What is your general feel for the current business climate in Bulgaria and are there any particular types of businesses you are more interested in attracting than others?
Having now firmly established itself as a working market economy, Bulgaria is keen to attract Foreign Direct Investment (FDI), as well as to promote the investment and re-investment of local businesses. Why choose Bulgaria? In a word, opportunity. Bulgaria’s strong economic performance over the past four years has meant the economy ‘bottoming out’ and now entering a growth phase in the wake of full EU membership in 2007. The country’s monetary and fiscal policy, macroeconomic and political stability, functioning free-market economy, privatised financial sector, favourable tax and labour rates, and flexible labour laws have all contributed to a visibly improved business climate. As a result, the international credit rating agencies are continually upgrading Bulgaria’s ratings, the most recent increase made by Fitch to an investment grade BBB- with a positive outlook.
There are a number of key industries where the Bulgarian Government is trying to attract FDI in order to stimulate economic growth through the transfer of capital and know how, the leading ones include:
Information Technologies & Telecommunications (ICT) – Bulgaria has always prided itself as the high-tech centre in Eastern Europe, and has now become a creative base for investors looking for the hard-to-find combination of technical expertise, innovation, language and project management skills.
Tourism – In 2003, tourist arrivals increased by 17.9% year-on-year to more than 3.6 million, some 190,000 of which coming from the UK. Some tourism facts:
- Bulgaria’s Black Sea coast averages nearly 300 days of annual sunshine
- Bulgaria has over 600 hot, warm, and cold mineral springs offering a wide variety of curative properties. The spas centres offer state-of-the-art therapies, curative mud, acupuncture, slimming procedures, and balneo-cosmetics.
- The ski resourts at Bansko, Borovets and Pamporovo offer some of Europe’s best skiing and a season lasting from Christmas until Easter. During summer there is the freshness and tranquillity of the mountain ranges, with endless open air activities to be explored.
Agriculture & Food Processing – Bulgaria’s traditional approach to agriculture, chemically-free land, proximity to markets both to the East and West, coupled with a consumer tradition for organically-grown foods, all suggest a major business opportunity for the willing investor. The EU’s Special Accession Programme for Agricultural and Rural Development (SAPARD) provides a 50% investment subsidy for qualified investment projects in this sector.
Telecommunications – In the period up to 2007 there is going to be major investment in this sector, including the completion of a nationwide fibre-optic network, broadband internet in all major towns, and the setting up of a third GSM mobile network giving nationwide mobile phone cover.
Transport – A modern air terminal and new runway are currently under construction at Sofia International Airport, while the two Black Sea airports at Varna and Bourgas are to undergo major upgrading as a result of a long-term business arrangement with foreign investors. Traditional road links to neighbouring countries and to Western Europe are to be further strengthened with the completion of major motorway links both in the north and south of the country.
What is the general feeling in Bulgaria about so many foreigners buying property there for investment purposes. Is this generally welcomed?
The purchase of property by foreign nationals is an inevitable part of the opening up of the country and part of the European integration process. Bulgarians are a traditionally hospitable people, and the society is quite tolerant in terms of nationality, religion, and political orientation. Foreigners have been quick to adapt to local culture and a generally easy-going lifestyle.
We hear a lot about the so called Mafia. Is a foreigner setting up a business in Bulgaria likely to be challenged by them or left alone?
The so-called “Mafia” issue is quite prominent in the press, which sometimes gives the wrong impression. The fact is that the situation is no different than in countries like Italy or Spain, criminal groups do operate, but the government takes effective measures to root them out by severing their sources of illegal finance. In this respect there is excellent cooperation between the Bulgarian police and Interpol, Europol, as well as the national criminal services of all EU member states, and the USA.
We also hear a lot about corruption, what advice can you give about this and how it may affect anyone wishing to invest in Bulgaria?
Bulgaria has an official “zero-tolerance” approach to corruption, but the reality is that in a country where the average monthly salary is around Euro 150 there are bound to be instances of corruption, particularly among the low-level bureaucracy. The best advice is not to give in or to encourage corruption demands, and to report any such cases as they occur.
What specific agreements are in place between the UK and Bulgaria that one should be aware of if wishing to set up a business, trade with or invest in Bulgaria?
The economic relations between Bulgaria and the United Kingdom are based on three main legal foundations:
Ø European Union Association Agreement (1995) – the legal basis for the harmonization of Bulgaria’s legislation with that of the EU.
Ø Double Taxation Avoidance Agreement (1987) – guarantees that income taxed in one of the countries would not be taxed again in the other.
Ø Investment Protection and Promotion Agreement (1997) – guarantees that investment originating from one of the two countries and made in the other will receive the latter’s full protection against all type of future political risk.
Where can the most comprehensive information about setting up a business or investing in Bulgaria be found?
In order to offer maximum assistance to both domestic and foreign investors, the government has set-up a dedicated agency, formerly known as the Bulgarian Foreign Investment Agency, recently renamed to InvestBulgaria Agency (IBA).
Under new legislation that was adopted in August 2004, IBA will be able to serve as a mediator between the administrative authorities and the companies willing to start investment projects in the country. The agency will also ensure equal terms for foreign and domestic investors.
Investors will be able to apply to the agency to provide them with the permits and licenses required for launching a project in the country. This will simplify the process and reduce the time needed.
The agency will assist investment projects in three separate classes according to their size: I Class investments are over 100 mln Bulgarian leva, ~50 mln EURO); II Class investments worth between 50 and 100 mln Bulgarian leva and III Class investments worth between 10 and 50 mln Bulgarian leva. With respect to the class (size) of the investment project, the company will be entitled to different package of services, provided by the Agency.
Under the new Law on investment promotion as of August 2004 the Bulgarian Investment Agency provides informational services and individual administrative services.
Services to investors are performed after the issuance of a certificate for investment category by the Agency or other selected administrative body at the investor’s request in accordance to the amount of the investments.
Class 3 Investments
· Pre-developed information materials
· Information about potential local partners
· Information about all administrative procedures concerning the implementation of the investment project
Class 2 Investments
· Individual administrative servicing with respect to all central and regional bodies of the Executive. Investors will have the opportunity to authorize officials of the Agency to obtain from the corresponding competent bodies on investors’ behalf and for investors’ account any documents for implementation of the corresponding investment project as may be required under the existing legislation.
Class 1 Investments
· Individual information
· Consulting and administrative services
· Infrastructure building assistance - Where the technical infrastructure networks and facilities of the transport, water- supply, sewerage, communication, and other systems facilities of the transport, water- supply, sewerage, communication, and other systems are public property, their construction will be financed from the state budget, or by the corresponding municipality on a decision by the Municipal Council in all other cases they shall be for account of the managing operation company.
At the request of the Class 1 investor the Agency may propose to the corresponding authorities to transfer ownership rights or establish a limited ownership right over real estate (private, state or municipal property) without a tender, free of charge or on preferential prices.
The latest details on the investment possibilities can be found on IBA’s Web site, www.investbg.government.bg.
If there is a change in Government, which is always possible, would this be likely to affect the currently increasingly favourable outlook to attracting foreign investment?
Bulgaria will hold general parliamentary election in July 2005, and expectations are that the next Government will be set up by a broad coalition of parties in the centre of the political spectrum. Irrespective of the actual percentages, however, it should be clear that the country has definite foreign policy goals, which include its commitments as a full member of NATO, and the completion of its EU negotiations and becoming a full member of the union in 2007. Foreign investors can be assured that these commitments have been approved by all major political parties, so that any future Bulgarian government will keep the country on course to becoming an integral part of a united Europe.