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Foreign investments in Bulgaria collapse

The foreign investments in Bulgaria literally plummeted in the past ten years, the Bulgarian Industrial Association alarms. In 2007 the foreign investments in this country amounted to nearly EUR 9 billion, while ten years later in 2017 they were at under EUR 900 million. In 2007 the foreign investments formed 28% of the country’s gross domestic product, whereas in 2017 they formed only 2% of Bulgaria’s GDP. In the first half of 2018 the foreign investments continued to dwindle. They decreased from EUR 487.2 million in the first half of 2017 to EUR 246.2 million in the same period this year, BIA announced.

All Balkan countries with similar economic development attracted more foreign investments than Bulgaria. Bulgaria’s neighbors Greece, Turkey and Serbia managed to attract more foreign capital, the report of the Bulgarian Industrial Association further shows. In other words, Bulgaria has difficulties attracting foreign investments. This country does not have enough domestic capital to modernize and boost its economy and increase the life standard of its citizens and relies a lot on foreign financial injections. However, it is relatively small market which is not attractive enough for the large global companies. The Bulgarian market is small not only because of the small number of the Bulgarian population, but because this is the poorest country in the whole European Union. The access to the single European market is an argument which should encourage many non-EU companies to invest in Bulgaria and make this country a gateway to the union. However, the biggest investors in Bulgaria are practically EU countries. According to the analysis of BIA, the Netherlands is the biggest investor in Bulgaria in 2017. Bulgaria attracted from this EU member state EUR 885 million last year. Germany and Switzerland are the second and the third-biggest investors in Bulgaria in 2017 with EUR 130 million each. Bulgaria’s neighbors Turkey and Greece also invested a significant amount of money last year- EUR 80 million each. Meanwhile, a significant capital flight was registered to the Czech Republic (-301 million EUR), to Austria (-EUR 142 million) and to Norway (-70 million EUR).

Bulgaria relied until recently on its cheap and highly-qualified labor force to attract foreign capital. However, there is a sharp deficit of workforce in Bulgaria at present and the companies operating on its territory have difficulties finding qualified personnel. Some of the qualified workers already found well-paid jobs in Bulgaria. Others migrated abroad. That is why the Bulgarian emigrants are currently the biggest foreign investor. In 2017 they transferred to Bulgaria over EUR 1.15 billion or EUR 284 million more as compared to 2016.

The citizens and the companies operating in Bulgaria are subject to a 10% flat rate, which is also a strong advantage. The supporters of this taxation model hoped that it would attract new foreign capital, but apparently they were wrong, because since its introduction in 2008 the foreign investments have been falling constantly year after year. According to many sociological researches, the foreign entrepreneurs do not pay big attention to this taxation. Instead, the foreign investors are mainly complaining of bad transport and energy infrastructure, corrupt and incompetent administration, lack of stability and foreseeability in the judicial system, etc.

English version: Kostadin Atanasov




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