The less visible the Government is, the better. Tax policies should not be altered if we are to attract investors. In the international investor’s mind, Bulgaria should the Silicon Valley of Europe.
These thoughts were shared by Mr. Petar Ivanov, CEO of the American Chamber of Commerce in Bulgaria (AmCham), in an interview for BGNES on June 6th, 2020.
While the coronavirus pandemic has indeed become a serious challenge for both the global and the Bulgarian economy, Petar Ivanov calls for a sober, evidence-based analysis of the situation.
“Regretfully, many key policymakers continue to assert that everything will collapse, things will go astray and recovery will not be fast. Those who talk in this way can rely that they will be right, because this is zero-risk narrative. My view however is based on facts. And the facts are that this crisis was caused by a pandemic,” said Mr. Ivanov.
His opinion is that the crisis did not ensue from economic fundamentals. “Once triggered by the pandemic, the crisis was exaggerated by mass media as it occupied 90 % of all news broadcasts. All this did not help defuse the situation, conversely, it made things worse and the resulting crash was far more severe than it had to be, due to the emotional approach of everyone to this crisis, including politicians and financiers”, noted Mr. Ivanov.
The coronavirus crisis unveiled new opportunities for making business and for communicating through advanced technology.
“Some would profess that we will never reach again the level of consumption we had before the crisis. To this I say: We do not need to. Let us be more wise and use the lessons we all learned – we can have videoconferences with people even if we live in the same city. Why start the car engine, waste 45 minutes, pollute the environment and cause traffic jams for the sake of showing up at work at 9.00 am sharp, together with everyone else? Technology enables us do some basic things, but we never make use of these enablers”, stressed he.
Many economists and politologists predict that Government would increase its role in a range of sectors or even nationalize them in the aftermath of the COVID-19 pandemic.
“The less visible the Government is, the better. However, there must be rule of law before this can happen. This is the way to achieve a balance between private interest and lawfulness, and thereby a viable market economy”, stressed the AmCham CEO.
Mr. Ivanov is firmly convinced that market economy is impossible without rule of law.
“When you do not have rule of law, things do not work. Then you have a jungle economy or the economy of monopolies and cartels we see right now. Because this is what happens when the law is not there”, said Petar Ivanov, explaining further that the law is actually there, but its application is bizarre.
“Slow justice is no justice at all. Because, if it takes as many as 30 years for a court to deliver a judgment, it does not take you anywhere. During the state of emergency we witnessed some outrageous performances, among other things. They came under the logo of “Let’s do some patriotic”, something to help us alone, without recognizing that we are part of the EU and of the common markets. This is how some people seek to get rid of their competitors. We saw that, too. There are already several infringement rulings – not only against Bulgaria, but against anyone who attempts to impose populist measures. When you are part of a community, you have to comply with the community rules or get out. One cannot be a member and non-member at the same time”, stated the AmCham CEO.
In recent months, against the backdrop of the pandemic which has disrupted certain supply chains as manufacturing processes had been outsourced to Asia, businesses have been looking to bring these processes back. Bulgaria must have a clear policy about we wish to be brought back, i.e. adequate profiling is needed.
“We Bulgarians are good at computer programming. While we cannot astonish anyone with the quantity of our software engineers, we can astonish them with their quality”, noted Mr. Ivanov.
We recalls a front page of The Economist more than 20 years entitled “Why India, why not Bulgaria?”
“Do you know how many policy-makers in Bulgaria have bothered to read that article? Seeing this kind of thing would make me fervent. I would embrace the article, but nothing like this happened. Nearshoring has now become a buzz word, but we should carefully consider what we can offer for these people and businesses to land at our shores. What I can say with certainty is that we would not attract them if we change our tax policy”, said the AmCham leader.
Mr. Ivanov has made some research which revealed the average personal income tax levels in Poland and in the Czech Republic are in the vicinity of 23%. “They have an income-based scale – the more you earn, the more tax you pay, but before that they went through the phase we are in now. They used to have a flat rate of 15%. If I am a US company looking to set foot in Eastern Europe, and hear names such as Prague, Warsaw, Budapest and Sofia, where would I go? First to Prague, Warsaw or Budapest, but not to Sofia. Sofia should offer something which makes a difference,” said Mr. Ivanov and added that he would choose to live in the place with the lowest taxes.
In his view, unless you have a clear policy about who and what you wish to attract, you will not attract anybody. Meanwhile, there have been positive examples in this respect. He hailed the clip of IvestBulgaria, because it encourages young people to come and work creatively in Bulgaria’s innovative and digital industries.
“We must position ourselves as the Silicon Valley country of Europe. No one sees us this way. Talk to people about innovations and they would cite the Baltic countries, Poland or the Czech Republic. These countries can afford to move from a flat-rate to an income-based tax system, but we are not there yet. When talking about nearshoring and attracting investments, we should clearly recognize that there are things we should not tamper with until we are strong enough to do so,” firmly said Mr. Ivanov.
The months of coronavirus state of emergency have had a positive impact on the modus operandi of the American Chamber of Commerce in Bulgaria. “It was positive because we realized that technology can help boost our efficiency. Before the crisis, people did not believe that the digital economy is here, and one week later they found themselves right there. The upside of videoconferencing is that it makes things happen very quickly, no bookings are needed.
In the month of May alone, we have had six webinars – with Mrs. Denitsa Sacheva, Minister of Labour and Social Policy, with the Transport Minister, Mr. Rosen Zhelyazkov, with Vice Premier Tomislav Dontchev, with EU Commissioner Mariya Gabriel and now with Mrs. Eva Maydell, Member of the European Parliament. We would never be able to stage six physical events in the matter of one month. What we discussed with them was not COVID-19, but how we can recover and do we have a clear strategy. The crisis has had a positive impact and I believe this should be the case for the Government, too. We should all learn our lessons from this crisis so that tomorrow we do not chant “Buy Bulgarian!”. This type of urging in itself means that we have a problem, because people would buy Bulgarian products only if they are good enough and make a natural choice for economic and other reasons,” concluded Petar Ivanov.
Interview for BGNES Agency, June 6th with Georgi Pashkulev, Apostol Apostolov (video) – Bulgarian version
Photos: Gergana Kostadinova, BGNES (Thank you)
English translation kindly provided by our member Interlang