Could you tell us a little bit about your companies, its structure, and its activities?
Everything in the company is still separate, but practically it is a holding, because I am the Chairman of the Supervisory Board. I represent the majority of them, which is 80%. Initially, I was an advisor in the privatization process here in Bulgaria. One of my first actions was Nestlé, seven or eight years ago. American Express and other foreign investors came after that. But some of them refused the process and this is the reason why I began participating in the metal industry. I advised an American company to buy the biggest Balkan foundry of aluminum. I am a jurist and I had worked as a chief lawyer of the Space Organization. After the changes I started to consult the foreign companies. This was an open door for the metal industry. After that I started to look for a place to invest. Foundry is very dirty and unattractive, with many debts. In the foundry the money is not fast because you have to work. It is heavy, dirty, and unattractive. I decided to invest the money I collected from consulting services in this field. One by one, I started to buy part of a former government structure of eight companies, Metal Technology, which belonged to the government. Now I have five of them. The name of my company, Angel Balevski, is the name of a famous Bulgarian scientist, who has a patent for caunter pressure casting method. He was a member of 25 foreign academies, National Geographic Society, etc. This is the reason that I invested my money in the heavy industry and foundries. I am an exception now.
The last project of Sviloza happened accidentally, because the people from Svishtov (which is my birthplace) came to ask me for an advice about how to privatize. Sviloza is a complex of different factories: paper, viscose rayon, etc. The candidate for the privatization was a person who was trading with paper and who was not interested in other activities. If he had bought this complex he would have closed the other activities that are not his specialization. I found the way. I invited all the clients and all the bigger suppliers and explained him that there is a possibility to organize a society like an insurance company. Everyone will participate with money and as a guarantee we'll have shares and a market niche for the next five years. It was a successful project. This year we will return all the money for the privatization. We have planned to double all the capacity of Sviloza - rayon, pulp, etc.
So both of your projects were successful?
Yes. All my companies are working well. Last year we made DEM 136 million in exports as we do not sell in Bulgaria. The Bulgarian market actually does not exist for us. We stopped to participate at the Bulgarian exhibitions but we have a permanent place in Hanover Fair. We produce turbines for hydropower plants and hydraulic presses. If I produced equipment for croissants I would never feel this situation, because everyone eats three times a day. But I am making heavy industry investments and this is the place where the crisis is felt first. The orders from Europe had decreased 50%. I will give you an example: last year we sold 365 presses to Europe. This year orders, until now, are 148, less than 50%.
Where are your markets right now and what is your strategy to enter other markets?
Mainly in Europe (Germany, Italy, Austria and Spain). The major problem for us is that the raw materials are paid in US dollars - Ukraine, Russia, Romania and we sell in Europe, using Euro currency. 80% of the raw materials we buy for Sviloza is in US dollars, and our market is Europe. From 1999-2000 the euro went down about 50%. I have no potential to change the price in Europe, maybe only 1-2%. This situation is pressing me to squeeze the costs and fire people, to reorganize in different ways the structure of the company.
Before the privatization, more than 80% of the market for viscose filament was Far East (Korea, Taiwan, etc). Clients in Korea are small ones (100 to 200 kg). Without any input control a Swedish consultant is coming in and this is a project to double the production of the pulp.
Now we are starting to sell in Europe. We did not have that possibility until now because our quality was bad. All the European serious companies have a very strong input control, a very strong laboratory, and it is not possible to sell them bad quality products. We have to sell them products with the best quality. We have made serious investments and now we sell 80% in Europe and not in the Far East. Europe needs these materials but much better quality. And this is what we are working on right now.
You just mentioned that you want to improve the quality. This needs a lot of investments. How do you finance this?
If we go to a bank our business would be dead immediately because our banks here give credits with a 16% interest. For example, if they give us a credit with a 14% interest every month we have to pay 0.25% taxes and other charges and finally it would be not less than 16%. How can you do business with a 16% interest?
What about foreign investors?
In order for someone to come I have to be ready to increase the prices, because I have to be equal to the foreign investor. And I want to be prepared for this. I want to be independent. I want to be stronger. This is the reason I made all that investments. In any case, these global merges are also happening in Bulgaria, because everyone is trying to survive. | What is your staff size within the group?
I had 7,300 people three years ago. Last year we had about 5,000 and this year we will end with less than 4,000 workers. I try not to fire people sending them on the street, I try to reorganize the companies in my own way. And at the moment no one from my employees is on the street. I separate the small entities, and I try the small companies to make business as before. I will give you one example. In the Sviloza complex we have a factory for chemical equipment. There are 500 workers there. It is a very strong factory with foundry, machinery department, electronic department, vulcanization, etc. I separated it like a private company, because when it was a part of the complex it would not be possible to take its orders outside of Sviloza. The costs would be too high, because all costs in Sviloza would include the costs of this company also. I separated the company and I gave them not the money but the assets, which are about USD 6 million. Now the company starts to run again and is increasing the salaries. When I need some reconstruction I invite the company to join us. But the company participates independently on the market conditions, not as my company. Now I make the competition and I implement the market conditions in our relationships. I use to have hotels and stadiums and they made me lose money. I separated them. I had a hotel and nobody there was caring whether someone was staying there or not. I separated it and now when I go to Svishtov, I pay for my stay in the hotel. But I never pay more than for those 60 people who are waiting for their salary.
Are those companies part of your group, or are they totally independent?
They are absolutely independent. The assets are mine. I rent them. For example the factory with the chemical equipment is paying 10,000 BGL, which is about USD 5,000. In this amount, transport services, insurance, etc are included. I do not look for a profit from this change. My profit comes from not paying ? salary to 500 people.
What is your opinion about the potential of Bulgaria for foreign investors?
The potential of Bulgaria is going down because we are wasting our time. We already lost eleven years because all those changes happened eleven years ago. Now we would be in a different position but with this situation, everyone playing his own game, I am not very optimistic. I am optimistic for my own company, but the situation in Bulgaria is not very pink.
And the investment climate is the same. There is a lot of noise, everyone is talking and there is nothing in practice.
But the government wants Bulgaria to become investment friendly, doesn't it?
Yes. I have participated in many meetings where this was declared. Every politician has declared this but what is more important for me is what actually happens. I am tired of those declarations, which I have been hearing for more than ten years. I do not believe them any more. These are just political declarations and nothing else. This is my opinion, because I still did not see anything concrete in the practice.
But still, are you confident?
Yes, because I am used to work against the situation, against the government, against the policy. I am used to do this. If someone starts to help me I do not feel comfortable. It would be strange for me. And we get stronger because we get opposition all the time. This is the reason why it is difficult for every single government to make something against us, because all of them have one permanent direction: To clean the Bulgarian industry. Nobody initially helped the Bulgarian industry after the changes. My idea of a common market is to make a green place around that common market, because our industry will disturb. We have potential, but if we go in we will make a mess in Europe. We have very serious potential. In these ten years there was not much investment here and very soon we will loose those theoretical possibilities.
You must have something positive, very attractive to say as a Bulgarian businessman who knows very well the economy?
It is more attractive than we can explain. Our life is perfect. We have been living a fantastic life here in the last years as various things have happened that could not happen during ten generations. I am very satisfied about everything I am doing in Bulgaria and life is very interesting. In your countries everything is structured and boring. Now it is going to be a little bit boring in Bulgaria because, little by little, everything is going back to its place. Can you imagine?, seven years ago we were not able to know what would be the exchange rate tomorrow, what would happen tomorrow, what government would be tomorrow. You did not know anything and you had to take the decisions right away, in a second. Life is incredibly interesting because when you go to sleep and wake up in the morning the situation is completely different. You can not say: "O.K. I will tell you tomorrow", because you do not know what will happen tomorrow. Every decision has to be taken now, immediately. Life is fantastic here for someone who is enjoying his work, because I enjoy my work.
We are an interesting mixture in Bulgaria. We mix that Western way of thinking with some oriental influence and a Mediterranean way of living. We like to live in Bulgaria and this is our mistake, because we do not have boarders for anything. When we start enjoying we do not stop.
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