Implementation of economic and social pact evaluated

In November 2007, the Bulgarian government and the representative national-level employer organisations and trade union confederations reported on the implementation of the 2007–2009 tripartite pact on economic and social development during the first half of the year. The pact is the first of its kind in Bulgaria and its implementation will be evaluated every six months. The latest evaluation relating to the first half of 2007 was a mixed one.

Background

At the beginning of 2005, the Confederation of Independent Trade Unions in Bulgaria (Конфедерация на независимите синдикати в България, CITUB) and the Confederation of Labour Podkrepa (Страница на КТ Подкрепа, CL Podkrepa) drew up a memorandum on the economic and social development of Bulgaria up to 2010. The Employers Association of Bulgaria (Съюз на Работодателите в България, EABG) later added some ideas, opinions and proposals to the trade unions’ initiative – EABG subsequently merged in May 2006 with the Bulgarian International Business Association (BIBA) to form the Confederation of Employers and Industrialists in Bulgaria (Kонфедерация на Работодателите и Индустриалците в България, CEIBG) (BG0606019I). Before the parliamentary elections in August 2005, these social partner organisations put forward to politicians a proposal on a general framework for a national economic and social pact, calling for such an agreement to be signed by whichever government came into power after the elections.

After two years of efforts and eight months of difficult negotiations, in September 2006 the government, the six nationally representative employer organisations (BG0412102F) and both CITUB and CL Podkrepa finally signed Bulgaria’s first ‘Pact on economic and social development’ for the period 2007–2009. In the pact, the government and the social partners took political and social responsibility for the achievement of 13 objectives in the economic and social sphere (BG0609029I).

The pact provides for a report on implementing policies and measures to be drawn up every six months. In November 2007, the government and social partners reported on implementation during the first half of the year.

Tasks implemented in first half of 2007

The social partners gave a positive evaluation of some macroeconomic developments from January to June 2007. In the first six months of the year, gross domestic product (GDP) grew by 6.2% compared with the same period of 2006. The state budget surplus was about BGN 3 billion (about €1.5 billion as at 27 February 2008). Positive labour market trends continued: in July 2007, the unemployment rate was 7.4% and the employment rate was 61.6%. The pact’s objective of creating 240,000 jobs by 2009 was already 80% fulfilled during the first quarter of 2007. Activity related to the EU Lisbon Strategy which promotes growth and jobs, as set out in Bulgaria’s national action plan, was given a positive evaluation, as was activity based on the national strategy for lifelong learning.

Aspects of taxation policy are also regarded as positive, such as: decreasing the burden of social security contributions by 3%; adopting a 5% dividend tax; and introducing a zero corporation tax rate in 138 municipalities and a 10% rate in the remaining areas.

Developments related to income in the first half of 2007 included: the conclusion of a first bipartite national agreement recommending a pay increase in the private sector (of 12.9% in 2007) (BG0706059I); the adoption of a methodology for determining the ‘official’ poverty line; and the adoption of a government ordinance on wage structure and organisation (BG0701089I).

Tasks not implemented in first half of 2007

Most of the pact’s measures concerning employment, education, healthcare, pension reform, the development of production and infrastructure, and the development of the labour legislation and social dialogue were not implemented during the first six months of 2007.

Trade unions’ evaluation

CITUB gives a generally negative evaluation of the pact’s implementation so far, because of the perceived failure to introduce policies and measures in the social and labour legislation fields, and a lack of effective social dialogue. CL Podkrepa and CITUB have strongly criticised a recent government decision to introduce a flat income tax rate (BG0712029I) without entering into dialogue with the social partners. According to the union confederations, this measure will affect a series of objectives agreed in the pact. The trade unions consider that the government’s decision to remove the minimum threshold for taxable income and abolish family-based income tax will negatively affect low income groups.

Employers’ views

A delay in introducing measures and long-term strategic priorities for the development of Bulgarian industry has been criticised by employer organisations. They argue that this perceived lack of an industrial policy stands in the way of Bulgaria moving towards achieving a better position in the EU ‘division of labour’. Employers bemoan a lack of measures to assist export-oriented Bulgarian companies, and argue that measures that have been taken to cut the number of licences and permits required by businesses, and thereby stimulate and facilitate business activity, are not enough.

Commentary

It is not yet possible to give a clear and straightforward evaluation of the implementation of the pact on economic and social development. Although the social partners are critical, they recognise some of the results achieved as being beneficial for business and for employees. The efforts of the social partners and the government should now be directed at creating an active dialogue on the development of priorities and the tasks to be fulfilled in 2008, and at allocating responsibility for their implementation.

Tatiana Mihaylova, Institute for Social and Trade Union Research