Bulgaria's Potential for Sustainable Growth & How to Enhance it in 2011

Views on BG | January 3, 2011, Monday // 13:58
Bulgaria: Bulgaria's Potential for Sustainable Growth & How to Enhance it in 2011 Tsvetan Vassilev is the Chairman of the Supervisory Board of Corporate Commercial Bank AD. Photo by BGNES

By Tsvetan Vassilev*

New Europe

In the last twenty years Bulgaria has unfortunately established a reputation as a country of economic turmoil and permanent crisis. Undoubtedly, its recent past has been quite turbulent and characterized by chaotic development in the various sectors and industries. Politicians promoted senseless reforms just for the sake of reforming without setting clear goals for the future and without considering the impact of their actions on the economy and on society. Indeed, most reforms were too fragmentary and sporadic to target the core of Bulgaria's problems or to provide a long-term strategy for sustainable development.

Hence it is not surprising that the international community is concerned about Bulgaria's economy and role on the global scene. Nonetheless, they should be aware that Bulgaria is a country with a lot of potential that is yet to be exploited.  Bulgaria has always been a competitive player on the global market and has established traditions in many strategic sectors of which I will present the three I consider of utmost importance. Bulgaria's growth, however, is inhibited by the lack of a consistent and viable national strategy—an uneasy task that should be the country's priority in 2011.

Where does the potential for sustainable growth lie?

First of all, Bulgaria has been and still is a regional energy power with notable expertise in the full spectrum of energy production. Bulgarian NPPs, HPPs, and TPPs not only abide by international security standards, but also sell energy at a significantly lower price than their counterparts in most EU countries (approximately 55 ?/MW). Bulgaria has always produced more energy than it consumed and has traditionally exported to Turkey, Greece, and the rest of the Balkan Peninsula.  In addition, due to its geostrategic location, Bulgaria is a desired partner for international pipeline projects such as Nabucco and South Stream which are meant to foster the energy security of Europe and which are to be negotiated in the near future.

Bulgaria has also turned into an important tourist destination that attracts visitors from as far as Japan. The roots of Bulgarian tourism can be traced back to 1896 when the first mountain resort was established and 1908 when the first resort on the Black Sea coast was founded. Today, for a country of its size, Bulgaria can offer an impressive array of tourist options: sea, mountain, and balneological resorts as well as a considerable cultural heritage. While in the past Bulgaria was primarily the choice of East Europeans, in recent years it has attracted the attention of EU tourists as well due to the good price-quality ratio. In 2008 the country received more foreign visitors than the size of its population: almost 8.6 million.  This sector is to be further developed since there are numerous natural and archaeological sites that have not been discovered by the general public.

Agriculture is another major sector which is often underestimated, but which could turn into a worthy engine of economic growth. Bulgaria has 6.2 million ha of agricultural land of which 4.8 million ha is arable. On one hand, this land is valuable because of the climate advantages and the omnipresence of water sources. On the other hand, the price of land in Bulgaria is much lower than in other EU countries. For instance, while in Italy arable land can be purchased at 20 000 ?/ha, in Bulgaria it could be bought at 2000 ?/ha. Moreover, Bulgaria currently receives only 110 ?/ha in European subsidies whereas Austria and Greece obtain as much as 500?/ha. Even though agriculture represents only 7.5% of Bulgarian GDP, it has the potential for major expansion particularly in the field of organic farming since the country has neither taken full advantage of its agricultural production capacity nor of European funding.

Why is the potential for growth exploited inefficiently?

It is not a secret that Bulgaria needs a profound administrative reform, but its benefits should outweigh its costs and its side effects. For a long time Bulgaria simply lacked politicians with a clear vision and strategy on promoting Bulgaria's most valuable assets. More specifically, Bulgarian politicians rarely analyzed the needs of Bulgarian business and seldom consulted representatives of the Bulgarian industries in order to hear the real problems which they encountered in the span of their ordinary business activity. In traditional market economies, however, the opinion of business counts.

Furthermore, most Bulgarian governments dedicated more time and energy on blaming their predecessors about the state of Bulgaria's economy instead of concentrating on the country's future. Neither dwelling on the past nor witch-hunting is a policy that gives results or promotes economic growth. It is more strategic and fruitful to demonstrate how bad the predecessors were by the example of hard work and sound leadership.

Bulgarian governments also need to deepen their relationship with the Bulgarian scientific community. Although good advice is just a door away, Bulgarian politicians have a tendency to ignore the voices of leading Bulgarian professors and researchers in the field of economics. Many of them have called for optimization of administrative structures and cutting down of public expenses. While these ideas can improve the country's macroeconomic outlook, they have been ignored.

Finally, the EU has a decisive role in integrating Bulgaria as an equal member of the European family. Sadly, there are numerous European projects that have been completed, but have not been refinanced by EU authorities. This phenomenon hinders development in multiple sectors, interrupts Bulgaria's progress towards a better future, and jeopardizes EU credibility before Bulgarian business.

 

*Tsvetan Vassilev is the Chairman of the Supervisory Board of Corporate Commercial Bank AD

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Tags: growth, crisis, economy, Bulgaria, agriculture, tourist, energy

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