Bulgaria attracts record tech investment



Bulgaria, the poorest country in the EU, is attracting a surge of greenfield foreign investment in information and communications technology (ICT), helping to drive a broader increase in cross-border inflows.

The Financial Times has contributed, opening a technology centre in Sofia in April 2019 with 110 employees. Other recent investors include Facebook and the World Bank, both of which have opened offices in the Bulgarian capital providing ICT services this year.

Bulgaria received a record amount of foreign investment in software and ICT services in 2018, with at least 16 projects valued at $240m, mostly in Sofia. Foreign investments in the sector have risen continuously since 2015, according to fDi Markets, an FT data service that tracks announcements by foreign companies of greenfield investments, which result in new facilities and jobs.

We looked at a number of locations across Asia, Europe and the UK before choosing Bulgaria, said Cait ORiordan, the FTs chief product and information officer, at the new centres opening.

Sofias longstanding reputation as a centre for technical excellence, alongside its pedigree in data and artificial intelligence and its emergence as the technology capital of the Balkans, made it an irresistible destination.

In the five years before 2015, cross-border investment to Bulgarias ICT sector averaged only five projects a year. Since then, it has become the primary target for foreign investment, attracting 30 per cent of all projects last year, according to fDi Markets.

Foreign investment to Bulgarian software and ICT

Year Projects Capex ($m*)

2019 7 93.5

2018 16 240

2017 10 172

2016 9 136

2015 4 32.4

Bulgaria has a long tradition in the ICT and electronics sectors that dates back to the communist era. The ICT sector had sales of $3.2bn in 2018, a year-on-year increase of 45 per cent, according to the International Data Corporation. It has more than 12,000 companies, of which 90 per cent are in Sofia, where they employ 50,000 people, according to the Sofia Investment Agency. About 70 per cent of companies sell their services for export only, according to the US Department of Commerce.

We recognised the potential of Sofia as a world-class technology hub back in 2015, said Stephen Gardner, chief services and delivery officer of UK sports-data company Genius Sports Group, whose Bulgarian office employs 320 people.

He said the office was likely to double in size over the next few years. While increasingly competitive, Bulgaria continues to provide access to a deep pool of tech and product development talent.

Top sectors for foreign investment to Bulgaria since 2015

Sector Projects Capex ($m*)

Software & IT services 46 673

Automotive components 23 816

Industrial equipment 16 143

Transportation & Warehousing 15 798

Business services 14 33.5

Global software company Acronis also expanded in Sofia this year. Its new R&D centre employs 200 engineers, which Acronis aims to expand to 1,000 in the coming years as Bulgaria becomes a global centre for the advancement of cyber protection, the company said.

Almost half of all foreign greenfield investments into Bulgaria since 2018 have taken the form of expansions of existing facilities, especially in added-value R&D projects. The biggest drivers of investment have been the availability of skilled workers and domestic market growth, according to fDi Markets.

Bulgaria offers broadband services that are among the fastest in the EU, a flat tax rate of 10 per cent on corporate profits and personal income, one of the EUs lowest rates, and competitive labour and living costs.

The country also boasts the EUs second-highest proportion of women working in the ICT sector, at around 45 per cent in early 2018, and easy licensing laws for IT companies.

Foreign greenfield investment to Bulgaria

Year Projects Capex ($m*)

2019 (Jan-Sept) 39 1,368

2018 54 2,285

2017 51 1,614

2016 46 1,033

2015 38 1,873

2014 41 1,040

2013 47 1,074

2012 49 2,296

2011 73 4,706

2010 63 2,186

2009 77 3,729

2008 132 10,105

Yordanka Fandakova, Sofias first female mayor, said the city was one of the educational centres of the region. For the past 10 years, she said, Sofia was the European city with the highest growth of per capita GDP, ranking third in Europe in the number of ICT start-ups and delivering 120 per cent growth in its software sector over the past five years.

More than one in 10 workers in Sofia are employed in the ICT sector. More than half of all newly rented office space in the city in the third quarter of this year was taken by ICT firms, according to real estate company MBL.

This year, Sofia was one of eight EU cities chosen to host the first European supercomputers the largest EU investment in Bulgarias scientific infrastructure. The city ranks second among the top 10 fastest-growing tech centres in Europe according to the State of the European Tech report, 2018.

Most foreign investors in Bulgarian tech over the past two years have come from the US and the EU, according to fDi Markets.

Jakov Milatovic, a regional economist at the European Bank for Reconstruction and Development, said Bulgarias cultural affinity with such investors was one pull factor, along with its place in the EU, high quality of life for a low cost of living, political stability and average annual GDP growth of 4 per cent since 2016.

The country also benefits from its proximity to Romania and Serbia, forming a tech triangle that some are calling the Silicon Valley of south-eastern Europe. Indeed, foreign investment to Bucharests tech sector has also grown exponentially since 2015, according to fDi Markets.

However, said Mr Milatovic, compared to some EU member states, Bulgaria has work to do. The country has deteriorated about 25 positions in the World Banks ease of doing business over the last five years as other countries make improvements.

He said further work to fight corruption and improve social policies especially in family care, such as better kindergarten support would be a good signal for private sector development.

Both greenfield FDI and overall FDI recorded in the balance of payments which includes mergers and acquisitions, intra-company loans and other items have failed to recover to their levels before the global financial crisis of 2008-09, when they were rising quickly following Bulgarias accession to the EU in 2007.

However, since 2014, inflows have shown a mostly positive, albeit slow, recovery, underpinned by flows to the ICT sector.

Check out all of Luximmo's offers in Sofia!

The published article is a translation / revision of the original article or material of the relevant quoted media. According to the Copyright Act of the Republic of Bulgaria (art. 9), the copyright on the translation or revised text belongs to the person who did it without prejudice to the rights of the author of the original text. If you wish to use the information in this article, please contact LUXIMMO to obtain permission.

You successfully saved this property or selection in your "Favourite properties''
The map is loading the selected properties