[05SOFIA1597] ECONOMY MINISTER: BULGARIA TO STAY THE MACRO COURSE; STEM CORRUPTION

Published by Wikileaks & Bivol.bg
C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001597    SIPDIS    TREASURY FOR ATUKORALA; COMMERCE FOR SAVICH;  DEPT PLEASE PASS TO USTR ERRION    E.O. 12958: DECL: 09/12/2015  TAGS: ECON, EINV, KIPR, ENRG, EFIN, ETTC, PREL, BU, EUN  SUBJECT: ECONOMY MINISTER: BULGARIA TO STAY THE MACRO  COURSE; STEM CORRUPTION      Classified By: DCM JEFFREY D. LEVINE FOR REASONS 1.4 B & D    1. (C) SUMMARY: Ambassador Beyrle made an introductory call  on Roumen Ovcharov, the new Minister of Economy and Energy,  on September 12.  He stressed USG support for Bulgaria's EU  accession in January 2007, as well as continued close  cooperation on economic and commercial issues.  In the  ensuing discussion, Beyrle and Ovcharov discussed the need  for greater protection of intellectual property rights (IPR),  compliance with agreements to privatize state enterprises,  and continued improvement in the investment climate.  Ovcharov stressed Bulgaria's confirmed priority on its  nuclear energy industry, where he said U.S. companies'  experience was helpful.  END SUMMARY    EU ACCESSION AND IMF/WORLD BANK  -------------------------------    2. (C) Ovcharov laid out his government's priorities, which  include EU accession, a "mature" relationship with  international financial institutions, continued  macro-economic success, and successful privatization of  remaining state-owned enterprises.  The GOB's highest  priority is the passage of laws necessary for EU accession,  especially those related to Justice and Home Affairs, and  streamlining coordination between ministries in order to  convince its EU partners that Bulgaria is up to the tasks of  membership.  Bulgaria is also ready to take the next step  toward a mature relationship with the IFIs, beginning with  more detailed discussion of problems and coordination of  solutions, according to Ovcharov.    PRIVATIZATIONS  --------------    3.  (U) Ovcharov noted that gas and electric supply companies  are still state owned; one of his priorities will be moving  ahead with their privatization.  However, according to  Ovcharov, the GOB still needs to support heavy industry,  particularly steel production, and agriculture, which could  continue to be a productive export for Bulgaria.  Amb. Beyrle  raised the need for Bulgaria to finalize the sale of Boyana  film studios to American film producer NuImage, the winning  bidder in a recent privatization tender.  Ovcharov noted that  Boyana's sale is currently tied up in the judicial system.    ENERGY/INFRASTRUCTURE  ---------------------    4. (C) Ovcharov, who was Energy Minister in the previous  Socialist government, said the proposed Nabucco gas pipeline  could dilute Russian influence by transporting gas from  eastern to western Europe.  Russian President Putin and Prime  Minister Stanishev also discussed the need for an oil  pipeline recently.  Bulgaria understands the importance of a  Bosphorus-bypass pipeline to global oil interests, said  Ovcharov.    5. (C) Beyrle stressed U.S. companies' commitment to  improving Bulgaria's capacity as an electricity exporter in  the region.  Ovcharov complained that the American company  AES has made little progress in more than six years (sic) on  its agreement to build a new power plant at Maritza East.  He  also raised problems with the upgrades of Maritza East III  plant, originally started by U.S.-based Entergy.    6. (U) Bulgaria wants to maintain its position as the  best-developed nuclear industry in eastern Europe, said  Ovcharov.  Thus, the GOB is reviewing the Belene nuclear  power plant project re-started by the previous government.  Licensing, safety and International Atomic Energy Agency  issues remain to be worked out.  Amb Beyrle noted U.S.  industry -- Westinghouse and Parsons -- work on Kozloduy  nuclear plant, and reminded Ovcharov that U.S. companies were  well-positioned to compete for Belene sub-contracts.  Ovcharov said he appreciated USG assistance through EXIM-bank  loans and thought the U.S. companies' experience would be  useful in Belene.    IPR  ---    7. (C) Beyrle pointed out that Bulgaria used to be a model of  success in tackling IPR problems, but recently has moved in  the other direction.  He stressed the need for greater  cooperation between agencies, and for leadership from the top  on this issue.  Ovcharov said the GOB is addressing the  issue, and has just passed optical disk media legislation  that "practically solves the problem."  He pledged to  cooperate closely with the U.S.  BUSINESS CLIMATE  ----------------    8. (C) Referring to the business climate, Ovcharov said the  current environment "allows for unequal treatment of  companies."  His ministry is responsible for some of that  imbalance because of its role in licensing and other  administrative requirements that give rise to opportunities  for corruption.  Ovcharov also said the administrative  process takes too long, with too many separate procedures.  Ambassador offered USG assistance in this area.    9. (C) Complex administrative procedures are not the only  problem facing potential investors.  Ovcharov also  highlighted the need to reform the judicial and prosecutorial  systems.  Currently judges move from one court to another,  with no real infusion of fresh blood.  Real change is not  possible under this environment.  He said the Prime Minister  and Socialist Party are prepared to make serious efforts in  this area.    10. (U) Ambassador stressed that passage of legislation  allowing the GOB access to bank and tax information was  necessary in order to complete negotiations on the Treaty on  the Avoidance of Double Taxation.  This treaty will give  greater incentives to American businesses to invest here.    ARMS EXPORT CONTROLS  --------------------    11. (C) Ovcharov and Beyrle agreed on the good cooperation  between our countries on export controls.  Ambassador  stressed USG desire that cooperation continue with the team  that has been in place at the working level, and that we  would like to review our consultative process with the newly  appointed Deputy Minister in charge of export controls.    12. (C) COMMENT: Ovcharov gives the impression that Bulgaria  is open for business despite some remaining problems.  He  clearly recognizes the weaknesses inherent in the current  system and the need to address these problems in order to  attract substantially more foreign investment.  The fate of  the privatization of Boyana Studios will be important in this  regard, sending a signal to U.S. investors, as will  Bulgaria's efforts to implement judicial reform in advance of  its EU membership.  While his analysis of the benefits of  recent IPR legislation is overly-optimistic, his concerns  about AES' slow progress on the Maritza power plant has some  merit.  The bottom line, however, is that there are numerous  opportunities in Bulgaria for U.S. companies in the coming  years, but the new government will need to work decisively to  prove it is serious about improving the business climate if  it is to reap the benefits.  END COMMENT  BEYRLE