The week: The case of the missing investments, (G)rain of protests, renewables boom

It's gone, however. In the last decade, Bulgaria has fared disastrously in that area, with FDI's plunging from 14% to 3% after the financial crisis of 2008. That's also common knowledge.

But here are two things that are not.

Bulgaria has grown accustomed to this. As EU funds have substituted FDIs as the main outside source of investment and the Bulgarian economy has fine-tuned itself towards the high-corruption low-efficiency model, this will have long-lasting effects. Gross capital formation - the indicator which basically shows how much of the value created in an economy is reinvested - is by far the lowest in the EU (15.4% of GDP). If you take out the financial sector, this figure will be even lower (you can read the analysis here). The Bulgarian economy, in other words, is not investing enough for its own sustainable future, let alone for catching up with the rest of the EU. That's very different from what Romania and Croatia are doing, for example.

And the second part concerns the said EU and the hypocrisy that reigns there. Several years ago, when Plovdiv was racing for its first really big investor - Volkswagen - the EU rules stipulated that the state can offer very little in terms of incentives for the company. Bulgaria was overtaken by Turkey, which of course is a very large market, but also could promise billions of euros and tax incentives. The whole thing ended without a factory, as Turkey became politically poisonous for VW and they shifted towards e-cars anyway.

Yet today, in order to not be outplayed by the US subsidies or China, Germany is showering Intel and TSMC with billions upon billions of euros to build their new factories there. The European Commission doesn't seem to mind that. It will be very hard to sell the ban on Chinese subsidized cars to the poorer Eastern European markets while demonstrating that.

Or take Schengen which is a very powerful tool for attracting investment. While we totally agree with the corruption allegations from the Netherlands, it's very hard not to see what they and Austria do as anything other than political blackmail. At this point, I honestly can't see a moment when they are going to agree to let us into the club. Southern Italy is owned by the Mafia, yet it is in Schengen. Lines of illegal migrants pour in Austria through Croatia, yet it is in Schengen.

What I'm getting at here is simple. Those two processes - inside and outside - have coincided. They must be tackled on their own, but they must be tackled if we are to progress.

This newsletter is helped by

Martin Dimitrov and Monika Varbanova

1. Politics this week:

Speaking of EU funds: Grain "terrorists" win

The reaction to the surprising decision of the authorities to drop the ban on Ukrainian grain imports early caused a chain reaction in the past six days. The grain producers' protests, which were joined by coal miners and blocked most of the main infrastructure arteries of the country, seemed to threaten the cabinet's very survival for the first two days of the week.

Initially, the cabinet seemed adamant to hold its ground and open the Bulgarian market to Ukrainian grain, giving reasonable free trade arguments for this. Prime Minister Nikolay Denkov made a splash when announcing he "does not negotiate with terrorists" during an interview on Saturday.

Well, he did (after apologizing).

On Tuesday evening farmers and the cabinet reached an agreement to keep the ban on imports of sunflower seeds from Ukraine - the main point of contention. For imports of wheat, corn and rapeseed Mr Denkov said negotiations were underway between the European Commission and Ukraine, together with the agriculture ministers of the member states. The following day, all the protesters' demands were gathered in a memorandum, which was signed by the cabinet.

The puppeteers approve

The initial proposal for the revocation of the ban came as a surprise to many - including to the cabinet's own agricultural minister - last week, a day before the EU was about to rule out the ban at European level. It was proposed by MRF mogul Delyan Peevski and his deputies. WCC-DB deputies jumped on his bandwagon, only to find themselves on the sharper end of the farmer's reaction.

Later on, Peevski and Boyko Borissov even said they are ready to deal with the crisis, if the government can't - a tell-tale sign of where real power still lies.

Which ties nicely with our weekly political article that explores who actually governs in the ruling coalition after the first 100 days in power.

A rising number of domestic violence reports after the "Debora" case

The State Police has recorded a spike in domestic violence reports after the case of the 18-year old girl from Stara Zagora, who was beaten and mutilated with a knife by her ex-boyfriend in August. The story was widely reported and sparked protests in over 30 cities in Bulgaria. On Wednesday, Zornitsa Shumanova of the General Directorate of National Police told reporters at a special press conference that there had been an increase in reports of domestic violence in its aftermath.

"The statistics on domestic violence are already taking on startling proportions," Shumanova said, adding that there is a rise both in the number of reported physical injuries as well as psychological abuse. According to data released by the Ministry of Interior, for the first eight months of this year there were more than 500 cases registered, while for the whole of 2022 the identified cases of domestic violence were 736.

Not new, just visible

It's clear that this is not a new problem - Bulgaria has long had an under-the-covers problem with domestic abuse. It's a good thing more people are coming out to search for help. The best part: Shumanova also said that as of 12 September the Internal Ministry has created a special Domestic Violence unit, which should create a unified standard for work in such cases in the Police.

2. Economy:

Figures:

16.5%

of all trips by Bulgarians were made by plane in 2021, which is the highest after Croatia in the EU. Blame the lack of speed trains.

7.7%

Is the inflation in August on an annual basis

43d

Place in economic freedom is where Bulgaria is placed in the annual ranking by Frasier.

3. Business:

The Vienna-based company together with Danish Eurowind Energy have started the first hybrid 3-in-1 renewables project. It consists of 250 MWh worth of wind turbines, a 238 MWh solar park and batteries that can retain up to 500 MWh of energy and will be constructed on the terrain of the old Tenevo military airport near the city in Southeastern Bulgaria.

IT

The Bulgarian-founded company, owned by a British conglomerate, will be sold to the Estonian Nortal for 8.5 mln. euro. The company has a 300-person office in Sofia.

Cloud

Will buy the Bulgarian software company GotoAdmins. The company is a fast-growing IT service in DevOps, migration to cloud and digital transformation.

4. Energy:

The interest in the construction of new renewable energy installations in Bulgaria is huge, but the lack of spare capacity on the grid hinders investors and prevents the country from quickly and painlessly parting with coal. At the same time, the state fears speculation in the sector and is considering the introduction of guarantees for new projects - BGN 50,000 for each megawatt applied for. By the end of August alone, the requests for new renewable energy plants submitted to the Electricity System Operator (ESO) reached over 40,000 MW. By comparison, the total available electricity capacity (TPPs, NPPs, HPPs, etc.) in Bulgaria is currently around 13,000 MW.

5. Watch out for:

The energy expert from the Center for the Study of Democracy was appointed as the state representative on the board of Lukoil Neftochim's Supervisory Council. He is known for his analysis and public defense of the thesis that the Bulgarian refinery can continue operations even if it fully abandons Russian sources of crude oil.

Maria Genova

The National Railway Infrastructure Company - the black hole of a company that is also key to the development of the rail network of the country - is getting a new boss, as outgoing Director General Zlatin Krumov and two other members of the board of directors are kicked out over "the huge delays in all railway infrastructure projects." Ms Genova has 10 years of experience in the firm and has most recently headed its Strategy and Administration bureau.

Place:

Varna