site.btaUPDATED Investment of Over EUR 600 Mln in Automotive Sector Expected in Early 2024 - Economy Minister

A large-scale investment of over EUR 600 million in the field of manufacturing critical components for the automotive industry is expected to be implemented in early 2024 in Bulgaria, Economy and Industry Minister Bogdan Bogdanov told BTA. 

Currently, the Western European investor, which has several production locations in Europe and experience in Bulgaria, is considering with the state two options to locate its production. One is in northern Bulgaria, near Ruse, and the other in the south-central region of Stara Zagora. 

Minister Bogdanov pointed out that this is one of the main trends in Europe and is related to the development of electric autonomous cars, and Bulgaria is positioned in this sector. According to Automotive Cluster Bulgaria, next year the sector's contribution to the national economy will vary between 10% and 12% of GDP. 

Minister Bogdanov explained that the upcoming investment at the beginning of next year is just one of several planned investments for 2024 that are being worked on.

Investments

The Minister of Economy described 2023 as successful for Bulgaria against the background of what is happening in Europe and in view of the economies of Germany and Austria entering a recession. He noted that for this year Bulgaria's GDP has increased by nearly 2% and foreign direct investment for the first ten months of the year alone has reached the record-high EUR 3.4 billion, which is nearly 54% more than in the same period of 2022. 

As some of the factors behind this positive development, the Minister highlighted the growing confidence of investors in this country's business climate and their improved perception of the predictability of the State's actions. The existence of a regular cabinet, its firm commitment for Bulgaria to join the Schengen area and the eurozone, and the stable financial framework also contribute to this process. A factor for the improvement of the investment climate in the country is also the adopted state budget for next year, which provides for significant capital expenditures in infrastructure, as well as the transparent policy pursued by the cabinet, the Bogdanov said, noting that all this gives positive signals to investors that Bulgaria's economy and financial system are stable.

Commenting foreign investments this year, Minister Bogdanov noted that a significant part of the investors' profits are reinvested in this country, which in his words is a clear indicator of the returning trust in Bulgaria. He also said that the reinvested profit for the period January-October 2023 is close to EUR 2.8 billion, pointing out that this is an increase of around EUR 1.4 billion compared to the same period in 2022.

New investments in Bulgaria are mainly in the manufacturing industry, with significant growth in industrial investments in Stara Zagora, Ruse, Shumen, Plovdiv, etc. - The growth in the region is mainly in Western European companies - Austrian, German, etc.

Minister Bogdanov said that this year the main flow of investments in Bulgaria is from the Netherlands, Belgium and Switzerland. 

State-owned companies

After start of the reform of state-owned companies, they have already submitted their business plans to the Ministry of Economy and have clear investment programmes and financial statements. Most of them also now have reduced board composition, reduced directors' and board salaries, he said, adding that the State will cut costs significantly.

Bogdanov said that from 2024, a new clearer methodology of remuneration formation for the management of State-owned companies will be introduced, which will be based on the enterprises' results. This is necessary because one cannot compare a company such as VMZ, for example, which generates between BGN 600 and BGN 700 million ]in profits and has several thousand employees, with the National Company Industrial Zones, for example, which makes less than BGN 10 million a year, Minister Bogdanov explained. 

In general, the state-owned companies are sending this year off with high levels of turnover and profit, with the leader being VMZ - Sopot, whose final financial results will be known in January, but the Ministry's expectations are for record levels in terms of production capacity, while the contracts signed offer the company a work horizon. "We have secured production for the next few years. In addition, the company has several investment projects, participation in the European initiative to increase production capacity, as well as opportunities to expand production and take on new orders to NATO standards, which will secure the VMZ in terms of capacity for at least the next 15 years, the Minister said.

Violations

The Ministry has initiated filed several lawsuits in connection with suspected violations in dam repairs, with estimates of damages to the State of about BGN 600 million. The Ministry has taken the case to court, although the prosecutor's office has refused to initiate proceedings on the issue of the dams, despite the fact that reports from the State Financial Inspection Agency and the Court of Auditors have been attached to the case. The prosecutor's office will also be contacted because of the substantiated suggestions that LB Bulgaricum was deliberately inflicted damages worth nearly BGN 1.5 million. The company has sold below cost products without justification. The checks showed that the company was apparently being led towards bankruptcy, Minister Bogdanov said, specifying that these were decisions taken to the detriment of the company between the end of 2022 and July 2023. "We have raised production to 100% capacity, because until the summer of 2023, the company was operating at only 60%. We also launched public tenders for raw material supplies, and from Bulgarian producers. We will stabilise the financial results," Minister Bogdanov said.

On the subject of the government complex, on which more than BGN 86 million were spent without public procurements and without financial justification, having been transferred in advance, Bogdanov pointed out that action had been taken by the cancellation of the contract with the contractor. There is a development there and the state will recover a substantial part of the funds, expressing the expectation that as early as January it will be able to get back from the contractor the initial BGN 46 million. We are also accruing daily statutory interest, which accrues on the amount not recovered. We have indications that it will be recovered from the company and the State Consolidation Company (SCC) will stop repaying the loan which was drawn from the Bulgarian Development Bank and on which it owes interest of BGN 6-7 million per year because all this continues to hurt the taxpayers, the Minister said.

The State Consolidation Company's future

The State Consolidation Company (SCC) need not remain in its present form as a structure because it opens doors for inhouse procurement - a major mechanism by which contracts were awarded and losses generated, the Economy Minister said. The future of the SCC is in question, but a hasty decision cannot be made that does not take into account the need to preserve all working assets at SCC, Bogdanov added.

He pointed out that the total amount of losses for the State Mining Company amounted to BGN 700 million, generated mainly in a few months in 2018. 

The Affordable for You campaign

Minister Bogdanov described as successful his Ministry's campaign for a lasting reduction of the prices of basic foodstuffs. "We started with three economic operators and 200 outlets in the country, and now they are already over 450, with another large chain joining in the last week," the Minister said, noting that this means the campaign is now close to more citizens. Among the persistently low prices of goods in the small consumer basket, he listed oil - between BGN 2 and BGN 2.30, eggs, sugar and rice - BGN 0.40. The campaign is expected to last at least until May, but Bogdanov said there are already indications that it will continue after that. The next stage of the campaign envisages the development of an interactive map from which consumers can find the product they need in the nearest store. The expansion of the initiative remains on the agenda, with indications that pharmaceuticals will be included in the Ministry's campaign from 2024.

Gasoline prices and the possible sale of the oil refinery

Minister Bogdanov said that unless there is significant turmoil on the global markets, no spike in the price of gasoline next year will be expected. "In October and November, there was even a decrease in prices, our hope is that this trend will continue next year," Bogdanov said. He recalled that in recent months a plan and timetable have been developed in connection with the lifting of the derogation for Russian oil. "We are continuing talks with our European partners, both in terms of controlling the export of oil products, because Bulgaria cannot cope with this process alone, and in terms of future supplies of raw materials for the refinery," the Economy Minister said.

He said that apart from Lukoil's already stated intention in the media to talk to a potential buyer, no such formalised intention has been submitted to the Government. According to the Minister, there is no shortage of potential interest in the refinery. "What is important, however, is that the State plays an active role in the process so that it can protect this key asset for our national security and prevent it from falling into dishonest hands," he said. "We need to get out of this dependence we have had for the last 15 years," Bogdanov added.