Petar T. Ivanov, CEO of the American Chamber of Commerce in Bulgaria had an interview on May 19th, 2021 for “24 chasa” newspaper.

Mr. Ivanov, why do you describe the investment fund under the Three Seas Initiative as the Second Marshall Plan? Surely, we are not taking about post-war reconstruction in Europe with US and Canadian money?

No, but there is a pledge of EUR 300 million from the Development Finance Corporation of the United States. However, because the money will be invested outside the US, the initiative is awaiting approval from the administration — this is the reason for the delay. The Three Seas initiative and the Marshall Plan are similar in that they both enjoy the support of the State Department.

In 1948, the United States and Canada decided that Europe had to be rebuilt as its entire infrastructure of roads, bridges and businesses had been almost completely annihilated by the war. The US and Canada were unaffected, especially as the land-lease agreement with Britain and the USSR had pulled their economies forward.

You are referring to the agreement under which the United States supplied the USSR with steel and other materials and vast quantities of military equipment to facilitate its victory in World War II, right?

Yes, a curious detail is that the main financial burden was actually borne by the United Kingdom. That is why 28 % of the Marshall Plan money went to the UK to offset its costs. The USSR was a net recipient of grants. The entire plan amounted to USD$17 billion, which would add up to approximately US$120 billion in today’s money.

It aimed to rebuild the economies of the Old Continent, and some of the money was also earmarked for the countries in Eastern Europe, where serious hostilities had been fought. Unfortunately, Stalin did not authorise the disbursement of funds and countries in our region did not receive a dime.

Eighteen percent (18 %) of the money went to France, and only 11 % to Germany. Greece and Turkey received 5 % each, and the rest went to the Scandinavian countries and other smaller countries in Western Europe.

As much as we consider the Marshall Plan a political undertaking, it was also a well-measured business plan. The reason for this is that both the US and Canada benefited greatly from the grant assistance because of the condition that all the products and raw materials to be used in the reconstruction effort were to be supplied from either of the two countries, further boosting their economies.

So, these are the similarities. Not only did Eastern Europe fail to rebuild its infrastructure at the time, but the Soviet Union deliberately precluded any development along the North-South axis because it had no interest in doing so — it was instead looking to develop trade between itself and the rest of Eastern Europe along its western border.

Unfortunately, even after the fall of the Iron Curtain, infrastructure along the North-South axis remained underdeveloped.

Try travelling now from Sofia to Tallinn. It will take you days by car or train.

I will probably have to change three planes.

It’s not just that. Send goods from Bulgaria to any of the Baltic countries, and you will see that they will first go to Amsterdam, and only then to Riga and Tallinn. 

The Three Seas Initiative is supported by the United States because it sees that these 12 founding countries, including Bulgaria, need more economic incentives. Investing in them and further integrating them in terms of infrastructure and quality of life into the European Union is an excellent idea. EU funds are not able to achieve this task on their own as their main focus and priority is the development of connectivity along the East-West axis.

I wonder why is it then the Ruse-Veliko Tarnovo highway and the tunnel under the Shipka pass are going to be funded by the national budget? Would it not be wiser to apply for assistance under the Three Seas Initiative?

Infrastructure building is an expensive undertaking — a country needs a huge economy with a large workforce, like Turkey for example, to be able to take on such construction projects and complete them without external assistance. Even Poland, which has the largest economy among countries in the Three Seas initiative, cannot afford such an undertaking on its own.

Bulgaria should first ensure that it has a robust pipeline of projects and that these are discussed with our neighbours. Lom, for instance, is a large river port that grew during socialism because the ore intended for Kremikovtzi used to be shipped there. If the tunnel under Petrohan is constructed and the port is expanded, or even a bridge over the Danube is constructed there, now this would be an enormously successful infrastructure project, especially if coordinated with the Romanian side. We did build a second bridge at Vidin, but unfortunately it has failed to boost the economy on either side of the river. No one succeeds on their own — public-private partnerships as well as private equity are needed.

There are strong prerequisites for the Three Seas Initiative to become a successful venture because the economic growth of countries in our region is higher compared to that in Western Europe, and the return on investment is quite high. If we learn to work together and get development banks on board to invest in infrastructure, success will come.

However, all this goes hand in hand with post-pandemic recovery. I assume you have read the latest versions of the Bulgarian Recovery and Resilience Plan. What is your opinion?

Overall, the document is not overly impressive, but I understand that all Member States had to draw up these plans in a bit of a hurry. We are talking about money and, as a new government will likely take over in Bulgaria soon, priorities may well change.

I don’t see a problem with the money from the Recovery Plan following in the trail of that from the Three Seas initiative. I am saying this because the projects in the initiative will be vetted by an investment company with a wealth of experience in such ventures. People who are basically seeking to make money out of money, it’s what they do — they invest in infrastructure.

Despite being politically inspired, the initiative has a strong business rationale. Politicians, unfortunately, often make the easy decisions. They do not necessarily understand how to link technology to projects, their imagination only goes as far as funding the obvious. This applies to Bulgaria, but then it applies to all other countries in the world. It’s universal.

Renovating buildings, for example, does have an impact on Green Transition — I do not deny it — because they reduce energy consumption and energy dependence. But we need to look beyond, seek impacts that act as a driver for entire regions and the entire economy.

Give us an example of such a project in any area.

I cannot think of a specific project, but yesterday (Tuesday) President Rumen Radev suggested that Greece should join the initiative as a guest. This is possible because the rules allow projects to be funded in a country outside the 12 target countries if the positive effects extend to a Member State of the initiative.

It is essential for Bulgaria to have access to the Aegean Sea, which is part of the Mediterranean.

Without having to march in on Thessaloniki, right?

Exactly, there’s no need to even go to Thessaloniki. The idea is to build a port at Xanthi, where no infrastructure currently exists, although the distance to the Makaza pass is only 50 km. So, if the proverbial tunnel under Shipka pass is used, then the Danube is crossed and the Via Carpathia route is followed, reaching Slovakia and Poland becomes amazingly easy. If road and rail are combined, we virtually have direct access from the Baltic Sea to the Suez Canal. None of this exists now, and goods from Poland to the Aegean travel slowly, taking circuitous routes. Such infrastructure would benefit all countries. Only, present thinking tends to focus on local benefits—how close the infrastructure will be to this or that major city, how close that city should be to the motorway, etc.

In trade and transport, a distance of 100 km saves a lot of money and implies cheaper goods and benefits for all in society.

You have worked for global IT companies for many years, I don’t know why you bypass the issue of digitalization?

Because in this case, I am talking about sectors that are outside my narrow remit of competence. But essentially, road construction in the modern world is directly linked to digitization. We don’t have to do the things that were done in Western Europe with Marshall Plan money, such as just build nice roads. This would be pointless. In the EU, almost all cars will be electric a decade from now, many of them autonomous, or at least having such features. For such a car to be drivable, roads must be equipped with sensors.

So, each infrastructure project will, by necessity, involve a digitization component — it’s inevitable if we want to still be able to use the roads in the next 40 to 50 years.

According to current economic projects Bulgaria’s economic growth next year will be 3.5 %. But this may not be enough to pull forward so that Bulgaria no longer brings the rear in terms of a variety of development indicators. What can be done?

When a country has a small economy like ours, its potential to develop standard, traditional industries is low because it will never be able to achieve sufficient scale. Countries like China or India, with their huge populations, can afford this, even if domestic consumption is too low to give a strong boost to such businesses. There is the possibility for the businesses to be grown globally.

Small nations must learn how to make commodities that are used across the globe, and today this is only achievable in IT. All industries have been transforming in this respect, with innovation in the lead, driving economic development around the world. We will only be able to offer a product in global demand, if we succeed in building a culture that supports such industries — start-ups, research, fintech companies, you name it. And the right prerequisites to do this are already in place.

Israel is a case in point. It now attracts 30 % of the world’s venture capital, which is invested in various developments. And a government policy is in place to loan companies US$1 million to expand in the United States.

Doesn’t support for startups entail a degree of risk? Practice on global scale shows that the lifespan of 9 out of 10 startups is between 12 and 18 months, and that most fail. How would you know which companies to channel support to?

The model is built on the assumption that 9 out of 10 startups will fail, with the achievements of the tenth that compensate the support given. The condition in Israel, for example, is that when the company goes public and raises capital, funding above a certain threshold is paid back. This is how losses are covered — it’s the general principle of venture funding.

However, for this to happen we need to teach children from a young age to be entrepreneurial, and this is a word that has been literally wiped out from Bulgarian vocabulary in the last 70 years.

It’s a matter of attitude that we need to cultivate as part of being human — to take risks, to try out new and different things. The success of a startup depends on whether the young people behind it are inclined to take risks or whether they would rather get a salary somewhere. But this is an ability that is learned and nurtured. And in Bulgaria, it is taught neither at secondary school nor at university.