A survey by Ernst & Young has found a contradiction between how investors see countries in South Eastern Europe and actual levels of investment in these countries. 

Bulgaria ranked second in inward foreign direct investment (FDI) towards the South East European Region, having received 25 per cent (174 projects) of the total FDI, but its image among international investors is not very positive, according to the survey.

Ernst & Young’s conclusions included that EU accession emerges as a significant opportunity to further improve Bulgaria’s image abroad.

The Southeast Europe Attractiveness Survey 2006 involved an opinion poll among 200 senior corporate executives worldwide in October 2006.

The survey found that South Eastern Europe was steadily improving its image as an attractive destination for foreign investment.

Romania emerged as the favourite destination among foreign investors.

Ernst & Young has been doing a European Attractiveness Survey every year since 2002 to gauge the nature and conditions of foreign investments in Europe.

A similar survey of seven South Eastern European countries, Romania, Bulgaria, Greece, Serbia, Turkey, Cyprus and Moldova, was done last year.

The company said that the objectives of the survey were to measure the perceptions of respondents about the attractiveness of the South Eastern European region as a whole, as well as the attractiveness of the individual countries within the region and to compare these perceptions with actual FDIs, provided by Ernst & Young’s European Investment Monitor (EIM).

“Emerging markets are attracting more capital inflows and South East Europe is emerging as a major contender for global emerging market FDI,” said Ernst & Young Bulgaria country managing partner Panos Papazoglou.

Key points of the survey’s finding included that Western Europe was perceived to be the most attractive European region as potential investment location (34 per cent), followed by Central Europe (18 per cent). South East Europe was gradually building its attractiveness. Eight per cent of international investors (not established in South East Europe) spontaneously ranked South East Europe as the most attractive European region in terms of locations where to establish operations.

The survey found that the attractiveness of South East Europe was based on financial criteria. Forty per cent of respondents believed that South East Europe wa the most attractive region in terms of low labour cost, and 31 per cent in terms of productivity increase.

The survey found that Bulgaria needed to improve its image among foreign investors.

From 2001 to 2005, Bulgaria received 25 per cent of all FDI in South East Europe, ranking 2nd after Romania (40 per cent) and before Turkey (20 per cent). These three countries received 85 percent of the total FDI in South East Europe between 2001 and 2005.

Bulgaria’s image among foreign investors was weaker than the actual FDI the country attracted.

Respondents ranked Bulgaria as the fourth most attractive country in South East Europe in terms of location where to establish operations (44 per cent), behind Romania (58 per cent), Turkey (49 per cent) and Greece (48 per cent).

Bulgaria was perceived to be the second most attractive country within South East Europe in terms of labour costs (19 percent) and corporate tax (12 per cent).  The FDI profile for the period 2001 and 2005 showed 17 500 jobs created in the country.

Those polled held that Bulgaria had to further improve its transport and communication infrastructures (29 per cent), ensure the stability of its political, legal and regulatory environment (27 per cent), meet European economic regulation standards (25 per cent), implement more flexible and simple administrative procedures (23 per cent) and improve the quality of life (20 per cent).

There was some significant optimism. Sixty-two per cent of respondents said that over the next three years, Bulgaria’s attractiveness as a potential investment location would improve (Romania 68 per cent and Turkey 59 per cent).

Ernst & Young said that, based on the experience of previous surveys by the company, EU accession was bound to improve Bulgaria’s image abroad in terms of the transparency and the stability of its political, legal and regulatory environment, as well as in terms of quality of life.

Furthermore, the country’s telecommunications and transportation infrastructure will also gradually improve, the company said.

However, the downside of Bulgaria’s accession to the EU was that it would have to compete directly with other countries, such as Hungary and the Czech Republic, on the basis of the same set of rules.