Bulgaria Recycling Body Chair Vladimir Dimitrov: Metals Theft Bill Serves Govt Darlings

Vladimir Dimitrov. Photo by personal archive

Bulgaria's environment ministry recently drew up a controversial bill on waste management, claiming it is ramping up efforts to tackle metal theft. The bill triggered the anger of local companies, dealing with scrap metals, who say it aims to monopolize the sector by forcing many SMEs to fall by the wayside.

The Bulgarian Association of Recycling and its head Vladimir Dimitrov have been one of the most vocal opponents.

Bulgaria's environment ministry justified the new waste management bill with the need to crack down on thefts of ferrous and nonferrous metals. Which are your main objections?

The new draft of the law, prepared by Bulgaria's environment ministry, requires that all scrap metal yards are located on plots, which come under the so-called general development plans.

The problem is that only one third of Bulgaria's municipalities have such plans. The Danube town of Russe and the Black Sea city of Varna, for example, have attracted huge investments from companies in the sector, but lack general development plans.

To cut a long story short, the new requirement will force 2000 out of all 2400 scrap metal yards in Bulgaria to cease their activities.

If the law comes into force in this version, traders in ferrous and nonferrous metals will be stripped of their licenses and forced to apply for permits. At the moment we have a great network of traders, who have timeless licenses. In order to obtain it, they have applied and been approved by a high-level commission, which includes members of economy, interior and environment ministries. These departments, along with the municipality have the right to control the scrap yards.

It is only logical that metal scrap traders are granted licenses since their activities are deemed as risky business. The cash flows are huge - investments in the sector amounted to BGN 1.136 B by July 2011.

The amendments to the law say the traders need permits, which should be issued by the environment ministry. The rules for revoking the licenses are far from clear. Why?

Bulgaria's government wants to takes us out of the sectors the Economy Ministry oversees. Does it mean that it no longer considers the sector to be part of Bulgaria's economy? How come the environment ministry is entitled to control business activities?

We want the licensing regime to stay, since it is a successful practice few European countries boast.

By declaring their intention to obtain an investment license, people vow that in their work they will comply with the rules. To open a scrap yard these people mortgaged their property, purchased land and equipment. If they are forced to shut down the yard, they will not be able to sell or export the equipment since it is very expensive and not widely used.

Bulgarian bad loans have risen to nearly 20% of total lending, according to data of the central bank. You can bet the figure will jump to 30% after the new waste management law comes into force.

The bill also obliges municipalities to build their own scrap yards up to two years after it comes into force. It is namely there that you and all Bulgarian citizens will be required to deposit their scrap – and to top it all off – for free! If you don't comply with the rule, you will be subject to a fine, ranging from BGN 300 to BGN 8000.

Bulgarian citizens, like all Europeans, have the right to dispose of their belongings as they see fit. The decision whether to sell them or give them away for free is their own, this is the only democratic principle.

To top it all off, the drafted legislation bans scrap yards from making cash payments for metal. This is unacceptable. Imagine what will happen if the scrap dealer has to pay the scrap seller BGN 10 or just BGN 2? The bank fee for the transfer will be higher than the deal price! Isn't the bill's proposed cash-less system a way to benefit particular banks?

Why do you claim that the proposed legislation, officially aimed at combating metal theft, will not provide the needed long-term solution?

There are lobbyist interests behind the bill. Its real aim is to radically redraw the scrap metal market and give the lion share to a few big companies and organizations to the detriment of hundreds of small scrap yards, which have been operating for more than ten years.

Companies dealing with scrap metal will be obliged to sign contracts with municipalities. "Nadin" however will be one of the few to benefit from the new law since it has already concluded contracts for waste collection with 143 different municipalities. It is worth pointing out that "Nadin" is the only company, which withdrew from membership in our association.

In Bulgaria there will remain 5-6 companies at the expense of thousands of others, which will cease their activities because they do not meet legal requirements.

The current network of scrap metal dealers meets all requirements set by European regulations. But the new law will spell the death of more than 70% of small and medium sites, not least because of prohibitively large bank guarantees, which the law requires – BGN 50,000 for establishing a company and another BGN 10,000 for each yard.

Here we observe violations of the principle of equal treatment of operators - regardless of financial status of companies, they are placed on equal footing, ie conditions are the same for companies with an annual turnover of BGN 40 000 and BGN 1-2 M.

Isn't it obvious that the law aims to kick out of the market the older players and welcome new ones?

Wiping out the smaller yards will adversely affect the recycling process and will deprive steel producers of relatively cheap raw materials.

Instead of being used by the local industry, they will be exported and sold abroad. In order to meet their needs, the metallurgy companies will be forced to import raw materials, which will impact Bulgaria's foreign trade balance.

Still there is no denying that business is flourishing for scrap metal traders, who work illegally....

Illegal yards are the biggest problem- they sponge on the legal yards, who eventually bear the brunt for all the faults in the system. We have alerted the police many times but there has been no follow-up on our tip-offs.

Our production also fall victim to attacks and massive theft. Let's say we are transporting 54 tons of metal at the town of Pleven, Northern Bulgaria, to the town of Pernik, near Sofia.  At the final stop however it turns out that the cargo weighs 49 tons. Five tons of scrap metals have disappeared mysteriously along the way even though the cargo is guarded by the transport and economic police, while businesses also do not hesitate to splurge money to beef up security measures?

How did your European partners and the European Commission, in particular, react to the proposed changes in the Waste Management Act?

We approached the Directorates-General for Competition, Internal Market and Services, Petitions and Complaints.

Erminia Mazzoni, Chairman of the Committee on Petitions of the European Parliament, informed us that the European Commission will be asked to to conduct a preliminary study on various aspects of the problem.

Let me also point out that on January 20, 2012 the UK government rejected proposed legislation aimed at combating metal theft. The drafted legislation banning scrap yards from making cash payments for metal and requiring them to take proof of identification and an address from any potential seller.

How do you make sure that a licensed company does not buy stolen scrap?

The metal dealers, who work legally, pay taxes and require the identity card of the person, who brings the metal to the shop. The name of the person is recorded in a registry, which can be checked by the authorities at any time. A 10% tax is levied, which is transferred to the National Revenues Agency.

It is important to point out that all companies in the sector handle identification information. They don't know whether the scrap metal they buy has been stolen, but can always tell the authorities the name of the seller.

What steps have you taken so far to voice your opposition to the bill and defend your arguments?

In mid-July last year ten industry organizations signed a cooperation agreement in connection with the waste management bill.

We put the issue to a broad public debate and I can tell you that all the people there – more than seventy people from different key sector of the economy - were against one or another part of the bill. It is not only people from the waste management sector, who vehemently oppose the bill, but also metallurgy and engineering companies, producers of beverages, paper, etc.

There are only two companies from the waste management sector, who support the scandalous amendments and their names - Ecopack and Ecobulpack – are no longer a secret.

But despite all bombastic proclamations one question remains unanswered. Who are the cable thieves? Police says thefts of ferrous and nonferrous metals are on the rise, but fail to hunt down the criminals and arrest them.

We, the people in the waste management sector, have already taken a number of steps to crack down on the thefts of ferrous and nonferrous metals, including the introduction of CCTV to monitor, protect and secure the scrap yards against vandalism, theft and accidental damage, as well as restrictions on trade with physical persons.

We also demand that Bulgaria's legislation slams the abuse of public infrastructure, a common epicenter of metal thefts, as an act of terrorism and introduces mandatory minimum sentences.

At a series of rallies staged in the summer last year the scrap traders voiced their objections.

Do you plan new protests?

Yes, we are ready to hit the streets again. The new law puts at stake the future of the people and the whole sector, which continues to be one of the most profitable for Bulgaria's economy despite the global economic crisis.

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