Bulgaria: Bridge Over the Atlantic

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 1 5 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 7 9m a y 2 0 0 7

Inter view:Eric Luftman, deput y directorat the Office of EuropeanUnion and Regional Affairs,Depar tment of State

American Chamberof Commerce in Bulgaria and theGerman-Bulgarian Industrial Chamberof Commerce held a conference on EU - U.S. Economic Par tnership

Bulgaria: Bridge Over the AtlanticAnalysis:Government’s Crusadefor Lower Taxes;Bulgaria - Still a Real Estate Hit

Bulgaria: Bridge Over the Atlantic

Do you remember that 1970 hit by Simon and Garfunkel, Bridge

Over Troubled Water? I could not stop humming it as I was select-

ing the cover photo for this issue. It's a song with a melody that

every person on the planet can follow easily. The refrain goes,

"Like a bridge over troubled water

I will lay me down."

Like a bridge over troubled water

I will ease your mind.

Why am I reminding you of this evergreen? Very simple - I am

enthralled with the idea of Bulgaria becoming a bridge between

the United States and the European Union. Some have sneered

at such an expectation, calling it naive, but I think now our coun-

try has a realistic shot at being cast in a larger geopolitical role.

We learned from the recent conference on the European-American economic partnership (see Page

4 to 13) that Bulgaria has a chance to become an intermediary in the business relations between

the two coasts of the Atlantic. Now, this is an opportunity that deserves an honest effort. Bulgaria

has maintained excellent rapport with both the United States and European Union, which is proba-

bly a unique position and an advantage. We should receive more good news in that regard during

the oncoming visit of President Bush in June.

On the other hand, Bulgaria has stayed in a close connection with Russia. Prime Minister Stanishev

just visited Russian President Putin in Moscow, which can be considered part of the preparations

for the talks with his U.S. counterpart. So, can Bulgaria become not only a bridge between the

United States and European Union, but also a facilitator of Russia's attempts to establish the terms

of its own connections with the West? I would say, yes, this is an open possibility for us.

Maybe such aspirations sound overly haughty and even arrogant to some, but I truly believe Sofia

has a lot to gain if it only tries for real to play such an intermediary role on the global scene. It is

certain, too, that Bulgaria's business community will benefit from more exposure and a government

that is not afraid to take the initiative.

Yours truly,

Milen Marchev

Editor-in-Chief 1p a g e

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Dear Reader,

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Publisher

American Chamber of Commerce in Bulgaria

Business Park Sofia, Mladost 4 Area

Building 2, Floor 6, Sofia 1715, Bulgaria

Tel.: +359 (2) 9742 743

Fax: +359 (2) 9742 741

e-mail: [email protected]

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, [email protected]

AmCham Bulgaria Magazine:

Milen Marchev, [email protected]

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 7 9m a y 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.

iF YOUR ADWERE pLACED HERE,

• WOULD BE CONVEYED TO THE LEADING US, INTERNATIONAL AND

BULGARIAN COMPANIES OPERATING WITHIN BULGARIA;

• WOULD REACH THE DESKS OF SENIOR EXECUTIVES AND DECISION-MAKERS

WHO DEMAND HIGH QUALITY PRODUCTS AND SERVICES;

• WOULD TRAVEL ACROSS THE EUROPEAN CONTINENT AS WELL AS THE

UNITED STATES, TAKING FULL ADVANTAGE OF THE INTERNATIONAL NET-WORK OF AMERICAN CHAMBERS OF COMMERCE;

• WOULD SERVE AS AN IDEAL NETWORKING OPPORTUNITY FOR POTENTIAL

FOREIGN INVESTORS AND BUSINESSMEN VISITING BULGARIA.

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YOUR MESSAGE

THE RIGHT MESSAGE TO THE RIGHT AUDIENCE.

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3M (East) AG . AA KRES EOOD . ABB Bulgaria Ltd. . Abbott Laboratories S.A. . AbCRO- Bulgaria . Accor Services Bulgaria . ACSIOR . ADIS Ltd. . Advance International Transport(Balkan) EAD . AES Corporation . AFA OOD . AIG Bulgaria Insurance & Reinsurance CompanyEAD . AIG Life Bulgaria . AIMS Human Capital . Alcoa Packaging Bulgaria . AlexanderHughes Bulgaria OOD . ALEXANDROV GROUP CORPORATION . Alfred C.Toepfer International. Alliance One Tobacco Bulgaria . Allied Pickfords Bulgaria . Alter Ego Company OOD .American College of Sofia . American English Academy . American Resarch Center in Sofia .American University in Bulgaria (AUBG) . Anglo-American School of Sofia . Anton Preslavski,Liebert Hiross . APIS - BULGARIA Ltd. . APOLO Ltd. . Argento Human Resource Solutions .Aries Commerce . Association Integra-BDS . Association of Bulgarian Broadcasters - ABBRO. Astra Zeneca UK Ltd. . AT Engineering 2000 Ltd. . Auditing Company Versi and Partners Ltd.. Avendi Ltd. . AVON Cosmetics Bulgaria Ltd. . Balkan Accession Fund . Balkan NewsCorporation Plc. . Balkan Star Automotive EOOD . Baxter AG . Bayer Bulgaria EOOD . BCSerdon . BearingPoint, Inc. . Berlitz Schools of Languages . BG Radio . BMG Ltd. .Bodyguard-Fire-K Ltd. . Borislav Boyanov & Co. . Braykov's Legal Office . Brown FormanBeverages Worldwide Sofia Branch LLC . Bulgaria Platinum Group . Bulgarian AmericanEnterprise Fund . Bulgarian Charities Aid Foundation (BCAF) . Bulgarian PostBank . BulgarianTelecommunications Company EAD . Business Media Group . Business Park Sofia EOOD .CallCenterBulgaria . Car Rental Bulgaria Ltd. . Carlsberg Bulgaria AD . Cefin Bulgaria EOOD(IVECO dealer) . Center for the Study of Democracy . Central Hali AD . CENTURY 21 Bulgaria. Chelopech Mining EAD . Cisco Systems Bulgaria . Citibank N.A.- Sofia Branch . CityUniversity . Clockwork Ltd. . CMS Cameron McKenna EOOD . Coca-Cola Bulgaria EOOD .Coca-Cola HBC Bulgaria AD . Coface Bulgaria Credit Management Services EOOD . Colgate-Palmolive Adria . COLLIERS International . ConsulTeam Recruitment and Selection Ltd. . CookCommunications . Corstjens Worlwide Movers Group . CPM Consultancy Sllc . Curtis / BalkanLtd. . DeConi International . Deloitte Bulgaria EOOD . DENIMAR Ltd. . DHL Express BulgariaLtd. . Diageo Bulgaria Ltd . Diamed Ltd. . Dimitrov, Petrov & Co. . Djingov, Gouginski,Kyutchukov, & Velichkov . DLA Piper Weiss-Tessbach Branch Sofia . Dobrev, Kinkin & LyutskanovLaw Firm . Domaine Boyar AD . Dr. Emil Benatov & Partners . Dr. I.S. Greenberg MedicalCenter, Ellen Ruth Greenberg, Ph.D. . DynCorp International LLC . Effekten Und Finanz - SofiaAD . Ekotoi - Service Ltd. . Electron Progress AD . Eli Lilly and Company . Elido (LamelLtd.) . Elmec Sport Bulgaria Ltd. . Elta consult AD associated partner of CB Richard Ellis forBulgaria . Emerson Process Management AG . Encouragement Bank AD . Enel Maritza East3 AD . Enemona SA . Engineeringservice Sofia Ltd. . Environmental Quality Management, Inc.. Epsilon Interactive International . Equest EAD . ERATO HOLDING PLC . Ernst & YoungBulgaria . European Bank for Reconstruction and Development (EBRD) . Flying Cargo BulgariaLtd. - Licensee of FedEx . Force Delta Ltd. . Forem Consulting Bulgaria . Forton InternationalJSCo . G4S Security Services Bulgaria JSC . General Electric International . GenmarkAutomation Bulgaria Plc. . GiTy Bulgaria ltd. . GlaxoSmithKline . Global Benefits Group GBGICEE LLC Representrative Office . Goodyear Dunlop Tires Romania . Grand Hotel Sofia .Grenville Bulgaria . Grey Worldwide Bulgaria EOOD . Hewlett-Packard Bulgaria Ltd. . HiltonSofia . Holiday Inn Sofia . Honeywell EOOD . IBM Bulgaria . IBS Bulgaria Ltd. . IdealStandard Bulgaria . In Time Ltd. . Industrial Holding Bulgaria . ING Bank Sofia Branch .Interbrands Marketing & Distribution Inc. OOD . Interdean . Investbank Plc. . IP Consulting Ltd.. ISI Emerging Markets (Internet Securities, Inc.) . Johnson & Johnson Doo. . Johnson ControlsElectronics Bulgaria . Junior Achievement Bulgaria . Kaliakra AD . Kamenitza AD . KamorAuto EOOD . Kempinski Hotel Grand Arena Bansko . Kolbis International Transfer Corporation. KPMG Bulgaria . Kraft Foods Bulgaria . LANDMARK Property Bulgaria . Lexim Sofia Ltd.. LIC Penkov, Markov & Partners OOD . Lindner Bulgaria EOOD . Lirex BG Ltd. . Lowe SwingCommunications . M & M Air Cargo Service BG OOD . M3 Communications Group, Inc. A Hil& Knowlton Associate . Maersk Bulgaria Ltd. . Magnetic Head Technologies . Marsh EOOD. MARTERN EOOD . Mathnasium Rossimat . McDonald's Bulgaria Ltd. . Mellon BulgariaEAD . Merck Sharp & Dohme IDEA Inc. . Microsoft Bulgaria . Miltech Ltd. . Mmd, Corporate,Public Affairs & Public Relations Consultants . Mobiltel EAD . Monbat Plc. . MoodyInternational Ltd. . Moten Sport . Moto-Pfohe Ltd. . Motorola Bulgaria EAD . National DIS-TRIBUTORS . NATO Defense College Anciens' Association . NDT Equipment Supplies LTD .Neochimiki Bulgaria S.A. . Net Is Ltd. . Neterra Communications . Neumann International AG. New Europe Corporate Advisory . New Europe Directories Bulgaria . Nexcom Bulgaria EAD. Nu Image Bulgaria . Opet Aygaz Bulgaria EAD . Oracle East Central Europe Limited - BranchBulgaria . Orbit Ltd. . Orkikem Ltd. . OSG Records Management . Outsource PartnersInternational . Ozone Laboratories Bulgaria . PANDA - IP Ltd. . Parsons E&C Bulgaria .Penev & Partners Law Offices . Pfizer Luxembourg SARL, Representation Office Bulgaria . PhilipMorris Bulgaria EOOD . Pioneer Semena Bulgaria EOOD . Plesio Computers Jsc . PopovLegal Office . PostPath . Pratt & Whitney . PricewaterhouseCoopers . Procter & GambleBulgaria . ProSoft . PSG Payroll Services Ltd. . Radisson SAS Grand Hotel . Reader's DigestEOOD . Regus Bulgaria Ltd. . Rising Force Co., Ltd. . Rockwell/Intelpack . S&T Bulgaria. Schenker EOOD . Schering - Plough Central East - Bulgaria . SEAF Management BulgariaEOOD . Sheraton Sofia Hotel Balkan . Sherita M Ltd. . Sienit Ltd. . SigmaBleyzer InvestmentGroup 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 . TeleLink AD . The Atlantic Club of Bulgaria .Tishman Management Company Ltd. . Tissue Bank Osteocenter Bulgaria EAD . TMF . TotemaEngineering . TravelStoreMaker.com . Tumbleweed Communications EOOD . UniCredit Bulbank. Unimasters Logistics Plc . Unisys Bulgaria Branch . United Consulting Ltd. . United MedicalCommunications . Urban 2000 Ltd. . Vaptsarov Joint Stock Company . Vector ManagementBulgaria EOOD . Videolux Holding / Technopolis . VIP Security Ltd. . VISA International ServiceAssociation . VSK Kentavar Ltd. . Welcome to Bulgaria . Westinghouse Energy SystemsBulgaria Branch . 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. 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

Ms. Maria Vranovska Abbott Laboratories

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

Executive Director Valentin Georgiev

Contentsc o v e r s t o r y

Businesses Want Same Regulations

on Both Sides of the Atlantic . . . . . . . . . . . . . . .4

By Irina Bacheva

Eric Luftman, deputy director at the Office

of European Union and Regional Affairs,

Department of State:Open-skies Agreement

Connects EU and U.S. Cities . . . . . . . . . . . . . . .14

By Irina Bacheva

a n a l y s i s

Bulgaria's Socialists Crusade for Lower Taxes . . . .16

e x p e r t s ’ o p i n i o n

Bulgaria and Romania Join the EU Crowd -

Latest EU Expansion Creates New Opportunities

and Challenges for Multinationals . . . . . . . . . . . .20

By Michael S. Lebovitz, Stamen Yanev, Katerina Kraeva, Roderik

Bouwman, Marc de Munter, Bernhard von Thaden, DLA Piper

n e i g h b o r s

The Day After . . . . . . . . . . . . . . . . . . . . . . . .24

By Boyko Vassilev

m a r k e t t r e n d s

Bulgaria - Still a Real Estate Hit . . . . . . . . . . . . .28

By Yuliana Boncheva

m e m b e r n e w s

Million Dollar Guild Adds

First Bulgarian Member . . . . . . . . . . . . . . . . . .38

Coca Cola Opens Renovated Bankya Plant . . . . . .39

Velkov Elected to Realtors Board . . . . . . . . . . . .39

ACS President Retires After

10 Years in Bulgaria . . . . . . . . . . . . . . . . . . . .40

Postbank Offers Repo Agreements . . . . . . . . . . .43

n e w m e m b e r s . . . . . . . . . . . . . . . . . . . .43

Coface Bulgaria Credit Management Services EOOD

Mellon Bulgaria EAD

Neochimiki Bulgaria S.A.

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Marcus Miller to Host Summer Jazz Cruise . . . . . .44

A strong economy that will allowBulgaria to become an important factorin transatlantic cooperation and aregional center for international businessis our ultimate goal, said Ivaylo Kalfin,vice prime minister and minister of for-eign affairs, at the conference on EU -U.S. Economic Partnership: NewOpportunities for the BulgarianBusiness.

The conference was organized by theAmerican Chamber of Commerce inBulgaria and the German-BulgarianIndustrial Chamber of Commerce onApril 17, 2007.

More than 100 representatives of U.S.,German and multinational companiesregistered for the event, which wasmeant to shed more light on the com-

petitiveness, investments, financing andlegal framework of Bulgaria. The partic-ipants agreed that the main problems forbusinesses from both sides of theAtlantic are the different trading and reg-ulatory practices.

"The voice of the American and Germanbusiness community is heard making fora unique forum in Bulgaria. The devel-

From Left: Stefan Ivanov, Citigroup Country Officer, Assen Gagauzov, Minister of Regional Developmant and Urban Planning, Plamen Mitev, General Manager of

Balkan Star Automotive and Peter Simon, Regional Director for Romania, Bulgaria and Moldova, Country manager ABB Bulgaria.

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Businesses Want SameRegulations on BothSides of the AtlanticAmerican Chamber of Commerce in Bulgaria and the German-Bulgarian

Industrial Chamber of Commerce held a conference on EU - U.S. Economic

PartnershipBy Irina Bacheva

opment of the transatlantic dialogue isimportant both to the European Unionand United States. Hopefully, in severalyears, Bulgaria will become one of thecountries where the transatlantic coop-eration between the Unites States andEurope is felt most strongly," Kalfin said.

One of the key achievements at the EU- U.S. summit in Washington on April 30was the signature of a transatlantic eco-nomic partnership pact, aimed at slash-ing remaining trade barriers between thetwo economic giants and harmonizingstandards in a number of key areasincluding intellectual property and theautomotive, pharmaceutical and chemi-cal sectors.

EU and U.S. leaders also signed the so-called "open skies" deal, replacing exist-ing bilateral agreements between theUnited States and member states. Theagreement will remove restrictions onthe number of flights able to operate thetransatlantic route, allowing all EU andU.S. airlines to fly between every city inthe 27-nation union and the UnitedStates, as of 30 March 2008. The EUexpects that the deal will generate up to12 billion Euro in economic benefits andup to new 80,000 jobs in Europe andthe United States over the next fiveyears.

A recent survey of Bank AustriaKreditanstalt AG showed that Bulgaria'sGDP growth, which hit 6.5 percent in2006, will peak in 2007. The GDP willcontinue to rise under the boost of thenew influx of foreign investments andthe increase capital spending in thepublic sector. The Austrian experts high-lighted the need to improve the compet-

itiveness of Bulgaria's economy as themain priority for the Bulgarian govern-ment. This, however, requires an accel-eration of the structural reforms whichare being implemented very slowly.

In 2006, BulgariaInvest Agency data

showed that U.S. investments inBulgaria amounted to $115.97 million. In2006 Germany invested $103.96 millionin Bulgaria's economy. From 1992 to2006, the United States invested $817.6million and took 11th place in the FDIinvestments statistics of the agency. For

Ivailo Kalfin, vice prime minister and minister of foreign affairs (first right) meets AmCham Bulgaria and

BATEC leadership.

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the same period Germany is ranked asthe fifth largest investor in Bulgaria with$1,207.2 million.

Kenneth Lefkowitz, NECA manager andchair of AmCham Public AffairsCommittee, said that in February andMarch 2007 U.S. investors in Bulgariaoutnumbered the investors from othercountries. The largest investor inBulgaria for 2006 was the U.S. compa-ny AES with 1.2 billion Euro in MaritzaEast 1. Lefkowitz foresees that most ofthe FDI will come in the energy and realestate sector, and media and communi-cations.

Investment priorities

Elaborating on the ways of Bulgaria'sstrong and independent economy,Rumen Ovcharov said that the countrymay not depend on the energy sourcesby developing as many as possible tran-sit ways in the country for transportingpetrol and gas. "This means energyindependence through common depen-dence," the minister added. Bulgaria hasto develop a strategy for attractinginvestments in priority industries.According to Ovcharov, the investmentsfrom now on will be directed in the sec-tors of high technology, low-cost energy

and maximum use of human recourses.Bulgaria has to keep its competitiveadvantages in the fields of energy, envi-ronment and infrastructure.

At the same time, according to Germanand U.S. investors, Bulgaria is now fac-ing a problem with qualified labor force,not the volume of FDI itself. A mostrecent study of the German-BulgarianIndustrial Chamber of Commerce showsGerman investors in Bulgaria experi-ence labor force shortages in all sectorsof the economy. They find the businessclimate in the country good, but thereare critics concerned with the infra-structure problems, corruption and lackof transparency in public procurementcontracts. Last year the average ratingof public contracts awarding procedureswas 3.6 on a scale from 1 to 5, where5 is the weakest point. This year the rat-ing fell to 3.9 points, the survey shows.

Road infrastructure projects

A special accent on the road infrastruc-ture was made by Assen Gagauzov, min-ister of regional development and urbanplanning. He cited a recent study of theGerman Chamber which says theGerman investors are most dissatisfiedwith the poor quality of the roads in thecountry. The conclusion of highwaysMaritsa and Trakia in Sofia-Bourgas sec-tion is envisaged in the short term of the

United States is the largest customer in the world for EU products, buying more than 20 percent of all of EU

exports, Ambassador Beyrle said at the forum.

More than 100 US, German and multinational companies registered for the conference.

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With the accession of Bulgaria into the

European Union and the strengthening

of its economic ties with the United

States, more and more business

opportunities are presenting them-

selves to companies operating in our

country.

The financial institutions in Bulgaria

are gearing up to support their clients

in their growth plans through an ever

increasing array of financing solu-

tions. I would like to point to two

examples of financing solutions com-

monly used in the EU and the United

States that have been little utilized in

Bulgaria, but which are gaining popu-

larity.

Financing with the participation of

Export Credit Agencies (ECAs) such

as U.S. Exim (United States), Hermes

(Germany), SACE (Italy), COFACE

(France), ECGD (United Kingdom),

ONDD (Belgium), CESCE (Spain),

Atradius (Netherlands), EKN (Sweden),

Finnvera (Finland), OeKB (Austria),

EGAP (Czech Republic), KUKE

(Poland), among others.

The primary objective of those agen-

cies is to stimulate the exports from

their respective countries to the rest

of the world through facilitating their

financing. Normally, the ECAs do not

extend the financing directly to the

importers but through commercial

banks which fund the transactions

and assume a portion of the risks

involved. The ECA generally guaran-

tees or insures the commercial risk

of the borrower and the cross-border

risk of the country of the borrower for

up to 85 percent of the amount being

financed - the rest is taken by the

commercial bank.

The tenor of the financing could

exceed 12 years, which is much longer

than what is available on the local

banking market in Bulgaria. The

upfront fees and margins are very

competitive so as to allow the ECA to

accomplish its objective of stimulating

exports from its home country. The

funds are disbursed as needed, unlike

the proceeds of a bond which come all

at once on the day of the issuance.

According to data provided by Dealogic

for the period 2003-2006, Citi (the new

brand name of Citigroup/Citibank) is

the global leader in arranging such

financing transactions with $12 billion

out of the total of $75 billion of ECA

facilities arranged. The minimum size

of transactions arranged by Citi is $15

million.

Private Equity - with over $1 trillion in

the hands of private equity funds,

those players are re-shaping the glob-

al financial markets and ever more

often outbidding strategic investors. In

2006, 57 percent of the IPOs in the

U.S. market were done by companies

which had at least partially been fund-

ed by private equity. While the bulk of

such funds is still concentrating their

investments in the United States and

the EU, they are making their way into

the rest of the world, including

Bulgaria.

Private equity investments come in the

form of capital or mezzanine debt with

long-term investment horizons of four

to seven years. The stereotype is that

those investors buy whole companies

change their management, turn them

around and sell them for profit.

While some of them certainly continue

doing that, it is becoming more com-

mon for private equity investors to take

minority interest in companies - i.e.

provide supplemental capital for

expansion, acquisitions, balance sheet

strengthening, management buy-outs,

etc.

What those investors normally look for

are reputable owners and experienced

management, strong growth potential

of the company and/or stable cash

flows, opportunities for cost savings,

and viable exit alternatives. They strive

to add value by enhancing the capital

structure, improving corporate gover-

nance, facilitating acquisitions of the

companies they invest in, etc. Citigroup

Venture Capital International (CVCI) is

among the largest private equity

providers to the emerging markets with

over $3.5 billion invested already and a

new even larger fund being currently

launched raised. Their target invest-

ment size is $20 million in capital. ■

Stefan Ivanov, Citi country officer for Bulgaria:

Financing Alternatives Increasing inPopularity

government's ambitious program,Gagauzov said. Also in the short term5,000 km of roads would be rehabilitatedand reconstructed. Another 1,650 km ofroads were rehabilitated in 2006, he said.

In July 2006, the Bulgarian governmentadopted the National Strategy for

Integrated Infrastructure Developmentuntil 2015. Among major road projects inthe period 2007-2010 that will befinanced by the European CohesionFund are the Struma highway (156 km),which is along the European TransportCorridor No. 4. The project will cost 600million Euro. At the end of June or July,

the construction of two leads will start.In October 2007 the construction of theroad will begin, linking the Hemus high-way with the Sofia Ring Road. Theamount of this project is 32 million Euro.All in all, the planned infrastructure pro-jects for 2007-2010 are for 7.477 billionEuro, 5.3 billion EUR of them for road

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Bulgaria's business and state adminis-

tration are already united by a common

goal - to attain sustainable develop-

ment and regional competitiveness.

That is why the Bulgarian government

is making serious efforts to create

favorable conditions for the develop-

ment of private investments and pub-

lic-private partnerships.

In July last year, the Cabinet approved

and is already implementing a national

strategy for an integrated development

of Bulgaria's infrastructure until 2015.

The infrastructure projects planned for

completion by 2015 amount to 7.477

billion Euro; of the total, some 5.3 bil-

lion Euro is dedicated to the road

infrastructure.

In the short term - until the end of the

mandate of the current cabinet - we

have the ambition to complete the

construction of the Maritsa and Trakia

freeways in the section between Sofia

and Bourgas, and to rehabilitate and

reconstruct some 5,000 km of roads

all over the country. A total of 1,650

km of roads were rehabilitated and

reconstructed last year.

Here are some of the large-scale pro-

jects, related to the road infrastructure

development between 2007 and 2010,

which will be financed by funds

released from the EU Cohesion fund:

the 156-kilometer long Struma freeway,

which is a section of the Pan-

European Transport Corridor No. 4.

The indicative cost of the project is

estimated at 600 million Euro. The

construction of two lots will start in late

June or early July - one of these lots

covers the inland section from the

Border with Greece. The road junction

between the Hemus freeway and the

Sofia ring highway will start in October

2007. The indicative budget of the pro-

ject is estimated at 32 million Euro.

The establishment of public-private

partnerships is being discussed also

for the construction and management

of the Black Sea and Hemus freeways.

The concession procedures are being

drafted jointly with the EBRD and we

hope that the project will be launched

in the mid or late 2008.

ISPA funds will be used for the con-

struction of the Lyulin freeway. The

total cost of the project is estimated at

148.4 million Euro. We expect that the

construction will be completed by

2010.

I do not think road infrastructure is the

only available sphere where business-

es, the state and municipalities could

find a common ground. The water and

sewerage utilities management is

another sphere for possible public-pri-

vate partnerships. Perhaps you know

that this sector needs about 9 million

Euro, in order to achieve the European

norms of services quality, while the

state is not in a position to meet these

expenditures alone.

It is obvious that infrastructure - road,

communications, and water and sew-

erage - is a key to the development of

the economy as a whole, and of

tourism, which is one of the leading

sectors in Bulgaria, in particular. There

is ample evidence that Bulgaria, as an

emerging market in the EU, is attract-

ing investors in tourism not only along

the Black Sea coast but also inland.

There is a major interest in the con-

struction of summer-house settle-

ments, spa facilities and golf courses.

The interest of both foreign and

Bulgarian investors in building con-

struction and in the development of

tourism in Bulgaria is best of all illus-

trated by the fact that currently some

11,000 construction companies,

including foreign-owned, with almost

150,000 workers, are busy on the

Bulgarian market. This sector generat-

ed some 4.5 billion Euro in 2005, and

its share in Bulgaria's GDP is expect-

ed to exceed 6 percent.

The agreements for the construction of

the Bourgas - Alexandropoulis and

Bourgas - Vlore oil pipelines are

already a fact. The start of these pro-

jects will allow companies, operating in

Bulgaria, to become involved in the

implementation of these major pro-

jects. This will help us, jointly, to

change Bulgaria and make this coun-

try in a place where people would like

to stay and work. ■

Assen Gagauzov, Minister of Regional Development and Urban Planning:

Large Projects Will Rely on Public-private Partnerships

infrastructure, Gagauzov said.

At present the ministry discusses possi-bilities of public-private partnerships forthe construction and management ofCherno More and Hemus highways. Theconcession procedure is contractualwith the European Bank for

Reconstruction and Development, andaccording to the minister the initiativewill begin in the middle or at the end ofnext year.

In the opinion of Gagauzov, except for theroad infrastructure, the businesses, thestate and the municipalities can coordi-

nate efforts in the management of thewater distribution utilities where public-private partnerships are still discussed. Itis well known that the sector needs about9 billion Euro of investments in order toreach a European quality of service. Headded that the state is not capable offinancing the sector alone.

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Urbanized road, communication andwater distribution utilities infrastructuresare prerequisites for a strong economyas a whole and in particular for a welldeveloped tourism sector, Gagauzovsaid. As a new market within the EU,Bulgaria is attracting investors not onlyalong the Black Sea coast but alsoinside the country. The investors arevery much interested in the constructionof country houses, spa centers and golfcourses. Figures speak for themselves:currently there are about 11,000 con-struction enterprises, among them for-eign ones, with some 150,000 employ-ees.

Companies' plans

Elaborating on Siemens’ main activities,Stoyan Neshev, CEO of SiemensBulgaria, presented the forthcoming pro-jects of the company in modernizationand development of the Bulgarian trans-mission and distribution grid and powerplants, modernization of the railwayinfrastructure - signaling and electrifica-tion, biometric passports together withthe Ministry of Interior, delivery of mod-ern medical equipment for the Bulgarianhospitals and elaboration of social insur-ance card in cooperation with theMinistry of Health. Other projectsinclude the modernization of the

From Left: Kenneth Lefkowitz , Manager of NECA, Dimo Nikolov, Managing Director Moto Phohe, and Petko Nikolov, Chairman, Commission for Protection of

Competition.

A predictable legal framework is an

important prerequisite for improving of

the business climate and for attracting

FDI to Bulgaria. Several speakers at

the conference elaborated on the sub-

ject what would an investor look for

and expect to find in Bulgaria.

Roumen Nenkov, Deputy Chairman of

Supreme Court of Cassation, talked

on the developments of the Bulgarian

legislation and its harmonization with

the EU one. He hopes the amending

and reforming of the legislation will

come to an end and at a certain point

the process will stabilize. He reminded

the many legislative changes con-

cerning the public procurement,

licensing, etc. In addition to a trustful

legislation, the businessmen should

expect very proper enforcement of

the laws, Nenkov said.

The judiciary in Bulgaria should be

associated with two words: effective-

ness and independence. There was

unfavorable public attitude saying that

the magistrates are too independent

and they should be responsible of

their acts. "The magistrates act inde-

pendently from the executive power

and from the litigants," Nenkov point-

ed out. He pleaded for support of the

judiciary's administrative capacity,

help improving of magistrates' training,

and not limiting their responsibilities.

The Committee for Protection of

Competition is applying the Act for

Protection of Competition which is in

line with the European law achieve-

ments, Petko Nikolov, Chair of

Committee for Protection of

Competition said at the forum. As of

January 1st 2007 the committee can

apply the European rules for protec-

tion of competition.

The European Commission has the

jurisdiction over antitrust and consoli-

dations with an effect at the Common

European market. At the same time, if

there is a doubt that the Bulgarian

market would be affected, the

Committee for protection of competi-

tion can ask for evaluation of a deal.

In addition, the Committee has the

right to conclude sector analyses to

improve the competitiveness in the

analyzed sector of the economy.

Predictable Legal Framework

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Bulgarian industry sector and modern-ization of the street lighting and set upof modern traffic control systems in dif-ferent towns in Bulgaria.

Stefan Ivanov, the recently appointedCitigroup country officer, elaborated onthe financing projects of Citigroup withparticipation of official agencies, andfinancing of infrastructure projects: intransport, in utilities and in telecom sec-tor. Ivanov pointed out that the financingand co-financing solutions are availableto various types of players: corporates,projects, PPPs. Citi covers all types ofinfrastructure transactions: green-fieldprojects, re-financings/recaps, acquisi-tion financing.

Plamen Mitev, general manager ofBalkan Star Automotive, spoke on theAllianz Leasing&Services company. Itwas established in 2002 as Balkan StarServices company and since the begin-ning of 2007 the major proprietor of the

company became Allianz BulgariaHolding. So the company was renamedto Allianz Leasing&Services company.Its main purpose is to offer leasing andfinancial services for new and usedvehicles of the brands: Mercedes-Benz,Mitsubishi, Chrysler, Jeep, Renault, othervehicles.

More EU means more US

U.S. Ambassador Beyrle said that theUnited States is the largest customer inthe world for EU products, buying morethan 20 percent of all of EU exports.Conversely, the EU is the largest cus-tomer for merchandise and servicesproduced in the United States, buyingabout 20 percent of all of U.S. exports.Considering the fact that the UnitedStates and EU account for 57 percent ofthe world's gross domestic product,Ambassador Beyrle said Bulgaria hasjoined a gigantic political and economictransatlantic partnership. He thanked

both Chambers for the initiative and thevision to put the event together andchoose the perfect timing for it, a weekbefore the Euro-American summit onApril 30.

Michael Geier, the German ambassadorto Bulgaria, said that the United Statesand Germany are the most importanteconomic partners of Bulgaria. "It is inthe best interest of EU and the UnitedStates to have similar procedures whentesting new medicines and new carmodels," Ambassador Geier said.

Opening the floor on behalf of morethan 250 members of AmChamBulgaria, Borislav Boyanov, AmChampresident, said that the EuropeanCouncil of American Chambers ofCommerce ranked AmCham Bulgaria aslast year's best developed chamber."The phrase that more EU means moreUS became our unofficial motto,"Boyanov said. ■

Bulgaria does not need to choose

between the United States and Europe,

as the similarities in terms of values in

a political, economic and cultural

aspect are huge; these are values

Bulgaria must try to attain. This means

that Bulgaria's EU membership should

not be regarded as an alternative to

the good relations with the United

States.

Being a small country with limited

resources, Bulgaria must lead a bal-

anced foreign policy, based on the

principle of reciprocity, including in the

economic sphere.

Two main factors boost the competi-

tiveness of Bulgaria's economy, and

the impact of these factors may be

further enhanced by utilizing European

and U.S. experience.

First of all, the current model of edu-

cation in Bulgaria needs a closer

involvement with the needs of the

national economy, as currently is has a

very low level of practical applicability.

Besides, this model has preserved the

almost exclusive role of the state in

planning the education in the various

directions and does not allow the par-

ticipation of the businesses.

The final result demonstrates a serious

disparity between demand and supply

on the labor market for key profes-

sions with the relevant professional

expertise, for instance, IT professionals

and economists.

The synchronization of the system of

education at all levels with the needs

of the economy must be achieved also

by employing the best practices, by

combining the US model of active

partnership between the business, the

academic community and the state,

and the accessibility of the good initial,

secondary and university education in

Europe.

There are problems in the labor market

in Bulgaria as well. Currently, they are

characterized by the limited options

available to employers to employ their

workforce (for instance the application

of deregulated working hours), high

cost (social insurance), and minimal

flexibility in case of redundancies.

The existence of these deficiencies

substantially reduces the attractiveness

of Bulgaria as an investment venue,

especially when this is combined with

an unfavorable demographic trend.

The urgent removal of the described

obstacles may and must be made by

using the experience of the United

States and of certain European labor

markets, for instance British and

Dutch. ■

Boiko Dimitrachkov, Deputy CEO of the Bulgarian Telecommunications

Company:

Bulgaria Must Reform its Educational System

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Mr. Luftman, in your address at the

conference you mentioned the recent

conclusion of the Air Transport

Agreement. How do you see changes

in providing goods and services from

the United States to Europe and in

particular to Southeast Europe?

The U.S.-EU Air Transport Agreementsigned on April 30 replaces existingbilateral agreements between the UnitedStates and EU member states andestablishes an "Open-Skies Plus" frame-work between the United States and all27 EU countries. Taking effect in March2008, it authorizes every U.S. and everyEU airline to fly between every city inthe European Union and every city inthe United States. Under the old systemof air service based on a network ofrestrictive bilateral air agreements, aRomanian airline might have flownbetween Bucharest and New York, orBucharest and Miami. Now, under thenew system, the same airline will beable to offer service not only betweenBucharest and New York or Bucharestand Miami, but also, for example,between Cluj and Chicago or evenBerlin and Boston or Paris and LosAngeles.

In the past, such options were unlikelyor impossible. Now, the market, ratherthan pre-negotiated bilateral agree-ments, will decide what is possible. Theagreement also allows American and EUmember state airlines to set faresaccording to market demand and toenter more freely into cooperativearrangements, including code-sharing,franchising, and leasing.

By opening the transatlantic aviationmarket to greater competition, theAgreement extends greater choice andmore efficiency in air services toEuropean and American passengersand businesses that rely on air transportand more possibilities for air carriers.

Could you tell more about the discus-

sions U.S. authorities had with the EU

bodies about the barriers that different

regulatory practices across the

Atlantic hamper bilateral trade?

Also on April 30, President Bush,Chancellor Merkel, and PresidentBarroso signed a Framework onTransatlantic Economic Integration. Oneof the main objectives of this Frameworkis to lay out concrete steps to reduceregulatory costs and remove unneces-sary differences between U.S. and EUregulations, which constitute some ofour most difficult barriers to transatlantictrade and investment.

The Framework targets regulatory differ-

ences in specific sectors - such asautomobiles, medical devices, cosmet-ics, electric equipment, chemicals, foodsafety, nanomaterials, and medicinalproducts - and establishes how we willcooperate to keep new regulations fromcreating barriers to economic integra-tion. It promotes closer collaborationbetween the U.S. Office of Managementand Budget and the EuropeanCommission's new Regulatory ImpactAssessment Board through risk assess-ment and cost-benefit analysis method-ology, through a study on the impacts ofregulation on transatlantic trade andinvestment, and through future regulato-

Eric Luftman, deputy director at the Office of European Union and Regional

Affairs, Department of State:

Open-skies Agreement Connects EU andU.S. Cities By Irina Bacheva

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ry plans.

Biofuels became an issue of the pre-

sent day in Europe. There are already

25 enterprises producing bioethanol

and biodiesel in Bulgaria. Do you

think that U.S. companies might be

interested in investments in Bulgaria,

developing this market? Can you men-

tion such companies and their ways

of producing biofuels in the United

States?

Cooperation between the EuropeanUnion and the United States to promotethe development of biofuels and todevelop common biofuel standards isone of the most important areas of ourSummit Statement on Energy Security,Efficiency, and Climate Change. U.S.companies pursuing development of bio-fuels include traditional energy compa-nies like ExxonMobil, major food pro-ducing companies like Cargill andArcher Daniel Midlands, and manysmaller companies and individual entre-preneurs who are seizing opportunitiesto break into this dynamic new market.They are competing to develop fuelsand improve technologies from every

conceivable organic source includingmajor crops, like corn, soybeans, andsugar cane, as well as vegetable oilsand organic waste products. While I donot offhand know which U.S. companiesmay be looking at the Bulgarian biofuelsmarket, with the enormous growth ofthis field, the prospects for such invest-ment are excellent.

How do you see partnership between

U.S. hi-tech companies and

Bulgarian IT managers? Can they

develop competitive products on the

local market to get over the estab-

lished brands?

Breaking into any market is always diffi-cult, whether it is dominated by a fewmajor companies or more broadly com-petitive. And certainly the EuropeanCommission is doing a lot to ensure thatthe IT field will be competitive through-out Europe. So rather than focus on a"monopoly of established brands" -which I don't think exists - Bulgarian ITengineers should focus on their owninnovations, and ways to bring theirideas to market. Even with the enor-mous amount of competition in the field,

there are undoubtedly niches, areasparticular to Bulgarian culture orBulgarian experience, that afford oppor-tunities for development of Bulgarianinformation technology.

What is your personal interest toward

Europe and Southeast Europe driven

from?

As a graduate student in the early1980s, I concentrated on the economiesof what we then called the Soviet Bloc.I studied German and Russian, and hada summer fellowship in Munich where Ifocused on energy issues in Romania,Hungary, and Poland. As I mentioned inmy presentation before the AmericanChamber of Commerce, when I joinedthe U.S. State Department in 1984, Icompeted for my first assignment to besent either to Bucharest or Sofia.Although I was not selected for eitherpost, and my career took a differentdirection, I retained a strong interest inthis part of the world. I was delightedfinally to be able to visit both cities, andwitness the incredible transformationthat has brought both Bulgaria andRomania into the European Union. ■

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When taxes are a part of the problem of an economy, theyhave to be part of the solution, too. Or this is what the lawsof financial logic prescribe. It seems Bulgaria's Socialists havealso realized this correlation - there is hardly another explana-tion for their

turning the spring into the season of tax

promises

and showering the populace with the good news about thefuture generosity of the treasury.

It is clear already that the Bulgarian Socialist Party (BSP) ispreparing a reduction in the income tax. The plans for a ratecut can materialize from the beginning of 2008. Provided, ofcourse, that the ideas of the Left are approved by the coali-tion partners, i.e. the Simeon II National Movement and theMovement for Rights and Freedoms, and then pass at theNational Assembly.

During a special plenum, BSP voted to reduce the tax on lowand medium wages. Strange as it may sound, though, it is

the rich who will benefit the most

if BSP's intentions are carried out.

The tax burden for people with an average wage will decreaseby 120 Leva next year, according to the plans of the Left. Thehighest rate of 24 percent will be levied on incomes exceed-ing 800 Leva, up from 600 Leva now. If budget performanceallows, social security rates will drop by 3 percent from themiddle of 2007. The program of the Left also envisages grad-ually raising health contributions from 6 to 8 percent.

Currently, workers with an average wage of 400 Leva receive318 Leva net after paying their security installments and taxes.If all the ideas of the BSP materialize, next year the workerswill get 328 Leva, or some 10 percent more. The calculationswill be correct if the 35:65 ratio between the social security

Bulgaria's SocialistsCrusade for Lower Taxes

p e s s i m i s m

To Bulgarians, poverty is a bigger threat than HIV/AIDS

and nuclear weapons. Their most serious problem is eco-

nomic survival. This is the main conclusion of the survey

of 44 nations conducted under the Pew Global Attitudes

Project, which is chaired by ex- U.S. Secretary of State

Madeleine Albright. According to the survey, Bulgarians

are the most dissatisfied nation: 50 percent say that their

life has worsened for the past five years and that eco-

nomic changes have a negative effect on their personal

living standards.

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payments made by employee and employer is preserved. If theratio is changed to 40:60, the benefit from the tax reductionfor workers will shrink in half: 5 Leva a month, or 60 Leva. Butthat will result in a bigger reduction in companies' employmentexpenses.

The people with a wage of 300 Leva for instance now receive250 Leva net after security contributions and taxes. If BSP'sideas are carried out, their money will increase to 254.50 Leva,i.e. they will save 54 Leva in taxes for a year.

Those who have the highest incomes and pay the biggesttaxes will benefit the most. They will save 340 Leva from amonthly wage of 1,000 Leva.

Rules for criminal liability for tax evasion are also reviewedand updated. Prison sentences will not be imposed if the hid-den tax is of a small amount but there may be fines or pro-bation. It should be noted, though, that a month ago financeminister Plamen Oresharski said straight out, "We should getused to the fact that the possibilities for reducing the tax bur-den in Bulgaria have been nearly spent." Oresharski alsoexplained that there are

no reserves for future tax cuts,

because even now Bulgaria has one of the lowest levels ofGDP redistribution in the EU (the average indicator in the EUcountries is 47 percent). That could deteriorate the quality andquantity of public services, the minister said.

He forgot to mention, however, that nearly two years ago thethree parties in the ruling coalition signed a joint agreementthat the budget will not appropriate more than 40 percent ofGDP. Oresharski did not mention either that according to planthe budget will receive 41.7 percent of GDP in the form oftaxes, i.e. the government will collect and spend more of tax-payers' money.

Bulgarian "tax heaven"

Ten years ago the three direct taxes - on profit, income andsocial security - had the same rate: a touch above 40 percent.Today the profit tax is down to 10 percent but the tax andsocial-security burden on labor remains high (36.7 percent forsocial security and 20 to 40 percent for income tax). It is quiteclear the time has come for abating labor taxation, said ana-lysts from the Sofia-based Institute for Market Economics.

Bulgaria levies progressive taxes on its citizens, i.e. people withlower incomes pay less and vice versa. The effective rates ofpersonal taxes are among the lowest in the Community:between 20 and 24 percent. The old EU member states arethe most stringent to their rich taxpayers. In Denmark, forexample, such taxes reach as high as 59 percent. In Swedenthe highest rate on incomes is 56.6 percent, in theNetherlands, 52 percent, and in Finland, 51 percent. Theincome tax in the ten 2004 EU entrants is more bearable.Slovakia and Estonia have a flat tax and all taxpayers con-tribute 19 and 23 percent respectively to the budget. Latvialevies 25 percent on the income of its wealthiest taxpayersand Cyprus, 30 percent. The average maximum tax rate for all

member state is 41 percent.

The situation in the region is different, however, and Bulgariacan hardly be called the best tax location, because the incometax in Romania is 16 percent, in Macedonia it is 12 percent,and in Serbia, 14 percent.

There is yet another interesting comparison. Bulgaria chargesthe maximum rate of 24 percent on amounts in excess of7,200 Leva (3,680 Euro). The tax-exempt minimum in Bulgariais 2,160 Leva, or about 1,108 Euro. Compare that with a non-taxable income minimum of 5,150 Euro in Denmark, 7,644Euro in Germany, 7,210 Euro in Malta, 10,000 Euro in Austria,12,000 Euro in Finland etc.

Besides, the social security rate in Bulgaria is 36.7 percent ofthe gross wage, well above the average levels in Europe. Theburden in Ireland is between 10 and 15 percent. There arecountries where security contributions are not paid at all. Labortaxation (taxes and social security installments) as a whole ishigh. For the poorest people here the burden is above 36 per-cent, while in Malta it reaches 18.7 percent, in Ireland, 19.9percent, in Cyprus, 19.1 percent, and in Iceland, 23.6 percent.

While these tax high-wire acts are being performed, the pub-lic is being bombarded with statements that

personal taxes in Bulgaria are among the

lowest in the EU.

If income tax rates are a reliable measure, it really turns outthat Bulgaria is one of the countries with the lowest taxes. Buttaxation has to be viewed within the context of people'sincomes. Several years ago an ex-minister of finance alsoclaimed that there were no better tax rates in Europe. In theend he admitted, "Even if tax rates are slashed to zero, it ishard to live on 300 Leva a month in Bulgaria."

It is true that personal taxes in Belgium reach as highas 55 percent, in France, 54 percent, in Germany, 53percent, in Austria, 50 percent. In addition, in somecountries like Spain, Belgium and France taxes are paidnot only to the state but to the local authorities as well.That raises taxes to 60 percent.

But Europe's tax system abounds in allowances that reducethe taxable income. Pension and health contributions areexempt from tax in most EU states. The maintenance pay-ments related to care for the elderly are recognized as expens-es in some countries. There are tax bonuses for raising chil-dren up to three years of age, as well as for assisting the dis-abled. The "stringent" laws in Germany allow setting transportexpenses to the workplace against tax, the fees collected bytax lawyers are not taxable either. In the Czech Republic,Ireland, the Netherlands etc. even the interest payments onmortgage loans are deductible.

The European taxation practice also allows other substantialreductions in the tax base for donations, professional trainingetc. All these preferences considerably shrink the taxableincome base, as a result of which the amounts paid to thenational budgets are smaller.

Besides, family taxation in Europe is anything but a youngpractice. The data show more substantial differencesbetween the disposable income of single people and marriedcouples with children. The average indicator in the EU is 13.8percent. In Poland it is 6.0 percent, in Slovakia, 16.2 percent,in the Czech Republic, 20.0 percent, and in Hungary, 21.3percent.

When poor Bulgaria boasts of its low rates in comparison withthe rich countries in the EU, we should keep in mind the

low economic growth rates

in these countries, as well as the fact that when they werebecoming rich their governments pursued low-tax policies. Oneof the manifestations of the German economic miracle of the1950s, 1960s and the early 1970s was the policy of low taxes.

A survey conducted by Graham Leech, a British economist,proves that economic growth in low-tax countries is much big-ger than in countries levying high taxes. The growth in Irelandfor the ten-year period between 1991 and 2001 was a total of82 percent, and the average tax revenue was 30 percent ofGDP. In Korea, the ten-year economic growth was 63 percent,the average tax rate stood at 26 percent.

Just the opposite trend is observed in heavy tax collectingcountries. For a decade, Denmark posted 24-percent growth,the tax burden was 49 percent of GDP. In Sweden, the indi-cators were 22 percent growth and 54 percent revenue, andin France, 21 and 45 percent, respectively.

It is a basic truth that low tax rates and simpler taxation rulesare the main tools for encouraging growth, as they stimulateconsumption and investments. Besides, they prevent the flee-ing of capitals and companies. They often secure more rev-enue than high taxes: that is what experience shows in Irelandand the East-European countries.

So, the government could have taken two roads: copy theexample of Ireland, which for only 15 years became known asthe "Celtic Tiger" of Europe due to its low taxes. Or follow theGreek manner of high taxes in the name of budget revenue,which turned it into one of the poorest European countries.

There is also

a third, more radical road,

which was preferred by countries like Russia, Estonia, Ukraine,Lithuania, Latvia, Slovakia. In 2004 Slovakia, for instance,slashed all direct taxes - on profit, incomes, VAT - to 19 per-cent. In addition, the changes undertaken as part of the pen-sion reform allowed people to pay 9 percent of their socialsecurity contributions to private companies, rather than to thestate security organization.

One by one, these countries also abandoned progressiveincome taxation and introduced a single tax rate on allincomes. That is not done in Bulgaria on grounds that it willbenefit the rich, and the most outspoken opponent of the flat-tax idea is the BSP itself. The well-off do not seem very inter-ested in the tax debate, though. ■

Prime Minister Sergey Stanishev promised once again a better financial conditions for the Bulgarian people during the 1st of May Celebrations in Sofia.

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On January 1, 2007, Bulgaria and Romaniajoined the European Union bringing the numberof countries in the EU to twenty-seven. TheAccession of Bulgaria and Romania follows theMay 1, 2004 Accession of Cyprus, the CzechRepublic, Estonia, Hungary, Latvia, Lithuania,Malta, Poland, the Slovak Republic andSlovenia. The 2004 and 2007 enlargements create an econ-omy equal in size to that of the United States. Joining the EUbrings challenges for Bulgaria and Romania as they modifytheir tax systems to meet the requirements of EU member-ship. For multinationals investing in Bulgaria and Romania,the enlargement creates issues and opportunities as theyrespond to the changing tax environment. The combination ofaccession and the new treaty with US clearly puts Bulgariaon the direct investment map.

Accession and the EU Direct Tax

Environment

Part of the price of admission into the EU for Bulgaria andRomania is bringing their individual tax systems into confor-mity with the EU tax environment. In some cases, this willbe beneficial in that the limited harmonization that existswithin the EU will apply to Bulgaria and Romania on January1, 2007. In other cases, this may be disadvantageous to theextent that Bulgaria and Romania are required to dismantleincentives and other tax regimes that are not in compliancewith an EU tax environment. As was the case with the 2004Accession, multinationals investing in Bulgaria and Romaniawill find twelve disparate corporate tax systems which differsignificantly not only from one another but also from the cor-porate tax systems in the existing fifteen EU Member States.

Tax Rates

Bulgaria and Romania offer attractively low general rates of cor-porate tax. Bulgaria recently lowered its corporate income tax

rate to 10% making it one of the lowest tax ratecountries in the EU. Romania's corporate incometax rate is 16% which also compares favorably withother EU Member States. Bulgaria and Romaniaboth have tax incentive systems designed to bringinvestment to their countries. For example,Bulgaria will provide a 100% tax exemption for

manufacturing enterprises conducted in designated regions.

Harmonization

Unlike VAT, there is no provision in the Treaty of Rome thatexpressly deals with the harmonization of direct taxation inthe EU. Article 94 of the Treaty provides for:

"… the issue of Directives for the approximation of such laws,regulations or administrative provisions of Member States asdirectly affect the establishment or functioning of theCommon Market."

Four Directives have been adopted in the area of corporatetaxation. These are the Parent-Subsidiary Directive dealingwith the payment of dividends between Member State enti-ties, the Interest and Royalty directive dealing with the pay-ment of interest and royalties between Member State entities,the Merger Directive dealing with cross-border mergers ofcompanies within the EU and the Mutual Assistance Directivedealing with tax cooperation.2 Subject to certain transitionrules discussed below, these Directives each entered intoforce in Bulgaria and Romania on January 1, 2007.

Dividends

From January 1, 2007, the Parent-Subsidiary Directive willhave direct effect in Bulgaria and Romania. Both countriesmust comply with the Directive by eliminating withholding taxon distributed profits. Thus, subsidiaries in Bulgaria andRomania will be able to pay dividends to their EU resident

Bulgaria and Romania Join theEU Crowd - Latest EU ExpansionCreates New Opportunities andChallenges for Multinationals

By Michael S. Lebovitz, Stamen Yanev, Katerina Kraeva, Roderik Bouwman, Marc de Munter, Bernhard von Thaden,

DLA Piper1

1 The authors are with the global law firm DLA Piper. DLA Piper is one of the world's largest legal services organisations with over 3200 lawyersoperating across 24 countries and 62 offices worldwide. Michael S. Lebovitz is an international tax partner in the Los Angeles office, KaterinaKraeva and Stamen Yanev are associates in the Sofia office, Roderik Bouwman is an international tax partner in the Amsterdam office, Marcde Munter is an international tax associate with the Brussels office and Bernhard von Thaden is a principal economist based in the Los Angelesoffice.

2 Council Directives 90/435/EEC, 2003/49/EC, 90/434/EEC and 77/799/EEC recently modernized in the field of direct taxation by Directive2004/56/EC respectively.

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parent companies free of local withholding taxes if the con-ditions imposed by the Directive are met. In addition, parentcompanies in the two Acceding Countries will have to providefor relief of any double taxation on dividends received fromsubsidiaries in other Member States and vice versa. In orderfor the Directive to apply, the EU parent company must haveheld at least 25% of the share capital of the subsidiary.When implementing the Directive, Member States have theoption of requiring a holding period of at least two years.Since 2003, a gradual reduction of the minimal shareholdingthreshold has been introduced. For 2007 and 2008, the per-centage is set at 15%, to be reduced to 10% as from January1, 2009. Bulgaria implemented the Directive at the 15% hold-ing threshold but also requires a two-year holding period.

Interest and Royalties

Under the Interest and Royalties Directive, Bulgaria andRomania must eliminate withholding taxes on payments ofinterest and royalties between associated companies of dif-ferent Member States. The Directive currently requires a 25%holding between the payor and the recipient although it isexpected that this threshold may be reduced or eliminated inthe future. Under the Protocol under which Bulgaria andRomania were admitted to the EU, a transition rule applies toboth countries with respect to their application of the Interestand Royalties Directive.3

Bulgaria is not required to apply the full provisions of theDirective until 2015. Between 2007 and 2010, the maximumwithholding rate Bulgaria can impose on interest or royaltiespaid to an EU recipient is 10%. Between 2011 and 2014, themaximum rate falls to 5% before full implementation of theDirective is required in 2015.

Romania is not required to apply the full provisions of theDirective until 2011. Between 2007 and 2010, the maximumwithholding rate Romania can impose on interest or royaltiespaid to an EU recipient is 10%.

Acquisitions and Reorganizations

The Merger Directive enables certain forms of cross-bordercorporate mergers, divisions, split-offs, exchanges of sharesand transfers of assets within the EU to be carried out withdeferral of taxable gains/recapture of tax depreciation, in sofar as the relevant transaction is possible under the MemberState's local corporate law. The Merger Directive wasamended and its scope broadened by a new Directive in2005. Bulgaria implemented the Merger Directive with itsmost recent tax legislation effective January 1, 2007.

Transfer Pricing

The transfer pricing rules in Bulgaria and Romania are notfully developed but this will change as a result of Accession.No specific transfer pricing legislation exists in Bulgaria. As

a result, the tax authorities have provided very little guidanceon intercompany transactions. Romania's source for transferpricing rules has historically been Article 11 of its FiscalCode and its Methodological Norms. Here, the Romaniangovernment focuses on implementing intercompany agree-ments for all material intercompany transactions but does notrequire contemporaneous documentation along the lines ofwhat is required in the more mature EU transfer pricingregimes.

Recent EU transfer pricing developments will shape the legaland regulatory environment for cross-border intercompanytransactions in Bulgaria and Romania. In 2002, the EUCouncil established the EU Joint Transfer Pricing Forum("JTPF") with the goal of reducing high compliance costs andeliminating the risk of double taxation on cross-border intra-group transactions within the EU. Following the JTPF'sreport, in July, 2006, the Council formally adopted an EUCode of Conduct on transfer pricing documentation("EUTPD").

With the EUTPD, the Council recommended to its membergovernments that they adopt the perspective of the OECDGuidelines4 and accept a regional approach to preparingtransfer pricing documentation. Under the Code ofConduct, transfer pricing documentation should consist ofa "master file" and "country-specific documentation"("country-files") files for each country where intercompanytransactions arise. According to the EUTPD, the master fileshould contain:

● Worldwide business and its value chain.● Organizational structure and identification of entities

involved in intercompany transactions with the EU,● General description of the nature, materiality and structure

of intercompany transactions with the EU,● General description of the functions performed and risks

born by entities in the EU,● Ownership of intangibles within the worldwide group,● Discussion of a worldwide group' transfer pricing policy,

and● Discussion of cost contribution agreements, rulings and

Advance Pricing Agreements, as they affect EU membersof the worldwide group.

The master file contains essentially everything that is ofinterest to a tax authority auditing any of the EU-based enti-ties of the worldwide group and, at the same time, factuallyapplies to all those entities.

The country file supplements the master file by providing adiscussion of a specific entity and its business environment.Specifically, the country file will provide:

● Detailed description of the local business and businessstrategy,

● Detailed description of the nature, materiality and structure

3 Treaty of Accession of Bulgaria and Romania to the European Union: OJ L 157, 21.6.2005; Bull. 4-2005.

4 "Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations", Organization for Economic Co-operation and Development,June 27, 1995. As discussed below, the new income tax treaty between the US and Bulgaria requires the use of OECD transfer guidelines forcertain purposes under the treaty


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of the country-specific intercompany transactions,● Discussion of comparability factors that are relevant for the

selection of an appropriate transfer pricing method (includ-ing and most importantly a discussion of functions per-formed, assets used and risks assumed by the local enti-ty),

● Explanation of the selection of most appropriate transferpricing method(s),

● Discussion of the comparables used under the selectedtransfer pricing method(s), and

● Description of application of the worldwide group's trans-fer pricing policy.

The master file and the country file together constitute thedocumentation file for the individual EU member state.

It is important to note that the EUTPD does not rise to thelevel of legislation but at this point merely represents a for-mal recommendation and endorsement by the Commissionand the Council to develop and implement national legislationthat follows the outline of the EUTPD. Bulgaria and Romaniawill need to determine whether and how to implement theCode of Conduct. It is likely that, given the lack of devel-opment of their transfer pricing legislation, they are most like-ly to follow the Council's recommendations and implement aversion of the EUTPD.

Accession and VAT

In the EU, Value Added Tax ("VAT") is levied on the basis ofa number of Directives. The most important VAT directive isthe Sixth Directive. These Directives prescribe how MemberStates must levy VAT and provide a basis for a uniform VATsystem that applies throughout the EU. The VAT Directivesdefine the scope of the VAT system by introducing crucialand binding notions for taxation, such as "taxable person"and "taxable remuneration", as well as defining the scope ofexemptions and the rates that are allowed to be used byeach Member State.

Member States must implement the Directives in their nation-al legislation. If a Member State has not fully met its obliga-tions under a VAT Directive, the European Commission can -and frequently does - initiate an infringement procedureagainst that state before the European Court of Justice.

VAT in Bulgaria

On January 1, 2007, the EU VAT Directives became applic-able in Bulgaria. However, Bulgaria is still working on theimplementation of the Directives into its national law and itwill take some time before all EU VAT legislation is com-pletely implemented into unified national VAT legislation. Itwill also take time for Bulgaria to gain experience interpret-ing and applying the Directives together with any relatedECJ jurisprudence. The regular VAT rate in Bulgaria is20%.

If a taxpayer believes that Bulgarian VAT law is not in accor-dance with a Directive under relevant ECJ decisions, a tax-payer can rely on the Directive if the Directive is more favor-able than national law.

VAT in Romania

Similarly, the EU VAT Directives became applicable inRomania on January 1, 2007. National VAT legislation inRomania appears to be in accordance with the Directives.The regular VAT rate is 19%.

As is the case in Bulgaria, if a taxpayer believes thatRomanian VAT law is not in accordance with a Directiveunder relevant ECJ decisions, a taxpayer can rely on theDirective if the Directive is more favorable than national law.

What Should Multinationals Be Doing

Now?

Accession brings both challenges and opportunities for multi-nationals investing in or planning investments in Bulgaria andRomania. There are a number of steps multinationals shouldconsider in order to protect themselves from changes in theBulgarian and Romanian tax regimes as well as capitalize onthe opportunities arising from Accession.

As noted, the limited harmonization that has taken place todate in the EU will apply in Bulgaria and Romania on January1, 2007 except as described above. As a result, multina-tionals should consider what changes are necessary to theirstructures to maximize the benefits of Accession. For exam-ple, multinationals with investments in Bulgaria and Romaniashould consider steps to transfer Bulgarian and Romaniansubsidiaries to EU holding companies in order to benefit fromthe Parent-Subsidiary directive. Austria is often used as aholding company for Bulgarian, Romanian and other Centraland Eastern European entities. Subject to home countryconcerns, the Merger Directive should facilitate the transfersnecessary to put in place an optimal structure.

Many multinationals with investments in or planned inBulgaria, Romania and the 2004 Accession Countries haveestablished project teams to evaluate the impact ofAccession. Perhaps the most important step a multinationalshould take as a result of Accession is to ensure that themultinational's Tax department is appropriately representedon the various project teams evaluating the impact andopportunities.

Just as Accession is a unique opportunity for the countriesinvolved, Accession will have a broad impact on multination-als investing there. Adequate preparation and planning willassist multinationals in capturing the benefits that Accessionwill bring. Multinationals with investments in Bulgaria andRomania should consider steps to transfer subsidiaries inthose countries to EU holding companies to benefit from theParent - Subsidiary Directive. Transfer pricing rules inBulgaria and Romania are not fully developed but this willchange as a result of accession. ■

This publication is a general overview. It should not be usedas a substitute for taking legal advice in any specific situa-tion. DLA Piper accepts no responsibility for any actionstaken or not taken in reliance to it. The full version of thisarticle could be found in the June edition of the Journal ofInternational Taxation.

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A married couple I knew emigrated toAmerica in the 1970s, settled there, builta house with two jacuzzis and garageswith three SUVs, gave their two childrenan education and found them brilliantjobs. In the end, having fulfilled theirdreams, the couple got divorced. It is likewhat Romania did in April 2007.

Six months before that Brussels wasimpressed with Romania's final sprint tothe European Union. The Romanian elite- which as a rule is more consolidatedthan the Bulgarian one - easily managedto convince the nation to forget the inter-nal friction and show an attractive face toEurope. Political rows abated, high-stand-ing leaders were charged with corruption,"Europe" was the word of the day. As aresult, Romania made a triumphant entryinto the EU and saved itself some of thethreats made to neighboring Bulgaria.

Four months later, however, presidentTraian Basescu quarreled with primeminister Calin Popescu Tariceanu; theparliament impeached the president inthe Balkans' first procedure of the kind;the MEP elections were postponed, andthe chairman of the EuropeanCommission, Jose Barroso, issued anominous press release that Romania hadmade commitments, particularly withrespect to corruption, and it had toobserve them. A family triumph - and adivorce. Excellent health during hardwork - and heavy flu on the first day ofrest.

But what was the point? Was Romania'sfinal sprint just a Potemkin village, a hol-low construct intended to conceal animage-tarnishing reality? Or there is areason for everything? Is it only Romaniathat suffers from this

post-victory flu?

We will leave the first assumption withoutcomment and elaborate on the secondand the third ones.

President Basescu is the typical East-European leader, riding the crest of peo-ple's love, while premier Tariceanu is the

typical East-European liberal technocrat.Due to the power of his office, the formeris more readily liked than the latter.Rumor has it that the president is backedby the secret services and the primeminister by the oligarchs, though it maywell be just the other way around.

Their honeymoon lasted for only a yearafter in 2004 the two had joined forcesto become president and premier. Oncein power, they remained tightly connectedwith their parties: Basescu with thedemocrats and Tariceanu with the liber-als. Interestingly enough, the conflict

between the two produced a merger: theliberal democrats of Theodor Stolojan,who chose Basescu. The rancor wasgathering momentum and after the firstNew Year in Europe they unleashedheavy blows on each other.

Basescu started vetoing the bills of thegovernment; Tariceanu, in turn, dis-missed all ministers from the president'sdemocratic party (including Brussels'favorite, corruption fighter MonicaMacovei). The culmination was spectac-ular: with an overwhelming majority andwith the help of the social-democratic

The Day AfterPost-integration fatigue in Bulgaria and Romania

By Boyko Vassilev

Romanian President Traian Basescu, right, walks with Romanian Premier Calin Popescu Tariceanu, left,

shortly after the European Commission presented its report on the integration of Romania and Bulgaria in the

EU, in Bucharest, Romania, Tuesday Sept. 26 2006.

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opposition, the parliament unseatedpresident Basescu. Although the formersailor and mayor of Bucharest expectsto regain his office at a referendum onMay 19, the meager rally in his support(only 2,000 people in the capital city)suggests that people's love should notbe taken for granted. It is Basescu'sfault, too: he promised, before the televi-sion cameras, that he would withdraw ifhe was impeached, but forgot hispromise the moment fate came knockingon the door.

Basescu's case shows what happens topeople's favorites in Central and EasternEurope. To win, they

promise ethics, honesty

and efficiency.

Heaven help them if they really win: onthe very next day they start to be remind-ed of their loftiest promises. And sincelife in the post-communist societies is notperfect, people's favorites fall into theirown traps: Basescu in the trap of hon-esty, just like Bulgaria's Ataka; SimeonSaxe-Coburg-Gotha, in the '800-day' trap;the Kaczynski brothers, in the trap of effi-ciency, and so on. It makes no differencethat some of these leaders are success-ful and others are not: if you make asuper-offer, you will be called to super-account. Bridge is a clever game, whichteaches a simple truth: you only winwhen you fulfill the contract - nothingelse matters.

That is exactly the game Bulgaria playedand was more successful in the firstmonths of EU membership. Criticizedand threatened with safeguard clausesuntil the very last moment, the Bulgariangovernment tiptoed into the EU withoutmuch ado and bragging. The skepticalBulgarian citizen was not pumped upwith superpromises and the incumbentsnever asked the populace to makesuper-efforts. The delicate coalition,which was created after so much troublein the summer of 2005, survived, and itseems to be functioning, despite thehuge scandal with the InvestigationDirector Angel Alexandrov and MinisterRoumen Ovcharov.

The powerful Romanian consolidationwas successful in the last months of2006, while the Bulgarian low-profileapproach gave results in the first monthsof 2007. If you look for some nation-spe-

cific explanation, you will find it: the 22-million country has its elite, and theeight-million one had some tricks afterall.

Nevertheless, Bulgaria, too, caught thepost-integration flu. The lack of EUeuphoria turned into early EU skepticism:as early as in January, Europe debutedin Bulgaria with petty talk about home-made rakia and construction in protectedareas. The canvassing for the first MEPelections started with a debate on howappropriate it was to invite Azis, a homo-sexual chalga singer and Big Brother par-ticipant, to sing for the Socialist Party.The Alexandrov-Ovcharov scandal washuge, with the Bulgarian authorities call-ing Brussels for help. On top of that, amisunderstood Bulgarian-German projectconcerning the slaughter in Batak in1876 aroused the usual suspicions thatsome vicious European wanted to dam-age the Bulgarian identity. Europe is nolonger sexy; what is more, it is becomingboring.

For 15 years, Bulgarians and Romanianshave been chanting, "EU, NATO, EU,NATO…" Now the goal is achieved andno new goals are visible on the horizon."There is a deficit of ideas," Bulgarianpresident Georgi Parvanov says; whilepolitical and social scientists are desper-ately urging for an answer to the question:

Where to now?

When asked, politicians give vagueanswers: yes, we have to focus on infra-structure, high technologies, education,standards, healthcare, pensions… Butwhen somebody tells you he has 12 pri-orities, that means he has none.

Just a few years ago speaking ofenlargement fatigue was the fashion."Western Europe is getting tired ofenlargement," Croatian president,Stijepan Mesic, told me in 2003 and verysoon we all understood the meaning ofthose words. But it seems to me thattoday we have to replace "enlargementfatigue" with "post-integration fatigue."

"You paid so many efforts and we askedso much of you that it is natural for youto be a little tired," Francois Bafoil, theFrench political scientist, told me in 2007.

Yes, the drinking bout is over and nowcomes the hangover.

But is this hangover dangerous to health?Probably yes, because the lack of ideasand goals and the European enthusiasmhave a high price in the long run. But theeconomy gives a most unexpectedanswer: No, there is no danger. The busi-ness processes are less and less influ-enced by politics; for ten years nowBulgaria has had an Asian-like econom-ic growth rate, Bulgarian business peoplesay.

Daniel Cain, a journalist from Bucharest,agrees: "The latest Romanian crisisshowed that people no longer go to ral-lies. The economy develops regardless ofpolitics."

And it is in the field of economy that themost interesting competition between thetwo neighboring countries is taking place.Already in January Romanians bought upthe shops in northern Bulgaria - as evilgossip had it, there was strong demandfor Bulgarian millet ale, boza, an allegedaphrodisiac. During the Easter holidays,the Black-Sea resorts in northernBulgaria were full of Romanian tourists.But then there came the bad news forthe Dobrudja region (northeasternBulgaria): Unilever moved one of its mar-garine factories to Romania and closedjobs.

The economic logic of

open borders

delivered its unrelenting news: Romaniahas a bigger market, higher standardsand order; Bulgaria has better lifestyle,more qualified workforce per capita andreally a lot of free space on a relativelylarge territory.

Political commentators are not accus-tomed to taking these factors intoaccount but they will get used to it quick-ly. Meanwhile, the hot Bulgarian andRomanian politics will be getting hotterand losing more and more spectators.Shall we call this an Italian, a South-European syndrome? A stormy politicaldrama,a never-ending corruption scandal,and economic growth that has nothing todo with both of it… We will have to waitand see.

Still, let us hope that the post-integrationfatigue is not the illness but the recovery:that peculiar moment when high temper-ature shows that the patient is gettingover the flu. ■


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Bulgaria is already such a popular real estate market that itis attracting not only the largest investment funds in theworld but also world celebrities. Italian media revealedrecently on their front pages that Antonio di Pietro - the manwho became the symbol of the combat against mafia in Italywith his "Clean hands" operation 15 years ago - has foundthe investment advantages of Bulgaria irresistible. Di Pietro,who is now the minister of infrastructure, has a rental com-pany, which rents out its own property in Varna, Bulgaria'sseaside capital. And he is far from being the only one of hiskind.

Everybody can find something in Bulgaria

Regardless of whether you will invest in an apartment at thesunny Black Sea shore, in a luxurious city residence or a two-floor condo in the top skiing resort Bansko, there is somethingfor everybody in Bulgaria, the British PR NewsWire agencyclaims. Most analysts say that Bulgaria's real estate market is

in an upsurge and will generate a high return for people, whoopted to invest here. Still, real estate agencies explain to theirclients that the prices in Bulgaria will continue to rise albeitat a slower rate, so it is worth investing only in case they areready to wait for five to 10 years in order to reap a good profit.

According to The Independent newspaper, the interest inBulgaria is understandable - its economy is growing at therate of 5 to 6 percent a year, while prices are low not onlyaccording to West European standards but also compared toother states in the former Eastern Europe. Prices in Bulgariafor instance are three times lower than in the Czech Republic.Prices growth in this country will continue until they reach thelevels in the rest of Europe, the Independent newspaper ana-lysts claim.

Bulgaria's membership in the EU is already attracting muchmore conservative investors, who are active on the capital

Bulgaria - Still a Real Estate HitPopularity and prices in the newest EU member state continue to rise

By Yuliana Boncheva

Project of a new residential park Klement Hils near seaside resort of Albena. Residential parks with build-in infrastructure and 24/7 private security are a hit on the

real estate market.


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market, and not only opportunist investors like the Irish. Wealready see interest manifested also by companies, whichwere until now hampered by the investment principles - forinstance the German pension funds, the Fortune companymanagers said.

On the eve of EU membership

Months ago, the heads of real estate agencies were unani-mous that there will be no drastic rise in real estate pricesafter Jan. 1, 2007. Instead, they expected a smooth increaseof some 10 percent a year and a market cool own. Manywere quick to conclude that the impact of Bulgaria's acces-sion to the EU had been "consumed" by the market inadvance - especially during the two preceding years.

Notaries in Bulgaria were practically overwhelmed in lateDecember by real estate contracts. The pre-New Year rushhad caught with the real estate market and sales rosebetween two and four times compared to the last days of pre-vious years, according to data, provided by notaries and realestate agencies. The boom involved all segments - from res-idential apartments to land lots acquired for investment pur-poses.

Real estate agencies attributed the drastic increase of thebusiness with the increase of tax-purpose evaluations and thehigher notary fees after Jan. 1, as well as with the withdraw-al of a large number of offers from the market, as higherprices were expected after Bulgaria's accession to the EU.

Yavlena Agency experts predicted that 2006 will set an all-time record - more than 280,000 individual real estate trans-actions. This is 40,000 more than in 2005. It turned out how-ever that Yavlena's predictions were exceeded, as the numberof individual real estate transactions reached the unbelievable300,000.

There is a marked growth in all segments, with the averagegrowth rate on 2006 set at 15 percent. According to anIndustry Watch analysis, the average prices of residentialproperty rose by 12 to 15 percent on an annual basis, with thehighest rate of increase recorded in the prices of land lotsacquired for investment purposes - up to 50 percent.

Rising prices in 2007

Regardless of all cool-down forecasts, the prices of realestate continued to rise unchecked and steadily, just as theydid during the intensive months before Bulgaria's accession tothe EU. It may sound improbable, but it is a fact - the morethe media write about investors' failures, the fraud attempts,the excessively dense construction at the resorts, the morenew buyers flock to small Bulgaria. This phenomenon couldbe easily explained - the prices, which are still low comparedto the general European background, the magnificent naturallandscapes and the good perspectives, overpower negativeadvertising, which is perhaps often true but more frequentlycriticisms are strongly exaggerated and relate to isolatedcases.

Bulgaria remains a heaven for real estate "hunters." A nice

house on the Black Sea shore may be bought for GBP70,000. A house with a large courtyard can be bought forGBP 50,000, but far from beaches - about 30 km inland. Oldvillage houses can be bought for about GBP 20,000, but usu-ally they require repairs. A house with a land lot may bebought for as little as GBP 2,000 in some of the remoteregions.

Actually, an investment in Bulgaria is the cheapest opportuni-ty for a person to own real estate in the European Union.Prices here are lower even than those in Bulgaria's neigh-bours - Greece, Turkey, Romania, Serbia. Real estate inCyprus, for instance, is offered at three to eight times higherprices. Besides, Bulgaria is very attractive because of itsdiverse natural resources.

That is why it is hardly surprising that experts place Bulgariaamong the leading countries in terms of real estate pricesgrowth in 2007. Knight Frank ranked Bulgaria on the fifth placein its forecast for this year. Even The Daily Telegraph award-ed Bulgaria a high investment rating - 8/10 (80 percent),regardless of its own series of critical publications.

Project for the highest building in Sofia in the area of Business park Sofia -

Mladost 4.


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The tour operator Opodo forecasts that Bulgaria will be No. 1among the most popular tourist destinations in 2007, which isanother good sign for investors. According to Opodo onlinereservations system, the orders for vacation packages inBulgaria rose by 40 percent over the last six months, and thecompany expects this tendency to persist.

Every third buyer is a foreigner

Almost one in every three real estate transactions in 2006involved a foreigner, Astra Bridge, one of the leading realestate agencies on the domestic market, announced. Most ofthe foreign buyers, 67 percent, are British. Some 13 percentof the transactions involved Irish, a little above 6 percent -U.S. citizens, about 4 percent were Germans, and some 3percent - Italians. The Dutch, Spaniards and French accountfor some 2 percent each. About one percent of the real estatetransactions involved Maltese, Greeks and Danes.

The revenue from sales of real estate to foreigners in 2006rose to 1.113 billion Euro, according to BNB statistics. This istriple the amount recorded in 2005.

The average price for a single property along the Black Seashore is estimated at 47,000 Euro. The average investment inskiing resorts is almost two times higher - 90,000 Euro, andthe average price of apartments is Sofia rose to 112,000 Euroin 2006.

The influx of Spanish and Maltese subjects, who buy vacationestates in Bulgaria's summer and winter resorts, is a newdevelopment, Astra Bridge notes. These are mainly people,who have come here with speculative purposes - they arelooking for projects in progress with the intention to reap aprofit from a resale or from renting out the property.

British clients buy mainly for investment purposes, with theprice being the leading criterion. Most frequently, they buy astudio or a single-bedroom apartment in some of the popularresorts for 30,000 Euro to 80,000 Euro. The Irish prefer sea-side or mountain apartments for personal use.

Young British women shop for real estate

in Bulgaria

Many British, who buy a real estate for the first time in theirlives, are immediately attracted by markets abroad, TheObserver weekly wrote. The objective is to save enoughmoney, so that they could afford to buy a residence in theirown country after several years. According to the latest datareleased by the Halifax real estate agency, the average priceof a residence in Great Britain is GBP 192,233.

County Financial Services wrote that the interest in statesfrom Eastern Europe, which have already joined theEuropean Union, is on the rise. The company highlightedBulgaria, Turkey and Northern France as hot destinations.David Smith from the Bulgarian Dream company confirmedthis tendency.

One out of every four "first-time buyers" think about settlingabroad in order to be able to save more money for the future

British home, The Observer wrote, quoting a survey of theinvestment intentions among the British subjects. Spain,Australia, New Zealand and the United States are the top des-tinations.

One out of every five, however, is ready to move to EasternEurope, where life is cheaper, survey results indicate.

A lion's jump of housing prices

Real estate prices went steeply up after Bulgaria's accessionto the EU. Buyers' binge was fully predictable. Still, the firstmonths of 2007 brought a major surprise - interest in thenewest EU member remained intensive and the pricesresponded to demand by an unexpectedly energetic jump.

Apartment prices went up by 9.3 percent within three months,and the average price reached 988.2 Leva per square meter,according to data released by the National Statistics Institute(NSI). This was an astonishing increase, especially on thebackground of a 14-percent appreciation for the whole of lastyear.

For comparison, prices in Spain, which is among the liveliestreal estate markets, rose by only 9.1 percent last year. TheSpanish BBVA bank expects real estate prices to risebetween 3 and 5 percent in 2007.

Latest data on Bulgaria run contrary to forecasts made bymost of the real estate brokers that prices will calm down, asthey have already reached their peak. It is fact that Varna,which has the most expensive apartments (at 1,646 Leva persq. m.) also experienced a 16-percent jump during the firstquarter of 2007.

Sofia is ranked second in terms of prices, with 1,588 Levaper sq. m. Real estate in the capital city went up by 14.3 per-cent in three months. Next follows Bourgas with 1,312 Levaper sq. m. However, investments in apartments in this citybring a very low yield - appreciation stood at a meager 1.2percent.

Cost of transfer of real estate - second

only after Russia

Foreign buyers have to spend the highest amount for trans-ferring the ownership on real estate in Russia and Bulgaria,according to a survey by Global Property Guide. These costsamount to 25 percent of the value of the acquired property,with Bulgaria a close second with 24.9 percent. Monaco,Belgium, Italy and France are also included in the list of stateswith high transfer costs, according to the survey, which isbased on the purchase of a residential property worth250,000 Euro in some of the largest cities, and the actualprice is calculated by adding various fees, brokerage fees andother unavoidable expenses.

According to the Global Property Guide survey, the lowest sur-charge for non-residents on the price of an apartment is reg-istered in Great Britain - a token 5 percent of the value of thetransaction. The Scandinavian states have the most expensivereal estate brokerage services.


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Change of focus

Bulgaria is a hit because of its magnificent opportunities fortourism, for its beautiful nature and competitive real estateprices. There is a huge demand for properties in the popularmountain resorts - Pamporovo in the Rhodopes, Borovets inthe Rila Mountain, and Bansko in the Pirin Mountain. Sofiaand Varna are also attractive.

Foreigners prefer to buy an apartment or a house in themountain regions, which offer all-season conditions for recre-ation. They rely on a 20-percent yield - 15 percent due tothe annual price increase and another 5 percent from rentalactivity.

The focus of investments is shifting, though. Resorts likeBansko and Sunny Beach have already a serious competition- the real estate in spa resorts. Bulgaria is phenomenally richin mineral springs and abounds in towns popular for theirhealthy climate. A growing number of foreigners, both privatepersons and powerful investments funds, are discovering thischarming feature of Bulgaria. It is only a matter of time forultra-modern and comfortable projects like SANUS per Aquato start emerging and evolve into another Bulgarian Klondike.

With a scent of the sea

A local internet site, imoti.net, announced in mid-April thatthere are some 1,000 apartments for sale in Sunny Beach.The specialized site is registering a boom in apartment offers,adding that there is a huge number of residential propertiesoffered for sale in seaside resorts. Prices vary within a broadmargin starting from 450 Euro per sq. m. to a ceiling of 2,500Euro per sq. m. The average price of the apartments on saleis estimated at 900 Euro per sq. m. The enormous number ofoffers is attributed to the rapid growth of construction, boost-ed by the poor legislative protection of the environment.Currently, powerful investors are offering several buildings forsale each and are in a hurry to have everything sold in orderto be able to invest in other projects.

Offers at 1,000 Euro to 1,200 Euro per sq. m. are only afew and relate to projects, which are close to conclusion.This price is seen as acceptable but for a residence with"extras" - for instance partially or fully furnished with mod-

ern equipment.

Currently, lower prices mean simple floor coverings in rooms,gypsum cardboard walls painted with latex, PVC window anddoor frames, air conditioning, lighting fixtures, an almost fullycompleted bathroom with a wash basin, douche and toiletseats. More expensive offers include luxuries like silent ele-vators, swimming pools (for the building or for the project),and all-season maintenance of the property. Prices above1,200 Euro per sq. m. refer to fully furnished apartments withsuch details as bathrobes, kitchen utensils etc.

Offers at more than 1,600 Euro per sq. m. imply that the prop-erty has a clear view of the sea. Vacation projects usuallyoffer free of charge use of a swimming pool, sauna, sportsfacilities etc. Up to 30 percent of the apartments, offered forsale in Sunny Beach and in St. Vlas resort near by, have beenacquired by investors, who paid for them between 600 and800 Euro per sq. m. three or four years ago. Now the pricesare about two times higher.

Golf and SPA - the new niches

Balneology and golf emerge as the new niches on the vaca-tions market, especially after the snow-less winter discour-aged both the skiers and the property owners in the mountainresorts. After several years, investments are shifting fromBansko to neighbouring regions with mineral springs - Banyaand Dobrinishte. Sandanski, Velingrad, Varshets also have amajor potential due to their healing mineral water resources.SPA centers have a major advantage - they can be used dur-ing the whole year, unlike winter and summer resorts.

In Velingrad alone, which is located at the foot of theRhodopes, there are numerous mineral springs with variouscompositions, used to cure more than 130 diseases. Townslike Velingrad are suitable for conference and seminar tourismdue to their proximity to major cities like Sofia and Plovdiv.

A recreation and SPA center, Lyra Temple, is being built inDobrinishte, where prices fluctuate around 1,000 Euro per sq.m. The complex will spread on a total of 18,000 sq. m. TheKIK Mountain Village complex is scheduled for completion in2008 and will include 16 single and double family houses.Sunset Resorts also has plans for a ski and SPA complex inthe same region.

Green movement activists lying in front of the bulldozer in a protest against the

constructions at the unique seaside nature park Irakli near the village of Emona,

in the middle of the road between Varna and Bourgas.One of the hundreds of new construction sites at the Black sea coast


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Projects for four large SPA complexes have been made for thevillage of Banya, located close to Dobrinishte and Bansko.Large projects are underway also in Velingrad - the SPA ClubBor, and the St. Spas project of the Sirona International SPAand Tourism Association are close to completion. The SPAClub Bor will have 87 apartments and 52 studios and will becommissioned in April. The second large project will have 118apartments and 98 studios and will also be completed nextyear. Sirona announced that those, who have acquired prop-erty with them are already collecting a 100-percent profit.

The RE/MAX - Bulgaria company reports a growing demandfor apartments and villas near golf resorts - Bansko, Razlog,and Banya. At the same time, the company sees a brightfuture for rural tourism in Bulgaria, especially after the capac-ities of the vacation villages is exhausted.

The business properties

Experts report a growing demand for all types of businessproperties in Bulgaria. The most attractive, in terms of ratesof return, are commercial-purpose lots. Besides the appear-ance of the first malls in Sofia, a large number of projects areunder way in the larger cities all over Bulgaria.

The market for office and industrial zones is still underdevel-oped. Currently, projects for some 500,000 sq. m. of officesare being implemented - these are 10 to 12 large complexes,which will be completed between 2008 and 2012.

Warehouse areas are still in deficit - and are offered at highprices for small volumes. However, there are several projectsfor modern warehousing facilities already, which aim to meetgrowing demand.

Outlets are also emerging in Bulgaria. Several internationalcompanies have declared their intentions to open such facili-ties in Bulgaria.

Sofia already has its malls, but still has a capacity to absorbadditional shopping centers. Sofia is perhaps the Europeancapital with the lowest rate of rented commercial areas per1,000 of citizens - less than 40 sq. m, compared to an aver-age of 250 to 300 sq. m. elsewhere in Europe.

The first international business park in Bulgaria will be com-missioned within the next 18 months - the Sofia AirportCenter, build exclusively to international standards. The pro-ject is financed by the U.S. Tishman InternationalManagement.

And the first offices hotel

The Belgian company Regus, which operates in 70 countries,opened the first offices hotel in Bulgaria two months ago. Anycompany could rent an office for years ahead or for a singleday. The complex is located in Sofia and gas a total of 1,650sq. m. of offices. Companies can use all kinds of services atthe facility.

There are 350 facilities of this kind in the United States and106 in Great Britain.

A virtual office can be opened in the Regus centers in Sofiaand elsewhere. A Bulgarian company, for instance, may enterthe market in a neighbouring or in a far-away country, withcalls to the virtual office transferred to a permanent location.Many large companies all over the world have adopted thatstyle of operations.

The use of a "virtual office" is a suitable option also for busi-nessmen, who travel a lot or who want to work from home,Regus experts claim. According to Regus, companies spendsome 60 percent of their office organization budgets on main-taining the office property.

Rankings

The London-based real-estate consultancy Assets rankedBulgaria, in terms of return on investments, on the third placeafter Poland and Great Britain. Turkey and France wereranked further down the list.

The profit from investments in real estate in Poland is esti-mated at 165 percent. For Great Britain, the ratio was set at63 percent, and for Bulgaria - at 54 percent.

The Assets survey takes into account the market prices, andthe profit from rents and capital gains. The Observer news-paper ranked Bulgaria at the top in a similar survey. Accordingto The Observer, Bulgaria is the most attractive destination forinvestments, followed by Cabo Verde, Estonia, Turkey andBrazil.

According to Knight Frank, prices growth on the internationalreal estate market is slowing down at several destinations.Developing economies top the list, with the new EU membersbeing a typical example. The growth in these countries isboosted by the development of the mortgage market and thegrowing incomes.

Point of Saturation?

The real estate market in Bulgaria may soon reach its pointof saturation, while the Romanian option remains more expen-sive, Romanian publication Diplomat Bucharest wrote in acomparative analysis of the real estate sector in the two coun-tries.

The average prices vary between 650 Euro and 850 Euro persq. m. for the lower price segment and between 1,200 Euroand 1,800 Euro for more luxurious properties, the publicationwrote. According to Diplomat Bucharest, some 70 percent ofall real estate properties are bought "on the green" by British,Irish and Scandinavians.

Some regions to the south of the Danube are over-populatedalready. The purchase of a property at Sunny Beach wouldturn out to be a poor investment, if made too late. At the largevolume of offers, currently the fight is not for high but ratherfor acceptable rent rates.

The capital cities and the seashore regions in Bulgaria andRomania offer the best investment opportunities, according tothe Willbrook Management construction company, with prices

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in Romania being higher. A 75 sq. m. two-bedroom apartmentin Varna can be bought for 45,000 Euro, while the same prop-erty would cost 58,000 Euro in Constanca.

Commercial properties are on the rise in Bulgaria, where fourmalls were commissioned in 2006, three of them in Sofia.Brand names like Marks & Spencer, Carrefour, Ikea and Zara,which have already made a foothold in Romania, have seriousintentions to move in Bulgaria as well, Landmark PropertyBulgaria wrote in survey.

The market of office areas is growing. The largest transactionin this segment was the purchase of the Business Park inSofia for 180 million Euro.

Entrepreneurs are looking for land everywhere around Sofia.The proximity of the Vitosha mountain attracts new residentialprojects in the southern suburbs of the capital city.

The Ministry of Defense - a major seller

Even the Ministry of Defense entered the real estate marketin Bulgaria. The Ministry has announced the total sale of landlots, stores, and buildings, and plans to complete some 250transactions before the end of this year - acquisitions andsales of property all over Bulgaria. The airport at Mussachevo(30 km away from Sofia, a large number of land lots alongthe Black Sea, in mountain resorts and in and around Sofiaare all included in the sale list. The list of properties is pub-

lished on the site of the "State property" department of theMinistry of Defense.

The Defense Ministry has already disposed of redundantproperties, but for the first time ever it plans such a massivesale of attractive real estate items. Most of the properties areprepared for swap against residential properties.

Three land lots of a total area of 1,562 decares are offerednear the Rousse airport of Shtraklevo. The airport will beoffered for a concession this year, with plans to build a logis-tic intermodal cargo terminal. A land lot of 1,750 decaresnear the former military airport in the Radomir village ofCondofrei will also be offered for sale or swap. Close to 3,000decares of agricultural land and land lots near the village ofBozhurishte, close to Sofia, will be sapped against residencesfor military personnel. The land is located next to another for-mer military property, which was swapped last year and nowthe Industrial Park company plans to build a modern techno-logical park there.

There are interesting seaside properties as well - 11.3 decaresin the village of Enemona (close to the town of Nessebar),and 50 decares in the Honyat location near the beaches ofPomorie. New owners will be invited to acquire a land lot 172decares near Razlog (10 km away from Bansko), and forthree buildings at the Betolovoto location, also close to themost popular Bulgarian ski resort, where two golf courses andseveral vacation villages are planned for construction. ■

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Assen Makedonov, CEOof ADIS Ltd., became thefirst Bulgarian to join the U.S. real estate Million Dollar Guild.Million Dollar Guild members are specialists who have certifiedsuccess in the million-dollar and above market.

He also received the prestigious Certified Luxury HomeMarketing Specialist (CLHMS) designation after the success-ful completion of a training program organized by the Institutefor Luxury Home Marketing and held in Dallas, Texas. In thatway he becomes a full member of the Institute with all theassociated benefits.

The Institute for Luxury Home Marketing, Dallas, Texas existsto help real estate professionals provide high quality service tothe buyers and sellers of luxury homes and to maximize theirown success in the upper-tier residential market. The Instituteawards the Certified Luxury Home Marketing Specialist desig-nation to those agents who go through special training andmeet the performance requirements in the upper-tier market.

The goal of the training course, organized by the Institute ofLuxury Home Marketing, Dallas, Texas is to help experts devel-op their special skills and competencies necessary to provide

exceptional service in the luxury homes and estates market-place. It covers such topics as demographics of the affluent,lifestyle segmentation, trends and amenities in today's luxuryhome product, and creating a marketing plan for the multimil-lion dollar property. ■

Million Dollar Guild Adds First BulgarianMember

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The employees of Bankya MineralWaters and Nigel Davis, CEO of Coca-Cola HBC Bulgaria, officially opened onApril 23 the renovated mineral water bot-tling production center in Bankya.

"Today we mark our newest investmentand 15 years investment presence inBulgaria. The renovated production cen-ter Bankya is among the most techno-logically advanced plants for bottling ofmineral water on the Balkans. Bankyanatural mineral water gives us the oppor-tunity to offer a full range portfolio ofnon-alcohol drinks to the Bulgarian con-sumer", said Nigel Davis during the offi-cial ceremony.

Over 300 official guests took part in theopening event in Bankya, among whichMayor of Sofia Boyko Borisov,Ambassador of Greece Koumanakou,Deputy U.S. Ambassador AlexanderKaragiannis, representatives of Bulgariangovernment, non-governmental organiza-tions, business partners of the company.

Coca-Cola acquired a 100-percent sharein Mineral Waters Bankya in 2005. Sincethen the company has invested 55 mil-lion Leva (28,12 million Euro) in manag-ing systems for people development,most contemporary production equip-

ment, land acquisition, building of newwarehouse, on-site waste water treat-ment, terrain improvement and riverbedcleaning.

Before the acquisition, the manufacturingcapacity of Bankya Mineral Waters was51 million bottles/packages a year andthe manufacturing center had 12,000 sq.m. of facilities.

After the acquisition by Coca-Cola, theinvestments increased the capacity to288 million bottles/packages a year andthe territory of the plant became 20,000sq. m. The newest generation line of thepopular brand SIDEL for bottling environ-

mentally sensitive products is alreadyfunctioning. It eliminates risks for pollu-tion of the environment. Filling and theclosing of the product is made in a ster-ile camera, where the air is cleaned 15times per hour through microbiologicalfilters.

The Bankya plant was certified by theInternational Standards for QualityManagement and EnvironmentalManagement ISO 9001 and ISO 14000.This allows the company to be muchmore competitive in the rapidly develop-ing market of bottled waters in Bulgaria,which has grown by more than 20 per-cent in the last five years. ■

Coca Cola Opens Renovated Bankya Plant

Ivan Velkov, general manager of Colliers

International Bulgaria and equity partner

in Colliers Southeast Europe, was elect-

ed to the new managing board of the

National Real Estate Property

Association (NREPA). The general

assembly of the organization voted on

his addition in April.

"For me the recognition and vote of con-

fidence I received by the real estate

industry, through the NRPA members, is

a confirmation that the direction we at

Colliers have set to follow is right. I will

be glad to contribute to an even wider

adoption of the global business and pro-

fessional standards we ascribe to

among real estate professionals in

Bulgaria," Velkov said. Since his gradua-

tion as an economist from BI Economics in 1992, Ivan Velkov

has been engaged in consultancy services for financial orga-

nizations and multinational companies

such as DTZ/CYL Corporate Real

Estate Service/Asia Pacific. With his

EMBA from CUE&B and over 10 years

of managerial experience in dynamic

and multicultural environments, Velkov

has combined his impressive academic

background with real world business

expertise.

Since joining Colliers in 2002 as man-

ager of key accounts, Velkov has been

responsible for several residential pro-

jects. He was promptly promoted to

strategic HR manager for Colliers

International Bulgaria and later for all of

Southeast Europe. During this time,

Velkov played an instrumental role in the

success of Colliers' office not only in

Bulgaria but also in the region. In the end of 2004 Mr. Velkov

became the general manager of Colliers Bulgaria. ■

Velkov Elected to Realtors Board

On April 23 General Manager of Coca Cola HBC Nigel Davis (third right) and the mayor of Sofia Boiko

Borissov (second right) opened the renovated production center for mineral water bottling.

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Mr. Perske, after being the head of

the American College of Sofia for 10

years, you are going to retire at the

end of the current school year. How

will you describe your experience in

Bulgaria?

I have been very fortunate to have hada wonderful 10 years in Bulgaria. I'vebeen able to meet and get to know somany kind and generous Bulgarian peo-ple and I've been able to see much ofthe beautiful country. I've skied andhiked in the beautiful mountains andswam in the Black Sea. I've visitedevery major city and many smallertowns and villages. I am fascinated bythe rich and full history of Bulgaria. Theamazing archaeological discoveries thathave come to light in the last few yearsare truly astounding and reflect the richcultural history of the Bulgarian people.

And of course, I have witnessed pro-found changes in the government andeconomy. By way of example, when Icame to Bulgaria in 1997, we could notfind hamburger to buy in the store. Mywife had to buy a meat grinder. The loneso-called supermarket often had bareshelves. Now there are huge Western-style supermarkets everywhere with allimaginable products available.

There are the remarkable changes thathave taken place at the AmericanCollege of Sofia. We have built two newbuildings and completely renovatedthree other buildings, which were origi-nally built in 1929. We have increasedenrollment by nearly 30 percent whilemaintaining the high academic quality ofthe educational program. All of ourteachers are truly professional and ded-icated educators, having actively partic-ipated in numerous educational work-shops. The school became fully accred-ited in the United States in 2004 and bythe International BaccalaureateOrganization in 2005. We have givenwell over 2.3 million Euro in financial aidto deserving students. Our studentshave won many Bulgarian and interna-tional academic Olympiads, as well assports and debate competitions.

It has truly been an honor to serve andlead such a prestigious school, withsuch outstanding and highly motivatedstudents and teachers.

Which were the most challenging and

the most significant moments for you

as ACS president?

I have already mentioned some of thesignificant moments. Achieving accredi-tation was a huge milestone for theCollege. Seeing our students scoreextremely highly on the SAT I exam(average score of over 1,400) and getadmitted with full financial aid to thebest universities around the world hasbeen very satisfying.

Some of the challenges have been such

things as administering our annual com-prehensive admissions exam whilemaintaining complete exam security,fighting off challenges to the ownershipof the school campus, maintaining thehigh standards of the educational pro-gram including the purchase ofresources with a limited budget (due tothe fact that each year we offer 5-yearscholarships to the top 50 girls and top50 boys), organizing the gala 140thanniversary celebrations of the College,and regularly finding the funding to keepthe school's technology up to date.

What will you advise Tom Cangiano,

who will succeed you of the position

of ACS president?

I will advise him to get out and meetpeople in the community so that he cangenerate support for The College, to lis-ten carefully to what the staff in theschool is telling him, so that he makeswell-informed decisions, and to maintainintegrity to his own and the College'shigh ethical standards.

What are your plans for the future?

I plan to live in my home in Monterey,California, and do all of the things that Ido not have time for now: play golf andother active sports, read novels, beactive in community service, keep inbetter touch with family and friends, andtravel around the United States andMexico. ■

ACS President Retires After 10 Years inBulgariaLouis Perske moves to California, leaving a top-notch school to his successor

Mr. Perske with 12th grade students from the President's List for excellent academic results.

n e w m e m b e r s

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Coface Bulgaria Credit Management

Services EOOD, subsidiary of Coface

Central Europe Holding AG, Austria -

100% owned by COFACE, France and

KSV 1870, Austria established in 1994.

Shareholders:

COFACE(Compagnie Francaise

d'Assurance pour le Commerce

Exterieur) is the biggest export insurer in

the world KSV 1870 is the market leader

in Austria in credit management services

- information, credit rating, collection of

outstanding receivables.

COFACE has more than 60 years of

experience in insurance, factoring,

company information and receivables.

Coface - subsidiary of Natixis, whose

share capital (Tier 1) after the applica-

tion of CRD/Basel II norms was 11,2 bil-

lion EUR end 2006. World leader in:

information and receivables manage-

ment, credit insurance and receivables

finance. Serves client companies

around the globe, thanks to its 60

offices and CreditAlliance network in 93

countries on 5 continents.

Contacts:

Tel.: +359 2 920 7125

Address: 85/87, T. Alexandrov Blvd.,

1303 Sofia, Bulgaria

Web: www.coface.bg

M e l l o n

Bulgaria EAD

was founded

in 2001 in Sofia and is a member of

Mellon Group of Companies - a leading

multinational group employing more than

2,000 people in over 9 countries with

corporate headquarters located in

Athens, Greece. Our offering consists

of specialized technological solutions

and value added services, to serve the

increasing needs of financial institutions

and organizations with strong consumer

transactions business. Our offering com-

prises of the following main business

activities: Transaction Facilitation H/W &

S/W Solutions, Transaction Processing

Services, Contact Center Services, Debt

Management Services, Business

Process Outsourcing Services, Business

Acquisition Services. Our unique offer-

ing builds on our expertise and proven

ability to successfully address the chal-

lenges that arise from our customers'

rapidly changing and highly competitive

environment. And we deliver on our

promise efficiently and cost-effectively

wherever our customers need us.

Contacts:

Mellon Bulgaria EAD

37, 6-ti Septemvri Str.

1000 Sofia, Bulgaria

Tel: +359 2 935 00 35

Fax: +359 2 987 73 74

E-mail: [email protected]

Web: http://www.mellonbg.com

Core activi-

ties of

Neochimiki

are the production, blending and pack-

aging of chemicals, as well as the dis-

tribution representing leading multina-

tionals.

Neochimiki's success is based on con-

tinuously meeting or exceeding the

needs of customers. More than 8000

customers value flexibility, reliability and

competence. Since is establishment in

1974, Neochimiki has steadily grown its

activities to become the largest Greek

company in chemical distribution.

Through its international expansion

Neochimiki today is among the fastest

growing chemical firms in South-Eastern

Europe. Neochimiki offers complete

solutions in a large variety of sectors:

Polymers

Agrochemicals

Paints & Coatings

Base Oils & Rubbers

Solvents

Home, Personal Care, Industrial

Ingredients

Food & Drinks

Contacts:

Neochimiki Group of Companies

P.C. 1407 Sofia, Bulgaria

Ujen Park. bl. 27 entr. A ap. 9

Tel.:+359(2)9699070

Fax: +359(2)9699089

As of April 23, 2007, Postbank includes

the offering of repo agreements in its

product portfolio. The repo agreements

represent short term funding against

securing of shares which are being trad-

ed at the Bulgarian Stock Exchange.

This service targets all enterprising peo-

ple who own shares, but have a limited

cash resource. For the realization of the

repo agreements, Postbank accepts the

shares as security of the financing, and

the client receives the resources against

a determined interest percentage.

These agreements are appropriate for

both private persons and corporate bod-

ies.

"These agreements have big potential

and there will be strong demand among

the clients when considering the rapid

development of the capital market and

the upcoming primary and secondary

public offerings. The major advantage

for the clients is that they receive

financing without having to sell their

shares, and this being done in very

short terms - financing of up to 40,000

Euro is granted within three days if the

shares cover the needed quality crite-

ria," said Preslav Kitipov, head of stock

exchange operations department,

Capital Markets Division.

The maturity period of the repo agree-

ments of Postbank is up to three

months. After this period the financial

treasury allows renegotiation of the

term. The bank offers up to 50 percent

financing of the market value of a share,

as this helps for the ensuring of bigger

security of the granted sum. Also pre-

sent in the bank offer is a possibility for

additional paying in of security at the

lowering of the price of the shares. ■

Postbank Offers Repo Agreements

Preslav Kitipov, head of stock exchange operations

department.

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Marcus Miller, winner of the Grammy Award

for Best Contemporary Jazz Album of 2001,

was born in Brooklyn in 1959 and raised in

Jamaica, New York. He came from a musi-

cal family and was influenced early on by

his father, a church organist and choir direc-

tor, as well as his musical extended family

(which included the extraordinary Wynton

Kelly, jazz pianist for Miles Davis during the

late fifties and early sixties!). He displayed

an early affinity for all types of music. By

the age of thirteen he was already proficient

on the clarinet, piano, and bass guitar and

had begun composing music. The bass gui-

tar, however, was his love and by the age of

fifteen, he was working regularly in New

York City with various bands. Soon there-

after, he was playing bass and writing music

for flutist Bobbi Humphrey and keyboardist

Lonnie Liston Smith

Miller spent the next few years as a top call

New York studio musician, working with

Aretha Franklin, Roberta Flack, Grover

Washington Jr., Bob James and David

Sanborn, among others. He has appeared

as a bassist on over 400 records including

recordings by artists as diverse as Joe

Sample, McCoy Tyner, Mariah Carey, Bill

Withers, Elton John, Bryan Ferry, Frank

Sinatra, and LL Cool J.

In 1981, he joined his boyhood idol Miles

Davis and spent two years on the road with

the fabled jazzman. "He didn't settle for any-

thing mediocre," Miller recalls. "And this

helped me develop my style. I learned from

him that you have to be honest about who

you are and what you do. If you follow that,

you won't have problems."

Miller subsequently turned his attention to

producing, his first major production being

David Sanborn's Voyeur, which earned

Sanborn a Grammy and turned out to be

the beginning of a career-long partnership

with the alto saxman. Miller later produced

various other top selling albums for

Sanborn, including Close Up, Upfront, and

2000 Grammy winner Inside.

For more than twenty years, Miller has also

enjoyed a musical relationship with R&B leg-

end, Luther Vandross. "We met in 79 in

Roberta Flack's band and instantly con-

nected because we were both so serious

about music," Miller recalls. Over the years,

Miller has contributed countless hits to

Vandross repertoire both as a producer and

writer. Those songs include "Till My Baby

Comes Home," "It's Over Now," "Any Love,"

"I m Only Human," and "The Power of Love,"

which won the 1991 Grammy for R&B Song

of the Year.

In 1986, Miller collaborated again with Miles

Davis, producing the landmark Tutu album,

the first of three Davis albums he would pro-

duce. He has also produced Al Jarreau, the

Crusaders, Wayne Shorter, Take 6, Chaka

Khan, and Kenny Garrett among others, and

Luther Vandross.

After spending many years as a producer

and session musician, Miller focused on his

solo career in late 1993 with the release of

The Sun Don't Lie. 1995's Tales found Miller

re-imagining the landscape of Black music

and its evolution over the past three

decades. After years of touring and in

response to Miller fans pleas, Live & More

was released in 1997. M2 ("M-squared"), his

first release of the new millennium, won the

2001 Grammy for Best Contemporary Jazz

Album and was selected by Jazziz as one

of the 10 Best CDs of the Year. 3 Deuces

Records now debuts The Ozell Tapes: The

Official Bootleg, a live double CD. The Ozell

Tapes is Miller's compilation of the best of

his 2002 tour dates. It's raw, unadulterated,

pure funk as only Marcus can do it.

In the past several years, Miller has also

turned his attention to film scoring, com-

posing for House Party (Martin Lawrence),

Boomerang (Eddie Murphy and Halle

Berry), Siesta (Ellen Barkin), Ladies' Man

(Tim Meadows), and The Brothers (Morris

Chestnut and D.L. Hughley) and Deliver Us

From Eva (LL Cool J). He wrote and pro-

duced the old school hit, "Da Butt" for Spike

Lee's School Daze soundtrack. Miller fur-

ther surprised people by composing and

performing the score to E.B. White's The

Trumpet of the Swan. "I loved getting the

opportunity to use jazz to tell a story to kids.

Children have much more sophisticated ears

than people give them credit for. You really

don't have to play down to them. Just keep

the music real."

Whether he's making music for kids or long-

time fans, keeping it real is the criteria that

steers all of Marcus Miller's music. "I like to

keep things balanced, combining R&B, jazz,

funk and movie stuff to help reflect what's

happening in our world. I just try to keep

challenging myself to continue to grow and

get better."

Marcus Miller will host the first sailing of the

seven-day North Sea Jazz Cruise, a July

2007 luxury maiden voyage to northern

European ports that will feature a stellar

lineup of talent.

The Holland America Line's Atlantic flag-

ship, the ms Rotterdam, will depart

Copenhagen, Denmark, on July 5 and put

in at Warnemunde, Germany; Gotenburg,

Sweden; Oslo, Norway; and Hamburg,

Germany, before docking at Rotterdam,

Netherlands and serving as a floating

hotel for the July 13-15 North Sea Jazz

Festival. Aboard will be cruise guests and

jazz greats including Grammy®-winner

Miller, vocalist Dee Dee Bridgewater and

her trio; saxophonist James Carter; trum-

peter Roy Hargrove and his quintet; the

Roberta Gambarini Quartet; guitarist

Lionel Loueke; the McCoy Tyner Trio;

Medeski, Scofield, Martin & Wood; and

saxophonists David Sanborn and Kirk

Whalum.

"As the musical host, I am truly excited that

this extraordinary group of artists are com-

ing on board," Miller said. "As a musician-

what a thrill to be performing with them, and

there are more acts to come!"

The North Sea Jazz Festival moved to

Rotterdam in 2006 after 30 years in The

Hague, Netherlands. It is the world's largest

indoor jazz festival, drawing hundreds of

artists and more than 70,000 spectators

annually. ■

Marcus Miller to Host Summer Jazz CruiseNorth Sea voyage to become floating jazz festival …

Documents

Bulgaria: Bridge Over the Atlantic