Public Opinion On Foreign Investment
Direct Foreign Investment in the Transition
Period: The Case of Bulgaria Project Sponsored by the International
Center for Economic Growth
SOFIA, APRIL 1993
Contributors:
Daniela Bobeva, Coordinator, Economic Program,
CSD
Blagovest Georgiev, Professor of Sociological
sciences, Sofia University
Sashto Stoyanov, Department of Sociology, Associate
Professor, University of National and World Economy
Boyan Guselev, Center for the study of Democracy
Tihomir Bezlov, Center for the Study of
Democracy
Translation:
Velislava Gurova
Sophia Kasidova
Editor:
Sashto Stoyanov
Graphic Design:
Tihomir Bezlov
Compared with the other central and
eastern European countries - Hungary, Czech and Slovak republics
and Poland, foreign investment turns to be a new phenomenon for the
Bulgarian economy. Thus the public opinion on it is in a process of
forming. The role of researchers, different studies, the mass-media
and foreign investors, themselves, in inspiring public support and
acceptance of foreign investment is of great importance. This will
contribute to the success of investments that have been made as
well as to their further attraction to the country.
A brief overview on the press shows
the existence of two types of information - articles and writings
introducing the country as an unattractive site for foreign
investment and their volume as rather inconsiderable. On the other
hand there are successful examples for some companies in the
country. The number of the analytical articles and scientific
publications that throw light on the necessity of foreign
investment is insufficient. There is a lack of information
depicting the experience of the other countries in this field - the
means of public policy for promoting investment, data on the state
of the international credit markets, etc.
In April 1993, the Center for the
Study of Democracy (CSD) conducted its second public opinion poll
on the Privatization and Economic Reform. It was sponsored by CIPE
and ICEG and included a set of questions related to foreign
investment. The sample (N = 2000) is nationally representative and
the sample methodology employed: two stage cluster sample.
Information was collected by face-to-face interviews.
A similar method and questionnaire
were employed in a survey on Privatization conducted in 1992. This
makes a considerable portion of the data from both surveys
comparable enabling the exploration of some tendencies. The issue
of foreign investment has been addressed several times in the
surveys conducted by CSD over the past three years. The present
analysis draws on those previous surveys, as well as on the one
conducted in April, 1993.
1. PUBLIC OPINION (PO) IN
BULGARIA: GENERAL REMARKS
For a better understanding of public
opinion in Bulgaria with respect to foreign investment certain
general public opinion characteristics as exemplified in
polls should be taken into consideration:
(1) PO in this country is to a
considerable degree conservative and
inert. Conservatism and inertia extend predominantly
over politically related issues, and that usually brings about a
marked split of the public on many strategic problems of
post-communist transformations. These characteristics could be
explained in several ways, but the dominant implication is that
practical level experience is usually derived from socialist
values, while the just-emerging frame of reference still has a
limited empirical background.
(2) The opinions of many social
groups are highly controversial, i.e. the split of
the public on the societal level is often reproduced on the
personal level. New realities are unproblematically combined with
the old ideals. Many find the explanation in the near past when
basic non-ideological landmarks were destroyed and in the
instability of the newly-emerging ones.
(3) Political
polarization is a determining factor. Party affiliation has
a strong influence on all non-political issues. Very often,
political attitudes override people's immediate economic
interests.
(4) Another PO feature is
etatism. As in other East European countries, a considerable
portion of the population (some 45-55 per cent) favor state
intervention in the economy. Most polls show that the public in
general has a predominantly leftist value orientation.
(5) PO tends to be very
sensitive to the actual positions of public
officials
in the power hierarchy. Even
newcomers on the political scene receive high confidence scores as
soon as they come to power.
Unlike Hungary, Poland, Czech
Republic, and Slovakia, foreign investment in Bulgaria is, at least
until the present moment, quite scarce. This makes the problem of
risks and public attitudes theoretical rather than practical.
Nevertheless, PO in the country on the issues of foreign investment
is in many cases better structured than opinions on other elements
of social and economic policy. The basic indicator for that is the
portion of people who
"Don't know". The examination
of "Don't know" rates shows that they are about 30 to 50 per cent
in questions on privatization techniques, relations with the CIS,
etc. while the respective rates in questions dealing with foreign
investment are about 16% - 23%.
The first PO data on foreign
investment that could be treated as initial basis, come from CSD's
post-election survey of the summer of 1990 1. Results
from the survey are in many respects symptomatic. To the question
of whether the country's economy can recover without foreign
investment 26.3 per cent say "Yes" and 52.1 "No" (21.6%
"Don't-knows"). It could be assumed that the configuration has
remained unchanged over the ensuing three-year period. The
following distributions were obtained on the question whether the
country needs foreign investment:
|
spring
|
spring
|
fall
|
spring
|
fall
|
|
19902
|
1991 3
|
1991 4
|
1992 5
|
1992 6
|
Yes
|
65.9%
|
62.6%
|
62.0%
|
63.0%
|
65.1%
|
No
|
18.0%
|
20.4%
|
19.5%
|
16.9%
|
16.9%
|
DK
|
16.1%
|
17.0%
|
18.5%
|
20.1%
|
18.0%
|
Data in the table show, a strong
positive attitude towards foreign investment throughout the entire
three-year period.
A point of interest would be to
compare the opinion of the country's business elite. Although
foreign investors are seen as competitors, the attitude to foreign
investment is quite positive. 28.8% of the 1200 interviewed think
that foreign investment would only have positive effects, 61.7%
think the effects would be both positive and negative, and only 4%
think foreign investment would have only negative social and
economic effects.7
3. EXPECTED EFFECTS FROM FOREIGN
INVESTMENT
Most generally attitudes towards
foreign investment could be assessed by the perception of the
public of the expected results from its operation in the country.
To the
1. During the 1990 elections the
Bulgarian Socialist Party, former Communist Party, won more than 50
per cent of the seats in Parliament.
2 CSD survey December
1990
3. CSD survey April 1991
4. CSD survey Noblemen
1991
5. CSD survey March 1992
6. CSD survey September
1992
7. CSD survey Noblemen 1992. This
sample consists of 600 state enterprise managers and of 600 owners
of private firms.
question of whether foreign
investment will be potentially dangerous to the country in April
1991, 35.7% answered "Yes" and 45.0% "No". The same question was
posed in the fall of the same year 8, and 32.9% gave
positive responses and 44.2% negative. The respective distributions
of March 1992 are 30.1% and 41.5%.
As far as the potential dangers are
concerned, the evident increase of the amount of foreign investment
flowing into the country has not influenced significantly people
with negative attitudes. Public distrust and criticism are in this
respect consistent with the general tendencies of PO. A
considerable portion of the population has a negative attitude
towards all changes. The assumption is that changes have the single
purpose to benefit the West. In September 1991 16.0% agreed
completely with the statement "The West is only taking advantage of
us", 15.8% agreed somewhat, 49.9% did not agree, and 19.3% were not
sure.
It is interesting to examine
employees' expectations as to the consequences from potential
buy-outs by foreign companies. The April 1993 survey shows that
24.8% expect staff cut-downs, 17% expect a wage increase, 15.6%
think that labor discipline will improve, and 14% think quality
will improve. According to employees significant changes in the
production process will be introduced if the enterprise is bought
by a foreign investor. Most of them expect positive effects in the
economic situation of the enterprise: labor optimization, reducing
bloated staff, improving work discipline. On the personal level,
however, some employees expect negative effects. The fears of mass
layoffs, labor intensification, etc. are all reasons making the
work in a foreign company a low preferred alternative,
Answers to the question "Whose
property would you like the enterprise you work in to be?" are
as follows:
• state-owned
• it does not matter
• private (Bulgarian)
• employees as
shareholders
• with foreign
participation
8 CSD survey November
1991
|
Now
|
In 5 Years
|
Now
|
In 5 Years
|
Now
|
In 5 Years
|
Now
|
In 5 Years
|
Big
|
Big
|
Average
|
Average
|
Small
|
Small
|
DN
|
DN
|
Bankers
|
42.9%
|
51.9%
|
17.0%
|
9.0%
|
8.5%
|
2.6%
|
30.7%
|
36.5%
|
Public Officials
|
37.7%
|
21.8%
|
17.3%
|
18.8%
|
13.5%
|
18.6%
|
31.5%
|
40.1%
|
Black Marketeers
|
55.6%
|
21.2%
|
11.0%
|
10.6%
|
10.8%
|
30.1%
|
38.2%
|
22.6%
|
Politicians
|
51.9%
|
33.3%
|
16.2%
|
19.6%
|
9.0%
|
11.1%
|
22.9%
|
35.9%
|
Foreign Investors
|
15.7%
|
39.0%
|
13.3%
|
13.9%
|
31.3%
|
6.8%
|
39.7%
|
40.3%
|
-
The role of foreign investors
according to the public is insignificant at present. Only 15.7%
think it is significant. The dominant roles in the economy are
attributed to black marketeers (55.6%), politicians (51.9%),
bankers,(42.9%).
Most people expect a radical change
in the situation in five years. Bankers will supposedly assume a
dominant role, while the influence potential of black marketeers,
politicians and public officials is expected to fall in relative
terms. The public expects a most serious change in the role and
influence potential of foreign investors: they will be the "second
power" in the future power structure of the economy.
As the comparison between the opinion
of the general public and the business elite on the present role of
foreign investment in the country shows, the latter give greater
importance to foreign investors. 12.9% think foreign capital
already has an important role, 20.6% think it is of average
importance, and 55.1% think its role is yet
insignificant.
PO polls on foreign investment have
registered a phenomenon typical of other debates on economic
issues. Whenever the question is posed in abstract terms, e.g.,
"Is foreign investment necessary for Bulgaria?" or "Do
you approve of foreign investment coming to Bulgaria?", then
positive attitudes account for some 60%. If, however, questions
address the personal level, the situation changes significantly,
and tolerance falls abruptly.
The data of CSD's fall
199110 survey are quite indicative in this respect. The
distribution on the question "Should foreign citizens be granted
ownership rights?" is as follows:
The distribution on the question
"Should foreign citizens be allowed to purchase land?" is
even more indicative:
The same questions were included in
the spring 1992 survey 11 , and the similarity of the
results prompts the assumption that PO is in this respect
relatively stable. The distribution on the first of the above
questions (of foreign citizens' ownership rights) are the
following:
And on the second on land
ownership:
Considering the above data, one
should have in mind that, unlike Poland, Hungary, Czech Republic,
and Slovakia, there have been practically no significant purchases
of property, or even stated intentions for such purchases. It
should also be noted that despite the negative PO attitude to the
possibility for foreign citizens to become owners, the Bulgarian
Law in Foreign Investment (adopted in 1992) is perhaps the most
liberal in Eastern Europe.
10 CSD survey Nobember
1991
11 CSD survey March 1992
4. DIFFERING OPINIONS ON FOREIGN
INVESTMENT
PO on foreign investment is not homogeneous.
Different social groups hold differing views on the issue.
Basically PO on foreign investment is conditioned by education,
occupation and ethnic background.
First, attitudes towards foreign investment are
better structured among men: 18.7% do not express an opinion, while
among women this share is 29.4%. Women have made progress in this
respect, however, as far as in March of 1992 about 36.2% did not
express a definite opinion.
The majority of the group of ethnic Bulgarians
does have a definite position on the issue, whereas the majority
among ethnic minorities has not formed its attitude yet. Only 19.3%
of the Bulgarians do not have an opinion, while among ethnic Turks
the percentage goes up to 52.2%, among Pomacks it is 57.1%, and
48.5% among Gypsies.
The higher the level of education and training,
the more active and informed people are. Only 6% of those holding
university degrees do not express a definite opinion on foreign
investment, whereas the percentage among those without education
(people with less than 4 years of schooling) is 74%.
The negative attitude to foreign investment is
more widespread among older people. Young people aged 20 and under
are the most optimistically minded - 61% think foreign investment
would have beneficial effects. The share of those who favor foreign
investment among the population aged 20 to 30 is almost the same,
among those aged 31 to 40 it is 58%, 41 - 50 44.8%, 51 - 60 36.5%.
and those above 60 - 27%.
Evidently, demographic characteristics are
strongly interrelated with the opinions on foreign investment.
Positive attitudes towards foreign investment are delimited to
specific population groups. It is highly unlikely for ethnic
minority groups or lower-education groups to assume a more
structured attitude in the near future, given the already
demonstrated tendencies.
Second, social status is another major factor in
the formation of an attitude to foreign investment. Those who
identify themselves as belonging to the upper class are most in
favor of foreign investment - 80%, with only 20% holding the
opinion that would be potentially dangerous. Among workers the
respective ratio is 35.9:37.9, and among the middle class it is
61.4:26.3.
Those who have started their own business
understand better the need for foreign investment than employees in
state enterprises. 75% of private entrepreneurs and a mere 34% of
state sector employees favor foreign investment Those who express
a
positive attitude to the development of the
private sector are also extremely supportive of the in-flow of
foreign investment, considering it a force promoting private
initiative and entrepreneurship, a vehicle for expanding the
private sector in the economy, and a decisive factor for the
success of economic reforms. 73.9% of those who favor full
privatization of the economy have indicated that foreign investment
would only have positive effects.
Household incomes are another, be it indirect
factor, for the formation of public attitudes towards foreign
investment. 81.3% of those whose financial conditions have improved
and only 23% of those whose conditions have deteriorated think
foreign investment is useful. These attitudes are preconditioned by
the overall negative attitude to the changes in the economy, rather
than by a well-formulated position on the issue of foreign
investment.
Third, PO on foreign investment is defined within
the context of the general attitude towards the economic reforms.
Those in favor of a market economy, privatization, the land reform,
etc., are to a large extent supportive of the idea of a massive
inflow of foreign investment. 62% of those who consider free market
economy the right reform alternative think foreign investment is
beneficial and only 26% think would be potentially dangerous.
Conversely, only 26.2% of those disproving of a free market economy
are in favor of foreign investment and 54.3% think would be
potentially dangerous.
A similar relationship is observed in
distributions on the question "Are you satisfied with the
economic reforms in the country?"
|
Foreign investment is
useful
|
Foreign investment is
dangerous
|
Very satisfied
Somewhat satisfied
Somewhat dissatisfied
Completely dissatisfied
|
67.9%
65.1%
47.9%
35.6%
|
25.0%*
25.1%*
32.8%*
43.4%*
|
* The remainder (to 100%) have not
expressed an opinion. CSD April, 1993
Only 31.8% of those who think that
things have gone worse after the 10th of November 1989, favor
foreign investment, compared to 64.9% of those who think conditions
have improved.
Fourth, PO on foreign investment is
very much dependent on political affiliations. This is also a
general tendency of PO and attitudes in the transition period.
Those who oppose the new political system are much more negative
towards foreign investment as it is part of the system they do not
approve of in principle. A mere 25% have said that
foreign investment is useful. 60% of
those in favor of the new system are also in favor of foreign
investment. The political tinge in all PO matters is even more
evident if the question whether socialism has future in this
country is posed. 61.5% of those who have respond positively to
this question consider foreign investment dangerous. Of those who
reject socialism completely only 19% think foreign investment is
potentially dangerous to the country.
The natural conclusion to draw is
that those most closely connected with socialism and communism,
former socialist (ex-communist) party members are the most
distrustful of foreign investment.
Which political party
would you vote for?
|
FI is useful
|
FI is dangerous
|
Union of democratic forces
|
67.1%
|
20.0%*
|
Bulg. socialist party
|
24.1%
|
58.2%*
|
Agrarian party
|
36.8%
|
41.2%*
|
Bulg. business block
|
53.0%
|
33.3%*
|
Buig.social democratic
party
|
78.6%
|
14.3%*
|
- The remainder (to 100%) have not expressed an
opinion.
CSD April, 1993
The political stratification of PO on
foreign investment is strongly influenced by the political
platforms and the direct action of parties and their leaders. Some
parties still can hardly accept the fact that foreign investment is
necessary for the recovery of the economy and for the development
of the private sector. Along with the delusions that we "will
manage on our own" and the nostalgia for the idealized past,
negative attitudes towards everything new accumulate in a large
share of the population. They will probably grow stronger as
dissatisfaction with reforms rises. It could therefore be assumed
that political factors will continue to play an important role
shaping PO on foreign investment. The possibility of heated
political debates that could considerably influence the current
liberal policy to foreign investment should not be
rejected.
PO on the treatment of investment in
this country reveals general views and an overall acceptance
towards investment. As a rule, those who disapprove foreign
investment do
not accept preferential treatment as
an option. What is more important is that the majority of those in
favor of foreign investment are also opposed to preferential
terms.
The general attitude of the public is
not in favor of protectionist trade or tax policies. As much as 98%
of the businessmen polled consider that domestic business should
not be given advantages over foreign business. However, the
majority of the respondents are also against giving any
preferential treatment to foreign capital.
Only 24 % of the "business elite"
support the view that tax breaks should be granted to foreign
investors; 20 % favor interest rate subsidies, 12% are for
preferences for payment of the rent, 23% favor preferential
treatment of foreign firms in the privatization process.
The only subsidies which are
supported by the Bulgarian business elite is in the promotion of
foreign investment in some underdeveloped regions of the country,
in conformity with the regional policy of the State.
The "business elite" study indicates
that the degree of approval for foreign investment also differs
between different sectors of the economy. Generally speaking, the
public's view is that foreign investment should be restricted as
far as transport, power supply, radio and television are concerned.
For these sectors, the negative ratings are twice higher than the
positive ones. The inflow of foreign investment in heavy industry
is generally supported.
Reviewing the expectations and
attitudes of the public towards foreign investment, we should touch
upon another very important aspect - the differential attitude
towards foreign investment depending on its national
origin.
The studies show that throughout
1990-1992, the public maintained a relatively realistic view about
the national origin of foreign investment prevailing in the
country. The question: "Which country do you consider is most
actively involved in Bulgaria's economic life?" produced the
following distribution:
|
1990
|
1991
|
1992
|
Germany
|
23.9% 23.2% 24.5%
|
USA
|
16.1% 17.3% 5.9%
|
France
|
10.5% 5.3% 6.0%
|
Japan
|
6.5% 1.3% 2.3%
|
The table above shows that according
to the public the prevailing investment is from Germany, and that
coincides with the official data by 1992. This can be explained by
the fact that during the 1980s Germany was Bulgaria's second most
active trading partner after the CMEA member-countries. The list
above, however, omits Austrian investment which also has a
considerable share in the Bulgarian economy.
The favor of German investment could
be attributed to the fact that Germany has maintained traditionally
good relations with Bulgaria ever since the latter's liberation
from Ottoman domination in 1878. It should also be noted that the
positive attitude towards German investment remains stable and
favorable throughout the whole period under review.
On the preference side the situation
is similar. Below following is the distribution to the
question:
"What country would
you prefer the foreign investment to come from?" (multiple answers
are accepted):
-
-
-
Germany 42.3%
U.S.A. 35.2%
France 18.7%
Britain 18.1%
Japan 17.0%
Austria 11.1%
Italy 10.5%
CSD November. 1992
The U.S.A. appear as the second most
preferred country and, just like Germany, it has been positively
evaluated by a constant share of respondents over the past three
years. This fact should rather be attributed to the leading
position which the US has on the world scene and to the
proliferation of American consumer culture than to its real
economic presence in this country.
French investment ranks third in the
mind of Bulgarians. From the third position downward, the shares
are usually smaller than 2% and the overall picture is rather
inconstant and diverse - Austria, Italy, Greece and the Arabian
countries (taken as a whole) often change their places.
The investor's national origin
influences the opinion of the "business elite" as much as the
public, in general. Bulgarian businessmen prefer to do business
with partners from the developed countries, among which Germany
ranks
first followed by the U.K. and
France; the US and Japan rank fourth. Bulgarian businessmen
demonstrate lowest interest and confidence towards Romanian
businessmen (only 12.2% of the respondents), Arabian (25.6%),
Turkish (31%), Russian (31)% and Greek (36%).
The assessment of what impact FI from
different countries would have varies considerably. The table below
shows the distribution to the question: "What in your opinion
would be the effect, if FI from the countries listed below flows
into the country?"
Country
|
Positive effect
|
Negative Effect
|
Germany
|
72.8%
|
0.9%
|
France
|
53.7%
|
1.8%
|
USA
|
50.8%
|
4.6%
|
U.K
|
47.7%
|
3.9%
|
Italy
|
41.2%
|
4.8%
|
CSD November, 1992
The "business elite" approves of
investment coming from the above countries. Assessments of
different countries vary by geopolitical orientations. The
country-to-country differences are determined by the experience of
the Bulgarian business community and its contacts with foreign
partners. In this respect Germany is best known. Respondents
consider all countries listed in the table above highly effective
economies with advanced technologies, industrial culture and
qualified labor force. And that preconditions a generally positive
attitude towards the respective countries.
Political affiliation also influences
people's attitude towards the national origin of foreign
investment. The supporters of the UDF are more positive towards
investment coming from the US, while BSP supporters are more
tolerant towards Russian investment.
Political affiliation does not
influence substantially the attitude towards German investments.
Some 84% per cent say the inflow of German investment in the
country would only have positive effects. Public opinion towards US
investment is also stratified on political grounds. Less than 2% of
UDF supporters believe that US investment will have a negative
impact on the economy, as against 7 % of BSP supporters. In April
1993, despite the rift between the UDF and MRF, the UDF followers
(36%) showed the greatest support (in relative terms) for Turkish
investment as compared to the other political groups (10 % of BSP
supporters).
7. PRIVATIZATION AND FOREIGN
INVESTMENT
The state of the Bulgarian economy
gives no grounds to believe that it will prove attractive for
foreign investors. Adding the unstable political situation, the
rapidly changing tax legislation, the badly performing state-owned
enterprises etc., it seems unrealistic to expect that foreigners
will show interest in state-owned enterprises.
Nevertheless, the data on
partnerships with foreign participation (under and above 50%)
indicate a growing interest in investing in this country. Their
total number exceeded 3 500 by the end of February.
A considerable part of foreign
investment inflows rather takes footholds, creating a new market
environment and new economic units (the so cold "green field
investment"), than setting up joint partnerships with Bulgarian
participation. The lack of privatization space for foreign
investment has led to the inflow of many but small-sized
investments. Importing mainly consumer goods and services, they
have taken the "cozy niches" of the still non-satiated market.
Their impact on the general development of the market in terms of
competition and quality of goods is still controversial. However,
it is difficult yet to conclude that foreign investment has so far
encouraged the restructuring of the economy, influenced the
recovery of the economy, or conditioned the improvement of
technologies.
Privatization is one of the basic
mechanisms for the inflow of foreign capital, particularly when
large capitals are concerned. The participation of foreign
companies in the privatization process is preceded by preliminary
investment estimates, considerable part of which are devoted to
establishing contacts and analyzing the state of the enterprise
subject to privatization.
The information which state
enterprises provide about the interest they have attracted is of
considerable importance for outlining the privatization
expectations, particularly among decision-makers. The results of
the survey conducted by the CSD among 600 state-owned enterprises
in all branches of the economy shows that foreign partners have
declared a privatization interest in 34,5% of the surveyed
enterprises, Bulgarian private firms in 32,7% of the enterprises,
and Bulgarian state-owned enterprises in 5.6% of the
enterprises.
According to the managers of 11.4% of
the state-owned enterprises, foreign companies are ready to buy the
whole unit. Foreign buyers have declared their willingness to
participate in the privatization of 23.1% of state-owned companies
through buying parts of them. It is worth noticing that only 30.1%
of the surveyed enterprises have not attracted any interest on part
of the foreign investors, whatsoever. Foreign companies hesitate
about the privatization of 13.8% of the enterprises.
Has your
enterprise attracted any privatization interest on part of the
following types of buyers?
|
FOREIGN
|
BULGARIAN PRIVATE
|
BULGARIAN STATE
|
Ready to buy in whole
|
11.4%
|
7,2%
|
1.8%
|
Ready to buy parts of the
enterprise
|
23.1%
|
25.5%
|
4.2%
|
Still hesitate
|
13.8%
|
9.5%
|
5.7%
|
No interest at all
|
30.1%
|
33.2%
|
57.8%
|
The enterprise won't be
privatized
|
6.2%
|
8.2%
|
7.9%
|
No answer
|
15.4%
|
16.3%
|
22.6%
|
CSD November, 1992
Obviously, foreign investors and
Bulgarian private firms will be the major agents and competitors on
the privatization scene. While Bulgarian buyers are more interested
in the privatization of parts of the enterprises, foreigners are
ready to buy larger privatizable units in whole.
It turns out that the privatization
of state enterprises attracts some interest, too. Its realization,
however, depends on the pace of privatization, on the techniques
employed, on the competitiveness of home buyers, and on the state
policy towards the units concerned. The results of this study show
that 8% of the state enterprises will not be privatized, according
to their managers.
The results of above cited survey
show that light industry is the most attractive. Foreigners are
ready to buy 35.9% of the surveyed light industry enterprises,
either entirely or partially. Buyers are hesitating about 21% of
them and only 24.9% have not attracted any interest whatsoever.
Considerable foreign participation in the privatization of the
tourism industry can also be expected. Fifty percent of the
surveyed 22 tourist companies have real chances to be purchased by
foreign companies; 6 may be bought only partially; no information
is available about 3 of them and only 2 are of no interest to
foreign buyers.
Judging by the results of this
survey, privatization of the heavy industry sector also has its
chances. Foreign companies are ready to buy 8.3% of the enterprises
in the heavy
industry entirely and 25% partially.
The following branches have proved most attractive to the foreign
investor: light industry, tourism industry and heavy
industry.
Unlike foreign buyers, Bulgarian
firms are most interested in the privatization of tourist
facilities (private firms are ready to buy 80% of the surveyed
tourist companies), banking (respectively 55.5% of the surveyed
banks), public utility services (55.4%), trade (43.8%) etc.
Obviously, industrial branches and larger capital-consumers are yet
not attractive alternatives for the Bulgarian investor. This is due
to the fact that the private sector still has a moderate investment
potential and that Bulgarian capital is more attracted by sectors
with small risk and faster return on investment. The survey
confirms the assumption that Bulgarian buyers will be less
competitive than the foreign buyers in the process of
privatization.
It is logical enough to suppose that
the most profitable and best-performing enterprises will be the
most attractive assets of privatization. The interest of foreign
buyers wanes with declining degrees of utilization of facilities.
There are foreign buyers for 50% of the enterprises with the
highest rate of facility utilization. But there is also keen
interest in a considerable share (27.5%) of the enterprises with
low degree of utilization of their production
capacities.
The situation is quite the same as
far as bankrupt enterprises are concerned. Foreigners are willing
to buy entirely or partly 34.4% of the worst performing businesses
and 33.4% of the most profitable surveyed state-owned enterprises.
It is probably the lower price of firms in bankruptcy that hightens
the buyers' interest in them. On the other hand, one could suppose
that voluntary bankruptcies have had some impact on this seemingly
illogical situation too.
Foreign buyers are most interested in
buying export-oriented enterprises. Foreigners show interest in
almost half of the monitored enterprises producing for the foreign
market (45.5%) and only in 20% of those oriented entirely towards
home markets. Bulgarian buyers, on the other hand, have greater
interest for companies working for the home market.
The size of the privatizable unit is
of considerable importance when choosing among privatization
techniques, character and number of participants. Unlike potential
Bulgarian buyers, who are ready to participate in the privatization
of 23.2% of the big-sized enterprises (employing over 1000 people),
the number of foreigners willing to do so is 40.0%. Foreign
investors are interested in just one-fifth of the small-sized
enterprises (less than 100 employees).
9. MOST UNATTRACTIVE ENTERPRISES
FOR FOREIGN BUYERS
Foreigners are not willing to take
part in the privatization of the agricultural sector. Public
utility services and construction rank second as least attractive
sectors, and transport comes third. These are branches of more or
less regional character and therefore unattractive for foreign
investors. Their revitalization requires state investment, mainly.
In some countries, Greece and Romania for instance, the inflow of
foreign capital in agriculture, transport and energy supply is
encouraged by preferential credit policy, tax allowances
etc.
Substantial foreign investment and
buying of small enterprises, including those working for the home
market, can hardly be expected. Turkish and Greek investors make an
exception in this respect, as it will be illustrated further
below.
The results of the survey show that
Bulgarians maintain a specific opinion towards investment coming
from neighboring countries. Such investments are growing rapidly
and account for the largest share of foreign investment registered
last year.
10. INVESTMENT FROM THE BALKAN
COUNTRIES
Bulgarians, in general, are
relatively well-disposed towards foreign investment, but grow
critical towards investment coming from neighboring countries. The
distributions in the table below give an idea of the specific
attitude of Bulgarians towards their neighbors.
What is your attitude in general
towards the following countries?
|
very good
|
rather good
|
rather bad
|
very bad
|
MACEDONIA
|
23%
|
53%
|
6%
|
2%
|
GREECE
|
21%
|
53%
|
11%
|
5%
|
RUMANIA
|
8%
|
41%
|
28%
|
11%
|
TURKEY
|
12%
|
32%
|
35%
|
15%
|
YUGOSLAVIA
|
7%
|
32%
|
33%
|
19%
|
April 1993 Survey
The BSP supporters have a
predominantly negative disposition towards Turkey, while the UDF
have a similarly negative disposition towards Yugoslavia.
Stratified by ethnic background, Bulgarians have negative feelings
towards Turkey, while the Gypsy minority has similar feelings
towards Romania. It is worth noting that throughout the last three
years the Bulgarians' negative attitude towards Turkey has declined
substantially, especially since the summer of 1992. This situation
comes as a natural
|