Executive Director of Invest Bulgaria Agency (IBA)
The Bulgarian Investment Agency was established in 1997 as a state agency under the Council of Ministers under the name of the Foreign Investment Agency. Hristo Etropolski joined the Agency in 2000 and has been part of it intermittently until today. In 2004 the agency became an executive agency of the Ministry of Economy and received its current name. At the end of 2004, the Investment Promotion Act and its implementing regulations were adopted, defining the main activities of the IBA. In 2021, the Ministry of Economy of the Republic of Bulgaria is divided into two ministries: the Ministry of Innovation and Growth (to which the IBA is part of) and the Ministry of Economy and Industry. We bring you Mr. Etropolski, a veteran expert and Executive Director of the IBA.
Mr. Etropolski, what are the main functions of IBA?
IBA has two main functions: marketing and investment services. In terms of marketing we have two main activities: we promote Bulgaria on the global stage by branding our country as a very good place for investment and secondly, we attract foreign investment by participating in various investment events around the world. Priority countries in the Far East are Japan and South Korea, in North America the USA and Canada, and of course Europe. Italy is in the top 4 countries not only in bilateral trade but also in investment and our strategic partner. We are working hard on potential investment projects and we are in very tough competition with other countries. For example, investors from Italy want to relocate their production facilities somewhere in Eastern Europe and they usually look at 3 to 6 countries. We are very active precisely in this process because we provide all the necessary information about Bulgaria: economic, structure of the workforce, including helping to find industrial sites where investment intentions can be implemented. When we win over the investor and he chooses Bulgaria, we provide so-called incentives from the side of the state. This is our other main activity: promoting the successful implementation of investment projects. I have to make one important clarification: IBA does not distinguish between foreign investments and Bulgarian investments, all are treated equally. After all, in order to realize foreign investment, investors need to register a legal entity in Bulgaria with all the rights and obligations of Bulgarian companies. Our important partner is the Bulgarian Small and Medium Enterprises Promotion Agency in almost all our events and foreign delegations so that we can present the whole range of services and incentives that the Bulgarian state provides.
What are these incentives?
We have two types of incentives: financial and non-financial. We certify investment projects that must meet certain conditions, such as volume of investment, economic sector (we do not support all sectors), new jobs. Investment class certificates are prioritized for large and structurally defining investment projects, class A, class B. When a project is certified, it can benefit from incentives. A non-financial measure is the individual administrative service. An expert from the agency is directly responsible for the successful implementation of the investment project, he optimizes the relations between the investor and the state and local authorities in the line of obtaining permits, licenses, etc., and the local authorities are obliged to issue the relevant documents in 1/3 shorter time, as the time factor is extremely important. Another incentive is the possibility to acquire land without auction, which is owned by the state or the municipalities, for the implementation of the investment project. Different companies benefit from different types of measures; these are requested at the time of certification. The first of the financial measures is the reimbursement of the social security contributions of the newly recruited staff for a period of one year when the investment is realised. This is the employer’s social security contribution, which is in the range of 17-19 %. This is particularly important in the high-tech and information technology sectors, because the investment there is in people and not so much in production. Another financial measure is the partial provision of financial resources for the training and retraining of newly recruited staff up to EUR 2 million. This training can also be carried out in other European countries. A financial incentive that has been used a lot over the years is the provision of funds for the construction of the technical infrastructure elements up to the property boundary (e.g. for the construction or rehabilitation of a road). The most serious financial measure that is valid for priority investment projects that are structurally decisive for the Bulgarian economy is the direct cash grant from the Bulgarian government. According to the European Commission regulation, it depends on the unemployment rate in the individual regions. If it is above the national average, the intensity of the state aid is higher. For example, if for Sofia as the most developed location in the so-called South-West region the intensity of eligible state aid is up to 20% of the investment amount, then for investments in Northern Bulgaria and all other regions the state aid is from 50% to 60% of the investment amount. The aim is to encourage investment in areas with high unemployment. These financial resources come directly from the national budget of Bulgaria; they have no connection with EU structural funds, the Recovery and Resilience Plan and the Just Transition Plan. In addition to what we are proposing, companies as Bulgarian legal entities are free to apply for European operational programmes on a competitive basis.
You said that Italy is our strategic partner. What is the agency’s experience with Italian investments in Bulgaria?
From 2006 to 2022, 10 Italian investment projects have been certified under our Investment Promotion Act, very successful, the amount of investment is over BGN 1.7 billion and they have led to the creation of more than 1 000 jobs. And these are just the certified projects, and the agency ultimately certifies a very small proportion of all investments, mainly in the manufacturing and energy sectors.
In addition, bilateral trade between Bulgaria and Italy in 2022 will reach 6.5 billion euros. According to preliminary data of the Bulgarian National Bank for the first half of 2023, trade in goods will amount to 3.35 billion euros, which means that bilateral trade in 2023 will significantly exceed last year’s. More than 14,000 Bulgarian companies have Italian capital or Italian participation. Only Greece has a larger participation, with around 18 000 companies. The agency’s focus is mainly on high-tech industries and large projects, but we are pleased to see that there are a large number of small and medium-sized companies with Italian participation that are developing successful businesses in Bulgaria in the service sector, in the catering industry, etc. In this way, we have the opportunity to experience Italy’s progress in gastronomy, fashion, art, apart from business, manufacturing activities and high technology.
Does the Agency in a way assist SMEs with Italian participation?
We provide them with systematic information materials on the business climate in Bulgaria, but we also work in cooperation with the Small and Medium Enterprises Agency, which targets precisely those small and medium-sized companies interested in entering the Bulgarian market. There is also a well-functioning Confindustria in Bulgaria, as well as a financial institution with an outstanding long-standing experience in the face of Unicredit Bulbank, to which we also refer companies. Because, apart from being a financial institution, they provide the necessary information to Italian businesses about the Bulgarian market. All of us together, each in our own field, are a bridge that promotes and facilitates the entry of Italian companies on the Bulgarian market. The Agency is also in constant contact with the Bulgarian trade representatives in Italy, with the Bulgarian Embassy in Rome, with the Consulates General, with the Italian Embassy in Bulgaria. I would therefore advise Italian entrepreneurs who want to expand their activities in Bulgaria to first contact Invest Bulgaria Agency, the Small and Medium Enterprises Agency and Confindustria Bulgaria.
What are the advantages of Bulgaria as a place for investment?
First, a simple and very competitive tax system. We have some of the lowest taxes, 10% income tax and 10% personal income tax. Very fast process to register a company in Bulgaria, even remotely when a lawyer is authorized. Few resources are needed to put into the whole process, but the most important thing is the short timelines. Only a little slower is the opening of a bank account in relation to the necessary checks and rules of financial institutions. We have very competitive operating costs to do business, a very average and highly skilled workforce. Examples are automotive, information technology. We have established the first institute of excellence in Eastern Europe, INSAIT, for deep tech and artificial intelligence. We are moving in the direction of decarbonisation, more than 20% of the energy mix for electricity generation is from renewable sources. Bulgaria annually exports between 20 and 30% of the energy generated, the natural gas supply issues have been resolved, we have well-established industrial zones: public, private, public-private, we have good logistical connectivity with the Middle East countries. Finally, a very clear indicator is the jump in foreign direct investment in 2022 compared to 2021: almost 50%. For the first 6 months of 2023 compared to the same period of 2022, the jump is 96% according to the Bulgarian National Bank. Industrial production growth in 2022 is 17%. The jump in bilateral trade with most foreign trade partners in 2022 is between 20 and 30%. All this points to a sustainable environment for new investments.
Where do you see opportunities for future cooperation with Italy?
We are currently working hard to attract strategic partners to manufacture solar cells, solar panels and batteries for electric vehicles. In April, through the Investment Agency, Bulgaria became a member of the European Battery Alliance. This is a €250 billion market in Europe over the next 10 years. There are 4 main pillars: critical materials (some of which are produced in Bulgaria), manufacturing, training, recycling. Bulgaria has experience over the years in battery production. In these areas, I see the possibility of a serious partnership, including with companies from Italy. Bulgaria is a place for innovation, for research and development, which has the infrastructure, the specialists and the financial resources to implement them.
* The interview was conducted by Olga Georgieva, correspondent for Il Velo di Maya MAGAZINE