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The crisis has shifted investments from finances to manufacturing

11 October 2012 / 22:10:01  GRReporter
3465 reads

Victoria Mindova

The deterioration of the financial situation of Greece and the gloomy outlook in the medium term have driven many companies in the country to seek a more attractive business environment in neighbouring countries. The Executive Director of InvestBulgaria Agency Borislav Stefanov spoke specifically to GRReporter and presented the comparative advantages of Bulgaria and the key sectors that provide opportunities for growth and profit.

What are the advantages of Bulgaria compared to its neighbouring countries? Why should investors prefer our country to Romania, Serbia and Turkey?

The choice of a country depends mainly on the sector in which investments are made. The factors that determine the investment interest involve labour costs, cost of electricity or land. For example, investments in the chemical industry focus primarily on machinery, equipment and electricity price plays an important role. Bulgaria has a priority in this respect compared with other European countries, because the price of electricity is much lower than the average European levels. It is a very important factor for industries related to the production of glass, cement and other similar types of production as well. Labour costs play a major role in light industries such as textiles and apparel. In the IT sector, the staff’s preparation and level of knowledge plays the most important role. Bulgaria has established traditions in the IT sector and in the development of software in particular. In the field of outsourcing, there are many companies that rely on staff with specific expertise and knowledge of many languages, no matter whether they are standard languages ​​such as English and German or more unpopular ones such as Scandinavian, Dutch and other languages.

One factor that is important for Bulgaria and which is not always considered in the first place but which also plays a role is the macroeconomic stability of the country. Certainly, a company never goes to a particular country because the country has a good credit rating or because it has a low sovereign debt. Factors such as taxation, costs of labour and raw materials are taken into account in choosing where to invest. However, if there is a long political or financial instability, recession or higher deficits in a country, they affect the business sooner or later.

From this perspective, Bulgaria has an advantage compared with our neighbouring countries. Macroeconomic indicators remain stable and good. Costs of doing business are low and the quality of production is good. As you know, if price was the only thing that mattered, there should not be production anywhere else except in India and China. In other words, Bulgaria offers a very good balance between price and quality of production. Speaking about price, we include taxes and fees, which are better than in Romania for example. They may be roughly the same as those in Serbia, but we are members of the European Union. The price of land in Bulgaria is very competitive too, whether we are talking about land for industrial, construction and agricultural purposes. Thirdly, it is important to note the strategic location of Bulgaria. The country provides an easy access to the European Union, to Russia and the Middle East via Turkey. The five major transport corridors of the European Union cross Bulgaria, which is a sign of the country’s importance as a logistics centre. To countries outside Europe, we try to present the advantages of Bulgaria as an entry point for distribution to the European Union.

What are the strategic sectors that have development potential in Bulgaria in your opinion?

Two years ago, we assigned a big company the task of making a detailed analysis of the capabilities of the Bulgarian economy. The results have shown eight most promising sectors that offer the greatest opportunity for development and growth. These are mechanical engineering, namely automotive machinery, chemical industry (organic and inorganic), electronics and electrical engineering, food processing, transportation and logistics, information technology (software development), outsourcing and medical tourism. These sectors are preferred because of certain geographical, natural features that are unique to Bulgaria and because the combination of cost and work force is very good.

Electronics and industry have begun to heavily grow over the past year. In the pre-crisis period of 2001-2009, investments focused mainly on finance, real estate and trade. The combination of these three sectors held between 60% and 90% of the flow of foreign investment depending on the year of accounting. After 2009, the interest in these three sectors waned. However, there was significant interest in manufacturing sectors such as mechanical engineering and electrical engineering. After the wake of the crisis, many European companies started to reconsider issues like where they delivered from, where they processed, where would be the most advantageous location to position their plants and how they worked. As result, they have turned to Eastern and South-Eastern Europe. In other words, their customer base remains in Western Europe, but their production moves to the east because transportation is much faster than if the production base were in China, and the quality is better. This is probably why many companies from the fields of mechanical engineering, electronics and electrical engineering have repositioned here. The quality is higher, the price is not much different, but the delivery time is much shorter.

Tags: EconomyMarketsInvestBulgaria AgencyBorislav StefanovGreeceCrisis
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