H.E. Ambassador Jonathan Allen shares views on the advice investors get on Bulgaria
OT 16:48:31 11-12-2014
MG1648OT.005
Великобритания - България - инвеститори - британски посланик
H.E. Ambassador Jonathan Allen
shares views
on the advice investors get on Bulgaria
Rositsa.Zlatilova@fco.gov.uk
H.E. Ambassador Jonathan Allen shares views
on the advice investors get on Bulgaria
Dear colleagues,
His Excellency the British Ambassador to Bulgaria Jonathan Allen
blogged about the advice investors get on Bulgaria. Please
follow the link to read the blog:
http://blogs.fco.gov.uk/jonathanallen
/2014/12/11/what-advice-do-investors-get-on-bulgaria/
Kind regards,
Rositsa Zlatilova | Communications & Media Relations| Political
Section I British Embassy Sofia | 9, Moskovska St. | Sofia |
Bulgaria
----------
E: Rositsa.Zlatilova@fco.gov.uk | T: +359 2 933 93 06 | M: +359
888 233 270
What Advice Do Investors Get on Bulgaria?
December 11, 2014
This post is also available in: Bulgarian
As British Ambassador I am asked almost as often by Bulgarians
what I say about their country to investors, as I am asked by
investors what I think about Bulgaria. I answer the same to
both: a wonderful country, with real potential and excellent
people, but some big problems, particularly in the rule of law
and regulatory bodies.
LetТs start with the advantages. Bulgaria enjoys macro-economic
stability and is a good performer in the region, with low
deficit and public debt. The currency board ensures exchange
rate stability. Despite the shocking independent audit report on
KTB, the banking system seems well-capitalised and an
appropriate size for the GDP of the country; Bulgaria has not
gone in for exotic financial instruments and so has avoided
toxic debt. Investors Ц and Bulgarians Ц enjoy a low corporate
and personal tax rate. Major investors also benefit from
additional incentives.
Existing investors are amazed by the quality of staff here.
Although Bulgaria worries about the low productivity of its
workforce (and there are serious issues over education levels
for many new entrants to the labour market), foreign investors
are able to pick from the cream of Bulgarian employees. Many
have post-graduate qualifications and speak two languages or
more. Bulgarians have an admirable work ethic: employers
(including me) find their Bulgarian staff to be hard-working and
to deliver commitments. There are thriving entrepreneurs and
start-ups, which I find genuinely inspiring.
Transport links to the UK are excellent. Some days, there are
eight direct flights from UK cities to Bulgaria. Within
Bulgaria, infrastructure is slowly improving, from a low base.
The motorway to Bourgas has made a big difference. Over the next
few years, the Greek border and even Varna should come into
reach. Train links are being upgraded and Sofia metro expanding.
So far, so good. What is not to like?
I think there are three major issues, all of which might be
grouped under the rule of law heading: an unpredictable judicial
system; a failure by local and national government to honour
contracts and agreements; and, a long-standing failure to take
serious action against corruption. I hear about these issues
from business leaders as well as from almost all my
ambassadorial colleagues, so it is a widespread view.
The judicial system has been the subject of CVM reports for many
years, and many think of it as a justice/human rights issue.
For me it is also a commercial problem. Put simply, if you
cannot quickly and consistently enforce a contract, you cannot
easily do business. Indeed, the ideal state is that the rule of
law is so consistently enforced, that no-one would dream of
avoiding their contractual obligations, as they know that they
will not only be compelled to meet them but also pay a financial
penalty for wasting the courtТs time. In Bulgaria, going to
court still takes too long and is too unpredictable.
National and local government should be shining examples of
honouring contracts, but sadly there seems to be a tradition in
Bulgaria of repudiating all that has been done by your
predecessors in office, no matter that legal commitments are
entered into. I have seen a few changes in Government and each
time I have dealt with British companies that have suddenly seen
contracts cancelled, without compensation being paid or work
carried out being recompensed. Some companies, who have worked
on long-term concessions here, face obstruction as they attempt
to exercise legally-binding renewal clauses. The energy
industry, and the problems faced by various foreign firms, are
widely-reported and put off investment.
Finally, there is the vexed issue of corruption. Although
experience of corruption is much lower than its perception,
those perceptions are in part driven by a lack of concrete
action. In Romania, former mayors, ministers, even a former
Prime Minister are in prison; in Bulgaria, even the small fish
seem to escape. Not only that, but the bribery laws seem
designed to let people escape justice. Why would Bulgaria not
choose to have the toughest bribery and corruption laws in the
world?
It is not about cash in brown envelopes, which is not normally
experienced by foreign businessmen. It is more subtle than that.
It is murky public procurement. It is laws or amendments that
are proposed to favour a business interest. It is in an
ineffective competition commission, which steers clear of
certain areas, or regulators at the Bulgarian National Bank who
face allegations of incompetence or corruption over KTB. It is
the collision of business and politics, whether the short-lived
appointment of Delyan Peevski as Head of DANS, or the
allegations from the Prosecution about Tsvetan Vassilev using
depositorsТ money for political and business purposes: it is not
good for BulgariaТs investment image.
These problems do not necessarily outweigh the benefits for
investors, but they make the risk/benefit calculation a closer
one than is normal in an EU country. It was striking at a
meeting with one of EuropeТs biggest investment banks earlier
this year to hear that Bulgaria is considered a relatively risky
operating environment. Yet unlike other conditions for growth,
like strong demand in the Eurozone, the solutions lie in the
hands of BulgariaТs institutions and politicians. If they are
serious about the economy, they will act.
Tags: Ambassador Jonathan Allen, British investors+Bulgaria,
Bulgaria, Bulgarian investment climate, corruption, CVM
reports+Bulgaria, public procurement+Bulgaria
Jonathan Allen
/МИГ/
MG1648OT.005
Великобритания - България - инвеститори - британски посланик
H.E. Ambassador Jonathan Allen
shares views
on the advice investors get on Bulgaria
Rositsa.Zlatilova@fco.gov.uk
H.E. Ambassador Jonathan Allen shares views
on the advice investors get on Bulgaria
Dear colleagues,
His Excellency the British Ambassador to Bulgaria Jonathan Allen
blogged about the advice investors get on Bulgaria. Please
follow the link to read the blog:
http://blogs.fco.gov.uk/jonathanallen
/2014/12/11/what-advice-do-investors-get-on-bulgaria/
Kind regards,
Rositsa Zlatilova | Communications & Media Relations| Political
Section I British Embassy Sofia | 9, Moskovska St. | Sofia |
Bulgaria
----------
E: Rositsa.Zlatilova@fco.gov.uk | T: +359 2 933 93 06 | M: +359
888 233 270
What Advice Do Investors Get on Bulgaria?
December 11, 2014
This post is also available in: Bulgarian
As British Ambassador I am asked almost as often by Bulgarians
what I say about their country to investors, as I am asked by
investors what I think about Bulgaria. I answer the same to
both: a wonderful country, with real potential and excellent
people, but some big problems, particularly in the rule of law
and regulatory bodies.
LetТs start with the advantages. Bulgaria enjoys macro-economic
stability and is a good performer in the region, with low
deficit and public debt. The currency board ensures exchange
rate stability. Despite the shocking independent audit report on
KTB, the banking system seems well-capitalised and an
appropriate size for the GDP of the country; Bulgaria has not
gone in for exotic financial instruments and so has avoided
toxic debt. Investors Ц and Bulgarians Ц enjoy a low corporate
and personal tax rate. Major investors also benefit from
additional incentives.
Existing investors are amazed by the quality of staff here.
Although Bulgaria worries about the low productivity of its
workforce (and there are serious issues over education levels
for many new entrants to the labour market), foreign investors
are able to pick from the cream of Bulgarian employees. Many
have post-graduate qualifications and speak two languages or
more. Bulgarians have an admirable work ethic: employers
(including me) find their Bulgarian staff to be hard-working and
to deliver commitments. There are thriving entrepreneurs and
start-ups, which I find genuinely inspiring.
Transport links to the UK are excellent. Some days, there are
eight direct flights from UK cities to Bulgaria. Within
Bulgaria, infrastructure is slowly improving, from a low base.
The motorway to Bourgas has made a big difference. Over the next
few years, the Greek border and even Varna should come into
reach. Train links are being upgraded and Sofia metro expanding.
So far, so good. What is not to like?
I think there are three major issues, all of which might be
grouped under the rule of law heading: an unpredictable judicial
system; a failure by local and national government to honour
contracts and agreements; and, a long-standing failure to take
serious action against corruption. I hear about these issues
from business leaders as well as from almost all my
ambassadorial colleagues, so it is a widespread view.
The judicial system has been the subject of CVM reports for many
years, and many think of it as a justice/human rights issue.
For me it is also a commercial problem. Put simply, if you
cannot quickly and consistently enforce a contract, you cannot
easily do business. Indeed, the ideal state is that the rule of
law is so consistently enforced, that no-one would dream of
avoiding their contractual obligations, as they know that they
will not only be compelled to meet them but also pay a financial
penalty for wasting the courtТs time. In Bulgaria, going to
court still takes too long and is too unpredictable.
National and local government should be shining examples of
honouring contracts, but sadly there seems to be a tradition in
Bulgaria of repudiating all that has been done by your
predecessors in office, no matter that legal commitments are
entered into. I have seen a few changes in Government and each
time I have dealt with British companies that have suddenly seen
contracts cancelled, without compensation being paid or work
carried out being recompensed. Some companies, who have worked
on long-term concessions here, face obstruction as they attempt
to exercise legally-binding renewal clauses. The energy
industry, and the problems faced by various foreign firms, are
widely-reported and put off investment.
Finally, there is the vexed issue of corruption. Although
experience of corruption is much lower than its perception,
those perceptions are in part driven by a lack of concrete
action. In Romania, former mayors, ministers, even a former
Prime Minister are in prison; in Bulgaria, even the small fish
seem to escape. Not only that, but the bribery laws seem
designed to let people escape justice. Why would Bulgaria not
choose to have the toughest bribery and corruption laws in the
world?
It is not about cash in brown envelopes, which is not normally
experienced by foreign businessmen. It is more subtle than that.
It is murky public procurement. It is laws or amendments that
are proposed to favour a business interest. It is in an
ineffective competition commission, which steers clear of
certain areas, or regulators at the Bulgarian National Bank who
face allegations of incompetence or corruption over KTB. It is
the collision of business and politics, whether the short-lived
appointment of Delyan Peevski as Head of DANS, or the
allegations from the Prosecution about Tsvetan Vassilev using
depositorsТ money for political and business purposes: it is not
good for BulgariaТs investment image.
These problems do not necessarily outweigh the benefits for
investors, but they make the risk/benefit calculation a closer
one than is normal in an EU country. It was striking at a
meeting with one of EuropeТs biggest investment banks earlier
this year to hear that Bulgaria is considered a relatively risky
operating environment. Yet unlike other conditions for growth,
like strong demand in the Eurozone, the solutions lie in the
hands of BulgariaТs institutions and politicians. If they are
serious about the economy, they will act.
Tags: Ambassador Jonathan Allen, British investors+Bulgaria,
Bulgaria, Bulgarian investment climate, corruption, CVM
reports+Bulgaria, public procurement+Bulgaria
Jonathan Allen
/МИГ/
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