Ruse: Northern Bulgaria's Caged Tiger

Ruse: Northern Bulgaria's Caged Tiger

Adverse demographic trends and infrastructure constraints limit the city's significant economic potential

© Tsvetelina Belutova

Missing infrastructure is a significant obstacle to unlocking Ruse's economic potential

Ruse, Bulgaria's fifth largest region, rarely hits top spot in national economic or quality-of-life rankings. However, on closer inspection, you can tell that the city is waiting for its moment to shine. Local macroeconomic indicators are good and industry is developing rapidly. Also, the region is well located strategically in the north-eastern part of the country, on the right bank of the Danube River, opposite Romania.

Within the last decade, the local gross value added has increased by 69.2% to over 11,000 levs per capita, which is close to the national average rate of 72.4%. Unemployment went down to 5.8% in 2017, closing in on the pre-crisis minimum, whereas employment reached a local record of 65%. Ruse also boasts a strong manufacturing sector and growing production of automotive components, which is becoming increasingly important to the Bulgarian economy.

At the same time, Ruse lacks a strong economic periphery to supply human resources and provide business opportunities for expansion. In addition, infrastructure development has stalled, leaving the region isolated from the rest of the country. Neighboring municipalities report unemployment rates of over 25%, but also poor educational attainment and adverse demographic trends. The regions of Silistra and Razgrad to the east and their surrounding municipalities cannot support Ruse's ambitions. As Yavor Alexiev from the Sofia-based Institute for Market Economics (IME) summarizes, "the isolation of Ruse from the rest of the country doesn't allow for the full potential of the region to be unlocked".

Fuel, guns and auto parts

Although Ruse cannot be classified as an industrial region yet, the industry is clearly its direction of travel. The sector's share in the local economy has grown from 33.8% in 2007 to 37.2% in 2017, well above the national average of 28.4%, according to the National Statistical Institute (NSI). According to IME, the main economic engine is manufacturing, which is unsurprising considering that is where the biggest local companies stand.

Similar to Stara Zagora, where energy is the leading sector, Ruse also has a dominating branch in the top five largest companies - fuel production. The leader in terms of revenue is the biodiesel producer Astra Bioplant with a turnover of more than 1 billion levs in 2017. Only 134 people work at the plant and the company is mainly export-oriented, selling between 70% and 80% of its total output abroad. The company is also the main supplier of biodiesel for Burgas-based refinery Lukoil Neftochim. The next three in the ranking are also active in fuel production.

However, the major employers are in other sub-sectors. For example, ammunition producer Dunarit is responsible for over 1,200 employees in 2017, while the Senovo-based producer of industrial materials (such as kaolin, quartz, sand, limestone) Kaolin employs 990 people. Earlier this year Kaolin began preparing for the construction of a new plant in the city of Dulovo, Silistra region. The investment is said to be worth 30 million euro, whereas the number of employees is 120.

The production of automotive components is becoming increasingly important for the Bulgarian economy and the sector is well represented in Ruse's industrial zone. One company is the French manufacturer of aluminium parts for the automotive industry Montupet, while the Bulgarian subsidiary of German locking system producer Witte Automotive and car filter manufacturer A.L.Filter together accounted for close to 2,600 employees in 2017. This group will be joined by the German manufacturer of leather upholstery BADER, which plans to invest 10 million euro in a production plant and open 700 new jobs in the process. Witte Automotive Bulgaria is also growing - over the next three years the company is planning a new production hall and a staff increase of 450 people.

The benefits of being in Ruse

The long presence of automotive production in Ruse has made an impact in the past decade by creating the value-generating combination of business, education and productivity. According to Yavor Alexiev, more people are looking for employment in the industrial sector, products are becoming more technologically advanced and the workforce is growing more skilled. The local education system corresponds to the region's economic profile by preparing employees for manufacturing in the fields of vehicles, shipbuilding and furniture. Ruse's industrial zone seems to be managing to market itself well.

On the one hand, Ruse benefits from the presence of a technical university. For example, one reason why Witte Automotive Bulgaria chose the city is precise because of the University of Ruse, as the German company has an internal policy to have all of its production plants located near a technical university. Mobile crane components producer SL Industries had the same motivation to choose Ruse as a base of operations. "Our engineering team is full of University of Ruse graduates. At that time, we selected the boys in their final year in the university and they are now a team," said the executive director of SL Industries Dimitar Dimitrov.

Another benefit is the proximity of Romania. Ruse may be disconnected from a large part of the Bulgarian economy, but it's also possibly the only border region that is functionally linked to a neighbouring country. The Danube Bridge is a direct transport link to the EU via Romania and to Bucharest International Airport, which is one of the main factors that attracted both Witte and other manufacturers to the region.

"Ruse is a good city in terms of living conditions. If you need to develop high-tech production, you have to be able to attract qualified personnel. It's very difficult to rely on people to come work in a place where the quality of life is not good enough for them and their families," said Witte manager Hristo Hristov.

Ruse's benefits: locked in two types of cells

Firstly, remuneration in the region is below the levels of similar investment destinations in Bulgaria. For example, the average monthly wage in manufacturing in Ruse was 875 levs in 2017, whereas employers in Plovdiv offered 943 levs, in Varna - 1 060 levs. Although yearly statistics for 2018 are still not available, it's safe to say that wages have continued to go up. On the one hand, this is a competitive advantage for Ruse because of the lower labour costs for companies. On the other hand, low wages are unattractive to qualified personnel and limit the development of sectors depending on consumption such as retail, restaurants and recreational industries, which are important for the quality of life.

Secondly, low unemployment and high employment rates show that the local labour market is overheating. Ruse has been losing people because of adverse demographic trends for years now. Moreover, the outskirts and bordering regions are too weak to support the ambitions of the economic centre. For example, Plovdiv, in southern Bulgaria, attracts people not only from neighbouring municipalities but also from surrounding regions like Pazardzhik, Smolyan, Stara Zagora and Haskovo, where the number of job seekers with only primary educational attainment is low.

In comparison, Ruse depends on the neighbouring regions of Silistra and Razgrad, where there are few university graduates and between 20% and 30% of employees have no high school diploma. "The municipality's outskirts are very poor, as is the region in general. Adjacent regions such as Silistra and Razgrad are not capable of fixing Ruse's labour shortage either in terms of qualifications, or numbers," said Alexiev.

The people who have decided to leave Silistra or Razgrad prefer to go abroad rather than stay in the country. According to national statistics, only 7-8% of the people who have relocated in 2017 have gone to Ruse.

Village Country

The problems in Silistra, Razgrad and, consequently, Ruse, are partly due to their leading position in Bulgaria as regions with a large share of people living outside urban areas. While the national average for the urban population in 2017 was 73%, in the Silistra region only 41.4% of the population lived in cities. In the Razgrad region, the percentage was 47%.

Bulgaria's village infrastructure cannot be compared to, for example, that of France. Village life means limited access to services, education opportunities and jobs, lower purchasing power and slower economic development in general. A main road is easier to build than many smaller ones, which means that the regions of Ruse, Silistra and Razgrad don't get large financial "gifts" from the authorities in Sofia.

The production of automotive components is becoming increasingly important for the Bulgarian economy and the sector is well represented in Ruse's industrial zone

Generally, missing infrastructure is a significant obstacle to unlocking Ruse's economic potential, said Alexiev. As part of northern Bulgaria, the region is largely dependent on two big infrastructure projects - the future north-south tunnel under the Shipka Pass in the Balkan mountain range and the east-west Hemus highway, along with its northward extension from Veliko Tarnovo to Ruse. "One day, if the Shipka tunnel is completed, synergy along with the Ruse - Gabrovo - Plovdiv axis can be sought as a natural extension of the backbone of the Bulgarian economy," Alexiev said. Until then, Ruse will continue to struggle alone to break away from the chains that bind it.

Silistra: The Eastern Northwest

Silistra is similar in many aspects to Bulgaria's poorest regions - the Northwest. The city lags far behind average national growth rates. Here, gross value added grew by 48% over the past decade to around 6,700 levs per capita in 2017. The reason - the leading economic sector in Silistra is agriculture, where productivity is typically the lowest. Agriculture creates 23% of Silistra's value-added, whereas the national average is 5%. For reference, the size of the local economy was only 744 million levs in 2017 - the second smallest in Bulgaria after Vidin. It grew by just 25% in the past 10 years.

A serious problem for business in the area and economic development, in general, is the quality of education and skills of the local workforce. "Not only is the educational structure of the active-age population in Silistra one of the worst in the country, according to the latest census from 2011, but the results of recent graduates show that local authorities are not looking for a solution, which means the issue will remain in the future," said Alexiev. He maintains that the region can only move forward if it can benefit from the neighbouring economic centre's activity (if the industrial park in Ruse becomes overcrowded, for example).
Razgrad: Football's effect

Razgrad's economic profile has been relatively constant over the past ten years. According to IME's classification, the region can be categorized as agricultural with one of the highest shares of agriculture in the local economy nationwide - 16% in 2017. On the other hand, industry accounts for less than a third of GVA.

Labour productivity is growing at a rate close to the national average. Value-added rose to around 9,000 levs per capita in 2017, which is an increase of 76% over the past decade. Foreign investment is also growing - between 2001 and 2017 the accumulated sum reached 1,340 euro per capita and the expenses for fixed material assets exceeded the levels in Ruse by 1,618 levs per capita.

At the same time, Razgrad remains a relatively small region with the fifth smallest economy in the country. Employment reached just 55.7% by the end of a strong labour market cycle last year, whereas employment is going down, but remains in double digits.

One good bit of news is Amylum Bulgaria's plan to expand its production plant with an investment of 243 million levs, but this would create just 54 new job openings. The lack of good infrastructure, poor neighbouring regions and sub-par local educational attainment make the region relatively unattractive for investors.

"Razgrad is too small to go forward on its own. Outside forces would be necessary to improve local living standards," said Yavor Alexiev. For example, according to him, neighbouring Industrial Park Shumen can become a generator of economic activity, which Razgrad can benefit from.

Having said all that, the rapid increase in the average monthly wage in the region seems a little strange. By the end of last year, gross monthly remuneration in Razgrad reached 1,008 levs, whereas in Ruse and Silistra the amounts were 952 and 813 levs, respectively.

A detailed breakdown of national statistics shows that in 2017 the high wages come almost exclusively from the sector "Culture, sport and recreation", where the annual salary reached astronomical proportions for Bulgaria - 54.6 thousand levs in 2017. By comparison, Sofia comes second with 11.8 thousand levs per year in the entertainment sector.

For a local football fan, it would be easy to guess where the bizarre numbers come from - the several dozen people associated with local Professional Football Club Ludogorets. The team, along with the pharmaceutical company Huvepharma and the veterinary drug producer Biovet, are associated with Kiril Domuschiev: the strongest economic figure in the city.

Author: Capital
Author: Capital
Author: Capital
Photographer: Capital
Missing infrastructure is a significant obstacle to unlocking Ruse's economic potential

Ruse, Bulgaria's fifth largest region, rarely hits top spot in national economic or quality-of-life rankings. However, on closer inspection, you can tell that the city is waiting for its moment to shine. Local macroeconomic indicators are good and industry is developing rapidly. Also, the region is well located strategically in the north-eastern part of the country, on the right bank of the Danube River, opposite Romania.

By using this site you agree to the use of cookies to improve the experience, customize content and ads, and analyze traffic. See our cookie policy and privacy policy. OK