The week: Lessons in change from Philadelphia, Dirty deeds done dirt cheap, Fibank is for sale

Yet go on, and try to change anything in the way cities are governed in Bulgaria. You will get the constant and familiar pushback that "this is not how it's done here" and "it can't happen". Nothing, the theory goes, can change because people don't like it and politicians fear it and also, because you know, corruption.

The irony of course, is that "the way it's done here" has only been around for a decade or so and everything man-made can be changed at any time.

Ask Philadelphia.

The 6th biggest metropolitan area in the US had a big problem in the 1990s. It was losing business, people and image. It was a gun-violent city, no young couples wanted to stay there and the downtown was dirty, abandoned and lawless. The New York Times said in a 1990 article titled "Philadelphia is struggling to survive", that there is a growing "evacuation mentality" there.

Fast-forward 30 years and suddenly Philly is in the top 3 of US cities coming back after the pandemic, and its downtown is clean, spotless, shiny and renovating, with population growth recorded in the area.

What happened? Paul Levy and his team happened.

Levy was tasked with creating a Business Improvement District - management organization whose purpose is to improve the competitiveness & attractiveness of a place of business: an office, retail or tourist district. Think of it as "the icing on the cake" where the government provides streets and services, while the BID provides a much better experience overall - cleaning graffiti, maintaining order, renovating spaces, fixing lightning and everything in between. The biggest change, says Levy, is in the mindset where people are actually willing to pay an extra tax, in order to see the local area thriving.

Levy was here this week. I'd invited him over, after meeting him in Philadelphia several years ago. I wanted him to speak to the local business and authorities and convince them that there are models out there for Bulgarian cities to follow. They will allow them to be a good place to live even if they don't have the budget for it. All they need is creativity, a little help from the business community and someone to step up and lead. Many people will say it's not a model suitable for here. I would argue it actually is and it can open up a whole new dimension for the cities. And my hope resides with those whom I met: like for example Pazardzhik's new administration, looking for new answers in a devastated city. Because change requires giving something up - a way of seeing, a way of being - in order for something new to bear fruit.

As for the lessons Levy said he had gleaned and the practical advice he gave, follow this space. At some point in the near future, we will be producing a paid report on that and if you want to buy it, let us know in advance.

This newsletter was helped by

Martin Dimitrov, Mary Ivanova, Evgeni Ahmadzai and Monika Varbanova

Politics this week

If you wonder why we don't write much about the 9 June double elections campaign, it is for the simple reason that it has quickly regressed down to a kompromat war, and a very one-sided one, at that.

On Monday, yet another one was published by the tabloid website Afera. It released a recording claiming to be of the leaders of WCC Kiril Petkov and Assen Vassilev, alongside their team. The leak is of poor quality and much of what is said is inaudible, while other parts are hard to follow because of what is not heard. From the general context, it is clear that the recorded conversation mainly discusses the need for money for election campaigning, as well as reporting of donations and compliance with legal limits. It's not only inaudible and boring, it is also old: it was recorded during the previous election campaign, suggesting it was made exactly to be used as a kompromat against WCC.

Who?

Well, the obvious answer is: someone who has the means and the motive to do it. WCC blamed the Bulgarian intelligence services, although our bet would be much simpler - just answer the question "who benefits".

Right now: WCC-DB will fight MRF and Vazrazhdane for #2 place

The result of the smear campaign (together with the tragic incident, in which a security detail of Kiril Petkov crashed into a civilian car and killed the driver) is that it is no longer certain that WCC-DB will get second place in the elections. According to a Trend poll, published on Thursday, the projected results of MRF and Vazrazhdane are getting closer to those of the reformists and it will not be known until the last moment who will be the runner-up after GERB, who are expected to get 26.1% of the vote - more than 10% ahead of WCC-DB (15.4% currently), MRF (14.9%) and Vazrazhdane (14.8%).

Economy

This is the far more interesting section this week, we know. Capital leaked the news first, then Fibank denied it, half-heartedly, Yet here it is: since the beginning of May, the shares of First Investment Bank (Fibank) on the Bulgarian Stock Exchange have jumped by almost 70%. Their market capitalization, which was around 350 million levs just weeks ago, climbed to around 650 million.

Officially, there is no disclosed information to explain the sudden boom in investor interest, but the rationale behind such a jump can only be the expectation that the bank is getting a new owner. Bulgaria's fifth-largest bank by assets called Capital Weekly's article on the topic "unfounded speculation." But the media confirmed through several sources that a procedure is indeed underway and is already at an advanced stage. Final bids and a buyer can possibly be selected as early as the end of the month, and if the necessary regulatory approvals are obtained, a real change of control could take place by the end of the year or early next year.

Who?

According to Capital's information, two bidders are vying to acquire Fibank - Unicredit Bulbank and Postbank. Expect a longer analysis of the deal on Monday.

BNB is still on the fence regarding the real estate market

The main conclusion from its report this week is that there is no emergency on the market. Although the regulator wanted to impose restrictive measures on the mortgage market, its decision for now is just to require banks to monitor and report 6 benchmarks each quarter.

Figure:

81,5%

This is the collapse in foreign direct investment (FDI) in the first quarter of the year according to National Bank statistics. From January to March, only 358.9 million euros entered the Bulgarian economy, compared to 1.935 billion euros in the same period of 2023, mostly due to drying credit by Western companies for their local offshoots and absence of reinvestment of profits.

5%

The unemployment rate in the country, which is 0.6% up compared to last year.

612.1 million levs

Is the volume of advertising market in Bulgaria for 2023, which is a 7.5% growth on an annual basis.

Business

Uber

Nine years after the shared services transport company shut down its main service in Bulgaria, the firm announced that it is closing its software unit, which until recently employed about 90 people.

The work of the Bulgarian engineers will be taken over by the company's office in India, and according to inside information, only the team of product managers in Sofia will be retained - about 10 people who will be able to work remotely for Uber.

The rest will receive benefits of four or more months' wages, depending on their position. Some will be able to continue their career at Uber in their offices in the Netherlands or India. Key people in the office will continue to work until September, when the office will officially cease operations.

Finance

Impulse Growth

The private equity firm has announced its intentions to IPO 2,962,132 of warrants at the Bulgarian Stock Exchange. A warrant is a security that resembles options and allows the purchase of a specific asset at a fixed price in a given period.

Energy

NEK

The National Electric Company (NEK) reported a colossal collapse in profits year-on-year - by about 1.1 billion levs to almost 100 million levs in 2023, preliminary data show. The main reason for this drastic drop in profit is significantly lower exchange prices for electricity after the record-high prices in 2022.

Energy:

Despite the uncertainties over the huge investment in the two new planned reactors at Kozloduy Nuclear Power Plant (NPP), Bulgaria has entered negotiations for loan financing with a US bank to provide the necessary security to start the project. The news came after caretaker Energy Minister Vladimir Malinov went on a work visit to the USA this week, announcing from there that an agreement has been reached with the US Export-Import Bank EXIM Bank to finance the US reactors for the plant in Bulgaria. According to various estimates, between $15 billion and $20 billion will be needed for the new reactors with equipment from the US company Westinghouse.

Watch out for:

Eva Maydel

The long-time GERB representative in the European Parliament is a favorite for a Eurocommissioner's position in the next EC, says Politico. We wouldn't be so sure, given the way Borissov chooses his picks, and also - he still isn't in charge fully yet.

Borislav Sarafov

The current chief of the Prosecution service has now overseen the end of all of Boyko Borissov's troubles with the justice system, since the last remaining investigation - into the Turkish link of "Barcelonagate" scandal has been officially closed. Job done, we'd say.

Place:

Central Hali

The Kaufland store in the Central Halls in Sofia opens for visitors today, after the German giant invested more than 50 million levs to buy and restore the building and plot of nearly 7 acres of the old shopping halls.

The opening comes after a year of repair work to restore the original appearance and functions of the building. In addition to the commercial part, there are designated spots for meetings and culture, including a square with seats around a fountain, a terrace with dining seats, as well as an interactive area for archeology and history in the basement and a children's bookshop.

Institution

BNO Shipka and Vassil Levski Bulgarian Military Union

Several years after Bulgarian and international journalists alike reported on their extreme ideology, pro-Russian sentiments and anti-refugee action, the district prosecutor's office in Varna finally asked the court to ban the paramilitary organizations Bulgarian National Movement (BNO) Shipka and Bulgarian Military Union Vassil Levski, concluding that "they work against the sovereignty, territorial integrity and unity of the nation" and "incite ethnic or religious hatred." Better late than never, we guess.

Date

Today!

From 9:30 pm until midnight, the National Library in the center of Sofia will be a 3D-mapping venue for the Cyrilic alphabet. The project "Hidden letters" of "Read Sofia" foundation is created by Poliforma with funding from Sofia municipality and tells the story of our language, its identity and how we perceive others. Go see it, tomorrow is 24th of May, so it's worth it.