The main engine of investment in Bulgaria after the beginning of the pandemic are the already established foreign companies that expand their production, as well as many smaller and larger local companies. A good signal that the local industry has already accumulated the experience and self-confidence to take its activity to the next level.
Judging by BNB statistics, foreign direct investment in 2020 reached over 2.1 billion euros – a record. However, the number comes after the BTC deal and the changed reporting method, which “provided” three quarters of the amount. For the first half of this year, FDI decreased slightly (to 657.8 million euros), with the bulk of capital inflows coming from reinvesting profits.
However, there is another point of view – not all funds that enter the economy are reported as FDI. “They often come in the form of non-capital costs when, for example, a company replenishes an account of its subsidiary here, and the funds are then used for operating costs, including renting a building, equipment, etc.,” said economist Georgi Stoev. , who is chairman of the Plovdiv platform Trakia Tech.
He explained that this happens, for example, in built-to-suit projects, when a Bulgarian company builds the enterprise at its own risk and leases it on a long-term basis to a foreign employer who does not actually make a direct investment.
Interest especially in Plovdiv, which in recent years has developed as a major industrial center with the Trakia Economic Zone remains high. “Inquiries from investors never stop, and the capacity of the local operator to serve them is not unlimited, and is therefore urged to establish more reliable and strategic partnerships,” Stoev said. According to him, there are many projects that remain under the radar of observers because they are made by existing investors in expanding the base, but are no less important.
For Plovdiv District, the total costs for acquisition of tangible fixed assets (FTA) in 2020 amount to BGN 1.72 billion, which is a decrease of 11% compared to 2019. “Given that 2020 was a pandemic year and the actions of the business were cautious, this cannot be defined as a dramatic decline, “Stoev commented. Of the total amount, just over one-fifth is the share of investments of foreign companies.
Among the biggest Bulgarian investments, which started last year, is that of the Plovdiv producer of zinc and lead KCM. The plant is one of the few examples of successful privatization by a labor management company and is currently owned mainly by former and current managers, but shares are also owned by many employees. After KCM completed an investment of over BGN 260 million a few years ago, with which it built an entirely new lead plant and modernized the zinc production, at the end of 2019 it became clear that a new project was launched for the same amount to upgrade the previous one and to ensure technological integration of the two productions. The implementation will take several years, but it is already underway – in 2020 the main capital costs of KCM were related to the implementation of basic engineering under the project, as well as the optimization and reconstruction of other facilities.
Such large investments in basic production, however, are rarely made for years to come. “This sector is very important and productive, because jobs there make a lot of money – much more than mechatronics,” Stoev said. But he added: “However, investments in the rest of the industry, which, although smaller, are a daily occurrence, should not be overlooked.”