(Bloomberg) -- The European Union’s poorest nation is backtracking on nearly 25 years of post-communist transformation by boosting the government’s influence across the economy.

After a devastating financial crisis in the 1990’s, Bulgaria began privatizing state-run companies and inviting competition, a crucial step in integrating with richer western Europe. But now it’s inserting itself into businesses ranging from water-supply management and construction to gambling and media distribution, reshaping industries controlled by some of the country’s richest and most influential people.

A process that began two years ago has gained speed, echoing efforts by governments across Europe that are strengthening their presence in their coronavirus-stricken economies. Prime Minister Boyko Borissov’s government is poised to win initial approval Friday to create an oil company that will compete with market leader Lukoil PJSC. A final vote in parliament is expected next week.

“The state will intervene wherever it’s necessary, or there where the market isn’t working,” Finance Minister Vladislav Goranov said last month. “The liberal model should probably be looked at with caution at the time of crisis.”

The former communist country joined the European Union in 2007 after a hyperinflation crisis a decade earlier forced it to speed up privatizations under a deal with the International Monetary Fund. The nation of 7 million remains the bloc’s poorest country, with living standards of about half the EU average, and the European Commission forecasts the economy will contract 7.2% this year.

Borissov’s Push

Borissov, a former bodyguard to Bulgaria’s last communist dictator, has ruled on and off for the past 11 years. His third government has launched large-scale in infrastructure and energy projects, including restarting a nuclear plant tender and clinching a pipeline bringing Russian gas from Turkey to central Europe.

Last year, following a water supply crisis, the government created a holding company to control water management firms. It also gave a state road-maintenance company 2.3 billion lev ($1.3 million) in highway-building contracts without a tender.

In May, it announced it would create a hotel-booking platform to support local tourism and assigned national media distribution to the postal service for 10 years.

“In today’s world, there is a case for improving the cost-quality trade off by building scale,” said Raffaella Tenconi, chief economist at ADA Economics Ltd. in London. “But the quality of the outcome depends on the quality of the leadership. In the case of Bulgaria, I would err on being cautiously skeptical.”

In Poland, the nationalist government has launched a “Repolonization” plan to buy out foreign companies, including banks and utilities, and replace them with locally owned, preferably state-controlled investors.

Prime Minister Viktor Orban has also transformed Hungary’s economy by boosting the state’s role in banking and energy at the expense of foreign owners. The government then sold off some assets to allies, whose businesses are showered with state contracts and EU funding.

State Capitalism

In one of Bulgaria’s biggest shakeups, the state-owned National Sports Totalizator took full control in January over all lottery business, which was previously run by Vasil Bozhkov.

Considered the country’s richest man, Bozhkov is facing 18 charges ranging from attempted bribery to murder-for-hire, and is now in self-imposed exile in Dubai.

He denies wrongdoing. But the case has raised speculation that Borissov’s government is moving to shift influence away from figures who have long enjoyed dominanceshift influence away from some figures to the benefit of others.

“Bulgaria has been developing a kind of state capitalism -- institutions are being used as a tool to redistribute market influence between players close to the government,” said Martin Vladimirov, an economic analyst at the Sofia-based Center for the Study of Democracy.

‘Realistically Achieved Value’

The government’s actions in the fuel sector are a case in point, as they create direct competition with Lukoil. Bulgaria’s biggest fuel retailer and storage supplier, Lukoil has a network of more than 220 gas stations and a 400-km oil pipeline. Its Burgas oil refinery on the Black Sea is the largest in the Balkans.

Last month, Borissov’s ruling coalition pushed through a customs-related law tightening control over Lukoil’s local unit, which said it may need to halt some operations over the new requirements. Lukoil declined to respond to a request for comment.

Now the State Oil Company is set to use government-owned bunkers to store other companies’ fuel and build 100 gas stations to offer “the lowest prices” to consumers.

“That’s the latest step that the state is taking,” Economy Minister Emil Karanikolov said in a May 28 television interview. “The state, with its 100 gas stations, won’t be the biggest or a main player, but the people will be able to see a realistically achieved value.”

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