In 1997, CSD continued to monitor the economic
policy process and to provide expert assessments. CSD was in the
position to build a coalition of NGOs and was the institution that
brought together policy makers, government officials and analysts
to reach consensus and draft the necessary amendments in the
regulatory framework of the economy.
The Economic Program activities for 1997 assisted
the government in its efforts to speed up privatization and promote
the development of small and medium size enterprises. Activities
involved drafting legislation, preparing alternative analyses and
policy recommendations based on research results, monitoring of
public attitudes and behavior, public education, and widely
reaching dissemination activities. One of the important issues in
this respect was the active involvement of CSD in the preparation
of the Credit Rating Presentation of Bulgaria in September
1997.
I. Privatization and Economic Restructuring
In September 1996 CSD started work on the project:
"Privatization and Economic Restructuring in Bulgaria", supported
by the Center for International Private Enterprise (USA). The main
objective of this project was to contribute to the acceleration and
success of privatization and economic restructuring in Bulgaria.
Through research, advocacy, and dissemination activities, the
project resulted in :
- Providing expertise aimed at making the mass
privatization program more effective, transparent and
successful;
- Providing continued assistance to government
institutions responsible for privatization by developing a
consistent medium-term privatization strategy;
- Facilitating privatization at the municipal level
by transferring best practice models;
- Increasing expert and public understanding of
post-privatization and corporate governance issues through
education and information activities.
The research and advocacy were structured in the
following main groups of activities:
- Introducing the Corporate Governance Concept and
Practices to Bulgarian Experts
Corporate Governance Agenda for Bulgaria
CSD started the implementation of a long-term
information and training Program on the problems of corporate
governance targeted at the general public and selected professional
groups. The Program sets the corporate governance agenda for
Bulgaria and is supported by all concerned institutions. The agenda
envisions the following activities:
- Research and analysis of the specific problems of
corporate governance in privatized enterprises and privatization
funds;
- Joint activities with the privatization funds'
associations;
- Study of foreign experience in the field of
protection of shareholders' rights;
- Introducing corporate governance concepts to the
Bulgarian public.
Facilitating the Implementation of Corporate
Governance Principles: Shareholders' Register Design
On July 3, 1997 the Council of Ministers made a
decision recommending that branch ministries introduce a
Shareholders' Register with unified format and maintenance rules
for the enterprises with a majority state ownership.
The design of the Shareholders' Register was
developed by CSD experts and presented to the Center for Mass
Privatization. The following sections of the Shareholders' Register
have been elaborated in detail:
- graphic format of the original register;
- format of the duplicate (electronic) copy of the
register;
- officials responsible for registration of the
shareholders and updating the information;
- regularity of entries and information
updating;
- conditions for keeping and restoring the original
register and the duplicate copy.
With the preparation of this document in
coordination with the relevant state institutions, CSD facilitated
the procedure of entering new shareholder rights, and the
implementation of the corporate governance principles and
practices.
Introducing of Small Investors to Their Rights as
Shareholders
On May 15, 1997 a Town Hall Meeting on corporate
governance and capital markets issues was held in Veliko Tarnovo.
The meeting was organized by CSD and conducted in cooperation with
the Veliko Tarnovo municipality, Sever privatization fund, and the
consulting firm Fynsis. The objective of the meeting was to bring
the topics of corporate governance and shareholders' rights into
public view. At the Town Hall Meeting, short
presentations were made by a number of speakers
including representatives of the following institutions: Center for
Mass Privatization, Securities and Stock Exchanges Commission,
Central Depository, Stock Exchange, managers of to-be-privatized
enterprises, managers of privatized enterprises, and Privatization
Funds.
The result of the Town Hall Meeting was an
introduction of small investors to their rights as shareholders and
to the mechanisms of the capital market. For the first time in
Bulgaria, the broad public learned about the possibilities for
their participation in the management of the privatized
enterprises.
Founding a Shareholders' Union (April 10,
1997)
CSD was instrumental in the establishment of a
Shareholders' Union in Bulgaria. The Union was founded as a
non-governmental organization in April 1997 and CSD is one of the
founding associate members. The Shareholders' Union sets as its
primary goal the facilitation of achieving a broader, more
effective, and less risky investment environment in Bulgaria.
As a founding member, CSD will work for the
achievement of the following objectives:
- Facilitating the activity of state and public
bodies and lobbying at the stages of preparation and adoption of
regulatory documents related to investment and protection of
investors' rights;
- Developing information and educational programs
and publishing activities aimed at elevating the investment culture
of the Union members and the public at large;
- Analysis of real and potential conflicts between
different groups of investors and suggesting of measures for their
more effective overcoming.
Corporate Governance and Protection of
Shareholders' Rights Workshop (November 14, 1997)
The main objective of the event was identifying the
major problems in Bulgarian practice after the first wave of mass
privatization and the start of capital market. Based on the broad
discussion on the workshop, some important decisions were outlined
based on the experience of USA, Germany, Great Britain, and other
countries:
- Corporate governance (Accountability, Board
Composition and Separation of Functions between the General
Director and the Chairman of the Board, Qualifications of Nominees
to the Board, Conflict of Interest);
- Shareholders' rights (Agenda for the Annual
General Meeting, Majority vs. Minority Shareholders, Voting Rights
Restrictions and Restricted Shares, Conversion of Open JSC into
Closed Type).
The workshop was attended by 25 Bulgarian experts
recruited in cooperation with the Union of Investors in Bulgaria.
Mr. Geoffrey Mazullo- US consultant, Multinational Strategies, New
York also participated in the workshop providing valuable advise
and expertise. Mr. Mazullo has extensive experience in implementing
corporate governance projects in Poland, Russia, Moldova and other
countries in the region.
2. Policy workshop: Enhancing the Development of the
Institutional and Policy Framework of Capital Markets in Bulgaria
(July 25, 1997)
The main objective of the workshop was to provide a
consensus Policy Document including the legislative agenda for the
institutional development of capital markets in Bulgaria. In this
respect the Policy Document identified the following three major
problem areas:
- Development of a System to Support Market
Infrastructure;
- Supply and Demand of Securities, Primary Market
Development;
- Preparing the Legal Infrastructure for a Self
Regulatory Environment.
In terms of content the Policy Document outlines the
most important action lines associated with each problem area. The
important features of the Policy documents are that it is:
- Based on the consensus of the major actors in the
field of capital markets on the most important problems that have
to be resolved;
- Presents a comprehensive overview of the status of
the legal and institutional framework of capital markets;
- Serves as an effective management and outreach
tool that sets the policy priorities and enables the effective
tracking of progress.
Among the important features of the Policy Workshop
on capital markets is not only the result (the Policy Document) but
also the multistage "production process". At the initial stage CSD
formed an expert group including representatives of business
associations, senior government
officials, financial experts, representatives of the
private sector and other concerned institutions.
At the second stage the draft document, which was
not only a result of expert work but also included consultations
between the relevant actors and institutions, was discussed at an
expert level workshop. The most important result of the policy
workshop was the endorsement of the recommendations proposed which
provided a complete working document supported by the major
stakeholders in the area of capital markets development.
At the third stage, after a new round of
consultations (conducted by CSD task force members and including
members of Parliament, senior officials at the Council of
Ministers, representatives of self-regulating organizations,
financial experts from the private sector and other relevant
institutions), the Policy Document was revised and published as a
policy recommendations paper: Institutional and Policy Framework for
the Development of Capital Markets in Bulgaria.
The publication was widely distributed in Bulgaria
and abroad and also provided a useful reference for the Financial
Times Seminar on the Development of Capital Market in Bulgaria
(October 23, 1997; Sofia).
3. Municipal Privatization
Survey Assessment of Municipal
Privatization
The survey conducted by CSD and the Privatization
Agency experts contains analyses of the following issues:
- Progress of municipal privatization in 1995 and
1996;
- Differences in privatization among regions and
municipalities;
- Necessity for, and forms of technical assistance
in some municipalities.
The analysis showed that municipal privatization is
still much more dynamic than privatization of state-owned
enterprises. Municipal privatization transactions are three times
more than that of state-owned enterprises. A marked positive
development is observed in terms of time limits, purchasing prices,
and in the level professionalism of the municipal privatization
officials.
Municipal Privatization and Local Economic
Development Workshop: Currency Board and Municipal Privatization
(April 22, 1997)
In 1997, the Municipal Privatization and Local
Economic Development Workshop focused on the prospects of municipal
privatization from the viewpoint of local economic development in
the context of the forthcoming implementation of a currency board
in Bulgaria. Representatives of about 20 Bulgarian municipalities
(at the level of Mayor, Deputy-Mayor, and Head of Privatization
Department) took part in the workshop. Among the participants were
also senior officers from the Council of Ministers, the
Privatization Agency, consulting firms, and journalists.
The discussion was based on the report of Mr. Petar
Antov, Chief Expert, Privatization Agency, entitled Tendencies
in the Municipal Privatization in 1996. Mr. Dimitar Batchvarov,
Head of the Structural Reform Department with the Council of
Ministers, made an overview of the intentions of the Government in
the area of structural reforms and the expected role of local
authorities' in this process. According to Mr. Batchvarov, the
potential of municipal privatization for a fast introduction of
market relations on the regional level is still insufficiently
utilized. Mr. Batchvarov also shared ideas regarding the use of the
resources of municipal privatization funds, among which the
preferential development and support for small and medium
businesses.
4. Providing Policy Recommendations for Speeding Up
Privatization
As a result of the joint initiative of CSD and
Bulgarian Association of Management Consulting Organizations
(BAMCO), a set of recommendations (Policy Document) was submitted
to the Structural Reform Council with the Council of Ministers. In
October 1997, the Policy Document (Strategy for Accelerating the
Privatization Process 1997-1998) was
adopted by the Council of Ministers.
The document recommends the implementation of a
coherent privatization strategy for Bulgaria including a more
market-oriented approach for overcoming the pitfalls of the first
wave of mass privatization. The main conclusions and
recommendations are as follows:
1.The delay in privatization is primarily due to the
social and political climate in Bulgaria which hampered the use of
existing legislature's potential and the practical implementation
of all mechanisms envisioned by law. Acceleration of privatization
on this basis is
possible and necessary even before the passing of
amendments to the Privatization Law and the connection with
secondary legislation.
2.A change in the principles of legislation is
needed in the direction of:
- Creating new statute and functions for the
institutions involved in the management of property and
privatization;
- Diversifying the approaches and methods of
privatization;
- Introduction of incentives and sanctions for
speeding up privatization.
3.Wider implementation of the internationally proved
practice to use consultants and mediators (both Bulgarian and
foreign) in the preparation procedures, marketing, and sale of
state-owned enterprises.
5. Facilitating Public Policy Debate
Discussion of Economic Reform
Alternatives:
In 1997, two discussions were organized by CSD, the
Open Society Foundation and the New Bulgarian University. They both
covered the problem of economic reform alternatives for Bulgaria
and received wide coverage in broadcasts on the National Television
and private TV and radio stations:
Joint Meeting of Prof. Jeffrey Sachs and Top
Bulgarian Economic Experts (March 8, 1997)
Discussion was focused on basic problems of the
current stage of economic reforms in Bulgaria:
- conditions and principles of the currency board
implementation;
- restructuring of the Bulgarian economy and
conditions for long-term economic growth;
- reform in the budget sphere.
Participants in the meeting were: Prof. Jeffrey
Sachs, Director, Harvard Institute for International Development,
Mr. Alexander Bozhkov, Deputy Prime-Minister and Minister of
Industry, Petar Andonov and Krassimir Angarski, Advisers to the
President, senior officials from the Council of Ministers,
ministers, prominent Bulgarian economists, and representatives of
private businesses. The intense exchange of opinions and
information was particularly useful in relation to the necessity
for revising the logic of reforms in Bulgaria and their decisive
acceleration.
Joint Meeting of Prof. Leszek Balcerowicz and Top
Bulgarian Economic Experts (April 3, 1997)
The focal point of the discussion with Prof. Leszek
Balcerowicz (Chair, Center for Social and Economic Research,
Warsaw) was the comparative analysis of reforms in Central and
Eastern Europe. The exchange of opinions and information was
particularly useful with respect to the comparisons between reform
practices in Poland and Bulgaria.
The meeting was attended by: Mr. Alexander Bozhkov,
Deputy Prime-Minister and Minister of Industry, Petar Andonov and
Krassimir Angarski, Advisers to the President, senior officials
from the Council of Ministers, prominent Bulgarian economists, and
representatives of private business.
The Problems of Privatization in Bulgaria
(International Conference, Dresden, January 27-28, 1997)
The conference was of great importance for
disseminating of detailed positive information about the prospects
of economic reforms and privatization in Bulgaria. The Bulgarian
experts and representatives of state institutions exchanged ideas
and received valuable recommendations from their foreign colleagues
who are professionally involved with the problems of the countries
in transition. A collection of the conference materials, including
all participants' reports in English, was published and distributed
in Germany, Bulgaria, and other European countries.
The conference was co-organized by the Society for
South-East Europe (Munich) and CSD. It was attended by Bulgarian
experts and scientists from Germany, Italy, and the United Kingdom.
An international conference focused on Bulgaria like this, had not
been organized for the last 4-5 years.
How to Trade Shares from Mass
Privatization
A brochure How to Trade with Shares from Mass
Privatization by Doncho Barbalov, CSD Research Fellow was published
in 5,000 issues in October 1997. This is the fourth successive
publication from the CSD series of brochures on privatization. The
brochure was disseminated at the Bulgarian Investment Forum (Sofia,
October 22-24, 1997) and throughout the country by the information
offices of the Center for Mass Privatization. Due to the large
interest, a second release is planned for 1998.
6. Sociological Surveys
Monitoring the Results of the First Wave of Mass
Privatization in Bulgaria
In 1997, CSD conducted two qualitative and one
quantitative survey which were part a of long-term strategy aimed
at monitoring economic reform developments and performing a
watchdog function. Data and results from the 1997 surveys have been
incorporated in the Policy Recommendations Paper on mass
privatization. All survey results have been provided on a regular
basis to:
- The Chairman of the Economic Committee of the
National Assembly;
- The Legal Department and Structural Reform
Department of the Council of Ministers;
- The Center for Mass Privatization, from where a
letter of acknowledgment was received.
The 1997 surveys disclosed a complex and
controversial picture of the implementation of the first wave of
mass privatization (MP) in Bulgaria:
1.In principle, the mass privatization is perceived
as a positive, although belated and not altogether perfect
process.
2.Shortcomings related to how the first wave of MP
was conducted include: the controversial and inconsistent behavior
of the state, the changes in the originally announced program of
the government, the changes in the privatized enterprises' capital
between the separate auction sessions and the poor protection of
the minor shareholders' rights.
3.The information collected shows that the preferred
way for participation in mass privatization is through
privatization funds.
Unfortunately, privatization funds do not enjoy a
high level of trust after the first wave of MP.
4.The respondents do not have sufficient information
about the enterprises they have acquired shares from.
5.The general awareness about the second round of
mass privatization is relatively low. Compared to earlier surveys,
there is declining awareness and interest towards the privatization
process. The level of information regarding the model of
implementing the second wave of MP is even lower.
II. Business Associations Executives Training
The event was co-organized by CSD and the Center for
International Private Enterprise at the International Management
Center in Bistritza (May 4-10, 1997). Representatives of sixteen
associations and seven chambers of commerce from all parts of the
country took part in the seminar.
Among the topics covered were strategic planing,
finance & budgeting, project design, and proposal writing. The
program gave the participants a unique opportunity to acquire new
knowledge and skills as well as to develop valuable contacts and
share experience with colleagues from the sector.
The results of the event exceeded the expectations
of both organizers and participants. At the final test, the
majority of trainees received a certificate for successful
completion of the Business Associations training. There is good
reason to believe that participants will implement the acquired
theoretical competence into practice.
International Business Club
Meetings
In 1997 the International Business Club organized
three meetings with the following guests:
Mr. Alexander Bozhkov, Deputy Prime Minister,
"Priority Areas for the Caretaker Government" (March 18, 1997)
Mr. Stephan Sofianski, Prime Minister, "Preparing
Accelerated Economic Reforms in Bulgaria: The Three Months of the
Caretaker Government" (May 8, 1997)
Mr. Valentin Vassilev , Minister of Trade and
Tourism, "Privatization in Trade and Tourism" (June 17, 1997)
The IBC meetings participants included the foreign
trade envoys and the representatives of International businesses in
Bulgaria.
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