Kamen Kolchev, Chairman, Board of Directors of ELANA Financial Holding: The Silver Fund and the state shares would trigger the stock exchange

- Mr. Kolchev, what is the current condition of the Bulgarian capital market and what are your expectations for its development in the near future?
- Its current condition is obvious and needs no comment. The market turnover is very low and so are prices. We are observing some price recovery, but unfortunately, the turnover figures are not optimistic. We are still far away from the recovery, which is taking place on the global markets. But this means that the market has great revival potential. And perhaps it needs a trigger.

- Last week it was officially announced that the Ministry of Finance is planning to invest 20% of the money from the Silver Fund in stocks and bonds on the Bulgarian market. Is this idea a reasonable one and what do you think the real impact of such a move would be?
- The idea is meritable. Since the establishment of the Silver Fund, all capital market participants supported such a move, because ultimately, this is Bulgarian money and it is proper that they be invested in Bulgarian companies. On the other hand, this fund is associated with the "white money for a rainy day," of Bulgarians. Therefore, funds must be invested with relatively low risk and very cautious. A 20% package is a sound percentage of investment in shares. The type of shares to be chosen for the investment is very important. I hope that the fund would be managed in a transparent way. There used to be an idea for the election of a fund manager, which has not been implemented. I think that the correct formula is a public board or a similar body in charge to supervise the decisions of the fund managers. There are enough representatives of business associations of investment firms and fund managers.

- The privatization of state -owned shares through the stock exchange is widely discussed, but could such a listing attract foreign players to our capital market? Which of the state - owned shares would be most attractive to investors, according to you?
- I consider the privatization of state owned shares in two aspects. Privatization of small residual shares of companies through compensatory bonds or even against cash can in no way have an impact on the stock exchange. This is a single turnover that runs through the stock exchange and disappears. Quite different is the case with the privatization of the large minority stakes, which the State holds, for example in the energy distribution companies, or the shares of entirely state-owned companies, which are interesting because the respective companies are large public utilities.
Such are: The National Electricity Company (NEK), the energy companies associated with NEK - Maritza Iztok 2, and why not Kozloduy NPP ... Of course, the structures and assets of NEK and the other companies should be clear. I am carefully following all the intentions for listing of state- owned shares in energy companies, because I think that this will serve as a "trigger" for the sudden stir up in the market as it happened during the listing of BTC shares in 2005. We all remember how the Stock Exchange’s turnover doubled and tripled after the big IPOs (initial public offering) of BTC shares. This can happen again on the Bulgarian capital market, but an initial boost is needed. And although I am not a supporter of the intervention on the part of the State, in this case, a combination of listing of state-owned shares and investments by the Silver fund on the BSE (Bulgarian Stock Exchange) can play the role of such a trigger.

- It is claimed that exports would be one of the strongest engines of the economic recovery, what is your opinion? What are the other industries with growth potential?
- Bulgaria is a small and open economy and it depends on exports. Currently, the major economies to which we export are developing well. Bulgarian exports follows the same trend. Exports would grow faster than the GDP. The fast moving consumer goods - foodstuffs, pharmaceuticals and others also are sectors with growth potential over the next two or three years. Industries, which traditionally export part of their products such as the mining sector and the mechanical engineering will grow as well

- Currently, which reform is crucial for Bulgaria and why? What are the sectors that the Government should develop in the long run?
- The Government should prepare a long term strategy for the economic development of Bulgaria and has to submit it for public debates, including to the National Council for Tripartite Cooperation. No Government so far has developed a serious strategy for our economic development over the next 20 years. It is high time to decide on the specialization of our economy. There have been some formal attempts for drafting such a document, but the results are not characterized by any strategic brilliance and no investor would take them seriously.

The Ministry of Economy, Energy and Tourism (MEET) published a summary of a research aimed at determining the priority sectors of the economy, but we never saw the analysis on the basis of which these sectors were listed. There are other documents analysing specific sectors, but the problem is that s these have always been too specialized. I agree that sectors with high value added for the economy must be selected, and that this issue has yet to be discussed in public.

My personal opinion is that we have to develop sectors where the country has competitive advantages over other EU economies. We have more resources, more land due to the low population density. I think that agriculture has an enormous growth potential. But in order to develop modern agriculture, a land reform should be implemented due to the high fragmentation of the land ownership. We also have some advantages due to the presence of mountains, spas and other. We have good prospects for development of rural tourism and in the traditional sectors such as the mining industry and the mechanical engineering, and why not - in the production of electric cars. In any case, we should start with the drafting of a serious and comprehensive development strategy, which should be discussed and approved in public. 

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