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Cablegate: Economy Minister: Bulgaria to Stay the Macro

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001597

SIPDIS

TREASURY FOR ATUKORALA; COMMERCE FOR SAVICH;
DEPT PLEASE PASS TO USTR ERRION

E.O. 12958: DECL: 09/12/2015
TAGS: ECON EINV KIPR ENRG EFIN ETTC PREL BU EUN
SUBJECT: ECONOMY MINISTER: BULGARIA TO STAY THE MACRO
COURSE; STEM CORRUPTION


Classified By: DCM JEFFREY D. LEVINE FOR REASONS 1.4 B & D

1. (C) SUMMARY: Ambassador Beyrle made an introductory call
on Roumen Ovcharov, the new Minister of Economy and Energy,
on September 12. He stressed USG support for Bulgaria's EU
accession in January 2007, as well as continued close
cooperation on economic and commercial issues. In the
ensuing discussion, Beyrle and Ovcharov discussed the need
for greater protection of intellectual property rights (IPR),
compliance with agreements to privatize state enterprises,
and continued improvement in the investment climate.
Ovcharov stressed Bulgaria's confirmed priority on its
nuclear energy industry, where he said U.S. companies'
experience was helpful. END SUMMARY

EU ACCESSION AND IMF/WORLD BANK
-------------------------------

2. (C) Ovcharov laid out his government's priorities, which
include EU accession, a "mature" relationship with
international financial institutions, continued
macro-economic success, and successful privatization of
remaining state-owned enterprises. The GOB's highest
priority is the passage of laws necessary for EU accession,
especially those related to Justice and Home Affairs, and
streamlining coordination between ministries in order to
convince its EU partners that Bulgaria is up to the tasks of
membership. Bulgaria is also ready to take the next step
toward a mature relationship with the IFIs, beginning with
more detailed discussion of problems and coordination of
solutions, according to Ovcharov.

PRIVATIZATIONS
--------------

3. (U) Ovcharov noted that gas and electric supply companies
are still state owned; one of his priorities will be moving
ahead with their privatization. However, according to
Ovcharov, the GOB still needs to support heavy industry,
particularly steel production, and agriculture, which could
continue to be a productive export for Bulgaria. Amb. Beyrle
raised the need for Bulgaria to finalize the sale of Boyana
film studios to American film producer NuImage, the winning
bidder in a recent privatization tender. Ovcharov noted that
Boyana's sale is currently tied up in the judicial system.

ENERGY/INFRASTRUCTURE
---------------------

4. (C) Ovcharov, who was Energy Minister in the previous
Socialist government, said the proposed Nabucco gas pipeline
could dilute Russian influence by transporting gas from
eastern to western Europe. Russian President Putin and Prime
Minister Stanishev also discussed the need for an oil
pipeline recently. Bulgaria understands the importance of a
Bosphorus-bypass pipeline to global oil interests, said
Ovcharov.

5. (C) Beyrle stressed U.S. companies' commitment to
improving Bulgaria's capacity as an electricity exporter in
the region. Ovcharov complained that the American company
AES has made little progress in more than six years (sic) on
its agreement to build a new power plant at Maritza East. He
also raised problems with the upgrades of Maritza East III
plant, originally started by U.S.-based Entergy.

6. (U) Bulgaria wants to maintain its position as the
best-developed nuclear industry in eastern Europe, said
Ovcharov. Thus, the GOB is reviewing the Belene nuclear
power plant project re-started by the previous government.
Licensing, safety and International Atomic Energy Agency
issues remain to be worked out. Amb Beyrle noted U.S.
industry -- Westinghouse and Parsons -- work on Kozloduy
nuclear plant, and reminded Ovcharov that U.S. companies were
well-positioned to compete for Belene sub-contracts.
Ovcharov said he appreciated USG assistance through EXIM-bank
loans and thought the U.S. companies' experience would be
useful in Belene.

IPR
---

7. (C) Beyrle pointed out that Bulgaria used to be a model of
success in tackling IPR problems, but recently has moved in
the other direction. He stressed the need for greater
cooperation between agencies, and for leadership from the top
on this issue. Ovcharov said the GOB is addressing the
issue, and has just passed optical disk media legislation
that "practically solves the problem." He pledged to
cooperate closely with the U.S.
BUSINESS CLIMATE
----------------

8. (C) Referring to the business climate, Ovcharov said the
current environment "allows for unequal treatment of
companies." His ministry is responsible for some of that
imbalance because of its role in licensing and other
administrative requirements that give rise to opportunities
for corruption. Ovcharov also said the administrative
process takes too long, with too many separate procedures.
Ambassador offered USG assistance in this area.

9. (C) Complex administrative procedures are not the only
problem facing potential investors. Ovcharov also
highlighted the need to reform the judicial and prosecutorial
systems. Currently judges move from one court to another,
with no real infusion of fresh blood. Real change is not
possible under this environment. He said the Prime Minister
and Socialist Party are prepared to make serious efforts in
this area.

10. (U) Ambassador stressed that passage of legislation
allowing the GOB access to bank and tax information was
necessary in order to complete negotiations on the Treaty on
the Avoidance of Double Taxation. This treaty will give
greater incentives to American businesses to invest here.

ARMS EXPORT CONTROLS
--------------------

11. (C) Ovcharov and Beyrle agreed on the good cooperation
between our countries on export controls. Ambassador
stressed USG desire that cooperation continue with the team
that has been in place at the working level, and that we
would like to review our consultative process with the newly
appointed Deputy Minister in charge of export controls.

12. (C) COMMENT: Ovcharov gives the impression that Bulgaria
is open for business despite some remaining problems. He
clearly recognizes the weaknesses inherent in the current
system and the need to address these problems in order to
attract substantially more foreign investment. The fate of
the privatization of Boyana Studios will be important in this
regard, sending a signal to U.S. investors, as will
Bulgaria's efforts to implement judicial reform in advance of
its EU membership. While his analysis of the benefits of
recent IPR legislation is overly-optimistic, his concerns
about AES' slow progress on the Maritza power plant has some
merit. The bottom line, however, is that there are numerous
opportunities in Bulgaria for U.S. companies in the coming
years, but the new government will need to work decisively to
prove it is serious about improving the business climate if
it is to reap the benefits. END COMMENT
BEYRLE

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