Bulgaria booms while Turkey promises

With yields shooting to 12 per cent and capital gains staying high at 36 per cent, Bulgarian property investments yielded returns on cash invested of 116 per cent last year, property investment specialist Assetz has calculated.

Its latest Property Investment Tracker puts Bulgaria ahead of Cyprus as the top yielding overseas investment destination in the first quarter of 2006.

Deposit levels of 30 per cent are easily accessible to most investors as Bulgarian property remains relatively cheap, with a typical two bedroom apartment costing in the region of ?80,000, said the firm.

‘Although the level of house price growth is expected to tail off slightly during the remainder of 2006, overall market growth will remain high, alongside excellent yields of 12 per cent in quality areas such as the ski resorts of Bansko and Bovorets.

Cyprus is not far behind and offers a lower risk opportunity for investors. Low deposit levels of just 15 per cent are possible now and Swiss Franc mortgages are available with rates of just 3.25 per cent, making borrowing more affordable. Capital growth is likely to remain stable at around 15 per cent which, combined with rental yields of 8 per cent, results in a total of 84 per cent return on cash invested’.

Assetz also rate Turkey ‘interesting’. Mortgages are not currently allowed, but prices are still rising well, it said. ‘However prepare for a rule change in 2006 permitting borrowing that will ignite the market further’.

Although gains are still strong, with 27 per cent capital growth and 8 per cent yield, the change of rules concerning borrowing will have a dramatic effect on the housing market, potentially pushing up prices in key areas as much as 50 per cent in one year.

However, South Africa and the USA were given danger warnings. With interest rates rising in both countries, some investors must prepare to make a loss, particularly with new build in the USA, it said.

South Africa house price increases have slowed from 24.6 per cent to 15.8 per cent and the rate is likely to continue to fall. Mortgage rates, already 8.5 per cent are rising, prompting serious concern over the stability of the market. Yields have fallen from 10 per cent to as low as 5 per cent in 2005, so rental income will fail to make a profit for many investors.

‘Overseas markets are still offering excellent opportunities for investors, with Bulgaria and Cyprus now overtaking some of the more established destinations in terms of total return on cash invested’, said Assetz managing director Stuart Law.

‘However, investors should remember that high return is often associated with higher risk. Established locations such as France are still holding up extremely well against the competition, offering a total 68 per cent return on cash invested with an excellent holiday rentals market. With the low deposits requirement of just 15 per cent in France, the total return on cash is still exceptional at 68 per cent.

'Property in America is in a very tense state at present with conflicting statistics showing resilient existing home sales but collapsing new build sales volumes. The jury is still out on how safe it is to be investing in the States right now.

'Cheap Bulgarian ski destinations are certainly in as much demand as quality resorts in the France Alps. However, for sunny destinations combined with quality investment returns I prefer the south of France and southern Cyprus to the coastal resorts in Bulgaria.

Bulgarian economic research company Industry Watch has also expressed some concerns over the outlook for the country’s property market.

Its figures put house prices up 21.6 per cent in the year to December. But with construction continuing at great pace, increased supply could see prices begin to level off, it said.

Given that prices in general are lower in the Black Sea resort of Bourgas than in Sofia, while construction is at a high level, the coastal town currently has the most overvalued property, said Industry watch. But Shumen, Rousse, Plovdiv and Pleven are currently undervalued, it believes.

Bulgarian property ‘losing appeal’

Prices of real estate in Bulgaria are certain to start a downward trend in 2006 because of the slightly but constantly diminishing interest towards Bulgarian property.

This is one of the conclusions in a report on Bulgaria’s residential property market in 2005, published on March 20 by the independent analytical company Industry Watch.

While the price of Bulgarian stock, measured through the Bulgarian Stock Exchange - Sofia blue-chip index SOFIX increased by 32 per cent in 2005, the average prices of housing properties in this country went up by only 21.6 per cent, Industry Watch said. This means that investment in shares of companies traded on the stock exchange has become more attractive to investors.

Return on investment in other sectors, like oil and metals has also become higher at 60 per cent.

The growth in the supply of new residential properties remains upbeat. Two thirds of all construction permits in the one-year period under review were issued in the country’s five largest cities where developers can find better profit margins, said Industry Watch.

The Black Sea city of Bourgas leads the capital Sofia and Varna (also on the Black Sea) in terms of apartment building permits. The speculative demand driven by second-home buyers will ensure a sustainable level of construction activity in the region over the near-term, experts say.

Growing supply will level off residential property prices in Sofia. The trend has already impacted several market segments in the capital where prices for some types of properties declined in late 2005. Speculative buyers, both locally and non-locally financed, remain the most significant market factor, Industry Watch says.

Bourgas has the most overvalued real estate market given that the price of services in the coastal city is significantly lower than those in Sofia whereas the property prices lag the capital by only eight per cent. The property markets in Shoumen, Rousse, Plovdiv and Pleven are undervalued, said Industry Watch.

Meanwhile, according to Industry Watch, mortgage credits are attracting a constantly increasing number of Bulgarian households. Housing loans represented 28.8 per cent of all debts of households in January 2006, compared to 27 per cent in September 2005.

However, the share of mortgage loans in the overall debt of the households still remains low compared to the European Union member countries, where the average share is around 69 per cent.

In the eurozone, the growth in mortgage lending is also outperforming the overall growth in credits. It was 12.5 per cent in 2005.

The recent decisions by the US Federal reserve and the European Central Bank to raise their basic interest rates has hiked the global price of capital. Nevertheless, the current situation on the mortgage markets shows that much more time will be needed for the interest-hike measures to influence these markets.

The competitive pressure forces creditors to maintain low interest-rate levels on mortgage loans, in spite of the two central banks’ steps. For instance, in the eurozone, the average interest rate on mortgage loans dropped from 4.4 per cent in end-2004 to 3.95 per cent in end-2005, while the basic interest rate moved up from two to 2.5 per cent.

Ivan Vatahov

Registry Agency

The Registry Agency (RA) has been established with aim to guarantee security of real property market by providing overall information about it.

The RA provides an open, easy and secure approach for the operation of its local subsidiaries the “Registry Offices” according to the EU quality standards.

The RA has been established on July 31, 2004 as in force of &27 of the Law on Amendments and Complements to the Law on Cadastre and Property Register (LCPR) /promulgated in SG, issue 36 of April 30, 2004/. With the acceptance of the RA Organizational Statute by the Council of Ministers /SG, issue 63 of July 20, 2004, in force of July 31, 2004/ the opportunity for real constituting on a new governmental organization was promulgated.

The RA is an executive agency to the Minister of Justice in the meaning of Article 54 of the Law on Administration for the implementation of the LCPR objectives.

The RA main activities regarding the implementation of the property register in Bulgaria are following:

Organize, develop and maintain property register activities ;
Provide linkage between property register and other registers ;
Provide development and technical enhancement of property register ;
Develop and maintain in electronic mode a central archive with real property lots and acts, and attached documents related to.
The RA successfully started operating on October 1, 2004 and 112 Registry Office’s staff from District Courts in Bulgaria has been transferred to the new Agency .

The RA is managed and represented by Executive Director. The Agency is administration consists of three Directorates – Administrative Legal Services and Human Resources Directorate (ALSHR); Financial-Economic Activities, Assets and Project Management Directorate (FEAAPM); Information Services and Technologies Directorate (IST) and Chief “Registry Offices” Directorate. Special place and role in the RA organization takes the Information Technologies and Services Directorate. The ITS Directorate, accept the activity related to the implementation of the new property register in Bulgaria, which is the Agency main objective, has also activity related to the development and maintaining the Bulgarian Judiciary IT System, project management functions - PHARE 2002 and PHARE 2003 Projects; IT activities related to development, implementation and maintenance of Bulgarian Judiciary information infrastructure and resources.

The activity for creation a new property based registration system, drafting a new legislation and providing resources for creation of cadastre maps had been started in Bulgaria in the early 1991. During this time, several land restitution laws have been passed, local self-governments were re-established and municipal and state property were regularized by law. The institution of Land private notaries have been introduced and new land market professions emerged: realtors, developers, land valuers. However, at that time the cadastre and notary specialists did not reach the agreement on how the new system should be built.

Later on in 1998 Bulgaria has been initiated the preparation of a “Bulgarian Property Registration and Cadastre Project”. A low on Cadastre and Property Register had been passed, in force from January 1, 2001.

In July 3, 2001 Bulgarian government and the World Bank signed an agreement about this Project, a “Land Agreement”, for 5 years implementation period in amount of 30 000 000 USD and 7 000 000 USD own Bulgarian co-financing. This loan for the development of the cadastre and property register has been secured with state guarantee and with repayment period starts 2005. Around 15% interest rate is running now on this amount.

Further in February 13, 2002 a “Grant Agreement” in amount of 2 000 000 USD was signed between Bulgarian government and the Kingdom of Netherlands for supporting the Project.

These days on June 6, 2005 a PAL –3 Loan has been signed (the third final Programme Adjustment Loan) given by the World Bank to Bulgaria to assist the country’s progress towards EU accession. Part of the resources will be allocated for further supporting and achieving the overall objective of the Project.

The RA has 12 Regional Directorates “Registry Offices” around the country – Regional Directorates to the Chief “Registry Offices” Directorate.

Regional Directorate - Sofia
Regional Directorate - Blagoevgrad
Regional Directorate - Burgas
Regional Directorate - Varna
Regional Directorate - Vratza
Regional Directorate - Veliko Tarnovo
Regional Directorate - Pleven
Regional Directorate - Plovdiv
Regional Directorate - Ruse
Regional Directorate - Razgrad
Regional Directorate - Haskovo
Regional Directorate - Yambol
Each of these “Registry Offices” perform under Judge Registrar order entries, marks and deletions on real property acts located and registered only at the relevant District Court; perform inquiries, issue Entry lots Certificates and, of course, take part in creation of a Bulgarian property register.

The RA with further building up the capacity of the administration, improving technical and office environments will assure a modern, up-to-date, open, transparent and secure approach for operation of its subsidiaries, the “Registry Offices”, according to the European quality standards.


The RA (Registry Agency) Administrative Legal Services and Human Resources Directorate consists of two departments:

Administrative Legal Services Department

Human Resources, Protocol and Public Relations Department

The Department of Administrative Legal Services provides legal advice and administrative services to the Agency units the “Registry Offices”; gives standpoints about produced legal acts, represent the Agency policy, and acts in drafting the Legal base of the RA.

The department of Human Resources, Protocol and Public Relations is responsible for whole human resources management process from selecting and employing staff to estimating staff performance through organizing training programs and further increasing their professional qualification .

The Directorate also is in charge of all workflow / document-management activity, PR campaigns, contacts with media, protocols, works meetings, symposia, seminars, and etc.


The RA Financial-Economic Activities and Property Management Directorate consists of two departments:

Financial and Economic Activities Department

Property Management, International Projects and Public Procurement Department

The Department of Financial and Economics Activities is chaired by Head of the Department – the General Accountant. The expected staff capacity is 10 persons. The main activity is connected with preparation of annual budget plan for the Agency, providing financial-accounting services, budget implementation, organizing inventory, and issuing enquiries related to the department activity.

The Department of Property Management, International Projects and Public Procurement is chaired by Head of the Department . The expected staff capacity is 11 persons. The main activity is connected with providing technical and office equipment – spare parts, stocks availability, consumables, furniture, etc. and dealing with public procurement and projects organization.


The RA Information Services and Technologies Directorate (ISTD)consists of two departments:

Information Projects and Methodology Department

Information Infrastructure and Support Department

The main tasks of ISTD are related with:

implementation of the main Agency activities related to the Law on the Cadastre and Property Register ;
developing and maintaining the Bulgarian IT Judiciary Strategy, management of PHARE 2002 / 2003 Projects ;
development, implementation and support of IT systems for assuring smooth running of the Bulgarian Judiciary System ;
building up and supporting the infrastructure of the Bulgarian IT Judiciary System;
The Directorate organizes the development, implementation and smooth running of the IT systems and infrastructure in the Agency. It also acts in development, coordination and supporting of etalons and classifications for information exchange within the Bulgarian Judiciary System .

In additional the Directorate develops, co-ordinates and supports a unified methodology for realization of information projects for the Bulgarian Judiciary system - procedures, documentations and criteria for selecting contractors for implementation of new IT systems , developing, implementation and supporting of applicational software, delivery of standard software and technical equipment, and etc; managing and coordinating the implementation and maintenance of infrastructure assuring IT activity; providing a unified approach for developing and supporting this infrastructure. It also provides the conformity of the Bulgarian IT Judiciary System with the requirements of EU and Bulgarian government information policy.

The rise and rise of Bulgarian property

Anyone who has bought property in Bulgaria will tell you that the prices are so low, it is impossible to lose. Prices will continue to rise. The only uncertainty is by how much. And how long.

The Balkan country already has had 12 years of increases. And the National Statistical Institute reported in January that the average sales price per square meter for residential properties in Bulgarian cities had gone up 36.6 percent in the previous year.

But residential prices in Sofia still average only €600, or $717, per square meter, or $66 per square foot. That is much less than the €750 average per square meter in Bratislava, Slovakia; €850 in Bucharest and €1,500 in Prague, according to the National Real Property Association of Bulgaria.

Those numbers have pushed Bulgaria squarely into the real estate spotlight, attracting West Europeans lured by the current hot place for vacation homes and, to a lesser extent, for investment. And real estate agencies from small European countries like Ireland and Malta have opened offices in Bulgaria in an effort to expand their businesses.

Foreigners were involved in 23 percent of the 220,000 property deals registered in Bulgaria in 2005, transactions that totaled more than €4 billion, according to the property association. The year before they generated 18 percent of all sales, or €3.36 billion.

Overall, real estate is one of the fastest growing sectors in the national economy, which grew by 5.2 percent in 2005. Observers say that while the foreign interest certainly has not hurt, the country itself is producing much of the change.

"I don't think this kind of growth can be supported by international investors," said Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors in London. "It must be driven by organic, domestic growth."

Much of the interest is linked to the country's expected entry into the European Union. Bulgaria and its northern neighbor, Romania - the two poorest of the former Soviet bloc countries in Europe - are on track to join the European Union on Jan. 1, 2007.

Construction costs, sales prices and incomes are all expected to jump after membership, fueling a "now or never" air of urgency among citizens and foreigners alike.

"If the prices are so low, people assume the prices must go up a lot, which means that the GDP and incomes will catch up with the EU average," Khatri said. However, he cautioned, "they may never take off."

At the end of World War II, 85 percent of Bulgaria's population lived in villages. Communism brought industrialization and blocks of Soviet-style housing, most of it concrete and all of it drab.

In the years after the collapse of communism, Bulgaria adopted a post-Communist style common to much of Eastern Europe: garish construction done quickly and cheaply, unmistakably meant to impress. But things are changing.

Deyan Kavrakov, a partner with Equest Investments Bulgaria and a specialist in luxury properties, says about two-thirds of the better properties being sold now are new construction, partly because renovations can easily be one and a half times as expensive as new builds.

Isolde Pringiers, an interior designer from Belgium who moved to Sofia with her husband and two children in 1998, said, "Some of the best work is now being done by interior decorators who are going into building."

"They are traveling, they subscribe to the international magazines, they are very well informed," Pringiers said. "They go to the Milan Fair to see what's going on. They have much more of a sense of space and how you live."

When she bought her house in 1999, there was far less to choose from than there is now. She searched for months before finding what she described as a house "with a spirit." It was built in 1939 by a German architect, and she fell in love with it and renovated it.

Kavrakov said he finds affluent professional Bulgarians in their 30s - the first generation to reach adulthood after communism - are developing a taste for modern minimalist interiors with integrated high-tech systems: blinds, air- conditioning, audio systems, security and lighting. "There are excellent examples in the area of contemporary modern style with more space," he said.

While Bulgaria is stable politically and economically, with protection for the rights of property owners, the regulation of the public space outside a home is chaotic. Urban planning is very much a new concept. "You don't know what's going to be next to you next year," Pringiers said. "That's the scary part."

Also, the rental market is in its infancy. The rate of home ownership is one of the highest in the world - more than 90 percent - so few Bulgarians rent. Foreigners who are thinking of investment, or who are planning to help finance the purchase of a vacation home by renting it when they are not using it, should first think about how to find tenants.

The property market is linked to tourism, one of Bulgaria's largest industries even during the Communist era, when attracting Westerners was seen as an effective way of getting hard currency into the country. Much of the current growth along the Black Sea, for example, has its roots in those times.

But now, according to Orlin Vladikov, chairman of the national property association, green spaces are being preserved and the country's policy makers have learned "not just from bad experience but also from best international practices."

By Matthew Brunwasser
International Herald Tribune

Building season begins in Bulgaria's ski resorts

The reputation of Bulgaria as a premier country for ski holidays is continuing to grow and investors are starting to take advantage of this by snapping up properties.

According to the Bulgaria Real Estate Directory, there is currently a large selection of plots for sale in Bansko and Pamporovo – two of the country's finest ski resorts.

Citing the Investor.bg website, the Sofia News Agency states that offers are now pouring in as the new building season gets underway, with investors keen to find themselves a bargain that will presumably gain a tremendous amount in terms of value during the coming years.

It is an option that is increasingly appealing to investors who have become frustrated by high prices in alternatives including Austria and France, with property in Bulgaria still remarkably cheap despite the quality of the ski slopes.

Nonetheless, it is claimed that the ever-popular Bansko is seeing much higher prices than some of the other resorts, starting at around €50 per square metre and rising to around €150.

The report suggests that there are approximately 450 plots for sale in Bansko, with existing ski properties and off-plan projects attracting interest in equal measure. As prices begin to rise considerably in the country, off-plan investment has been tipped as a particularly sensible option, in that house price inflation can mean that investors have made huge returns on properties before they are even completed.

The ski resorts have also seen hotels and rented accommodation springing up in recent years to cater for the growing number of tourists hitting the areas each season.

With Bulgaria still seen as relatively undiscovered, many are combining the traditional ski holiday with an opportunity to explore the spectacular scenery, with the Black Sea resorts and the capital city of Sofia similarly popular.

Tourism inevitably has a significant impact on property investment and it is a factor that is expected to affect Bulgaria more than most.

The World Travel and Tourism Council (WTTC) predicts that the travel and tourism sector will grow by 6.3 per cent this year in Bulgaria and by 4.3 per cent per annum, in real terms, between 2007 and 2016.

In terms of its direct and indirect impact, travel and tourism is likely to contribute 16 per cent of GDP and 13.6 per cent of total employment this year, both of which should be instrumental in enhancing the property market.

While Bulgaria is still only 68th out of 174 countries represented in the WTTC survey, the speed with which Bulgaria has emerged as a tourist hotspot has been striking and it is a trend that can only improve the country's reputation for investment.

Bulgaria is not without problems, however, and the Sofia News Agency has reported that Delia Meth-Cohn, senior consultant for CEEMEA at the Economist Intelligence Unit (EIU), remains concerned over infrastructure and state administration.

EU accession is a step that will be crucial in determining just how substantial the economic growth in the country will be, but speculative investors are already banking on impressive capital gains by purchasing cheap properties in ski resorts and beach resorts alike. Add Links

Exhibitions Mart 2006

International wine exhibition starts in Bulgaria

The largest vine-growing and wine-making exhibition in the Balkans started in Bulgaria’s second-largest city of Plovdiv on March 15, hosted by the International Plovdiv Fair.

The wine fair, as it is also popularly known, has already proven in the past decade to be the shortest bridge between what Bulgaria hopes to be in the world of wine and what it is on the global map of wine dealers, critics and lovers. But it is also a chance for this country to develop a very attractive form of spending anyone’s vacation - wine tourism.

And while wine tasting and other lures during the fair (continuing through March 18) are music to the ears of visitors, some exhibitors discovered the way to promote both things - wine and tourism.

Wine has been a cultural art in these lands since some of the first-known tribes that inhabited them - the Thracians. To honour this fact, the company Vinprom Peshtera (mostly known for the rakia it produces and sells on the domestic market, but also for its wine brand) brought a “sacred vine” to its stand at Vinaria.

The vine comes from the ancient Thracian temple near the village of Starosel in central Bulgaria. In 2000, archaeologists found there a large temple and tomb of what is believed to be a Thracian ruler, possibly Sitalkes I (r. 431-424 BCE), the first king of a combined Thracian empire.

The art of making wine comes from the Thracians. Thanks to the cult for their god of wine, Dionysus, they started growing vine and learned the craft of making the sacred elixir.

The Starosel temple holds some of the secrets of the ancient civilisation. A key function of the sanctuary was to honour Dionysus with wine, vine and fire. The two stairs of the temple, the huge ritual platform and the wine-storage tub testify of the Thracians’ homage to wine.

One of the most popular rituals in their world was to predict the future through wine and fire. Usually the ruler himself, who was dressed as Dionysus, carried it out.

Bringing this ancient history to Vinaria is a way of reminding tourists of what a cradle of civilisation the lands occupied by Bulgaria today are. This is a chance for any person coming from any corner of the world to taste both wine and the rich culture of this country in concert.

Of course, many entrepreneurs in Bulgaria still hardly believe that anything else but its seaside and ski resorts could bring more tourists. With the winter season still rolling on, the country once again found out about its appeal to foreigners.

A report by Agence France Presse (AFP) from the past week says that every year more UK skiers “flood Bulgaria’s high-altitude mountain resorts, attracted by the well-managed slopes and low prices”.

AFP continues: “A two-hour drive south from the capital Sofia gets you to the most-popular Bansko ski resort, where numerous construction sites testify to tourism’s rapid development on the Pirin mountain slopes.”

The agency pays special attention to the appeal of Bulgaria’s resorts as a destination for second-home buying.

“Bulgaria offers an enormous potential with its bid for the 2014 Winter Olympics and the European Union accession,” says Tim Savva, a Briton running a property agency in Bansko, quoted by the AFP.

“Bulgaria is like Andorra - high-quality skiing at low prices,” says Janet, a visiting Londoner.

All costs included - with the flight here, a week in a four-star hotel, pool and spa, plus a week-round ski-tow pass - total 800 euro. Nothing like the prices in the Alps, says the middle-aged skier.

A rather discouraging World Travel and Tourism Council (WTTC) study has shown that tourism in Bulgaria is expected to register a growth of 6.3 per cent in 2006 and of 4.3 per cent on average every year between 2007 and 2016.

The data indicate a serious decrease in the growth of the country’s tourism industry. The growth in the number of foreign tourists in Bulgaria was 13.6 per cent in 2004 and 18 per cent in 2003, official statistics showed.

Revenue from tourism is expected to total more than 5.6 billion euro in 2006, or about 16 per cent of the forecasted GDP of the country.

The sector will employ about 400 000, or 13.6 per cent, of the total workforce, WTTC analysts say.

Bulgaria ranks 68th out of the 174 countries presented in the study in terms of nominal size of tourism revenue, and 43rd in terms of sector contribution to GDP.

Ivan Vatahov

...

BULGARIA PRESENTED DURING MOSCOW TOURISM FAIR

The presentation of Bulgaria as a tourist destination during the International Travel Fair ITM 2006 in Moscow began today and will continue until March 22, representatives of the national tourism agency said.

Representatives of national and regional tourism companies and tourism agency officials will participate in the fair, Focus news agency reported.

March 21 will be the Day of Bulgaria, fair organisers said. During this day the Sofia, Nessebar and Tsarevo municipality will carry out presentations and representatives will distribute promotion materials. Bulgarian wines degustations will also take place.

The exhibition is taking place for the first time right before the Moscow International Travel and Tourism Exhibition 2006.

More than 500 companies from 71 Russian regions and 46 countries will participate. The fair’s organisers include the Russian federal tourism agency, the Russian hotel association and other tourism and state institutions.

Alternative investments in CEE

Alternative investments in CEE: Europe’s (not so) new Eastern Frontier

Viera Kucerova and Glen Lonie of PricewaterhouseCooper’s Prague office outline the alternative investment trends and opportunities in Eastern Europe.

The alternatives markets in Central and Eastern Europe (CEE) are true growth markets, with investor interest and deal volumes increasing year on year.

Significant developments are occurring in both real estate and private equity, and encouragingly also to the tax and legal infrastructure in the CEE region.

Real estate
The real estate markets of central Europe – particularly in the Czech Republic, Hungary and Poland – have been on investors’ radar screens for some time.

By some estimates, there are between EUR 12-15 billion of raised investment funds, either in specific CEE funds or CEE allocations of pan-European funds, looking to invest in real estate in CEE.

This compares with an annual transaction volume of between EUR 5-6 billion in 2005. This supply-demand imbalance has had a number of impacts.

First, as with the more mature markets of Europe, the real estate markets in CEE are generally sellers’ markets. Competition among investors for properties is high, resulting in significant reductions in returns for investors, particularly in the core markets of Central Europe.

This has meant that yields have rapidly converged to levels approaching those of Western Europe.

As a consequence, investors are looking further east to the emerging markets of the Baltics, Russia, the CIS, Bulgaria, Romania, and other South Eastern Europe markets where higher returns can be achieved.

Second, given the difficulty of sourcing properties, investors are looking at a wider range of property types and classes. To meet this demand, there is a great deal of development in all types of property – office, retail, industrial and logistics, residential and tourism.

Third, rather than only buying standing properties, investors are also looking to get involved in projects at an earlier stage by participating in their development or by committing to forward purchases of new properties, both to secure investment opportunities and to maximise returns.

Private equity
Private equity is now also keenly chasing opportunities within the CEE region. It is estimated that over the last 15 years, more than EUR 7 billion of funding has been raised by private equity funds that are dedicated to the CEE countries. In 2004, fundraising increased by 59% compared to 2003.

Various global private equity funds have recently set up CEE dedicated private equity funds while others are continuing to explore the investment opportunities throughout the region.

The majority of the funds raised are being invested in Poland, Hungary, Romania and the Czech Republic.

To match this demand for transactions, an increasing number of commercial banks are focusing on acquisition finance and there is enhanced activity of mezzanine funds in the CEE markets.

CEE legal challenges for alternative investment
The local tax and legal platforms are developing to address the issues typical for leveraged private equity and real estate transactions.

Over the past few years, the tax and corporate laws in all CEE countries have undergone significant developments to harmonise their local regimes with EU regulations. Though most of these changes have not been specifically aimed at regulating leveraged transactions, they have improved the investment infrastructure for investors.

Due to the relatively young history of real estate and private equity throughout the region and the consequent absence of precedents, investors need to be very careful when designing acquisition structures to be put in place.

Local tax authorities have little experience with sophisticated instruments and acquisition structures.

Also, the wording of tax laws often leaves large scope for multiple interpretations. The tax treatment of leveraged acquisition structures is not yet being properly addressed in all territories. Careful attention needs to be given to the deductibility of the interest on acquisition loans and transaction expenses; the amortisation of goodwill within multi-tier structures and recently introduced loss carry forward restrictions for change of ownership/business.

With the increased competition in the region to secure deals and the enhanced availability of secure debt financing, more sophisticated acquisition structures will be implemented. The expected improvements in the tax environment in the region will bring more confidence to investors wishing to move into the CEE region.

Black Sea Property Fund reports net loss of 1.4 mln pounds for '05

Black Sea Property Fund, which specialises in the financing and sale off-plan of luxury holiday apartments in Bulgaria, was quoted by news agency Dow Jones as saying Monday it posted a net loss of 1.4 mln British pounds for the period from January 27 to December 31, 2005.

'Competition has increased significantly, with a number of new funds and property developers looking to profit from the attractiveness of the Bulgarian holiday property market,' said chairman Melville Trimble

The company said that although slower than 2004, the growth in tourism continued, with tourist numbers rising 5.1% in the first 11 months of the year. Receipts from tourism are forecast to have risen by between 8% and 9% for the year as a whole. Within these numbers are divergent trends; Germany, until now the premier tourist group, saw a decline in interest whilst UK tourists visiting Bulgaria increased by a healthy 36%. At this stage, there seems no reason that this should not continue, Dow Jones quoted the fund as saying.

E.U. accession will make a considerable difference to both tourism levels and the demand for holiday homes. It will also attract the low cost carriers. Wizz Air announced recently that they would commence flights to Sofia from London's Luton airport and would fly direct to Bourgas during the summer season. British Airways will commence a direct flight to Varna, increasing the frequency during summer.
Prior to the March 2005 admission to AIM, the fund manager, Development Capital Management (Jersey) Limited, had acquired three options over some 1,300 luxury holiday apartments to be built along the Black Sea coast. The sites at Kavarna, Obzor and Shabla are each within an hour's drive of either Bourgas or Varna, the main airport towns in the region. These options committed the fund, if exercised, to an investment of 9.3 mln, the company said in a press release quoted by Dow Jones.
In April 2005 the fund entered into a fourth option agreement with Byala Beach Tour for the construction of a further 1,200 luxury apartments as part of a holiday complex on the coast. Upon exercise this would commit the fund to an investment of 15 mln euro. This was followed by an investment in the ski resort of Pamporovo in October 2005, of a further 4.6 mln euro, taking the proportion of the fund potentially committed to a little over 40%, said the press release.

Before the year end, talks were at an advanced stage to acquire development land in Bulgaria's fast growing ski resort of Borovets, which the government plans to use as its principal resort area in its bid for the 2014 Winter Olympics.
"The deal was announced mid January 2006 and the full cost of the project at 15.7 mln euro brought the total amount of the fund allocated to investment, to more than 60%, said the press release

Profiling property in Rousse

There is a hardly a week that passes without a story about the latest property hotspot in Bulgaria, be it a small town on the Black Sea coast, or a perhaps the latest discovered village just a hop, skip and a 4x4 away from the ski lifts at Bansko.

I’d, therefore, like to start by saying that Rousse is not such a place (and let it always be so!). However, since our company opened an office in this small town exactly one year ago, it has emerged as a popular place for many of our clients. In fact, the ratio of viewings to purchasing has been as high as in our offices as in the more traditional locations of Varna and Veliko Turnovo.

We first introduced Rousse to the UK property scene through the British ITV’s equivalent of the programme A Place in the Sun. The first clients - three Scottish ladies - bought two traditional cottages in front of tens of thousands of viewers, leading to a great interest in the Rousse region.

For those not familiar with the locale, is it more akin to the rolling hills of England than to the mountainous areas to the south. Its quiet villages are home to thriving, if ageing, agricultural communities and to a healthy and reviving agricultural economy (boosted by SAPARD funding in recent years). Its proximity to the Danube and numerous small tributary river valleys make the area abundant in wildlife. In years past the region was better known to British bird spotters than to holiday homebuyers.

Rousse also has some key location advantages, which house buyers are quick to pick up on. Being only 65km from Bucharest means that there is an international airport on the doorstep. European Union (EU) membership will make the border crossing easier, bringing the airport ever closer. A new river passenger terminal is also planned for the town to cope with the growing demand for cruise ships plying the Danube from Germany. And, of course, as the only bridge crossing the Danube between Romania and Bulgaria, the roads are part of the EU’s trans-European transport network, giving rise to major road investment both now and in the future. With direct rail connections to several major European cities, it is easy to travel to and from Rousse.

Over the past year, we have had an interesting range of buyers, from an English lady wishing to move from a village near Veliko Turnovo because there were too many Brits (!), to a couple who sold their holiday home in California’s Joshua Tree National Park to buy in Rousse’s own wonderful National Park only 20km from town. From holiday homes, to retirement homes, to investment opportunities, the region provides a wide range of property. Prices for apartments in town average about 460 euro a sq m, making it very competitive with Varna or Sofia, while village properties range from 10 000 euro to 100 000, depending on condition and size.

The very essence of why cities and regions grow, prosper or decline is because of the individual choices we all make about whether to live, work or spend time in a place. Judging by the response of the British to the Rousse region, the area still has the ability to attract people and provide a pleasant place to live and perhaps start a business.

By Andy Anderson

TOURISM REGULATIONS IN BULGARIA TO MEET EUROPEAN STANDARDS

One of the main problems for the development of the Bulgarian tourism sector is related to taxation policies and the degree to which they correspond to European regulations, President Georgi Purvanov said.

Today Purvanov and Finance Minister Plamen Oresharski met representatives of tourism companies, Focus news agency reported.

The acceptance of European tourism norms should still maintain the competitiveness of the Bulgarian sector, Purvanov said. With the entrance in the EU competition to the Bulgarian tourism sector will increase, said Purvanov.

Both the interest of foreign and Bulgarian tourists should be considered when changes are implemented, Purvanov said.

Representatives of tourism companies said the problem of value added taxation (VAT) persists. At the moment VAT is 20 per cent. Tourism packages abroad are offered with a seven per cent VAT. To equalise the two levels the tourism packages offered would become significantly more expensive, company representatives said.

The expected price increase will minimise the competitiveness of Bulgarian tourism offers, company representatives said.

darling of the property market

Bulgaria a 'darling of the property market'

Confidence in the Bulgarian property market appears to be on the rise, as growing numbers decide they are prepared to invest their money in properties throughout the country.

Few would disagree that the market possesses phenomenal potential and it has been commonplace in recent years to compare Bulgaria to Spain in the 1980s. With EU accession to come and the country's infrastructure undergoing a comprehensive overhaul, investors have been flocking to Bulgaria to suss out possibilities for capital growth, while many have been overwhelmed by the country's natural beauty.

The latter point seems to have led to an influx of holiday home seekers, as highlighted by CNN in an interview with British businessman Dave Hunt.

CNN argues that while stocks and shares remain popular with some, business travellers in particular are choosing property to raise extra income, not least because it offers both "healthy returns and healthy relaxation".

The report goes on to say that Mr Hunt purchased his property in the popular ski town of Bansko, with three key factors in mind.

Primarily, he wanted an impressive holiday home. With views over the country's favourite ski slopes, it is an objective that has surely been achieved.

Secondly, he hoped for capital growth – something that Mr Hunt has already seen with prices rising from €800 per square metre to €1,400 within a year. The third factor was potential for rental income and the choice of Bansko was perhaps particularly inspired in this regard.

Bulgaria is hoping to host the Winter Olympics in 2014, but whether it succeeds in this bid or not, the attention that it will bring to Bansko will have a huge impact on tourism and on demand for rented accommodation.

While Mr Hunt may have picked a chalet in Bansko, the Sofia Echo yesterday suggested that Pamporovo is an equally sensible investment choice.

The newspaper reports that the ski season has been a roaring success, with Pamporovo enjoying average hotel occupancy higher than 80 per cent. It is revealed that English and Irish skiers have been most taken by the resorts, although Russians, Turks and Greeks have also been making regular trips to Bulgaria.

As the country's tourism industry begins to take off, property investment is becoming an increasingly secure bet, with foreign visitors necessarily impacting on the state of the economy and the country's reputation as a whole.

The aforementioned parallel with Spain became all the more pertinent today, with representatives from both countries meeting at a two-day Bulgarian-Spanish business and investment forum in Sofia.

As picked up by the Sofia Echo, the issue has been discussed on the Bulgarian National Radio, with tourism and foreign investment central to the links forged between the two countries.

Spain is already a keen supporter of Bulgaria's EU membership and Spain's secretary of state for EU affairs has announced that his country is prepared to share its knowledge and experience of the utilisation of EU structural funds.

If Bulgaria does indeed follow in Spain's example in terms of a sustained property boom, investors who are currently getting their hands on remarkable deals will be set to make significant returns in the years to come.

Ways of promoting Bulgaria

There are many ways - some traditional, some alternative - to promote Bulgaria as a tourist destination, with various original undertakings being demonstrated since the beginning of the month.

The first to embark on a different approach was the national flag carrier Bulgaria Air, which on March 1 launched a series of initiatives to present Bulgaria to the world.

The company management and Transport Minister Petar Mutafchiev announced the start of a project entitled The Spirit of Bulgaria on Board Bulgaria Air.

On March 1, the Bulgaria Air planes were decorated with “martenitsi” - red and white tassels believed to bring health and good luck - that Bulgarians traditionally exchange on the date. All passengers were acquainted with the tradition and each given a martenitsa.

However, the project did not end with the red-and-white decorations. Throughout the campaign, there will be a series of one-month events focusing on various aspects of the Bulgarian identity - the national cultural and historical heritage, the Bulgarian language, sports, nature, Bulgaria’s faces and others.

The events will be implemented through changing the outside decoration of the aircraft and organising special experiences on board the planes. This way the message will get directly to 40 000 passengers a month, and hundreds of thousands of foreigners, who will see the planes at airports all around the world, will get it indirectly.

According to Zlatin Surustov, executive director of Bulgaria Air, wherever they are, with this carrier Bulgarian nationals will feel closer to and more frequently at home. In his words, the company is Bulgaria’s natural envoy, and the ambition of its management is that their aircraft turn into a kind of a visit card Bulgaria presents to the rest of the world.

Furthermore, Bulgaria Air is the initiator and sponsor of the Days of Bulgarian Culture in Rome. The company’s participation consists of providing transport for Bulgarian performers, the stage property and cultural artefacts.

“I believe that similar initiatives, directed by the company’s management, will not only help raise the image of the carrier at its privatisation but will also be instrumental in the attainment of the great goals it has set itself: more destinations and more customers for this new and small but stable company,” Mutafchiev said.

In his view, the initiative gets off ground at the right time - on the eve of Bulgaria’s accession to the European Union (EU), which would give the EU citizens the opportunity to get familiar with the country in advance.

Bulgaria Air said it would operate flights to new destinations in the summer season: Sofia-Dublin (Ireland) and Milan (Italy)-Varna (on the Black Sea).

The service to Dublin will be opened in April, and at the beginning of the summer season the flights will be between Dublin and the Bulgarian Black Sea airports (Varna and Bourgas). A new service between London and Bourgas will be operated in the summer, too.

Another opportunity for bringing Bulgaria closer to foreign holidaymakers is already being provided by Bulgaria’s second largest GSM operator, GloBul.

The company and the Bulgaria in Miniature project (that has so far hosted an exhibition of miniature copies of Bulgarian historical and cultural buildings) have started their co-operation with the launch of a mobile guide of the most significant historical, cultural and natural landmarks in Bulgaria.

Via the Bulgaria in Miniature Mobile Guide (called Bulgaria Na Dlan, translating as “Bulgaria in your palm”), Bulgarian and foreign tourists will have access to mobile telephone lines with comprehensive information about the most important historical monuments and natural phenomena.

Signboards with the respective numbers at the sites will inform tourists of the info-line numbers of in Bulgarian and English. The info hotlines will be accessible from anywhere in Bulgaria for all GloBul subscribers at 1.20 leva (about 0.60 euro), VAT included, for a call. GloBul would donate all revenue from the hot lines to the further development of the Bulgaria in Miniature project, the mobile operator said.

Turnovgrad (now called Veliko Turnovo), the capital of Bulgaria between the 12th and 14th century; Arbanassi (on one of the hills around Veliko Turnovo), known for the legendary collection of murals in the Nativity Church; and the Black Sea’s Kaliakra Cape are the first historical monuments included in the mobile guide initiative.

The project authors, Sunny Suninski and Stefani Racheva, elected the first three sites as symbols of the history, the invincible spirit and faith of Bulgarians.

The respective mobile numbers are: for Turnovgrad - 1300 001 in Bulgarian and 1300 002 in English; for Arbanassi - 1300 003 in Bulgarian and 1300 004 in English; and for Kaliakra Cape - 1300 005 in Bulgarian and 1300 006 in English.

A total of 20 sights of the capital Sofia will be included in the mobile guide by Easter, and by June some 50 sights from all over the country are expected to become part of the project.

However, the crown for the most alternative way of alternatively promoting Bulgaria as a tourist destination did not originate in Bulgaria.

More than 60 000 Germans paid a virtual visit to the north-western Bulgarian town of Vratsa at visit.vratza.com in the end of February due to a radio quiz of the German Antenne Bayern radio.

The radio announced a prize of 80 000 euro for the listener who first translated into English or German the Greek word “orivasia”, which means climbing. Hundreds of thousands of listeners rushed to find the translation. Those who had access to the internet googled the word and so came across the Greek version of Vratsa’s site with a description of the rock gorge Vratsata (doorway), from which Vratsa takes its name.

Peak time the visits exceeded 300 a second, the total reaching 66 140 at the end of the day. The site received dozens of letters where the German entrants in the radio game expressed their amazement with beauty of the place and asked for directions on how to reach it.

The discovery of the site triggered discussions in hundreds of internet forums in Germany where users argued that the word was most probably Bulgarian and denoted the name of a resort or town in Bulgaria.

Awed by the beauty of Bulgarian nature, the mountain climbers who virtually visited Vratsa wanted to come and see it in person as well.

Ivan Vatahov

Pamporovo Ski Season

The 2005-2006 ski season in Bulgaria got off to a tremendous start. The three major winter resorts - Pamporovo, Borovets and Bansko - celebrated the start of the winter season with firework displays, festivities and parties. Hotels and tour operators predicted a bumper year and recent findings are proving them to be true, especially for the Pamporovo ski resort.

Hotels have been logging record bookings for all of Bulgaria’s winter resorts. Pamporovo, especially, has stood out, with average occupancy reaching just over 80 per cent. This is not surprising when considering the amount of investment generated by the mountain resorts as a whole. With their 240 sunny days a year and a snow layer of 150cm, the tradition of welcoming tourists from all over the world continues. English and Irish seem to be the most popular visitors to the area, followed by Russians, Turks and Greeks, who represent about 70 per cent of all snow tourists.

Hoteliers had been expecting substantial increases for visitors in the 2005-2006 ski season. Of all the ski resorts in Bulgaria, Pamporovo is unarguably the most upmarket, especially when considering the night life and the amount of money spent on ski facilities over the past two years, about 69 million euro. Pamporovo, this season like last season, has won over its visitors with its beautiful scenery and excellent ski facilities. There are the bunny slopes for beginners, and the challenging black diamonds for the more experienced, as well as an internationally reputed ski and snowboard school.

There are words of caution, however. Statistics can sometimes be misleading: for certain groups, like the Bulgarians, there has actually been a considerable reduction in the number that go to Pamporovo, due to the increase in the price of ski passes. Many Bulgarians feel that its pristine beauty is being sacrificed in favour of too much commercial interference.

Also, mountain tourism is unlike sea tourism: ski resorts are high above sea level. As a result, large investments are needed to develop infrastructure, which could lead to mountain areas being over developed - precious natural resources like trees could be sacrificed for more hotels or restaurants, which could lead to a situation not unlike Slunchev Bryag (Sunny Beach), were the property market is almost saturated. There is also the danger of global warming, resulting in a much shorter ski season and fewer people occupying hotel rooms.

The Pamporovo ski resort might have the best facilities in the Balkans at the moment. Numerous ski slopes, natural beauty, wild forests and other nearby attractions make it an ideal place to go for a ski holiday, now, and for many years to come.

Bulgaria in TUI Top 10 Summer Hotspots

German concern TUI, Europe's largest travel company, has placed Bulgaria in its Top 10 of summer holiday hotspots.

Bulgaria is placed on the tenth position in the prestigious TUI ranking for top priority summer 2006 destinations, Romanian newspaper Cotidianul reports.

A spokesman from the German concern explained that Bulgaria is the hottest destination from the countries from Eastern Europe as over the last years it has considerably developed its hotels and infrastructure. The main reason for the tourists to chose Bulgaria is the great development of that destination.

TUI has not included Romania in its list, Cotidianul points out. As main drawback for Romania as tourism destination is pointed out the lack of hotels and the poor infrastructure compared to Bulgaria. Links

Greece, Egypt, Turkey, UK, Germany are also among the top ten destinations of TUI.

Heavy Construction Grief Problem for Bulgaria's Tourism

The heavy construction works at Bulgaria's seaside are among the most serious problems the country's tourism sector faces, it appeared after meetings of Bulgaria's tourism chief Mario Al-Jebouri in Berlin.

Bulgaria's tourism chief met the Secretary General of the World Tourism Organization (WTO) Francesco Frangialli in the end of his visit to Berlin. The two discussed Bulgaria's activity as a WTO members and options for assistance in the know-how area and the preparation of policies and strategy for the tourism development.

Mario Al-Jebouri also had meetings with the management of the German concern TUI. The heavy construction at Bulgaria's seaside was pointed out as the main problem for Bulgaria's tourism. Al-Jebouri and TUI management focused on the problems of Bulgaria's tourism sector and the reasons for the drop of the German tourists coming to the Balkan countries.

Options for cooperation in the advertising field between Bulgaria's State Tourism Agency and TUI were also discussed at the meeting.

Boosting cooperation between Bulgaria and Ukraine was among the main topics of discussion between Bulgaria's tourism chief and Ukraine's State Tourism Agency head.

Bulgaria Invites 1 M Koreans to the Seaside

Nearly 1 million Koreans are expected to come to Bulgaria's seaside after 2007, local media reports.

Bulgaria's embassy in Seoul will make a special presentation of the Balkan country, 24 Hours daily reported Saturday.

Official figures show that annually nearly 9 million Koreans travel around the world. In 2005 alone one million people from the Asian country have visited different European countries. Only 3,000 of these tourists, however, have visited Bulgaria and a 1/3 of them enjoyed Bulgaria's winter and summer resorts.

Now the biggest Korean tourism agencies have been invited to the presentation and some of Bulgaria's tour operators will be asked to join it. The presentation scheduled for April will also be attended by diplomats from the Czech Republic, Poland, Slovakia and Romania.

Preliminary information shows that in May and June representatives of the biggest Korean tourism companies will make a tour in Bulgaria and the other 4 countries participants in the presentration.

Bulgaria Tourism Sector 2006

Boom of 6.3% Predicted for Bulgaria's Tourism Sector in 2006

Bulgaria 's travel and tourism sector is expected to grow 6.3 % in 2006 and by 4.3 % per annum, in real terms, between 2007 and 2016, a survey of World Travel and Tourism Council (WTTC) shows.

According to the survey tourism in Bulgaria in 2006 will generate USD 6725.6 million of economic activity. Bulgaria's travel and Tourism economy (direct and indirect impact) in 2006 is expected to account for 16 % of GDP and 400 000 jobs (13.6 % of total employment).

These figures place Bulgaria on the 68th position in absolute size worldwide from a total of 174 countries represented in the survey and on the 43rd place in Relative Contribution to national economies.

Travel and tourism in the Central and Eastern Europe in 2006 is expected to generate USD 244,631.3 B of economic activity. The Central and Eastern Europe travel and tourism is expected to grow 5.9 % in 2005 and by 5.8 % per annum, in real terms, between 2007 and 2016.

Each year the World Travel & Tourism Council, together with its research partner Oxford Economic Forecasting, produces comprehensive reports that quantify and forecast the economic impact of Travel & Tourism for 174 economies and the world.

WTTC's mission is to raise awareness of the full economic impact of the world's largest generator of wealth and jobs - Travel & Tourism.

EU markets boost Bulgaria’s overall growth in 2005

International tourist arrivals in Bulgaria increased by 5% over the first eleven months of 2005. Europe is the major generator of tourism for Bulgaria and the share of the European Union (EU) in the total count has increased to 55% thanks to a higher than average 6% rise in arrivals from member countries, and more than 7% from new EU member markets.

Last year’s growth was particularly welcome given the increasing concerns about the impact of excessive construction along the country’s Black Sea coast which, many believe, has reduced the quality of a Bulgarian sun & beach holiday. But the peak months of August and September were adversely affected.

Markets showing the best growth – clearly from different bases – during 2005 were the UK, Russia, Ukraine, Scandinavia, Turkey, Central Europe and the USA.

Meanwhile, the government is reportedly starting to recognise the fact that the state budget allocated to marketing and promotions is sorely inadequate and is looking at the possibility of injecting new funds into the tourism authorities. The longer-term goal is to diversify the country’s tourism product and markets away from sun & beach summer holidays.

Theodore Koumelis

Bulgaria Hires Consultants for 2007 Accession

Bulgaria is hiring consultants to identify parliamentarians and opinion-makers in member states where ratification of its EU accession treaty is seen as problematic, signalling nervousness about a possible delay of its EU membership.
The Bulgarian Public Procurement Agency has closed a public tender for a €100,000 consultancy job targeting at least four member states – Germany, France, the Netherlands and Denmark - where it fears a "possible delay of ratification."
Sofia appears nervous that national parliamentarians in the four countries will be influenced by a key report by the European Commission, due in May, which might recommend a delay of Bulgaria and Romania's scheduled accession in 2007 by one year.
The tender speaks of "a possible delay of the ratification procedure of the Bulgarian accession treaty in some member states, particularly by the link established between the ratification procedure and the European Commission's monitoring report."
A negative or critical report by the commission could cause national MPs to postpone ratification, which is necessary in all EU member states for the accession treaty to enter into force.
As part of a last-minute Bulgarian PR offensive, a consultancy firm should now identify key opinion and decision-makers in the four states and devise strategies to convince them that the 2007 entry date should be upheld and ratification accelerated.

Speed up ratification

The tender, first picked up by Bulgarian news-portal Europe.bg, lists three aims of the job.
First, "To avoid the application of the delay clause postponing the membership of Bulgaria with one year from 2007 to 2008."
Second, "To speed up the process of ratification before the final review of preparedness for membership [the May commission report]."
Third, "To increase support for Bulgarian membership in 2007 in key countries such as France, Germany, the Netherlands and Denmark."
The winning consultancy firm is set to be made public by mid-March.

Little enthusiasm

The French, German and Danish parliaments are to deal with ratification of Bulgarian and Romanian EU membership only after publication of the commission report, sources confirmed.
The Dutch senate is also considering this option. The Dutch lower house already ratified the accession treaties in February - despite the country's largest Christian Democrat party voting against Romanian accession in 2007.
Meanwhile, Romania appears to share Bulgaria's uneasiness with the slow pace of ratification, with Bucharest's foreign affairs minister Mihai Razvan Ungureanu recently expressing disappointment about France.
"To be honest, I expected a lot more enthusiasm from France," he said in February according to Bucharest daily news.

Real risk of delay?

However, Brussels insiders and national parliament sources generally see no risk of a delay of ratification, even if parliamentarians are awaiting the commission report.
To soothe sceptics' fears that Bulgaria and Romania are insufficiently prepared for EU entry, the commission report may contain one or more so-called safeguard clauses.
These clauses provide for an exclusion of either countries from participation in specific EU policy areas - primarily justice and home affairs and parts of the internal market - even if they become member states in 2007.
But despite the unlikelihood of delay "Bulgaria wants to be on the safe side," said Marin Lessenski, an analyst at the Institute for Regional and International Studies (IRIS).

Enlargement fatigue

A Bulgarian diplomat said the lobby offensive was "nothing extraordinary," but also pointed to concern about the "enlargement fatigue" currently characterising EU public opinion.
"Bulgaria is not such a well known country," the diplomat added.
European diplomats told EUobserver last month that public opinion will be "a factor" for both France and the Netherlands in handling the option of a delay for Bulgarian and Romanian accession, despite the official line that timing depends purely on meeting EU standards.
French and Dutch citizens' uneasiness over enlargement is widely seen as a contributing factor to why they rejected the EU constitution in referendums early last year.

By Mark Beunderman

Bulgaria's coastal airport to see rising visitor numbers

The airport in Varna, the largest city on Bulgaria’s Black Sea coast, is set to come under growing pressure as international airlines have signed up to serve burgeoning tourist demand.

Concern has risen about whether the airport will cope this summer.

On February 4, the Bulgarian Airlines Association (BAA) held its fourth annual meeting in Ihtiman near Sofia.

BAA reported that nearly five million passengers had travelled by air to and from Bulgaria in 2005. Varna Airport handled a total of 1.431 million passengers, a 12 per cent increase compared to 2004. Foreign companies transported 52.3 per cent of the passengers.

Overall, the number of passengers travelling on scheduled and charter international flights to Bulgaria’s airports in Sofia, Varna, Plovdiv and Bourgas rose last year by 16.4 per cent to 4.853 million passengers.

“Growth in passenger numbers will surely continue in 2006 by at least the same pace as last year,” BAA secretary-general Yovko Yotzev told a Bulgarian news agency.

“This tendency is driven mainly by two factors: the growing lure of the tourism sector and Bulgaria’s forthcoming accession to the European Union, hopefully next year,” Yotzev said.

The influx of low-cost carriers was also among the factors boosting the market by creating a new segment.

In 2005, Hungary’s Wizz Air and Slovak-based SkyEurope were the first low-cost carriers who launched flights to Bulgaria.

In May this year, Wizz Air is expected to launch a flight between Varna and Luton in the UK, and SkyEurope to start flights from Budapest to Varna in June.

In 2006, several other low cost carriers have announced plans to start flights to Bulgaria. Norway’s budget airline Norwegian Air Shuttle will launch flights from Oslo to Varna and Bourgas in May. British low-cost airline easyJet was also considering entering the Bulgarian market in 2006, Yotzev said.

Charter traffic to Varna and Bourgas usually peaks between June and September, owing to the summer season, while flights from and to Sofia airport are usually linked to ski resorts and business trips.

The three Bulgarian carriers - Bulgaria Air, Hemus Air and Viaggio Air – did scheduled international flights that absorbed 40.54 pre cent of the total passenger traffic in 2005. Eighteen foreign airlines, including British Airways(BA), Air France, Malev, LOT and Alitalia did the rest of the flights.

However the situation with scheduled carriers flying only to Sofia, with only a few flying to Bourgas or Varna, will change this summer.

On February 3, BA announced it would start regular flights to Varna.

BA signed a contract for the Varna-London-Varna route with Varna Airport, with the first flight scheduled for March 29.

As of February 24, more than 50 Bulgarian and foreign companies have applied to the Ministry of Transport and Communication to carry out flights to Varna this summer.

The Sofia Echo contacted Ivilina Panayotova, head of Varna Airport’s media office, who said they expected а 10 per cent increase in the number of passengers in summer 2006. The start of the active season is scheduled for May 1, but “the first tourists will arrive on March 1, from Leipzig on a Bulgarian Air Charter company charter.

“In the past few years, there has always been talk before the start of the season that Varna Airport will not handle the processing of passengers, but we always manage, and this year will be further proof of this,” Panayotova said.

Among the measures planned by Varna Airport is the opening of a temporary terminal to serve arriving passengers.

The question of new terminals, however, is not new for Varna Airport.

There have been several calls in the local Bulgarian-language press for new terminals to be built to cope with the ever-increasing number of passengers.

Currently, Varna Airport is state-owned. When in 2005 a concession procedure was opened, the question of new terminals seemed solved.

In April 2005, the Government chose Danish company Copenhagen Airports (CPH) to upgrade, manage and maintain the airports in Varna and Bourgas.

CPH pledged 526 million euro in investments in the two airports for the term of the 35-year concession. CPH offered to pay the state 30 per cent of either annual total revenues or airport fees, whichever was higher, in exchange for the concession.

The Transport Ministry estimated the total concession fee at 1.2 billion euro for the entire 35-year period. However, two unsuccessful bidders, Fraport from Germany and France’s Vinci Airports, appealed against the decision. Their objection was based on the tendering commission, headed by former transport and communications minister Nikolai Vassilev, not having applied the initial criteria when choosing the successful candidate.

In its final judgment on January 27, Bulgaria’s supreme court revoked the granting of a coastal airport concession to CPH. The decision is not subject to further appeal. Link

Petar Kostadinov

Bulgaria's tour operators against VAT vexation

Bulgarian tour operators have launched a campaign against any possible vexation that value added tax (VAT) is or could be causing them.

Foreign companies siphon millions of euro from Bulgaria, refunding the VAT they paid in this country on the price of hotel accommodations, participants in the international tourist exchange Vakantsia 2006 (Vacation) in Sofia said on February 23.

According to Lyubomir Pankovski of the Bulgarian Association of Tourist Agencies (BATA), who spoke on behalf of other members of the association, Bulgaria set the precedent in this field, as legal entities around the world typically do not allow VAT refunds for this type of service.

Pankovsi believes that this represents a siphoning of an enormous national resource and is a form of discrimination towards local sector players.

Under legislation introduced in early 2005, foreign tour operators are allowed to refund VAT paid in Bulgaria. Before that, only individuals were entitled to VAT refunds on goods they purchased in this country.

A check by The Sofia Echo, however, shows that Bulgaria does not set the precedent in the VAT refund policy towards businesses, and at least two European Union (EU) member countries also allow it.

By a decision of Germany’s supreme court, travel expenses effected after December 31 1999 can be reclaimed if the correct name of the traveller and applicant company is shown on the receipt or invoice.

The German Bundesamt fur Finanzen (ministry of finance) has become increasingly strict on the documentation requirements for a refund claim, and tends to apply the most stringent interpretation of the rules when reviewing a claim. The refund, however, is completely legal.

The Italian government also recently issued a procedure under which travel agencies may reclaim the Italian VAT paid for hotel accommodation and transportation costs they incur when they purchase them directly from the supplier.

This new procedure is primarily directed at tour operators and agencies that organise large travel groups; however, any travel agency may apply for a refund of the Italian VAT.

As The Sofia Echo reported on February 24, Bulgarian tour operators are facing a tougher challenge with the possible introduction of the 20 per cent VAT on tourist services in Bulgaria.

Currently, Bulgaria charges only seven per cent VAT on tourist services. However, in line with its commitments to the EU, the country will have to raise the rate to 20 per cent, which is the uniform rate for all goods and services in Bulgaria.

This tax burden, according to experts, will make it hard for the country to counter the competitive pressure of other markets, such as Greece, Spain and Turkey.

Bulgaria’s direct competitors for the highest VAT charged on tourist services in the EU currently can be found in Austria and Italy, but even these in countries it is much lower, at only 10 per cent. Denmark charges the highest rate for hotel accommodations at 25 per cent, followed by Slovakia with 19 per cent and the UK with 17.5 per cent.

The new tax burden for Bulgarian tourism is envisaged in the new VAT Bill, which has been prepared by the Finance Ministry, and has already been criticised on many other points and from other business representatives. If passed by Parliament, it will enter into force in 2007.

An increase to 20 per cent in the VAT rate for hotels, for example, will increase prices by more than 13 per cent, which will discourage customers. About 80 per cent of foreign visitors come to Bulgaria through foreign tour operators and their packages of hotel, food and other services currently include seven per cent VAT.

If prices increase by 13 per cent next season, hotels will face quite serious problems. Their sales will slump or expenses will surge. In both cases, hotels may be forced to stop operating, as they will be unable to cover their costs and repay investment.

Bulgarian tour operators are now considering an idea of switching to offshore registration in order to avoid a 20 percent VAT rate, participants in Vakantsia 2006 said.

Ivan Vatahov

Bulgaria Air

National flag-carrier Bulgaria Air '05 profit plunges threefold

Bulgaria Air's 2005 pre-tax profit is seen at а 500,000 levs, down from 1.7 mln levs the previous year, said the company's executive director Zlatin Surustov.
The downside is seen as a fallout from the surge in fuel prices and the entry of low-cost carriers on the Bulgarian market.
The privatisation-bound Bulgaria Air plans to include in its summer schedule flights from Sofia to Dublin, Milan to Varna, London to Bourgas and Kuwait to the coastal airports.
However, several budget carriers have announced that they too are thinking of covering these destinations. Irish tour operator Budget Travel, part of tourist concern TUI, said its charter company Budget Air will start flying Dublin-Bourgas this year.
Hungary's Wizz Air has said it will perform direct flights from London to Sofia and Bourgas.
Another no-frills carrier, Italy's Myair, will launch charter flights from Milan to Sofia, news outfit SeeNews reported recently.
Pressure from the budget airlines has prompted Bulgaria Air to offer a series of promotions at discount prices.
Bulgaria Air is launching a one-month campaign to promote this country abroad. The initiative is expected to indirectly help add more destinations to the carrier's network and ultimately benefit the company's pending privatisation.
Parliament will discuss the privatisation strategy for Bulgaria Air next week.