Bulgaria hopes for change

For Gergana Gecheva, laid off when Bulgaria's biggest paper mill closed in her hometown this month, the situation was clear: "This town is dying," she said. "Change has to start from the top."

The 48-year-old woman had worked for 30 years in the mill when its owner, South African-based Mondi, shut it because the global recession had slashed demand.

First opened in 1957, the mill had been a provider of direct and indirect jobs to one in three people in this impoverished town of 12,000 in the Thracian valley some 120 km (75 miles) south of Sofia.

Foreign cash inflows have halved to 995 million euros ($1.38 billion) in the first four months from a year earlier.

Some Chinese and Middle Eastern investment is trickling in, but economists expect foreign direct investment to at least halve to about 3 billion to 3.5 billion euros for the full year.

It's the same story in small towns across Bulgaria: foreign firms are packing up and quitting one of the newest, poorest and more remote corners of the European Union just as it heads to a parliamentary election.

"No one thought it would come to this," said Gecheva, looking at the deserted yard of the mill in Stamboliyski.

In a town developed as a food-processing center in the 1930s, the only other big employer - a communist-era canning factory - closed a decade ago.

The people of Stambolyiski and economists blame government incompetence for the fact the Balkan country was unprepared for the global economic crisis.

Bulgaria lacks high-end manufacturing and is at the mercy of fast-moving producers and developers, they said.

Bulgaria also is vulnerable because it did not take advantage of a recent economic boom to spruce up infrastructure or tackle corruption and crime, critics added.

The government, which opinion polls project is headed for defeat in the July 5 elections, reports that unemployment currently is at 7 percent and will stay below 10 percent.

It argues that years of prudent fiscal policies and an accumulation of 22.7 billion levs of hard currency reserves, -more than 30 percent of the GDP - will cushion the economy.

But about 5,000 people are losing their jobs each month, and analysts warn Sofia's next government risks having to seek a loan from the International Monetary Fund similar to those sought by Romania, Hungary and Latvia.

"There is no urgent need to get money now. But obviously on the macroeconomic side, someone has turned off the switch," said Lars Christensen, an economist at Danske Bank.

Public discontent

Anger about the failings of the Socialist-led coalition now dominates public debate, and the election is widely expected to hand power to the opposition GERB party of straight-talking Sofia mayor Boiko Borisov.

Opinion polls show some 80 percent of Bulgaria's 7.6 million people want the current government to go.

"People are scared," said Sonya Chatalova, 46, who also worked at the paper mill. "We are angry at the politicians for allowing us to be treated like this."

The company on which the town of Stamboliyski relies has dismissed most of its staff of 500, but says it might reopen the plant once global demand picks up and if wood prices come down.

Capital from China

Economists said fresh capital could come from China, the world's third-largest economy which is eager to diversify its investment base, or from some Arab countries.

Chinese car manufacturer Great Wall last month started building a car plant, while other Chinese investors are looking into energy projects including wind farms and an oil refinery.

Earlier this year, an investment fund of the government of the Sultan of Oman bought a minority stake in Bulgaria's Corporate Commercial Bank and said it was looking into potential investments in tourism and energy.

The Emir of Qatar visited twice this year to explore real estate, tourism and energy opportunities.

Such projects offer hope, but not an immediate cushion.

Reuters

(China Daily 07/20/2009 page5)