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Foreign Direct Investments in Bulgaria

Foreign Direct Investments in Bulgaria. Authors: Petya Boevska Nemanja Gruji č i ć. 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

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Foreign Direct Investments in Bulgaria

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  1. Foreign Direct Investments in Bulgaria Authors: Petya Boevska Nemanja Grujičić The Euros are Coming

  2. 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”

  3. 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

  4. 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

  5. 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

  6. 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”

  7. 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

  8. Data Breakdown and Analysis III

  9. Data Breakdown and Analysis IV

  10. 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)

  11. 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

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

  13. Thank you for your attention

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