13
TOWARDS STABILIZING THE CONDITIONS FOR HUMAN DEVELOPMENT?
The existence of lasting unsound ten-
dencies in the economy generates inflation
pressure and possibilities for destabilizing
both the financial and credit institutions,
and the real economic sector. The economy
can also be directly destabilized by uncer-
tainties concerning the exchange rate of the
Lev. Given these conditions, it is difficult
to forecast the level of the GDP, industrial
production, inflation and unemployment.
The expected 3-4 per cent GDP growth rate
in 1996 depends on the payments of the
foreign debt, that at the end of 1995 was
8.4 billion US Dollars, and on the expected
agreements with the international financial
institutions.
This hard-to-predict situation jeopar-
dizes investment activeness, and particu-
larly that of foreign investors. By 15 De-
cember 1995
the total volume of their di-
rect investments was US Dollars 530 mil-
lion. This is a far cry from investments in
Hungary, the Czech Republic and Poland.
The investment structure is likewise
unfavourable. Out of a total of 4,806 di-
rect foreign investments, 3,543 are below
US Dollars 1,000, i.e.
they are practically
irrelevant to the national economy. The
largest investor is Germany (38.5 per cent
of all investments), followed by Switzer-
land, Belgium and Greece.
In these complex internal and exter-
nal economic conditions, the feasible task
solved in 1995 in the income policy was to
curb the quick and sizeable drop of the real
incomes of large population groups. For
the minimum working salary this policy has
led to checking the drop of its real pur-
chasing power to 3.2 per cent, as against
31.7 per cent in 1994. The drop of working
salary in the budget sphere was reduced to
6.6 per cent, as against 29.1 per cent in
1994. The median salary in industrial pro-
duction grew by 5.7 per cent, and median
pension - by 8.8 per cent. This growth of
real incomes cannot, however, compensate
the plunge in the incomes from the first
half of the nineties that came as a result of
the decreased GDP and the growing in-
come differentiation.
These conditions obviously require
decisive actions for boosting economic ef-
fectiveness, including a close-down of los-
ing enterprises. A strong political will is
needed to undertake socially unpopular
measures, some of which have been post-
poned for years on end.
1.2. Need of strategic decisions and
actions
The deep and complex transformation
initiated in the early nineties has been main-
taining high political tension. It is due to
the clash of different and opposing views
of the countrys future, as well as to the
intermingling of diverse individual and
group interests. The sharp political confron-
tation from the first half of the decade ex-
pressed the general insecurity about the
goals and means of national development,
and the ways of making interests meet.
Against this background the simple
evaluation of the past period of political
changes is impossible. There can be no ig-
noring or underrating the fact that the po-
litical confrontation has not turned into
violence. The legal and organizational
foundations of
future sustainability of the
national politics have been laid in many
walks of social life. Yet the high political
tension did not allow for carefully drafting
and quickly implementing any strategic so-
lutions for economic restructuring and re-
forms in other fields of social life. Certain
decisions and actions, such as those con-
Table 1.2.
Relative share of the private sector in the output of branches
(1991-1995, in %)
Branches
1991
1992
1993
1994
1995
Industry
1.6
2.6
6.4
8.0
13.8
Construction
13.5
23.7
39.3
50.5
62.4
Agriculture
27.6
49.9
63.7
76.1
76.3
Transport
4.8
13.3
17.0
22.9
34.9
Trade
24.0
42.4
54.2
61.7
70.3
The stabilization of
incomes has strong
deterrents
HUMAN DEVELOPMENT REPORT ! BULGARIA 1996
14
cerning the reform in farming, were obvi-
ously inadequate. Their consequences
would be suffered for decades to come.
As a result, in the mid-nineties Bul-
garia once again has to mobilize its re-
sources so as to solve the fundamental
problems that have piled up. The search
for strategic
solutions is once again made
in the conditions of an acute shortage of
time. Unlike
at the beginning of changes,
however, there is a stronger conviction that
decisive actions can no longer be post-
poned. There is also a greater readiness to
take the responsibility for actions, whose
positive results might come in a more dis-
tant future, while at present they create ad-
ditional economic and social difficulties.
This development becomes possible in
the conditions of a relative lull of political
confrontation. The reasons for this are the
fatigue from the prolonged political stress
and the disappointments with the quality
of political life. Another major reason is
the awareness that continuous political ten-
sions are counter-productive. Political pref-
erences have also been stabilized. The re-
sults of elections held in late 1994 and the
fall of 1995 outlined the prospects of a rela-
tively stable government:
The relative stability of political pref-
erences has led
to strengthening the state
institutions at a time when decisive mea-
sures are needed both nationally and in-
ternationally. Major efforts were made to
restore the states capacities for regulating
the economic life under emerging market
conditions. Components of strategic man-
agement have been re-introduced. Among
these, noteworthy are the strategies, devel-
oped and implemented in 1995, concern-
ing key social and economic issues:
- restructuring the industry;
- development of power generation;
- development of agriculture;
- national security;
- Bulgarias territorial development;
- environmental protection;
- health care;
- development of education and sci-
ence;
- social security and social welfare.
Individual strategic projects developed
further into laws, e.g. the Programme for
privatization through investment vouchers,
the Law on defense and the armed forces,
the Law on higher education. Others were
rendered concrete in programmes: for in-
dustrial control between 1995-1998, for in-
vestments between 1996-1998, for measures
to combat crime between 1995-1998.
There is an indubitable drive to sub-
stantiate priorities and coordinate reforms
in individual areas in a long-term perspec-
tive. The recovery of production and the
market is accompanied by a gradual mod-
eration of the restrictive economic policy
and boosting economic growth. The con-
tinuing economic reform and the legisla-
tive and organizational changes imple-
mented in defense and the armed forces,
education, health care, science and culture
directly or indirectly aim at stabilizing the
conditions of human development. The bill
Table 1.3.
Mandates of the major political forces from the parliamen-
tary elections (December 1994) and the elections for local
governments (October-November 1995)
December 1994
October-November 1995
MPs
Municipal councillors
Number %
Number %
BSP and coalition
125
52.1
3291
46.8
UDF and coalition
69
28.6
1365
19.4
Popular Alliance - BAU, DP
18
7.5
671
9.5
Movement for Rights
and Freedoms
15
6.3
669
9.5
Bulgarian Business Bloc13
5.4
229
3.3
Strategic solutions are
sought in a shortage of
time and resources