EVENTS ANALYSES INTERVIEWS

CONNECTIssue 2(173)

March-April 2017

Bulgaria in EU's MirrorBulgaria in EU's Mirror

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1executive's remarks

A stable government and more European integration are a must if we want to have predictable political environment in Bulgaria. “No more business as usual” sounded as the main message of the Transatlantic week in Brussels where 37 representatives from 23 AmChams exchanged views on advocacy and ways to cooperate. The 25th anniversary of the EU Single Market and Bulgaria’s 10 years of EU membership provided the chance to draw up a balance sheet. GDP has increased by nearly 70% in nominal terms during that period and, according to Euro barometer, Bulgarians are happier now than before. Some 70% of Bulgarian exports are destined for the EU; a similar percentage goes to the countries at the “fastest” EU speed – Germany, France, Italy and the Benelux.

AmCham’s view on Europe on “several speeds” is aligned with that of the current caretaker government – Bulgaria needs more integration and more EU. This will lead to better investment climate in our country. Bulgaria’s good macroeconomic performance is not suf cient to attract more FDI, as high levels of corruption, problems with rule of law and law enforcement all present major impediments. For instance, economist Krassen Stanchev discusses on Page 16 Bulgaria’s structural problems

related to the constitutional arrangement of the prosecutorial powers.

We are not mere observers, but also contributors to the efforts to change the status quo. Major political parties assured AmCham of signing a Memorandum of Understanding, which should enable the Chamber to pursue its key priorities outlined in the 2017 White Paper, read more on Page 4 and Page 26.

God helps those who help themselves, says an old proverb. Numerous pundits and scholars in Bulgaria have pointed out its great and unrealized potential that is still hampered by excessive bureaucracy, outdated governance structures and narrow-minded mentality. Those impediments must be addressed and removed soon if we do not want to be left behind in an unpredictable, fast changing world.

Sincerely Yours,

Alex NestorExecutive Director

Bulgaria needs more EU

chamber news . . . . . . . . . . . . . . . . . . . . .4standpoint

Obamacare Trips Trump . . . . . . . . . . . .8

cover story

Bulgaria in EU’s Mirror . . . . . . . . . . . .10

interview

EU, Bulgaria: Trading With the Richer Makes You Richer . . . . . . . . . . . . . . . .16cover story

No More “Business as Usual” . . . . . . . .20

EU Is About Rules . . . . . . . . . . . . . . . .22

Single Market Follows EU’s Ups and Downs . . . . . . . . . . . . . . . . . .23

More Countries Comply With the Maastricht Criteria . . . . . . . .25By Investor.bgamcham events

AmCham Talks Better Business Environment with Political Parties . . . . . . . . . . . . . .26Seminar Tackles Power of Digital Marketing, Business Opportunities for SMEs . . . . .28Ambassador: U.S. Trade, Investment in Bulgaria Exemplary . . . . . . . . . . . . . . . . . . . . . .30

Content

Business Connect Magazine

Business Connect

Board of Directors of the American Chamber of Commerce in Bulgaria

President Ms. Krassimira Chemishanska Amgen Bulgaria

First Vice-President Mr. Venislav Iotov AIG Europe Limited (Bulgaria Branch)

Second Vice-President Mr. Sergey Koinov AG Capital

Treasurer Ms. Stanislava Taneva Citibank Europe Plc, Bulgaria Branch

Members Mr. Olivier Marquette AES Bulgaria

Mr. Solomon Passy Atlantic Club Bulgaria

Mr. Plamen Zhechev Cisco Systems Bulgaria

Mr. Iravan Hira Hewlett Packard Enterprise Bulgaria

Ms. Iva Todorova IBM Bulgaria

Mr. Petar Ivanov Individual Member

Ms. Zlatina Ruseva-Savova Individual member

Mr. Stoyan Ivanov The Coca-Cola Company Bulgaria

Ex-Officio Member Ms. Maria Galindo Senior Commercial Officer, U.S. Embassy

Acting Executive Director Mr. Alex Nestor

3content

3M Bulgaria EOOD . AA KRES EOOD . AbbVie EOOD . Abrites . Accedia . Actavis Bulgaria EAD . Adecco Bulgaria Ltd. . ADM Bulgaria Trading EOOD . Advance International Transport EOOD . AES Corporation . AFA OOD . AGORA-IN Ltd. . AIG Europe Limited (Bulgaria Branch) . AIMS Human Capital . Albena AD . Alcomet AD . Alcon Bulgaria EOOD . ALD Automotive OOD . All Channels Communication . Alliance One Tobacco Bulgaria . Allied Pickfords Bulgaria . America for Bulgaria Foundation . American College of Sofia . American English Academy . American Research Center in Sofia . American University in Bulgaria (AUBG) . Amgen Bulgaria EOOD . Amway Romania Marketing Srl. . Anglo-American School of Sofia . AON Bulgaria . Apis Europe JSC . APOLO Ltd. . Architect Nikolay Mihaylov Galabov . Architectural Agency Kadinovi Bros LTD . Arexim Engineering . Ashtrom International Ltd. . Association Srednogorie Copper Industrial Cluster . Astra Zeneca Bulgaria EOOD . AT Engineering 2000 Ltd. . Atlantic Club Bulgaria . Atos IT Solutions and Services EOOD . Attica Eva AD . August Research . Auto Bavaria Ltd. . Auxionize Jsc . AVAir Ltd. . AVON Cosmetics Bulgaria . AW-Tronics LLC . Axway Bulgaria EOOD . Baker Tilly Bulgaria . Balkan Star Automotive EOOD . Ballistic Cell Ltd. . Baxter Bulgaria EOOD . BG Radio . BICA International Ltd. . BLVD Ltd. . BMG Ltd. . BMW Vertriebs GmbH - Branch Bulgaria . BNP Paribas S.A. - Sofia Branch . Bojinov & Bojinov . BOYANOV & Co. . Braykov's Legal Office . British American Tobacco Bulgaria . Brown-Forman Bulgaria Ltd. . Bulgarian Charities Aid Foundation (BCAF) . Bulgarian Executive Search Association . Bulgarian International Television . Bulgarian Property Developments EOOD . Bulgarian Tennis Federation . Bulgarian-American Commission for Educational Exchange Fulbright . Bulgarian-American Credit Bank . BulPros Consulting JSC . Bulstrad Life Vienna Insurance Group . Business Intellect Ltd. . Business Park Sofia EOOD . C3i Europe EOOD . CAD R&D Centre Progress Ltd. . Castello Precast OOD . Center for the Study of Democracy . CEZ Bulgaria EAD . Chaos Software ltd. . Cheque Dejeuner Bulgaria Ltd. . CheckPoint Cardio . Cibank JSC . Cisco Systems Bulgaria . Citibank Europe Plc, Bulgaria Branch . Cleves . CMS Cameron McKenna LLP - Bulgaria Branch . Coca-Cola Enterprises Services Bulgaria EOOD . Coca-Cola HBC Bulgaria AD . Coface Bulgaria Credit Management Services EOOD . COLLIERS International Bulgaria . Comverse Bulgaria . Congress Engineering Ltd. . Contitrans M Ltd. . ContourGlobal Maritsa East 3 AD . Curtis / Balkan Ltd. . DA Travel Ltd. . Danailov, Drenski, Nedelchev & Co. . Delchev & Partners Law Firm . Deloitte Bulgaria EOOD . denkstatt Bulgaria OOD . Dentsu Aegis Network Bulgaria OOD . Deutsche Bank AG . Devin AD . DHL Express Bulgaria Ltd. . Diamed Ltd. . Dimitrov, Petrov & Co. . Djingov, Gouginski, Kyutchukov, & Velichkov . Dobrev & Lyutskanov Law Firm . Dr. Greenberg Medical Center . Drujba Glassworks SA . Dundee Precious Metals Inc. . DuPont Bulgaria EOOD . Economedia . EcoPack Bulgaria AD . Edenred Bulgaria . Ekoterm Proekt EAD . Ekotoi - Service Ltd. . Ekzotika EOOD . EL-A-Project Ltd. . Eldrive . Electron Progress EAD . Eli Lilly and Company . Eltrak Bulgaria Ltd. . eMAG . EMC Computer Systems Austria GmbH . Emerson Process Management . EnergoService AD . Engineeringservice Sofia Ltd. . Enterprise Communications Group OOD . EOS Matrix Ltd. . EPAM Systems Bulgaria . EQE Control OOD . Ernst & Young Bulgaria EOOD . ESRI Bulgaria Ltd. . Eurobank Bulgaria . European Bank for Reconstruction and Development (EBRD) . European Trade Center EOOD . EVS Translations Bulgaria . Expat Capital . Experian Bulgaria EAD . FairPlay International . Fama Consulting OOD . Flying Cargo Bulgaria Ltd. - Licensee of FedEx . Force Delta Ltd. . Forton AD . Foundation Glob@l Libraries - Bulgaria . Founders Foundation . Fox Networks Group Bulgaria EOOD . Galardo Real Estate . Garitage Investment Management EOOD . Gasstroymontaj Jsc . General Electric International . Georgiev, Todorov & Co. . Geostroy AD . Geotechmin OOD . Geotrading AD . GfK Bulgaria, Market Research Institute EOOD . Gi Group . GIFTA . Grand Hotel Sofia . GSK . GTC Bulgaria . Gugushev & Partners Law Office . Harley-Davidson Sofia . Helios Power Jsc . Hewlett-Packard Enterprise . Hilton Sofia . Holzindustrie Schweighofer . Honeywell EOOD . Hotel Marinela Sofia . HP Inc Bulgaria EOOD . Hydroenergy Company JSC . IBM Bulgaria . ICAP Bulgaria JSC . IDC Bulgaria . Ideal Standard - Vidima AD . IIA Bulgaria . Imperial Tobacco Bulgaria EOOD . Industrial Holding Bulgaria . Ingram Micro SSC EMEA EOOD . InterConsult Bulgaria Ltd. . Interlang Ltd. . International Legal Advice center - ILAC . Intertek BA . Intracom Bulgaria EAD . Investbank JSC . Investor BG AD . IP Consulting Ltd. . Janev & Janev . Japan Tobacco International Bulgaria . Jobs.bg EOOD . JobTiger Ltd. . Johnson & Johnson Bulgaria EOOD . Junior Achievement Bulgaria . KAI Group . Kalamaris Group . Kambourov & Partners Attorneys at Law . Kamenitza AD . Katilin Popov Enforcement Officers . Kempinski Hotel Grand Arena Bansko . Kinstellar . Kolcheva, Smilenov, Koev and Partners Law Firm . KPMG Bulgaria OOD . LANDMARK Property Management AD . Law Firm McGregor & Partners . Lexim Sofia Co. Ltd. . Lindner Immobilien Management EOOD . Lirex BG Ltd. . M3 Communications Group, Inc. Hill+Knowlton Strategies Partner . Maria Vranovska, MD, MBA . Mars Incorporated Bulgaria EOOD . Marsh LLC. . MBL| Part of the CBRE Affiliate Network . Medical Center AmeriMed . Megatron EAD . Mellon Bulgaria EAD . Merck Sharp & Dohme Bulgaria . MetLife Europe Ltd. - Bulgaria Branch . Microsoft Bulgaria . Miltech Ltd. . Minstroy Holding Jsc . Mnemonica . Mobiltel EAD . Monbat Plc. . Mondelez Europe Services GMBH - Bulgaria branch . Moten Sport . Moto-Pfohe Ltd. . Mr. Alex Nestor . Mr. David Hampson . Mr. Jean Talmon . Mr. Kalin Kostov . Mr. Nikolay Ouzounov . Ms. Kalinka Kovatcheva . Ms. Margarita Radeva, CPA . MTAC . Municipal Bank Plc . Musala Soft AD . Mylan EOOD . National Network for Children . NDB Ltd. . Nemetschek Bulgaria . NEXTDOOR Ltd. . Novacon Bulgaria Ltd. . Novotel Sofia . Oiltanking . On Bulgaria Ltd. . Oracle East Central Europe Limited - Branch Bulgaria . Orak Group Europe Ltd. . Orbit Ltd. . Panchim Ltd. . PANDA - IP Ltd. . pCloud . Pedersen & Partners . Penev LLP . Penkov, Markov & Partners . Petar Ivanov . Pfizer Luxembourg SARL Branch Bulgaria . Philip Morris Bulgaria EOOD . Philips Bulgaria Ltd. . PPD Bulgaria EOOD . Premier Luxury Mountain Resort . Premier Tours Ltd. . Prestige 96 AD . Provident Financial Bulgaria Ltd. . PSG Payroll Services Ltd. . PwC Bulgaria . Quintiles Bulgaria Ltd. . Radisson Blu Grand Hotel . Raiffeisen Investment Bulgaria EOOD . Raiffeisenbank Bulgaria EAD . Red Devil Catering Plc . Refan Bulgaria Ltd. . Regus Bulgaria Ltd. . Renault Nissan Bulgaria SRL . Right Rental Ltd. . RSM BX Ltd. . S&T Bulgaria EOOD . Sanofi - Aventis Bulgaria EOOD . Santa Fe Relocation Services . SAP . Sb Accounting and Consulting . ScaleFocus . Schenker EOOD . Schneider Electric Bulgaria . SECTRON . Sensata Technologies Bulgaria EOOD . Shell Bulgaria EAD . Sherita M Ltd. . Siemens EOOD . Siemens Healthcare EOOD . SIENIT Holding . Silver Ridge Power . Sitel Bulgaria EOOD . Sodexo Pass Bulgaria EOOD . Sofia Airport Center EAD . Sofia Hotel Balkan . Sofita Translation Agency . Software Group . Sogelife Bulgaria IJSC . Sopharma AD . Sopharma Trading JSC . Sportal.bg JSC . Stanton Chase International Bulgaria . Stefan Dimitrov, Norman Realestate Co. Ltd. . Sterling Serviced Office Group . Sunfoods Bulgaria EOOD - Development Licensee of McDonald’s in Bulgaria . Sutherland Global Services Bulgaria EOOD . Synchron-S OOD . Tavex EOOD . TBI Bank EAD . Techceramic-M . TechnoLogica EAD . Telelink EAD . Telenor Bulgaria . TELUS International Europe . The Coca-Cola Company Bulgaria . Titan Zlatna Panega Cement . TMF Services EOOD . Tocheva & Mandazhieva Law Office . Uber Bulgaria EOOD . UniCredit Bulbank . UniCredit Leasing EAD . Unimasters Logistics Plc . Unique Estates . United Bulgarian Bank . V+O Communication . Veolia Energy Bulgaria EAD . Videolux Holding / Technopolis . VIP Security Ltd. . VISA Europe . Visteon Electronics Bulgaria . Vitosha Soft Ltd. . VIVACOM . VMware Bulgaria EOOD . VSK Kentavar - IZ Dinamika EOOD . VUZF University Higher School of Insurance and Finance . Walltopia Ltd. . Welcome to Bulgaria . Westinghouse Energy Systems Bulgaria Branch . Woodward Bulgaria EOOD . World Courier Bulgaria Ltd. . World Transport Overseas Bulgaria Ltd. . WorleyParsons Nuclear Services JSC . Xerox Bulgaria Ltd. . Xogito Ltd. . Yatoto . Zlatina Ruseva-Savova, LL.M., MBA . Zobele Bulgaria EOOD .

members

Business Connect Magazine

Business Connect Magazine

innovation

Sensata Technologies Opens New Testing Facility in Bulgaria. . . . . . . . . . . . . . . .31amcham events

Winter Sport Weekend Offers Ski, Bowling . . . . . . . . . . . . . . . . . . . . . . . .32facts and figures

Positive Expectations in Testing Time – Deloitte CFO Survey . . . . . . . . . . . . . .33advice corner

New Regime Amends Special Pledges . . . . . . . . . . . . . . . . . .34

Exchange Rates Clauses Are Matter of Thorough Consideration . . . . . . . . .35

cradle

Construction – Laggard Doomed to Change. . . . . . . . .36

Courage to Build Cause . . . . . . . . . . . .39

new members . . . . . . . . . . . . . . . . . . . .40Fox Networks Group Bulgaria EOODSoftware GroupV+O Communication

4

2017 White Paper Outlines Key Areas for Improved Business EnvironmentAmCham Bulgaria published 2017 White Paper in March by sending the document to the members and present-ing it to the media. The Paper marks only the beginning of AmCham active involvement in the improvement of the economic and business climate in Bulgaria. The White Paper contains stra-tegic recommendations to the next gov-ernment with focus on three key areas aiming to promote economic growth, in-vestments and employment: Sustainable Economic and Business Environment; Human Capital Development; and Rule of Law and Law Enforcement.

Sustainable Economic and Business EnvironmentPromoting sustainable business envi-

ronment and contributing to the overall competitiveness and prosperity of the country are among the key objectives of the Chamber. Based on the feedback from our member-companies, the Paper identi ed the following areas of primary focus to achieve the above goals: invest-ment promotion and innovation; tax policy; public procurement and public-private partnerships; digital economy and society; capital market develop-ment; and energy policy.

Human Capital DevelopmentAmCham Bulgaria recognizes the strong link between human capital and eco-nomic growth and our Human Capital Development recommendations focus on three key areas which will contribute to better quali ed, more effective, and healthier workforce. These areas are education, healthcare, and labor policy.In the area of education, AmCham recom-mends stronger collaboration between educational institutions and the business community and customization of educa-tional curricula to re ect business needs; provision of life-long learning trainee-ships to adapt the workforce to jobs in demand; and introduction of digital-skills and soft-skills courses to improve the employability of young graduates.

Rule of Law and Law EnforcementAmCham Bulgaria acknowledges the important step made with the changes to the Constitution and the Judiciary Act introduced in 2015 and 2016 and considers these changes as the begin-ning of a process to achieve a fully- edged judicial reform thus overcoming

a major barrier to economic growth in the country.In order to complete this reform process and have a positive social and economic impact, we recommend the following: full independence of the judiciary; trans-parency and accountability of the pros-ecution; specialization and quali cations of judges; and introduction of e-justice.

For the full text of the White Paper go to www.amcham.bg

From left: Alex Nestor, AmCham executive di-rector, Sergey Koinov, AmCham vice-pres-ident, Iva Todorova, board member and Dr. Krassimira Chem-ishanska, AmCham president presented White Paper to media.

Media raised issues relating to improve-ments in investment climate at the of cial launch of 2017 White Paper on March 6, 2017 at the BTA press club.

Chamber News

5

Chamber Events

AmCham Talks Better Business Environment with Political Parties AmCham Bulgaria Board of Directors and Executive Director Alex Nestor had a series of meetings with representatives of the major political parties in Bulgaria during the last three months. The meet-ings were part of the Chamber initiative to further communicate recommenda-tions and measures for better business environment in line with AmCham’s 2017 White Paper, namely for sustaina-ble economic and business environment, human capital development, rule of law and judicial reform. The White Paper presented on March 6 is the voice of AmCham business as it is based on the valuable feedback from our member-companies.

Read more on page 26No More “Business as Usual”“We live in unpredictable times and nothing is as it used to be.”The above phrase has been taken from AmCham EU Transatlantic Economy 2017 annual survey. “Brexit” and the election of Donald Trump, an anti-es-tablishment economic nationalist, as the 45th president of the United States, has rocked the very foundation of the trans-atlantic partnership at a time when the

European Union is besieged by a daunt-ing array of simultaneous challenges.To exchange views on advocacy and ways to cooperate, AmCham EU welcomed 37 representatives from 23 AmChams across Europe in March. This year's Brussels Brie ng focused on the Single Market and how to communicate its bene ts at the member state level. Moreover, the Transatlantic Week on March 8-10, 2017 put at focus the ongo-ing challenges: the future of EU and European values, transatlantic trade, the United States under a Trump adminis-tration, Brexit, digital single market and more. Two highlights of the program included the launch of The Transatlantic Economy 2017, the annual survey of jobs, investment and trade between the EU and the US, and the Transatlantic Conference.

Read more on page 20Sensata Technologies Opens New Testing Facility in BulgariaSensata Technologies Holding N.V., (NYSE:ST) one of the world’s leading suppliers of sensing, electrical protec-tion, control and power management solutions, announced the opening of its largest global testing facility in So a, Bulgaria in March.

Read more on page 31

Allied Moving ServicesMeeting your specific needs, not ours…Guaranteed.

Contact:T: 02 807 6688E: AmChamVIPs@allied.bg

6chamber events

See Them in So a – Unless you Have Tickets for CanadaThe global phenomenon TED is coming to So a for 3 nights with a guaranteed “WOW!” effect

Serena Williams and Gary Kasparov are coming to So a. On the big screen any-way. The two ultimate stars are part of the TED Conference at the end of April in Vancouver, which will also be broad-cast via satellite in cinemas around the world, Bulgaria included. And seen as the $8500-and-up tickets for the week-long event in Canada have been sold out since the fall of 2016, the best alternative is to see it on the big screen, exclusively in Cine Grand, So a Ring Mall.

On April 25th, 26th and 30th audiences will meet futurists, scientists, celebri-ties – both on and off screen. Three different events within one week will include excellent networking opportu-nities, high-end cocktail reception, live performances and brief talks during the reception and, of course, the live satel-lite screening of TED.

On April 25th 2017 (Tuesday) cinema audiences will get an exclusive look in-side the opening night of TED, featuring world-renowned speakers: productivity guru Tim Ferriss, world champion and chess master Garry Kasparov, cyber-space analyst Laura Galante and others. Also including inventor and dancer Huang Yi and musical band OK Go.

On April 26th 2017 (Wednesday) we will think about what we would do to make the world a better place, if we had $1 million to do it. Dr. Raj Punjabi who is this year’s winner of the TED hu-manitarian award will share with us his vision. This session also includes tennis goddess Serena Williams and journalist Gayle King.

On April 30th 2017 (Sunday) join us for a curated event created exclusively for cinema audiences. It will include highlights of the most “Wow!” moments of the week-long TED2017: The Future You – as seen by the lucky few who paid $8500 for a conference ticket.

8standpoint

By Christopher Karadjov

Obamacare got to live another day after the health care bill dubbed “Ryancare” (as in “Paul Ryan, the House majority leader”) got pulled abruptly before a vote in the House of Representatives on March 24, 2017.

That was a massive failure of the GOP’s lawmaking machine, which was expected to sail more or less smoothly now with the White House and Con-gress held by the same party. Instead, the inability to pass the promised “repeal and replace” of the much-ma-ligned Obamacare exposed the Repub-licans’ ssures.

President Donald Trump – for whom this was a major campaign promise – reportedly lashed at his own staff for “not pushing it” aggressively enough, before unleashing Tweeter invectives against the so-called Freedom Caucus – an assortment of 29 conservatives (all former Tea Party Republicans) in the House. They disliked the proposed Ry-ancare for its perceived scal pro igacy on par with Obamacare. GOP moder-ates, for their part, feared a backlash in their districts because the new bill was expected to hit their voters across

the board; ditto for a number of Re-publican governors who worried that a loss of federal subsidies will hurt their constituencies. The non-partisan Con-gressional Budget Of ce estimated that some 24 million may lose medical in-surance under the proposed law. Many ordinary Americans pressured their congressmen in town halls and via di-rect communication with their of ces; to them, the changes in the health care arrangement seemed poorly thought out and hasty. The dislike against the American Health Care Act (AHCA) was universal. The GOP had seven years to come up with a viable plan, yet the lawmakers and the White House spent only about 17 days working on such a complex document, which was suf cient neither to prepare a strong bill, nor to iron out disagreements. The pushback within the Republican ranks made gathering the requisite number of House votes unlikely and a win in the Senate impossible.

The Democrats, of course, were up in arms, too. They pointed out the danger of millions losing their health insur-ance, and the rest receiving subpar coverage: no support for maternity leave, mental health, emergency room visits and prescriptions, along with the likelihood that insurers may hike the premiums dramatically next year. The Democrats also emphasized that the bill was giving some $600 billion in tax breaks to the richest Americans over the next decade.

When it was adopted in 2010, Obamac-are was viewed even by its most ardent proponents as a awed but ultimately needed attempt at reforming the ailing U.S. health care. It boasted both suc-cesses (halving the number of unin-sured Americans, allowing those with pre-existing conditions to get coverage, keeping young people on their parents’ policies longer), and failures (limiting plan choices in some places, increasing

Obamacare Trips Trump

Negotiator-in-chief, GOP fail to deliver health care reform bill

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U.S. President Donald J. Trump (C), House Speaker Paul Ryan (L), and U.S. Vice Presi-dent Mike Pence (R) walk down the steps of the U.S. Capitol after attending the Friends of Ireland Luncheon at the U.S. Capitol in Washington, DC.

9standpoint

premiums in others, pissing off those who had to pay the penalty for not being insured, adding to the budget de cit).

Democrats and Republicans have bit-terly argued about everything Obamac-are; they agreed only that the health-care status quo could not last for much longer.

Indeed so.

A recent report by the OECD noted: “High health care spending has far-reaching consequences in the U.S. economy, contributing to wage stagna-tion, personal bankruptcy, and budget de cits, and creating a competitive disadvantage relative to other nations.”

A bypass surgery goes for $75,000 in the United States, including the hospi-tal stay. In the Netherlands the compa-rable expense is $15,000, in Germany about $30,000. All told, the United States spends around $9,000 per capita on health-related costs, while in the runner-ups, Norway and Switzerland, the price tag is about $6,000 (in Germa-ny and France it is around $4,000, with an OECD median of around $3,500). Americans have to pay up on average three to four times more out of pocket for medical visits than most Europeans (except the Swiss) and put up with fewer doctors and hospitals per capita. The United States also leads the world in terms of public spending on health care, but has little to show for such

disparities.

Americans are lagging behind their counterparts in most developed coun-tries in key healthcare metrics – from longevity to chronic disease to child mortality. They incur tremendous nancial uncertainty as two-thirds of

all personal bankruptcies are caused by excessive medical bills. Millions of Americans are still uninsured, and tens of millions are underinsured – that is, having health plans that will give them unacceptably high deductibles and out-of-pocket expenses. Small businesses are forced to lay off employees because of inability to pay up bene ts – almost always related to medical insurance – and larger companies are saddled with tremendous extra cost on a workforce that largely depends on its jobs to pro-vide for a safety net in case of illness or accident.

Truth be told, the health care sector has been among the fastest growing in the past decade. These jobs, however, are mostly in support of an ever-increasing bureaucracy and needlessly in ated costs that are simply becoming unbear-able for patients, doctors, employers and public nances alike.

In February, Trump notori-ously said, “Who knew health care is so complex?” This remark predictably drew derisive comments by pundits. After the bill failed in the Congress, the White House and GOP leaders doubled down with some hapless pronounce-ments that were intended to leave the impression that a new – and improved – health care law was right around the corner.

Do not hold your breath.

Republican Speaker of the House from Wisconsin Paul Ryan speaks about the Re-publican health care bill in the U.S. Capitol in Washington, DC, March 16, 2017. Ryan also said he does not believe U.S. President Trump's claims that president Obama wire-tapped him.

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10cover story

By Marina Tsvetkova

Adapting the single market might well be a never-ending task, since new eco-nomic, social and technological develop-ments appear every day in Europe, says Michel Barnier, European Commission-er for Internal Market and Services.

The single market of the EU is a terri-tory without internal borders where people, goods, services and capital can move freely. When it was launched in 1992 it was open to 345 million people in 12 EU countries. Today it is the key economic driver of the EU and includes more than 500 million people in 28 member states.

By allowing people, services, goods and

capital to move freely in the world's largest economy – our half-billion con-sumers are served by 30 million busi-nesses generating 14 trillion Euro – we all bene t from more choice and lower prices. For our companies it means new business opportunities; for our citizens, the chance to live, work and study wherever they want. It is the single market that has created growth and jobs by giving European citizens, businesses and consumers opportunities that did not exist 25 years ago, says the President of the European Commission Jean-Claude Juncker.

Of course, the development of that mar-ket is a never-ending process. It needs to respond to a constantly changing world where the economic, social and

Bulgaria in EU’s Mirror

The European Single Market is not just a mantra for this country’s

economic prosperity. The big winners are students, travelers and the

companies that have ventured to seek new markets or investors

Average summary index of Single Market integration across EU Member States: 1995 – 2015

Source: London Economics based on Eurostat and European Commission.Note: The labels EU-15, EU-25, EU-27 and EU-28 refer to the number of Member States

included in the EU-wide aggregate during the years shown.

Does reality obey prescriptions dressed in legal attire? Are the so-called four freedoms of the European Single Market – the movement of people, goods, capital and services – already a fact? Twenty- ve years ago, in 1992, the then president of the European Commission Jacques Delors said that one could not just “fall in love” with the single market. And one of the fathers of European integration, Robert Schuman, prophesied that Europe would ag without free exchange of resources, products and workforce. Are such concerns justi ed today, a quarter of a century later?

11cover story

demographic changes, the challenges and restrictions, the new technologies, as well as the exhaustion of the natural resources and climate change are shap-ing new political thinking.

Bulgaria: Ten of 25

Bulgaria is celebrating the 25th anni-versary of the European Single Market on the eve of its 10th anniversary of joining the EU. But the reworks give

rise to many questions. Have Bulgarians become wealthier for this period of time and what are the main advantages of EU member-ship and the four freedoms respectively?

Data and everyday ob-servations show that the people who bene ted the most from Bulgaria’s membership are the more mobile ones: students, travelers and the companies that have ventured to seek new markets or investors.

Improved stability, better nancial results and more

optimism

These in short are the bene ts for Bul-garia from its participation in the EU single market and from EU membership respectively. Statistics abound with facts supporting that claim. For instance, Bulgaria’s economic growth in 2016 was 3.4% - one of the highest rates on the Old Continent – and gross domes-

tic product was on the rise for another consecutive year. Data show that for 10 years Bulgaria’s GDP has increased rap-idly: from 56 billion Leva to more than 88 billion Leva. Ten years ago per-capita GDP was 41% of the EU average and in 2015 it reached 47%.

The number of people at risk has fallen too. Some 60% of Bulgarians were in that category in 2007 and in 2015 their share was 41.3%. Wages have also increased. Over the past decade the minimum wage has risen from 180 Leva to 460 Leva per month. The average wage in Bulgaria at the end of 2016 stood at 941 Leva and is expected to rise some 5-9% this year. For comparison, the average wage in 2007 was about 400 Leva.

The minimum pension in Bulgaria in 2007 was 92.23 Leva. In 2016 it was already 161 Leva and a hike by 1.6% is envisaged in 2017.

Catching up with the EU in terms of incomes has been slow, however, espe-cially in the period immediately follow-ing the 2009 crisis. After 10 years of EU membership income (GDP) at purchas-ing power parity, i.e. by taking into account the differences in the standard of living, has increased from 38% to just 47% of the EU average. Individual con-sumption is 53% of that of EU-28.

Bulgarians are happier today than they were a decade ago, shows a survey of Eurobarometer. Only 36% of the Bul-garians interviewed in 2007 said they

Ten years in EU made Bulgarians happier

Impact of integration

12cover story

were satis ed with their life; the share increased to 51% in the fall of 2016. Eurobarometer’s surveys also show that Bulgarians have a relatively high con -dence in the EU and its institutions: 49% today compared with 33% 10 years ago. That is one of the highest con dence rates in the region.

For the 2007-2014 program period Bul-garia received 15 billion Euro, net of the contributions for EU membership, and a lot of infrastructure projects were car-

ried out. More than 22,000 young people bene ted from the Erasmus student exchange program.

Bulgaria pays regularly its EU membership fee at the beginning of each year. From 2007 until 2014 it contributed a total of 6.53 billion Leva, i.e. 816 million

Leva a year. The average annual pay-ment for 2015-17 is expected to be about 960 million Leva.

In 2015 Bulgaria paid 424 million Euro to the general EU budget and received over six times more: 2.73 billion Euro. The general EU budget for that year amounted to 130.1 billion Euro. By 2014 Bulgaria had received more than 8.5 bil-lion Euro and in 2014 it received another 2.255 billion Euro, i.e. a total of 13.5 billion Euro, the European Commis-sion’s nancial report for 2015 shows. The budget for the 2014-2020 period is smaller than the previous long-term budget. By tradition almost all resources

are directed to agriculture and regional policy (the cohesion and structural funds). Their aim is to achieve better economic and social cohesion between the member states by providing more support to the poorer nations.

Local economists are unanimous that

EU funds are Bulgaria’s major bene t

as they have helped foster internal growth. Without that money we would not have had even the present mod-est growth, the Bulgarian Industrial Association (BIA) says. Many Bulgar-ians have found a job abroad, received good payment and returned a large part of the money back to Bulgaria. At the same time that deprived the local market of workforce. Prices in Bulgaria have neared those in the EU but labor payment is still well behind EU’s, BIA’s analysts sum up.

The dynamics of the export of goods and services as a percent of GDP in the 2011-2014 period are also interesting. Bulgaria is ranked 11th in the EU in relative share of goods and services with the enviable 65.1% of GDP, which places it ahead of Germany, Italy, France and the United Kingdom. The data are pro-vided by the World Bank and cover the whole world, where Bulgaria occupies the 27th position.

It is hardly surprising that

The Single Market can deliver more

EU funds are directed to agriculture and regional policy

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63.9% of the export of goods in 2016 was destined to EU countries.

In 2016 Bulgaria’s export to the EU in-creased 7.2% on 2015 and amounted to 31.153 billion Leva. The Balkan coun-tries are a key trade partner of Bulgaria too and export to Asia is also growing.

Bulgaria’s main trade partners are Germany, Italy, Romania, Greece and France, which account for 63.8% of the total export to EU member states. The export of materials and energy resourc-es contributes the most to the overall growth, followed by the export of con-sumer and investment goods. Non-fer-rous metals and oil products top the list and it should be noted that through the years these two groups have been con-stantly competing for the rst place. The strongest increase in 2015 was registered by furniture and household equipment (more than 16 times) and spare parts and equipment (more than 13 times); the export of machinery (high-value-added goods) also saw a substantial rise of more than 8 times.

Bulgaria’s export jumped from 3.7 bil-lion Euro in 1999 to 23.2 billion Euro in 2015 with a decrease observed only in the crisis year of 2009, as well as a minimum drop in 2014 (most probably due to the lower prices of materials).

As a relative share, the export of goods since 2013 has remained steadily above 50% of GDP. The export of all categories of goods has multiplied for the past 20 years with energy and investment goods exports surging the most: more than nine times.

Besides the purely statistical data that show the bene cial impact of the EU single market on Bulgaria, there are also a series of indirect effects. A lot of companies invest in Bulgaria and that makes this country increasingly attrac-tive for other Europeans as a destination for residence or doing business.

Bulgaria is next to last in the EU in terms of digitalization

Bulgaria has progressed in the enhance-ment of its broadband infrastructure and in open data developments. How-ever, its low performance in digital skills, digitization of businesses and of public services are acting as a brake to the further development of Bulgaria's digital economy and society, the Euro-pean Commission says.

Of the ve monitored indicators, Bul-garia has the worst results in terms of digital skills. The survey shows that more and more Bulgarians are taking up mobile broadband subscriptions and the share of fast broadband subscriptions continues to increase. The price of xed broadband connections remains rela-tively high. The availability of spectrum for electronic communication is one of the lowest in the EU.

More than half (58%) of Bulgarians are connected online but two-thirds of citizens do not have basic digital skills and the number of Science, Technol-ogy, Engineering and Mathematics graduates has not increased, despite growing demand by the labor market. The survey shows that Bulgarians are intensive internet users when it comes to making video calls and using social networks but, on average, they engage in online activities much less than other Europeans.

One to one:

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Bulgaria has not yet closed the gap when it comes to business digitalization. In e-commerce, small and medium-sized enterprises rarely use electronic sales channels and their turnover form online sales is the lowest in the EU. Bulgaria has progressed in the provision of online public services thanks to the developments in open data, where it has become one of the trendsetters in the EU. Nevertheless, citizens are not using e-government services as much as other Europeans do.

Bulgarians and the Single Market

The biggest change has occurred for Bulgarians working or studying in the EU. They are close to 1.1 million people, including children and students, but the numbers are not certain. Foreign Minis-try’s estimates show that there are some 2 million Bulgarians abroad but they are not in the EU only. The National Statisti-cal Institute only has external migration data after 2012 and only for people who have changed their present address with one abroad. They increased rapidly in

2014 and 2015 but they were far from millions (24,000 and 25,000 Bulgarian emigrants respectively).

An alternative measure is the number of European health cards, which are issued for a one-year period except for pen-sioners’ ones. The data provided by the National Health Insurance Fund show that their number has risen to reach 165,000 last year. However, they are also used by people going on business trips, as well as by tourists.

The largest emigrant community is supposed to be in Greece. According to local sources there some 200,000 Bulgar-ians living there (not taking into account the settlers in Aegean Macedonia), including at least 50,000 seasonal work-ers. Other assessments set the number at 350,000. Greece does not provide of cial information to Eurostat, so the numbers are speculative.

Different estimations show the number of Bulgarians in Spain is above 200,000 and most of them settled there right af-ter Bulgaria joined the EU. That number may be smaller already. Eurostat data show that the number of Spanish citi-zens of Bulgarian origin has fallen from 147,000 to 126,000 in 2015. Although unemployment in Spain remains high, a relatively small part of the people return to Bulgaria and in the last few years there has been a migration shift to Germany.

The number of Bulgarians arriving in Germany has increased ten-fold, exceed-ing 226,000 in 2016, of cial German data show. According to 2016 data of the Federal Labor Agency, 73,000 of them are on social assistance. That is going to stop soon since Germany, like the EU as a whole, is planning to tighten the requirements for social assistance and other social programs for foreigners.

Some 100,000 Bulgarians are supposed to live in Great Britain and as many in Italy. The of cial data show smaller numbers but it is a well known fact that the UK Independence Party questions the of cial statistics concerning the arrivals of Bulgarians and Romanians

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due to the larger num-ber of national insurance numbers issued. One of the reasons for the discrepancy in principle is the people who reside there but do not work, as well as the tempo-rary workers (up to three months’ stay).

Besides, unof cial data show that some 10,000 young people go to study in Eu-ropean universities every year – mainly in Great Britain, Germany and the Netherlands.

Of cial statistics are provided by the Bulgarian National Bank and they show

a two-fold increase in the money transfers made by Bulgarians working abroad.

The total amount transferred for a period of ten years is about 5 billion Euro but that gure does not include the money brought in as cash through the borders.

That is a substantial amount; however, the annual transfers make up just 1.3% of the GDP produced in the country. Even if we take into account the trans-fers that are not declared and re ected

in BNB’s statistics (in addition to mis-takes and omissions), those remittances do not seem to justify the exaggerated headlines about the contribution of Bul-garians working abroad. Those remit-tances are undoubtedly crucial for their families, many of whom live in poor regions, but it requires a more careful assessment to see if the bene ts com-pensate the loss of economic potential (connected with the workforce).

Experts and economists, as well as the Bulgarian political elite, say that

So a will strive for more presence in the Community

in the medium term. That is mainly connected with Bulgaria’s upcoming presidency of the Council of the Euro-pean Union in two years. Bulgaria still has a lot to do in Europe to achieve a real functioning single market without physical and digital barriers to busi-nesses and citizens. The free movement of goods, people, services and capital is one of the most distinguishing features of the EU for each and every citizen. It helps Bulgarians to more easily study abroad and exchange professional experience and fosters investment and business. Those advantages of member-ship should not be underestimated.

Bulgarians abroad transferred 5 billion Euro

Pope Francis posing in the Vatican City’s Sistine Chapel with the leaders of EU countries and institutions in March 2017 on the 60th anniversary of signing the Treaty of Rome.

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Mr. Stanchev, is the European Single Market an idea or real-ity today, a quarter of a century since it was established?

It is de nitely not just an idea. In 2015 trade turnover (goods plus services) within the Union amounted to 4.6 trillion Euro, i.e. 28% of GDP for the same year. Internal trade within the Union does not hamper the improve-ment of the trade balance with the rest of the world, which showed a sur-plus in 2015. Between 2005 and 2008 de cit existed, then the balance started improving and in 2015 trade turnover increased by 1.5 trillion Euro. The EU is the largest trader in the world. The volume of turnover with China is almost the same, but export prevails. The United States has the same vol-ume of trade, yet it has a trade de cit.

Businesses in Europe say that some European governments cannot understand why the sin-

gle market – the cornerstone of prosperity in Europe for the past 25 years – still remains too frag-mented and insuf ciently devel-oped in areas that are crucial for future economic growth. What measures do the EU leaders need to take to ensure there are more visible results and better inte-gration?

Protectionism has been the global fashion since 2014, but it is least employed by the EU. The total level of customs and non-customs barriers here is lower than in North America. Therefore, the trade agreements with the North-American countries are more favorable for the EU. One of the strangest political phenomena is the rejection of those agreements by some vocal European politicians and parties. Legislators here have an ideological attitude only towards some foods and technologies, e.g., GMOs and shale gas production. That last thing is sure to die out – rst in the other countries and then in Bulgaria.

The single market is far from perfect mainly in the area of services. To some extent that is natural, as national sup-pliers are sometimes to be preferred. Such is the case in construction. As concerns banking services, the situ-ation is slowly improving: supervi-sion is dif cult, regulations are often changed and contract execution (espe-cially enforcement) is different in the different states. Some national regu-lations, e.g. food taxes, also hamper trade.

With respect to Bulgaria’s place in the European Single Market, what are the direct economic bene ts for businesses and the state?

interview

EU, Bulgaria: Trading With the Richer

Makes You RicherBulgaria can have political weight but hardly any

economic impact on maintaining the Single Market

17

That market is more interesting for the new member states. Since 2003 the an-nual increase in their exports to other EU countries has been above 11% (which is Bulgaria’s rate), and some countries like Lithuania for instance have seen a rise of 17%. Bulgaria has increased its export four times for the period, and only Romania and Poland have outperformed it by this indicator.

The following graph by my colleague Metodi Tsanov from Infograph shows very well what has happened with Bulgaria’s export. (We should remem-ber that export growth comes with growth in employment, incomes and money in circulation.)

The general rule saying that when you trade with the richer you become richer holds true for Bulgaria.

Let’s even take the West Balkans. Since the EU signed a free-trade agreement with the West-Balkan countries in 2001 (reaf rmed every ve years) imports from former Yugoslavia and Albania have risen ve to seven times, and 80% of the income in those countries is due to trade.

In the light of EU’s GDP of 16.5 trillion Euro, Bulgaria’s export to member states is below 0.9%. As is the case with the other Balkan states, the Union

is more important for Bulgarian citi-zens and companies as a market and not the opposite.

Here is another graph by the same colleague.

It shows that Russia for instance is as important for Bulgaria in terms of ex-port as the Czech Republic, Macedonia and the United States. (The difference is that these countries do not corrupt the political circles in Bulgaria with useless projects of state-owned com-panies.)

Can an economy of Bulgaria’s scale have a more sensible im-pact on the European market? Has enough been done in this direction by the governments and businesses?

Bulgaria can have the same politi-cal weight as the other countries in maintaining the market. I do not think it can have the same impact in terms of trade, although there are signi -cant achievements on a sector level. In the area of pneumatic components the Bulgarian unit of Germany’s Festo is one of the most ef cient in the world. That holds true for many local af liates of foreign companies like Lufthansa Technik, Aurubis, EMI. Chelopech is the largest and cleanest-

interview

Bulgarian export of goods by destination (1999-2015)Million Euro

18interview

operating gold mine in Europe. Bul-garia is the world’s largest producer of climbing walls, second in automotive components (including electronics) and fourth in bicycles. Yulian Popov recently wrote about that ranking. In the eld of non-ferrous

metals, KTsM Group of Plovdiv, which 25 years ago I was urged to shut down for excessive pollu-tion (at that time I chaired the respec-tive parliamentary committee), is now one of the best en-terprises in the EU (although small on a European scale).

What changes do you expect af-ter Bulgaria joins the Eurozone? When is the right time, that is, when is it economically and nancially reasonable to adopt

the Euro? Will Bulgaria bene t from that?

There is not much choice. It will be no small feat for Bulgaria to keep the current monetary regime for as long as possible while trying to meet the membership requirements - and until the Euro area starts ful lling them,

too. Budget discipline in the Eurozone is a devil’s thing. In terms of breaches of the budget de cit requirements alone the ranking is the following: Greece has 17 breaches (an 18th one is

very likely), Portugal has 15, France, 12, the United Kingdom, 11, Italy, 9, Spain, 8, Germany 7. Added to this is the govern-ment debt, which is about 88% on the av-erage (and likely to go up due to Italy). If such dangers arise here – and there is the threat of revoca-tion of the currency

board – Bulgaria had better be in the Eurozone. There will be no change in prices, the access to loans will cheapen for both businesses and the govern-ment, although the latter may be quite dangerous.

Does the tax system in Bulgaria need to be reformed concerning either direct or indirect taxa-tion? There are temptations in the political platforms towards changes in the taxation system. Doesn’t that pose a risk to the competitiveness of labor and the economy as a whole?

Size of export of goods in 2015 by destination, top 20 marketsMillion Euro

Bulgaria has to keep the current monetary regime as long as possible

19interview

The ad valorem tax can be improved, e.g., by waiving the tax on dividend, pro t, the patent tax and the special treatment of sole proprietors. The changes promoted during this year’s election campaign will have two cer-tain effects: less budget revenue and a budget de cit in the short term and

smaller investment stim-uli and more taxes in the longer term, that is, budget de cits and government debts again. Some ideas for changes are more danger-ous and stupid than others.

Can we expect any car-dinal changes in the EU after Brexit? How should Bulgaria and the local economy react to protect themselves or gain from that process?

The former government took good advantage of one of Brexit’s effects: it was able to take low-interest loans and y to security on the sover-eign debt markets, which allowed it to pay back its old debts and accumulate a reserve for nes and contingency costs. The West-Balkan governments did not manage to do that.

The European Union is no longer the same after June 23, 2016. There are two trends or political sentiments: one is towards a union with more taxa-tion and quasi-taxation, i.e., regula-tory competition; the other is towards a closer union. The second prevails for now, including through Junker’s invitation to member states to consider the ve scenarios he proposed. Those scenarios are actually two.

In what direction can we expect the European single market to develop?

Centralization and protectionism, if they happen, will have a high social price, but they will only be a transi-tion to further liberalization. TTIP and

are necessary but modest steps towards improving the situation and ensuring more competitiveness and

higher incomes in North America and Europe. As a matter of fact, they keep protectionism at a more bearable level. Otherwise trade practices like Ali Baba will destroy protectionism much faster than the opponents of CETA and TTIP can imagine.

The Eurosceptics forecast a division of the EU countries into center and periphery, see a two-speed Europe, and so on because of the large imbalances among the different member states. Such scenarios contradict the idea of unity. What are the prospects, especially from the viewpoint of Bulgaria?

I just answered some of these ques-tions. I do not think that the EU as-sessment of the so-called imbalances has some relevance to Bulgaria – it simply misses the most important problems. They are connected with the security of property and contracts. All negative rankings of Bulgaria are a consequence of the constitutional form of the prosecution and the politi-cal phenomenon of Peevski. The most glaring example is that since 2013 Bulgaria has performed worse than Zimbabwe in terms of court independ-ence.

Security of property and contracts, lack of court independence are our major imbalances

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By Irina BachevaSo a-Brussels-So a

To exchange views on advocacy and ways to cooperate, AmCham EU welcomed 37 representatives from 23 AmChams across Europe in March. This year's Brussels Brie ng focused on the Single Market and how to communicate its bene ts at the member state level. Moreover, the Transatlantic Week on March 8-10, 2017 put at focus the ongoing challenges: the future of EU and European values, trans-atlantic trade, the United States under a Trump administration, Brexit, digital single market and more. Two highlights of the program included the launch of The Transatlantic Economy 2017, the annual survey* of jobs, investment and trade between the EU and the US, and the Transatlantic Conference.

The transatlantic economy generates $5.5 trillion in total commercial sales a year and employs up to 15 million workers in mutually “on-shored” jobs on both sides of the Atlantic, showed the survey.

Bulgaria and the United States

America’s investment base in Bulgaria is

rather small with assets totaling just $4.7 billion in 2015, according to estimates. U.S. af liates in Bulgaria employed an es-timated 10,241 workers in 2015, a consid-erable rise since 2014, placing Bulgaria 6th among the EU13 in terms of employment. The United States imported approxi-mately $600 million worth of goods from Bulgaria in 2015, accounting for just 1.6% of Bulgaria’s total exports; the percent-age rises to just 4.6% when intra-EU trade is excluded from the total, down from a high of 14.4% in 2001. Imports from the United States are also rather small, total-ing just $268 million in 2015, only 2.5% of Bulgaria’s extra-EU imports.

Brexit and the UK-US Trade

The United Kingdom and EU are critical economic partners for the United States. In 2015 the United States exported $123.5 billion in goods and services to the United Kingdom, and imported $111.5 billion worth of British goods and services. The United States is UK’s largest export destination after the EU. U.S.-UK trade is signi cant. But the real driver of the British-American economy is investment.

In 2015, U.S. foreign direct investment in the United Kingdom totaled a record $593.0 billion, and UK foreign direct investment in the United States totaled $483.8 billion. Estimated sales of Ameri-can af liates in the UK and British af- liates in the United States totaled more

than $1.3 trillion. The UK accounted for 22% of overall global U.S. assets outside the United States.

A View from the United Kingdom: Sir Simon Fraser, Former Head of UK Foreign Of ce & Diplomatic Service

The Brexit negotiation process must not become a choice between the EU and the UK and therefore political animosity will

No More “Business as Usual”

Policy issues in healthcare in the EU, transport, energy and climate were the most discussed topics at AmCham-s meetings.

21cover story

not bene t the process. Negotiating a free trade agreement with the United States is not going to be fast – you can get a fast deal or a good deal but not both. Busi-ness cannot wait for the political agenda to play out to make decisions; they need to align their timelines with political ones. This is easier for large companies to do, much harder for SMEs.

Frederica Mogherini, High Representative of the EU for Foreign Affairs and Security Policy, Vice President of the European Commission

Europe needs to focus on its strengths and achievements, many of which are built upon strong transatlantic coopera-tion over the past 70 years; the business community has a key role to play in the future direction that the EU, US and UK will take. The EU remains the most attractive market and largest source of investment in the world even without the UK. The decision to leave will have tougher consequences for the United Kingdom than the EU.

The Transatlantic Digital Economy

In 2015 the United States exported

$184.2 billion in digitally deliver-able services to Europe and imported $113.2 billion from Europe. U.S. ex-ports of digitally deliverable services to Europe were more than double the U.S. trade with Latin America and almost double the U.S. trade with the entire Asia-Paci c region. ICT-enabled services trade represented 56% of all EU services exports to non-EU coun-tries and 52% of all services imports from non-EU countries.

The Transatlantic Economy 2017 study shows that the transatlantic economic relationship generates close to 5.2 trillion Euro in total commercial sales a year and employs up to 15 million workers on both sides of the Atlantic. The United States and Europe are each other’s main source of foreign direct investment. Europe has attracted over 58.5% of total U.S. global investment since 2010, more than in any previous decade.

*Source: Transatlantic Economy 2017, Annual Survey of Jobs, Trade and Investment between the United States and Europe, Center for Transatlantic Relations, The Johns Hopkins Univer-sity.

Susan Danger, CEO of the AmCham EU, welcomed over 100 decision makers and business leaders across Europe at the Transatlantic Confer-ence.

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By Andrey Kovatchev, MEP

The European Union has been faced with serious challenges for quite a long time and the challenges have increased in the past two years. Some of them are the result of external factors: pressure from south and southeast due to the hot con- icts in the Middle East and the problems

in Africa; from east, due to Kremlin’s policy; from west, due to the changes in Washington following the presidential election. That has given rise to movements in the member states that try to manipu-late citizens’ legitimate fears of migration – and gain political dividends by putting EU’s unity at stake.

Therefore the White Paper on the future of the EU, which will be discussed until the end of the year, puts the question of what we are going to do. Shall Europe be just a single market for trade in goods and services but without political and economic coordination? Or shall it be a very strong, fast and ef cient political union responding to the changing word? And no matter how unpopular the term “European federalism” is today, move to a more united EU?

There are a lot of options between a com-mon market and a federation. In some policies cooperation is deeper, in others only some of the countries participate.

At the same time the EU is just 7% of the global population but it generates more than 20% of the world’s GDP and ac-counts for 25% of global trade. The EU also allocates 50% social payments to its citizens. In order to be able to preserve all that, there is one requirement: we have to maintain a competitive economy and a single market and expand that market to other countries in the world like Canada, Japan and New Zealand. The European Commission is currently discussing such bilateral free-trade agreements between the EU and some 20 or 30 countries in the world. Such agreements have been prepared with North Korea, Vietnam and Singapore. Some of them are causing big debate, as was the case with Canada, while others are adopted without much discussion, e.g. the one with Vietnam. As concerns the Canadian agreement, it be-came the object of many lies and manipu-lations from certain circles.

Some analysts believe that the so-called Brexit may even have a positive impact on the rest of the EU by consolidating it around the single currency and around economic policies for building the sin-gle market, e.g. in the digital area. Some nancial institutions may move their

headquarters from London to Frankfurt or elsewhere in the EU. The question is what price Great Britain is ready to pay to leave the union. Prime Minister Theresa May seems to be on a course for a hard Brexit, where everything will have to be negotiated anew. That will make London a third party without agreements with the EU and its access to EU’s markets and services will have to be negotiated again through a new UK-EU agreement. Or probably another solution will be found to keep Great Britain’s access to the market in exchange for certain obligations to the EU, the way Norway pays the EU for its access to the single market.

Brexit is like an alarm clock for many people, reminding them that the EU we so much like to criticize is not a given thing and is not eternal. And that it is not very

EU Is About Rules

Brexit hides unknowns but it is also an alarm clock for Europeans

23cover story

wise to eliminate it – as were the signals sent at the beginning of the presidential election in Austria for instance. Do we really want it? For 2000 years on our continent there have been wars every 20 or 30 years, especially in the 20th century. Young Europeans should know that peace, cooperation and the single market in Europe are not given forever – we have to cater for them and build on them. That is the right thing to do rather than invest in short-lived nationalistic and populist “successes” of one party or another at the expense of lasting European coopera-tion. If it fails, the consequences will be devastating. It is good for our continent to be united. Former Belgian prime minister Paul-Henri Spaak says that there are only small countries in Europe. But some of the small countries have not realized that yet… Even Germany is small on a global scale. We should not forget that 50 times Luxembourg makes one Germany and 50 times Germany makes one China. In order to preserve the competitiveness of European goods and services, the growth of GDP and jobs we have to invest in co-operation, research and development.

No country in the European Single Market can cope better by itself in global competition than in cooperation with the others. When we sign agreements like that with Canada, as a democratic community we should set the global standards for countries like India, Brazil, China and Russia. Therefore I believe that the bigger loser from Brexit will be Great Britain, un-less it keeps its access to the single market. The leaving of the EU by Great Britain, which has always been an obstacle to the creation of common European defense, will now encourage a shared European defense and intelligence capacity, external border defense and common migration policy.

The single market still stands on sustain-ability, stability and transparency but it also stands on the rule of law, on rules. The EU is mainly about rules. No matter how hard some people are trying today to present the continent’s democracy in a negative light, it is attractive. Why would otherwise millions of human beings con-tinue striving for Europe as a promised land.

By Ivaylo Kal n*

European integration was created around EU’s foundation: the European Single Market. The Treaties of Rome of 60 years ago were the basis of coopera-tion among the warring countries in World War II. It started with united efforts in the area of economy – the opening of the borders and the creation of a common market for goods, capital and movement of people. That break-through of the EU in post-war time paid by allowing Europe to build the largest economy in the world. So the develop-ment of the Single Market is a founding principle that the EU needs to follow.

This said, with economic and especially technical development the Single Mar-

Single Market Follows EU’s

Ups and DownsBrexit will make the Eurozone a weightier topic

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ket is no longer common in areas that are new, e.g., the digital area. Less than 10% of e-commerce in the EU is transborder trade. Electronic services and trade usually take place within state borders. Due to the segmented market there are more than 400 telecommunications companies in Europe. The European Com-mission has suggested measures to remove the barriers among member states. That explains the reduction in roaming pricing, as well as data portability.

In many areas of develop-ment in the separate countries there are national supervision bodies, banks, insur-ance companies, telecommu-nications companies, anti-trust commissions. Business will be facilitated and the price of trans-border transactions will fall when more rights are transferred to the EU and those organizations start working on a European level.

Two directives were recently adopted related to the digital market for reporting data leak-age as a result of hacking attacks. However, the requirements for information system security in the directives differ from those in the regulation for data protec-tion. So a company operating in several countries has to choose which one to observe – the direc-tive or the regulation. Although they are both effective on a Eu-ropean level, the company has to choose whether to report the data leakage in the country where it took place or in the country of its registration.

Brexit came as a new challenge to the European Single Market.

The EU is changing and passing through periods of glory, upsurge and crisis. I am optimistic: there is no trend towards the EU fall-ing into a self-destruction crisis and returning to the national states. However, euroskepticism is growing, as a result of which Great Britain is leaving the EU. If the EU does not change, that will mean its immune system is not working. It is a question of

vitality for it to nd a way and

solve its prob-lems. The White Paper on the future of the EU does not name the problems. The EU is vital enough but it is starting to raise overexpecta-tions it cannot meet. It should

be very clear what is done on a national level and what is done on a European one. As far as the market is concerned, the regula-tion should be on a European level but small issues should not be raised to it.

That should be well settled so that citizen can know what to expect from whom and make the EU more comprehensible, be-cause the common understanding of it is of a large administration that spends a lot of money. That is not correct, because the com-mon European budget is 40 times smaller than the national budgets of the countries but it is expected to solve all our questions. The European administration receives 5% of the European budget – there is no such administration in the world. Europeans pay the price of a cup of coffee a day to Brussels and expect roads, border protection and social policies. But the budget discussion in the European Commission is already not so much about amounts than about ef ciency, i.e., what is

achieved with the budget.

Talking about the Single Market, there is a battle in many Europe-an countries on the topic of spec-trum policy. That concerns the frequency resource that needs to be allocated to ensure that there is one and the same frequency for high-speed internet through-out Europe. Those frequencies have to be free, synchronized and granted on a concession basis to telecoms to provide that connectivity. So when people move across countries they can use the 4G service, although we already talk about the superfast 5G internet. That will give busi-nesses resource. The European Commission has started pursuing the policy of “budget focused on results” in order to see the effect of each spent Euro.

For countries like Bulgaria Brexit will have a very important effect, because London had the strongest voice among the non-eurozone countries. That showed that you could be a member of the EU and not be in the Eurozone. That returned the EU to its roots: the Single Market. With Brexit, there will be a stronger trend towards solutions being focused on the problems of the eurozone and they are different from those of the Single Market. Though the eu-rozone and the Single Market are no alternatives, the topic about the Single Market will lose weight at the expense of that related to maintaining the Euro.

*Ivaylo Kal n is chief economic adviser at Razvitie Fund, former minister of foreign affairs

EU's immune system is put to the test and I am an optimist about its vitality

25cover story

Over the last couple of weeks there is a lot of talk about Bulgar-ia’s membership in the Eurozone – a step widely considered as inevi-table and indispensable for further integration with the European Union (EU). Apart from political will, Bulgaria should meet certain formal criteria, especially in view of its macroeconomic and nancial stability, writes economist Adrian Nikolov from Institute for Market Economics.Here come the convergence cri-teria (i.e. Maastricht criteria) that impose limits on in ation, public debt, budget de cit, long-term interest rate and exchange rate between national currency and euro. Last reports of European Central Bank (ECB) on compliance with the criteria show that before the nancial crisis only Bulgaria and Estonia had complied with all Maastricht criteria.They include 5 basic requirements:1) in ation – it should be as much

as 1,5% above the average value of the three member states with lowest in ation

2) budget de cit – as a share of GDP it should be as much as 3%

3) public debt – 60% at most as a share of GDP

4) long-term interest rates – as much as 2 percentage points above the average value of the three countries with lowest in ation

5) stable Euro exchange rate – this rule is more exible. Applicant country must not have deval-ued signi cantly its national currency in the last two years

against euro.As for 2015 the average value of the countries with lowest in ation was 1,2% while long-term interest rate – 1,9%.Compared with before crisis nine countries have complied with all criteria in 2015 – Bulgaria, Den-mark, Estonia, Latvia, Lithuania, Luxemburg, Romania, Slovakia and Czech Republic. Ireland, Ger-many and Sweden fail in only one of the criteria.Interestingly enough, four of the member states that have complied with all criteria in 2015 (Bulgaria, Denmark, Romania and Czech Republic) are not part of the Euro-zone. Six of the Eurozone member states have complied with them – 5 newly accepted and only Luxem-burg from the old ones. This means that if Eurozone was being created today and its future members had to comply with the Maastricht cri-teria, its structure would have been the opposite of today.Basically, the main problem most states have is to bring their public debt under 60% of GDP. In some countries it is close or even above 100%, with no prospect in near

future to reduce it under 60%, es-pecially in Greece (177%) and Italy (132%).

As for in ation, which was one of the problems of ECB before the crisis, we see opposite trends in the last couple of years. ECB put a lot of efforts to prevent de ation in the Eurozone. At the same time the Maastricht rule aims to prevent too high in ation which is why most countries have complied with the limit in 2015.

EU countries have managed to also narrow their budget de cit and it’s higher than 3% only in three of the four so-called PIGS countries – Por-tugal, Spain and Greece (with the exception of Italy). Close, but not above 3%, are United Kingdom, France and Croatia.

As for Bulgaria, it ful lls all the of cial requirements for member-ship in the Eurozone. This applies not only for 2015, but for most of the time since the crisis. With the exception of the sharp rise of de cit in 2014, the country follows all limits. So Bulgaria is in compliance – but when is the right time to ask to join the Eurozone is a matter of a separate discussion.

More Countries Comply With the

Maastricht CriteriaIf the Eurozone were being created today, its structure would have

been very different

A le picture shows a copy of the Maas-tricht Treaty displayed dur-ing the confer-ence `Twenty Years Treaty on European Union: Re ec-tions from Maastricht`, in Maastricht, The Nether-lands.

26amcham events

AmCham Talks Better Business

Environment with Political Parties

The Chamber intends to sign a memo-randum of understanding with major political parties. AmCham held meet-ings with Hristo Ivanov of “Yes, Bul-garia”, Radan Kanev of “New Repub-lic”, Boyko Borissov of GERB, along with representatives of Movement for Rights and Freedoms (MRF), Volya Political Movement, the Reformist Block, and Bulgarian Socialist Party.

During the meetings with the parties BoD representatives of the Chamber discussed common areas of interest relating to the economic programs of the parties.

Hristo Ivanov, the leader of “Yes, Bulgaria”, presented to AmCham the new political movement that was established in response to the contin-ued inaction on the political scene on issues related to rule of law, corrup-tion and the lagging judicial reform. Another priority of the formation is to develop a strong economic agenda for stimulation of growth and investment in the country through a vigorous debate with the business.

On Jan. 23, 2017 AmCham met with Radan Kunev, chair of New Republic,

who presented his views on Bulgarian scal policy, foreign relations, defense

policy, judicial reform, national educa-tion strategy, integration of Bulgaria in the Eurozone.

On February 23, 2017 AmCham had a meeting with the Movement for Rights and Freedoms (MRF), represented by Mustafa Karadayi, chair, Yordan Tsonev, economic expert, Filiz Hyus-menova, member of European Parlia-ment, Ilhan Kyuchyuk, member of the committee on foreign affairs, and Peter Chobanov, economic expert. Tsonev elaborated on the key priorities in MRF program, namely the rule of law, tax system preservation, human capital development and education, investment promotion, healthcare and e-government reform.

“MRF believes that the procedural is-sues and the administrative and legal procedure in the judicial system are on the rst place, but not the prosecution structure and criminal proceedings,” Tsonev said. There is a lack of a mod-ern and quick process of help to the business, he added.

AmCham had a meeting with Volya political movement on Feb. 24, 2017. The latter was represented by the movement’s team of experts including Veselin Mareshki, Stefan Avgustinov, Dimitar Topalov, Lyubomir Ivanov, Miroslav Nikolov, Veselin Halachev, Kalinka Kovacheva, Veselin Mareshki-son. Mareshki, party’s chairperson, outlined the key priorities: investment promotion, preserving the current tax system, ght against corruption, e-government, reduction of adminis-trative burden for business by review-ing licensing regimes, measures for tackling the demographic crisis, incen-tives for small- and medium-sized enterprises.

On March 1 AmCham met with the

BSP leadership rep-resented by Dragomir Stoynev, Kornelia Ninova and Zhelyo Boichev met with the AmCham board.

27

Reformist Block’s representatives Bozhidar Lukarski, chair of United Democratic Forces (SDS), Naiden Ze-lenogorski, chair of election headquar-ters, Antoni Trenchev, MP candidate. The Reformist Block assured it will work for achieving a better and more

predictable business environment, continue with the judicial reform, keep the current tax system, and work for a more exible labor policy and legisla-tion. The Block representatives said they are open for a dialogue with Am-Cham business community and regu-lar discussions of issues important for the business. Zelenogorski elaborated on the need for greater autonomy of mayors and decentralization of local government.

On March 13 AmCham had a meet-ing with the Bulgarian Socialist Party, represented by Kornelia Ninova, chair of National Council of BSP, Dragomir Stoynev, economic expert, and Zhelyo Boichev, MP.

“It is for the rst time that BSP puts in

its platform economic issues on top, in particular industry development and production, Ninova said. BSP envis-ages state nancing by establishing a 500-million-Leva “Industry” fund for public-private partnerships. BSP stands also for the development of the capital market and restructuring the Bulgarian Bank for Development in a way that will effectively facilitate small and medium-size enterprises. Ninova further said BSP will introduce progressive income taxation of 20% for persons with more than 10,000 Leva of monthly income.

amcham events

Mustafa Karadayi, chair of MRF, and his team discussed busi-ness climate issues at the meeting with AmCham board.

Meeting with Volya political movement in

AmCham of ce.

Meeting with the Reformist Block.

28amcham events

The power of digital marketing in the exploration of new business opportu-nities, the prospects for the SMEs to enter foreign markets and the consumer behavior online were at focus during the Seminar “Digital Marketing and e-Commerce” organized end-February by the American Chamber of Commerce in Bulgaria, Small and Medium Enter-prises Promotion Agency and Microsoft Bulgaria Business at the So a Tech Park, Labs Complex.

The speakers at the event were: Zlatina Ruseva-Savova, co-chair of the Public Procurement and EU Funding Advi-sory Committee and AmCham board member, Nikola Stoyanov, deputy executive director, Small and Medium Size Enterprises Promotional Agency, Nevena Mladenova, manager Structural Funds and Funding Programs, Micro-soft Bulgaria, Maria Zhekova, market-ing manager SMEs, Microsoft Bulgaria, Kaloyan Parchev, CEO, Zetta Tech-

nologies, Dimitar Iliev, CEO, Navtech, Ventsi Popov, project lead, Zinga Soft.

Zlatina Ruseva-Savova proposed AmCham and Small and Medium Size Enterprises Promotional Agency can cooperate in building of a bridge for export nancing of SMEs. Nikola Stoy-anov elaborated on the new approach of direct communication of the Agency with the companies and establishing of a register for SMEs. A national network for support of SME is being developed where every company can present an own business idea to be nanced.

Maria Zhekova said that 57% of B2B purchase evaluation is done without speaking to a human, shows the analy-sis of McKinsey & Company. According to International Data Corporation that de nes six stages of the customer jour-ney based on speci c goals that must be met:

Companies must align their demand generation activities and keep pace as customers progress;

Each customer may have a unique path to purchase, but all research is done online;

Customers can move forward or back-ward and even appear to skip steps. But they need to accomplish stage-speci c goals before they buy;

There are differences in importance and the amount of time spent in each stage for different kinds of customers and re-gional markets, but at the highest level they share the same decision making process;

Seminar Tackles Power of Digital

Marketing, Business Opportunities for SMEs

Labs Complex at So a Tech Park.

Zlatina Ruseva-Savova Nikola Stoyanov Nevena Mladenova Maria Zhekova

30amcham events

American companies have invested mil-lions of dollars in community centers, in environmental conservation, in educa-tion, and healthcare, serving as a model example, said U.S. Ambassador Eric Ru-bin during the AmCham business lunch on March 2, 2017 held at the So a Hotel Balkan. The diplomat spoke in front of 120 members and partners on the perspectives of U.S.-Bulgarian economic relations. AmCham Bulgaria was highly praised for its efforts to facilitate the business relationships between Bulgaria and the United States.

U.S. investment in Bulgaria reached $1 billion in the past four years. In the words of the envoy, the companies are not only providing jobs and building the economy, but they are directly investing in Bulgarian communities. In 2015 the bilateral trade between the United States and Bulgaria amounted to $1.05 billion, with a near parity achieved between US and Bulgarian exports.

A healthy business environment and strong economic relations with the United States and other partners gener-ate economic growth, rising incomes and increased prosperity for all levels of society, said Ambassador Rubin. According to him those conditions will work to stem Bulgaria’s demographic decline.

“I am an optimist,” Ambassador Rubin said. He pointed out that he would like to see young people stay in this country and see others who have left come back, start new businesses, and help shape this country’s future.

Dr. Krassimira Chemishanska, Am-Cham president, elaborated on the Chamber’s 2017 White Paper with stra-tegic recommendations to the govern-ment.

Ambassador: U.S. Trade,

Investment in Bulgaria Exemplary

From left: Alex Nestor, Elena Marinova, Musala Soft, Plamen Zhechev, Cisco Systems Bulgaria, Iva Todorova, IBM, Iravan Hira, Hewlett-Packard, and Zlatina Ruseva-Savova.

Dr. Krassimira Chemishanska. U.S. Ambassador Eric Rubin.

31innovation

The Testing Laboratory and Mechani-zation Of ce is now operational and employs more than 100 highly-skilled engineers and technicians in the ar-eas of durability testing, research and development, eld failure analysis and equipment development for Sensata’s automotive sensing technology. The company invested approximately 3 mil-lion USD in the Testing Laboratory and Mechanization Of ce.

“Our customers rely on Sensata to deliver proven, mission-critical sens-ing capabilities that help solve some of their toughest problems while meet-ing stringent quality and performance standards,” said Paul Chawla, Senior Vice President, Performance Sensing, Europe. A single automotive sensor de-signed by Sensata engineers undergoes over 200 functional tests in the Testing Laboratory before it moves to manufac-turing to simulate the complete lifetime of a car in three months’ time.

The sensors are tested to endure temper-atures from -40 to +1,200 degrees. The sensors also undergo tests for protec-tion against moisture, dust and “steam cleaning, where each sensor is exposed to high-pressure water steam reaching up to 100 degrees Celsius and pressure up to 100 bars.

Sensata Technologies Bulgaria currently employs more than 3,000 people in So a, Botevgrad and Plovdiv.

Sensata Technologies Opens New

Testing Facility in Bulgaria

Several testing labs in So a's Drouzhba dis-trict were presented at the of cial opening of the new facility center.

32amcham events

In the middle of March AmCham members visited Pamporovo, where the first ever AmCham Winter Sport Weekend was held. Building on the long-lasting and successful Ski Tour-nament the Winter Sport Weekend included the traditional ski competi-tion, but also offered participants alternative entertainment activities such as a bowling tournament and board games.

Participants from 13 companies

joined in the winter adventures and demonstrated exceptional sport en-thusiasm and an unsurpassed drive for achievement. The event started with a cocktail and wine tasting at the hotel lobby, where representatives of different teams had the chance to network.

On Saturday morning around 50 ski-ers and snowboarders raced down the “Stenata” slope under the loud cheers of the AmCham audience. In the afternoon both skiers and other event participants took part in a very loud, cheerful and tough bowling competi-tion.

Venislav Iotov, AmCham vice-pres-ident, and Nikolay Melemov, mayor of Smolyan, greeted the guests at the awarding dinner. Winners in all categories received attractive awards, kindly provided by various AmCham members and partners. Among the most attractive categories were the “Veteran” award presented to Petar Popov from Curtis Balkan and the “Youngest competitor” award shared between the 6-year-old twins Angela

Winter Sport Weekend Offers Ski,

Bowling

Participants enjoyed the abundant snowfall.

Perelik hotel hosted the bowling game.

33facts and fi gures

and Maria Kandilarovi. The “Best team performance” award was won by the small, but very enthusiastic team of Abrites. Runner ups were Congress Engineering (2nd place) and Nemetschek (3rd place). A special “Best performing family” award was given to the Dimitrovi family from Air Berlin, who received recognition for their outstanding performance in the children, women and senior executive categories.

Participants were just as passionate on the dance floor, where the celebra-tions continued until midnight with both modern disco dances and the traditional Bulgarian horo.

AmCham Bulgaria extends a special thank you to the kind support of the sponsors Abrites and The Coca-Cola Company Bulgaria, as well as the kind host Pamporovo AD.

Deloitte Bulgaria announced the ndings of De-loitte CE CFO Survey in front of CFOs from leading Bulgarian and international companies in March at the So a hotel Balkan. This is the 8th edition of the Survey report, tracking the latest thinking and ac-tions of CFOs representing largest and most in uen-tial companies in the region.

For Bulgaria the survey was held for the 6th time, following the Central-European questionnaire and methodology. CFOs were asked to share their ex-pectations in three major areas: economic outlook, business environment outlook and companies’ growth outlook.

This survey paints a picture of an increased con -dence across the CE region. CFOs in Bulgaria also enter 2017 in better spirits than any time since the last 4 years. The brighter mood represents improved prospects for the CFOs own businesses and the economic growth. Strict cost control is still to keep an eye on, however the openness to introduction of new products / services is now more visible.

While CFOs across the region hold varying views

on the possible consequences of the UK leaving the European Union, Bulgarian CFOs see less or no impact on their businesses. However, similar to the majority of their colleagues in CE, they are mainly concerned that Brexit may lead to increased complexity and cost and expect restricted work-force mobility. It will be extremely interesting in early 2018 to see how the views and predictions of our respondents have stood the test of time.

For more information on the survey and the report, please visit: www.deloitte.bg

Positive Expectations in Testing Time –

Deloitte CFO Survey

Petya Kolcheva (right), among the winners in womens category awarded at the ceremony.

Venislav Yotov, vice-president of AmCham, is awarding the best performing Dimitrovi family from Air Berlin.

34

By Velyana Hristova, Penkov, Markov & Partners

Exactly 20 years ago, with the adoption of the Spe-cial Pledges Act (SPA), the still edgling Bulgarian commerce law was enriched with the gure of the special pledge. Its main difference in comparison with the regular pledge is the lack of obligation for the actual transfer of the pledged property in the pledgee’s possession – a characteristic that makes the special pledge an especially appropriate securiti-zation mechanism for business purposes.

Unfortunately, with the accumulating practice in the application of the law, defects, inconsistencies and omissions have become clear, some of which have to a great extent compromised the idea. During the re-cent years such issues have turned the SPA into one of the instruments that bad-faith debtors have most often preferred for fraud and unpunished disposal of the content of the securities that are supposed to guarantee the collection of the creditor’s receivables.

Therefore, putting an end to such practices has been long overdue. The adoption of the new amend-ments to SPA, some of which have entered into force, while others will become effective as of Sep. 1, 2018, certainly represents a step in this direction. A different question, however, is whether all of the amendments are the correct steps and whether they are suf ciently well determined.

As immediately becomes obvious some of the amendments create guarantees for the pledgee that without the latter’s explicit consent with respect to a particular action, not only actions of disposal over the pledged property but also changes in the

legal status of the pledger (reorganizations of any kind) will be impossible. Even more important, however, is the fact that without the previous pledgees’ explicit consent it will be impossible to establish further pledges over the same property or to register commencement of enforcement by a next pledgee.

It is without doubt that this change puts a priority on the protection of the rights and legal interests of the rst registered pledgee, which is probably grounded, minding the practices from the recent years including schemes with arti cially created later pledges in favor of related parties, which were used as an instrument to snatch the pledged prop-erty without the initial pledgee to be in a position to counteract.

In fact, a potential risk is created for acting in bad-faith creditors to refuse without grounded reasons to give consent for the establishment of further pledg-es, thus preventing the debtor from receiving ad-ditional nancing which might be important for the latter. Nevertheless, the measure undertaken comes in response to an urgent public interest and as such it is justi able. On the other hand, it could probably contribute to the overcoming of the practice for ex-cessive securitization of the creditors’ receivables.

Another signi cant change concerns the regime for enforcement against the pledged property, intro-ducing requirements for publicity of the deadlines and terms and conditions for effecting of the sale of pledged property and a requirement on the minimal sale price of the pledged property by the rst sale attempt. Such minimal price shall be the tax evalu-ation for immovable property and the insurance value for movable assets. The adequacy of such criteria as regards the minimal sale price is question-able as least for the predominant number of cases.

Under the new special pledges regime it is not pos-sible anymore for the pledgee to effect enforcement outside and irrespective of the bankruptcy proceed-ings, in case the latter is initiated earlier than the registration of the commencement of enforcement. This possibility also used to be very frequently used in practice for fraudulent actions damaging the rest of the bankruptcy creditors, as well as the debtor.

Explicitly regulated is the surviving of the mortgage,

advice corner

New Regime Amends Special Pledges

35

when the mortgaged property is sold under the terms and conditions of the SPA.

In addition to the above the most commented amendments in the law concern the status of the CRSP, the new regulation of the registration proce-dure taking effect as of Sep. 1, 2018, and the access to the data registered in the CRSP. These amendments, which are already signi cant enough to be subject of a separate independent analysis, will probably make the registry of special pledges much easier to be accessed and will facilitate the use of this secu-

ritization mean which is otherwise very exible and convenient.

While we take into account the indisputably positive aspects of the reform attempt, the aim of the above article is to draw the attention on certain controver-sial solutions, which are already recognizable in the new regime and which will need to be put under balance and to be overcome through the practice or to be subject to further amendments of the law until the optimal balance between legal security and ef- ciency of the special pledge institute is achieved.

advice corner

By Tzvetelina DimitrovaAttorney-at-lawGeorgiev, Todorov & Co Law Of ces

Exchange Rates Clauses Are Matter of

Thorough Consideration

36cradle

By Chaika Christova

Construction as an industry is usually the engine behind the economic recov-ery after recession. It's the locomotive that drives other industries out of the deadlock. That's economically speaking. In the social sense it's the industry that ensures our nearest environment – our homes, of ces, industrial buildings, theaters, public and meeting places, roads, infrastructure, etc. Our com-fort, health and well-being (not only in present tense, but also in the next several decades) depend on that clos-est environment. According to recent statistics, Americans spend 90% of their life time indoors and it is not likely that the populations of other industrialized countries differ much.

Paradoxically or not, the Engineering & Construction (E&C) is also the industry that is the ultimate laggard when speak-ing of modern technology and innova-tion – not only in the building processes and technologies, but also in their im-plementation in the ready products.

A new report by the World Economic Forum (WEF) and Boston Consulting Group (BCG) – Shaping the Future of Construction, underscores that compara-tive to other industries, productivity in E&C has nearly stalled over the past 50 years. Technology was not making any fundamental advances, and companies

remained averse to changing their tradi-tional methods.

Even more, the construction industry dooms our well-being not only in our clos-est environment, but leaves a devastating ecological footprint in many senses. The sector is liable for serious air pollution, energy and water consumption, waste generation and nature degradation. What is more, the buildings the sector produces are inef cient in energy and water savings. For example, E&C is responsible for about one-third of total direct and indirect CO2 energy-related emissions. No wonder the industry is at the center of the global cli-mate change debate. And according to the WEF’s latest Global Risks Report the failure of climate change policy is

the greatest risk to business and society over the next decade

The above challenges are expected to drive the technological advances in construction industry. According to the report Shaping the Future of Construc-tion, the industry has vast potential for improving productivity and ef ciency. Thanks to digitalization, innovative technologies and new construction techniques, materials and tools that are already on the market, the sector has the tremendous opportunities to catch up by transforming itself.

For example, new technologies in the digital space will not only improve pro-ductivity and reduce project delays, but can also enhance the quality of build-ings and improve safety, working condi-tions and environmental compatibility.

Building Information Modelling (BIM – common name for the digital represen-tation of the building process) plays a central role here, as it is the key facilita-tor for many other technologies: the building of a bridge, for example, can be greatly facilitated by combining robot-

Construction – Laggard Doomed to Change

Multiple global megatrends are shaping the future of the industry

The Edge in Amster-dam, home of Deloitte and Touche, is world’s No. 1 sustainable of ce building, which illustrates the value of embracing innovation in the E&C industry

37cradle

ics and 3D printing via a parametrically designed 3D model.

3D printing

3D printing is widely used in food, cloth-ing and fashion industry, for manufac-turing tools, for production of auto and plane spare parts, in implant surgery and prosthetic orthopedy, etc. 3D printable building models may be created with a computer-aided design (CAD) package. This is conceptually known for decades. In the last ve years or so this technology has been put to task in the construction industry. Dutch and Chinese (Winsun company) in demonstration projects have slowly constructed 3D-printed buildings in China, Dubai and the Netherlands. Those are examples of mostly plant-based building technology, where prefab elements are produced off site and are then assembled on site.

In February 2017 Apis Cor, a startup based in Russia and in San Francisco 3D-printed a small residential house in just 24 hours. The “ink” they used was concrete. The house was built com-pletely on site with the exception of the windows and the household equipment. The cozy 38 sq m home was “printed” in Stupino town, Moscow region in the severe Russian winter, when the temperature outside was -35 degrees. The mobile 3D printer with automatic mix and supply unit, that looks more like a tower crane, was invented by the company's founder and CEO Nikita Chen-yun-tai. The construction cost of the completely nished house is $10,134, i.e., $275/sq m, when a regular house of the same size would cost $223 /sq m and would take months for building.

The unusual shape of the house is on purpose – to demonstrate the exibility of the equipment and diversity of avail-able forms of the design and structure.

Another extremely powerful lever for innovation in the industry is that of

construction materials

The associated solutions are numerous and wide-ranging – from incremental innovation of traditional materials and existing characteristics to radically in-novative materials with entirely new capabilities.

But let's look at the most used man-made material in the industry – the concrete. Now a day it can build not just the dull gray hard surfaces. Over the past decade many new types of concrete and cement have been formulated with unthinkable before properties. Here we shall mention just three of them.

Bendable con-crete is 500 times more resistant to cracking and 40% lighter in weight. Its other

name is Engineered Cement Composites technology (ECC). It is an easily molded mortar-based composite, reinforced with specially selected short random, usually polymer bers, thus avoiding the in exibility that causes brittleness and breakage in the regular concrete. It is more durable, bears severe loading and the resulting expenses of repair are low.

LiTraCon (light transmitting concrete) is

Apis Cor approached the issue of building this house from all sides and invited ve world renowned companies, known for their innovative approach, as partners: PIK Companies Group, Samsung Electronics, TechnoNICOL corporation, Bitex Reibeputz com-pany and Fabrika Okon company. Source: Apis Cor

38cradle

a translucent concrete building material made of ne concrete embedded with optical glass bers. Thousands of optical glass bers form a matrix and run paral-lel to each other between the two main surfaces of every block.

It was developed in 2001 by Hungarian architect Aron Losonczi at the Technical University of Budapest. A wall made of LiTraCon has the strength of traditional concrete, but is offering a silhouette view of the outside world, plus much day light. This quality is very suitable for building of ces both for sustainable and well being reasons.

Organic concrete is rst created by a Portugese architectural rm, e-studio, which was patented in 2005. It encompasses organic and inorganic material, seeds and fertilizers may be added and is suitable for covering ground spaces – park and between the buildings lanes, steep slopes along the roads, etc. Its permeability allows for the rain water to go underground and the surface remains dry and not slip-pery. This moisture “battery” allows

for grassy vegetation to cover it, thus purifying the air and cooling it in the hot days, ameliorating the microcli-mate.

More recently Spanish researchers developed another kind of living concrete, suitable for creating vertical gardens and living walls on build-ing facades. Capturing rainwater, the multilayered cement encourages and sustains the growth of speci c mosses and lichens directly on the material. Within an year, the “green” cement cre-ates a patina or living painting on the building surface.

A multiyear global project

Although many innovative solutions are already being applied on a small scale or in a few countries, the industry still needs a large-scale application or bet-ter adaptation of current technological developments.

The WEF calls the Future of Construc-tion report a project – the rst step of a multiyear global project, aimed at sup-porting the E&C sector while it pursues its transformation. (According to it the industry’s future success will rely heav-ily on effective collaboration among all stakeholders.)

Subsequently, the project will focus on speci c topics; for example, the ways that new technologies, materials and processes will improve the project delivery and the life-cycle performance of buildings, and the ways of selecting relevant measures from the industry transformation framework.

“Incremental change is not an option; by rede ning the ultimate frontier, leapfrogging innovations in construc-tion will nally help to address major societal challenges, from mass urbaniza-tion to climate change,” says Michael Buehler, Head of Infrastructure and Urban Development at the WEF. “The widespread adoption of these innova-tions is going to make a serious impact, socially, economically and environmen-tally.”

Applications of BIM along the E&C Value ChainSource: The Boston Consulting Group

39

For two years in a row the National Network for Children pursues an idea, approved and taken as decision by the General Assembly of the Network. The idea is to build a brand new Center for ad-vocacy and training in children's rights. This will be a center for know-how exchange between the Network member organizations as well as a center where children will develop their skills, learning what they can’t learn at school. We call this center “The House of children”.

Established 11 years ago, the National Network for Children carries out advocacy campaigns in part-nership with NGOs, businesses and institutions. Furthermore, its activities are supported by children themselves. "We create, defend and propose to the state and municipality institutions the certain poli-cies for children and families. Our aim is to consoli-date the non-governmental organizations working in the eld of children and families and to improve the communication, the know-how exchange and the sharing of best practices among those organiza-tions. Annually, our member organizations work with over 80,000 children and 13,000 families. The Network together with its members have achieved real changes in Bulgarian legislation", says the Ex-ecutive Director Georgi Bogdanov.

Today the challenge in front of the National Net-work for Children is to build a House for children which differs quite from the conventional under-standing of what constitutes a "House of Children".

The dream of a modern and up-to-date House of children was born two years ago growing gradually

into a decision to create and establish a Center for advocacy and training in child rights. Additionally, the vision for this Center is to be also a hub for all organizations working in the interest of the children throughout the country. What an extremely ambi-tious project for a country like Bulgaria! Thanks to the fact that the NNC manages to defend the idea before the OAK Foundation and Velux Founda-tion the Network already purchased a land in the city center of So a. This year the big task is to raise funds for the architectural design and the prepara-tion of the start of construction works.

To raise donations is not easy. To raise donations for long-term project that aims profound change and investing in education is even harder. But let’s face it: such a house is not a super uous luxury, but an investment in the future of the country. For invest-ment even in one child is an investment in the future of Bulgaria.

The administration of the National Network for Children is open to all kind of support from the business for the realization of the common idea – the "House of Children". “We are open for advices, logistics, in-kind donations or nancial aid” openly shares George Bogdanov. And, we can see it form now - any support is going to be accepted with grati-tude.

Courage to Build CauseThe National Network for Children raises funds to build a modern

House of Children

The National Network for Children Our organization is a network that brings together over 140 civil society organizations working with children and families across the country. The Net-work supports and advises the organizations uniting their positions and leading advocacy campaigns for implementing bettered policies and practices for children and their families at home. A guiding principle in the Network is respecting as well as protecting the children rights. We believe that all policies and practices that directly or indirectly affect children should be designed, implemented and monitored with the active participation of the children. We investigate the problems and nd solutions in four main areas of child welfare: education, health, family and justice. The results of our work are not seen easily as it take time and long term efforts. What we do requires persever-ance and sense of purpose to reach results that are stable and valid throughout the country.

The plot where the House of Children will be built is currently used as parking.

40new members

Founded in 2005, Fox Networks Group Bulgaria EOOD is a branch of Fox Networks Group (FNG), a primary operating unit of 21st Century Fox. FNG consists of Fox Television Group, which includes

Fox Broadcasting Company and 20th Century Fox Television; Fox Cable Networks, which includes FX Networks; Fox Sports Media Group, National Geo-graphic Partners, and Fox Networks Group Europe, Asia and Latin America. Together these units create, program and distribute on a global basis much of the world’s most popular entertainment, sports and non ction programming. In Bulgaria FNG operates a portfolio of world famous TV brands FOX, FOX life,

FOX Crime, National Geographic, Nat Geo Wild, 24KITCHEN and distributes BabyTV and Sky News. The So a of ce employs highly professional programming, creative, technical, sales, marketing and nancial teams and acts as a business coordination hub for 9 Balkan countries.

Contacts:Kassimir Nikolov

SVP Central & Eastern EuropeManaging Director Balkans & Russia

115G Tsarigradsko Shosse Blvd., oor 161784 So a

Tel: 02 437 22 80www.foxtv.bg

Software Group is a global technology company that is spe-cialized in delivery channel and inte-

gration solutions for institutions that provide nancial services. Founded in 2009 and headquartered in So a, Bulgaria, it currently serves a worldwide client base in more than 65 countries from 9 regional of ces located in Australia, Bulgaria, Egypt, Ghana, India, Kenya, Mexico, the Philippines and the USA. The company’s vision is to accelerate nancial inclusion by creating cutting-edge technology solutions. Some of Software Group’s customers are organizations

such as Bill & Melinda Gates Foundation, Interna-tional Finance Corporation (IFC), Asian Development Bank, Asian Confederation of Credit Unions (ACCU), Financial Sector Deepening (FSD), 7 of the top 10 Micro nance networks (Finca, OI, VFI, Accion, Hope International, Microcred, ReAll), Bank South Paci c, National Bank of Vanuatu, Fullerton Financial Services Holding, Fidelity Bank Ghana, Grameen Koota Finan-cial Services, etc.

Contacts:Kalin Radev, CEO

+35929231783www.softwaregroup.com

115N, Tzarigradsko Shosse Blvd., 1784 So a

V+O Communication is a leading strategic com-munications agency in Southeastern Europe with operations in Athens, So a, Belgrade, Bucharest, Tirana,

Nicosia, Lagos, and Brussels. The of ce in Bulgaria was established in 2004. We are a team of talented and passionate professionals with concrete knowl-edge and accumulated experience. An agency of conversation starters, enablers and storytellers of an original and disruptive sort that clients need. A group of restless creative thinkers that constantly seek for trailblazing ideas that create new perspec-

tives, change perceptions and generate growth. A full- edged business and strategy partner of compa-nies, institutions, and non-governmental organizations with unique client retention rate. V+O is a catalyst for growth that transforms, develops and gives strength and value to companies, brands, and organizations. A hub of creativity that breaks new ground in all types of communication landscapes, always making a difference.

Contacts: Svetlana Savova, CEO

tel.: +359 2 850 96 04www.vando.bg

102, Bulgaria Blvd., Block B, . 5, Of ce 60, So a, 1680