Outlook on Bulgaria: EBRD event weighs up prospects

Art and auctions, Country Profiles, Markets — By on June 9, 2018 at 8:11 PM

Radost Ivanova.

Outlook on Bulgaria: EBRD event weighs up prospects

By James Brewer

Bulgaria is promoting itself as a magnet for business investment, with Sofia the prime destination; but imminently one of the biggest focuses of attention will be a place 130 km distant from the capital and which has more than 6,000 years of history.

Event planners at the country’s second biggest city, Plovdiv, are intensifying preparations for its role as European capital of culture 2019. It has already been recommended for the Melina Mercouri Prize, named after the famed singer who was Greek minister of culture in 1985, when Athens became the first European culture capital. A panel of experts appointed by the European Commission praised the Plovdiv team “for professional and dedicated work.”

Stadium of Philippopolis.

Radost Ivanova, deputy director for marketing, advertising and commercial activity at her city’s European Capital of Culture 2019 Foundation, was among business and tourism experts who travelled to the UK for a one-day investment conference Outlook on Bulgaria 2018. The event was organised by the European Bank for Reconstruction and Development  and the think-tank Emerging Europe,  at EBRD London headquarters on June 4.

Bulgaria, which joined the European Union in 2007, has for the first time held the six-month rotating presidency of the community, from January-June 2018, a period in which one EBRD official says the government has driven the EU agenda in a very inclusive way.

Ms Ivanova said that the excitement of being nominated a culture capital (an honour it shares for 2019 with Matera, Italy) had triggered greater optimism in the city, which was once a place that “almost nobody knew about” in tourist terms beyond domestic visitors and those from neighbouring countries.

A big programme of music festivals is being lined up, and there will be emphasis on the region’s wine production – the city serves the main wine-growing region.

Roman theatre, Plovdiv.

Bulgarian wine quality is said to have improved considerably since smaller producers took the reins from what had been a state monopoly.

One of the panel members at the EBRD conference, Alexander Todorov, head of real estate and foreign investments at law firm Dimitrov, Petrov & Co, said: “If you are not a specialist, you will not be able to tell the difference between Italian, French and Bulgarian wine.”

Contemporary with the glories of ancient Troy and Mycenae, Philip of Macedonia in 342 BC founded Philippopolis one of the world’s greatest cities with an Acropolis and other structures on the site of modern Plovdiv, and his contribution will continue to be celebrated.

He reinforced a settlement which had become a fulcrum in a network of transport which gave eventual access to the Greek ports of Apollonia and Mesembria on the Black Sea; the Lower Danube; and the Thracian settlement of Serdica which was to become Sofia. Philip’s town can still be traced in the citadel and the street grid of Plovdiv.

Mosaic birds from Bishop Basilica: Plovdiv Archaeological Museum.

Plovdiv will in its 2019 cultural offering highlight the conservation of the 2,000 sq m of mosaics on two layers, in what was 1,500 years ago the biggest early-Christian temple in the Balkans.

During the London conference, the bank hosted the city of Plovdiv’s display entitled The Bishop’s Basilica and the Roman mosaic heritage of Philippopolis. This showed that the floors of the basilica, which had three naves, were covered with mosaics of geometrical design; eternal knots; vases with the water of eternal life; and a variety of birds, which were the symbols of pious souls. The basilica was destroyed in the sixth century, although a cathedral was later built on part of the site.

Further Roman mosaics can be viewed in the Small Basilica and ancient residential building known as Eyrene.

Despite all the vicissitudes of Plovdiv as a prime target for conquest, there has been a continuity for 6,000 years or more of human activity.

Bulgaria welcomed a record near-9m visitors in 2017, some a tally 2m more than the resident population. Revenue from international tourism reached 3.5bn, up 9% on the previous year. Emerging Europe magazine quotes tourism minister Nikolina Angelkova as saying average growth for the past five years has been 6%, and that this is higher than European Union and worldwide averages. Seaside and ski resorts have been bursting with tourists, and the government wants to see interior destinations attract a greater share.

Minister Alexander Manolev.

In a keynote speech to the conference, deputy minister of economy Alexander Manolev, referred to his country’s economic growth in 2017 of 3.6% and its role as an inward investment destination. Main foreign investors are the Netherlands, Austria, Germany and Greece. Mr Manolev said that among other successes, eight out of 10 cars made in the EU have parts made in Bulgaria.

Jürgen Rigterink, first vice-president and head of client services group at the EBRD, said that Bulgaria had witnessed fundamental changes during its 11-year membership of the EU and deserved credit for its commitment to the values of the single European market. The EBRD had invested 3.7bn in almost 250 projects in the country.

Alfonso Velasco Tamames, research analyst with the Economist Intelligence Unit, forecast growth in 2018-19 would be 3.5%, supported by strong domestic demand, trends expected to continue over the medium term. On the other hand, the domestic demand would contribute to a widening of the trade deficit and to higher inflation. Investment growth would be constrained by slow recovery in bank lending.

There remained challenges from corruption, “one of the biggest issues if you are in business.” Political instability over the past five years would prevent quick reform of institutional deficiencies; a declining working age population and skills deficiencies limited the employability of the labour force; high private sector debt would constrain productivity-enhancing investment; and there remained a high level of inequality. “Overall, yes, Bulgaria is doing quite well right now, but more needs to be done [in these fields].”

Jayesh Parmar of Baringa consultancy.

The conference ranged over what were said to be dynamic areas of the Bulgarian economy including automotive, manufacturing, information and communications technology, aerospace, tourism, outsourcing and real estate

Jayesh Parmar, who leads the energy advisory practice at business and technology consultancy Baringa, urged Bulgarian policymakers to ensure a stronger role in the economy for natural gas – global gas prices were expected to remain relatively low. Gas should not be unfairly treated compared to other fuels, he pleaded.

He called for action to remedy the lack of interconnectivity between southern European countries. Bulgarians are anxious to avoid a repeat of 2009, when they shivered after Russia shut the main pipeline. At the time, the country lacked storage facilities and had little means of securing gas from the rest of Europe.

Mr Parmar was keen that there should be emphasis on the planned second fork of the Turkstream system which is due to make landfall in Bulgaria. This would import up to 15.75bn cu m of natural gas a year at maximum capacity of the line between Bulgaria and Turkey. TurkStream will stretch across the Black Sea from Russia to Turkey and to Turkey’s border with neighbouring countries.

Larisa Manastirli of EBRD and Andrew Wrobel of Emerging Europe

The first string of TurkStream is intended for Turkish consumers, while the second string will deliver gas to southern and south-eastern Europe. Eventually there will be four parallel pipelines across the Black Sea.

The giant Russian company Gazprom is a big supplier of gas to Bulgaria: in 2017, a total of 3.3bn cu m, an increase of 4.7% on the previous year. Gazprom says it provides 12% of global gas output.

Matteo Patrone, regional head for Romania and Bulgaria at the EBRD, stressed the importance of maritime and road transport links, citing the significant hubs at Varna and Bourgas, and six ports on the Danube. He declared: “regional integration is absolutely fundamental.”

Bulgaria is in the east Mediterranean corridor of TEN-T, the European Union-defined transport infrastructure in Europe, which has as its maritime pillar the concept known as Motorways of the Sea.

Ripe for export: competitive wines

Mr Patrone said that Bulgaria is one of the most energy-intensive economies in Europe “so you need incentives to promote energy efficiency. The authorities are doing that in the industry and transport sectors.” He warned against becoming over-dependent on the monopoly of Russian gas supply, or on nuclear energy. Bulgaria has two nuclear power plants which produce one-third of its electricity.

Larisa Manistirli, head of the Bulgarian section at the EBRD, said the country had a falling and ageing population. Industries needed to retain young people, she said, and she stressed the importance of strengthening infrastructure.

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