Bulgaria 2019

representatives, who had obtained real estate at prices far below the estimated market value. According to the opinion polls at that moment, they were measured behind BSP. The ruling party GERB also retook the capital Sofia, as well as 15 out of the 28 mayoral seats, at the local elections in November this year. Current Mayor of Sofia Yordanka Fandukova was аt the second round despite scandals with the poor repair work of the city center and deteriorating air quality in the capital. Bulgaria is a parliamentary democracy, with its 240-seat unicameral National Assembly. Representatives are elected via proportional representation in multiple constituencies. Elections are generally deemed as free and fair by international community, with some problems which remain yet to be addressed, such as party financing, restrictions to conduct a campaign in Bulgarian language only, and election-day violations such as voter intimidation or cases of vote buying. Ruling party pushed for several electoral changes in recent years. However, many of them were declined. Key concerns include the introduction of electronic vote, the regulation of preferential votes, voting abroad, campaign transparency and vote-buying. Sanctions - as a part of legislative changes adopted in parliament in regard to mandatory voting - were later declared as unconstitutional by the court. In the mid-2019, Bulgarian parliament adopted measures that should cut state subsidies to political parties and remove limits for private donations to political parties. It is still to be seen whether these measures will enter into force later during the year, since they were widely criticized, for limiting political pluralism in the country and for their potential to increase the already high level of corruption.

them maintain close ties with politicians or even are involved into politics, using their influence to shape the country’s policies according to their personal needs. Weak system of checks and balances allows for manipulation of democratic institutions. Although formally independent, judiciary is often subject to extensive political pressure, or pressure by wealthy businesses.

abuse of budgets for communicating EU programs in Bulgaria, by using them as a tool for the influence over the media environment in the country, has remained. Namely, EU funds are relocated in a way so as to fund government-friendly media outlets. Also, recent concentration of the media ownership in the hands of wealthy businessmen, as well as media opaque structures, caused growing concerns over independence of journalistic profession and pluralism of the Bulgarian media scene in general.

encouraging news, yet FNF`s own monitoring on the ground showed that – during the selection process regarding recent judicial appointments - trade-offs between political parties, instead of merit-based decisions, were in place too often. Big challenge for the independence of the judiciary system in Bulgaria is also the structure of the Bulgaria`s prosecutor’s office. The Chief Prosecutor, who is above all other prosecutors, can stop any investigation, including a (hypothetical) investigation against his own self. He is elected by the Supreme Judicial Court, which has 25 members, 11 of which are appointed by political parties. Recently, Ivan Geshev was elected as the Chief Prosecutor, amid protests against him. Better selection, monitoring and evaluation of judges and prosecutors might on a longer run decrease corruption in the judiciary. As for the latter, the portal GAN assessed in December 2017: “Organized crime in Bulgaria is enabled by corruption in the public administration, judiciary, police, and customs.” 

framework of CVM (unlike the one in the neighboring Romania that would certainly continue). If the EU withdrew, that would mean that domestic (at least legal) mechanisms were all in place and sufficient to provide results on the longer run. That would also mean more responsibility on the face of domestic (old as well as recently created) anti-graft institutions. 

mother-tongue is quite limited to them. Women employment rate is lower than for men, but on the other hand the gender pay gap is smaller than the EU average. Women are still under-represented in management structures, but numerous have recently come to important political positions. Domestic violence and insufficient application of the existing laws that protect women thereof remain as a problem, yet, in July 2018, the Constitutional Court has found Istanbul Convention on prevention of gender-based violence as unconstitutional hence unfit to be ratified by Bulgaria. LGBT people face numerous problems in society, while enjoying at least a basic protection by the state. Sofia Pride was freely held in June 2019, yet LGBT people in Bulgaria still lack equality of their unions, with all the adjacent social benefits that different-sex couples enjoy, as well as opportunities to adopt and raise children. 

below two fifths of the claim. There have been several judiciary reforms under the Cooperation and Verification Mechanism (CVM) of the EU, including establishing a unified anti-corruption commission, and aiming at strengthening the independence of judges and prosecutors in the Supreme Judicial Council. However, most of these actions are not perceived as successful in increasing the level of independence and accountability in the judiciary, and the CVM was concluded in October since it was mostly considered as ineffective. Although most of the land has a clear title, property registration is burdened with numerous procedures and associated costs through notary fees and the property transfer tax that vary from one municipality to another. Registration of property has been made more secure with the recent introduction of notaries, but the local tax administration is often slow. There is no general discrimination against foreign companies in Bulgaria, but in specific cases regulatory obstacles could be used to benefit important market players. An important example is the energy company that enjoys a quasi-monopoly status, since new prospect market players from the US have been actively discouraged from entering the market. The Offshore Company Act stipulates restrictions for companies that have got more than 10% registered offshore equity participation, in 28 specific industries (including banking and insurance, natural resource exploitation etc.). That was one of the measures against money laundering and corruption, but its influence has been diluted by the fact that it did not apply to Bulgarian nationals or businesses whose parent companies were publicly traded. Private property can be expropriated by the Cabinet of Ministers or by local governors, but these cases and rare. Non-EU nationals cannot own agricultural land, and neither could off-shore registered companies do so.

reform - implemented in 2015 through an increase of the pension contribution rate and the statutory retirement age - has somewhat alleviated fiscal pressures stemming from population aging on the medium run, the pension system is not sustainable. That will lead to high pension deficits, that will themselves need to be addressed. Apart from public utilities, SOEs operate in various industries, but are mostly notable in energy sector, transportation and infrastructure. There are approximately 220 SOEs in the country, and their revenues surpass 13% of GDP. However, their management is often dubious, suffering strong political influence, which is often leading to poor performance, which to its part creates infrastructure bottlenecks and fiscal risks. Although direct government subsidies to inefficient SOEs are below the EU average level, this figure is inflated through indirect channels, such as by tolerating arrears. Total SOE debt is lower than the EU average, but several SOEs in the energy and transportation sectors have accumulated considerable debts, and the bulk of it needs to be serviced by loss-making state entities, which itself is unsustainable. Improving SOE governance could have a significant positive impact on public infrastructure. Therefore, the commitment to enter the ERM II mechanism could prove as an important vehicle for this, since it requires alignment of the current SOE legislation with the OECD guidelines. The Sofia airport concession, which was initially cancelled and delayed on several occasions, was finally finalized, by awarding the concession to an international consortium. However, there are several outstanding issues that have not been fully resolved, since this consortium did not provide the highest financial bid. Shadow economy in Bulgaria is widespread, reaching up to one third of the GDP, and although tax collection has improved there is still much more to be done in this field. Relatively low level of public spending, as compared to the EU average, leaves room for lower taxation: both personal income and corporate tax are flat and set at 10%. The standard VAT rate is 20%, while the preferential one is just 9%. However, high social contributions make the labour tax wedge significant - approximately 34% on the average wage - which is comparable to the OECD average and somewhat below other countries in the region.

could last for more than 3 months. It could incur significant costs through mandatory fees. Obtaining an electricity connection is very expensive due to high mandatory fees of the utility company, and also a very lengthy procedure, lasting up to 9 months, due to inefficiency of the public utility provider and municipality supervision bodies. Tax regulations are overly complicated and burdensome, especially those pertaining to VAT and social security contributions, requiring long hours to comply, although the overall number of payments is not high. Labour regulation in Bulgaria is mostly flexible: fixed term contracts are not prohibited for permanent tasks and could last up to 36 months while redundancy notification period and severance pay do not increase with the number of years in tenure. Collective bargaining is mostly limited to public sector employees, through the tripartite social dialogue, and is mostly absent from private sector. The last increase of the minimum wage was in July, for additional 10% nominally, which is a manner that has been in place for several years now - significantly above the productivity rise. Nevertheless, the unemployment has reached its historical low records, partially due to emigration. The process of minimum wage determination is mostly arbitrary, with political considerations overcoming the economic ones.  

financial resources from the EU for these purposes - through regional cohesive funds - are underutilized due to the lack of accountability in project financing and low administrative capacities for absorption. Bulgaria’s main export markets are fellow EU-member countries such as Germany, Italy, Romania or France, followed by Turkey, with similar patterns in imports. Bulgaria, alongside Romania, Croatia, Ireland, Cyprus and United Kingdom (which will exit the EU), is one of the few EU countries that is not a part of the Schengen area. To its part, not being a euro-zone country is mitigated by the fact that Bulgaria has - since 1997 - been using a currency board, with its currency previously pegged to German mark, and now to the euro. As an EU member, Bulgaria is obliged to aim towards the euro-zone. Unlike some other CEE countries, which have put this question on hold, it has made progress in this regard. It has already fulfilled the Maastricht criteria, regarding the level of public debt, deficit, inflation and interest rates, and is now in the process of joining the ERM II currency exchange mechanism, in which it would need to stay for at least two years prior to the adoption of euro. In order to join the ERM II, and the banking union, Bulgaria needs to complete strengthening of the financial sector supervision, improve SOE corporate governance and enhance anti-money laundering framework. There are some restrictions on foreign workers, such as the one that non-EU workers cannot exceed 35% of total workforce in SMEs or 20% in large companies. In 2017, the procedures for obtaining work permits for non-EU workers were simplified and the necessary waiting time was shortened.