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Business Breakthroughs Help Bulgaria Pull Ahead

February 21, 2004

(Balkanalysis.com Research Service)- It’s official- the EU’s associating of Bulgaria and Romania in a unique accession group has ended, due to concerns in Brussels and Strasbourg over slow reform in the latter state.

By contrast, Bulgaria is looking good, with promising signs from key sectors buoyed by recent breakthroughs in foreign investment.

According to Reuters, the American private equity fund Advent yesterday signed a 230 euro million deal for 65 percent of Bulgaria’s state-owned telecom operator BTC, “…after nearly two years of legal and political battles.” Even now, it took a “last-minute breakthrough” to close the deal, due to squabbles over BTC’s dividend and a mobile phone license.

In contrast with Romania, which has recently been held up as an example of sluggish structural reform, Bulgaria’s BTC sell-off is being regarded as an example of success, according to Reuters. Bulgaria’s telecom market has long interested foreign investors. In 2001, Greece’s OTE successfully launched the country’s second mobile operation. Directed by CEO Nikos Avgerinos (now head of OTE’s Macedonian mobile operator, Cosmofon), the operation got off to a quick start. (See our UPI interview with Mr. Avgerinos reprinted here).

Another promising privatization is that of Bulgartabac, the state-owned tobacco monopoly. After 9 months of waiting, the appointment of a foreign privatization consultant on Tuesday means that the government’s final strategic plan will be completed within 3 months, and bidding can resume. Tobacco is one of Bulgaria’s most promising industries and the consumer base in this Balkan state is formidable.

In tourism, Bulgaria continued double-digit gains recorded last year, when British package tours for the first time started arriving on its Black Sea shores. Enthralled by the inexpensiveness of the country, and its happening night life, droves of tourists came to mark Bulgaria’s most successful summer season ever.

Now, newly released data from the Economy Ministry shows that Bulgaria has attracted 21.96 percent more tourists (195,544) in January 2004 compared to the same period last year. Since December, says the government, there’s been a rise of 26.15 percent in tourists. Bulgaria’s interior is blessed with mountains, making it a winter sports destination as well as a summer one. Among the skiers, snowboarders and nature lovers, 50,000 or so have come from Greece. The next most popular country of origin is neighboring Macedonia, followed by the United Kingdom, Serbia, Turkey, Russia, Germany, Israel, the United Stated and Italy.
According to the report, an EU tourism commission study reveals that “…Bulgaria is one of Europe’s fastest developing destinations.” The survey showed that the country is achieving “…great success at a time when the world tourism faces hard times as in 2003, when it marked a decline of 1.2 percent.”

Of course, there are some caveats. Bulgaria’s inexpensiveness- the country’s prime tourist draw- will level off after it joins the European Union in 2007, and both wages and service costs rise. And foreign dominance is not always beneficial. Germany’s Deutsche Bank may have bowed out from the Bulgartabac deal last April, but it can still develop a presence as owner of major European package holiday operators. As in the more popular tourist countries of Greece and Turkey just next door, Bulgarian tourism managers could find themselves the indentured servants of international giants, lured by a quick injection of cash but paying for it over the long run. While by no means pristine, post-Communist Bulgaria does have its charms and unsightly package tourism could sully them.

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