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published Thursday, June 17, 2010 2:42 PM
Radio Bulgaria Economy

Inter-company debt – one of Bulgarian economy’s serious problems 

© Photo: Tanya Harizanova

Mr. Vladimir Georgiev, CEO of Debtnet
Inter-company debt in Bulgaria is estimated to exceed EUR 51 bln. and over 60% of firms have delinquencies. The greatest debts can be found in the construction and furniture businesses where over 90% of companies are indebted. Compared to this EUR 51 bln., the state owes to companies only 2% or EUR 1 bln. This is what data from a national research based on information from the free register for debtors Debtnet has shown.

Those numbers are impressive even without any comment and the chain gets longer when we add subcontractors, suppliers and producers that are all creditors of the state. According to the Bulgarian Industrial Association the main reason for the increasing inter-company debt hides in the fact that the state delays payments for companies. Thus everyone along the chain is forced to act accordingly – allow repayments by installments and give discounts to suppliers or subcontractors. 70% of inter-company transactions are paid with delay and more and more firms tend to function “on credit”. The situation is analogical to the one in Central and Eastern Europe.

“The main problem of the Bulgarian economy is the excessive inter-company debt – Mr. Vladimir Georgiev, CEO of Debtnet said for Radio Bulgaria. Debtors’ registers are the right way for solving this issue, he thinks.

“After the 2006-2007 “boom” we have observed a very serious development of inter-company debt in Bulgaria – Mr. Georgiev commented for Radio Bulgaria. – Companies with arrears are now almost 60% and this is a very serious indicator that is going up and cannot be stopped for the moment. The only way is this growth to be limited and this can be achieved with the development of those free registers that are widely spread in the developed economies of Europe, such as Germany, Great Britain, Denmark and also in the USA, Australia etc. They create an environment of information for anyone, involved in any kind of economic activity, and also for companies with debts. I.e., some sort of a quarantine is imposed and we can restrict the “virus” in the same way.”

Banks, companies and average citizens have now debts worth some EUR 1 bln. Private enforcement agents sell property at public auctions in order to collect money for the debts. However, global economic crisis and also the debtors’ disability to pay their loans decrease the sums collected from these sales. 1277 real estate properties and 206 chattels, such as cars and different kinds of appliances are announced for sale at the register of the Bulgarian Chamber of Private Enforcement Agents. And these are the lowest offers on the market with sometimes ridiculously low prices. For instance a two-room flat, situated in the famous ski resort of Bansko can be bought for EUR 11 000. A studio is being sold at the same price at the seaside, in the yacht port of Sveti Vlas. Some of the most exotic offers are for the sale of hens, worth EUR 1.2 and goats for EUR 30. 

English version: Zhivko Stanchev

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