Bulgarian tech sees rising foreign investment

Bulgaria’s software and IT services sector welcomed a record-high of 16 foreign investment projects in 2018, furthering the non-stop growth in this sector since 2015, reports fDi Markets, an FT database that tracks greenfield investment. Capital expenditure from FDI into the sector rose sixfold between 2015 and 2018.

Tech companies from the US, Switzerland and France were the most active investors, accounting for more than half of the $240m invested in 2018, shows fDi Markets. Greenfield investment into Bulgarian tech has remained strong in 2019, with seven greenfield projects and $76.3m invested, and US companies accounting for 83.4% of that investment.

Bulgaria’s success in attracting investment from tech companies is due to the country providing “some additional benefits such as a [good geographic location in Europe], a relatively well educated labour force, and relatively good business friendliness”, says Mr Milatovic, principal economist at the European Bank for Reconstruction and Development (EBRD). 

“Some big IT companies from Germany are going to move some offices from other European countries [for cost advantage, and Bulgaria may benefit]. In terms of the tech industry, because of the cultural similarities, it was realised that at some point that perhaps it’s [easier for European companies to work with a European workforce],” he adds.

To increase this tech investment into the future, Mr Milatovia recommends that the Bulgarian government could make more changes to social policies, such as investing in kindergarten, as high quality of life is a key factor to attract people from the IT community, especially for those with young families.

Yet Bulgaria's legal system and corruption levels remain a concern. The judiciary is unable to completely uphold private property rights, while court insolvency cases can take up to four years and freeze the assets of the companies during the process, according to Balkan Insight. 

The European Commission report of 2018 stated that Bulgaria had made significant progress in addressing corruption.

Despite significant room for improvement in terms of the rule of law, several US and European companies - such as Facebook, Acronis and Milestone Systems - have invested in the country in recent years. Some leading Chinese-based internationally operating companies like Huawei and BYD are also increased their trading and investment activities in Bulgaria in 2019, according to China Business Law Journal.