[Intl-tobacco] World Bank to Bulgaria: Privatize Tobacco Monopoly or Risk $150 mln. Loan

[Robert Weissman]

Bulgaria Risks Losing $150 Million Loan
Wed May 14, 2003
Associated Press

SOFIA, Bulgaria - A World Bank (news - web sites) official on Wednesday
warned that
Bulgaria risks losing a $150 million loan unless it reforms its legal
system and
privatizes its state-owned tobacco monopoly, Bulgartabac. Andrew
Vorkink, the World
Bank director for Bulgaria and Romania, said the loan "may be
jeopardized" unless
Bulgaria demonstrates an "adequate progress of judicial reform and
privatization of
Bulgartabac." A deal to sell Bulgartabac to a Bulgarian-Dutch consortium
owned by
Deutsche Bank fell apart in March when the government and the consortium
failed to
agree on the terms of the acquisition.

The consortium =97 made up of a Bulgarian company, Tobacco Capital
Partners, and a
Dutch company, Clar Innis =97 had bid 110 million euros ($127 million) for
80 percent
of Bulgartabac. It failed, however, to agree with the government on several
conditions, in particular Bulgaria's plan to fix prices of raw tobacco
crops by
2007. The government of Prime Minister Simeon Saxcoburggotski has also
been unable
lately to put through changes to its laws sought by the World Bank and
the European
Union. The EU says Bulgaria, which hopes to join the union in 2007, must fi=
rst
enact legal changes =97 including making it easier to replace judges.

The Constitutional Court earlier this year revoked the
government-sponsored law
instituting such changes. The 12-judge court is empowered to annul laws
if it finds
them in violation of the constitution. The loan at stake is the second
tranche of a
$450 million World Bank lending program for Bulgaria. The bank has
already paid the
first $150 million and its board is supposed to approve the second
tranche by the
end of this year.