In an interview for Profit.bg the Agency for Economic Analysis and Forecasts stated that investments in Bulgaria, coming from Belgium, Luxembourg, UK and Spain, have declined considerably at the expense of other countries, among which is Germany. This gave us grounds to contact the German-Bulgarian Chamber of Industry and Commerce on this issue.

Profit.bg discussed with Andreas Schaefer, deputy chairman of the German-Bulgarian Chamber of Industry and Commerce, issues such as the expected German investments in Bulgaria in 2009, the investment of Bulgarian companies in the Europe's biggest economy and why Bulgaria attracts German investment.

Mr. Schaefer, what is the reason for the growth of German investments in Bulgaria at the expense of investments from other countries? What are your expectations for this process in 2009?

We have just polled our members about this question, and they are expecting German investment to drop because of the global economic turmoil. However, we believe that German investment will be less affected by the current economic situation than investments from many other countries. German investors have been quite reluctant to invest in real estate - the sector hardest hit by the crisis. In the past we have received a lot of criticism for this conservative attitude, because it caused Germany to lose their position as the biggest investor in Bulgaria. Now this works out as an advantage for both sides: German companies tend to focus on projects that create jobs and that are based on a long-term strategy. They are not so easily influenced by a temporary slowdown of the economy.

Why German business invests in Bulgaria and what are the most attractive sectors of the Bulgarian economy?

Producers like Liebherr, Festo and Grammer see Bulgaria as an attractive location for industrial operations. Their factories help to reverse the de-industrialization of Bulgaria that happened in the 1990s, and they offer attractive opportunities for local suppliers. German retailers like Metro, REWE, Kaufland, Praktiker, Lidl, Plus, and Penny set up outlets because the Bulgarian market is growing, and they can be competitive by offering lower prices, higher quality or a wider range of products. Others like SAP or Lufthansa Technik like the combination of qualified engineers, competitive salaries, and the geographical proximity to major markets. And yet others like Fraport and E.ON want to bring their know-how to Bulgaria to improve existing outfits. Besides, we have hundreds of sales and purchasing offices. Germany is the biggest exporter worldwide, so German companies have a global network of country offices in all major markets.

Do you have information on the volume of German direct investment in Bulgaria in recent years and when was their peak? What is the investment activity of Bulgarian companies in Germany?

Germany has invested over a billion Euros in Bulgaria, the bulk of it after 2004. By that time it was pretty sure that Bulgaria would join the EU and that the macroeconomical stability was something permanent. This year was the most successful in terms of German investment. In the first three quarters German companies have invested 320 million Euros in Bulgaria; several new plants have opened or have increased their capacity. Bulgarian companies have mainly invested in South Eastern Europe, the biggest destinations being Serbia, Turkey, Macedonia, Romania, Cyprus and Greece. Outside this region, the USA and Germany have been the main markets for Bulgarian investors, receiving 21 and 18 million Euro respectively. Most Bulgarian investors open sales offices in Germany in order to have a foothold in Europe's biggest economy. A notable exception is Telerik, a Bulgarian IT company which has recently bought its German peer Vanatec. I hope that more companies will follow in their footsteps, because this will strengthen Bulgaria's image as a dynamic and innovative economy.

We live in an interesting time and the sentiment of German managers in the latest survey of the German-Bulgarian Chamber of Industry and Commerce is not optimistic at all. What are in your opinion the serious problems of Bulgarian economic life?

The recent pessimism was mainly caused by external factors: a slowdown in global demand and tightened conditions for financing. In general, German companies are doing good business in Bulgaria. It is an expanding economy, and macroeconomic conditions have steadily improved in the past ten years. Apart from joining the EU, Bulgaria has slashed taxes, the currency was kept stable and the government managed to run a budget surplus. However, there remain weak points that companies criticize in our annual business surveys. These weaknesses circle around the transparency of public procurements as well as a perceived lack of impartiality when it comes to implementing rules and regulations. And the vocational training needs to be brought in line with the needs of a modern economy, so that those who do not study become „Facharbeiter" - specialists with theoretical and practical training who take pride in their skills. These are challenges that Bulgaria needs to tackle no matter if there is a global crisis or not.

Hopefully the current feeling of urgency will help to accelerate the necessary changes, so Bulgaria can become an even stronger and more dynamic partner in the future.