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 Siconco AG
Manager:
Dipl.-Ing. Dantcho Lazarov, Chairman of the Board
Contact:
150, Vartopo Str.
1797 Sofia,
BULGARIA
Phone:
(00359 2) 971 30 44
(00359 2) 971 20 07
(00359 2) 971 20 08
Fax:
(00359 2) 971 10 61
Telex: 24 327 sicon.bg
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| STRATEGY |
 Interview with Dantcho Lazarov
Chairman of the Board of Siconco AG
Q: Your company is well known in the construction sector, could you give to our readers some brief historical background of Siconco as well as your own professional experience?
A: We are about to celebrate our twelfth anniversary. It is true that at the time of its establishment the company was not an individual company but rather a subsidiary of a company called Metal Constructions. We started its main activities as a construction trust in Russia and mainly in Western Siberia. Our primary tasks were according to the Yamburg agreement, if you are familiar with that agreement. It was an agreement between the former Soviet Union and Bulgaria, which was a barteral agreement relating to the supply of natural gas in return for providing construction services. Our main activity was industrial and housing construction for the needs of Gasprom. Ever since that time, which was 1987, the company underwent a pretty excessive development. We expanded our activities on the territory of Russia considerably. In 1993 the privatisation of the company was completed, and privatisation process was a hundred per cent completed in 1994. We have always taken pride in the fact that we are the first joint-stock company in Bulgaria which has been completely privatised. Even our temporary certificate signed by the former prime minister Mr. Berov is number 1. The privatisation was carried out through management by outmode which wasn’t familiar at all at that time. With the help of about 400 shareholders, employees, managers of ours we managed to raise the capital, and we executed the buy-out of the company. [With a hundred per cent cash as the only cash privatisation in Bulgaria until now.] There is one more interesting department development of the company. We provided for the management of the company ourselves, and we participated in the mass privatisation, too. And we relied primarily on the employees, who were trained in the company and were employed by the company, employees who, for the period of those twelve years, outnumber 10,000 people. We created two privatisation funds - one fund was called Siconco Invest, and the other privatisation fund is Bulinvest Group. Through these two privatisation funds we acquired the majority shares of twelve companies participating in the mass privatisation. We also have participation in the capital of some other companies, but this is an insignificant participation, that is why I leave it out. After the privatisation funds were transformed into holdings this year, the companies which were acquired by those privatisation funds merged with Siconco and this way we created the Siconco Holding. We continue our construction activities as a truly construction company on the territory of Russia. As to the territory of Bulgaria, I would say that the present times are not very good for the construction business. Unfortunately the situation is very difficult, stagnation is extreme and the effects of this are felt in the construction sphere. The development of the economy has not really started yet, at least we do not feel it. The lack of investment has put a hold on the development of the construction sector. Certain programs are under way, taken care by PHARE. These programs are primarily concerned with constructions of highways, roads, and constructions on the border between Bulgaria and Turkey.
Q: I would like to know what were the financial results of your company and what is the turnover? Not too precisely.
A: We will give you the precise data we published for the last five years. We can give you our financial reports for the last two or three years for you to see what the turnover is.
Q: Could you tell our readers where the main guidelines of your strategy and the best opportunities for the future growth of your company are?
A: Our main strategy is primarily directed to work, saving our potential on the Russian market. Along with this we are trying to enter the Bulgarian market but for the reasons that I previously mentioned we are not in the situation to use our potential to the fullest here in Bulgaria. The main characteristic feature of the company is to impose here the quality, the promptness in execution of the activities that the foreign investors most appreciate and require. In the situation of the transition to a market-orientated economy, conditions for the operation of companies who do not comply with the fair play were established. The main problem is that in Bulgaria the construction companies are not being licensed, there is no such term as a licensed construction company. This is not a common practice anywhere. For instance, two people would get together, they would go to a site, and they would start construction work. They do not have the support of a qualified engineering crew. In Russia, in order to be able to operate and to receive a license you need to submit a whole bunch of documents, all kinds of certificates to be able to prove that you are skilled in your field of operation. I think it is a major problem that the construction companies have to face in Bulgaria. There is an unregulated competition, which does not comply with any rules of the Bulgarian market. There are drastic examples, for instance, participation in auctions. State structures goes on the market, like for instance GUSV, which is a state-owned company and part of the military complex financed by the state, Transportation Division Army. There are state-owed companies that face liquidation.They are almost in a state of insolvency and the participation in such auctions and the prices they offer are not in complies with any rules.
Q: Mr. Lazarov, I would like to ask you to mention maybe being a private company your relation with the government. Do you receive any kind of help? Do you have the feeling that the government is helping the private sector?
A: I have the feeling that the government is occupied with much more important problems concerning the country. And I would not say that the government, through all of its structures and ministries, has really established any order in this sector. Creation of precise rules is a necessary and distinct condition and it is a job of the state. The macro-economic factors and problems are for the government to take care of but it is also the job of the government to establish order in the country itself.
Q: Do you have the feeling that they would give priority to public companies getting private, and they would consider those companies like the private sector?
A: This is an interesting question. It is very much to the point. It is obvious that you have responded to the heart of the problem. They put their efforts into a preservation and maintenance of the state-owned enterprises, for which there should be some place on the market. I think that such efforts have no point, and the support of such interest is against the interest of the economy of the country itself. The large structures in the construction sector have long been destroyed. They are powerful structures with a lot of production capacity. In the present market situation where such capacity cannot be justified, the conditions are being established for those enterprises to divide into smaller companies and finally disappear.
Q: To come back to Siconco, in what kinds of construction projects are you specialised?
A: We are specialised in all kinds of industrial
construction work. Of course, with the exception
of complicated technological projects. For the execution
of such projects we usually attract sub-contractors.
But for the last four years our attention has been
focused on the housing construction works and public
construction works. |
Q: What are your main advantages when you have to compare your company to your main competitors?
A: At a point of my presentation I already mentioned those operations in Russia, where competition is extremely fierce and where the requirements of our contractors are very high, have taught us to be precise, have taught us discipline. The demands, the requirements of the investors in Russia have taught us to use very skillful, wise decisions, and we primarily use materials not from Bulgaria but from foreign countries; I would not go into details as to what a block of living apartments contains in terms of construction materials, but we have run to use highly-qualified materials.
Q: You have already penetrated into the Russian market, and the Russian market is a big market. Would you say that comparatively your advantages in it are not only quality and promptness, but that that prices have something to do with this?
A: Of course, there is a set of factors influencing the decision to select a particular construction company. Price is one of the most determining factors in the selection of a construction company. Our competitors have other advantages, but I would say that one of our main advantages is that we have a pretty good knowledge on the situation on the Russian market. There is a certain specific mode of operation under certain conditions as well. Let’s take Western Siberia for instance. Although we do not only carry out construction work in Western Siberia but also in Southern Siberia, and in other parts of Russia. But I would say that in the last years the decisive factor in the selection of a contractor has been the quality of the services, the materials, the supplies. Not the price that much as the quality.
Q: Mr. Lazarov, our readers are always interested in new business, opportunities. In which areas of your activities are you interested to attract partners or investors?
A: There are a lot of interesting spheres of our activities we would like to discuss with potential investors. It’s true that Bulgaria hasn’t created the perfect investment conditions yet, most of all because of the instability of the legal system. I would give you an example with a Bulgarian company we take pride in. Now Mr. Tilkov will explain to you in details what this company is - this is a company for the production of window frames. Mr. Tilkov (Marketing Director): Not only window frames but I would rather say full-scaled windows. They are of a highest standard - there is no comparison to American windows and window frames.
Q: OK, you mean they are better?
Mr. Tilkov: They are much better. There is no comparison at all. I was in the States only two weeks ago that and I saw some showrooms of window manufactures - there is no comparison at all.
Q: I want to ask you, what are your relations with the United States - do you have any business relations?
A: Yes, we have partners in the United States. For the purposes of supplying our sites with materials we purchase a lot of those materials from the United States. For instance, we buy these materials directly from the United States and not from Western European companies.
Q: Why, because it is easier to make business with the States? I am asking you this because we’ve already faced the same problem with some other private companies here. They said that in Western Europe it was too much of the bureaucracy, and even though they would buy materials in Western Europe, they had a difficult time to sell them back in their countries, while in the States within a couple of days everything was settled.
A: Yes, this may be one of the reasons. ...
Q: So why would you go to the States - because they have more competitive prices, more competitive than the German prices?
A: I would like to make a point here. Now with the existence of the European Union and the associate membership of Bulgaria the products from the European Union for Bulgaria are duty free or there is a reduction in the customs duty while the products from the States are charged the full amount of customs duty. We have a structure of our own for automobile transportation. Many Mercedes automobiles and Western Star automobiles which we import from the United States
Q: So, even though you have these facilities, importing from the US is still more interesting, is that true?
A: Yes. Continuing to the Russian market. If we have to export materials to our construction sites in Russia we have a better interest to import those materials from the United States since they are only transit-transported through Bulgaria to Russia and they custom duties do not affect the prices that much. But let’s go back to the question of the investment opportunities in Bulgaria. We started this issue talking about the window frames. We have an up-to-date technology, we use an up-to-date equipment bought from Germany for the production of window frames. The final product is not any different from the final product of a German company using the same equipment. But in price terms the products would be much more interesting than the German ones, and only for a period of one year we started using the full capacity of ours. We have made our own investment in this production. If we have partners ready to invest and to take some risk... I would like to point out that I am talking about partners, not only about people coming to Bulgaria to invest. As an example I’d give the American Standard. We participated in the construction of their factories in Sevlievo. They came to Bulgaria having already a partnership with a Bulgarian company called Vidima Ideal. We have witnessed the construction of the first factory of this company here in Bulgaria, a very large facility. They are in the preparation stages of construction of a second factory. Maybe this is the road which foreign investors interested in Bulgaria should follow. Bulgaria has a very well-developed road network, it connects Europe to the Middle East, to Africa, to Asia. Bulgarian work forces are very well educated but primarily they need partners, well-qualified, well-trained people that they would be able to do business with.
Q: What would be your final message to our readers?
A: If I want to do a favour to the government I would say: don’t be scared of investment in Bulgaria. But I am not positive about such tendencies, business is a very risky. I would like to appeal to our government - let’s fast establish order in our own country and then we won’t need to appeal to anybody. Capital has a particular quality of itself, the quality of going to that particular location where it finds the best conditions. We bought quite a lot of equipment, even American tractors and harvest machines, but most of the equipment comes from Germany. We rented large land areas to work on. We have a factory for fodder in our holding, which is located in Gorna Oryahovitsa, we have can factories. This a diversification of our operations.
Q: You are not putting all your eggs in the same basket?
A: This would be a big mistake. Actually, to satisfy the demands of our main market, the Russian market, the price demands of this market, we are forced to produce a lot of packaging too. Besides, we have inherited large facilities with very large production capacities.
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© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Bulgaria
published in FORBES Magazine's
November 30th issue.
Developed by AgenciaE.Tv
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BULGARIA, 
