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Friday, 18 January, 2002, 14:16 GMT
Bulgaria to sell off tobacco monopoly
Bulgarian cigarettes
More than half of Bulgaria's agricultural exports were tobacco based 10 years ago
Bulgaria's government has announced plans to sell up to 80% of state tobacco monopoly Bulgartabak in an attempt to revive the fortunes of what was once a flagship industry.

Bulgartabak is 92% state-owned, and Sofia hopes to sell 51-80% of the firm to a strategic investor, such as another tobacco company or a financial institution.

Under the draft plan adopted by Bulgaria's Cabinet, the government will keep a "golden share" in Bulgartabak so that it can retain a role in company decision making.

The government also plans to place almost 13% of Bulgartabak on the Bulgarian Stock Exchange as part of efforts to boost trade on the market.

Cigarette seller in Russia
Russia was a main markets for Bulgarian cigarettes

Bulgarian officials declined to say whether potential buyers would be given the opportunity to close down loss making factories, or if a minimum price for the stake would be set.

The government hopes to boost the country's struggling tobacco industry, once a cornerstone of Bulgarian exports.

Lost market

In the early 1990s, Bulgartabak produced 130,000 tons of tobacco products a year, of which 80% or more was exported - mainly to Eastern Europe, CIS countries and parts of the Middle East, with Russia as the major importer.

More than half of Bulgaria's total agricultural exports were tobacco based.

With the Soviet market all but closed for Western cigarettes, Bulgarian tobacco was extremely popular within the USSR.

In 1993, Russia's government introduced tariffs on imported tobacco, with 150% on Bulgarian cigarettes and only 70% on American ones.

After that, the price of the two types of cigarette became almost equal.

Bulgartabak production contracted fourfold, although the CIS remained its main market.

The company has 12 tobacco factories in Bulgaria, five subsidiaries in Russia and one each in Ukraine, Romania and Yugoslavia.

Foreign domination

Although domestic sales rose in recent years, analysts say it is unlikely that Bulgarian cigarettes will regain their former position in Eastern European and Russian markets now dominated by foreign companies, producing international and cheaper local brands.

Bulgartabak's executive director Georgi Popov said earlier that domestic sales rose 8% in 2001, but exports fell by almost one half.

The company made a net profit of 11.68m levs ($5.27m, 3.71m) in 2000, up from 5.3m levs the previous year.

It targeted a 10% profit rise for 2001.

See also:

27 Dec 01 | Country profiles
Country profile: Bulgaria
19 Aug 01 | Europe
Bulgaria unveils economic reform
15 May 01 | Health
Europe strikes at smoking
05 Dec 00 | Business
Eastern Europe - ready or not?
03 Aug 00 | Health
Tobacco giants deny smear tactics
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