Foreign Direct Investments in Bulgaria

Authors:

Petya BoevskaNemanja Grujičić

The Euros are Coming

General Trends:

Since 1997 – rapid growth in Foreign Direct Investment in the country

Increasing investment flows following clear prospects for NATO and EU membership

UNCTAD Report – “Bulgaria among the world’s 10 most attractive destinations for investors”

Why invest in Bulgaria? I

Legislative framework No differentiation between local and foreign firms Government support is provided for major investment

projects Since January 1, 2007 – the lowest corporate tax in the EU

(along with Cyprus) Big real capital investments are exempt of VAT “One-stop shop” procedure adopted in 80% of state, regional

and municipal administration

Why invest in Bulgaria? II

Political environment Political consensus on EU and NATO membership A “region of stability” in the Balkans

Market size theory The market size hypothesis Bulgaria’s market = EU internal market

Why invest in Bulgaria? III

Economic stability Sustainable real GDP growth of

more than 5% since 2002 A continuous budget surplus Currency stability following the

introduction of a currency board in 1997 – lev pegged to the Euro

Other advantages Low costs of doing business Qualified work-force

Data breakdown and Analysis I

Total FDI in Bulgaria – 1990-2006 A sizeable increase since 1997 Overlap between government post 1997 reforms and EU’s

“Agenda 2000”

Data breakdown and Analysis II

The decrease in FDI flows due to the end of privatisation process

Shift towards “green field” investments and reinvested earnings

Bulgaria is fourth among CEECs in terms of FDI as a percentage of GDP

Data Breakdown and Analysis III

Data Breakdown and Analysis IV

Data Breakdown and Analysis V

Comparison with 10 new EU Member States shows similar pattern of FDI flows

As in Bulgaria, increase in FDIs started previous to accession It was followed by a minor decrease in the 2 years prior to

accession (the flows remained relatively high)

Future developments

Prospects for future FDI flows increased following the formal entry of 10 new

Member States The same projections can be made for Bulgaria given the

stable macroeconomic conditions in the country

Remaining challenges Unfinished judicial reforms High level of corruption Bureaucratic inefficiencies still present

References

Bulgarian National Bank Invest Bulgaria.com Dnevnik, Sofia Forem Consulting, Sofia Bulgarian Investment Agency

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