Abstract
Bulgaria is one of the poorest countries in Europe. The only significant
security threats it faces come from
organised crime, which is pervasive,
and corruption. Although Bulgaria is a recently-admitted member of
NATO,
the country is not strategically significant in any of the regional tensions
or issues. However, it
lies on the transshipment route for drugs coming
out of the Central Asia region and the Caucasus.
Bulgaria is therefore
significant in the associated crime, human-trafficking and
money-laundering
operations that surround the international drug
trade.
During the Cold War, Bulgaria was a member of the Warsaw Pact. It
maintained a large, mostly
conscript, army and benefited from having a
defence industry that earned several hundred million dollars
annually from
sales to other Warsaw Pact countries. (This was a significant amount, given
the small size
of Bulgaria' s economy). Up to 90% of military production
was exported.
The demands placed on the military as a NATO member are very
different. The need now is for a much
smaller and a much more professional
force, capable of operating in peacekeeping and humanitarian
roles. The
need to inter-operate with other NATO forces means that the Ministry of
Defence is working to
standardise and codify its military products to
comply with NATO standards. Bulgarian forces have
sought to improve their
compliance with these standards by recent military acquisitions, such as a
pair of
Belgian frigates, and armoured security vehicles from the USA.
The Bulgarian defence industry recently stated that Bulgaria is regaining its
position in the international
arms markets. Deputy Economy and Energy
Minister, Yavor Koyumdjiev, has stated that last year
Bulgaria exported
' special production,' valued at EUR180mn. ' The country has retained positions
in its
traditional markets in Northern Africa and Europe, and has also
succeeded in placing products in the
USA,' according to the minister.
Bulgaria became part of the European Union in 2007. Having made little
progress in cleaning up the
judiciary or cracking down on organised crime,
with a high-profile conviction remaining elusive, the
European Commission
suspended several hundred million Euros in EU subsidies following the release
of
its scathing report on July 23 2008. The highly-publicised report has
not only strained relations between
Bulgaria and the EU, but has also
further weighed on the popularity of the Bulgarian Socialist Party
(BSP)
among the electorate. EUR220mn of these suspended funds were forfeited in
November, when two
Bulgarian agencies charged with administering the funds
failed to meet the deadline for EU accreditation.
Aside from concerns over
economic growth and standards of living, we believe that the lack of
progress
in eradicating corruption will remain top of the list of the
government' s perceived policy failures. While
the existence of endemic
corruption was the central tenet of the report, the Commission did note
the
encouraging developments that have occurred since Bulgaria joined the
EU on January 1 2007. The
establishment of a State Agency for National
Security - charged with fighting corruption and organised
crime - was
praised, as was the appointment of a new deputy prime minister to oversee the
collection and
distribution of EU funds.
However, frustration over
increasing poverty and government inaction on corruption contributed to
mass
protests and rioting in the capital Sophia on January 14.
BMI
believes that the Bulgarian government' s attempts to shore up public support
through a planned
social aid payment to pensioners and poor households
will be insufficient to win over the electorate ahead
of the June 2009
parliamentary election. Indeed, on the back of its failure to eradicate
corruption and to
improve standards of living, we do not expect the
Socialist-led coalition government to survive the
election in its present
form, with the Citizens for European Development of Bulgaria (GERB) party
likely
to be the main partner in the next coalition government.
We
believe that the potential for foreign capital inflows to dry up and lay bare
Bulgaria' s substantial
external exposure, or for an emerging Europe-wide
banking-sector crisis to unfold, would precipitate a
rapid unwinding of
the country' s substantial economic asymmetries.
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