Petty interests downgrade image of Bulgaria and Borisov

Petty interests downgrade image of Bulgaria and Borisov


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Bulgaria is one of the few member states with great potential for development, yet it cannot take full advantage of the opportunities offered by its integration into European structures.

Indeed, despite the fact Bulgaria should be one of the major receivers of EU funds, the country lies between being a net receiver (according to the government) or a net contributor (according to the opposition). In practical terms, this means that despite the country’s great potential of receiving significant funding from the European Union programmes, it is a loser in real terms. The reasons for this include a lack of technical knowledge as to how to prepare proposals and how to draft terms of reference for tenders, as well as the transparency of such procedures that is needed for the European services to assess the practices of a good and honest administration.

New Europe has twice referred to Bulgaria’s poor administrative practices – we published ‘Traps and pitfalls for Borisov’ and ‘Conflict of interest: Bulgaria sets new record’ which have been viewed with much scepticism in Brussels’ corridors of power.

In our articles, we specifically referred to two important issues – the violation of the EU internal market and competition rules in the case of Sopharma Pharmaceuticals and the privatisation of the Municipal Bank of Sofia. Sopharma appears to be a typical case of violation of Articles 102 (Dominant Position) and 107 (State Aid) of the EU Treaty, while the case of the Municipal Bank privatisation may fall under internal market rules as regulated by Directives 2004/17 and /18. Both companies, Sopharma and the privatised bank, belong to Ognyan Donev. There is a lot more to be said on these two cases, but one thing at a time…

This week, we focus on certain practices concerning public procurements in Bulgaria which, when assessed in Brussels, add to both Bulgaria and the Borisov government’s negative image. When Boyko Borisov came to power in July 2009, Brussels and member states enthusiastically received him, as they had previously associated him with transparency and anti-corruption.

However, with cases such as those cited above ongoing, the initial enthusiasm at a European level is fading away. Among other examples this is reflected in the participation of the EU in co-financed projects, which, compared with neighbouring Greece, remain low.

Subsidies for Greece are now set at 95%, because of the crisis. In 2006, with no crisis in sight and only because of the credibility of the-then new government under Kostas Karamanlis, EU co-financing was raised from 40% to 80%, thus allowing Greece to absorb more than €25 billion, the entire remaining amount of Community Support Framework III – this was contrary to the expectations of the previous government, which had, as its best-case scenario, to absorb €8bn.

The Bulgarian government now has a good chance to increase EU co-financing participation, but hard work on the transparency front is required, as well as maximisation of the support of the European People’s Party (EPP), which is the most influential political platform in Brussels.

We should not lose sight of the fact that, on the eve of Borisov's election in 2009, thanks to the political intervention of the EPP party, the European Commission released some €500 million in European payments to Bulgaria, which had been blocked by OLAF.

The case of malpractice in public procurement, which we will outline here, concerns the grotesque circumvention of Public Procurement rules (Directives 2004/17 and /18) with a non-transparent, ‘photographic’ terms of reference issued by Alexandrovska Hospital for the procurement of equipment producing radioactive isotopes used by graphic diagnostic scanners (PET) in Sofia and Varna.

As for transparency, the Public Procurement Directives seek to base procurement on that principle. Transparency increases price competition among suppliers, but the increased competition may drive down prices to a level where poor quality or predatory pricing becomes a concern. Thus, non-transparency not only violates the above Directives but also could be a competition concern under Article 102 of the Treaty.

So far, radioactive isotopes are imported into Bulgaria from Hungary and Austria. The unit price paid by the Bulgarian state is around 2,500 Lev, following a reduction of 500 Lev imposed recently by the government, but the price of producing locally will drop to 800 Lev, the difference being due to transport costs. Currently, Bulgaria pays around 8m Lev per year; therefore, the decision to produce radioactive isotopes in Bulgaria was correct. The terms of tender, however, were not.

Without going into too much detail, the terms of reference for this tender provide that the bidders must have a licence for producing medicines and also that the bidders must have an authorisation by a cyclotrons producer. In Bulgaria, only one company has such an authorisation, Sopharma to which the licence was granted by General Electric, an American company noted in the past for doing easy business with the Bulgarian health ministry, since procurements specifications were seemingly very much based on its templates.

The combination of the two basic requirements of the tender specifications by the Alexandrovska Hospital motivated the Centre for the Protection of the Rights in Healthcare (CPRH) to file, a couple of weeks earlier, a complaint to the Sofia prosecutor (registration number 11333), requesting that a criminal investigation be opened.

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