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ACTS publishes opinions with a wide range of perspectives to encourage constructive debate.
“Understand, things are tragic with us.” Martin Mihailov is the manager of two large nightclubs in Sofia, which have stopped all activities due to the coronavirus epidemic. Before the State Gazette, he described the situation in the industry.
SG: Mr. Mihailov, the coronavirus pandemic forced you to stop the work of the two establishments you manage. How did this affect you? Did you have to fire some of the staff, how do you handle the rents?
Mihailov: Organizers and sites in the field of club life and concert activities were the first to stop working. It seems that the opening method will be a mirror: we will be the last to renew it. We are among those with a clear awareness that this is for the good of all. We expected the same attitude and understanding from the institutions to get out of the difficult situation, but unfortunately, so far we have not heard any encouraging words.
And the reality looks like this: we do not carry out any commercial activity. 28 of the 30 employees in the two clubs I manage have unpaid leave, and it is highly likely that we will move to full layoffs in the next two weeks. Regarding rents: In both places we are fortunate to work with extremely reasonable owners who are fully human at a difficult time and obviously trust us as loyal business partners. However, many colleagues do not enjoy such favorable conditions.
No one in the chain will last more than a few months. Especially without state intervention, which should protect entrepreneurs and help them “freeze” the balance at least around zero. And most importantly: help them keep their jobs.
SG: Did you take advantage of any of the measures that the state has adopted in support of companies: 60/40, interest-free loan?
Mikhailov: No. From government statements, it became clear that measure 60/40 does not apply to companies that have completely ceased operations in the restaurant and entertainment business. There is no way to generate 40% of expenses at 0% of income. Statistics show that the proportion of beneficiaries is insignificant. According to the latest data from a week ago and official statements, it is clear that as of April 21, fewer than 8,000 companies have submitted applications. How much they pass is another question.
And one more thing about the 60/40 measure: the most important thing is to activate it once the sites are open. And wait for at least four to six months, even up to a year, for it to be effectively implemented as an anti-crisis measure. Because the beginning will be extremely difficult.
Regarding loans: I don’t know a person who has personally benefited, neither a business owner nor an employee. After public statements by the Minister of Finance, several banks told me that they had no active offers for such programs at that time, at the beginning of the fourth week of April. This process may already be underway, but we have lost all interest.
Last but not least, the application requirements are unbearable for small and medium businesses. The main thing is related to the indebtedness of the companies with the state. It is clear that such indebtedness is not recommended, but it is a fact. The problem is that small and medium-sized companies have suffocated in recent years without a crisis. And today we are talking about the survival of the business and, consequently, the physical survival of thousands of employees and their families.
Understanding, in a small business, things are tragic. We work with enthusiasm and high expectations. You earn money this month and it has been distributed for a long time. If it shows good results, it is time for growth. An entrepreneur with a small neighborhood store, who earned BGN 5,000 this month, is unlikely to spend it in Maybach. Most likely, it will reinvest. Over time, if you continue to be successful, you will want to expand. Isn’t this the meaning of entrepreneurship and the economy in general? I have not heard of savings that boost the economy. And I don’t accept being accused of not having it. No one in the industry intends to evade their obligations. But there is a good chance that he will go bankrupt before that. Beware of entrepreneurs: they create jobs.
SG: What do you think the state should do to save its livelihoods and jobs?
Mihailov: It is commented in our circles that a work measure, especially for sites that fall under the “prohibited” seal, is to refund a percentage of the total taxes paid for 2019, divided into monthly installments. This is logical and fair, since it is based on real numbers, real amounts received by the state treasury. Maintaining 60/40 in open business is imperative, and for the closed business period it is appropriate to introduce another popular measure, which is discussed in Europe: between 60/0 and 85/0 per month. The latter should apply to sites that are closed by order of 03/13/2020. Because if we send our employees to the Labor Office, they won’t “cost” cheaper to the state.
SG: How do you evaluate the compromise recently reached between the state and industry representatives?
Mihailov: I wouldn’t call it a compromise. NIGHT and the Council of Ministers have decided that it is possible to start with the gradual opening of restaurants. First and foremost, of course, is human health. But there must be income in the treasury. The Bulgarian is not financially prepared for months of isolation.
I am in favor of social isolation, but for a time. It helps to postpone the dire consequences until we reorganize our organization at any level, especially in the healthcare field. I see my personal social isolation and the risk of ending the business that I have tried to develop in the last 20 years as a “loan on time”, a trustworthy credit for specialists in Bulgaria to use this period to make up for lost time. I do not criticize anyone for the latter. “The whole world has underestimated the situation. The important thing is how we are going to rise. I cannot believe that the government of a country and the entrepreneurs who are the engine of the economy cannot play on one team.”
Bulgaria
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