The anti-crisis plan of the Confederation of Employers and Industrialists in Bulgaria is based on the conviction that the crisis affects all members of society, the responsibility is common and should be shared. Bulgaria can meet the crisis challenges by preserving its financial and macroeconomic stability..
Bulgaria should have a plan for alleviating the crisis impacts as well as a contingency plan for meeting the challenges of the worst-case scenario.
Any anti-crisis plan should be based on the currency board retention until ERM-II accession and Euro adoption.
Should Bulgaria be denied early ERM-II accession and Euro adoption, the CEIBG would have to consider unilateral Euroisation as the only option for preserving Bulgaria's macroeconomic and financial stability in the crisis period.
An ad-hoc group, consisting of financial and real sector representatives, should be set up at the Prime Minister to monitor and analyze the crisis developments.
Reach political consensus and pre-election commitment by all significant political parties to carry out structural reforms, spend public funds transparently and fight organized crime in order to unblock access to EU funds immediately. The CEIBG is ready to assist the preparation of a similar document. The Bulgarian economy needs the EU funds now!
2. The ad-hoc group together with the BNB and Ministry of Finance (MOF) should select and monitor closely a set of vulnerability indicators that provide early signs of crisis exacerbation, and signal the necessity to implement the contingency plan.
3. The anti-crisis plan for Bulgaria should be based on the following principles:
Strengthening of transparency and accountability of the financial institutions and their regulators, including the Financial Supervision Commission (FSC) and BNB Banking Supervision.
Enhancing and strengthening regulatory regimes, prudent oversight, and risk management capacity of the BNB and FSC, as well as enforcement of law compliance by investment intermediaries and listed entities.
Reinforcing international cooperation with regulators and other relevant authorities on crisis prevention, management and resolution; further deepening of collaboration with home country authorities of the foreign-owned banks operating in Bulgaria.
Reinforcing coordination among the BNB, MOF, FSC, European Commission, ECB, IMF and WB.
Enhancing transparency and public control on public investment expenditures to ensure their efficient utilization, as they will be the main factor to make up for the current FDI outflow.
4. Key Measures to avoid financial sector confidence and liquidity crisis. The CEIBG respects the BNB independence and is fully aware that it is up to the BNB to decide if the suggested measures are appropriate, and if, when and how they should be implemented:
Improve coordination and negotiate agreements with home country authorities (Greece, Austria, Italy, Hungary) of foreign-owned banks operating in Bulgaria to keep within Bulgaria the provided extra liquidity to foreign-owned banks;
Provide liquidity from the Fiscal Reserve Account (FRA) to banks by repurchasing Bulgarian and foreign government securities from them against commitments to continue lending;
Based on transparent and clear-cut rules, make use of a part of the FRA for emergency liquidity assistance by providing deposits to those banks that lend regularly to the real sector;
Lower banks' minimum required reserves under Regulation 21 from 12% to 8% and less, if appropriate – specify when and under what circumstances
Relax the refinancing terms of the BNB lender of last resort facility of Regulation 6, if necessary – specify when
Provide capital support to banks on the basis of stress tests and close monitoring of the quality of their loan portfolios:
Specify the source and limits of the capital support provision;
Specify the eligible criteria for a bank to apply for the capital support;
Specify the terms under which the capital support should be provided to a bank.
Create a working mechanism to guarantee inter-bank lending;
Gradually increase depositors' protection in compliance with the European Commission recommendations on deposit guarantee schemes to:
Increase the minimum guarantee threshold to BGN 200 (Euro 000) per depositor;
Reimburses depositors up to the minimum coverage level;
Reduce the payout period in the event of bank failure.
Increase borrowers' protection by:
Complying with the European Commission recommendation to eliminate penalty fees for loan repayments prior to their maturity expiration;
Introducing tax-deductions for interest payments on principal habitats of up to Euro 50.
5. The CEIBG suggests further improvements in the taxation system, based on the introduction of:
a favorable holding regime facilitating free capital movement without creating any fiscal risks, which are implemented in many European countries;
a flexible VAT regime, based on the EU Directive 112, which will result in lower VAT costs for the financial sector;
the Electronic Data Interchange, based on the EU Directive on VAT.
6. Strengthen Companies' Flexibility
KRIB suggests the following policy measures to strengthen companies' flexibility during the crisis period:
Improve the risk management system in the National Revenue Agency (NRA) and refund up to 80% of VAT before tax inspections for those companies, which have the history and reputation of good taxpayers;
Set up jointly with the NRA and CEIBG a unit for internal control that will make public the names of tax offices and officers, causing any unreasonable delays in VAT refunds;
Eliminate dividend tax;
Cut employers' social security contributions by 5 percentage points;
Postpone the planned 20-percent increase in natural gas prices from January 1, 2009 for a period when the low prices of oil derivatives will make up for it;
Clear all arrears of budget organizations;
Capitalize the Bulgarian Export Insurance Agency to enhance its capacity and enable it to:
Increase its limits for Bulgarian firms' claims on foreign companies;
Introduce a special insurance instrument for inter-enterprise claims in Bulgaria.
7. A System to offset inter-company claims and debt:
The CEIBG suggests the setting up of a clearance system for inter-company debt;
The offsetting system will be Internet-based and will cover without requiring any additional financial support:
all claims regardless of their amount
chain indebtedness indirectly;
all legal entities and sole proprietors.
The offsetting company should be introduced by a special law or a self-regulating mechanism among CEIBG members, including the banking community.
8. Improve business climate to attract quality FDI. The business climate should be improved to continue attracting FDI, including quality FDI. KRIB requires the introduction of reforms to:
improve regulations and simplify or eliminate burdensome administrative regimes and procedures;
improve administrative capacity and services;
eliminate corruption and limit the size of the illegal economy;
improve the efficiency and quality of the judicial system.
Infrastructure investments can contribute to business climate improvement and can make up for contraction in construction and other sectors.
9. Increase Bulgaria's capacity to absorb EU Funds. Make better use of the EU funds as a major source of liquidity in the crisis period through:
Law enforcement with no exemptions.
Inclusion of legitimate businesses in all stages of EU fund absorption – from project evaluation to control for project implementation.
Outsourcing of EU fund management, especially the National Road and Infrastructure Agency.
Implementation of all CEIBG recommendations for amendments to the Law on Public Procurement.
10. A Social Plan against High and Stagnant Unemployment
KRIB is offering the following measures to avoid a worst case scenario effect of the crisis on the workers:
Reduction in orders requires flexible working time. Flexibility in working time is better than chain insolvencies.
At present, employers are bound to pay 50 percent of idle time at the workplace. At the present crisis, companies would not be able to pay those 50 percent.
The Bankruptcy Guarantee Fund must cover 50 to 30 percent of the above amount.
Non-EU firms that are subsidized by their states and those who employ illegal migrant workers should be kept off the Bulgarian market.
11. Construction and Real Estate
Transparency and efficiency of public expenditures for infrastructure should be enhanced;
The Government and municipalities should immediately, without any delays pay out all executed contracts in the construction sector;
Working capital amounting up to BGN 500 million should be provided to construction firms by banks or through factoring schemes;
The shrink in the vacation homes segment entails problems for other areas like commercial space, offices, etc. The chances are for top-quality projects;
Mostly the Business climate will model the behavior of investors.
12. Textile Industry
The seasonal works will suffer most from the crisis: Orders were cut by 35 percent for the last 6 months. KRIB proposes:
Companies with good results for the last years to receive state guarantees enabling them to renegotiate credit terms with the banks.
Social Partners should form an ad hoc alliance to warrant jobs by introducing flexible working time.
13. Tourism
Urgent anti-crisis action to be taken for:
Providing the necessary conditions for turning Bulgaria into a year-round destination;
Upgrading the existing tourist product with special offers with an accent in health tourism, SPA and wellness.
Additional BGN 14-15 million for advertising and marketing for 2009 are necessary to meet the above targets in tourism.
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