93 passports. This is the price Bulgaria paid for the "investments for citizenship" scheme over the past decade. 93 people have gained the right to claim EU citizenship and, in return, invested anything from 500 thousand euro upwards into the Bulgarian economy.
Except, we don't really know if they did. As it turns out, no one actually keeps a record of where the money is going and whether it is really invested or just a figure in the books of private companies which are then quietly giving it back. We don't really know where those people came from and why they want the Bulgarian passport. Last year, for example, an investigation by Capital Weekly discovered tens of Chinese citizens acquired just enough shares in a publicly traded company on the Sofia stock exchange to be able to claim citizenship.
This angered Brussels - both the European Commission and the European Parliament put Bulgaria under monitoring for the "golden passports scheme". Usually the government quickly deals with issues affecting the flow of eurofunds and solidarity. And it tried to do so - the Ministry of Justice proposed amendments to close the loophole. Yet parliament overthrew the text and a small group of deputies provided a new text which not only kept the gate open, but widened it up a bit (you can read about it here).
So why is it that Bulgaria keeps this door open?
Simply, because someone is benefiting a lot from this. The more complicated answer is that right now the state is beholden to various interest groups with enough lobby power to do anything they want, national interest be damned. Think of it more like a medieval state - a loose federation under the guidance of a single power, with lots of local feudals exercising their right to extract money or inflict punishment.
This might, or might not change in the elections on 4th of April. But before that, there are some serious hurdles to overcome.
Let's take a look.
POLITICS
Let the mud-slinging begin ...
To cite another gruesome example of how those local interests are exercising their right to power, consider the case of Vladislav Panev. Panev is the leader of the Green movement, part of the right-wing opposition coalition Democratic Bulgaria. Last week, he found himself knee-deep in a fabricated pedophile scandal, picked up by a web of yellow and brown websites.
Their only goal was to smear Panev as much as possible - all without a scintilla of evidence. Some of those websites are mouthpieces for the ruling coalition, but some are not. The attack seemed much like something someone was paying for.
Panev has no shortage of enemies: he personally investigated cases of burning illegal trash in the powerplants of a well-known energy mogul - Hristo Kovatchki, as well as an illegal forest residence built by another oligarch with connections to power - Rumen Gaitansky, the Wolf. So while the coalition in power is at hand-distance from this scandal, it serves many parties just fine.
Who, me? Do I look like a dictator?
Was what Boyko Borissov kinda said in Vienna when asked about media freedom in the country. The prime minister, who has completely shunned journalists in Bulgaria over the past year, fielded an unexpected question about corruption and media freedom while meeting Austrian chancellor Sebastian Kurz to discuss vaccines. Visibly annoyed, Borissov responded that "freedom of speech is so free it is incomparable with other countries". This, while laughable, is partly true - as seen with the Panev case, you can write anything you want here, as long as you can be guaranteed the state regulators won't act. Or, as the old saying goes, "the fist is easiest to catch in muddy waters".
Speaking of freedoms, here is another one gone
Bulgaria enters its third lockdown next week. This time restaurants and bars are not alone. Schools, kindergartens, malls, retail centers, gyms and basically anything that is not a grocery store, a pharmacy or a financial service, is closing down until 31 March. Welcome to the past, due to the lag of vaccinations, mounting infections and the completely botched strategy throughout. Clearly, the only way out will be fast vaccination of large parts of the population and Bulgaria is nowhere near that. This promises months and months of suffering.
And don't forget: it's nobody's fault
Borissov's reason for hopping to Vienna was his desire to deflect any pre-election political damage regarding the vaccination rate. Bulgaria is dead last in the EU and that is very bad indeed, given that the EU itself is lagging behind almost everyone else. Yet Borissov is not to blame, of course (even if there was enough free press to dare suggest such a thing). Together with Kurz and their counterparts from Slovenia, Czech Republic, Croatia and Latvia, they blamed the EU for the lack of vaccines and requested a correction mechanism that would see available shots redistributed on a per capita basis. To which the Commission kindly replied that such a mechanism was already proposed and rejected by the leaders of the 27.
Discontent today? Trust us with tomorrow
A doubling of the GDP to 100 billion euro, 500 euro minimum wage and a 1000 euro average wage - all by 2025. These are some of the promises the ruling party GERB made in its economic program. The 120 pages-long-document is notable for a ton of promises but scant details. The main point: there will be an abundance of EU money, which will be spent wisely (and mostly on infrastructure). Also, taxes won't change, except for local taxes and for social security. All of which sounds intriguing, if you discount that those same people have been in power for 12 years now and we've all seen how EU funds are dispersed and who usually benefits.
One unexpected idea
Is the proposal about remigrants: Bulgarians who decide to return from abroad. GERB wants to support those for a year with a paid rent and child support, as well as financial stimulus for working in low-wage areas. It's an obvious nod to voters abroad and to the thousands who returned because of COVID.
ECONOMY
Brussels gives the go-ahead to Sofia airport concession
The European Commission approved the request by the Bulgarian government to allow the postponement of the concession fees for Sofia airport in the coming decade. Paris-based investment fund Meridiam, the leading member of the SOF Connect consortium which was awarded the concession to run the airport, sought the delay in payments because of the coronavirus crisis. In that way, SOF Connect will start paying its annual fee after the 10th year of the 35-year contract. Brussels' approval means the airport is ready to go into private hands.
Goods export in 2020: 6.4% down
The numbers for the awful 2020 keep pouring in - according to national statistics, the value of goods exported from Bulgaria in 2020 was 54.7 billion levs (or 28 bn euro), down 6.4% compared to 2019. Both EU and non-EU markets shrank following the pandemic.
Undoubtedly, the decrease in demand for intermediary goods in manufacturing was a factor. But, judging by the data, the annual decline was largely due to the collapse in oil prices and weaker demand for fuels, which reduced sales of Bulgarian fuels abroad by 54%, down to 2.55 billion levs last year. On the positive side, sales of refined and unrefined copper are rising.
Expect a deeper dive into Bulgaria's exports next week on Kapital Insights.
Yet another bond auction
Two weeks ago, the Ministry of Finance rejected all orders in a T-bond auction because the yield demanded by investors was slightly higher than authorities expected.
Now, the state is going to try again. On March 22, the ministry will offer 5-year zero-interest securities worth 300 million levs (153 million euro) on the domestic market. Earlier this month - the last time the state offered securities from the 5-year segment, the achieved yield was -0.17%.As a whole, since the beginning of the year, the state has raised half a billion leva or 250 million euro from T-bonds.
Summer 2021 promises to be different
Contactless payments, safety equipment, quarantine rooms. These are not hospital requirements, rather official requirements the Ministry of Tourism introduced for the summer season, officially starting on May 1. That's also the date when the new rules will come into force. Hotels must provide appropriate distance between tourists, and protective equipment. Also, hotels will need to have rooms on stand-by for quarantined guests, and a contract with a medical professional or center. On the beach, businesses are allowed to place one umbrella per 20 square meters, and all services, including water sports and other entertainment, must be able to receive contactless payments.
BUSINESS
Pharmaceutical
BiovetBiovet, manufacturer and marketer of medicated and nutritional feed additives based in Peshtera, was awarded a Class A investor certificate by Economy Minister Latchezar Borissov on Wednesday after announcing it will launch a new production facility in Razgrad, Northeastern Bulgaria. The investment is valued at 200 million euro and will create 350 new jobs in the city, the Ministry of Economy announced.
Mining
KCM 2000KCM 2000 - the third-largest company in metallurgy in Bulgaria, will invest 11 million levs in copper ore mining. This became clear after the government gave a 30-year concession to the company to extract metal minerals from the Tsar Asen 2 deposit in the Pazardzhik municipality in southern Bulgaria. The new initiative means that the group, which traditionally focuses on zinc and lead, will be entering the copper ores industry, which is currently dominated by the Bulgarian unit of German copper giant Aurubis. According to the company's estimates, the completion of the project will raise revenues above 1 billion levs - a 30% increase compared to the results achieved in 2019.
Technology
MYXBulgarian startup for "digital twins" MYX raised 350 thousand euro. MYX, which develops digital copies of physical objects that allow remote management and data collection - has raised funding in the form of convertible debt. Of the total amount, 150 thousand euro come from NV3 (the third fund NEVEQ - manager of the Fund of Funds). The remaining 200,000 euro stems from private investors.
Finance
RaiffeisenbankRaiffeisenbank will provide 85 million euro in loose credit to companies. The funds will be offered with a guarantee from the European Investment Fund (EIF) under the European Guarantee Fund (EGF) mechanism. According to the agreement, a 70% guarantee will be provided by the EIF for each loan. Which means that, in case the borrower is incapable of repaying his obligations, the fund covers 70% of the bank's losses.
ENERGY
The deep pockets of Bulgartransgaz get even deeper
The national company for gas transmission plans to invest 22 mln euro in hydrogen projects and 1.2 billion on new facilities. The investment program of the company, published on the portal for public consultations on Wednesday, shows projects like the expansion of the national gas grid, completing the gas interconnectors with Greece and Serbia, the expansion of the Chiren gas storage facility and the development of the Alexandroupolis LNG terminal in Greece, where Sofia holds a 20 percent share.
The plan also includes the potential creation of 175 km infrastructure that would link the Thermal Power Plants in the Maritza basin with the gas grid in order to facilitate their transition from coal to liquefied gas.
And they also bet on hydrogen
Bulgartransgaz is also planning to invest 22 million euro in hydrogen projects. Over the next three-to-four years, the firm will build infrastructure for the transmission of gas to coal-reliant regions. However, the 10-year plan explicitly states that no final investment decision has yet been made regarding the projects.
WATCH OUT FOR
PEOPLE
Petar AndronovThe current CEO of UBB bank and country manager for KBC Group is getting promoted to the Executive Committee as CEO of the International Markets Business Unit. He will be succeeded in his current position by Peter Roebben, the current CEO of KBC Bank Ireland.
Paun Iliev
Until recently president of the Bulgarian Institute of Meteorology, Iliev is the new head of the State Petrol Company - the new entity which is supposed to create a chain of petrol stations to lower fuel prices.
DATE
the beginning of the next lockdown
COMPANY
the American digital marketing company just got valued at over 1.4 bln dollars and got a 230 million dollars investment, part of which will be devoted to growing its team in Sofia. Last year, Yotpo acquired the Bulgarian startup SMSBump for 37 million dollars and turned its 40-people office here into an R&D division.
WORDS OF THE WEEK
A field in which the deputy prime minister Mariana Nikolova, whom we introduced several weeks ago, decided to get her PhD. It is the same as the regular ethics, only online and involving things like blockchain ethics and whether the state should know everything about you. Nikolova should know, as she is basically half the state now - it turns out she did her thesis while being simultaneously minister for tourism, responsible for economy, demography, e-governance and elections. Quite a feat.
We wish you a successful new week and be at least half as productive as Ms. Nikolova
93 passports. This is the price Bulgaria paid for the "investments for citizenship" scheme over the past decade. 93 people have gained the right to claim EU citizenship and, in return, invested anything from 500 thousand euro upwards into the Bulgarian economy.
Except, we don't really know if they did. As it turns out, no one actually keeps a record of where the money is going and whether it is really invested or just a figure in the books of private companies which are then quietly giving it back. We don't really know where those people came from and why they want the Bulgarian passport. Last year, for example, an investigation by Capital Weekly discovered tens of Chinese citizens acquired just enough shares in a publicly traded company on the Sofia stock exchange to be able to claim citizenship.
