Political Fallout

Economic News

22 Jul 2010
Text size +-

With the government managing to weather the political storm last week over the failed privatisation of the Bulgartabac factories, many are now wondering what price the country’s administration may have had to pay in order to survive.

Although initially it looked as though the scales in parliament might tip in the opposition’s favour, after the government reached a compromise deal with the maverick New Time group, on February 11, the sixth no-confidence vote faced by Prime Minister Simeon Saxe-Coburg’s administration since it took office became a mere formality.

The exact nature of the political deal has not yet been revealed. However, New Time group leader Emil Koshlukov, who began his group by leading an exodus of deputies from the ruling National Movement for Simeon II (NMSII) last year, said during a press conference on February 9 that he had been promised by the prime minister that reforms in the cabinet would be made after the no-confidence vote.

Only last week the New Time parliamentary group was demanding the resignations of four ministers – Minister of Economy Lydia Shouleva, Minister of Interior Georgi Petkanov, Minister of Culture Bozhidar Abrashev and Minister of Regional Development Valentin Tserovski.

Yet now it seems that New Time may have softened its stance. Analysts in Sofia speculate that the ruling NMSII party may have offered some sort of pre-election alliance and possibly one ministerial seat in the cabinet in exchange for New Time’s support. Ahmed Dogan, leader of the ethnic-Turkish party the Movement for Rights and Freedoms (MRF) – a long time partner of NMSII – confirmed in an informal discussion with journalists on February 10 that New Time and NMSII would most probably run on a joint ticket in the upcoming parliamentary elections, scheduled for June.

While this looks like a political coup for a splinter group with 25 MPs which does not have a structure of its own via which to participate in elections, some analysts say that New Time has lost some credibility over this deal. Its behaviour has been described as “cynical” and “opportunistic” by opposition politicians. According to New Time leader Koshlukov though, “Everything in politics is subject to compromise except the principles in which you believe and to which you adhere.”

Meanwhile, the reaction of the right wing Union of Democratic Forces (UDF) was outright negative. UDF Deputy Floor Leader Hristo Kirchev said during the parliamentary debate, “We have witnessed one of the most shameful and humiliating political deals between Simeon Saxe-Coburg, Ahmed Dogan and the New Time horse-traders.”

At the same time, the Bulgarian Socialist Party (BSP) focused their criticism on the MRF, accusing them of destroying the deal to sell Bulgartabac to British American Tobacco (BAT) and thereby triggering the latest political crisis.

Meanwhile, many analysts argue that a cabinet reshuffle will have to take place in perhaps 10 to 15 days, despite the prime minister’s earlier objections to such a move so close to the elections. Reinforcing this argument was the fact that Saxe-Coburg himself said last week that he was ready to discuss the replacement of ministers, but that all changes should be carefully thought over.

According to analysts, the prime minister is reluctant to dismiss the embattled minister of economy, Lydia Shouleva, who is likely to survive the reshuffle. Her resignation was demanded by both New Time parliamentary group and the MRF, following her key role in the failed Bulgartabac deal. Tobacco giant BAT walked away from the deal citing a complicated political situation as the primary reason.

One other impact of the crisis has been the emergence of a pre-electoral coalition which strengthens the Turkish party's position in parliament. Secondly, the crisis has raised doubts over the possibility of any centre-right alliance emerging that is strong enough to take on the BSP without the involvement of the MRF. On the other hand, many analysts say the crisis seems to have strengthened the prime minister’s position. He has come out of this crisis looking like a survivor, which may increase his party’s electoral chances.

At the same time, the Bulgartabac sell-off itself must now shuffle on. Parliament also decided on February 11 that the government should open a fourth round for the privatisation of the company.

Shouleva said that 17 tobacco factories were in the sales procedure, with deals almost completed for six of them. Of these, Bulgartabac’s supervisory board had taken a decision on privatisation contracts for the factories in Topolovgrad and Parvomay, while the other four sales would soon also be approved, the minister told parliament. Shouleva also said that the future of the cigarette industry in Bulgaria would be best served by concentrating production in just two facilities – Blagoevgrad and Sofia.

Yet the decision to re-launch the same sales procedure was not supported by everyone. Many critics point out that this decision rules out the possibility of adopting another strategy for the sell-off – such as that recently successfully employed for the Bulgarian Telecommunications Company (BTC), which saw its final state-owned block of shares sold via an IPO.

Yet Bulgartabac is not BTC, and much still remains to be done if the tobacco giant is to be sold off; not the least of such tasks will be to reassure potential investors that they are not walking into a political minefield. This may well be the government’s most difficult task of all.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Bulgaria

Counting Down

Approval of Bulgaria's handling of its economic reform programme this week by the International Monetary Fund (IMF) was welcome news for the country's leaders, as they square up for next month's...


Nigeria targets agro-processing as a future growth driver

As Nigeria looks to restructure its economy to be more diversified and sustainable, agro-processing is emerging as a key tool to improve agricultural value added while also bolstering the sector’s...