Finacial Times

by Andrew MacDowall

As expected, Bulgaria's government rode out yet another vote of no confidence this morning, but that won't make the issues that triggered it – corruption and organised crime – go away.

Bulgaria's parliamentarians launch doomed no-confidence votes like it's going out of fashion: this is the fourth that the right-of-centre populist government has faced since it took office three years back. The previous Socialist-led administration faced similar pointless exercises on a number of occasions supported by many of those now in power.

But the latest vote was triggered by two serious events – the issue of a wounding report by the European Commission on Bulgaria's efforts to tackle corruption and organised crime and its progress on judicial reform; and the government's alleged security failings around the Burgas airport bombing which killed five Israeli tourists and a Bulgarian last week.

Leaving aside the latter issue (it's highly doubtful that any other Bulgarian government, or others in the region, could have prevented the bombing) and the blatant opportunism and hypocrisy of the opposition (itself having a lot to answer for on graft during its time in power), there is no doubt Bulgaria has serious difficulties. Again and again, the EU and other bodies have highlighted corruption and organised crime.

While some investors claim never to encounter a problem with either, that is by no means a universal view, and some are doubtless put off Bulgaria in the first place by its reputation. It may be that the burden falls mainly on local SMEs – the lifeblood of the economy.

"Corruption in Bulgaria is a problem that has remained unresolved for many years," Svetla Kostadinova, executive director of the free-market Sofia think-tank Institute for Market Economics, told beyondbrics. "Over the years different governments have made some good reforms, for example on tax, but none has succeeded enough in fighting corruption significantly enough to have a real effect on people and businesses. Business has huge hidden costs in dealing with or bypassing it. Corruption lowers the quality of the business environment and reduces the competitiveness of Bulgarian companies. Also, the higher and persistent corruption deprives Bulgaria from higher FDI which means growth is below potential."

Meanwhile, Bulgaria's weak administrative infrastructure, poorly-resourced police and security services, history of dodgy business deals and its position on major international smuggling routes are all factors behind the incidence of organised crime. This also has an effect on bona fide businesses, though perhaps to a lesser extent that the other difficulties Kostadinova cites, particularly the unpredictable regulatory environment in a political system open to lobbyists.