BULGARIA Rising economy seeks to boost investment levels
A HIGHLY SKILLED, LOW-COST WORK FORCE, A PROXIMITY TO LUCRATIVE EUROPEAN MARKETS, AND A LOW CORPORATE TAX RATE MAKE BULGARIA AN OUTSTANDING INVESTMENT DESTINATION

The Saxe-Coburg government is well aware that privatization is the only practical way for Bulgaria to restructure its economy, create new jobs, and introduce new technology. The authorities hope to sell some 1,700 firms still owned by the state, which will provide the government with $300 million in sell-off revenue. In November 2001, the government approved changes to laws governing public companies, giving more protection to small shareholders and making the activity of public companies more transparent.

MILEN VELCHEV Minister of Finance

Companies slated for privatization in 2002 include tobacco monopoly Bulgartabak, telecom monopoly BTC, Bulgarian Maritime Shipping Company, Bulgarian River Shipping Company, the State Savings Bank, parts of the National Electric Company and DZI, the state insurance company. Minister of Finance Milen Velchev believes that the Bulgarian people are generally receptive to the idea of privatization. “I think the last 10 years has brought some concerns in terms of corruption, inefficiencies, and monopoly situations. But now the Bulgarian public does not see much benefit in keeping companies in state hands. There has been no criticism whatsoever so far towards our intentions to privatize certain sectors,” he states.

INVESTMENT DOWN THE LINE The electricity sector is to be liberalized in the coming months.

Despite the new government’s commitment to eradicating corruption, it still remains a problem, as do bureaucratic delays and barriers to economic development due to government restructuring and reorganization. “The much talked about corruption is related to two main factors–poverty and the first accumulation of capital,” comments Bojidar Bojinov, Chairman of the Bulgarian Chamber of Commerce and Industry. “The issue of the Balkans is not related to religion or nationality. It has to do with one thing only–the standard of living.” The Saxe-Coburg administration intends to combine their privatization efforts with a fierce drive against corruption and an implementation of measures to make the bureaucracy less intrusive in business life.

A sharp increase in foreign investment to boost economic growth is top priority for the Bulgarian government. The country has one of the lowest foreign direct investment levels in Eastern Europe; it stood at a meager $4.5 billion from 1992 to 2001. Since then, however, great strides have been made in transparency and additional market-oriented changes have been made to the laws governing foreign investment, taxation and land ownership by international investors. In October 2001 the cabinet drafted a new foreign investments bill and prepared a package of legislation for tax reform, a new accounting act and the gradual introduction of international accounting standards.

Corporate tax will be cut in 2002 from a peak rate of 20% to 15% across the board. Some patience may be required for those thinking of investing in Bulgaria, but it is a small price to pay for the outstanding long-term investment possibilities available.
The country offers a highly skilled, low-cost labor force and proximity to both European and Near-Eastern markets. Philip P. Philipoff, Executive Director of the American Chamber of Commerce in Bulgaria, says, “we have established a strong presence as a lobbyist for American business interests here. It will soon become easier to deal with authorities and we applaud the current government’s intention to do away with corruption.”