Bulgarian Govt Rushes to Sell Key Military Plant over Social Unrest

Business | October 23, 2012, Tuesday // 20:02|  views

Bulgarian Labor Minister Totyu Mladenov has touted the sale of the VMZ Sopot military plant as the "cardinal solution" to its woes. Photo by BGNES

The urgent privatization of Bulgaria's largest military-industrial plant, VMZ Sopot, has been touted again by the Bulgarian government as a way to cope with the social unrest in which more than 3 000 factory workers have gone unpaid for months.

After a one-hour warning strike by the workers in VMZ Sopot on Tuesday, Bulgarian Labor Minister Totyu Mladenov reassured them that "the problem" with their delayed salaries would be resolved "in a few days".

Mladenov said, as cited by Darik Radio, that he is constantly in touch with the Economy Ministry, which is technically in charge of VMZ Sopot, and that the workers are being informed all the time about the plant's financial situation.

"The Economy Minister [Delyan Dobrev] has ordered the privatization procedure for VMZ Sopot to be finalized by the end of November. This is the cardinal solution of the problem," Mladenov reminded.

The employees of VMZ, which is located in the town of Sopot in Central Bulgaria, have not received their payments on time in the past 1.5 years.

The syndicates have been insisting for a while that Bulgarian Economy Minister Delyan Dobrev approve a request for a company loan for the still state-owned arms producer so that the workers can get paid and the plant can purchase raw materials for its produce.

They also claim VMZ Sopot is not short of orders, and that it can be a successful producer, with the VMZ management doing everything necessary to request a company credit that has not received the Economy Minister's approval.

The troubled VMZ Sopot is the largest Bulgarian military plant, and has been expected to be privatized.

Candidates applying to buy VMZ Sopot will be eligible to bid for it if they demonstrate they have enough funds to cover its mounting debts, totaling some BGN 140 M, according to the strategy for the privatization of VMZ Sopot adopted by the Bulgarian Parliament in 2011, and the future owner  will not be allowed to lay off workers in the first three years after buying it.

Sopot, where the plant is located, is the birthplace of Bulgarian writer and poet Ivan Vazov, after whom it was named. The plant was founded in 1936, and during the communist period was developed into a large-scale military industrial unit.

VMZ Sopot produces anti-tank guided and unguided missiles, aviation unguided missiles, artillery ammunition, fuses. It also manufactures civilian products – it makes diamond tools, abrasive discs and grinding wheels, gas cylinders, food industry equipment, and household appliances.

VMZ Sopot has been in a troubled financial condition in the last few years. In 2007, Bulgaria's Privatization Agency started to sell some of the plant's assets in order to cover part of its debts; some of its assets were also sold at the beginning of 2009.

The bulk of the Bulgarian military-industrial complex was created during the communist period when the People's Republic of Bulgaria made lots of cash by selling arms mostly to developing countries. Together with the former USSR and the former Czechoslovakia, Bulgaria was the third COMECON member specializing in the defense industry.

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Tags: Military-industrial complex, defense industry, VMZ Sopot, military factory, minority stake, state-owned, Defense Minister, Defense Ministry, privatization, delayed salaries, Delyan Dobrev, Economy Minister, Podkrepa Labor Confederation, syndicates


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