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Bulgaria
>> Regional Overview >> Bulgaria Overview Activity Data Sheet
PROGRAM: Bulgaria
TITLE & NUMBER: Accelerated Development and Growth of Private Enterprises in a Competitive Environment, 183-013
STATUS: Continuing
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $5,675,000 AEEB
PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $7,650,000 AEEB
INITIAL OBLIGATION: FY 1992 ESTIMATED COMPLETION DATE: FY 2005Summary: Thriving micro, small and medium private enterprises are an essential element of a competitive free-market environment. Activities under this strategic objective strengthen the business practices (i.e., operations, production, marketing, etc.) of selected industry clusters that offer potential for economic growth and increased exports. Access to finance is facilitated through a set of enterprise credit activities. Other activities work to reduce the legislative, regulatory and administrative barriers to investment, trade and growth.
Program Categories include Micro, Small and Medium Enterprise (SME) Technical Assistance, Commercial Law Reform, Agriculture and Agribusiness, Micro-Enterprise Credit, and Energy Efficiency.
Key Results: Under this strategic objective, the Mission seeks to: (1) strengthen private enterprise and industry clusters (principally small and medium enterprises); (2) mobilize investment and credit for growth and job creation; and (3) establish or reform laws, policies, and institutions which are conducive for private sector growth.
Performance and Prospects: In FY 2001, USAID intends to obligate $5,675,000 for the Accelerated Development and Growth of Private Enterprises. Performance to date has been satisfactory.
In CY 2000, the Bulgarian Gross Domestic Product (GDP) grew by 5% in large part due to the privatization of more than 80% of state-owned enterprises, and because of foreign and direct investment in capital formation. Reflecting the changes that have occurred since the current reform-minded government took power, private sector share of GDP has increased from barely half of GDP to more than two-thirds. Still, the pace of private sector development remains a limiting factor of economic growth in Bulgaria.
USAID supported the private sector contribution to GDP growth through activities that brokered more than $15 million in transactions (including trade, licensing, franchising, etc). In total, USAID completed 310 advisory assignments (more than half of which were with woman-owned or managed firms). Under the USAID competitiveness initiative, the tourism and light manufacturing export sectors increased 15-20% among the target firms, compared with a national average of 13%. These USAID-assisted firms also added more than 1,700 jobs, most (55.2%) held by women. During 2001, USAID intends to obligate $1,500,000 for continued technical assistance to strengthen business practices, including operations, production, and marketing for micro, small and medium enterprises.
USAID is helping to promote the reform of commercial law, particularly to improve collateral and commercial law. Objectives include: strengthening creditor rights to seize assets; promoting wholesale adoption of internationally accepted accounting standards; enhancing disclosure necessary for credit analysis; and increasing tax collections thus reducing the gray economy. Adoption of international accounting standards (IAS) is among the most important initiatives in commercial law reform. Having succeeded in requiring IAS reporting for all banks and financial institutions, USAID is now working to influence the Ministry of Finance to similarly mandate IAS for all tax-related purposes. This is essential for transparency and good governance and will contribute to the creditworthiness of would-be Bulgarian borrowers. It will permit Bulgarian firms to raise debt and equity capital; important corporate financial tools that will further support investment and growth. With USAID assistance, sixteen firms adopted ISO 9000 quality standards and thus were able to penetrate Western European markets. During FY2001, USAID intends to obligate $1,900,000 to promote commercial law reform including the adoption of international accounting standards for all tax-related purposes and to promote banking law that improves capital availability for small business operators.
Support for small and medium agribusiness firms has been provided at the firm level to increase production and to improve the effectiveness of agribusiness operations. Although the agriculture sector was hard-hit by drought, the Warehouse Receipts program continued to expand. The number of licensed warehouses increased to 22 with nearly 250,000 metric tons of grain in storage by fall 2000. Under this program, farmers are issued a "Warehouse Receipt" for the grain that they store in a licensed/bonded warehouse. This receipt serves as a financial instrument and can be pledged as collateral to secure necessary working capital loans. During 2000, three banks originated more than $3.5 million in loans against these receipts. By obviating the need for farmers to sell grain at potentially disadvantageous prices, the Warehouse Receipts program has helped to increase farm incomes, and to stabilize grain and commodity prices, which is good for the markets. USAID proposes to obligate $850,000 to continue technical assistance directly to small agribusiness firms, to improve agribusiness' marketing skills, and to improve access to credit.
Complementary banking reform efforts have improved the ability of banks to appraise and administer loans, but banks continue to be reluctant to lend to small and medium business operators. To enhance access to capital, USAID supports three credit facilities to assist micro-, small, and medium enterprise and two loan guaranty facilities. SME finance facilities, focused in part on businesses located in the Danube River region, are currently administering loan portfolios exceeding $10 million. These credit facilities provide critically needed financing to a growing segment of the economy that is currently under-served by commercial banks. The loan guaranty facility (which secures up to 50% of the risk in energy efficiency related investments) loaned nearly $1 million to private and municipal borrowers and currently has approximately $5 million under loan committee review. During 2001, USAID proposes to obligate $1,425,000 to continue to facilitate credit mobilization.
In FY 2002, Mission intends to obligate $ 7,650,000 to accelerate the growth and economic contributions of Bulgaria's small and medium enterprises. Particular emphasis will be placed on employment generation as well as on building the competitiveness of export-oriented priority industry clusters directly contributing to sustained economic growth. USAID will pursue remaining commercial law reforms to enhance the legal and regulatory environment for business competition. Additionally, support to facilitate private sector credit mobilization will focus on areas where the market has failed to supply adequate credit for economic growth.
Beneficiaries: The direct and primary beneficiaries are private enterprises that create jobs and fuel demand for domestic inputs through export-led growth. All Bulgarian citizens will benefit from the improved business environment through increased economic stability and growth that will create jobs that generate wealth.
Possible Adjustments to Plans: During FY 2001, USAID/Bulgaria will revise its program strategy to determine the appropriate level and content of activities to support this sector. Assessments and sector specific studies will provide valuable analyses for developing the strategy. Continued support for development of the private enterprise sector is expected to be a significant set of activities.
Other Donor Programs: USAID coordinates its assistance for the growth of the private enterprise sector through a World Bank-hosted Coordinating Committee, comprised of a Policy Committee chaired by USAID and a Finance Committee chaired by EU PHARE. EU assistance has focused largely on institutional strengthening of the Bulgarian SME Agency. The British, German and Austrian aid agencies have programs targeted at policy reform, as does the World Bank. USAID has worked closely with the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), Soros Fund, the British, Dutch and Swiss to launch new SME finance initiatives.
Principal Contractors, Grantees, or Agencies: USAID implements its activities primarily through the following partners: International Executive Services Corps; the University of Delaware; Agriculture Cooperative Development International/Volunteers Oversees Cooperative Assistance; Management Systems International; Opportunity International; Catholic Relief Services; World Council of Credit Unions (WOCCU); American Bar Association/Central and Eastern European Law Initiative (ABA/CEELI); Bulgarian-American Enterprise Fund; and private banks (in conjunction with the loan guaranty facilities).
FY 2002 Performance Table
Selected Performance Measures: Accelerated Development and Growth of Private Enterprises in a Competitive Environment, 183-013
Indicator FY97 (Actual) FY98 (Actual) FY99 (Actual) FY00 (Actual) FY01 (Plan) FY02 (Plan) Indicator 1: Private Sector Share of GDP 55 65 57 67 75 80 Indicator 2: Number of laws, regulations, and policies affecting private sector growth are drafted or amended and presented to Parliament 10 12 23 21 25 25 Indicator 3: Increase in exports of target firms NA 13 9.5 14.6 15 15 Indicator Information:
Indicator Level (S)or(IR) Unit of Measure Source Indicator Description Indicator 1: S Percentage National Statistical Institute Proportion of GDP provided by the private sector. Indicator 2: IR Number National Assembly Number of laws, regulations, and policies affecting private sector growth are drafted or amended and presented to Parliament. Indicator 3: IR Percentage Reports of assisted firms and report from FLAG implementers Annual percentage increase in the value of exports of target firms. U.S. Financing
(In thousands of dollars)
Obligations Expenditures Unliquidated Through September 30, 1999 4,260 DA 4,213 DA 47 DA 0 CSD 0 CSD 0 CSD 2,120 ESF 21,200 ESF -19,080 ESF 50,486 SEED 44,855 SEED 5,631 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Fiscal Year 2000 0 DA 307 DA 0 CSD 0 CSD 0 ESF 0 ESF 9,269 SEED 5,076 SEED 0 FSA 0 FSA 0 DFA 0 DFA Through September 30, 2000 4,260 DA 4,520 DA -260 DA 0 CSD 0 CSD 0 CSD 2,120 ESF 21,200 ESF -19,080 ESF 59,755 SEED 49,931 SEED 9,824 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Prior Year Unobligated Funds 0 DA 0 CSD 0 ESF 837 SEED 0 FSA 0 DFA Planned Fiscal Year 2001 NOA 0 DA 0 CSD 0 ESF 5,675 SEED 0 FSA 0 DFA Total Planned Fiscal Year 2001 0 DA 0 CSD 0 ESF 6,512 SEED 0 FSA 0 DFA Future Obligations Est. Total Cost Proposed Fiscal Year 2002 NOA 0 DA 0 DA 4,260 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 2,120 ESF 7,650 SEED 0 SEED 73,917 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA
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Last Updated on: May 29, 2002 |
