Analyzing Bulgaria: International Business, Trade, and Investment

This report provides a comprehensive analysis of international business in the Republic of Bulgaria, examining political, economic, socio-cultural, and technological factors influencing its trade and investment landscape. It highlights Bulgaria's democratic political system established in 1991 an...Read More

Running head: INTERNATIONAL BUSINESS ACROSS BORDERS
International Business Across Borders
Name of Student:
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Author’s Note:

1INTERNATIONAL BUSINESS ACROSS BORDERS
Executive Summary
The discourse of the study has stated on various aspects of political, economics, socio-cultural
and technological influences/benefits of the country. In addition to this, the national resource and
factor endowments which creates competitive advantage has been also discussed in the report.
Some of the different types of the other discussions include the Foreign currency and exchange
influences in Republic of Bulgaria. The latter part of thee study has included the existing level of
foreign direct investment. The main findings of the analysis have stated that the present political
system of the country has been further seen to be based on the adoption of “democratic
constitution in 1991”. It has been further considered as “unitary parliamentary republic” with a
high degree of the “political, administrative, and economic centralisation”. The significant
learnings on the National resource and factor endowments which creates competitive advantage
is identified with agriculture. The national resource of the country is depicted with “The
Bulgarian Academy of Sciences (BAS)” which is considered as a leading scientific establishment
for the Bulgarian researchers. In addition to this, the Chronic underinvestment in the research has
been seen with the creating competitive advantages in the country. Existing level of foreign
direct investment in the country surpassed by 45.90 EUR Million in February 2018. The average
FDI is averaged with 182.58 EUR Million from 1996 to 2018 which is recognised with an “all
time high of 1018.40 EUR Million in December of 2007 and a record low of -414 EUR Million
in September of 2010”. The improving initiatives are associated to the opportunities for the
entrepreneurs has been also regarded as an important factor for the emphasising on the start-up
calls during several instances of bankruptcy.

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Table of Contents
Introduction......................................................................................................................................3
General overview of the country.....................................................................................................3
Political, Economics, Socio-cultural and technological influences/benefits...................................3
National resource and factor endowments which creates competitive advantage...........................4
Foreign currency and exchange influences......................................................................................4
Existing trade policies, systems, barrier and incentives..................................................................5
Existing level of foreign direct investment......................................................................................5
Summary and recommendation based on the assessment...............................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................8

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Introduction
As discussed by Beverelli, Fiorini and Hoekman (2017), cross border trade refers to the
buying and selling of the goods and services between the neighbouring countries with the seller
being in one country and buyer in another country. The country selected in this study is
considered with Republic of Bulgaria. The report aims to address the various aspects of political,
economics, socio-cultural and technological influences/benefits of the country. In addition to
this, the natsional resource and factor endowments which creates competitive advantage has been
also discussed in the report. Some of the different types of the other discussions include the
Foreign currency and exchange influences in Republic of Bulgaria. The final section of the scope
of discussions have been included in the existing level of foreign direct investment (Bown and
Crowley 2016).
General overview of the country
Republic of Bulgaria is situated in the south eastern Europe which is 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”. The total area covered by the country is “110,994 square kilometres
(42,855 sq mi)” and discerned as the 16th-largest country. The total population of the country
has been further seen with 7.2 million which is predominantly urbanised and concentrated in the
administrative centres across 28 provinces. A majority of the commercial and cultural activities
are considered in the capital and largest city, Sofia. The strongest contributions to the economy
are evident with “heavy industry, power engineering, and agriculture” which mainly relies on the
local natural resources. Rumen Radev is appointed as the fifth democratically elected president
who is sworn in for a five-year term in January 2017. It has been further discerned that eastern
Balkans is undergoing slow and painful transition as per the market economy since the
culmination of communist rule (Pickles et al. 2015).
Political, Economics, Socio-cultural and technological influences/benefits
The present political system of the country has been further seen to be based on the
adoption of “democratic constitution in 1991”. The political system encompasses of “unitary
parliamentary republic” with a high degree of the “political, administrative, and economic

4INTERNATIONAL BUSINESS ACROSS BORDERS
centralisation”. The prehistoric culture was initiated on the current Bulgarian lands during the
Neolithic era. It has been further discerned that Bulgaria spends only 0.95% of the GDP on
research and development. It needs to be further understood that chronic underinvestment in the
research since 1990 has forced many scientific professionals to exit the country. Therefore, the
country scores low in terms of the “innovation, competitiveness and high-value added exports”.
The central areas of the research have been further seen to be based on the significant nature of
the research which has been considered with the development in the fields of “energy,
nanotechnology, archaeology and medicine” (Bown 2014).
National resource and factor endowments which creates competitive advantage
Bulgaria is relatively considered as endowed with arable land with various preconditions
related to the plant growing rather than livestock raising and forestry. In 1994, the plant growing
has accounted for 52% of total agriculture. This is further considered with the main form of the
competitive advantage for the country. The infrastructure is closely related to the economic
growth and competitiveness along with the economic growth. The country has been further seen
to engage in the international competition and heavily investing in the improving local
infrastructure (Kim et al. 2018).
The national resource of the country is depicted with “The Bulgarian Academy of
Sciences (BAS)” which is considered as a leading scientific establishment for the Bulgarian
researchers. In addition to this, the Chronic underinvestment in the research has been seen with
the creating competitive advantages in the country. The various types of the factors in terms of
the historical aspect is considered with the major schools of economic theory: “Classical theory;
Neoclassical theory; Keynesian economic theory” (Cororaton and Orden 2016).
Foreign currency and exchange influences
Bulgaria is seen to choose currency board for attaining monetary stabilization. The
currency board further recognises the budgetary constraints which leads to real appreciation. The
exchange rate strategies in the country has been determined with high inflation and main
transformation process has been seen to be applied in terms of the anchoring the entire system
during a situation of economy stabilization followed with hyperinflation. Consequently, it has

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been further determined that the country has experienced high inflation with deep depreciation.
The central bank has considered experiences from the currency reserves with a limited success.
For instance, in March 1994 the central bank attempted at stabilization of the exchange rate and
depreciation charged against the dollar. The appreciation of the real exchange rate is seen with
the convergence of the “upward movement in its equilibrium value, not a loss in
competitiveness”. Several types of other important depictions from the empirical research has
been able to suggest that the convergence process is seen as per the trading activities in both the
economies irrespective of their exchange rate regime and currency board regimes (Chowdhury et
al. 2017).
Existing trade policies, systems, barrier and incentives
The existing trade policies in Bulgaria is depicted with operations in four free trade
zones. The trade zones of the country have been further seen to be based on the main highways.
In addition to this, “Trakia economic zone” is outside Plovdiv which is having great success in
attracting more than 100 companies till date. In addition to this, the “National Industrial Zones
Company” has been 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, lying in the Northwest region and mainly concentrating on the high
unemployment existing in the country. In 2004, “Investment Promotion Act” is considered with
primary legislations providing the appropriate investment incentives to the investors in Bulgaria
which has been stipulated with “equal treatment of foreign and domestic investors”. The
company creates investment incentives by assisting the investors in purchasing the municipal or
“state owned land without tender, provides state financing for basic infrastructure”. The trade
barrier in Bulgaria has been considered with the Poor IP protection which requires greater
transparency and predictability in the regulatory environment (Pomeranz et al. 2015).
Existing level of foreign direct investment
The “foreign direct investment” in the country surpassed by 45.90 EUR Million in
February 2018. The average FDI is seen with 182.58 EUR Million from 1996 to 2018 which is
recognised with an “all time high of 1018.40 EUR Million in December of 2007 and a record
low of -414 EUR Million in September of 2010”. Despite of the exceeding FDI in terms of the

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USD 9.8 billion in 2008, the inflows in the FDI to Bulgaria have dried up since 2009 when the
country suffered the impacts of “global economic crisis” and the “Eurozone crisis”. This is
especially seen to be evident with the Greece being the traditional investor in Bulgaria. Post FDI
it has been further discerned that the “FDI flows have stagnated and accounted for USD 1,774
million in 2015”. As per the “World Economic Forum (WEF) 2017” the country ranks 50th in
terms of the “Global Competitiveness Index” (Kütük and Akbostanci 2016).
Summary and recommendation based on the assessment
The uncertainty in the Europe is depicted with recent political events and by rising
“populism” is a cause for real apprehension. The EU leaders needs to bolster unity in Europe
thereby providing the roadmap for the effective integration and supporting values and principles
of the Single Market. It is also important for the country to attract the right talent and skills. The
innovation in the country also needs to be prioritised which will be able to bolster the different
types of the trading activities within the country. This initiative will be also conducive in
encouraging competition and enhancement of efficiency. The 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 calls during several instances of bankruptcy.
This initiative will also ensure greater access to finance and promotion of small business
(Williams, Franic and Dzhekova 2015).
Conclusion
The main findings of the study related to the general overview of the country have
depicted that a majority of the commercial and cultural activities are considered in the capital
and largest city, Sofia. In addition to this, the present political system of the country has been
further seen to be based on the adoption of “democratic constitution in 1991”. It has been further
considered as “unitary parliamentary republic” with a high degree of the “political,
administrative, and economic centralisation”. The main resource of the country is discerned with
excellence in the agriculture sector. In 1994, the plant growing has accounted for 52% of total
agriculture. This is further considered with the main form of the competitive advantage for the
country. Bulgaria is seen to choose currency board for attaining monetary stabilization. The
currency board further recognises the budgetary constraints which leads to real appreciation. The

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exchange rate strategies in the country has been determined with high inflation. The various
types of the existing trade policies in Bulgaria is depicted with operations in four free trade
zones. The trade zones of the country have been further seen to be based on the main highways.
In addition to this, “Trakia economic zone” is outside Plovdiv which is having great success in
attracting more than 100 companies till date.

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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.

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