Bulgaria ranks 35th among 178 countries in the Heritage Foundation’s 2021 Index of Economic Freedom. Thus our country maintains its position in the “mostly free” category, where Bulgaria climbed up a year ago.
The index measures countries on 12 indicators in four categories: Rule of law, Government size, Regulatory efficiency, and Open markets. With a maximum score of 100 points, Bulgaria received 70.4, an increase of 0.2 points compared to the previous year, mainly due to an improvement in the assessment of the tax burden. The result is above the average for the region and the world. In Europe, Bulgaria ranks 20th among 45 countries, and 1st in the Balkans.
In the Government size category, Bulgaria put on a good performance in the indicators of tax weight and fiscal health, with the good result mainly due to the flat tax and government gross debt.
The assessments for Open markets and Regulatory efficiency have also risen. For the category of open markets, the study shows that as a member of the European Union, Bulgaria has 45 existing preferential trade agreements. Traditionally, our country lags behind in the Rule of law category.
This is Heritage Foundation’s 27th edition of the “Index of Economic Freedom”. The study defines the term “economic freedom” as the fundamental right of every human to control his or her own labor and property.
At the top of the index, this year are Singapore, New Zealand, Australia, Switzerland, and Iceland – each with a score of over 80 points. The survey page offers easy-to-read comparisons between countries, custom graphics, and an interactive map. Bulgaria’s profile and full index can be viewed here
Our Senior Executive Director – Dr. Maria Hristova & Joanna Dragneva – Senior Expert at Invest Sofia will take part to the International conference ‘Innovations in Science and Education’ with the article “Exploring opportunities for the return of Bulgarian migrants in response to the growing need for specialized staff in Sofia”. You can read the abstract below, the full article will be published in April.
This article examines the issues related to Bulgarian migration after the country’s accession to the EU in 2007 and focuses its research on the phenomenon of “brain drain” – the process of mass emigration during which specialists, scientists and skilled workers leave. Today this phenomenon is quite typical for Bulgaria as part of the former socialist countries of Eastern Europe. The problems associated with the “brain drain” are very relevant as the country suffers significant economic and cultural losses, while the host countries acquire large and inexpensive intellectual capital.
During the years of transition, Bulgaria strives to be not only a full member of the EU but also to provide opportunities for development and realization of specialists, scientists and researchers. This requires the adoption of measures and initiatives to establish sustainable development in the capital and in the country, as well as to meet the need for highly skilled labor in the industrial sphere.
The aim of the article is to explore the possibilities for the return of Bulgarian migrants in response to the growing need for specialized staff in Sofia. The quantitative study involved more than 500 Bulgarian migrants residing in different host countries, who were selected randomly and responded voluntarily.
The article defends the thesis that if Bulgaria provides opportunities for the development of specialized staff through the undertaking of specific initiatives, this can be an attraction and a motive for the return of Bulgarian migrants.
The results show that in recent years the need for specialized staff is constantly growing. In response to this need, the initiatives that are undertaken are aimed at innovations in science and education. The study also takes into account the readiness of Bulgarian migrants to return home.
Bulgaria ranks first in the study “The Best European Countries for Women to Work” conducted by the British digital marketing agency Reboot Online. Our country scored 236.6 points out of a possible 300.
The index evaluates the European countries on a variety of factors to determine which countries offer the best prospects for female professionals. Aspects considered in the study are: maternity leave packages, economic opportunity and women in leadership roles.
According to Reboot Online Bulgaria has one of Europe’s best maternity packages. The country allows women to take a minimum of 58.6 weeks off (410 days) – the longest minimum maternity leave in the world. In addition, mothers receive 90% of their full salary during their leave. As a result, Bulgaria scores the highest possible 100 points per category.
Bulgaria comes in third place for women in leadership, awarded 90 points in the index – 10 points less than the leader in this category – Norway, and 6 points behind the second in the ranking – Romania. According to our analysis, 22.1% of Bulgarian women hold leadership roles.
Bulgaria finishes mid-table in terms of economic opportunities (46.6 points), but its overall result ranks it first among all 29 countries in the ranking.
More about the study and the performance by country is available here.
The first edition of the State of IT Sales in Bulgaria report prepared by the sales development agency Out2Bound in partnership with the Bulgarian Association of Information Technologies (BAIT), shows that despite COVID the sector is growing.
75% of IT companies focused on selling their own products reported growth in revenue in 2020. Just as the world was entering its first lockdown, demand was keeping steady or rising.
There has been some loss of clients but it has been limited. Around 32% of respondents reported losing less than 1/4 of existing clients, mainly citing economic uncertainty as a reason. Only 4% lost more than 1/4 of existing clients. The rest had no loss.
Even with these good results, the Bulgarian IT industry clearly wanted to achieve more as only 29% reported achieving the goals they set.
Europe & North America account for the majority of the external markets that respondents listed. From talking to founders in the past 5 years we know that Western Europe is a key regionfor new business development. Looking at the results, we see that Germany and Nordics (besides UK) are the go-to territories for Bulgarian tech companies.” shared Teofil Shikov,
Out2Bound’s CEO.
Surveyed companies that could be affected by Brexit share they are not exclusively reliant on the UK, as a majority also work with EU and North American clients.
The known high personnel turnover is still present in the IT sector. 83% of companies that added employees plan to hire even more in the near future.
In terms of sales tools only 11% of respondents rely on one exclusive channel to sell. 31% of respondents used expos and those were mainly the bigger companies.
And when it comes to sales personnel – 63% of surveyed companies shared these roles earn an annual income below € 30 000. In terms of the structure of their remuneration – most often
sales people cite earning between 11 and 49% of it as a bonus.
“Looking forward, most companies seem positive. 80% of our respondents expect their company revenue from NEW clients to increase. They plan to put in more work and adjust their approach to foreign markets. We’re noticing newfound optimism from the introduction of the COVID vaccine. Executives are even expecting the return of trade shows and conferences in
the third quarter of 2021.” added Shikov.
The State of IT Sales in Bulgaria 2020 report
Sofia has a specially developed Methodology for Assessment of Projects in the field of digitalization and innovative urban Solutions. This is a result of the agreement for a grant of consultancy support signed a year ago between the Sofia Investment Agency and the European Investment Bank.
The methodology is a tool through which Sofia Municipality will assess the potential of project proposals for digitalization and smart city initiatives. It will allow identifying gaps in the relevance of project proposals, their feasibility, and funding prospects. The methodology was developed by an international team of experts from the Deloitte consulting company.
The methodology will be implemented by the Digitalization, Innovations, and Economic Development Department of Sofia Municipality (Innovative Sofia) to the projects set in the Action Plan for Implementation of the Digital Transformation Strategy of Sofia. It will also be used in the”Sandbox for innovative solutions” project – the programme for pilot projects for testing innovative tech solutions on urban challenges defined by the city administration (environment, utilities, education, transport, e-government, entrepreneurship, innovation, etc.). An assessment of the admissibility of the proposals and their readiness for testing and implementation will also be made under the methodology.
Our team would like to express our gratitude to the European Investment Bank and Deloitte experts for supporting Sofia on its path to becoming a digital and smart city. Digitalization will give the city more order, more publicity, better control, better speed and will favor local IT solutions, attract foreign investment, enhance the quality of life and it is a vehicle for economic growth.
Sofia Investment Agency invites entrepreneurs and SMEs to apply for participation in the free programme “Successful together. Develop your business online.” The initiative aims to provide entreprises with the necessary assistance in the current situation of limited opportunities and resources to make the decisive step for preserving and developing their activity through online positioning. In the current economic crisis, the digitalization of the business is a crucial step for survival.
The programme “Successful together. Develop Your Business Online” is free and open to submissions from candidates from a wide range of sectors – from production in pharmacy, technology and food, to services and products in creative industries, IT, research and development activities and others.
The included companies will be able to start their online business with services and expert consultations provided free of charge by the initiative’s partners – The Bulgarian Small and Medium Enterprises Promotion Agency (BSMEPA), CloudCart, DSK Bank, and Mastercard.
130 companies will be chosen and will receive one-year of free access to the e-commerce platform CloudCart, preferential installation on virtual POS-terminal for online payments, among others.
We are announcing the invitation on behalf of the team of CloudCart – a Sofia-based company ranked in Top3 in the world e-commerce industry according to Newsweek. CloudCart software allows you to quickly and easily build an online store with a wide range of pre-integrated features and marketing tools that lead to quick sales without the need for programming skills. Together with CloudCart, we share a common goal – to help entrepreneurs start and grow their business.
Apply for participation in “Successful together. Grow your business online.” by April, 2020.
Find out more about the initiative and an application link here
Logistics, Retail and Distribution Companies Remain the Major Driver on the Market
The advisory company “Cushman & Wakefield Forton” published its Q4 2020 reports on the state of the industrial, office and retail market. According to the data, the completion of 43,930 sqm production and logistics space provided significant input to the industrial market stock in Sofia in the last quarter of 2020. With the new completions, the modern industrial stock in Sofia reaches almost 1.4 mln sqm, with logistics, retail and distribution companies still being the major driver of the Sofia industrial property market.
The new supply includes three large projects – Industrial Park Sofia East, Retail Park Vladimir Vazov and the logistics park of RGS Invest in Bozhurishte, as well as extensions of owner-occupied premises.
Rents in Sofia remain stable, with prime rates in the range of 4.2-4.4 euro/sqm for mid-sized units and slightly below 4 euro/sqm for larger premises, above 10,000 sqm.
The situation on the office space market is different. According to Cushman & Wakefield Forton, 2020 was the weakest of the last five years. The amount of rented space dropped by 39% compared to the previous twelve months. The new completions are lower than expected – roughly 93,000 sqm in 2020 and most buildings obtained use permits with high vacancy rates.
Some companies reconsidered their office space needs, offering part of their premises for sublease. According to Cushman & Wakefield Forton’s research, this supply accounts to about 10% of the available space in Sofia or 28,046 sqm.
Prime asking rents in the central business districts remain unchanged at 15 euro/sqm. The main road and suburban areas’ rents registered a slight decrease. At the end of 2020, Class A projects alongside main boulevards are relatively stable at 12-14 euro/sqm. The increase of vacancy is expected to keep rents under pressure in the coming months, especially in areas with new office construction, the report states.
The average vacancy rate in shopping centers in Sofia slightly decreased in Q4, before the second lockdown, to 7.9%, having reached almost 9% in the previous quarters.
After slight decrease in the previous quarters, the asking rents in Sofia stabilised in the end of 2020 at 53 euro/sqm on average for high street locations and 36 euro/sqm for shopping centers. However, the volatile market keeps rents under pressure. Rents in the retail parks remain unchanged, in the range of 8-10 euro/sqm.
Detailed
At an online conference, the European Investment Bank (EIB) presented the results of its annual survey on the corporate investment landscape in Bulgaria. The event was held on February 8 and was organized jointly with the Ministry of Finance. The presentation of the results for Bulgaria is part of a series of events in all EU countries. TThe survey is based on 12 000 companies across the 27 Member States countires.
The meeting was attended by EIB Vice President Lilyana Pavlova, Finance Minister Kiril Ananiev, EIB Senior Economist and Analyst Atanas Kolev, Deputy Minister of Economy Stamen Yanev, Fund of Fund’s Executive Director Vladimir Danailov, Trakia Tech Chairman Georgi Stoev, CEO and Board Member of the Bulgarian Startup Association – BESCO and others.
Should you be interested, you can get the EIB Investment Survey for Bulgaria here https://www.eib.org/en/publications/econ-eibis-2020-bulgaria, and below are some of the main conclusions.
Highlights of the report
Investment Dynamics
The COVID-19 crisis has affected companies’ investment strategies this year, with more than a half of them (53%) stating that they will either invest less (46%) or invest more than planned (7%), which is close to the EU averages.
Investment Priorities
Almost 59% report operating at or above full capacity in the last financial year. In the next 3 years, enterprises plan to invest mostly in capacity expansion (34%) and new products and services (27%).
Innovation Activities
Almost one third of all firms claim to have developed or introduced new products, processes or
services (28%) which is close to 2019 results but well behind the EU average (42%). More than 55% of all companies have implemented (fully or partially) at least one digital technology. This is below the EU average of 63%.
Drivers and Constraints
Both in BUlgaria and in Europe, the businesses are less optimistic about the overall economic climate. The most cited long term barrier to investment in Bulgaria is uncertainty about the future (86%). This is above the EU average (81%).
Investment Finance
Around eight in ten firms in Bulgaria (83%) and EU-wide (80%) report that they were generating a profit in the last financial year. Internal funding was the main source of investment in
Bulgaria (67%) in 2019, above the EU average (62%). Bank loans made up the largest share of external finance (40%), well below the EU average (59%).
Energy Efficiency
In 2020, 37% of the Bulgarian companies have invested in measures to
Sofia Investment Agency is negotiating a partnership agreement with Varna – another large city in Bulgaria, to work together to attract foreign investors to our country. The cooperation between the two cities will be part of the joint initiative launched at the end of last year between Sofia and Plovdiv to build a national union of the major industrial centers in Bulgaria.
The partnership with Varna will be signed between Sofia Municipality and Varna Municipality. It will aim to develop investment profiles of the cities and through joint efforts and a unified marketing strategy to attract strategic investors to the location with the most appropriate profile.
According to the Institute for Market Economics, Varna Region reports moderate investment activity. The number of enterprises remains high (70 per 1,000 compared to 59 for the country), and domestic and foreign investment is growing. Foreign direct investment reaches EUR 3968/person (compared to EUR 3560/person in the country).
Varna Municipality is working to develop a business-friendly environment that will allow sustainable growth and the establishment of high value-added businesses. In recent years, large companies have expanded their activities in our country by opening offices in our Black Sea capital. At the end of last year, Paysafe chose Varna as its first office outside Sofia for Bulgaria. Sofia-based Pontica Solutions also chose Varna for its second office in the country.
We believe that Varna Municipality is an important partner in our initiative for the national coalition of the major industrial centers in our country, and we will be able to exchange best practices, as well as implement the most appropriate investment projects for both cities.
Sofia Investment Agency will sign a partnership agreement with Burgas. This is the next step in the joint initiative launched at the end of last year between Sofia and Plovdiv for the national union between the major industrial centers in Bulgaria.
The Memorandum with Burgas to be signed with DigIhub (Southeastern Digital Innovation Hub) – a non-profit association that started its activities at the beginning of last year. Co-founder is the Burgas Municipality.
DigIhub is a joint initiative of organizations from the city’s public, private, non-governmental, and educational sectors. Digital Hub’s primary goal is to support innovation, boost the digital transformation of manufacturing enterprises in the Industrial and Logistics Park – Burgas, and the companies in the ICT sector by facilitating cooperation between stakeholders, technology experts, investors, government, and academia.
The agreement has been approved by the Supervisory Board of Sofia Municipal Privatization and Investment Agency and is soon to be signed. The Memorandum will aim to establish cooperation between Sofia and Burgas to make the investment profiles of the two cities and attract investors through shared resources and a common strategy.
Maria Hristova, Chief Executive Officer of Sofia Investment Agency, and Plamen Panchev, Executive Director of the Trakia Economic Zone (TEZ), discussed the opportunities for joint initiatives to develop Sofia’s investment policy. The conversation focused on working models and possible joint activities between the Agency and TEZ in projects related to the development of the industrial and business areas and the attraction of investors in Sofia.
The meeting was the next step in a joint initiative launched at the end of last year between Sofia and Plovdiv for national union of major industrial centers in Bulgaria, which would establish our country as an attractive investment destination through joint efforts, resource sharing, and a unified marketing strategy for our country. We are glad that during the discussion with TEZ, we reaffirmed our shared vision that Bulgaria has strong competitive advantages in the region and has the potential to become a preferred nearshoring destination in Europe. During the meeting, our team spoke about our vision for the future and the models for transforming the former industrial zones in Sofia, which would become modern multifunctional urban areas through proper planning and a balanced mix of functions.
Sofia Municipality and TEZ have a solid basis for cooperation in investment projects due to the expertise of both parties in public- private partnerships, local strategies for attracting investors, managing investment projects, and attracting leading companies from countries such as the USA, Italy, Germany, France, the Netherlands, Great Britain, etc. We also share the common goal to attract investors in high value-added services and industries, at the expense of low-profile ones, and to create a healthy environment for business development and sustainable growth.
In recent years, the public and private initiative TEZ has implemented many successful projects for Plovdiv and the region with the development of 6 industrial zones. More than EUR 2 billion have been invested in an area of 10,700,000 sq.m, and more than 30,000 jobs have been created. The company applies a complex investor service model – from site selection with developed infrastructure, through construction of facilities, to assisting investors in applying for European programmes. The investments in projects agreed for implementation in 2021 amount to about BGN 100 million – in high value-added products, automotive sector, electronic components, logistics, pharmacy, etc.
TEZ also has joint projects with other municipalities in the country (Haskovo, Burgas, Gabrovo, etc.). It partners with Sofia projects for centers of
Sofia is an indisputable leader in investment activity, has the largest number of companies, and the attracted foreign direct investments are significantly higher than the national average reaching EUR 9361 / person per capita. The data are from the ninth annual study “Regional Profiles 2020” of the Institute for Market Economics (IME), presented on 26 January in a live broadcast on Facebook.
According to the report, Sofia is also the indisputable leader in terms of investment activity. It shows the highest investments in tangible fixed assets – BGN 5568 per person at BGN 2750 on average for the country. The attracted foreign direct investments are also significantly higher than the average for Bulgaria – EUR 9361 per capita. The number of working enterprises reaches 91 per 1,000 people, with an average of 59 per 1,000 people in the country.
City government has received a high assessment as well. Sofia administration’s work has been recognized as the most transparent in the country and has the highest rating for the development of e-government and the provision of “one-stop-shop” administrative services.
According to the report, Sofia is the region with the highest gross domestic product (BGN 33,437.00 per capita) and the highest salaries and incomes. The employment rate reaches a record level of 76.4% (compared to 70.1% in the country). The lowest value in Bulgaria’s modern economic history is noted by the unemployment rate – 1.6% (compared to 4.2% in the country). The average annual gross salary in Sofia reaches nearly BGN 19,000 and exceeds Bulgaria’s average by over 38%.
Sofia remains the area having the workforce with the highest educational attainment levels. It has the most favorable demographic structure and is among the few regions that continue to attract people showing a positive mechanical population growth rate of 2.4%.
Sofia has weak performance in only two criteria – taxes and fees and security and justice. The first is due to the fact that the capital has the highest local taxes in the country and the second – to the increased workload of judges and the relatively large number of crimes.
The annual study “Regional Profiles” by IME is the only one of its kind in terms of scale and depth of the social and economic situation of the 28 regions in Bulgaria. The analysis is based on 64 indicators and this year it focuses on the labor market and the effects