A large-scale investment of more than EUR 600 million in the field of manufacturing critical components for the automotive industry is expected to be implemented in early 2024 in Bulgaria. At present, the Western European investor, which has several production locations in Europe and experience in Bulgaria, is considering with the state two options to locate its production: in Northern Bulgaria — around Ruse, or in the region of Stara Zagora. This was announced in an interview with BTA by the Minister of Economy and Industry Bogdan Bogdanov.
Minister Bogdanov pointed out that this is one of the main trends in Europe and is related to the development of electric autonomous vehicles, and Bulgaria is positioned in this sector, with the trend, according to ‘Automotive Cluster Bulgaria’, next year its contribution to the national economy to be between 10 and 12 percent of GDP.
Minister Bogdanov clarified that the upcoming investment at the beginning of next year is only one of several investment plans for 2024 that are being worked on.
Investments
The Minister of Economy reported the year 2023 as successful for Bulgaria against the background of what is happening in Europe and in view of the economies of Germany and Austria entering recession and noted that for this year our gross domestic product is growing by nearly 2 percent and foreign direct investment for the first ten months of the year alone is a record and reaches EUR 3.4 billion , which is nearly 54 percent more than in the same period of 2022. Among the factors for this positive trend, the economic minister highlighted the growing confidence of investors in the country’s business climate and their improved perception of the predictability of the state’s actions. The existence of a regular cabinet, its firm commitment Bulgaria to join the Schengen area and the euro area, the stable financial framework contribute to this process. A factor for the improvement of the investment climate in the country is also the adopted state budget for next year, which provides for significant capital expenditures in infrastructure, as well as the transparent policy pursued by the Cabinet, the minister said and noted that all this gives positive signals to investors that our economy and financial system is stable.
Regarding foreign investments this year, Minister Bogdanov noted among the positive aspects the fact that a significant part of the investors’ profits are reinvested in the country, which in his words is a clear indicator of the returning trust in Bulgaria. Minister Bogdanov noted that the reinvested profit for the period January-October 2023 is nearly EUR 2.8 billion, pointing out that compared to the same period in 2022 this is an increase of about EUR 1.4 billion. The new investments in Bulgaria are mainly in the manufacturing industry, the growth of industrial investments in Stara Zagora, Ruse, Shumen, Plovdiv, etc. is significant — mainly of Western European companies — Austrian, German, etc.
Minister Bogdanov said that this year the main flow of investments in Bulgaria is from the Netherlands, Belgium and Switzerland, and reminded about the last announced Belgian investment of EUR 1.1 billion.
State companies
After the reform of the state-owned companies started, they have already submitted their business plans to the Ministry of Economy, have clear investment programmes and financial statements. Most of them now also have reduced board composition, reduced directors’ and board salaries, and reduced representation expenses. We have a significant amount that will be saved to the state, the economy minister said.
Bogdanov said that from 2024 a new clearer methodology of remuneration of the management of state companies will be introduced, which will be linked to the generated results of the enterprises. This is necessary because you cannot compare a company like VMZ, for example, which generates between BGN 600 and 700 million profit and has several thousand employees with the National Company ‘Industrial Zones’ (NCIZ), for example, which is less than BGN 10 million per year, Minister Bogdanov explained.
In general, the state-owned companies send 2023 with high levels of turnover and profit, with the leader being VMZ — Sopot, whose final financial results will be known in January, but the Ministry’s expectations are for record levels in terms of production capacity, and the contracts signed provide the company with a horizon for work. We have secured production for the next few years. In addition, the company has several investment projects, participation in the European initiative to increase the capacity for the production of shells, as well as opportunities to expand production and take new orders to NATO standards, which will secure the VMZ as capacity for at least the next 15 years, the minister said.
Abuse
The ministry is conducting several cases in connection with suspected abuses in the repair of dams, with estimates of damage to the state of about BGN 600 million. The ministry has taken the cases to court, although the prosecutor’s office has refused to initiate proceedings on the issue of the dams, despite the fact that reports from the Public Financial Inspection Agency and the Court of Auditors have been attached to the case. The prosecutor’s office will also be referred to because of the justified proposals for deliberate damage to ‘LB Bulgaricum’ with nearly BGN 1.5 million. The company sold below cost products without justification. The inspections showed that the company was apparently being led to bankruptcy, Minister Bogdanov said, specifying that these were decisions taken to the detriment of the company in the period from the end of 2022 to July 2023. We have raised production to 100 percent capacity, because until the summer of 2023, the company was operating at only 60 percent. We have also launched public tenders for raw material supplies and from Bulgarian producers. We will stabilise the financial results, Minister Bogdanov said.
On the subject of the government complex, on which more than BGN 86 million were spent without public procurement and without financial justification, having been transferred in advance, Bogdanov pointed out that action had been taken to cancel the contract with the contractor. There is a development there and the state will get back a substantial part of the funds, expressing the expectation that as early as January it will be able to get back from the contractor the initial BGN 46 million. We also charge a daily statutory interest which accrues on the amount not repaid. We have indications that it will be reimbursed by the company and the State Consolidation Company (SCC) will stop repaying the loan, which is drawn from the Bulgarian Development Bank and on which it owes interest of BGN 6-7 million per year, because all this continues to harm the taxpayers, the minister said.
Regarding the case for the acquisition of claims and shares between the State Construction Company EAD and the commercial company ‘Kemira’, which the ministry lost because of missing documents and a null contract, Minister Bogdanov reminded that it was being appealed, but added that he was not optimistic that the state would be compensated for the damages of about BGN 97 million because most of the companies were already bankrupt and the assignments in question were not real. We see some hollow companies. It is very likely that this will be another damage done to the SCC, and this raises the question whether this company — with this model of operation and this structure, has a future in view of the damage done, the minister said. We are waiting for a prosecutor’s inquiry into the cessions that have taken place because they may turn out to be fictitious, he added.
The future of the SCC
The SCC does not need to remain in its present form as a structure because it opens the door for inhouse procurement — the main mechanism by which contracts were awarded and losses generated, the economic minister said. The future of the SCC is in question, but a hasty decision cannot be made that does not take into account the need to preserve all working assets of the SCC, Bogdanov added. We need to keep all working assets like the VMZ and not continue to cover the losses generated, the minister said.
He pointed out that the total amount of damages for the SCC amounted to BGN 700 million , generated mainly in a few months in 2018.
The campaign ‘Affordable for you’
Minister Bogdanov reported as successful the Ministry’s campaign for a permanent reduction of prices of basic foodstuffs. We started with three economic operators and 200 outlets in the country, and now they are already over 450, with one more large chain joining in the last week, the minister said, noting that this means the campaign is already close to more citizens. Among the permanently low prices of goods from the small consumer basket he pointed out those of oil — between BGN 2 and 2.30, eggs — about 38 cents, sugar, rice. The campaign is expected to last at least until May, but according to Bogdanov there are already indications that it will continue after that. The next stage of the campaign foresees the development of an interactive map from which users can find the product they need in the nearest store. Expansion of the initiative remains on the agenda, with indications that pharmaceuticals will be included in the Ministry’s campaign from 2024.
Gasoline prices and the possible sale of the refinery
Minister Bogdanov said that unless there are significant shocks on global markets, there is not expected to be a spike in the price of gasoline next year. In October and November there was even a decrease in prices, we hope this trend to continue next year, Bogdanov said. He recalled that in recent months a plan and timetable had been developed in relation to the abolition of the derogation for Russian oil. We are continuing talks with our European partners, both in terms of controlling the export of oil products, because Bulgaria cannot cope with this process alone, and in terms of future supplies of raw materials for the refinery, the economic minister said.
He said that apart from Lukoil’s already stated intention in the media to talk to a potential buyer, no such formalised intention had been sent to the government. According to the Minister of Economy, however, there is no lack of potential interest in the refinery. The important thing, however, is that the state plays an active role in the process to be able to protect this key asset for our national security and to prevent it from falling into unscrupulous hands, the economic minister said. We need to get out of this dependence we have had for the last 15 years, Bogdanov said.