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Bulgaria: Prime Minister Seeks Investments From U.S.

Prague, 10 March 1998 (RFE/RL) -- Bulgarian Prime Minister Ivan Kostov, who is visiting the United States, is trying to persuade American corporations that his government has created the right conditions for large-scale investment.

Kostov is tonight attending a dinner in New York with top executives from key U.S. companies such as Chase Manhattan, General Electric, Philip Morris and the J.P. Morgan. The dinner has been arranged by Jeffrey Sachs, director of the Harvard University's Institute for International Development.

Kostov's visit comes at a time when foreign perceptions of the business opportunities in Bulgaria are generally improving, in large part because of the stability engendered by Kostov's government since its election in April 1997.

But the country remains a long way behind the front-running transition economies, having a post-communist legacy of years of economic mismanagement before the current government came to power. One mark of this backwardness can be seen in Bulgaria's international credit rating, still one of the lowest in Eastern Europe. Last month it was improved slightly by the Moodys ratings agency, but remains on a level comparable to Ukraine and Turkmenistan.

Despite the difficulties of crime, pervasive corruption, and inefficient bureaucracy, American companies have shown interest in moving into Bulgaria. Figures from the country's Foreign Investment Agency show that U.S. companies invested nearly $66 million in 235 ventures in Bulgaria in 1996. And the pace of investment has picked up markedly in the last year. Figures from the same agency show that direct investment from all countries in the first 9 months of 1997 reached more than $410 million. In addition, privatization revenues reached almost the same amount.

Kostov and his government are pushing for higher investment this year, arguing that opportunities are being opened up by the continuing privatization plans, which envisage that 85 per cent of companies will be in private hands by the end of 1998. The government can also point to its liberal investment code, which allows wide freedom of action to foreign investors, including the repatriation of profits.

Sectors which analysts see as offering some of the best possibilities are food processing, chemicals, transport and the construction industry.

Analysts say the Asian crisis is contributing to a renewal of interest in the transition economies, including Bulgaria, as investment targets. There's some evidence that with the former high-growth economies of Asia no longer attractive for investment, money is turning towards Central and East Europe and Russia. One London-based Bulgarian analyst told RFE/RL that he expects eventually a spill-over of investment funds from the bigger and better-performing eastern markets, like Russia, Poland and Hungary, into Bulgaria. He predicts that this trend will become evident in the second quarter of this year.

He notes that Bulgarian offers comparative bargains on its stock market because stocks have not rallied to the same extent as elsewhere following last year's bout of worldwide market volatility.