Many Strategies and Zero Reforms in Bulgaria
Adelina Marini, 28 April 2014
Judging by the previous national specific recommendations of the European Commission, reforms in Bulgaria are completely paralysed. And judging by the national reforms programme, which is updated by the government every year on the basis of these specific recommendations, the paralysis will continue in the future. This means that in a month we will read absolutely the same specific recommendations as we did in 2013 and 2012. They are seven and cover the following key, for the functioning of the economy and society, areas: tax revenue collection, pension, health care and education reform, efficiency and independence of the judiciary, efficient and electronic administration, fight against unemployment, especially youth unemployment, energy security and independence. In the interim review on the implementation of the recommendations, the Commission reported several nuances of grey which is everything but not a good news.
Tax revenue collection
Last year, the Commission demanded from the Bulgarian government not simply to create a comprehensive taxation strategy to strengthen all aspects of the tax legislation, but to create an independent body to control budgetary policies and to prepare analyses and recommendations. According to Eurostat data published this year for 2011 about the levels of tax revenue collection, Bulgaria is with the lowest level of tax collection measured to gross domestic product - 27.2% of GDP with EU average of 40 per cent and euro area average of 41%. This is the reason why the Commission has been recommending for two years in a row an increase of tax collection. The Bulgarian government reports to Brussels, in the reforms programme [in Bulgarian language], which has recently been published, that a specialised Fiscal Control directorate has been established in the framework of the National Revenue Agency. The new body is expected to increase tax revenues this year by 200 million levs (100 million euros). The recently approved amendments to the VAT act are also expected to contribute by between a 200 million and 400 million levs increase of revenues compared to last year, the programme says.
The second specific recommendation of the Commission is to undertake measures to improve the adequacy of the pension system by levelling the retirement age of men and women as well as to enhance control over the invalidity pensions and to remove the possibilities for early retirement. Sofia's response is that this year a debate will begin in the Consultation council for optimisation of the social security system under the minister of labour and social policy on limiting early retirement. Again with discussion, Sofia responds to the recommendation for levelling the retirement age of men and women. In terms of control over disability pensions, Prime Minister Oresharski's government reports that by the end of June this year "should" end, which is definitely not the same as "will" end, the transfer of data in the integrated system between the National Social Security Institute, the Ministry of Labour and Social Policy and the Ministry of Health.
The Commission believes that the minimum social security contribution thresholds are one of the essential hurdles before the fight against youth unemployment in Bulgaria, pointing out that the country is in the group of nations with the highest youth unemployment - 28%. According to the Commission, social security thresholds make hiring of low qualified workers very expensive. Besides, Brussels wants the government in Sofia to work more on integrating Roma in national labour strategies as well as to synchronise demand and offering on the labour market. The response, again, is "we will discuss", "we will see", "we will think about it". The cabinet aims by 2015 to reduce youth unemployment from 28.4% to 27.2%.
Soon, it is expected the first results from the Ministry of Labour's study of the impact of minimum social security thresholds on employment to be ready. The preliminary results show, as the reforms programme reads, that in trade, hotels and restaurants "it is possible to observe a negative effect from the increase of minimum social security thresholds in the period since 2009 up to date". It is not clear, though, what will happen after the final results come out. Probably, we will again amaze the Commission with another strategy or action plan.
The Commission is still not losing patience with its expectation the famous and never happening education reform to finally end. For that to happen, however, it should first begin. Last year, the Commission recommended acceleration of the adoption of the School Education Act to which Sofia answers with "The work of the working group, established in July 2013, continues for updating the new bill on school education". It is explained that the rework of the bill is necessary because of the introduction of additional quality criteria as well as to improve the access to education. The government expects the new draft to be adopted by Parliament in 2015 which means that it is very likely we read the same specific recommendation to Bulgaria next year, too, unless the new Commission changes radically the approach. In May 2014, it is expected the parliament to adopt the already finalised strategy for development of high education in Bulgaria for the period 2014-2020, currently being publicly debated.
Also unchanged remains the fifth recommendation for improvement of the business environment, reducing bureaucracy, introducing e-government and applying the legislation for payment of arrears. Again is reiterated the need for ensuring independence of the judiciary, fight against corruption and improving the access of small and medium sized enterprises to funding. So far, only 8% of the administrations provide services through the single portal of the e-government. The experts in Brussels will also read that in March the strategy on e-government has been approved which aims by 2020 to increase the number of administrative services provided online to 57% from the current 15 per cent.
Regarding the reform of the judiciary, the government does not state any intention to change the current situation. Moreover, it slightly bares its teeth reminding in the national reforms programme that the independence of the judiciary in Bulgaria is guaranteed in the Constitution under Article 117 (2). The programme even believes that this is all a matter of subjective assessment of the independence of the judiciary which is why it is pointed out that such bias is hard to measure. Nonetheless, the government states it is willing to respond to the "requirement for more civil control with the draft of the updated strategy for the judiciary by 2020 which envisages the participation of civil society to be enhanced in the selection of candidates for leading posts in bodies of the judiciary. A public discussion of the draft strategy is upcoming".
The programme also talks about the Supreme Judicial Council (SJC) and how it has taken very seriously the issue of increasing public trust and transparency through public discussion of the candidates for leading positions in judicial bodies. Something which the Bulgarian judicial reporters are unlikely to agree with. In the programme, there is no word about the significant political interference in the judiciary pointed by, again, the European Commission, but in its report under the Cooperation and Verification Mechanism (CVM), published in January this year. The criticism of the fight against corruption in Bulgaria are much more thoroughly outlined in the specific report on Bulgaria than in the recommendations under the European semester, but both documents belong to the Commission and concern a huge problem. The government, however, does not offer a solution. In the subheading about the fight against corruption, the programme is practically silent. It only reports the establishment of the BORKOR project in 2009, subjected to strong criticism in the CVM report.
There, it is pointed out that BORKOR (the anti-corruption body) is being broadly promoted as a major tool to identify and point to corruption risks but there is one major shortcoming in the fight against corruption and it is that it is fractured. There is no single body that has the power and the autonomy to conduct this fight. In this area is also one of the clearest recommendations in the report: "Entrust a single institution with the task to coordinate the fight against corruption, to assist and coordinate the efforts in different sectors", the Commission recommended in the CVM report. Sofia, however, responds with "an update of the national strategy for prevention and counteraction of corruption and organised crime in Bulgaria, which will introduce a methodology for identification of corruption risk in all the areas of government activities".
EU funds absorption
The sixth recommendation affects the absorption rates of EU funds and demands the "proper application of public procurement legislation by expanding ex ante control exercised by the Public Procurement Agency with the aim to prevent irregularities". On this issue the government responds, again, with the development of a strategy for "development of public procurement" and a new draft of a framework Public Procurement Act.
The Commission demands from the government to create "a transparent wholesale market for electricity and natural gas" - an issue which is especially timely given the developments in Ukraine. Here is what the government has written in the reforms programme on this occasion: "ensuring energy independence on the gas market in Bulgaria continues to be among the country's main priorities, especially in view of the latest political and economic developments in Ukraine. With the aim to ensure cheaper gas for the Bulgarian producers and to improve their competitiveness and especially with the aim to ensure energy independence and security of natural gas supplies there is intensive work going on on all infrastructure projects. Special attention is paid on the construction of the inter system, reverse gas connections with the neighbouring countries (Greece, Serbia, Romania and Turkey). The activities on building the inter system gas connection Bulgaria-Romania (IBR) have been completed. After completion of the final tests on the facility, it will be officially open for exploitation which is expected in mid-2014".
Regarding criticism about the controversial independence of the state commission for energy and water regulation, the government reports that already undertaken have been changes to the founding rules of the commission and that new amendments are being discussed (already approved) to the Energy Act which practically increase the dependence on Russia instead of reducing it. The changes to the act were entirely aimed at circumventing the Third Energy Package of the EU for the South Stream project. This is not mentioned in the programme, but instead it is pointed out that the changes are MAINLY related to legal regulation of the independence of the energy regulating body, introducing mandatory publication of information on the price formation procedures and establishment of a public council to the energy commission which is to participate in the process of reviewing and setting of regulated prices.
Hardly those who read the Bulgarian national reforms programme in Brussels will come to a different conclusion than that that, again, they receive a huge nothing. This nothing is the result of the lack of continuity and agreement between the main political forces in the country about the necessary reforms. With every new government, new "analyses" begin, new "strategies" are written, thus postponing the real reforms for some time in the future. Plamen Oresharski's government is not an exception. If the Commission warms up without much passion last year's recommendation meal, there is a huge danger not only the Bulgarian political parties, but the citizens as well to cool off toward the Brussels' efforts to boost reform moods in the EU's poorest member state just like they cooled off for the judiciary reform, although Bulgaria had promised to complete it and this it misled the EU to adopt the country on January 1st 2007 with a special Mechanism.
The conclusion that comes automatically with all this is that no mechanisms coming from Brussels can help unless the citizens demand themselves the reforms the Brussels's bureaucrats demand.