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Bulgaria: some hopeful signs for glassware, but the sector is still suffering

The glassware sector in Bulgaria is showing slight signs of recovery due to the activities of two foreign investors. Turkish glassware maker Sisecam announced its plan for investment in the constructi…

The glassware sector in Bulgaria is showing slight signs of recovery due to the activities of two foreign investors. Turkish glassware maker Sisecam announced its plan for investment in the construction of a flat glass plant in Russe for BGL 100 million. Despite the creation by the government of a working group to provide institutional support to the Turkish company, Sisecam is still in doubt whether the plant should be located in Bulgaria or Romania. Currently, two Bulgarian plants, Diamant and Kristal-Pernik, both of which face insolvency, are operating in the flat glass sub-sector. At the end of 2002, the Greek Youla Glassworks decided to consolidate its two plants in Bulgaria, which are among the largest in the country. The company controls 99.88% in Stind and 97.29% in Druzhba through its Cypriot subsidiary Glassinvest Ltd and Barek Overseas. The plan for the merger of Stind and Plovdiv-based Druzhba was approved by the State Securities and Exchange Commission. After the merger the new company will have a 70% share in the domestic glass bottle market. The other major glass bottle producers are Pleven based Rubin, owned by Deltacom Holding Group, and Seres Glass in Novi Pazar. Household glassware is produced by Belopal in Beloslav, bought by Sliven based Kvarts, and by Kitka Novi Pazar. The last two companies are involved in insolvency proceedings. In the last few years the domestic glassware sector has perfomed poorly and has attracted little foreign investment. Most of the plants in the sector are either inoperational or produce only very modest amount of glass. The numbers employed in the sector are also falling. There were 5,169 employees in 2000; a year later there were 4,459. The collapse of leading companies, rather than the introduction of new technology, mostly to blame. Glassware output fell by 53.8% in 2000 compared to 1997 and exports went down by 56.4% for the period. There are 221 companies registered but few of them make any impact on the development of the sector. Falling production is mainly due to the high prices of natural gas, shrinkage of markets related to the crisis in the wine and food canning sectors and the lack of new capital investment. Foreign investments for the whole sector include USD 20 million paid for the Druzhba plant and USD 5.0 million for Stind. Most of the other glassmakers were either purchased by management-employee buyout companies or were sold during mass privatisations. Foreign investors are not interested in the obsolete technologies in Bulgaria and investments in the glassware sector are decreasing, statistics show. A total of BGL 35.5 million were invested in 2001, compared to BGL 56.8 million in 2000. The Bulgarian glassware sector depended strongly on the large exports of wine and canned food to theformer communist countries in eastern Europe, but the collapse of the market inevitably hindered the development of the domestic sector. Local producers are additionally affected by the cheaper imports mainly from Turkey. Imports by Turkish companies represented USD 6.3 million of the total imports of USD 33.8 million for 2001. Other major importers include Germany with USD 5.4 million and the Czech Republic with USD 4.0 million. Fifty% of production costs in the sector come from the prices of natural gas and electricity, which are quite high at the moment. Glass producers were some of the biggest debtors of Bulgarian gas monopoly Bulgargas in 2002. Diamant owes the gas monopoly BGL 11.5 million, Belopal owes BGL 8.7 million and Kitka BGL 8.3 million. Most of the producers ask for state support, saying the high natural gas prices set by the government are not realistic.

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