German companies did not register any improvement in the traditional weak points of Bulgaria’s business environment: corruption, the lack of transparency in public procurements, as well as the poor state of the country’s infrastructure. These were the findings of a survey, published on April 9, carried out by German-Bulgarian Chamber of Industry and Commerce (GBCIC) among 61 member companies in February 2008.

The companies used a six-point system of marks to evaluate the business environment in Bulgaria with five the lowest and zero the highest mark.

The survey results show that, in general, the German investors in Bulgaria are not satisfied with the framework conditions in the country. They found that the effectiveness of local administration, access to funding and the conditions for scientific work were unsatisfactory - all marked with 3.6, while legal security and public procurement transparency  received a grade of 3.8. Even worse was the evaluation for public infrastructure and the fight against organised crime (4.1).

Still, the companies that took part in the survey found positive development trends in the business climate in Bulgaria. They appreciated the low tax burden after the introduction of the 10-per cent flat tax rate, marking it as “good” at 2.0. The entire tax system and administration are considered satisfactory (3.0), as is the politic and economic predictability rated at 3.1. Political stability scored “good” (2.5), but the survey was conducted before the latest rows that shook the Cabinet.

In March, police arrested deputy head of the Interior Ministry chief directorate for combating organised crime Ivan Ivanov and former Interior Ministry chief secretary  Iliya Iliev, respectively, on charges of leaking confidential information about ongoing investigations and overstepping authority, tantamount to an obstruction of justice. By that time, Interior Minister Roumen Petkov admitted to  meetings with people under investigation. In April, Petkov resigned and the Cabinet survived its fifth no-confidence motion, but one of the partners in the ruling coalition, National Movement for Stability and Progress, abstained from voting instead of supporting the Cabinet.

These events could have changed the companies evaluation dramatically.

The GBCIC survey showed that German investors were rather satisfied with their Bulgarian business partners. They found the availability of local providers (2.6), their quality (2.9) and payment honesty (2.8) to be satisfactory.

Labour market in Bulgaria was also evaluated as more or less satisfactory. German investors planned to continue opening new job places, with 57 per cent willing to hire more personnel in 2008. Another 35 per cent planned to keep their current staff. An important observation, made by the German companies, was that it was getting more difficult for them to find qualified personnel. That was why they evaluated the availability of qualified workers as unsatisfactory (3.6). The qualification of current workers was satisfactory (2.7), but newly-appointed workers were not so satisfactory (3.5). Despite the fact that unemployment in Bulgaria was under seven per cent, the lack of workers was substantial in a number of regions and branches, GBCIC said in a statement.

German investors seem to be quite happy with the opportunities offered by Bulgaria, with the internal market evaluated at 2.3 and the access to other markets in the region given a mark of 2.6.

According to the survey, German companies were optimistic about their business in Bulgaria. Most companies, 70 per cent, said that they expected the economy to improve in 2008, compared with 2007. That was why almost half of the companies surveyed, 49 per cent, said that they had planned bigger investments in the country. Another 30 per cent said that they would invest the same amount as last year. As a result, 80 per cent expected a revenue increase in 2008 and only five per cent expected a drop.

The GBCIC survey last year showed the same optimism. The chamber then concluded that joining the European Union on January 1 2007 was making the country even more attractive for German investors. In general, the evaluations of the indices given then and now vary only slightly. The main differences are in the evaluations of the tax burden and internal market, which were considered satisfactory a year ago and are already evaluated as good in 2008. As previously mentioned, German companies are more eager to hire personnel in 2008 (57 per cent), compared to 2007 (44 per cent). However, a year ago 74 per cent of them said that their economic condition was good, while in 2008 that figure dropped to 64 per cent. The number of companies which planned to make bigger investments also decreased year-on-year by eight percentage points.

Germany is the sixth largest investor in Bulgaria. In 2007 alone, German companies invested 1.23 billion euro in the country, data from investment promotion agency InvestBulgaria data showed.

Opacity

It’s no wonder that lack of transparency and corruption have been emphasised as one of Bulgaria’s weaknesses in the latest survey of the German-Bulgarian Chamber of Industry and Commerce for 2008, after Bulgarian authorities failed to prevent the alleged deep conflict of interest in the case of Binder road construction company. The case is an excellent example for the non-transparency of public procurement tenders. Binder, owned by Emil Geogriev, brother of the former head of the National Road Infrastructure Fund, Vesselin Georgiev, won the biggest contract handed out by the fund. This was one of the cases that made the European Commission freeze all pre-accession and part of the structural funds for Bulgaria. In an interview for Dnevnik daily on April 10, Transport and Communication Minister Petar Moutafchiev said that public procurement tenders had been investigated and that new tenders might have to be called.