COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 15.07.1997 
COM(97)2008 final 
Commission Opinion 
on Bulgaria's Application 
for Membership of the European Union 

Contents 
A. INTRODUCTION Page 
a) Preface 
The Application for Membership 
The Context of the Opinion 
The Contents of the Opinion 
b) Relations Between the European Union and Bulgaria 
Historical and Geopolitical Context 
Bulgaria's Position Concerning the European Union 
Contractual Relations 
The Pre-Accession Strategy 
Trade Relations 
General Evaluation 
B. CRITERIA FOR MEMBERSHIP 
1. Political Criteria 
1.1..Democracy and the Rule of Law 
Parliament and Legislative Powers: Structure 
Functioning of Parliament 
The Executive: Structure 
Functioning of the Executive 
The Judiciary: Structure 
Functioning of the Judiciary 
1.2 Human Rights and the Protection of Minorities 
Civil and Political Rights 
Economic, Social and Cultural Rights 
Minority Rights and the Protection of Minorities 
1.3 General Evaluation 
2. Economic Criteria 
2.1 The Economic Situation 
Background 
Liberalisation 
Stabilisation of the Economy 
Structural Change 
Financial Sector 
Economic and Social Development 
2.2 The Economy in the Perspective of Membership 
Introduction 
The Existence of a Functioning Market Economy 
The Capacity to Cope with Competitive Pressure and Market Forces 
Prospects and Priorities 
2.3 General Evaluation 
3. Ability to Assume the Obligations of Membership 
3.1 Internal Market Without Frontiers 
The Four Freedoms 
- General Framework -
- Free Movement of Goods 
- Free Movement of Capital 
- Free Movement of Services 
- Free Movement of Persons 
- General Evaluation 
Competition 
3.2 Innovation 
Information Society 
Education, Training and Youth 
Research and Technological Development 
Telecommunications 
Audio-visual 
3.3 Economic and Fiscal Affairs 
Economic and Monetary Union 
Taxation 
Statistics 
3.4 Sectoral Policies 
Industry 
Agriculture 
Fisheries 
Energy 
Transport 
Small and Medium Enterprises 
3.5 Economic and Social Cohesion 
Employment and Social Affairs 
Regional Policy and Cohesion 
3.6 Quality of Life and Environment 
Environment 
Consumer Protection 
3.7 Justice and Home Affairs 
3.8 External Policies 
Trade and International Economic Relations 
Development 
Customs 
Common Foreign and Security Policy 
3.9 Financial Questions 
Financial Control 
Budgetary Implications 
4. Administrative Capacity to Apply the Acquis 
4.1 Administrative Structures 
4.2 Administrative and Judicial Capacity 
4.3 General Evaluation 
C. SUMMARY AND CONCLUSION 
Annexes 
Composition of Parliament 
Single Market: White Paper Measures 
Statistical Data 
IV 



A. INTRODUCTION 
a) Preface 
The Application for Membership 
Bulgaria presented its application for membership of the European Union on 14 
December 1995, and the Council of Ministers decided on 29 January 1996 to implement 
the procedure laid down in Article 0 of the Treaty, which provides for consultation of the 
Commission. 
That is the framework in which the Commission submits the present Opinion, responding 
to the request of the European Council in Madrid in December 1995 to present the 
Opinion as soon as possible after the conclusion of the Intergovernmental Conference, 
which commenced in March .1996 and concluded in June 1997. 
The Context of the Opinion 
The Bulgarian application for membership is being examined at the same time as 
applications from nine other associated countries. Bulgaria's accession is to be seen as 
part of an historic process, in which the countries of Central and Eastern Europe 
overcome the division of the continent which has lasted for more than 40 years, and join 
the area of peace, stability and prosperity created by the Union. 
The European Council in Copenhagen in June 1993 concluded that: 
"The associated countries in Central and Eastern Europe that so desire shall become 
members of the Union. Accession will take place as soon as a country is able to assume 
the obligations of membership by satisfying the economic and political conditions. 
Membership requires: 
that the candidate country has achieved stability of institutions guaranteeing 
democracy, the rule of law, human rights and respect for and protection of minorities; 
- the existence of a functioning market economy, as well as the capacity to cope with 
competitive pressure and market forces within the Union; 
- the ability to take on the obligations of membership, including adherence to the aims of 
political, economic and monetary union. 
The Union's capacity to absorb new members, while maintaining the momentum of 
European integration, is also an important consideration in the general interest of both the 
Union and the candidate countries". 
This declaration spelled out the political and economic criteria for examining the 
accession requests of the associated countries of Central and Eastern Europe. 
The European Council in Madrid in December 1995 referred to the need, in the context 
of the pre-accession strategy, "to create the conditions for the gradual, harmonious 
integration of the applicant countries, particularly through: 
the development sf the market economy, 
the adjustment of tl. eir administrative structure, 
the creation of a stable economic and monetary environment''. 
In its Opinion, the Commission analyses the Bulgarian application on its merits, but 
according to the same criteria as the other applications, on which it is delivering Opinions 
at the same time. This way of proceeding respects the wish, expressed by the European 
Council in Madrid, to ensure that the applicant countries are treated on an equal basis. 
In addition to the individual Opinions the Commission is presenting separately to the 
Council, in the framework of its communication "Agenda 2000", a general assessment of 
the accession requests, and its recommendations concerning the strategy for successful 
enlargement of the Union. At the same time, it is presenting an evaluation of the impact 
of enlargement on the Union's policies policies. 
The Contents of the Opinion 
The structure of the Opinion takes account of the conclusions of the European Council in 
Copenhagen. It: 
- describes the relations up to now between Bulgaria and the Union, particularly in the 
framework of the association agreement; 
- analyses the situation in respect of the political conditions mentioned by the European 
Council (democracy, rule of law, human rights, protection of minorities); 
- assesses Bulgaria's situation and prospects in respect of the economic conditions 
mentioned by the European Council (market economy, capacity to cope with competitive 
pressure); 
- addresses the question of Bulgaria's capacity to adopt the obligations of membership, 
that is the acquis of the Union as expressed in the Treaty, the secondary legislation, and 
the policies of the Union; 
- makes finally a general evaluation of Bulgaria's situation and prospects in respect of 
the conditions for membership of the Union, and a recommendation concerning accession 
negotiations. 
In assessing Bulgaria in respect of the economic criteria and its capacity to assume the 
acquis, the Commission has included a prospective assessment; it has attempted to 
evaluate the progress which can reasonably be expected on the part of Bulgaria in the 
coming years, before accession, taking account of the fact that the acquis itself will 
continue to develop. For this purpose, and without prejudging the actual date of 
accession, the Opinion is based on a medium-term time horizon of approximately five 
years. 
During the preparation of the Opinion, the Commission has obtained a wealth of 
information on Bulgaria's situation from the Bulgarian authorities, and has utilised many 
other sources of information, including the member states and numerous international 
organisations. 
b) Relations Between the European Union and Bulgaria 
historical and Geopolitical Context 
Bulgaria, bounded by the Black Sea to the East, the Danube to the North and mountains 
along its frontiers with Greece and the former Yugoslav Republic of Macedonia, has an 
area of 111,000 km2 and a population of 8.3 million. The existence of a Bulgarian state 
goes back to 681, and Bulgaria has contributed significantly to the evolution of Slavonic 
culture. It gained independence from the Ottoman Empire in 1878, and until 1946 was a 
constitutional monarchy. Bulgaria participated in the First Balkan War of 1912 against 
the Ottoman Empire; and in the Second the following year, in which the country lost a 
considerable part of its territory. Bulgaria sided with Germany during the first World 
War and lost further land in its aftermath; and again for much of the Second World War, 
though it successfully resisted the deportation of Jews from its territory. In 1944, 
Bulgaria joined the Allied Powers. In 1946 Bulgaria's pre-war borders were 
reconfirmed. 
After the War, Bulgaria was briefly occupied by Soviet troops. In September 1946, 
following a referendum, the monarchy was abolished and a People's Republic declared. 
By 1947 the Communist Party had fully established its control. In 1956 Todor Zhivkov 
came to power, and was to rule the country for over thirty years. A highly centralised 
economic policy gave priority to nationalised industry, resulting in a rapid rise in 
industry's share in the economy. In agriculture, collectivisation was imposed and 
cooperatives were reorganised into larger agro-industrial complexes. From the 1970s 
onwards economic growth slowed; by the second half of the 1980s it came to a 
standstill. 
In November 1989 communist rule in Bulgaria collapsed. The transition to democracy, 
inspired by similar developments in other former communist countries, was sudden and 
peaceful. Todor Zhivkov was removed from office and an interim government led the 
country to its first free elections since the War. Since then, Bulgarian political life has 
seen repeated changes of government and a significant degree of polarisation, but also 
respect for the constitutional order and a virtual absence of violence. Elections in June 
1990 were won by the Bulgarian Socialist Party (BSP), successor of the Communist 
Party; but the BSP government was forced by economic crisis to resign in November 
1990, to be replaced by a "programme" government. New elections in October 1991 
resulted in a coalition government led by the Union of Democratic Forces (UDF); but 
that too was replaced by a non-party government the following year. Elections in 1994 
gave a majority to a BSP government which, however, was forced by renewed economic 
troubles to resign in February 1997, to be replaced by an interim government. President 
Stoyanov, elected two months earlier with UDF support, played a substantial role in 
bringing the country through the ensuing political crisis to new elections in April 1997, 
which produced a majority for the UDF and its allies. 
The strategic objective of integration with the EU has been maintained by consensus by 
all the governments since 1990. Bulgaria's application for Union membership, backed 
by a virtually unanimous endorsement from the National Assembly, was lodged on 14 
December 1995. The Government Memorandum accompanying the application states: 
"Bulgaria's membership of the European Union constitutes a strategic goal and is a 
matter of national interest. It will consolidate the results of the democratic reforms which 
have been carried out since the beginning of the 1990s and will represent a political 
acknowledgement of their success. Membership of the EU will be an important factor for 
the further economic development of the country. The stabilisation cf the democratic 
process and the establishment of a market economy in Bulgaria correspond to the 
interests of the countries in the neighbouring region and of all Europe. They will have a 
positive impact on the security and stability of the continent. Bulgaria's aspiration for 
full membership of the EU reflects the will and readiness to take part in the realisation of 
the vision of a united Europe living in peace, prosperity and social justice". 
On 29 January 1997, during his visit to the European Parliament, President Stoyanov 
stated: "I would like to reaffirm, before this high forum, our determination to follow the 
path of integration with the European Union and realisation of common European values. 
This is the top priority of Bulgarian policy on which ... there exists broad consensus 
among the political forces. The main driving forces of the dynamic development of 
cooperation and ever fuller integration of our country with the European Union are: the 
consistent implementation of the Europe Agreement and the EU-adopted strategy of 
preparation of the associated states for full membership as well as the recommendations 
of the White Paper regarding participation in the common market...". 
On 21 May 1997, in his inaugural address to the National Assembly, the new Prime 
Minister Kostov stated: "Bulgaria's European choice is an expression of a consensus 
which has taken shape in the course of a long and painful path of Bulgarian society over 
the last seven years". 
Contractual Relations 
Diplomatic relations between the European Communities and Bulgaria were established 
in 1988. A Trade and Cooperation Agreement was signed in May 1990. The Europe 
Agreement was signed on 8 March 1993 and entered into force on 1 February 1995. An 
Interim Agreement covering the trade aspects of the Europe Agreement came into effect 
on 31 December 1993, replacing the 1990 Agreement. 
The Europe Agreement is now the legal basis for relations between Bulgaria and the 
Union. Its aim is to provide a framework for political dialogue, promote the expansion of 
trade and economic relations between the parties, provide a basis for Community 
technical and financial assistance, and an appropriate framework to support Bulgaria's 
gradual integration into the Union. The institutional framework of the Agreement 
provides the necessary mechanism for implementation, management and monitoring of 
all areas of relations. Sub-committees examine questions at a technical level. The 
Association Committee, at senior official level, provides for in-depth discussion of 
matters and often finds solutions to problems arising under the Agreement. The 
Association Council examines the overall status of and perspectives for relations and 
provides the opportunity to review Bulgaria's progress in preparation for accession. 
In March 1995 the previous government set up an inter-ministerial coordination 
arrangement for promotion of the European integration policy. The arrangement 
involves a Ministerial Commission chaired by the Prime Minister, a committee at deputy-
minister level chaired by the Government Secretary on European integration, various 
technical working groups and a European Integration Secretariat. The current 
government is considering modifications to these arrangements. 
The Pre-Accession Strategy 
Implementation of the Europe Agreement and the White Paper 
The institutional framework of the Europe Agreement is fully operational, and 
functioning in accordance with the agreed timetable. Three meetings have taken place of 
the Association Council, and two of the Association Committee. Nine multidisciplinary 
sub-committees have been established and are meeting regularly. The EU-Bulgaria Joint 
Parliam .ntary Committee has met three times. 
Implemsntation issues have occurred in respect of compensation for Bulgaria" for the late 
entry into force of the Agreement, che alignment of tariffs and quotas for Bulgaria's 
exports to those applicable to the V'segrad countries, and the adaptation of the Europe 
Agreement following the Uruguay Round and the Union's most recent enlargement. All 
these issues have been solved. 
The Commission's White Paper of 1995 on the Internal Market set out the legislation 
which the candidate countries would need to transpose and implement in order to apply 
the acquis, and identified elements essential to the implementation of the single market 
(known as Stage I measures) which would need priority attention. In response to the 
White Paper the Bulgarian Government adopted a "Strategy for implementing the 
recommendations of the White Paper" in May 1996. The document provides a 
comprehensive survey of existing Bulgarian legislation in the light of requirements 
emanating from the acquis. It also gives a timetable for the process of legislative 
approximation and defines the government bodies responsible. Under the auspices of the 
Ministry of Justice (recently renamed the Ministry of Justice and Legal European 
Integration) a legislative council was given the role of ensuring the compatibility of draft 
legislation to EU laws and practices. The new government has promised a national 
strategy for accelerating preparation for EU membership. 
Bulgaria is making good progress under the Europe Agreement. There have been few 
problems on trade issues. The weakness of Bulgaria's internal coordination structures 
^as made it difficult to exploit the Agreement fully, but the new government is 
committed to improving these. 
Structured Dialogue 
Bulgaria has participated in the Structured Dialogue, seeing it as an instrument in its 
preparation for accession. Bulgaria has submitted position papers to various meetings, 
including a paper on Bulgaria's pre-accession policy. 
Phare 
The total PHARE budget for 1990-1995 was 476 MECU, and the allocation for 1996 
62.5 MECU. Over the past two years, the overall contracting rate has risen to 70%. Lack 
of momentum for reform has made assistance for enterprise restructuring, the financial 
sector, privatisation and agriculture less successful, but this is changing with the new 
government's reform programme. 
The Cross-Border Cooperation programme with Greece has faced important 
implementation delays due to Bulgaria's inability to match its constructive regional role 
with administrative and management measures. More than 40 MECU have not been 
used; no new budget was allocated in 1996 or 1997. 
Participation in Community Programmes 
In 1996 Bulgaria became eligible to participate in Community programmes under the 
Additional Protocol to the Europe Agreement. Discussion has started of Bulgarian 
participation in Youth for Europe and SAVE from 1998. Preparations are also under way 
for participation in Socrates and Leonardo. 
Trade Relations 
Economic relations between Bulgaria and the Union have developed positively over the 
past six years. EU imports from Bulgaria increased by 260% over those years, to 1.83 
BECU in 1995. The most important products are iron, steel, base metals, textiles, 
agricultural and chemical products. EU exports increased by 37% over the same period, 
to 2.05 BECU in 1995. The most important sectors are machinery and equipment, 
agricultural products, textiles and chemicals. Bulgaria's four main EU trading partners 
are Germany, the United Kingdom, Italy and Greece. Trade between Bulgaria and its 
non-EU neighbours is modest. 
General Evaluation 
Since 1989 relations between Bulgaria and the Union have evolved positively. There 
have been no significant policy obstacles to overcome though Bulgaria will need to 
amend its Constitution so that nationals of EU Member States can acquire (other than by 
inheritance) land, and to tighten its border controls. But Bulgaria's progress in 
integration has been hampered by its political and economic problems and by the 
continuing weakness of its administrative structures. The new government is committed 
tackling these. 
B. CRITERIA FOR MEMBERSHIP 
1. Political Criteria 
The European Council in Copenhagen decided on a number of "political" criteria for 
accession to be met by the candidate countries in Central and Eastern Europe. These 
countries must have achieved "stability of institutions guaranteeing democracy, the rule 
of law, human rights and respect for and protection of minorities". 
In carrying out the assessment required in this connection, the European Commission has 
drawn on a number of sources of information: answers given by the Bulgarian authorities 
to the questionnaire sent to them by Commission staff in April 1996, bilateral follow-up 
meetings, reports from Member States' embassies and the Commission's delegation, 
assessments by international organisations (including the Council of Europe and the 
OSCE), reports produced by non-governmental organisations, etc. 
The following assessment involves a systematic examination of the main ways in which 
the public authorities are organised and operate, and the steps they have taken to protect 
fundamental rights. It does not confine itself to a formal description but seeks to assess 
the extent to which democracy and the rule of law actually operate. 
This assessment relates to the situation in June 1997. It does not examine in detail any 
changes which have taken place since the fall of the Communist regime or which may 
come about in the future, though it generally takes account of any stated intention to 
reform a particular sector. The situation of the government is mentioned here only in 
passing: it will be examined in greater depth in chapter 4. 
1.1 Democracy and the Rule of Law 
In July 1991, Bulgaria adopted a new Constitution, marking the transition to 
parliamentary democracy. The Bulgarian institutions work smoothly, the various 
authorities being mindful of the limits of their powers and of the need for cooperation. 
Parliament and Legislative Powers: Structure 
Parliament consists of a single house - the National Assembly. Its 240 members are 
elected for four years by proportional representation. There are no rules specifically 
ensuring the representation of minorities. At the last elections, 15 members representing 
the Turkish minority were elected. 
Under Article 99.5 of the Constitution, the President of the Republic can dissolve the 
National Assembly if it fails to form a government. He cannot, however, use this power 
during the last three months of his term of office. These provisions were applied in 
January 1997. 
Members of Parliament enjoy a traditional array of immunities. Under Article 79.3 of the 
Constitution, the National Assembly can set up parliamentary select committees with 
extensive powers of investigation. 
The fact that there were 34 political parties and groupings in existence at the time of the 
April 1997 General Election campaign shows that there is a genuine multi-party system 
in Bulgaria. Political parties receive State funding to help finance their election 
campaigns. The Bulgarian Constitution prohibits the setting up of political parties on an 
ethnic, racial or religious basis. This ban, however, did not prevent free participation in 
the elections and in political life by the 'Movement for Rights and Freedoms" (MRF), 
which largely represents the interests of the Turkish minority. in December 1996 the 
Constitutional Court confirmed that the creation of this party was not unconstitutional. 
Legislative power lies with the National Assembly, which shares its right of initiative 
with the Government. The Government has regulatory power when conferred only by 
legislation and for the purposes of applying the law. Individual ministers also have this 
power. 
The National Assembly can decide to hold a referendum. 
Functioning of Parliament 
The elections of 1994 and 1997 were free and fair, and in both cases they resulted in a 
different party coming to power. 
Parliament operates satisfactorily. Its powers are respected and the Opposition plays a 
full part in its activities. 
The Executive: Structure 
The President of the Republic is elected by universal suffrage, with majority voting in a 
double ballot, for a five-year term, renewable once only. He is assisted by a Vice-
President elected at the same time. The President exercises the traditional prerogatives of 
a Head of State. He may ask Parliament to reconsider a law which it has adopted but the 
Council may override his veto by a simple majority vote of its members. The President 
of the Republic can be dismissed from office only for high treason or for violating the 
Constitution (Article 103 of the Constitution). The National Assembly must, by a 2/3 
majority vote of its members, refer the matter to the Constitutional Court, which must 
then give its judgment on the proposed dismissal from office. 
The Government is accountable to Parliament, which can bring it down by a simple 
majority vote of MPs. The Prime Minister is appointed by Parliament, on a proposal 
from the President of the Republic. Parliament appoints and dismisses ministers on a 
proposal from the Prime Minister (Article 84 of the Constitution); the ministers are also 
individually answerable to Parliament. 
The administrative organisation of the country depends on nine decentralised regional 
arms of the central government in which the regional Governor coordinates action by the 
State. Bulgaria has only one type of local authority, the municipality, of which there are 
255. Their governing bodies - the mayors and town councils - are elected for a four-year 
term. The law of 1991 gives the municipalities responsibility for managing local public 
services. 
There is no Civil Service Act or regulations, though the Bulgarian Constitution requires 
such regulations to be introduced. 
The army, the secret services and the police are under the control of the Government. A 
National State Security Council was set up in 1994: it has an advisory role and is chaired 
by the President of the Republic. 
Functioning of the Executive 
The main central institutions of the State operate smoothly, in spite of a certain instability 
at ministerial level due to the fact that there have been seven governments since 1990. 
The political crisis of December 1996 - January 1997 was resolved in accordance with 
the procedures laid down in the Constitution. 
Although the Constitution provides for the autonomy of the local authorities, this 
autonomy is as yet limited, particularly on the financial level, since the local authorities 
are largely dependent on State funding. The new government has committed itself to 
giving the local authorities greater economic and financial independence. 
Corruption is a serious problem in Bulgaria. The new government and the new President 
of the Republic have given priority in their work programme to combating corruption and 
organised crime. The fact that there is no Civil Service Act has made it easier for 
political parties to gain control of the Civil Service, and changes of government have 
been accompanied by changes at all levels of the administration. Considerable 
discretionary power and a lack of clarity in allocating responsibilities and powers among 
Civil Service departments has allowed corruption to take hold easily. Bulgaria must 
therefore introduce transparent public administration procedures particularly with regard 
to public contracts, and must establish a professional and impartial public service. 
There appears to be insufficient control of the secret services and they are not 
accountable to Parliament for their activities. The only body playing a positive role in 
this field is the National Audit Office, which exercises financial control over these 
services. The new government has announced its intention of tightening civilian control 
over the secret services. 
The Judiciary: Structure 
The independence of the Bulgarian judiciary is guaranteed in a number of ways. Judges 
are confirmed in their posts after serving a three-year probationary period. Thereafter, 
they can be dismissed only if they have committed a crime or become incapable of 
carrying out their duties. Their work is overseen by the Supreme Council of the 
Judiciary, an independent body consisting of 25 members (11 elected by the National 
Assembly; 11 designated by the judiciary; the President of the Supreme Court of 
Cassation; the President of the Supreme Court of Administration; the Procurator General) 
which also has responsibility for managing the judiciary's budget. Similarly, the 
presidents of the Supreme Court of Cassation and the Supreme Court of Administration 
are appointed for a seven-year term, which may not be renewed, by the President of the 
Republic acting on a proposal from the Supreme Council of the Judiciary. Judges may 
not be members of political parties and they enjoy the same immunities as members of 
Parliament. 
The Supreme Council of the Judiciary plays the same role in respect of the procurators as 
it does vis-à-vis the judges. The Procurator General is appointed for a seven-year term, 
which may not be renewed, by the President of the Republic acting on a proposal from 
the Supreme Council of the Judiciary. The Procurator General is the guardian of legality 
and gives "procedural guidelines" to the procurators as a whole (Article 126 of the 
Constitution). 
The monitoring and review of administrative measures is the task of the ordinary courts, 
whose decisions may be challenged before the Supreme Court of Administration which 
has just been set up. 
Bulgaria has no Ombudsman. 
The Constitutional Court comprises 12 judges appointed for a nine-year term which may 
not be renewed. The National Assembly, the President of the Republic and the Supreme 
Court each appoint four members of the Constitutional Court. It verifies the 
constitutionality of laws and treaties, judges presidential and parliamentary elections, 
settles conflicts which may anre between the various public authorities regarding their 
respective spheres of responsibility, and can give legally binding interpretations of the 
Constitution. Matters may be referred to it by one-fifth of the members of the National 
Assembly, the President of the Republic, the Government, the Supreme Court of 
Administration, the Supreme Court of Cassation, the Procurator General and, under 
certain circumstances, by town councils. There is no procedure whereby citizens can 
refer matters directly to the Constitutional Court. This is possible only where a dispute 
has already been brought before the Supreme Court, and then only at the latter's initiative 
(Article 150 of the Constitution). 
Functioning of the Judiciary 
The process of dispensing justice in Bulgaria is still marked by serious shortcomings. 
The courts are overburdened with work and take a long time to deliver their judgments, 
though Bulgaria has recently introduced an accelerated penal procedure for certain 
crimes. A shortage of qualified judges, low salaries, the complexity of legal procedures 
and a plethora of new rules to be applied all contribute to this situation. It is particularly 
serious where penalties and sentencing are concerned, as a number of procedures are not 
fully completed. The new government has included in its programme for 1997 - 2001 a 
section on reforming the judiciary. 
Moreover, Bulgaria has still not set up the Supreme Court of Cassation provided for in 
the Constitution. In the meantime, the functions of this institution are being performed 
by the Supreme Court. Bulgaria should take the necessary steps to set up these 
institutions as soon as possible, so as to avoid prolonging an unsatisfactory state of 
affairs. 
In recent years, the Constitutional Court has played a constructive role in ensuring that 
the Constitution is complied with and that the various institutions keep to their respective 
spheres of responsibility. Since 1990, the Court has given about 100 rulings. 
1.2 Human Rights and the Protection of Minorities 
Bulgaria has introduced various internal rules designed to ensure respect for human rights 
and minorities' rights. Such respect may also be guaranteed by the application of certain 
international conventions, most notably the European Convention for the Protection of 
Human Rights and its main additional protocols. Under Article F of the EU Treaty, this 
10 
set of provisions forms part of the acquis: any State wishing to join the European Union 
must first have ratified the said texts. 
Bulgaria, which has been a member of the Council of Europe since 1992, ratified the 
European Convention for the Protection of Human Rights and its additional protocols 
Nos. 1, 2 and 11 in September 1992. It also grants private individuals the right to appeal 
to the European Court if they consider that their rights under that Convention have been 
violated. 
Among the other conventions on human rights and minorities' rights, Bulgaria has 
ratified the European convention for the prevention of torture. It has not, however, 
signed the European Social Charter or the Framework Convention for the Protection of 
National Minorities. It has signed but not ratified the main human rights conventions 
concluded under the aegis of the United Nations. 
Under Article 5 of the Constitution, any duly ratified international treaty is directly 
incorporated into Bulgarian law and takes precedence over any provisions of national law 
which might conflict with it. 
Civil and Political Rights 
The Bulgarian Constitution recognises the right of any individual to have recourse to the 
judicial system to defend his or her rights. A system of legal aid makes it easier to 
implement this right: however, the Code of Criminal Procedure does not provide for the 
application of this rule during the preliminary hearing, and this effectively means that the 
poorest individuals are unable to obtain the services of a lawyer during this stage of the 
proceedings. Furthermore, victims of police violence cannot bring a legal action against 
the police if the Procurator's Office refuses to do so. 
The death penalty has not been abolished in Bulgaria, but since 1990 it has been subject 
to a moratorium decreed by the President of the Republic. 
Protection against arbitrary arrest is enshrined in the Constitution. The police cannot 
make an arrest without a warrant issued by the Procurator's Office. An exception may be 
made in an emergency, but in that case the judicial authorities must decide within 24 
hours whether the arrest is legal or not. Preventive detention cannot exceed two months, 
but this period may be extended to six months by order of the Procurator General. It 
should also be noted that the detention of juvenile delinquents in "Labour Education 
Schools" does not comply with the essential rules of judicial procedure, and in particular 
the audi alteram partem principle. 
All citizens over 18 years of age enjoy electoral rights. 
Freedom of association and demonstration is also guaranteed by the Constitution and is 
exercised without difficulty. In 1997 there are nearly 4 800 associations in Bulgaria. The 
tax arrangements for NGOs should be improved, particularly with regard ta donations 
and other income received by such organisations. 
Freedom of expression in Bulgaria is evidenced by pluralism in the press and other 
media: there are some 30 radio stations, three public broadcasting networks and a private 
national network as well as several private local television networks. The situation and 
11 
independence of the audio-visual media was threatened when, in 1996, the National 
Assembly adopted a new law giving greater powers to the broadcasting regulators. 
However, the Constitutional Court censured much of this text, and a new law is now 
being drafted. 
The impartiality of public radio and television in Bulgaria has often been questioned, 
since the Opposition was given much less air time than the governing majority not only 
during the presidential election campaign in November 1996 but also in the run-up to the 
April 1997 general election. 
The right of ownership is now assured, arid expropriation may take place only in the 
public interest and with fair compensation paid in advance. Arrangements for restoring 
their property - or, failing that, for paying compensation - to those who had been deprived 
of it under the Communist regime have been introduced in respect of claims registered 
before June 1993. The restoration of real estate in urban areas has been completed; the 
restoration of land, on the other hand has been greatly delayed and the new government 
has undertaken to remedy this situation. The land register is still rather inaccurate and 
must be updated when restoration takes place. The restoration of property confiscated 
from various religious communities was begun in 1991 and is continuing apace without 
major difficulties. 
Under Article 22 of the Constitution, foreign nationals cannot own land in Bulgaria, 
unless they have inherited it. The government has announced its intention of putting 
before Parliament, by the end of 1997, a proposal to amend the Constitution so as to 
allow land to be owned by nationals of countries which reciprocally grant the same right 
to Bulgarian citizens. 
Respect for private life is guaranteed in Bulgarian law: searches cannot be undertaken 
without a warrant. However, the effective application of this legislation is considerably 
reduced by numerous exceptions to the rule and frequent abuses by the police. 
Although Bulgaria has ratified the Geneva Convention on asylum-seekers, its national 
procedures do not meet international standards. A new law is being drafted to remedy 
this situation and to define more precisely the status and rights of asylum-seekers and 
refugees. 
Several organisations have reported numerous instances of the police inflicting inhuman 
and degrading treatment on persons in detention. Judicial proceedings are not always 
initiated as a result of such incidents. Prison conditions are also extremely difficult, 
largely because of inadequate funding. 
Where children's rights are concerned, living conditions for children in orphanages are 
still difficult because these institutions are short of money. 
12 
Economie. Social and Cultural Rights 
The right to the minimum income required for survival and to social security is enshrined 
in the Constitution. 
Trade union freedoms are guaranteed, and are respected in practice. Between 30% and 
50% of workers are members of a trade union. 
The right to strike is recognised by the Labour Code adopted in 1992, except within 
organisations providing essential pubic services. Political strikes were originally banned, 
but the Constitutional Court censured this provision in September 1996. The government 
places no obstacle in the way of this right, which is freely exercised in Bulgaria. 
Freedom of education and religion are guaranteed in Bulgaria. The Constitution 
recognises the Eastern Orthodox confession as the country's "traditional" religion, but 
there is separation between Church and State (Article 13 of the Constitution). The State 
grants financial assistance to Bulgaria's main confessional groups, in particular Muslims, 
Catholics and Jews. 
Minority Rights and the Protection of Minorities 
Between 15% and 18% of the population of Bulgaria consists of minorities, principally 
Turks (9.4%) and gypsies (Romanies) (3.4% to 7% depending on estimates). Mention 
should also be made of the Pomak minority, consisting of Slavic-speaking Muslims. 
Bulgaria has not signed the Council of Europe's framework convention* on minorities, but 
has signalled its intention of doing so shortly. It has not subscribed to recommendation 
1201 of the Parliamentary Assembly of the Council of Europe, which provides for the 
collective rights of minorities but is not legally binding. 
The situation of the Turkish minority, which had suffered considerable discrimination 
before 1989 under the Communist regime, has improved very appreciably in the past few 
years. Its relations with the rest of the population also appear more harmonious. Some 
members of the Turkish minority sit in Parliament (fifteen Members of the MRP elected 
in April 1997). In the 1995 local elections, 25 MRF mayors and more than 1000 MRF 
town councillors were elected. The Turkish minority receives education in its own 
language. There are, however, no arrangements for allowing minorities to use their own 
language for official communications in areas where they represent a significant 
percentage of the population. 
The gypsies (Romanies) continue to suffer considerable discrimination in daily life and 
are the target of violence either directly by the police or by individuals whom the police 
do not always prosecute. Their social position is difficult, though here sociological 
factors play a part alongside the discrimination they suffer from the rest of the 
population. One of the particular problems facing these people is the situation of the 
street children (4 000 to 5 000 in Sofia), virtually all of whom belong to this minority. 
The government should take appropriate steps to ensure that the specific difficulties of 
these people are genuinely taken into account. In this connection, it would be useful to 
carry out a reliable survey of the numbers of gypsies resident in Bulgaria and of their 
13 
social situation (levels of unemployment, statistics on their health and educational level): 
no precise statistics of this kind are available at present. 
1.3 General Evaluation 
Bulgaria has set up democratic institutions and their stability now seems secure. They 
must be reinforced by practices more in keeping with the rule of law at all levels of the 
State apparatus. Free and fair elections produced changeovers of government in 1994 
and 1997. 
Shortcomings remain on respect for fundamental rights but the new government elected 
in April 1997 has announced a series of reforms in the right direction. Considerable 
efforts must be made to combat corruption, improve administration of justice and provide 
fuller protection for individual freedoms, particularly as cases of abuse of power on the 
part of the police and the secret services are still all too frequent. 
Although the Turkish minority seems well integrated, this is not the case with the 
Romany (tzigane) population. 
The improvements since the new government came to power suggest that Bulgaria is on 
the way to meeting the political conditions set by the European Council in Copenhagen. 
14 
2. Economie Criteria 
In examining the economic situation and prospects of Bulgaria, the Commission's 
approach is guided in particular by the conclusions of the European Council in 
Copenhagen in June 1993, which stated that membership of the Union requires "the 
existence of a functioning market economy as well as the capacity to cope with 
competitive pressure and market forces within the Union". 
This part of the Opinion therefore gives a concise survey of the economic situation and 
background, followed by a review of Bulgaria's progress in key areas of economic 
transformation (liberalisation of the price and trade system, stabilisation of the economy, 
structural change, reforms of the financial sector) as well as its economic and social 
development. It then reviews the prospects and priorities for further reform, and 
concludes with a general evaluation of Bulgaria in relation to the criteria mentioned by 
the European Council. 
2.1 The Economic Situation 
Background 
Bulgaria, with a population of 8.3 million, had a gross domestic product (GDP) of 35 
billion ECU IN 1995 (expressed in purchasing power parity) with a fall in the following 
year. Its population is thus about 2 percent of that of the Union, while its economy is only 
about 0.5 percent; GDP per capita is therefore about 24 percent of the Union average. 
Average monthly wages were low at the equivalent of about 80 ECU per month in 1995. 
Exchange rate movements in 1996 and early 1997 drastically reduced the real value of 
wages: the average wage fell at one stage to as little as 10 ECU per month. 
Bulgaria joined the WTO in 1996 and is seeking to become a member of CEFTA. 
Progress in Economic Transformation 
Bulgaria started its transition to a market economy later and under more unfavourable 
conditions than most central European countries. Economic reforms were not launched 
until 1991, by which time the country was undergoing a deep economic crisis. In March 
1990, the country declared a moratorium on the servicing of its foreign currency debt, 
effectively cutting itself off from international finance. 
Additional external shocks to the economy came from the break-up of the CMEA, with 
which Bulgaria conducted a particularly large share of its foreign trade, and from the 
Gulf War: Bulgaria had important commercial relations with Iraq. In the early stages of 
the reform programme a further external shock came in the form of the disintegration of 
Yugoslavia. The subsequent embargo on Serbia-Montenegro cut Bulgaria's main 
overland transit route to Western markets. 
Bulgaria made a late but bold start to economic reform. In February 1991, prices of most 
goods were liberalised, subsidies were sharply reduced, a unified floating exchange rate 
was introduced, the state monopoly on foreign trade was abolished, and a two-tier 
banking system was created. Good progress was made also in establishing the legislative 
15 
basis for a market economy: by mid-1992 much of the legal framework was in place, 
with the notable exception, however, of a bankruptcy law. 
Structural change has been the weak point of Bulgaria's reforms. Initial progress in 
demonopolisation and restructuring state enterprises stalled in the absence of clear 
political support. Privatisation has been extremely slow. In the enterprise and financial 
sector, market disciplines remained largely absent. Central planning was abolished, but 
basic institutions of a functioning market economy, such as well-defined, readily 
enforceable property rights, were not put in its place. Six years into its transition to a 
market economy, Bulgaria is still in the early stages of structural reform. Faced with 
looming domestic and external financial crises, the authorities attempted to relaunch 
structural reforms of the financial and enterprise sectors in mid-1996. 
The government which took office following the April 1997 elections is unambiguously 
committed to rapid reforms. Progress will depend on how effectively the limited 
resources of the administration are able to operate largely untested legal procedures and 
provisions. 
Foreign Direct Investment 
Reflecting the slow pace of privatisation, and an unstable political, economic and legal 
climate, foreign direct investment (FDI) inflows have been low. Up to the end of 1996, 
cumulative FDI since 1989 amounted to under 400 million ECU - little more than 40 ECU 
per capita - reflecting an annual inflow averaging less than 1% of GDP (SOURCE: EBRD). 
In the first months of 1997 there has been a significant acceleration in FDI related in 
particular to privatisation of a number of large state enterprises. 
Economic Structure 
During the period of central planning, the state came to own virtually all the means of 
production, distribution and exchange, and accounted for almost all of the output of the 
economy. In comparison with most transition economies, the subsequent growth of the 
private sector has been relatively slow. In 1996, about 45% of GDP was privately 
generated. 
The one exception to public ownership was agriculture. In this sector private plots leased 
from state collectives produced close to one-half of output, although they occupied only 
about 28% of farmland. Agriculture now contributes about 12.6% of Gross Value Added, 
but over one-fifth of total employment. Agriculture is a significant net earner of hard 
currency for Bulgaria: about one-fifth of exports are agriculture-based products, while 
such goods make up under one-tenth of imports. 
16 
Main indicators of economic structure 
(all data for 1996 unless otherwise indicated) 
Population 
GDP per head 
as % of EU-15 average 
Share of agriculture in: 
gross value added 
employment 
Gross foreign debt/GDP 
Exports of goods & services/GDP 
Stock of foreign direct investment million 
PPS-ECU (1995) 
per cent (1995) 
per cent (1995) 
per cent (1995) 
per cent 
per cent 
billion ECU 
ECU per head 8.3 
4200 
24 
12.62.6 
222 
99 
45(1) 
0.4 
40 
Source: Commission services, national sources, EBRD 
(1) 1995 
Agricultural output has fallen substantially during the 1990s. A number of factors have 
contributed to this. Asymmetric price liberalisation freed prices of inputs, but left prices 
of farm produce subject to government intervention aimed at limiting consumer price 
rises. The land reform process has not taken place smoothly. Policy aimed at restituting 
agricultural land to its pre-collectivisation owners. While most land was rapidly 
restituted, farm machinery remained in the possession of farm collectives, which 
disposed of their assets in a haphazard manner. Moreover, allocation of definitive titles to 
land has lagged, so that individuals are unable either to sell land or use it as collateral. In 
1995, amendments to the land restitution law sought to restrict private land sales, and 
gave priority to the re-establishment of co-operatives. 
The inadequacy of agricultural policy in particular, and of economic reforms in general, 
became acutely evident in 1996 when a wheat shortage emerged. Policy now aims at 
rapidly remedying past errors. Land restitution and privatisation of the food processing 
industry are to be accelerated. Most food prices have been liberalised again. 
Bulgarian industry remains dominated by state enterprise, with private firms accounting 
for under one-fifth of output; overall, little progress in restructuring or privatisation has 
been made. A recovery in output which took place in 1994 ran out of momentum towards 
the end of 1995. The pick-up in output had been concentrated in branches such as 
chemicals and metallurgy which were particularly energy-intensive and export-oriented: 
these branches were able to take advantage of subsidised energy and of the boost to 
external competitiveness provided by the sharp depreciation of the currency which 
occurred in Spring 1994. However, real appreciation of the lev during 1995 eroded away 
this price advantage. In 1996, weak international demand for metals resulted in Bulgaria 
being unable to take advantage of the renewed depreciation of the lev to boost exports. 
Moreover, from mid-1996 onwards, prices for oil and gas have been increased to world 
17 
market levels, depriving Bulgaria's energy-intensive production of much of its 
competitiveness. 
The artificially low prices charged for energy up until mid-1996 encouraged waste: 
Bulgaria is estimated to use two to four times more energy per unit of output than 
European Union economies. Pricing energy at an economic rate should reduce this 
disparity, as industry (and private consumers) cut back on their energy usage. 
Restitution of urban property was-completed at a relatively early stage of reform. This 
has resulted in a relatively dynamic private retail trade sector. The services sector 
(excluding transport and communications) has attracted a large share of the limited flows 
of foreign direct investment that Bulgaria has received during the transition period. 
Public services have inevitably been weakened by the cutbacks in public expenditure that 
have taken place in recent years. Telecommunications services are poor; the intention to 
sell a majority stake in the state telecommunications company has been announced, and 
should be followed by much-needed investment in upgrading the system. Several existing 
projects are beginning to produce results. 
The banking sector, which is largely state-owned, suffered a deep crisis in 1996. The 
causes of this are discussed in section 6.5 below. 
Liberalisation 
Price Regime 
Far-reaching price liberalisation was undertaken in 1991, and extended in 1992. By this 
time, almost all prices were in principle free of state control, except for energy and goods 
and services provided by public utilities. The prices of 13 basic food items were subject 
to "price monitoring", although in practice this did not appear to restrict price increases 
for these goods. 
The range of goods subject to this form of indirect control was extended, to cover about 
30 items during 1993 and 1994. The Prices Act adopted by Parliament in September 
1995 represented a step backwards with regard to market determination of prices, which 
is one of the fundamental institutions of a market economy. This law empowered the 
government to regulate prices of goods and services. In early 1996 it was estimated that 
approximately 50% of goods (weighted by their share in the consumer price index 
"basket") were subject to some form of official monitoring or control. The artificially low 
price of wheat contributed to bread shortages in 1996 and 1997. Since early 1997, prices 
of most goods and services have been freed again. 
Trade Regime 
Since abolishing the state monopoly of foreign trade in 1990 and 1991 Bulgaria has 
maintained a liberal trade regime. There are virtually no quantitative restrictions on trade, 
other than for health and security reasons. A notable exception is a ban on wheat exports, 
introduced in 1994 and still in force. Inadequate implementation of this ban was another 
factor in the bread shortage. 
18 
Bulgaria has recently been accepted as a member of the World Trade Organisation 
(WTO), and is seeking to join the Central Europe Free Trade Association (CEFTA). In 
addition to the trade liberalisation provisions of the Europe Agreement, Bulgaria also has 
a free trade agreement with EFTA. 
Faced with a deepening economic crisis, in mid-1996 the Government announced the 
imposition of an import surcharge, as part of its unsuccessful attempt to meet targets for 
the budget deficit agreed with the IMF under a stand-by arrangement. The surcharge is 
to be phased out over a period of four years. 
Foreign Exchange Regime 
On 1 July this year, Bulgaria introduced a fixed exchange rate under a currency board 
arrangement, pegging the lev to the deutsche mark. This replaced the floating exchange 
rate regime which was introduced at the outset of Bulgaria's economic reforms in 1991. 
This initial decision to allow the currency to float, rather than to peg it to a hard currency 
"basket" was essentially pragmatic: the central bank had no reserves with which to 
defend a fixed exchange rate. 
Although the foreign exchange market is very free, in that there are very few formalities 
involved in buying or selling foreign currency, the size of the market is quite small: the 
daily value of transactions has typically been about $20 million or less. Partly in 
consequence, the floating exchange rate tended to follow a pattern of periods of stability 
(resulting in real exchange rate appreciation) interrupted by sudden deprecations. 
Particularly violent adjustments occurred in Spring 1994, and again from April/May 1996 
until February 1997. 
This instability in the exchange rate clearly caused difficulty for producers, consumers, 
and policy makers. However, in the absence of economic policies which could achieve 
lasting macroeconomic stability, a floating exchange rate policy was realistically the only 
option open to Bulgaria. Successful implementation of the currency board arrangement 
crucially depends in the short-term on supportive fiscal policy. Medium- and longer-term 
economic stabilisation and growth requires vigorous implementation of comprehensive 
structural reforms. 
Stabilisation of the Economy 
Domestic 
After the initial price jump following liberalisation, inflation stabilised at a monthly rate 
of between 4 to 6 percent from 1991 to 1994. This pattern was disrupted by a temporary 
acceleration following the rapid exchange rate depreciation in Spring 1994. In 1995 and 
the first months of 1996, inflation slowed: the annual rate fell below 30%, helped by a 
prolonged period of exchange rate stability. The collapse in the exchange rate which 
started in April/May 1996 brought this favourable development to an end. Consumer 
prices rose by 310% in 1996. A deepening of the exchange rate crisis was followed by a 
short burst of hyperinflation in early 1997. 
Gross domestic product (GDP) fell sharply during the first years of transition. Economic 
growth restarted in 1994, and continued into 1995. During the latter part of the year, there 
were increasing signs of a renewed economic slowdown. This intensified in 1996, when 
19 
GDP fell by approximately 10%. The severity of the recession in the first months of 1997 
was such that Bulgaria is expected to suffer another large decline in real GDP this year. 
Some recovery in output is, however, likely following the stabilisation of the economy 
during the second quarter of 1997. 
Main economic trends 
real GDP growth rate per cent 
Inflation rate 
annual average per cent 
December-on-December per cent 
Unemployment rate, end-year per cent 
ILO definition 
General government budget 
balance per cent of GDP 
Current account balance per cent of GDP 
Debt/export ratio per cent 
Foreign direct investment inflow per cent of GDP 1994 
1.8 
96 
122 
20.5 
-4.9 
-0.3 
220 
1.0 1995 
2.1 
62 
33 
14.7 
-5.2 
-0.2 
151 
0.8 1996 
-10.9 
123 
311 
13.7 
-11.5 
-0.2 
159 
1.6 
Source: Commission services, national sources, EBRD, IMF 
Unemployment rose rapidly following the end of central planning, reaching 10% of the 
labour force by end-1991. Ceilings on overall wage bills in state enterprises resulted in 
substantial reductions in employment. Registered unemployment peaked at about 14% of 
the labour force in early 1994. It then declined to around 10%, before again starting to 
rise from mid-1996. 
The public finances in the 1990s have been characterised by a steep fall in the ratio of 
government revenues and expenditures to GDP, and the persistence of large budget 
deficits, which averaged well over 10% of GDP from 1990 to 1993, before falling to 
around 6% in 1994 and 1995. Interest payments on both foreign and domestic debt are a 
major drain on the public finances: in 1996, interest payments amounted to over 20% of 
GDP. The budget deficit could only be held at around 10% of GDP in 1996 by severe 
cutbacks in spending: for example, pensions and public service wages were not adjusted 
in the final quarter of the year, during which time prices rose by more than 60%. The 
adoption of the budget for 1997 was delayed until mid-year, due to the political crisis and 
elections in the first months of the year, and the need to ensure consistency between the 
budget and the operation of the currency board arrangement. The 1997 budget foresees a 
deficit of 6.2% of GDP. 
20 
External 
Only support from the international community enabled Bulgaria to avert a default on its 
foreign debt in 1997. 
A lack of foreign currency reserves had already obliged Bulgaria to declare a moratorium 
on its foreign debt service in 1990. Agreement with the London club of private creditors 
on a debt and debt service reduction (DDSR) in 1994, while substantially reducing the 
burden of foreign debt, nonetheless left Bulgaria a quite heavily indebted country: the 
ratio of external debt to GDP was about 80% at the end of 1995. The shrinkage of the 
Bulgarian economy in 1996 brought this ratio to 100% again. 
Debt service will remain a significant difficulty for Bulgaria in the medium-term, even if 
the pick-up in FDI inflows in the early months of 1997 continues over the coming years. 
Structural Change 
Foreign Trade 
There has been a remarkable change in the direction of Bulgaria's trade. Trade with the 
EU accounted for as little as 5% of exports, and under 10% of imports in 1990. By 1996, 
the share of Bulgaria's foreign trade conducted with the EU had risen to about 35%). 
At the outset of transition, Bulgaria conducted the vast majority of its external trade with 
the countries of the CMEA. According to some estimates over four-fifths of trade was with 
these countries, and as much as 60% of total trade took place with the Soviet Union. 
Moreover, the majority of Bulgaria's exports to CMEA countries were investment goods, 
which were not in demand in the initial stages of the recession in transition countries. The 
collapse of the CMEA hit Bulgaria particularly hard, therefore, and was compounded with 
the impact of Bulgaria's unilateral moratorium on debt service declared in 1990. The 
latter measure left Bulgaria without access to short-term trade credits. The aggregate 
consequence was a steep fall in trade flows, of the order of 50%. 
Changes in the commodity composition of trade are difficult to assess for statistical 
reasons, but also appear to have been dramatic. Machinery exports have fallen 
substantially in relative terms, while chemicals and base metals accounted for close to 
40% of exports in 1995, compared with no more than 30% in 1992. Much of the 
expansion in exports of these products was due to temporary factors, such as the large 
exchange rate depreciation of Spring 1994 allied with continued access to subsidised 
energy. The raising of energy prices to world levels in mid-1996 removed this artificial 
and unsustainable advantage. Despite the boost to price competitiveness given to 
Bulgarian exports in 1996 by the sharp exchange rate depreciation, export volumes have 
fallen sharply, perhaps by as much as 10-15%. A contributing factor to this fall is the 
disruption to economic activity caused by the collapse of the banking system, which is 
discussed in more detail in section 6.5 below. 
Labour Market 
A feature of the decline in unemployment which occurred in Bulgaria in 1994 and 1995 
was that those leaving the register were in general those who were younger and more 
skilled. On the one hand, this was encouraging, in that it suggests that new jobs were 
21 
being created in the economy. On the other hand, it points to the presence among those 
who remain unemployed of a large group of older, less skilled or unskilled workers who 
can be expected to face increasing difficulties in finding employment the longer they 
remain unemployed. 
The relaunch of structural reforms in 1997 will place considerable pressure on active 
labour market policies. A substantial retraining effort will be needed for those who lose 
their jobs, or lack of suitably qualified labour could become an obstacle to economic 
growth. Moreover, the effective exclusion of significant segments of society from the 
benefits of higher wages and living standards could result in economic and social 
instability. 
Public Finances 
The share of government revenues and expenditures in GDP has shrunk considerably in 
recent years. Revenues fell from 53% of GDP in 1990 to less than 35% of GDP in 1996; 
expenditures declined from 65.7% of GDP in 1990 to under 50% in 1996, of which two-
fifths was made up of interest payments. The primary balance of the budget - i.e., 
excluding interest payments - has recorded large surpluses since 1994. 
The drop in the share of GDP accounted for by government revenue and expenditure has 
been accompanied by substantial restructuring in the make-up of taxes and spending. 
Profit taxes and non-tax revenues have declined in relative importance, while indirect 
taxation (VAT took effect in 1994) has become a more significant source of revenue. On 
the expenditure side, there have been severe cuts in capital investment, and in 
maintenance and operating expenditure. Social transfers and interest payments, although 
they have remained approximately constant as a proportion of GDP, each accounted for 
approximately 25-30% of public expenditure up to 1995. The slow pace of 
implementation of the structural reform measures announced in mid-1996 appears in part 
to be due to inadequate resources in public administration, compounded by an absence of 
a strong political commitment to economic reform. 
EnterpriseSector: Privatisation and Enterprise Restructuring 
Slow privatisation and restructuring lie at the root of the difficulties of the enterprise 
sector in Bulgaria. In the absence of appropriate incentives for state enterprise managers, 
there was widespread decapitalisation, or "profits privatisation" of state enterprises. This 
is part of the reason why creditors have been unwilling to initiate bankruptcy 
proceedings: many state enterprises are likely to have very little value in liquidation. 
From a creditor's perspective, it has been more worthwhile to keep the enterprise afloat, 
in the hope that the state would assume responsibility for the enterprise's debts. 
The slow pace of privatisation resulted partly from an excessive division of 
responsibilities between the government, line ministries, local authorities, the 
Privatisation Agency, and the Centre for Mass Privatisation, and partly from a lack of 
political will. The mass privatisation scheme which got underway in October 1996 has 
the potential to" strengthen the constituency in favour of market reforms. A possible 
weakness of the scheme is that it leaves the state with a blocking minority of shares in 
most of the enterprises to be sold. In a radical departure from previous years, the current 
22 
Government has pledged to privatise all commercial enterprises and half of the utilities 
during the first half of its term in office. 
In some sectors of the economy, a large number of small private enterprises has 
developed. Branches such as construction and retail trade are now mainly comprised of 
small private firms. The development of the private sector has been stifled, however, by 
the situation in the state enterprise and financial sector, and by the state's need for loans 
to finance the budget deficit. This combination of circumstances has both limited the 
amount of funds available for lending to private companies, and has kept interest rates 
unaffordably high. It was not until 1996 that a serious attempt was made to tackle the 
problems caused by the continued existence of large loss making state enterprises: these 
efforts have begun to produce clear results. 
Investment has fallen to very low levels: fixed investment accounted for under 15% of 
GDP in 1996. This fall can be ascribed to several factors: slow privatisation, coupled with 
a lack of incentives for managers to run state enterprises efficiently, poor lending 
practices in the banking system, a lack of funds for private investment, cutbacks in public 
investment, and uncertainty about economic policy. Successful implementation of the 
new government's programme should remove or reduce most of these obstacles. 
Financial Sector 
The problems of the financial sector in Bulgaria are connected with the situation of the 
enterprise sector. Imprudent lending, poor supervision, and an absence of "hard budget 
constraints" - the idea that debts have to be repaid - resulted in mounting losses in these 
sectors, which derailed progress towards macroeconomic stabilisation. The stock of debt 
owed to banks by loss-making state-owned enterprises was estimated in late 1995 to be 
of the order of 20%) of GDP. 
In common with most of the countries in transition, the inheritance of central planning in 
Bulgaria included a burden of non-performing loans, and an absence of experience in 
assessing creditworthiness of borrowers. These difficulties were exacerbated by the slow 
pace of structural reform, and the inadequate and partial implementation of the reforms 
that have been attempted. Previous recapitalisations of banks were not followed by action 
to prevent a recurrence of bad debts. 
This created an expectation that the state would ultimately bail out insolvent banks and 
firms - which spread to the private sector. Weaknesses in banking supervision and in 
legislation have contributed to the emergence of a private sector banking and enterprise 
"bad loans" problem also. 
The Bulgarian National Bank (BNB), the central bank, while keeping interest rates high in 
support of the exchange rate, adopted a broadly accommodating attitude to these 
practices. Gaps in the regulatory framework, ineffective banking supervision, and 
perhaps a certain reluctance to act in isolation of structural measures in other parts of the 
economy, contributed to the central bank engaging in excessive uncollateralised lending 
to commercial banks to prevent their collapse. This contributed to the onset of the 
exchange rate instability in early 1996. When the BNB then froze uncollateralised credit, 
the weak state of the banking and enterprise sectors quickly became apparent. The assets 
of several banks were frozen and their operations suspended. Liquidation or bankruptcy 
23 
procedures were initiated against a number of these banks. Delays in successfully 
concluding these proceedings have exposed weaknesses in the legal framework. 
Those banks that remained open were for the most part in fragile condition. Lack of 
confidence in banks, due to their poor lending practices, left them without funds for even 
short-term lending. This had serious spillovers onto the enterprise sector. Firms were 
unable to borrow to finance imports of raw material inputs for export goods. This 
inability to purchase imports explains a large part of the fall in Bulgaria's exports in 
1996. The resultant fall in income and output was a contributing factor to the deep 
economic recession. 
Very high inflation in 1996 and the first months of 1997 caused a huge redistribution of 
wealth from creditors to debtors. The real value of enterprise debts and non-performing 
loans held by banks was greatly reduced. 
The independence of the BNB was established by law in 1991, but subsequent 
amendments to the legislation somewhat undermined this independence. In late 1996, 
and again in 1997, it was legally obliged to provide large loans to the budget. This 
contributed to the surge in inflation. 
Prior to the introduction of the currency board arrangement, the BNB had the normal 
range of monetary policy instruments at its disposal. However, the effectiveness of 
monetary policy was hampered by lax fiscal policy, the weakness of the banking system, 
and delays in structural reform in general. Under the currency board arrangement 
introduced on 1 July the BNB's scope for conducting discretionary monetary policy is 
severely restricted, since it is required to ensure that the amount of domestic currency in 
circulation is fully backed by its own holdings of foreign reserves. Successful operation 
of the currency board will be a key instrument in restoring economic stability. 
Capital markets are underdeveloped. The equity market is in an embryonic state and 
cannot be viewed as an alternative source of finance for the corporate sector. State-owned 
insurance companies have a dominant share of the market, although some private 
companies have emerged. Foreign insurers have not yet entered the insurance market. 
The market for short-term instruments is limited to the interbank money market. Activity 
has declined as a result of the current problems of the banking system. 
Economic and Social Development 
Social Indicators 
The population of Bulgaria is about 8.3 million. In recent years, the population has 
declined a little. The birth rate is below 9 per thousand, and falling, while the death rate 
has risen to over 13 per thousand. About one-fifth of the population is aged under 15, 
while about 15% are aged 65 or over. In broad terms, this is similar to the population 
structure of the EU. 
Approximately half of the population has completed secondary education; the average 
adult has spent 9-10 years in formal education. As a result of the economic crisis, the 
health system is facing severe financial problems, leading to a shortage of medicines and 
medical instruments. 
24 
The economic crisis of 1996 and 1997 has had a drastic impact on the population. Public 
sector wages and pensions fell steeply, with serious effects on living standards. The share 
of income spent on food increased, and accounted for over half of household purchases. 
While households spent relatively more on food, consumption declined: compared with 
the same period of 1995, in the third quarter of 1996 per capita consumption of meat, 
eggs, fruit and vegetables was some 15% lower; only milk and potatoes were eaten in 
quantities little changed compared with 1995. 
In late 1996, it was estimated that 40% of the population lived below the official poverty 
line. With the initial economic stabilisation since March 1997, the situation has 
improved to some extent. However, the income position of large sections of the 
population will remain difficult for a considerable period. 
Regional and Sectoral Differences 
Approximately two-thirds of the population live in urban areas. Standards of living are 
significantly higher in cities and towns, at least up to mid-1996: hyperinflation may have 
had less severe effects on rural dwellers, who may at least be able to grow food for their 
own consumption. Labour force participation rates are higher, and unemployment rates 
lower, in urban than in rural areas, so that a much larger proportion of the urban 
population is employed. 
Standards of education are also substantially higher in towns and cities: almost three-
quarters of the rural adult population have no education beyond primary level. The 
equivalent figure for urban dwellers is about 35%. Women tend to have less formal 
education, and have lower rates of labour force participation than men, but the 
differences are not substantial. 
By mid-1996, significant regional variations in unemployment had emerged, with rates 
varying from well under 10% in larger urban areas to 20% and more in some rural and 
mountainous regions. The large-scale industrial restructuring which is now under way is 
likely to cause sharp jumps in regional unemployment rates, since much industrial 
employment is concentrated in single plants in one location. Such unemployment will 
also be sectorally concentrated, raising the prospect of regional concentrations of workers 
with outdated skills. 
2.2 The Economy in the Perspective of Membership 
Introduction 
The European Council in Copenhagen in 1993 defined the conditions that the associated 
countries in central and eastern Europe need to satisfy for accession. The economic 
criteria are: 
• the existence of a functioning market economy; 
• the capacity to cope with competitive pressure and market forces within the Union. 
These criteria are linked. Firstly, a functioning market economy will be better able to 
cope with competitive pressure. Secondly, in the context of membership of the Union, the 
25 
functioning market is the internal market. Without integration into the internal market, EU 
membership would lose its economic meaning, both for Bulgaria and for its partners. 
The adoption of the acquis, and in particular the internal market acquis, is therefore 
essential for a candidate country, which must commit itself permanently to the economic 
obligations of membership. This irreversible commitment is needed to provide the 
certainty that every part of the enlarged EU market will continue to operate by common 
rules. 
The capacity to take on the acquis has several dimensions. On the one hand, Bulgaria 
needs to be capable of taking on the economic obligations of membership, in such a way 
that the single market functions smoothly and fairly. On the other hand, Bulgaria's 
capacity to benefit fully from the competitive pressures of the internal market requires 
that the underlying economic environment be favourable, and that the Bulgarian 
economy have flexibility and a sufficient level of human and physical capital, especially 
infrastructure. In their absence, competitive pressures are likely to be considered too 
intense by some sections of society, and there will be a call for protective measures, 
which, if implemented, would undermine the single market. 
The capacity and determination of a candidate country to adopt and implement the acquis 
will be crucial, since the costs and benefits of doing so may be unevenly spread across 
time, industries and social groups. The existence of a broad based consensus about the 
nature of the changes to economic policy which membership of the Union requires, and a 
sustained record of implementation of economic reforms in the face of interest group 
pressure reduce the risk that a country will be unable to maintain its commitment to the 
economic obligations of membership. 
At the level of the public authorities, membership of the Union requires the 
administrative and legal capacity to transpose and implement the wide range of technical 
legislation needed to remove obstacles to freedom of movement within the Union and so 
ensure the working of the single market. These aspects are examined in later chapters. At 
the level of individual firms, the impact on their competitiveness of adopting the acquis 
depends on their capacity to adapt to the new economic environment. 
The Existence of a Functioning Market Economy 
The existence of a market economy requires that equilibrium between supply and 
demand is established by the free interplay of market forces. A market economy is 
functioning when the legal system, including the regulation of property rights, is in place 
and can be enforced. The performance of a market economy is facilitated and improved 
by macroeconomic stability and a degree of consensus about the essentials of economic 
policy. A well-developed financial sector and an absence of significant barriers to market 
entry and exit help to improve the efficiency with which an economy works. 
Failure to build on the promising initial start to market reforms means that in many areas 
Bulgaria is little advanced compared with its situation at the outset of transition six years 
ago. It is hard to imagine a more telling symbol of the distance Bulgaria still has to travel 
to a market economy than the reappearance of bread queues in the recent past. 
26 
As far as price liberalisation is concerned, early reforms were partially reversed in 1995. 
It is only very recently that prices have been liberalised again. 
Hyperinflation in the early months of 1997 resulted in a massive redistribution of wealth 
from savers to borrowers. One side-effect has been to improve the health of the banking 
and enterprise sectors, though they remain quite weak. To a large extent, the financial 
system is dysfunctional. It has not fulfilled its essential market economy role of financial 
intermediation between savers and investors. Rather, much of the activity of banks has 
appeared to entail extending new loans to keep afloat enterprises which are in arrears on 
outstanding debt. 
Part of the reason for this behaviour on the part of banks and enterprises lies in the 
absence of strong legal institutions. In a market economy most contentious issues in 
relations between economic agents can be settled without involving courts. This is 
possible because there is a widely shared understanding of what the rules are, as well as 
certainty that they will be implemented if necessary. In Bulgaria, this element of a market 
economy has been largely lacking. In particular, repeated state-initiated write-offs of bad 
debts created an expectation on the part of both borrowers and lenders that the state 
would continue to come to the rescue. This may explain why the bankruptcy law adopted 
in 1994 remained inoperative until the state moved against the most insolvent banks and 
enterprises in 1996. 
Inadequately defined property rights resulting from delays in land restitution hampered 
the development of Bulgarian agriculture, and effectively prevented the emergence of a 
land market. Experience following energy price increases in 1996 shows that people's 
behaviour may respond to price changes in unexpected ways when there are no effective 
mechanisms to enforce payment. 
Institutional and political instability, in particular the absence of a general consensus on 
the elementary legal basis underlying economic activity and on the general direction of 
economic policy, has created a climate of uncertainty. 
Even in the absence of formal obstacles to private enterprise, such an economic climate 
will discourage new ventures. The inadequacy of the banking sector has further limited 
opportunities for domestic entrepreneurs. 
When institutional instability is compounded with acute economic instability as was the 
case in Bulgaria during much of 1996 and early 1997, much activity essential for the 
functioning and development of a market economy stops. The uncertainty created by very 
high and variable inflation provides poor incentives for saving and investment, and thus 
weakens the future prospects of the country. 
Because of the weakened state of the public finances, public administration lacks 
resources. Tax collection is poor. The slow pace of land restitution is in part due to 
administrative weaknesses. Line ministries seem unable to exercise adequate control over 
state enterprise managers. 
27 
The Capacity to Cope with Competitive Pressure and Market Forces 
It is difficult, some years ahead of prospective membership, and before Bulgaria has 
adopted and implemented the larger part of Community law, to form a definitive 
judgement of the country's ability to fulfil this criterion. Nevertheless, it is possible to 
identify a number of features of Bulgaria's development which provide some indication 
of its potential to cope with competitive pressure and market forces within the Union. 
The capacity to cope with competitive pressure and market forces within the Union 
requires a stable macroeconomic framework within which individual economic agents 
can make decisions in a climate of a reasonable degree of predictability. There must be a 
sufficient amount of human and physical capital including infrastructure to provide the 
background so that individual firms have the ability to adapt to face increased 
competitive pressures in the single market. Firms need to invest to improve their 
efficiency, so that they can both compete at home and take advantage of economies of 
scale which flow from access to the single market. This capacity to adapt will be greater, 
the more firms have access to investment finance, the better the quality of their 
workforce, and the more successful they are at innovation. 
Moreover, an economy will be better able to take on the obligations of membership the 
higher the degree of economic integration it achieves with the Union ahead of accession. 
The more integrated a country already is with the Union, the less the further restructuring 
implied by membership. The level of economic integration is related to both the range 
and volume of goods traded with member states. Direct benefits from access to the single 
market may also be greater in sectors where there are a sizeable proportion of small 
firms, since these are relatively more affected by impediments to trade. 
Delays in Bulgaria's transition to a market economy have left it badly placed to cope 
with competitive pressure. The transformation of Bulgaria's centrally planned economy 
into a market economy able to prosper within the Union will require substantial 
investment over many years in modernising the country's productive capacity, as well as 
major improvements in physical infrastructure. Although Bulgaria is developing its 
telecommunications network, much of the equipment remains obsolete and 
telecommunications services need to be developed. Similarly, the rail and road systems 
have suffered from a lack of investment, notwithstanding major investment projects set 
up since 1991. Changing skill requirements, and adapting public administration to the 
requirements of the single market, will necessitate large investments in people. Although 
Bulgaria has a tradition of high standards in education, the sector today is acutely short of 
the resources necessary to develop a system capable of responding to society's needs. 
Low levels of investment, both private and public, have been a marked feature of 
Bulgaria's transition. Poor economic performance in general, linked to inadequate 
progress in restructuring, has reduced tax receipts. Combined with lax fiscal policy, this 
created a large domestic government debt. Resources used in servicing this debt could 
not be used for public investment. The reasons for low levels of private investment are 
more widespread and fundamental and are grounded in the general weaknesses in key 
institutional features which a market economy requires. 
Potential investors in Bulgaria have faced an unfavourable economic and institutional 
climate. With the exception of much of 1995 and the early months of 1996, inflation in 
Bulgaria has been high and frequently quite variable from month to month. Legislation in 
28 
some areas has been subject to frequent revision, implementation of legislation 
incomplete. Delays in land restitution and in first the adoption and then the 
implementation of the bankruptcy law have already been mentioned. The law on 
ownership and use of farmland has been amended over 10 times. Tax treatment of foreign 
investment has been modified. 
The frequent changes have left economic agents uncertain and unable to plan their 
activity. Uncertainty about whether property rights can be enforced has discouraged 
investment. Failure to impose "hard budget constraints" on firms, due to weaknesses in 
both the banking system and in public administration (tax collection), added to state 
interference in the determination of prices, provided managers of state enterprises with 
distorted incentives. Consequently, restructuring has been too slow, so that single firms 
dominate large segments of industry. 
The overall atmosphere of uncertainty which has been created by persistent political 
instability and an ambiguous attitude to market reforms has helped to create a climate in 
which corruption can thrive. Civil servants' involvement in the management of state 
enterprises creates a potential conflict of interest with their responsibilities to implement 
government policy. 
Developments in Bulgaria's economy during 1996 revealed serious weaknesses in the 
competitiveness of its industrial base. The sectors which contributed most to the positive 
export performance in 1995 were shown to depend for their cornpetitive advantage on 
artificial, unsustainable conditions. 
The first of these was cheap energy: the prices paid by Bulgarian enterprises for fuel and 
power were heavily subsidised until mid-1996. The second advantage arose from the 
sharp depreciation of the lev which occurred in Spring 1994. However, the real 
appreciation of the currency during 1995 eroded this temporary competitive boost. Other 
things being equal, the precipitous fall of the lev in 1996 might have been expected to 
give a renewed impetus to exports. That this did not happen was due to some extent to a 
relative slowing of economic activity in the Union. However, this should not obscure the 
key issue, which is that the development of sustainable international competitiveness 
cannot be based on a continuously and rapidly depreciating currency. This is particularly 
relevant in the context of potential membership of the Union. 
Bulgaria's relatively weak competitive position is also linked to a narrow industrial base: 
exports have been unduly concentrated in a small number of basic industrial goods. This 
situation is related to the gaps already identified in the country's transition to a market 
economy. 
Improvements in competitiveness have also been slowed by very low levels of foreign 
direct investment (FDI). In those countries which have progressed furthest in transition, 
FDI has played a substantial role in modernising productive capacity, thereby improving 
efficiency and competitiveness. In addition to the factors already identified which have 
discouraged investment in general, the slow pace of privatisation has reduced the supply 
of investment opportunities for foreign capital. 
FDI can be* a significant source of technology transfer and innovation. This is particularly 
important in transition economies, as domestic funds for Research & Development (R&D) 
will be limited both by cutbacks in public spending and by economic restructuring in 
29 
general. Bulgaria has attracted a small amount of FDI, and reported R&D spending has 
fallen by a factor of almost 3 since the late 1980s. R&D activities also appear to have 
suffered from an uncoordinated approach to policv. including a lack of incentives for 
private research. There has been a significant "brain drain" from the sector. 
As a consequence of the uneven progress which Bulgaria has made with market reforms, 
the country is now in an economically weak position. Developments in 1996 showed that 
even with the benefit of a dramatic improvement in price competitiveness following the 
steep currency depreciation, Bulgarian products were largely uncompetitive on 
international markets. 
Prospects and Priorities 
Faced with the prospect of national bankruptcy for the second time within a decade, the 
authorities have recently stated their firm commitment to serious and far-reaching 
structural reform. The fact that the temporary measures during the past six years have 
failed demonstrates the fundamental need for a sustained and consistent reform effort. 
Bulgaria's future membership of the European Union will require that short-term 
stabilisation measures currently being undertaken are followed up by forceful 
implementation of a comprehensive strategy for the medium-term development of the 
country. The Commission has initiated discussions with the Bulgarian authorities which 
should lead to the elaboration of such an approach. Good progress in implementation of 
the Europe Agreement should also help smooth the transition to membership of the 
Union. 
Lack of progress in implementing market-oriented economic reform means Bulgaria 
faces challenges in a broad range of policy areas. 
A first and immediate priority is to achieve solid macroeconomic stability. Once this has 
been realised, the Government needs to set about consistent implementation of stability-
oriented economic policies, both at macroeconomic and structural level. 
In agriculture, priority should be assigned to completing the land restitution process and 
removing any bureaucratic obstacles to the functioning of the land market. Agricultural 
wholesale markets and agro-food enterprises need to be privatised and opened to 
competition. Price and trade policies should be such as to promote investment by farmers 
in future production. 
Previous inability to impose discipline on state enterprises and banks through non-market 
means suggests very strongly that rapid privatisation should be a priority. This will need 
to be accompanied by the completion and strengthening of market economy institutions. 
The current procedures for winding up banks and enterprises are lengthy. The legal 
framework should be examined to ensure that it provides creditors with adequate means 
of enforcing their claims; it will also be necessary to strengthen the capacity of the courts. 
Investment is at very low levels. Correcting the circumstances which have led to this 
situation - essentially, an unstable political, legal and economic environment - is a pre­
requisite if Bulgaria is to be able to make progress in improving its productive capacity 
30 
and bringing its industry to a level where it could hope to withstand competition within 
the Single Market. 
Investments in transport infrastructure need to be directed at enabling Bulgaria to profit 
from its potentially significant role as a transit country. 
Attracting greater flows of foreign direct investment will be facilitated by consistent and 
transparent implementation and application of legislation. In this regard, removing the 
constitutional bar on foreign land ownership would provide a positive signal. FDI will be 
crucial to the substantial restructuring required in most sectors of industry. FDI, apart 
from its usual benefits, brings particular advantages to Bulgaria, since investors may use 
the bonds issued by Bulgaria as part of the DDSR as part payment in privatisation 
transactions; this diminishes the stock of outstanding debt, and so reduces future debt 
service. 
Large budget deficits over the past years have represented a sizeable drain on domestic 
savings, thereby absorbing resources which could be used to finance productive 
investment. Successful implementation of the currency board arrangement will constrain 
the authorities' room for manoeuvre in the area of fiscal policy. Improved taxation of the 
private sector would help the health of the public finances. This implies increasing 
resources allocated to tax collection. In the short-term, rapid and successful stabilisation 
will lower interest rates, creating substantial savings on debt service. 
If enterprises are to compete effectively they need a well-trained labour force. The large 
scale restructuring that the Bulgarian economy needs implies considerable changes in the 
nature of employment, and in the type of skills which will be demanded by employers. 
This poses a substantial challenge to the educational system, whose capacity to respond 
to the economy's needs is constrained at present. 
Competitiveness would also be improved by the development of an R&D policy which 
encourages technical innovation and development, in particular by providing incentives 
in the private sector. 
Active labour market policies will also have an important contribution to make in 
facilitating the sectoral restructuring of employment. Developing and implementing 
policies aimed at ensuring that the long-term unemployed do not become in effect 
detached from the labour force, and limiting any further increase in their numbers should 
be a priority area of labour market policy. This is all the more important in view of the 
likelihood that the relaunch of structural reform will initially result in increased 
unemployment. 
Full implementation of the Government's economic and structural reform programme 
will substantially address these challenges. 
2.3 General Evaluation 
Bulgaria's progress in the creation of a market economy has been limited by the absence 
of a commitment to market-oriented economic policies. Early liberalisation of trade and 
prices was partially reversed, and price controls were not removed until this year. It is 
31 
only since the crisis at the end of last year, and the recent change of government, that 
consensus about the desirability of economic reforms has begun to develop. 
Bulgaria would not be able to cope with competitive pressure and market forces within 
the Union in the medium term. If the authorities can translate their renewed commitment 
to economic transition into successful and sustained action, a rapid turnaround in 
Bulgaria's prospects is possible. However, the country has been set back by six largely 
wasted years. Incomplete reform has hampered the emergence of a modern agricultural 
sector. Slow privatisation and economic instability has weakened state enterprises and 
delayed the development of a dynamic private sector. 
32 
3. Ability to Assume the Obligations of Membership 
The European Council in Copenhagen included among the criteria for accession "the 
ability to take on the obligations of membership, including adherence to the aims of 
political, economic and monetary union". 
In applying for membership on the basis of the Treaty, Bulgaria has accepted without 
reserve the basic aims of the Union, including its policies and instruments. This chapter 
examines Bulgaria's capacity to assume the obligations of membership - that is, the legal 
and institutional framework, known as the acquis, by means of which the Union puts into 
effect its objectives. 
With the development of the Union, the acquis has become progressively more onerous, 
and presents a greater challenge for future accessions than was the case in the past. The 
ability of Bulgaria to implement the acquis will be central to its capacity to function 
successfully within the Union. 
The following sections examine, for each main field of the Union's activity, the current 
and prospective situation of Bulgaria. The starting-point of the description and analysis is 
a brief summary of the acquis, with a mention of the provisions of the Europe Agreement 
and the White Paper, where they are relevant. Finally, for each field of activity there is a 
brief assessment of Bulgaria's ability to assume the obligations of membership on a 
medium-term horizon. 
3.1 Internal Market Without Frontiers . 
Article 7a of the Treaty defines the Union's internal market as an area without internal 
frontiers in which the free movement of goods, persons, services and capital is ensured. 
This internal market, central to the integration process, is based on an open-market 
economy in which competition and economic and social cohesion must play a full part. 
Effective implementation of the liberties enshrined in the Treaty requires not only 
compliance with such important principles as, for example, non-discrimination or mutual 
recognition of national regulations - as clarified by Court of Justice rulings - but also 
concomitant, effective application of a series of common specific provisions. These are 
designed, in particular, to provide , notably in terms of safety, public health, 
environmental and consumer protection, public confidence in the services sector, 
appropriately qualified persons to practise certain specialist occupations and, where 
necessary, introduction or coordination of regulatory and monitoring mechanisms; all 
systematic checks and inspections necessary to ensure correct application of the rules are 
carried out on the market, not at frontier crossings. 
It is important to incorporate Community legislation into national legislation effectively, 
but even more important to implement it properly in the field, via the appropriate 
administrative and judicial structures set up in the Member States and respected by 
companies. This is an essential precondition for creating the mutual trust indispensable 
for smooth operation of the internal market. 
This chapter must be read in conjunction with, inter alia, the chapters on social policy, 
the environment, consumer protection and sectoral policies. 
33 
Thf F»"r Freedoms 
A step-by-step approach is being taken to absorption of the acquis by the candidate 
countries: 
The Association Agreement between the Community, its Member States and 
Bulgaria entered into force on 1 February 1995. With regard to the four freedoms and 
approximation of legislation, the Agreement provides, in particular, for immediate or 
gradual application of a number of obligations, some of them reciprocal, covering, in 
particular, freedom of establishment, national treatment, free trade, intellectual property 
and public procurement. 
The Commission's 1995 White Paper (COM (95) 163 final) guidelines intended 
to help the candidate countries prepare for integration into the internal market gives a 
closer definition of the legislation concerned. It identifies the "key measures" with a 
direct effect on the free movement of goods, services, capital and persons and outlines 
the conditions necessary in order to operate the legislation, including the legal and 
organisational structures. Twenty-three areas of Community activity are examined, 
dividing the measures into two stages, in order of priority, to provide a work programme 
for the pre-accession phase. The Technical Assistance and Information Exchange Office 
(TAIEX) was set up with the objective of providing complementary and focused 
technical assistance in the areas of legislation covered in the White Paper. A legislative 
database has recently been established by the Office. 
The candidate countries will have to implement all the acquis.The Action plan for 
the single market submitted to the Amsterdam European Council gives details of the 
priority measures necessary to make the single market work better between the Fifteen in 
preparation for introduction of the single currency. This will inevitably entail changes to 
the acquis. 
- General Framework 
Whatever their field of activity, undertakings must be able to operate on the basis of 
common rules. These are important since they shape the general framework within 
which economies operate and, hence, the general conditions of competition. They 
include the rules on competition (on undertakings and State aid) and tax measures 
discussed elsewhere in this opinion, the opening-up of public works, supply and service 
contracts, harmonisation of the rules on intellectual property (including the European 
patent), harmonisation of the rules on company law and accountancy, protection of 
personal data, transfer of proceedings and recognition of judgments (Article 220 
Conventions) 
Descriptive Summary 
Public procurement in Bulgaria is at present governed by a newly adopted Law on public 
and municipal procurement contracts. Concessions are regulated by a law of 1996. The 
enforcement is entrusted to the Council of Ministers, while supervision and monitoring is 
carried out by the National Audit Office. Following its accession to WTO on 1 December 
1996, Bulgaria has started negotiations on accession to the WTO Agreement on 
government procurement. 
34 
Bulgaria has adopted legislation on the protection of intellectual and industrial property 
especially in patent (1993) and copyright (1993) and has acceded to nearly all relevant 
international conventions in this respect. Bulgaria undertook to implement the TRIPS 
(trade related aspects of intellectual property rights) agreement with immediate effect by 
its WTO accession in December 1996. 
Company law is primarily governed by the Commercial Code, introduced in 1991 and 
subsequently amended. Bulgarian law recognises a range of enterprises falling into two 
broad categories: associations of persons and associations of capital. In June 1996, 
around 45,000 limited liability companies were registered. Companies may issue shares 
to raise finance; shareholders are protected by law. Minimum capital requirements are 
laid down by law. Creditors are adequately protected. District courts keep company 
registers containing the key material facts concerning each company; these data are open 
to the public. Annual reports are published in the Official Gazette. 
With regard to accounting, rules on annual and consolidated accounts are to be found in 
the Accountancy Act (1991, last changed in 1996), the national schedule of accounts and 
31 National accounting standards. All regulatory acts have been based on the EC 
Directives and international accounting standards. There are rules concerning auditors in 
the Accountancy Act as well as in a regulation. Since the last amendment of the 
Accountancy Act, the Institute of Certified Public Accountants represents the Bulgarian 
auditors. A Disciplinary Commission appointed by the Minister of Finance is responsible 
for supervision. 
With regard to the protection of data. Article 32 of the Bulgarian Constitution provides 
that the privacy of citizens shall be inviolable and that they shall be entitled to protection 
against any illegal interference in their private or family affairs. 
Current and Prospective Assessment 
Further efforts will be needed to adopt all the relevant acquis in public procurement. 
In general the new law does not provide a sufficient basis to assess whether the scope of 
the different directives has been respected, particularly as regards services and utilities. 
Furthermore, as regards technical requirements and technical/financial capacity the law is 
not very detailed. At present, Bulgarian firms (or EU firms with subsidiaries located 
inside Bulgaria) obtain preferential treatment as regards the award of public procurement 
contracts. Firms located in the EU will get equal access only after the expiry of the 
transition period set out in the Europe Agreement (31 January 2005, at the latest). In 
addition, remedies and review procedures do not seem to be fully compatible with the EC 
requirements. 
Whereas further amendments to the Law on public procurement are envisaged to be 
completed in 1997, the actual application is still hampered by the lack of implementation 
procedures and the generally low public awareness in the area of public procurement. 
Complete harmonisation is expected to be achieved in the medium term. 
Special efforts are necessary to improve the protection of intellectual and industrial 
property. On patent laws some progress has been achieved; for trademarks, copyright and 
neighbouring right, important progress has to be made. With regard to enforcement, 
certain efforts, especially border enforcement for copyright, have been undertaken. 
35 
However, also in this area, important progress is required, notably because of weakness 
of internal control and border enforcement for industrial property. Under the Europe 
Agreement (Art. 67) Bulgaria has to align its legislation by the end of 1997. Piracy still 
remains an important concern. 
In relation to company law. Bulgaria's legislation appears to be to a large extent, if not 
entirely, in conformity with the First, Second and Third Directives. The legislation does 
not appear to be fully in line yet with the Eleventh and Twelfth Directives. Problems 
exist on the implementation of company law, due to insufficient knowledge and 
experience in the judiciary on company and commercial law issues. This holds 
particularly for company insolvency proceedings under the commercial code, which 
include new procedures in which the courts select and appoint trustees. Law enforcement 
is also hampered by deficiencies in laws relating to privatisation and concessions. 
As regards accounting, a high degree of conformity with the Directives has already been 
achieved but the profession's compliance with the legislation needs to improve. In 
auditing, changes are planned in particular to raise qualification requirements. 
Certain transitional problems are in evidence relating to the implementation in practice of 
the new rules, including a shortage of qualified accountants and auditors, an issue which 
requires major efforts for it to be solved in the medium term. 
On the Protection of Personal Data, a draft law and a new law concerning the 
telecommunication sector aim to achieve compliance with Directive 95/46/EEC. An 
independent monitoring authority is foreseen. Accession to Convention No 108 of the 
Council of Europe can only be achieved after the adoption of these legislative measures. 
Conclusion 
In the sectors indicated above, Bulgaria has taken on several important directives and has 
drafted laws for several others. Important efforts on the implementation of the White 
Paper recommendations are still needed. Bulgaria will need to make a strong effort to 
align its legislation and practice to the EU requirements in the field of public 
procurement as well as intellectual and industrial property. 
As far as company law is concerned, there would not appear to be any major problem 
with Bulgaria's implementing the acquis. As regards accounting and auditing, an 
important effort is needed for ensuring the practical application of the existing 
legislation. 
Considerable efforts are still needed to adopt and implement measures to meet 
Community requirements on data protection. 
- Free Movement of Goods 
Free movement of goods can be achieved only by removing measures which restrict trade 
- not only customs duties and quantitative restrictions but all measures with equivalent, 
i.e. protectionist, effect, irrespective of whether or not they are specifically aimed at 
domestic or imported products. Where technical standards are not harmonised, the free 
movement of goods must be ensured by applying the principle of mutual recognition of 
national rules and accepting the rule that national specifications should be no more 
36 
stringent than is required to achieve their legitimate objectives. This rule was established 
in the Cassis de Dijon judgment. 
For the purpose of harmonisation, the European Community has developed the "New 
Approach" which introduces an approach carefully balanced between government and 
private autonomous bodies and in which European Community legislation and European 
standards play a distinct complementary role. Thus, instead of imposing technical 
solutions, European Community legislation is limited to establishing the essential 
requirements which products must meet. 
Products manufactured in accordance with European standards are presumed to meet 
such essential requirements, but European stuidards are not the only way to prove such 
conformity. The "New Approach" works in conjunction with the "Global Approach" on 
product certification which governs the apposition of the "CE Mark" on the product. For 
other products such as pharmaceuticals, chemicals, motor vehicles, and food products, 
European Community directives follow the traditional regulatory pattern of providing 
fully detailed rules. 
The free movement of goods also dictates that a number of Community harmonisation 
measures be transposed into national law. Implementation of health and safety 
harmonisation rules is particularly important and requires the establishment of 
appropriate mechanisms and organisations, both for businesses and the authorities. 
Two of the "horizontal" directives essential to smooth running of the single market are 
the Directive on general product safety and the Directive on liability for defective 
products. The regulations concerning general product safety are covered in the section on 
consumer protection. 
The rules on agricultural products (compliance with veterinary and plant-health 
standards) are explained in detail in the section on agriculture. 
Descriptive Summary 
Since 1990 Bulgaria has followed a general policy of trade liberalisation and recently 
started to fully liberalise prices. The conditions for a secure and transparent legislative 
environment for private economic operators are being achieved gradually. There are very 
few discriminatory measures in place at the moment. 
No significant problems exist concerning the implementation of the conditions for the 
free movement of goods relating to Article 8 to 37 of the Europe Agreement. Several 
quantitative restrictions and measures having an equivalent effect have been abolished by 
Bulgaria ahead of schedule. The customs clearance fee will be abolished as from 1 
January 1998. 
Concerns remain over the effectiveness of government institutions involved in the 
implementation of laws and regulations compatible with the Europe Agreement and the 
acquis. 
The area of standardisation and conformity assessment is the responsibility of the 
Committee for Standardisation and Metrology, a state body under the Council of 
Ministers with a mix of policy and executive functions for standardisation, certification, 
37 
accreditation and metrology; the Committee is an affiliate member of the European 
Committee for Standardisation (CEN) and the European Committee for Electrotechnical 
Standardisation (CENELEC). 
Current and Prospective Assessment 
Despite Bulgaria's generally good record on trade issues, efforts remain needed for the 
full adoption and implementation of the acquis related to the free movement of goods 
within the internal market. The approximation of technical legislation has witnessed a 
slow start although, according to the Strategy paper submitted in May 1996, alignment of 
major measures is planned for 1998. While progress on the New Approach directives 
and the chemical sector is limited, some progress has been achieved in the fields of 
foodstuffs and automobiles; for the latter sector complete alignment is expected by the 
year 2000. Technical legislation on pharmaceuticals has attained a good degree of 
approximation. Secondary legislation remains necessary to implement the general 
legislative framework. Further efforts are also required for the full alignment of trade 
mark law, marking, labelling and the safety of products. 
Current legislation on standardisation is not in line with the EU system. 
Draft legislation exists in the fields of standardisation and conformity assessment. Once 
adopted, this legislation will substantially improve conformity with the EU system and 
clarify the voluntary nature of standards in Bulgaria. 
The administrative structures for standardisation and conformity assessment need 
reinforcement in order to implement the future legislation. Clarifications are needed as to 
the future svatus of the Committee for Standardisation and Metrology, notably in regard 
to its independence in executing standardisation measures. Difficulties arising from 
lengthy administrative procedures have been resolved in the context of the Europe 
Agreement. 
At the moment the concept of civil liability for damage caused by defective products 
does not exist in the Bulgarian civil code, which, therefore cannot meet the Community 
requirements in this field. 
In the areas subject to national rules and not covered by Community harmonisation, there 
is too little information available to assess whether Community legal principles on the 
free movement of goods are properly applied in Bulgaria. 
The situation is explained, in particular, by the fact that the reporting procedures which 
form part of the internal-market machinery are not yet operational and so cannot be used 
in the pre-accession period. The most important instruments in this connection are: 
Directive 83/189, requiring governments to report draft national technical standards and 
regulations; Decision 3052/95 on measures derogating from the principle of the free 
movement of goods; procedures by which complaints can be submitted to the 
Commission; and Article 177 of the Treaty, enabling Member States to ask for 
preliminary rulings from the Court of Justice. It is also hard to assess whether Bulgaria 
complies with the principle of mutual recognition; more information is required on its 
national rules, and on administrative practices, which can have an effect on product sales. 
38 
Conclusion 
Bulgaria's record on the implementation of its commitments on free movement of goods 
under the Europe Agreement is generally good. However, the Bulgarian authorities 
should also ensure that, in areas not covered by Community harmonisation, their own 
national laws do not hamper trade. In particular, they should check that measures are 
proportionate to their objectives. Although there are positive indications, a considerable 
effort remains needed before the acquis will be fully and effectively implemented by 
Bulgaria. 
Free Movement of Capital 
The Europe Agreement establishes the principle of the free movement of capital between 
Bulgaria and the EU. This, as far as the obligations of Bulgaria are concerned, applies 
from the entry into force of the Europe Agreement as regards direct investments made by 
companies already established in Bulgaria; and as regards branches and agencies of 
community companies (as well as the self employed), gradually during the transitional 
period.. According to the Agreement the parties shall consult each other with a view to 
facilitating the movement of capital between the Community and Bulgaria in order to 
promote the objectives of the Agreement. 
The White Paper highlights the link between the free movement of capital and the free 
movement of financial services. It suggests a sequence of capital liberalisation, starting 
from long-term capital movements and those linked to commercial operations and 
subsequently focusing on short-term capital. 
Descriptive Summary 
The Bulgarian Constitution provides that foreign capital enjoys the same legal protection 
as capital of nationals. International capital flows between Bulgaria and the Union are 
still relatively modest. Foreign investment flows to Bulgaria were low up to the end of 
1996 but have since picked up. Cumulative FDI inflows during 1989-96 are estimated 
at400 MECU. To attract foreign investment important legislation has been put in place 
and a Foreign Investment Agency has been set up. 
The Lev is convertible for current account transactions. Regarding capital movements, 
foreign direct investment is free in general. An authorisation is required if investments 
are undertaken in sectors that are considered sensitive. Profits and invested capital can be 
repatriated in convertible currency. 
Restrictions exist on the acquisition by foreign physical persons or foreign legal persons 
of real estate in Bulgaria, except through legal inheritance. Possibility for non residents 
to acquire land (except agricultural land) exists through the establishment of a company 
in the country. 
Non-residents may maintain accounts in Leva and foreign currency. The crediting and 
debiting of foreign currency accounts, as well as transfers abroad from these accounts, 
39 
are free from restrictions. Licensed banks may borrow abroad without the authorisation 
of the National Bank and residents may keep foreign currency deposits in Bulgaria. 
Outward capital movements require prior permission by the Bulgarian National Bank. 
The establishment of branches of EU investment firms as well as access to official 
listings for EU issuers has not oeen regulated so far. The incorporation of non-domestic 
subsidiaries of EU investment firms is made subject to the general provisions laid down 
by the Securities, Stock Exchanges and Investment Companies Act. 
Current and Prospective Assessment 
The intention of the Government is that the removal of restrictions on capital movements 
will follow the approach adopted and commitments undertaken in the Europe Agreement. 
The latter provides for the possibility to maintain restrictions on outward direct 
investment during the first five years from its entry into force, and gradual liberalisation 
of the rest of capital transactions. 
Restrictions exist regarding the acquisition of real estate by foreigners, notably resulting 
from the Constitutional prohibition of foreign ownership of land. While being 
compatible with the Europe Agreement, these restrictions hamper the free flow of 
capital. There are also administrative and procedural difficulties in relation to the 
registration of companies. 
Conclusion 
Bulgaria has introduced currency convertibility for most current account transactions but 
limited liberalisation of capital movements. The liberalised capital transactions concern 
exclusively inward capital movements. A relaxation of restrictions, notably on outward 
capital movements, can be envisaged only once durable improvement is achieved in the 
financial situation and performance of the banking sector and in function of the process 
of economic stabilisation and structural reform. 
Free Movement of Services 
The basis of the free movement of services is the prohibition of discrimination, in 
particular on grounds of nationality, and rules on the alignment of divergent national 
legislation. These rules often concern both the right of establishment, which comes under 
the heading of the free movement of persons, and the freedom to provide services. Their 
implementation implies the establishment of administrative structures (banking control 
boards, audio-visual control authorities, regulatory bodies) and greater cooperation 
between Member States in the area of enforcement (mutual recognition arrangements). 
A substantial amount of the legislation applicable to the free movement of services 
relates to financial services. It also concerns the problems relating to the opening-up of 
national markets in the sectors traditionally dominated by monopolies, e.g. 
telecommunications and, to a certain extent, energy and transport. These subjects will be 
dealt with in the sections of the Opinion specifically referring to them. 
40 
Descriptive Summary 
The Bulgarian banking sector is relatively fragmented. Seven state banks represent more 
than two thirds of total assets; 16 banks are under special supervision or are undergoing 
bankruptcy procedures demanded by the National Bank. 
Most legislation for Phase I measures is considered consistent with the requirements of 
the relevant EC directives. The main regulatory framework consists of the Law on Banks 
and Credit Activity and the National Bank Regulations No 2 on bank licensing, No 8 on 
the Capital Adequacy of Banks and the Law on State Protection of Deposits and 
Accounts combined with the National Bank's Regulation No 1 on Bank Deposit 
Insurance. Phase II measures have been enacted only partially. À Law on measures 
against money laundering was adopted in 1996 but is not fully compatible. 
Supervision of banks is the responsibility of the Bank Supervision Department of the 
National Bank. 
Bulgaria's most important legislation concerning trade in securities comprises the 
Securities, Stock Exchanges and Investment Company Act (SSEICA) as well as the 
foreign persons economic activity and foreign investment companies act, which entered 
into force in 1996. A draft law is ready on commodity exchanges and market places. 
The provision of professional investment services is subject to a licensing procedure. 
Investment brokers must comply with specific requirements in support of market stability 
and investors' interest. Credit institutions may also act as investment intermediaries on 
the basis of their "universal license". In fact the banks play a major role in the market as 
the profession of brokers/dealer is only emerging. 
The establishment of branches of EU investment firms as well as the access to official 
listings of EU issuers has not been regulated so far. The incorporation of subsidiaries of 
EU investment firms is made subject to the general provisions laid down by the 
Securities, Stock Exchanges and Investment Companies Act. 
The Commission on Securities and Stock Exchanges, established under the 1996 
Securities, Stock Exchanges and Investment Companies Act, exercises control over 
transactions on the security market. 
Legislative changes from 1989 enabled the establishment of private sector insurance 
companies. An Insurance Act and a Regulation on Mandatory Insurance entered into 
force in 1997. Together with the protection of Foreign Investment Act, the Insurance Act 
regulates Bulgarian and foreign insurance companies. The insurance act states that "a 
foreign insurer may carry on insurance only through a branch whose registered office is 
in Bulgaria", if he is registered pursuant to the Commerce Act and has a licence from the 
Insurance Supervision Department, the supervisory body with the Ministry of Finance. 
Foreign persons may also participate in companies and acquire shares after obtaining 
permission from the Supervision Department. A majority of participation by foreign 
insurers is possible after a period of seven years. These measures are part of a policy for 
gradual liberalisation of the insurance market. The level of activity by foreign insurers 
has so far been limited. 
41 
Current and Prospective Assessment 
During 1991-1993, a number of banking laws and prudential regulations were passed 
setting strict standards for the sector. While to a certain extent in accord with the Union 
system, the requirements for solvency and bad loan provision set out in these laws have 
not been achieved, largely due to the economic and banking crisis. In relation to the 
White Paper measures, for two out of four Stage I measures for credit institutions 
legislation needs to be amended, whilst all Stage II measures require new legislation. 
The Government is undertaking a complete restructuring of the financial sector, including 
the setting up of a currency board arrangement, a rationalisation of bank licensing, a 
strengthening of accounting and external auditing provisions, a new law on bank 
insolvency, provisions for the strengthening of the National Bank's Bank Supervision 
Department and a review of the National Bank's regulations on capital adequacy, loan 
classification and liquidity. In this connection, rapid progress on legislative 
approximation can be expected during 1997 in such areas as bankruptcy procedures, 
deposit insurance and banking supervision. The enforcement of the banking laws and 
prudential regulations by the Bulgarian National Bank requires substantial efforts, 
including with regard to staff training. 
The implementation of the White Paper directives as regards the securities markets is still 
incomplete, notably as regards most of the Stage II measures. However the Bulgarian 
authorities have prepared some draft regulations which should fill the gaps significantly, 
if not totally. The Bulgarian securities market is still at an early phase of development, 
and affected by deficiencies concerning organisation and regulation of the market as well 
as by a lack of transparency in the financial market. The existing privatisation funds are 
to be transformed into investment companies or in collective investment undertakings, 
which still have to be established. An official Bulgarian stock exchange will be set up 
before the end of the year. In the last year about 15 private unregulated exchanges were 
operating which have been closed by the Commission on Securities and Stock Exchange. 
While the legal monopoly of the state insurance companies has been dismantled, a 
private insurance market characterised by fair competition still needs to develop. 
Government policies will need to include measures for guaranteeing the transparency of 
the private insurance market. To this end, in June 1997 the Government approved a draft 
amendment to the Insurance Act which will establish a National Insurance Council with 
the aim to introduce a stable and transparent insurance system and to provide security for 
clients and citizens. The Insurance Supervision Department in the Ministry of Finance 
will need to be given the corresponding powers; where needed adequate follow-up needs 
to be provided by the judiciary and law enforcement bodies. 
Conclusion 
While there is some progress in the financial services area and a clear commitment exists 
on the part of the authorities to undertake further steps, the full adoption of the acquis is 
dependent on the implementation of the economic and structural reform programme, 
including the strengthening of the supervisory structure, for which several steps have 
recently been undertaken. The process will require a sustained effort over several years 
42 
before Bulgaria's financial system will be able to sustain the impact of integration in the 
internal market. 
Free Movement of Persons 
The free movement of persons encompasses two concepts with different logical 
implications in the Treaty. On the one hand, Article 7a in Part One of the Treaty on 
'Principles' mentions the concept in connection with the establishment of the internal 
market and implies that persons are not to be subject to controls when crossing the 
internal frontiers between the Member States. On the other hand, Article 8a in Part Two 
of the Treaty on 'Citizenship of the Union' gives every citizen of the Union the 
individual right to move and reside freely within the territory of the Member States, 
subject to certain conditions. The abolition of frontier checks must apply to all persons, 
whatever their nationality, if Article 7a is not to be meaningless. While the rights 
deriving from Article 8a apply in all Member States, those stemming from Article 7a 
have never been fully applied throughout the Union. 
a) Free Movement of Union Citizens. Freedom of Establishment and Mutual 
Recognition of Diplomas and Qualifications 
The Europe Agreement provides for the non-discriminatory treatment of workers that are 
legally employed (as well as their families). It covers the possibility of cumulating or 
transferring social security rights, and encourages member states to conclude bilateral 
agreements with Bulgaria on access to labour markets. During the second phase of the 
transitional period, the Association Council will examine further ways of improving the 
movement of workers. 
The White Paper considers the legislative requirements in order to achieve a harmonious 
development of the labour market, whilst simultaneously preventing distortions of 
competition. 
The free movement of workers is one of the fundamental freedoms enshrined in the 
Treaty; freedom to practise certain professions (e.g. in the legal and health fields) may, 
however, be subject to certain conditions, such as qualifications. Depending on the case, 
these may be dealt with through coordination or by applying the principle of mutual 
recognition. 
Freedom of establishment is also guaranteed under the Treaty and covers the economic 
activity of self-employed natural persons and companies. 
The free choice of place of residence may thus be subject to minimum conditions as to 
resources and health insurance where the person does not exercise a profession in the 
country concerned. 
Descriptive Summary 
The Constitution grants all foreigners residing in Bulgaria the same rights and obligations 
as those of Bulgarian citizens, with the exception of a few specific areas for which 
Bulgarian nationality is required. While equal treatment is guaranteed by the 
Constitution, in practice Bulgaria deploys a relatively restrictive immigration policy. In 
43 
general, work permits are granted for a period of one year, extendible for a further two 
years, and on the basis of full-time employment. 
The Ministry of Education is the competent body for diplomas of higher education and 
for academic recognition. As regards the acquis concerning mutual recognition of 
diplomas Bulgaria has made alignment efforts in respect of the relevant directives. 
Current and Prospective Assessment 
There are no specific legal provisions determining the rights of entry and residence 
enjoyed by a worker's family, securing rights of residence in the case of voluntary or 
involuntary cessation of work and for the taking up of alternative employment in the case 
of unemployment (voluntary or otherwise). The grounds cited for the refusal of a work 
permit do not yet meet EU provisions governing mobility of the work force stemming 
from Article 48. Family employment rights appear unduly restrictive; any right of appeal 
needs to be dealt with at the administrative level and not in a court of law. There are only 
few measures seeking to encourage the occupational and social integration of the worker 
or his/her family; this is reflected in the restrictive conditions applying to participation in 
the country's educational system. 
Little experience exists as to co-operation between Bulgaria and EU Member States as 
regards mutual recognition of diplomas and professional qualifications. For higher 
education qualifications, a National Accreditation and Assessment Agency was set up on 
1995, preparing the ground for mutual academic recognition. A similar body for 
vocational qualifications does not exist. A systematic analysis of the equivalence between 
Bulgarian and Member State professional curricula still needs to be carried out, once the 
relevant information to be provided by Bulgaria has been examined. A major effort will 
be required to take up the acquis in the medium term and ensure its effective 
enforcement. 
Conclusion 
The transposition and implementation of the acquis are very limited. Notwithstanding 
progress in several areas, a major legislative, policy and administrative reform effort is 
required in order that Bulgaria can accomplish the full acquis on the free movement of 
persons within the medium term. 
(b) Abolition of Checks on Persons at Internal Frontiers 
The free movement of persons within the meaning of Article 7a of the EC Treaty, i.e. the 
abolition of checks on all persons, whatever their nationality, at the internal frontiers has 
not yet been fully implemented in the Union. Doing away with checks on persons is 
conditional on the introduction of a large number of accompanying measures, some of 
which have yet to be approved and implemented by the Member States (see separate 
section on Justice and Home Affairs). However, that objective has been achieved by a 
limited number of Member States in accordance with the Schengen Convention (seven 
Member States already apply it and another six are working towards implementation). 
44 
The draft Treaty aims to make that objective easier to achieve within the Union by 
including a new chapter on "an area of Freedom, Security and Justice" and incorporating 
the Schengen acquis into the EU. 
Bulgaria has stated its desire and readiness to fulfil the provisions of the Schengen 
acquis. It has begun preparations to this end and has sought assistance in this connection 
from Member States, notably in regard to the strengthening of border controls. 
Ceneral Evaluation 
1. Bulgaria's progress in the implementation of legislation relating to the White Paper is 
summarised in a table annexed. According to the table, Bulgaria considers that by 
30 June 1997 it will have adopted national implementing legislation for 126 of the 899 
directives and regulations in the White Paper. That figure covers provisions for which 
Bulgaria considers it will have adopted implementing legislation or which it will have 
checked for compatibility with Community rules and does not prejudge actual 
compatibility as such, on which the Commission is not able at this stage to state an 
opinion. 
2. In all areas of the internal market Bulgaria's legislation is only very partially in line 
with the acquis. The scale of the progress still required will call for extremely strenuous, 
sustained efforts, both on approximation of legislation and on the establishment of 
structures to implement it. . 
» • * . 
Complete restructuring of the financial sector to restore the indispensable public and 
investor confidence is the top priority and is recognised as such by the Government. 
3. Generally, the weakness of the Bulgarian authorities is a major problem, calling into 
question both the pace and quality of the moves on approximation of legislation. At the 
moment the structures essential for implementation of the internal market legislation lack 
the capacity to do their job. The same reservations apply to the capacity of businesses, 
particularly small firms, to implement the acquis. 
4. Leaving aside certain specific aspects relating to agriculture, checks at the internal 
frontiers of the Union can only be abolished once sufficient legislative harmonisation has 
been achieved. This calls for mutual confidence, based in particular on sound 
administration (e.g. the importance of safety checks on some products at the place of 
departure). As far as goods are concerned, the completion of the internal market on 
1 January 1993 was only achieved by doing away with all the formalities and checks 
performed by the Member States at the internal borders of the Union. In particular these 
checks covered technical points (in particular, product safety), veterinary, animal-health 
and plant-health matters, economic and commercial matters (e.g. prevention of 
counterfeiting of goods), security (weapons, etc.) and environmental aspects (waste, etc.). 
In most cases, the abolition of checks was only made possible by the adoption and 
application of Community measures harmonising the rules on movement and placement 
on the market (particularly as regards product safety) and, where applicable," by shifting 
the place where controls and formalities within the Member States or on their markets are 
conducted (in particular as regards VAT and excise duties, veterinary and plant-health 
checks, and the collection of statistics). A section of Bulgaria's present borders will 
45 
become the Union's external frontier and this means border checks will need to be 
stepped up (see separate section on customs). 
In view of the overall assessment that can be made of progress achieved to date and the 
rate at which work is advancing in the various areas concerned, it is difficult at present to 
put a time-scale on Bulgaria's ability to take over and implement all the instruments 
required to abolish internal border checks and to transfer those checks to the Union's 
external frontier. 
5. Bulgaria has yet to adopt fundamental elements of the acquis relating to the single 
market. Considerable efforts will be necessary to enable it to adopt and implement the 
internal market legislation and to set up the mechanisms needed to apply it. 
At the moment, it is not possible to envisage that Bulgaria could be capable of 
participating fully in the internal market in the medium term. 
Competition 
European Community competition policy derives from Art. 3 (g) of the Treaty providing 
that the Community shall have a system ensuring that competition in the internal market 
is not distorted. The main areas of application are anti-trust and state aid. 
The Europe Agreement provides for a competition regime to be applied in trade relations 
between the Community and Bulgaria based on the criteria of articles 85 and 86 of the 
EC Treaty (agreements between undertakings/abuses of dominant position) and in article 
92 (state aid) and for implementing rules in these fields to be adopted within three years 
of the entry into force of the Agreement. Furthermore it provides that Bulgaria will make 
its legislation compatible with that of the Community in the field of competition. 
The White Paper refers to the progressive application of the above provisions and those 
of the Merger Regulation (4064/89) and of Art. 37 and 90 (Monopolies and Special 
Rights). 
Descriptive Summary 
The current legislative basis for competition legislation is the Law for the Protection of 
Competition (May 1991) which contains the basic clauses on restrictive practices, abuse 
of dominance, merger control and rudimentary provisions on procedural rules. A new 
draft Protection of Competition Act (PCA) aims to create with more precision the 
conditions for free enterprise in all sectors, free pricing and the protection of consumer 
interests. It will also provide protection against the abuse of a dominant market position, 
as well as against unfair competition and other actions that may have a restrictive effect 
on domestic markets. 
The 1991 Law established the Committee for the Protection of Competition (CPC), 
which is charged with the enforcement of Bulgaria's competition policy. 
On 25 October 1996, the monitoring body on state aids was established under the 
Ministry of Finance. But no rules have been laid down as to its functioning. 
The existing state aid inventory represents a step towards transparency. Nevertheless, 
more information is needed as regards global amount granted, breakdown by sectors, 
46 
objectives, form of aid given and more particularly the financial relations between the 
State and state-owned companies. 
Current and Prospective Assessment 
The conditions for economic competition do not fully exist for the moment. The 
establishment of the Committee on the Protection of Competition has been slow; its 
enforcement mandate and budgetary resources need to be strengthened. 
As regards public undertakings and undertakings with special and exclusive rights, 
some sectors are advancing faster than others. The liberalisation of telecommunications 
is underway, while other sectors, such as transport, postal services, energy policies in this 
direction have been formulated. The power sector, alcohol, oil, salt and coal mining are 
still State monopolies of a commercial character. 
In the field of state aid, Bulgaria does not, at this stage, meet the requirements of a 
credible state aid control. No rules for the monitoring of state aid exist for the moment 
and the transparency required in the granting of state aid has not yet been achieved. It is 
therefore not possible to examine whether the state aid granted is compatible with the 
Community state aid rules. Since 1996 progress has been made. State aid to the 135 
main loss-making state-owned enterprises and public undertakings (representing around 
78% of total losses by state-owned companies in 1995) have been substantially reduced 
and rendered transparent where still granted. Prices of services delivered by the public 
utilities for electricity, gas, liquid fuels, water and telecommunications have been raised 
to cost-recovery levels; state subsidies still exist for district heating and public transport. 
It will be necessary to set up a monitoring authority whose role and powers will be 
clearly defined; a substantial effort needs to be made to establish a state aid inventory in 
accordance with Community practice. 
In addition to the adoption of legislation sufficiently approximate to that of the EC, 
credible enforcement of competition law requires the establishment of well functioning 
anti-trust and state aid monitoring authorities. It requires moreover that the judicial 
system, the public administration and the relevant economic operators have a sufficient 
understanding of competition law and policy. 
Conclusion 
In the field of anti-trust, Bulgaria has made some progress with the institutional and 
legislative requirements. Nevertheless, the implementation enforcement and control of 
the legislation will require sustained structural reforms. 
In the field of state aid progress has been limited in all aspects, despite improvements 
since mid-1996. Considerable efforts are necessary to meet the requirements of a 
credible control of state aid, in particular as regards transparency in the granting of state 
aid and the establishment of a well-functioning monitoring authority on state aid with 
sufficient powers to monitor state aid and a sufficiently qualified staff. 
47 
It appears, moreover, that in certain sectors exclusive or special rights exist which are 
not compatible with the Community acquis. These problems should be addressed in the 
near future. 
Close cooperation with the Commission will be necessary. 
3.2 Innovation 
Information Society 
Present Situation 
The economic and social effects made possible by the combination of information 
technology and telecommunications are great. Although Bulgaria played â prominent 
role in the Comecon's information technology production, these possibilities proved not 
effective due to lacking technological and manufacturing innovation. Nonetheless before 
1989 general education was a priority. The result seems to be that demand for computers 
has spurted beyond normal expectations given the level of GDP per capita. The existence 
of host computers on the Internet (25,000 equivalent to 0.4 per 1000 inhabitants) as a 
relative measure of development towards the IS, suggests that Bulgaria has not yet 
reached the positions which the average EU country has reached two years ago. If 
Internet connections follow the same pattern of growth, the telecommunications 
infrastructure, which is at present abput seven years behind the EU average, may remain 
a brake on IS developments. 
Conclusion 
As the approach to early liberalisation is hesitant and the GDP per capita is one of the 
lowest in the region, it can be expected that the Information Society potentialities will be 
realised later than the average CEECs. 
Education. Training and Youth 
Articles 126 and 127 of the EC Treaty provide that the Community shall contribute to the 
development of quality education and implement a vocational training policy aimed at 
promoting the European dimension in education and at enhancing industrial adaptation 
and the responsiveness of the labour market through vocational training policies. 
The Europe Agreement provides for co-operation in raising the level of education and 
professional qualifications. The White Paper includes no measures in this field. 
Descriptive Summary 
Bulgaria's spending on education amounts to 4.0 % of GDP. It takes 1.6 % of the state 
budget. 
There are 1,190,000 pupils, 240,000 students and 105,000 teachers in Bulgaria. 
A main problem facing the education and training system relate to Bulgaria's severe 
economic problems, which have meant dwindling budgetary allocations (from 6.1% of 
48 
GDP in 1992 to 4.5% in 1995) and have on occasion even led to acute cash shortages for 
the operation of schools» the provision of school books and the payment of teachers' 
salaries. 
The budget problem has not prevented steps being taken to reform the educational system 
at all levels. Key statutory instruments have been the State Educational Requirements of 
1991 (objectives and entitlements in the educational sphere), the Academic Autonomy 
Act of 1990 and the Higher Education Act of 1995. The latter formed the basis for The 
National Agency for Assessment and Accreditation for higher education, set up in 1996, 
and for the transformation of semi-higher education institution to higher education 
establishments and their rationalisation. Curricular change within secondary and post-
secondary education focuses on introducing a stronger vocational emphasis monitored by 
the Regional Educational Inspectorates. 
A serious challenge exists in continuing vocational training, as a result of the closure of 
training centres within state-owned enterprises and in view of the rise in unemployment. 
Programmes have been established to integrate young persons into the job market and to 
combat the phenomenon of school drop-outs and social exclusion. 
The Tempus programme has contributed to the achievement of the goals of higher 
education reform and created the basis for cooperation with the EU higher education 
institutions. 
About 14 % of the total population of Bulgaria is aged between 15 and 25. Bulgarian 
youth organisations have been involved in European youth activities since 1990. From 
1995, youth cooperation with Central Europe was included in the Youth for Europe 
programme. 
Current and Prospective Assessment 
The main challenges for the education and training system are to continue the positive 
structural, financial and curricular reform initiatives developed over the past years, 
despite the very adverse budgetary and economic environment. Specific areas requiring 
attention are the further reform of the financing of education and training, efforts for 
upgrading the knowledge and skil among teachers as well as investments in education 
infrastructure. 
The efficiency of the vocational training system will depend on the identification of 
economic and labour market trends and active labour market policies based on the 
principles of life-long learning. A special effort remains needed to combat through 
training the social exclusion of young persons and of the newly unemployed. Social 
dialogue on education and training requires strengthening. 
Bulgaria's ability to fully benefit from the relevant Community programmes will depend 
on the Bulgaria's economic development situation and the consequent improvement of 
the financial position of the education and training sector. 
Conclusion 
In the perspective of accession, no major problems should be expected in these fields. 
49 
Research and Technological Development 
Research and Technological Development activities at Community level, as provided for 
by the Treaty and in the Framework Programme, aim at improving the competitiveness of 
European industry, the quality of life, as well as supporting sustainable development, 
environmental protection, and other common policies. 
The Europe Agreement and its additional Protocol provide for co-operation in these 
areas, notably through participation in the Framework Programme. The White Paper 
includes no direct measures in this field. 
Descriptive Summary 
Government support is channelled to the institutes of the Academy of Sciences and 
higher education establishments and to funding schemes under the Ministry of Education, 
Science and Technology and the Ministry of Industry. 
Total expenditure in this field was 0.62 % of GDP in 1995 (down from 1.13 % in 1993) 
and the number of personnel witnessed a decrease of about 18 % over the period 1990-
95. A major decline occurred in the number of researchers employed in industrial 
research units. 
Private sector initiative is limited and basic and applied research is to a predominant 
extent conducted in the country's Academies of Sciences, public research institutes or 
research units or state-owned enterprises. 
Regular cooperation with the European Community started in 1992 with the 3rd 
Research and Technology Development Framework Programme. So far, cooperation 
was mainly concentrated on COPERNICUS (Specific Programme for Cooperation with 
CECs and NIS) and remains low for participation in the 4th Framework Programme. 
The statistics in this field are not yet compatible with OECD standards. 
Current and Prospective Assessment 
There has been so far a lack of strategic direction of policy. The existing infrastructure 
and research institutions have suffered greatly from the lack of economic reforms. 
Policies are needed to stimulate innovation and the creation of small and medium 
enterprises, and to provide the fiscal environment to encourage technological innovation 
and development. 
Bulgaria will need to reflect on the organisation of the sector, which at present is very 
centralised, and take the necessary administrative and financial measures to promote and 
further encourage participation in EU programmes. 
Consideration should also be given to the criteria governing the distribution of grant 
funding from central government, proper evaluation and co-ordination of projects within 
both public and private sectors, and the production of relevant statistics. 
The biggest challenge for Bulgaria is to diminish to the wide-ranging presence of the 
state in the economy. Unless drastic economic reforms are undertaken, the structures will 
continue to depend on governmental decisions and financial support. The 
50 
competitiveness of the whole system remains weak and does not allow full participation 
of Bulgarian scientists in international cooperation activities. 
Conclusion 
Making Bulgarian research and technological development efficient and competitive at 
European level will need greater efforts. Nevertheless, in the perspective of accession, no 
major problems should be expected in this field. 
Telecommunications 
The objectives of EC telecommunications policy are the elimination of obstacles to the 
effective operation of the Single Market in telecommunications equipment, services and 
networks, the opening of foreign markets to EU companies and the achievement of 
universally available modern services for EU residents and businesses. These are 
achieved through harmonisation of the standards and conditions for service offerings the 
liberalisation of the markets for terminals, services and networks and the adoption of 
necessary regulatory instruments. The Directives and policies needed to achieve this have 
now been established, but the liberalisation of public voice telephony and operation of 
related infrastructure will be deferred for a year or two after 1998 in certain member 
states. 
The Europe Agreement provides for co-operation aimed at enhancing standards and 
practices towards EC levels in telecommunication and postal policies, standardisation, 
regulatory approaches and the modernisation of infrastructure. The White Paper focuses 
on the approximation of regulation, networks and services, followed by further steps 
ensuring gradual sector liberalisation. 
Descriptive Summary 
Two state-owned companies exist, the Bulgarian Telecommunications company (BTC) 
and the Bulgarian Postal Company (BPC). These companies are supervised by the 
Committee on Posts and Telecommunications (CPT) which is a government body 
equivalent to a Ministry, but without representation in the Council of Ministers. 
BTC has exclusive rights until 1 January 2005 over access to the telecommunications 
network, and until 1 January 2003 over provision of voice telephony services. There are 
two licensed operators for mobile telephony services (an analogue and a digital network 
with around 40,000 subscribers), which have to use the infrastructure owned by BTC; the 
bidding procedure for a second GSM network is under preparation. Three national and 
five regional paging operators as well as three data transmission operators have been 
licensed after a tender process. 
Bulgaria has a relatively well developed telecommunications network, with a telephony 
penetration rate of 37.5% as of January 1997 (about 40% planned for the year 2000). The 
average waiting time for a telephone connection is 18 months. Much of the equipment is 
of an obsolete electro-mechanical design which now needs to be comprehensively 
replaced. Investment in digitalisation has begun (2.8 % digitalisation was achieved by 
March 1997) but tariff revenue is not sufficiently high to permit quick progress. The 
government plans to reach current EU levels of penetration and digitalisation within 
fifteen years. This can only be achieved with economic rebalanced tariff rates, further 
51 
liberalisation, competition and investment. The government has decided to privatise a 
majority share of BTC, probably over 50% starting in early 1998. 
BPC is obliged by law to deliver letters, parcels, money orders and to distribute 
newspapers and magazines. Several national and international operators are offering 
profitable international courier services and the delivery of periodicals in big towns 
without any obligations. This situation causes financial losses to the national operator. 
Competition needs to be better regulated. BPC will need increased revenues in order to 
maintain a universal service and compete effectively. 
Current and Prospective Assessment 
Degree of Liberalisation 
According to the commitments at the WTO negotiations in 1997, the Government will 
abolish the exclusive rights of the Bulgarian Telecommunications Company "(BTC) over 
access to the telecommunications network by 1 January 2005 and for the provision of 
voice telephony by 1 January 2003. There are two licensed operators for mobile 
telephony, one for an analogue and one for a digital network (GSM). The award of a 
license for a second GSM network is planned but no time schedule has been indicated 
yet. Three national and five regional paging operators as well as three data transmission 
operators have been licensed. Furthermore, three companies are providing public pay 
phones and six operators are providing VSAT services. The Government has decided to 
partially privatise BTC for a majority share. 
Approximation to EC Law 
A new draft telecommunications law will be submitted to the new Parliament in July 
1997 and is expected to be adopted later this year. The draft law provides for a new 
regulatory authority which will be under the supervision of the Committee on Posts and 
Telecommunications (CPT). The future law introduces a licensing regime and universal 
service and interconnection principles. These provisions will have to be checked for their 
compatibility with EU regulation after the final version of the draft has been submitted to 
Parliament. For the time being licenses are granted on the basis of two decisions of the 
previous caretaker Government giving a licensing authority to the CPT for a temporary 
period. Under the present conditions, simple resale of leased line capacity and the 
provision of voice telephony to closed user groups are not allowed. 
The current administrative capacity necessary for issuing new regulation to adapt to the 
acquis and to implement this regulation in practice, in particular to monitor fair 
competition, seems insufficient. However, it is possible that the creation of a new 
regulatory authority after adoption of the law will improve the efficiency of the 
regulatory function. 
Infrastructure 
From 1991 to 1996, telephone service penetration increased from 25 lines for 100 
inhabitants to 37 per 100. It is planned to reach 40 lines per 100 by the end of the year 
2000. Investment in digitisation is progressing slowly and only 2.27% of the network was 
52 
digitised by the end of 1996. Much of the equipment is of an obsolete electro-mechanical 
design which now needs to be comprehensively replaced. The number of subscribers for 
mobile telephony service at the end of 1995 was about 20,500 equivalent to 0.23% 
penetration rate. There are 75,000 cable TV subscribers served by 87 licensed regional 
operators, equivalent to 1.28 CATV lines per 100 inhabitants. 
Foreign investment in the sector is rather limited, concentrating on the following medium 
sized companies: BETKOM Company (50.9% BTC and 49.1% a UK company) and 
BULFON Company (34% BTC and 66% a Greek company) operating public pay 
phones; Sprint Business Telecommunications Company for data transmission services 
owned 40% by BTC and 60% by a USA company Radio Telecommunication Company 
owned 51% by Bulgarian companies and 49% by a UK company. 
Competitiveness of the Sector 
In 1995 there were 9.4 employees per 1000 lines (average in Ireland, Portugal and Greece 
is about 6.2). In 1996 the unsatisfied applications for a telephone line stood at high level 
and the average waiting time is 18 months. The price of a standard line for business 
communications (252 ecu) is at a low level compared to the prices in the region. The 
revenue per line at the end of 1995 (70 ecu) was among the lowest in the region and was 
an obstacle to network modernisation and expansion. Since early 1997, tariffs have been 
set and are adjusted monthly - to achieve full cost recovery and to maintain an adequate 
level of investment and an inadequate operating ratio. Nevertheless it is doubtful whether 
BTC s targets for increase of telephone penetration and network digitisation rates can be 
achieved. This will also make the operator very vulnerable to a future introduction of 
competition in infrastructure and voice telephony. 
Conclusion 
Bulgaria would have difficulties in adopting the EU model of telecommunications 
liberalisation because of the slow development of its telecommunications sector and of 
delays in the field of regulatory reform. The competitiveness of the public network 
operator will crucially depend on a substantial increase in foreign investment and an in-
depth internal restructuring, aiming in particular at improving the commercial flexibility 
of the company. 
Audio-visual 
The audio-visual acquis aims, in the context of the Internal Market, for the provision and 
free movement of audio-visual services within the EU as well as the promotion of the 
European programme industry. The Television Without Frontiers Directive, which is 
applicable to all broadcasters regardless of the modes of transmission (terrestrial, 
satellite, cable) or their private or public nature, contains this acquis, setting down basic 
rules concerning transfrontier broadcasting. The main points are: to ensure the free 
movement of television broadcasts throughout member states; to promote the production 
and distribution of European audio-visual works (by laying down a minimum proportion 
of broadcasting time for European works and those by independent producers); to set 
basic standards in the field of television advertising; to provide for the protection of 
minors and to allow for the right of reply. 
53 
The Europe Agreement provides for co-operation in the promotion and modernisation of 
the audio-visual industry, and the harmonisation of regulatory aspects of audio-visual 
policy. 
The Television Without Frontiers Directives is a Stage I measure in the White Paper. 
Descriptive Summary 
The legal framework for the audio-visual sector is determined by the 1975 Law on 
Telecommunications, the 1995 Law on Concessions, and the 1996 Law on Radio and 
Television. The first two laws establish the conditions and procedures for the allocation 
of frequencies and radio distribution, whilst the latter determines the establishment and 
operation of the electronic media. A new law on telecommunications, including radio 
distribution, is under preparation. The Radio and Television Law was passed by the 
National Assembly in September 1996, but several of its provisions were ruled 
unconstitutional by the Constitutional Court. Consequently the law is currently being 
revised and will either be completely redrafted or significantly changed. Until this 
happens the electronic media are governed by the incomplete version of the law passed 
in September 1996. 
The main television broadcaster is Bulgarian National Television, the only domestic 
nation-wide broadcaster. However, there is an increasing number of local private 
channels. 
The state monopoly over film production was lifted in the late 1980s. The National Film 
Centre (NFC) is now charged with promoting Bulgarian cinematography, including film 
production and distribution. In 1996 the NFC received 547,000 ECU in state subsidies. 
The film distribution sector is dominated by a number of small independent companies; 
American and European film distributors have not yet opened local offices in Bulgaria. 
Current and Prospective Assessment 
The audio-visual sector in Bulgaria is attempting to re-establish itself after major 
upheavals in recent years, and is characterised by rapid growth and constant change. Its 
ability properly to adhere to the acquis presupposes an upgrading of the capacity of the 
programme-making industry to meet the important challenges of an adapted regulatory 
framework. 
Bulgarian audio-visual legislation is not fully compatible with EU requirements; 
deficiencies remain over jurisdiction, the promotion of European works, and aspects 
concerning advertising. 
Conclusion 
Provided that the necessary legislative measures are pursued with sufficient urgency and 
are accompanied by the necessary structural adaptation of the industry, it is reasonable to 
expect that Bulgaria should be able to meet EU requirements in the audio-visual sector in 
the medium term. 
54 
3.3. Economie and Fiscal Affairs 
Frnnomic and Monetary Union 
By the time of Bulgaria's accession, the third stage of EMU will have commenced. This 
will mark important changes for all Member states, including those that do not participate 
in the euro area. All Member states, including the new ones, will participate fully in the 
economic and monetary union. Their economic policies will be a matter of common 
concern and they will be involved in the coordination of economic policies (national 
convergence programmes, broad economic guidelines, multilateral surveillance, 
excessive deficit procedure)., They will be required to respect the stability and growth 
pact, to renounce any direct central bank financing of the public sector deficit and 
privileged access of public authorities to financial institutions, and to have completed the 
liberalisation of capital movements. 
Accession means closer monetary and exchange rate co-operation with the European 
Union. This will require strengthening structural reforms in the area of monetary and 
exchange rate policies. Member states not participating in the euro area shall be able to 
conduct an autonomous monetary policy and participate in the European System of 
Central Banks (ESCB) on a restricted basis. Their central banks have to be independent 
and have price stability as their primary objective. Monetary policy has to be conducted 
with market-based instruments and has to be "efficient" in transmitting its impulses to the 
real economy. Therefore, reforms need to be pursued to tackle factors that hinder the 
efficiency of monetary policy, such as the lack of competition in the banking sector, the 
lack of development of financial markets and' the problem of "bad loans" in the banking 
sector. Finally all Member states shall treat their exchange rate policy as a matter of 
common interest and be in a position to stabilise their exchange rates in a mechanism yet 
to be decided. 
As membership of the European Union implies acceptance of the goal of EMU, the 
convergence criteria will have to be fulfilled by Bulgaria, although not necessarily on 
accession. While the fulfilment of the convergence criteria is not a precondition for EU 
membership, they remain key points of reference for stability oriented macroeconomic 
policies, and must in time be fulfilled by new member states on a permanent basis. 
Hence the successful conclusion of systemic transformation and market oriented 
structural reforms is essential. Bulgaria's economic situation and progress has already 
been analysed in preceding chapters of this Opinion. 
Current and Prospective Assessment 
The National Bank is formally independent from the government in terms of the 
appointment procedure of the Governor and the conduct of monetary policy. However, in 
the past the Bulgarian National Bank was influenced by the government in its 
commercial bank refinancing and budget deficit financing policies. The country has 
introduced a currency board arrangement. The currency board arrangement fixes the 
volume of Leva in circulation to the national bank's foreign exchange and gold reserves 
and thus sets the parameters for Bulgaria's monetary policy. The formal objective of the 
National Bank has been the stability of the Bulgarian national currency, but with the 
introduction of the currency board arrangement there is no discretionary scope for the 
central bank monetary policy. Finally, the National Bank has been deeply involved in the 
55 
past in financing the budget deficit, but the currency board arrangement will set a very 
strict limit on this activity. In June 1997, the Law on the National Bank was amended to 
strengthen the Bank's independence and supervisory role and to adjust its functions to the 
currency board arrangements. 
Past monetary policy performance has been quite discouraging. Since the outset of 
transition the National Bank has found it difficult to maintain price stability largely 
because the policy mix was never directed towards achieving a sustainable disinflationary 
process. However, since the government approval in March 1997 of a structural reform 
programme agreed with the IMF, inflation has stabilised. The programme envisages the 
tightening of monetary and fiscal policy as well as the privatisation of the 6 state owned 
banks within two years. The programme paved the way for the introduction of the 
currency board arrangement in July 1997. Bankruptcy laws were not effectively 
implemented although Court action has increased in recent months with the closure of a 
major bank. In June the Law on Banks was amended to rationalise bank licensing, 
improve accounting and audit provisions and strengthen measures on bank insolvency. 
The National Bank also issued a new Regulation providing for internationally accepted 
standards for the minimum total capital adequacy of banks. Financial markets are still 
quite underdeveloped and segmented. Bad loans are still a problem of the weak banking 
sector, though hyperinflation has reduced their significance. The currency board will 
resolve this problem, because the banks will no longer be able to benefit from an 
extensive refinancing by the National Bank. 
The exchange rate regime has been a free float since 1991. Due to the lack of foreign 
reserves, the National Bank has often had limited scope for intervention on the foreign 
exchange market. Hence, the various currency crisis episodes have often been tackled by 
rising domestic interest rates and reserve requirements. The unsound expansionary policy 
mix has led Bulgaria on a depreciating exchange rate path often interrupted by severe 
crises. The adoption of the currency board will stabilise the exchange rate. 
Conclusion 
It is premature to judge whether Bulgaria will be in a position, by the time of its 
accession, to participate in the euro area; that will depend on the success of its structural 
transformation permitting to attain and to adhere permanently to the convergence criteria, 
which are not however a condition of accession. 
Bulgaria's participation in the third stage of EMU as a non-participant in the euro area 
could pose serious problems, even in the medium term. The country has made only very 
limited progress in the transition to a market economy. The Government's economic and 
structural reform programme, however, is expected to make a substantial contribution to 
this objective. Therefore, it is hard to evaluate at this stage when Bulgaria after the 
eventual cessation of the currency board arrangement, will be able to have an 
independent Central Bank, able to target price stability by means of an efficient monetary 
policy based on market instruments. 
56 
lâiâlioji 
The acquis in the area of direct taxation mainly concerns some aspects of corporation 
taxes and capital duty. The four freedoms of the EC Treaty have a wider impact on 
national tax systems. 
The indirect taxation acquis consists primarily of harmonised legislation in the field of 
Value Added Tax and excise duties. This includes the application of a non-cumulative 
general tax on consumption (VAT) which is levied on all stages of production and 
distribution of goods and services. This implies an equal tax treatment of domestic and 
non-domestic (import) transactions. The VAT acquis also contains transitional 
arrangements for the taxation of transactions within the European Union between taxable 
persons. In the field of excise duties the acquis contains harmonised tax structures and 
minimum rates of duty together with common rules on the holding and movement of 
harmonised excisable goods (including the use of fiscal warehouses). As a result of the 
introduction of the Single Market, all fiscal controls at the Community's internal frontiers 
were abolished in January 1993. 
The mutual assistance between Member State tax authorities is an important feature of 
administrative cooperation in the Internal Market; the respective Directive covers both 
direct and indirect taxation. 
The Europe Agreement contains provisions on approximation of legislation in the area of 
indirect taxation. 
The White Paper contains as Stage I measures those which make up the main 
requirements of the indirect taxation acquis (essentially, those measures applied in the 
Community up to 1993), and as Stage II measures those which are in addition necessary 
to implement the full indirect taxation acquis. 
Descriptive Summary 
Direct Taxation 
The two company taxation Directives and the Arbitration Convention provide for a 
mechanism which applies on the basis of reciprocity. Respective provisions can 
therefore by definition not be expected to exist before accession. 
Indirect Taxation 
The overall contribution of VAT and excise duty revenue to the Bulgarian state budget 
was about 23% and 9% respectively in 1995. Before presenting the 1998 budget, the 
Government intends to submit a major fiscal reform plan, the implementation of which 
could significantly change these figures. 
Value Added Tax 
The current Bulgarian VAT system was introduced on 1 January 1994 replacing the 
previous turnover tax. Bulgaria only applies a single VAT rate of 22% which is 
applicable to all taxable transactions including imports. The supply of certain goods and 
services is exempt from VAT without the right to claim the input credit on such supplies. 
57 
Some specific supplies are, however, only exempt from VAT for a period of five years 
from the date of the introduction of VAT, thus till the end of 1998. 
Taxable persons are in principle entitled to deduct VAT incurred on their purchases for 
business purposes of goods and services on the condition that the taxpayer can 
substantiate the claim by means of a proper VAT invoice or the like. However, the 
Bulgarian VAT Act does not contain any provisions enabling tax to be refunded to 
taxable persons not established within the country. 
Excise 
The current system of excise duties in Bulgaria was introduced on 1 April 1994. Excise 
duties are levied on a wide range of products including products other than those subject 
to common excise duties within the Community (mineral oils, alcohol and alcoholic 
beverages and manufactured tobacco). Ad valorem rates on most products were 
introduced from 1 July 1996 in order to protect the tax yield during periods of high 
inflation. 
Mutual Assistance 
The tax administration has not yet had to develop its capacity for mutual assistance with 
the tax authorities of Member States, since mutual assistance is a feature which would 
only become applicable on accession. 
Current and Prospective Assessment 
Value Added Tax 
The current VAT system in Bulgaria has been based on the main principles of the VAT 
legislation of the Community. However, it is relatively general and inconsistent in its 
application. 
It is not possible for foreign traders to register for the purpose of VAT in Bulgaria. Since 
Bulgaria does not operate any arrangements for the refund of VAT to non-registered 
foreign taxable persons, VAT represents an increased cost to such traders. As for exempt 
transactions, the Bulgarian approach differs to a large extent from that of the Community 
which is based upon the principle of exempting certain transactions in the public interest. 
Bulgaria's membership of the European Union would require substantial adjustment to 
bring the VAT legislation into line with the requirements of the Community acquis, both 
in respect to the general provisions of the Community VAT legislation and as regards the 
system of taxation necessary in a Community with no internal frontier controls. 
In 1997 the present government announced important revisions to the Bulgarian national 
strategy plan, aimed at early implementation of the recommendations of the White Paper 
regarding VAT. 
Excise 
There are significant discrepancies between the Bulgarian excise regime and EU 
requirements. 
58 
Firstly, there exists no excise suspension system where goods can move between 
authorised tax warehouses without payment of duty. 
Secondly, the ad valorem rate, such as currently applied on most excisable products in 
Bulgaria, tends to exaggerate price differentials between products and is open to 
challenge as being discriminatory against more expensive imports. 
In the event of accession, excise duties on products not belonging to the above-mentioned 
categories could continue to apply provided, however, that they would not give rise to 
border-crossing formalities in trade between member states and that they complied with 
the principles of non-discrimination between national products and products originating 
in other member states. 
In order to ensure a correct application of the Community excise legislation it is essential 
that Bulgaria sets up a warehousing system based on the Community model as soon as 
possible, strengthens control procedures and adapts the structure and level of its excise 
rates in such a way that they comply with the Community principle of non-discrimination 
between national products and those originating in other member states. 
The Bulgarian national strategy plan for implementing the provisions of the White Paper 
does not provide a clear and detailed timetable for future adjustments of Bulgarian excise 
legislation. It is planned to return to specific rates when there is improved price stability. 
Existing customs warehouses could be converted into tax warehouses when required, but 
provisions for this and the creation of registered traders have not yet been put into the 
draft law. Nonetheless, the present Bulgarian Government does envisage full 
harmonisation of legislation in this area in due course. 
Mutual Assistance 
There would also be a need, on accession, to implement the appropriate arrangements for 
administrative cooperation and mutual assistance between Member States. These 
requirements are essential for the functioning of the Internal Market. 
Conclusion 
The acquis in respect of direct taxation should present no significant difficulties. 
As regards indirect taxation, although a start has been made, a sustained effort will be 
required if Bulgaria is to comply with the VAT and excise duties acquis in the medium 
term. 
It should be possible to start participating in mutual assistance as the tax administration 
develops its expertise in this respect. 
Statistics 
The main principles of the Community acquis relate to the impartiality, reliability, 
transparency, confidentiality (of individual information) and dissemination of official 
statistics. In addition there exists an important body of principles and practices 
concerning the use of European and international classifications, systems of national 
accounts, business registers, and various categories of statistics. 
59 
The Europe Agreement provides for co-operation to develop effective and reliable 
statistics, in harmony with international standards and classifications. 
The White Paper includes no provisions in this field. 
Descriptive Summary 
The National Statistics Institute (NSI) is the body charged with producing and 
disseminating official statistics in Bulgaria. It consults the Supreme Statistical Council 
(SSC) for guidance on methods and operations. 
The legal basis for Bulgarian official statistics consists of the 1991 Statistics Act. 
Current and Prospective Assessment 
Bulgarian legislation is generally compatible with the current standards applied within 
the European Union. 
Some issues of impartiality, transparency and confidentiality need clarification, and there 
are deficiencies in sectors such as external trade, transport and regional statistics, 
financial accounts, coverage of the business register and related business surveys, and the 
need to fully implement internationally comparable classifications. 
Conclusion 
Bulgaria will require a sustained effort if it is to comply with EU requirements for 
official statistics in the medium term. 
3.4 Sectoral Policies 
Industry 
EC industrial policy seeks to enhance competitiveness, thus achieving rising living 
standards and high rates of employment. It aims at speeding up adjustment to structural 
change, encouraging an environment favourable to initiative, to the development of 
undertakings throughout the Community, and to industrial co-operation, and fostering 
better exploitation of the industrial potential of policies of innovation, research and 
technological development. EC industrial policy is horizontal by nature. Sectoral 
communications aim at transposing horizontal concepts into specific sectors. EU 
industrial policy results from an articulation of instruments from a number of Community 
policies; it includes both instruments related to the operation of markets (product 
specification and market access, trade policy, state aids and competitions policy) and 
measures related to industry's capacity to adapt to change (stable macro-economic 
environment, technology, training etc.). 
In order to cope with competitive pressure and market forces within the Union, the 
industry of applicant countries needs to have achieved a certain level of competitiveness 
by the time of accession. The applicant countries need to be seen as pursuing policies 
aimed at open and competitive markets along the lines set out in Article 130 ("Industry") 
of the Treaty. Co-operation between the EC and the candidate countries in the fields of 
industrial co-operation, investment, industrial standardisation and conformity assessment 
60 
as provided for in the Europe Agreement is also an important indicator of development 
in the right direction. 
Descriptive Summary 
With the economic transition accompanied by a highly unstable macroeconomic 
environment, the loss of traditional markets and increased competition, industrial 
production dropped and its share in GDP decreased from 33% in 1991 to 28% in 1995, 
at the level of 3.3 bn Ecu or about equal to the industrial production of Luxembourg. 
Total industrial employment stands at about one million or 33% of the total workforce . 
Small and medium sized firms account for three-quarters of all industrial firms and for 
16% of industrial employment while large (and still mostly state-owned) firms have the 
largest share in employment. The situation in Bulgarian industry is characterised by 
significant state ownership, under-utilisation of capacities, large losses-and debts, 
declining investment and production, and overall lack of international competitiveness. 
61 
Bulgaria, main industrial sectors in 1995 
Sector % Share in industrial value added 
Chemicals and oil refinery 
Food industry 
Mechanical engineering and metalworking 
Ferrous and non-ferrous metallurgy 
Textiles and clothing 
Electrical and electronic engineering 
Wood, pulp and paper 
Building materials 
Glass, porcelain 
Leather, footwear 17.0 
16.5 
13.6 
9.8 
6.1 
5.2 
5.0 
2.6 
1.8 
1.2 
Total above 
Other (incl. construction) 78.8 
21.2 
% share industry(excl. construction) 
in total GDP 28 
The chemical and oil refinery industry did not suffer so much from the decline due to 
increase exports of basic chemicals products on traditional international markets, and 
certain subsectors (e.g. pharmaceuticals) remained profitable independently of the crisis. 
Main markets are Russia and other CIS countries. Exports of soda ash go mainly to the 
EU. New markets are developed in Asia (South Korea). Strong exporters, including two 
world-class producers in their respective products (calcinated soda and carbamide) are 
currently privatised. 
Bulgaria has a strong agricultural tradition (notably in fruit and vegetables) and the food 
industry has been a logical branch for the country to develop. It attracted some foreign 
investors keen to develop export potential and low-cost local production possibilities. 
The mechanical engineering and machine industry was geared toward production for 
the CMEA. Overall recovery will be very difficult. The sector stabilised as a whole at a 
very low level but many enterprises suffered badly from the crisis. They are among the 
62 
heaviest loss-makers. On the other hand, there are strengths such as a highly skilled 
labour force and, in certain subsectors, good quality capital stocks, which attracted some 
FDI. 
In ferrous metallurgy a relative stabilisation of steel output can be observed. Compared 
to other CEECs, the steel industry is of medium size. Weak domestic and export demand 
and quality problems are among the reasons for decline, along with the urgently needed 
modernisation, privatisation, and restructuring. 
This is also the case for the non-ferrous sector, where most exports are destined for the 
EU as well as other CEECs and the Middle East. Growth will not return soon: a stricter 
government approach to energy pricing is removing one of the key advantages of the 
sector. 
The position of the textiles and clothing industry is unstable and was among the worst 
hit by the transition. The industry is experiencing strong competition from Asian 
producers. However, the combination of low labour costs, a skilled workforce and high 
quality standards can be attractive to foreign investors. 
The situation in electrical and electronic engineering is critical and urgent restructuring 
measures are needed. Almost all output was destined for the former USSR and apart from 
a few enterprises which already in the past had developed a position on Western markets, 
the companies in this sector did not manage to restructure and adapt to new conditions. 
Due to delays in large-enterprise privatisation, privatisation in industry has been slow so 
far, and the private sector accounts for only about 14% of industrial production. By mid 
1996 privatisation procedures had been opened for some 1400 state-owned enterprises 
representing 20% of state-assets, of which around 370 enterprises had been privatised by 
more than two thirds. The share of foreign investment is estimated at one quarter of 
privatisation revenues. 
Current and Prospective Assessment 
Bulgaria was until recently in an extremely difficult macroeconomic situation. The 
introduction of the currency board should lead rapidly to certain financial stability, but 
the solution to the underlying causes of the crisis will require fundamental and sustained 
reforms. Previous attempts to stabilise have been derailed by a combination of large 
losses in state-owned enterprises and a weak banking sector. It will take time to solve 
these problems. 
Privatisation of some industry is difficult given that it is very energy intensive. 
Privatisation might at first lead to a contraction of heavy industry. The steel sector has to 
continue structural changes, and the largest producer has to undergo major financial 
restructuring. Energy pricing remains a problem. At the same time, the bad debt situation 
restricts the banking system's capacity to provide capital. Given this environment it is not 
surprising that investment is low (11% GDP) and that FDI has been modest. In turn, lack 
of investment capital is a major potential impediment to restructuring and diversification 
efforts. 
Bulgaria's relatively weak competitive position is linked to the narrow industrial base 
with exports concentrated in a small number of basic industries. A number of the main 
63 
export branches may lack long-run viability and sustainable competitiveness. Many 
industrial sectors face significant problems in restructuring and adapting to market 
conditions, including textiles, machinery and metal processing, mining, electrical 
engineering, electronics and shipbuilding. 
Industrial sector weakness and the slow restructuring process is underlined by the heavy 
losses generated by public sector enterprises. Total losses of industry amounted to an 
estimated 4% of total sales in 1995, down from 15% in 1993. Direct budget subsidies 
have been drastically reduced, "to large loss making enterprises and uncollateralised bank 
lending - which contributed to the banking crisis - and escalating arrears to the budget 
have greatly ceased. 
With the squeeze on domestic resources - investments in industry in relation to GDP 
declined from 11% in 1990-93 to 6% by 1994 - attraction of foreign investment will be of 
paramount importance. This will require a significant improvement in the overall 
investment climate. 
The government's 1997 structural reform programme foresees substantial privatisation 
and restructuring in most industrial sectors, in accordance with a strict timetable agreed 
with international financial institutions. This implies privatisation within two years of all 
state-owned enterprises operating in a commercial environment as well as a substantial 
part of the utilities. Implementation of the programme will be prerequisite for 
establishing a sustainable and competitive industrial structure in the medium-run. 
Conclusions on Industrial Competitiveness 
In spite of positive recent policy changes, the integration into the European market 
would pose serious difficulties for Bulgarian industry during the medium term. Many 
sectors still face important restructuring and privatisation needs. A major potential 
impediment to restructuring and diversification efforts is the lack of investment capital 
due to the low levels of foreign investment and the bad debt situation which restricts the 
banking system's capacity to provide capital. 
An evaluation of the acquis specific to the free circulation of industrial goods is to be 
found in the separate section on the internal market. 
Agriculture 
The Common Agricultural Policy aims to maintain and develop a modern agricultural 
system ensuring a fair standard of living for the agricultural community and the supply of 
food at a reasonable price for consumers, and ensuring the free movement of goods 
within the EC. Special attention is given to the environment and rural development. 
Common market organisations exist to administer the CAP. These are complemented by 
regulations on veterinary health, plant health and animal nutrition and by regulations 
concerning food hygiene. Legislation also exists in the area of structural policy, 
originally developed primarily to modernise and enlarge agriculture, but more recently 
with an increasing emphasis on the environment and the regional differentiation of the 
64 
policy. Since reforms in 1992, increasing contributions to farm support have come from 
direct aid payments increasingly compensating for reduced market support prices. 
The Europe Agreement provides the basis for agricultural trade between Bulgaria and the 
Community and aims to promote co-operation on the modernisation, restructuring and 
privatisation of Bulgaria's agriculture sector as well as the agro-industrial sector and 
phyto-sanitary standards. The White Paper covers the fields of veterinary, plant health 
and animal nutrition controls, as well as marketing requirements for individual 
commodities. The purpose of such legislation is to protect consumers, public health and 
the health of animals and plants. 
Descriptive Summary 
Agricultural Situation 
The value of the agricultural production in 1995 was approximately 1.29% of that of the 
Union. 
In 1995 agricultural production accounted for 12.6% of GDP, and about 22% of 
employment. Total agricultural area consists of éS 6.2 million ha, of which 4r7 4.0 
million ha are arable land, mainly cereals (49 55 %) and pasture (18%). However a 
significant share of the land has remained uncultivated last years because of restitution 
process and low farmgate prices. 
Around 5.1 million ha (S4 82 % of Bulgaria's total agricultural land area) has been 
claimed for restored private ownership by the heirs of the former private owners (nearly 
1.7 million in number) under the heavily amended Farm Land Act of 1991. By April 
1997, land claim ownership certificates had been issued for 50% of the restitutable land 
total (2.4 million ha) and the Government announced measures to accelerate and 
complete certificate issues by 30 June 1998. These certificates allow buying and selling 
of land although only 8% of owners have been issued with formal title by notaries. The 
lack of legal title is a major block to investment and development of an active land 
market. In September 1996 the Land Tenure Law was passed, describing the general 
conditions for land leasing and improving prospects for long term leases. 
The majority of private farms have an area of less than 2 ha, often split into separate 
plots, which is generally too small for economic viability through direct farming but 
represents an important social buffer during the transition period. 1,600,000 household 
plots have less than 1 ha and represent 15% of the total area, 400,000 family farms have 
between 1 and 10 ha and only a very limited number of family farms have more than 10 
ha. Most of the privatised land is leased to groups of farmers. (3,000 private co­
operatives, averaging 700-800 ha) of other collective structure, often on an annual basis; 
2,000 state farms and state registered companies are still in operation. In broad lines 
about 33 % of the land is under co-operatives, 12 % under individual farms and 10% 
under state farms. 
Both arable and livestock production have declined heavily (±50%) since 1990, with 
further sharp falls in wheat and feedgrains production (barley, maize) from 1995 to 1996. 
(53 % wheat reduction from 3.4 million in 1995 to 1.8 million t in 1996) and in 
sunflower production (30% reduction from 760 000 tonnes in 1995 to 530,000 tonnes in 
1996) as a result of reduced areas planted combined with very low yields. The cereal 
65 
shortages have led to accelerated destocking, the need for imports, further reductions in 
beef cattle and pigs and substantial price increases. 
The decline in the production of perennial crops (orchards, vineyards) has also been 
significant, due to market difficulties during the first years of transition and then to lack 
of care during the land restitution process. 
In 1995, Bulgaria produced 78,000t beefmeat, 257,000 pigmeat, 74,000t chickenmeat and 
l,128,000t cow milk (1985 : 2,135,000t). Livestock production in 1996 did not fall by 
the same percentage as arable production; dairy cows and poultry actually showed a 
slight increase over 1995. Pig and sheep populations fell by 11.5%, with state farm 
reductions offsetting the 13% increase in privately owned pigs. Milk production 
increased by 6% over January to September 1996 compared with 1995 and meat 
production by nearly 70% (largely as a result of fodder shortage slaughtering). 
The pace of the privatisation process in the upstream and downstream sectors has been 
extremely low. Less than 10% of the total number of enterprises for the agricultural and 
food industry have been privatised by the end of 1995. Most of the state-owned 
enterprises are in a critical financial situation. The government has agreed large-scale 
privatisation targets with the international financial institutions: of the 45 state agro-
enterprise to be privatised by end May, 50 % had been privatised or liquidised by this 
date and tenders have been launched for a further 13 enterprises. A further 60 agro-
enterprises are scheduled for privatisation by end 1997. 
Bulgaria has for many years been a food exporting country and agricultural products used 
to account for a significant share of total exports destined mainly to the COMECON and 
the Middle East. The volume of agricultural trade was sharply reduced mainly because 
of the collapse of the Soviet Union and the consequences of the war in the former 
Yugoslavia. Meanwhile, trade with the EC has developed a particular significance. 
In 1995, exports of agricultural products accounted for 21 % of total exports; and reached 
ECU 779 Million (ECU 218 million to EU). Imports of agricultural products accounted 
for 7.5 % of total imports and reached ECU 291 million (ECU 226 million from EU). 
The main exported products (65%) are tobacco, wine, processed vegetables, fruit, and 
live animals. Data for 1996 are likely to be significantly reduced compared with 1995 
due to lower production of these commodities. 
Agricultural Policy 
Agricultural policy since the beginning of the transition period has mainly been 
characterised by short-term measures like subsidised short-term seasonal credits, aimed at 
ensuring production in the turmoil of land reform, and ad-hoc temporary border measures 
aimed at stabilising the internal market. Price liberalisation started in February 1990, but 
prices of 13 essential food products were monitored by a mechanism called "projected 
prices" which were replaced in 1993 by "ceiling prices". These policies and other related 
measures have had a depressing effect on producers' output prices, which remained 
below world prices, but not on their input prices or on retail prices, and as a result 
farmers have switched production into non-price controlled crops. Since March 1997, 
66 
prices for all commodities except wheat, wheat flour, bread and cooking oil, have been 
liberalised. 
For 1996, total budgetary expenditure on agriculture amounted to 17.3 billion Leva (100 
Mecus) of which 13% were to support minimum purchase prices (wheat, tobacco, maize, 
sugarbeet); 23% for interest rate subsidies for the Agriculture Fund; and the remainder 
divided between 'standard' government functions such as agricultural education, 
veterinary and other state services, breeding and improvement, irrigation, research and 
development, etc. 
In 1996 the government adopted a strategy document for the agriculture and food 
industry. The implementation was very slow and there were substantial changes in 
foreign trade policy, as the state monopolies were removed and foreign trade has been 
liberalised. The general licensing regime for products was abolished, and exports and 
imports are executed on the basis of customs declarations. Agricultural and food 
products are still subject to different regulations including temporary export bans, 
quantitative restrictions on exports and imports, export and import taxes, exemptions 
from import duties and, in some cases, minimum export prices, all of which have 
contributed to depressed farm output prices and further isolate the Bulgarian economy 
from international prices and competition. 
Further changes in agricultural support have been introduced in 1997 to avert a further 
decline in production. The Government has stated that minimum wheat purchase prices 
will not fall below 80% of world prices for producers who take working capital loans 
from the Agriculture Fund with a 50% subsidy on interest rates and who agree to forward 
contract deliveries from their 1997 production. Similar support will be given for 
sunflower production. The number of commodities subject to profit margin controls 
have been reduced. Export restrictions will be liberalised and import tariffs will be 
reduced. 
The farm gate prices are generally lower than world prices. The difference between 
Bulgarian and EC prices is significant. Bulgarian prices in 1995 were about 50 % of 
ruling EC prices. However, there were substantial variations within this average, e.g. 
tomato prices at 11 %, wheat (price control) at 44 % , maize (not controlled) at 57% and 
pork/poultry meat(imported items) at 80 %. 
Most preferential quotas under the Europe Agreement, which were based on historic 
trade patterns, have not been fully utilised. Negotiations are in progress to complete the 
adaptations of the agreements for primary and processed agricultural products and to add 
economically significant traded commodities, such as wine and fish products to the 
formal agreements. 
Bulgaria's accession to the WTO was followed by introduction of a new customs tariff at 
the beginning of 1997. Changes were made to 23% of the food and agriculture tariff 
headings: the net effect on tariff levels appears to be neutral. Most of the duties remain 
significantly below the level of the bindings: exceptions are butter, sugar and fresh 
grapes. The WTO-registered trade regime accordingly provides possibilities for 
Bulgarian tariff protection at levels considerably above the EC's level of protection. 
Negotiations to join CEFTA are in process. 
67 
The process of introducing the legislation identified in Stage I of the White Paper has just 
begun. 
Current and Prospective Assessment 
Potential exists for increasing agricultural production, but it is very difficult at this time 
to forecast the rate of recovery over the next few years. The process of land reform and 
privatisation far from complete; an active land market has not yet been established; rural 
financial and banking facilities-must be developed. 
The Bulgarian food industry sector need a major restructuring and huge investment to 
allow it to compete not only on the EC market, but first and foremost, on the domestic 
market. Without this privatisation, upstream and downstream sectors will continue to 
operate under non-competitive conditions, which distort price formation. 
The liberalisation of agricultural prices at all levels is the most important challenge the 
government faces in the short term as well as speeding up the reform process, e.g. 
privatisation of land and of the agro-food sector. The speed with which this may be 
achieved depends on the implication for consumers. 
The main market policy instruments applied in the EC are not applied in Bulgaria. This 
includes key instruments such as dairy quotas, key features of the arable crop schemes 
(base area, set-aside, compensatory payments and premiums in the livestock sector), as 
well as certain rural and structural development programmes. 
Management and control of these measures would require relatively sophisticated 
administrative systems, including an appropriate land register and cattle identification 
and registration system. As a general observation, it is clear that the administrative 
capacity would need to be considerably developed in these areas if these measures were 
to be applied in Bulgaria. 
It is difficult to foresee at this stage what will be the development of agricultural support 
prices in Bulgaria in the period before accession; this will depend on a number of factors 
including the domestic economy, the situation on exports markets, and the development 
of price support levels in the Union. 
A number of price supports and associated measures operated in 1996 and previously 
appear incompatible with EC policies. Other important EC measures, such as rural 
development policies and measures remain to be legislated and supported adequately 
from the national budget. 
Bulgaria is correctly applying the provisions of the Europe Agreement concerning trade 
with the Union in agricultural products. 
Harmonisation of legislation with Stage I of the acquis according to the White Paper is at 
an initial stage. Negotiations on a veterinary and phytosanitary agreement have 
commenced. With a few exceptions, legislation in the veterinary field does not meet EC 
requirements, but Bulgaria has presented an ambitious timetable which should align most 
of the legislation to EC requirements by the end of 1998. 
68 
Bulgaria has an infrastructure for veterinary control and inspection. The structural 
changes in the veterinary services, together with the increased fragmentation of the 
livestock units, make inspection and overall disease control difficult. Because of its 
geographical situation and weak border controls, Bulgaria runs a high risk that animal 
disease enters from outside. Also Bulgaria vaccinates against classical swine fever and a 
change to a non-vaccination policy is necessary but will be difficult. 
The facilities at border inspection posts are still inadequate for veterinary control at 
Community standards. Complete facilities for the inspection of live animals and animal 
products at the border inspection posts are not yet available and most border checks are 
limited to controls on certificates and other documents with the majority of physical 
checks being undertaken at destination. 
As regards internal measures there is a need for the Bulgarian authorities to ensure 
Bulgaria's animal health status in respect of certain requirements. The system of 
registration of holdings and identification of animals will need to be adjusted to the EC 
systems. Testing and diagnostic facilities are not adequately equipped to perform tests 
required by EC law, and welfare legislation needs to be further developed. There will be 
a need to upgrade certain food processing establishments in particular for the national 
market, to develop acceptable veterinary audit and certification procedures, also for both 
imports and exports, and to maintain an adequately structured, resourced, staffed and 
trained veterinary sector. 
The recent legislation concerning seeds and propagation material is likely to need 
subordinate legislation and inspection and enforcement measures. Since Bulgaria enjoys 
Community equivalence for several major species it can be assumed that the standard of 
at least some of its production is equivalent to that in the EU. 
In the field of plant health Bulgaria has prepared draft legislation for approximation of 
EC legislation. There is no timetable established for its adoption. Administrative 
structures and control and inspection arrangements appears to be inadequate to ensure the 
appropriate level of protection. Legislation in the field of animal nutrition is limited in 
scope and not consistent with EC legislation. The Bulgarian authorities have not given 
any timetable for the completion of this work. 
As regards legislation on plant protection products, it appears that little, if any, 
approximation to Community law has been made at this stage. 
Conclusion 
Very limited progress has been made in adapting to the Community acquis and 
considerable sustained effort will be needed with regard to restructuring the agriculture 
and the agro-food sector and reform of agricultural policy to prepare Bulgaria to apply 
the acquis. 
Particular efforts are needed in relation to : 
adoption, implementation and enforcement of veterinary and phytosanitary 
requirements and upgrading of establishments to meet EC standards; this is particularly 
69 
important with regard to the inspection and control arrangements for protecting the EU 
external borders; 
strengthening of the administrative structures to ensure the necessary capacity to 
implement? and enforce the policy instruments of the CAP; 
restructuring of the agricultural and agro-food sector to improve its competitive 
capacity. 
Fundamental reforms are necessary before Bulgaria will be able to meet the obligations 
of membership. 
Fisheries 
The Common Fisheries Policy includes common market organisations, structural policy, 
agreements with third countries, management and conservation of fish resources, and 
scientific research in support of these activities. 
The Europe Agreement includes provisions concerning trade in fisheries products with 
the Community . The White Paper includes no measures in this field. 
Descriptive Summary 
In 1995 the total catch was 2,500t, all from the Black Sea. The high sea fleet consisted of 
6 distant water freezer trawlers and 16 Black Sea vessels, of which five were in private 
ownership. No catches were registered from distant waters in 1995 compared with a catch 
of 5,000t in 1994. Only two distant water vessels operated on a full-time basis in 1995, 
on a cost-sharing basis with foreign operators catching non-Bulgarian quotas. 
Production of inland fisheries was 4,000t in 1994 (mainly carp and trout) valued at 4 
million ECU from 20 state farms employing 500 people plus unspecified output from 6 
privately-owned aquaculture enterprises. The Bulgarian authorities did not provide 
statistics on ownership, production and employment for 1995, but consider that 
production has declined due to state enterprises financial problems and lack of 
investment by the newly-emerging private enterprises. 
As a trading partner of the Community, Bulgaria represents 0.08 % of total EC imports 
(independent of origin) of fishery products and 3.2 % of EC imports of fishery products 
from the candidate countries alone (in term of value). As regards EC exports, Bulgaria 
receives 0.34 % of our total exports of fishery products and 4.1 % of our exports of these 
products to the candidate countries(in terms of value). 
Bulgaria has concluded fisheries agreements with Mauritania (1971), Canada (1978), 
Mozambique (1971) and Ukraine (1993). Fisheries agreements with the former Soviet 
Union for the Black Sea (1959 - general; and 1978 - anchovy and shrimps) and the 
Barents Sea (1978) are reported to be still in force. A co-operation agreement with the 
Russian Federation has been suspended. 
70 
Current and Prospective Assessment 
Bulgaria's production and foreign trade are low when compared to the corresponding EC 
figures and are therefore unlikely to have any significant impact upon the Community as 
a whole. According to the information given as regards fisheries agreements concluded 
and Bulgaria's membership of international or regional fisheries, no major problems of 
compatibility with EC membership is envisaged. Recent Bulgarian information on the 
reduction in Bulgarian capabilities to enforce quotas and undertake research could lead to 
difficulties in compliance with EC and international obligations. 
The adaptation of the deep sea fleet capacity to available resources and the modernisation 
of the sector will become thé main issue. 
National economic difficulties are likely to lead to complete disposal of distant water 
vessels and effective privatisation of the majority of state aquaculture, marine fishing and 
fish processing enterprises over 1997/1998. Future development is likely to be 
concentrated on development of freshwater aquaculture and, possibly, marine fish 
farming in the Black Sea. Development of these opportunities and establishment of 
efficient privately-owned fish processing capacity will depend heavily on export 
earnings. 
The industry is outdated and will require modernising. It will be necessary for Bulgaria 
to establish a fisheries administration which is capable of implementing the Common 
Fisheries Policy - in particular, the management of resources, the keeping of a fishing 
fleet register, the application of structural policy for the sector, the management of the 
market scheme and the collection of all statistical data- as well as the EC's policies on 
health, hygiene and environmental matters. 
Conclusion 
The process of modernisation and acquis implementation will require significant efforts. 
In the medium term the fishery sector does not appear to present a major problem. 
Energy 
Main EU energy policy objectives, as reflected in the Commission White Paper "An 
energy policy for the EU" include enhancement of competitiveness, security of energy 
supplies and protection of the environment. Key elements of the energy acquis comprise 
of Treaty provisions and secondary legislation particularly concerning competition and 
state aids, internal energy market (including directives on electricity , price transparency, 
gas and electricity transit, hydrocarbons licensing, emergency response including security 
stock obligations, etc.), nuclear energy, as well as energy efficiency and environmental 
rules. Development of Trans-European Energy Networks and support for energy R&D 
are other important elements of energy policy. Ongoing developments include 
liberalisation of the gas sector, energy efficiency acquis and the Auto-oil programme. 
In the field of nuclear energy, the Community acquis has evolved substantially from the 
original EAEC Treaty to a framework of legal and political instruments, including 
international agreements. At present, it addresses issues of health and safety, including 
radiation protection, safety of nuclear installations, management of radioactive waste, 
71 
investment including EURATOM financial instruments, promotion of research, nuclear 
common market, supplies, safeguards, and international relations. 
The Europe Agreement provides for co-operation to develop the progressive integration 
of the energy markets in Europe and includes provisions on assistance within the related 
policy areas. The White Paper preparing CEECs for the internal energy market 
underlines the need for full application of key internal market directives in combination 
with EC competition law. As to the nuclear sector, the White Paper refers to nuclear 
supply safeguard and shipments of-radioactive waste. 
Descriptive Summary 
Bulgaria is more than 70% dependent on external energy sources. Oil, gas (26% and 
17% of the energy balance) and nuclear fuels are all imported mainly from Russia, and 
so are most of the limited coal imports. 
Indigenous solid fuels, particularly low quality lignite, is extracted uneconomically and is 
a chief source of environmental pollution. Hydropower plays a limited role in the energy 
sector; uranium mining ceased in 1990. 
Bulgaria's energy sector accounts for 15% of GDP. The sector is two to four times less 
efficient than the EU average, contributing to pollution. This situation is due to the 
heritage of low prices, a lack of energy efficiency policies and obsolete technologies. 
Bulgaria is an important transit country for particularly gas supplies in the region 
including Greece. Its' regional role may increase in the longer term through oil imports 
via the Black Sea port of Burgas and through future gas imports from Central Asia and 
Iran. Bulgaria's link to the Western European UCPTE interconnected electricity system 
is technically feasible, but will require substantial investments and is therefore not 
expected in the short term. The recent synchronous connection, as a test, of the 
Romanian, Bulgarian, Greek, Serb and Albanian electricity networks is a preliminary 
step towards future connection to the UCPTE. 
Bulgaria operates a nuclear power plant at Kozloduy, producing around 40% of 
Bulgaria's electricity. It consists of six reactors of Soviet design: units 1 to 4 are VVER 
440-230 reactors and units 5 to 6 are VVER 1000-320. The design and construction 
standards of the VVER 440-230 reactors are considered not to meet the safety objectives 
generally accepted in the EU. The VVER 1000 - 320 are of more recent upgradable 
type. Considerable investment in these reactors has been undertaken since 1990 to help 
improve their safety for the remainder of their operation. 
Under the 1993 Nuclear Safety Account Agreement, managed by the EBRD Bulgaria 
undertook to cease operating the reactors 1-4 as soon as alternatives for energy supply 
would become available. In 1993, it was expected that these four reactors could be 
closed by that time. The Bulgarian government has yet to adopt its position on a revised 
timetable for the decommissioning. At present there are no known plans for the closure 
of the Units 1-4 before the end of the design lifetime (2004, 2011). 
72 
The design and construction standards of the two VVER 1000-320 reactors are 
considered to be closer to meeting safety objectives generally accepted in the EU. 
Investment in modernising these reactors is expected to start in 1998. 
The construction of two other VVER 1000 reactors at Belene was suspended in 1990 
owing to lack of funds. The Government has stated that it has permanently shelved the 
completion of the Belene plant. One research reactor is also in operation in the country. 
The nuclear power sector is monitored by the Committee on the Use of Atomic Energy 
for Peaceful Purposes (CUAEPP), whose tasks are laid down in the Law on the Use of 
Atomic Energy for Peaceful Purposes. Over the past years, the CUAEPP has received 
substantial technical assistance, among others from the Union, for the strengthening of its 
working methods and for human resources development. 
Nuclear fuel is supplied by Russia. In the past, it was partly fabricated from indigenous 
uranium and shipped to the then Soviet Union for processing. There is no uranium 
enrichment or fuel fabrication facility in the country. Spent fuel is not currently shipped 
back to Russia, but is stored on site in a pool. The construction of a facility for 
intermediate dry storage is planned. A policy on final storage of spent fuel needs to be 
developed. The cost of spent fuel treatment and plant decommissioning is presently not 
reflected in the electricity tariffs. A fund has been created for that purpose, but no 
payments had been made to it by early 1997. There is a need for a new national disposal 
facility for the radioactive wastes from Kozloduy and other producers. 
Current and Prospective Assessment 
A coherent overall energy policy has yet to be elaborated. The Government's 1995 
"Strategy for the development of the energy sector", covering the period 1995-2010/2020 
concentrated on increasing capacity for electricity production, paid little attention to the 
development of other energy sub-sectors and did not identify the likely sources of 
financing for the needed investments. 
In its work programme, the current Government defines the energy sector as a national 
priority. The programme announces that the Government will concentrate on 
strengthening the legal framework for the energy sector, improving energy efficiency, the 
restructuring and gradual privatisation of the power utilities and the diversification of 
energy supply and energy usage. 
The competition framework in the energy sector does not yet fulfil the directives of the 
internal energy market in combination with the application of EC competition law. 
Despite the applicability, in principle, of the 1991 "Law on Protection of Competition", 
to the energy sector, there is currently no legislation which addresses energy matter 
specifically. Adoption and implementation of the Energy Law is therefore crucial. The 
Concession Act foresees non-discriminatory access to hydrocarbon resources and is a 
good step towards matching EU rules in this respect. 
The major companies which are responsible for energy production, transmission and 
distribution are state-owned, vertically integrated monopolies; the Government has 
announced privatisation. Liberalisation of oil trade should also be noted. 
73 
Energy prices have been increased significantly in the recent period. Since April 1997, 
gas prices appear to cover costs and electricity prices to cover operational costs but not 
yet investment and environmental costs, including those related to the decommissioning 
of nuclear power reactors and the management of nuclear waste. District heating prices 
are still subsidised, for social reasons. The lack of adequate prices in the past and, to a 
lesser extent, at the present moment have hampered the restructuring of the power sector. 
There are no detailed plans known on future compliance with ECrequirements on 
emergency preparedness, including the obligation to hold 90 days of oil stocks. The 
country's difficult financial situation will most likely hamper the building up these stocks 
in the short to medium term. 
In the solid fuels sector a restructuring policy was envisaged in 1996 and will have to 
address the social and regional consequences. State interventions will need to be 
assessed against EC rules. 
Bulgaria should make considerable efforts to adapt to EC energy efficiency (labelling 
appliances, minimum efficiency norms) and environmental norms (e.g. fuel quality). It 
may be difficult to adapt the country's refineries, which will have to compete in a 
saturated European market. 
Bulgaria's accession could increase the EU's overall dependence on Russian uranium and 
enrichment. The nuclear materials supply policy of security through diversification of 
sources would however apply to supply contracts concluded after accession. 
Upon accession, Bulgaria would need to comply with the provisions of the Euratom 
Treaty, in particular those related to supply of nuclear material, the nuclear common 
market, safeguards, health and safety and international agreements. Although Bulgaria is 
party to all of the international nuclear regimes in these fields, it has not yet implemented 
all of them in its national legal order. Some legislative adjustments would be necessary 
to permit Bulgaria to conform with the Euratom Treaty provisions on supply and 
property ownership. Since Bulgaria has a full-scope safeguards agreement with the 
IAEA, no major difficulties in applying Community legislation in this area are expected. 
The problem of nuclear safety needs to be dealt with and realistic programmes, including 
closure where necessary need to be agreed upon and implemented in due course. 
Continuous support to the safety authority, which has a considerable task to perform, 
should be foreseen in the coming years. 
Conclusion 
Bulgaria needs to step up considerably its efforts in the energy sector in order to prepare 
for integration. Particularly the following matters need close attention: the adjustment of 
monopolies including import and export; access to networks; energy pricing; emergency 
preparedness including the building up of mandatory oil stocks; restructuring and state 
interventions in the solid fuel sector, the development of energy efficiency and fuel 
quality standards. Bulgaria has to implement certain international nuclear regimes and 
make some legislative adjustments in order to comply with the Euratom Treaty. 
74 
Nuclear safety requires continued particular attention, with rapid implementation of 
agreed realistic programmes including closure where necessary. Longer term solutions 
for waste need to be found. 
Transport 
Community transport policy consists of policies and initiatives in three fundamental 
areas: 
• Improving quality by developing integrated and competitive transport systems based 
on advanced technologies which also contribute to environmental and safety 
objectives. 
• Improving the functioning of the single market in order to promote efficiency, choice 
and user-friendly provision of transport services while safeguarding social standards; 
• Broadening the external dimension by improving transport links with third countries 
and fostering the access of EU operators to other transport markets( The Common 
Transport Policy Action programme, 1995-2000). 
The Europe Agreement provides for approximation of legislation with Community law 
and co-operation aiming to restructure and modernise transport, the improvement of 
access to the transport market, the facilitation of transit and the achievement of operating 
standards comparable to those in the Community. The White Paper focuses on measures 
for the accomplishment of Internal Market conditions in the transport- sector, including 
such aspects as competition, legislative harmonisation and standards. 
Descriptive Summary 
Bulgaria has a long border with Greece and is on the traditional route from the Middle East 
to Central and Western Europe. Three Pan-European Transport Corridors as identified at 
the Pan-European Conference in Crete cross Bulgarian territory, the fourth is the Danube, 
which forms most of Bulgaria's border with Romania. The war in former Yugoslavia led to 
a rise in transit traffic to and from Greece and to a diversion of transit traffic to and from the 
Middle East, this development caused congestion on Bulgaria's main roads, at border 
crossings and on the Danube river crossings. 
Bulgaria's economic problems caused a sharp reduction in the demand for cargo and 
passenger transport for all modes. Exceptions were maritime cargo transport, resulting 
from a redirection of the Bulgarian fleet's operations out of the Black Sea basin, and air 
passenger transport. Overall transport demand has not yet recovered to its previous level, 
although it is now beginning to rise again. The substantial change in the modal split 
occurred in freight transport, with a significant increase in the share of road transport 
compared to other modes. 
Bulgaria has been faced with the need to invest in significant improvements-to its road 
network and there is a need to develop previously very limited border-crossing 
infrastructure. The lack of investment in infrastructure and equipment for transport during 
the last decade poses major problems, especially in a situation where most public transport 
equipment will have to be imported. Much of the existing equipment originated from the 
75 
former Soviet Union, so that substantial investments are needed to replace non-standard or 
out of date equipment. 
Current and Prospective Assessment 
As regards completion of the internal market, Bulgaria has made great efforts to 
implement the existing Community legislation. The international transport sector in 
Bulgaria already applies rules similar in part to the EC rules, particularly on inland 
waterways and combined transport. Regarding air transport, the draft Aviation Act is 
being amended to comply fully with EC rules. Yet major investments and 
implementation efforts are needed, notably in the safety field. Safety legislation and its 
implementation has to be strengthened. The need for fleet renewal could also pose 
considerable funding problems. In the maritime sector, the principal cause of delays in 
implementing the existing Community legislation is safety, on which Bulgaria is still 
some way from Union standards. 
Bulgarian road freight transport is not in full conformity with the current Community 
legislation. Points to be monitored during the pre-accession period include measures on 
road safety, weights and dimensions and user charges. Full compliance with Community 
rules on weights and dimensions needs to be ensured in order not to restrict the ability of 
the Bulgarian network to accept EU vehicles. 
Rail and passenger transport by road pose fewer problems than other sectors with regard 
to implementation of the existing Community legislation, although clarifications are 
needed and further efforts must be made in the rail sector. By contrast, greater caution is 
called for on the actual operation of these two markets, since the structural changes 
(private management, opening-up to competition, etc.) are only just starting. 
The Bulgarian authorities have taken account of the objective of developing an integrated 
and competitive transport system. The two principal constraints in this area are likely to 
be achieve acceptable safety standards and optimum use of the transport system. 
Bulgaria has made encouraging progress on safety, but is still far from Community 
standards, particularly for air, sea and road. As regards the objective of cohesion within 
the transport system, Bulgaria will probably have to face a steady increase in road's share 
and to concentrate its efforts on use of rail and inland waterway, given the weakness of 
its road network compared with the railways and inland waterways. 
The transition from a controlled economy, giving precedence to the use of rail and inland 
waterway, to a market economy giving users a free choice of mode of transport, will lead 
to a shift of traffic onto roads. This has not yet been fully completed in Bulgaria. In this 
context, the Government programme prioritises the maximum establishment of private 
market principles in the transport sector, including the restructuring and privatisation of 
Bulgarian State Railways (BDZ) and Balkan Air and as part of the general withdrawal of 
the state from the ownership and management of transport companies. 
To improve links with the Member States and its neighbours, between 1995 and 1999 
Bulgaria plans to invest ECU 0.6 billion from its own budget in transport infrastructure 
used by international traffic, principally the pan-European corridors. This is equivalent 
to around 1.2% of GDP, but will probably not be enough to meet the needs, given the 
current state of the road network, particularly the deviation from the technical 
76 
characteristics for heavy goods vehicles from the Community. Any cuts in this amount, 
as a result of budgetary constraints, could further aggravate this weakness. 
Conclusion 
Bulgaria has made progress with implementing the existing Community legislation on 
transport. Rapid alignment is necessary; in this respect, maritime, air and road freight 
are the sectors posing the most potential problems, particularly on safety. In the other 
sectors, particularly rail, implementation of the existing Community legislation in 
practice must still be monitored. 
It will also be necessary to make sure that the resources necessary to lay the foundation 
for extension of the future trans-European transport network to the acceding countries are 
provided, and rapidly to compensate for the current shortcomings in the road network and 
the consequences of implementation of the existing Community legislation on fleet 
renewal. It would also be necessary rapidly and systematically to reinforce Bulgaria's 
administrative structures, including the supervisory bodies, for example for safety. 
Small and Medium Enterprises 
EU enterprise policy aims at encouraging a favourable environment for the development 
of SMEs throughout the EU, at improving their competitiveness and encouraging their 
Europeanisation and intemationalisation. It is characterised by a high degree of 
subsidiarity. The complementary role of the»Community is defined and implemented 
through a Multiannual Programme for SMEs in the EU. This programme provides the 
legal and budgetary basis for the Community's specific SME policy actions. The acquis 
has so far been limited to recommendations on specific areas, although legislation in 
other sectors also affects SMEs (e.g. competition, environment, company law). 
The Europe Agreement provides for co-operation to develop and strengthen SMEs, in 
particular in the private sector, inter alia through provision of information and assistance 
on legal, administrative and tax conditions. The White Paper contains no specific 
measures. 
Descriptive Summary 
From a virtual non-existence in the late 1980s, private sector has grown to account for 
38% of value added in 1995 and approximately 41% of total employment. By the end of 
1996, 321,000 private companies were registered (a significant increase over the 
proceeding three years) compared to 20,000 public owned companies. Data on the size 
of private companies are not collected, but all available sources suggest that the vast 
majority are micro-enterprises with less than five employees. The majority of the private 
entities are engaged in trading and the provision of services to individuals and 
companies. 
Private companies have to face an unstable economic environment, high interest rates, 
high and unstable taxation and legislative uncertainty as the principal constraint to the 
expansion of their activities. There is no special legal framework in place for SMEs in 
Bulgaria. An SME Fund was established in 1991 under the auspices of Ministry of 
Industry to assist the setting up of small private enterprise through the provision of loans 
at favourable interest rates. Regional development agencies, business support centres and 
77 
an SME credit line have been set up with Phare assistance. A certain SME support is 
also available through non-governmental organisations, such as the Chamber of 
Commerce and Industry. Successive Governments repeatedly pledged their support for 
the set-up of a national SME Agency; a Government decree is reportedly to be adopted in 
the near future. 
The on-going efforts to strengthen the SMEs during the pre-accession period will 
therefore need to be continued. 
Current and Prospective Assessment 
Overcoming the barriers for private sector growth in Bulgaria will require a determined 
effort to stabilise the macro economic environment, simplify legislation and 
administrative routines, strengthening of the support infrastructure, improvement of the 
tax environment, and development of SME access to financing. This task will take 
several years. 
The previous economic policies and the legislative, fiscal and administrative environment 
have not been conducive to SME development. Given the restructuring efforts required 
for Bulgaria's larger state-owned enterprises, appropriate incentives and support 
structures for SMEs are needed. Recent Government initiatives are encouraging in that 
respect. 
Conclusion 
There are no specific problems regarding Bulgaria's integration in this field. 
3.5 Economic and Social Cohesion 
Employment and Social Affairs 
Community social policy has been developed through a variety of instruments such as 
legal provisions, the European Social Fund and actions focused on specific issues, 
including public health, poverty and the disabled. The legal acquis covers health and 
safety at work, labour law and working conditions, equal opportunities for men and 
women, social security co-ordination for migrant workers and tobacco products. Social 
legislation in the Union has been characterised by laying down minimum standards. In 
addition, the social dialogue at European level is enshrined in the Treaty (Article 118B), 
and the Protocol on social policy refers to consultation of the social partners and 
measures to facilitate the social dialogue. 
The Europe Agreement provides for approximation of legislation with EC law and co­
operation on improving standards of health and safety at work, labour market policies 
and the modernisation of the social security system. It also provides for Community 
workers legally employed in Bulgaria to be treated without discrimination on grounds of 
nationality as regards their working conditions. The White Paper provides for measures 
of approximation in all the areas of the acquis. 
78 
Descriptive Summary 
In Bulgaria the framework for dealing with socip-economic problems in a dialogue with 
the social partners is still embryonic. The social dialogue is mainly a tripartite 
consultation procedure involving the trade unions, the employers and the State, which 
leaves the final decision with the competent government body. It takes place within the 
framework of the "National Council for Tripartite Co-operation". Until recently the trade 
unions were reluctant to participate in the tripartite co-operation structures because of the 
dominant role of the government. There are two major trade unions which are members 
of the European Trade Union Confederation (ETUC) and four other recognised trade 
unions, while the employers' side is made up of a number of bodies, representing the 
public and private sector's interests. Further progress in the privatisation process may 
help to create a more balanced social dialogue. 
Since the transition, the decline of the state sector has been dramatic, the growth of the 
private sector has been moderate and unemployment has risen sharply. In 1996, it was 
down to 13.7% from 20.5% in 1994, according to ILO methodology. 
Bulgaria has started to develop modern labour market policies, regulations and 
institutions. This process will have to be pursued within the framework of the 
government's policy for structural reforms. 
Although the social security system covers the majority of social risks including sickness, 
accident and health care and social assistance schemes, the actual level of benefits 
provides inadequate protection against poverty: in late 1996, more than 40% of the 
population lived below the official poverty line. The number of people insured against 
social risks has gone down from more than four million in 1990 to less than three million 
in 1994, but the figures have started rising again. The share of GDP spent on social 
security is relatively low, at about 10% in 1995 (reduced from 12% in 1990). Continued 
efforts are required to ensure that measures of social protection are developed. 
The overall health situation in Bulgaria is grave. The health system is faced with major 
difficulties, including on occasion a shortage of medicine and basic medical instruments. 
Current and Prospective Assessment 
While Bulgaria has started to adapt its legislation relating to specific EU practices for 
health and safety at the workplace, the requirements and principles of the 1989 
framework Directive have not been met. It remains uncertain to what extent an 
independent inspection structure is in place to ensure an equal and proper application of 
the health and safety standards. The existing structure has neither the mandate nor the 
resources to ensure the proper enforcement of occupational health and safety standards. 
Major adjustments are needed in the area of labour law, both at the level of legislation 
and the structures for enforcement. Legislation to ensure proper consultative roles for 
employees and their representatives in situations such as collective redundancies or 
transfer of undertakings is incomplete. Similarly, there are no specific provisions 
regarding the protection of employees in the event of the insolvency of the employer and 
collective dismissals. Laws and regulations relating to the conditions of employment, 
79 
such as employment contracts, protection of young people at work and working time 
need to be completed and properly enforced. 
Concerning equal opportunity, the basic provisions of EC non discrimination law 
between women and men are covered by Bulgarian legislation. But the laws in favour of 
women are not always applied in practice, and the situation of women appears to have 
deteriorated. Industrial tribunals do not exist, and it is not clear whether discrimination 
cases can be taken to the normal court. 
Concerning the right to the free movement of workers, there would appear to be no 
obstacles to prevent Bulgaria from being able to implement the provisions of the acquis 
in this area. The introduction of the right to free movement will however require changes 
in the national law, particularly as regards access to employment and a treatment free 
from discrimination on grounds of nationality. 
In the field of social security for migrant workers, accession does not, in principle, pose 
major problems but certain technical adaptations will be necessary. More important is 
the administrative capacity to apply the detailed co-ordination rules in co-operation with 
the other countries. Bulgaria will have to develop the necessary administrative structures 
to work within the co-ordination system. 
Bulgarian legislation covering the EC directives on the warning labelling of cigarettes 
packages and the maximum tar-content has been adopted. 
Conclusion 
Compatibility with EC standards is low, and existing measures are not always applied in 
accordance with ECU practice. The social system is in need of reform, and the social 
dialogue needs to be improved. Very considerable efforts will be needed to ensure 
effective implementation. Substantive progress is required on legislation alignment and 
the application of the acquis before Bulgaria will be able to take on the obligations of 
membership. 
Regional Policy and Cohesion 
In accordance with Title XIV of the Treaty, the Community supports the strengthening of 
cohesion, mainly through the Structural Funds. Bulgaria will have to implement these 
instruments effectively whilst respecting the principles, objectives and procedures which 
will be in place at the time of its accession. 
The Europe Agreement provides for co-operation on regional development and spatial 
planning, notably through the exchange of information between local, regional and 
national authorities and the exchange of civil servants and experts. The White Paper 
contains no specific provisions. 
Descriptive Summary 
In 1995, Bulgarian GDP per capita was around 24 % of the EC average and real 
unemployment was 14 %. The worst hit region Montana (19.6%) has a registered 
unemployment rate close to 15 percentage points higher than that of Sofia (4.5%). 
80 
The current process of structural adjustment at regional level is influenced by two main 
factors : 
- regionally differentiated decline of industrial and agricultural activities. Most 
significant is the decline in manufacturing industry in the regions of Haskovo, Russe and 
Varna. For agriculture, the most affected regions are Bourgas, Varna and Plovdiv. 
- regional disparities as regards pre-conditions to economic development due to varying 
endowments of among others infrastructure and human resources. 
There is also some concern about the border areas, because of their depopulation and 
isolation. 
Bulgaria is divided into nine regions which are administrative units for state governance. 
255 self-governing municipalities form the basic administrative and territorial units for 
the implementation of self government. Bulgaria is currently elaborating an 
administrative reform envisaging to replace the nine regions with 12 to 21 districts to 
which right of self-government might be granted. 
Following the "National directives for Regional development" adopted in 1994, the 
structural adjustment policy is developed at national level on a sectoral basis, which can 
include specific consideration to regional problems. Draft legislation on regional policies 
based on EC practices and plans to establish a Regional Development Fund is under 
preparation. 
The Ministry of Regional Development arid Construction is the leading government 
institution. Its role has traditionally focused on infrastructure development, in particular 
water resources and utilities, construction, energy connections and spatial planning. 
A consultative council for cross-border policies, infrastructure and local authorities has 
been established to co-ordinate regional development initiatives implemented through 
sectoral policies. 
The financial assistance to municipalities in crisis constitutes Bulgaria's main regional 
development measure. However, tr share of Bulgaria's development related expenditure 
constituting potential counterpart funds to the EC structural policy cannot yet be 
determined. Therefore, Bulgaria's co-financement capacity cannot presently be evaluated 
with sufficient reliability. 
Current and Prospective Assessment 
Bulgaria's regional development initiatives are implemented within the framework of 
sectoral polices. Nevertheless, it is a growing awareness of rising regional disparities 
and the need for an active regional policy involving all government levels. 
At present, however, there is no coherent set of strategies, administrative framework and 
budgetary instruments for a regional development policy and the Regional Development 
Fund due to operate in January 1997 has not yet been set up. 
Conclusion 
81 
Bulgarian authorities manifest increased awareness of the need to counteract rising 
regional disparities through an efficient regional policy. However, its administrative 
capacity to manage integrated regional development programmes needs to be improved. 
In particular, administrative and budgetary procedures need to be strengthened. 
Significant reforms are still necessary including the establishment of efficient inter-
ministerial co-ordination and the introduction of appropriate counterpart funds before 
Bulgaria is able to apply Community rules and to channel effectively the funds from the 
EC structural policies. 
3.6 Quality of Life and Environment 
Environment 
The Union's environmental policy, derived from the Treaty, aims towards sustainability 
based on the integration of environmental protection into EU sectoral policies, preventive 
action, the polluter pays principle, fighting environmental damage at the source, and 
shared responsibility. The acquis comprises approximately 200 legal acts covering a 
wide range of matters, including water and air pollution, management of waste and 
chemicals, biotechnology, radiation protection, and nature protection. Member states are 
required to ensure that an environmental impact assessment is carried out before 
development consent is granted for certain public and private projects. 
The Europe Agreement stipulates that Bulgarian development policies shall be guided by 
the principle of sustainable development and should fully incorporate environmental 
considerations. It also identifies environment as a priority for bilateral co-operation, as 
well as an area for approximation of legislation to that of the Community. 
The White Paper covers only a small part of the environmental acquis, namely product-
related legislation, which is directly related to the free circulation of goods. 
Descriptive Summary 
Bulgaria's environmental problems are very serious, and have not been effectively 
addressed. Bulgaria has high emissions of air pollutants, in particular sulphur dioxide and 
particulates originating from thermal power plants, heavy industry, domestic heating and 
motor vehicles. Local air quality poses significant risks to human health. Waste is an 
area of major concern: waste management practices are elementary, especially for 
disposal activities, and incineration is not regulated. Soil pollution and erosion are also 
serious. Groundwater quality is generally good for drinking water supply. However, in 
localised areas there are problems of contamination by metals, as well as by sulphates 
and nitrates from fertilisers. Bulgaria enjoys an impressive bio-diversity and the 
protection of the country's natural heritage has traditionally been a priority. 
After 1990, a Ministry of Environment was created, and an environmental framework 
law was passed (1990, amended subsequently), introducing inter alia the "polluter pays" 
principle and environmental impact assessment. An environmental strategy was 
formulated in 1992 and updated in 1994.. The strategy lays down further development of 
the institutional, legal and regulatory framework and identifies areas that require priority 
actions, namely - among others - air emissions of lead and other heavy metals and 
82 
possible contamination of drinking water and food supplies. The National Environmental 
Protection Fund, set up in 1995 and financed principally from fines and taxes for 
industrial pollution and fuel, provides grants and loans to municipalities and enterprises 
for environmental measures. Up to now, environmental spending in Bulgaria has been 
low. 
Legislation, including regulations on Environmental Impact Assessment remains 
inadequate. Air emission standards are inadequate for some substances, and existing 
standards are not uniformly enforced. However, an air pollution law has been drafted 
which proposes the introduction of a system of permits. Standards for emissions to water 
are inadequate, although a new water act has been drafted. Apart from the area of 
hazardous waste for which some regulations exist, there is no coherent national policy or 
legislation for waste management. There is no official control of waste management 
practices and no specific legislation on incineration of waste. Not all types of waste are 
listed in a recently drafted waste law. Regulations on chemical substances and 
agricultural pollution are lacking or need updating. The same is true for radiation 
protection, where there is moreover a lack of safety culture. The Rovi Han radioactive 
waste repository does not meet the safety objectives generally accepted in the EU. 
In its programme, the Government announces a new environmental strategy, new 
legislation, including laws on water and nature protection, as well as fiscal incentives for 
environmental investments. 
Current and Prospective Assessment 
Though the whole of Bulgarian environmental legislation is undergoing revision, and 
new legislation tends to adopt or approach EC standards (for instance the draft water act), 
the level of approximation is still low in most areas, including air and water quality, 
waste management, chemical substances, radiation protection and nature protection. 
Regulations on Environmental Impact Assessment need to be further developed, as recent 
amendments have substantially weakened its impact. Particular attention should be 
given to the quick transposition of framework directives dealing with air, waste, water 
and the Integrated Pollution Prevention Control directive (IPPC), as well as the 
establishment of financing strategies for legislation in the water, air and waste sectors 
requiring major investments. 
With respect to effective compliance with EC environmental standards, Bulgaria still has 
to make even greater progress. The national environmental monitoring network has been 
strengthened in recent years, but effective enforcement of regulations also requires 
appropriate political will and adequate staffing in national and municipal institutions. 
Very important investment will be needed for effective implementation of EC standards 
fn most areas, particularly in water quality, urban waste and in the modernisation of 
industry. Considerable efforts will also be necessary to build the administrative capacity 
that will allow the country to fully adopt, implement and enforce EC legislation. The 
country's' environmental accession strategy should include implementation timetables 
for meeting the EC environmental acquis, starting amongst others with implementation 
of the framework and IPPC directives mentioned above. 
83 
Conclusion 
Compliance with the EC acquis presupposes a positive turn in the economic situation and 
will necessitate greater and consistent emphasis on environmental issues, large-scale 
investment, as well as development of a comprehensive, cost-effective and focused 
environmental strategy and of adequate implementation and enforcement structures. If 
such a strategy is followed, full transposition of the acquis could be achieved in the 
medium to long term. However, effective compliance with a number of pieces of 
legislation requiring a sustained high level of investment and considerable administrative 
effort (e.g. urban waste water treatment, drinking water, aspects of waste management 
and air pollution legislation) could be achieved only in the very long term. 
Consumer Protection 
The Community acquis covers protection of the economic interests of consumers 
(including control of misleading advertising, indication of prices, consumer credit, unfair 
contract terms, distance selling, package travel, sales away from business premises and 
timeshare property) as well as the general safety of goods and the specific sectors of 
cosmetics, textile names and toys. 
The Europe Agreement provides for approximation of legislation with EC law and co­
operation with a view to achieving full compatibility between the systems of consumer 
protection in Bulgaria and the Community. Stage I measures of the White Paper focus on 
improving product safety, including cosmetics, textiles and toys, and on the protection of 
economic interests, notably measures on misleading advertising, consumer credit, unfair 
terms and indication of prices. Stage II measures relate to package travel, sales away 
from business premises and time share property. New EC legislation which has been 
adopted recently (distance selling) or will be adopted soon (comparative advertising, 
price indication) will also need to be taken into account. 
Descriptive Summary 
The Constitution refers to consumer protection and freedom of competition as 
fundamental economic principles. A draft law on Consumer Protection has been under 
discussion for some time. Meanwhile, the area is regulated by a number of specific laws. 
There is no particular institution in charge of creating consumer policy and enforcing 
consumer protection legislation. Various ministries are involved in the preparation and 
monitoring of consumer legislation but there is no single co-ordinating body. Created in 
1990, the Federation of Consumers is the only organisation in Bulgaria dealing 
specifically with the interests of consumers. It is an independent federation made up of 
consumer unions and clubs and responsible for providing consumer advice and 
information as well as campaigning and lobbying the government. 
Current and Prospective Assessment 
There is a need to establish an independent body overseeing consumer affairs. Although 
the adoption of the planned law on Consumer Protection could remedy many 
shortcomings, there are still a number of gaps. On the economic protection of 
84 
consumers, substantial amendments will need to be made to existing legislation 
concerning the indication of prices, misleading advertising, unfair contract terms and 
consumer credit. New legislation will have to be introduced in areas such as sales away 
from business premises, distance selling and package travel. 
Since the Bulgarian legislation does not include any general provisions on standards for 
product safety, the adoption of a new law on Consumer Protection would be a step 
further in the approximation of legislation with European law. There is no known 
legislation imposing labelling requirements for clothes and textile products while 
adjustments will be required to existing legislation on the safety of toys. Legislation on 
cosmetics is, in general, close to European law, but some changes are needed to ensure 
full compatibility. 
In their national strategy paper for the implementation of the White Paper, the Bulgarian 
authorities announce that the transposition of consumer protection directives into national 
law should be completed by late 1998. 
The development of a strong and independent consumer movement, sustained by public 
authorities, will need to accompany the introduction of the acquis. 
Conclusion 
If Bulgaria is to comply with EC standards on the protection of consumer interests, she 
will need to accelerate her preparation of consumer policy legislation considerably. 
Although she has started the approximation process under the Europe Agreements, the 
main principles of the acquis have not yet been transposed into Bulgarian law. Achieving 
full compatibility in the medium term will require commitment and substantial efforts. 
3.7 Justice and Home Affairs 
The Present Provisions 
The Justice and Home Affairs (JHA) acquis principally derives from the framework for 
co-operation set out in Title VI (Article K) of the Treaty on European Union (TEU), "the 
third pillar", although certain "first pillar" (EC Treaty) provisions and legislative 
measures are also closely linked. 
The EC JHA framework primarily covers: asylum; control of external borders and 
immigration; customs co-operation and police co-operation against serious crime, 
including drug trafficking; and judicial co-operation on criminal and civil matters. The 
TEU stipulates key principles upon which such co-operation is based, notably the 
European Convention on Human Rights and the 1951 Geneva Convention on the Status 
of Refugees. It is also based implicitly on a range of international conventions 
concerning its fields of interest, notably those of the Council of Europe, the United 
Nations and the Hague Conference. The legislative content of third pillar acquis is 
different from the first pillar; it consists of conventions, joint actions, joint positions and 
resolutions, (including the agreed elements of draft instruments which are in negotiation). 
A number of EU conventions (including the 1990 Dublin Convention, and conventions 
relating to extradition, fraud and EUROPOL) have been agreed by the Council and are 
now in the process of ratification by national Parliaments; several other conventions, 
including one on external frontiers are in various stages of negotiation in the Council. 
85 
The JHA acquis involves a high degree of practical co-operation, as well as legislation 
and its effective implementation. 
The New Treaty 
For many of the above matters, the entry into force of the Treaty resulting from the 
Amsterdam Inter-Governmental Conference will mark the end of the current cooperation 
framework. 
Reiterating the objective of developing the Union into an "area of freedom, security and 
justice", the new Treaty brings these matters, including the free movement of persons, 
asylum and immigration, into the Community's sphere of competence. 
On the free movement of persons in particular, the new Treaty provides for the 
incorporation of the Schengen acquis into the framework of the European Union and 
binds any candidate for EU membership to accept that acquis in full. 
With regard to matters remaining within the cooperation framework, i.e. policing and 
criminal justice, the new Treaty provides for the reinforcement of the cooperation system. 
The Europe Agreement and the White Paper 
The Europe Agreement includes provision for co-operation in the fight against drug 
abuse and money laundering. 
The White Paper does not deal directly with third pillar subjects, but reference is made to 
first pillar matters such as money laundering and freedom of movement of persons which 
are closely related to Justice and Home Affairs considerations. Reference is also made to 
the Brussels and Rome conventions. 
Descriptive Summary 
General Preconditions for JHA Cooperation 
Bulgaria joined the Council of Europe in 1992 and ratified in October 1996 the most 
important instruments concerning human rights, except that concerning minorities. There 
is provision for an independent judiciary according to the rule of law. 
Some progress has been made on reform of JHA institutions but there is still much to do 
in tackling problems such as the need to embed respect for the rule of law. structural and 
staffing deficiencies, and institutional corruption. Bulgarian legislation only gives 
minimum guarantees for data protection and with the advice of the Council of Europe 
Bulgaria is beginning the preparation of a comprehensive data protection system. (See 
also separate section on Single Market). 
Asylum 
Bulgaria acceded in 1992 to the Geneva Convention of 1951 and the 1967 Protocol. At 
present the convention has direct effect and is implemented by decree through an 
ordinance regulating refugee status and asylum procedures, administered by the National 
Bureau on Territorial Asylum and Refugees (NBTAR). Some 850 applications for 
refugee status were made in 1995. Current procedures do not match international 
86 
standards in a number of respects, especially in relation to interviewing and expulsion 
procedures. Responsible officials and NGO staff have little knowledge of foreign 
circumstances and legislation and there is a major shortage of resources. A new draft law 
designed to regulate asylum procedures more effectively is currently in preparation. 
Immigration/Border Contrôlâmes 1989 many Bulgarians have sought work in EU 
countries, notably Germany and Greece. Bulgaria is now becoming a transit country for 
third country migrants, from Asia and Africa as well as the NIS, seeking to cross to the 
EU. Because of concerns about emigration trends, abuses of the immigration system and 
other relevant factors such as drug trafficking through the Balkan route, the EU decided 
to include Bulgaria and Romania on the list of third countries for which visas are 
required. The Bulgarian authorities are now seeking to put in place measures which 
effectively tighten the visa regime. The admission system is also being strengthened, 
with rules on residence and work permits and naturalisation being tightened, especially 
for risk countries. In March 1997 the Bulgarian Government decided to introduce a visa 
free regime for citizens of EU/EEA countries. Bulgaria is also tightening up enforcement 
procedures, deportation procedures and penalties for illegal immigration and have put in 
pjace sanctions against carriers. Bulgaria has readmission agreements with Germany, 
Greece, France, Spain, Poland, Slovakia, Slovenia and Lithuania and is preparing 
agreements with Portugal, the Benelux countries, Denmark, the Czech Republic and 
Romania. It does not have such an agreement with Turkey. The Bulgarian border 
management system is currently being reformed, introducing common information 
systems, document control and improved surveillance. Responsibility is split between 
the military (Turkish border, reflecting arrangements during the Warsaw Pact period) and 
the border guard, but plans are now being implemented to create a single, civilian 
national border guard. 
Police Cooperation 
Since 1990 there has been a significant increase in organised crime in Bulgaria, covering 
many areas including trafficking in women, protection and other rackets, extortion, 
economic crime and smuggling of many items, including drugs. Most groups are of local 
origin but there are close connections to foreign groups. The Government is developing a 
national coordinated programme to counter organised crime and is aiming to revise the 
criminal code to tackle such crimes more effectively. The lead agency is the Ministry of 
the Interior's Central Agency for Combating Organised Crime. Co-ordination with other 
relevant services (Customs, Finance, Justice) has been poor but the Government is 
seeking to improve it. Bulgaria is party to the 1990 Money Laundering Convention and 
adopted in May 1996 a Money Laundering Act. Considerable work remains to be done, 
however, to enable the system to work effectively in practice. (See also separate section 
on Single Market). Bulgaria has ratified the main terrorism conventions. It does not 
consider there to be terrorist activity within the country, but there is some evidence of 
terrorists using the country for transit. 
Drugs 
Bulgaria is a major transit country for drugs trafficking and domestic demand is 
increasing. The main drug transiting Bulgaria is heroin, but seizures indicate an increase 
in cannabis transit. There is some domestic drugs production of opium poppies. Bulgaria 
is party to the main international drugs conventions. The Government is setting up a 
87 
national council to pursue a global strategy to counter drug abuse and trafficking. It has 
prepared draft laws to strengthen the control of narcotic and synthetic drugs and 
precursors and has set up special anti-drugs units in the police and customs. 
Judk™1 Cooperation 
Bulgaria has ratified the key criminal conventions and the criminal procedure code 
allows for judicial cooperation, but the implementation regulations for the conventions 
are not in place. In the civil field the procedure code allows for certain judicial 
cooperation procedures and Bulgaria has ratified the commercial arbitration convention 
but has still to tackle the Hague Conventions. Overall the Bulgarian judicial system 
suffers from severe resource shortages, has little experience of judicial cooperation and 
has only limited expertise in foreign legal systems. The process of institution building 
and setting out the rules for the functioning of judicial structures is underway. A 
programme for the reform of the Bulgarian judicial system was approved in December 
1996. 
Current and Prospective Assessment 
Bulgaria has begun to take the steps in all key areas of JHA to work towards EU 
requirements. In the legislative field most (but not all) key measures are either in place 
or in preparation. The difficulties Bulgaria is facing over its relations in the visa field 
with the EU are leading to considerable efforts on the part of the Government to 
strengthen the visa and admission systems to bring them more into line with EU systems, 
but there is still some way to go to achieve alignment with the acquis. Bulgaria is 
heavily affected by organised crime and drug trafficking. The Government response is 
significant and having some effect but the scale of the task is large. For the most part 
Bulgarian officials have little if any practical experience of working with EU 
counterparts and institutions. Given the transnational nature of the JHA problems facing 
Bulgaria (immigration policy, drugs, organised crime) as well as its Balkan neighbours 
there is also a need to develop more effective regional cooperation mechanisms in these 
fields. 
Conclusion 
Given the scale of the problems facing Bulgaria in the JHA field, it will be difficult to 
meet the acquis (present and future) requirements in the medium term. To achieve this a 
major, sustained effort will be needed, with particular emphasis on improving the 
efficiency and effectiveness of JHA institutions. 
3.8 External Policies 
Trade and International Economic Relations 
The acquis in this field is made up principally of the Community's multilateral and 
bilateral commercial policy commitments, and its autonomous commercial defence 
instruments. 
The Europe Agreement includes provisions in several areas requiring parties to act in 
accordance with WTO/ GATT principles, or other relevant international obligations. 
88 
The White Paper includes no provisions in this field. 
Descriptive Summary 
Bulgaria is a member of the World Trade Organisation (WTO), and has dbserver status in 
the Government Procurement Agreement. Upon accession Bulgaria would have to 
comply with the obligations of the plurilateral WTO agreements to which the 
Community is a party. 
At present Bulgaria does not maintain quantitative restrictions on any textile or clothing 
products. On accession the Community textiles policy would be extended to Bulgaria; 
any Community restrictions still maintained at the date of accession would require 
adjustment by an appropriate amount to take account of Bulgarian accession. 
Bulgaria maintains balance of payments restrictions which will have to be phased out 
prior to accession. The Bulgarian authorities have agreed to begin phasing out as soon as 
the balance of payments situation improves. 
Current and Prospective Assessment 
On accession Bulgaria would have to apply the Community's Common Customs Tariff, 
and the external trade provisions of the Common Agricultural Policy. The post Uruguay 
Round weighted average level of most favoured nation duties for industrial products will 
be 16.4% for Bulgaria and 3.6% for the Community. The progressive implementation of 
free trade between Bulgaria and the Community by the time of accession will, however, 
reduce the impact on the domestic industry of applying the lower Community Common 
Customs Tariff. 
In its relations with international organisations Bulgaria should ensure that its actions and 
commitments respect the Europe Agreement and ensure a harmonious adoption of its 
future obligations as a member of the Community. 
On accession Bulgaria would become party to the Community's various preferential 
agreements. Preferential agreements between Bulgaria and third countries would, in 
general, have to be terminated on accession. 
Bulgaria's export restrictions on ferrous scrap are due to be eliminated by the end of 
1997. 
In the area of trade in services and establishment, Bulgaria is engaged in a process which 
should enable it to bring its multilateral commitments more closely into line with those of 
the Community, wherever necessary. 
On accession Bulgaria would have to repeal national legislation in the field of 
commercial defence instruments, and EC legislation would become applicable there. 
Experience from previous accessions has shown that the automatic extension of existing 
anti-dumping measures to new member states prompts third countries to raise problems 
in terms of the compatibility of this approach with relevant WTO provisions. It has also 
shown that accession creates a potential for circumventing measures adopted by the 
Community under the commercial defence instruments. This happens when, prior to 
accession, substantial quantities of the products subject to measures are exported to the 
89 
territory of the future member state and, on accession, are automatically released for free 
circulation in the enlarged customs territory. These two problems would have to be 
addressed during Bulgaria's pre-accession phase. 
Bulgaria is a member of two out of four existing regimes for the non-proliferation of 
weapons of mass destruction, is a candidate for admission to a third, and has expressed 
interest in joining the fourth one. Bulgaria is expected to shortly approve the EU control 
list of dual-use items. Arms export is also controlled. It is difficult to assess the extent to 
which export controls are effectively enforced, and whether certain reservations are 
justified, but Bulgaria appears to have no major problems applying EC legislation in this 
field. 
Conclusion 
Bulgaria should be able to meet Community requirements in this field in the medium 
term. 
Development 
The acquis in the development sector is made up principally of the Lomé Convention, 
which runs until early 2000. 
Neither the Europe Agreement or the White Paper include provisions in this field. 
Descriptive Summary 
Bulgaria has a number of trade agreements with ACP countries, based on Most Favoured 
Nation treatment. Under its GSP scheme Bulgaria grants a degree of preferential 
treatment in the form of reduced duties to a number of ACP countries, and grants duty 
free access to those ACP countries considered as Least Developed Countries. 
Bulgaria has no budget for development aid, although it has participated in actions to 
support internationally developing countries, including the granting of humanitarian aid. 
Current and Prospective Assessment 
On accession, Bulgaria should apply its preferential trade regime to the ACP States and 
participate, together with the other member states, in financing the European 
Development Fund (EDF), which provides financial aid under the Lomé Convention. 
Applying the Lomé trade regime should not generally be a source of difficulties for 
Bulgaria. 
Normally, new member states accede to the Lomé Convention by means of a protocol on 
the date of their accession to the EU. 
Conclusion 
Bulgaria is well placed to be able to meet EU requirements in this field in the next few 
years. 
90 
Customs 
The acquis in this sector is the Community Customs Code and its implementing 
provisions; the EC's Combined Nomenclature; the Common Customs Tariff including 
trade preferences, tariff quotas and tariff suspensions; and other customs-related 
legislation outside the scope of the customs code. 
The Europe Agreement covers the establishment of a free trade area with the Community 
and the progressive removal of customs duties on a wide range of products, according to 
clear timetables starting from the date of entry into force of the agreement. 
The White Paper includes in Stage I, measures to consolidate and streamline the free 
trade established under the Europe Agreement, including legislation compatible with the 
Customs Code, Combined Nomenclature, etc. Stage II concerns the adoption of the full 
Community legislation, with a view to joining the customs union upon accession. 
Descriptive Summary 
On accession the Bulgarian customs authorities would be required to assume all the 
responsibilities necessary for the protection and control of their part of the EU's external 
border. Besides the provisions on indirect taxation, they would be responsible for the 
implementation and enforcement at the external border of the Community's common 
commercial policy, the common agricultural policy, the common fisheries policy etc. 
Bulgaria's capacity fully to apply the acquis presupposes the possibility to adopt and 
implement the Community legislation; and the existence of an adequate level of 
infrastructure and equipment, in particular in terms of computerisation and investigation 
means and the establishment of an efficient customs organisation with a sufficient 
number of qualified and motivated staff showing a high degree of integrity. 
Bulgarian legislation in the customs field dates from 1960. With the support of the 
technical assistance provided by customs programmes, Bulgaria is gradually drafting 
legislation harmonised with the Community's customs code. 
Bulgaria aligned its national goods nomenclatures to the Community's Combined 
Nomenclature in 1996. The Bulgarian administration does not yet have an Integrated 
Tariff. This will make the comparison of the Bulgarian tariff rates with the Common 
Customs Tariff rates difficult. Bulgaria is not yet familiar with the Community's Binding 
Tariff Information system. 
Bulgaria adopted on 1 January 1997 the new system of cumulation of origin between 
European countries. 
Bulgaria has applied to become a contracting party to the EC/EFTA Common Transit 
Convention and the Single Administrative Document Convention. A Community task 
force is assisting Bulgaria in this field, but development is hindered by difficulties in the 
area of guarantees. Accession to the Transit Convention will require a period of 
considerable further preparation. 
91 
Current and Prospective Assessment 
Bulgaria would need to adapt its national procedures to the Community's legislation 
regarding suspensive arrangements and customs procedures with economic impact. At 
the moment of accession, some transitional arrangements would be needed, notably for 
operations beginning before the date of accession but which are concluded after that date. 
In its trading relations with the European Community, Bulgaria will have to fully abolish 
the remaining charges having'equivalent effect to customs duties such as the customs 
clearance fee still applied in spite of its being in contravention of the Europe Agreement. 
It will be important that the Bulgarian customs authorities can participate appropriately in 
the various computerised systems necessary for the management, in the customs 
union/internal market, of the customs and indirect tax provisions, as well as the 
computerised systems for mutual administrative assistance in customs, agricultural and 
indirect tax matters. 
Bulgaria would need on accession to dismantle customs controls at the border with EU 
member states and with other acceding countries. The resources needed for the 
reinforcement of the border posts along its frontiers with non-EU member states should 
be taken into account in its strategic planning. 
Difficulties have arisen over possible non-compliance with the Europe Agreement, 
concerning re-export of sensitive products outside the EU. 
Conclusion 
The Bulgarian Customs Administration is in the process of reorganisation. It will be 
necessary to align the organisation to the duties that have to be carried out by a modern 
customs organisation. Low salaries make it difficult to recruit staff. 
It seems unlikely that Bulgaria will be ready to fulfil the responsibilities of an EC 
customs administration within the next few years. 
Common Foreign and Security Policy 
Since 1989, Bulgaria has re-oriented its foreign and security policy towards European 
and Euro-Atlantic integration. Improvement of relations with neighbouring countries has 
also been a priority for successive Bulgarian governments. Bulgaria has been an active 
participant in the dialogue arrangements provided for under the Union's Common 
Foreign and Security Policy and when invited has supported EU actions within that 
framework. Bulgaria is a member of the UN, OSCE, Council of Europe and many other 
international organisations. It is an associate partner of WEU, a participant in NACC and 
PfP; and has made clear its desire to become a member of WEU and NATO as soon as 
possible. It has participated in the reconstruction efforts in Bosnia and sent 50 police 
observers to the UN multinational force in Bosnia. It also participates in a number of 
regional organisations including the Black Sea Economic Co-operation, the trilateral 
arrangements with Romania and Greece, and the CEI. In 1996 it took the initiative in 
hosting a ministerial meeting in Sofia which adopted a declaration on regional co­
operation. 
92 
There are no territorial disputes between Bulgaria and any member state of the Union, or 
with Romania. 
Relations with Turkey have improved considerably in recent years with the democratic 
changes in Bulgaria and the reduction in ethnic tensions. But there remain a number of 
open issues including the demarcation of the borders and the continental shelf, defining 
the regions for flight information, the navigation regime through the Bosporus straits and 
cultural matters. All these issues are currently under negotiation and are unlikely to pose 
a serious problem to bilateral relations. 
Bulgaria was the first country to recognise the independence of FYROM on 15 January 
1992. Since then relations have intensified and FYROM is an important trading partner 
of Bulgaria. Although no basic treaty has been signed because of the so called "language 
dispute" (Bulgaria does not recognise Macedonian as a separate language), the 
government recently stated its intention to resolve this matter. 
Relations with the Federal Republic of Yugoslavia (FRY) stagnated during the period of 
armed conflict in the former Yugoslavia when Bulgaria adhered to the sanctions regime 
imposed by the UN Security Council. Since the agreement on trade and economic co­
operation of 1995, relations between Bulgaria and FRY have gradually intensified, but 
the demarcation of the border remains to be settled and Bulgaria is concerned by the 
treatment of the Bulgarian minority in FRY. 
Bulgaria has a sizeable diplomatic service which would permit it as a member of the 
Union to play an effective role. It maintains 87 representations abroad and employs 588 
diplomatic staff. 
Bulgaria supports non-proliferation of nuclear, biological and chemical weapons and is a 
signatory to all relevant international arms control agreements. It exercises strict control 
concerning the dual use of technology, being a member or candidate member of all the 
major existing export control regimes. The Bulgarian armed forces, which are being 
brought under democratic control, are being reorganised to meet NATO requirements. 
The defence industrial base has declined sharply in recent years and is also in the process 
of re-organisation in an attempt to meet NATO standards. 
In the memorandum accompanying its application for membership of the Union, the 
Bulgarian government confirmed that it was ready and able to participate fully and 
actively in the Common Foreign and Security Policy. 
The assessment of Bulgarian foreign and security policy to date leads to the expectation 
that as a member it could effectively fulfil its obligations in this field. 
3.9 Financial Questions 
Financial Control 
The implementation of Community policies, especially for agriculture and the Structural 
Funds, requires efficient management and control systems for public expenditure, with 
provisions to fight fraud. Approximation of legislation is moreover needed to allow the 
system of "own resources" to be introduced, with satisfactory provision for accounting. 
93 
The Europe Agreement provides for cooperation in audit and financial control, including 
technical assistance from the Community as appropriate. The White Paper includes no 
measures in this field. 
Descriptive Summary 
The National Audit Office (NAO) is the highest external control body; originally 
established in 1880 but suspended in 1947, it was reinstated by a law in 1995; it is a legal 
entity funded by the budget, independent of the executive and accountable directly to 
Parliament. The general directorate of the NAO is established in Sofia. Its nine regional 
territorial offices, comprising 28 sectors, are based in the other main municipalities. The 
State and municipal budgets and all budget-supported organisations, foundations and 
funds established with budget resources or guaranteed by the government are subject to 
control by the NAO. Findings from inspections are legally binding on their subjects. 
Within the government structures, the State Financial Control is a legal entity with its 
own budget within the Ministry of Finance, performing preventive and a posteriori 
controls. It consists of a general directorate and 28 regional offices. It effects control 
over the overall activities and oversees the internal control units in ministries and other 
public institutions. 
Internal and external financial control bodies exercise documentary controls and controls 
of substance, including on-site inspection. 
The tax administration and customs administration are both established as legal entities 
with their own budget within the Ministry of Finance. The tax administration effects 
preventive, current and a posteriori controls and it consists of a general directorate, 
regional and local tax offices. The customs administration exercises preventive control 
over imports, exports and foreign exchange valuables going through the state border. It is 
responsible for the establishment and the collection of import duties. 
The judiciary system comprising courts, prosecutor's office and police are responsible for 
fighting fraud. The State Financial Control also investigates such cases. The Central 
Office for Control of Organised Crime operates under the Ministry of the Interior. 
Current and Prospective Assessment 
The legislative basis of the NAO guarantees the institution's independence and 
establishes a proper basis for the autonomous development and execution of its activities, 
but its implementation has been slow due to budgetary and logistical constraints. 
The Government's internal financial control faces the same problems as the public 
administration at large. It needs a thorough examination and reorganisation. The 
establishment of methodological guidelines for financial control would be needed as 
well. There is no central authority responsible for fighting fraud. 
Further cooperation with the Commission will be needed to establish whether accounting 
procedures entirely fulfil the requirements of Regulation 1552/89. The tax and custom 
services need restructuring in order to ensure the effectiveness of tax collection. 
94 
The funding of agricultural policies only began fairly recently. The payment mechanism 
is already in place but the necessary steps in relation to controls over the payments are 
not in accordance with EC regulations. 
Given the absence of a regional policy comparable to that of EU Member States, it is 
difficult to provide any assessment of the financial control tools in the field of regional 
development and regional development funding. Efficient monitoring, control and audit 
structures would need to be set up in this area. 
Conclusion 
Provided the current commitment continues, the National Audit Office could function in 
accordance to EC standards within the medium term. 
Major efforts are essential to strengthen internal financial control functions. 
Budgetary Implications 
The communication entitled "Agenda2000" sets out the overall financial framework 
which should accommodate the budget impact of any future enlargements in the medium 
term. This is to ensure that any enlargement is compatible with proposed Community 
policy guidelines within reasonable budget limits. 
As things stand, it would be difficult, not to say premature, to attempt precise country-by-
country evaluations of the budgetary implications of each of the applicants joining the 
Union. Exactly what the impact would be may vary considerably depending on a whole 
series of factors: 
the date on which the applicant country joins; 
developments in Community policies between how and then, in particular the 
decisions to be taken on further reform of the common agricultural policy and new 
guidelines for structural measures; 
the progress made by the applicant countries in terms of growth, increasing their 
competitiveness and productivity and their ability to absorb the acquis; 
the transitional measures that will come out of the negotiations. 
Only a few orders of magnitude for certain budget categories and an overall estimate can 
be given purely as a guide. 
Expenditure 
If the common agricultural policy were to be reformed along the lines suggested by the 
Commission, once the reforms were fully up and running and in terms of just market 
intervention measures, Bulgaria's accession would give rise to additional expenditure in 
the order of 1% in relation to likely expenditure on the present fifteen Member States. 
After a phasing-in period, the allocations for structural measures in Bulgaria should total 
not more than around 4% of Bulgaria's GNP. 
95 
Application of the other internal Community policies in the new member countries would 
be likely to involve additional expenditure probably in excess of their relative proportion 
of Union GNP, since for certain policies the additional implementing costs also depend 
on the target population, the geographical area covered or the number of Member States 
involved in the coordination and harmonisation measures. The GNP of Bulgaria is 
currently 0.2% of total Union GNP. 
By contrast, Bulgaria's accession should not involve significant additional expenditure as 
far as Union external action is concerned. 
It should not be forgotten that when an applicant country joins, the Community budget 
will no longer have to bear the costs of grants the country was eligible for under the 
various pre-accession programmes, such as PHARE. 
In light of the above, the estimated costs in the three areas mentioned arising from 
Bulgaria's accession should fall within the range of, annually, ECU 1.0 to 1.2 billion in 
2005-06 (at constant 1997 prices). 
Revenue 
Assuming full application of the own resources system, the new members' contributions 
to the Community budget should, in terms of total GNP and VAT resources (taking 
account of the capping rules applying to VAT), be close to the proportion of the Union's 
GNP they account for, which in Bulgaria's case is in the order of 0.2%. Bulgaria's 
portion of traditional own resources will depend on the structure of its trade flows at the 
time of accession. 
To ensure that the own resources are established, monitored and made available in line 
with Community regulations, Bulgaria will have to overhaul its current customs system. 
In addition, for the purposes of accurately calculating the GNP resource considerable 
improvements will have to be made to the national accounts to ensure that they are 
reliable, homogeneous and complete. Improving the statistics will also be essential for 
drawing up the VAT own resources base, which- will mean bringing Bulgaria's VAT 
system fully into line with the Community directives. 
96 
4 Administrative Capacity to Apply the Acquis 
The European Council in Madrid in December 1995 concluded that the harmonious 
integration into the EU of the central and eastern European applicant states would, in 
particular, require the adjustment of their administrative structures. This chapter 
examines the current state of the public administration in Bulgaria, including relevant 
aspects of the judicial system, and assesses the current and prospective ability to carry out 
the functions required of it in a modern, democratic state, with a particular focus on the 
need to administer matters related to the acquis. 
4.1 Administrative Structures 
A description of Bulgarian constitutional structures, their powers and responsibilities, 
including those of regional and local government, is given in Chapter 1. 
At the central level there are 16 ministries, a coordinating Council of Ministers and a 
variety of specialised agencies charged with policy formulation and implementation in 
specific fields. The European Integration Department in the Ministry of Foreign Affairs 
coordinates EU accession related matters. 
The main legal bases for the civil service are the Constitution and the Labour Code 
regarding the civil service. A law on the civil service was foreseen in the Constitution but 
has not yet been brought before the National Assembly. 
Although the civil service is in principle .politically independent, in practice many 
appointments down to middle-ranking levels in ministries and local government are 
changed when a new government or a new minister takes office. 
In 1996, the central administration employed about 128,000 staff; major staff reductions 
have since taken place and are planned to continue over 1997, in the framework of the 
Government's structural reform programme. Salaries in the private sector are much 
higher than in the civil service. Officials are frequently dependent on secondary sources 
of income. 
The present Government has made public administration reform a priority. In addition to 
the introduction of a civil service law, it aims to reform the state administration and 
create an open information culture towards the citizens. Backed by a unanimous 
declaration of the National Assembly adopted in May 1997, the Government has also 
undertaken a comprehensive fight against corruption. As regards the local administration, 
the Government intends to complete, by the end of 1997, a new legislative basis for local 
self-governance establishing a greater economic and financial independence for the 
municipalities. 
For the improved coordination of European integration policy, the Government is 
considering setting up a special body, beyond existing arrangements. (See also the 
section of the Introduction concerning relations between the European Union and 
Bulgaria). 
97 
4.2 Administrative and Judicial Capacity 
Bulgaria was administered under central planning during the communist period. The 
communist system rejected the primacy of the rule of law and subjugated the law and the 
adniinistration to the implementation of Party policy. Against this background, both the 
administration and the rule of law itself increasingly came to be seen by the public as 
instruments of political control. 
The administrative framework currently in place is generally adequate. However, its 
functioning in practice raises substantial problems. There is a need for reorganisation and 
the introduction of effective management and training methods. Decision making is 
centralised and coordination and information exchange within and between ministries is 
limited. 
Many of the key ministries will require a major reform and reorganisation in the course 
of Bulgaria's progress toward EU membership. The audit and financial control organs, in 
particular, will require further development. A review of the division of responsibilities 
among Government institutions, as well as internal reforms in individual institutions, will 
be necessary in order to carry out policies effectively. These problems underline the 
importance of the Government's commitment to the reform of the administration. 
The lack of a clear legal basis for the civil service is a serious defect. The introduction of 
a civil service law has the potential to stabilise the position of the public administration 
and help to promote its political independence. 
The civil service is not understaffed overall. But the gap between public and private 
sector salaries, the absence of career perspectives and the low popular esteem and 
confidence in the public administration has made a civil service career unattractive to 
potential young entrants, and to many of the more talented of the established staff. 
Innovative recruitment and career planning policies will be required. Similar policies 
will be needed to broaden the currently limited base of highly qualified staff capable of 
dealing with complex European integration issues and generally to counter the problem 
of "brain drain" to the private sector. 
Public confidence in the civil service is affected by the legacy of the past and by 
widespread abuses. The National Assembly and the Government recognise the 
seriousness of the problem of corruption. A comprehensive programme will be needed to 
tackle this, including the simplification of legislation and administrative procedures, 
accelerated privatisation of state property and other measures reducing the managerial 
role which the state still plays in the economy and which renders the public 
administration prone to opaque and improper practices. 
The Government's reform plans for the public administration point in the right direction. 
It will be a major challenge for these policies to achieve the radical improvements in 
management, training and overall professionalism required throughout the Bulgarian 
public administration. Nonetheless, if a sustained and concerted effort is made, 
significant progress should be possible. All this will need to take place against the 
backdrop of the Government's economic and structural reform programme, which 
foresees a major reduction in administrative expenditure. 
98 
The capacity of the Bulgarian administration to implement and monitor legislation that is 
compatible with the acquis is constrained by the difficulties already described. Bulgaria's 
policy for European integration requires a stronger institutional structure. The current 
structure for the coordination is fragmented. It also lacks resources, notably in terms of 
staffing, and has at present no permanent representation at the level of the government. 
Several institutions have been established or prepared to enable the enforcement of the 
acquis. At the same time, in various sectors specific bodies for the implementation of the 
acquis need to be strengthened or created. 
Key Areas for the Implementation of the Acquis 
The uniform application of EC law: The effective application of the acquis presupposes 
that the judicial authorities of member states are able to apply the provisions of the 
Treaty dealing with ensuring the unity and application of the acquis, and are able to 
ensure the proper functioning of the Single Market and Community policies in general. 
A high quality and well trained and resourced judiciary is necessary for the application 
by the courts of EC law, including cases of direct effect, and cases of referral to the 
European Court of Justice under the terms of Article 177 EC. 
The judicial system in Bulgaria has important weaknesses, particularly concerning 
resources, and relevant expertise. Given this situation, the Commission has significant 
doubts about the ability of the system to assure the effective application of the acquis. 
Single market: The ability of Bulgaria to ensure the correct application of Community 
requirements in the Single Market, particularly concerning the free movement of goods 
and services presupposes the existence of highly developed and effective regulatory, 
standardisation, certification and supervisory authorities, able to act fully in accordance 
with EC rules. An analysis of these points is made in Chapter 3.1 (under "The Four 
Freedoms"). 
Concerning the administrative capacity in respect of free movement of goods the 
situation in Bulgaria is not yet satisfactory in a number of respects, despite some recent 
progress. The administrative structures for standardisation and conformity assessment 
need reinforcement in order to implement the future legislation in this area. 
Clarifications are required on the future status of the Committee for Standardisation and 
Metrology (1,350 staff overall), particularly with regard to its independence in executing 
standardisation measures. Further staff training is required. Concerning free movement 
of services, the situation is improving but still has some way to go. The Banking 
Supervision Department has an adequate (and increasing) number of staff (90); there is a 
Securities Stock Exchange Commission (with 180 staff), and in the insurance sector a 
regulatory body is planned to be created soon. Some enforcement bodies need 
considerable strengthening, such as those dealing with intellectual property rights, despite 
recent improvements. 
In order to meet EU requirements in this area important improvements remain necessary. 
Competition: As explained in Chapter 3.1 (under "Competition") enforcement of 
competition law requires the establishment of anti-trust and state aid monitoring 
authorities, and that the judicial system, the public administration and the relevant 
economic operators have a sufficient understanding of competition law and policy. 
99 
In Bulgaria the central authority is the Committee for the Protection of Competition, 
which has 50 staff; the level of expertise needs improvement, particularly with such a 
relatively modest number of staff. The ability effectively to implement EC requirements 
in this field will require strengthening of the enforcement mandate (which in itself will 
require institutional reinforcement) and improvements in financial and human resources. 
Telecommunications: In order to formulate and implement the many liberalisation 
regulations contained in the acquis in this field it is necessary to have a regulatory and 
policy making body that is effectively separated from any operating company. 
In Bulgaria this body is the Committee for Post and Telecommunications (CPT) which 
has 120 staff. This is an adequate number. In order to ensure the effective administration 
of the telecommunications acquis the CPT's regulatory functions need to be rendered 
fully independent from the operating companies and the fairness of the licensing 
procedures needs to be ensured. 
Indirect taxation: The effective administration of the indirect taxation acquis 
presupposes structures capable of implementing the EC legislation concerning the 
harmonisation of Valued Added Tax and excise duties in an environment in which fiscal 
controls at internal EU frontiers have been abolished; and the excise system is based on 
the tax warehouses, duty being payable at the local rate in the member state at the time 
the goods are consumed. This requires a highly developed and well trained and 
resourced service, with a high degree of integrity. 
In Bulgaria the relevant authority is the Ministry of Finance. The number of staff is 
approximately 11,000 (including the general tax/ excise administration). Due to a large 
turnover of staff, resulting partly from trained staff being recruited by the private sector, 
it is difficult to estimate the capacities of existing staff. In order to ensure the effective 
administration of the acquis in this area it will be necessary to consolidate and improve 
the overall professional standards of the staff, including training measures and 
improvements in pay. 
Agriculture: The administrative requirements in the agricultural area primarily concern 
veterinary and phytosanitary control, to protect public health and ensure the free 
movement of agricultural goods; and the ability to administer the mechanisms and 
requirements of the CAP, including high standards of financial control and official 
statistics. These points are dealt with in Chapter 3.4 (under "Agriculture"); general 
standards in the statistical field are examined in Chapter 3.3 (under "Statistics"). 
Concerning the administrative capacity in respect of veterinary and phytosanitary 
controls the situation in Bulgaria is unsatisfactory. Although Bulgaria has an established 
infrastructure in this area, structural changes in the veterinary services, together with 
increased fragmentation of livestock units, make inspection and disease control difficult. 
Also, because of weak border controls there have been several instances of disease 
entering from outside, indicating important risks in this area. The State Veterinary and 
Sanitary Service and the Border Veterinary Control Department of the Ministry of 
Agriculture employ 4,900 staff, which is adequate. Concerning the administration of 
general CAP requirements the appropriate administrative structures are not in place. 
100 
In order to meet EC requirements in this area major improvements will be required across 
the board. 
Transport: The application of the EC Internal Market and competition requirements to 
the transport sector, the development of relevant infrastructure products, and other 
aspects of the transport acquis will present administrative challenges to new member 
states. 
The responsible government authority in Bulgaria is the Ministry of Transport with a 
total of 1,380 staff. This raises particular concerns with regard to the enforcement of 
safety controls, in a context where safety issues are already a concern. 
Employment and social policy: A central administrative requirement in respect of the 
acquis in this area is adequate inspection capacity, particularly concerning health and 
safety at work. 
In Bulgaria the Labour Inspectorate employs about 530 staff. It will require 
reinforcement of staff resources, expertise and its independence. 
Regional policy and cohesion: The main administrative requirements in this area are the 
existence of appropriate and effective administrative bodies , and in particular a high 
degree of competence and integrity in the administration of Community funds. 
In Bulgaria the principal administrative body is the Ministry of Regional Development 
and Construction (around 150 staff). Ministry does not have a strong record, for example 
on the administration of EU assistance programmes. The situation concerning financial 
control is not satisfactory (see the section, below, on "Financial control"). The effective 
administration of the acquis in this area will require substantial improvements, notably 
concerning coordination between ministries, and the different levels of government. 
Environment: Because EC environmental policy, involves the integration of 
environmental protection into EC sectoral policies the administrative requirement is 
potentially very wide, affecting many bodies not normally associated with environmental 
protection. However, the main responsibility lies with environment ministries and 
various subsidiary bodies. 
In Bulgaria the Environment Ministry employs 140 staff. Monitoring is carried out by the 
National Centre for Environment and sustainable development, and enforcement by the 
Ministry and 16 regional inspectorates, with a total of 2,800 staff. These arrangements 
provide a basis for the implementation of the acquis, but require a substantially stronger 
enforcement mandate. 
Consumer protection: In this area, the effective administration of the acquis requires the 
allocation of overall responsibility to a specific State body through which the 
formulation, implementation and enforcement of consumer policy and consumer 
protection legislation can be undertaken. 
In Bulgaria, the Commission for the Protection of Competition, a competition authority, 
has a horizontal, but not exclusive, responsibility for consumer issues. As regards non­
governmental consumer bodies these remain far too weak. There remains confusion 
about the exact scope and objectives of consumer policy. This in part explains difficulties 
101 
in the effective enforcement of consumer laws; however, other factors which need to be 
addressed include a lack of expert staff, organisational deficits, and a lack of sensitivity 
to consumer questions among the judiciary. 
Justice and home affairs: Oversight of justice and home affairs questions falls to the 
justice and interior ministries. The administrative structures need to be able to deal 
effectively with asylum and migration questions, border management, police cooperation 
and judicial cooperation. There is an overriding need for sufficient and properly trained 
staff with a high degree of integrity. 
The National Bureau on Territorial Asylum and Refugees does not currently have the 
administrative capacity to meet EU standards, for example regarding expulsion 
procedures. Responsibility for border management is currently shared between the 
military and the border guard, which can lead to problems regarding coordination. Police 
cooperation with other law enforcement agencies (both inside and outside Bulgaria) 
needs to be improved. The effective administration of the acquis in this area will require 
reinforcement and refinement of existing administrative structures, a framework to 
improve coordination, a comprehensive training programme, and concerted efforts to 
eliminate corruption. 
Customs: Applying the acquis in this area requires an adequate level of infrastructure 
and equipment, including computerisation and investigation resources, and the 
establishment of an efficient customs organisation with a sufficient number of qualified 
and motivated staff showing a high degree of integrity. 
In Bulgaria the customs service employs 4,100 staff. Due to a high turnover of staff, it is 
difficult to estimate their efficiency, and therefore the adequacy of staffing levels. The 
effective administration of the acquis in this area will require fundamental organisational 
and financial reform. The problem of corruption needs to be urgently addressed. 
Financial control: The protection of the Community's financial interests requires the 
development of anti-fraud services, training of specialised staff (investigators, 
magistrates) and the reinforcement of systems of specific cooperation. The 
implementation of Community policies, especially for agriculture and the Structural 
Funds, requires efficient management and control systems for public expenditure, with 
provisions to fight fraud. Administratively it is essential to have a clear separation 
between external and internal control. Police and judicial authorities need to be able 
effectively to handle complex transnational financial crime (including fraud, corruption 
and money laundering) which could affect the Community's financial interests. 
In Bulgaria the main external control body is the National Audit Office. The staff is being 
built up to 440. This is adequate, but the effective administration of the acquis in this 
area will require a through examination and reorganisation of the institutions, including 
the establishment of methodological guidelines. 
102 
4.3 General Evaluation 
Bulgaria's administrative structures will require a major, concerted and sustained effort of 
reform if there it is to be adequate capacity in the medium term effectively to administer 
the acquis. 
Concerning the judicial capacity effectively to apply the Community law, a definite 
evaluation at this stage is difficult. 
103 
C. SUMMARY AND CONCLUSIONS 
Bulgaria submitted its application for membership of the European Union on 14 
December 1995. Its request is part of the historic process of ending the division of 
Europe and consolidating the establishment of democracy across the continent. 
In accordance with the provisions of Article O of the Treaty, the Commission has, at the 
request of the Council, prepared an Opinion on Bulgaria's request for membership. 
Bulgaria's preparation for membership is going forward notably on the basis of the 
Europe Agreement which entered into force in February 1995. The Bulgarian 
government has attached importance to implementation of the White Paper of May 1995 
on the Internal Market, another essential element of the pre-accession strategy putting in 
place in May 1996 an implementation programme. 
In preparing its Opinion, the Commission has applied the criteria established at the 
Copenhagen European Council of June 1993. The Conclusions of this Council stated 
that those candidate countries of Central and Eastern Europe who wish to do so shall 
become members of the Union if they meet the following conditions: 
- stability of institutions guaranteeing democracy, the rule of law, human rights and 
respect for and protection of minorities; 
- the existence of a functioning market economy, as well as the ability to cope with 
competitive pressures and market forces within the Union; 
- the ability to take on the obligations of membership, including adherence to the aims 
of political, economic and monetary union. 
A judgement on these three groups of criteria - political, economic, and the ability to take 
on the acquis - depends also on the capacity of a country's administrative and legal 
systems to put into effect the principles of democracy and the market economy and to 
apply and enforce the acquis in practice. 
The method followed in preparing these Opinions has been to analyse the situation in 
each candidate country, looking forward to the medium term prospects, and taking into 
account progress accomplished and reforms already under way. For the political criteria, 
the Commission has analysed the current situation, going beyond a formal account of the 
institutions to examine how democracy and the rule of law operate in practice. 
1. Political Criteria 
Bulgaria has democratic institutions whose stability seems now secure. They need to be 
reinforced by fuller respect in practice for the rule of law, at all levels of public 
administration. Elections are free and fair and led to alternation of power in 1994 and 
1997. 
Some gaps remain in respect for fundamental rights, though the new government elected 
in April 1997 has announced a series of positive reforms. Considerable efforts are 
needed to pursue the fight against corruption, to improve the operation of the judicial 
104 
system and to protect individual liberties in the face of too frequent abuses by the police 
and secret services. 
The Turkish minority seems well integrated, but this is not so for the Roma. 
V 
The current improvement following the arrival in power of a new government permits the 
conclusion that Bulgaria is on the way to satisfying the political criteria set by the 
Copenhagen European Council. 
2. Economic Criteria 
Despite some first steps taken in 1991, Bulgaria is still only at the start of the process of 
structural transformation. The new government has clearly undertaken to the IMF, the 
World Bank, and the European Commission, that it will set in train rapid reforms in order 
to free prices and start privatisation. This policy should permit recovery from the 
situation created by the crisis of recent months which saw a negative growth" (-10.9% of 
GDP in 1996), worsening public deficits, hyper-inflation (311% in 1996) and 
depreciation of the currency. 
Bulgaria has a population of 8.3 million and its GDP per capita is 24% of the EU 
average. The agricultural sector employs more than 20% of the working population and 
provides 13%> of the Gross Value Added. It still has severe structural difficulties despite 
recent privatisation. Trade with the EU has grown significantly and now represents 35% 
of Bulgaria's external trade. 
On the basis of its analysis, the Commission's judgement as to Bulgaria's ability to 
meet the economic criteria established at Copenhagen is as follows: 
Bulgaria's progress in the creation of a market economy has been limited by the absence 
of a commitment to market-oriented economic policies. v Early liberalisation of trade and 
prices was partially reversed, and price controls were not removed until this year. It is 
only since the crisis at the end of last year, and the recent change of government that 
consensus about the desirability of economic reforms has begun to develop. 
Bulgaria will not be able to cope with competitive pressure and market forces within 
the Union in the medium term. If the authorities can translate their renewed 
commitment to economic transition into successful and sustained action, a turnaround in 
Bulgaria's prospects is possible. However, the country has been set back by six largely 
wasted years. Incomplete land reform has hampered the emergence of a modern 
agricultural sector; slow privatisation and economic instability have weakened state 
enterprises and delayed the development of a dynamic private sector. 
3. Capacity to take on the obligations of membership 
Bulgaria's ability to take on the acquis has been evaluated according to a number of 
indicators: 
- the obligations set out in the Europe Agreement, particularly those relating to the right 
of establishment, national treatment, free circulation of goods, intellectual property 
and public procurement; 
105 
- implementation of the measures set out in the White Paper as essential for establishing 
the single market; 
- progressive transposition of the other parts of the acquis. 
Bulgaria has made considerable efforts to meet its obligations under the Europe 
Agreement. The Agreement has been implemented without major problems and 
according to the timetable for implementation set out in it. Most of the problems related 
to implementation have been resolved. But the weakness of the national coordination 
mechanisms have prevented full exploitation of its potential. The new government has 
decided to reinforce these structures. Bulgaria has an unsatisfactorily low rate of 
transposition of the rules and the directives set out in the White Paper. 
Bulgarian legislation only incorporates a small part of the acquis for the fundamental 
elements of the single market, except for certain aspects of free circulation of goods. 
The scale of progress to be achieved requires very substantial and sustained efforts both 
in approximation of legislation and in creation of structures enabling it to be 
implemented. Complete restructuring of the financial sector, in order to re-establish 
public and investor confidence in it, is among the highest priorities, and the government 
recognises this. 
The weakness of public administration is a major problem, putting in question both the 
rate and the quality of approximation of legislation. The various structures needed to 
apply the legislation on the single market are not currently capable of playing their roles. 
As for the other parts of the acquis Bulgaria should not have particular difficulty in 
applying the acquis in the medium term, provided it maintains its current transposition 
and modernisation efforts, in the following sectors: education, training and youth; 
research and technological development; fisheries; small and medium enterprises; 
international trade relations; and development. 
By contrast Bulgaria will need to make substantial efforts in order to apply the acquis in 
the fields of telecommunications (particularly price structures), audio-visual, taxation, 
statistics, consumer protection and customs. 
Integration into the European market could pose serious difficulties for Bulgarian 
industry in the medium term. Many sectors still face important re-structuring and 
privatisation needs. 
For the environment, very important efforts will be needed including massive 
investment and strengthening of administrative capacity to enforce legislation. Full 
compliance with the acquis could be expected only in the very long term and would 
require increased levels of public expenditure. 
Bulgaria has made some progress in meeting the transport acquis, but serious recent 
difficulties have held this process back. It must accelerate its efforts in particular in the 
maritime, air and road freight sectors. Bulgaria must also provide the investment 
106 
necessary for extending the European transport network, which is an essential element for 
the effective operation of the single market. 
Bulgaria still needs to make substantial efforts to align its procedures in employment 
and social affairs with EU standards. Progress is needed in particular on labour law and 
the structure of the labour inspectorate, since these have neither formal autonomy nor the 
necessary means to fulfil their role properly. 
For regional policy, Bulgaria will have to achieve significant preparatory steps, in 
particular on financial control and the coordination of the different actors involved in 
policy in this field, before it can effectively use structural funds. 
Bulgaria must put in place fundamental reforms of its agricultural sector before it can 
meet the obligations of accession. Considerable progress is needed on restructuring of 
the sector; on the agrifood industry; on agricultural policies and on health and quality 
controls. A particular effort will be needed on the administrative structures responsible 
for administering the CAP. 
For energy, increased efforts must be achieved to prepare for accession, in particular on 
monopoly operations, price fixing and state intervention in the solid fuel sector. Bulgaria 
has a nuclear power station at Kozloduy, which produces around 40% of the country's 
electricity. It must in the medium term modernise the units for which this is possible, so 
that they meet internationally accepted standards; and keep its undertaking tô close those 
which cannot be modernised according to the conditions set in the 1993 Agreement. 
Bulgaria must make a number of modifications to its legislation" to comply with 
Community rules in the nuclear sector and to respect international regimes. 
On the basis of the analysis of its capacity to apply the acquis, it is not yet possible to be 
sure when Bulgaria could become able to take and implement the measures necessary to 
remove the controls at borders between Bulgaria and member states of the Union. 
Bulgarian participation in the third stage of economic and monetary union, which 
implies coordination of economic policy and complete liberalisation of capital 
movements, poses serious problems in current circumstances, given the substantial 
structural reforms which still need to be achieved. It is premature to judge whether 
Bulgaria will be in a position, by the time of its accession, to participate in the Euro area. 
That will depend on how far the success of its structural transformation enables it to 
achieve and sustain permanently the convergence criteria. These are, however, not a 
condition for membership. 
Bulgaria faces a particular challenge in justice and home affairs, given the serious 
difficulties which it faces in these sectors. Only by considerably improving the 
efficiency of the institutions responsible for action in these fields will Bulgaria become 
able to apply the acquis. 
Bulgaria should be able to fulfil its obligations under the common foreign and security 
policy. 
It has considerably improved its relations with its neighbours and settled almost all its 
disputes with them. 
107 
4. Administrative and legal capacity 
Bulgaria's administrative structures will need a major and sustained effort of reform if it 
is to become able to apply the acquis effectively. 
The capacity of the judicial system to ensure uniform application of Community law is of 
importance for achieving the single market. It is difficult in current circumstances to 
judge Bulgaria's prospects in this sector. 
CONCLUSION 
In the light of these considerations, the Commission concludes that : 
- the current improvement in Bulgaria, following the arrival in power of a new 
government, indicates that Bulgaria is on its way to satisfy the political criteria; 
- Bulgaria's progress in the creation of a market economy has been limited by the 
absence of a commitment to market-oriented economic policies; it would not be able to 
cope with competitive pressure and market forces within the Union in the medium term;, 
but it would still face serious difficulties to cope with competitive pressure and market 
forces within the Union in the medium term; 
- despite the progress that has been made, Bulgaria has neither transposed nor 
taken on the essential elements of the acquis, particularly as regards the internal market. 
It is therefore uncertain whether Bulgaria will be in a position to assume the obligations 
of membership in the medium term. In addition, considerable efforts will be needed in 
the areas of environment, transport, energy, justice and home affairs as well as 
agriculture. More generally, substantial administrative reform will be indispensable if 
Bulgaria is to have the structures to apply and enforce the acquis effectively. 
In the light of these considerations, the Commission considers that negotiations for 
accession to the European Union should be opened with Bulgaria as soon as it has made 
sufficient progress in satisfying the conditions of membership defined by the European 
Council in Copenhagen. 
The reinforced pre-accession strategy will help Bulgaria to prepare itself better to meet 
the obligations of membership, and to take action to improve the shortcomings identified 
in the Opinions. The Commission will present a report no later than the end of 1998 on 
the progress Bulgaria has achieved. 
108 
ANNEX 
Composition Of Parliament 
38th National Assembly (following the general elections of 19 April 1997) 
Party Seats % of votes 
United Democratic Forces 137 57.1 
Democratic Left (main party: 
Bulgarian Socialist Party) 58 24.2 
Alliance for National Salvation 19 7.9 
Euroleft 14 ~5.8 " 
Bulgarian Business Block 12 5.0 
1 240 J 100.0 
m 
SINGLE MARKET: WHITE PAPER MEASURES 
This table is based on information provided by the Bulgarian authorities and confirmed by them as correct as at the end of June 1997. It does not 
indicate the Commission's agreement with their analysis. The table includes directives and regulations cited in the White Paper which total 899. 
These have been listed in accordance with the categorization used in the White Paper and in relation to the policy areas covered. The table 
shows the number of measures for which the Bulgarian authorities have notified the existence of adopted legislation having some degree of 
compatibility with the corresponding White Paper measures. 
White paper chapters 
l.Free Movement of Capital BuIgana 
Number of White Paper measures 
2.FM and Safety of Industrial Products Bu,gar,a 
Number of White Paper measures 
3.Competition Bulgar,a 
Number of White Paper measures 
4.Social policy and action Bulgar,a 
Number of White Paper measures 
5.Agriculture Bulgar,a 
Number of White Paper measures 
6.Transport Bulgar,a 
Number of White Paper measures 
7.Audiovisual Bulgaria 
Number of White Paper measures 
8.Environment Bulgar,a 
Number of White Paper measures 
9.TeIecommunication Bulgaria 
Number of White Paper measures 
lO.Direct Taxation Bulgaria 
Number of White Paper measures 
ll.Free movement of goods Bulgaria 
Number of White Paper measures 
12-Public Procurement BuIgaria 
Number of White Paper measures 
13.FinanciaI services BuIgaria 
Number of White Paper measures 
14.Protection of personal data Bulgaria 
Number of White Paper measures 
15.Company Law Bu,garia 
Number of White Paper measures 
16.Accountancy BuIgaria 
Number of White Paper measures 
17.CiviI law BuIgaria 
Number of White Paper measures 
18.Mutual rec. of prof. Quai. BuIgaria 
Number of White Paper measures 
19.1ntellectual property Bulgaria 
Number of White Paper measures 
20.Energy Bulgaria 
Number of White Paper measures 
21.Customs law BuIgaria 
Number of White Paper measures 
22.1ndirect Taxation Bulgaria 
Number of White Paper measures 
23.Consumer Protection Bulgaria 
Number of White Paper measures 
Total Bulgaria 
Number of White Paper measures Direct 
Stage I 
3 
3 
17 
56 
0 
3 
3 
12 
18 
93 
1 
19 
1 
1 
1 
31 
1 
9 
2 
2 
0 
0 
4 
5 
6 
13 
0 
0 
2 
2 
3 
3 
0 
1 
2 
2 
3 
5 
2 
10 
0 
2 
8 
15 
1 
8 
78 
295 lives 
Stage 
II/III 
1 
l 
1 
104 
0 
0 
6 
15 
7 
46 
0 
15 
0 
0 
0 
7 
0 
7 
0 
2 
0 
0 
0 
1 
3 
s 
0 
2 
2 
3 
2 
2 
1 
1 
0 
16 
2 
3 
0 
2 
0 
1 
2 
54 
0 
3 
27 
293 Regul, 
Stage I 
0 
0 
0 
4 
0 
1 
.2 
0 
16 
62 
0 
8 
0 
0 
1 
7 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
3 
0 
14 
0 
0 
0 
0 
19 
99 ïtions 
Stage 
II/III 
0 
0 
1 
i 
0 
0 
0 
2 
0 
2 
0 
13 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1 
0 
0 
0 
0 
0 
0 
1 
3 
0 
0 
0 
184 
0 
6 
0 
0 
2 
212 Total 
4 
4 
19 
165 
0 
4 
11 
29 
41 
203 
1 
55 
1 
1 
2 
45 
1 
16 
2 
4 
0 
0 
4 
6 
9 
21 
0 
2 
4 
6 
5 
5 
1 
2 
2 
18 
6 
n 
2 
15 
0 
201 
10 
75 
1 
11 
126 
899 
[Cb 
STATISTICAL DATA 
If not explicitly stated otherwise, data contained in this annex are collected from „ National Statistical Institute" 
with whom Eurostat and Member States' statistical offices are co-operating since several years in the 
framework of the Phare programme. Regular data collection and dissemination are part of this co-operation 
process with the aim to enable the application of EU laws and practices in statistics. The data presented below 
have been compiled as far as possible using EU definitions and standards which in some cases differ from 
national practices. This may occasionally give rise to differences between the data presented here and those 
shown elsewhere in the opinion, which are generally based on the individual applicant countries' updated 
replies to the questionnaire sent to them in April 1996. The exact compatibility with EU standards on statistics 
and thus the comparability with EU figures can still not be guaranteed, particularly those statistics that have not 
been supplied through Eurostat, but have been delivered directly by the countries concerned. Wherever 
available, methodological notes are given describing content and particularities of statistical data presented in 
this annex. Data correspond to the information available as of May 1997. 
BASIC DATA 
Total Area 
Population ( end of the period) 
- Total 
- Females 
- Males 
Population density 
Urban Population 
Deaths rate 
Births rate 
Income and GDP per capita 
-Average monthly wage and salary per employee 
-GDP per capita 
Structure of production: share of branch GVA 
-agriculture 
-industry 
-construction 
-services 1990 1993 1994 1995 1996 
1000 hectares 
11099.0 11099.0 11099.0 11099.0 
in 1000 
8460.0 
4308.0 
4152.0 8427.0 
4297.0 
4130.0 8385.0 
4281.0 
4104.0 8340.0 
per 1 Icm2 
78.1 75.5 75.1 
in % of total population 
67.1 67.8 
per 1000 of population 
12.9 
10.0 13.2 
9.4 13.6 
8.6 14.0 
8.7 
European Currency Unit 
76 
in % of Total Gross Value Added 
14.4 
32.9 
4.5 
48.2 13.9 
28.4 
5.2 
52.5 
share of branch GVA in 1990 share of branch GVA in 1995 
10.0 ,0.0 
,48.2 14.4 
32.9 g -agriculture 
g -industry 
Q -construction 
g] -services 
• - Others r*52.5 13.9 
28.4 g -agriculture 
gg -industry 
Q -construction 
U -services 
H - Others 
Structure of production: share of branch of GVA: Data for 1990 refers to 1991. 
Lit 
NATIONAL ACCOUNTS 
Gross Domestic Product (Current Prices) 
Gross Domestic Product (Current Prices) 
Gross Domestic Product 
Gross Domestic Product 
Final consumption expenditure 
-of households and NPISH 
-of general government 
Gross Fixed capital formation 
Exports of goods and services 
Imports of goods and services 
Final consumption expenditure 
-of households and NPISH 
-of general government 
Gross fixed capital formation 
Exports of goods and services 
Imports of goods and services 1991 1992 1993 1994 1995 
in Millions of National currency 
135711 200832 298934 548015 867691 
in Billions of ECU 
5.8 6.6 9.2 8.5 9.9 
in Purchasing Power Standard per capita 
3886.8 4129.5 4209.8 
% change over the previous year 
-7.3 
-3.1 
1.0 
-14.9 
-7.3 -1.5 
-3.6 
-0.8 
-12.5 
-17.5 1.8 
-4.5 
-2.6 
-11.9 
1.1 2.1 
-2.9 
-1.6 
-8.2 
8.8 
in % of Gross Domestic Product 
73.1 
54.1 
19.0 
18.2 
43.5 
39.2 85.9 
65.6 
20.3 
16.2 
47.1 
52.9 92.3 
73.5 
18.9 
13.0 
38.2 
45.8 91.2 
74.0 
17.2 
13.8 
45.1 
45.7 85.8 
70.3 
15.5 
14.2 
44.7 
44.9 
GDP (% Change over the previous year) 
4.0 
2.0 
0.0 
-2.0 
-4.0 
-6.0 
-8.0 1991 v ;«;V î. %' . \ \ V }9$$ 
Id 
MAIN ECONOMIC INDICATORS 
Inflation rate 
Industrial production volume indices 
Gross agricultural production volume indices 
Unemployment rate (ILO methodology) 
- Total 
- less then 25 years 
- 25 years and more , 
Gross Foreign debt 
Balance of payments 
-Exports of goods 
-Imports of goods 
-Trade balance 
-Services, net 
—Income, net* 
-Current account balance 
-Capital and fin. acc.(excl. reserves) 
-Reserve assets 1990 1991 1992 1993 1994 1995 1996 
percentage change over the previous year 
23.8 338.5 79.4 56.1 87.1 62.1 123 
previous year" 100 
89.1 
80.6 108.5 
107.1 105 
116 99.0 
86.7 
in */• labour force 
21.4 
47 
17.3 20.5 
44.9 
16.8 14.7 
37.7 
11.6 13.7 
33.5 
11.3 
in Billions of USD 
in millions of USD 
6113 
-7427 
-1314 
237 
-758 
-1710 
762 
878 3737 
-3769 
-32 
-86 
-28 
-77 
157 
-311 3956 
-4169 
-212 
-95 
-96 
-360 
981 
-591 3727 
-4612 
-885 
-57 
-192 
-1098 
834 
247 3935 
-3952 
-17 
11 
-193 
-32 
303 
-344 5345 
-5224 
121 
153 
-432 
-26 
120 
-234 
Inflation rate: Percentage change of yearly average over the previous year - all items index (data are based on national CPIs which are 
not strictly comparable). 
Industrial production volume indices: Industrial production covers mining and quarrying, manufacturing and electricity, gas and water 
supply (according to the NACE Classification Sections C,D,E). Index of industrial production annually is based on exhaustive survey 
of enterprises (public and private) assigned to industrial sector.. 
Gross agricultural production volume indices: Data are based on the System of National Accounts (SNA) methodology. Data are revised 
data and for 1996 are provisional data. 
Unemployment rate (by ILO methodology): - Percentage of the unemployed labour force This rate is derived from LFSS (Labor Force 
Survey) observing the following ILO definitions and recommendations 
Labor force employed and unemployed persons in the sense of the ILO definitions stated below. 
The employed all persons aged 15+, who during the reference period worked at least one hour for wage or salary or other 
remuneration as employees, entrepreneurs, members of cooperatives or contributing family workers. Members of armed forces and 
women on child-care leave are included. 
The unemployed all persons aged 15+, who concurrently meet all three conditions of the ILO definition for being classified as the 
unemployed: (i) have no work, (ii) are actively seeking a job and (iii) are ready to take up a job within a fortnight. 
The data relate to employees under labour contract in the public sector (comprehensive survey). 
Gross foreign debt : Debt is extracted form the OECD's External Debt Statistics. 
Balance of payments: Data is derived from IMF database, their comparability with respective EU statistics can not be guaranteed, but 
balance of payments is compiled mainly in accordance to IMF standards. Balance in trade of goods in accordance with balance 
of payments principles. Exports and imports are both in f.o.b. values. Net income includes direct, portfolio and other investment 
income, compensation of employees. Current account balance by definition of IMF 5th Manual, capital transfers are excluded. 
Reserve assets: it means changes in reserve assets during the year; (+) signifies an increase, (-) a decrease in reserve assets. 
US 
FOREIGN TRADE 
Imports and exports (current prices) 
• Imports 
-Exports 
- Balance of trade 
External trade volume indices 
- Imports 
-Exports 
Structure of Import by SITC (current prices) 
- (0+1) food and live animals, beverage and tobacco 
- 2 crude materials, inedible 
- 3 mineral fuels and lubricants 
• 4 animal and vegetable oils etc. 
- 5 chemicals and related products 
- 6 manufactured goods classified chiefly by material 
- 7 machinery and transport equipment 
- 8 miscellaneous manufactured articles 
Structure of export by SITC (current prices) 
- (0+1) food and live animals, beverage and tobacco 
- 2 crude materials, inedible 
- 3 mineral fuels and lubricants 
- 4 animal and vegetable oils etc. 
- 5 chemicals and related products 
- 6 manufactured goods classified chiefly by material 
- 7 machinery and transport equipment 
- 8 miscellaneous manufactured articles 
External trade price indices 
- Imports 
- Exports 1993 1994 1995 
in millions of National Currency 1996 
131523.1 
102877.4 
-28645.7 
114.3 
94.6 
8.8 
4.4 
37.4 
0.3 
10.1 
13.2 
19.6 
5.9 
18.1 
5.7 
8.7 
0.8 
14.8 
25.1 
17.2 
9.5 
96.5 
105 227010.3 
216194.4 
-10815.9 380012.1 
359663.6 
-20348.5 
previous year » 100 
160.9 
181.9 152.6 
148 
in % of total Import 
9.8 
5.6 
28.3 
0.3 
10.4 
16.9 
20.3 
5.4 7.3 
6.2 
27 
0.2 
12.8 
18.1 
19.3 
5.8 
in % of total Export 
19.5 
5.6 
7.1 
0.5 
14.7 
27.2 
12.2 
9.4 19.8 
5 
6.1 
0.9 
16.9 
28 
11.3 
9.3 
previous year» 100 
164.4 
165.7 149.1 
145.5 
Imports and exports (current prices), External trade volume indices and Structure of external trade by SITC (current prices): 
Trade data exclude direct re-exports, trade in services and trade with customs free zones as well as licenses, know-how and patents. 
The data are based upon the special trade system and are regularly updated. Trade Classifications: Merchandise trade flows are 
recorded according to Combined Nomenclature (CN) and the Single Administrative Document (SAD). Imports are reported on a 
CIF- basis. Exports are reported on a FOB-basis. The customs statistics is utilized for monitoring of foreign trade data.. Eurostat 
has converted National Currencies to the US dollar by applying the International Monetary Fund annual average exchange rates. 
External trade price indices: The price indices have been calculated by "unit value" method on Laspeyrc formula - since 1995. Up to 1994 
- by Paasche formula indices arc calculated from the sample of commodities consisting of all export and import for final use only, 
excluding special consignment, processing, re-exports. 
IM 
FOREIGN TRADE PARTNERS 
Structure of imports by main countries (current prices) 
1st partner 
2nd partner 
3rd partner 
4th partner 
5th partner 
others 
Structure of exports by main countries (current prices) 
1st partner 
2nd partner 
3rd partner 
4th partner 
5th partner 
others 1993 1994 1995 1996 
in % of total imports 
RU 
DE 
UA 
IT 
US 29.3 
11.6 
5.3 
4.6 
3.9 
45.3 RU 
DE 
IT 
GR 
UA 26.4 
12.8 
5.4 
4.8 
4.2 
46.4 RU 
DE 
IT 
GR 
UA 28.1 
12.4 
5.8 
4.4 
3.3 
46 
in % of total exports 
RU 
DE 
GR 
MK 
IT 13.6 
6.6 
6.2 
6.1 
5.9 
61.6 RU 
MK 
DE 
GR 
IT 13.5 
10.3 
8.9 
7.8 
7.6 
51.9 RU 
DE 
IT 
MK 
GR 10 
8.6 
8.1 
8.1 
6.9 
58.3 -
Structure of export by main partners 
in 1995 RU 
10.0% 
58.3% Structure of import by main partners 
in 1995 
46.0% 
UAGR 
3.39*4% 5.8% 
DE 
IT 
GR 
MK Germany 
Italy 
Greece RU 
UA 
US Russian Federation 
Ukraine 
United States 
The Former Yugoslav Republic of Macedonia 
S 
lh 
SOCIAL INDICATORS 
1991 1992 1993 1994 1995 
Population on 1 January 
Proportion of population by age 1 January 1995 
y0_14 
yl5_24 
y25_44 
y45_64 
y65_max 
Live births 
Deaths 
Infant deaths 
- Less than 1 year 
- Still birth 
Marriages 
Divorces 
Crude marriage rate 
Crude divorce rate 
Natural growth rate 
Net migration rate 
Total population growth rate 
Total fertility rate 
Infant mortality rate 
Late foetal mortality rate 
Life expectancy 
- Males 
- Females 
Life expectancy 
- Males 
- Females 8669.3 
95910 
110423 
1624 
612 
48820 
11044 
5.44 
1.23 
-1.68 
-6.87 
-8.55 
1.57 
16.93 
6.34 8595.5 8484.9 8459.7 
in % of total population 
total number 
89134 
107998 
1420 
654 
44806 
9465 84400 
109540 
1310 
587 
40022 
7104 
per 1000 of population 
5.26 
1.11 
-2.21 
•10.74 
-12.95 
1.53 
15.93 
7.28 4.7 
0.8 
-2.96 
-0.01 
-2.97 
1.46 
15.52 
6.91 
at 65 years 4.5 
0.9 
16.3 8427 
18.6 
14.6 
27.2 
25.0 
14.6 
4.4 
1.3 
14.8 
67.1 
74.9 
12.6 
15.5 
Population on 1 January: Figures for 1989-1992 have been recalculated according to the 1992 Census results. 
Proportion of population by age on 1 January 1995: Data only available for 1994. 
Net Migration rate: No comprehensive migration survey carried out: residual category including statistical discrepancies. Figures for 
1989-1992 have been recalculated according to the 1992 census results. 
Total population growth rate: Net migration and population figures for 1989-1992 have been recalculated according to the 1992 
Census results 
I to 
LABOUR MARKET 
Economic Activity Rate (ILO methodology) » 
Average employment 
Unemployment rate (ILO methodology) 
- Total 
- less then 25 years 
- 25 years and more 
Registered unemployment (end of period) 1993 1994 1995 1996 
in % of population age +15 
55.4 52.4 51.5 51.8 
v in thousand 
3221.8 3241.6 3282.2 3279.5 
in % of labour force 
21.4 
47 
17.3 20.5 
44.9 
16.8 14.7 
37.7 
11.6 13.7 
33.5 
11.3 
m % o( economically active population 
16.4 12.8 
i * 11.1 12.5 
Average paid employment indices by NACE classes 
- Agriculture, hunting, forestry and fishing 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 
- Construction 
- Transport, storage and communication 
Monthly wages and salaries indices 
- real 
- nominal 1993 1994 1995 1996 
previous year = 100 
60.8 
96.6 
86.8 
104.6 
75.8 
92.4 
157.8 68.1 
93.9 
90.7 
101.3 
81.4 
93.3 
153.5 76.1 
95.6 
94 
101 
85.2 
93.3 
153.2 94.2 
100.2 
87.7 
102 
94.7 
100.3 
174.7 
Economic activity rate (ILO Methodology): - Percentage of labor force in the total population aged 15+. This rate is derived of LFSS 
(Labor Force Survey) observing the following ILO definitions and recommendations: 
Labor force employed and unemployed persons in the sense of the ILO definitions stated below. 
The employed all persons aged 15+, who during the reference period worked at least one hour for wage or salary or other 
remuneration as employees, entrepreneurs, members of cooperatives or contributing family workers. Members of armed forces and 
women on child-care leave are included. 
The unemployed all persons aged 15+, who concurrently meet all three conditions of the ILO definition for being classified as the 
unemployed: (i) have no work, (ii) are actively seeking a job and (iii) are ready to take up a job within a fortnight. 
The data by ILO methodology are for September 1993, October 1994, October 1995 and November 1996. 
Unemployment rate (by ILO methodology): - Percentage of the unemployed labour force. This rate is derived from LFSS (Labor Force 
Survey) observing the ILO definitions and recommendations (see ILO definitions above) 
The data relate to employees under labour contract in the public sector (comprehensive survey). 
Average employment: Annual data only (comprehensive survey, covers all employees in public and private sector). 
Average paid employment indices by NACE classes: The data relate to employees under labour contract in the public sector 
(comprehensive survey). The national branches classification is different from NACE classification, that is why the figures are 
estimated data. 
Registered unemployment (end of period): Registered unemployment in per cent 
economically active population, based on Labour force sample survey (LFSS). percentage of unemployed registered in civil 
m 
PUBLIC FINANCE 
Government budget 
-Government revenue 
-Grants 
-Consolidated central government expenditure 
-Consolidated general government expenditure 
-Consolidated central government deficit/surplus 
-General government deficit/surplus 
Government budget 
-Consolidated central government expenditure 
-Consolidated general government expenditure 
-Consolidated central government deficit/surplus 
-General government deficit/surplus 1990 1991 1992 1993 1994 1995 
in millions of national currency 
22265 
471 
25028 
29228 
-2292 
-2040 49497 
450 
54497 
65052 
-4550 
-4156 71554 
209 
81591 
98315 
-9828 
-11454 99875 
92 
133877 
152181 
-33910 
-33652 209321 
117 
235905 
261775 
-26467 
-27066 314624 
920 
360607 
398725 
-45063 
-44951 
x in % of Gross Domestic Product 
40.2 
47.9 
-3.4 
-3.1 40.6 
49.0 
-4.9 
-5.7 44.8 
50.9 
-11.3 
' -11.3 43.0 
47.8 
-4.8 
-4.9 41.4 
45.8 
-5.2 
-5.2 
Government budget: These data relate to central and general government as published in the IMF's Government Finance Statistics 
Yearbook (1996) (GFSY); included also is the country's presentation in the GFSY. 
Because the GFSY does not present statistics for general government, but for individual levels of government separately, the 
consolidated series presented here were obtained from central and local government data and adjusted in consolidation for the 
identified intergovernmental transfers. 
Even though the statistics cover the central and local government published in GFSY, the coverage may not be exhaustive if 
some central or local government units are not included in that coverage. A measure of the exhaustiveness of the coverage can 
be obtained by comparing in the GF-SYthe note on the coverage of data for individual countries with the list of central and local 
government units provided. 
It should be noted that the deficit/surplus used here is equal to revenue and grants minus expenditure, and does not take 
lending minus repayments into account (see further below). 
The netting of inter-government transfers carried-out in the attached tables is limited to the current and capital transfers 
consisting of the identified grants and current and capital subsidies between the levels of government. Other types of 
transactions occurring between government levels, such as the payments of taxes and employers' social security contributions, 
and the reciprocal purchases of goods and services are not normally classified as inter-governmental transfers have not been 
eliminated in the consolidation process. Finally, whether the absence of data for current and capital transfers should be 
attributed to the absence of transfer or to lack of data is unclear; in all cases absence of information on transfers have been 
deemed to represent zero-transfers. 
a. Government expenditure consists of general government cash expenditures on current and capital goods and 
services, interest payments and current and capital transfers but excludes non-cash transactions. 
b. Deficit/surplus equals cash revenue and cash grants minus cash expenditure. This measure of the deficit/surplus 
differs from that used in GFS which equals cash revenue and cash grants, minus cash expenditure, minus net lending. This 
exclusion of net lending(consisting, in the GFS methodology, of operations in financial assets and liabilities carried out for 
specific policy purposes, rather than for liquidity purposes) brings the measure of the deficit/surplus presented here closer to the 
national accounts concept of net borrowing/net lending. Also, as a result of this exclusion, receipts from privatisation (classified 
as repayments in the GFS methodology) do not enter in the determination of the deficit/surplus presented in the attached tables 
(and therefore do not reduce the deficit). 
In 
FINANCIAL SECTOR 
Monetary aggregates 
- Monetary aggregate Ml 
- Quasi money 
Total reserves ( gold excluded, end of period) 
Average short term interest rates 
- lending rate 
- deposit rate 
Official discount rate (end of period) 
USD exchange rates 
Average of period 
End of period 
ECU exchange rates 
Average of period 
End of period 1990 1991 1992 1993 1994 1995 1996 
• Billions (10*9) of National Currency 
48.30 
181V62 75.13 
333.98 107.89 
463.42 177.28 
787.33 
Millions (10*6) of US Dollars " 
% per annum 
52 72 34 180 
1 USD - «BGL 
1 ECU - ...BGL — 
-
Monetary aggregates (end of period): Money (MI): Includes demand deposits and currency outside banks. Quasi money: Include 
time, savings and foreign currency deposits. Data for 1996 refer to November 1996. 
Official disccunt rate (end of period): Data for 1996 refer to November 1996. From december 1996 Bulgarian National Bank denotes 
monthly interest rate. 
USD exchange rates: International Monetary Fund exchange rates as present in the publication: "Statistiques Financières 
Internationales". 
/# 
INFLATION (12 months 
changes) 
Percentage change of the CPIs with the current month compared with the corresponding month of the previous year (t/t-12) 
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 
1993 
1994 
1995 
1996 83.1 81.3 84.1 85.3 74.4 71.6 68.5 70.8 71.6 68.3 64.9 63.9 
59.1 58.8 61.6 89.3 93.9 94.0 93.3 98.4 112.1 117.6 119.7 122.0 
122.1 120.4 112.1 76.1 66.2 60.5 61.9 54.7 46.0 40.0 36.0 32.9 
30.9 28.5 26.4 28.8 42.2 70.2 106.7 140.7 172.9 210.5 232.0 310.8 
350.0 
300.0 .; 
250.0 
200.0 I 
150.0 | 
100.0 
50.0 
0.0 Inflation (% change of CP1) 
*$XâÊ 
& 
H 1—I 1—<—H-f- H—I—I—I—I 1 Î—H 1 I' •<—I—H -1—I—'—I—t—f-
Inflation (12 months changes): Inflation rates (12 months changes) are percentage changes of the CPIs with the current month compared 
with the corresponding month of the previous year. Inflation rates are based on national CPIs which are not strictly comparable 
between candidate countries or with those based on EU HlCPs (different methods, concepts, practices in the calculation of 
CPIs). 
10 
I Lu 
INDUSTRY 
Structure of GDP by economic activities (NACE, current prices) 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 
Industrial production volume indices by NACE classes 
- Total 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 1993 1994 1995 1996 
in */o of Gross Domestic Product 
previous year = 100 
89.1 
104.5 
86.8 
100.8 108.5 
101.6 
111 
92.9 105 
103 
105.1 
105.4 99 
Industrial production volume indices by NACE classes: Industrial production covers mining and quarrying, manufacturing and 
electricity, gas and water supply (according to the NACE Classification Sections C,D,E). Index of industrial production annually is 
based on exhaustive survey of enterprises (public and private) assigned to industrial sector. Data for 1996 are provisional data. 
INFRASTRUCTURE 
Railway network 
Length of motorways 
Number of inhabitants per 1 passenger car 1985 1990 1995 1996 
in Km per 1000 Km2 
38.7 38.7 38.7 38.7 
Kilometre 
221 273 314 314 
inhabitants 
8.4 6.6 5.1 
11 
III 
AGRICULTURE 
Land area by land-use categories 
- total 
- agricultural land 
- forest 
- arable land 
- permanent meadows and pastures 
Agricultural land by legal status 
- state enterprise 
- Cooperatives 
- others 1992 1993 1994 1995 1996 
in 1000 Hectares 
11099 
6159 
3873 
4047 
1833 11099 
6159 
3877 
4063 
1852 11099 
6159 
3876 
4001 
1942 11099 
6164 
3876 
3998 
1962 11099 
6164 
4203 
1761 
in % of agricultural land 
69 
8 
23 45 
21 
34 28 
33 
39 21 
79 
Share of GDP 
- Agriculture, hunting, forestry and fishing (Nace A+B) 
Gross agricultural production volume indices 
Main crops by area 
- Cereals 
- of which: wheat 
- Potatoes 
- Sugar beet 
- Fodder beet 
Main crops by yield 
- Cereals 
- of which: wheat 
- Potatoes 
- Sugar beet 
- Fodder beet 1992 1993 1994 1995 1996 
in % of Gross Domestic Product 
Previous year = 100 
80.6 107.1 116 86.7 
in 1000 Hectares 
2182 
1108 
48 
18 
5 2315 
1266 
39 
11 2341.3 
1319.8 
47 
8 2185.8 
1181.1 
56 
9 1841.2 
957.7 
40 
8 
in 100 kg/Hectares 
29.8 
31.1 
117.9 
168.9 
342.0 24.7 
28.6 
91.5 
86.4 27.6 
28.5 
105.6 
140.0 30.2 
29.1 
115.9 
174.4 18.8 
18.7 
80.7 
108.9 
Sales or procurement of animal for slaughter 
- pigs 
- cattle 
- poultry 
Livestock breeding intensity (end of period) 
- cattle 
- of which: cows 
- sheep 
- P'gs 1992 1993 1994 1995 1996 
in 1000 tons of live weight 
heads per 1000 Ha of agricultural land 
158.1 
79.4 
781.7 121.8 
68 
611 103.5 
56.9 
551.2 102.5 
60.2 
548.8 
heads per 1000 Ha of arable land 
659.6 517.7 496.8] 509.2 
Gross agricultural production volume indices: Data are based on a System of National Accounts (SNA) methodology. 
12 
Bulgaria 
1994 
Legend: 
/V Country boundary 
A/ Region boundary 
COUNTRY NAME 
REGION NAME 
OTYNAME 
Selected major settlements: 
(1 000 inhabitants) 
o 200 - 250 
• 250 - 500 
• 500-1000 
• > 1 000 
General information about the country: 
Age groups (in years): c = <15 
15- 65 
>65 
Living standard (in 1993): ECU 1 024 
(QDPparoapfta) 
Area: 110 994 km8 
Administrative regions: 9 districts 
Population: 8 427 400 
8ouroa: National Stattatloal Inattuta 
Cartography and gaographlo Information managamant: QI80O 
eui 

Bulgaria 
1994 
A/ Country boundary 
A/ Main railway line 
Ferry connection 
A/ Motorway 
A/ National road, Double lane 
- V National road 
Principal road 
A/ Main navigable waterway 
Selected major settlements: 
(1 000 inhabitants) 
ô 200-250 
• 250 - 500 
• 500-1 000 
• > 1 000 
General information about the country: 
Age groups (in years): 6 <15 
15- 65 
>65 
Living standard (in 1993): ECU 1 024 
(QDP par capita) 
Area: 110 994 km2 
Administrative regions: 9 districts 
Population: 8 427 400 
Sourco: National Statistical InatNuta 
Cartography and geographic Information managamant: QI8CO 
eurostat 


ISSN 0254-1475 
COM(97) 2008 final 
DOCUMENTS 
EN 11 oi 06 
Catalogue number : CB-CO-97-376-EN-C 
ISBN 92-78-22884-2 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
Jl