What activities is InvestBulgaria Agency (IBA) currently involved in to attract foreign investments?
STEFANOV: As an investment promotion agency we have two main roles. The first one is to promote Bulgaria and the second one is to act as an intermediary between investors and other government and state institutions. In our marketing capacity, we identify potential investors in different sectors and provide them with information of different metrics and regulations. We also try to identify partners, so that we can put potential investors in touch with different companies in their area of interest. Last, but not least, we are assisting the government to allocate subsidies. Foreign companies setting up companies in Bulgaria are eligible for monetary support either through our national budget or through some different sources through the European Union. In our administrative capacity, we assist companies with their day-to-day issues, some of which may involve the obtaining of different permits from government and state institutions and establishing communication channels between them and the ministries, agencies, and so forth.
What are your projections for the FDI flow into Bulgaria for 2012?
STEFANOV: In the years before the financial crisis, Bulgaria received large amounts of FDI. For example, between 2005 and 2009, Bulgaria received around €27bn of FDI. After the financial crisis, the FDI has declined, especially in areas such as real estate and finance. What has been consistent over the last 2 or 3 years are the investments in manufacturing, telecommunications, and energy. In my opinion, the investments in these sectors will be around their current volumes of €2bn. Investments in areas such as finance or trades are more dependent on what is happening outside of the country, thus it is hard to predict these numbers.
Who are your prime collaborators outside the EU?
STEFANOV: Outside of the EU, our main trading partners are Turkey, Russia, and the USA. In the last 3 years our trade with China has improved dramatically. We have seen increases in both imports and exports. As for one of our main collaborators, Turkey, I believe this is actually one of the countries with whom our trade will continue to grow. Not only we are neighboring countries, but also their economy is rapidly developing. Russia has traditionally been a strong partner to Bulgaria and lots of Bulgarian exports have been going that way for a long time. We are very interested in increasing our trade portfolio with the Middle East. It is still an area where we do not export or import as much as we could. It is one of the geographic regions which we are very keen on developing. With regards to investments, rather than trade, again the main partners of Bulgaria are the countries of the European Union. China has increased its investment capital in Bulgaria, but never the less, the USA remains one of the largest investors in Bulgaria.
In your opinion, what are the most interesting projects currently taking places in Bulgaria?
STEFANOV: I think the two main areas of interest to investors, especially from the Middle East, are agriculture and medical tourism. With regards to agriculture, Bulgaria has been famous for organic farming and the quality of the land. Our country is not large when it comes to land area, but at the same time it has one of the most fertile soils in Europe. Currently, some of the largest international food producers have already settled in Bulgaria. We have companies such as Kraft and Nestle. But never the less this is an area with great potential. The second area of interest to investors is medical tourism. One of the most interesting things about Bulgaria is that it has the second largest number of mineral springs in Europe, after Iceland. In fact, our capital, Sofia, was founded 2500 years ago by the Romans because of the mineral springs located there. In general, as a government, what we are trying to do is to offer incentives to investors in those areas. Companies, which are interested in setting up balneology centers and spas, can receive quite substantial government support.
What are some of the challenges facing foreign investors in Bulgaria?
STEFANOV: Bulgaria is still in transition from a centrally planned economy to a market one. We still have a significant amount of government institutions, meaning we still have to cooperate with high bureaucracy. I strongly believe that we have made quite a lot of progress with setting up new legislation polices and new procedures to ease the way of doing business in Bulgaria. One of our biggest challenges is to educate investors on our potential opportunities. Given our small size and location, potential investors are not even aware about what we have to offer. Another interesting issue is that investors normally will regard Central and Eastern Europe as a unified region with similar laws and regulations, taxes, and costs. In many cases those are different. This is why investors who have been thinking about starting a business in Central and Eastern Europe are surprised to find out that Bulgaria offers costs of doing business which are much more favorable than those in other countries in the region. One of the challenges in Bulgaria is the quality of physical infrastructure. The current government is very keen on increasing the length of highways and generally improving the road system. Bulgaria benefited quite a lot from joining the European Union in 2007. Currently, many of the infrastructure projects in Bulgaria are being developed with funds from the European Union, which helps to improve the physical infrastructure quite rapidly. However, there is still more to be desired.
In the years before the financial crisis, Bulgaria received large amounts of FDI. For example, between 2005 and 2009, Bulgaria received around €27bn of FDI. After the financial crisis, the FDI has declined, especially in areas such as real estate and finance. What has been consistent over the last 2 or 3 years are the investments in manufacturing, telecommunications, and energy. In my opinion, the investments in these sectors will be around their current volumes of €2bn.
What are the incentives offered to potential investors in Bulgaria?
STEFANOV: The incentives which are offered to potential investors come either through our national budget or through the funds of the EU. The Investment Promotion Act (IPA) outlines the industries that are supported by the government with such incentives. The industries under IPA are all sorts of manufacturing, R&D, IT, high value-added technology, healthcare and so forth. These are the sectors where government supports exist and potential investors can receive different sources of support, starting from government land or help with the infrastructure. There are different incentives available through EU funds as well. Such incentives are related to HR activities such as hiring, training and retaining of personnel.