Bulgaria Table of Contents
Initiated in 1981, the next program of reforms was designated the New Economic Madel (NEM). This program involved both agricultural complexes and industrial enterprises. Goals of the NEM included updating the technical infrastructure of Bulgarian industry and improving the quality of Bulgarian exports to raise hard-currency income. Centralized planning now was relegated to setting gross profits and overseeing the national scientific program. In 1978-79 and 1982-83, the NEM's principal instruments were financial incentives and accounting regulations aimed at all levels of management, but especially at the smallest unit of labor, the brigade. Brigades, each containing thirty to fifty workers, now would set labor and material input levels and dispose of finished products. In an effort to remedy the chronic distribution problems of the central economy, higher economic institutions became financially accountable for damage inflicted by their decisions on subordinate levels.
Several important initiatives were launched in 1978. The longstanding limits on enterprise investment were lifted. In their place, a new investment plan was based on the enterprises' contractual obligations and credits with the BNB. The bank monitored the cash balance of enterprise contracts with customers and suppliers, granting credits only when required. Three separate reinvestment funds received first claim on the net income of the enterprise. Although budgetary subsidies were not eliminated, the NEM directives assigned responsibility for financial losses to all levels of enterprises. Self-financing became the watchword for all economic organizations.
Another major change eliminated the automatic first claim of salaries and wages on gross enterprise income. This meant that wages could rise only after an increase in labor productivity, and then only by 50 percent of that increase. Moreover, management salaries could be cut by as much as 20 percent if the complex or enterprise failed to meet its norms for production and productivity. The formula for sanctions against management salaries changed several times. Finally, binding performance criteria were limited to five financial indicators for agricultural complexes and industrial associations, and to four for individual enterprises. Profit criteria were set only for the complexes or associations. Complexes or associations were given explicit freedom to sign their own contracts with suppliers and customers at home and abroad.
The BNB was granted some flexibility in restricting its terms of lending and in charging interest rates above the nominal 2 percent. These measures were designed to bestow greater rewards for efficiency and to reduce the number of unfinished or unprofitable new projects. The latter accounted for 57 percent of all Bulgarian investment as late as 1976. A provision for joint ventures with foreign firms met little enthusiasm from abroad.
Data as of June 1992