intended to support already-begun policy reforms and to additionally strengthen a set of institutions judged to be weak. More specifically, the loan backed efforts to strengthen laws and property rights related to agricultural land and forest lands situated on private property. The loan also included provisions design to facilitate the privatization of food processing and related state-owned enterprises, and to put in place legal and regulatory frameworks related to: seed, fertilizer and pesticide markets; inventory-based financing (through warehouse receipts); and irrigation systems.

# <u>Transport policies</u>

Coincident with agricultural reforms were a series of policy and investment decisions that affected the transport component of food markets in Bulgaria. In this regard, opening of trade and the freeing of domestic markets during the already mentioned 1991 reforms was crucial because it brought about a reorientation of trade flows and, with it, a restructuring of the Bulgarian transportation sector. This occurred primarily through the emergence of small transport business and external competition rather than changes in basic infrastructure or the privatization of public enterprises.<sup>8</sup> Fuel costs, an important component of transport costs, rose during the study period.<sup>9</sup> Moreover, as with food markets, institutional changes relating to transport markets also occurred late in the reform process.

For example, significant restructuring of the railroad did not take place until the passage of the first Railway Law in November 2001.<sup>10</sup> A second law, passed in early 2002, created a regulatory body and opened the market for transport services. At the same time, rail transport became increasing less relevant to the changing Bulgarian economy and goods carried by rail declined by nearly 61% between 1990 and 2000 (World Bank 2006a; World Bank 2006c). Similarly, despite the emerging importance of road transport, little was done to improve Bulgaria’s national road system or the agency charged with its management until late in the reform process. Externally funded projects to improve the road system began around 1994 but centered on the 3,300 kilometers of Class I roads that carried international traffic.<sup>11</sup> For the most part, maintenance efforts were under-funded and proved inadequate. As a consequence, by 2005, only one-third of Bulgaria’s national roads were in good condition.<sup>12</sup> Efforts to improve the nearly 4,000 kilometers of regional and district (Class II and

> 8 The Bulgarian ground transport network included roughly 4,300 kilometers of rail and 37,000 kilometers of roads in 1990 and in 2001 (World Bank 2005; World Bank 2006a).

> 9 By 1992, petroleum prices in Bulgaria were linked to international prices via a cost-plus pricing formula (World Bank, 1992). In constant US dollars, international prices for crude oil rose about 8% between 1995 and 1997, and rose by more than 18% between 1997 and 2001 (World Bank, 2006a). Excise taxes on gasoline, initially low, were raised in 1996 and the phase-out of less expensive leaded gas began in 1998 (Malý, Jakubes, Jilková and Snajdrová, 2002).

> 10 The law mandated the separation of the Bulgarian State Railway into two separate enterprises; one in charge of infrastructure and the second in charge of freight and passenger services.

> 11 Roughly 19,000 of the 37,000 kilometers of Bulgaria’s roads are national roads managed by the Road Executive Agency (REA). The remaining roads are managed locally by cities and towns.

> 12 Policies to insure targeted funding for road maintenance were slow to emerge, although a significant step was taken with the establishment of a vignette system in 2004.

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