Austrian Commercial Counselor in Sofia Michael Angerer: Bulgaria's Volume of Austrian FDI Is Impressive

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An interview with Dr. Michael Angerer, Commercial Counselor of the Republic of Austria in Bulgaria – for "International Survey: Bulgaria-Austria", Novinite.com (Sofia News Agency) & Novinite.bg.

 

You've often stated that Austria is Bulgaria's best business partner. Why do you think that is? Can you elaborate to substantiate this claim?

Since the independence of Bulgaria Austria has always been one of it?s most important partners in trade; since end of communism Austria has become one of the top foreign investors in the country. This shows that Austrian companies are long term oriented – once they decide to make business with Bulgaria or in Bulgaria they are determined to stay and to improve the business in this country and by doing so they contribute actively to its development.

Of course, business is not a one way street only. Austria has become as well a more and more important destination for Bulgarian exports. Bulgarian companies use Vienna as a center of business and as a meeting point with European and even non European partners. I see a steady increase of interest of Bulgarian companies to set up an office in Vienna and to discover the advantages of Austria as a place for investment and even for a private residence.

Hardly can any other country match this close relation between our countries which can be summarized as the "best business partner".

Austria has been the second largest foreign investor in Bulgaria in the past 20 years but the large figures include foreign companies registered in Austria or channeling their investments through Austria. ). How can Bulgaria attract more Austrian investors? What should Bulgaria's authorities do to make the business environment more attractive?

You are right: Based on accumulated FDI by the end of 2011 Austria is currently the second largest investor in Bulgaria.

However, over many years until 2009 Austria was even Investor No. 1 and just due to the move of the regional headquarter of a big multinational investor Austria lost the pole position by 2010. According to preliminary statistics of BNB Austrian companies invested last year – 2011 – EUR 553.3 M in Bulgaria. This amount is more than half of the total FDI in Bulgaria in 2011 and Austria was again investor No. 1.Currently about 400 Austrian companies operate subsidiaries in Bulgaria.

During my stay of more than 5 years in Bulgaria I have seen some important improvements which make the country more interesting for investments: The taxes for entrepreneurs are very low, the currency is kept on a steady level and the ministry of finance is very concerned to put stability on the top of the agenda.

In my opinion there should be more attention to the so called soft facts: The competence and speed of work of all administration on state and on regional level which handles business matters must improve.

There should also be a more flexible attitude towards investors concerning urgent need in the field of infrastructure such as connecting roads, sufficient energy links etc. Generally, there should be a fair and even approach to all investors – regardless of the amount of investment – and a strict rule of law in tax matters etc. in order to reduce unfair competition. This demand includes as well a well functioning court system.

The figures of the last decade prove that Bulgaria has become an attractive destination for investment. This fact should be much better publicized – particularly abroad. In general, the image of Bulgaria as a country and further on as a good place for investment must be actively promoted.

What would you say are Bulgaria's advantages and disadvantages as an investment destination?

Over the last 15 years Bulgaria has become an interesting location for production mainly for exports since the cost situation including labor costs and taxes is very competitive within the European Union and as well compared to neighboring countries in Southeast Europe.

Bulgaria is a country quite close to Austria and investments here are easier to manage compared to investments in the Far East. There are very frequent flight connections between Vienna and Sofia, up to 9 times per day. And the communication skills of Bulgarians are not only good in English, but often in German as well.

On the more negative side it should be mentioned that the infrastructure such as industrial zones and quality of roads and railways in Bulgaria are generally not up to EU standards. Companies are concerned with quite frequent changes of legislation which make medium and long term planning as well as financing of business ventures difficult.

More specifically, which are the sectors and/or large-scale projects that (potential) Austrian investors are interested in with respect to Bulgaria?

Austrian companies are present in most sectors of the economy in Bulgaria: starting from a strong position in financial and insurance services, Austria also is among the top players in telecommunication and energy in the market.

Over the recent years the industrial sector gained in importance since Austrian companies use Bulgaria as a location for the production of machine tools, metal ware, wooden and paper products, construction materials and clothing. Within this context transport and logistics services are also provided by Austrian companies in Bulgaria. IT companies show a great interest in outsourcing towards Bulgaria – in some cases they have set up their own facilities in Bulgaria.

Among other things, Austria is known for its SMEs. How would you characterize the impact that Austrian SMEs have had in Bulgaria? Do you see emerging Bulgarian SMEs that are starting to be similarly successful, and are adopting Western European standards?

Austrian SMEs prefer to invest in countries which are in the neighborhood and therefore can be managed relatively easy. This is one reason why Bulgaria has become an investment destination which is used increasingly by Austrian SMEs.

In Bulgaria I can see successful SMEs in particular in the service sector: There are very qualified companies providing IT services and in some cases in tourism. Some Bulgarian SMEs could benefit from EU financial support – they have improved their production facilities and succeed as well in export markets.

Bulgaria has a deficit in its trade with Austria. What is the reason for that? What kinds of Bulgarian goods are competitive on the Austrian market?

Traditionally, Austria exports technologically advanced machines, industrial materials and chemicals of high value added as well as quality consumables. Bulgaria exports more products with a lower degree of value added such as metal products, wooden components, components for machinery and only few products of advanced technology.

However, Bulgarian exports to Austria have increased strongly over the last two years. The range of products increases; the relation between price and quality is apparently very attractive for the Austrian market. More and more Bulgarian industrial materials made of metals, rubber and timber, machine tools, high quality clothing and sports equipment are successfully sold to Austrian customers.

Bulgaria seems to be failing to attract a large number of Austrian tourists. Why do think you that is? Or perhaps you would disagree?

Austria is also a country where tourism is of major importance. About half of Austria?s population spends the holidays in Austria. The other half mainly travels abroad for the summer holidays; the majority go to Mediterranean sea resorts in Italy and Croatia.

Bulgaria seems to be of special interest for Austrian tourist as a destination for cultural tourism. Austrians are very interested in historic sites such as the famous Bulgarian monasteries and medieval cities. Since Austrians are not much aware of the beauties of Bulgaria a concentrated promotional campaign in Austria could support an increase of tourism to Bulgaria.

Do you think Bulgaria has been utilizing sufficiently its EU membership? Other than the obvious need to boost the EU funds absorption, from an Austrian point of view, how else can Bulgaria benefit from being in the EU to build a stronger economy (and democracy)?

EU funds are a great support for member countries which are eager to improve their infrastructure and technology. The benefit can be drawn by the population which hopefully as well in Bulgaria will steadily enjoy a better living standard. This process naturally takes some time.

A big step ahead concerning quality of life in a big city for example is the extension of Sofia?s subway which is made possible by EU funding. The upcoming opening of the extension of the existing line to Tsarigradsko Shose Blvd, and the opening of the new crossing line in summer 2012 will make the daily way to work for a big part of the population much more convenient.

Having experienced life in Vienna before inauguration of the modern subway system end of the seventies and now with 5 subway lines I can only underline the essential importance of good public transport for the quality of life in the city.

Generally, it seems that Bulgaria has increased the speed in the absorption process and will use a substantial part of the available funds by end of the current planning period 2013.

However, there are also other benefits from EU membership Bulgaria should draw on: The EU membership should bring as well the benefit of a modern efficient administration to Bulgaria. The observance of European legislation and ethics undoubtedly will strengthen the economy which then can compete better in European markets and as well in other countries.

The big interest of foreign direct investment in Bulgaria which was attracted by the perspective of the EU membership of Bulgaria even before 2007 has proven to be of huge benefit for Bulgaria since these investors support the country to reach faster EU level in efficiency.

Do you expect that the plan for a new fiscal union within the EU / euro zone + would be sufficient to fix, even if gradually, the European debt crisis? On that note – how has the debt crisis affected the Bulgarian-Austrian economic ties?

The plans within the EU and the euro zone are extremely important and very urgent in order to calm down as fast as possible the very nervous situation in the financial markets which affects as well directly business and consumption in the EU. There are good signs that the pact will be successful. The success will of course very much depend on the discipline of all partners.

Concerning the effects of the debt crises on Austrian-Bulgarian economic ties: The main effect was for sure the slowdown of Austrian investment in real estate ventures in Bulgaria; in general, investments done so far in Bulgaria had to be re-evaluated. In the meantime, I can confirm that the Austrian companies doing business in Bulgaria used the difficult time very well: They invested in modernization and efficiency.

Since 2011 they can compete better in export markets. Due to their good performance they get more orders though their parent companies and contribute substantially to Bulgaria?s exports to Austria and to other countries. Austrian companies depending on the local consumption are recovering slowly and are actively looking for additional business in a very competitive environment.

What tangible results in terms of (Austrian) investment and (bilateral) trade should Bulgarians expect from the realization of the EU Danube Region Strategy? Building upon that, Austria is clearly a Danube nation but it seems that Bulgaria doesn't see itself as one; what opportunities do you see for Bulgaria in exploring its Danube links? Or are those perhaps overrated?

The Danube strategy provides for all countries along this great European river a better coordination of all their activities along the Danube and a more efficient use of their own funds as well as EU funds starting from the next program period in 2014.

This better coordination should in particular lead to a better use of the Danube as the environment friendly transport route from Central Europe to the Black Sea. A better coordination between the countries along the Danube will also support tourism in the whole area. This can be very useful in particular for Bulgaria since the current employment situation in the northern part of Bulgaria is very difficult.

In the medium and long term I can see further opportunities: The use of the Danube as an energy source (Austria operates several power stations on this river) can be combined with additional transport links to Romania.

Austrian companies show big interest in cooperating in Bulgarian ventures along the Danube. This concerns the modernization of the ports along the Danube and the planning and investment of tourism facilities. The expected improved infrastructure along the Danube could be the base for more Austrian investment in industry in the northern part of Bulgaria.

To sum it all up - where does Bulgaria stand in Austria's commercial and economic interests in Central and Eastern Europe?

Bulgaria is Austria?s third most important business partner in Southeast Europe. Since Bulgaria was expected to join the EU the interest of Austrian business for Bulgaria increased tremendously. More than 1000 Austrian companies do business with Bulgaria on a regular basis.

The volume of business, even in difficult times, is on the rise again. Particularly impressive is the high volume of Austrian FDI in this country: Considering the small size of Bulgaria's economy, in relative terms Austrian companies have invested more in Bulgaria than in Romania or event more than in our neighboring countries the Czech Republic and Hungary.

This can lead to the conclusion that Bulgaria has become a very important business partner and Austrian investors in Bulgaria are long term oriented reliable employers of many thousands of Bulgarians.

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