Bulgaria's International Business Across Borders: Trade & Investment

This report provides an overview of international business in Bulgaria, examining its political, economic, socio-cultural, and technological influences. It discusses national resources, factor endowments, foreign currency exchange influences, existing trade policies, systems, barriers, and incentives. The report also analyzes the level of foreign direct investment in Bulgaria, noting the impact of the global economic crisis. It highlights the importance of innovation and entrepreneurial opportunities, recommending that EU leaders bolster unity and support the Single Market. The report also emphasizes the need to prioritize innovation to support trading activities. References to various studies and publications are included to support the analysis.

International
Business Across
Borders
A Study on Bulgaria

General overview of the country
• Situated in the south eastern Europe
• Bordered by “Romania to the north, Serbia and Macedonia to the west,
Greece and Turkey to the south, and the Black Sea to the east”
• Covers is “110,994 square kilometres (42,855 sq mi)” and discerned as
the 16th-largest country
• The main commercial and cultural activities take place in the capital and
largest city, Sofia
• Strengths include “heavy industry, power engineering, and agriculture”

Political, Economics, Socio-cultural
and technological influences/benefits
• Political system of the country is seen with democratic constitution in 1991
• The political system encompasses of “unitary parliamentary republic” with a
high degree of the “political, administrative, and economic centralisation”
• Prehistoric initiated during the Neolithic era
• Underinvestment in the research since 1990 has forced many scientific
professionals to exit the country
• Country scores low in terms of the “innovation, competitiveness and high-
value added exports”

National resource and factor endowments
which creates competitive advantage
• Preconditions suitable for plant growing rather than livestock raising and
forestry
• In 1994, the plant growing has accounted for 52% of total agriculture
• The infrastructure is closely related to the economic growth and
competitiveness along with the economic growth
• Heavily engaged in international competition and investing in the improving
local infrastructure
• Historical aspect is considered with the major schools of economic theory:
“Classical theory; Neoclassical theory; Keynesian economic theory”

Foreign currency and exchange
influences
• Bulgaria is seen to choose currency board for attaining
monetary stabilization
• Exchange rate strategies determined with high inflation
• Central bank has considered experiences from the currency
reserves with a limited success
• The appreciation of the real exchange rate is seen with the
convergence of the “upward movement in its equilibrium
value”

Existing trade policies, systems,
barrier and incentives
• Trading operations restricted to four free trade zones
• “Trakia economic zone” is outside Plovdiv is having great success in attracting
more than 100 companies
• “National Industrial Zones Company” established to support the creation of
such zones and parks which has allowed stable FDI inflow
• The companies are presently seen to be operating in the industrial zone in
Vidin
• “Investment Promotion Act” is considered with primary legislations providing
the appropriate investment incentives to the investors in Bulgaria

Existing level of foreign direct
investment
• “Foreign Direct Investment” in the country surpassed by
45.90 EUR Million on February 2018
• Average FDI is seen with 182.58 EUR Million from 1996 to
2018
• Despite of the exceeding FDI, the inflows have dried up since
2009 due to “global economic crisis” and the “Eurozone
crisis”
• Post FDI it has been further discerned that the “FDI flows
have stagnated and accounted for USD 1,774 million in 2015”

Summary and Recommendations
• Uncertainty in the Europe with recent political events and rising “populism” is a
cause of concern
• EU leaders needs to bolster unity and provide a roadmap for the effective
integration and roadmap for values and supporting values and principles of the
Single Market
• The innovation in the country needs to be prioritized for supporting different types
of the trading activities within the country
• Improving initiatives are associated to the opportunities for the entrepreneurs which
has been also regarded as an important factor for the emphasising on the start-up
projects

References• Beverelli, C., Fiorini, M. and Hoekman, B., 2017. Services trade policy and manufacturing productivity: The role of
institutions. Journal of International Economics, 104, pp.166-182.
• Bown, C., 2014. Temporary trade barriers database: Update through 2013. World Bank. Available at: http://econ.
worldbank. org/ttbd/, June.
• Bown, C.P. and Crowley, M.A., 2016. The empirical landscape of trade policy. In Handbook of Commercial Policy (Vol.
1, pp. 3-108). North-Holland.
• Chowdhury, A., Liu, X., Wang, M. and Wong, M.S., 2017. Institutions in International Trade: The Effect of GATT/WTO
Membership on Trade Volatility and Trade Volatility Co-movement.
• Cororaton, C.B. and Orden, D., 2016. GII Working Paper No. 2016-1 Preliminary Report: Potential Economic Effects
of the Reduction in Trade Barriers in the Transatlantic Trade and Investment Partnership.
• Kim, I.S., Milner, H.V., Bernauer, T., Osgood, I., Spilker, G. and Tingley, D., 2018. Web Appendix Firms’ Preferences
over Multidimensional Trade Policies: Global Production Chains, Investment Protection and Dispute Settlement
Mechanisms.
• Kütük, M.M. and Akbostanci, E., 2016. Do regional trade agreements actually increase Turkey's foreign
trade?. METU Studies in Development, 43(1), p.257.
• Pickles, J., Plank, L., Staritz, C. and Glasmeier, A., 2015. Trade policy and regionalisms in global clothing production
networks.
• Pomeranz, K., Northrup, C.C., Bentley, J.H., Topik, S., Eckes Jr, A.E. and Manning, P., 2015. Encyclopedia of World
Trade: From Ancient Times to the Present: From Ancient Times to the Present. Routledge.
• Williams, C.C., Franic, J. and Dzhekova, R., 2015. Explaining the undeclared economy in Bulgaria: An institutional
asymmetry perspective. South East European Journal of Economics and Business, 9(2), pp.33-45.

Thank You