- The Bulgarian tobacco monopoly Bulgartabac holding (BTH) stays state owned. Once the family silver of Bulgarian industry now its 22 companies are technically bankrupt with two exceptions. This government’s second attempt to privatize it has just failed because the Turkish Minority Party (TMP) switched ranks from government coalition to socialist opposition rejecting the proposed deal. The one and only candidate British American Tobacco (BAT) withdrew its offer to buy for Euro 250 mln the three major BTH cigarette factories because of the hostile political environment. BAT project team put a lot of heart to die hard but reality proved to be very different from a happy-end movie.
- The economic absurdity of the TMP position can be illustrated by the fact that only two years ago they agreed the whole BTH (all 22 companies) to be sold for Euro 110 mln- contract signed with TMP approval but turned down by supreme court on matters of legality. Now only 3 companies generate a price of Euro 250 mln and TMP is not satisfied. Is the difference b/n 110 and 250 the kick-back which is missing this time? Or they revenge the recent failure of Turk Telecom to buy the Bulgarian Telecom when the bid was won by a US investor?
- BTH has long been alleged to be the golden hen laying kick-backs for those in power. Selling it just 5 months before crucial parliamentary elections turned out to be politically unrealistic. It collapsed with spectacular political fireworks and changed the landscape.
- TMP and opposition left former king Simeon’s government into a minority which is unlikely to survive a non confidence vote. A post mortem parliamentary debate was called to discuss the failed deal which deteriorated into an in-house election rally. MPs quarreled like doctors over a dead patient with the only fixed idea to evade responsibility. They dared to ventilate and to mock a commercially confidential and unsigned draft of a privatization memorandum only for the sake to distort the record for history.
- The disaster sends grave signals to the international investment circles that Bulgaria loses its main credit rating asset- the political stability. And the driving force is the basic animal instinct to be in power in order to dispose of huge EU funds assigned to Bulgaria. International champions and guardians of European, Atlantic, monetary and world banking values, who otherwise intervene readily, watched the drama with thumbs up and down as if it was on a Roman arena.
- BTH market relevance will be fully melted down by 01.01.2007 when Bulgaria joins EU and protective tariff barriers against imports disappear. The main sponsor of the deal vice premier Mrs. Lidia Shuleva bluntly told Turks and socialists that they had assassinated a traditional industry. She is seen to be one of the very few men in government.
- The current BTH crisis and its potential is seen as a long term political billiard where the BTH stretch is only the first hit on the balls which may develop into a complex cascade and some other ball may be designed to make the score in a totally different direction and context:
1. If the government is destabilized and a care taker comes to power it is very likely that Bulgaria will soon withdraw its troops from Iraq. The main power of such a new political formula will be the socialists who have declared that intention and they mean it-right or wrong-on the wave of a huge popular support to capitalize at elections. It is something TMP can live with.
2. The next “bridegroom” of BTH will certainly be the Mafia. BTH can’t stay state owned, any government would like it to die out of its “hospital” and in private hands. Mafia does not care, will turn it into a counterfeit producer (not punished in Bg) and then thrash it. This Mafia perspective will kill legitimate tobacco business in the region and beyond.
3. Even if the government does not fall, the transaction’s crash will kill Simeon’s political credibility with the Bulgarian electorate. He will be perceived as the “Turkish wife with shalwars” in this coalition marriage and will be simply despised by ethnic Bulgarians at the elections. The deal’s failure might be the beginning of the end of the “Wonder Simeon”.
4. But the lesson of substance to would-be investors is that in order to get political blessing for their projects they should tour the head-quarters of all major parties and not only speak to central government- like in a feudally fragmented state.
- Those who kicked off the political avalanche will soon learn that “a war, a marriage and a construction never develops according to plan”.
- The only hope is that in this inferno eruption of basic instincts the nation will see the true face of its elite and will not wait for St. George to defeat the dragon but will take up the job itself.
February 2005 – Sofia
Braykov’s Legal Office