FREE ESSAY ON ANALYSIS ON BULGARIA

ANALYSIS ON BULGARIA

External historical events often changed Bulgaria's national boundaries in its first
century 
of existence, natural terrain features defined most boundaries after 1944, and no
significant 
group of people suffered serious economic hardship because of border delineation. Postwar

Bulgaria contained a large percentage of the ethnic Bulgarian people, although numerous 
migrations into and out of Bulgaria occurred at various times. None of the country's
borders was 
officially disputed in 1991, although nationalist Bulgarians continued to claim that
Bulgaria's 
share of Macedonia--which it shared with both Yugoslavia and Greece--was less than just 
because of the ethnic connection between Macedonians and Bulgarians. In 1991 Bulgaria had
a 
total border of about 2,264 kilometers. Rivers accounted for about 680 kilometers and the
Black 
Seacoast for 400 kilometers. Ridges in mainly defined the southern and western borders 
high terrain. The western and northern boundaries were shared with Yugoslavia and
Romania, 
respectively, and the Black Sea coastline constituted the entire eastern border. The
Romanian 
border followed the Danube River for 464 kilometers from the northwestern corner of the 
country to the city of Silistra and then cut to the east-southeast for 136 kilometers
across the 
northeastern province of Varna. The Danube, with steep bluffs on the Bulgarian side and a
wide 
area of swamps and marshes on the Romanian side, was one of the most effective rivers 
boundaries in Europe. The line through Dobruja was arbitrary and was redrawn several
times 
according to international treaties. In that process, most inhabitants with strong
national 
preferences resettled in the country of their choice. Borders to the south were with
Greece and 
Turkey. The border with Greece was 491 kilometers long, and the Turkish border was 240 
kilometers long. Bulgaria covers approximately 110,550 square kilometers. Its topography
is 
mostly hills combined with plateaus, with major flatlands to the north and the center of
the 
country. Its main mountain ranges Balkan and Rhodope include two major ranges, Pirin and

Rila. The climate is divided by mountains into continental and Mediterranean. The
rainfall is 
very variable, with largest amounts in higher elevations.
Its population estimate is 8,989,172. Its 1990 growth rate was negative .35 percent, and

its population density eighty-one per square kilometer. Bulgaria's official state
language is 
Bulgarian. There is also a main national minority language witch is Turkish. Bulgaria has
many 
different ethnic groups. The country is made up of 85% Bulgarians, 8.5% Turks, 2.5%
Gypsies, 
2.5% Macedonians, 0.3% Armenians, and 0.2% Russians. The country's religion is 85% 
Bulgarian Orthodox, 13% Muslim, 0.8% Jewish, and 0.5% Roman Catholic. There was a 
significant increase in public worship and observance of religious holidays beginning
in1990. 
The country's health system in post-World War II era became available to large part of 
population through a polyclinic system, with all medical services free. In 1990 the state
control 
was removed to promote diversity and specialization and reduce bureaucracy. There were
serious 
shortages of medical supplies in the early 1990s. Education is mandatory between the ages
of 
seven and sixteen. The re was an extensive growth in education system in post-World War
II era, 
with a rigidly Marxist ideological curriculum. A complete restructuring, modernization,
and 
depoliticization program in the education system began in 1990. 
Why do business in Bulgaria?
Bulgaria has many resources to offer. External investment in Bulgaria was slow right
after the 
abolishment of communism, but it has been increasing at an accelerated pace since the new

political and economical reforms have been implemented. Some of the resources that
Bulgaria 
has to offer to its foreign investors are location, high skilled workforce, and low
wages. 
Bulgaria's location between Europe and the Middle East gives the country a very strategic

position. Also all land routes from Euro to Asia pass through the country. It is also
equidistant 
from Europe, the Middle East, and Africa; this would make Bulgaria a perfect location for

manufacturing and distribution to the above mentioned regions. 
Culture
The social system in this country is quiet interesting. Most manifestations of
traditional 
Bulgarian familial and societal relations disappeared in the initial postwar wave of 
modernization, but some traditions were persistent and survived into the 1990s,
especially in 
parts of western and southwestern Bulgaria. Although postwar communist regimes nominally

emphasized emancipation of women, strong elements of paternalism and emphasis on
traditional 
female roles remained in Bulgarian society. By 1990 economic forces had eliminated
traditional 
extended families and limited the number of children, especially in urban areas. Some
evidence 
of resurging traditional relationships was seen in the immediate post-Zhivkov years. 
Bulgaria has been a crossroads for population movement. Early settlement occurred mainly
in 
the most fertile agricultural lands. After World War II, however, Bulgarian cities grew
rapidly at 
the expense of rural population in concert with state industrialization policy. 
Administrative Subdivisions
In 1991 Bulgaria was divided into nine provinces. These administrative units included the
city of 
Sofia and eight provincial districts: Burgas, Khaskovo, Lovech, Mikhaylovgrad, Plovdiv, 
Razgrad, Sofiya and Varna. Each province was named for t he city that was its
administrative 
center. Excluding the city of Sofia, the provinces encompassed territories ranging from
9.5 
percent of the country to 17.2 percent, and their population ranged from 7.5 percent to
14 percent 
of the national total. The eight provinces were divided into a total of 273 communities.
The city 
of Sofia was divided into districts. Because this system was established in 1987,
references to 
another type of district, the okrug remained common in the early 1990s. The new
government 
that took office in 1991 announced that yet another change was needed in Bulgaria's
political 
subdivisions because the 1987 system reflected the discredited policies of the Zhivkov
regime. 
The 1985 census recorded Bulgaria's population at 8,948,649, an increase of 220,878 over
the 
1975 census figure. At the end of 1990, the Central Statistical Bureau had estimated an
updated 
figure of 8,989,172, including about 100,000 more women than men. However, the estimates
for 
1989 and 1990 did not account for major emigrations in those years: first the massive
emigration 
of Turks in 1989, then the emigration of ethnic Bulgarians in 1990. Adjusting for
emigration 
figures, the population figures actually decreased between 1985 and 1990. Bulgaria's 1989

population density figure of eighty-one people per square kilometer made it one of the
least 
densely populated countries in Europe. Bulgaria's rate of population growth began a
steady 
decrease in the mid-1920s, and the trend accelerated thereafter. Before World War II, a
man's 
status in his community was determined by how many children he had. Women who did not 
marry, or who married but had no children, were seen as failures. As the country became
more 
urbanized, however, such traditional views gradually disappeared. Large families were no
longer 
the economic necessity they had been in agricultural society, and extra children became a
burden 
rather than a boon. As women became more educated and less accepting of the traditional 
patriarchal family norms, their attitude toward childbearing changed. In 1990 the
majority of 
Bulgarian women believed two children ideal for a family, but because of economic and
social 
conditions, their personal preference was to raise only one. By the 1980s, this change in
attitude 
had begun to prevail even in villages and with less-educated women. In 1985, 75 percent
of 
Bulgarian women indicated that they would not like to have any more children. Families
with 
three or more children became a rarity, and women who opted for more than two children
had a 
lower standard of living and were generally less respected in society. Although few
social 
planners advocated a return to the large families of the past, Bulgarian policy makers
were 
dismayed that the population did not increase. During the Zhivkov era, the mass media and

scholarly journals expressed concern that the nine millionth Bulgarian had not yet been
born, and 
that families were unwilling to have two children instead of one. By 1985 population
experts 
were urging that 30 to 40 percent of families have three children to make up for those,
which had 
none or only one. 
Meanwhile, although the 1973 Politburo had affirmed a family's right to decide how many 
children to have and when they should be born, in the 1970s and 1980s contraceptives were
not 
available in sufficient quantity for family planning. Strict restrictions on abortions
established by 
the Zhivkov regime was repealed in 1990. Partly because contraceptives were in short
supply, 
abortions had surpassed births by 1985 despite the restrictions. Until 1990 bachelors and

unmarried women had to pay a 5 to 15 percent bachelors' tax depending on their age. In a
more 
positive step, laws provided family allowances for children under sixteen. The age limit
for the 
family allowance was raised to eighteen in 1990 for children still in school. In 1990
Bulgarian 
demographers recorded a negative growth rate for the first time. At that point, the
number of live 
births per woman were 1.81. Demographers reported that the figure must increase to 2.1 to

maintain the country's natural rate of population replacement. Mortality figures in
Bulgaria were 
also much higher than those of the developed European countries. The most alarming 
demographic trend of the late 1980s, however, was substantially greater emigration
totals. The 
1989 Turkish exodus caused by the Zhivkov assimilation campaigns had a severe impact on
the 
Bulgarian labor force. Then, in 1990, economic reform brought harsh living conditions
that 
stimulated a wave of emigration by ethnic Bulgarians. As of March 1991, some 460,000 
Bulgarians had emigrated, bringing the total number of Bulgarians living abroad to about
3 
million. The majority of the emigre population remained in nearby countries (1.2 million
in 
Yugoslavia, 800,000 in other Balkan countries, and 500,000 in the Soviet Union). Smaller

numbers went as far as the United States (100,000 to 120,000), Canada (100,000), and
Argentina 
(18,000), and Australia (15,000). Throughout its history, the Balkan Peninsula was a
homeland 
for many diverse ethnic groups that were able to preserve their national identities
despite being 
shifted among the jurisdictions of powerful empires. In modern Bulgaria, the opposite has
been 
true: the largest minority ethnic group, the Turks, remained in territory that their
Ottoman 
ancestors had occupied. After the fall of the Zhivkov government, Bulgaria moderated its

minority policy substantially to improve delicate relationships with neighboring
countries such 
as Turkey and Yugoslavia. The 1893 census listed the following nationalities and
religious 
groups in order of prevalence: Eastern Rite Orthodox Bulgarians, Turks, Romanians,
Greeks, 
Gypsies, Jews, Muslim Bulgarians, Catholic Bulgarians, Tatars, Gagauzi (a Turkishspeaking

people of the Eastern Orthodox faith), Armenians, Protestant Bulgarians, Vlachs (a
Romanian-
speaking people in southwest Bulgaria), and foreigners of various nationalities, mainly
Russians 
and Germans. Migrations and boundary changes after the two world wars reduced the list 
somewhat; few Greeks and Romanians remained in Bulgaria by 1990. However, Bulgaria's 
communist leaders often tried to deny the existence of minority groups by manipulating or

suppressing census data or by forcibly assimilating undesirable groups. In 1985, at the
height 
of the last anti-Turkish assimilation campaign, a leading Bulgarian Communist Party
official 
declared Bulgaria a one-nation state and affirmed that the Bulgarian nation has no parts
of 
other peoples and nations. After the fall of Todor Zhivkov in 1989, all the minorities in
Bulgaria 
progressed somewhat toward self-determination and freedom of expression. New minority 
organizations and political parties sprang up, and minority groups began publishing their
own 
newspapers and magazines. Non-Bulgarian nationalities regained the right--curtailed in
the 
Zhivkov era--to use their original names, speak their language in public, and wear their
national 
dress. In 1991 significant controversy remained, however, as to how far the rights of
minorities 
should extend. Legislators making policy on such issues as approval of non-Bulgarian
names and 
Turkish-language schools faced mass protests by nationalist Bulgarians, who successfully

delayed liberalization of government policy on those issues. During the Zhivkov era,
Bulgaria 
signed several friendship treaties with other Comecon nations to ease the exchange of
workers. 
In the 1980s, for example, a large number of Bulgarians worked in the construction and
timber 
industries of the Komi Autonomous Soviet Socialist Republic under an exchange agreement
with 
the Soviet Union. Workers were expected to return to their own countries when their
contracts 
ended, but they did not always do so. For example, some Vietnamese construction workers
sent 
to Bulgaria under Comecon agreement in the 1980s remained, and in 1991 the Vietnamese 
population of Bulgaria was 11,000. Because they arrived completely unprepared for life in

Bulgaria and began working after only one month of training and language courses, the 
Vietnamese who remained in Bulgaria generally received the hardest and lowest-paying jobs
and 
often became involved in criminal activity. In 1991 several violent incidents involving 
Vietnamese provoked calls for their repatriation. In response, the government made plans
to 
expel all resident Vietnamese from Bulgaria in 1992. The Bulgarian Orthodox Church, which

played a crucial role in preserving Bulgarian culture during the Ottoman occupation,
remained 
central to the sense of Bulgarian nationhood even under the postwar communist regimes. In
spite 
of the official status of Orthodoxy, Bulgaria also had a tradition of tolerance toward
other 
Christian religions. Tolerance of Islam, however, remained problematic under all forms of

government because of that religion's historical identification with the occupation and 
subjugation of Bulgaria. 
In 1991 most Bulgarians were at least nominally members of the Bulgarian Orthodox Church,
an 
independent national church like the Russian Orthodox Church and the other national
branches 
of Eastern Orthodoxy. Because of its national character and its status as the national
church in 
every independent Bulgarian state until the advent of communism, the church was
considered an 
inseparable element of Bulgarian national consciousness. Baptism, before 1944 an
indispensable 
rite establishing individual identity, retained this vital role for many even after the
communists 
took power. The power of this tradition caused the communist state to introduce a naming
ritual 
called civil baptism.
Although communist regimes could not eliminate all influence, they did undermine church 
authority significantly. First, the communists ruled that the church only had authority
on church 
matters and could not take part in political life. Second, although the constitution made
the 
church separate from the state, the clergy's salaries and the fees needed to maintain the
churches 
were paid by the state. This meant that the clergy had to prove its loyalty to the state.
From 1949 
until 1989, religion in Bulgaria was mainly controlled by the Law on Religious
Organizations, 
which enumerated the limitations on the constitution's basic separation of church and
state. The 
number of Orthodox priests declined from 3,312 in 1947 to 1,700 in 1985. Priests
associated 
with the prewar regime were accused of engaging in illegal or antisocialist activities,
supporting 
the opposition, and propagandizing against the state. Upon taking control of all church
property, 
the state had the choice of maintaining churches or closing them down. Thus, for example,
Rila 
Monastery, the largest monastery in Bulgaria, became a national museum in 1961. In 1987
the 
Orthodox Church had 3,720 churches and chapels, 120 monasteries, 981 regular and 738
retired 
priests, 135 monks, and 170 nuns. The church was administered by a Holy Synod. Under 
communist rule, the synod had the authority to publish limited quantities of religious
material 
such as magazines, newspapers, and church calendars. A new translation of the Bible was 
published in 1982, but in such small quantities that the size of the printing could not
be 
determined. By 1988 the 1982 edition was being resold at ten times the original price.
After the 
fall of Zhivkov, the Orthodox Church and other churches in Bulgaria experienced a
revival. 
Church rituals such as baptisms and church weddings attracted renewed interest, and
traditional 
church holidays were observed more widely. Christmas 1990, the first Christmas under the
new 
regime, was widely celebrated and greatly promoted in the mass media. By contrast,
Christmas 
had received little public attention during the postwar years. The government returned
some 
church property, including the Rila Monastery, and religious education and Bible study
increased 
in the early post-Zhivkov years. The Orthodox seminary in Sofia returned to its original
home in 
1990 and attracted over 100 male and female students in its first year of operation. The

Konstantin Preslavski Higher Pedagogical Institute added a new theology department to
train 
theology, art, and music teachers as well as priests. The Holy Synod planned to publish
300,000 
Orthodox Bibles in 1992. 
Between independence and the communist era, the Bulgarian government had used its social

welfare funds mainly for government workers, army officers, white-collar workers,
craftsmen, 
and tradesmen. The 1949 social welfare law founded a new social welfare system that
endured 
into the 1990s. The new system greatly expanded the categories of people eligible and the

amounts they could receive. The social welfare system in 1991 was largely based on the
1951 
section of the Labor Code which regulated monetary compensation and supplements, and the

1957 Law on Pensions. Both laws were revised countless times and no longer agree with
each 
other. The National Assembly delayed creation of a new law until the new constitution was

ratified in the summer of 1991. In 1991 two-thirds of Bulgaria's social welfare budget
was spent 
on pensions; the rest went for monthly child-care allowances and other programs. As of
late 
1990, the Bulgarian government provided over 4 billion leva per year to 2,300,000
pensioners— 
almost one fourth of the entire population. To keep pace with the rising cost of living
in the 
transition to a Western economic system, the government had to index pensions several
times in 
1990. By the beginning of 1991, some 165 leva were being added monthly to every pension,

casting doubt on the long-term possibility of maintaining the program. The ratio of
Bulgaria's 
pensioners to its total population was the largest in the world, almost twice that of
most Western 
countries. Because the society was aging, some experts declared that workers should be 
encouraged to remain in the work force and participate actively in society much longer
than had 
been the practice under the communist regimes. 
In early 1991, in a further effort to keep pace with the rising cost of living, the
Council of 
Ministers established a new minimum wage and new subsidy levels for all social welfare 
programs. Anyone who had received the old monthly minimum wage of 165 leva would now be 
compensated 270 leva to provide for a new minimum wage of 435 leva. This minimum wage 
was subsequently changed three times in 1991, peaking at 518 leva. The 1991 program also
gave 
242 leva to pregnant or nursing women and to those on temporary workers' disability.
Child-care 
compensation for households with children under three years of age was raised to 90 leva,
with a 
monthly supplement of 100 leva per child. In 1991 several cost-of-living increases were
added to 
those categories as well. In 1991 unemployment compensation was set at 270 leva per
month; 
students over eighteen received 130 leva per month; graduate students, 230 leva. Those 
payments were funded from the state budget and from enterprise salary budgets, neither of
which 
seemed adequate to keep pace with rapidly changing prices in 1991. Under socialism all
citizens 
who had been awarded the title active fighter against fascism and capitalism for military
or 
civilian contributions in World War II received a large pension and special privileges
such as 
free public transportation, free medical prescriptions, and free vacations at special
resorts. After 
much controversy, those privileges were abolished in 1990. 
Legal System In Bulgaria
Guided by the striving for transition to a market economy and encouragement of foreign
investments the Bulgarian Parliament passed a series of laws: Law on Commerce, Law on
Foreign Investments, Law on Banks, Law on Insurance, Law on Corporate Taxation, Value
Added Tax Law, Law on Excise Duties, Income Tax Law; Concessions Law; Law on
Transformation and Privatization of State-Owned and Municipal Enterprises, Law on
Protection of Competition, Law on Cooperatives, Law on International Commercial
Arbitration, Equal rights and position of the Bulgarian and the foreign subjects. 
Priority aspects of the business activities of the foreign persons are legally regulated
likewise in the Constitution of the Republic of Bulgaria, in the Council of Ministers,
and in some other operative legal acts. Bulgaria has concluded bilateral agreements for
the mutual protection of investments with various countries like Germany, France, Italy,
China, USA and Finland; agreements for economic and trade cooperation with Italy, Germany
and the United Kingdom. There is an unlimited foreign participation in all forms of
business activity registered in Bulgaria. 
The forms of activity in Bulgaria are: a branch; a representative office; a private
merchant; a limited liability company (single-person or with the capital of several
persons); an unlimited partnership; a public limited company; a limited partnership;
holdings; cooperative; a joint stock company; a sole trader; a joint venture. Private
merchants, branches and representations aren't independent legal entities. Branch offices
may engage in economic activities; they have their own property and compile a separate
balance sheet. Representation offices may not engage in economic activities. Holdings and
cooperatives are legal entities.
The forms of business organization, save representative offices and co-operatives, are
governed by the Commerce Act 1991, as for certain types of companies (e.g., banks,
insurance companies, public companies) special rules apply. Representative offices and
co-operatives are regulated respectively by the Foreign Investments Act 1997 and by the
Co-operatives Act 1999. The most appropriate types of companies for conducting business
in Bulgaria are the limited liability and the joint-stock company, including in the form
of a single-member company. These types of companies must be entered into the commercial
register of the relevant district court.
Private Limited Company is a commercial company, whose capital is formed by the quotas 
(shares) of its shareholders. The members' liability is limited to the amount of the
capital they 
have subscribed. A private limited liability company must be founded by at least two
persons, 
including foreign natural or legal persons. The minimum authorized capital is BGN 5,000.
At 
least 70% of the capital must be paid before registration. One person owns a private
limited 
company, including a foreign individual or legal entity. The sole owner exercises the
powers of 
both the general meeting and the manager, unless another manager has been appointed to
run the 
company. The sole owner's liability is limited to the amount of the capital subscribed. 
Joint-Stock Company is a company whose capital is divided into shares, each of a par
value of at least BGN 0,1. Any higher par value must be divisible by 100. The company is
liable to its creditors to the extent of its assets. A Joint-Stock Company is required to
have no fewer than two shareholders, including foreign individuals and legal persons. The
only exception to this rule occurs when the State is the only founder and, therefore, the
sole owner of the whole capital of the company. In this case we have a one-member public
limited company. The minimum capital is BGN 50,000 or BGN 100,000 if the capital is
raised by subscription. A higher minimum capital is required to establish a bank,
insurance company or an investment company: banks - BGN 10,000,000; Insurance companies-
BGN 2,000,000 for life insurance and personal accident insurance- BGN 3,000,000 for
property insurance- BGN 4,000,000 for reinsurance; Investment companies - BGN
500,000,000
Public Company is a new type of joint-stock company introduced by the Securities, Stock
Exchanges and Investment Companies Act, now repealed by the Public Offering of Securities
Act (POSA). A company must register as public where it makes a primary offering of
shares; or its shares are registered for trading on an organized securities market.
Another way to create a public company is through a business combination involving at
least one public company - the surviving company will be public, too.
Holding company is any joint-stock company, partnership limited by shares or private
limited company. A holding company can hold interest in any form or participate in the
management of and control over other companies. It can also conduct its own business, or
hold interest in other companies and control them. The activities a holding can perform
or is disallowed to perform are exhaustively enumerated in the Commerce Act.
Branch - foreign legal entities registered abroad, as well as foreign individuals or
persons other than legal entities can register a branch in Bulgaria if fully incorporated
and entitled to conduct business activities under their national law. A branch of a
foreign person is part of its parent company, but has a different seat. A branch is not a
legal entity. However, it must keep account books just like independent legal entities
do. Although branches are not legal persons, branches of non-resident companies have
separate balance sheet and profit and loss account. They are subject to corporate income
tax at the standard rate of 20%, and to other general taxes too. Foreign persons,
entitled to engage in business activity under their national law, can set up
representative offices. 
Representative offices are not legal entities and may not engage in economic activities.
They are not subject to corporate taxation.
Joint Venture is a company formed jointly by a Bulgarian and a foreign partner. The
extent of the foreign participation in a joint venture is not limited. Joint ventures
must take one of the forms of business entities under the Commerce Act. Establishing a
joint venture is one of the forms of investing in Bulgaria. Other forms of business
organizations are: 
General Partnership is a company founded by at least two partners for the purpose of
engaging in commercial transactions under a joint business name. The partners bear joint
and unlimited liability. A foreign person must be resident in Bulgaria in order to
participate in a general partnership. There are no requirements for minimum or maximum
amount of registered capital. 
Limited Partnership is a company founded by two or more persons for the purpose of
engaging in commercial transactions under a joint business name. In a limited partnership
there are one or more general partners, bearing unlimited liability, and one or more
limited partners, whose liability is limited to the extend of their agreed capital
contribution. 
Partnership Limited by share is a transitional entity between a joint-stock company and a
limited partnership, and shares features of both legal forms. A partnership limited by
shares has general partners, who have unlimited liability, and at least three limited
partners, whose liability is limited to the extent of their shareholding. To be able to
participate in a partnership limited by shares the foreign general partners must be
residents in Bulgaria. 
Co-operative Society - a co-operative is a voluntary society of individuals, with a
non-fixed capital and a non-fixed number of members, who carry out economic and other
activities to satisfy their interests, by mutual aid and co-operation. A co-operative is
a legal entity and is deemed a merchant under the Commerce Act. Co-operative members can
only be individuals, at least 7 in number. To participate in a co-operative, foreign
person should have permanent residence in Bulgaria. 
Sole Trader - any capable individual, residing in the country, can register as a sole
trader. 
State Companies - they exist under the forms of one-member private limited or joint-stock
companies where the quotas/shares are solely owned by the State. These forms of business
are established to facilitate the process of privatization of the state companies through
the sale of their shares to private persons. 
Municipal Companies - the above mentioned in respect of the State and the its fully or
partially owned companies is accordingly relevant to the municipalities and their
companies.
Taxes. Bulgaria has signed agreements for avoiding double taxation with 41 countries. A
company is resident in Bulgaria for tax purposes if it is registered in Bulgaria.
Companies resident in Bulgaria are subject to tax on their worldwide income. Foreign
entities are subject to tax on their Bulgarian-source income, but their Bulgarian
branches are considered Bulgarian resident companies for tax purposes. Corporate income
tax Under the Corporate Income Tax Act (CITA) states that all companies and partnerships
are liable to corporate income tax. Tax on insurance and re-insurance premiums Insurance
companies pay one-time final tax on insurance premiums and on any other kind of income
and are not obliged to pay corporate income taxes separately for their activities other
than insurance or re-insurance. The rate of the special tax for insurance companies is
7%, except for life insurance companies whose income will be taxed at 2%. Entertainment
and representative expenses and business gifts, that do not bear the trademark or the
business name of the company, as well as donations and sponsorships, which are not
accounted for as expenses, are subject to a final 25% tax. Social expenses representing
fringe benefits in kind, as well as expenses for maintenance, repair and exploitation of
cars are subject to a final 20% tax. Capital gains are included in the corporate income
and taxed at the full corporate tax rate. 
Foreign income. Income, derived outside Bulgaria by resident entities and branches of
non-residents, is included in the taxable base for corporate income tax purposes.
Resident entities utilize tax credit for the foreign source income, which is taxed
abroad. The tax credit is limited to the amount of the Bulgarian tax obligation, which
would have been levied if the profit or income had originated from Bulgaria. Loses are
carried forward over the following five years (ten years - for banks). Carry-forward of
foreign source losses is restricted. Loss carry-back is not permitted. 
Tax Exemptions. Entities, investing in regions with a high unemployment, enjoy a
reduction of the corporate income tax if the investment is in the form of acquisition,
modernization or reconstruction of tangible fixed assets such as buildings, equipment,
transmitters, electricity transmitters, and telecommunication lines. The fund for the
investment is generated from the contributions made by shareholders for acquisition of
new shares (including on incorporation) in the company making the investment. If the
requirements for the tax reduction are met the corporate tax is reduced by an amount
representing 10% of the amount of the share contributions used in the above manner. The
sum for the reduction is accounted for as reserves and if greater than the corporate tax
in the respective year it can be used to reduce the corporate tax in the following five
years.
Violations and Fines. A fine of at least BGN 100, but not exceeding BGN 500, shall be
imposed on any person under an obligation pursuant to the Commerce Law which does not
apply for registration within the prescribed time periods or does not present documents
or signatures provided for in this Law. If, after a fine has been imposed, the person
under an obligation does not apply for registration or does not present the documents or
signatures within the time period determined by the court, further fines shall be imposed
upon such person until the acts are performed. Fines shall also be imposed upon officials
who, when they are obliged to do so: have not informed officially the respective district
court of the occurrence of a circumstance which is subject to registration, and do not
undertake the necessary action for registration. The statements for establishing the
violations shall be drawn up by the mayors of communities, and the penal orders shall be
issued by the mayors of municipalities or persons designated by them. The establishment
of the violations, the issuing, appeal and enforcement of the penal orders shall be done
pursuant to the Law on Administrative Violations and Penalties.
Bulgarian intellectual property legislation has been strengthened recently, and now
includes modern patent and copyright laws and criminal penalties for copyright
infringement. Bulgarian legislation in this area is considered to be among the most
modern in Central and Eastern Europe. Infringement of trademarks is a problem in Bulgaria
for many U.S. manufacturers. While the law allows for confiscation of offending products,
infringement is deemed a misdemeanor under the Penal Code and subject to a nominal fine
that does not act as a deterrent to illegal activities. However, the competition law
provides for fines of up to BGN 500,000 for companies, which use misleading packaging,
trademarks or other signs, which injure the interest of competitors.
Bulgaria made the most difficult part of the transition. The Stability Pact, a
comprehensive regional plan for economic development, democratization and security, will
lead to new and expanded trade and investment opportunities in Bulgaria over the long
term. The U.S. Government vigorously supports efforts to bring Stability Pact benefits to
Bulgaria. The Bulgarian Government will create conditions for opening of new jobs, for
elimination of the bureaucratic obstacles and difficulties in business, for tax burden
alleviation, for easier and quicker access to financial and material resources for
development of production and trade. 
POLITICAL SYSTEM/ GOVERNMENT
Having fought on the losing side in both World Wars, Bulgaria fell within the Soviet
sphere of influence and become a People's Republic in 1946. Communist domination ended in
1991 within the dissolution of the USSR, and Bulgaria began the contentious process of
moving toward political democracy and a market economy while combating inflation,
unemployment, corruption, and crime. Today, reforms and democratization keep Bulgaria on
a path toward eventual integration into the EU and NATO.
Besides that, Bulgaria has the following active international organization participation:
ACCT, BIS, BSEC, CCC, EBRD, EU (applicant), FAO, IAEA, IBRD, ICAO, ICFTU, Inmarset,
Intelsat (non-signatory user), Interpol, NAM (quest), WEU (associate partner).
Ambassador Snezhana Botusharova carries the diplomatic representation of Bulgaria in U.S.
The Bulgarian flag has three equal horizontal bands of white (top), green, and red; the
national emblem formerly on the hoist side of the white stripe has been removed. It
contained a rampant lion within a wreath of wheatears below a red five-pointed star and
above a ribbon bearing the dates 681 (first Bulgarian state established) and 1944
(liberation from Nazi control). 
POLITICAL RCONOMY-OVERVIEW
In April 1997, the current ruling Union of Democratic Forces (UDF) government won 
pre-term parliamentary elections and introduced an IMF currency board system which
succeeded 
in stabilizing the economy. The triple digit inflation of 1996 and 1997 has given way to
an 
official consumer price increase of 6,2% in 1999. Following declines in GDP in both 1996
and 
1997, the economy grew an officially estimated 3,5% in 1998 and 2,5% in 1999. In
September 
1998, the IMF approved a three year Extended Fund Facility that provides credits worth 
approximately $900 million, designed to support Bulgaria's reform efforts. In 1999, an 
unfavorable international environment- primarily caused by the Kosovo conflict- and
structural 
reforms slowed economic growth, but forecasters are predicting accelerated growth over
the next 
several years. The government's structural reform program includes: (a) privatization
and, where 
appropriate, liquidation of state-owned enterprises (SOEs); (b) liberalization of
agricultural 
policies, including creating conditions for the development of a land market; (c) reform
of the 
country's social insurance programs; and (d) reforms to strengthen contract enforcement.
THE GOVERNMENT
We begin this section with the extract from the Chapter 1 Fundamental Principles, 
Article1:
"(1) Bulgaria is a republic with a parliamentary form of government.
(2) The entire power of the state shall derive from the people. The people shall 
exercise this power directly and through the bodies established by this Constitution.
(3) No part of the people, no political party nor any other organization, state 
institution, or individual shall usurp the expression of the popular sovereignty."
Bulgaria is a Parliamentary Republic and the Legislature is the basic power within 
the country. The National Assembly is vested with the legislative power and exercises 
parliamentary control. Its mandate is for a term of four years. The Council of Ministers
is the 
principal body of the executive branch. Chaired by the Prime Minister, it heads and
implements 
the domestic and the foreign policy of the state, ensures the public order and the
national 
security, exercises the overall guidance over the state administration and the Armed
Forces. The 
Prime Minister designate is nominated by the largest parliamentary group and is given a
mandate 
by the President to form a cabinet. The proposed Council of Ministers is elected by the
national 
Assembly. The activity of the Council of Ministers is under the direct control of the
National 
Assembly. Individual ministers and the Prime Minister are obligated to answer questions
and 
interpellations addressed by members of the National Assembly.
The statute and the competence of the local bodies of the executive branch depend 
on the territorial division of the Republic of Bulgaria. The municipality is the basic 
administrative territorial unit at the level of which self-government is exercised. The
region is an 
administrative territorial unit where the state authority is decentralized for the
purpose of 
pursuing an effective regional policy. A regional governor, appointed by the Council of 
Ministers, performs the government of the region.
The Supreme Legislative body in the country is the National Assembly, which exercises 
parliamentary control over the government. The judiciary is independent but continued to

struggle with structural and staffing problems. Most citizens have little confidence in
their legal 
system.
HUMAN RIGHTS PRACTICES IN BULGARIA
Most security services are the responsibility of the Ministry of the Interior, which 
controls the police, the National Security Service (civilian intelligence), internal
security troops, 
border guards, and Special Forces. A number of persons known to be involved in repressive

activities during the communist regime returned to senior-level positions in the security
services 
in 1995. Some members of the police force committed serious human rights abuses.
The post-communist economy remains heavily dependent on state enterprises. Most 
people are employed in the industrials and service sectors; key industries include food 
processing, chemical and oil processing, metallurgy, and energy. Principal exports are 
agricultural products, cigarettes and tobacco, chemicals, and metal products. Continued
political 
and social resistance has retarded the transformation of the economy into a
market-oriented 
system. Privatization of the large communist-era state enterprises has been very slow and

is the main reason for Bulgaria's economic stagnation. The government is now developing a

mass privatization program, which (if successfully implemented) would partially address
this 
problem. The service and consumer goods sectors in private hands continued to be the most

vibrant. Although all indicators point to a reviving economy this year (2001), the last
several 
years' decline has affected the employment of people from ethnic minorities
disproportionately. 
The annual per capita Gross Domestic Product of $1.300 provides a low standard of
living.
The government generally respected the human rights of its citizens, but problems 
remained in some areas. Constitutional restrictions on political parties formed on
ethnic, racial, 
or religious lines effectively limit participation. There were several reports that
police used 
unwarranted lethal force against suspects and minorities, and security forces beat
suspects and 
inmates. Human rights observers charged that the security forces are not sufficiently
accountable 
to Parliament or to society and that the resultant climate of impunity is a major
obstacle to 
ending police abuses. Prison conditions are harsh, and pretrial detention is often
prolonged. 
Mistreatment of ethnic minorities by the population at large is a serious problem, and
both the 
government and the private citizens continued to obstruct the activities of some
non-Eastern 
Orthodox religious groups. Discrimination and violence against women and Roma are serious

problems.
SPECIAL ECONOMIC CIRCUMSTANCES
Bulgaria is still a largely cash economy. Visitors should exchange cash at banks or 
Change Bureaus. Some Change Bureaus charge commissions on both cash and travelers' check

transactions, which are not clearly posted. People on the street who offer high rates of
exchange 
are confidence tricksters intent on swindling the unwary traveler. Old, dirty or very
worn 
denomination bank notes are often not accepted at banks or Change Bureaus. Major branches
of 
the following Bulgarian banks will cash travelers' checks on the spot for Leva, the
Bulgarian 
currency: Bulbank, Bulgarian Postbank, Biochim, First Investment Bank and United
Bulgarian 
Bank (UBB). UBB also serves as a Western Union agent and provides direct transfer of
money 
to travelers in need. ATM cash machines are increasing in numbers in Sofia and other
major 
cities. Most shops, hotels, and restaurants, with the exception of major hotels, still do
not accept 
travelers' checks or credit cards. Due to the potential of fraud and other criminal
activity credit 
cards and ATM's should be used with caution. On July 5 1999, the Lev was re-denominated
at a 
rate of 1,000 old Leva to one new Lev.
BULGARIA AND NATO: LETTING NATO FORCES USE BULGARIAN TERRITORY
In Sofia (March 29, 2001), Bulgarian Foreign Minister Nadezhda Mikhailova said on 
Thursday an agreement with NATO now before parliament would allow alliance forces to use

Bulgarian territory in the event on a Balkan crisis.
The government has asked parliament to ratify the agreement, which was signed in 
Brussels last week. Ratification is expected on Friday or early next week. The text of
the 
agreement and an accompanying note from the government say Bulgaria would allow NATO 
forces taking part in operations to secure peace in the Balkans to use its land, air and
sea space. 
Western diplomats say that quick expansion of NATO is unlikely, adding that states like 
Bulgaria has first to reform their armies and prove themselves in regional cooperation.
THE BALKAN PROBLEM IN BULGARIA
Bulgaria's President Peter Stoyanov said on March 31, 2001 that recasting Balkan 
borders along ethic lines would be disastrous for the volatile region." Redrawing borders
in the 
Balkans in search of an identity for newly formed States based on ethnic or religious 
homogeneity threatens to destroy the very foundation of European civilization", Stoyanov
told at 
a conference in Sofia.
His comments came after respected Balkans watchdog the International Crisis Group said 
that the West should stop trying to prevent the break-up of what remains of the former 
Yugoslavia. Western powers fear the break-up of federal Yugoslavia could fuel ethnic
violence 
and trigger demands for more border changes in the region where a large ethnics Albanian

community straddles several internal and international frontiers.
Stoyanov said ethnic Albans in Yugoslavia had a right to live under a democratic system.

He said the West should support promotion of civil societies in the Balkans to foster
ethnic 
tolerance and help the region shed its image as Europe's trouble spot.
Bulgaria suffered economic losses but remained untouched during a decade of wars 
accompanying the break-up of the former Yugoslavia. It allowed NATO to use its airspace 
during the 1999 bombing of Yugoslav forces, which drove them out of Kosovo.
But concerns have been raised in Bulgaria by the recent fighting between neighboring 
Macedonia and ethnic Albanian guerrillas along the Macedonia-Kosovo border.
BULGARIA SETS STAGE FOR PARLIAMENTARY POLL
Bulgarian president peter Stoyanov on March 29, 2001 set June 17 as the date of a
parliamentary 
elections, expected to be a tight race in which exiled King Simeon II has emerged as a
possible 
wild-card candidate. The parliamentary poll is also sure to be overshadowed by the crisis
in 
neighboring Macedonia which has unnerved politicians, scared citizens and further
underscored 
investor wariness over the Balkan region.
The government of Ivan Kostov (he leads UDF, the center-right party), is the first in the

Balkan state to serve a full four-year mandate since the end of one-party rule in 1989.
The government's popularity has waned due to falling living standards, painful market 
reforms and a series of public scandals involving some top UDF officials.
Opinion polls show that the public is desperate for an alternative and the King has 
emerged as a potentially welcome third force.
IMF APPROVES $66 MLN LOAN INSTALLMENT FOR BULGARIA
The International Monetary Fund said it had approved a $66 million loan to Bulgaria, the

final disbursement under a three-year deal which helped the Balkan country's recovery
from a 
1997 financial crisis.
The Washington-based lending agency said its decision to disburse the funds came after 
the completion of a review of Bulgaria's economic performance under a lending agreement 
approved in September 1998.
The IMF said Bulgaria had maid significant progress in its transition to a full market 
economy. In a written statement, the IMF official praised government leaders in Sofia for

keeping inflation and the current account deficit under control. 
The IMF acting chairman, Fischer, said Bulgaria's economic growth was expected to remain

strong. However, Fischer warned there were still some areas that bear watching. Fischer
said: "A 
strict incomes policy for state enterprises and steps to improve labor market flexibility
and the 
business environment will help enhance competitiveness."
ECONOMIC ENVIRONMENT IN BULGARIA
In Bulgaria 2000 passed to confirm the financial stabilization in the country, supported
by 
the currency board arrangement, which was introduced in mid-1999. The Government of 
Bulgaria (GOB) was able to achieve most of the preliminary set indicator, co-coordinated
with 
the IMF and the World Bank for the development of the country. Tight constraints on
fiscal and 
monetary policy yielded remarkably low inflation at just 1%, budget surplus and moderate

current account deficit. The GDP is finally on a rise after a long series of collapse,
now estimated 
to have grown by 3.5%. Improved legislation and supervision in the banking sector has 
constructed more prudence and eventually ease in the crediting policies to support
revival in the 
real sector. However, the needed real sector restructuring was again delayed, which could
turn 
into a major obstacle for the possibility of future growth and the ability of maintaining
economic 
stability over the medium term. Privatisation of the major enterprises from the banking
and real 
sector is still pending, and unpopular measures for the liquidation of loss-accumulating
units will 
still have to be taken, thus testing the political will and decisiveness of the
government in the eve 
of coming elections.
Economic figures announced by the authorities are strongly encouraging for the country's

potential, though testing times still lie ahead. Growth opportunities in the short run
may turn 
strongly vulnerable to outside effects and rapid measures for recovery of the real sector
will be 
vital. New laws to support pension reform and capital market activities are already in
the 
pipeline.
Source: Monthly Bulletins 
CURRENCY
The peg of the Bulgarian lev to the Deutsche mark at an exchange rate of BGL 1,000 per 
1 DEM proved its efficiency as an important factor for the financial stabilisation in the
country. 
The turmoil of early 1999 quickly faded away and activities were brought to normal pace.

Eventually, a draft for denomination of the national currency was introduced, envisaging
a new 
currency to be put in circulation with three zeros less than the present. Thus as of 5
July, 2001 
one new Bulgarian lev equals one Deutsche mark. A significant step made by the
authorities has 
been the acceptation of the obligations of Article VIII, Sections 2,3, and 4 of the IMF
Articles of 
Agreement, with effect as of 24 September 2000. No restrictions are now imposed on making
of 
payments and transfers for current international transactions. Despite the existing
pressure for 
upward adjustment of the anchor level, the general opinion is that there is enough
political will to 
defend the peg at the current position of BGL 1,000 per DEM. As of January 2001, the 
introduction of the European currency brought to a fixed rate to the Euro at 1997.83
levs.
INFLATION
Anchoring of the Bulgarian lev to the German mark allowed the continuous and 
uncontrollable depreciation of the national currency to be ceased. This was to help
subdue 
inflation in the country, which had skyrocketed to the cumulative 578.6% in 1999. In 2000
y-o-y 
CPI was down to 1%, remarkably outperforming the projected annual 16.4% by the
government. 
In this aspect the country was the best performer among the countries in transition.
Inflation 
moves, however, were not flat within the year, oscillating between the steep 3% of
September 
and negative 1.9% in June computed on a monthly basis. Such slides in inflation were not

regarded as a positive trend as they revealed weaker purchasing power of the population
and 
contraction in the domestic consumption. A major influence had the corporate cost cutting
in the 
state sector, stemming from the necessity to rehabilitate or close the highly indebted
and 
unprofitable enterprises. External deflationary forces also occurred as the national
currency 
strengthened against the dollar and dragged on lower import prices and weaker export 
opportunities.
Source: Monthly Bulletins
WAGES AND UNEMPLOYMENT
The CPI-adjusted increase in the wages was 22.4% in 2000, reaching USD 111.4 vs the 
average of USD 78.2 in 1999. Pensions also grew, noting an increase of 36.3%, and now 
accounting for USD 35 on average. In view of the modest GDP per capita, no vigorous
increases 
are expected to occur in 2001. The government has already set a 10% limit for the budget
sector, 
and 100 major state-owned companies faced salary restrictions to the amounts reported as
at the 
end of the past September. The labour productivity was estimated only modest according to

preliminary figures.
Rate of unemployment was also reduced to less than 12% in the second half of the year 
pushing away the turmoil of five years ago, when initial stages of restructuring brought
about 
unemployment rate of over 15%. Significant monthly fluctuations are, however, a fact as 
employment base is the country is estimated to just slightly over 2 million persons. GDP

(Growth Domestic Product).
The GDP is on a rise, expected to note the peak acceleration of the 90'saccording to
preliminary data. Government estimates point on growth of 3.5% on annual basis. The value
of Bulgaria's GDP now amounts to around BGL 22,4297 trillion according to preliminary
data, which equals about USD 12.6 billion. Thus the increase in the dollar value of the
output reached over 20% compared to the 1999 achievements. Official statistics for the
period January-September reported a rise of 4.3% in the real GDP.
Monthly Bulletins, BNB, press releases
Traditionally, the major contributor to the country's GDP was the services sector, with a

share of approximately 50%. Estimates for the nine months of the year, provided by the
National 
Statistics Institute, report a robust advance in the sector, which had already
outperformed its total 
1999 results on the basis of non-deflated prices. Industry and agricultural sector
accounted for 30 
and 20% respectively, generally in line with the proceeding years' structure. For 1999
the 
authorities projected a further boost of 3.7% in the country's GDP.
CURRENT ACOUNT AND TRADE BALANCE
In line with all expectations, in 2001 the country's current account shifted into a
deficit, 
estimated to USD 272.7 million. The decline of around $700 million from the 1999 result
was 
dragged by substantial deterioration in the trade balance, now reported to deficit of USD
329.5 
million. 
Source: Bulgarian National Bank
Exports fell by 13.1% on annual basis, triggered by the low competitiveness of Bulgarian

goods and shrinking international demand for basic commodities as a result of the crisis
at the 
Russian and Asian markets. The negative trend was intensified in the second half of the
year, 
when semi-annual exports dropped by 17.4% compared to the corresponding period of the 
preceding year. Most severe was the decrease in the export of chemicals and fuel,
shrinking by 
29.8 and 32.5% respectively. Growth was noted only in the group of textiles, leather,
apparel and 
footwear, which increased exports by 7 .8% over the 1999 year-end, revealing the positive

results of the faster privatisation in the sector. Imports; On the other hand, imports
grew - albeit 
slightly, exceeding the preceding year's figure by 1.4% and by December amounting to USD

4,623.5 million. The value of the imported consumer goods noted a leap of 41.8% for the
year, 
which is not surprising for a country with a currency board and anchored national
currency. This, 
however, was strongly unfavourable for the weak domestic production, as retail
consumption 
grew by merely 5.1% within the year. Sovereign Debt: Country's gross foreign debt bounced
to 
over $10 billion from the end-1999 level of $9.68 billion, now heading to reach in dollar
value 
the figures of 2000 and 1999. A major increase faced the long-term public debt from $8.5
billion 
at the end of 1999 to over $9 billion, reflecting loans extended by the IMF and the World
Bank. 
For 2001 Bulgaria has scheduled foreign debt servicing to the total of USD 882.6 million,
half of 
which stands for interest payments, mostly on its Brady bonds. Reforming: Privatisation
in the 
banking sector continued with the sale of many banks in Bulgaria such as, Bulgarian Post
Bank, 
which ranks among the seven biggest financial institutions in Bulgaria. 
CONCLUSION
In conclusion, the economy in Bulgaria in getting better little by little. The GDP is 
finally on a rise after a long series of collapse, now estimate to have grown by 3.5%. A
draft for 
denomination of the national currency was introduced, envisaging a new currency to be put
in 
circulation with three zeros less than the present. Thus as of 5 July 2001 one new
Bulgarian 
equals one Deutsche mark. The CPI adjusted increase in the wages was 22.4% in 2000,
reaching 
USD 111.4 vs the average of USD78.20in 1999. The GDP is increasing, expected to note the

peak acceleration of the 90's according to the preliminary data. Government estimates
point on 
growth of 3.55on annual basis. However, Exports fell by 13.1% on annual basis, triggered
by 
the low competitiveness of Bulgarian goods and shrinking international demand for basic 
commodities as a result of the crisis in the Russian and Asian markets. On the other
hand, 
Imports grew slightly, exceeding the preceding year's figure by 1.4%. Bulgaria is also
facing 
bank privatization. For an investor Bulgaria offers many opportunities. At the time,
investing in 
the country could be a little bit risky, but most the forecasts indicate that the
country's resources 
and key geographical position can be heavily utilized in the near future without such a
high risk 
of potential loss.