Why is it worth investing in Bulgaria?

Radio Bulgaria website, Written by Milka Dimitrova, 4th April 2006

Over the recent couple of years Bulgaria has become a magnet for foreign investors. In fact there are two countries attracting the financial currents flowing to the Balkans – Bulgaria and Romania. Investors are reassured by both countries’ NATO membership as well as by their forthcoming EU accession. Foreign businesses find Bulgaria attractive for its macroeconomic stability since the introduction of the currency board arrangement in 1999 with the Bulgarian Lev pegged to the Euro; the predictable business environment, stable banking system and the lowest taxation levels compared to Europe’s market economies.

To this bunch of assets one should add the moderate continental climate and the country’s beautiful and diverse nature. Anybody with investor’s interest in Bulgaria, has access to comprehensive information on the website of the IvestBulgaria Agency. It reads that Bulgaria boasts of highly skilled multilingual workforce at Europe’s most competitive wages. Besides, EU accession on 1 January 2007 will give investors access to the European markets with 500 M consumers. Low production costs and a comparatively low corporate tax are among other local strengths.
The state provides substantial support to the major foreign investors (with investments exceeding BGN 70 M, or EUR 35 M) through building adjacent road and communications infrastructure as well as through providing free terrains for construction of production facilities.

Over the recent years, Bulgaria’s investment legislation has been tangibly liberalized. Any corporate body, including a foreign company, is free to buy land. Foreign investments for the last 15 years have reached US $ 15 billion. For 2005 alone they amounted to some 2 billion. Largest investors come from EU – Germany, Austria, Greece and Italy. The USA has come 5th. Our taxation system is fairly liberal – corporate tax is 15%. Equipment imports are duty free when investment exceeds EUR 5 million. There is still room for improvement though. Entrepreneurs have pressed for relieving reinvested profit from tax. The key spheres of Bulgarian economy attractive for foreign investor business include power generation, light industry, IT and the infrastructure.

In a study carried out by Bank Austria Creditanstalt (BA-CA) owner of the Bulgarian banks HVB Bank Biochim and Hebros Bank has found that investor interest in Bulgaria has not subsided. The study suggests that in 2006 the country will attract foreign direct investments worth 2.2 billion euro. A similar volume is forecast for 2007. The bank’s study however indicates that despite Bulgaria’s satisfactory macroeconomic indices the deficit on the current account generated by the worrying imbalance between import and export is a major challenge to the country. For the time being, it poses no great risk, because it is offset by the large volume of foreign investments, as well as due to the Central Bank’s measures to curb consumer lending.

A study by Deloitte Bulgaria commissioned by the Ministry of Economy and Energy, identifies several branches with a good potential for successful investments. These include outsourcing, IT and communications, machine-building and electronics. Deloitte experts however also point to the difficulties which foreign companies are faced with, looking for skilled personnel. This means that a major reform of the education system is a must.

Europe’s largest supermarket chains such as the German Metro and Hit and the Austrian Billa have been operating in Bulgaria for years. Blue chips Hewlett Packard and IBM have set up their regional centers here. Italian textile concern Miroglio has privatized a few Bulgarian textile factories. The German construction group Lindner built Business Park Sofia and earned First Class Investor Certificate. In 2005 one of France’s largest spare part makers Montupet arrived to Bulgaria and started construction of a plant for automobile components in the Danubean City of Ruse. Montupet plans to invest some EUR 40 million in it. One of the largest investments in 2005 was the increase in the capital of M Tel mobile operator, as it was acquired by Telecom Austria. Key investors include also Turkish glass making giant Sisecam, and Kremikovtsi metallurgical works bought by the Indian Mittal family. Their Global Steel Holding is Kremikovtsi’s new owner.

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