Procurement potential still far from being fully exploited
Carmen Struck, AHK Sofia: "Thanks to professional management, high productivity gains can be achieved in Bulgaria".
Carmen Struck, deputy director of the German-Bulgarian Chamber of Commerce and Industry in Sofia, gave BME the following interview*
What about German-Bulgarian trade relations?
Bilateral goods and services are flourishing. In 2016, the volume of trade between the two countries again reached a record value of EUR 6.66 bn and rose by 6% compared to the previous year. The Federal Republic of Germany is not only the number one trading partner for this South-Eastern European country but also the most important sales market for Bulgarian products. In 2016, Bulgarian exports to Germany climbed by 12% to a value of EUR 3.17 bn - and the trend is increasing. German exports to Bulgaria came to almost EUR 3.5 bn in 2016, slightly above the previous year. German direct investment in Bulgaria is still on the up. It amounted to more than EUR 124 m last year. At present, more than 5,000 German companies are involved in economic exchange, of which 1,200 are represented on the spot.
Do the good foreign trade figures affect the business climate?
Definitely. Both German buyers and investors are pushing their business activities in Bulgaria. Small and medium-sized enterprises in particular are increasingly interested in establishing production capacities in one of the numerous industrial zones between Sofia and Varna. Bulgaria's EU membership, its favourable geostrategic position, low wage and salary costs, access to public funding and the favourable tax system have a positive effect on the selection of locations. The average monthly wages in Bulgaria are the lowest in the European Union. From this point of view, too, the country is a lucrative source of supply and production.
Which sectors are particularly suitable for German business activities?
These include above all the automotive sector, electrical engineering and electronics, machine and plant construction, tool manufacturing and logistics. German companies have a keen interest in investing and cooperating with potential Bulgarian suppliers. These activities also have a positive effect on the Bulgarian procurement market, which has always been closely linked to Germany. For example, if German automotive suppliers such as Grammer, Behr-Hella Thermocontrol, Witte Automotive or Würth Elektronik manufacture in Bulgaria, they buy the materials and services required for the production on site. This strengthens the Bulgarian procurement market in a sustainable manner, the potential of which is still far from being exhausted.
In which areas does Bulgaria still have disadvantages?
According to the annual AHK Economic Survey, among our more than 500 member companies, there are some economic policy areas for the government. In order to attract even more foreign buyers and investors, the dual vocational training programme should be expanded, the judiciary should be reformed, existing state monopoly structures should be resolved, and corruption and crime should be further pushed back. It would also be helpful to improve the infrastructure and transport routes in the industrial zones and to introduce e-government.
Why should German buyers choose Bulgaria as a procurement market?
Because some things speak for this location. The Balkan republic offers the most favourable tax conditions for investors across the EU. In Bulgaria, a single tax rate for income and corporation tax of 10% applies - this is a record value in the EU. Double taxation treaties with 61 states, as well as further tax relief and investment incentives, make the location of Bulgaria extremely attractive for international companies. A further plus is that in all parts of the country foreign buyers and investors alike have the opportunity to achieve high productivity gains through professional management. Bulgarian employees are committed and willing to learn. They also like to work with foreign companies. Not to be forgotten is also the strong and long-lasting German-Bulgarian network on site. In particular, when acquiring and maintaining buyer-supplier contacts, it is a fact that many Bulgarians have good knowledge of German.
Can German buyers in Bulgaria expect AHK support? Of course. We are here for you! For German companies that want to use the purchasing or production potential in Bulgaria, we offer a supplier pool with qualified Bulgarian companies. In addition, we particularly support German SMEs in identifying business opportunities.
With individual market analyses, the provision of suitable business partners, and consultation focused on establishing companies, we provide targeted support at every stage of the launching and expansion of foreign operations.
* The interview was conducted by Frank Rösch, BME
SAVE THE DATE: A detailed report on the opportunities and challenges of the Bulgarian procurement market can be found in the September issue of the BME magazine for buyers BIP - Best in Procurement.