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COMPUTERWORLD | Articles | Market Analysis
15 Apr

Borislav Stefanov: I expect new investors in Bulgaria


Mr. Stefanov, what is the current state of foreign investments in Bulgaria?

As a whole, we have seen a growth compared to the previous two years.

If we have a more detailed look at the investment structure in Bulgaria, there is cautious recovery in sectors which were important for investments prior to 2009. These include trade, real estate, the energy sector and telecommunications.

In the sphere of manufacturing the decline was not that bad even during the years of crisis, unlike other areas, like the finance sector, trade and real estate.

Domestic and global investment statistics are structured in a way that lets respective central banks monitor capital flow in both directions – from parent companies to local subsidiaries and vice versa, but they cannot understand what part of this capital is for investments. So, the following situation arises: if one company draws a loan to build a facory, for instance, when the loan enters Bulgaria it is rated as a positive investment, and when the firm pays it out it is registered as a negative investment. So, in a lot of cases the real case could be that the investments made do not match the balance between what was taken out and what was paid out. This can rather distort statistics, especially in manufacturing.

Regarding the investments by country, those coming from the Netherlands are traditionally the highest in total. In fact, however, very few large Dutch companies are present on the Bulgarian market. This is mainly due to the fact that a lot of international companies are registered in the Netherlands, and when they direct capital towards Bulgaria it is marked as FDI.

As for the projects we have been working with, last year foreign investors in Bulgaria demonstrated highest interest in two sectors. One of them is in light industry but is connected to the automotive industry.

In the automotive industry we worked with projects mainly from Europe, but there were investors from China, Japan and the USA as well.

One of the projects we are currently working on is an investment from a large German company that works with Bentley, Bugatti, Lamborghini. It produces air-conditioning panels for automobiles and also develops software that comands in-vehicle air-conditioning systems. Bulgaria is the fourth country whare the company has operations. The other three are Germany, China and the USA. In about three years the Bulgarian factory is expected to employ 600 people, of which approximately 20% will do R&D.

Another German company, Witte-Automotive, which works with all big vehicle makers, is building a new production plant in the Danube city of Rousse where it will make electronic and mechanical parts for the automotive industry. The factory will be built at two stages, the first of which is to be completed by March 2014. The entire Bulgarian production of Witte-Automotive will be exported.

Another ongoing project is a new plant of Swiss company LEM, which makes electronic components. The facility, which will be in Sofia, will start working by October 2013. LEM will invest 2 mln Swiss francs (some 1.64 mln euro) in it.

In the sphere of outsourcing, the first large 2013 entry is Coca-Cola Enterprise. In Bulgaria we already have Coca-Cola Hellenic, which serves Eastern Europe, Russia and several more countries. The Bulgarian operations of Coca-Cola Enterprise will serve almost every market in Western Europe. Coca-Cola Enterprise said it had chosen Sofia as the place to set up an internal shared services center where it plans to migrate its accounting and financial activities from its offices in Western Europe. The company, however, is not allowed to do trade in Bulgaria, so it will cooperate with Coca-Cola Hellenic.

The largest technology distributor in the USA Ingram Micro, Swiss producer and distributor of passive components and copper and optical cables Reichle & De-Massari (R&M), Japanese manufacturer of high-tech medical equipment and cameras Pentax and five other companies were awarded with the Investor of the Year prize for 2012 in Bulgaria. The Invest Bulgaria Agency gave the award for the seventh consecutive year to the largest investors in different sectors of the Bulgarian economy. The official ceremony took place in January 2012 in Sofia.

R&M took the investment award for the electronics and electrical engineering sector. The company opened its own fiberoptic component production and assembling facility in Sofia, which gave work to over 100 people, including in the R&D sphere. It is expected that the plant's personnel will eventually reach 250 people. The investments in this project are about 10 mln Bulgarian levs (5.11 mln euro) by now.

Pentax also took an investment award for the electronics sector. In 2012 it opened a repair center in Bulgaria. The very specific and exacting task of maintaining and repairing endoscopic equipment produced by Pentax and used by medical centers in Europe, Africa and the Middle East is in the hands of 40 newly employed, highly qualified employees of the company in Plovdiv. The investment by now is 4 mln Bulgarian levs (2 mln euro), and the number of repaired devices in Bulgaria jumpred from 20 in June 2012 to 200 in December 2012.

Ingram Micro hired 120 employees for their newly opened service center in Sofia. The company, which is present in Fortune 100, is the largest global wholesale technology distributor and a global leader in IT supply chain, mobile device lifecycle srvices and logistic services.

I think it is a positive trend that in the past year foreign investors opened new factories and outsourcing centers outside the capital too. What do you think?

Bulgarian outsourcing companies, like Sofica Group and CallPoint New Europe, were among the largest ones which said that in 2013 would open offices outside Sofia. And back then they already had offices in Plovdiv. Sutherland Global Services also announced they were in the process of looking for a proper location outside Sofia.

The Invest Bulgaria Agency is trying to promote different places that are good for investments and are outside the capital. I think that having several good examples of centers outside Sofia will attarct other investors in the same direction. Bulgaria has enough large cities with talents, so I do not see any reasons for investors not to set up centers with 200 to 300 employees around the country.

Moreover, the communication infrastructure in Bulgaria is among the best in Europe.

Another advantage is the fact that universities in smaller cities are more open to get in contact with businesses.

I believe that in the next several years the firms in the outsourcing sector in Bulgaria will pay more attention to cities outside Sofia.

What is new in the activities of Invest Bulgaria Agency? What do you exptect from 2013?

For the first time in 7-8 years the agency had a strong marketing policy.

During the second half of 2012 and the first half of 2013 we have been actively working with Financial Times, whose task is to organize several conferences dedicated to Bulgaria as an investment destination.

In March 2013 we also started a massive ad campaign promoting Bulgaria as an investment destination. We are going to make some 40 publications, oncluding online, in leading global media, like Economist, Financial Times, Business Week and Wall Street Journal. We are also going to buy TV comercials in popular but specialized channels, such as CNBC and Bloomberg.

Along with the aforementioned initiatives and our success in the automotive and business process outsourcing industries, we are also working on attracting investors in spheres which have been were less popular, like the bevarage industry or the medical tourism. The more investors enter the country, the more will consider doing so too. An avalanche effect.

By Konstantsa Grigorova

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