Financial Times: Bulgarian city turns around its fortunes

Financial Times: Bulgarian city turns around its fortunes

The country’s ‘wild east’ image has faded since EU accession,
encouraging investors to explore impoverished corners

On a hot summer evening in Plovdiv, children splash noisily in the fountains of a manicured city park. Young techies gather at Hackafe, an IT learning hub in the city’s historic centre.

Bulgaria’s second-largest city, with a population of 350,000 and a rich cultural history, is enjoying a long-awaited revival.

Georgi Stoeff, a local economist, estimates foreign and local investors have poured €4bn into companies around Plovdiv since 2011 after a long period of economic stagnation.

The city’s turnaround shows what a handful of dynamic local businesspeople and officials can achieve when confidence improves, Bulgarian analysts say.

It also helps that the country’s “wild east” image has faded since EU accession, encouraging investors to explore the potential of impoverished corners .

With a jobless rate of just 4.9 per cent, the city has almost full employment, helped by  sectors such as logistics, auto-parts and software serving a global market.

Plovdiv’s recovery is all the more striking when compared with the plight of Greece, its recession-battered neighbour to the south.Although Greek investors pulled out of Bulgarian banking and real estate projects as their own domestic crisis deepened, some Greek traders have more recently moved headquarters to take advantage of Bulgaria’s 10 per cent tax rates, for both corporate and personal income, the lowest in the EU.

“We dismissed Plovdiv as a low-tech manufacturing centre with not much hope of modernising,” said a former manager of a Greek real estate developer, now a Sofia-based consultant. “It’s turned out rather differently.”

Stefan Stoyanov, deputy mayor for investment, says the catalyst for growth was not just Bulgaria’s 2007 accession to the EU but “a new, co-operative approach by local government”.

Nine municipalities in the region gave up competing for investors and teamed up with local businesspeople to offer manufacturing and warehouse facilities in six industrial areas — now promoted as the Trakia economic zone.

Plamen Panchev, co-founder of Sienit Holdings, a local construction company, was a first mover, acquiring sizeable tracts of disused farmland around the city and setting up a one-stop shop to assist potential investors.

“When we started industry had collapsed, people weren’t working the land, all the young were emigrating to find jobs. But my partner and I were convinced Plovdiv had a future,” he said, speaking at the company’s offices in the Rakovski industrial zone, its walls plastered with printouts of factory and warehouse designs.

“We’ve attracted some leading European businesses, especially from central Europe,” Mr Panchev boasts, citing ABB, the Swiss engineering group, Kaufland, the German hypermarket chain and the logistics group DB Schenker.

“There’s a base of talent here, you have access to skilled engineers, quality control expertise, specialists in logistics,” says Tommy Ver Elst, general manager for Bulgaria for Sensata Technologies, a US company that makes high temperature sensors for the European automotive industry. “But the labour market is getting more competitive.”Mr Stoyanov, the deputy mayor, has taken the search for skilled workers to Ukraine, home to a 250,000-strong Bulgarian ethnic minority in the south of the country. “We think there’s a good chance of getting people to repatriate given the situation there,” he said.

EU funds have helped smarten up Plovdiv’s elegant 19th century centre, built over the wealthy Roman city of Philippopolis. Museums and art galleries are being revamped: in 2019 the city will achieve a long-held ambition of serving as Europe’s cultural capital.

Nevertheless, Pavel Ezekiev, a partner at Neveq Capital, a venture capital fund, cautions that competition to attract high-tech investors is increasing across south-east Europe.

In Bulgaria, other regional centres such as Varna on the Black Sea coast and Veliko Tarnovo, the country’s medieval capital, are eyeing Plovdiv’s success.

“The local government deserves credit for its aggressive approach, but it’s no easy task to attract high-quality investors,” he said.

Source: Financial Times, by Kerin Hope 

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