The analysis of the current available data discloses slow but visible positive trends of economic recovery in most districts of Bulgaria. The enhancement is mostly tangible on the labour market due to the later publishing of certain macroeconomic indicators on regional level. The opinion polls, especially performed among businesses and citizens of the 28 districts for the purposes of the research, verified these trends. Nonetheless, employment in some of the poorest districts of Bulgaria remains embarrassingly low in 2013, and it continues to inhibit incomes and the standard of living. The underemployment–stagnating incomes–diminishing population spiral is the cause for the continuing socioeconomic divergence between the capital of Sofia and the rest of the country.
The investment activity in most districts remains well below the level before the crisis, and this is especially valid for Sofia City (the capital). In 2010 and 2011, Sofia City (the capital) reported a net outflow of foreign capital, which combined with the continuous inflow of significant investments to a certain number of the other main economic centres of Bulgaria (such as Burgas) was also the reason for diminishing the differences between the capital city and the other districts in relation to foreign direct investments.
These realities also affect the other aspects of regional development such as the citizens’ evaluation of the quality of the social environment, the investment activity of businesses and attitudes towards migration. Nevertheless, there have been examples for the past two years of quickly recovering districts that had managed to attract significant investment interest, and thus to offer their citizens better living conditions. Such a district is Burgas where the cumulative foreign direct investments in non-financial businesses has increased almost three times from 2008 to 2012, reaching the figure of 5 billion BGN – it ranked third in Bulgaria following Sofia City and Sofia District. Employment of people aged fifteen or more has reached its levels before the crisis in the district and it has already been higher than Varna District. Burgas also ranks second with regard to European funds drawn by municipalities as beneficiaries under the operational programmes in terms of the number of people. As a result of these and other positive trends, the average population of the district increased in 2013, which has only been characteristic of Sofia City (the capital) for the past two years. A gradual improvement concerning employment was noticed in Plovdiv back in 2012, and such a trend has also been noticed in Varna District since 2013, among other districts. Conversely, traditionally strong economic centres such as Stara Zagora and Ruse have not been able to recover the creation of jobs.
The political instability of the central government and the relative inactivity of local authorities with regard to the local business conditions continued to obstruct the economic recovery that has begun. According to an opinion poll, conducted among 1,680 businesses throughout Bulgaria for the purposes of this research, the average evaluation of businesses, pertaining to the efficiency of the district and municipal bodies, have decreased compared to the previous year, and perceptions of corruption have increased. In addition, the enhancement of electronic and one-shop stop services remains slow and inconsistent. It has been concluded for another year that new incentives for local authorities must be created in order to significantly improve the business environment. The reimbursement of direct taxes back to municipalities could constitute such an incentive. Thus, municipalities could have a direct financial interest to work more actively on attracting investments and on creating new jobs on their territory.
Infrastructural development continued to be extremely unequal throughout Bulgaria, and the key projects again were focused in South Bulgaria in 2012 and 2013. The uncertainties relating to funding and the deadlines for the construction of facilities of strategic nature, which have the potential to improve the competitiveness of part of districts such as the Hemus and Struma highways, remain. Given the commissioning of the Trakia highway, the data of the Road Infrastructure Agency – that the relative share of roads in good condition dropped from 40.3% in 2012 to 39.6% in 2013 – are disturbing.
Rather negative trends in the field of education and healthcare have been going on for the past few years. These are largely due to the lack of clear reforms on behalf of the central government. The scope of both systems was smaller in 2013 compared to 2012 – for instance, health-insured persons decreased from 87.3% to 86.1%, and the enrolment rate of the population (grades 5th through 8th) decreased from 81.0% to 79.7%. Despite the conditions of slightly increasing employment and economic activity, such tendencies continue to confirm the necessity of reconsidering the implemented policies in these fields.
Contrary to the trends above, an improvement in bigger part of the indicators in the Environment and Social Environment categories has been monitored. Owing to the successful implementation of a number of projects on environmental protection, the citizens’ evaluation about the quality thereof has increased, and the share of the population having access to sewage and the share of people connected to waste water treatment plants has quickly increased. The main apprehensions regarding further enhancement are rather related to the instability of the central government and the frozen payments from the European Commission under the Environment Operational Programme. Improvements are also available with regard to the social environment and living conditions. A slight decrease of the crime rate was monitored in 2013. The registered attendances at cinemas and theatres have reached a record number for the past several years – a trend that is valid even for the smaller districts like Targovishte.
The third edition of ‘Regional Profiles: Indicators of Development’ includes four thematic analyses. The first one examines which districts that are mostly attractive for foreign and local investments before the crisis, and also after the beginning thereof. Other than the established trends in the investment process, the main reasons for the attractiveness of certain districts as investment destinations have been specified in the analysis. The interrelations between the investment activity and a number of macroeconomic and social indicators have been researched. It is notable that the stock and flow of attracted local and foreign investments are highly related to the local well-being, measured via GDP per capita. This relation is not surprising – the more investments a territory attracts, the more prosperous its economy is and incomes increase. On the other hand, the high degree of development of a district also attracts investments mainly due to the high potential of the local market.
In parallel with this, the investment indicators on individual districts show high or moderate correlation with a number of indicators on the availability and the quality of the human capital. In other words, the availability of a sufficient workforce and also the quality of this workforce constitute simultaneously a factor and a consequence arising out of attracting investments. This is equally valid for both local and foreign investments. In view of this, the focus on training and education of the workforce should dominate when drafting national and local strategies for attracting investments.
In this year’s edition, an analysis on fiscal policy and regional development has also been included. It is based on last year’s analytical piece – Tax Policy on Local Level – and it critically reviews the policy of subsidised regional development. This policy seriously depends on European funds, as well as on the centralised administrative allocation of public funds to regions, which is at the expense of decentralisation and financial independence. The analysis demonstrates the relation between the financial stability of municipalities and attracted foreign investments, thus supporting the argument that financially independent and not fully dependent (from the state or the European funds) municipalities are more active, and attractive to foreign investors respectively. Along with the financial and economic reasoning for higher financial independence of municipalities, the analysis also specifies particular steps for implementing the idea, which include ceding a part of the corporate tax of municipalities starting from next year, and also certain rules for spending these resources.
The third thematic analysis is dedicated to the labour market and the rate of recovery thereof from the crisis in various parts of Bulgaria. The labour market situation has generally improved in most districts, notwithstanding the political instability since the spring of 2013. Simultaneously, the trend of quickly recovering South and stagnating North, monitored in the last year’s edition, is still valid. This is clear from both the monitoring of the workforce and businesses’ expectancies for the number of employed people for the period June 2014 – May 2015.
The last thematic analysis is based on the current clustering (grouping) of districts by similarities and differences. Eight types of regional profiles were identified this year, but there are variances in their composition despite the fact that the number of clusters is similar to the last year’s one. The scope of profiles featuring a poor socioeconomic state or negative development trends remains larger than the ones with good states. The cluster of districts in a poor socioeconomic state demonstrates a trend of enlarging its composition. Only two districts were considered in a poor state in 2012 – Razgrad and Silistra, and in 2014 five districts: Lovech, Montana, Razgrad, Silistra and Targovishte. Sofia (capital) remains the sole district in a very good socioeconomic state, and Varna, Burgas, Plovdiv and Blagoevgrad continue to be the best developed districts after Sofia (capital).
Figure 1: Typology of districts according to their socioeconomic state and development
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