October 4, French president Nicolas Sarkozy was scheduled to be awarded
the country’s highest state order, the Stara Planina,
for his role in negotiating the release of the Bulgarian medics
from Libya. It was expected that during his visit, Sarkozy
would propose an offset deal linked to Bulgaria’s acquisition
of French corvettes that would significantly boost economic
relations.
Photo: FRENCH EMBASSY
Bilateral business worth hundreds of millions of euro would take centre stage during the October 4 visit by French President Nicolas Sarkozy to Bulgaria, the French embassy to Bulgaria said on September 28.
During talks with both his Bulgarian counterpart Georgi Purvanov and Prime Minister Sergei Stanishev, Sarkozy will be looking to put the "point finale" to a 750 million euro offset deal with Armaris. Finalisation of the deal has been lagging for years.
A few years ago, Bulgaria's Defence Ministry commissioned the largest shipbuilder in France - and arguably, Europe - to produce four GOWIND corvettes for the Bulgarian navy. Lack of financing has been an obstacle to finalisation of the deal.
Sarkozy is coming with several trump cards to negate the financial deterrent and will put both France and Bulgaria on the winning side, French embassy officials said.
First, Armaris has offered to cash in on the deal only in 2012 , the tentative deadline for the first corvette handover. Bulgaria, in return, should give Armaris pecuniary assurances through the issue of a 20-year state-guaranteed debt.
Defence Ministry officials said that by that time, Bulgaria will have finished payments on three expensive modernisation projects, and the defence budget will have spare resources to finance the deal. Defence Ministry estimates for 2012-2015 see the budget for modernisation in the 320 million to 350 million leva range.
The benefits from attractive financial details apart, the advantages of the proposal include its impact on the local economy and the state budget. The combination of positives has moved local and international military experts to dub it Bulgaria's first-ever successful offset deal.
In the first place, Armaris declared it will build three of the corvettes at Varna-based Bulyard Shipbuilding Industry. To ensure their proper commissioning, the French company is to create a regional centre to employ 1000 individuals directly and another 1000 indirectly through subcontracting jobs to local companies over a 10-year period.
Apart from alleviating the seasonal distortion on the labour market, Armaris will also ensure the transfer of know-how and, consequently, training for both low- and high-tier workers involved in the project.
Furthermore, the project will go hand-in-hand with technological and equipment upgrades in what would be Varna shipyard's first large-scale modernisation project in decades.
The combination of modernisation and know-how upgrades will allow Varna shipyard to take up orders it was technologically unable to accept previously, including corvette orders from third countries. Georgian government officials already pledged readiness to assign Varna shipyard the building of two corvettes.
Armaris committed itself to continue working with the Varna-based regional centre after the completion of the offset deal. The French shipbuilder has won a deal to build European multi-mission frigates under the FREMM programme. Since this is Europe's largest wartime shipbuilding contract in 50 years, Armaris does not have sufficient capacity to complete the order at its own shipyards.
If the Government agrees to the offset deal and Armaris implements the necessary upgrades in Varna, Bulgaria will be given priority as subcontractor to peers in Croatia, Poland and France. In particular, Armaris will be outsourcing the construction of several ship modules.
The national budget will also be an indirect beneficiary. The state is expected to get 7.2 million leva in annual income from social security contributions and taxation. The calculation draws on the direct employment of 1000 people at a monthly wage of 1000 leva and the indirect recruitment of another 1000 at an average salary of 700 leva. Over a 10-year period, the figure becomes 72 million leva.
Business on Sarkozy's agenda does not end with Armaris. Among projects up for discussion will be Bulgaria's second nuclear power plant, as well as the Nabucco gas pipeline. France has direct interest in both as AtomStroyExport of Russia, tipped to build the nuke plant at Belene, will act in co-operation with Areva of France and Gas de France aspires to enter the line-up of Nabucco shareholders.
