- Vtal Statistics
- POPULATION
- EDUCATION
- LANGUAGE
- NATIONAL ANTHEM
- CLIMATE
- NATURAL RESOURCES

- THE ECONOMY
- VALUE PROPOSITION
- HIGHLIGHTS
- FDI STRUCTURE
- OUTLOOK
 
 

VITAL STATISTICS
 A land that abounds in natural beauty
 
A central part of the Balkan Peninsula, Bulgaria is situated in south-eastern Europe. It faces the Black Sea to the east, Turkey and Greece to the south, Romania to the north and Serbia and Macedonia to the west. Some 38% of its 110,912 sq km of territory (about the size of Portugal) is arable land, with some 35% covered by forests. The Danube River, which crosses the north plains, forms most of Bulgaria's longest (608 km) border with Romania. The mountainous Greek border I the south is 494 km long.

LANDSCAPE: With its open expanses of flatland, spectacular rugged mountains traversed by deep valleys and rivers and pristine, sandy coastline, Bulgaria abounds in natural beauty. Almost a third of the country is situated 500 metres above sea level. Hikers and mountaineers are drawn by some 130 mountain peaks over 2000 metres in altitude. Meanwhile, a record number of visitors in 2004 went on holiday to Bulgaria, attracted by its 220-km coastline. Located at 550 metres above sea level and next to Vitosha Mountain, Sofia is the only capital in Europe that is within a 20-minute drive to a ski resort.

The country itself can be split up into three parallel east-west zones. Extending south-wards from the Romanian border lie the fertile Danubian plains. The central part of Bulgaria is dominated by the Stara Planina (the Old Mountains), the longest mountain range in the Balkans. Sometimes referred to as the Balkan range, it allegedly lent its name to the whole peninsula. It is intersected by the beautiful Valley of the Roses, home to the traditional rose oil industry.

In the south and southwest lie the famous Thracian Plain and the Rhodope and Pirin mountains. The highest mountain in the Balkan peninsula, Mount Musala (altitude 2925 metres) is located in this region. Mount Vihrin (altitude 2914 metres) is a close second. While nature has been generous to Bulgaria, the area is prone to earthquakes and landslides.

POPULATION

Bulgaria has one of the most acute demographic problems in eastern Europe. Low birth rates coupled with a wave of emigration have produced an annual decline rate of 1%, with the whole population shrinking by 1.5m in the last 15 years. The 1992 census showed there were 8.487m people living in Bulgaria at the time. With that figure falling to 7.84m at the end of 2003, population density decreased from 81 to 70.3 people per sq metre.

Low population density is particularly visible in rural areas, which have recorded the steepest decline, with many farm workers travelling to larger towns and abroad. More than 70% of Bulgarians now live in urban areas. With 1.1m people, Sofia accounts for the greatest urban concentration. It is followed by Plovdiv - a distant second with 340,000 - and the Black Sea town Varna, with 313,000 people. Other regional centres include Burgas (193,000), Ruse (160,000), Stara Zagora (144,000) and Pleven (119,000).

Another concerning statistic is that over 30% of Bulgaria's population is over 50 years old. It is likely to place a significant social burden on the 28% of the population that is between 20 and 50 years old. The Bulgarian labour force is estimated at 3.3m. Unemployment levels have been falling and are currently at 12%. Life expectancy is higher among females, who enjoy an average of 74.56 years, while the age for men is 67.45 years.

Ethnic breakdowns show that Bulgaria is a fairly homogenous country. With 83.6% of the total population, Bulgarians are by far the biggest group, Turks follow at 9.5% and are a well-represented ethnic minority with a lot of clout in Bulgarian politics. This is less true for the Roma, who make up 4.6% of population and are deemed by the European Commission to be somewhat socially and politically marginalised, accounting for the lowest literacy rates within Bulgarian society. Other ethnic minorities include Armenians, Jews and Russians.

Most ethnic Bulgarians belong to the Christian Orthodox church. Christianity was adopted as the official state religion in 865 AD. Despite years of anti-religious communist ideology, some 83.3 % of Bulgarians consider themselves part of the Christian Orthodox church. Unlike the Russian Orthodox Christians, Bulgarians celebrate Christmas between December 24 and 26 along with the rest of the Christian world. Meanwhile, the majority of Turks living in Bulgaria are Muslim. There are some small Protestant and Catholic communities.

EDUCATION:

A literacy rate of 98% and the strong performances of Bulgarian scientists in international contests are often hailed as products of Bulgaria's excellent education traditions. At one time it was a centre for innovation in electronics and computer technology.

Basic compulsory education starts at the age of seven and consists of two stages: the first stage includes Form I to Form IV, and basic education second stage is from Form V to Form VII. All pupils are awarded a form of leaving certificate after each stage. Secondary education, which can last either four or five years, is offered in three types of schools: comprehensive schools, profile-oriented and technical and vocational-technical colleges. Higher education for bachelor's degree normally lasts four years.

Although education is compulsory only until the age of 16, about 80% choose to continue their education, with a high percentage completing tertiary education. Higher education institutions are entitled to train their students for all degrees, and there are a number of specialised technical universities, a medical university and a university of national and world economics. In total, Bulgaria has 43 universities and 45 colleges and technical schools.

LANGUAGE:

Bulgarian is the official state language and is spoken by some 90% of the people. Belonging to the South Slavic group of languages, it is closely related to Serbo-Croatian, Slovene and Macedonian, all which were brought to the sub-Alpine and Balkan regions by migrating Slavs around 500 AD. The South Slavs took on some linguistic influences from the Latin-speaking peoples who lived in this area at the time, such as the Illyrians and Thracians. Many Turkish words were absorbed during the 500-year rule of the Ottoman Empire, and some Russian words were adopted during the communist era. Modern Bulgarian was moulded in the 19th century and is written in a slightly modified Cyrillic alphabet. It is largely based on the dialect of Bulgaria's former capital region, Tarnovo. Turkish is also spoken by ethnic minorities.

NATIONAL ANTHEM:

Previously known as "Mila Rodino" (Dear Native Land), the national anthem was restored in 1965 during the communist rule. It was written and composed in the 19th century by Tsvetan Tsvetkov, a Bulgarian student on his way to fight in the Serbo-Bulgarian war, "proudly rise the Balkan peaks, at their feet blue Danube flows" are the opening lines. When Bulgaria fell to communism, a third verse was added to "Mila Rodino", a reference to Moscow's allegiance to Bulgaria. This line was, however, swiftly removed following the collapse of communism.

CLIMATE:

Like most countries in Europe, Bulgaria is blessed with four distinct seasons. Although the Black Sea coast tends to have milder winters, there is nearly always snow for winter sports in the mountains. The interior of the country, especially the exposed Danube plains, can experience some bitterly cold temperatures, at times below - 30C. The capital, Sofia, is to some extent protected by the Rhodope Mountains, yet the temperatures here can also drop to - 20C in the winter. Bulgarian summers tend to be long, hot and dry inside the country and somewhat cooler on the coast. Temperatures rarely exceed 30 C. July is the hottest month of the year.

NATURAL RESOURCES:

Bulgaria's natural resources are quite limited. It is almost entirely dependent on oil and gas imported from Russia. Locally extracted oil has been around 1000 barrels per day, just over 1% of total consumption.

Nevertheless, there are reasonably sized iron ore and non-ferrous ore deposits, such as copper, lead and zinc. The main sites of iron ore deposits are located near the Kremikovtsi steel factory in the Sofia region. Total deposits of iron ore are estimated at 317m tonnes. Nonferrous ore deposits of copper, lead, and zinc are mined in open cast mines in the Rhodope Mountains.

Bulgaria also has around 40 coal basins, most of which are lignite. All of them together amount to some 4.1 bn tonnes of proven recoverable reserves; coal is principally used by local thermal power stations. Meanwhile, deposits of bituminous and anthracite coal have almost been used up. Pernik basin, located south-west of the capital, and Maritsa, near Plovdiv, are the principal mining areas. Other mineral resources include rock salt, gypsum, limestone, dolomite, kaolin (china clay), asbestos, perlite, feldspar, fluorite and barite.
THE ECONOMY:


TURNING POINT
Bulgaria has become the leading investment hotspot in south-eastern Europe.
Attracting more than 30% of all foreign capital flow in south-eastern Europe, with total volumes reaching Euro 2bn in 2004, Bulgaria is claiming its place amongst the most attractive foreign direct investment (FDI) destinations in eastern Europe. With total foreign investment accounting for 9.2% of its GDR, Bulgaria's FDI per-capita levels are now the highest in the region.

Although the introduction of the currency board in 1997 and the political commitments to the IMF and the EU helped to trigger economic growth, it took some years before foreign investment confidence returned to Bulgaria's market. Until recently, the annual inflow of foreign capital was below Euro 1bn. However, by 2003, the tide was turning in Bulgaria's favour.

It became clear that political and economic stability was firmly anchored by Bulgaria's desire to join the European Union in 2007. Meanwhile, the end of privatisation programmes in the Czech Republic and Slovakia helped to shift investors' attention further south in search of the second wave of convergence and the so-called pre-EU accession discount. For the first time in 2003, foreign investment flows exceeded Euro 1bn, with a record amount of Euro 927m coming from greenfield investments.

However, it will most likely be 2004 that will be remembered as the turning point in Bulgaria's FDI fortunes. Preliminary estimates showed the total amount as Euro 2bn, marking a remarkable increase on 2003 and placing Bulgaria among the hottest FDI destinations in eastern Europe.

According to the Ministry of Energy, revenues for the successful privatisation of electricity distribution companies in 2004 are estimated to be Euro 693 m, which is approximately 35% of Bulgaria's FDI and 5% of GDP. Despite a substantial share of proceeds coming from privatisations, a healthy growth in greenfield investments and reinvestments, reaching Euro 966.7m at the end of October 2004, suggests that the new record set in 2004 constitutes a sustainable upward trend. The total stock of FDI stood at Euro 7.9 bn at the end of September 2004.

VALUE PROPOSITION:

Fiscal competition in eastern Europe is growing fiercer every year. Cutting the corporate tax level has been on the agenda in most countries of central and eastern Europe.

However, most investors say, while low taxes are important, stability is much more important. Yet, communicating a country's specific advantages is becoming increasingly hard, in what is to some extent a marketing war. Nonetheless, Bulgaria stands out as a particularly stable country that offers a very attractive pre-EU accession discount for investors willing to catch the second wave of convergence.

According to Moody's credit rating agency, top reasons to invest in Bulgaria are "strategic location, skilled labour, excellent technical qualifications, competitive cost, robust legal framework and expected EU membership." Although none of these reasons are unique to Bulgaria, there is a degree to which it scores better than its regional rivals.

Bulgaria is constrained, to some extent, by its population size, which at just below 8m people is not likely to attract investors looking for a large consumer market on a par with Russia or Romania. However, it is very similar in size to former FDI champions such as Hungary, the Czech Republic and Slovakia.

With its macroeconomic stability, educated work force and location at the heart of a south-eastern European market of some 560m people, it is an ideal place for manufacturing sites as well as regional support and service centres. Its strategic access to the Black Sea provides a natural gateway to the large markets of Russia, Central Asia and North Africa.

Meanwhile, labour costs are currently among the lowest in the region. The average gross monthly salary is Euro 156, compared to Euro 476 in central Europe. And with 15% of Bulgarians holding a higher degree, it is only a couple percentages behind developed nations such as the United Kingdom and Japan in terms of education levels.

Above all, Bulgaria is considered to be a politically stable country, with all the parties sharing the same economic and political vision. The European Union and the IMF have imposed certain fiscal and macro-economic policy parameters, which politicians are unable to escape.

Meanwhile, an investment encouragement law introduced in 2004 stipulates that investors in the top investment bracket (over Euro 50m) will receive help with information and administrative services as well as infrastructure and building assistance.

While the overall investment value proposition is compelling, Bulgaria still has a lot to do in order to reduce corruption, remove red tape, strengthen its judicial system and improve its infrastructure - all of which continue to act as deterrents for foreign investors.

HIGHLIGHTS:

The biggest projects launched in 2004 include the Austrian Tsankov-Kamuk hydro-power system and the Turkish Sisecam's glass factory project in Targovishte. Tsankov-Kamuk, the first joint venture of its kind between Austria and Bulgaria, was launched to install a new hydropower facility in the southern part of Bulgaria.

Another FDI flagship project was launched in July 2004, when Turkey's Sisecam announced that it was building the Balkans' first sheet glass flow line in Targovishte (north-eastern Bulgaria). The company said it would invest $100m in fine glass production capacities and $60m in manufacturing glassware. This represents the biggest greenfield project to date and is a sign of good neighbouring relations with Turkey. Some 85% of Targovishte factory's output will eventually be destined for EU countries.

FDI STRUCTURE:

While financing Bulgaria's external deficit, FDI plays a crucial role in the process of technology transfer and productivity growth. Yet, some critics point out that a substantial part of FDI goes into boosting consumption rather than productivity, with lots of investment going into the retail sector and trade as well as low added-value manufacturing plants, such as textiles.

According to the latest statistics, the sectors that attracted the most FDI in 2004 were: transport and communications (Euro 345m), manufacturing (Euro 124m) and banking (Euro 123m). By country of origin, Austria invested Euro 463m, followed by the Netherlands with Euro 167m, while Greece accounted for Euro 104m of inflows. Total figures from 1998 to September 2004 show that industry absorbed 25% of all FDI, with 21% going to finance and 19% to trade. While, the service sector with a combined share of tourism, real estate and telecoms attracted 24%.

Many analysts predict that the share of services is going to increase, given that Bulgaria is an ideal location for back-up offices, regional logistics centres and subsidiaries. With the overall cost of labour increasing every year, more skills-intensive rather than capital-intensive investment is expected to flow into manufacturing, shifting from low-tech to medium-tech industries. As Bulgaria's purchasing power rises, the share of FDI inflows directed at capturing the local market may increase.

OUTLOOK:

FDI inflow into Bulgaria is likely to develop hand in hand with its steady progress towards the EU and economic growth. Apart from Bulgartabac and power utilities, there is little left to privatise. Yet, the arrival of a number of export-oriented greenfield investments in 2004 bodes well for the future.

The global outlook for FDI, according to most analysts, is bright, as low interest rates and excess liquidity in developed markets are pushing investment towards the emerging markets. The battle for FDI is primarily fought between Asia, central and eastern Europe and Latin America. However, with its generous pre-EU discount, economic stability and improving business environment, Bulgaria is well placed to be among the most attractive FDI destinations in the region.