None of the factories of former state tobacco monopolist Bulgartabac would be shut down with immediate effect, Hristo Zheliazkov, the head of the Confederation of Independent Trade Unions in Bulgaria (CITUB), told a news conference on February 22 2008.
The decision represents a reversal of the original decision of Bulgartabac management. Additionally, all plans to sell off the company included keeping the cigarette production licence, he added.
Zheliazkov’s statement came out after hours of negotiations between CITUB, Podkrepa trade union and the management of Bulgartabac, which declined to attend the news conference.
The sides considered three options for the future of the Bulgartabac. The fast-track privatisation plan envisages the sale within three months of Stara Zagora and Plovdiv factories, who would see their license to produce proprietary Bulgartabac brands stripped off. All employees made redundant would get compensations equal to one gross salary per year of employment, up to 20 salaries.
According to the second scenario, all four factories – in Stara Zagora, Plovdiv, Sofia and Blagoevgrad – would be sold within nine months; but the first two will immediately halt operations. Employees would once again be entitled to compensations. All facilities will retain their cigarette production licence and the right to produce Bulgartabac brands.
Under the third scenario, the status quo will be kept for another nine months and then all factories are sold together with their licences and cigarette brands.
Negotiations also focused on a fourth alternative, which would combine the first and second options, Zheliazkov said. It would see the quick sale of the Stara Zagora and Plovdiv factories and temporary revocation of their right to make Bulgartabac brands; termination of employment contracts and payout of severance packages. After the privatisation of Sofia and Blagoevgrad factories, Plovdiv and Stara Zagora plants would be allowed to re-purchase Bulgartabac brands.
According to the CITUB, the main shortcoming of all three options is the planned sale through the stock exchange. This method precludes the seller to negotiate with the buyers and impose conditions on them.
CITUB recommended a competitive procedure as the preferred method for sale. In this way, the seller can set eligibility criteria toward buyers.
Instead of swiftly selling the factories, as Serbia and Romania did, politicians had waited for years, arguing that the strategy on Bulgartabac should not focus on each factory being sold separately. The delay saw three factories wind down operations in Vidin, Shoumen and Haskovo. Should the matter be delayed any further, other factories might follow suit, Trenchev said.
The Government’s “irresponsible” decision-making and the rigid policy on excise duties were the direct causes of the high amount of Bulgartabac cigarettes being smuggled, amounting to 30 per cent of the company's output.
