Jonathan Allen: Bulgaria Needs Transparent Public Procurement, Predictable Business EnvironmentDiplomatic Channel | November 24, 2014, Monday // 17:28| views
Photo by the British Embassy in Sofia
Novinite.com is interviewing ambassadors of Bulgaria's main trading partners as well as neighboring countries. Here is an interview with the British Ambassador to Bulgaria Jonathan Allen.
What major bilateral projects are currently in the making?
All year we have been running a bilateral project called “100 years UK in BG.” It celebrates a hundred years since the British Ambassador’s residence in Sofia was built. It is a very impressive building on Vasil Levski Boulevard. We are running a blog which has been about British people’s experience in Bulgaria. They are all very positive and they share the reasons why they have chosen to come here, how they live here, etc. I think that it sends a really important message because there has been a perception in Bulgaria, because of the coverage of the migration debate in the United Kingdom, that British people are somehow anti-Bulgarian. I do not think it is true, but still, this perception exists. What this project helps to do is to show just how close bilateral relationships are and how British people are living here, because we have a lot of British people living here.
We have done some commercial work as well. There was a big whiskey event, celebrating one of Britain’s most successful exports. We also had a finance company enter the Bulgarian market.
It has been a complicated year because of the different governments. However, one thing everybody agrees on from a business perspective is the importance of predictable legislation and regulation. We have been working with the Oresharski government and now, hopefully, with the Borisov government too, on the question of impact assessment. Before you produce a new law or a new regulation or change existing legal provisions, you first want to understand what impact it is going to have on businesses, on society, and on the environment. You do that through the economic process of gathering data, analyzing it, and talking to people who are going to be affected. This applies to all companies, not just British companies. One challenge in Bulgaria is the fact that legislation is constantly changing very rapidly, without any real understanding, I suspect, sometimes, by those who are changing it, about its impact.
Another interesting project coming up next week is related to the Ludogorets - Liverpool football match in Sofia. Around that we are going to be doing some work with the Liverpool FC Foundation. The initiative involves children who often remain unseen, including children in institutions and disabled children. We are going to be doing some coaching and other work to highlight their skills and to show what they can do. Because with disabled children in particular, people spend a lot of time making assumptions about what they cannot do, rather than talking about what they can do.
What are, in your opinion, the biggest challenges in bilateral relations?
I am very lucky as an Ambassador because my key objectives coincide with the ones of the Bulgarian government. What I want is for British nationals to live here peacefully and be part of Bulgarian society. I also want tourists to have a good time here and go home without any problems. If they have any problems, I want them to be resolved easily, fairly, and quickly. I think that the Bulgarian government wants exactly the same thing. You want tourists to come, have a good time, spend some money, and then go home. You do not want them to have problems and say bad things.
On the prosperity side, I want to raise the level of trade between the UK and Bulgaria. I also want to make it easier for British companies to do business here.
The third thing is security. We work with Bulgarian authorities on issues like terrorism, organized crime, the Co-operation and Verification Mechanism (CVM) of the European Commission, judicial reform, etc.
Mainly, what I am trying to do is what the Bulgarian government is trying to do, which is extremely good news. Naturally, there are some problems such as unpredictable legislation. Parliament passes laws too quickly without thinking about their impact, which is a problem. But there are no really big bilateral problems.
I think that our greatest concerns on the investment side involve public procurement. It is a problem when public procurement is not being done in a transparent way, or when rules or procurement parameters are being set so as to favor one particular company or provider, rather than to get the best deal for Bulgaria.
The other thing we worry about sometimes is that when a new government comes in, it is quite common to find that all sorts of contracts get ripped up and then you start all over again. That is not a very helpful way to proceed if you are trying to improve Bulgaria in the long term. If investors fear that a change of government will land them into a legal battle to get their money back, it will prevent them from signing any new contracts in the future.
These are the key areas of concern for me – procurement, predictability in the business environment, and ensuring that contracts are honored.
For the most part, we have had a very good relationship with the different governments. We are a very active Embassy, I hope. We have been talking to all parties before the elections and we are ready to support them in their priorities. Obviously we are talking to GERB and the Reformist Bloc in this government about what we can do to support their priorities, for instance in the energy sector, or wherever it might be.
Where do you see the greatest potential for cooperation and untapped opportunities?
We have an interesting set of British companies operating in Bulgaria. I would say they are quite widely spread across different sectors and different kinds of business. There is no particular model or stereotype, which is interesting and good. We had a lot of property investors, but a lot of them left. However, we still have companies that deal in manufacturing, in the service industry, IT companies, companies that have relocated their back office here, and companies involved in architecture. I think that they are pretty happy here. When I talk to British businesses in Bulgaria, apart from the concerns that I have mentioned, such as procurement, contracts, etc, they are mostly relatively happy here. What tends to happen, I find, is that the British business community, they come here and they become real believers in Bulgaria’s future, and they are really keen to help and are very cross if people are rude about Bulgaria, and they want to help to develop the country’s potential. However, this has not truly happened. There seems to be slowness in some of the sectors taking off and achieving their full potential. I wonder whether part of that is due to the relationship that exists between politics and business, where different interest groups prevent each other from winning business rather than making some concessions to allow Bulgaria to grow. Maybe there is a tendency sometimes for companies to attack each other rather than try to work together to deliver.
Apart from that, one of Bulgaria’s big bits of potential is in the IT world. I think there is huge interest in programming and software engineering in Bulgaria. I believe that it can be a big thing. I think Bulgaria should also make more of its logistical centers. You are the only country in the EU to be on five different access routes which are routes of European interest. That is the highest number. Therefore, you need to get the infrastructure sorted out.
If I was Bulgaria, I’d be running round the world saying “We are the next door country to the biggest emerging market in the European continent”, that is, Turkey. Turkey is growing regularly at a 5-6% rate, which is way above EU’s performance. The percentage of the local population speaking Turkish as a first language is another advantage. So if a business wants to locate in the EU, why not come and locate here? You are an amazingly located place and you are not really selling there as much as you could.
On the whole, I think that Bulgaria is a place where British business is very happy. I also believe there is a lot of potential for growth in the future. Stability in the eurozone and a return to growth would be very good news for our countries.
What British business also really likes here is the quality of staff in Bulgaria. You have got very well-trained high-quality employees. However, as regards education results, I believe that what you have at the moment is that the elite are extremely well-trained, the middle is fine, but the lowest level is way behind. This must be a concern. It is believed that 24% of the new entrants on the labor market in Bulgaria are Roma. Yet, the vast majority of Roma, over 80%, do not finish their education. So in Bulgaria you have got a choice coming – if you want to have high growth and high value, so that you are doing things that are worth more money, and are therefore becoming richer, you have got to find a way of educating your Roma workforce and improving the results of the low-educated, or you are going to have to rely on massive immigration, or you are not going to have high economic growth.
I think that Bulgaria’s potential is bound up in being able to replicate that excellence of education at the top throughout the education system. Then the combination of location, skills, costs, would be unbeatable.
How are Bulgaria and Bulgarians perceived by your compatriots?
We have lots of British people who live in Bulgaria who are extremely happy and very well-integrated. This makes me very happy as an Ambassador because they tend to live all around the country, meaning that they rely on their Bulgarian neighbors for support and understanding. I also think that many of them are key members of the local communities in which they live.
Of course there has been this big migration debate in the UK. The UK has changed very fundamentally in the last decade, since the new Member States joined the EU. We have seen huge immigration from both countries and it has had a big impact on some of our communities. There is a reaction but I do not think that it is particularly aimed at Bulgaria. It is rather a reaction about European migration. There are all sorts of conversations about that in the UK.
Taking into account the number of British tourists who come here on holiday and the ones who live here and therefore know the country quite well, I think British people are mainly very well disposed.
Apart from that, I think that there are secrets about Bulgaria which have to be uncovered. Bulgaria is not just Slanchev Bryag or Bansko, you know, there are other places too. There are amazing cultural and historical monuments which it would be wonderful to see better exploited and shown off. Food and drink is amazing, Bulgarian people are so welcoming - these all add up to a different kind of tourist experience, if they are exploited.
As for the government, we have been very clear that any work we do on migration is aimed at everyone in Europe, including British citizens. The rules that apply to Bulgaria and Romania and the EU as a whole also apply to British people who live overseas. So it is all very fair. The British Prime Minister said in an interview for Bloomberg last year that Bulgarians are generally hard working, pay their taxes, and are highly valued by their employees. That is what the British government thinks.
How do you estimate the impact of Romania’s recent presidential elections for the region? Romania seems to be performing better than Bulgaria in its progress reports under the CVM mechanism.
It is very dangerous to comment on elections even if you are in the country, let alone if you are a neighbor. What we can say is that there has been a strong turnout and there has been a big mandate for the new President, which must be a positive thing. People are voting in large numbers and are expressing their views democratically. I think it is too early to say what the policies will be or to estimate the implications for Bulgaria or anyone else. Romania is definitely considered to be doing better than Bulgaria in its progress on justice and home affairs. I would say the big difference is not that Romania has more saintly politicians or anything else. There was an attempt last year by the Romanian Parliament to grant itself more immunity, which was stopped. The difference is, I think, that Romanian institutions seem to be genuinely independent. The judiciary, the anti-corruption agency, the prosecution - they show time and time again that they are independent. And they show that most vividly. Considering the jail term of former Prime Minister of Romania and the fact that that there are politicians, including ministers, Prime Ministers, and mayors, who are serving prison terms for corruption – this is something really impressive. This has also happened to many more customs officers, police officers, and members of the judiciary. So in Romania, if you are a Romanian citizen, you can see for yourself that your law enforcement authorities are punishing people who break the law. I think that is the single big difference between the two countries. While in Bulgaria we are still talking about strategies and we are not looking at results. I have been in Bulgaria for almost 3 years now. There have been scandals involving ministers, mayors, etc. They have been accused of things, investigations have started, people have been suspended, tapes have been released…What has happened? Who can the Bulgarian people point to, saying “He/She broke the law and as a consequence they are in prison.”? You fail to send a signal that you do not tolerate this behavior. There is a genuine risk of Bulgaria ending up on its own in the CVM, unless it manages to guarantee independent institutions. Apart from that, you will also end up with the Bulgarian people saying “We have been failed!” This is a big concern. This is an issue for Bulgarian people. You should do it for that reason, not because someone in Brussels is asking you to.
Do you find the CVM mechanism efficient?
I have heard a lot of criticism about it. I think that what is happening in Romania proves that a lot of those criticisms are wrong. I have been told by two different foreign ministers of Bulgaria that the CVM mechanism is impossible to achieve and that you never get praised for progress, that it is subjective, and all that. At the same time, what you see in Romania is that it gets very strong praise from the European Commission for those parts of the Romanian system that are doing well. The country gets recognition for its progress. I think that it is an efficient mechanism. If you do well and achieve the benchmarks, you get rid of it. If politicians condemn it as unachievable, unfair, unsuitable, etc, this is the easy way out, is it not? It is like blaming the exam for being hard rather than blaming yourself for not doing the work to pass the exam. I think it is a good enough system and a very sensitive system. We understand the sensitivities that are involved.
My view is that you could be doing better at the cooperation part of the CVM. I think the verification part will do. Bulgaria is able to use EU funds in particular to develop human resources. It could use the resources to improve its institutions and judiciary, prosecution, investigation, police, etc. The money is available. Besides, you can get support from other countries, including the UK, but, as you can see, it does not happen very much. Bulgaria could really use international support to raise these standards. That is up to the country and the authorities.
How would you comment on the outcome of the G20 summit, especially as regards the conflict in Ukraine?
I think that the summit happened at quite an important time. As Europeans, we had hoped that we were starting to leave the problems behind and that 2014 and 2015 would be years of solid growth. That we would see a return to feeling richer as European citizens. Maybe the recession has ended, technically, but none of us feel very well off as a result. Or confident, or happy. The UK economy is growing, which is good. However, we stand on the brink of perhaps the third Eurozone recession in the last five years. So I think that the commitments that were made about the economic growth agenda are really important. And I think that in European terms that translates into two, maybe three key areas. The first one is international trade. We have a real opportunity to add 1-2 percentage points on our EU GDP through free trade deals with major countries and the most obvious one is the Transatlantic Trade and Investment Partnership (TTIP) deal with the US. It is true that there have been many opponents of the TTIP and a lot of protests against the deal. The negotiations must be happening behind closed doors. If you want to play poker with someone, you tend to want to keep the cards facing you, not facing them. The deal cannot be negotiated through the media because then it would expose problems which can be exploited. The EU and the US make up about half of all global trade. If we can agree common standards now, then other countries will have to meet those standards, because that is how the world develops. If we don’t, then the US will go off and agree those standards with the Pacific countries and China and the EU will end up in the future having to adapt its standards to meet global ones. So I think this is a really big opportunity. I think a lot of the concerns are overstated. Nobody likes changes. Human beings are averse to changes. However, I do not think that there is not going to be a huge pressing danger to EU public health if we allow US products into the Union. I think a lot of the concerns are overstated, if genuinely held.
I think the second consequence for us is that we need to complete our own free trade internally, and the single market in services in particular. We are very good at the single market in goods, but the single market in services has got far too much protections. The classic example I was given is French ski instructors. Bulgarians cannot go to France and teach them to ski. Obviously the snow is different. I do not know why, but this is not possible. Why is it like that? This is service provision. We have the world’s most freely transmitted medium, which is the digital world. With the Internet there are no borders, and yet we impose the strictest borders on goods we wish to sell digitally, demanding that our companies have 28 different regulatory requirements to deliver to the single market. Less than 10% of e-commerce is done across borders in the EU. That is crazy, when you consider how easy it is actually.
The third element for our growth is deregulation. The UK has worked quite a lot on it with Bulgaria in Brussels. Bulgaria is a very strong proponent of lower regulation, of better regulation, of deregulation, particularly for the smaller companies, which is very important. I know that successive Bulgarian governments want to deregulate as well. These are the main things I can say about our growth.
In terms of Ukraine, it is quite clear what is happening there. Under President Putin, Russia invaded and illegally annexed part of another country. It did so, in the famous words of a Bulgarian friend of mine, in less time than it takes to buy a car in Bulgaria, which I am not sure if it is a comment on car buying or on Putin. But they did this. Then they sent Russian troops in Ukraine. During that confusing period, a Russian missile launcher shot down a passenger plane carrying innocent civilians, the MH17. So what we conclude from this is that on the continent of Europe, we have a country, Ukraine, which touches a number of EU Member States, where all of these problems started because of the will of a section of its people for a European future. It took us all by surprise, by the way, I think nobody was expecting that the protests that started in the Maidan would become what they became.
And Russia’s reaction has been, shall we say, not of the same century as the one we are living in. It has become unpredictable. And this is a risk to the stability of the EU. It is a huge risk to our values. I think it presents a risk to countries like Bulgaria, which are neighbors of Russia across the Black Sea, and which have a lot of Russian influence. I do not think it is a choice for Bulgaria between Russia and the West. I think Bulgaria should be proud of its historical and cultural links with Russia, as well as the connections between the institutions and the academia of the two countries. But if you have a choice between the rules of the international community and the West and the behavior of the government of Russia, then there is only one choice, is there not? And that is democratic values. The best way we can counter that risk is with the takeaway of the leverage that Russia has over us, and the leverage in Bulgaria is energy. Now, if I was to say to the Bulgarian government “Stop depending on Russia tomorrow!”, they could not. So nobody is saying that. What people are saying is, though, that we had a warning in 2009 with the gas dispute with Ukraine. This is no longer a warning, it is a flashing red light, a siren. I think there is a big job to be done for Bulgaria and other countries in terms of diversification. And there are many ways of doing that. First of all, there is energy efficiency. Bulgaria consumes way too much energy. Energy efficiency programs would be excellent because you would both be saving money and making yourself less dependent on Russia. You need to connect to the Southern Gas Corridor. Gas from the Shah Deniz field is coming in 2019. Via a connection to Greece, you could have a lot of gas coming through that pipeline in the future. You could also get gas supplies from Iran, if the sanctions are lifted and if it becomes a proper member of the European community. Even from Cyprus, if they can resolve their problems with Turkey. Besides, there are also the Greek LNG terminals people are talking about. If Bulgaria does not connect to its neighbors, it is never going to benefit from diversified supplies. Gas grid interconnections with neighbors, better compressor stations, all sorts of things need to be done to make Bulgaria able to move energy around. Because that is how you prevent yourself from becoming dependent. And of course there are also the Black Sea opportunities. One company operating at the Black Sea at the moment is a British company and I would like to see the Energy Minister saying “This company is my top priority because I want it producing more gas for Bulgaria because they produce it cheaper than Russia.” There are lots of ways of diversifying, for instance nuclear fuel. The last government signed a deal with Westinghouse to explore finances. We will see whether they come up with a commercially viable financial solution which is acceptable to the current Parliament. Obviously there is logic to not being dependent on Russian fuel.