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Bulgaria launched
its privatization drive in 1991 and passed the law governing privatization
in April 1992. However, until 1997, privatization proceeded slowly and
unevenly, hindered by changing government regulations, bureaucracy, insider
trading, and lack of transparency. Only about 5 percent of all state-owned
assets had been privatized by August 1996. In January 1997, the
privatization process began to accelerate and become more transparent. The
Government embarked on an ambitious two-stage privatization program. The
first stage included privatization of small- and medium-scale enterprises
and large enterprises in sectors other than energy, transport and
infrastructure. The second stage covered privatization of enterprises in
energy, transport, utility and infrastructure sectors.
In 2002, the
Government launched a large-scale privatization plan hoping to complete
sell-offs of major state enterprises by 2004. As a result of these efforts,
assets worth more than US$573 million were sold by the end of 1997. This
figure represented about 75 percent of planned privatization for the first
stage in terms of assets. The privatization transactions signed between
April 1997 and December 1998 represented 65 percent of total privatization
activity undertaken since the start of the transition process.
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The privatization process is governed by the 1992
Privatization Law and the Privatization Program adopted by Parliament in
2000. The law was amended more than 20 times over the years. The latest
amendment was adopted in Fall 2000 and cleared the way for the second stage
of privatization. It introduced Parliamentary approval for strategies and
transactions in energy, transport and utilities/infrastructure sectors and
removed many incentives for management and employees buy-outs (MEBO). The
Bulgarian Privatization Agency, established in 1992 as an independent state institution, is responsible for the sale of
the large and strategic state-owned enterprises. Privatization of
state enterprises with a book value of up to BGN 1 million is done through
branch ministries, while privatization of enterprises with a book value of
more then BGN 1 million is implemented by the Privatization Agency itself.
Municipal property is privatized through municipal councils regardless of
its value; the Center for Mass Privatization organizes and supervises
voucher privatization. Privatization of some strategic enterprises requires
an additional approval of the Council of Ministers.
The Privatization and Post-Privatization
Control Act of 2002 seeks to increase the transparency of sales by
making the Privatization Agency the only body responsible for selling state
assets, removing preferential treatment of management buyouts and
preventing sales through negotiations with preferred buyers. The
enforcement of the Act will open to privatization some 1,600 public
enterprises.
The privatization process in Bulgaria is supported by the IMF Three-Year
Extended Fund Facility and the World Bank Environmental and
Privatization Support Project.
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In
1999, the number of privatization transactions concluded by all state
bodies was 1101, exceeding slightly the number projected for that year. The
largest privatization transactions of 1999 were the sale of 58 percent of
Neftochim AD to Lukoil Petrol (Russia) for US$101 million, the sale of 51
percent of Petrol AD to the International Consortium (Bulgaria) for US$52
million, and the sale of 97.9 percent of Expressbank AD to Societe Generale
(France) for US$39 million. By the end of 2000, 85 percent of overall state
assets had been privatized (Since 1993, just over 50
percent of state assets have been privatized, generating around US$3.2
billion in revenue – PWC). The private sector's share of the economy in Bulgaria by
the first half of 2002 is estimated to be 70 percent. The private sector share in the
banking sector increased after completion of privatization of Bulbank in
2000, reaching 80 percent in terms of assets, 82 percent in terms of loans,
and 78 percent in term of deposits.
According to the 2000
Privatization Program, 673 privatization transactions were expected to take
place in 2000. These included a number of attractive enterprises from the
infrastructure and banking sectors. However, only one strategic company has
been sold so far - Bulbank AD. Bulbank is the largest Bulgarian bank in
terms of deposit base and holds 26 percent of the banking system's assets.
The contract for the sale of a 98 percent stake was signed in July, 2000.
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The Government has stated its intentions to complete the
privatization process by the end of 2003. The restructuring and
privatization of the infrastructure sector is at the core of the new
privatization strategy. The main part of the remaining state monopolies,
i.e. the Bulgarian Telecommunication Company, Bulgartabak Pie, as well as
Biochim Bank, and some thermal power plants, will most likely change hands
this year or early next year.
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