Bulgaria licenses first grain warehouse in new receipts system

by Teresa Acklin
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By Rozalia Hristova

   The first officially licensed grain warehouse is now operating in Bulgaria. Zurnoizkupuvane STH, a 20,000-tonne warehouse located in the town of Turgovishte in the main grain region of Bulgaria, received its license June 23 at a ceremony attended by the deputy director of the Bulgarian National Grain Service, representatives of USAID and ACDI/VOCA and nearly 60 local cooperatives and independent grain producers.

   At the ceremony, Todor Mitsev, president of Zurnoizkupuvane STH, promised to arrange for transportation of grain to his warehouse during the first month of the harvest for all producers who use the warehouse receipts system.

   ACDI/VOCA Bulgaria, a non-profit organization funded by USAID, has been an active participant in the implementation of a warehouse receipts system in Bulgaria (see World Grain, April 1999, Page 6). In February 1998, ACDI/VOCA teamed with the U.S. Department of Agriculture to assist the Bulgarian Ministry of Agriculture, Forestry and Agrarian Reform in drafting the country's grain law. The law was passed in Parliament on July 29, 1998.

   Through the summer of 1998, as a part of the Grain Industry Development Program (GIDP), ACDI/VOCA launched a demonstration and education project. Three warehouses were selected to participate in the pilot project, and as a result four loans totaling U.S.$25,000 were given to producers. ACDI/VOCA and U.S.D.A. cooperated in training warehouse examiners.

   In January, the pilot project was officially completed with an evaluation conference. At that conference, the Ministry of Agriculture identified a need for more training and education of the potential users of the warehouse receipts system in Bulgaria. ACDI/VOCA was asked to organize nine awareness seminars to be held in Bulgaria's main grain producing areas.

   ACDI/VOCA consultants and two U.S. experts — Si Matthies, a former General Mills executive and senior adviser for the GIDP program, and Erwin Schrag Jr., an insurance specialist and former executive with Aon Risk Services, Inc., Kansas City, Missouri, U.S. — have been working with the Bulgarian Ministry of Agriculture to develop a performance guarantee for the public warehouses.

   “For a very short time, less than a year and a half, the program managed to create an appropriate environment for the implementation of the warehouse receipts system,” said Krassimir Kiriakov, country representative for ACDI/VOCA and GIDP manager. “The biggest success is that we already have a licensed public warehouse in real, not demonstration, conditions. Now, with the first step accomplished, we expect the next licensed facilities.”

   Prior to licensing, the Zurnoizkupuvane warehouse received ACDI/VOCA technical assistance. Donald Graham, a U.S. volunteer and former warehouse manager in Texas, spent several days at the company, recommending ways to improve management practices and providing information for new warehouse equipment.

   Mr. Mitsev, the president of the warehouse, said there were three reasons the company applied for a license.

   “First, the benefit for the company is that, thanks to the warehouse receipts system, we will not have to apply for bank credits, which is a complex and continuous process,” he said. “Second, the implementation of the system will substantially decrease the current chaos in the grain market. And last, but not least, the license is a guarantee for the quality of the stored grain.”

   Mr. Mitsev said all public warehouses that want to participate in the grain business in Bulgaria should be licensed.

    “This will make the market transparent and limit the illegal operations of some grain storage facilities,” he said.

   He is optimistic about the future of the warehouse receipts system in Bulgaria, and is confident that the license for his facility will evoke enough trust in grain producers to fill at least half of the warehouse's capacity with grain used as a collateral for receiving bank credits. Mr. Mitsev said he also believes that the system will secure the quality of the grain processed in his own mill, which is located in a non-grain producing area.

   “We should satisfy the increasing demand of the Bulgarian market for high-quality products.” Mr. Mitsev added. “Moreover, if we want to market our grain production internationally, we should strive for higher quality standards.”

   Rozalia Hristova is a journalism and business administration student at the American University in Bulgaria, serving a summer internship at the ACDI/VOCA office in Bulgaria.