The recent EU reports may reverse the inflow of foreign investment to Bulgaria, economy minister Petar Dimitrov said on Monday.

Foreign direct investment (FDI) fell 500 mln euro year-on-year by the end of June 2008 after pacing ahead of the year-ago figure during the first quarter, said the official.

'The latest EU report has tainted Bulgaria's image,' admitted the economy minister

He fears the fallout from the damning report could have much more dire consequences compared to the loss of EU funding.

Brussels unveiled last week two scathing reports on Sofia's efforts to fight organised crime and corruption and tackle the irregularities in the domestic spending of EU cash.

The European Commission has also withdrawn the accreditation of two payment agencies and suspended over 800 mln euro in aid.

The latest FDI figures released by the central bank show a decline to 1.705 bln euro in January-May 2008 versus 2.02 bln euro a year earlier.

The FDI now covers 55.7% of Bulgaria's c/a deficit versus 78.1% a year earlier.

An FDI pullback may have a negative impact on macro-economic stability, Tsvetoslav Tsachev, chief analyst at investment intermediary Elana, said, noting that this is based on preliminary data which is usually revised upwards.

The FDI inflow has so far served as a buffer in terms of the c/a deficit which has been rising for years and in 2007 reached 21% of GDP. In the case of a negative outcome, the budget surplus could be used as alternate buffer, said Tsachev.

He warned that if the budget surplus is spent on pay and pension raises that would only stoke domestic consumption and imports thus leaving the c/a further agape.

According to Stoyan Stalev, executive director of the Investment Agency, the biggest turn-off for the foreign investors is the creaky judicial system.

He considers the bumbling judicial reform to be a greater cause for concern that than the problems with the absorption of EU funding.

Stalev said he is still confident that 2008 will be another growth year for Bulgaria in terms of FDI.

(Dnevnik)

The Bulgarian central bank Monday reported that the APR on new housing loans stood at 9.72% at the end of June, up from 9% in February.

The average APR on consumer loans has added 1.21% year-on-year to 11.96%.

In June, the rates on new consumer loans ticked up 1.38 percentage points to an average of 10.80% while the rates on outstanding loans fell 0.11 percentage points to 11.03%.

The cost of new housing loans increased by 0.41 percentage points to 8.81%, just shy of parity with the rate on outstanding loans which added 0.31 percentage points to 8.94%.

The average cost of corporate loans of up to 1 mln euro has risen 1.27 percentage points over the past year to 10.73% while the rate on credits in excess of 1 mln euro was reported at 9.74%, up 1.83 percentage points year-on-year.

The average rate on deposits with agreed maturity is reported at 5.20%, up 1.79 percentage points in a year.

Household deposits yield 5.33% on average.(Dnevnik)

Bulgaria's anti-trust authority said Monday it has fined four foreign law firms operating here with a total of 150,000 levs.

DLA Piper, CMS Cameron McKenna, CMS Reich-Rohrwig Hainz and CHSH Cerha Hempel Spiegelfeld Hlawati incurred the anti-trust penalty on account of their unconscientiously business behavior and sidestepping of the Bar Act.

By providing attorney services, the four law firms, otherwise registered as commercial partnerships, create for themselves a loophole out of the Bar Act, said the Commission for the Protection of Competition (CPC).

The regulator recommends that the foreign law firms register as attorney partnerships pursuant to domestic law.

Earlier this year, 13 of the biggest Bulgarian law firms complained to the Supreme Bar Council (SBC) and the CPC that several of their foreign counterparts were allegedly operating here in breach of the Bar Act and local anti-trust regulations.

That complaint was rejected after the regulator found that the alleged firms were not providing attorney services and were not competing on the same market as the Bulgarian firms.

In an official press release, the fined law firms said they will appeal and pointed out that the decision of the regulator was informed by no evidence and that it lay outside the competence of the commission anyway.

The press release further notes that the requirement for law firms opening offices in Bulgaria to be owned exclusively by attorneys registered with a Bulgarian Bar and practise exclusively under the names of such attorneys is a limitation of competition and contravenes community law.

The foreign law firms point out that the law bars attorneys from engaging in commercial activity yet the CPC treats them as commercial entities.

'Howsoever unbelievable it is, with this decision, the CPC officially recognised the incompleteness and truly archaic nature of the Bar Act,' said Gentcho Pavlov, partner at CMS Reich-Rohrwig Hainz in Sofia.

(Dnevnik)

Nine banks have handed in their credentials to advise the Burgas-Alexandroupolis oil pipeline project, said Burgas-Alexandroupolis BG, the outfit in charge of Bulgaria's share of the venture.

The advisory contract will be contested by France's Calyon, Societe Generale, BNP Paribas, ING, Project Finance Solutions, RBS, Lazard, Citi Group and Gazprombank.

The selected consultant will use the technical and economic feasibility studies as a baseline to draw up the documents needed to apply for loan financing and research the market interest towards the project, said Stefan Gunchev from the regional development ministry.

The official said the advisor is expected to be picked in August.

Germany's ILF should update the feasibility study for the project by the end of 2008.

The facility will cost 1.5 bln euro, judging by statements from Nikolai Seryogin, member of the supervisory board of the international project company in charge of the pipeline. The figure is significantly higher than the initial price tag that was seen at around 800 mln euro.

The shareholders in the project company will contribute 30% of the necessary financing, securing the remainder from external sources.

Russia's Transneft, Rosneft and Gazpromneft control a combined 51% in the project company. Bulgaria and Greece each have 24%.

Bulgargaz and Technoexportstroy, the co-owners of Burgas-Alexandroupolis BG, will have to raise 110 mln euro in funding.

The Russian media have reported that problems with the taking of private land for the project will cause the pipeline to be rerouted on Bulgarian territory. The Bulgarian side had previously reported no difficulties with the expropriation of private land.(Dnevnik)

No less than 100 industrial zones are planned to built under Bulgaria's export strategy for the 2008-2013 period, economy minister Petar Dimitrov said at the unveiling of the blueprint.

The effort will be backed with the disbursement of 100 mln levs annually.

No rules have been set yet for how municipalities will apply for the funding.

The ministry estimates the average cost per industrial zone at around 6 mln levs.

Parliament will either adopt a separate law or make the relevant amendments to the Investment Promotion Act to provide a legislative definition of the term industrial zone.

The economy ministry will fine-tune its treatment of investors, attaching priority to projects that create value added and products that are globally marketable, said Dimitrov.

The aim of the new strategy is to reverse the nation's c/a deficit by 2013.

Five years after Bulgaria shut down its export promotion agency, the concept will be resurrected as BULTrade, a directorate with the Small and Medium Enterprises Agency.

The institution, which will operate on 16 mln levs annually, will have representation offices in 30 key export markets.(Dnevnik)