Prime Minister of Bulgaria – Boyko Borisov: Opportunities & EU Funding

The American Times Presents: Prime Minister of Bulgaria, Boyko Borisov

Mr. Borisov, you were Prime Minister in 2012 as well. What are some things you are looking to accomplish this time around or what would you do differently?  

Unfortunately, we have to handle our national finances, something we were unable to do back in 2012. As a result, our first step is to stop the financial downfall of the country, it the foremost concern. This means handling our external debt, broken financial system, reduced credit ratings and reduced international investments. All of the working funds from the EU when we were in power in 2012 have been stopped for over a year and a half now. My colleagues Donchev, Pavlova, Moskovski as well as DPMs Kuneva and Kalfin are working on the Operational Programs with the latter taking the Euro Funds Program into manual control 24/7, they stayed up late last night to write the last reports so we can send them to Brussels today. This is because 2014 was a zero-year for absorbing EU funds. The most optimistic forecast for receiving money from the EU would be no earlier than June next year.

It appears that Mr. Donchev is playing a very important role in the initial months of the new government.

Mr. Donchev was a Minister of EU Funds, now he is the Deputy Prime Minister of EU Funds and Economic Policies. The fact is, he left a large wage as a European member of parliament and stayed here so we could fulfill our program connected to the EU funds. This is especially important when considering over 70% of our financial resource comes from Europe. First we need to fix our finances to the level they once were and then we can aim for an increase. Bulgaria was an example for responsible reforms and financial maintenance for the region of Greece, Romania, Serbia and the Balkans in general. To place this in perspective, the monitoring reports by the EU for Bulgaria in the past were done every year and a half whereas Romania’s was done every six months; unfortunately, now it going to be done the other way around. So you can see I need to depend a lot on the financial and economic departments to regenerate the good name of Bulgaria in order to bring forth more investors. When there is no financial stability, no political stability, no judicial reform it is viewed as a risk to foreign investors. Mr. Donchev will be pivotal with these objectives.

We noticed that back in June you met with a US senator, Chris Murphy .

Yes, also McKenneth and his colleagues from the republican institute.

Could you elaborate more on the yield of oil from the coast?

I have said many times that the toughest decision that the last government had to make was in allowing the exploration and production of petroleum gases to international companies, such as OMV, Repsol and the French company Total and what percentage they going to get from potential discoveries of petrol and/or gas. Minister Stoynev [Former Minister of Economy, Energy & Tourism] canceled those concessions and we are going to discuss them again if not this Wednesday at the Council of Ministers, than next Wednesday. Currently, Scottish company Melrose Resources extracts 10 % of the discovered yields.

I’m sure that the huge pressure over our government from Russia is from nothing else but the possibility of losing that market. Every year we import oil and gas, from Russia to Bulgaria, to the tune of 6.5 billion USD, when Bulgaria has the potential to produce that for ourselves as well as surpluses available for export. This is of huge interest to Bulgaria. This would give 100% diversity and 100% energy independency to Bulgaria.

Absolutely, when a country controls their energy, they control their destiny.

I’m guided only by the national interest. I have sent my ministers of economy, energy and foreign affairs to make some re-negotiations regarding thermo-electric power- station 1 and 3 in an attempt to lower the prices a bit due to all the tension in the eyes of the public and the high prices of electricity right now. These re-negotiations are due to the purchase price of the American centrals compared to the Bulgarian thermo- electro power- station (TEC 2), with the former at almost 3 times higher rates. Yes, we recognize that those investments bring diversity and we applaud their presence in Bulgaria but we want to lower the prices and take credit as we did with the wind energy because people are struggling.

Hopefully the negotiations will go in the right direction. The other contract that is also in front of us is with Westinghouse and the 7th reactor, I want to specifically underline that we are going to welcome them with traditional bread and salt to build the 7th reactor as long as they are investors. If this project is a success there is no point for them not to want to invest further, there is already land, storage areas, systems, trained staff and technical support at the ready. The whole world knows that this is the biggest central, it has passed all of its regulations and Westinghouse is absolutely more than welcome to invest. They build the reactor; they get 100% support from us, as long as it is ours.

When I met with Senator Murphy and the President of Westinghouse we spoke about how wonderful an opportunity this is for the US government if they are looking for diversity of energy in the region. They need to stand behind this project with a guarantee from the American government to build the 7th reactor and produce electricity to make in both our interests; in this case they are more than welcome to do so. But you can’t go to the poorest country in Europe to be an energy dealer with the newest technology in the world. From us you have the support, the infrastructure, the specialists, and from the US you have the money and the technology; together this represents a rare opportunity for investment. Keeping in mind as well the friendly relations shared between the US and Turkey; there could easily be a contract for them to buy energy from us. So, welcome.

You have a lot of heavy issues on the plate. The people around, even in this coalition government, must be extremely important in correcting these issues you’ve mentioned?  

Yes and I’m happy that I have such great human assets available to me which were cultivated over the years. People are moving up the ladder. In time, when I decide to step down, there will be at least 40 people ready to take my position. With assistance from Brussels we have a program in place for the education of our party [GERB], you can’t imagine the young people that are so capable and well educated; we are creating the 3rd and 4th echelon of people prepared to govern.

Another great power that we possess is local authority. We have over 90 mayors in the biggest cities across the country.  There is a lot of trust in GERB which shows when many of these mayors are in their 3rd and 4th mandates. We can add Kristalina Georgieva to the list, who is now European Commissioner for International Cooperation, Humanitarian Aid and Crisis Response in the second college of the Barroso Commission. So, the American investor is more than welcome. We are going to do everything in our power to stabilize the economy and the finances of this country, to unleash the EU funds.

What are the specific factors we could present to investors?

Many of the sectors already have legs and strong precedent firms. Starting with Coca Cola and the mineral water spring sources, Microsoft, HP and the whole IT sector and of course the energy sector we spoke about earlier. Something can be said regarding the agro-sector and all the vineries, there are some great vineyards. Some wine cellars are proud owners of golden medals and so on. Every sector is available.

I’d like to add the automotive industry. Nowadays many things are produced in Bulgaria; all the parts from a car including engines and electrical components are produced here.

The American Times has spent some time in Macedonia, one of the greater strengths they possess are their well-functioning economic zones which focus on automotive components; which leads me to two things: First, what economic zones, if any, exist here to further these types of investments and second, how does Bulgaria stand out to some of the regional competitors in that regard?

We have many Chinese factories which are producing parts for automobiles. They have at their disposal trained staff, technical support and a very important geostrategic position in Bulgaria in the middle of 5 European Trans crossroads. We wish our neighbors from Macedonia great success and their share of great investors as well. Peace and prosperity will be when all countries become a part of the EU and help each other out. That is the point when we are going to be able to stop discussing historic ethnic conflicts of the Balkans. Serbia, Macedonia, Albania have always had the support of our country.

Obviously there are going to be challenges when restructuring the finances for EU funds. What specific steps lay ahead?

The huge payments that we are going to have to make to cover the bankruptcy and the huge deficit which we have to bring below 3%. This is on the top of rectifying the fake promises politicians have made for more jobs, higher pensions and wages. People have been promised a bright future for 40 years now and youngsters want to live today, to go to the theater and the cinema today, they want to drive on the highways and ride the subway and so on. We have to make it a priority to deal with those things. Finally, we need to address overall energy efficiency and healthcare.

Yet again you have been in the office for a week as you said, this would be a different conversation if this was 6 months from now.

I was Prime Minister a few years ago and the first incumbent Prime Minister as of this week. We have never fallen into obscurity. The party continues to conquer new towns. As a conclusion, I would like to say that I believe in every political party, that we are going to continue working together, even though it will be tough at times to continue to stabilize the country until next year’s elections and bring back the investors.

As a Prime Minister what is your personal message to US investors.

If the Americans (business or political) are looking for a geostrategic presence in the Balkans within the Russian realm, Bulgaria is your place. We have maintained solidly in the midst of war, UN embargo and mass murder 15 years ago in Kosovo, which was 300 km away from Sofia. Now 500 km away from our other border, Ukraine and Crimea are falling apart. These incidents depict why and how there is so much Russian influence. It is your duty to help us with investments and healthcare and develop to develop and nurture our friendship; you should not be waiting for a special invitation, you should know you are welcome here, not only for us but for your own interests.

 

 

The American Times Presents: Deputy Prime Minister of EU Funds and Economic Policies, Tomislav Donchev

 

 

Deputy Prime Minister Donchev, thank you for joining us today. In your position you are in charge of EU Funds and Economic Policies. Can you elaborate on a few of the key tenets of this position?

EU financing is about 10% of public expenses but 72% of our public investment. The more important thing is that the EU financing is focused in the spheres of improving the business environment and factors that generate growth. You can see that there is an excellent combination between EU financing and pedestal for the necessary reforms. It’s typical for the program period of 2014-2020 because of the strong connection between the financing that is available and the necessities to make reforms in member states. There will be ex-ante conditionality’s that place us in a position where we must make key reforms before we can take any EU financing. I believe these conditionality’s are needed and the number one driving force in making reforms.

What is the timeline on when these reforms are expected to be in place?

The first progress review with be done at the end of 2016.

Can you please elaborate further on the energy sector and how this reflects on overall Bulgarian society?

Energy independence is not an economic concern but rather one of national security and has different dimensions. First of all, when speaking about gas supply we must continue with our interconnectors with our neighbors Serbia, Greece, Romania, and Turkey as it offers diversity in the supply. This is in addition to Mr. Borisov’s ambitions to further explore the Black Sea coast for potential reserves.

If you see the comparison between the different EU member states Bulgaria is not in a good position amongst our colleague states in regards to energy consumption and prices. This of course presents issues for businesses especially in high consumption activities like in the manufacturing and production industries. However, we have experience in assisting some of them [companies] through our “Operational Program” [Development of the Competitiveness of the Bulgarian Economy] with grants in order to achieve better energy efficiency. But of course, it’s also an issue for people in their homes. As such, this sector’s deficiencies are of the highest priority for the new government. We need to offer support to people in their efforts to develop energy efficiencies in their homes; especially, in the multi-family blocks.

It really makes for a complicated situation when as a prerequisite to rehabilitation we must gather consensus between all the owners in the block. Augmenting these complications further and an aspect singular to Bulgaria is that 90% of these multi-family dwellings are privately owned. We’ve done some things with grants in the past five years; however, we must do more to make available financing options to help people become more energy efficient as well as simplifying the procedures to obtain assistance. We want to implement this system to replace the current mechanism which has the state paying 50% of the energy costs for these multi-family dwellings.

How are you funding these energy subsidies?

From the State budget and an EU fund.

You’ve were in charge of EU funds during Borisov’s first tenure as Prime Minister as well. How has your position changed this time around in 2014?

The function and title are the same. However, I am now in charge of coordinating all applicable ministries such as economy, energy, transportation, regional development and environment. Of course, this makes sense when considering the importance of receiving EU funds through required reforms in these particular ministries as mentioned earlier.

When discussing Funds from external sources, transparency is of paramount importance. How do you make certain the public are aware of incoming funds, projects, etc?

Transparency has to be reduced to the procedure. During our first term I believe we made some important steps and I am particularly proud of one of them. If you visit the EU Funds website [eufunds.bg] you’ll find a section named UMIS (United Management Information System) that lists openly all the contracts, beneficiaries and payments; all in tremendous details.

That’s nice to see although this is most likely a requirement of the EU.

Actually, it is not. We created this through our own initiative; that fact is a major reason why I am so proud of it.

Fantastic. Digitization tends to minimize corruption and maximize transparency. Are there any plans to create E-Systems for other services or databases like UMIS?

That is the next step. We’d like to create similar systems for all types of public investment and expenses. Our next natural ambition would be to take these systems beyond state administration and use them in various agencies, institutions, healthcare and so forth. Fortunately during our first term we created a base in this regard that we hope to build on now. Ultimately it will reduce administrative expenses, corruption and time via better efficiency.

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