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Serious drop in FDI registered in Bulgaria in recent years

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Serious drop in FDI registered in Bulgaria in recent years

Photo: Darik

Foreign direct investment (FDI) in the Bulgarian economy has taken a nosedive in recent years, Bulgarian Industrial Association (BIA) Executive President Radosvet Radev told reporters on Tuesday. Radev noted that in 2017, foreign direct investment amounted to 1.858 billion leva, which was 9.8 per cent of total investment (foreign and domestic). This compares with 17.711 billion leva in foreign direct investment in 2007, accounting for 98.6 per cent of total investment.

Between 2007 and 2017, the annual amount of total investment (foreign and domestic) in Bulgaria remained relatively steady at around 18 billion leva, peaking at 24 billion leva in 2008, but the share and the absolute amount of foreign direct investment plummeted, Radev said.

BIA Vice President Kamen Kolev said the Bulgarian economy has been decapitalized and clearly needs more investment. According to him, the standard ratio of foreign direct investment to GDP is 1 to 10. Given that Bulgaria's GDP is approximately 100 billion leva annually, this means that the country needs about 10 billion leva in foreign direct investment a year, but the actual level is far lower.
In the first six months of 2018, foreign direct investment stood at 250 million leva, which was half the level in the first six months of 2017, Kolev said, citing data from the Bulgarian National Bank.

In 2017, the money which Bulgarians working abroad remitted to recipients in Bulgaria exceeded foreign direct investment by far. The gap is even larger than officially estimated because statisticians only consider remittances of 2000 leva and over. Transfers of smaller amounts of money and physical deliveries of cash remain unregistered. This kind of money goes mainly towards consumption and only a small portion is used for investment, but even so, it has a positive effect on the economy, Kolev said.

The largest share (one-fifth) of foreign investment flows into the manufacturing industries. The real estate sector, banking and insurance services also absorb notable amounts of foreign investment, Kolev said. He remarked that, on a regional level, the ratio of foreign direct investment to GDP in Bulgaria is still higher than in Romania but Bulgaria's lead used to be much more significant. Compared with Serbia and Croatia, the situation in Bulgaria is far worse.

Radev proposed that some of the major infrastructure projects in Bulgaria, including the building of another nuclear power plant, should be carried out on a concession basis. This will push foreign direct investment up to the necessary level. Smaller investors are discouraged by the cumbersome bureaucracy, corruption and the large number of licences and certificates they need to obtain, Radev said.

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