BULGARIA: GERB FINANCIAL EXPERT HIGHLIGHTS

C O N F I D E N T I A L SOFIA 000343

SENSITIVE
SIPDIS

PASS TO EUR/CE

E.O. 12958: DECL: 06/26/2019
TAGS: ECON PREL PGOV BU
SUBJECT: BULGARIA: GERB FINANCIAL EXPERT HIGHLIGHTS
ECONOMIC PLATFORM

Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d).


1. (C) SUMMARY: Simeon Dyankov, a World Bank economist and
financial advisor to Boyko Borissov's Citizens for the
European Development of Bulgaria (GERB),recently presented
highlights from GERB's economic plan to a group of foreign
diplomats. The platform contains immediate anti-crisis steps
-- such as an IMF agreement -- and main measures to diminish
the grey economy, to streamline the government, and to reform
education, health and energy. A GERB-led government wants an
agreement with the IMF as soon as possible, and would
maintain the currency board to reassure foreign investors to
attract more FDI. GERB plans to restructure the government
bureaucracy -- splitting the Ministry of Economy and Energy
into two separate ministries and closing down others -- to
cut costs and increase government efficiency. GERB also
proposes reforming the education, healthcare, and energy
sectors. Part of GERB's economic plan is to cut the Belene
Nuclear Power Plant (BNPP) project. Dyankov said Belene
makes "no sense economically." END SUMMARY.

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DYANKOV'S MISSION
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2. (C) During a regular meeting of the Bulgarian Club of
Economists and Diplomats (CoDe),Simeon Dyankov -- a leading
economist on "a leave of absence" from the World Bank --
touched upon the key pillars from GERB's economic program.
Dyankov, who some tout as a future GERB Finance Minister also
met, also manages the GERB "executive branch strategy" --
putting together teams to work on issues for ministries.
GERB has tapped Bulgarian expat professionals to return and
advise GERB on all policies. He has three main tasks in
advising GERB: 1) finalizing their anti-crisis/economic
measures; 2) advising on forming an economic team; 3)
coordinating and implementing a "package of 30 measures" with
specific changes to laws and to implement policies. The GERB
economic plan makes no promises but has identified measures
to fix unemployment (short term) and investing in education
(long term). Dyankov threw out some names of the GERB
"economic team." Bisser Boev (former Economedia group chief)
will be responsible for regulation and foreign investment
problems. Vladi Binarov will deal with the budget and
customs. Rossen Plamediev (a developer of Sofia Business
Park and Treasurer of the AmCham board) will advise on
Regional Development and Transportation. GERB's EU Funds
team will feature lots of professionals with experience in
Brussels.

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IMMEDIATE STEPS FOR ECONOMY/MAIN MEASURES
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3. (C) Dyankov told us GERB will keep the currency board --
a signal for investors that the lev is stable -- until
Bulgaria enters the Eurozone. GERB will also commit to an
agreement with the International Monetary Fund (IMF) for a
future loan to counter risks arising from a possible 4-4.5
billion lev budget deficit. GERB has a letter to the IMF
"waiting to go" requesting an IMF Plan. He added that GERB
will actualize the current 2009 budget (streamline budget
expenditures). Dyankov had reviewed the current budget and
was surprised at the waste, saying that there is government
debt in places where it is not even reported. GERB will cut
the next (2010) budget, and cut government payroll taxes 5
percent. Other main measures in the GERB economic portfolio
include: diminishing a share of the grey economy by
electronically connecting customs and the National Revenue
Agency, introducing a short VAT return period with reciprocal
obligations for businesses and the state; optimizing public
administration; and ensuring efficient EU funds utilization
by a new project development system with better management
and oversight.

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STREAMLINE GOVERNMENT, REFORM EDUCATION, HEALTH, AND ENERGY
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4. (C) Dyankov said that GERB plans to restructure the
government bureaucracy -- by closing down or merging
inefficient ministries -- to cut costs. GERB will add a
"Youth and Sports" ministry, but cut State Administration,



Disasters/Emergency Management. The Economy and Energy
Ministry will be split into two separate ministries. The
Ministry of Environment could be incorporated into Energy or
Agriculture. The Tourism Administration and Invest Bulgaria
would be folded into Economy, as may EU funds coordination.
The Ministry of Foreign Affairs will absorb the European
Integration Ministry. All concessions may be handled of one
ministry. Dyankov prefers that all state enterprises (380
state enterprises with ties to different ministries) will be
consolidated into one mega state holding. The Bulgarian
Energy Holding (BEH) will also have a different structure,
and may be included into the mega holding. The Concession
Law will be changed to create a "Concession Agency" to handle
all government concessions. Dyankov stressed that GERB will
have professionals, not bureaucrats running the ministries.


5. (C) Dyankov said that the Education Ministry's budget
will not face cuts because the Bulgarian education system is
in desperate need of reform. The current government's
higher-education reform package is "very good." GERB would
likely try to push that package through the next parliament
and then focus on primary and secondary education. The
healthcare sector is by far the worst off of all the
ministries and sectors in the country. The healthcare
situation is so bad that no one -- experts and politicians
alike -- knows where to begin or how to fix the problems.
Nevertheless, he suggested that they begin by cutting the
waste and trying to instill fiscal discipline in the sector
(and the budget). In addition to separating the Energy
ministry, Dyankov targeted improving the overall energy
infrastructure and promoting energy efficiency as Bulgaria is
the most energy inefficient EU country. He said GERB would
slash government funding for the Belene nuclear project; a
GERB government will not support it as it makes no economic
or financial sense.


6. (C) COMMENT: Dyankov is quite Americanized. He seemed
very optimistic, giving straightforward, no-nonsense
presentation of the GERB economic platform. He made no
apologies for GERB's decision to finalize an agreement with
the IMF or maintaining the currency board to reassure foreign
investors and the Bulgarian public, while bashing the BSP-led
government for its lack of anti-crisis measures and sustained
budget deficit spending in a time of economic crisis. GERB's
economic platform is optimistic. Streamlining the government
bureaucracy, cutting budget expenditures in 2009 and 2010,
and prioritizing Education and healthcare reform, make sense,
but will generate political friction, while taking time to
deliver results. Much will depend on GERB's strength in the
next coalition government. END COMMENT.


7. (C) BIO NOTE: Simeon Dyankov, 39, is the chief
economist for Finance and Private Sector at the World Bank
group. In his 13 years at the World Bank, he has worked on
regional trade agreements in North Africa, enterprise
restructuring and privatization in transition economies,
corporate governance in East Asia, and regulatory reforms
around the world. He is also an expert in anti-crisis
measures, and was a principle author of the World Development
Report 2002. He holds a Ph.D. in economics from the
University of Michigan at Ann Arbor, and has published over
70 articles in academic journals. Dyankov-- originally from
Lovich, Bulgaria -- was a former two time national track and
field champ. He has lived outside of Bulgaria for the past
20 years, 18 of them living in the United States. His wife
also works at the World Bank and is being considered for a
job with the Obama Administration. They have two children.
McEldowney