Monday, 21 Jan 2013
Overseas Business Risk - Bulgaria
Political and Economic
Bulgaria is a member of NATO since 2004 and of the European Union - since 2007. This provides for a stable political environment and legislation that is harmonised with EU acquis. A minority government was elected in 2009 on an anti corruption and reformist agenda. Although its determination to do away with corruption and red tape is undeniable, it still has not delivered against that. Securing successful convictions is an ongoing concern. The upcoming accession into the Schengen area in the autumn of 2011 will be a strong vote of confidence from the European Union about the Government’s commitment to enhance the rule of law and the proper functioning of the judicial system.
The country remains the poorest in the EU despite a prolonged period of sustained growth prior to the financial crisis. The crisis hit Bulgaria hard but the first signs of economic recovery are visible with the quarterly increase of GDP in 2011 as follows: 3.3% in Q1, 2.0% in Q2, and 1.6% in Q3. The projected growth for 2012 is 2,3 %. The recovery is driven by the exports of raw material and pharmaceutical and light industry products but if not backed up by increased local consumption and foreign investment it may not be sufficient to ensure the return of pre-crisis growth levels, which are needed to bring Bulgaria up to EU average levels.
EU funding of over 12 billion EUR for 2007-2013 partially balances the negative effects of the downturn. However, absorption of these funds has been difficult and is unlikely to reach 100% and a significant amount, up to half, is at risk of being lost due to the lack of administrative and project management capacity.
Please see below the distribution of EU funds for sectors in EUR (mil):
Transport – 3,918,468,569
Environment – 3,521,957,127
Regional development -3,131,821,212
Competitiveness – 2,273,096,041
Technical support – 111,129,140
Human resources development – 2,374,122,531
Administrative capacity – 353,592,720
Bulgarian currency is fixed against the Euro since 1997.
More information on political risk, including political demonstrations, is available in FCO Travel Advice Bulgaria.
Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In 2012, Bulgaria ranked 75 out of 176 countries in the Transparency International’s corruption perception index (CPI) (ranked 73 in 2011).
A number of campaigns and programmes for tackling bribery and corruption at all levels of government administration have been implemented in the last couple of years. This led to more transparency, better control mechanisms and behavioural change, at least at lower levels. Companies are strongly advised to comply with local legislation and report any bribery hints and requests. Corruption remains a serious problem at higher levels of administration and the judicial system. Preventive measures such as contracts governed by English law will minimise the risk.
Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Bulgaria and some basic effective procedures you can establish to protect your company from them.
Read the information provided on our Bribery and corruption page.
Bulgaria has not been a target of terrorist attacks but as a NATO member it is subject to an underlying threat of terrorism.
Read the information provided on our Terrorism threat page.
Protective Security Advice
The Centre for the Protection of National Infrastructure also provides protective security advice to businesses
Bulgaria is generally a safe country. Petty crime and non-violent thefts do occur, with pickpockets especially active in city centres and tourist resorts. No major health hazards can be identified, although the avian influenza virus H1N1 was reported in 2009/10. Travel and medical insurance is recommended.
Personnel security is ensured by applicable health and safety regulations. They might not always be observed in the private sector, for example in construction, and international businesses have to work hard to enforce international health and safety standards. Some companies violate the Labour Code, most often by avoiding the payment of the personnel-related taxes, which distorts the market conditions.
E-crime is an increasing problem in Bulgaria, though still from relatively low levels.
Read the information provided on our Protective security advice page.
Bulgarian legislation and procedures on copyright and intellectual property are in line with EU requirements. Implementation still needs improvement and infringements will sometimes occur but generally this is not a major issue of concern for businesses.
Read the information provided on our Intellectual Property page.
Organised crime groups are active in the grey economy but may also be engaged in legitimate business, which increases the propensity for money laundering. People and businesses unconnected with these groups have not been specifically targeted by serious crime, but businesses should carefully check the background of potential partners.
Read the information provided on our Organised crime page.
More information is available on overseas business risk in a range of markets.