State Owned Companies: state capture, clientelism and corruption in Bulgaria

SOEs play an important role in Bulgarian economy, despite the fact that Bulgaria completed its major privatizations in the 1990s and early 2000s. The government has gradually reduced its ownership in SOEs, but still maintains a monopoly in critical sectors such as railway infrastructure, postal serivce or electricity and gas market infrastructure.

There are four categories of challenges underlined by the report, based on the structured and in depth interviews conducted with experts regarding the activity of state enterprises in various industries. SOEs confront with large political interference (71.4% of the responses), managerial challenges (66.7%), financial (52.4%) and overall legislative inadequacies (19%). The main issues underlined by the report refer to: i) No framework for deciding when the state is to get involved in business; ii) Incomplete and unstable SOE governance framework; iii) Financial accountability is in place, but economic accountability is absent;

A majority of the respondents also underlined that there is a lack of compliance with the existing legislation (60%), the quality of the supervision mechanisms concerning state-owned enterprises is fair, but not implemented (70%), while 67% consider that the international standards for SOEs – those of OECD and GRI – are not implemented.

The existence of these problems and challenges concerning management and operation of state-owned enterprises in Bulgaria creates a favorable environment for their capture and subordination to interests other than the collective interests of the citizens. Fieldwork in the case of Bulgaria shows several different types of such capture in the country, mainly i) ideological capture, ii) political-power capture, iii) party capture, iv) corporate capture and v) individual capture.

Full report is available here. 

About the authors

Georgy Ganev is an economist and is a program director for economic research at the Centre for liberal strategies in Sofia, Bulgaria. Since 2003 he is an assistant professor at Sofia University’s Faculty of Economics and Business Administration. Since 2005 he is Chair of the Governing Council of the Bulgarian Macroeconomics Association. His interests are related to issues of macroeconomics and monetary theory and policy, political economy, transition, development and growth economics, new institutional economics. At the university he teaches the standard courses of introductory macroeconomics, money and banking, as well as a graduate seminar in new institutional economics.

Petia Kabakchieva is Professor of Sociology at the Sofia University. She has been a Visiting Fellow at the Institute for Human Sciences (IWM) in Vienna and has completed several studies on the socio-political situation in Bulgaria financed by international organizations, such as NATO, UNDP and the World Bank. Among the courses she teaches is Sociology of Power, Sociology of Modern Ideologies, Sociology of Citizenship, etc. She is an author of several books and numerous publications.

Stefan Popov holds a Ph.D. in Philosophy and Social Science from the New School for Social Research, New York (1996) and from Sofia University St. “Kliment Ohridski”. He has specialized in constitutional policy (Vienna, 1994, and Freiburg, 2003), international security (Washington, 1999) and public policy (Vienna, 2011-2012). He is Executive Director of RiskMonitor from 2007. He was Program director at the Center for Liberal Strategies from 1996 until 2004 and Chairman of the Board of Trustees of the Open Society Institute – Sofia from 2000 to 2006.

Rada Smedovska-Toneva holds a Ph.D in Sociology. She is an adjunct professor in the Department of Sociology at the Sofia University. She graduated in Public Law from the Université d’Auvergne Clermont-Ferrand, France (2002). Law Program coordinator at Open Society Institute – Sofia (2002-2007). Since 2007 she works as a researcher responsible for the institutional studies at RiskMonitor. She developed and managed several national and international initiatives in the field of the fight against organized crime. Her main interests and publications concern the institutional policies for combatting nonconventional crime, the effectiveness of the law enforcement institutions and strategies and the control on the security sector structures.

This report is part of the “State-Owned Companies – Preventing Corruption and State Capture” project, implemented by the Romanian Center for European Policies, Expert Forum, Freedom House, Amapola Progetti (Italy), Risk Monitor (Bulgaria and Candole Partners (Czech Republic). The project is financed through Economic and Financial Crime, Corruption, Environmental Crime Programme,  DG Migration and Home Affairs, European Commission and co-financed by Open Society Foundation. 

The contents of this report does not necessarily reflect the official position of the DG Migration and Home Affairs or Open Society Foundation. Liability regarding the accuracy and coherence of the information within lies with the partners of the project  and with the author(s) of the report. 

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