Cut through the media and political hype and the truth is blatant: Bulgaria’s economy is in danger of another crash.
Credit rating companies don’t tell lies; politicians and brokers often do and if this worst-case situation becomes a reality in the near future, everyone will lose out, but none more so than the average Bulgarian family, who was just starting to feel the positive effects of development.
The past few years have seen a boom in the Bulgarian economy caused by stable political and economic trends and the push for European Union membership and driven by a combination of foreign direct investments in the real estate sector and an increasing flow of foreign tourists, etc. Bulgaria was described as “the new Spain”, luxury properties were constructed with lightening speed, new resorts created and cash poured into the creation of golf courses and yacht marinas.
The Bulgarian dream was about to become a reality, or so it appeared.
However, a bubble seems to grow every month reflected to the increasing budget deficit. In the year 2007 the deficit was 21.6 per cent of GDP going from 15.7 per cent in 2006. The imports are driving up the deficit. An 18.7 per cent increase in imports in 2007, while export only rose to 11.7 per cent according to the Bulgarian National Bank. Too many cars, too many goods and travels financed with loans and investment capital. This does not look good especially, when considering the meltdown of the property financial markets as a result of the sub prime crisis. Let us not forget the demand for increased pay, which in turn is fuelling inflation. Sadly lacking in this picture, are improvements in productivity and wealth generating infrastructure in tourism. We need a world-class tourism university in Bulgaria, a national strategic tourism development bank, new airports yesterday, we need hospitals, we need safe roads, we need super spa and wellness facilities, we need La Santa Sports Bulgaria, programme for national clean up of nature, we need first class theme parks, we need more golf courses like Lighthouse Golf Resort & Spa, we need top-class marinas, we need quality in the development of the skiing resorts, etc.
Niggling indicators indicates to a future fall in tourism and without swift action Bulgaria will maybe find that bargain-hunting tourists have gone elsewhere and that they have not been replaced by a wealthier class of visitor. They have no reasons to come here, when they can go to France, Greece and Spain, etc.
Bulgaria is becoming too expensive too fast, out-pricing itself from the mass market of package tourists. Instead of raising quality, it was busy raising prices, but giving nothing positive back to enhance the tourist experience. Like a cheap brand of aftershave, the scent of discount is overpowering in comparison to destinations like Greece, Turkey and Spain. The rubbish-strewn countryside, potholed roads and the high density, low quality development across the Black Sea coast and within the ski resorts is testimony to the lack of effort put in to raising standards in what could have been an exotic new destination.
Realistically the only card to play is tourism.
Lacking in oil, high technology, innovation, a high-class education system, biotech and the capacity to compete with aggressive Far Eastern production markets, Bulgaria was handed a window of opportunity to lift itself from poverty by creating a thriving tourist industry capable of taking the country into the next decade. Yet, the current decision makers and the Bulgarian business elite fails to seize this chance and shows incompetent national leadership and thoughtless, reactive marketing strategies to position Bulgaria in the competitive tourism landscape of Europe and indeed the world. The potential is still there, but it nobody in power is taking this fact seriously enough. The point is that we have to take put this on the top of the agenda, because the development of Bulgaria depends on it.
Even the EU is facing enormous problems in aiding the improvement of the country’s infrastructure because millions of EU funding is not easy to invest because of the tradition of corruption among the old generations of decisions makers.
In this instance local media is littered with examples and citing of extreme corruption and the hope of smashing this destructive behaviour is non-existent.
Bulgaria is still among the poorest of EU member states and it looks set to plummet further into the poverty trap before it is offered another opportunity for change.
May be when this happens, Bulgaria will – because of threat of poverty – be forced to implement a competitive strategy by, for instance, forming a consortium of responsible, principled participants – municipalities, organisations, municipalities, political parties, trade unions and private companies interested in implementing a long-term and sustainable national strategy to put Bulgaria at the top of the worldwide tourist industry.
The group should work fast to prepare a strategic action plan, to be introduced and implemented by a new generation of younger politicians more in touch with the modern world. This strategic consortium should be endorsed and financed by the EU or IMF, needs to be headed up by a top Bulgarian executive change manager, who currently works in the tourist market and should be a joint venture with one of the leading consulting companies like McKinsey and Partners, KPMG or PriceWaterhouseCoopers. Whatever strategy the group draws up, it needs to be cultivated, sophisticated and controlled. Let us find the path for Bulgaria that pulls us away from poverty.
Which Bulgarian leaders will lead the change?
Rene Rasmussen
Manager, M. Sc. Commercial Law & Business Adm.
