Bulgarian workers protest over privatisation of the Tobacco holding Bulgartabak

On 2 September the tobacco unions affiliated to the Confederation of Independent Trade Unions in Bulgaria and Podkrepa Confederation of Labour organised a protest rally against the sale of tobacco holding Bulgartabak. More than 600 tobacco workers are taking part in the rally in Sofia. The workers, worried about their jobs, gathered in front of the privatisation agency asking for the transaction to be stopped. They claimed that the terms of the sale were not transparent and BT Invest could close down plants and lay off workers. Despite the protests, the privatisation contract has been signed.

Background

There is a long-standing controversy over the future of tobacco industry between the successive governments and trade unions over the years. In November 1993 Bulgartabak was transformed from a state company into a holding company, Bulgartabak Holding AD, which included 22 joint-stock companies. The privatisation strategy of Bulgartabak Holding was approved in 2003.

The employees and trade unions are concerned about the employment and social consequences of the planned restructuring and privatisation. 2004 saw a number of protests by Bulgartabak workers (BG0410102N). Now Bulgartabak Holding is a majority shareholder in 11 subsidiaries including two cigarette factories and a tobacco processing plant. The remaining factories have been sold, declared insolvent or are in liquidation. In 2010 the Privatisation and Post-privatisation Control Agency (PPPCA) started preparation for privatisation procedure for the majority stake of the Holding capital. This is the fifth attempt to privatise the holding in the last 13 years. The previous attempts failed due to different reasons - not attracting any bids at all; failure in the negotiations with the potential investors; considering the deal unfavourable or because of court decision to stop the deal due to losers in the bid claims of procedural flaws.

The parameters of the deal

The PPPCA declared the BT Invest, an Austrian investment firm owned by Russia's second-biggest bank VTB as a winner of the privatisation tender on 31 August 2011, despite suspicions of corruption given that the tender specifications had strikingly fitted the profile of BT Invest. It was the only remaining bidder, after British American Tobacco and other bidders withdrew. BT Invest agreed to pay EUR 100.1 million for the state's 78.9% stake in Bulgartabak. The parameters of the deal are not transparent and were announced only after the trade union protests and public pressure. According to the PPPCA information the privatisation agreement contains obligations of the buyer as follows:

• to buy a minimum quantity of 5000 tons of Bulgarian tobacco in the next five years

• to invest BGN 7 million within the first two years in Bulgartabak

• to maintain average staff number at the 2010 level for three years

• to preserve the principal business of the company and avoid liquidation and bankruptcy within ten years.

Trade union discontent

The announced sale of the Bulgartabak to the BG Invest company sparked fierce resistance from the trade unions, tobacco workers and some opposition parties. Trade unions voiced their demands as soon as the government privatisation plans became known. In May 2011 the President of the Confederation of Independent Trade Unions in Bulgaria (CITUB), Plamen Dimitrov, met with the Prime Minister, Boyko Borisov and announced the CITUB social demands on prospective buyer, including: not to change the main production activity of the holding within 10 years; to preserve the number of staff at its current average level for 5 years; to preserve the wage level; to acknowledge the current collective agreement and extend it by two years. Due to the non transparent procedure and very fast privatisation, the Independent Trade Union of Tobacco Workers (ITUTW) affiliated to CITUB and Tobacco Industry National Union affiliated to Podkrepa Confederation of Labour (Podkrepa CL) organised protest rally on 2nd of September. The protesters passed through the city center to reach the PPPCA building with slogans and posters including ‘Bulgartabak at the price of an big trade centre’, ‘No to privatisation during the crisis without social commitments’, ‘Mr. Borisov, the deal for the Bulgartabak privatisation "stinks",. In a protest declaration they demanded halting the deal and the resignation of the PPPCA Executive Director. Workers are worried about the tobacco industry and its employee’s future. They called the privatisation of Bulgartabak "wild, ruthless and in the interests of the only bidder"

Employers’ reaction

The Bulgarian Industrial Association (BIA) executive chairmen considered the Bulgartabak sale as a good deal, because they believe that the state is a bad owner. ‘If the Bulgartabak buyer complies with all regulatory mechanisms and adhere to the signed agreement, we should not have grounds to worry’, he said.

Government optimism

The sale of Bulgartabak is favourable for Bulgaria, according to the PPPCA head. ‘The most important thing for the unions is that we are preserving the business activity of both the parent company and its subsidiaries for the next ten years. And the employees who are between 2 400 and 3000 are protected for a period of three years’, he added.

Commentary

Despite the optimism of the government officials, the suspicion that VTB is only acting on behalf of one of its clients which remains anonymous, and that it will sell Bulgartabak after they acquire it remains.

Nadezhda Daskalova, ISTUR