The Central Bank of Bulgaria declared a sudden drop of direct foreign investments to this country. Barely EUR 90 mln. entered Bulgaria in the January – July period on nearly EUR 400 mln. for the same period in 2010. Is this due to the crisis, or other reasons caused this drastic drop of investments? Deputy Chair of Bulgarian Chamber of Commerce Kamen Kolev commented for Radio Bulgaria:

“There is a serious drop and investments have been reduced four times on 2010 and over 20 times on 2008 when a peak of investment activity was registered. The main reason is the financial and economic crisis,” Kamen Kolev says and adds: “There is more. The structure of investments was not aimed at sectors that provided bigger added value even in the period when these were many. Over 2/3 of them were headed towards real estate, construction of malls and brokerage. The result – prices of real estate properties marked a sudden drop. However, the goal of these investors was speculative – they wanted to sell later, at higher prices. Their interest collapsed with the collapse of prices.”

The second explanation for the drop of investments lies in the fact that local branches of foreign banks returned their loans to the mother-banks at a certain moment. These capitals can also be called “investments”. This affected the general recapitulation of direct foreign investments and they went down. However, even those huge investments of billions of euro were not aimed at technological and industrial activities that are more sustainable to the effects from the crisis.

What will be the effect from the drop of investments?

“The overall effect will be a negative one,” Mr. Kolev says. “Negative towards macroeconomic indexes of Bulgaria, since such a drop reduces currency assets. It is also negative, regarding the possibility for opening of new jobs. However, direct foreign investments went down or dropped all over the globe. Estonia is a positive example and its economy is similar to ours. There are more and more investments there. The investment success is linked to a strict fiscal policy – and Bulgaria has it. The ease of foreign investors via the services, offered by the eGovernment comes next. Bulgaria also works actively for the creation of its own eGovernment. This is a serious relief that overcomes bureaucracy, corruption and gives many possibilities to investors to contact with the administration. Moreover, the administration of this country is a bit clumsy and this often changes the legislative background. Low taxes and low expenses for the creation of a company – for instance, 1 euro – those are the Bulgarian advantages for attraction of investments. Besides that energy and labor expenses are lower than in neighboring countries, which is another plus.”

According to Kamen Kamenov the heavy procedures for leaving the market/bankruptcies/ are a negative point. The defense of the investors’ rights within the solving of commercial disputes can be developed too.

What sectors do investors opt for now, in these times of insecurity? Malls are still built, although fewer. There have been serious investments in the construction of RES over the past couple of years, since investors have greater stimulus to give money for wind energy and solar powers. Unfortunately not enough is invested in production and technologies, along with “green” investments. On the other hand, no investors have left this country, Mr. Kolev says in conclusion.

BNR