The week: Gooood morning Vietnam!

It was 2008, the socialist government wanted to begin importing labor for the booming Bulgarian economy, having just entered the EU. The construction business had big plans - new Vietnamese workers would help build new infrastructure, nuclear plants, and pipelines. There was even a sense of history - the minister who signed the new letter of intent was the same who ended the socialist-time agreement with Vietnam - Emilia Maslarova.

Yet it wasn't to be.

The biggest financial crisis the world has seen in a century happened the same year and Bulgaria fell off a cliff. Optimism evaporated, together with Maslarova and her government, a new, determined leader - Boyko Borissov, came to power. It would be years before Bulgaria started looking abroad again, and as for big plans: they got drowned in corruption and EU money.

So here we are again, 15 years later, in the same place. The Bulgarian economy is better paid and more advanced, yet even more hungry for labor, and Vietnam keeps exporting mind-boggling amounts of it. The unemployment rate back then was 6.5%, now it is 4%. The wage offered to Vietnamese back then was 500 USD - between 600-700 levs, now it will probably be 3-4 times that.

We are a little bit late to the party, as usual. Countries like Romania and Hungary are already importing tens of thousands of people from Asia. Yet I'm hoping that this time it will be a bit different. When I was in Hanoi, there were companies around me explaining big infrastructural plans, like the ones Bulgaria fulfilled in the 80s, when the first wave of Vietnamese came to help socialism build a better future. All those plans went down the drain, and we're left with several unfinished highways, no trains and no big, inspiring projects to look up to. Maybe this time, we will go slower but reach further. Unless a new crisis hits.

This newsletter is helped by

Martin Dimitrov, Monika Varbanova, Evgeni Akhmadzai, Mary Ivanova

1. Politics this week:

On Thursday, representatives of the defense ministries of the three countries signed a Memorandum of Understanding on the establishment of a Mine Countermeasures Maritime Group in the Black Sea (MCM Black Sea). The memorandum was signed by Deputy Defense Minister Atanas Zapryanov on the Bulgarian side, as Minister Tagarev is on a 5-day visit in the US in order to check on the companies that produce the F-16 fighter jets for the Bulgarian Air Force and the Stryker armored vehicles for the army.

Let's go

After the final approval of the Memorandum at national level by the other participating countries, the process of operational planning of the Mine Action Group in the Black Sea is about to start. Initially, the MCm Group is to include mine countermeasures on ships of the three Black Sea allies alone and mine clearance operations will focus on their territorial waters and exclusive economic zones.

Speaking of Tagarev, an Epiphany

Epiphany, or Yordanovden (The day of Yordan), is a big holiday in Bulgaria, not only because it celebrates one of the most popular male names in the country, but also because it is marked by ceremonies to bless the flags of the defenders of Bulgaria. This year the military ceremony turned out more exciting than expected, as the Minister of Defense Todor Tagarev came under fire for not inviting all political leaders to the flag-blessing ceremony. This angered many, including the leading pro-Western politician in recent months, MRF's US-sanctioned oligarch Delyan Peevski.

There is more than meets the eye

as the rotation of the cabinet is drawing nearer, Mr Tagarev - who is a thorn in the side of every party apart from WCC-DB for his staunch determination to move forward with the long-postponed and much-needed rearmament of the Bulgarian army - has his job on the line.

Radev fights back on the Constitution

As expected, the cabinet of President Rumen Radev announced on Monday that he has appealed a part of the constitutional changes approved by Parliament in mid-December. However, the Head of State is not really attacking the crux of the reforms to the judiciary, but solely those sections of the changes adopted that are curtailing his own authority, i.e. the ability to appoint and direct caretaker cabinets without much interference.

Your Parliament is not enough!

At the same time, he also asks the Constitutional Court to rule on the constitutionality of the very procedure by which the changes were adopted. "The president believes that some of the amendments, in addition to containing contradictions with other constitutional provisions, change the balance between the main bodies and the mutual control between them, directly affecting the form of government and are within the exclusive competence of the Grand National Assembly," the press center of the President wrote.

2. Economy:

First, there were kilometer-long queues at the borders because of increased checks on cargo to Austria. Then the call of the chairman of one of the largest employers' organizations Vasil Velev, to "not buy Austrian goods or use Austrian services". And on Wednesday, the National Revenue Agency (NRA) and other regulators began intensive checks, focused on Austrian food and petrol retailers BILLA and OMV. The two companies are perhaps the most recognizable Austrian investments in Bulgaria, albeit the supermarket chain is actually majority-owned by a German firm.

Not a Schengen issue

The checks, however, are hardly revenge against Austria, but rather because of the new requirements under the Ordinance on the Control of High Fiscal Risk Goods, which was changed at the request of Finance Minister Assen Vassilev. The list mainly includes food, oils and fuels. And the mandatory declaration of their shipment to the NRA came into force on 3 January this year. But since the revenue agencies have been used as tools for political repression over the years, it is logical to seek a similar reading now.

NB: Guess who's gonna check your FDI

Whether as a sought-after effect or because of an oversight the law effectively introduces a licensing regime for the vast majority of FDIs entering into the country, which (if approved) might have to obtain prior approval from a specially created body - the Inter-Ministerial Council for Screening of Foreign Direct Investment Related to Security or Public Order.

Expect more on that, and her full opinion is here.

3. Business:

Bulgarian company Green Innovation, which operates through the Hydrogenera brand since early 2023, is working on its first order for a 1 megawatt electrolyzer for green hydrogen production.

Startup

The technology unicorn, which develops open source software in the field of databases, announced it will open an office in Sofia. Initially the company will employ 75 people.

Circular economy

The Bulgarian company, which sells used phones, raised another 1.4 million euro from Vitosha Venture, NV3, Sofia Angels Ventures, as well as many business angels, after a 1 million levs investment in 2022. In 2023, Swipe.bg reported just under 5 million levs in revenue, a nearly fivefold increase compared to a year earlier.

4. Energy

Perhaps the most important local story in the Bulgarian energy sector this week is again the delayed Recovery and Resilience plan program providing funds for large renewables and batteries. To cut a long story short, it is unlikely to happen soon after it became apparent that its technical details are still being analyzed by EC experts, and until it is approved it cannot be released. The program envisages the installation and commissioning of at least 1425 MW of new power generation capacity from renewable sources with at least 350 MW of batteries.

Bulgaria lost a case against a RES operator

Malta-registered ACF Renewable Energy Limited won a 61 mln euro case against the country in the World Bank arbitration due to the changes introduced in 2013 by the government that changed the way renewable energy is treated and taxed. The company owns a big solar park near Plovdiv.

In a recap: the market is changing

Apart from the constantly developing renewables sector, early 2024 is the right time for making conclusions about 2023. In brief, Bulgaria is losing its position as a net importer of electricity and if you look at the final quarter of 2023, Bulgarian energy utilities have earned only 29 million levs of revenue from electricity exports to Turkey, North Macedonia, Greece, Serbia and Romania. Overall, in 2023 utilities made around 800 million levs revenue even though in two months, May and November, Bulgaria became a net importer. There is enough evidence to think that if the current governance of the energy sector continues and money is not invested in new, modern and low carbon plants, Bulgaria will start to rely much more on foreign volumes.

5. Brussels

#Free travel - 36 thousand eighteen-year-old Europeans, including 567 Bulgarians, will receive a free travel card to explore the diversity of Europe, learn more about its cultural heritage and history and connect with people from across the continent. This is thanks to the DiscoverEU initiative, funded by the EU's Erasmus+ program. The winners will be able to travel by train between March 2024 and May 2025 (not sure if the famous Bulgarian rail network is part of the package);

#Ukraine - The European countries agreed on Wednesday to pool EU aid for Ukraine in a joint fund, but not how much money should flow into this fund. On 1 February, the European heads of state will hold an emergency meeting to discuss how to deal with Hungary's veto on the matter. Budapest itself seems to have changed its mind and is no longer against the release of the funds and proposes that the amount be approved separately for each year.

6. Watch out for:

The severely ill head of the Bulgarian Orthodox Church expressed his staunch support for Ukraine in his address - something rather unexpected for the Bulgarian church, which is quite divided when it comes to its attitude towards Russia. "The Lord and the Holy Church bless only the army which does not show aggression, and whose only purpose is to protect and defend its people and state, within its internationally recognized territorial boundaries," his message stated.

Company:

The state-owned HEMS operator firm, which was almost shut down by the last caretaker cabinet, is once again operational and will soon receive its first specialized helicopter, which would allow it to begin daytime operations as soon as February. Six pilots and almost 100 medics have already undergone training and are ready to start work. So Bulgaria joins the ranks of the other EU nations, where air rescue is an option.

Location:

The troubled seaside mall has a new owner - the mighty Karanenovi family, which runs the Primoretz hotel in the city, owns a couple of other resorts and (rumor has it), runs the show when it comes to procurement decisions around there. The price they paid is 12.6 mln euro.

Date:

After the Sofia City Council once again failed to agree who will head it, Save Sofia leader Boris Bonev warned that if this does not happen by January 25th, there will be new elections for local representatives to break the deadlock.