Transcript Foreign Direct Investments in Bulgaria General Trends

Foreign Direct Investments in Bulgaria
The Euros are Coming
Authors:
Petya Boevska
Nemanja Grujičić
General Trends:
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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
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Legislative framework
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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
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Political environment
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Political consensus on EU and NATO membership
A “region of stability” in the Balkans
Market size theory
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The market size hypothesis
Bulgaria’s market = EU internal market
Why invest in Bulgaria? III
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Economic stability
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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
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Low costs of doing business
Qualified work-force
Data breakdown and Analysis I
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Total FDI in Bulgaria – 1990-2006
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A sizeable increase since 1997
Overlap between government post 1997 reforms and EU’s
“Agenda 2000”
2.9
3
2.7
FDI (net) USD bn
2.2
2.1
FDI (net) USD bn
1
0.8
1990
1991
0
0
0
1992
1993
1994
0.1
0.1
1995
1996
0.5
0.5
1997
1998
1999
0.8
2000
2001
0.9
2002
2003
2004
2005
2006e 2007f
Data breakdown and Analysis II
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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
1000.0
800.0
600.0
1998
400.0
1999
2000
200.0
2006
2004
0.0
-200.0
2002
2000
1998
2001
2002
2003
2004
2005
2006
Data Breakdown and Analysis IV
EU's share in Bulgaria's FDI
14000.0
12000.0
10000.0
8000.0
6000.0
4000.0
2000.0
0.0
1999
2000
2001
2002
EU Total (EUR million)
2003
2004
Total FDI in Bulgaria
2005
2006
Data Breakdown and Analysis V
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Comparison with 10 new EU Member States
shows similar pattern of FDI flows
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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
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Prospects for future
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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
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Unfinished judicial reforms
High level of corruption
Bureaucratic inefficiencies still present
References
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Bulgarian National Bank
Invest Bulgaria.com
Dnevnik, Sofia
Forem Consulting, Sofia
Bulgarian Investment Agency
Thank you for
your attention