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Is there convergence in the levels of economic development within the economic centres? This is the question that the Institute for market economics’ new study attempts to answer. It is based on the “Economic centres in Bulgaria” study, and aims at explaining the processes taking place within the individual centres. In the broadest sense, the study has three goals: to establish the fundamental differences in demographic and economic development between municipalities within and outside economic centres, to assess the potential for convergence in the levels of economic development within the individual economic centres, and finally to study whether such convergence is already taking place.

From the economic perspective, the study found that in the primary economic measures (production per capita, foreign direct investment and fixed assets expenditures, unemployment and salaries) municipalities in the periphery of economic centre resemble more those outside centres than their cores. In spite of that, the differences between peripheral municipalities and those outside centres are quite noticeable, which in turn means that there can be no doubts in the positive effects of the participation in economic centres on the peripheral municipalities.

As far as demography is concerned, the results of the study are much more ambiguous. Out of the main population dynamics indicators, a significant and unambiguous difference between municipalities in and out of economic centres can be seen only in mechanical growth. In municipalities outside of economic centres there are much more people permanently leaving compared to those settling in them; in the peripheries this ratio is lower, and in economic cores there are more people settling than ones leaving. This is a result of the possibility for daily committing from peripheral municipalities to a nearby economic core, where the better and better paying workplaces are located. In other words, the ability to commute daily to a nearby core means that people take the decision to move away permanently less frequently. This, in turn, keeps smaller and less economically developed settlements in the periphery of economic cores from depopulating. The very structure of the economies of the big groups of municipalities is different, primarily in the balance between agriculture, industry and high tech. While municipalities outside economic centres and those in the peripheries have a larger share of agriculture, most cores have and industrial profiles. High tech activities are almost exclusively located in the cores and are almost absent from other municipalities.

The assessment of the potential for convergence in the levels of economic development of municipalities met the IME analyst’s expectations. Municipalities who started the period between 2011 and 2015 from a lower level of economic development have been growing faster compared to those with better developed economies. It is interesting to note that this relationship is stronger for municipalities outside economic centres, compared to those in them.

When it comes to the convergence process, some economic centres do show convergence in the levels of economic development, i.e. a shortening of the distance between core and peripheral municipalities. This can be seen in the change of the standard deviation of production per capita and unemployment. In most centres there is a relatively even distribution of peripheral municipalities in groups that converge towards their respective cores and ones that lag behind. In other words, in many centres, especially larger ones, have two “tiers” of peripheral municipalities – one whose rate of economic development surpasses that of its core and is thus gradually approaching it, and one which is lagging behind.

The most optimistic result of the study is that in centres where the data allow for comparisons I the levels of household income, the average income in peripheral municipalities is approaching that of the cores. This is yet another confirmation that being a part of an economically strong centre provides a chance for faster development to economically weaker municipalities, and to better income of their population.

The complete analysis is available in Bulgarian.

Yavor Alexiev

In 2017 the Bulgarian labour market continued its expansion, and the improvement that took place in the last couple of years is becoming more visible on the regional level. According to the last annual data provided by the Employment agency (EA) there are 30 municipalities with unemployment below 5% (marked blue on the map) and 80 more with unemployment between 5 and 10 per cent. In 2013, in the heat of the labour market crisis the number of municipalities with such levels of unemployment were 3 and 43, respectively. Compact groups of low unemployment municipalities can be found in North Bulgaria, around Varna, as well as in the area around Troyan, Gabrovo and VelikoTarnovo, and in the South – around the capital, Plovdiv, Pazardzik, Burgas, Stara Zagora and Kazanlak.

Unemployment in the Bulgarian municipalities (2017 compared to 2013)

Source: EA, IME calculations

Municipal level data

Compared to 2016, unemployment has increased only in 4 municipalities – Brezovo (+6 percentage points), Bobovdol (+2.8 pr.p.), Lisichovo (+0.8 pr.p.) and Tryavna (+0.2 pr.p.). Despite the overall improvement, compact clusters of municipalities with high levels of unemployment (above 25%) still remain. A large part of North Bulgaria is still in the red, which is also true for the mixed-ethnicity regions as well as most municipalities along the Danube. In most cases, municipalities with high unemployment are either very far from the leading economic centres and the traditional flows of daily labour commuting, or have very low levels of education and training of the labour force. This combination of negative factors does provide for a near-future solution of their problems; it is more likely that the opposite is true, as the negligibly small effect of the overall economic growth on their local labour markets points to a long-term isolation from the processes taking place on the national level.

EA data also show that:

• Vidin is the only district centre where unemployment is still above 10% in 2017. Unemployment above 5% in North Bulgaria is observed in all North-Western district centres, as well as in Razgrad, Targovishte and Silistra;
• In South Bulgaria there are only four district centres with unemployment above 5% - Blagoevrgad (6.2%), Sliven (9.6%), Karzdali (5.8%) and Smolyan (6.3%);
• Most of the tourist municipalities achieve very good results – in 2017, unemployment in Bansko, Primorsko and Nesebar was below 5%, in Pomorie, Sozopol, Razlog and Chepelare – below 10%;
• Relatively low levels of unemployment are observed also in municipalities with large companies, such as Panagyurishte (7.3%), Etropole (7.8%) and Sopot (2.6%).

Structural issues

While the data provided by EA undoubtedly provides reason for optimism, some negative long-term trends can also be observed. The primary market in many districts still has difficulty providing such a number of workplaces as necessary to reduce unemployment faster and in a more noticeable way.

In addition, 2017 EA data for the characteristics of the unemployed show that:

• 54.6% of the unemployed have no training and this share (available only on the district level) is the highest in Sliven (75.8%), Shumen (71.7%) andPazardzik (66.6%) and the lowest in the capital (23.4%), Gabrovo (28.2%) andPernik (40.2%);
• 27.8% of the unemployed have basic or no education, and this share is the highest in Sliven (52.7%), Shumen (44.2%) andYambol (43.8%), thelowest – inthe capital (4.4%), Gabrovo (6.7%) andSmolyan (11.3%);
• Unemployed for more than a year were 37% of registered in the labour offices, which is 4,5 percentage points below than the 2016 level. The most significant drop in long-term unemployment is in Gabrovo and Plovdiv, where the 2017 levels are respectively 17.3% and 28.3%. There are, however, districts where the relative share of the long-term unemployed is growing, and it reached 58% in Vidin, 56% in Montana and 48% in Silistra.

Following the above data, the claims that the labour offered in the economy does not meet the requirements of employers are far from surprising. In order to solve this issue, in the past months the government introduced changes aiming to reduce red tape in the process of hiring foreign workers – an important measure in support of the continued expansion of the labour market. The problems with the nature and quality of the active labour market policies however remains, as in 2018 the state continues to rely on subsidized labour rather than unemployed retraining and education. In addition, the effect of the record increase of the minimum wage on the poorest regions is yet to be assessed, and it appears that the debate around the mechanism for the setting of the minimum wage has died out.

Yavor Aleksiev

The annual NSI labour market data for 2017 confirm our preliminary observations[1] for continued improvement in large parts of the country. The annual average employment rate of the population aged 15-64 reached a record high of 66.9% and for the first time there are no districts in which this rate is below 55%.

In 2017 the difference between the capitol and the district with the lowest employment rate of the working population is 19 percentage points, compared to 24 percentage points in 2008 and 2009. Similar trends are also observed in regard to the economic activity and unemployment rates. The reduction of this spread is to be expected since the record high unemployment and almost non-existent unemployment in the capitol suggest that these indicators will change more slowly in future periods. At the same time the economic upturn is spreading out to smaller economic centres due to the lower price of labour, land, offices and other factors.

There is also a decrease in the standard deviation of the employment rate across Bulgarian districts – from 5.5 percentage points in 2016 to 5.1 percentage points in 2017, which is also the lowest value recorded under an economic turn since 2005. Lower values have been registered only during the labour market crisis in 2011-2014. Once again, these data show that the ongoing labour market development is more balanced than that in previous periods.

Despite these positive developments, some of the most persistent regional disparities are more visible than ever. The increase in the number of the employed in 2017 is concentrated primarily in the southern part of the country – for every four new jobs created there, there has been only one created in Northern Bulgaria. The largest increase in the number of people employed is observed in the district of Plovdiv (33 thousand people), followed by Stara Zagora and the capitol (16 thousand each); and the largest decline in registered in Haskovo (-2 thousand), Gabrovo (-1.5 thousand) and Vidin (-1.4 thousand). The employment rate of the population aged 15-64 has increased in almost all of the country’s 28 districts with the exception of Gabrovo and Vidin, in which there is a slight decline, as well as Varna Sliven and Haskovo, where the rate has remained unchanged.

Despite the relatively better 2017, it is obvious that the labour market in some regions of the country continues to struggle. Vidin, Montana, Lovech, Razgrad and Sliven are not only the districts in which the employment rate is traditionally lowest, but are also among the handful of districts that are yet to recover to their pr-crisis levels. We may also add Silistra to this group – although the 57% employment rate registered in 2017 is the highest ever for this district, it is still one oft he lowest in the country.

The map below illustrates this process since 2008. Although there are no longer districts in which the employment rate of the population aged 15-64 is below 55%, the general impression of a strong south and weak north remains valid. The data for the first two quarters of 2018 will show to what extend local economies in the poorer regions of the country have managed to deal with the record minimum wage hike as of January 2018.

Expectations for 2018

It is hardly surprising that by approaching EU-average economic activity and employment rations, the Bulgarian labour market has started to experience some well documented in other countries issues such as growing labour shortages. The recently adopted changes targeted at making the hiring of foreign workers easier are important, but insufficient to make a significant difference in the short term.

In 2018 we can expect an even stronger clash between the negative demographic trends, the problem with the qualification and skills of the unemployed (and of some of the employed) and the requirements of the labour market. The current period presents a rare chance for the Bulgarian government to put itself before the curve of labour market developments, by re-evaluating its active labour market policies (ALMPs). In light of the record high employment rate and existing labour shortages, policies targeted at direct job-creation are not only theoretically hard to justify, but can also be viewed as an instrument that hinders the long-term integration of the workers concerned in the real economy. The latter is an important prerequisite for obtaining skills that are valued by businesses and for creating a “qualification buffer” against future labour market shocks.

Concepts such as “VET and lifelong learning” still lack concrete substance and should be put at the centre of the policy debate and the Government’s ALMPs, or we may once again wake up to find that unemployment has surged to the surprise of politicians.

Efforts should also be targeted at general optimization of Bulgaria’s labour market legislation, so that part-time work and flexible employment practices become more popular.

And, frankly speaking, 32 years later – is it time for a new Labour Code?

The English version of “Regional Profiles: Indicators of Development 2017” was presented on March 13th 2018 at a dedicated round table discussion attended by representatives of foreign embassies, chambers of commerce and industry and international organisations, among other distinguished guests.

download the full study | browse the district profiles | download the presentation [1] [2]

The presentation was focused on the following topics:

• Economic expansion: which parts of the country grow robustly and which lag behind;
• Labour markets: is labour shortage the only game in town;
• Education: what is education quality in the regions and is there a feedback loop to labour market performance;
• Local taxes: are tax hikes trendy among local authorities.

The IME also presented the country’s leading economic centres – a pilot research effort, made public just a few weeks ago. The study came out of the team’s desire to draw an economic map of the country based entirely on natural economic processes. The analysis highlights the strongest nuclei of the national economy and their pertaining peripheries.

Yavor Aleksiev

Recent Eurostat data show that the gap between the poorest and richest regions in EU countries is still considerable. In the 2007-2016 period, this gap increased in 12 countries, including Bulgaria, and declined in 9. In almost all cases "convergence" was achieved because the poorest regions have caught up, but because of a decline in the relative wealth of the richest one. The indicator used by European statistics for this comparison is GDP per capita, expressed in terms of purchasing power standard (PPS).

Figure 1 shows the differences in the development of the richest and poorest regions in each member state (as % of the EU average), which has more than one such region within Europe.

Figure 1: Per capita GDP (PPS) as % of EU average, 2016

Source: Eurostat, IME calculations (* Data for the richest region in the UK show the average for all five London regions.)

It is clear that Bulgaria is far from being among the countries with the greatest unevenness in the development of the regions. At the same time, Bulgaria, Croatia and Greece, which has seriously deteriorated in recent years, are the only countries in which the richest region has lower welfare than the EU average.

Change over the last decade

The analysis of the wealth gap in the richest and poorest regions in European countries over the last decade shows that the countries in which disparities decrease between 2007 and 2016 are nine, and we can conditionally divide them into three groups :

• Countries in which differences are shrinking because of declining relative development in the richest region and increasing development in the poorest (Austria , Germany and Portugal);
• Countries in which differences are declining, but there is a decline in the relative development in both the richest and the poorest regions (Belgium, Finland, Spain, the UK and Greece);
• The only country that has managed to achieve some, albeit minimal, upward development of its poorest and richest region, that has lead to more cohesion, is Hungary.

In the vast majority of Member States, the gap between the poorest and the richest regions is widening. We can define four groups here:

• Countries in which both the richest and the poorest regions have increased their relative development, but the differences are getting bigger due to faster growth of the rich regions - Denmark , Poland , Romania and Bulgaria;
• Countries in which both in the richest and the poorest regions are losing ground compared to average EU levels, but the negative processes are more pronounced in poor regions, so the gap is widening - the Netherlands , Sweden and Croatia;
• Countries in which the differences are growing due to an increase in the relative level of development in the richest region and a decline in the poorest - Ireland, France and Italy;
• Countries in which the poorest region stagnates and the richest improves its relative level of development - the Czech Republic and Slovakia.

Focus on Bulgaria

Between 2007 and 2016 GDP per capita, expressed in PPS, in the poorest Bulgarian region (Northwest Bulgaria) has increased only slightly - from 27% to 29% of the EU average. For the same period, the increase in Southwest Bulgaria is from 67% to 78% and the average for the country has increased from 40% to 49%. Thus, our country remains last in terms both of the relative prosperity of its poorest region and that of its national values. In 2007, the poorest Romanian region (Northeast) had the same level of development as Northwest Bulgaria. In the following period, however, the increase in this region of our northern neighbour is from 27% to 36% of the EU average compared to the 29% for Northwest Bulgaria.

Of course, some of the observed differences are a consequence of the peculiarities of the administrative divisions of EU countries, as the capitals of many of them are separate statistical regions.

Yavor Aleksiev

After years of systematic analysis of the Bulgarian regions, the IME took the next step and focused its efforts on the municipal level. The study "Economic Centers in Bulgaria" raises a number of questions and their answers must be found as soon as possible so that the notion of "regional policy" can aquire a more functional sense.

What are the economic centers?

As "economic centers", our analysis identifies the economically leading municipalities (nucleus) in the country and their adjacent periphery. The importance of these centers for the development of the country's economy is indisputable. Although they occupy only 36% of the territory, they account for nearly 75% of employment and investments in fixed tangible assets and for over 80% of foreign investment and total output.

Importance of the economic centers for the national economy

Source: NSI, IME calculations

It is important to note that this map in no way exhausts the “economically active” regions of the country. With slightly more liberal selection criteria, the centers would have been more, but the focus would have been blurred without sufficient rationale from a research point of view. The municipalities we designate as "economic nucleus" meet at least two of the following three criteria:

• they rank among those in which production is highest (all without Sopot);
• they rank among the most attractive for workers from neighboring municipalities, viewed through the prism of everyday labour migration (only 5 of the included nucleus do not correspond to this criterion, among which the secondary ones - Pernik and Devnya);
• they are distinguished by a high density of the employed in relation to the territory of the municipality (here the exceptions are 7, but they all cover the other two criteria);

Some well-performing municipalities, even smaller ones (such as the resorts Bansko and Nessebar), are excluded from the scope of the survey because they do not meet more than one of the criteria mentioned.

Conclusions from the analysis

The conclusions we can make are many, but only a handful of them can serve as a starting point for policy making:

• It is evident that the current administrative-territorial division of the country is far from optimal. The number of municipalities not meeting the initially required population threshold is growing. Limited human and financial resources make it so that local authorities are mere observers of the processes taking place on their territory. Bulgaria needs fewer territorial-administrative units which will better reflect the actial social and economic processes in the country.
• The lack of sufficient own funds is an enormous problem, has led to a race towards higher local taxes . However, even clearly identified problems at local level can often not be solved due to the lack of own resources. The revenues of local authorities are more than two times lower than the average for the EU in relation to GDP.
• The best way to overcome the gap between taxation and political representation at the local level is to transfer income tax returns back to municipalities via the principle "money follows the ID card". Transferring only 2 percentage points of the personal income tax currently collected will result in additional municipal revenues of around 650 million. This reform will create opportunities both to cover old liabilities and new capital costs while at the same time provoking local authorities to work towards attracting investment, higher employment and wages.
• There is no analysis based on daily labour migration data that does not make infrastructure development a top priority. Without good infrastructure (specifically road infrastructure) we cannot expect the working population to be mobile and ready to work 50 or 100 km. away from home. Despite the relative progress over the last decade, there is still much to be done, both in terms of the overall infrastructure development of North Bulgaria and in terms of its connectivity with the southern part of the country, in particular the tunnel under Shipka and the "Black Sea" highway.

Whether there is political will and, more importantly, public interest in such matters remains the key question. The reform of the administrative-territorial division must overcome political interests, and financial decentralization should happen at the expense of, and not in addition to, the existing tax burden to the central government.

We will only achieve real progress when local processes become a determining factor for the financial well-being of Bulgarian regions and their citizens. Only then will local democracy make sense, and it goes hand in hand with something long lost in our country - local identity.

In 2017, the IME set out to map the borders of Bulgaria’s economic centres. Our goal was to go beyond the country’s administrative and territorial division and establish new internal boundaries, based solely on natural economic processes. The grouping within the centres was done around the economic cores, which gather significant daily labour migration from surrounding municipalities, have significant concentration of employed people and generate relatively large production.

A key element of the study of economic centres is the establishment of peripheral municipalities with strong economic ties and highly reliant on the cores. In this analysis, the peripheries were formed by municipalities where more than 10% of the employed people travel daily and work in the core. This definition of economic cores and their peripheries differentiated several broad categories of economic centres:

• Large economic centres with economically strong cores and large periphery, such as Sofia and Plovdiv;
• Smaller centres, with peripheries generally limited only to the surrounding municipalities, such as Ruse, Pleven and Shumen;
• Specific economic centres, neighbouring each other and having a numerous features in common, despite having very limited on non-existent peripheries, such as Gabrovo-Sevlievo, Stara Zagora, Kazanlak and Radnevo

It is important to note that the map of the economic centres does in no way cover the entire economic and investment map of the country. The exclusion of certain regions does not mean that there is no economic activity, investments and perspectives for development in them. It is true, however, that the municipalities not included in the map fall behind in their level and rate of economic development in comparison with the centres. They also lack peripheries, and thus they lack tangible effect on employment in the surrounding municipalities. Because of this, the focus of the analysis is on the 20 largest centres.

The economic mapping of the country led to several very curious observations. The first one is the territorial coverage of the centres. A little over one third of the territory of Bulgaria is covered in economic centres, but they generate 86% of the total production of the country (based on 2015 data). In other words, about two thirds of the territory of the country is, figuratively speaking, an economic wasteland, outside of a small number of “oases” which generate the other 14% of the production of the country.

Particularly interesting is the fact that the process of concentration of economic activity in the centres has continued in the past years. In 2011, 85% of the production of the country was generated in them, while five years later this share has increased by 1 percentage point. The continued concentration of capital and labour in them as a result of the good infrastructure, the size of their markets, synergies with existing companies, the social environment and other factors will likely continue to support this trend of economic centralization.

The economic centres attract most of the investment – 81% of foreign direct investment (FDI) in the country at the end of 2015 where in them. When it comes to the other important investment indicator - annual expenditure on tangible fixed assets (ETFA), three quarters of all ETFA’s were made in the centers in 2015.

Seventy-five per cent, or three quarters of the people employed in the economy worked in the centres in 2015. In the same time, in 2016 62% of the population lived in the economic centres, which in turn means that more than one third of the population lives outside of the most economically active and prospective parts of the country. It is also interesting that the economic centres concentrate not only more production, but a larger share of the total population of the country – in 2000 there lived 59% of the population, while in 2016 this share has grown by 3 percentage points.

The total number of economic centres in the country is 20, but their size, territory and economic profiles are very diverse. It comes as no surprise that the largest economic centre has formed around Sofia municipality. It is the largest in terms of territory, population, production, investment, and number of employed. The Sofia economic centre also has a secondary core – Pernik municipality. This happens because Pernik attracts significant labour migration from the surrounding municipalities, but in the same time it is a major labour donor for the capital – so large that Pernik is the municipality with the lowest net labour migration in the country. This centre generates 43% of the total production of the country according to 2015 data, and 42% in 2011. The centre encompasses 18 municipalities and employs a third of the workers in the country. The centre attracts the most foreign investment – 55% of the total FDI as of the end of 2015.

Here, the unemployment is the lowest in the country (3.5% in 2016), and the average salary is the second highest in the country (1174 leva average monthly gross salary), lower only than that in the small economic centre Kozlodui where the high salaries in the nuclear power plant have significant impact on the averages.

The economic centre around the capital also has a concentration of highly educated people, as it has the highest share of the population with tertiary education – nearly one third, compared to 20% in the country as a whole. The quality of education, measured through the results on the Bulgarian language and literature matriculation exams, is the highest in “Sofia” – Good 4.48 in 2016, compared to 4.17 in the entire country, which points to a capability of the centre to retain a high share of highly education population.

Apart from the centre around the capital, the other geographically large centres are formed around the core municipalities of Plovdiv, Burgas and Varna. The second largest centre – “Plovdiv” is nearly five times smaller in terms of production compared to “Sofia”. The total production of the three centres “Plovdiv”, “Burgas” and “Varna”, as well as the number of employed in them is a little more than a half of that of the economic centre around Sofia, and foreign investment is about a third.

The centre around Plovdiv – the second largest in the country – encompasses 12 municipalities and generates about one tenth of the total production of the country. We have to not that, thanks to significant investment and the attraction of human capital from remote municipalities, “Plovdiv” has one of the highest production growth rates among the economic centres in the past five years. In 2015, the production in “Plovdiv” was 39 per cent higher compared to 2011, second only to the 40 per cent growth of the much smaller centre around Ruse.

It is rather interesting that south of Stara Planina, all the centres are connected. In the same time, the centres in North Bulgaria are islands of economic activity and investments, surrounded by large areas with little economic activity. The only exception is the "agglomerate" of several centers in North-East Bulgaria, comprised of several interconnected centers – “Varna”, “Shumen” and “Targovishte”, containing a total of 17 municipalities, 10 of which are peripheral to Varna. It is likely that the absence of a highway north of Stara Planina also contributes to this situation.

The interconnectedness of the centers in the south part of the country means that it is likely that after some time the boundaries between some of them may start to fade. The center around the capital, for instance, borders “Pazardzik” to the east, which in turn borders “Plovdiv”. Near “Plovdiv” is “Haskovo” – a rather interesting center with a rather fast-growing core, but currently without a periphery. “Haskovo” is already officially positioned as a part of “Economic area Trakia” (EAT), which formed around Plovdiv in the past years, linking together six industrial areas. “Haskovo” could also become a part of the agglomerate comprised of “Sofia”, “Pazardzik” and “Plovdiv”. An important factor for this, of course, was the completion of two highways in South Bulgaria in the past years – “Trakia” (connecting Sofia and Burgas) and “Maritsa” (connecting “Trakia” highway at the Orizovo road junction with the Bulgarian-Turkish border at Kapitan Andreevo border checkpoint).

The agglomerate of centers in South-West and South-Central Bulgaria is also growing eastward. In the spring of 2017 it was announced that EAT will be expanding towards Burgas. A memorandum between the area and Burgas municipality has been signed, pursuant to which the territory of Burgas will be included in the area. Given that, it will come as no surprise if in the future a supercentre is formed in South Bulgaria, on the axis Sofia – Pazardzik – Plovdiv – Haskovo – Burgas.

On the other hand, in the area around Stara Zagora the IME methodology has identified four economic centers – “Sopot”, “Kazanlak”, “Stara Zagora” and “Radnevo”. Galabovo could also be added, as data from the recent years indicate the appearance of a new center, which has not yet surpassed the necessary thresholds. These five centres, given their territorial proximity, infrastructural and economic interconnectedness are a part of one larger economic centre, with a pronounced industrial economic profile. The natural formation of an economic centre is the reason for the push by local authorities for the creation of the “Zagore” industrial area. Without a doubt this move is a response to the good development of Plovdiv and the positioning of EAT as a leading investment destination. Obviously, “Zagore” will be the first attempt to replicate the successful model of EAT. The socio-economic profile of Stara Zagora forces the decision to form a separate investment destination rather than join the EAT. The two, of course, can have numerous links and amplify each other’s effects, but as separate zones with distinct profiles. The centres around Stara Zagora are relatively even in terms of the economic development of the five cores. This region has untapped potential for development in the field of information technology and outsourcing following Plovdiv, which is important for the retention of highly qualified young people in the area.

The lack of good and fast infrastructural links between North and South Bulgaria is an important factor influencing the boundaries of economic centers. There is, for instance, a clumping of several centers in Central Bulgaria on the two sides of Stara Planina – to the south, there are the centers around Stara Zagora, and to the north there a two other economic centers – “Gabrovo - Sevlievo” and “Veliko Tarnovo”. The lack of appropriate infrastructural connections through the mountain hinders the economic linking of the two active territories on its two sides and limits their growth potential.

The economic centre “Gabrovo - Sevlievo” north of Stara Planina is also a very interesting formation. It is comprised by two cores – the municipalities of Gabrovo and Sevlievo, united in a single centre due to the geographical proximity and relatively high labour migration between them. The centre has no periphery, and it has pronounced industrial profile. It has a relatively small economy, as its share is about 1% of the production of the country. The centre around Veliko Tarnovo is one of the smaller ones, as it has a core – Veliko Tarnovo municipality and only one peripheral municipality – Lyaskovets.

These two centres aside, north of Stara Planina four other, rather limited, centres are formed, around the cores Ruse, Pleven, Kozlodui and Dobrich. The centre around Dobrich has only Dobrich-rural municipality as a periphery, and its formation is the result of the small area of Dobrich municipality and the fact that Dobrich-rural municipality surrounds it from all sides. Thus it is an integral part of the economy of the city of Dobrich and the existing boundaries are administrative rather than economic. A similar case is the geographically small Yambol municipality and the surrounding Tundzha municipality as well as the Sopot and Karlovo municipalities, the latter becoming natural periphery of Sopot.

Among the economic centres to the north, “Ruse” has the largest economy, with a total of three per cent of the production of the country. It holds the second place in North Bulgaria, following Varna and fifth in the country. The centre formed around Ruse is comprised of five municipalities and employs 3% of all employees in the economy in 2015.

The review of economic centres and their peripheries should be views as a first step towards the formation of successful investment destinations. The positioning of an economic centre as an investment destination should not follow the rigid administrative territorial boundaries of the municipalities in question, but rather unite the natural economic area around the economic cores. The map and profiles of the economic centres created by the IME allow for the identification of the correct investment destination – from the expansion of economic centre “Plovdiv”, including Haskovo, through the appropriate unification of the centres around Stara Zagora to the big challenge in the north, namely the formation of strong investment destinations from the few centres, currently developing separately.