site.btaJapan External Trade Organization President: Japan Eyes Southeast Europe for Strategic Investments, Bulgaria Poised as Innovation Hub

The region of Southeastern Europe is gaining strategic importance for Japan due to the changing geopolitical environment and increasing risk in international relations, President of the Japan External Trade Organization (JETRO) Susumu Kataoka told BTA’s Delian Petrishki here on Tuesday.

Kataoka said that Japanese companies are broadening their focus beyond traditional investment destinations such as Poland and Czechia and are now looking towards Southeastern Europe and the Baltic countries. This shift involves Japanese businesses considering the region as a whole for investments, rather than evaluating each country individually. Nonetheless, if Bulgaria positions itself as an innovation hub for Southeastern Europe, it will certainly draw more investment directly to the country.

Susumu Kataoka is in Sofia leading a business delegation of around 100 representatives from Japanese companies and participating in the Bulgarian-Japanese Business Forum, 2024, organized by the JETRO office in Bucharest and the InvestBulgaria Agency.

In the past six years, there has been limited progress in strengthening Bulgaria's bilateral ties with Japan, but the dynamics shifted after the visit of Japan’s Minister of Economy, Trade, and Industry in May 2023. Japanese businesses are now showing increased interest in Bulgaria's high-tech sector, startup ecosystem, and investment opportunities in green transition and infrastructure projects.

The full text of the interview follows:

Mr. Kataoka, what role do Bulgaria and Southeast European countries play in Japan's trade and economic strategy, especially in light of modern challenges?

As I mentioned during the forum, in the context of rising geopolitical risks and tensions worldwide, Japanese companies are increasingly showing interest in Central and Eastern Europe, including your country. We’ve witnessed a sharp increase in Japanese investment in this region. There’s a growing interest from Japanese companies in this area, which is why I led a large delegation of around 100 people today.

We see substantial business opportunities here, particularly in green transition and digital infrastructure.

It's not only the traditional investment destinations like Poland and the Czech Republic that attract interest, but also Southeast European countries, including Bulgaria, as well as the Baltic countries. This region is becoming strategically very important for JETRO.

Since 2018, Bulgaria and Japan have been preparing to deepen their bilateral relationship. What specific steps have been identified over the past six years?

In 2018, there were about 36 Japanese companies operating in Bulgaria, and now, in 2023, that number has risen modestly to around 40. While the increase isn't as large as we might have hoped, there has been steady progress. For instance, companies like Toshiba and Meiji have started operations in Bulgaria.

A key turning point was the visit by Mr. Nishimura, the then-Minister of Economy, Trade, and Industry in May 2023. He visited INSAIT and organized a pitch event over there with Bulgarian startups, and it was a very big turning point for Japanese companies. This was a trigger to make Japanese companies better understand the advantage of this country, particularly in the ICT sector and startup ecosystem. Now, Japanese companies are more focused on Bulgaria, especially considering the government's intention to become an innovation hub in the region. This is very important for Japanese companies.

What is the potential for trade and investment between Bulgaria and Japan, and how will it be realized?

As I mentioned, Japanese companies are very interested in Bulgaria and Southeast Europe. There's significant potential for investment, particularly in green transition and infrastructure, with EU subsidies already in the pipeline. The business environment in Bulgaria, with its low corporate tax, competitive wages, and highly skilled workforce, is very attractive to Japanese companies.

In the future, we need to strengthen bilateral cooperation, particularly through business alliances between Bulgarian and Japanese companies.

Do you think it’s possible to balance trade relations between the two countries?

Trade between Japan and Bulgaria is not the primary focus. JETRO places more emphasis on investment and business cooperation rather than trade. While we support Japanese SMEs in exporting their products, we believe the real potential lies in fostering investment and business alliances between Japan and Bulgaria.

Bulgaria needs a constant flow of foreign direct investments (FDI), but also opportunities to invest abroad. Which areas of the Japanese economy are open to Bulgarian investments?

Both directions are important. Bulgaria has a strong advantage in the ICT sector, which has attracted the attention of Japanese companies. I expect Japanese investment in Bulgaria to grow significantly in the coming years, particularly in green transition and infrastructure projects.

On the other hand, Japan welcomes foreign direct investment, and if Bulgarian companies are interested in investing in Japan, JETRO is ready to support them with a full range of services.

Finally, Mr. Kataoka, as you know, the small size of the internal markets is a feature of all South-Eastern European countries except Romania, of course, which is emerging as a regional driver. When you put Bulgaria on the investment map of Japanese business, do you pay attention on the regionalization as a process and the chance for the core region to attract much more and bigger FDIs?

Japanese companies view Central and Eastern Europe as a region for investment, rather than focusing on individual countries like Bulgaria. However, if Bulgaria can position itself as a regional innovation hub, as the government intends, it will attract even more Japanese investment. Strong regional connections and collaboration will also enhance Bulgaria’s attractiveness as an investment destination.

If Bulgaria has strong connections with other European countries, it will naturally benefit from regional cooperation. As a region, it is important to view Southeast Europe as a key investment destination. However, if Bulgaria positions itself as a strong player within this region, it will attract more Japanese investment