___________________________________________________ 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 2 Transition to the Market Economy (1989-1993) Governmental policy on restructuring and privatising the economy officially started in 1990. This had a direct impact on the co-operative sector. Co-operative societies, both old (restructured in accordance with the Law of 1991) and new (having emerged during the last five years), currently contribute to the implementation of the privatisation policy. Their democratic values and principles lead to self-sufficiency in food, income-generating activities and social justice. Thus, co-operatives should not be looked upon as the passive result of the privatisation policy. As part of the economic pluralism, they also participate in the implementation of market conditions at all levels. 2.1 Privatisation policy The privatisation policy and its subsequent implementation, begun in 1989, aimed firstly at dismantling State and municipal enterprises, means of production and land, and secondly at establishing a market economy. Arguments in favour of privatisation were already to be found in 1987. Based on the economic revival plan decided by the 13th Congress of the Communist Party in 1986, the Council of Ministers issued regulations on private individual business and co-operative activities the following year. A special ordinance permitted 35 co-operatives, old and new, to undertake a wide range of economic activities. Public authorities were directed to support and promote such businesses, particularly those conducted by pensioners, students, women and handicapped people. No hired labour was permitted to be employed for such activities. This opening of the Bulgarian authorities to a limited market economy is a reminder of the Soviet perestroika started by Gorbatchev at that time. Later on, reconstruction of the economy began with the passing of Decree 56 of January 1989, regulating economic activity. A special team handling questions of small individual and private forms of entrepreneurship was created for this purpose in the Ministry of Economy. During the same year, Decree 922 introduced the dismantling of the agro-industrial complexes which had been in operation for almost 20 years under the National Agrarian Union, which the Ministry of Agriculture was then called. Consequently, a great number of small shops, restaurants and the like sprung up throughout the country, as a movement of spontaneous private business and property. In contrast, several associations and co-operatives working in the areas of food production and sales were also established during this period. These co-operative type organisations have not yet fully assimilated co-operative values and principles, and are thus known as "wild" co-operatives. The political changes which began in 1989 opened the door to the official restructuring and privatisation of the economy through an adequate legislative policy and texts aiming merely at: - creating an institutional framework of economic pluralism including single traders, commercial firms, co-operative societies and banking activities; - facilitating the restitution of State and municipal enterprises and land; - privatising State and municipal enterprises and property; - encouraging and protecting foreign investments. The economic and financial situation of the country, which worsened in 1990-1992, sped up the process of privatisation. Industrial production fell by 13% in 1990 and by 27% in 1991, while inflation rose rapidly. In 1992, industrial output fell by 55% in comparison with that of 1990. The export trade to the former COMECON countries decreased by 60% and to other countries by 25%. In 1991, half of the country's State enterprises were functioning at less than 60% of their previous capacity. The structure of large enterprises affected by the significant decrease in productivity and job losses are shown in Table 6. Table 6: State enterprises and employment levels in 1990 Number of workers Number of enterprises Less than 10 25 11-30 120 31-50 162 51-80 274 81-140 343 141-200 287 201-500 744 501-1,000 388 1,001-2,000 207 2,001-3,000 70 3,001-5,000 27 5,001-10,000 9 Over 10,000 4 Source: National Statistics Institute The available data indicate that the number of workers employed in the State sector fell from 3.7 million to 3 million in 1991. In 1992, unemployment benefits amounting to 44 million US dollars were paid to 700,000 redundant workers. The crucial questions of price liberalisation (the price of some 90% of goods and services was liberalised at the beginning of 1991), high inflation, wage fluctuations, high rates of taxation, external debts, lack of foreign currency and other related problems were the object of a reform programme introduced in 1991 with the approval and assistance of the International Monetary Fund. Foreign investments in the form of joint ventures had grown up slowly by that time. In 1991 approximately 80 million US dollars of foreign capital was invested in some 240 joint ventures. The participation of foreigners in the privatisation process is encouraged through public sales of State assets and securities. Foreign citizens and legal bodies are governed by the same legal texts as Bulgarian persons and legal entities, and also by the specific provisions of the Law on the Economic Activity of Foreign Persons and Protection of Foreign Investments (the Foreign Activity Law) of 1992. There were more than 210,000 small private enterprises in 1992 and the number of full-time employees was estimated to be around 400,000. A much higher number of part-time employees is hidden for taxation and other social reasons (e.g. those simultaneously claiming unemployment benefits). All actors within the privatised economy are classified as "merchants" and "non-merchants". Merchants are physical and legal entities participating in business and profit-oriented activities. They are individuals, various forms of partnership, limited liability and joint-stock companies registered in the commercial register. They are governed by the provisions of the Commercial Code adopted in May 1991. Co-operatives are classified as "merchants" (except the housing co-operatives), but their constitution, functioning and activities are regulated by the special provisions of the Co-operative Law of July 1991. "Non-merchants" are all producers and workers engaged in farming, handicrafts and various professions as well as the self-employed. Thus the members of workers' production co-operatives and agricultural co-operatives are not considered to be "merchants". Banking institutions and insurance companies must be organised either as joint-stock companies or as co-operatives. By June 1993, 30,772 small enterprises and properties of the 54,426 claimed, nationalised or confiscated by the State, municipal councils and other State bodies, had been returned to their previous owners or their heirs. The percentage of the above enterprises and property already returned to the former owners varies between 43.4% and 90.9% according to each category (see table 7). Restitution is differently implemented from one region of the country to the next. The most important State enterprises facing difficulties with privatisation are the big industrial complexes. As yet, only a few have been sold. Unconfirmed sources put the figure at 2% (including the Razrad pharmaceutical plant, financed with the help of Belgian investors). The privatisation law of May 1992 created the Privatisation Agency. This is governed by a supervisory board of eleven members appointed by the Council of Ministers and the National Assembly, and managed by an appointed executive director. The activities of the agency are financed through the State budget. The agency prepares privatisation programmes in the form of annual targets, lists of enterprises to be privatised and guidelines for the privatisation process. The programmes are then approved by the Council of Ministers. The agency, staffed by legal, administrative and technical personnel, is still in the process of organisation. Some eleven regional offices are to be established in the country's main urban centres. The privatisation of municipal assets is handled by the municipal councils. The implementation of the privatisation process is centralised at present, which is both costly and time consuming. The value of the assets concerned, mechanics of sale by public tender, and issues concerning employees, are some of the difficult problems which face the inexperienced administrators. Foreign investments from abroad are very rare, although Greece, Germany and other members of the EU (European Union, formerly the European Economic Community) are showing some interest in investing in some of the smaller enterprises. Table 7: Restitution of small enterprises (end of June 1993) Category Claimed Redistributed % Total 54,426 30,772 56.5 Shops 9,003 7,452 82.8 Restaurants 161 134 83.2 Pharmacies 77 70 90.9 Hotels/guest houses 286 150 52.4 Car stations 11 5 45.5 Garages 143 82 57.3 Waterhouses 1,201 882 73.4 Administrative buildings 511 402 78.7 School buildings 56 25 44.6 Hospitals 164 122 74.4 Children's centres 207 176 85.0 Cultural centres 368 203 55.2 Apartments 11,484 6,775 59.0 Mills 1,059 713 67.3 Other establishments 159 109 68.6 Dairies 41 26 63.4 Workshops 218 158 72.5 Other industrial units 1,563 1,010 64.6 Sport centres 84 58 69.0 Grounds and courts 25,536 11,090 43.4 Miscellaneous 2,094 1,130 54.0 Source : TRUD (=Labour) Newspaper of 15/9/1993 With regard to the land reforms, a legal framework setting out the necessary policy guidelines, has been adopted. This consists of the Law on Ownership and use of Farm Land, passed in February 1991 and since amended, and the Rules of Application issued in April 1991, together with their amendments. The Government is watching the process of implementation closely. Difficulties, therefore, are limited to technical issues, mainly related to the allocation of land to its previous owners or to their heirs. The financial cost of the endeavour is funded by the State budget, and it is estimated that the restitution costs will amount to three billion levas. All claims and settlement of disputes, at all levels, are free of charge for the people concerned. According to the Ministry of Agriculture, 25 to 30% of the collectivised land for which claims had been registered had been returned by the end of 1993. Another one or two years will be necessary for the completion of this huge technical and legal undertaking. At the national level, the Ministry of Agriculture (Department of Land Reform) is planning and implementing the land reform. At the local level, municipal commissions undergo the day-to-day work, collecting claims (declarations), studying them and deciding upon their validity. Appeals against their decisions may be made to the court. Land seized by the State farming system is returned to: - the previous owners or their heirs (Article 10, paragraph 1); - co-operatives, such as the consumer societies, whose cultivated land was seized after 1944 (Article 29); - municipalities which owned seized land and have not been compensated for its loss (Article 25, paragraph 2); - current and retired member-workers of the collective farms are also entitled to compensation (Article 27); - private individuals are allocated other land belonging to the State and municipalities free of charge (Article 26). Any other land which is not handed over to those listed above remains in the hands of the State (Article 24, paragraph 1). All agricultural land which is not that owned by private individuals, legal entities or the State shall be municipal property (Article 25, paragraph 1). Article 8 recognises the right of the new private land owners to unite in co-operatives and associations for the joint cultivation of agricultural land. A comparison between the policies concerning, on the one hand, the privatisation of State and municipal enterprises and property and, on the other, land reforms should result in the following conclusions: - At the policy level, the one concerning land reform has clear and well-defined objectives. The privatisation policy, in practical terms, does not go beyond the current year; - The policy of land reform is the result of a national consensus of all the social partners involved. Such a consensus seems to be missing in the case of privatisation policy; - The implementation of land reform is mainly in hands of the local authorities. Reallocation of scattered land property is being undertaken by technicians from the Ministry of Agriculture. Implementation of the privatisation policy is highly centralised; - Land reform can be performed within the State budget. The privatisation process depends on foreign investment, which is not currently forthcoming; - The privatisation policy gives little consideration to the views of trade unions belonging to workers employed in the State and municipal enterprises, and their participation in the sale of these units. According to Article 31 of the 1992 Privatisation Law, 30% of the employees can bid in the auction of the State and municipal enterprises and obtain up to 20% of the shares of the privatised enterprises, the value of which is estimated at over ten million levas. The employee scheme adopted by the Law provides for a discount, set at a 50% in case of an employee buy out, to be repaid in instalments from one year's salaries. No voting rights are allowed, however, at least for the first year. The Law also provides for the use of a part of the sale proceeds for social and developmental purposes. The Law missed the opportunity to include former workers in the privatisation of State and municipal enterprises in the form of employee-owned private enterprises, organised in co-operative type and participatory ventures, whose management and labour would be in charge of the member-employees. The law on land reform does not limit the rights of former workers to claim against the assets of the collective farms (Article 27). Similar provisions in transitional clause 8 of the Law on Co-operatives guarantee the rights of employees of farming organisations under reorganisation. 2.2 Co-operatives under restructuring and privatisation The radical changes of 1989 created a serious identity crisis regarding the definition and role of Bulgarian co-operatives in the context of the market economy. Confusion among the population and some of the liberal political leaders who came to power during 1990 and 1991, contributed to the perception of co-operatives as an integral part of the Socialist economic system. Taking advantage of the general embarrassment about State domination of collective farms and other types of co-operatives, the Government attempted to enforce the obligatory distribution of co-operatives' property to their members. Existing co-operative property, at the level of the consumer societies' unions, was perceived to be similar to that held by the State and municipal councils. Co-operative leaders, assisted in their difficult task by the advisory services of the ICA and the ILO, managed not only to extinguish such erroneous views about the past role of co-operatives but also to counter the adverse political views. Finally, the new policy adopted special legislative texts which confirm the private nature of co-operative societies. Such a legal framework favoured the restructuring of existing co-operative societies. The privatisation process and land reform, on the other hand, gave the signal, and the opportunity, for the emergence of new co-operatives. 2.2.1 Spontaneous restructuring As from 1987, the co-operative movement as a whole felt the need to proceed to various reforms and improvements regarding economic, financial and educational structures. The creation, between 1987 and 1990, of a private individual and commercial sector had a double impact on existing co-operatives. Consumer co-operatives gave up a certain number of co-operative shops with the objective of getting rid of the less productive part of their retail system. These shops were sold or rented. It is now planned that the latter are to be reintegrated in the CCU system. The CCU started also rationalising its administrative staff, reducing their number by 80%. New consumer, handicraft and production co-operatives were formed. In 1988, although the legal basis for individual business and self-employment was still narrow, the Union of Workers' and Producers' Co-operatives was revived. Subsequently, the Union claimed separation from the consumer co-operative system and autonomy from the State. The most important institutional event in 1990 was the creation of a Department for Co-operative Management and Business at the University of Sofia, with provincial branches, and a Co-operative College. These two new, third and fourth level educational institutions completed the existing training system financed by the consumer societies: two higher co-operative centres and twelve professional schools. In early 1990, the CCU laid down a policy programme breaking its previous links with the State and taking decisive steps towards restructuring and privatisation. The 10th Congress of the CCU held in Sofia immediately after the political changes (1990) largely concentrated on the ways in which the transformation and privatisation of the consumer co-operative system could be merged. The Resolution of the Congress supported all the democratic changes under way and focused its task on restructuring co-operative societies by reviving the co-operative values and principles: - "the deep processes of restructuring and democratisation of Socialist society and the establishment of a democratic Bulgarian State create the conditions for rapid development of the co-operative movement. Bulgarian co-operators support all democratic changes within society and are resolved to work towards ending the economic crisis"; - "the primary task now is to restructure the co-operative system and revive the co-operative values and principles". The Recommendations of the Congress addressed everyone within the co-operative movement (members, managers, executives, staff and workers), and further highlighted and defined in 17 points the main areas of intervention and objectives of structural, organisational, economic and social changes of the system: 1. Revival of co-operative values and principles and condemnation of previous departures from these due to State interference. In the future, elected bodies and members should be honest and open and devoted to the co-operative cause, and elected bodies should report regularly to the members. Equality of rights and obligations of members should be restored; 2. The vertical structure should be completed from the bottom up-wards according to the needs of the primary societies which, represented by delegates to the union's General Assembly, should be the owners of their union's assets; 3. The role of the CCU should be redefined in the interest of the member-societies; 4. Co-operative property should be guaranteed as one of the forms of private property. New bylaws should be adopted covering co-operative principles, property, shareholding and distribution of profits according to the amount of shares, work undertaken and the volume of transactions. New activities, such as saving and credit, should be undertaken. This should result in a larger system of co-operative banking operations; 5. The relationship between co-operatives and the State should be redefined on the basis of separation and mutual autonomy. Income and profits realised by co-operatives should belong, after payment of taxes, to the co-operatives; 6. A broad programme of social services, including health, housing, sport and recreation, social tourism, safety at work and mutual insurance, should be implemented for the benefit of the members and workers; 7. Modernisation of the information system by microcomputer technology should be implemented, providing for the better information of member societies on topics such as accounting, statistics and co-operative activities; 8. Independence of every co-operative's management from interference by the unions. The management of the member-societies should be ensured by its own elected bodies without inter-ference from the higher level co-operative organisations; 9. A legal framework allowing restructuring should be created; 10. Co-operative activities should be diversified and multiplied through new productive networks; 11. Improvement of services to the members including new areas (supplies, repairs, leasing of equipment, agricultural products) should be sought; 12. Business-oriented organisations should seek to supply better quality goods and services through wholesale trade and retail outlets. Recommendations 13 to 17 refer to various other priorities and areas of restructuring of consumer societies and to joint-ventures, co-operation between co-operatives and collaboration with the ICA. During 1990 and 1991, before the adoption of the Co-operative Law of July 1991 referred to above, changes and improvements were implemented in most areas. The detailed restructuring programme was presented by the CCU at the ICA Seminar on the Co-operative Legislation of Central and Eastern European countries, organised in Prague in December 1990. The Report of the CCU entitled "Bulgarian Co-operation Under the New Conditions" was based on the decisions taken by the 10th Congress of March 1990 and on the progress of restructuring. The positions and proposals of the CCU, among the most complete and well-defined, were afterwards used for the elaboration of the Co-operative Law of 1991 and for the subsequent restructuring of co-operatives. 2.2.2 Co-operative policy and legislation Approximately two years were devoted to consultations and preparatory work for the formulation of an acceptable Governmental policy on the place and role of co-operatives in the system of economic pluralism. A national consensus was reached providing for a new general law applied to all types of co-operatives within the country, both existing and future. In all matters controlled by the Government co-operatives enjoy full and equal rights with other company forms. The Commercial Law also states that co-operatives are traders with rights which are equal to those of the country's other economic organisations. The co-operative organisations (and the Central Co-operative Union) have a lot of official support. The leaders of the Central Co-operative Union are well accepted in all the ministries and departments, and by Members of Parliament in general. Individual ministers and Members of Parliament are helping to further the development of, and support for, the country's co-operative movement, but such support is not properly coordinated. Regarding the essence and orientation of the new policy on co-operatives, the Constitution of July 1991 states beyond any doubt the place and role of co-operatives as part of the free economy: Article 19, paragraph 1: The economy of Bulgaria is based on free economic initiative. Article 19, paragraph 4: The law establishes conditions for the co-operatives and other forms of association of citizens and legal entities with regard to the achievement of economic and social progress. Article 41, paragraph 1: provides for freedom of association. Elaboration of the basic and general co-operative law started in early 1990. The CCU played a leading role in the preparatory work. It sought and received advisory services from the ICA and the Co-operative Branch of the International Labour Office. Several working meetings took place in Sofia and Geneva, which permitted the Drafting Committee to take advantage of the international experience on co-operative policy and legislation. The Draft Law submitted to the Government for consideration by Parliament was the result of a compromise between the views of all parties interested in, and concerned by, the co-operative legislation. The Law adopted on 19 July 1991, is one of the country's first legislative texts providing for the restructuring and the creation of private economic institutions. The Law was largely inspired by and drafted alongside the following considerations and principles agreed by all social partners: - the law should be a legal instrument used for economic and developmental purposes, rather than an administrative document sustaining bureaucratic mechanisms; - it should create a favourable climate for an improved working relationship between co-operatives and the State, excluding any interference by the latter in the day-to-day management of the societies; - it should restore legality and give legal guarantees regarding the rights of citizens to affiliate voluntarily to autonomous co-operatives, democratically managed by their elected members. Co-operative activities, services and profits should benefit their members; - it should spell out the role of the co-operative sector in comparison with the State and private commercial sectors. This principle implies legal and actual separation of co-operatives from the State enterprises, but permits working relations based on contractual agreement. Co-operatives could therefore enjoy rights to private ownership, make their own plans, act according to free market conditions and benefit from the same facilities, guarantees and advantages available to the two other sectors of the economy; - it should refer to co-operative values and principles accepted and respected by co-operative movements in all developed countries, periodically fixed by the ICA's Congresses and presently under review. The Law is composed of 67 Articles, plus clauses regarding additional and transitional provisions. It was slightly amended and completed in 1992. The new law, abrogating the previous law of 1983, is a unified and general text which applies to the constitution and functioning of all types of co-operatives, co-operative enterprises and joint ventures. Its text is published in Annex 3. Express reference to the international co-operative principles as referred to above is made in the Explanatory Note (Expos‚ des Motifs) which accompanied the Draft Law. The law provides for all issues regarding the constitution and functioning of voluntary and democratic co-operative organisations according to practices experienced in West European and North American countries. Some provisions of the law, relating to basic topics, are cited below for ready reference and easy understanding of its orientations and features: Article 1 defines the co-operative societies: "A co-operative shall be a voluntary organisation of physical persons with variable capital and a variable number of members, who shall engage in economic and other activity along the lines of mutual assistance and co-operation in order to meet their interests. A co-operative shall be a corporate entity". Article 2 refers to the promotion of co-operatives by the State: "The State shall assist and promote the co-operatives through tax, lending rate, customs and other economic concessions". Article 3 stipulates that a co-operative society must be founded by a minimum of seven physical persons. According to Article 4, registration is to be made at the district court rather than at the local authorities or councils, as is the case in some other countries of Eastern Europe. Members' rights and obligations are fixed by Articles 10 and 11 on the basis of equality. Employment conditions concerning workers who are not members are regulated by the common law existing in this field. Co-operatives, however, should also adhere to the above legislation by means of an elected committee of social affairs (Article 12). Functions of the General Assembly and elected bodies are stipulated in law (Articles 17 to 30). Article 32 enumerates various sources of capital: members' subscription, share capital, additional capital from the members, business earnings, loans etc. Article 34 relates to limited liability according to the importance of the assets of the co-operative and to the amount of the members' shares. Article 36 imposes the annual formation of legal reserves amounting to at least 20% of the share capital. Statutory reserves can also be decided upon by the General Assembly. Both types of reserve are calculated on the basis of each year's profits. Article 38 authorises co-operatives to organise saving and credit activities for their members. Article 39 allows co-operatives to set-up and run mutual insurance societies for their members. Article 48, paragraph 3 stipulates that in case of liquidation members' shares shall be reimbursed only after all other liabilities have been settled. Although it is not stated that shares would be reimbursed at their nominal value, this should be seen as the only possible response. Article 51 provides for the disposal of the residual assets of the liquidated co-operative. These should be distributed among members in proportion to their shares, unless bylaws prescribe otherwise. Co-operatives are allowed to proceed to the constitution or reconstruction of co-operative enterprises (Articles 55 to 57) the assets and profits of which will be owned by the founder co-operative. Furthermore, co-operatives can constitute inter-co-operative enterprises engaged in activities of common interest to the founder societies (Articles 58 and 59). The vertical structure of the co-operative organisations is foreseen by Articles 60 to 63. By decision of their General Assembly, primary societies can create or join a territorial, sectorial or other union ("alliance"). "Alliances" must consist of at least two primary societies, and can form higher-level unions as well as federations. Higher-level co-operative organisations can create funds designated for the mutual assistance, education and professional training of members and employees. The district court is competent to settle all kind of disputes concerning the functioning and management of a co-operative society. Those entitled to call on the court are members, the body of the elected controllers and the Public Prosecutor. Consequently, a decision of the court can suspend a resolution or action taken by the elected managing committee (Articles 66 and 67). The restructuring of existing co-operatives is dealt with by means of additional and traditional provisions. These provisions settle three major problems concerning the reconstruction, privatisation and smooth functioning of co-operatives: - Firstly, the restitution to existing co-operatives (namely consumer and workers' or producers' societies) of any property confiscated or nationalised after September 1944. The law establishes the conditions for proving previous ownership of such property (additional clause 1). Rules on the implementation of the above principle were stipulated by the Council of Ministers' Ordinance 192 of 1 October 1991, amended and completed in 1993 (the text of Ordinance 192 is attached as Annex 4). The Ordinance, composed of four long articles, laid down all the conditions for proving ownership and settling claims for the restitution of co-operative properties. The authorities competent to decide upon ownership claims are: ministries, municipalities and liquidation councils in the case of cultivated land, and the regional court where the property is situated. Officials and employees who refuse, or fail, to return confiscated properties to co-operatives risk prosecution, whilst the co-operatives affected are entitled to seek compensation for damages caused and profits missed as a result of such administrative failures. - Secondly, the distribution of co-operative property to members. The question regarding the destiny of the property accumulated by apex co-operative organisations during the Socialist regime raised contradictory voices and claims during 1990 and 1991. Because of this, in late 1991 the Ministry of Finances attempted to bring about obligatory redistribution of co-operative property to the physical members. Opposers of this plan were supported by the ICA President and the ILO, and these Governmental proposals failed to be adopted by Parliament. Apex co-operative organisations accepted, however, to proceed with the distribution of the accumulated property according to the provisions of additional clause 2. The CCU distributed all of its property to the unions and primary member-societies in the form of shares. The Central Union of Workers' Production Co-operatives started even distributing such property to its members, to physical persons. The amount of property to be distributed, and all other matters of procedure, are decided upon by the General Assembly of each organisation concerned. - Thirdly, the transformation and restructuring of all co-operatives constituted prior to March 1st, 1992. Transitional clauses 7 to 10 relate to matters regarding new agricultural co-operatives created during recent years. Land owners, even those who were not members of the co-operative, are entitled to receive a share for the years that their land was cultivated by the co-operative. If land remains in the hands of the co-operative, the owners or their heirs are also entitled to receive both dividends on their shares and rent for their land. In addition to the basic Co-operative Law of 1991 and Ordinance 192 of 1991, amended in 1993, two other legislative texts regulate the constitution of co-operatives based on private ownership. These are the Law on Land Reform of 1991 (Article 8) and the Law on Private Banking. The wide legislative policy followed between 1991 and 1993 favours a separate co-operative sector, restructured and privatised. The co-operative sector is also affected by other legislative texts redistributing State and municipal property, returning confiscated properties and enterprises, introducing a commercial code and creating the other financial, economic and social institutions and mechanisms required by a market economy. Therefore, the impact of the new constitutional and legislative framework for co-operatives, both new and in the process of reconstruction, was direct and decisive. From the 1990 - 1991 crisis regarding the identity, nature and role of co-operatives within the conditions of an economy in the process of privatisation, has emerged a new image of co-operative societies. They are seen as part of the economic pluralism and pioneer organisations of the country's privatisation strategy. In comparison with other countries in Central, and particularly Eastern Europe, one could safely say that co-operative legislation in Bulgaria is fair and advantageous. Apex co-operative organisations were restructured rather than dismantled. Furthermore, co-operatives form a separate sector of the economy under privatisation, not only separate from the State sector but also distinct from the private commercial one. Although separate, their status is equal to that of the two other sectors.