Parliament voted on February 11 in favour of opening another privatisation procedure for Bulgartabac Holding, after British-American Tobacco (BAT) withdrew its offer to buy the company earlier this month.
"We have to speed up the privatisation process to make the Bulgarian tobacco industry competitive. Once the protective duties are lifted in 2007, the year in which we will join the European Union, it will become difficult to sell Bulgarian cigarettes," Deputy Prime Minister and Economy Minister Lydia Shuleva told the National Assembly. She was personally blamed by opposition and ruling coalition members for being responsible for the failure of the most recent deal.
The MPs decision paves the way for a third attempt to privatise Bulgartabac, which has 22 factories and employs some 300 000 workers, most of them members of the Turkish minority in the south of the country.
A first attempt failed in 2003 after the Government sought to sell the company as a whole and to demand that the prospective buyer undertake not to fire any staff.
An attempt to sell three of the company's factories - in Sofia, Plovdiv and Blagoevgrad - to BAT fell through on February 1 when BAT withdrew its offer because of what it said was "the difficult political environment" in the country. Media reports said that BAT had offered to pay 200 million euro for Bulgartabac's best performing cigarette plants.
The debate in Parliament on February 11 showed that Movement for Rights and Freedoms (MRF), the junior coalition partner to the ruling National Movement Simeon II (NMSII), holds Shuleva personally responsible for the failure of the second attempt to divest Bulgartabac. The opposition would not agree with this however, and blamed it on the MRF itself and the incumbents.
"The MRF reacted with a delay and improperly laid the blame on Shuleva," said Blagoi Dimitrov, MP of the United Democratic Forces (UtDF). In his words, the MRF reaction came only when tobacco growers in certain regions started staging protests. The MRF is responsible for the bad strategy and the failure of the deal for Bulgartabac with BAT, Dimitrov said.
The blamed mainly Turkish-ethnic movement did not try it harder to refute the allegations and just demonstrated once again they were pleased with the negative impact. Hyussein Chaush of the MRF said that the Council of Ministers should open a new privatisation procedure, which must be transparent, objective and accommodating this country's national interests.
That was a view, opposition MPs could not agree with. "The Bulgartabac crisis caused serious jolts in Bulgaria's political life," said Georgi Bozhinov of the Bulgarian Socialist Party-dominated Coalition for Bulgaria. In his words, the choice of the Government was to reduce Bulgartabac Holding to the matrix proposed by the only possible buyer.
"The strategy was entirely wrong, Bulgartabac could have sought a merger with national monopolies at worst," Bozhinov observed.
During the Parliamentary hearings, Shuleva, who challenged her critics, presented a review of the privatisation progress made so far. According to her, a total of 17 tobacco factories are in sales procedures, with deals almost completed for six of them.
Bulgartabac's supervisory board has taken a decision on two privatisation contracts (for the factories in Topolovgrad and Parvomai), the approval of the other four sales is just a matter of time.
The best option for the future of the cigarette industry in Bulgaria is concentrating production in two factories only - the ones in Blagoevgrad and Sofia, Shuleva said. The restructuring of the other enterprises should continue. This proposal is contained in the supervisory board's report to parliament of November 19, she recalled.
The decision of the parliament to recommend the opening of a new sales procedure means that the holding's privatisation strategy remains in force and future deals will be closed for separate factories. The holding will remain a state structure until the objectives of the strategy are achieved.
The receipts from the sale of companies will be credited to the holding, not the budget. The body responsible for approving the sale of factories will be the supervisory board. The only outstanding issue for the time being is the members of the board, due to the expected cabinet reshuffles.
The fact that Government was quite disappointed of the failure in the negotiations with BAT and the latter's withdrawal was seen in statements that preceded the debate and decision in Parliament on February 11.
On February 9, Finance Minister Milen Velchev, said that a new procedure for the privatisation of Bulgartabac Holding should be opened as soon as possible. A successful deal would have secured a much faster rise in Bulgaria's credit rating, he said.
The sale of Bulgartabac, which analysts have seen as key for Bulgaria's image among the international investment community, has been drawn-out for years. The country rejected a planned 110 million euro sale of 80 per cent in Bulgartabac to a Deutsche Bank-led consortium in March 2003, saying the deal was unfavourable.
A previous attempt to sell the tobacco monopoly attracted four bidders but world industry heavyweights ignored the tender, saying they would only be interested in the profit-making factories.
An attempt by the previous government to sell the tobacco monopoly failed in 2000 after no bids were placed.