Doru Dragomir: Bulgarian-Romanian economic relations need to be driven by internal dynamism
A podcast discussion on Bulgarian and Romanian economic realities
Episode 1 of the joint podcast between the BIlateral Chamber of Commerce Bulgaria-Romania and the blog The Bridge of Friendship deals with some economic notions and realities in the two countries of interest for Doru Dragomir and Vladimir Mitev: transition, privatization, foreign investment, relations between business and politicians, balance between foreign and national capital and the future of Bulgarian-Romanian relations after the fall of the government of Kiril Petkov in Sofia.
Vladimir Mitev: Welcome to the first episode of the Joint Initiative of the Romanian-Bulgarian Chamber of Commerce in Sofia and the Bridge of Friendship Blog. As we have discussed with Doru Dragomir, my partner in this initiative, we aim to make some kind of space for discussion, interactive discussion, not only between us, but also with the public about phenomena, evolutions, problems in Bulgarian, Romanian space, and especially with a certain emphasis on economics. So in this episode, we will try to make some kind of discussion or look closer at the economic situation in the two countries, the road which they have passed in the last 30 years, and more to spot some issues that may require better understanding.
And now let us start with, first of all, the fact that both countries, Bulgaria and Romania, made a transition from a type of economy, which was very centralized and as they say, socialist type of economy. And now they are driven by strong capitalist market forces. So we can try to somehow make some kind of a summary of the road which was passed by these countries in the last more than 30 years.
Doru Dragomir: Yeah, I also consider that it is extremely important for everybody, for all the players, all the stakeholders in the in the two countries, in the two economies, to better understand how we got to the place that we are today, starting from 30 years ago, where, as you said, we as countries, we are running a very solid socialist, centralized economy. What was that meaning? Basically, both of the countries were trying to industrialize and to create a type of environment that was going to cover all the needs of the country. Basically all the products, all the services that were needed by the population of the country and by the economy of the country were supposed to be produced inside the two countries. And this is the point zero, let’s say, of the moment in 1990 when both Romania and Bulgaria changed the system, political system and economical system, and they engage in a road to the market economy, so called market economy.
I would say that we can split these 30 years that we lived in three main periods: the first period will be the first decade – from 1990 to 2000, and here there are some huge differences between Romania and Bulgaria in terms of development. Mainly for Bulgaria, it was a very difficult period till 1996, 1997, if we are taking in consideration the moment of establishing the currency board. But until that moment, Bulgaria basically didn’t make too much in terms of steps on developing from the centralized economy to another type of economy. In the meantime, Romania was taking this type of development. We have to take into consideration that a lot of private companies that are appearing on the market have a certain level of investment from foreign countries, especially Europe, that were somehow giving us a head start when we are talking about the year 2000, in between the two countries. It was quite a big difference. If any investor or any foreigner would visit the two countries in that particular moment around 1998, 1999 would have seen big differences from the economical and social point of view and even development of the country by itself as infrastructure. Fortunately for Bulgaria, after 1997, the steps were made much faster. They recovered quite a lot. Let’s put it like this – in 2005 if somebody would have asked me what is the difference between the two countries in terms of time frame, I would have said that between Romania and Bulgaria we are having about a 5 to 10 year difference in development. Nowadays after another 15 years, I can say that they’re more or less in the same level of development. That means that Bulgaria made huge, huge steps in getting to the level that, let’s say it’s expected for a country that is coming from the former communist bloc. This was, let’s say, the second period of transition between 2000 and 2010.
From 2010 till today, I think that both of the countries were making the same steps. Also taking into consideration that from the political point of view, we are all the time as a package, all the time. When you are speaking in Brussels about Romania, the name of Bulgaria all the time. When you are speaking about Europe generally, the package, it’s coming. Romania, Bulgaria for all the important general issues we got together in NATO in 2004. We got together in the European Union in 2007. Basically everybody outside the two countries are seeing us as a package. We are having the tendency still, we are having this tendency not to see each other as working together that much. I’m really happy to see that in the last couple of months, one year, let’s say, there has been a lot of improvement from this point of view. On the political level especially, I saw a lot of common projects that at least are announced by both of the governments. And this for sure, we’re going to give us some kind of advantages in the long term, because we’re going to be some of the first steps of working together between Romania and Bulgaria.
You said a lot of important things, especially both in the past and the present. So you make my job difficult now to continue the discussion, because one thing we need to say is that both Bulgaria and Romania had so-called Ponzi schemes or pyramids in the nineties. So it is sometimes not understood well that both countries had this experience. Sometimes maybe our people think that it’s only them, that what they lived is something specific.
It’s true. You know, I’m having in my experience, which I acquired in this very close contact with both of the countries in the last ten, 12 years. For me, it was extremely interesting to understand that wherever you are going in these two countries, the people are having the impression that they are unique. They think that just in that particular country, in that particular city something good or bad happened. The reality is that we are very much alike. A lot of good and bad things happened in both of the countries. As you are saying Ponzi schemes were in Romania and Bulgaria and they affected a lot of people. At the same time, you can see, let’s say in both of the countries, the type of interest for certain. Certain sectors or certain industries were pretty much similar. Most of the people in both of the countries in the beginning of this transition went into the idea of becoming entrepreneurs, but not necessarily because they were having a great idea, a great business idea, but most of the time because they were in need of this. The transition between the centralized economy and the market economy came with a lot of sacrifices from the people. What were they? Just take into consideration all the companies that were closed and all the people that lost their jobs. And we are talking here about people that were, let’s say, at the age of 40, 50, people that were not really able all the time to understand what this new economy is, it’s all about. They do not have this type of knowledge. They are not having this type of acceptance of losing their. Very stable jobs. People that are not understanding what is happening with them, but they are put in the situation to find a solution to live. And that solution for a lot of them, means to become entrepreneurs. But this type of entrepreneurship was based on very low value added services or products. We are talking here about a lot of small shops, a lot of small businesses that most of them, of course, didn’t manage to survive.
That’s an important issue. But we need to say that both countries had a very large industrial base in the beginning of transition, and eventually they lost it. And a part of the process of this loss was related to the so-called privatization process. And now it’s once again what you say about uniqueness. Maybe it’s valid here because I have heard Bulgarians claiming Romanian privatization was much better. And I wouldn’t be surprised if Romanians say that maybe Bulgarians did some privatizations better. I don’t know what some large industries may have survived in Bulgaria. So are you aware of certain models, Bulgarian, Romanian models of privatization? What is the difference? What is the common between the two countries in this domain?
Well, I don’t know if we can speak necessarily about a model. I would say that if you are taking in consideration the concept of model, Romania and Bulgaria had the same type of privatization. Let’s compare with the countries from Central Europe that in the moment they made the privatization. Basically, this privatization was based on foreign investment that went into the country and bought the former industrial companies. Romania and Bulgaria were more on the level of self privatization. I cannot give you, let’s say, percentages, but a lot of the big industry producers were internally privatized. Which means that basically the management of the socialist companies, directors of these companies decided that they were going to take the company. They bought it from the state, which was the owner. And then at least or more successfully, as I saw based on my experience, it was Bulgaria. From this point of view I see now, even nowadays I see enough Bulgarian companies that are existing on the market after 30 years. So they are privatized, let’s say in 1996, 1997, 1998. After almost 30 years, they are still successful. The model was splitting the big companies. These absolutely huge industrial companies split it and then from one big company like let’s say we are having the example of Balkan car from a huge Balkan car company. Now you can see about five or ten small companies, most of them still successful on the market, creating part of the production of Balkan.
Romania, on the other hand, was also doing this type of self privatization, meaning Romanian citizens investing in different assets from the industry. But also I can say that from this point of view, Romania was not that successful. There are not so many companies that are still existing on the Romanian market nowadays. After 30 years, most of them failed to do the business in the right way, but not necessarily because they are not experts on the business, mainly due to the fact that they were lacking the support of the entire environment. One big production facility, let’s say, I don’t know, chemical production facilities, let’s say they are needing an infrastructure behind them. They are needing supply of gas, they are needing supply of manpower. They are needing, of course, some kind of customers to buy their products. Unfortunately, in Romania, this system didn’t go that well. That’s why, in my personal opinion, the most successful. Privatization in Romania was not made in the beginning of the process but was made a little bit after. So between 2000 and 2007, when the foreign investment came into the country and started investing in those facilities that were extremely powerful before the nineties with in terms of money, in terms of technology, in terms of, of manpower. And somehow the foreign investment came and gave them the push that made them to be still successful on the market. And here we are having a couple of big examples. One of them is still in Bulgaria also. It’s Petrom. So in terms of model, I would say that we are quite similar, of course, that Bulgarians are going to say Romanians are better. Of course, Romanians are going to say Bulgarians did some kind of thing better. Again, it’s important to take in consideration that Bulgaria started this privatization process much later than Romania. So till 97 in Bulgaria, almost all of the state owned companies were still state owned companies.
I also have something to add in my view. One difference between the models, let’s say “models” in inverted commas, is that Romania used much more proactively its stock exchange. So basically Romania was developing the stock market through these privatizations. And maybe as a result of that, we see that for certain strategies, maybe for the development of the stock exchange. We see that recently, maybe two years ago, if I’m not mistaken, last year the status of the Romanian Foreign Stock Exchange was raised. So as far as, if I remember correctly, it became an emerging market, which means higher access to capital or higher interest of international capital to it. So how is this dimension of the privatization through the stock exchange involved in what Romania did?
Well, for sure. The Bucharest Stock Exchange, because I presume you are referring to the Bucharest stock exchange, is on the right track at this moment in developing. I would not say that it was necessarily a strategy. I think that it’s more a result of the development of the Romanian economy, also the development of the stock exchange in Romania. From this point of view, I consider that we are talking about different types of strategies based on different moments in time. When we are talking about privatization, stock exchange as a concept, it’s a financial instrument that in the nineties couldn’t be used because most of the people were not really understanding what the stock exchange means. Nowadays, after 30 years, of course, that the expertise that came into the market from the foreign investment companies, from the Romanian experts on the on the field, it’s giving the possibility that the Bucharest Stock Exchange to develop more and more the the level of of trust also of the market in the stock exchange. It’s helping this Bucharest stock exchange to develop that much and to attract more and more companies and, of course, capital, because at the end of the day, as a financial instrument, the main job of the stock exchange is to attract capital. But in order to attract the capital, you have to also have the players on the stock exchange that are attractive to the capital. So I would say that this is a circle, but the stock exchange by itself, let’s say this is my personal opinion, I’m not considering it to be an instrument of privatization. It is more a result of the process of privatization in Romania.
And another thing which Romania seems to be lauded in Bulgaria for is the ability to attract foreign investment. If I’m not mistaken, maybe you correct me, but Romania has around 90 billion euros of euro foreign investment. Bulgaria is not in this category of attracting as a foreign investment right now. So how did this happen? How did it happen and what does it mean for the economy? My guess is that there is a different balance between foreign capital and local national capital in Romania than in Bulgaria.
Well. I would say that the situation is where it is from the objective point of view. First of all, I told you, we had a head start. Romania had the head start of about seven years, between 90 and 97, when in Bulgaria nothing was happening. And it was a period when the entire Eastern European area was full with potential foreign investors. And that’s why, let’s say Romania was the first one on the market. More than that, we are talking about a four times bigger economy. We are talking about plus minus on the level of nineties, three times bigger population. So there were a lot of advantages of Romania on the market in front of Bulgaria. Also, I would say that even after 2000, the language was kind of a barrier for foreign investors that were interested to come in in Bulgaria. The lack of foreign language speakers and especially the lack of English-language speakers was kind of a barrier. And, you know, that we are having this discussion for a long period of time, the language barrier, it’s a very big barrier when you’re talking about international trade or international business. The alphabet was also one kind of barrier because most of the investors that were coming from the western side of Europe or the states were not really. Into understanding the the alphabet, probably, and here I’m saying again, this is my personal opinion, probably it can be also the fact that the Cyrillic alphabet is used also by Russia and in the 90s still Russia was the the former enemy of the Western countries so the people were still scared when they were getting closer to Russia and somehow it was assimilate in Bulgaria. The alphabet and the language, a Slavic language, somehow sound pretty similar to Russian. And the people were scared. I can tell you, based on my experience and based on what I’m seeing at the moment, I came from the first time in Bulgaria, most of the medium level foreign investors in Bulgaria. We’re not investing directly in Bulgaria by making their own companies. They were buying or creating joint ventures with local companies. They are identifying who are the players in their industry and then they are choosing one of them and they are buying or creating some kind of partnership with that company, Bulgarian company. And this is how they are opening the offices in Bulgaria. On the other hand, in Romania, most of the companies that enter the market create their own companies. As a subsidiary of the company that was coming from wherever it was coming. And then they were employing Romanians in the company. So there were some small differences in the perception of the two countries. Nowadays, these things are not anymore on the market, I would say. Now I think that the main differentiator is it’s coming from the way the two countries manage to promote themselves. The advantages and disadvantages that each of the economies are having and of course, that lately we are having. Most of the investment or not most of the investment that I was seeing in Romania, some some figures. I think that about 35, 40% of the foreign investors do reinvestment on the market, it’s in fact a rare investment of the companies that are already on the market. So they are reinvesting the profit that was making in Romania in the new facilities on the market. Bulgaria, not having that many investors already on the market is not having this possibility to reinvest because the level of reinvestment from the investors on the market is not that high, obviously.
So I would like to counter some hypotheses of yours, because I believe there is another reason for Romania’s success in attracting investment. It is basically that Romania has resources – if you wish natural resources or if you wish to set more people (human resources). So basically Romania has things to be invested in. If you allow me so and also when I was listening that you believe Romania had a head start, I remember that there is a lot of rhetoric in Romania about the Snagov Accords of 1995, which are said to be opening the way for Westernisation in Romania for the road towards NATO and the European Union. These were certain agreements on a political level, as far as I understand. And it is curious that, namely, in 1995, Bulgaria also put in its application for joining the EU. In fact I don’t mean to counter, but I just want to provide a little bit more nuance to what you say. Of course, Cyrillic to the unprepared person could seem to be some kind of barrier, let’s say, if he/she comes from a Latin environment. But capital is something which is universal, which can penetrate any situation, culture. So capital speaks an universal language, and I’m certain that it can find interlocutors on any grounds.
Oh, absolutely. And that’s why you had some investors in Bulgaria in that period of time.
And when we speak about capital, there are of course, there are players in business. These are usually businesses that tend to emphasize some companies and or managers to the detriment of the workers, maybe in a way. But I want to ask you here, when we make comparisons and observe both Bulgaria and Romania, we see that there are some maybe you see some differences between attitudes towards companies and the role, some basically, at least in my view. Romania seems to promote a lot of companies who are elite companies. So they are constantly consulted on energy matters, on other matters. When I go to a conference or have a look at the list of conference participants in Romania on economic matters, I have the feeling there are some companies which always have spots. They’re something like consultancy companies or energy companies, etc. So maybe you could tell us about the players in the economic environment in Romania and Bulgaria and what you observe about them.
Well, here is a very interesting story, let’s say, because the economic theory is telling us that generally in each of the economies, you are having 20% of the companies that are bringing 80% of the revenue in our region. These companies are more or less four types. And let’s put the four a little bit on a side, and we’re going to discuss the three main types. The three main types are. Companies that are on the market for at least ten years, if not more, and they are successful on the market and the trend of their development its it’s up. Then you are having the so-called elite companies like you are calling them that can be international companies or can be national companies that are bringing so much value to the economy. And then we are having in both of the countries the so-called state owned companies, those companies that are still majority owned, more than 50% by the state, basically in both of the countries. This is the structure of the economy. And these three types of companies are usually bringing to the GDP about 80% of the money. The fourth types are the normal entrepreneurial companies 3 to 5 years. And in the rest of the environment the business environment that exists now because you are asking me about Romania. I would say that it’s absolutely normal and this is happening not even in Romania. I can tell you that I’m having absolutely the same experience in Bulgaria. Whenever we are going to discuss some economical issues, you’re going to have on the table a couple of actors that are extremely important for the economic environment of Bulgaria. Let’s say if we are talking about the Bulgarian Development Bank, if we are talking, I don’t know, in the energy sector about the energy holding in the transport, you are having a couple of very powerful players, also construction also. Basically each of the economies of Romania, Bulgaria or whatever country you name it, will have a couple of elite companies that will be more present and they are having a voice on the economy due to the fact that either they are running a large number of employees, like in both cases of Romania and Bulgaria. The state owned companies in both of the countries are running a huge number of employees compared with the rest of the companies on the market. That’s why they are a voice, because those companies, in fact, are not giving you just the point of view of the company. They are also giving you the point of view of the employees. Of course, we believe positively that those companies are really caring about their employees. And from this point of view, I think that this is why you are seeing a couple of names that are similar or they are the same all the time in different events or conferences that you are participating in.
Yes, I have another reason to point that out. It’s about my Bulgarian context from which I observe. Of course, I don’t want to put you into the political issues of Bulgaria, but I have the hypothesis that the balance between political and economic or corporate world is a little bit different in Bulgaria, especially now. Maybe you remember that there were some protests against the previous government of Petkov. Basically, I have the feeling that in Bulgaria there is some kind of attachment between large businesses and certain parties and I’m not sure it is exactly the same in Romania. My hypothesis, and I may ask you in order to test that with you, my hypothesis is that in Romania capitalism is a little bit more advanced in the sense that the political or party control over the system, economic system is lower, but maybe I’m wrong about that. It’s just a hypothesis. It’s just because I see these excelling companies or elite companies somehow very strong in Romania. While in Bulgaria I always have the feeling parties somehow make some kind of alliance with big business. And that is how our system continues. And that’s why there is so much talk about oligarchy in Bulgaria and less in Romania.
Well, first of all. I would say that you’re right talking about the fact that the Romanian market is a little bit more mature. Economically speaking than the Bulgarian one. So from this point of view, you’re right. Now, the fact that always between the business and the policymakers will be some kind of relationship. I think that it’s absolutely normal and it’s important to have some kind of touch base, touch point between the economy, the business and the politics. In fact, any normal society should have a couple of stakeholders that are bringing the different interests of the society on the table. The business was going to bring you the economical interest of the society. The social NGOs were going to bring you any other type of needs and interests from the society. The politicians were going to bring you a different point of view. The normal and balanced society is putting all the stakeholders on the same table and they are finding the best way to negotiate to create the future of the society. I cannot tell you if it’s better or worse in Romania versus Bulgaria from the point of view of the relationship between business and politics. What I can tell you for sure is that. Romania started a little bit later than Bulgaria to create the so called associative organizations representing the business. If you are in Bulgaria nowadays, you are having five main business associations or business support organizations. Let’s say in Romania, the number of business support organizations that are relevant on the national level, is a little bit smaller. And the main one in terms of activity, it’s the Association of the Foreign Business Companies. And here again, we are not talking about the associations that are related with the industries. In Romania, we are having a couple of employers associations that are running a huge number of businesses that represent a huge number of businesses and of course, huge numbers of employees from those businesses. I don’t really take into consideration all those rumors that are existing in Bulgaria about the oligarchy. At least not on the level that it’s presented. I’m not really going in that direction. I’m not seeing it really like this for sure. Always you’re going to have people that are interested in the money. And the money, as you said earlier, are not smelly and they are having a common type of language. So basically, you’re always going to find people that are going to run for the money. But our job at the end of the day is to be sure that the development of the society from the economical and social and political point of view, it’s reasonable.
Thank you for what you see. I would like to remind our listeners and readers that you have graduated from an American university with a degree in business. So I am somehow interested in the theories which you have somehow interiorized or learned and later applied. Basically, business, or at least my impression of the American schools of business is that they put emphasis on the manager. And of course it’s one reality in the USA with management and another reality here. I can give you a lot of examples of how basically you can have a great idea, but the lack of people, the lack of money, the deficits in our provincial areas, let’s say in Bulgaria and Romania, could kill any great idea. So could you tell us how Romanian and Bulgarian economists look when the management perspective is put into consideration?
Well, I was going to start by telling you a story. That was one of the stories I heard in the States. It was the story about Jack Welch. I don’t know if you have heard the name Jack Welch. He was the biggest CEO that GE, the General Electric Group, the biggest company in the state for a period of time, was having. And Jack Welch was one of the most successful CEOs of this organization. And basically, he was called the 10% due to the fact that he was having the tendency to buy new companies to include them in the group. And then these companies were either closed because they were representing competition for the group or they were becoming very successful. And one moment in time, one journalist came to Jack Welch and asked Mr. Welch, please tell us what is the secret of your success? How do you manage all the time you are bringing new companies in the group? They are becoming efficient. And Jack Welch said the following and somehow remained in my mind. And I’m always talking about this, he said the following: Every time I’m looking for a new company to buy, I’m looking what are the problems that they are having? Because, of course, a company that is for sale, it’s having some kind of problems. If the company is having problems with the money, this is no problem for us. GE – it’s a huge company. We are having a lot of cash, but at the same time we are having credit lines on all the American banks. No problem. We can fill in with the capital. And we are solving the problem the company was going to solve. Then the company could be having problems with the technology and especially in the last 20 years, the level of the technology is getting obsolete so fast…. you really need to get a return on investment very high in order to cover the investment that you made in the technology. If in the eighties, the technology you are investing in today, you’re going to have a return on investment on this technology for, I don’t know, 15 years. Nowadays, the technology is changing every one year, two years, six months even. And that means that you have to be very sure that you are making a good investment in that technology. So basically coming back, Jack Welch was saying, I’m looking if they’re having problems with the technology, this can be solved by us in two ways. Either GE is having inside the group one company that is producing that technology, we are bringing that technology to the new company. We are making it efficient or we are buying technology from outside the group and that’s it. I’m buying the company, I’m making it run. And the reporter said, okay. And the third one? Well, the third one is if they are having problems with the human resources and the journalists said, okay, and what are you going to do then? And Jack Welch said, Well, if they’re having problems with the human resources, I’m not buying them. Because basically if you are having a problem with the human resources, you need a lot of time and money to invest in order to become efficient. And that was his secret when he saw problems with human resources, he was not investing in that company. Now, coming to your question. It’s very difficult to make a comparison between Europe and us as an economy. There we are talking about just results here. The European, generally speaking, European economy, it’s a little bit more social, much more inclined on protecting the employee in front of the employer. In the States, the employer has all the rights. If tomorrow he’s not liking you anymore, you are out with some benefits or without the benefits. You’re out in Romania, as in Bulgaria. If you have a problem with one of the employees, not on the personal level, if you are having a problem with that employee because he’s not doing the job or he is not efficient enough and so on. The procedure to change that employee is taking you a lot of time and a lot of money. As their employer from this point of view, I would say that I’m much more on the side of the employers because I’m understanding what that means for me also. Years ago, when I left the multinational companies, I went to the side of the entrepreneur. I understood the difference. Before that, it was difficult for me. I was a simple employee. I was just taking my salary on the fifth of the month and I was happy with what I was doing. Then when you are an employer, it’s a little bit different.
Okay. Gradually we reach the issue of Bulgarian-Romanian economic and human relations, which I would really like to put to the end of our discussion. And one element of that, when we speak about the people and the human resources as you say, is that Bulgaria has a very specific development in the sense that southern Bulgaria provides almost two thirds of the GDP of Bulgaria and most of the foreign investment goes to southern Bulgaria. Highways are in southern Bulgaria. So northern Bulgaria, the area which is next to Romania, which is most naturally inclined to do something with Romania, at least geographically speaking, remains underdeveloped and people leave this area for Sofia or for other places in the world. So here I really don’t know how to put it, but basically maybe I could merge it with your statement that Bulgarian-Romanian, diplomatic and political relations got much better under the government of Petkov, and maybe we could conclude this episode with a little bit of maybe prognosis of yours. Do you think that this opening between Bulgaria and Romania is something which will not depend on one person or one government? Do you think it will be something lasting, maybe something which has deep roots either deep roots in the country, or maybe it’s caused by the international context. And therefore, it doesn’t matter who really is in power in Bucharest or Sofia, or rather, is it something really something like a moment in time, this opening, and if somebody else, some other majority is formed, it will not be these dynamics will be reduced.
Well, I really hope. It is not related just to the context. For sure. On the other hand, the level of interest in between Romania and Bulgaria on the political level. Was increased by the general situation of the region, mainly what is happening in Ukraine nowadays. As you are having in Bulgaria. We are having also in Romania say that shortly it’s telling us that usually we are sticking together when an external threat comes to us before having an external threat. We are not stuck together as people or inside the society. So for sure what is happening now, it’s having some kind of momentum due to the war in Ukraine. I really hope it is not something that it’s happening just now because of the situation and it will be something that will happen in the long term, how much this is related with a foreign interest to our region. I cannot tell you, probably there are very few people in our two countries that can answer your question. On the other hand, I think that till the moment the people in power in both Bucharest and Sofia start having either interest in the country from the other side of the Danube, the things are not going to be much better. What we are trying to say on the level of the bilateral Chamber of Commerce is to create the value added on the economical level between Romania and Bulgaria that are going to make both communities, business communities in Romania and Bulgaria to go to their own governments. Romanians to Bucharest and Bulgarians to Sofia. And to say: “Guys, look, we already started to do some business with Romanians or with Bulgarians. The things are looking good. Please support us to do the business even better.” This means that basically the business needs the infrastructure in order to do better business, you need infrastructure. I don’t want to discuss today about all these small needs that are smaller and not that small needs that both of the businesses in both countries are having. But I’m giving you another example of the way other countries from our region are doing business. I was really impressed.
I participated in a conference where it was presented the way the Polish government is supporting business in the country. Basically the Polish government is having a new strategy. It’s an old strategy, but they are implementing it lately on creating a G to g business. In the moment, some representative of the Polish government, goes to a visit outside the country or some foreigner is coming in Poland, besides the topics that they are having in their agenda (of course the Ministry of Environment are going to speak about environment), but all the time the representative of the government is having some kind of topic related with the business and the government is supporting the businesses in their own country by interacting with the government from another country and asking them directly, What do you think we can trade in between Poland and your country? We are having these type of companies that are providing this type of goods and we are having another type of companies that are needing this type of goods from your country. We as a Polish government are supporting our business by warranty of the government for that trading. This is just a small example that somebody in our region is doing it, because you ask me about what is happening and how the business is done in the US. It’s very different. We can take a couple of things from us, but the way of doing business is different. But we can learn or at least take some information from the people that are our neighbors. And I’m considering that this type of approach, for example, can be done also by Romanians and Bulgarians, governments and businesses, but. Again, coming to your question a little bit earlier about the relationship between business and government. This is the type of relationship that, for example, I’m considering that it’s more than beneficial. It’s very important that the Ministry of Economy in Romania or in Bulgaria is very clear that the minister is having on his agenda a number of companies that are elite companies or important companies for the country. And all the time he’s serving international meetings. He should put the emphasis on supporting those companies to develop. Now we are having a little bit different problem, let’s say, or situation in Romania. As you are saying, the level of foreign investor investment is huge compared with Bulgaria. It’s at least I think it’s at least five times bigger, if not more. On the other hand, if we are taking into consideration a number of approximately 60,000 companies that are elite or big companies in Romania, those 60,000 companies are providing about 80% of the GDP of Romania. If I’m telling you now. That. Romanian economy. It’s bringing to the international market less than 150 companies as investors outside Romania. Would you believe it?
I believe it, because I am aware that also a large part of the export of Romania is, in fact, foreign companies-owned.
Absolutely. And also the import, it’s coming from foreign foreign companies. From foreign investors. So basically, 60% of the export of Romania is done by foreign investor companies and about 50% of the import of Romania. It’s done also by foreign investors in Romania, Romanian capital. The Romanian capital as Romanian companies are. 50% of the total imports and less than 40% of the exports of Romania. Even though I’m talking about really big, big two huge companies that are still on the border of Romania, they are not going outside the countries. Even though they are having everything that they need, they are having the capital. They are having the technology. They’re having the human resources. Still they are not going abroad.
What do they lack?
Well, I think that mainly they are lacking the culture of doing business abroad. They are not used to doing it. And as you know, the biggest fear of the people is change. The companies as we all are not that interested in changing their behavior. So I don’t know if you if I answer to your to your last question, but I felt the need to to discuss about about this this topic, because I consider it it’s extremely important. I know more Bulgarian companies that are investing outside Bulgaria than the Romanian companies and from the macroeconomic point of view. This is something very strange. Because the capital is in Romania, the fiscal facilities are in Bulgaria. Normally it should be an investment. Investment is coming from Romania to Bulgaria and the market for whatever it’s produced in Bulgaria to Romania. Well, nowadays it’s a little bit different.
Okay. I suggest that we continue the discussion about change in Bulgarian-Romanian relations and in doing business in our next episode or the next episodes we plan to make very soon, let’s say within a few weeks, a discussion on the Bilateral Chamber of Commerce itself. The chamber, which you are heading to. And I think it was an informative, useful discussion and invited our readers to follow our channels on social networks, to follow our products, media products, and follow our next episode. Thank you.
Thank you so much. Also, Vladimir. Yes, it is a huge, huge topic. We have very little time to discuss all the things. But in the next episodes, we have a lot of time to cover the rest of the topics that we just touched a little bit today.
Photo: Doru Dragomir (source: BCCBR)
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