes will be raised by 33 percent in 2008, withanother two steps at the same rate are planned for 2009 and2010. It is planned to reduce the excise on mixtures using bio-fuels (for gasoline and bio-ethanol to BGN 671.3 per tonne,and for fuel oil and bio-diesel to BGN 588 per tonne. Therequired bio-fuel content is set at 2 to 5 percent. Excise duties

on coffee and coffee extracts will be reduced as well.

Tax payers should be concerned by the

fact,

that the bulk of the budget funds next year will be allocatedto unreformed sectors like healthcare and education, econo-mist Georgi Ganev said.

It is normal to talk about GDP at the end of the fiscal year -this is the time to evaluate developments, "but when theexpenses of the state are planned, it is a highly corruptapproach to ask so much money for the systems", Ganevsaid.

"The state budget idea is not just spending money, but receiv-ing something in return. Which means that we, as taxpayers,spend some money, but at the same time we expect to receivea product, the so called public welfare - protected health,national or personal security, justice and a feeling of getting asquare public deal. Money can be spent for such objectives,but to pour funds without getting anything in return while sec-ondary education in Bulgaria continues to drown - this is notacceptable", Ganev added.

Critics if the Cabinet's fiscal policy

claim that, judging by the figures in Budget 2008 and by the poli-cies emerging behind these figures, the public sector will remainwithout reforms. The proportions relevant to the funds allocated

Bulgarian Minister of Finance Plamen Oresharski handles the State Budget 2008 to the Chairman of the National Assembly Georgi Pirinski.

Pho

to b

y Pre

ssph

oto

BTA

13p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

e c o n o m y

to education, healthcare and the social sphere follow the 2007budget targets, while the increased financing will come out ofeconomic growth and not as a result of new policies.

Financial experts from the non-government sector claim thateducation has been highlighted as a priority in words alone. Thearguments of the finance ministry that education will receivemore funds next year, expressed as a portion of the gross nation-al product, are not sufficient for the time being to convince nei-ther the teachers, nor the science community that this sector hasbecome a genuine priority for the government. These estimatesare supported by claims that the 4.2 percent of the GDP for2008 is the same as in 2007, while the difference equals theGDP targets reassessment made in the middle of the fiscal year,which means that the allocations for all sectors are actually lowerif expressed as a share of the GDP. Besides, the "value" of thissector remains below the 4.7 percent asked by teachers and the5 percent asked by young scientists.

In nominal terms, the money for education will be by BGN 470million more next year, which raises the total to BGN 2.6 billion.According to the cabinet assessments, the funding per studentwill be increased from BGN 933 to BGN 1151 in 2008, whichwill allow for an increase of average salaries in the sector toBGN 650. However, the cabinet has stressed that the spendingof the money must be optimized. Expenses optimization is shift-ed to school headmasters - as of 2008, the principle of dele-gated budgets will be introduced in full, which is a year aheadcompared to the program for reforms in secondary educationas approved by the National Assembly last year.

Enforcement by financial tools remains the single incentive forthe restructuring of the sector, based on the funding-per-stu-dent principle. The schools, which manage to enlist more stu-dents in their classes, would be able to allow higher salariesfor their teachers. The survival scheme-school should beclosed down if the number of students is low - will perhapsnot be applied in full scope.

An additional BGN 240 million is allocated in Budget 2008 forvarious programs for school network optimization, for repairs,improved conditions for sports, and others. It is this item of thebudget that was left with some BGN 20 million unspent thisyear, as the municipalities were unable to utilize.

Science is allocated 0.4 percent of the GDP, which amounts toclose to BGN 269 million. Compared to 2007, the 2008 budgetprovides for a BGN 43 million increase of the allocations forresearch. Thus, "research" money will become BGN 60 million,and will be subject to the competition among research projects.The state subsidy for the Bulgaria Academy of Sciences will riseby 13 percent in 2008 to a total of BGN 77 million.

The subsidies for universities next year will be increased byBGN 33 million to BGN 219 million. The base amount of fund-ing for a single university student will be increased by 10 per-cent to BGN 816.

The "Intellect" fund, for which the state

allocated BGN 20 per month

for all children born after January 1, 2008, will be launched

next year. This money will be made available after the chil-dren become of age and will be used for enrolling with a uni-versity or for choosing a professional school.

Hospitals remain underfinanced. Healthcare will receive a lit-tle more next year. Healthcare allocations are increased fromBGN 2.2 billion to BGN 2.6 billion in 2008, which is equiva-lent to 4.2 percent of the next year's GDP target. Thisamounts to a 16-percent increase, which however will beconsumed in advance by inflation, which is expected toemerge above the double-digit level before the end of thisyear.

The budget of the National Health Insurance Fund (NHIF) isincreased by BGN 150 million - BGN 1.61 billion. The expect-ed budget performance of the NHIF for 2007 however is setat BGN 1.55 billion, which indicates that the increase for nextyear is minimal. The most sensitive section - the hospitals -will receive BGN 785 million. The expenses of the hospitalsfor 2007 are estimated at BGN 865 million, which requiredan amendment of the NHIF by an increase of BGN 86 mil-lion. Figures indicate that the financing deficit of the hospi-tals, as admitted by the Health Minister Radoslav Gaidarski,will persist through 2008 as well.

The funds for specialized medical pre-hospital care will beincreased by BGN 10 million, and dental services will getsome BGN 6 million more. No additional funds are plannedfor the general practitioners although the National Assemblyhas already approved on first reading the BSP proposal tospare the pensioners the medical check-up fee.

The allocations for pharmaceuticals for home treatment areincreased by BGN 13 million and will be partially or in fullpaid for by the NHIF. These figures indicate that withoutstructural reforms doctors will continue to work under thesame conditions and patients will receive the same medicalservices as before. NHIF and Union of the Bulgarian Doctorsexperts have improvement of health services, which requiresa BGN 1 billion more than the current NHIF budget. That iswhy the doctors' professional union has deposited its ownbudget proposal, which will have to be discussed by the par-liament.

According to the 2008 Budget bill,

the Ministry of Healthcare will receive

BGN 560 million,

which is 20 percent more than this year. The ministry is pay-ing for emergency treatment, for treatment at psychiatric hos-pitals and cancer dispensaries, chemo-dialysis and healthprophylactics programs. Some BGN 140 million will be usedto finance emergency hospitals and the treatment of seri-ously ill patients. Another BGN 160 million has been allocat-ed for expensive drugs for cancer patients and for other seri-ous illnesses, whose treatment is not paid for by the NHIF.The funds for repairs of hospitals, outside those repairs thatwill be carried out by state investment loans, will beincreased by BGN 5 million to BGN 36 million. These fundswill be dedicated mainly to state-owned medical establish-ments. ■

e c o n o m y

14

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Bulgaria's trade and current-account deficit already exceeds 6billion Euro, i.e. more than 20 percent of the country's GDP. Thatis the reason why most economists share the opinion that thewhole economy depends on foreign investment. The inflow of for-eign capital in turn is encouraged by the stability of the Lev.External capital is vital for Bulgaria. Since the gap in the coun-try's balance of payments continues widening, foreign investmentis one of the main ways of stabilizing the economy and the localcurrency, macroeconomists say.

The vocabulary of the Bulgarian incumbents in recent years hasbeen interspersed with investment superlatives. In their words,Bulgaria is something like "a pot of gold" in the Balkans: a def-inition that was used for the first time in relation to Ireland by theU.S. economist Benjamin Powell. The statistical figures encour-age the optimistic assessments of the state's achievements inattracting foreign capital. The data show that foreign investmentin Bulgaria soared from $200 million in 1996 to some 3.5 billionEuro 10 years later, in 2006.

2008 - will be yet another strong year for

Bulgaria

as concerns the inflow of foreign direct investment, governmentanalysts and international experts and observers are unanimous.Forecasts show that the foreign capital in Bulgaria will amount to4.7 billion Euro. Such level of estimated investment confirms thatBulgaria is an attractive place for foreign capital, Minister ofForeign Affairs Ivaylo Kalfin said.

For the past three years, including the capital inflow expecteduntil this year's end, the investment in Bulgaria has reached 11.5billion Euro, compared with 15 to 18 billion Euro for the past 20years. Moreover, in the next seven years Bulgaria will have thechance to absorb 7 billion Euro from the European Union funds.In addition, 10 billion Euro will be injected in the energy sectoralone. The Belene nuclear power plant for instance will cost 3.9billion Euro. In the next few years, two new units will be built atthe Maritsa Iztok thermal power plant, where the investment will

Foreign Investment: New Capitals Flow in 2008

By Marina Tsvetkova

15p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

e c o n o m y

amount to 1 billion Euro. Another 12 or 13 billion Euro is expect-ed from the EU funds and other sources for large infrastructur-al projects. The problem is that currently

only 25 percent of the investment goes to

production,

while real estate attracts 35 percent of the foreign capital.Bulgaria continues enticing foreign investors: the most preferredareas for investment in 2007 are real estate operations, rentalactivities, business services, and financial intermediation.

A survey conducted by the United Nations Development Programshows that Bulgaria is now one of the nine most attractive invest-ment destinations in the world. According to data of theInvestBulgaria Agency, the foreign direct investment in Bulgariabetween 1992 and 2005 amounted to $12.9 billion.

The investment in real estate last year reached an all-time highof 409 million Euro. The direct investment through financialintermediation totaled 614 million Euro. The investment in trade,repair of motor vehicles and personal and household goodsamounted to 36.8 million dollars, data of the National StatisticalInstitute show. Two fields of business that attracted 18.8 milliondollars each were the manufacture of machinery and equipment(excluding electrical and optical equipment) and the manufactureof chemicals, products and man-made fibers. The investment inthe construction sector also registered a substantial increase andin the third quarter of the year the figure doubled to $15.8 mil-lion.

The most attractive sector for

foreign investment in Bulgaria is tourism,

which accounts for 10 percent of the country's GDP. The num-ber of tourist arrivals in 2007 stands at 5.5 million, which showsthe sector's great potential. More and more Britons are choosingthe Bulgarian Black-Sea coast for buying a second home, a sim-ilar trend is observed among German and Russian citizens. Thathas also triggered growth in the tourism sector in recent years.Foreign home buyers in Bulgaria are attracted by the good cli-mate and affordable prices, because foreign currency has a bigpurchasing power in this country.

Great Britain already tops the ranking in investment volume.Companies and natural persons from the British Isles haveinvested 1.1 billion Euro in the Bulgarian economy this year.Some 90 percent of the amount has been used for purchase ofreal estate.

Economists forecast that 2008 will see

a 40-percent increase in foreign investment

in property.

According to experts of BG Estates Worldwide, an internationalreal estate consultant, foreign capital will be directed mainly toBulgaria's seaside resorts, as well as to the balneological cen-ters for recreation and rehabilitation. Investors are interestedmainly in houses and villas and less in apartments. There is alsointerest in the purchase of office buildings and logistic centers.

Bulgaria's direct rivals in the property sector are Croatia,Montenegro, Cyprus, Turkey, and Greece.

Another undoubted magnet for foreign investors is the marketof agricultural land, where deals have been closed for 100,000hectares and at high price levels at that: some 2,000 Leva perha. Year on year, the number of deals has doubled and themarket price has jumped by 30 percent. There are a total of24 special purpose vehicles registered in Bulgaria and only fiveof them invest in agricultural land. The capital of these fivecompanies is 178 million Leva, part of it has been raised on thestock exchange. Some 40 percent of the capital has beeninvested in arable land. In 2006 the special purpose vehiclesbought 35,000 ha of land, i.e. some 1.5 percent of the arableland in Bulgaria. Note that there is 530,000 ha of agriculturalland in Bulgaria, including land that is not fit for cultivation.Interestingly, more than 70 percent of the buyers are foreigninstitutional investors.

East Europe is the most vulnerable region in the world in

the event of a large-scale outflow of foreign capital if the

mortgage crisis in the world aggravates, the International

Monetary Fund (IMF) said. The fund's World Economic

Outlook report points out that a number of market

economies in Europe and the former Soviet Union have

large current account deficits and a substantial increase

in government spending. The vulnerability of these coun-

tries will become evident if the current crisis deepens and

triggers repatriation of capital, the fund's analysts point

out.

The IMF focuses on the credit boom in the Baltic states,

Romania and Bulgaria. The loans are denominated in for-

eign currency and are concentrated mainly in the real

estate sector, which creates concerns for the macroeco-

nomic stability, the report reads. Inflation remains under

control due to the strong competition among countries in

determining wages but the increasing domestic demand

already starts exerting pressure on the economic

resources, the IMF underscores. Growth in the region will

probably slow down to 5.8 percent on the average in 2007

and to 5.2 percent in 2008 due to the tightening of the

monetary and budget policies, as well as to the drop in

exports as a result of the growth decline in West Europe.

The activity slow-down is expected to be most conspicu-

ous in the Baltic states, where the lower rates of increase

in demand will be of use, the fund's experts forecast.

Meeting the inflation criterion is expected to be the most

difficult requirement for the candidates for the Eurozone.

The IMF recommends budgeting prudence. As a whole,

however, the emerging economies in East Europe have so

far managed to resist the crisis in the US mortgage mar-

ket, the economists of the fund point out.

Foreign direct investment in budget 2007

in million euro: 2,708.6

as percent of GDP: 10.4

Macro-pessimism

e c o n o m y

16

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Investment in industrial enterprises

has risen by some 11 percent, according to a business poll ofthe National Statistical Institute. The private sector accounts forabout 79 percent of the estimated expenses on acquisition offixed tangible and intangible assets and managers forecast ayear-on-year increase by 13.4 percent.

The investment made by public enterprises is much smaller: theyear-on-year rise is just 3.2 percent. The bulk of investment wasused for boosting the production capacity of enterprises: 33.7percent of the total volume of expected investment in industry.Another 28.0 percent was injected in mechanization and automa-tion and in implementation of new technologies; the capital usedfor replacement of outdated equipment made up 27.9 percent ofinvestment. The remaining 10.3 percent of investment was spenton environmental protection, security measures etc.

The energy and water-related sectors accounted for 37.7 percentof the investment in 2006. They were followed by the sectorsmanufacturing intermediate goods (36.4 percent) and the sec-tors manufacturing foods and drinks (11.2 percent).

In 2007, industrial enterprises expect to increase investment by16.4 percent. The public sector accounts for 23.7 percent of theestimated investment, i.e. a 28.3 percent rise year on year. At thesame time the private sector projects an increase in the volumeof investment by 13.2 percent.

The investment priorities in Bulgaria's first year as a EU memberare increasing the production capacity, and mechanization,automation and implementation of new technologies: 36.2 per-cent and 26.8 percent of the total volume of expected investmentrespectively.

Bulgaria has been noticed already by for-

eign investors,

the government is adamant at repeating. The InvestmentEncouragement Act was amended earlier this year to ensureEuropean rules for the inflow of foreign capital. But manyobservers found the changes to be creating difficulties, ratherthan enhancing the investment climate. Under the amendments,to provide infrastructural aid to A- and B-class certified investors,the state has to ask the European Commission (EC) for approval.Even if the approval is granted, the minister of economy andenergy is not obliged to submit a proposal to the cabinet for allo-cation of resources. Thus the new procedure considerablyextends the term when investors can receive support. Evenbefore Brussels' approval was required, the procedure took sev-eral months. The facts speak for themselves: despite investors'strong interest in receiving infrastructural support, the state hasso far provided financing for only three projects. These are theSofia Business Park, the project of France's Montupet in Rousse,and the hospital of the Japanese Tokuda.

Also, companies that have been certified as A-class investorsalready will keep their privileges only if they submit a new appli-cation to the Ministry of Economy. That has to be done withinthree months of entry into effect of the amendments and con-cerns only projects that have not been launched yet. Thechanges preserve the three-year validity term of the certificates.

A-class investors with projects exceeding 100 million Leva, how-ever, will be able to extend their certificates by another year.The privilege can be used when the project has been delayedbecause of slow administrative servicing. As a rule, an A-classcertificate is granted for projects exceeding 70 million Leva butthe new conditions raise the threshold to 80 million Leva.Besides, the very certificates will be issued by the Ministry ofEconomy and Energy, not by the Invest Bulgaria Agency.However, that could be a problem, because the ministry doesnot have a trained team to do that. The agency itself will onlybe acquainted with the projects after the investors have beencertified.

The business sector on the investment out-

look

To keep the interest of foreign investors, Bulgaria has to embarkon the promised reforms in the public sector, the way the privatesector is doing it, the Confederation of Employers andIndustrialists in Bulgaria says. Urgent measures have to be takento optimize education and carry out the necessary downsizing inthe state administration. The low taxes and the stable fiscal pol-icy are some of the advantages of the economy; thereforeemployers will suggest that social security contributions shouldbe cut by another 3 percent from 2008.

The capital inflow is essential but businesses should work moreactively on investing in neighboring countries, too. A network ofbilateral agreements on avoiding double taxation will provide forzero taxation of dividend, interest and capital gains from othercountries to Bulgaria. Such agreements may be closed withUkraine and Russia first and then with other countries. Currentlythere are some ten national champions with offshore operationsbut their number may increase, business representatives say.

The World Investment Report of the United Nations Conference onTrade and Development (UNCTAD) points out that Bulgaria is sev-enth in the world in attracted foreign investment in 2007. The doc-ument reviews the size of foreign investment in a total of 141economies. Better performing than Bulgaria are Luxembourg,China, Suriname, Iceland, Singapore and Malta. The reason for theinvestment boom is Bulgaria's EU membership, as well as thereforms in the private sector. Bulgaria is also preferred by foreigninvestors for its low prices and strategic location in the region.

Together with Romania and some CIS countries like Russia,Kazakhstan and Ukraine, Bulgaria is among the leaders inattracting foreign investment in Southeast and Central Europe.These states account for 85 percent of the investment in 2007.Foreign investment in Bulgaria amounted to 3.4 billion by August;35 percent of the amount was invested in real estate and 25 per-cent, in production. To keep investors' interest, Bulgaria shouldreduce the state administration and continue cutting the tax andsocial security rates, the Confederation of Employers andIndustrialists in Bulgaria said. The organization will propose arevision in social security contributions by 3 percent if the bud-get revenue performance in 2008 remains as strong as in 2007.According to data of the Bulgarian National Bank, foreign invest-ment in 2006 amounted to 4.4 billion Euro, but the figure mayreach 5.5 billion Euro when the data of the National StatisticalInstitute are added, macroeconomists say. They forecast thatinvestment in 2008 will increase by 30 to 40 percent. ■

s e c r e t s e r v i c e s

18

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

The cabinet of Prime Minister Sergei Stanishev was the firstto embark on a major restructuring and modernizing ofBulgaria's security services after 17 years of delays by anumber of successive cabinets.

Government experts drafted a bill on the creation of aNational Security Agency (NSA), which will merge theNational Security Office, the military counterintelligence andthe financial intelligence authorities, removing them, respec-tively, from the ministries of the interior, defense and finance.The new agency, expected to start operations as of thebeginning of 2008, will be directly subordinate to the PrimeMinister and will have the rank of a ministry.

Stanishev aired his views on the NSA bill for the first timeduring the visit of U.S. president George Bush last June inBulgaria. According to unofficial information, the provisionsof the bill have been coordinated with U.S. professionals andNATO experts.

"It is our view that the changes in the structure of the intel-ligence services as proposed by the Cabinet are good, asBulgaria needs the strong potential of intelligence. If theprinciples of professionalism and supervision are providedfor in the bill, then Bulgaria will have a modern securityagency, which is a must under current circumstances", U.S.Ambassador John Beyrle said Oct. 15.

Government Star tsIntelligence ShuffleMajor players object or seem not to care

By Panayot Angarev

Members of the Commission for Interior Safety and Public Order and the State Council of Defense had discussed the setup of new National Security agency during

a meeting in Sofa last month.

Pho

to b

y Pre

ssph

oto

BTA

19p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

s e c r e t s e r v i c e s

The provisions of the bill, approved on first reading by theNational Assembly, stipulate that NSA will be in charge ofeliminating any challenges to national security related tospying in favor of foreign powers, corruption or organized-crime ties of senior officials, use of violence for political pur-poses, as well as to threats against economic, financial andenvironmental security. The NSA will also protect classifiedinformation.

The bill stipulates that the three authorities merged into theNSA will be transformed into general directorates with indi-vidual budgets. The agency will be headed by a director,deputy directors and a chief secretary. Currently, debatesamong the authors of the bill are focused on whether theagency director should be a professional, with experiencewith the special services, or a political appointee.

The future agency will have a special unit in charge of wire-tapping and surveillance. Thus, it will be independent of theassets within the Ministry of the Interior. The services of thecurrent "Operative and Technical Information" and "OperativeSurveillance" departments of the Ministry of the Interior willbe used only by sanction of the agency director. Any data,indicating the perpetration of a crime, will be submitted to theprosecution and the investigation authorities. The agency willnot have investigative powers and will deal exclusively withintelligence, counter intelligence and surveillance operations.

The agency's operations will be subject to the supervision ofa parliamentary committee. Although it will be directly sub-ordinate to the Council of Ministers, the NSA will provideidentical information to the president, the Prime Minister andthe speaker of the National Assembly.

A number of questions and problematic provisions werehighlighted during the debates, as members of the parlia-ment claimed that a number of amendments must be madeto the original bill. A working group has been established,with Tatyana Doncheva (Bulgarian Socialist Party, BSP), IlkoDimitrov (National Movement Simeon II, NMS) and KassimDal (Movement for Rights and Freedoms, MRF) as members,who were charged to draft the necessary changes beforethe bill is submitted for a second reading.

One of the major issues, which will have to be resolvedbefore the bill is approved, is whether the President shouldappoint the NSA director. According to the provisions of theoriginal bill, the President signs a decree for the appointmentof the director, who is nominated by the cabinet. Oppositiondeputies, however, said that guaranteeing national security isa prerogative of the executive and not of the head of state.

Another major issue, identified by members of parliament, isrelated to the proposed merger of the three authorities.Yordan Bakalov of the United Democratic Forces (UDFs)said that the bill did not stipulate a detailed organizationalstructure of the future agency. MPs from the ruling coalitionsaw some structural problems arising out of the transfer ofmilitary intelligence personnel under the command of civilsuperiors. Ilko Dimitrov from the NMS also said that themechanical merger of the three authorities might createproblems by establishing "feudal fiefs" within the new

agency. He proposed that the departments of the agencyshould be granted functional independence at a later stage.

The mechanism for coordination between the new agencyand the Ministry of the Interior remains unclear. Accordingto the provisions of the bill, these issues should be speci-fied by a supplementary instruction. Opposition MPsexpressed their reservations that conflicts may emergebetween the NSA and the Ministry of the Interior in thefuture regarding cases, on which both authorities operatesimultaneously.

Debates in the parliament highlighted also the issues relat-ed to the parliamentary control over the operations of thenew agency. The provisions of the bill simply state that thecontrol shall be executed by a parliamentary committee,without specifying whether this committee shall be special-ized or its obligations will be taken over by an existing par-liamentary committee. Angel Naidenov from BSP said thatboth options would be acceptable. The opposition insists onthe establishment of a new parliamentary committee, whichwill be chaired by a member of parliament outside the rul-ing coalition. Similar practices have been employed by otherEuropean states.

The ruling coalition will have to decide before the secondreading whether the final text of the approved act shouldban the employment of officers of the former secret ser-vices. The initiative for the inclusion of the provisions waslaunched by the chairman of the Internal SecurityCommittee of the National Assembly, Nikolay Svinarov(NMS). BSP deputies however challenged such amend-ments.

"It is more important to focus on the provisions, related toguaranteeing the professionalism of the employees of thenew agency, on the texts, which will eliminate political inter-ference and the notion that the Agency will be nothing but anew political umbrella for corrupted civil servants at seniorexecutive positions or for criminals involved with senior stateofficials," said BSP's Angel Naydenov.

The MRF is seen as having the final say on whether officesof the former state security apparatus will be allowed intothe new agency. ■

The 2008 budget will have to tackle some serious issues

related to the functioning of the future agency. Being a

first-class budget assets manager, the NSA will need its

own substantial budget, comparable to the budget allocat-

ed to the Ministry of the Interior and of Defense.

According to national security experts, an insufficient bud-

get will restrict the agency's capabilities to engage in intel-

ligence and surveillance operations, which will immediate-

ly make it dependent on the Ministry of the Interior.

Judging by the current provisions of the 2008 budget,

none of the affected ministries - the finance, the interior

and the defense - is planning to part with its departments

that nominally should become part of the NSA in a few

months' time.

a n a l y s i s

20

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

If, while reading this, you can see tanks on television, then theTurkish army has advanced for the 25th time into North Iraq.If another movie is on screen - the Turkish Prime MinisterErdogan and the U.S. President Bush shaking hands - thenTurkey has listened to the advice of the United States - prob-ably for the 125th time. But do not be mistaken: in both casesthe problem remains, the problem Turkey has with its minori-ties and its past.

Turkey has been quite nervous this fall. First, the two internalelites - the old secularist and the new Islamist - engaged intheir latest, but hardly last, tough election fight (as theAmCham Magazine reported). Second, the U.S. HouseCommittee on Foreign Affairs recognized the Armenian geno-cide, which infuriated Ankara. And third, the paramilitary unitsof the Kurdistan Workers Party (PKK) killed 40 Turkish sol-diers. Besides, they operated from de jure Iraqi but de factoautonomous Kurdish territory. "Our patience is running out," thenew president, Abdullah Gul, warned. One can easily believehim.

Let us start with the PKK. Until recently Turkey thought it haddone with it. In 1999, after a masterly though murky operation,the leader of the party and Number One enemy to Ankara,Abdullah Ocalan, was captured. He was sentenced to deathand the sentence has not been carried out yet. In prison,leader Apo re-discovered Western values, started reading phi-losophy books and declared Nietzsche "a prophet."

In 2001 the United States started its war on terror, which pre-sented a handy opportunity for the Turkish state to repeatedlyattack the PKK (declared a terrorist organization by both the

United States and the European Union).

Coupled with the stick, though, the Kurdish cause got a car-rot. After having been neglected and dubbed "mountain Turks"for a hundred years, the Kurds in Turkey found an importantally: the moderate Islamists of the Justice and Development(AK) Party. The Islamists opposed the nationalist secularistsand the depressed minority saw in that

a promise for more rights.

Thus Anatolia, the residence of 14 to 18 million Turkish Kurds,became the booster rocket of the AK Party. Despite the grum-ble of Istanbul's establishment, the mutual liking betweenKurds and Islamists created the victorious election machine ofPrime Minister Recep Tayyip Erdogan that has already twicewon absolute majority in the Turkish parliament.

But what is the problem then, you may ask. The problem is thatthe Kurdish issue - which has been neglected by history - isthe ghost of Asia Minor; if you chase it out of the door, it willget in through the window. There has almost never been aKurdish state; there are Kurds living in Turkey, Syria, Iran andIraq, not to mention the huge European diaspora. The typicalKurdish career is that of the Crusaders' rival, the noble 12th-century sultan Saladin - destined to become famous under theflag of a foreign nation, dynasty and cause. The fight for astate has not ceased for the past 100 years. It was destinedto win its first victory in Iraq.

After Operation Desert Storm in 1991, the Kurds and their twopolitical parties practically controlled part of the mountain

Allies in ChainsTurkey, Kurds and the United States in hatred and in love

By Boyko Vassilev

A Turkish military chopper, moving soldiers to the frontier, lands in a mountainous district of Yuksekova, in the Hakkari province, near the Turkish-Iraqi-Iranian bor-

der, southeastern Turkey in the end of October.

Pho

to b

y Pre

ssph

oto

BTA

21p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

a n a l y s i s

regions of North Iraq. Their fighters, dubbed "peshmerga,"helped overthrow the enemy Saddam, the man who used achemical weapon against them. Thus the Kurds (some 4-6 mil-lion) became some of the most faithful friends of the UnitedStates in Iraq and the region. The new Iraqi constitution gavethem an autonomous regional status: they interpreted it as fullautonomy and did not wave the Iraqi flag but the motleyKurdish one. The territory is important: oil fields of Kirkuk areclose by. One of their political leaders, Jalal Talabani, becamepresident of Iraq and the other, Massoud Barzani, premier ofthe Kurdish region.

All that makes it easy to explain why the PKK managed to re-organize in the de facto Kurdish North Iraq. Its 3,000 youngfighters were trained in the rugged mountains and decided toact. They sneaked into Turkey and started killing. Not that theyhad not done it before, forcing the Turkish army 24 times toinvade North Iraq for punitive operations. But now it is differ-ent. Challenging the Turkish army, an ally and friend of theAmericans, are the Iraqi Kurds -

also U.S. ally and friend.

Somewhere in between are the guerillas (or terrorists) from thePKK, but they may be forgotten in all the turmoil. "Our pesh-merga fighters will resist any Turkish incursion," said Barzani,driving Ankara mad once again. Washington in turn harnessedits whole diplomatic imagination to stop a possible Turkishoffensive.

This is where yet another link broke. The Democrat-dominatedU.S. House of Representatives (as a matter of fact, one of itscommittees) decided that now is the time to talk of the geno-cide against the Armenians in Turkey in 1915. Whether it didit just as a snub to Bush or because of influential donors fromthe Armenian diaspora, it does not matter: the Turkish-American relations were strained to the extent that Ankararecalled its Washington ambassador "for consultation."

The White House started explaining and apologizing, but all invain. It is difficult to explain to the sensitive Turks the pecu-liarities of U.S. foreign policy: they will not understand,because they do not want to. Such facts here usually entailfundamental conclusions: "America no longer loves us," someTurks say; "America is angry with us that we did not back it100 percent in Iraq," others add. "America wants to make aKurdish state - first in Iraq and then on our territories," yet oth-ers fear. And then they recapitulate: "Is it not time for us tolook for other allies - Iran, Syria, and why not Russia? Why notgive America a piece of our mind? Why not abandon thestrategic partnership with Israel?"

The leaders of the AK Party - premier Erdogan, President Guland foreign minister Babacan - belong to none of the fourgroups. While they tried to make friends with the Kurds, theyalso tried - slowly and quietly, step by step - to take up withArmenia and the Armenians. They showed that they were notenthusiastic about the anti-Armenian hysteria in Turkey byleaving it to their opponents, the secularists - judges, the mil-itary, historians. The very word "genocide" was even spoken bya Turkish mouth - something unthinkable before. The moder-ate Islamists wanted to impress Europe and convince it that

they can cope with the problems of the minorities and thepast.

Once you get into the eye of the storm, small steps will nothelp you run away. Premier Erdogan had to show the suspi-cious military that he is no lesser a Turk than them. He gotmad at the United States over the Armenian genocide resolu-tion and concentrated a 100,000 man army at the borderagainst the PKK.

Zugzwang

is the word chess-players use in similar situations. You mustmake exactly this move and no other.

This raises at least two strategic dilemmas. One is for Turkey,the other is for the United States.

The first question is how can Turkey make itself Europeanwithout becoming disintegrated and losing its national pride? Itis clear that a Bulgaria of 8 million will stomach Brussels' con-ditions more easily than a Turkey of 75 million. But what hap-pens if Turkey does not want to stomach it?

The United States knows that the Iraqi Kurds love it, becausethey think they have been promised a state (the same beliefexplains the Americanophilia of the Albanians in Kosovo).Washington, of course, avoids the question of what will hap-pen with this Americanophilia if Kurdistan and Kosovo do notbecome independent. And here is the second strategic dilem-ma: If it duly backs the Kurds in Iraq, the United States willalarm the other Iraqis (Sunnites and Shiites) and anger an allythat was until recently faithful, Turkey. If it abandons the Kurds,the United States will win their hatred.

What a bad luck!

Americans have very few friends in this region and even thesedisplay opposite interests. Allies against allies: you love the oneI hate and I hate the one you love. Relations blocking otherrelations: Allies in chains, I apologize to the famous rock bandfor the pun.

Of course, there is a way out: a delicate, slow and difficultbalance that will not lead to a zero-sum game and will createa win-win situation. Now that I think of it, there is no elegantway to translate the last two phrases in Bulgarian. Or at leastthere is no immediate translation that gives idea of what theyare about. I do not speak Turkish, and I speak Kurdish evenless, but I am certain that there are no such phrases thereeither. A win-win situation: do people in Anatolia know what itmeans?

Turks have their own lovely proverbs.

"You can take a horse to water but you cannot make it drink;and even if you can, you should not," says one of them. It isuseless - both for the PKK to kill any more and for the Turkisharmy to chase it in the mountains of Iraq.

What is needed is a little common sense, some time and a coolhead. I am sure that this can be translated into Turkish. ■

a n a l y s i s

22

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

EC cuts Bulgaria's greenhouse emission

allowances by 37.4% in 2007-2012

The electricity sector has overcome the main supply risks inthe first half of 2007 stemming from lost production capacitiesand regulatory failures on the electricity market but is facingnew challenges after the decision of the EuropeanCommission in late October to cut the carbon dioxide (CO2)emission allowances for Bulgaria by 37.4%. The Commissionreduced the (CO2) allowances in the Bulgarian national plansfor 2007 and 2008-2012 to 42.3mn tonnes per year from pre-viously envisaged 67.64mn tonnes. The country will thus losethe opportunity to sell excess emission allowances in theamount of 25.34mn tonnes annually which are valued at aboutEUR 575mn at the current market price (EUR 3.5bn for the 6-year period). Moreover, the country may not be able to meetthe new CO2 emission cap that would necessitate purchaseof allowances from other countries and could block manyongoing or planned projects in the coal-fired power generationsector or in other sectors relying on conventional energy. Theverified emissions for Bulgaria are reported at 40.6mn tonnesin 2005 against the new cap of 42.3mn tonnes per year.However, the closure of two nuclear power units as of Jan 1this year has raised significantly the electricity output in coal-fired generation facilities and related CO2 emissions. Takinginto account the sound industrial growth in 2006-2007, it mayturn out that the country is already above the new allocationplan.

Energy supply overcomes supply risks but

administrative barriers persist

The gross value added in the energy sector, as reported in theGDP breakdown by supply components, dropped by real 10.6%y/y in Q1 after a much steeper fall of 27.5% y/y in Q4 lastyear, but rebounded to a growth rate of 4.1% y/y in Q2. Thefigures are preliminary and cover supplies of electricity, heat,natural gas, and water. The weak performance at the end oflast year and the first months of this year also reflects weath-er-driven demand effects, which are quite strong in the field ofheating supplies where no export options exist. The monthlystatistics for energy production and sale volumes show furtherrecovery in the second half of the year but the country's powerbalance has been seriously threatened again not only by the

new emissions caps but also by regulatory pitfalls. Excessprice regulations on the market of electricity supplies tohouseholds, coupled with insufficient liberalisation of importsand exports, create unfavourable conditions for power produc-ers and large electricity users. The energy regulator has triedto achieve several incompatible targets as of July 1 for main-taining low electricity prices for households in response topolitical pressure, low power generation prices amid rising inputcosts, and market opening in compliance with EU regulations.To maintain low domestic prices, the energy commission andthe government have been forced to accommodate indirectforms of limiting export deals. Power producers however com-plain that the current regulatory framework does not allowthem to use reserve production capacities in periods of highexternal demand while sales on the local market bring nega-tive net income flows.

The coal-fired power plant in Varna, which was acquired bythe Czech Electricity Company (CEZ) last year, claims that itcould be forced to stop production in order to minimise loss-es and at the same time it would not able to take attractiveorders from abroad due to various export limitations defined as"national security" principles. CEZ Group has meanwhile wona big deal for electricity supplies to Kosovo and plans to usefree power generation capacities in Bulgaria to fulfil part ofthese obligations. The price contracted in Kosovo is more thantwo times higher than the corresponding one in Bulgaria butCEZ may face new regulatory barriers despite the formalopening of the export market. At the same time, large elec-tricity users complain that the price ceilings in the householdsector will force power producers to raise the average price ofelectricity supplies in the industry by about 30% to cover high-er costs for primary energy inputs and to capitalise on elec-tricity supply gaps in the region.

The ratio of price adjustments for large industrial users willapparently depend on international fluctuations in future thatwill restore the previous model of cross-subsidies in the elec-tricity sector, as big consumers will pay higher prices thanhouseholds in contrast to cost fundamentals and price struc-tures in other EU members. In these circumstances, big elec-tricity users are urging the energy commission to maintain var-ious forms of export barriers until demand is fully guaranteedby domestic producers.

Energy Sector FacesNew Threats over EUEmission Allowances

This article is based on extracts from ISI Emerging MarketsIntelliNews publications: Bulgaria This Week and BulgariaCountry Report. For more detailed information please contactISI Emerging Markets office in Sofia at +359 2 8160404 or info_bg@securities.com

23p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

a n a l y s i s

Power supply outlook

The risks of supply gaps will increase next year when someof the biggest coal-fired power plants will have to pay sanc-tions set by the line EU regulations or stop operations.According to the rehabilitation programme in the sector, thethree power plants in the coal basin of Maritsa East have tomeet EU environment standards by the end of the year butonly few units are modernised so far. The private investorsworking on state orders or buy-own-transfer contracts with thestate power system operator pledge to speed up installation offilters but at least some of the units will have to pay sanctionsin the beginning of the year when energy demand will be atseasonal hikes. In addition, strike warning of coal miners

increase supply risks. On the other hand, the energy produc-tion and sales reports for 2007 indicate that the sector has thepotential to raise capacity utilisation rates.

The electricity sector could separately benefit from commis-sioning of small power generators that are not monitored ona regular basis by the system power operator but may haveplayed an important role in the country's energy balance inview of the large number of investments allocated to buildingsmall hydropower plants and other small-scale projects. Theparliament and the government have passed new regulationsin the first half the year in support to private investors in cleanenergy that could offset part of the supply risks in the tradi-tional energy sector. Investment commitments in the field ofhydro, wind and solar energy have risen significantly in 2007and look like the most promising alternative for offsetting sup-ply gaps until the project for building a nuclear plant in Beleneis completed. In the meanwhile, environment ministerDzhevdet Chakarov vows to appeal the decision of EC andbelieves that local authorities will win the dispute even it isbrought to court.

But the ministry is not in the best position to argue with EUauthorities, as the country is facing sanctions on several otherenvironmental failures linked to the programme for preservationof biodiversity and possible violation of emission targets insteel mill Kremikovtsi and several large coal-fired power plants.The ministry of environment is separately attacked by a num-ber of investors seeing vested interests in the licensing proce-dures for mining and exploration activities. ■

p r o c u r e m e n t

24

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Bulgarian companies won U.S. military procurement contracts inrecent years and proved they can deliver, said Mark Lumer, con-tracting executive for the U.S. Army Space and Missile DefenseCommand. He participated in a contracting training seminar inPlovdiv on Oct. 9-11, organized by the Defense AcquisitionUniversity (DAU), the American Chamber of Commerce inBulgaria and the U.S. Embassy. The seminar was designed toprovide detailed information on contracting procedures to firmsinterested in US-Bulgaria joint training facilities.

More than 100 Bulgarian companies throughout the country reg-istered to learn more about U.S. contracting procedures and theopportunities to participate in the tenders for the U.S. bases inBulgaria. Defense Ministry officials also attended the event.

A Bulgarian company, Agrima, has won a subcontract to supply

Pepsi-Cola to U.S. military bases in Romania, U.S. expertsannounced during the seminar. At the moment, negotiations areheld with a Bulgarian company to deliver mineral water to theU.S. soldiers in the Middle East, said Sean Scott, U.S. Armyattache to Bulgaria.

Lumer explained that every year the U.S. government is buyingproducts and services for more than $400 billion, approximately$250 billion going to the U.S. Army. For the fiscal year 2006, theU.S. government bought products and services for $425 billion.There are 800 U.S. laws on military procurement, but the proce-dures are clear and every company can go through them, saidseminar participants. The training session was focused on cur-rent and future business opportunities and included discussion ofU.S. contracting procedures for tenders, evaluations and award-ing of contracts.

Some $50 Million WillBe Spent in Bulgaria for Contracting in 2008

By Irina Bacheva

From Left: US Experts Bruno Wengrowski, DAU and Mark Lumer, contracting executive for the US Army Space and Missile Defense Command (From Left) and

Bulgaria's Defense Ministry officials - Brig. Gen. Boyko Rabadjiiski, General Staff of Bulgarian Army (third from right), Venislav Tzanov, Director Procurement and

Management Directorate at the Ministry of Defense share business cards.

25p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

p r o c u r e m e n t

"We already have awarded about two dozen prime contracts toBulgarian companies over the last two years, so Bulgariancompanies are way beyond just being subcontractors," Lumersaid. He praised the quality offered by the Bulgarian compa-nies.

"Bulgarian companies should have advantages related to lowertransportation costs for procurements in Europe, and they mayvery well have a labor rate advantage over some other countries."

Meanwhile, fifteen companies and organizations from Plovdivregion have started procedures for participation in U.S. Army ten-ders. The companies are from the food industry, hotel, cosmet-ics, and transport business. Some of them are: Bella, Agri-M,Dimitar Madjarov, Roza Impex, Leipzig Hotel, Sugar factoryKristal, City Transport Plovdiv, etc.

To participate in a U.S. Army tender, the companies have toobtain the so-called DUNS number (Data Universal NumberingSystem), then NATO Cage Code (Commercial Activity andGovernment Entity), and, finally, CCR (Central ContractorRegistration). The procedures are free of charge. For companiesin Bulgaria, three types of contracts offered at the tenders aremost suitable: micro contracts for up to $3,000, middle-rangedcontracts of up to $1,000,000 and large contracts, of $1 millionor more.

Seminar tutors presented a very detailed picture of the U.S. con-tracting system, which is very structured and predictable, but thecandidates should be very careful of the deadlines and tenderconditions. According to Bruno Wengrowski, DAU, the process ismechanical, not political, and the federal acquisition system aimsat satisfying the customer in terms of cost, quality, and timeliness

NOVO SELO, Bulgaria - Joint Task

Force-East "Lion Strike" held a ribbon-

cutting ceremony Sept. 26 to celebrate

the completion of a humanitarian pro-

ject at the Public Retirement Home in

Sliven, Bulgaria.

"This retirement home was selected as

the beneficiary of both our nations'

desires to improve the accommodations

of those who have served and sacri-

ficed and are deserving of the best we

can provide in their retirement years,"

said Lt. Col. Bruce Sones, commanding

officer, JTF-E "Lion Strike", who spoke

at the ceremony.

Eleven U.S. Navy personnel from the

Naval Mobile Construction Battalion 40,

commonly referred to as SeaBees, over-

saw the project to replace metal-framed,

single-paned windows in the lobbies on

all three floors with insulated, double-

paned windows, which will prevent the

loss of heat.

Because the project required the

removal of the surrounding walls and

placement of custom-fitted windows, the

SeaBees contracted the installation of

the windows to a local construction firm,

said Chief Petty Officer William Nesbit,

assistant officer in charge of the NMCB

40-Detail Romania. Once the windows

were installed, the SeaBees performed

an inspection and did some finish work,

such as patching and painting the sur-

rounding interior walls.

"The reward here was not just the new

windows to keep the heat in during the

winter, said Iliana Slavova, director for

the retirement home, "but also the

friendships developed with the SeaBees

standing here."

"I know that words are not enough to

express my gratitude, but on behalf of

myself, my colleagues and the residents

here, I would like to thank you," said

Slavova. Before leading five of her fel-

low residents in a popular Bulgarian

song about never forgetting your home-

land, Milka Bankova also expressed her

gratitude to the SeaBees, stating that

the time they spent together was spe-

cial.

"In your faces, we see our sons, and in

our faces, you probably see your par-

ents," she said. "It fills our hearts with

joy, happiness and hope that we have

not been forgotten - that there are still

people who think of us." ■

Successful Projects

Joint Task Force-East "Lion Strike" HoldsRibbon-Cutting Ceremony at Retirement Home

By Master Sgt. Kimberly Williams, Photos by Pfc. Crystal Abbott

Lt. Col. Bruce Sones, commanding officer, JTF-E "Lion Strike", gives his remarks during a ribbon-cutting

ceremony Sept. 26 at the Public Retirement Home in Sliven, Bulgaria. SeaBees conducted a humanitar-

ian project at the retirement home to replace broken, single-paned windows with insulated, double-paned

windows.

of the delivered product or service.

Concerning business opportunities in U.S.-Bulgarian trainingfacilities, the tutors mentioned as most needed the hotel ser-vices, water and food supply, engineering and construction ser-vices, transportation, mobile telecommunications, office consum-ables, fuel, electricity supply, portable toilets and showers, laun-dry and dry cleaning, medical services, custom services. In addi-tion, the U.S. military will enjoy the recreation and leisure time inthe surroundings of the facilities, which would lead to extrainvestments in the local economy.

Major William Cundy, team leader, 409th Contracting SupportBrigade, U.S. Army Contracting Command Europe, indicated that

the plan is for approximately $50 million to be spent in Bulgariafor contracting in fiscal year 2008, perhaps even more.

He said that over the last four months the following types of con-tracts have been utilized in either Romania or Bulgaria or both:Janitorial, Chemical Toilets Refuse Removal, Bulk Potable WaterDelivery and Waste Water Removal, Transportation Motor Pool andMaterial Handling Equipment (TMP & MHE), Grounds and RoadsMaintenance, Wash Rack Service Support Laundry Services.

Major Cundy also said that as part of the recent exercise con-ducted at Novo Selo, two humanitarian assistance projects werecompleted: a senior citizens home in Sliven and kindergarten inMokren. ■

p r o c u r e m e n t

26

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Bulgarian Companies Have an Edge inServicing U.S. Bases in Europe An interview with Mark Lumer, con-

tracting officer, U.S. Space & Missile

Defense Command

- Can you mention some countries that are on top of the U.S.

list of buying products?

- Most of the U.S. government trading partners are from Europe,Canada, Australia, South Korea, where we can buy products andservices.

- What kind of services does the U.S. government buy?

- We buy everything: medical supplies, police whistles, ammuni-tion, furniture, uniforms, not as the general perception is that webuy mainly airplanes and missiles.

- Is there anything specific for the upcoming tenders for

establishment of U.S.-Bulgarian bases?

- The tenders will be open up to everybody, to every company.Over the last two years there have been at least two dozen con-tracts awarded to Bulgarian companies for the joint military train-ings in Novo Selo and other regions. The critical thing for theBulgarian companies is not to think you are limited to do workfor the U.S. Government only in Bulgaria. You can do works inGermany, in Italy, Iraq, Afghanistan, and to the United States.

- How Bulgarian companies managed to compete for other

tenders?

- Bulgarian companies, like most European companies, have anadvantage to work in Europe, because they are here and itmeans that the transportation costs would be substantially lowerthan for the Japanese or American companies.

- How do you appreciate the potential of Bulgarian compa-

nies to serve the U.S. bases here?

- Based upon the fact that we have awarded those dozen con-tracts, and in every case Bulgarian companies have performedvery well, now we believe that they will get larger dollar contracts,

comparing to 18 months ago. We hope that Bulgarian companieswill compete and hopefully win contracts for 500 000 millionUSD. They have a track record for positive performance. I wouldlike to point out that most of the companies do not read theentire tender that is the most common mistake in tenders.

- Comparing to the previous years, like 2004 or 2005, are

there more companies competing for the tenders? Is the U.S.

government spending more money to buy products and ser-

vices?

- The U.S. government contracting projects have almost doubledfor the last 6-7 years. So in 2000 we were looking for $200 bil-lion and now it would be more than $400 billion. We have moremissions worldwide and we are hiring more and more contrac-tors to perform work, obviously the war in Iraq is one such oppor-tunity for the various companies. We are contracting hundreds offirms only in Iraq.

- This is an ongoing trend, right?

- It has to go on. I guess it would double in six or seven years.We have to hire contractors, businesses. In Iraq we have morecontractors than U.S. soldiers. We have 180,000 contractors,compared to 160,000 US troops. ■

27p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

p r o c u r e m e n t

NOVO SELO, Bulgaria. As the two-week "Lion Strike" exer-

cise came to a close, U.S. and Bulgarian military personnel

joined together for two symbolic ceremonies Sept. 27 and

28.

First, Joint Task Force-East celebrated the ribbon-cutting

ceremony for a humanitarian project at a kindergarten in

Mokren, Bulgaria. Eleven U.S. Navy personnel from Naval

Mobile Construction Battalion 40, otherwise known as

SeaBees, finished an extensive renovation of the school dur-

ing the exercise.

The children from the school, along with parents, teachers,

school director, local officials and U.S. and Bulgarian mili-

tary personnel, crowded the small courtyard during the cer-

emony.

"We say in the United States that the children are our

future," said Lt. Col. Bruce Sones, commanding officer for

JTF-E "Lion Strike". "We hope through the efforts of those

involved in this project that the improved environment creat-

ed for teaching the children will contribute to the children's

development as they grow and become leaders in your soci-

ety."

The school director, Margarita Nicolova, thanked the

SeaBees and then presented them with a picture painted by

the children, a CD of Bulgarian folk music, a photo of the

children and a glass vial filled with Bulgarian soil. Of the soil,

she said, "Wherever you go, you know you'll have a piece of

Bulgaria with you."

The school children then sang several songs for the audi-

ence and the ribbon was cut. But, there was another sur-

prise for the children, a HMMWV full of gifts. All of the

Soldiers, sailors and airmen participating in the exercise had

contributed money to buy much-needed school supplies and

educational toys for the school.

"We will maintain what you have done, and promise to con-

tinue with improvements," said Emil Enchev, mayor of

Mokren. "Hopefully we will continue working together in the

future." The next day, all JTF-E "Lion Strike" participants,

both U.S. and Bulgarian, came together again, this time to

commemorate the end of the exercise during the closing

ceremony.

During the ceremony Sones and Col. Biser Kalinov, chief of

Training, Bulgarian Land Forces, presented certificates of

achievement to 14 U.S. soldiers and 16 Bulgarian soldiers

for their efforts during the exercise.

"During this training, we had the opportunity to gain military

experience from the leading force in NATO - the United

States Military, and to show that while representing a small

army, the Bulgarian officers, NCOs and soldiers are honor-

able partners and excellent professionals," said Kalinov, who

spoke first during the ceremony. He was followed by Sones,

who echoed Kalinov's feelings.

"This closing ceremony does not mark the end of a training

opportunity or a farewell to relationships fostered," said

Sones. "In our minds, it marks the hopeful commencement

of future training opportunities to be conducted between our

nations."

"We can truly say the professionalism and generosity of the

Bulgarian Land Forces is unrivaled," he said. "We know the

strong relationship between the United States and Bulgaria,

as demonstrated during this exercise, will continue to grow,

and we look forward to training and serving with you in the

years to come." ■

Lion Strike EndsStory by Master Sgt. Kimberly Williams,

Photos by Pfc. Crystal Abbott

Lt. Col. Bruce Sones, commanding officer for the JTF-E "Lion Strike" Exercise,

holds Asen Ivanov, 5, so he can cut the ribbon during a ceremony Sept. 27 to

celebrate the completion of work at the kindergarten in Mokren, Bulgaria.

During the two-week exercise, SeaBees conducted an extensive renovation pro-

ject at the school. (Pfc. Crystal Abbott)

Successful Projects

p r o c u r e m e n t

28

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

- What is the Defense Logistics

Agency?

- I am for the first time in Bulgaria. I am acontracting officer and I am buying prod-ucts. Except for food and water, ouragency is responsible also for finding sup-pliers for anything from medical products,uniforms, equipment to coffee machines.My office is responsible for the Europeanregion. I have been in this business for 40years, so I usually go to make personalcontacts with the companies - to see andtest the products, to really say they aregood, that the company is qualified. TheDefense Supply Center Philadelphia -European Region (DSCPE) Market ReadyBusiness Unit is committed to providingbest value logistical solutions to the cus-tomer, ensuring that the Military Services,Defense Commissary Agency, DoD andother civilian agencies maintain readinessand recognize DLA as their "provider ofchoice." We provide expert technicalassistance and product knowledge to ourvalued customers throughout EUCOM andCENTCOM to ensure that they receivehigh quality products at competitive pricesto meet their mission and organizationalgoals.

- How do you appreciate the capabili-

ties of Bulgarian companies to win con-

tracts for servicing U.S. - Bulgarian joint

training facilities?

- We find that the quality Bulgarian com-panies offer is very good. I started to con-tact directly the companies here and Iwould say that several contacts woulddevelop in partnerships. If I am dealingwith a broker in Germany, it is complicat-

ed, because the question is about fooddelivery and products that need to bedelivered in short terms. Right now I amlooking desperately for suppliers of freshfoods and vegetables from Bulgaria.

- Have you succeeded in finding those

contacts?

- Not enough of that what I would like.The market is ready for dairy products,and soft drinks. It is very important for theBulgarian companies to understand thelanguage of the tenders, the Englishwording, so they have to read the tenderson the Internet very carefully. Contactdetails of companies have to enter thesystem, because otherwise the business-es can not compete. If they do not haveNATO Cage Code, they can not partici-pate. Ten years ago I just wrote a fax andspecified what kind of deliveries I wanted,and that was all. I have contracts all overEurope, with small firms, like bakeries,etc., but when you physically go there, itis always different. Step by step I explainthem what they have to do, and in a fort-night everything is fine and the contract isready.

- Concerning Bulgarian companies and

tenders here, do you think there would

be enough time to be in touch with

Bulgarian companies?

- I can make a contract in 14 days. If thecompany is on the Internet, and it has allthe necessary registrations, there wouldbe no problem. It is just formal and in myopinion, it is not that difficult to do. I havecontracts up to $40 million as well. Butthis would be a long-term contract, twooptional years, and you have plenty oftime. In Bulgaria it is not likely to have a$40-million contract for the bases here,because it is just about food and waterdelivery. We buy fresh fruits and vegeta-bles, we buy bread - it is possible to reach$100,000 per month, but that is it.

-Can you predict at what prices would

be the contracts?

- It depends on the numbers of the mili-tary - how many would come. But thenumber of U.S. soldiers is been reducedin Germany and the Netherlands, on theaccount of the new bases in the EasternEurope. ■

U.S. agency looks for Bulgarian suppliersAn interview with

Monika Schoeller, super-

visory contract officer,

Defense Logistics

Agency

EUCOM - CENTCOM Troop Support

Specialty European Products

● Post - Pre-Mix Sodas, C02,

Fountains including Maintenance

● Non-Carbonated Mineral Water,

Canned Sodas

● Dairy Products, Eggs, Bakery

Items, Ice Cream, Juices,

● Non-Alcolic Wine, Beer,

Champagne, Potable Ice

● Coffee - Juice Products with

Dispensers

● Produce

Off-Shore Acquisition -

Backup PVN-PVS

Supporting OEF/OIF/KFOR/SFOR/

Forces/Military Exercises with vari-

ety of fresh products

Navy Vessel Support throughout

Europe/SWA Ports

Market Ready Unique

Requirements

● Vitamin A and D added to fresh

milk products, not authorized

within the EU

● American size milk cartons, not

available in Europe

● Preparation of all 302 Customs

Forms, KFOR and SFOR Custom

Forms

● Cyclamate and Saccharin not

authorized for products delivered

to

● Troop Support

● U.S. Military Veterinarian

Approval for all products offered

● Eggs fresh must be delivered in

refrigerated trucks

Contacts:

Contracting Officer:

Monika Schoeller

Telephone: 0049 6134 60 4558

Fax: 0049 6134 60 4667

E-Mail: Monika.Schoeller@dla.mil

a m c h a m e v e n t s

30

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Apromo evening of the AmChamBulgaria new series of events,called "Meet the New Members,"

took place on Oct. 30 at Flannagans,Radisson SAS Grand Hotel. Seven newmembers of the Chamber were givenfloor to present their activities in front ofthe AmCham community. These werethe companies Candole PartnersEOOD, Economedia AD, GeneralSecurity Ltd., Hotel Yastrebets Wellness& SPA, Mercurius - Sofia, and RenaultNissan Bulgaria SRL., and TransCompany Ltd.

Borislav Boyanov, AmCham president,and Chris Thompson, AmCham boardmember, welcomed the newcomers.

Some 50 other guests at the partyattended the cocktail as an opportunityfor both networking and relaxing. Thefloor was given to each of the newmember companies.

Managing Director Diana Pazaitova pre-sented Candole Partners as a companydefining and managing political and reg-ulatory risk across Central and SouthEast Europe. Bisser Boev, general man-ager of Economedia, elaborated on thenew editions and initiatives of one of theleading business media groups inBulgaria. Petya Tsacheva, marketingmanager of Hotel Yastrebets Wellnessand SPA, invited the guests to visit thehotel during the weekend, and to enjoy

the services it offers. Vyara Titorenkova,marketing manager of Mercurius Sofia,said a few words about the variousoffice products the company offers.Laurent Bernard, executive director ofRenault Nissan Bulgaria, expressed hisenthusiasm about the new car modelsthat will be sold on the Bulgarian mar-ket.

To please and amuse the guests, thenew member companies offered specialraffle prizes, such as subscriptions toEconomedia publications and its recentDVD collections; one week test drive ofRenault Scenic Conquest; weekend fortwo at Hotel Yastrebets; and a priceyParker pen. ■

AmCham LaunchesMeet-the-new-membersEvent Series

31p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

a m c h a m e v e n t s

Chris Thompson, AmCham Board Member introduces Diana Pazaitova,

Managing Director of Candole Partners.

At the gates - meeting Bisser Boev, General Manager of Economedia, and Katrin

Ivanova, Marketing Manager, Economedia.

Ms. Vyara Titorenkova, Marketing Manager of Mercurius Sofia.

Getting a sophisticated "Parker" pen from Mercurius Sofia. Wine and beer added to the good moods at the party.

Subscription packages for Economedia editions were given to the most lucky

guests from the audience.

Laurent Bernard, Executive Director of Renault Nissan Bulgaria (on Left) is

delighted to deliver the test drive of Renault Scenic Conquest.

Petya Tsacheva, Marketing Manager of Hotel Yastrebets delivers a weekend stay

award of the hotel to Natalia Hristoforova, General Manager of Regus Bulgaria Ltd.

a m c h a m e v e n t s

32

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Bulgaria is a member of the EU bychoice, and except for adopting the EUstandards and regulations, it shouldactively influence EU institutions fromthis year on.

That was the main point that BridgetCzarnota made advising Bulgarian com-panies in her capacity of a person fromthe Brussels kitchen. Czarnota is a for-mer director of the Technical AssistanceInformation Exchange Office (TAIEX) ofthe European Commission and formerhead of the Bulgaria Unit of theEnlargement Directorate General.

Czarnota said that Bulgarians have toknow what is being cooked in thekitchen of Brussels. "Do not wait to seethe dish in front of you, but go in thekitchen, see what the chef is putting inthe dish, and tell him - we Bulgarians donot want the dish this way, we want toadd our flavors."

The power is in the hands of Bulgarians,furthermore through the Bulgarian rep-resentatives in the EU Parliament, andthe businesses have to know them verywell, and to search for the first handinformation.

Czarnota was a moderator of a work-shop entitled "How to Make Friends andWin EU Contracts," organized Oct. 22 bythree business organizations: BulgarianChamber of Commerce and Industry,Confederation of Industrials andEmployers and AmCham Bulgaria.Among the issues at focus were how theBulgarian businesses will protect theirinterests in Europe and how they willcompete successfully within theEuropean market.

"There are no guarantees that Bulgariancompanies will win the money under theEU structural funds if they are not capa-ble to defend their business projects,"Czarnota pointed out. Approximatelyone year is needed to get the partialfinancing of the projects after applyingfor the EU structural funding, she said.So far Bulgarian businesses are not

feeling strongly the competition on theEU market, but they definitely will expe-rience it in 2-3 years, she added.Czarnota advised Bulgarian companiesto search constantly for informationfrom the EU institutions and to be famil-iar with Bulgarian representatives in theEU Parliament.

"There is no such thing as free lunch,and there is no such thing as free infor-mation. You have a choice - either getinformation by yourself, or try to find thecheapest and most effective way to getinformation," she said.

There is no single web address wherecompanies can go and find all of thenecessary information to participate in atender, or to win a contract, Czarnotasaid during the meeting. For businessesis very important to concentrate onbuilding a sound business base to beable to absorb EU structural funds butnot to see this money for a solution ofeveryone's problems, Czarnota further

explained.

"For example, to build up an effectivenetwork for selling yoghurt, you shouldfind at least one consultant in therespective country to advice how to pro-ceed on the market," said Czarnota.

On her part Maria Kapon, a Bulgarianobserver in the EU Parliament,informed that there is an ongoingdebate within the EU whether the wineshould contain sugar, or not. This is animportant debate that Bulgarian wineproducers are interested in and theyshould know the developments about it,Kapon said.

James Wilson, general secretary of ЕU-Ukraine Business Council, Brussels andEU Croatia Business Council, explainedthat Bulgaria needs an association ofbusinesses with a common understand-ing to lobby before Brussels and to con-sult the enterprises here. The modelworks very well for Ukraine and Croatia

Adding Bulgarian Tasteto Brussels' Cooking

Bridget Czarnota has worked for the

European Commission since 1986. She

was in the then DG3, then DG15, now

known as DG Market, dealing with intel-

lectual and industrial property rights. In

1994 she was responsible for the draft-

ing of the White Paper on preparing the

countries of Central and Eastern Europe

to integrate into the internal EU market

- a kind of simplified guide to the entire

Acquis Communautaire. In 1995 she was

given the job of setting up an entirely

new structure offering technical

knowhow on all the acquis to the 13

would-be members of the EU countries

of which 12 have now acceded (Turkey

is still pending). This new assistance

structure was called TAIEX - technical

assistance information exchange office.

In 2004, following the accession of the 10 new member states, Czarnota was

given the responsibility to head the negotiations with Bulgaria, a post which she

has held until Dec. 31, 2006, year when the country joined the EU. As of Jan.

1, 2007, she has been an advisor within the Secretariat General, in charge of

overseeing the continued progress of both Bulgaria and Romania by means of

what is known as the Cooperation and Verification Mechanism.

businesses and it is "a copy-paste one,"which needs several local companies totake a lead, said Wilson.

The EU-Ukraine Business Council is anindependent CEO-level forum forEuropean and Ukrainian business lead-ers that is set up as a non-profit orga-nization in order to promote trade andinvestment between the EU and Ukraine,to assist companies to develop businessopportunities, and overcome regulatoryobstacles both for Ukrainian businessesin the EU and EU businesses in Ukraine.According to the expert, the model helpsvery much in providing legal consultan-cy, which spares the efforts of compa-nies to look for consultants and ways oflobbying before the EU institutions.

Patrick Zoltvany of the Slovak NationalEmployers Union, a member of the EU

and International Affairs Committee inEuropean Economic and Social Council,talked about problems the Slovak busi-ness faced during the first three yearsof EU membership. Slovak small andmedium-sized companies had to findways to survive in a competitiveEuropean market.

"There are no preferences once youhave become a member of the EU,moreover that you are not receiving thepre-accession money and the rules forthe structural funding are completely dif-ferent," Zoltvany said. He presented aninstitutional view of how to influence thedecision making process in Brussels.Based on the Slovak experience, headvised Bulgarian companies, which aremostly SME-s, to unite and form biggerstructures in order to survive Europeancompetition. ■

B2B Resources: InternationalDevelopment Consulting The Assortis database (www.assortis.com) was presented to the workshop par-

ticipants. Launched in 2001, Assortis has been providing a range of dedicated

B2B resources servicing the needs of both private and public sector organiza-

tions active within the international development aid sector.

The Assortis Daily Tender Alert service is personalized daily e-mail alert that

informs clients of every new business opportunity for tenders, shortlists and

awarded contracts the day they are published from a selection of 25 interna-

tional and bilateral donor funding agencies targeted to the clients sectors and

regions of primary business activity.

The Experts Database is Europe's most comprehensive and up to date database

of development aid consultants with 5000 in total.

The Job Posting Board is a dedicated resource used by organizations looking to

source new profiles for projects they are currently recruiting for.

From Left: Maria Kapon, a Bulgarian observer in the EU Parliament, Ms Bridget Czarnota, former head of

the Bulgaria Unit of the Enlargement Directorate General, Tsvetan Simeonov, Vice President and CEO of

BTPP, Olga Borissova, PhD, Director Centre for European Programmes and Elieff Center, and Irina

Yordanova, Director Projects and Public Communications, CEIBG.

The idea of a different bank - FOODBANK - was introduced to business orga-nizations and companies from the foodindustry during Food bank Informationdays in Bulgaria the week of Oct. 16.

Is the business interested in seeing foodbanks functioning in Bulgaria was thefocus of the discussion held at theAmerican Chamber of Commerce inBulgaria. The concept and benefits fromfood banking were presented from U.S."food bankers" who have more than 20years of experience.

The first food bank was created in theUnited States by a retired businessmanin 1967. Food banks operate in morethan 20 countries in Europe.

What is a Food Bank (FB)?

FB is a charitable organization by nature.Its goal ultimately is to give resources topeople who are in need, hungry, mal-nourished, and cannot afford to buyfood.

Functionally FB is part of the food indus-try. They function as any food distributor,with one major exception that they donot profit and they are not buying thefood that they are giving away. Foodbanks have a dual relationship with thefood industry. On one hand, they arecharitable beneficiary - they are taking

products and resources that the industryis making available to them so they cantake care of people who are in need. Onthe other, they are a business partner tothe food industry.

How food banks can part-

ner with the industry?

Any company makes mistakes in its pro-duction process. Sometimes the mistakeleads to the product they are producingnot being consumable. Most of the timethese mistakes do not really affect thenutritional quality of the food so much asthey affect the economic viability of theproduct. This might be a labeling error.Companies may decide to changebranding and withdraw large quantities ofproduct from the market. Products thatare consumable, but fail to be marketedor can not be sold before their expirationdate is the life blood of the food banks.Food banks provide business solution tothe industry to take that product savingthe industry the cost of disposal theproducts. It takes this product and turnsit to a useful benefit to somebody whois hungry and needs it.

Another part of the business solution isrelated to the charitable activities of thecompanies-companies typically havedozens of charities knocking on theirdoor every year asking for charitabledonation of the products. Companies are

Banking on Food Marina Brakalova, FORA Foundation

Chris Rebstock, Global FoodBanking Network

not in the business of giving their foodaway and do not have the staff or thebudget to spend time identifying who islegitimate and should receive donations.The food bank becomes an extension ofcompanies' philanthropic purposes,because it works with the organizationsserving people directly in their communi-ty.

Food banks are a cost-effective modelfor social assistance. Food banks doprovide assistance of large scale. U.S.food banks provide food worth at least$9 for every donated dollar. Food isalso collected through community fooddrives organized in stores, schools,companies, etc. Food banks are man-aged by professional staff, but at least70 percent of the time is provided byvolunteers.

Warehousing, inventory and food safetystandards: Food banks standards in theUnited States were developed in conceptwith the industry, such as trade associa-tions and the Food Marketing Institute,as well as with the USDA and FDA. Foodbanks facilities look like any big food

industry facilities with the same sanitaryand pest control.

Food banking in Bulgaria?

American and Bulgarian Red Crossworked to introduce and start foodbanking efforts in Dobritch, StaraZagora, Shumen and Pazardjik wheremore than 200,000 kg of donated foodwas provided to 30,000 people for threeyears. These food banks are in a initialphase compared with scales andcapacities in the United States andEurope, but have achieved great suc-cess in mobilizing support form peopleand creating trust.

The "Information days" initiative wasorganized by FORA CommunityDevelopment Foundation in partnershipwith the Bulgarian Red Cross and theCommunity Food bank in Pazardjik andwith the support of USDA. FORAFoundation is established with support ofthe American Red Cross and works toprovide assistance for the developmentof food banking in Bulgaria. For moreinformation visit: www.fora.bg ■

35p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

n e w s

Chris Rebstock, Global Foodbanking Network

u s n e w s

36

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Bio-Microbics, headquartered in Kansas,manufactures proven, affordable and reli-able wastewater and storm water tech-nologies that can help make quick, sus-tainable, and affordable infrastructureimprovements. The company has a widerange of products for wastewater andstorm water applications in residential,municipal and commercial uses.

Contacts:

Robert Rebori, President8450 Cole Parkway

Shawnee, KS 66227Telephone: 913-422-0707

E-Mail: rrebori@biomicrobics.comWebsite: www.biomicrobics.com

Coler & Colantonio, Inc. is a consultingfirm specializing in providing innovative,technology-based services in the areas ofwater/wastewater, energy, and land devel-opment. Their clients include governments,companies, institutions and utilities. Thecompany has developed projects inPoland, Canada, Peru and Kenya. InPoland, the firm has recently completedan assessment and application of waste-water treatment technologies in a water-shed that provides drinking water for thecity of Krakow, Poland.

Contacts:

Mark Devine, Group ManagerDavid Kiely, Partner - Jennings

O'Donovan (Irish subsidiary)101 Accord Park Drive

Norwell, MA 02061Telephone: 781-982-5400

E-Mail: mdevine@col-col.com;dkiely@jodireland.com

Website: www.col-col.com

Environmental Products Corporation

(Envipco), a 28-year old company head-quartered in the State of Connecticut, pro-vides innovative Reverse VendingMachines (RVMs) for beverage containerrecycling. Envipco's machines identify,accept, count, sort and compact usedbeverage containers in exchange for cashvouchers, coupons or loyalty card credits.Additional options include targeted video

advertising, targeted couponing and printadvertising capabilities.

Contacts:

Christian Crepet, Vice President ofEurope Operations

Una Petroske, Vice President ofTechnology

99 Great Hill RdNaugatuck, CT 06770

Telephone: 203-720-4059E-Mail: christiancrepet@aol.com;

unap@envipco.com Website: www.envipco.com

Froehling & Robertson is a multi-discipli-nary engineering firm with core compe-tencies in geotechnical, environmental,construction, materials testing, and con-struction monitoring. The firm is over 125years old, employs over 450, as is head-quartered in Virginia. Froehling &Robertson has worked with many of thelargest U.S. and international companies.In 2005, Froehling & Robertson estab-lished its international subsidiary company,F & R Worldwide, in Romania.

Contacts:

Jeff Hudson, Director of InternationalOperations

3015 Dumbarton Rd. Richmond, VA 23228

Telephone: 804-263-2778E-Mail: jhudson@fandr.com

Website: www.fandr.com

ITT Corporation, Inc. supplies advancedtechnology products and services in keymarkets including: fluid and water man-agement including water treatment;defense communication, opto-electronics,information technology and services; elec-tronics; and other specialty products.Headquartered in White Plains, N.Y., thecompany generated ~$8 billion in 2006sales.

Contacts:

Mike Hughes, Director for Water andWastewater

ITT Corporation4 West Red Oak Lane

White Plains, NY 10604Telephone (UK): 44-1256-303810

E-Mail: mike.hughes@itt.comWebsite: www.itt.com

MIOX on-site generators for water disin-fection provide a safer working environ-ment by eliminating hazardous materials.MIOX, headquarted in New Mexico, offersboth on-site hypochlorite and mixed-oxi-dant generators. MIOX's technology uti-lizes salt, water, and electricity to generatea disinfectant solution, which is collectedin a day tank and injected into the waterat a dosage suitable for treatment objec-tives.

Contacts:

Carlos Perea, CEOIoana Engstrom, Director of International

SalesRadi Simeonova, International Project

Coordinator5601 Balloon Fiesta Parkway, NE

Albuquerque, NMTel: 505-938-1014

E-Mail: ioana@miox.com; radi@miox.comWebsite: www.miox.com

Severn Trent Services, based inPennsylvania, is a leading supplier ofwater and wastewater treatment solutions.The company's broad range of productsand services is concentrated around disin-fection, instrumentation and filtration tech-nologies, contract operating services andstate-of-the-art residential metering prod-ucts and services.

Contacts:

Catherine Estoup, European BusinessDevelopment Manager

3000 Advance LaneColmar, PA 18915

Telephone (UK): 44-7714-346634E-Mail:

cestoup@severntrentservices.co.ukWebsite: www.severntrentservices.com

Zoeller, founded in 1939 and located inKentucky, manufacturers a wide variety ofnon-clogging pumps for the drinking waterand wastewater pump market. Zoeller alsooffers on-site technology that enableswater reuse. Zoeller pumps range from0.5 to over 100 horse power with modelsavailable for handling potable water,excess water and a large variety of efflu-ents.

Contacts:

Alan Nachby, Director of International Sales

3649 Cane Run RdLouisville, KT 40211

Telephone: 502-778-2731E-Mail: alann@zoeller.comWebsite: www.zoeller.com

U.S. Department of Commerce EnvironmentalTrade Mission Visits Bulgaria The U.S. Commercial Service, which serves as the trade promotion unit of the

International Trade Administration of the U.S. Department of Commerce, organized a

trade mission in Bulgaria for American companies working in the environmental sec-

tor. The firms were primarily from the sectors of drinking water, wastewater treatment,

and recycling. The mission visited Turkey, Romania and Bulgaria on Oct. 1-5, 2007.

The U.S. businesses envoys met with representatives of the Ministry of Regional

Development and Public Works, Ministry of Agriculture and Food Supply, and Ministry

of Environment and Waters. They were briefed on the water sector in Bulgaria - water

projects in rural areas, water supply and sewerage companies, construction of drink-

ing water treatment plants, and packaging waste management in Bulgaria. The U.S.

guests had a chance to convene with some 100 Bulgarian organizations and indi-

viduals in matchmaking meetings.

m e m b e r n e w s

38

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

While most foreign scholars, like devel-opers and real estate agents, see theBlack Sea as the most alluring part ofBulgaria, a team of researchers is find-ing great potential in the often over-looked region of Yambol.

A new archaeological project has beenlaunched to explore the site and envi-rons of Kabile, near Yambol. ThisHellenistic, Thracian, and Roman citynot only boasts a dramatic history, but isarchaeologically important due to itsexcellent state of preservation. Whilesimilar ancient cities in the Thracianplain have either been submerged byreservoirs (Seuthopolis) or built over bymodern construction (Philippopolis/Plovdiv), Kabile has survived in a mini-mally-developed rural setting.

The project members include Dr. ShawnRoss (a lecturer in history, University ofNew South Wales, Sydney, Australia)and Adela Sobotkova (a doctoral stu-dent, University of Michigan, Ann Arbor,Mich.), in collaboration with members ofthe Department of Archaeology at SofiaUniversity "St. Kliment Ohridski." Theywere joined for one week by Dr.Samsung Lim (senior lecturer inSurveying and Spatial Analysis, UNSW),a GPS and GIS specialist. The project isrealized thanks to the logistic support ofthe American Research Center in Sofiaand with the help of the YambolMuseum of History. During the 2007season, Dr. Shawn Ross was appointed

a Research Associate at the AmericanResearch Center in Sofia.

During the fieldwork a new remotesensing methodology was tested.Quickbird satellite image (acquiredthrough a UNSW grant) was enhancedand used for the identification ofarchaeological sites in a 100 squarekilometer area around Kabile. Suspectfeatures in the image - traces of poten-tial archaeological sites - were then vis-ited. Some 70 percent of the satelliteimagery has been investigated, andresulting data recorded in a GIS anddatabase. The satellite image serves asa highly accurate and detailed map, andwill also inform future archaeologicalwork in the area.

In 2008 the researchers plan to com-mission a geomorphological survey andconduct an archaeological surface sur-vey with a team of Bulgarian and foreignstudents. While the geomorphologicalsurvey will form a basis for geologicaland palaeo-environmental reconstruc-tion, the survey will produce a detailedaccount of visible archaeologicalremains. The goal of this research is torecord evidence of the ancient environ-ment and past human activity aroundKabile before such evidence isdestroyed by modern development (con-struction of the Trakia Highway consti-tutes the most immediate threat), and toilluminate the social, economic, environ-mental and cultural setting of thisancient metropolis. ■

Kabile Attracts hi-tech Archaeologists By Shawn Ross & Adela Sobotkova

Observing excavations of burial mounds near Yambol. Shawn Ross at the archaeological site of Kabile.

The research team and scholars from Sofia University "St. Kliment Ohridski" and the American Research

Center in Sofia in front of the University Library

39p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

m e m b e r n e w s

SE Europeans Accumulate Wealth,Choose to InvestThe GDP growth in the South Eastern Europe is well above theEU average. It is mostly driven by lively consumption and invest-ment activity. "The strong consumption is driven by households'wish to reach the same living standards of their richer WesternEuropean neighbors," said UniCredit Group CEE ChiefEconomist Debora Revoltella at the Euromoney Conference inDubrovnik. South Eastern European households - in Bulgaria,Romania, Croatia, Bosnia and Herzegovina, and Serbia - are theengine of growth, especially for the new EU countries Bulgariaand Romania it is forecast. These two countries are still profit-ing from the positive EU accession this year. Strong domesticdemand and favorable external environment are behind adynamic performance in both Serbia and Bosnia andHerzegovina. In both countries however sustainability of growthin the medium term is conditional on advancement of structuralreforms. In Bosnia and Herzegovina political forces so far con-tinue to fail to find the necessary agreement, while in Serbiaforthcoming local and presidential elections are likely to delayfurther actions. Wide external unbalances in both countries posean additional threat.

In Bulgaria and more recently in Croatia, the emergence of newsavings flows is adding to the accumulation of wealth (financialand real estate). All over the SE European region, the householdsare rapidly improving their living standards, on the back of fast

increase in incomes and good economic prospects. The personalconsumption grows extraordinary in the SEE countries. Regardingthe ownership of the consumer goods - around 20 percent ofthe SE Europeans have Internet access at home, just under 40percent own a car, around 70 percent do have a mobile phonein the SEE region. Households are increasingly investing in realestate, so there is a strong demand for housing financed by mort-gages. This will continue the high potential for the mortgage mar-ket in the region. The Economists of the CEE ResearchDepartment of the BA-CA and UniCredit Group forecast a 24-per-cent growth per year in 2007-2009 in this area.

"Households in the SEE region are adapting their consumptionhabits to new and improved standards of living. At the same time,they are increasingly investing in their homes. Consumption ismarked by fast income growth and improved access to the cred-it market, which in turn is also supported by a wealth effect aris-ing from fast growth of house prices," Revoltella said.

As a result of mass housing privatization for housing during tran-sition, home ownership rates are comparably high, especially inBulgaria, Romania, Croatia and Serbia. People have discoveredthe best way to invest their money. In the South EasternEuropean countries still persist some underevaluation of prices ofhouses compared to their theoretical level, except for Croatia. ■

m e m b e r n e w s

40

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

Ernst&Young in Bulgaria announcedthat two new partners are joining thecompany. Nikolay Garnev is the newpartner with the Assurance & AdvisoryBusiness Services, and AlexandrosKarakitis leads the Tax Advisory andCompliance Practice of Ernst & Youngin Bulgaria.

Garnev has 10 years of experience inindependent auditing mainly in the fieldof companies within the finance ser-vices sector (banks, insurance andleasing companies and other non-banking institutions). Since August2007, Garnev has been based in theBulgarian office. He will continue to bein charge of audit engagements acrossother Eastern European countries andlargely for the Ernst & Young projectsin Romania, where he has been overthe last year. Garnev is a certified pub-lic accountant and member of theAssociation of Chartered CertifiedAccountants UK (ACCA) and theBulgarian Institute of Certified PublicAccountants (IDES).

Alexandros Karakitis leads the TaxAdvisory and Compliance Practice ofErnst & Young in Bulgaria, beingresponsible of the work of 30 tax pro-fessionals and accountants with legalor economic background. Since July2007, he has been a partner of theContinental Western Europe Area of

Ernst & Young (one of the sevenGlobal Areas of Ernst & Young, whichcomprises France, Spain, South EastEurope, Italy, Portugal, Belgium,Luxembourg and the FrancophoneAfrica). He moved to Bulgaria from theAthens Practice of Ernst & Young lastNovember. His mid-term goal is toachieve market leadership through taxservice quality excellence and opera-tional effectiveness.

Karakitis has extensive experience inall fields of corporate and internationaltax law, advising major multinationalclients in their operations, expansionplans and intercompany transactions.

He specializes in International Tax andespecially transfer pricing, supply chainstructuring and cross-border M&A (healso leads the Transfer Pricing and TaxEffective Supply Chain ManagementPractice of Greece). His clients portfo-lio consists of some of the most promi-nent companies of the Pharmaceutical,Real Estate, Energy and Retail &Consumer Products Industries.Karakitis is an attorney-at-law andholds a doctorate in international taxlaw from the University of Tubingen,Germany. He has a postgraduatedegree in European law from theEuropean Institute of the University ofSaarland, Germany. ■

Garnev, Karakitis Join Ernst&Young in Bulgaria

Nikolay Garnev Alexandros Karakitis

41p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

m e m b e r n e w s

Kempinski Hotel Grand Arena Banskobecomes the leading spa resort inBulgaria for 2007 at the World TravelAwards. The World Travel Awards wereestablished in 1993 to acknowledge,reward and celebrate the enormousachievements in all sectors of the glob-al travel industry. Candidates for nomi-nation are based upon the previousyear's voting. Voting is cast by travelagents in over 190 countries around theworld. Hundred and thousands of voteseach year are registered online at theofficial World Travel awards website.

Situated in one of the most symbolicBulgarian cities, the Alpine style hotelblends gracefully into the surroundingarea. The ensemble consists of fivebuildings located at the foot of Banskoski slopes, offering direct access to themodern gondola station. On the foot ofthe beautiful Pirin Mountain The up-scale Zalez Spa & Wellness Center rep-resents an exclusive space for anybodywho revels in luxury and harmony. Every

detail was designed to give completerelaxation. Unique in its size and varietyof services, the Zalez Spa & WellnessCenter in the "Kempinski Hotel GrandArena" is situated on 1,200 squaremeters.

The guests enjoy an indoor and two out-door swimming pools, children's poolheated throughout the year, and severalJacuzzi. Large windows overlook themountains and open a stunning view,which inspires admiration of the naturalbeauty. Guests find completely satisfac-tion and revitalization in the differenttypes of saunas, steam baths andunique snow room.

Besides a comprehensive range of

beauty and health treatments alreadyexisting at the Kempinski Hotel GrandArena, the authentic SoftouchAyurvedic Center will offer not onlybody and face treatments but a com-pletely different "way of life." TheKempinski Hotel Grand Arena in Banskooffer a variety of restaurants, bars andlounges allows the guests the possibili-ty to choose among diverse cuisines,including local and international spe-cialties. Guests can enjoy the a-la-carterestaurant Come Prima withMediterranean flavors prepared in ashow kitchen right in front of their eyes.The Gallery restaurant which is acces-sible right from the ski slopes; it revealsa marvelous view to the mountain. BellaVista Lounge is the perfect place for anafternoon drink, a relaxing retreat or acocktail party on the extensive BellaVista Terrace. Seven bars and restau-rants at the hotel are first choice forguests with a taste for elegant servicein the amazing landscape of PirinMountain. ■

Motorola employees have a tradition to

dedicate one day in October - Global Day

of Service - to activities benefiting the

society. These services are performed by

Motorola employees in different areas,

such as taking care of underprivileged

children, repair and maintenance of build-

ings, planting trees.

Motorola Global Day of Service on Oct. 10,

2007, was aimed at improving the environ-

ment in the city where we all live and

work. The first stage of Motorola's project

"Mladost Garden and Children Playground"

this year was planting trees on the terri-

tory of Mladost Municipality, in the area

between blocks 446 and 447 in "Mladost

4," some 200 meters away from Business

Park Sofia.

In the next couple of months the Motorola

team will finalize the building of the chil-

dren's playground and invite representa-

tives of the local community and busi-

nesses to the official opening. ■

Kempinski Hotel Grand Arena BanskoAwarded as Leading SPA Resort

Motorola Plants Trees in Mladost

n e w m e m b e r s

42

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

The alliance Renault Nissan created Renault

Nissan Bulgaria with the mission to participateactively on the fast developing Bulgarian market.Renault Nissan Bulgaria is 100 % property ofRenault S.A.S. and is responsible for the import ofvehicles and spare parts for the brands Renault,Nissan and Dacia as well as for their distribution tothe dealer's network which is created in conformitywith the standards and requirements of the threebrands.

Renault Nissan Bulgaria has started its activity asthe official representative and importer of Renault,Nissan and Dacia in September 2005.

Its mission is to stimulate the commercial activity

and to realize effective marketing strategies for the3 brands. Renault Nissan Bulgaria controls theentire dealer's network which realizes the sales andthe after sales services. In October 2007 the deal-er's representatives for Renault are 16, for Dacia -17 and Nissan is offered in the 6 biggest cities. Theteam is composed of 30 professionalists.

Contact information:

Renault Nissan Bulgaria SRLLaurent Bernard - General Manager

47 blvd. Nikola Vaptzarov Sofia 1407

Tel. 02/9335777Fax. 02/9335788

contact.bg@renault.bg

43p a g e

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007

m u s i c

When the first blinding flash of first-wave punk detonated in 1976-77, itwasn't immediately apparent that anenduring cultural phenomenon wasunder way. Clearly, something young,loud, brash and reactionary was goingon-especially musically-but fads andmovements came and went in the cos-mopolitan cultural centers of Londonand New York like the weather.

But if punk passed quickly as a musi-cal phenomenon, it succeeded wildly-and enduringly-as a powerful andworldwide cultural one. After all, in itsspiritual home and cultural epicenter,London, punk was never conceived ofas a strictly musical movement, butrather as a cultural one that alsoencompassed art, fashion and politics.

Most interestingly, although mid-'70spunk rock flamed out quickly inEngland and never really escaped theunderground in America, punk's viralattitude and imagery infected the restof pop music and pop culture so suc-cessfully over the ensuing decadesthat it's now simply part of the land-scape. Whereas other popular musicalmovements (i.e., rockabilly, swing)were eventually relegated to niche sta-tus, punk imagery and attitude areeverywhere, having rained down likefallout to near-omnipresent status.Punk culture is on TV, in the movies,on clothing, online, on newsstands, inart, business and politics.

For its part, Fender played a signifi-cant role in the history of punk.Fender instruments turned out to beperfectly suited for its raucous sound,its powerfully arresting look and itsiconoclastic DIY attitude and workethic.

It was an interesting situation. Fenderinstruments had been around for a

couple decades by then. By the mid-'70s, it was a big company and every-body was using its gear, from ama-teurs to professionals; from the pre-vailing blues-rock masses and reigningrock elite to those who made uprock's little-known fringes and inhabit-ed its underground. The rock giants ofthe '70s were still going strong in 1976,when punk made its first big, sordidsplash in the U.K.-Led Zeppelin, PinkFloyd, Yes, Queen, Genesis and manyothers were still at their height of pop-ularity, embarking on massive worldtours, all loaded with an impressiveshare of Fender gear.

Interestingly though, Fender instru-ments were also being put to equallygood use by those who had somethingentirely different in mind; contingentson both sides of the Atlantic who vig-orously-sometimes violently-rejectedrock's more lofty, indulgent excesses.The very same Stratocaster®,Telecaster®, Jaguar® and Jazzmaster®

guitars-and especially Fender's stal-wart workhorse, the Precision Bass®-

that were embraced by the old guardwere also embraced by the punks,who were poised in 1976-77 to make abigger, more lasting impact than theyever could've imagined. And the sameuncannily versatile design elements ofutility and aesthetics that madeFender instruments right at homeonstage at Wembley in front of mil-lions also made them right home inNew York's cramped, grimy CBGB andLondon's venerable 100 Club in frontof, well, dozens.

After all, Fender instruments were high-ly regarded by punk rock's parents andspiritual progenitors, garage rock, glamand psychedelia. The fact that Fenderinstruments could take a beating andsomehow stay in tune and look evencooler dovetailed nicely with punk'smore abusively theatrical element(nothing new, once again-rock starshad been smashing them and lightingthem on fire for years); a use that justdidn't work with all the fancy high-endboutique guitars that had cropped upby the mid-'70s, not that punks could

Punk at 30: A Retrospective on theFilth, the Fur y and FenderThree decades on, punk culture is everywhere. Fender looks back at its young,

loud and humble beginnings...

afford them anyway. And what wereyou going to do-plaster your high-priced boutique guitar with stickers orpaint it lime green? Don't think so.

In short, Fender instruments were per-fect for punk because the more youabused them and the more you per-sonalized them, the better they got, ina way that just didn't work with otherinstruments. It was perfect-punk was,after all, a DIY phenomenon, andFender instruments were originally theDIY products of Leo Fender-a guy whodidn't even play guitar or know anythingabout them when he first started mak-ing them. It was a yet another good fit.

The '70s first-wave punks who playedFender amounted to a who's who ofthe genre (setting aside the manyarguments, valid or otherwise, aboutwho and what really was and reallywasn't punk): the Sex Pistols, theRamones, the Clash, the Damned, theStranglers, the Dictators, theBuzzcocks, Patti Smith, theHeartbreakers, the Talking Heads,Television, the Dead Boys, the Germs,Blondie, the Avengers, Generation X,the Saints, and many, many others.

And contrary to first-wave punk's own

charmingly contrived guerilla market-ing campaign, many of punk's gui-tarists and bassists could play theirinstruments just fine-certainly wellenough to make good records.

As original Pistols bassist/songwriterGlen Matlock (see related story)noted, while attending a summer 2007fashion show at onetime London punklandmark the 100 Club, "They wasplaying all these records in the back-ground, you know, and they sand-wiched 'I Wanna Be Me,' which is oneof our earliest recordings, with someBowie track and something else andsomething else, and, you know, ourplaying is just as good as on any ofthe records. I just think when we cameout that people were trying to compareus to Yes and Genesis, who weredoing, like, 14/8 time or whatever thatis, but we weren't doing that. We did-n't want to do that."

Fender instruments were particularlypopular with punk bass players, whowielded them like weapons. The ven-erable Fender Precision becamealmost the de facto punk rock bassright from the start.

"He liked it because it was heavy,"said Arturo Vega, Ramoneslighting/graphics director and designerof the band's famous "presidentialseal" logo, of the time when Dee DeeRamone was explaining to him why hepreferred a Precision. "He said, 'Youfeel it when you play it; you feel it inyour body. This is a very strong instru-ment and you feel it when you playand you feel like you're doing some-thing.'"

Across the Atlantic, in London, Matlockconcurs. When he landed a post-Pistols gig with U.S. punk godfatherIggy Pop in 1979, Matlock said, "I wentout and bought a Fender '61 PrecisionI saw in a store; played it; loved it, andI've never really picked up anotherguitar, you know-I've still got it, 30years out. The thing with Fender isthat they just sound like bass shouldsound. When I'm recording, you invari-ably just plug it in and you end up justusing the D.I. sound. They got it right,you know."

There was Television's Tom Verlaineonstage at CBGB, choking his jagged,

angular melodies out of a Jaguar or aJazzmaster. There was the Stranglers'Jean-Jacques Burnel, using a growlingPrecision to bludgeon his way through1977's seminal Rattus Norvegicus andNo More Heroes. There was ChrisStein, wielding a Stratocaster onstagewith Blondie. There was Paul Simononof the Clash, about to smash hisPrecision on the stage of New York'sPalladium on Sept. 21, 1979, a momentcaptured by photographer PennieSmith as the cover of London Callingand one of the greatest rock photosever taken. Glorious, every bit of it.

"The original aesthetic of the '77 punkwas so strong and identifiable that Ithink it just keeps cycling back aroundfor generation after generation ofkids," said artist Shepard Fairey (ofObey Giant fame). "I think that'ssomewhat timeless, and it's a formulathat anybody who has that sort of do-it-yourself spirit can latch on to anduse for themselves. So it's a very viralform of art-making, I think. I mean, it'swhat got me going. I think one of thethings that holds people back, proba-bly as musicians-I don't know; I'm nota musician-but definitely, I know, asvisual artists, is that they feel theywon't be doing something that's goodenough. And the cool thing about punkis that it has encouraged people toparticipate whether they thought theywere awesome or not. And then, youknow, just by participating, you oftenbecome awesome."

And now just look at the world. Lookat pop music. Look at pop culture.Punk has infiltrated it all. From theDead Kennedys to Green Day; fromthe Police to Black Flag; from theCure to Rancid to Elvis Costello to theOffspring to the Circle Jerks to FallOut Boy. It's everywhere.

"Who would've thought 30 years agothat punk artists like the Ramones, theSex Pistols and the Clash would beinducted into the Rock and Roll Hall ofFame?" said Justin Norvell, Fender'ssenior marketing manager for electricguitars. "The same music that was vili-fied and dismissed at the time is nowcelebrated and honored by the masses.It highlights the fact that sometimes animportant cultural movement can hap-pen without anybody knowing it, until it'stoo late to deny anymore." ■

m u s i c

44

Am

Cham

B

ulg

aria M

agazin

e N

ovem

ber 2007