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Bulgarian-Dutch Business Club Chair Schouten: Bulgaria Is Best-Value for Foreign Investors

Bulgaria-Netherlands » BUSINESS | Author: Ivan Dikov |January 27, 2010, Wednesday // 15:17
Bulgaria: Bulgarian-Dutch Business Club Chair Schouten: Bulgaria Is Best-Value for Foreign Investors Koos Schouten, Chair of the Bulgarian-Dutch Business Club in Sofia.


Interview with Koos Schouten, Chair of the Sofia-based Bulgarian-Dutch Business Club, for the Dutch Survey ("International Survey: Bulgaria-Netherlands") of Novinite.com (Sofia News Agency).


According to the InvestBulgaria Agency, the Netherlands has been the second largest foreign investor in Bulgaria since 1996. Why have Dutch investors been attracted to Bulgaria on such a scale? Why do you think the Netherlands has overtaken countries such as Germany, UK, USA as a foreign investor in Bulgaria?

The explanation for that is that Holland has a very low taxation for world headquarters based there so you will find that many companies that have nothing to do with Holland as technically Dutch investors in Bulgaria. Even the former Balkan Bulgarian Airlines Ltd when the Israeli company was the owner, was actually a Dutch-registered company at the time, and I believe that certain parts of Lukoil are actually Dutch limited companies.

So the statistics are false. They are correct financially and statistically but this is one of those moments where you come to realize that you can’t always trust statistics.

What would you say is the share of the small and medium enterprises, or the genuinely Dutch companies in Bulgaria?

The real Dutch companies that are in Bulgaria include the ING bank which is here as a wholesale banker not as a retail banker at the moment, and Heineken, which has bought the Zagorka breweries. And there are some other smaller companies. The Dutch multinationals are all here – or such as Unilever – sometimes they are represented through regional headquarters in Budapest, or in Bucharest, or in Athens.

After them come small and medium-sized enterprises (SMEs) although they might be representing larger entities in Holland. There are many larger Dutch logistics companies in Bulgaria. Actually I think all the major players in the Dutch market are now here; if they are not here in their own right, then they are here through a Bulgarian partner that has their label on its trucks.

In the agriculture we also have quite a bit of diversified Dutch investments even though they are not staggering; they didn’t buy up Dobrudzha (i.e. agriculture region in Northeastern Bulgaria – editor’s note) – even though some of the farmers would like to.

The funny thing is that the Dutch real estate investments in Bulgaria were relatively small. They had a very low exposure to the collapse of the mountain and beach property markets. Which is actually good because at the moment there is a growth in the Dutch investments in the Bulgarian real estate market.

And I dare say, to the best of my knowledge that only the Dutch investments are growing in Bulgaria’s real estate market. It is very strange. More is being sold now in 2009 to Dutch businesses or owners in 2009, than in the years before, according to what I know from the people who are directly involved in Dutch-Bulgarian real estate firms. Because they were not here to lose their money earlier. The Dutch are very conservative with these things. They always seem to like to see the wave go by, and take the next wave.

What other sectors of the Bulgarian economy have proven attractive for Dutch investors?

There are more sectors. One of the big sectors at the moment is alternative or green energy. We have a lot of knowledge in Holland, and a lot of technology is being exported to Bulgaria. Also, again in SMEs because a lot of these consultancies are also smaller companies.

Then there is carbon trading, there are a few companies operating in the field now, and those are smaller companies but they deal with big amounts of money so the carbon trading is becoming a very serious industry.

And there is an expansion of Dutch tourism. We are seeing more Dutch tourists in Bulgaria than ever before. And the Dutch seem to like Sofia for city tourism. Many Dutch people that I meet here as tourists or business visitors who enjoy the city for what Sofia has to offer. Which is – especially in the summer – nice terraces, cheap beer, relatively good food, nice looking women, the whole package. It is just right for weekend tourism.

The growth of weekend tourism in Bulgaria from Holland is amazing. Especially with the new flight from Eindhoven to Sofia from Wizz Air. It’s fantastic. I spoke to the people from Wizz Air about who is on board, and I spoke to several travel agencies that are involved in the Dutch market. I was at the Plovdiv Fair and I met several Dutch tour operators that were talking about buses and stuff, and they were amazed by the cheap market for Dutch tourists in Bulgaria.

Which is maybe something not to be proud of, but it is very good to have. Let’s be honest. Beggars cannot be choosers at the moment, and the whole Mediterranean is dying – because I consider Bulgaria part of the Mediterranean tourism, it sounds a bit strange but it is a more Mediterranean country to me than any other of the Black Sea countries.

So the Dutch people who come here – three months ago they were in Bratislava for a weekend, or in Krakow, you know. And that is really interesting because that is direct business money into the Bulgarian economy. That is not through some vague EU sponsoring nonsense. This is all about real cash coming into the hotel owner, the baker, the butcher, the cleaning lady. To me that’s real economy, and if that can be promoted through cheap flights or cheap beer, let’s have more cheap beer.

In your view, what is Bulgaria’s greatest advantage as a foreign investment destination? Are the low taxes, which have been much advertised by all recent Bulgarian governments, enough to attract foreign investors such as Dutch companies?

Of course, low taxes are tempting. The problem with that is that Bulgaria has elections every few years, and is changing governments, opinions change, ministers of finance and economy change, different personalities come into town.

I’ve been here for 11 years so I remember the Kostov gang, the King’s gang, the Socialists, and everybody changed the rules. So to start a company here based on the low taxes is a suicide. That’s the case anywhere in the world, if you base your company on government incentives – because they are very temporary. I like, by the way, what the Macedonians are doing. That they guarantee for five years certain projects.

But in Bulgaria I don’t see any long-term guarantees, I see short-term guarantees that could change in six months. If in six months the Prime Minister feels that we need to go to a different, lower VAT and up the income tax, it’s all over, so I would not put my eggs in that basket.

The companies that I deal with a lot because I am in the IT business – how should I put this... I just came from a meeting with an American IT company that has more than 100 people working for it in Bulgaria, and one of the things that I discussed with the CEO there was the good value in Bulgaria, i.e. quality of what we get proportional to the salaries.

So, yes, we could open up somewhere else, we could go to a provincial city in Russia where the salaries are very low, we could go to “Another-stan” but the point is that in Bulgaria we are getting a great value for our money – a very highly educated workforce relative to the costs.

I know that Bulgarians are very critical of the quality of their education system at the moment but it is still one of the highest in Europe at the moment, in my eyes, in terms of what you are getting, and the people coming out of the high schools.

I make websites, that is my main business. And this is the only country that I have worked in – and I have worked in quite a few Western European countries – where designers can also do algebra. Designers in Bulgaria can count. You can work in London, or Amsterdam, or Paris, or Milano, where I was before I came here, and then you have designers and they design, and if you are lucky, they can tell you the size of the screen they are working on, and the rest is – talk to the developer. And here my designers have a broad education.

Also, the call centers are growing in Bulgaria at the moment. That is a phenomenal opportunity – because there are so many people here with so many languages. I spoke to a girl the other day that went to the Veliko Tarnovo University, and had Dutch as a language, and I thought she had lived in Holland for years, she was almost without an accent. And she was not that old, we are talking about somebody who came out of university a couple of years ago.

So maybe the comfort zone is not so easy. They have to work harder now, you can’t drift through education any more. But the quality is here, and the Bulgarian people are people that want to be educated. I think that urge is here. Compared to what it is in Holland, and in England – absolutely.

Because everybody here is complaining about the brain drain. Well, you just have to wait until the next class comes out of university. Lots of new people looking for jobs. And the universities are packed with kids who study sciences, or mathematics, or languages. So when you talk to people who invest in this country, it’s not just about cheap labor, it’s about getting a proportionally very high-quality product for the buck, a very good value.

What is the greatest issue that investors from the Netherlands have been faced with in Bulgaria?

Understanding the flexibility of the rules. In Holland everything is black and white, when it comes to taxation, business rules, corporate law. It’s almost impossible to cheat on your taxes in Holland. It is impossible to make VAT mistakes. The rules are so implemented.

In Bulgaria there are rules too. Foreigners, Dutch make a big mistake. They think Bulgaria is a lawless country. No, no. It is a country with a lot of rules that are badly implemented. But the rules are here, the infrastructure is here. There are very few fields of law that I can even think of that have not been tuned up here in the last 20 years. And definitely the last five years.

It is just that there is not that much eagerness to implement them. Why that is – it’s not my problem, that is a strictly Bulgarian problem. If you let people be corrupt, they will be corrupt. If you let people be incompetent because of nepotism, they will be incompetent. That is not for me to comment on because I can see that in different countries.

I do think that in the sectors in Bulgaria that the laws are implemented, and in the sectors that the departments of the government are doing a good job, Bulgaria is equal to Holland. But it confuses the hell out of Dutch businessman when he comes here and is told by his accountant, “Oh, don’t worry.” This is the biggest thing why people come to me and say, “I am not gonna do this!” “Why not?!” “Well, I spoke to three different lawyers, they gave me three different stories. I spoke to three different accountants, they told me three different things.”

I know one occasion where I had to spend two days talking to this guy, and finally he decided to invest in Bulgaria but after I introduced him to a good accountant, and a good lawyer.

Do you know of specific cases in which corruption and/or administrative flaws have led Dutch companies to scrap their plans for Bulgarian investments?  

Yes, yes, very sad stories. Especially in smaller municipalities where the local government, the law, the police, everybody was against them, or they wanted too much “bakshish” (i.e. tip -editor’s note), and then they left town.

But those are stories that are not specific to the Dutch. They happen to everybody around here. I always tell people, “If you want to hear about problems, talk to the Bulgarians, because they have had a lot more problems with Bulgarians than foreigners have had with Bulgarians.”

Yet, 99 out of 100 foreigners that come here to do business encounter very friendly municipalities, ministries. I was even held by the hand by the Bulgarian Ambassador in London and the commercial secretary, I was based out of London at the time, and they are still very good friends of mine – eleven years later. They helped me, and even today you have a wonderful economic support system through the Ministry of Economy, very capable people that can help any type of industry.

And I know that Dutch people go to those places. A Bulgarian would never go there. This is funny. Because the Italians won’t do it either, you know, people from those countries. Dutchmen go to the government. Almost every Dutch businessman in Bulgaria I know – they go to the InvestBulgaria Agency, and they go there, they make an appointment, and they sit down, and they get advice.

One time I went alone, and I thought, “I have to see this.” Because I am also a Bulgaria-skeptic. So I got an appointment, and they were getting me statistics and this, and that. And that was about seven years ago, and I thought, “Wow, this is amazing!”

Three-four years ago I was asked by a company to buy or to find asparagus farms in Bulgaria. Before World War II Bulgaria was a big producer of asparagus, and for some reason after 1944 there was a political issue, it was considered bourgeois to eat asparagus or something like that so no more asparagus.

So I made a phone call to the Ministry of Agriculture. And I know a few people there, and I told them. And they said, “No, we will help you!” They came with a report the size of a table, with all the statistics: where the ground was good, what the soil was. And I said, “Do you do this for everybody?” They said, “Absolutely, if people call us, we will help.”

You cannot explain this to the Bulgarian people. If a Bulgarian farmer goes to the Ministry of Agriculture, I can’t imagine that they would get that welcome. So foreigners get a lot more attention.

And this is one thing I hear from Dutch investors. They say, “Why is everybody so critical? People here are so nice, they help us!”. I have become critical because I have lived here longer.

Also my the Netherlands Embassy, it is small but very supportive; they have a department that liaises with all the different ministries in a very professional way.

Because Holland is not just critical of Bulgaria, it is also a friend of all the good things in Bulgaria, and we only get the press when we say something bad about Bulgaria. But we never get the press when we say good things about Bulgaria both from the Bulgarian-Dutch Business Club, my own organization, and from the Embassy or our Ministry of Foreign Affairs.

There are many positive things noted that are about how individuals within organizations make the difference, and that is never making the press. And there are improvements in the different ministries.

How does Bulgaria fare with Dutch firms in comparison to the other countries in Eastern and Southeastern Europe?

Romania is much more known in Holland. We have something with Romania, I don’t know what it is, but it has always been – even Dutch tourism to Romania was much bigger in the 1970s and 1980s than tourism to Bulgaria. And there is more contact. The Dutch community in Romania is massively bigger.

Do you know of specific cases in which Dutch companies preferred Bulgaria’s neighbors as investment destination over Bulgaria?

You have situations where they come to Bulgaria and the factory infrastructure here has dilapidated so badly and it is very hard to find larger production areas in industry. So I think that ship has sailed for Bulgaria. There are some exceptions but of course in Romania a lot of factories are still operational. Here a lot of factories were closed, say, 10 years ago, and to open up a factory after ten years – it’s not even worth the second-hand value of the steel they have there.

That’s why there are smaller Dutch investments here, and they are also healthier, by the way, because they also go to towns where they actually make a difference.

I see that a lot – for example, we have a very successful wood factory in Lovech, we have a rubber ring factory in Kula, that sort of locations and the size of those operations – they employ a few hundred people here and there – that makes a difference in those economies. And to buy a steel factory outside of Sofia – let’s leave that to the Indians.

The only industry in which I really heard that Dutch companies were leaving Bulgaria’s market was garbage disposal. Because they could not get it – one guy said to me back in the days of Mayor Stefan Sofiyanski (i.e. before 2005 – editor’s note), “We can take care of this problem in six months, and they are talking now about ten years.”

So they got frustrated. There is a frustration with not getting things done. Then, companies are saying this market is so far away. This has nothing to do with corruption, this is just hard work, investing too much just to be in this market.

Because Bulgaria is hard work to do things in. Even when everybody is well-meaning, and we just have to make that assumption. It’s a very hard work to get things done in Bulgaria. Because the first answer you get here is, “No, it’s not possible!” And then you go, “O-kay, can we go to the maybe possible version.” But here always be prepared to hear “No”, and don’t leave the table. When you say that to a Dutch guy, he would say, “Ok, then let’s go have a few beers.”

How has the crisis affected Dutch investors in Bulgaria? Have any of them laid off many workers and canceled large-scale investment plans?

It’s only been good. Especially for the countries exporting back to Holland. All of a sudden we have a lot more clients interested in having quality products for a lower price produced within the EU.

All those aspects are here in Bulgaria. As I said at the beginning, quality is good, value is good, and we are within the EU. People here, Bulgarians always look at EU as an opportunity to go work in another country.

No, it’s about the level of respectability, it’s a predicate, it’s a sticker on your door: “We are a member of a very, very important club. And because we are a member of the club we can sell things, without too many questions asked.” So the labor cost, for example, in Ukraine or Turkey could be lower, or it could even be a better product, but it won’t be a EU-made product. So that I think has been very, very good for our home markets. I sold in Holland a lot more last year than I did the year before so I know that from my own experience.

And a lot of the things done here in Bulgaria are by medium-sized companies which have very high-end wood products, very high-end rubber products, very high-end IT. I don’t make cheap websites in Bulgaria, I hire the best people that Bulgaria has and I make the highest-quality products.

So what Bulgarian products are exported to the Netherlands?

No a single Dutch businessman that I know in Bulgaria is here for the cheap, cheap market. We are not competing with products from Indonesia. Because there is not enough labor force here. I can’t put together a call center of 2 000 people in Bulgaria, and compete with India. But what I can do is I can put together a call center of 20 people – or 20 stations – I would still need 60 people – working in ten different languages that are all engineers who can talk about some technical issue to their clients on a very high level.

And that’s what you see here. It is becoming a very sophisticated service industry country. Go into the call centers. You will not believe what you see. Supporting telephone networks, doctors in Belgium are getting advise from Dutch-speaking call operators here.

And that is growing, not shrinking. More and more people here have the benefit of their multilingual education. That’s very important. And is only true of a few countries. It’s Holland, it’s Bulgaria – there are only 15 million people in Holland speaking Dutch, nobody else speaks Dutch. Eight million Bulgarians if everybody comes home. It’s growing.

And it’s very important that schools from smaller cities are becoming so much better. You see kids from Shumen or Sliven that can actually do the same things as the kids from Sofia – when they come out of high school – university is a different story. I really do believe the regional capitals – cities of that size – that they are competing, and are doing that with budgets that you can’t do anything on. That’s a miracle what they do here.

Now, there is a statement I really want to make – everything I told you so far is based on education. And I am shocked by the way the government is currently looking at the Bulgarian higher education system. I really believe that it should not be done by economists or politicians.

Yes, things have to change but not chopped down that way. We all want to save money, and get things right, and reorganize but I think letting the guys with the budgets control the education – that scares me!

And to use the Bulgarian Academy of Science to make a point against the Socialist Party – that’s taking politics too far into the education system and that borders on intellectual suicide of the nation. I really feel that way. And I am really worried. Not for this year. But I really think that Prime Minister Borisov’s government has to look 20 years from now, and to think if they want to have the legacy of having destroyed the Bulgarian higher education system.

Because he is the one who said in Chicago – “Hey, we are a nation of gypsies and pensioners”, if I remember well. And if he really wants this country to become this nation to become a nation of “gypsies and pensioners” - no offense to the gypsies and pensioners! - but everybody will be going to university in other countries. I feel terrible about it!

What is your impression of the new government and Prime Minister Boyko Borisov?

I love them. I am Boyko’s biggest fan. I predicted he would be Prime Minister. Five years ago I wrote a column saying that he would be the Prime Minister of Bulgaria. But I also said that Hristo Stoichkov would be the President. That still has to happen.. But seriously, I think that Boyko Borisov is the medicine.

How come? Why do you think so?

Because he has the guts. He is not afraid. And if he is, he hides it very well. And he dares to speak his opinion. He is not a committee man, he doesn’t wait, he gets things done.

I love what he did to my own street. His administration here in town fixed the pavement in the center. There are little things.

Mayor Sofiyanski told me personally that it was almost impossible legally to tow cars away, and to put parking meters in this town. A year later the first parking meters came under my window. So the point is, Borisov gets things done. If all the things he gets done are wise things, sometimes they might not be – and that’s why I am criticizing the things I see happening with the Bulgarian Academy of Sciences – but besides that.

Do you have other examples of positive changes brought about by Borisov and the GERB government?

As good as my Bulgarian allows me, I followed the debates on the economy, and his critics say, “Oh, he is only talking back, he is not talking forward.” No, he is talking forward. I am not sure that everything his advisers tell him is right but I like what I hear.

I loved the expression he used for the “witch hunt” of the former officials. Yes, and then I say, “Please, let me carry the wood to burn them on the stake.” Because that is poison to your economy. The only poison that he has is the one that every new leader has – that his own people may become the new witches.

His problem is not “How do I cut down the communists”, it is how to keep his own people under control. And it looks like he has put some rules down.

It’s almost a religion, his party GERB. This GERB thing is turning into a religious experience. You are member of it, it’s not a political party. And I am not being euphoric about it. I am just saying, I see people, when I talk to them, they are saying, “We are making a change!” And these are ordinary people such as my neighbors.

So I think that if he is charismatic enough, and he can get past the women voters – because let’s be honest about it – when he became Mayor of Sofia, he got something like 70% of the votes of all women between 14 and 45 years of age – this is some ridiculous statistics I read once.

If he can keep up the momentum with 60-65% approval rating... because people are fed up with the old nonsense. And as long as his new way forward is different from that. You must give a new leader the benefit of a doubt.

So far I can’t blame him for anything – except for the Bulgarian Academy of Sciences which shocked me – but maybe I don’t know enough. But my wife is doing her Ph. D. in Oxford, and she is also critical of the system here. Foreign Bulgarian academics are also very worried. One of my advices would be – get some young foreign-based Bulgarian professors or doctoral students – of course, from top foreign education institutions. I am not talking about people who go to the North London electricians’ college.

Because the BAS is top education. Sofia University is top university. It is not the greatest but it is good. So we need to get the input from people at Oxford, Cambridge, the top American universities, the Sorbonne. There are plenty of good Bulgarians there at those schools that would be able to give great advice because they mean well. None of those people will come back to teach here in Bulgaria – except for free. But they would definitely give every type of advice.

Is there anything that you find particularly amazing about Bulgaria, the Bulgarian people – anything you would like to share about your “Bulgarian experience”?

Every day I see things here that make me wonder why I am here, and then every day an hour later I realize why I haven’t left. And that sounds a bit philosophical, and what I mean to say with that is that there are not that many mysteries if you are just doing normal business here.

If you are staying within the confinement of the law, if you are dealing with respectable institutions. I don’t know one case of people having mafia problems. It’s always the people that are letting themselves be guided into the gray that have these problems.

Nothing here worries me, scares me, that I would not experience in Amsterdam. The one fantastic thing – I live in the center of Sofia, the heart of Sofia. And I have lived all over the world – East Coast, West Coast America, London, Paris, Frankfurt, Milano, everywhere. I have never felt safer anywhere else than in downtown Sofia. At 3 am I would happily walk from a bar back to my house.

And that has to do with the fact that in general the people here are good people. That’s what I want to conclude with. Bulgaria is made up of Bulgarians, and Bulgarians are good people.

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