In year 2001 the work of the Economic Program
focused on the following major issue areas:
- Building critical advocacy capacity for corporate
governance reform in Bulgaria. The successful completion of the
project Transforming Business Practice through Corporate
Governance brought the Corporate Governance Initiative (CGI) to
a stage at which it is widely recognized as the major national
advocate of reform. The efforts of CSD also aimed at including the
mass media in this process through the project Corporate
Governance Reform and the Mass Media: Building Critical Advocacy
Capacity in Bulgaria.
- Enhancing the business environment for foreign
direct investments. Special efforts to bridge research and policy
were made through the project The Impact of European Union
Enterprise Relocation on Inter-Firm Relations in Bulgaria. In
cooperation with partners from other Balkan countries CSD assisted
the Applied Research and Communications (ARC) Fund in the
implementation of the project Foreign Direct Investments in
Balkan Countries: Alternatives to Reduce Existing
Barriers.
- Exploring the frontiers of the new economy.
CSD was at the center of the national effort to join the World Bank
initiative of a Global Development Gateway which puts the internet
at the service of the goals of development by completing the
preparatory stage of the Bulgarian Development Gateway.
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I. Building Critical
Advocacy
Capacity for Corporate Governance Reform in Bulgaria
In year 2001 CSD continued to serve as the Secretariat of the
Corporate Governance Initiative which also includes the Association
of Industrial Capital, the Association of Voluntary Pension Funds,
the Center for Economic Development, the Investors' Union and the
Securities Holders Association, all working together to change
corporate governance practices and introduce standards and
procedures ensuring transparency and accountability (www.csd.bg/cgi).
1. Transforming Business Practices through
Corporate Governance (CGI)
The specific context of the business environment in
Bulgaria and the need for comprehensive measures toward acceptance
of the principles of corporate governance in Bulgarian companies
have determined the approach followed by the CGI team on this
project, completed in April 2001. The main activities included: a)
monitoring the state of corporate governance in the country and the
impact of the activities undertaken within CGI; b) consensus and
coalition building; c) cooperation with partners from other
countries facing similar challenges; and d) dissemination and
advocacy for further reform. A task Force of experts held 12
meetings aiming at elaborating the corporate governance indicators
in Bulgaria for the purpose of improving the quality of national
corporate sector data. The Task Force developed a set of indices to
measure the progress in reforming the legal framework for corporate
governance, the efficiency of the relevant institutions and the
corporate governance practices in Bulgaria. A pilot monitoring
survey of Bulgarian publicly traded companies was carried out,
designed together with experts from the National Securities
Commission, the Bulgarian Stock Exchange - Sofia and the
Association of Industrial Capital in Bulgaria and conducted with
the help of Vitosha Research.
Corporate Governance Assessment Report
On the basis of the survey results CGI experts
drafted a Corporate Governance Assessment Report which was
discussed at a Policy Workshop held at CSD on April 18. The report
provided an overview of the general framework and particular
dimensions of the corporate governance in the country; it contained
information unavailable up to that time to the professional
community and the media. With regard to the legal and
institutional framework the index of corporate governance was
assessed at 3.26 (on a scale of 1 to 5) covering the role of the
judicial system, capital market development and efficiency of its
institutions, and above all the extent in which the existing
legislative framework facilitated or constrained proper governance.
The internal factors of corporate governance as well as company
practices received a lower rating - the value of the index was
3.11 as a whole, including 2.42 on protection of minority
shareholders' rights, 3.47 on composition of boards and boardroom
practices, and 3.43 on disclosure of information.
The Corporate Governance Assessment Report is an
effective advocacy tool for better understanding of the issues by
the public, which can also serve as an important resource for the
international business community. CGI intends to replicate it in
order to track the changes and trends in the course of corporate
governance reform in the Bulgaria.
Corporate Governance Guidelines for
Bulgaria
Building on the work already done and in line with
the 1999 CGI a Policy Recommendation Paper entitled Corporate
Governance Guidelines for Bulgaria was drafted; it focuses on
the following issues:
- responsibilities and motivation of boards;
- role of the judiciary and improvement of judicial
practice;
- promotion of capital market development and role of
institutional investors;
- residual state shareholding.
The Guidelines include practical measures for the
promotion of a culture of compliance with the existing regulations
and appropriate disclosure of information. The set of policy
instruments which need to be developed or elaborated should focus
on regulation and enforcement along with dissemination and
education.
Corporate Governance Policy Workshop-April 18,
2001
The Policy Workshop was the main public event in the
project. It brought together more than 30 experts - representatives
of government agencies (ministries. Privatization Agency, Center
for Mass Privatization, Foreign Investment Agency), business
associations (Bulgarian Chamber of Trade and Industry, Bulgarian
Industrial Association, Association of Industrial Capital in
Bulgaria, Association of Private Pension Funds), development
organizations (World Bank and USAID), academics and journalists
from the mass media. The workshop provided a practical framework
for consensus building among all parties involved in the
implementation of modern corporate governance principles in
Bulgaria. All the participants agreed on the role to be played by
key actors in this process - the government. Stock Exchange, the
business community, the shareholders' associations and the media.
The discussions which took place helped prepare the final version
of the Corporate Governance Guidelines for Bulgaria.
Dissemination and Advocacy
In the period under review CSD paid a special
attention to dissemination and advocacy of the need for corporate
governance reform and used all available means for this purpose.
The web site of CGI (http://www.csd.bg/cgi/) was regularly updated
to cover current activities and events - it contains the final
version of the Policy Recommendation Paper, legal and other
documents, publications of CSD and CGI, such as summary reports,
draft documents, press releases, etc.; in addition, it provides
links to the websites of partner organizations to facilitate access
to relevant information.
The CGI activities received broad coverage in the
specialized economic and financial press. Articles on the project
outputs were published in specialized daily and weekly newspapers
with national distribution, namely Dnevnik Daily, Demokratzia
Daily, Pari Weekly, Pari/Capital Market Weekly, Kapital Weekly,
etc.
2. Corporate Governance Reform and the Mass
Media: Building Critical Advocacy Capacity
CSD's work in year 2001 aimed at launching a network
of corporate governance advocates in the mass media, giving
publicity to the efforts undertaken so far in the course of the
reform and creating a wide constituency and public opinion in favor
of implementation of corporate governance principles in business.
For this purpose CSD's efforts focused in particular on:
- assessment of the capacity of the Bulgarian mass
media to advocate corporate governance reform;
- training a significant number of journalists to
cover developments in corporate governance and disseminate the
ideas and the know-how formulated in the course of previous
projects within CEI;
- providing these journalists with tools necessary
for conveying their message to the public.
A preliminary assissment of the coverage of
corporate governance reform was instrumental for the success of the
project. A survey of about 100 print and electronic media was
conducted to assess the capacity for corporate governance advocacy,
including journalists responsible for editorial policies as well as
reporters. This study helped formulate the major issues for
discussion and the forms and methods of training. A set of
materials on corporate governance for the seminar is available on
the CSD website.
The central element of this project was a training
seminar organized by CSD for representatives of the national and
regional print and electronic media and held in Sofia on November
20-21, 2001. It had five sessions, each of which devoted to a major
issue area of corporate governance (corporate governance and the
relationship between shareholders and management, corporate
governance and capital markets, corporate governance and governing
bodies, corporate governance and disclosure of information, etc.).
Experts who participated in previous projects on corporate
governance and representatives of the relevant state bodies
(Professor Bistra Boeva, Chair of the Department of International
Economic Relations at the University of National and World Economy,
Professor Stefan Petranov of Sofia University who is also Chairman
of the Board of Directors of the Zlaten Lev Investment Fund, Mr.
Manu Moravenov, Director of Trading Surveillance at the Bulgarian
Stock Exchange, Professor Plamen Chipev of the Economic Institute
of the Bulgarian Academy of Science, Ms. Ralitsa Again, Chair of
the Parliamentary Subcommittee on Capital Markets and Securities
and Professor Margarita Alexandrova, Member of the State Securities
and Exchanges Commission) made presentations or moderated the
discussions. The participating journalists had the opportunity to
share their ideas about how the issues under consideration could be
brought to the attention of a larger audience.
The final phase of the project included publication
of a series of articles in a number of print media, namely the
national papers Zastrahovatel Weekly, Pari Daily, Pari Weekly,
Ikonomicheski Zhivot Weekly, the regional Nov Zhivot Daily and
Cherno More Daily, broadcasts of the Bulgarian News Agency,
Bulgarian National Radio, etc. As a whole, the involvement of the
representatives of the media in the project should contribute
toward a greater clarity of the language of corporate governance
and lead to better understanding, creating a constituency for
corporate governance reform and bringing life to the principle of
transparency and disclosure of information.
II. Enhancing the Business
Environment for Foreign Direct Investment
CSD has an established track record in promoting
foreign direct investment since the beginning of the 1990s. In year
2001 it was involved in two projects on this subject in which it
worked with partners from such countries as France, Greece, Albania
and Macedonia.
1. The Impact of European Union Enterprise
Relocation on Inter-Firm Relations in Bulgaria
This project has had the following objectives: a) to
explore the impact of cross-border capital flows on inter-firm
relations in Bulgaria; and b) to outline the increasing role of FDI
from EU member-states in helping accession countries meet the
Copenhagen criteria for EU enlargement. To accomplish these
objective the project team, led by Dr. Vesselin Minchev of the
Bulgarian Academy of Science and Petkan Iliev of the University of
National and World Economy, studied the structure and motives of
foreign investors in the country, the characteristics and evolution
of trans-European equity cross-border activities in Bulgaria
parallel to the negotiations for EU accession and the
characteristics and evolution of trans-European non equity
cross-border activities in Bulgaria (including subcontracting,
licensing, franchising, management and turnkey projects). The
following tasks were undertaken:
- macroeconomic, geographical and branch structure
statistical analysis of outward FDI flows from EU to o
Bulgaria;
- analysis of the policies for attracting FDI flows
to Bulgaria;
- econometric analysis of the determinants of the
distribution of FDI entry;
- qualitative analysis and identification of the
types of European companies operating in Bulgaria
(companies-leaders and companies-followers);
- qualitative analysis and identification of the
company strategies in the different regions of Bulgaria ("resource
seeking", "market seeking" and "efficiency seeking"
strategies).
As the available information and analysis of the
motives and strategies of the foreign cross-border initiatives in
the country are still insufficient, a survey of 100 EU-based
investors in Bulgaria was carried out to explore equity and
nonequity cross-border ventures as well as different types of
non-equity contractual arrangements and the preferred forms and
networks of the inter-organi-zational relationships between the
EU-based MNCs and local enterprises.
The findings of the field research and their initial
analysis were reported at a workshop, held in Sofia on April 25,
2001, to policy makers, academics, representatives of NGOs,
consultants, local private enterprises and foreign companies doing
business in Bulgaria. The discussion at the workshop provided
significant material for further analysis was which further done in
the research papers by the project team.
The dissemination of the research findings included
a presentation at the annual conference of the Center for Economics
Research and Graduate Education - Economic Institute (CERGE -El)
grant recipients in Prague, held on July 22 and 23, 2001, and
publication of the research papers on the web site of CSD. The
project received coverage in the mass media in Bulgaria; its
outputs will be used in the preparation of teaching materials in
economics, business administration and European studies.
2. Foreign Direct Investment in Balkan Countries:
Alternatives to Reduce Existing Barriers
This was an on-going sub-regional project with
Applied Research and Communications Fund's participation in which
CSD provided expertise and which was completed in the spring of
year 2001. Following up on the project activities for year 2000
which included a planning and coordination meeting in Sofia, design
of the macroeconomic indicators for FDI, analysis of the legal
framework and a survey of the large and medium-size foreign
companies doing business in Bulgaria, the project team undertook a
number of case studies and analyzed the environment for FDI.
The project team carried out an analysis of the survey results
which served as a basis for the Bulgarian Country Report on Foreign
Direct Investment. At a workshop, held on March 9, 2001, business,
government, media experts and academics discussed a draft of this
report and proposed policy measures aimed at reduction of the
existing barriers and attracting foreign capital.
On the basis of the country reports prepared by the
institutions participating in the project (Institute for
Development Research and Alternatives and Institute for
Contemporary Studies, Albania, ARC Fund, Bulgaria and Forum-Center
for Strategic Research and Alternatives, Macedonia) a comparative
study of the barriers to FDI in the Balkan countries was prepared
by the project coordinator (IDRA) and reported to a Balkan
Conference on Foreign Direct Investment, held in Tirana on October
22 and 23, 2001.
III. Exploring the Frontiers of "The New Economy"
and E-Development through the Bulgarian Development Gateway
(BDG)
The Bulgarian Development Gateway
(www.bgrazvitie.net) represents the Bulgarian contribution to
the World Bank initiative of creating a Global Development Gateway
as a network of country development gateways. The goals of this
initiative are: a) to facilitate the establishment of a virtual
community of government, civil society and private sector
organizations with common interest in promoting competitive markets
and democracy in a business-friendly environment; b) to empower the
local development community to use the internet as a low-cost tool
for knowledge-sharing, networking and collaboration; c) to assist
this community by providing links to ideas and good practices,
information about development activities and trends, funding and
commercial opportunities; and d) to increase global access to
locally-generated development knowledge.
In the year under review the preparatory stage of
the BDG was completed. Its goal
was to assess the potential for development of such a gateway in
Bulgaria as well as its likelihood of success and potential impact
on social and economic development. CSD provided the overall
management of the project in which a number of interested parties
(donor organizations, foreign and local businesses, government
agencies and NGOs) formed a coalition in pursuit of common
developmental goals.
The work included assessment of the needs for a
Bulgarian Development Gateway (a study of what the stakeholders
expect from it as well as what they could contribute to it),
drafting a business plan for launching and sustaining the BDG
(defining the potential user communities, their key characteristics
and information needs, suggest country specific content/services
and possible content suppliers, proposing an implementation
strategy, organizational structure and financial plan) and creating
a special demo site to be tested and evaluated by users. The
project team solicited broad feedback on all the preliminary
elements of the strategy, the potential gateway objectives and
content components.
Partnership Building
A major element of the preparatory stage was forging
a partnership which would be able and willing, one the one hand, to
contribute to the BDG and, on the other hand, to take advantage of
the opportunities presented by the Gateway for furthering the goals
of the individual participating partners. The work in this respect
began with two coordination meetings of the BDG Steering Committee,
devoted to the broad issue of IT for Development and co-organized
with UNDP - one with representatives of the government, NGOs and
the donor community held on February 15,2001 and one with
representatives of the private sector and business associations,
held on March 8, 2001. The participants in these meetings gave
their support to the idea of a BDG and expressed their willingness
to contribute in their respective fields of activity.
To guarantee the success of the initiative CSD
worked with individual Gateway partners, including foreign and
international donor organizations (the World Bank, UNDP, the
European Commission, the US Agency for International Development,
etc.), private sector entities and business associations (Bulgarian
Association of Information Technologies, Bulgarian American
Enterprise Fund, Bulgarian Chamber of Commerce and Industry,
Bulgarian Industrial Association, Bulgarian Telecommunications
Company, Microsoft, Cisco, Hewlett Packard, etc.), NGOs whose
activities are related to the issues of development (CED, EPI, Open
Society Fund, etc.) and relevant government agencies (Ministry of
the Economy, Ministry of Transport and Communications, Ministry of
Education, etc.). Partnership agreements (Memoranda of
Understanding) were signed with dozens of potential Gateway
stakeholders. The BDG management team benefited from the help of
the consulting missions of World Bank experts (Dr. George Sadowski
in February-March and Professor Elias Karayanis in July 2001) as
well as the visits of representatives of the Global Development
Gateway team (Mr. Oleg Petrov in February and Ms. Denisa Popescu in
August 2001).
CSD paid a special attention to partnership building
with other countries' development gateways. It hosted a workshop
for the country development gateway teams from Southeast Europe on
July 6-7, 2001 in Sofia. Experts from Romania, Moldova, Croatia,
Poland, Azerbaidjan, Georgia and Bulgaria shared their experience
on planning and implementation of the preparatory phase of the
Gateway; they discussed major challenges and possible common
strategies concerning not just this phase but also the next stage
of the implementation per se of the Country Development
Gateway.
Conceptualization of the Country Development
Gateway for Bulgaria
The BDG Task Force prepared a Needs Assessment
Report which analyzed the need for a country gateway among
Bulgarian development stakeholders. After holding in-depth
interviews with representatives of the relevant government
agencies, private business, NGOs and donor organizations the Task
Force came to the conclusion that a BDG was both needed and
feasible; the work on this report also highlighted the expectations
of the Gateway partners and their potential contributions.
The Task Force also drafted a Business Plan for
the BDG after extensive consultations with the individual
Gateway partners. Upon its implementation the Gateway is expected
to become a point of association of development stakeholders in
Bulgaria, a forum for cooperation among the most active civil
society institutions, private sector interests, public figures and
government and international agencies in Bulgaria, a permanent
framework under which different organizations and individuals can
promote developmental programs or projects in the field of
development. The BDG should help overcome the digital divide and
existing knowledge gaps as well as introduce good governance based
on public-private partnership within the development community.
The implementation of a CDG in Bulgaria will be
based on an already existing structure - the Internet Alliance for
Economic Development (www.online.bg/iaed/). This
coalition was established in mid-1999 to promote the use of the
internet as a tool for accelerated economic development. It
provides an excellent platform for combining the interests of
various stakeholders. Based on a distributed content model, the BDG
will consist of two fully functional parts (mirror sites) in
Bulgarian and English, hosted respectively on a local server and on
the central GDG server. The BDG will be built upon two parallel
taxonomy trees and divided into three main components: background
content, development issues and interactive part.
Prototype Development
A technical team of the BDG worked on
developing a prototype on the basis of which the implementation of
the Gateway could be based. In close cooperation with the Global
Development Gateway technical team it provided a solution to the
complex problems involved in design, template building and web
hosting - two parallel servers (one nationally based at Bulgaria
Online and one at the World Bank) are to be used. With regard to
content design the possible architecture of the BDG was agreed upon
in May 2001. Updates of the topics resources on the main gateway
server were regularly carried out. In order to accomplish these
tasks the technical team held two workshops -one portal site
building involving experts on building portal sites, database
management, e-security, server management, etc. (June 25, 2001) and
one on the content strategy involving experts and content provider
partners for the Gateway (June 29, 2001).
On July 31, 2001 a public presentation of the Bulgarian
Development Gateway prototype took place. The Gateway partners
expressed their approval for the parameters of its design and for
the implementation strategy chosen by the BDG team.
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