Conclusions

     ___________________________________________________
     This document has been made available in electronic 
    format by the International Co-operative Alliance ICA 
    -----------------------------------------------------
                         November 1995

                    ICA Studies and Reports
           Co-operatives in Eastern & Central Europe

                           Bulgaria
               by Professor Dinonysos Mavrogiannis


4   Conclusion

The long tradition of co-operative action in Bulgaria is part of
its economic and social history. It has gone through various
periods of successful development, as well as of difficulties and
transformations. Although its economic model was brought in from
outside Bulgarian society, the co-operative movement soon
developed deep roots in the fertile social soil of this Balkan
country, which was always keen to be endowed with civilised
institutions quickly assimilated by the working population.
Various forms of co-operatives managed to overcome cultural and
organisational obstacles before the Second World War. They also
absorbed the structural, functional and ideological blows since
imposed by the totalitarian Socialist regime. Recent steps taken
by both Government and co-operative leaders have resolved the
crisis of identity and restored co-operative tradition, values
and principles.

The following highlights could further substantiate evidence of
the above conclusion. Brief reference will also be made to the
Bulgarian co-operative movement's plans and expectations.


4.1    Main highlights

.c.The most important factor which favoured the reconstruction
and privatisation of co-operatives was the wide and propitious
legal framework instituted in the country by Governmental policy
and various legislative texts adopted between 1989 and 1992. The
national consensus of all social partners regarding restored
economic pluralism, placed co-operative societies and the
co-operative sector among private associations, alongside
commercial companies. These facts brought about the resurrection
of co-operatives in much clearer conditions than in some other
countries of Central and Eastern Europe.

Table 12 borrowed from the Article of M. Meurs and Ch. Rock:
"Recent evolution and issues of Bulgarian co-operatives",
published in the Yearbook of Co-operative Enterprise 1993, pp. 
39-52, Plunkett Foundation, Oxford, U.K., up-dated and completed
in the light of data collected  in late 1993, points out the
legal and policy changes and improvements already evident.

Table 12:  Changes in Co-operative Rules and Practices in
           Bulgaria

Issues                   Pre-1989 Laws       Current Laws and
                         and Practices       Practices (1993)

Autonomy

Legal, constitutional    uniform-mandatory  freedom-within
framework for            for all co-ops     constraints of 1991
individual co-ops:                          co-op law and
                                            constitution

Individual co-ops in          obligatory       voluntary
federations (co-op unions): 

Individual co-ops' rights      minimal            yes 
to establish own internal 
practices within law:


Only a single federation      yes (1970-88)     no, several
(co-op union) for co-ops:

Co-op federation (union)      yes-finance,      no-only by
right to intervene in         products,         mutual accord
member co-ops'                planning
decisions

Internal governing of        practice:           democratic by 
individual co-ops            oligarchie          elected bodies


Property Rights/Privatisation

Distribution of the co-op        co-op union       members
property on dissolution to:

Dividends paid on share      very small(0-2%)    no limits capital
contributed as                               (bylaws)
proportion of wages paid:

Restrictions on               non-individual:   individualised:to
distribution of rights         to whole co/op      each member
to share in co-op's 
capital or profits

Rent paid to members or     not in practice         yes, required
others contributing land

Retention of members'          no: only as         yes: or can property
rights to              abstract share     agree    
specific land or other           until 1959        to share 
physical property

Right of members to with-       no                 yes, share and draw
property on ending                            land
membership

Share capital permitted         not relevant        yes
for non- workers
in worker co-op


Co-operative Credit

Central co-op bank exists            no            yes since 1991
Saving credit and              no/nationalised     yes 1) by deposits 
consumer
                                                   societies          (Art
                                                                      .38
                                                                      Law
                                                                      1991
                                                                      )

Possibility of                 no                  yes
individual co-ops 
borrowing directly 
from any existing bank:


Labour Rights  and  Trade Unions

Income per member-worker     relatively equal     at least equal
compared to hired labour                          plus dividends      for
shares    
Effective restrictions       yes(in practice)     no, but in  wage rates  
                                        worker' co-ops
                                                  depends on productivity

Trade union representation      yes               yes, except mandatory
for hired labour                        workers' co-ops

Non-member hired workers    maximum 10%          no legal limits
permitted in co-op:  

Member's right/obligation       yes                 yes
to job in production co-op:

Obligation of member to         yes            no, unless
work specified number of days                  stipulated in      by-laws
                                             and        internal
                                               regulations

Marketing

Ad hoc subsidies/siphoning    yes              no
of income by Government
to achieve central state
goals :

Who is involved in           federation         no restrictions
export/import trading ?      obligatory         but in practice
                                                second and
                                                third degree              
                                      organisations                        
                                                                           
                                                                           
                                                                          
                                                                      plus
                                                                      co-o
                                                                      p    
                                                industries

Decisions on a co-op's      some co-op          100% by unions
main products, prices,      unions, but         and co-ops
quantitiy produced :        mostly by State Plan

Laws which apply to co-operatives: See list in Annex 2.


The recent years of restructuring, land reform and privatisation,
which are still on-going, have resulted in the emergence of a
wide co-operative sector in quest of its private identity and
seeking to reclaim its part of the market economy, and
increasingly beginning to affect the everyday life of consumers,
workers and farmers, as they continue to establish themselves.

Three main trends are typical in all types of co-operatives. Apex
organisations at the top, and primary societies at the bottom,
constitute the essence of each sectorial movement. The
intermediate organisations, local and regional unions, are
insufficient in number, have less activities and are still in the
process of reconstruction. In contrast, the apex organisations
are not limited to planning, advising and defending their
member-societies, but continue to undertake large-scale economic
activities. Finally, membership of some apex organisations is
mixed in the sense that their members are both primary and
secondary co-operatives.

Due to the specific conditions prevailing in the country,
especially the level of unemployment, and the social benefits
which co-operatives provide (sickness schemes, accident cover,
pensions, maternity pay) some of the co-operatives are reluctant
to reduce their workforce. This slows down the process of
restructuring and makes them less competitive. It also risks
perpetrating the condemned working and living conditions of the
Socialist period. This is particularly true for the new
agricultural co-operatives in that they concentrate on joint land
cultivation rather than on the provision of services in common
to their individual member-farmers. The drawback is that the
agricultural co-operatives' members are not only farmers directly
and personally involved in agricultural activities but also land
owners occupied in other activities, retired land owners,
landless workers, administrative staff and technicians.

Workers' co-operatives also continue to hang on to their
administrative staff, technicians and high staffing levels.
Certainly, this decreases the unemployment figures and supports
the benefits system. However, the delay in restructuring the
organisations concerned, prevents them from being fully prepared
for the market economy, in the context of which productivity and
competitiveness guarantee survival and successful functioning.

The consumer societies, in contrast, reached an advanced stage
of maturity, due particularly to three initiatives taken since
1991: firstly, they provided financial and technical support for
the creation and functioning of higher educational institutions
at the university level. This will improve the qualifications of
a new generation of co-operators, managers and technicians. In
this field the consumer co-operative system of Bulgaria is ahead
of many other countries. Secondly, the rapid and successful
development of credit and deposit services created the right
conditions for the establishment of the Central Co-operative
Bank, the most important working tool of the country's
co-operative movement. Thirdly, consumer societies, through their
direct involvement in the production, processing and marketing
of agricultural products, bring farmers and consumers closer
together and achieve larger goals of economic development.

With regard to their economic role and volume of activities, the
importance of the consumer societies is significant. In the
context of the dismantling of the State trade, and in the absence
of a developed private and commercial network of retail trade,
consumer societies will continue to occupy a key position for the
time being and for many years to come.

Among the six main co-operative institutions, two, The Central
Co-operative Union of Consumer Societies and The Central Union
of Workers' Production co-operatives,  are already members of the
International Co-operative Alliance and its specialised
Committees of INTER-COOP  (trade) and CICOPA (workers' co-ops)
and have many working relationships abroad. Two other
organisations, the newly-constituted Central Co-operative Bank
and the National Union of Agricultural Co-operatives, are in the
process of establishing such links with international
organisations and seeking membership of the ICA and other
European institutions. Within the remaining two institutions, the
Department of Co-operative Management and Business and the
Central Union of Workers' Co-operatives of Handicapped Persons:
one old and one new, working relationships are focused on
questions of expertise, assistance and collaboration.


4.2   Expectations

In the transition to the market economy, the major problem seems to be the
delay in completing the restructuring and privatisation process in all its
forms and dimensions. Furthermore, the restitution of properties and
enterprises to consumer societies and workers' co-operatives is far from
complete, and the land redistribution is still only at the halfway stage.
As for the sale of State enterprises, the plan is still in its infancy,
and does not favour the workers' views and proposals for full
participation in the auction and sales. Co-operatives are right in saying
that settlement of the above difficulties and delays in transforming the
State economy are not under their control. However, they have prepared
themselves for the process and wish to be able to overcome these
transitional problems as quickly as possible.

The taxation system, which applies to most co-operative organisations, but
particularly to consumer societies and to the Central Co-operative Bank,
should take into account the fact that co-operative activities are not
lucrative. Through its taxation policy, customs duties and other financial
measures, the State should support and promote co-operatives as stipulated
in Article 2 of the Law on Co-operatives of 1991. The tax exemptions which
Article 37 of the same Law makes for some types of co-operatives should be
enlarged to include those co-operative activities which are connected to
production and to investment in labour.

The administrative machinery of the State and other related bodies and
authorities handling economic, legal and financial matters should be
simplified so that it is ready to take snap decisions on developmental
subjects. Also, the State's control over the activities of workers'
co-operatives should be abolished and the burden of co-operative
contributions to the State budget reduced.

Credit facilities at affordable rates of interest, and other favourable
conditions, should be organised for workers' and private farmers'
co-operatives.

The State should establish an appropriate physical, technical,
technological and scientific infrastructure for the emerging agricultural
co-operatives.

Last, but not the least, Article 31 of the Law on Privatisation of State
and municipal-owned enterprises permits the workers in such enterprises to
bid in their auction or sale, and to receive favourable conditions of
price and repayment. This should be extended to all types of
co-operatives. As a matter of fact, agricultural, workers' and consumers'
co-operatives are strongly interested in such an opportunity. In
conclusion, the country's co-operative movement, in its capacity of
private societies, wants the State to speed up the privatisation process,
and to complete it by improving administrative channels and adjusting
legislative texts in the light of the new economic conditions.


4.3   Perspectives of further co-operative development

Within the new conditions of market economy, the three main types of
co-operatives are working hard, each of them at its own speed and
capacity, to renew, expand and diversify their economic and social
activities.

Far behind the other two, agricultural co-operatives are only just
beginning to get off the ground. Their future depends on the effective
implementation of the State's policy on the distribution, reallocation and
renting of land. The organisation of agricultural co-operatives should
start from scratch and involve both the State and individual farmers.
Whatever the outcome of the steps taken to this end, the fact is that
reconstruction of the agricultural economy and society can not become
reality without the group action of individual farmers who own small plots
of land. Co-operatives, therefore, are a viable choice for the State's
privatisation of land and the survival of new farmers. The two are
connected, representing two sides of the same coin.

Workers' production co-operatives have decided to proceed with the
creation of new production ventures for their members, in collaboration
with partners from abroad. They intend to make better use of a workforce
which desperately wants employment. The success of their expansion plans
can be achieved only at the price of further sacrifices: firstly, the
existing large co-operative organisations must be divided into smaller
organisations and secondly, the high cost of production must be reduced.
Staffing levels have to be decreased, and co-operatives which cannot keep
up with changing economic circumstances abandoned. The workers'
co-operative system should claim the right to bid in the auction of State'
and municipal enterprises, some of which could be organised as employee
buy-out units and run as co-operative type businesses. Through such a
strategy workers' co-operatives can fight for their place in the
industrial sector, securing employment and a better income for a large
number of workers.

Table 13 reflects the ambitious investment programmes of 144 production
enterprises and workshops in the process of creation or re-organisation
during the Workers' co-operatives' 1990-1995 period.

Table 13:  Investments required for the construction of 
small enterprises, workshops and production
lines  -  1990-1995

Small Enterprises   Number   Year    Capacity     Capital
Workshops                            per Annum    Investment
                                                  (1,000levas)

Yarn manufacturers  10      1991/95    5,900t          49,300
of which: cotton     1        "        1,500t             -
wool                 8        "        3,400t             -
(short) flax 
filament             1      1993       1,000t             -
Weaving Workshops    8      1990/93   10,200thmr       18,500
Fur-dressing
Enterprises          3      1990/92    2,000furs        2,000
                                       3,000sq dcm      7,000
Shoe Manufacturers  10      1990/91    4,350 pairs      5,000
Metalworking Shops  40      1990/95  125,000 levas     37,755
China Manufacturers
(ceramics)           5      1990/95   20,000 levas      3,000
Ready-to-wear
Clothing            47      1993/95    2,290pcs         3,250
Knitwear            17      1993/95    7,285pcs        47,650
Packaging            4      1990/95       -            20,500
Furniture            -      1990/95       -            80,000
Plastics             -      1990/95       -            25,000

TOTAL              144                                298,955


NB: estimates based on 1990 prices (exchange rate: 1,000 levas = CHF
1810.-)

The consumer co-operative system is lining up its human and material
resources to fight on three fronts: firstly, by up-grading the role and
functions of the regional unions. These will collect information regarding
members' needs and pass this upwards to the Central Co-operative Union,
whilst also acting as central points for the marketing of goods and
commodities to the primary co-operatives. Secondly, by organising new
types of services such as food and catering chains and rent and leasing
activities. Furthermore, they plan to expand the existing sectors of
tourism and insurance services as well as production, purchase, processing
and the sale of agricultural products. The restituted agricultural
enterprises (dairies, canneries, wine and tobacco producers) will give a
new impetus to this. Thirdly, by the adoption of a new approach regarding
the distribution and utilisation of profits and investments, which will be
used to create the motivation for further action. Members of primary
societies will be given coupons corresponding to the volume of their
purchases in the co-operative shops. The coupons will entitle the holders
to dividends, which are reinvested in shares. Other projects will
encourage members to save, and to deposit their savings within the
co-operative system.

The new plans already being implemented by the consumer co-operatives have
a good chance of success for several reasons: the consumer co-operative
system owns a considerable amount of property and capital. Furthermore, it
has a long experience in managing trading activities, and it can rely on
new generations of members, managers and technicians' being trained within
its educational system. Consumer societies are not isolated. They don't
hesitate to seek advice from international organisations, such as the ICA,
ILO, and EU, and national co-operative movements from the developed
countries of Western Europe and North America. Legislative policy has also
created the necessary framework for long-term programmes and activities. 

This means that consumer co-operatives are ready to proceed without
waiting for the completion of the restructuring and privatisation process
conducted by the State and municipalities. It can safely be said that
consumer co-operatives have not only the ambition to be successful but
also the capacity to realise their ambitions.

In addition, three other factors will determine the smooth development and
efficient functioning of the Bulgarian co-operative sector:

1.   The creation of a unified structure for all types of co-operatives
(fourth degree apex organisation) for coordination, planning and defense
purposes. Preparatory work is already in progress and basic guidelines are
under discussion by all concerned;

2.   The growth and consolidation of the co-operative saving, credit and
deposit services. This will facilitate co-operative activities and will
contribute to the relative financial autonomy of the co-operative sector.
The key role in this matter will be that of the Central Co-operative Bank,
which must attract a large membership among all types of co-operatives and
also extend its services to the commercial sector. The Central
Co-operative Bank should therefore prove that it has the capacity to
provide financial support for the promotion of the country's co-operative
movement;

3.   The definition and role of labour and trade unions in the new context
of privatised co-operative organisations and enterprises has not been
adequately studied. Any weakening in the trade unions' voices regarding
the role of workers in the process of privatisation may lead to further
disputes between the labour force and management regarding the role and
position of the former in the context of the privatised enterprises,
including the use of hired workers who have no financial stake in the
organisation.