i s s u e 4 4o c t o b e r 2 0 0 3

A m e r i c a n C h a m b e r o f C o m m e r c e i n B u l g a r i a

h o m e p a g e : w w w . a m c h a m . b g e - m a i l : a m c h a m @a m c h a m . b gBus in e s s Pa rk So f i a , M lados t 4 A re a , Bu i l d ing 2 , F lo o r 6 , 1 7 1 5 So f i a

Te l . : ( 3 5 9 2 ) 97 6 9 5 6 5 Fax : ( 3 5 9 2 ) 97 6 9 5 6 9

Door-knock Mission in Washington D.C.

Door-knock Mission in Washington D.C.

a m c h a m n e w s

AmCham Door-Knock Mission in Washington D.C. 2

US Congress Commemorates 100 Anniversary of Diplomatic Relations between USA and Bulgaria 3

AmCham Bulgaria Meets U.S. Treasury Officials to Discuss on U. S. – Bulgaria Treaty on Avoidance of Double Taxation 4

a m c h a m e v e n t s

USAID Global Development Alliance Starts with YES 7

C o r p o r a t e S o c i a l

R e s p o n s i b i l i t y

Citigroup Makes Another Big Contribution to Bulgarian School 8

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Nexcom Bulgaria Obtains Fixed Telecom Operator License 10

Microsoft Office 2003 Improves Team Communication and Collaboration 11

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Leaders Are Made Not Born 13

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Antoine Iskandar:“I love Bulgaria and my work here the most.” 14

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Employee Remuneration Packages in BulgariaAIMS Human Capital 2003 Compensation and Benefits Survey 16

Balancing the Balance 18

n e w m e m b e r s

AVON Cosmetics Bulgaria

M & M Air Cargo Service BG 19

l e i s u r e

AXN Launches with Action Party 20

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3M (East) AG . AA KRES EOOD . ABB (Asea Brown Boveri) Ltd. . AbC.R.O. - Bulgaria EAD .Abela Airport Services Ltd. . Abrotea Bulgaria AD . Accor Services Bulgaria . ACDI / VOCA .Acsior . ACT Soft Ltd. . Address Bulgaria Holding JSCo.- A real estate company . ADIS Ltd. .AES Corporation . AFA OOD . Ahrend Profesionalni Interiery S.R.O. . AIG Bulgaria . AIG LifeBulgaria . AIMS Human Capital . Albena Joint Stock Company . Alexandrov Ltd. . AllanColliautt Associates, Inc. . Allied Pickfords Bulgaria . American Bar Association and CEELI .American College of Sofia . American Construction Products JSC . American University in Bulgaria. Amylum Bulgaria AD . Anglo-American School of Sofia . Anton Preslavski, Liebert Hiross .APIS - Hristovich Ltd. . APOLO Ltd. . Aries Commerce . Association of Bulgarian Broadcasters- ABBRO . AT Engineering 2000 Ltd. . AUBG - Elieff Center for Education and Culture . AvendiLtd. . AVIS . AVON Cosmetics Bulgaria Ltd . Balkan News Corporation Plc. . Baxter AG .Bayer Bulgaria . BearingPoint LLC . BG Radio . Bodyguard-Fire-K Ltd. . Borislav Boyanov &Co. . Bristol-Myers Squibb . BTC-NET Ltd. . Bulgarian American Enterprise Fund . BulgarianCharities Aid Foundation (BCAF) . Business Links . Business Park Sofia EOOD . Business toBusiness . CA IB Bulinvest . Cable Bulgaria . Carlson Wagonlit Travel . Center for the Studyof Democracy . Cilag AG International (Johnson & Johnson) . Cisco Systems Bulgaria . Citibank,N.A.- Sofia Branch . City University . Clarina / Coca Cola . Coca-Cola Bulgaria EOOD . COL-LIERS Continental Properties . Combi Trans Bulgaria Ltd. . Compass Translation Services .ConsulTeam . Contex Drouzhba Ltd. . Corstjens Worlwide Movers Group . CPM InternationalLtd. . Cresta Marketing S.A. . Curtis / Balkan Ltd. . DeConi M&A . Deloitte & Touche . DHLInternational (Bulgaria) Ltd. . Diageo Bulgaria Ltd . DIMON Bulgaria . Djingov, Gouginski,Kyuchukov, & Velichkov . Domaine Boyar AD . Don & Co. . Dow Europe GmbH RepresentationOffice . Dr. Emil Benatov & Partners . Effekten Und Finanz - Bulgaria EAD . Eli Lilly and Company. Elido . Ellen Ruth Greenberg, Ph.D., Dr. I.S. Greenberg Medical Center . Elta Consult Ltd. .Emerson Process Management AG . Engineeringservice Sofia Ltd. . Entergy Wholesale Operations. ERATO HOLDING PLC . Ernst & Young Bulgaria . EURO RSCG New Europe Sofia . ExpoTeam OOD . First Global Health Corporation . Flying Cargo Bulgaria Ltd. - Licensee of FedEx .Force Delta Ltd. . General Electric International . Genmark Automation Bulgaria . GEO - CARLtd. . Glaxo SmithKline . Group 4 Securitas (Bulgaria) Ltd. . Haemimont-Smartcom AD .Hayhurst Berlad Robinson . HEBROS Bank AD . Hewlett-Packard Bulgaria EOOD . Hilton Sofia. Honeywell EOOD . Horizon . IBM Bulgaria . In Time Ltd. . Infoguard - Stefan Nedkov . INGBank Sofia Branch . Interamerican Bulgaria Ins.Co . Interbrands Marketing & Distribution Inc. .Internet Securities Bulgaria EOOD . Interpartners Plc. . IP Consulting Ltd. . Junior AchievementBulgaria . Kolbis International Transfer Corporation . KPMG Bulgaria . Kraft Foods Bulgaria .Kulev Project . Lefkowitz & Co / BalkanData . Lexim Sofia Ltd. . Lindner Immobilien Bulgaria OOD. Lirex BG Ltd. . Lowe Swing Communications . M & M Air Cargo Service BG Ltd . M3Communications Group, Inc. A Hil & Knowlton Associate . Maersk Bulgaria Ltd. . Magnetic HeadTechnologies . Management Systems International . Marsh EOOD . McDonald's Bulgaria . MerckSharp & Dohme IDEA Inc. . Michael Delia, European Bank for Reconstruction and Development(EBRD) . Microsoft Bulgaria . Miltech Ltd. . Moto Pfohe Ltd. . Motorola Bulgaria EAD . NationalDISTRIBUTORS . NDB Ltd. . NDT Equipment Supplies LTD . Net Is Ltd. . NET IS SAT Ltd. .New-I . Nexcom Bulgaria EAD . Nokia Bulgaria EOOD . Novel Consult Law Firm . Oracle EastCentral Europe Limited - Branch Bulgaria . Pain D'or Ltd. . Pfizer H.C.P. Corporation . PioneerSemena Bulgaria EOOD . Popov Legal Office . Postbank . PricewaterhouseCoopers . PrimaSoft . Procter & Gamble Bulgaria . ProSoft . Radisson SAS Grand Hotel . Rila Solutions .Rockwell/Intelpack . RTC Mobikom . S&D Chemicals Bulgaria . S&T Bulgaria . Sante InternationalOOD . Schering - Plough Central East - Bulgaria . SEAF Trans-Balkan Bulgaria Fund . SheratonSofia Hotel Balkan . Sherita M Ltd. . Sofia Echo Media Ltd. . Stefan Dimitrov, Norman ManagementCompany Ltd. . Student Labour Office . Sun Spree Holidays . TechnoLogica . The Atlantic Clubof Bulgaria . TM Auto Ltd. . TMF . Tumbleweed Communications . Unimasters Logistics GroupLtd. . Unisys Bulgaria Branch . Urban 3000 Ltd. . US Meds - Bulgaria AD . Via Expo Ltd. .Videolux Ltd. . Vidima AD . Westinghouse Energy Systems Bulgaria Branch . Willi Betz GmbH &Co KG - Balkan Star . WizCom Ltd. . Wrigley Bulgaria . Wyeth-Whitehall Export . Xerox BulgariaLtd. . Yordan Tchoudomirov Goleminov . Zlati Dinev Studio

Publisher

American Chamber of Commerce in Bulgaria

Design, Prepress and Printing

Milen Marchev

AmCham Bulgaria Magazine reaches members , decision makers in Bulgaria and the United States ,

as well as all AmChams around the world.

The artic les in AmCham Bulgaria Magazine show the opinion of the authors and do not necessarily reflect

the Chamber’s position.

I f you do not receive regular ly the magazine or the AmCham Daily News electronic bulletin, please contact

the AmCham office in Sofia at tel . 9769 565 or e-mail amcham@amcham.bg.

Board of Directors of the American Chamber of Commerce in Bulgaria

President Kenneth Lefkowitz Lefkowitz & Co./BalkanData

Vice President Stefan Dimitrov Allied Pickfords

Treasurer Dennis Fiehler Bulgarian American Enterprise Fund

Borislav Boyanov Borislav Boyanov & Co.Amnon Halper AshtromDavid Hampson US Meds – BulgariaJanet Heckman CITIBANKRoumen Mihailov 3M (East) AGFriedrich Niemann Hilton SofiaGeorgi Randelov IBM BulgariaMaria Shishkova AIMS Human CapitalElitsa Tsaneva Ideal Standard

Ex-Officio Member Reginald Miller US Commercial Attache

Executive Director Valentin Georgiev

i s s u e 4 4o c t o b e r 2 0 0 3

On October 7-8, 2003, the U.S.Chamber hosted a door-knock visit inWashington for the board membersfrom the American Chambers ofCommerce in Bulgaria, Croatia,Hungary, Romania and Serbia. Thisvisit was a follow-up of the firstAssembly of Central and EastEuropean AmChams on EUEnlargement that took place inBrussels on April 2-3. AmChamBulgaria was represented by itsPresident Kenneth Lefkowitz andExecutive Director Valentin Georgiev.

The purpose of the Washington visit wasto: (1) demonstrate to both Washingtonand Brussels the strong U.S. businesssupport for EU enlargement; (2) makeU.S. officials aware of the growing stakeof U.S. companies, which are among thelargest investors in the region, to the eco-nomic success of enlargement; (3) advisethe U.S. government on the challenges ofadopting EU regulations and practices inthe acceding countries; (4) discuss theprospect of compensation negotiationsand the impact of other trade-orienteddisputes between the EU and U.S.; and(5) obtain the U.S. government’s insightson its post-Cancun trade policy. TheAmChams met with the following officials: • Heather Conley, Deputy Assistant

Secretary of State for European and

Eurasian Affairs

• Cathy Novelli, Assistant U.S. Trade

Representative for Europe and the

Mediterranean

• Nancy Lee, Deputy Assistant Secretary

for Eurasia

• Stephen Schaefer and Nova Daly, Trade

Subcommittee of the Senate Committee

on Finance

• Vincent Morelli, Subcommittee on Europe,

House International Relations Committee

• Brent Perry and Patricia Norman, Office

of Senator George Allen, Chairman,

Subcommittee on European Affairs,

Senate Foreign Relations Committee

• Petros Sourmelis, Head of the Trade

Section, and Peter Berz, First Secretary,

Trade Section, Delegation of the

European Commission.

Also during their visit, the AmChamsbriefed companies on the U.S. corporateexperience in Central and Eastern Europeat a roundtable hosted by U.S. Chamberof Commerce and the Central andEastern Europe Business InformationCenter (CEEBIC) of the U.S. Departmentof Commerce. The topic of the roundtablewas “The American Corporate Experiencein Central and Eastern Europe”. TheAmChams discussed the current businessenvironment in Central and EasternEurope, the realities of adopting EU regu-lations and practices in the accedingcountries, and how EU and NATO acces-sion will affect U.S. business interests.The AmChams highlighted also their latestactivities and opportunities for U.S. com-panies in the markets of Bulgaria, Croatia,Hungary, Romania, and Serbia. Based on the success of the NATOAccession conference on trade and

investment opportunities AmChamBulgaria suggested that next year’s followup conference should be hosted in Sofiaand should assume a more regionalframework. US Chamber of Commerceand CEEBIC were invited to be co-orga-nizers of the event and DanielW.Christman, Senior Vice-PresidentInternational Affairs of the US Chamber,expressed his support for this initiative.AmCham Bulgaria had very productivemeetings with the management ofCommercial Law Development Programand a couple of initiatives were launchedas a result – among them a series of jointseminars on intellectual property rightsprotection to be held in Bulgaria in 2004.AmChams also met with the AmericanChemistry Council concerning the pro-posed EU chemicals directive and itspotential impact on the EU accessionstates. In addition, the AmChams werehonored at a reception organized by SorinDucaru, the Romanian Ambassador to theUnited States.Throughout the meetings, the AmChamdelegates emphasized that U.S. compa-nies have invested in Central & EasternEurope for the long term with the expec-tation of continued growth and profitabili-ty. However, the burden of EU regulations,the lack of a viable competitive environ-ment, and the restrictions imposed by thegrowth and stability pact may have a neg-ative impact on investment in the region.The delegates noted that U.S. business-es, the U.S. government, and theEuropean Union have a common chal-lenge to ensure that the accession of thenew member states does not create newdisputes – and fuel existing ones –between the European Union and theUnited States. The AmChams also raisedthe issues of preserving Internal RevenueCode Section 911. Section 911 allowsU.S. citizens living and working abroad toexclude up to $80,000 in foreign earningsfrom gross income. Finally, the U.S. Chamber’s Europe/Eurasia Business Committee announcedthe initiative of the follow-up meetingsover the next year in both Washingtonand Brussels on EU enlargement. TheChamber also acknowledged AmChamBulgaria and Balkan Data company whichwere among the primary sponsors of thisimportant event.

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AmCham Door-KnockMission in Washington D.C.

AmCham Bulgaria meets Commercial Law

Development Program officials at the US

Department of Commerce.

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Dear Friends,

I am very pleased to inform you that on October 8, 2003, the U.S. House ofRepresentatives passed H. Res. 355, a Congressional Resolution commemorating the100th Anniversary of Diplomatic Relations between the U.S.and Bulgaria, by the overwhelming margin of 397-0. I washonored to work with the Democratic Co-Chair of the BulgariaCaucus, Congresswoman Ellen O. Tauscher, the Members of theBulgaria Caucus, and Chairman Doug Bereuter, to pass thisimportant legislation. The passage of this bill coincided withthe important visit to America of the Speaker of Bulgaria'sNational Assembly, the Honorable Ognian Gerdjikov. Thistrip was nothing short of historic. Speaker Gerdjikov met withSecretary of State Colin Powell in New York, and inWashington, D.C., he met with our Speaker of the House, J.Dennis Hastert, Majority Leader Tom DeLay, Chairman ofthe International Relations Commitee Henry J. Hyde, andChairman of the Judiciary Committee, F. James Sensenbrenner,Jr. I was also honored to host Speaker Gerdjikov and his dele-gation in my office and to attend an extraordinaryCongressional Reception in the beautiful Mansfield Roominside the Capitol Building in his honor. Despite the busy weekwe had in Congress working on the Iraq supplemental appro-priations bill, these leaders recognized the importance ofSpeaker Gerdjikov's visit and took time out of their schedulesto meet with him and his delegation of Parliamentarians.

I am very much looking forward to my next visit to Bulgaria.Until then, I want to express my sincere thanks to the peopleof Bulgaria. We in America, are truly grateful for the supportyou have shown us during the global War on Terrorism, andwe know that Bulgaria is a true friend of our nation.

Very truly yours, JOE WILSON

Member of Congress

US CongressCommemorates 100 Anniversary of Diplomatic Relations between USA and BulgariaCongressman Joe Wilson is a great

friend of Bulgaria. His first acquaintance

with the country started in 1990 when

he was appointed as an observer for the

first democratic elections in Bulgaria on

June 10, 1990. Among his recent contri-

butions is the support of Bulgaria’s

NATO accession as well as his sponsoring the bill recognizing the 60th Anniversary

of Historic Rescue of 50,000 Bulgarian Jews from Holocaust.

(Letter from Joe Wilson, Member of US Congress)

Congressman Joe Wilson

met with AmCham Bulgaria President

Kenneth Lefkowitz and Executive

Director Valentin Georgiev during the

AmCham door-knock mission to

Washington DC

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The most important series of meet-ings in association with the visit toWashington D.C. on October 6-8,involving AmCham President andExecutive Director were the ones withthe U.S. Treasury officials. The topicof these meetings was the absenceof U.S. - Bulgaria Treaty onAvoidance of Double Taxation whichis becoming one of the major obsta-cles in improving the volume of bilat-eral trade and investments betweenthe two countries. AmCham has pre-sented its position paper on the mat-ter. The document has been a resultof extensive discussion in theChamber. It was prepared with the

invaluable professional assistance ofErnst & Young’s office in Bulgaria andsupported by individual letters writtento Secretary of Treasury from Ernst &Young Bulgaria, Hilton Sofia,Curtis/Balkan Ltd., Bristol-MyersSquibb Bulgaria, Bulgarian AmericanEnterprise Fund, Citibank Bulgaria,American Standard, Entergy, Coca-Cola HBC Bulgaria.

The position paper outlines the factthat Bulgaria and the United Stateshave developed significant trade andinvestment ties since the advent ofdemocratic changes here 13 yearsago. American Chamber of Commerce

in Bulgaria looks forward to futuregrowth in bilateral ties in light ofBulgaria’s coming NATO accession.The rapid growth of the Chamber tonearly 200 members reflects theincreasing depth of those economicties. AmCham members include awide range of firms, including not onlymajor investors such as AmericanStandard, Entergy, News Corp., andCitigroup, but also a multitude of U.S.and Bulgarian firms active in bilateraltrade.

For this future growth to translate intoincreased U.S. investment andexports, however, concrete actions

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AmCham Bulgaria Meets U.S. Treasur y Officials to Discuss on U.S. – Bulgaria Treat y on Avoidance of Double Taxation

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need to be taken to improve the cli-mate for U.S. investors in Bulgaria.Chief among such actions is the adop-tion of a bilateral treaty on the avoid-ance of double taxation.

The absence of Double TaxationTreaty (DTT) harms U.S. commercialinterests in Bulgaria because itimpedes investments and trade rela-tive to other comparable countries inthe region, nearly all of which haveconcluded a DTT with the U.S.,despite the U.S. Government statedgoal of facilitating deeper economicties with Bulgaria. Given Bulgaria’sincreasingly close political ties withthe U.S., there is no reason for eco-nomic relations to be at a disadvan-tage vis-а-vis other European coun-tries. U.S. investors are disadvan-taged for the following reasons:

• U.S. expatriates face punitive dou-ble taxation of their worldwideincomes in excess of the foreignearned income exclusion, making itdifficult and costly for companies toattract them to work in Bulgaria;

• The foreign tax credit for corpora-tions and individuals is not an ade-quate substitute for a double-taxtreaty, because:

• Claiming the foreign tax creditinvolves substantial delays;

• The foreign tax credit is not avail-able in all cases, especially whena company that has paid withhold-ing tax posts a loss for the taxperiod;

• Many potential investors in theBulgarian capital markets, such asuniversity endowments and pensionfunds, are unable to claim the for-eign tax credit due to their non-profit status.

Partially as a result of these disad-vantages, U.S. investment in Bulgariahas lagged relative to WesternEuropean countries, when comparedto the relative importance of U.S.investment in other Eastern Europeancountries. By not “punching itsweight” on investment, the U.S. lacks

the full persuasive strength that itnow needs when speaking out on EUaccession issues, notably the sub-stantial tariff advantage given toimports from the EU.

Currently, Bulgarian law provides for15% withholding tax on all paymentsof interest, dividends, rent, royalties,capital gains, etc. to a foreign entity.Also, under certain circumstances(more than 183 days presence in thecountry in any 365 day period),Bulgaria taxes foreign persons ontheir worldwide income, as does theU.S.

The adoption of a bilateral double taxtreaty would settle to what extentBulgaria is entitled to tax the incomeand capital of US residents derivedfrom Bulgaria. Based on the generalprinciples of the bilateral double tax-ation conventions, the followingobstacles to trade and investment willbe resolved:

• The profits of an US enterprise willnot be taxed in Bulgaria, unless

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they are attributable to a perma-nent establishment of that enter-prise situated in Bulgaria;

• If the profit is derived through apermanent establishment, thereshall be allowed as deductions,expenses incurred for the purposesof the permanent establishment,including executive and generaladministrative expenses incurred inBulgaria or elsewhere (this possi-bility is not provided by theBulgarian domestic law);

• US companies engaged in interna-tional traffic would not be taxed inBulgaria - usually the taxing rightsover profits from the operation ofships or aircraft involved in theinternational traffic are left to thestate of residence;

• U.S. expatriates, whose presence isa requirement for inward invest-ment, face burdensome double tax-ation of their worldwide incomes.Due to the lack of a treaty theworldwide income of an individualmay be subject to double taxationboth in Bulgaria and the US;

• Further, the treaty will set up the

applicable methods for the elimina-tion of the double taxation. The for-eign tax credit for corporations andindividuals, envisaged within theBulgarian domestic law is not anadequate substitute for a double-tax treaty, because the tax creditgranted by virtue of the Bulgarianlaw has very limited scope and isnot available in all cases, especial-ly with respect to certain specifictaxes;

• The treaty will ensure that USNationals will not be subjected inBulgaria to any taxation or anyrequirement connected therewith,which is other or more burdensomethan the taxation of the Bulgariannationals;

• The treaty will ensure that any per-son considering that the actions ofBulgaria result or will result for himin taxation not in accordance withthe provisions of the Convention,may present his case to the UScompetent authority. By virtue ofthe treaty, they should endeavor toarrive at a satisfactory solution andto resolve the case by mutualagreement with the Bulgarian com-petent authority.

The expectation is that by virtue ofthe Treaty, Bulgaria will reduce itstaxing rights over the investmentincomes (dividends, interest and roy-alties) of U.S. residents derived fromBulgaria. The current Bulgarian prac-tice is the withholding tax to bereduced to 10% at source. To bringmaterial benefit, the DTT should fore-see zero withholding on at least twokey categories of income, such asdividends and interest. Such provi-sions have a number of precedents,notably the UK-Bulgaria DTT.

In conclusion it must be noted thatdeepening economic ties reflect astrong positive trend in bilateralpolitical and military relations.Bulgaria materially and logisticallysupported the U.S. in the war onterrorism, in the Iraqi conflict, and inthe subsequent peacekeeping andreconstruction effort. Bulgaria isalso a prospective location for futureredeployment of U.S. bases inEurope. Restarting negotiations on aU.S.-Bulgarian DTT is a logicalextension and of the positive trendand would be tangible gesture tocommemorate the ongoing 100thanniversary of U.S.-Bulgarian diplo-matic relations.

The Global Development Alliance initiative of the U.S. Agencyfor International Development (USAID) was first presented ata no-host luncheon with members of the American Chamberof Commerce and BIBA, held on October 21, 2003 atRadisson SAS Hotel Sofia.Dr Kent Hill, USAID Assistant Administrator for Europe andEurasia, spoke about the new partnership model involving thepublic and private sector and non-governmental organiza-tions. The public private partnership idea is critical for democracy,Dr. Hill pointed out. Eastern European countries still sufferfrom the legacy of the communist regime which stifled entre-preneurship and prohibited any charity activities. After thecollapse of communism, these countries need to make moreof an effort in reconstructing the civil society, fostering cor-porate philanthropy and enterprising spirit. USAID recognizesthe progress made by Bulgaria and the other South-EastEuropean countries in that respect and will support them inthe development of sustainable public private partnerships.The first for Bulgaria Global Development Alliance partner-ship is in support of the Young Entrepreneurial Spirit initiativeof Junior Achievement (JA) Bulgaria – an NGO working toeducate young Bulgarians to value free enterprise, under-stand business and economics, develop as ethical leadershipand be workforce ready. USAID Bulgaria has contributed a$60,000 grant.The Young Entrepreneurial Spirit initative (YES) is based onthe strong partnership between education, civil society andthe business sector. The program will provide businesses withan opportunity to share their practical experiences in the JAclassrooms and financially support the teaching of ethicaland moral business practices in Bulgaria.Young Entrepreneurial Spirit is also intended to change theperception young people have about business, doing busi-ness in Bulgaria and starting their own businesses here. Under Young Entrepreneurial Spirit, Junior AchievementBulgaria expects to accomplish a number of goals: to edu-cate 15, 000 students a year by the end of the 2005 schoolyear, to lower the cost per student to $6 per year, to doublethe number of student-operated mini-enterprises, reaching100 student companies per year by 2005.JA Bulgaria invites new donors and supporters from the localand international business communities as a means of fund-ing the program itself and to work as volunteer business con-sultants, mentors or trainers within the classroom.

The members of the American Chamber of Commerce willraise funds for JA Bulgaria through a Silent Auction and bydirect donations at their Thanksgiving Community Dinner onNovember 20, 2003 at the Sheraton Sofia.

Global Development Alliance at a Glance• The Global Development Alliance (GDA) is USAID's com-

mitment to change the way the Agency implements itsassistance mandate, as well as its response to the newreality of development assistance which flows between thedeveloped and developing worlds. In 1970, 70% of officialdevelopment assistance (ODA) to the developing world wasfrom the United States government and 30% was from theprivate sector. Today, 20% of the flows to the developingworld are from ODA and 80% are from the private sector

• These changes in flows reflect the emergence of the pri-vate for-profit sector, and the non-governmental or so-calledthird sector, as significant participants in the developmentprocess itself. The Global Development Alliance serves asa catalyst to mobilize ideas, efforts and resources of boththe public and the private sector as well as non-govern-mental organizations in support of shared objectives.

• Alliance partners make financial and/or in-kind contribu-tions to increase the impact and sustainability of develop-ment efforts.

• GDA alliances seek at least a one-to-one match. In addi-tion to monetary contributions, in-kind resources, intellec-tual property, implementation know-how, and technicalassistance are also valuable contributions.

• In his remarks before Congress on May 10th, 2001,Secretary of State Colin L. Powell introduced GDA as "afundamental reorientation in how USAID sees itself in thecontext of international development assistance, in how itrelates to its traditional partners and in how it seeks outand develops alliances with new partners."

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USAID GlobalDevelopmentAlliance Startswith YES

Dr Kent Hill, USAID Assistant Administrator for Europe and Eurasia,

presents the Global Development Alliance initiative

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Citigroup Foundation, through theSofia branch of Citibank, madeanother $25 000 grant for an educa-tional project in the National Tradeand Banking School, following thesuccessful accomplishment of thetwo-year project in the Sofia MathSchool and the Musical School in thevillage of Shiroka Luka. For its three-years presence in Bulgaria Citigrouphas donated $113,000 for education-al programs and for support of social-ly disadvantaged people in Bulgaria.

The educational project supported byCitigroup is aimed to introduce a vir-tual training commercial bank in theBulgarian vocational secondary edu-cation and to develop contemporarysoftware. Five teachers and 240 stu-dents at the age of 17 and 18 willparticipate directly in the program. Assoon as the pedagogical documenta-tion and training software are devel-oped, many more students will havethe opportunity to use them. The pro-gram will ensure better-trained spe-cialists for the banking labour marketin the country and will create aneffective model of training bank thatcould be replicated in other econom-ic schools.

The project is also aimed to addressthe problems of insufficient practicalpreparation and the isolation of theo-ry from practice for both secondaryschools and universities in Bulgaria.The lack of close contacts betweenprofessional schools and employersin the country makes it extremely dif-ficult for the Ministry of Educationand Science and other educationalinstitutions to overcome the problem.Consequently, employers have diffi-culty in recruiting qualified personnel.

The bank will take care of the projectmanagement, including participationof lecturers, the professional compi-lation of the software content, andthe method and form of instruction.The main objective is students toacquire working knowledge of whatreally happens in a modern commer-cial bank and to have self-confi-dence while meeting their futureemployers.

Plamen Iltchev, Citigroup CountryOfficer, commented: “We have cho-sen to support projects focused onthe financial education of Bulgarianchildren and our endeavour is tocover more schools in the country.

We are also very happy that thisschool-year we will work togetherwith the excellent team and childrenfrom the Trade and Banking Schoolunder a project aiming the creation ofa training commercial bank. The stim-ulus for the project was the ambitionto improve the practical knowledge ofthe young people and to give thembetter career opportunities. It isabsolutely essential that these chil-dren be given a helping hand in thetransition from school to the labourmarket.”

Emiliia Ivanova, Principal of theNational Trade and Banking School,said: “The virtual banks training ofstudents from the economic schoolsis an important innovation for theBulgarian vocational education. Theparticipation of Citibank as a mainsponsor and methodological leader inthis training is crucial for the projectimplementation.”

This year will be the project’s pilotphase, and if successful its organiz-ers wish to increase the number ofchildren who could use this practicaleducation to facilitate their entry intoadult life.

Educating The Next Generation:

Citigroup Makes Another Big Contribution to BulgarianSchoolIt’s not about money,

it’s about hope

Plamen Iltchev, Citigroup Country Officer, talking to students from the National

Trade and Banking School at the Project presentation on October 30, 2003

iF YOUR ADWERE pLACED HERE,

YOUR MESSAGE

• WOULD BE CONVEYED TO THE LEADING US, INTERNATIONAL AND BULGARIAN

COMPANIES OPERATING WITHIN BULGARIA;

• WOULD REACH THE DESKS OF SENIOR EXECUTIVES AND DECISION-MAKERS

WHO DEMAND HIGH QUALITY PRODUCTS AND SERVICES;

• WOULD TRAVEL ACROSS THE EUROPEAN CONTINENT AS WELL AS THE

UNITED STATES, TAKING FULL ADVANTAGE OF THE INTERNATIONAL NETWORK

OF AMERICAN CHAMBERS OF COMMERCE;

• WOULD SERVE AS AN IDEAL NETWORKING OPPORTUNITY FOR POTENTIAL

FOREIGN INVESTORS AND BUSINESSMEN VISITING BULGARIA.

THE RIGHT MESSAGE TO THE RIGHT AUDIENCE.

ADVERTISE IN THE AMCHAM BULGARIA MAGAZINE

THE PRIMARY FORUM FOR AMCHAM NEWS, POLITICAL AND ECONOMIC ANALYSES, BUSINESS OPPORTUNITIES, NETWORKING, TRAVEL AND LEISURE SUGGESTIONS

CALL NOW TO FIND OUT MORE ADVERTISING OPPORTUNITIES on (+359 2) 9769 565 or 9769 566 e-mail to amcham@amcham.bgvisit us at www.amcham.bg

Nexcom Bulgaria PLC has obtained a20-year license for building, maintaining,and utilizing fixed telecom networks inthe territory of Republic of Bulgaria. TheChairman of the CommunicationRegulatory Commission of Bulgaria, Mr.Alexandrov, officially granted the licenseto Nexcom Bulgaria’s CEO Mr. MoniuMonev and to Mr. Emil Nikolov, CEO ofNexcom Telecommunications onOctober 20th, 2003.

Q. As a licensed operator what newservices are you going to offer to yourBulgarian customers?A. Starting January 1st, 2005 all Bulgarianoperators – Bulgarian TelecommunicationCompany EAD (BTC), MTEL EAD, CosmoBulgaria Mobile EAD (Globul) and RTKEAD (Mobikom) - will establish intercon-nections with Nexcom. The negotiationswith them have already started. The newservices we are offering to our clients areselection, pre-selection, IPCENTREX/IPPBX services - Call Transfer,Call Forward, 3-way Calling, Voice VPN,SMS, CLIP, CLIR, toll free numbers (0800), etc.

Q. How will a BTC subscriber useNexcom’s network and services?A. With the so called “selection” serviceall BTC subscribers will be able to useNexcom Bulgaria’s network and servicesby dialing the selection code 1004 priorto the number they wish to call.

Using “selection” the subscribers wouldnot be obliged to sign a contract withNexcom. The calls they make throughNexcom’s network will be charged byNexcom but will be included in their cur-rent BTC invoice. We expect this ser-vice to be available in the first quarter of2004. However, in order for us to beable to offer this service to our cus-tomer, first the BulgarianTelecommunications Company (BTC)will have to carry out their obligationsstated in the 2003 TelecommunicationsLaw – interconnections, cost-orientedprices, template contracts, billingschemes, etc.

Q. Why would Bulgarian customerschoose to use Nexcom’s services?A. Largely, because of the specific fea-tures of our new services but alsobecause we guarantee quality and relia-bility, while offering competitive prices,professional service, and a 24-hour net-work support. We continue to developflexible and intelligent solutions for ourclients.

Q. What changes do you expect in thetelecommunication market followingthe privatization of BTC?A. I do not foresee substantial changesin the market after the BTC privatization.We should not forget that the BTCmonopoly ended at the beginning of thisyear but that did not really have animpact on the market till now due to theabsence of legal frame. We hope thatthe market share of the alternative tele-phony will continue growing leading to areal competitive environment stimulatingthe business and improving the qualityof services.

Q. Nexcom has been on the Bulgarianmarket for 5 years now. What has thecompany achieved during that periodon the Bulgarian telecom market?A. Nexcom Bulgaria was founded in

1998 and is a wholly-owned subsidiaryof the U.S. company NexcomTelecommunications, LLC. Nexcom is thefirst company to offer VoIP services inBulgaria and provides telecommunica-tions solutions and services for corpo-rate and individual clients.Our own marketing surveys shows thatNexcom currently controls 65% of themarket for alternative telecom servicesin Bulgaria. That means that Nexcom isthe leading VoIP provider in theBulgarian market. Maintaining this lead-ership for the past 5 years proves thatthe company has built a solid technolo-gy base, gained customer-facing experi-ence, and is a work model for the tele-com sector. The company is client ori-ented.Nexcom has branch-offices in thebiggest cities in Bulgaria and a POP net-work in 18 cities across the country. Thecompany is the only VoIP operator thatdoesn’t use the Public Internet for itsservices but has built it’s own traces.Internationally, Nexcom is the firstprovider which opened a communicationswitch in London (2000), New York(2001), and Frankfurt (2002), and estab-lished interconnections with the biggesttelecoms in the world (France Telecom,KPN, IDT, MCI-World Com, etc). TheHermes Phone trade mark is famous inthe USA, Canada, and Great Britain withits low-cost rates to Bulgaria and theother East European countries. TheBulgarian and the other East-Europeancommunities already use Hermesphoneas it’s preferred operator.

Q. What are your goals?A. Nexcom is a 100% telecommunicationcompany, providing the best telephonyservices for its customers through theuse of custom-made individual solutions.We are looking forward to building uponour strong leadership position in Bulgariawhich guarantees our adherence to highquality and competitive pricing.

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Nexcom Bulgaria Obtains Fixed TelecomOperator LicenseExclusive Interview with Mr. Emil Nikolov, CEO of Nexcom Telecommunications

Mr. Emil Nikolov,

CEO of Nexcom Telecommunications

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Inefficient, expensive collaboration is a major business chal-lenge in today's economy. The Microsoft Office Systemmeets the collaboration challenge head-on by deliveringeasy-to-use programs, servers and services that helpstreamline communication and encourage collaboration bothinside and outside of organizations.

Taking part in the Microsoft's early adopter program,American Management Systems Inc. (AMS), GraphicPackaging International Inc., Honeywell International Inc.,Lockheed Martin Corp. and Virgin Entertainment are amongthe companies now achieving greater individual, team andorganizational productivity using Microsoft's communicationand collaboration solutions. They reported an average pro-ductivity gain of 25 percent through use of the communi-cation and collaboration capabilities in the new Microsoft®Office System, which was released October 21.

"In designing the new Microsoft Office System, we workedextensively with customers to understand how we could besthelp them solve business challenges such as managingrapidly changing business conditions, responding to cus-tomers more quickly, faster products and services innova-tion, and improving customer business relationships. Withtoday's diverse work environments posing a significant bar-rier to productivity, it was no surprise to hear over and overagain that helping their employees better collaborate was atthe top of their lists," said Joe Eschbach, corporate vicepresident of the Information Worker Product Management

Group at Microsoft. "Early adopter customers tell us thatMicrosoft Office System products are already providing tan-gible, significant impact on their businesses, with averageincreases in customer satisfaction and retention of 10 per-cent, costs savings in travel and expenditures averaging 10percent, and cost savings in document creation averaging20 percent. They also report a 20 percent increase in orga-nizational collaboration and team productivity using thesesolutions."

For example, Virgin Entertainment needed a better way forits headquarters to communicate information about salespromotions and campaigns to 23 store locations. In addition,Virgin was looking for a more effective way for corporateheadquarters to share daily sales projections with storesand, in return, for stores to report actual sales figures back

Microsoft Office 2003 Improves TeamCommunication and Collaboration

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to the corporate headquarters. To address these needs,Virgin Entertainment is implementing Microsoft OfficeSharePoint Portal Server 2003 and Microsoft WindowsSharePoint Services to help its 1,500 employees collabo-rate more efficiently by easily creating team sites andpersonal portal pages, called My Sites. This solution willprovide a way for corporate headquarters and individualstores to share key sales information with one another aswell as a means for corporate headquarters to dissemi-nate details on special sales promotions.

Honeywell, a diversified technology and manufacturingcompany, streamlined communications and collaborationefforts with thousands of engineers worldwide by inte-grating Microsoft Office Live Meeting into its intranet. Thissolution has allowed Honeywell to conduct thousands ofLive Meeting sessions involving its employees worldwide.

Lockheed Martin, one of the world's premier advancedtechnology systems integration companies, was in search ofa solution that would enhance communications capabilitiesfor employees around the globe. As an early adopter of LiveCommunications Server, Microsoft's enterprise-grade instantmessaging platform, Lockheed Martin is able to streamlinecommunications and collaboration with "presence" capabili-ties found in instant messaging technologies.

Microsoft products that contribute to enhanced end-usercommunication and collaboration include the 2003 editionsof Microsoft Office, Microsoft Office SharePoint (TM) PortalServer 2003, Microsoft Windows® SharePoint Services,Microsoft Exchange Server 2003, Microsoft Office LiveMeeting, Microsoft Office Project 2003 and Microsoft OfficeProject Server 2003, and Microsoft Office LiveCommunications Server 2003.

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When people think of Toastmaster’sInternational the first thing thatcomes to mind is a club that teach-es public speaking. Well, this is true,however it is only a small part of thegoal of Toastmaster’s. At theAmCham Bulgaria Toastmaster’s clubwe are making leaders! OnDecember 3rd a membership meet-ing will take place at the RadissonSAS at 19:00 and your most impor-tant investment in your companystarts here.

You may be thinking that as theowner or head of your company thatToastmaster’s does not directly applyto you. In this regard, you could notbe more wrong! As a company leader,you have a responsibility to help youremployees to improve and grow bothprofessional and personally. You alsohave the responsibility to improve andbuild your business. By teachingleadership skills to your employees,you can do both!

Leadership is a popular businessconcept, and by giving your employ-ees an opportunity to build the skillsnecessary for leadership, you aremaking an investment in your compa-ny. These skills include working in ateam environment, management anddelegation, Running successful andeffective meetings, and motivatingothers to do the same.

In today’s business, most companiesoperate in teams, therefore having theability to work in this environment iscritical. You want employees that cantake the lead, think creatively and toverbalize ideas effectively.

Just because you are the boss doesnot mean you are the leader. Real

leadership is based on action, perfor-mance, and effectiveness; not posi-tion or rank. Therefore it is safe tosay that managers can’t manage ifthey can’t lead. Likewise, it is difficultto delegate tasks and responsibilitiesto other team members on a projectif you are not perceived as a leader.

Many sales opportunities have beenlost due to poor and ineffective meet-ings. I am sure each reader canremember a time when an importantmeeting went from bad to worse.Most likely, the reason was poor plan-ning and not knowing your audienceas well as you should have. Leadersare generally better prepared and can‘read’ their audience. They have thenecessary skills to not only motivatetheir team in a meeting, but also theclient.

The necessary skills needed for lead-ership can be taught and youremployees can learn them! Thequestion is, are you willing to makean investment in your company bymaking an investment in your employ-ees? If so, you should considersponsoring your employees to join theAmCham Bulgaria Toastmaster’s club.We are dedicated to helping eachand every member become effectiveleaders; which will make your compa-ny stronger and the business environ-ment in Bulgaria better!

Official meetings will start January 7thand will take place the 2nd and 4thWednesday of each month thereafter,promptly at 19:00 at the RadissonSAS hotel. For more informationplease contact Christa Pleasants-Hunter at chunter@abcro.com.

Leaders Are Made Not BornBy Christa Pleasants-Hunter, AbC.R.O., Chief Operating Officer AmCham Bulgaria Toastmaster’s International, President

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I was working in real estate in LosAngeles, California. Building single-family houses and selling them. Thelast house I built was on the PacificOcean shore, in Oxnard, ten milessouth of Santa Barbara, and 50miles north of Los Angeles. I built asuper deluxe house, with a swim-ming pool on the roof. Now youwould say how big is this house, orhow small is this swimming pool.OK, it was small, but it had a jet atone end that keeps pushing youback and no matter how much youswim, you can never reach the otherend of the pool. That settles thisquestion. To go back to my realestate business, President Bushsenior, in order to cut the defenseexpenses, (Now since the SovietUnion had been dismantled), closeddown a lot of bases. Army bases,marine basis, navy bases etc. Thisdrained California of a big income,which instigated a real depression inCalifornia’s economy, and realestate was the most affected, wherethe houses lost 60% of its value.Many builders went bankrupt and

the banks sold these newly builthouses for less than half theirprices. Many real estate agentswent bankrupt too, and all of theeconomy in California was veryseverely affected. Consequently mynew house (Which was unfortunate-ly completed at the same time)dropped in value too, and could notbe sold at a price that would cover,at least, the expenses. So, I took itoff the market.

Of course I lived in my new house,and enjoyed the big space, and theswimming pool too, whenever theocean was rough. But, at the end ofthe day, I had to work. Work in any-thing. It’s killing to stay idle. Althoughthe pleasures that LA, or SantaBarbara offer, are very seductive,there comes a time when you wantto do something of value. You appre-ciate pleasure more, when it comesafter you overcome a failure. Work iswhere you learn from a failure, andenjoy your success.

One day, I was talking to a friend ofmine. He told me he’s in coffee busi-ness (Nova Brasilia) in Bulgaria. Hetold me how beautiful Bulgaria is,and that it’s an emerging country,and the business climate is great,then he invited me to check it out formyself. I did. And I liked it. So Idecided to come back here soon, Icame back, very soon, because thebeauty of the country lingered in mymind, and the generosity and hospi-tality of its people impressed, as itdoes to whoever visits Bulgaria. Andmostly, I loved the traffic. I used to

drive all over Sofia with no carsaround, except a few in the center ofthe city. I thought to myself, let meenjoy this nice traffic now, becausein five years time it’s going to beworse than Paris or Rome. I wasright. Starting 1999 the traffic startedto build up, to the extent that, now,when I want to go downtown, I takea taxi. For sure it will be much worsein another five more years.

Back to my market study (Of coursethere were no companies then to dothis job). I saw a lot of croissantsbeing sold everywhere. All wereimported. So I decided to establish acroissants factory and beat theimport. This was what I did. And thiswas why I came to invest in Bulgaria.You would ask how come a contrac-tor can become a baker in anovernight. Well, I bought the know-how; I hired an Italian master-bakerand paid him $5000 monthly, in1993. My Bulgarian master-bakerslearned at his hands, and today theyare as good as he is. Now, the crois-sants factory is producing, otherthan croissants, McDonald’s buns,Billa frozen breads, Shell’s frozenproducts, strudels (For export, at themoment), filled cookies, and a bigvariety of fresh breads.

During my life, I have worked in sev-eral countries, in several professions,but to say the truth, I love Bulgariaand my work here the most. I amvery grateful to my friend who intro-duced me to this beautiful country.

“I love Bulgaria and my work herethe most.”By Antoine Iskandar, Chairman of Pain D’Or

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Employee RemunerationPackages in BulgariaAIMS Human Capital 2003 Compensation and Benefits Sur veyWith the stable development andgrowth of business in recent years,attracting, keeping and motivatinghighly skilled professionals becomes ademanding issue for most employers.Come the EU accession, the need fordevelopment and retention of talent ona highly competitive market wouldbecome a key aspect in organization-al development.

The fast-growing number of employ-ers in Bulgaria paying significantattention to their compensation andmotivation policies is already indica-tive of the outlined trends. Theincreasing number of participants inthe annual Compensation andBenefits Survey of AIMS HumanCapital Bulgaria clearly sustains theabove conclusion.

90 leading private companies, themajority of which major foreigninvestors, have taken part in this edi-tion of the survey with the major pur-pose to benchmark their positions onthe market.

Brief outline of some of the main find-ings and observations on the labormarket of highly-skilled employees inthe 2003 edition of the Compensationand Benefits Survey is presentedbelow.

General Trends

The past year showed stable marketconditions in terms of political andeconomic environment, resulting instable industry trends. With few largeforeign investors, influencing labormarket, the compensation and bene-fits policies bear slight changes. Atthe same time, with increased compe-tition for highly qualified professional

staff among industries and profes-sions, diversity and development ofincentive policies are observed.Although salary continues to be theprevailing motivator in the compensa-tion package, additional fringe bene-fits and compensation means are inincreasing progression.

Salary Policy

There is a clear tendency of a shift inthe preferred currency for fixingsalaries. BGN and EUR are replacingthe USD, in an attempt to keep andincrease the salary levels and avoidthe consequences of the fluctuationsin USD currency exchange rate. Thepercentage of surveyed organizationshaving their salaries fixed in USDdrops from 26% to 9% this year, andmost of these companies have adopt-ed a fixed exchange rate for salariescalculation.

Main factors taken into considerationin adjusting salaries are performance,promotion and general companyincrease.

Incentive Policy

The performance-related bonuses aretraditionally popular means for finan-cial reward of achievements. A total ofup to 72% of the companies providebonuses for their employees, whereascommissions are provided by 26 % ofthe participants.

Fringe Benefits

Fringe benefits are becomingincreasingly important factors in thecompensation package.

Benefits, provided to employees in thepast, such as medical services, havea steady position in the compensationpackage already. About 50% of thesurvey participants provide additionalmedical service in the form of a sub-scription for private medical centers,regular medical check-ups or medicalinsurance.

The provision of food allowance in thepast 3 years has been shrinking.However, the expectations are that

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this benefit will become more popularwith recent changes in legislationensuring tax deductions for employersfor such expenditure and the pres-ence of international service providersof food vouchers on the Bulgarianmarket.

In the past three years there is aclear-cut tendency to including thepossibility for company sponsoredloans in the compensation and moti-vation packages. This tendency isgaining speed. The development andincreased competitiveness of thebanking sector provide additionalopportunities for the companies to beable to give this benefit indirectlythrough negotiating better terms ofbank loans for their employees.

Along with the stable trends in provi-sion of transportation means – publictransportation pass and companycommuting vehicles, provision of com-pany car has marked a trend ofincrease. The most important criteria

for car allocation are now the jobrequirements and job status.

Mobile phones allocation trend hascontinued its rapid progression in theyear 2002/3. In the 2003 mobilephones are provided to an average of80% of company employees (fully orpartially compensated expenses). Jobrequirement and job category remain

the predominant allocation factors.

Apart from the usual additional com-pensation means, some new types likecompany shares are being offered toemployees as well. The chart belowsummarizes the other new benefitsprovided in the surveyed organizations.

(to be continued in AmCham Magazine issue 45)

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The cabinet approved the draft bud-get for next year at an extraordinarysession on October 29 and passedthe document for voting in parlia-ment. As expected, the general bud-get deficit was set at 0.7% of GDPnext year amid expectations for 5.3%GDP growth, CA deficit of 6.2% ofGDP, year-end CPI inflation of 4.2%,and year-average CPI of 4%.However, the government failed tomeet its major pre-election goal for agradual decrease of the deficit to afully balanced budget at the end ofits mandate – the target deficit nextyear remains at the 2003 level andthe target for 2005 is reportedly setat 0.5% of GDP. The deficit target fornext year is also diverging from thebenchmark of 0.5% set in the medi-um-term fiscal target adopted lastyear and is against the recommenda-tions of the IMF for a deficit of up to0.5% of GDP next year. However, wedo not expect the fiscal loosening totrigger significant imbalances. On thepositive side, the cabinet decided tocut the corporate profit tax for nextyear from 23.5% to 19.5%. The deci-sion came as a very pleasant sur-prise for the business sector, as theexpectations were for a tax rate of22% or 20%. The tax amendmentshave yet to pass the approval of theparliament. The personal income taxremains unchanged for next year, as

the government withdrew its initialplan to cut slightly the tax burden forlow-income categories.

The CA balance continued to deterio-rate relative to a year ago but themonthly performance in August wasless concerning than the figures forthe previous months. The seasonalCA surplus of EUR 142mn in Augustwas just 13% lower compared to ayear ago while the surplus in July was3 times lower y/y. The merchandiseexport growth and tourism inflowsimproved in August in euro termsalong with a large upward revision forunidentified inflows in July, confirmingour observations for underestimatedtourism- or travel-related effects.However, the accumulated CA gap inJan-Aug is still posing risks on thelong-term sustainability of the exter-nal balance. The CA gap widened 4times y/y to EUR 760mn in Jan-Augand accounted for 4.2% of the pro-jected full-year GDP relative to 1.1%for the same period last year.According to our calculations, the full-year CA deficit will reach 7.5% ofGDP if the tourist inflows are notadjusted for existing discrepancies.

Strong domestic demand, pushed bysome 50% private credit growth andnew job openings, maintained a dou-ble-digit increase in the import of mer-

chandise goodsand the trendwould most likelycontinue in medi-um terms. On theother hand, therapidly developingtourist sector hasoffset a part ofthe trade gapwidening. The offi-cial figures in ourview continue tounderestimate therole of the tourismin the CA balance,showing a travel

revenue hike by just 1.1% y/y in Jan-Aug and 8.6% y/y in August in euroterms. This is inconsistent with thenumber of tourist arrivals, which roseby some 16% y/y in Jan-Aug. The datadiscrepancies come from USD adjust-ments to the physical volumes that failto take into effect the USD deprecia-tion and the euro-based structure ofthe tourist visitors. The data gap iseasily seen in the large net inflow ofEUR 332mn in errors and omissionsfor Jan-Aug relative to a net outflow ofEUR 324mn for the same months lastyear. If errors and omissions wereadded to the CA, the deficit as a shareof GDP would stay roughly flat relativeto a year ago. However, not all inflowsin errors and omissions are linked toCA transactions but our estimates forexchange rate discrepancies show thatthe tourist revenues are at least EUR190mn higher than reported in Jan-Aug.

The central bank reports showed amonthly growth by EUR 165mn of thegross external debt stock in Augustto EUR 10.7bn at the end of themonth. The debt accounted for59.3% of the full-year GDP projectedin the budget law. The increasereflected the 4% appreciation of theUS dollar against the euro but theweakening of the US currency inSeptember would turn back the debtstock to the level from July and evenlower. The exchange rate effect isbest seen from the earlier reportedgovernment debt.

The public debt dropped to 48.7% ofthe projected full-year GDP as ofend-September from 50.4% at end-August. The change in the debt stockwas driven by the appreciation of theeuro and the local currency inSeptember, as the data for debtrepayments stood unchanged relativeto the first 8 months of the year. Ineuro terms, the public debt slid byEUR 200mn m/m and EUR 540mny/y to EUR 9.13bn at the end of

Balancing the Balance

Balance of payments flows, EUR mn

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September. The domestic debt stoodrelatively flat at 6.3% of GDP and allfluctuations in the pubic debt stockcame from liabilities to non-resident

entities. Meanwhile, finance ministerMilen Velchev recalled governmentprojections that the public debt wouldslide to 48% of GDP at the end of

the year, 44% at end-2004, 41% atend 2005, and 38% upon the expect-ed entry of Bulgaria in the EU as ofthe beginning of 2007.

The finance ministry issued a EUR20mn euro-denominated local bondin early November with a 15-yearmaturity and a 6% coupon. Theissue was overbid 3 times andachieved a relatively low yield of6.55%. The bond is consistent withthe debt management strategy forexpanding the share of euro-denominated instruments and fixedinterest rates in the total debt.However, it is quite strange that thegovernment is issuing debt at timewhen the fiscal reserve is abouttwo times higher than the recom-mended floor.

This article is based on extracts from ISI Emerging MarketsIntelliNews publications Bulgaria This Week and BulgariaCountry Report. For more detailed information please contactISI Emerging Markets office in Sofia at +359 2 9806598 orsales-bg@securities.com.

AVON Cosmetics Bulgaria Ltd. is a subsidiary of AVONProducts Inc. The company was founded in May 1999 and ithas 4 years of successful operations on the Bulgarian mar-ket. AVON Cosmetics Bulgaria is the leader in direct saleschannel with 70% of brand awareness on the local market. Itis also the leader in colour cosmetics sales and takes one ofthe leading positions in skin care company shares. By the endof year 2003 the family of AVON Bulgaria will reach 35 000members – AVON’s Representatives. For the four years oper-ating in Bulgaria, the company has expanded its business sig-nificantly and has covered effectively all regions of Bulgaria. AVON is the world’s leading direct seller and one of the threeworld’s leading cosmetic companies with a turnover of above$ 6,2 billion. The company has business operations in 147countries worldwide – in North America, Latin America,Europe, Asia and Africa. The company has 3,9 millions ofRepresentatives and more than 40 000 employees through-out the world.

Valentina Beshevishka,Marketing Manager

5 Vitosha Bul., Sofia 1040tel. 930 10 30, 930 10 38, fax: 930 10 65

Valentina.Beshevishka@avon.com; www.avon.bg

M & M Air Cargo Service BG Ltd. is a subsidiary of M &M Militzer & Munch International Holding AG, St. Gallen,Switzerland.

M & M Militzer & Munch was established in 1880 in Germanyand now employs more than 2300 staff in over 30 countries.

In Bulgaria the two M & M companies employ 210 high qual-ified staff in 11 locations. The M&M companies provide ser-vices in air, road, rail and ocean transport and logistics. M &M BG owns a 30 500 m2 multi - modal transport and for-warding terminal, including office, customs bonded, distribu-tion and consignation warehouses.

Michail DantchevManaging Director

M&M air cargo service BG LtdSofia 1463, 96 A Vitosha blvdPhone: ++ 359 2 950 09 35

++ 359 2 950 09 36Fax: ++ 359 2 953 00 83

E-mail: mumairsof@mumnet.comwww.mumnet.com

US dollar weakening in September restoresfavourable debt fluctuations

Sony Picture’s Entertainment basic TV chan-nel AXN launch party was extreme, actionand sophisticated as the channel itself is.The party was opened by Tom Davidson,GM, AXN Central Europe and GeorgeVascan, HBO Country manager for Bulgariaand Romania. AXN launched on Oct. 17th inBulgaria and Central Europe. AXN, the top-rated action and adventure entertainmentcable and satellite network, now reachesover 86 million households in over 40 coun-tries throughout Asia, Europe and LatinAmerica. In Europe, AXN is available inSpain and Portugal. AXN’s unique programoffering includes a wide selection of hitEuropean and U.S. series, blockbuster fea-ture films and exclusive franchise properties.Launched as a customized subscriber andad-supported channel, AXN delivers local-ized content to the Bulgarian, Hungarian,Polish, Czech, Slovak and Romanian and isdistributed on the basic channel tier in eachterritory by HBO, the region’s premium moviechannel service.

Splendid cascades, running in flames actionhero and martial arts were seen by theguests on the launch party. The event wasin a former factory, now TV soundstageOrpheus. During performance of the famousfemale jazz singer Beloslava – she wasunexpectedly “kidnapped” by some “badguys” and “saved” by “the good guys”. Aftera spectacular fight “the good” won over

“the evil” and Beloslava continued hersinging. Other great performance was ofRitham techno-drums, followed by dancers,skaters/rollers/bikers at the biggest half pipein Bulgaria. The big screens in the main hallprojected action scenes from AXN programand the faces of the playing guests atPlayStation. The hot DJ Kikk played cooltechno music till the morning.

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A XN launches with

action party