41
ENTREPRENEURSHIP IN THE TRANSITION TOWARDS MARKET ECONOMY
Two questions remain open in connec-
tion with social insurance. The first con-
cerns the behaviour of entrepreneurs as
employers that have to insure their employ-
ees. The second pertains to the self-insur-
ing behaviour of entrepreneurs.
Having once overcome the psychologi-
cal barrier of hiring their own workers,
petty owners quite often do not sign labour
contracts with them. They sign personal ser-
vices contracts or work on the basis of oral
agreements. In this way the employer saves
himself the security payments, or at least
the unemployment and vocational training
instalments. The workers agree to this be-
cause of the unfavourable labour market
situation, and because of inadequate insur-
ance culture. Often entrepreneurs shun
social insurance for their own selves and
relatives. Irrespective of the size of remu-
neration or income, the common practice
is insurance based on the minimum work-
ing salary.
Indicative of the scope of this beha-
viour of private entrepreneurs is the fact
that the hired labour, employers and self-
employed total more than one-third of all
those employed, while this sectors contri-
bution to revenues
of the State Social Se-
curity Fund accounts for a mere 5-6 per
cent. One of the reasons for this phenom-
enon is rooted in the nature of Bulgarias
social security system inherited from the
former regime. It was adjusted to an
economy characterized by a monopoly of
the state ownership and full employment.
That is why private entrepreneurs, the self-
employed and farmers avoid any contacts
with the social security system and bear the
social risk themselves. Some join the state
social security system only in order to gain
some benefits through sham labour con-
tracts for their relatives that face certain
social risk. The lack of an adequate health
insurance system poses many questions as
to the health care for entrepreneurs and
petty owners.
In order to adapt itself to the changed
employment structure and to the emerging
new forms of economic activity, the social
security system in Bulgaria needs deep-go-
ing transformations. In view of boosting the
development of entrepreneurship and its
participation in the insurance system, these
transformations should be as follows:
- closer link between the size of
instalments and the size of indemnities for
short- and long-term insurance;
- participation of those insured by
making them pay part of the insurance
instalments differentiated according to
types of insurance;
- stricter criteria for availability of dif-
ferent payments from the social security
system;
- a transition from an expense-cover-
ing to a capital-forming social security sys-
tem.
The further development of entrepre-
neurship and small business as a machine
for new working places also requires alle-
viating regimes for insurance and self-in-
surance in this sector. The payment of all
or part the security instalments by another
source at the initial stage of entrepreneur-
ship reduces labour expenses other than
salaries and promotes the development of
this sector. Such stimulating schemes lead
to employment increase and help legalize
the activity of many small companies and
self-employed people who now form the
shadow economy.
3.7. Economic activity and crime
The transition towards market eco-
nomy and private entrepreneurship has
some criminogenic components that assist
the growth of general, and especially eco-
nomic, crime. The economic crimes de-
tected in 1995 number 9,956, or by 5.4 per
cent more than those in 1994. The damage
they incurred are to the tune of 18,508 mil-
lion levs, or by 54 per cent more as com-
pared with 1994. The growth rate of dam-
ages outstrips that of inflation. Yet detected
The profound reform
in the social insurance
system is unavoidable
HUMAN DEVELOPMENT REPORT ! BULGARIA 1996
42
and registered crimes are only the tip of
the iceberg. Public opinion indicates the
importance of this problem and shows a
stable high sensitivity towards it.
The white-collar crime is growing -
the number of well educated and high-rank-
ing people that commit economic crimes
has been increasing. Also growing is the
gap between the educational status of eco-
nomic and traditional law offenders. In
1995 documentary crimes, typical of white-
collar workers, accounted for the greatest
share of economic crimes (25% of all es-
tablished violations).
Among other offences, the public opin-
ion ranks corruption of state employees as
the gravest problem - 29.3 per cent of the
population think so. Bribes are common
occurrence in contacts between citizens and
officials. Yet they are hard to detect and
prove, and in practice remain unsanctioned.
The 71 proven bribery cases in 1995 indi-
cate the impotence of specialized bodies
to combat them. The bribery cases sanc-
tioned by court are ten times less than those
detected.
In the course of hidden privatization,
funds from the state sector are shifted into
the private sector. State capital is leaking
out through mixed companies. Managers
of state enterprises or their kin develop a
similar business of their own, using the most
profitable technological solutions and busi-
ness contacts of the state enterprises, their
material and financial resources. State com-
panies are stalked at their entrance and exit
by private companies which do not take
production risks and do not invest in pro-
duction, but collect the production profits.
The losses are covered by society.
Crimes accompany the development
of private business. The latter was under-
taken not only by enterprising and capable
people, but also by such whose dirty
money has come from profiteering, traf-
ficking, and other criminal offences. Oth-
ers have engaged in small business with the
idea that this is a possibility for becoming
rich quickly by semi-legal and illegal means.
Part of the private business became
both an object and a subject of criminal
action. Citizens, state enterprises, private
companies have suffered various frauds
perpetrated by other private companies.
The financial
pyramids that have emitted
unbacked securities and embezzled billions
Assessment of basic types of economic crime (very grave
problem, national sample, June 1995, in %)
Figure 3.2.
Attitudes to complying with law
(national sample, June 1995, in %)
Violations against the
state property are
frequent
Figure 3.3.