ECONOMY

Sell-offs will go ahead

SOFIA – Bulgaria is determined to sell its telecom and tobacco monopolies despite depressed global markets but the deals will not be completed by the end of the year, Economy Minister Nikolai Vassilev said earlier this week. The Balkan state’s reformist government has pledged to complete the long-delayed privatizations quickly, even as the telecom monopoly BTC is hit by a global sector slump and the sale of tobacco monopoly Bulgartabak faces a legal challenge. The sales are seen by foreign investors and credit rating agencies as a test of the government’s success in implementing structural reforms. «The government must sell those companies. This is a matter of life and death,» Vassilev, who oversees privatization, told foreign media representatives in Sofia. «I am sure that we have taken the right decisions no matter how bitter some of them are,» he added. He confirmed, however, that the sales would not be closed by the end of this year as the government had initially hoped. But analysts said the delay should not hurt Bulgaria’s reputation among investors as long as the government remained committed to completing the sales. The government is under pressure from opposition parties and trade unions to abandon the BTC sale, arguing that it would fetch a low price and steep job cuts would follow. London-based equity fund Advent, chosen by the Privatization Agency as a preferred buyer for a 65 percent stake in BTC for 200 million euros ($197.8 million), plans to cut BTC’s work force to 16,000 within three years from about 24,800 now. At the height of the telecoms boom two years ago, Bulgaria rejected a bid of $610 million for 51 percent in BTC and a GSM license, put forward by Greek phone operator OTE and Dutch KPN. «We cannot abandon the BTC sale as we have no guarantees that the external environment will improve next year. BTC is an aging company that needs huge investment, which the government can not afford to pour in it,» said Vassilev. Bulgartabak in court Bulgartabak’s fate is in the hands of the legal system after three failed bidders appealed against the Privatization Agency’s decision to name a consortium backed by Deutsche Bank as preferred buyer for an 80 percent stake for 110 million euros. The Supreme Administrative Court canceled the agency’s decision and said it should have asked all candidates to improve their final offers. The sell-off agency is currently appealing against the court’s decision. A final court ruling is due by the end of this month. A previous attempt to sell Bulgartabak failed in 2000 because there were no bids. Vassilev said failure to complete the two deals this year plus the global economic slowdown would hurt foreign direct investment (FDI) in Bulgaria. He forecast this year’s FDI to be below $600 million, compared to his initial projection of $1 billion. Next year’s FDI would be between $500 million and $1 billion, depending on how fast the world economy recovered, Vassilev added. Excessive red tape, corruption and regional instability has kept Bulgaria at one of the lowest investment levels over the past decade among countries queuing up for European Union membership. Bulgaria has attracted a total of $5 billion in foreign investment since 1992, whereas the Czech Republic had more than that in just the first eight months of this year.