This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001597 
 
SIPDIS 
 
TREASURY FOR ATUKORALA; COMMERCE FOR SAVICH; 
DEPT PLEASE PASS TO USTR ERRION 
 
E.O. 12958: DECL: 09/12/2015 
TAGS: ECON EINV KIPR ENRG EFIN ETTC PREL BU EUN
SUBJECT: ECONOMY MINISTER: BULGARIA TO STAY THE MACRO 
COURSE; STEM CORRUPTION 
 
 
Classified By: DCM JEFFREY D. LEVINE FOR REASONS 1.4 B & D 
 
¶1. (C) SUMMARY: Ambassador Beyrle made an introductory call 
on Roumen Ovcharov, the new Minister of Economy and Energy, 
on September 12.  He stressed USG support for Bulgaria's EU 
accession in January 2007, as well as continued close 
cooperation on economic and commercial issues.  In the 
ensuing discussion, Beyrle and Ovcharov discussed the need 
for greater protection of intellectual property rights (IPR), 
compliance with agreements to privatize state enterprises, 
and continued improvement in the investment climate. 
Ovcharov stressed Bulgaria's confirmed priority on its 
nuclear energy industry, where he said U.S. companies' 
experience was helpful.  END SUMMARY 
 
EU ACCESSION AND IMF/WORLD BANK 
------------------------------- 
 
¶2. (C) Ovcharov laid out his government's priorities, which 
include EU accession, a "mature" relationship with 
international financial institutions, continued 
macro-economic success, and successful privatization of 
remaining state-owned enterprises.  The GOB's highest 
priority is the passage of laws necessary for EU accession, 
especially those related to Justice and Home Affairs, and 
streamlining coordination between ministries in order to 
convince its EU partners that Bulgaria is up to the tasks of 
membership.  Bulgaria is also ready to take the next step 
toward a mature relationship with the IFIs, beginning with 
more detailed discussion of problems and coordination of 
solutions, according to Ovcharov. 
 
PRIVATIZATIONS 
-------------- 
 
¶3.  (U) Ovcharov noted that gas and electric supply companies 
are still state owned; one of his priorities will be moving 
ahead with their privatization.  However, according to 
Ovcharov, the GOB still needs to support heavy industry, 
particularly steel production, and agriculture, which could 
continue to be a productive export for Bulgaria.  Amb. Beyrle 
raised the need for Bulgaria to finalize the sale of Boyana 
film studios to American film producer NuImage, the winning 
bidder in a recent privatization tender.  Ovcharov noted that 
Boyana's sale is currently tied up in the judicial system. 
 
ENERGY/INFRASTRUCTURE 
--------------------- 
 
¶4. (C) Ovcharov, who was Energy Minister in the previous 
Socialist government, said the proposed Nabucco gas pipeline 
could dilute Russian influence by transporting gas from 
eastern to western Europe.  Russian President Putin and Prime 
Minister Stanishev also discussed the need for an oil 
pipeline recently.  Bulgaria understands the importance of a 
Bosphorus-bypass pipeline to global oil interests, said 
Ovcharov. 
 
¶5. (C) Beyrle stressed U.S. companies' commitment to 
improving Bulgaria's capacity as an electricity exporter in 
the region.  Ovcharov complained that the American company 
AES has made little progress in more than six years (sic) on 
its agreement to build a new power plant at Maritza East.  He 
also raised problems with the upgrades of Maritza East III 
plant, originally started by U.S.-based Entergy. 
 
¶6. (U) Bulgaria wants to maintain its position as the 
best-developed nuclear industry in eastern Europe, said 
Ovcharov.  Thus, the GOB is reviewing the Belene nuclear 
power plant project re-started by the previous government. 
Licensing, safety and International Atomic Energy Agency 
issues remain to be worked out.  Amb Beyrle noted U.S. 
industry -- Westinghouse and Parsons -- work on Kozloduy 
nuclear plant, and reminded Ovcharov that U.S. companies were 
well-positioned to compete for Belene sub-contracts. 
Ovcharov said he appreciated USG assistance through EXIM-bank 
loans and thought the U.S. companies' experience would be 
useful in Belene. 
 
IPR 
--- 
 
¶7. (C) Beyrle pointed out that Bulgaria used to be a model of 
success in tackling IPR problems, but recently has moved in 
the other direction.  He stressed the need for greater 
cooperation between agencies, and for leadership from the top 
on this issue.  Ovcharov said the GOB is addressing the 
issue, and has just passed optical disk media legislation 
that "practically solves the problem."  He pledged to 
cooperate closely with the U.S. 
BUSINESS CLIMATE 
---------------- 
 
¶8. (C) Referring to the business climate, Ovcharov said the 
current environment "allows for unequal treatment of 
companies."  His ministry is responsible for some of that 
imbalance because of its role in licensing and other 
administrative requirements that give rise to opportunities 
for corruption.  Ovcharov also said the administrative 
process takes too long, with too many separate procedures. 
Ambassador offered USG assistance in this area. 
 
¶9. (C) Complex administrative procedures are not the only 
problem facing potential investors.  Ovcharov also 
highlighted the need to reform the judicial and prosecutorial 
systems.  Currently judges move from one court to another, 
with no real infusion of fresh blood.  Real change is not 
possible under this environment.  He said the Prime Minister 
and Socialist Party are prepared to make serious efforts in 
this area. 
 
¶10. (U) Ambassador stressed that passage of legislation 
allowing the GOB access to bank and tax information was 
necessary in order to complete negotiations on the Treaty on 
the Avoidance of Double Taxation.  This treaty will give 
greater incentives to American businesses to invest here. 
 
ARMS EXPORT CONTROLS 
-------------------- 
 
¶11. (C) Ovcharov and Beyrle agreed on the good cooperation 
between our countries on export controls.  Ambassador 
stressed USG desire that cooperation continue with the team 
that has been in place at the working level, and that we 
would like to review our consultative process with the newly 
appointed Deputy Minister in charge of export controls. 
 
¶12. (C) COMMENT: Ovcharov gives the impression that Bulgaria 
is open for business despite some remaining problems.  He 
clearly recognizes the weaknesses inherent in the current 
system and the need to address these problems in order to 
attract substantially more foreign investment.  The fate of 
the privatization of Boyana Studios will be important in this 
regard, sending a signal to U.S. investors, as will 
Bulgaria's efforts to implement judicial reform in advance of 
its EU membership.  While his analysis of the benefits of 
recent IPR legislation is overly-optimistic, his concerns 
about AES' slow progress on the Maritza power plant has some 
merit.  The bottom line, however, is that there are numerous 
opportunities in Bulgaria for U.S. companies in the coming 
years, but the new government will need to work decisively to 
prove it is serious about improving the business climate if 
it is to reap the benefits.  END COMMENT 
BEYRLE