EKIP– Expert Club for Economics and Politics A Different Opinion
Among the owners and managers of the largest beneficiaries of 60/40 are individuals such as Kiril Domuschiev, the wife of Tseko Minev, a former MP and former mayor of GERB.
In recent days, the most recent data from the National Social Security Institute on beneficiaries of state aid under Decree 55 of the Council of Ministers has made headlines. Decree 55 was adopted on March 30 and concerns the government's notorious 60/40 measure. The government adopted a program through which it pays 60% of the salaries of employees in businesses that were forced to cease work as a result of the measures accompanying the declared state of emergency in the country. These 60% also include the relevant part of the insurance premiums, and the remaining 40% continues to be paid by the employer. The aim of the measure is to maintain employment in the most directly affected businesses and to prevent a too sharp jump in unemployment.
So far, this is the largest measure taken by the government to support business in the current pandemic and crisis. According to Prime Minister Borissov on April 28, this scheme has already saved 101,000 jobs. In this article, I will not comment on the feasibility of the measure itself from an economic point of view. Based on a relatively short study on the topic, EKIP presents information about the owners of the companies that are the largest beneficiaries of the last tranche of the program granted on April 28.
Keep in mind that there are 3 other tranches before this one, but we are focusing on the most recent one, which includes some of the largest amounts. All the companies we are looking at here are in the top 10 largest beneficiaries for all tranches. The first four form the top four in terms of funds allocated. In some of the cases considered, we will ask naturally arising questions related to them. The purpose of this article is not to seek scandal or sensation, but simply to inform Bulgarian taxpayers about who receives money under the main crisis program, which is ultimately financed from their pockets.
Urban Mobility Center – 363,547 BGN; 12.6% of the total amount last allocated
This is the largest beneficiary of the latest transfer under the 60/40 program. According to the National Social Security Institute, as of April 28, the amount received by the CGM is equal to 12.6% of the last amount allocated (the National Social Security Institute has lists of 3 other earlier groups of cash transfers that we have not examined). This is an extremely high share for just one enterprise. The owner of the CGM is the Sofia Municipality, of course, in which the mayor is Yordanka Fandakova from GERB, and the parties from the ruling coalition hold a majority in the municipal council. The former director of the CGM, Hristyan Petrov, became a municipal councilor from GERB in the last elections, and the current director is Dimitar Dilchev, former mayor of the "Studentski" district from GERB in Sofia.
One can immediately question how expedient it is to allocate such a large sum specifically to CGM. First of all, due to the fact that the enterprise is publicly owned, that is, state (specifically municipal in this case). Shouldn't jobs in the private sector be prioritized? Secondly, it should be noted that CGM has not ceased operations - public transport in Sofia is still operating, albeit in a limited mode.
The third major problem is that CGM is an extremely opaque company, which despite its public ownership refuses to disclose information about its finances and management to citizens. The company has repeatedly refused to provide information under the regulations of the Access to Public Information Act. This opacity, of course, raises doubts about the quality of the company's management.
"Union Ivkoni" – 212,101 leva; 7.3% of the total amount
The second largest beneficiary of the latest 60/40 transfer is the transport giant Union Ivkoni. Given that this is a transport company that is certainly suffering very seriously during extremely severe restrictions on travel, both within the country and abroad, allocating a large amount to it seems logical. Especially considering the fact that Union Ivkoni is the largest such enterprise in Bulgaria.
It should be noted, however, that the owner of the company is Ivaylo Konstantinov, who is not only a member of GERB, but also a former MP of the party. He left parliament at the end of 2017, in the first year of the mandate of the current government led by GERB. His name then became famous due to an incident in which a bus of the "Union Ivkoni" brand turned around on the "Trakia" highway, as a result of which 17 people were injured. The State Traffic Safety Inspectorate found that the bus had an old tachograph disk and there were doubts whether the rules for transportation were followed. Konstantinov left parliament after his name became famous due to the incident.
"BH Air" – 126,241 leva; 4.4% of the total amount
BH Air is a small private airline that operates flights from the country to a number of airports in Europe. It is logical that an airline would be among the first to be supported under the 60/40 measure, given that flights have practically been almost completely suspended. In other countries, airlines are suffering such serious losses that in Italy and Portugal, for example, nationalization of large companies in the sector is being considered. It should be noted, however, that BH Air is certainly one of the smaller Bulgarian-owned airlines and mainly operates tourist flights for the travel company Balkan Holidays Services.
In fact, Balkan Holidays Services owns the largest share of BH Air's capital - 49.1%. The owner of Balkan Holidays Services is Radka Mineva, who is a member of the supervisory board of First Investment Bank and is also the wife of one of the bank's main owners - Tseko Minev.
Professional Football Club "Ludogorets 1945" – 110,407 BGN; 3.8% of the total amount
PFC Ludogorets hardly needs an introduction. It is the most successful Bulgarian football club in terms of titles won in the last decade. Football matches have been suspended under the state of emergency, so it can certainly be argued that since they are directly negatively affected by the measures, it is logical that football clubs should receive some form of support. On the other hand, we should not forget that there should still be some prioritization of what type of businesses should be approved for financial support under the 60/40 scheme. It is unlikely that many people would categorize a football club as an "essential business", except perhaps the club's fans themselves, who (jokingly) in the case of Ludogorets are definitely not many.
The owner of "Ludogorets" is, of course, the well-known Bulgarian businessman Kiril Domuschiev. He participated in the privatization of the Bulgarian Maritime Fleet shipping company and became a 70% owner of the company in 2008. In addition, he has many large and successful enterprises in the pharmaceutical sector, and since last year he has also been the owner of Nova Broadcasting Group, the company that owns NOVA television. Domuschiev's name can be associated with doubts about some legislative changes with a seemingly heavy lobbying nature.
Palms Mercure Casino – 109,521 BGN; 3.8% of the total amount
The presence of a casino among the top 5 largest beneficiaries of the 60/40 program will likely raise some eyebrows, but it is not really surprising. Being part of the entertainment and tourism sectors, such businesses are certainly among the hardest hit by the current crisis. Both in terms of being closed for an unknown amount of time, and in terms of the fact that travel restrictions are seriously shrinking their potential customer base for this year.
It was more difficult to find detailed information about this company. According to the Commercial Register, the manager is Angel Andonov Iribozov, who is the chairman of the board of the Bulgarian Trade Association of Manufacturers and Organizers of the Gaming Industry (BTAPOII). Given his position in the gaming industry association, Iribozov is probably one of the most influential and successful figures in the sector and it seems logical that his company would be one of the first major beneficiaries of the 60/40 program.
"Borosport" – 67,437 leva; 2.3% of the total amount
Leaving the top five beneficiaries, the amounts fall significantly below 100,000, but remain relatively large. The sixth largest beneficiary is Borosport, the concessionaire of the Borovets resort. Again, it is rather logical for a resort to receive support, given that the tourism sector is probably suffering the most in the current conditions. Of course, one could question the appropriateness of a resort specializing mainly in winter tourism being such a large beneficiary, given that we are out of season.
According to an article in the newspaper "Banker" from February this year, in January "Borosport" drew a significant loan from FIB for 12.6 million euros. The pledge of this loan in favor of FIB is the enterprise "Borosport" itself. According to "Banker", this may be the first step towards a change of ownership of the company. Again, according to "Banker", the majority owner of 79.83% of the capital of "Borosport" is currently "PFHC Limited", a company represented by Violeta Noveva.
The media claims that this lady's name is associated with "many of the companies that are connected to the remnants of the Multigroup empire." For those who have forgotten, Multigroup was associated with criminal circles during the transition period and its owner was the late Iliya Pavlov, who was also the owner of CSKA in the 1990s and a close friend of the current Minister of Culture Vezhdi Rashidov, according to the minister himself.
When we draw the line...
According to data from the National Social Security Institute, these are the 6 largest beneficiaries of the 60/40 program, who received 989,254 leva or 34.2% of the total amount allocated through the last transfer of the program as of 28.04. The National Social Security Institute website has uploaded data for 3 previous transfers, which we have not reviewed, we focused on the most recent one. Keep in mind that some of the names cited above are direct or indirect beneficiaries of the program through other enterprises of which they are owners or in whose management they participate.
For example, a major beneficiary is the Bulgarian Football Union, which received 51,052 leva. Kiril Domuschiev is on the executive committee of the company, as well as a number of other interesting personalities such as Spas Rusev, owner of BTC, a major client of the Bulgarian Development Bank, and Ventseslav Stefanov, owner of PFC Slavia, in the past directly connected to names from the SIC such as Mihail Mihalev-Madjo and Rumen Nikolov-Pashata. A number of politicians from parliamentaryly represented parties are also on the executive committee of the BFU.
We remind you that the purpose of this article is not to seek sensationalism, but simply to provide important information for the taxpayers of Bulgaria. Transparency is of utmost importance when we are talking about such state aid programs as 60/40, which under normal conditions contradict the rules of the European Union. In conditions of emergency, both journalists and taxpayers themselves must be especially vigilant about how and to whom extraordinary state aid is granted. We must be especially careful, because the misuse of our money is far easier when the population lives in fear (naturally aroused or not) of a dangerous pandemic.
Useful information and a balanced publication - no unnecessary personal opinion and staggering to extremes, which makes a positive impression! But is it a crime for the companies cited above to apply for the government's 60/40 program after meeting the conditions?!? These companies also pay salaries to workers who are now on forced leave. At the same time, in order to receive from the program - they are also regular payers to the budget and the state, that is, they have paid all due contributions and taxes.