Bulgaria Lures More Foreign Investors Despite Net FDI Outflow
Even though Bulgaria registered a negative balance of foreign direct investments in the first quarter of 2010, an increasing number of foreign investors are arriving to the country.
In January-March 2010, Bulgaria had a negative FDI growth of minus EUR 22 M compared to a positive growth of EUR 926 M in the first quarter of 2009.
The data was announced by Bulgaria’s Economy Minister, Traicho Traikov, in Parliament Friday.
Traikov did point out that the number of foreign firms investing in Bulgaria was on the rise in the first quarter – 214 companies in January, 340 in February, and 424 in March - and that the increase is the first clearly positive trend since the end of 2008 when the economic crisis kicked in. Thus, a total of about 1 000 foreign firms invested in the Bulgarian economy n the first three months of the year.
At the same time, the number of foreign companies withdrawing their investments from Bulgaria was about 120-130 each month.
According to data of Bulgarian National Bank cited by Traikov, Bulgaria had a positive FDI balance of EUR 53 M in January, and EUR 94 M in February, while in March the FDI balance was a negative EUR 170 M
The sharp net outflow of investments in March is due to four transactions of foreign companies which transferred about EUR 200 M from their Bulgarian offices to their branches other countries, Traikov explained while refusing to specify the investors.
“Independent analysts actually say that investors’ expectations for the business climate in Bulgaria indicate an improvement. I will abstain from providing the names of the specific investors but in the last two weeks I talked to two foreign companies, and the InvestBulgaria Agency is talking to them the entire time. One of the companies is planning to invest EUR 30 M in expanding its production, and the other one is mulling a green field investment of EUR 15 M. Both investments will be in manufacturing industries,” Minister Traikov explained.
In his words, the BNB data indicating a net negative balance of FDI in the first quarter do not indicate a trend, while what matters is the increase of the number of foreign firms and physical persons investing in Bulgaria.
Data of the National Statistical Institute released earlier during the week, which was not discussed by Economy Minister Traikov, shows that Bulgaria registered a 412% growth year-on-year of foreign direct investments in the non-financial sectors in the first quarter of 2010.
Thus, a total of EUR 513 M are estimated to have been invested in the non-financial sectors in Bulgaria in the first three months of the year, which means that some EUR 535 M must have been withdrawn from the country in the same period by investors for Bulgaria to have a negative FDI balance of EUR 22 M in the first quarter.
This conclusion is confirmed by BNB data made public at the end of May indicating that the total amount of money owned by Bulgarian banks to foreign or parent companies declined by EUR 505 M since the beginning of the year.
Minister Traikov was severely criticized in Parliament by his predecessor Bulgaria’s former Economy Minister Petar Dimitrov, who occupied the post in the Stanishev government in 2005-2007,
Dimitrov believes that the planned revision of the 2010 state budget (to be voted by the Parliament after June 15) is going to shatter any trust that foreign investors may still for Bulgaria.
He pointed to an article by The Financial Times Deutschland which explores “a conflict” between Bulgarian Prime Minister Borisov and foreign investors such as Siemens and Bulgaria’s three power utilities – CEZ, AVN, and E.ON.
“Every instance of brutal rhetoric is chasing foreign investors away from Bulgaria,” Dimitrov declared apparently referring to the accusations for Siemens and the electricity providers made by Borisov that in Bulgaria the foreign companies do not employ the Western business standards that they stick to in their home states.
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