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BULGARIA
>> Regional Overview >> Bulgaria Overview 
Introduction
Regional stability is the overwhelming U.S. national interest served by continuing, U.S. transition assistance to Bulgaria. A peaceful, democratic, and economically prosperous Bulgaria will help to promote stability in the Balkan Region. The recent Kosovo crisis challenged Bulgaria to become a leader in preserving stability and in advancing democratic principles in a region torn by ethnic conflict, and underlined Bulgaria’s importance as an anchor state in the region. Bulgaria is well positioned to assist with regional efforts to combat terrorism, arms proliferation, and narcotics trafficking. The Bulgarian government, against significant opposition, supported the North Atlantic Treaty Organization (NATO) operations in Kosovo, and opened its air space to NATO over-flights. The Kosovo crisis caused economic losses in Bulgaria and in the region – Bulgaria’s losses due to the indirect effects associated with disrupted trade links. Consequently, the U.S. priorities in Bulgaria are to intensify support for economic reform and prosperity in the country; and support Bulgaria’s completion of its democratic transition and eventual European Union (EU) accession. USAID’s program contributes directly to two of the goals of the Embassy’s Mission Performance Plan in this regard – broad-based economic development, and democracy. With the Stability Pact and other regional integration initiatives in place, USAID is considering uses of Support for East European Democracy (SEED) assistance to pursue U.S. interest in promoting regional cooperation between Bulgaria and its neighbors.
The Development Challenge
The major challenge faced by Bulgaria for the past decade has been economic and political transition to a market-oriented democracy. The Kosovo crisis added new challenges to the Bulgarian transition; e.g., disruption of trade and transit links with major trading partners; lost economic opportunities; and increased unemployment in certain regions of the country. USAID has been working very closely with Bulgaria’s reform-minded government since it came to power in early 1997 to support this transition. A key dimension of the assistance program has been accelerating Bulgaria’s transition, and thus its readiness for EU accession.
In spite of the Kosovo conflict and other unfavorable external factors, the government has continued to push forward with its ambitious reform program and has achieved tangible results. Economic activity recovered in 1998, with real GDP growth estimated at 3.4%, after a contraction of a cumulative 17% in 1996-1997. Substantial progress has been achieved in privatization and enterprise restructuring -- as of end of August 1999, 64% of all assets earmarked for privatization was fully privatized. As a result, the private sector has raised its share in GDP to over 60%.
USAID has provided assistance to, and actively participated in Bulgaria’s implementation of legislative and regulatory reform essential to restructuring the economy, and conducive to harmonization with EU legislation. USAID advisors have played a critical and increasing role in preparing, tendering, and negotiating privatization of four state-owned banks. Assistance to the Bulgarian National Bank helped improve the Central Bank’s oversight and regulation of licensed banks. USAID’s Capital Market Project has delivered valuable training and advice to increase the efficiency, transparency, and liquidity of the capital market. The number of small- and medium-sized enterprises in Bulgaria has increased rapidly with significant assistance from USAID, and account for well over 90% of all registered economic entities. USAID’s enterprise growth program has delivered business services and technical assistance to more than 650 Bulgarian firms, raised venture capital, and led to 72 business linkages worth about $30 million.
Nevertheless, the country is not yet in a position to cope with competitive pressure and market forces within the EU. Though macroeconomic stability has been maintained, intensified effort is needed to implement an ambitious reform agenda, including accelerated privatization and restructuring of strategic and banking sectors. Additional financial discipline is needed, particularly in state-owned enterprises. Liquidation and bankruptcy procedures need to be more effective. A more stable and transparent legal framework for business is needed.
Bulgaria’s political institutions are now sufficiently structured and stable to meet the Copenhagen political criteria for application for EU membership, and Bulgaria has been invited to launch negotiations in early 2000 on its accession to the EU. However, Bulgaria needs to strengthen rule of law; and do more to protect human and minority rights, particularly of the Roma population. Anti-corruption efforts need to be intensified, and functioning of the judicial system improved. Bulgaria is still confronted with widespread poverty (a recent World Bank study found that poverty was increasing, with more than a quarter of Bulgarians living on less than a dollar a day). Life expectancy and other health indicators are worsening and health sector reform requires urgent attention.
Withdrawal of SEED assistance in 2002 as planned in the current USAID strategy would be premature in light of these challenges and others. The negative impacts of the Russian and Asian economic crises, slower than expected progress on privatization and restructuring, and the Kosovo Conflict have impeded progress toward the results, prompting reconsideration of strategy parameters. More time and resources will be needed to help Bulgaria consolidate economic, and democracy and governance improvements, and address social sector constraints in the wake of these crises.
FY 1999 Kosovo Supplemental Funds.
In an effort to alleviate unfavorable repercussions of the Kosovo crisis, USAID added two components to its portfolio in FY 1999. The Economic Support Program provided $25 million in FY 1999 Economic Support Funds (ESF) for emergency balance-of-payments support to help cushion the negative effects of the Kosovo crisis on Bulgaria’s economy. The Bulgaria Crisis Recovery Program (BCRP) was funded with $5.0 million in FY 1999 SEED Supplemental resources to help affected, Danube River communities recover from crisis impact: to restore local government capacity, strengthen civil society capacity, generate employment, and improve commercial life in those municipalities. The BCRP is providing immediate, technical and financial assistance to entrepreneurs in these communities; and developing new mechanisms for communication between local governments and civil society organizations, and among ethnic groups. Also in the BCRP are $1 million for the American University in Bulgaria for education and vocational training for Kosovo refugees.
Other Donors
International donor support to Bulgaria is substantial, with total donor assistance projected at over $1 billion in 1999 – the IMF, EU and World Bank providing the lion's share of the funding. Among bilateral donors, the U.S. manages the largest technical assistance program, which is closely coordinated with multilateral and other bilateral programs. USAID has inspired the development of working groups for donor coordination at the expert level in key areas, and has taken the lead in donor coordination in critical areas, such as improving the SME policy environment. The World Bank and IMF often prepare the policy and legislative environment for USAID programs to be effective, and USAID reciprocally provides targeted technical support assisting Bulgaria to meet multilateral conditionalities.
The World Bank leads assistance efforts in energy, pension reform and economic restructuring with USAID providing technical assistance in these areas. USAID coordinates activities with the United Nations Development Program (UNDP) in areas including small- and medium-enterprise (SME) development, poverty alleviation, integration of marginal populations into society, employment promotion, and government decentralization. Post-Kosovo rehabilitation and regional integration initiatives are expected to increase USAID collaboration with the World Bank and UNDP in the social arena, particularly with respect to the Regional Initiatives Fund. U.S. coordination with the EU is strong, most notably in the area of judicial reform. Collaboration is expected to intensify as USAID works with the Government of Bulgaria and the EU to facilitate the accession process. The EU supports Bulgaria’s accession preparations, and has provided assistance totaling $100 million in both 1998 and 1999. This level is expected to be $200 million a year in 2000, and thereafter.
Country Background Information Resources CIA Factbook
Library of CongressNational Geographic Country Maps
State Dept. Country Information
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Last Updated on: December 12, 2000 |
