Investment bait
The two cornerstones of Bulgaria's economic growth in the five years before the global economic crisis were consumption and investment - both foreign direct and domestic.The crisis caught up with Bulgaria late, in the last quarter of 2008, but in the first full year of recession, investment was down 26.9 per cent, according to Bulgaria's statistics board. To spur a fresh inflow of funds, the Cabinet now plans to lower the thresholds for incentives offered to prospective investors.It was the most effective way for the Government to stimulate the economy, employment and Budget revenue, Economy Minister Traycho Traykov said."We have envisioned up to 10 per cent of investment in manufacturing industries and up to 50 per cent of investment in research and development and high-tech to be rebated after the projects reach a certain stage," Traykov said on May 11, as quoted by Bulgarian-language media.Specifically, that meant the point when at least half of the minimum amount stipulated for the investment was reached or when the investment project entered its fourth year.There would be no funds allocated for such spending in the 2010 Budget, but the amended regulations would give investors a clear framework to plan in advance, Traykov said."It might look like unnecessary spending, but I believe that 90 per cent of the work depends on that. Right now, companies do not have enough cash to invest because of the credit crunch," Traykov was quoted as saying.It was not immediately clear, however, how the promise of future subsidies would help alleviate the cash squeeze now.The focus of the changes were lower thresholds to secure investment certificates entitling their holders to Government incentives. To secure a class A certificate, investors would have to commit 20 million leva to a project, down from 32 million now, and for a class B certificate the threshold was reduced from 16 million leva to 10 million.For high-tech production facilities and investment in areas with high unemployment, the thresholds would be set at one third of the standard rate, while investment in high-tech services would need to meet a threshold set at one fifth of the standard amount, according to the summary of the amendments, posted on the Economy Ministry's website.Furthermore, Bulgaria would certify "priority investment projects" that were outside the sectors now subject to the investment incentives regulation. The threshold for such projects would be 100 million leva investment and the creation of at least 200 jobs, with several exceptions - for industrial areas the requirements were 70 million leva invested and 100jobs, while for technology parks it would require 30 million leva and 50 jobs.However, that opened the door for types of projects - construction of shopping centres, golf courses and hotels - that were explicitly taken off the list of recipients of state incentives at the height of the construction boom, Sega daily reported. The Sofia Echo was unable to confirm the report.Provided that such projects met the financial and job creation requirements, they would once again be eligible for investor certificates, which include facilities such as the acquisition of land without tender at tax valuation (as opposed to the generally higher market prices) and free infrastructure, as the state would cover the cost of roads and utilities connections, Sega said.The infrastructure incentive exists now as well, but its implementation has often been criticised by investors because in its current form, it requires the company to build the connections and then be refunded, but the regulations do not stipulate any deadlines for the rebates.