SENIOR EXECUTIVES OF companies that have taken the plunge and invested in Bulgaria talk enthusiastically about their experience. They cite the stable political and economic climate, the high qualifications and low cost of managers and staff and the ready access to EU and Balkan markets as reasons for their success.
These investors range from large western banks, such as UniCredito Italiano, to Greek cement maker Titan, which has invested e40 million in a plant. IT company Hewlett-Packard has a regional business centre in Sofia and two mobile phone companies, Mobiltel and Global, are owned by Austrian and Greek firms.
An improving environment “Bulgaria is changing from a country in which is difficult to do business to one which is very predictable. This is particularly so for large European companies because the government knows it needs them and offers strong support,” says Kirko Kirkov, president of the Bulgarian International Business Association.
Despite these successes, Bulgaria has failed to attract the level of foreign direct investment needed to provide longer-term economic prosperity. Having totalled around $500 million a year in the late 1990s, the combination of greenfield investment, sales of state industries to foreign owners, internal credits and reinvested profits rose to $1 billion in 2000 and $813 million in 2001 before slumping to $479 million last year.
It has not been easy to sell a country that has a small local market and, despite its own political stability, is located in a highly volatile part of the world. Nor has Bulgaria been helped by recession in the US and the EU, which has forced foreign companies to delay investment decisions.
Pavel Ezekiev, chairman of the Foreign Investment Agency, concedes that last year’s FDI figures were disappointing but insists that this year the flows will be much better. “Last year was the first one in which greenfield investment has declined but in the first quarter of 2003 the figures are up by nearly 50%,” he says.
Ezekiev is particularly pleased that it has been possible to attract leading global companies such as Liebherr, Enel and American Standard. “The perception of Bulgaria is changing,” he says. There are also reports in Sofia that these companies may be joined by Siemens and BAE Systems. And Bulgaria has been winning some economic battles with its neighbours. “We have won the competition with Romania to attract glass manufacturing company Sisecam, which will now make a $150 million investment. We did this because we were able to mobilize our institutions to give them the sort of package that they needed,” says Ezekiev.
The government has intensified its marketing campaign. “I see potential in attracting export-oriented firms. They can establish companies offering customer-
| Foreign direct investment ($mn) |
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| Source: Bulgarian Ministry of Economy |
oriented services at a cost that is not only lower than in western Europe but in countries such as Hungary,” says Ezekiev. In particular, he is keen to attract software and biotechnology firms, companies focusing on renewable energy and those involved in industrial manufacturing.
Tourism is also regarded as an area where Bulgaria can take what Ezekiev says is “a substantial competitive advantage.” Nearly 3 million people visited the country last year, generating $1.34 billion revenue.
Ezekiev believes investors will be attracted by the liberalized access to an expanded market of consumers including the EU and Balkans, as well as future membership of the EU and Nato.
He also points out that managers and staff are extremely well educated and that the cost of doing business is among the lowest in Europe – the average monthly salary is e144.
“We also have a rapidly improving business climate,” says Ezekiev. “Taxes are among the lowest in Europe and there has been a significant drive to reduce regulatory obstacles and start-up costs.”
Among the regulatory improvements is a simplified licensing, permit and registration regime and Ezekiev is planning to introduce a one-stop shop that will serve both local and international investors.
One of the most effective innovations has been the appointment of UK company Crown Agents to operate the customs regulations. This has resulted, say business executives, in a more efficient service and an increase in the amount of customs duties collected.
Another initiative is the concept of “sent approval”. If a company has not received a response from the licensing authorities within a month, it can open for business and the onus will be on the government organization to check compliance.
