Ready for Business in Sliven

Transcription

1 Ready for Business in Sliven November 2006 Industry Watch 1

2 Ready for Business is a product of Industry Watch. Our partner in Sliven is the Regional Economic Development Center. Регионален център за икономическо развитие Regional Economic Development Center Regional Economic Development Center supports small and family businesses, develops projects for sustainable development and ecological tourism, it offers services for professional training, intermediation and provision of employment. The Center also assist in the settlement of business related disputes, it works with the local communities and supports groups in disadvantaged social position. Dimitar Pehlivanov Street 3а Tel.: 044/ ; 044/ ; Faxс: 044/ ; E mail: rcir@sliven.net, redc_training@sliven.net 2

3 Sliven is one of the larger Bulgarian cities with population around 100 thousand people. The city possesses the features of an industrial cluster, although the bulk of it already represents only industrial assets. Traditional businesses in Sliven like heavy industry are not the leading job creators anymore, but their presence could still be witnessed in the large industrial buildings and market halls in the industrial zone at the entrance of the city. The city s industrial past has left good management traditions as the leading factories in the town still rely on commercial contacts and trade with foreign markets. This is indicative of high level of management skills and experience. The new investors are aiming at the light industries like textile and apparel, as well as food productions. This is economically sound strategy for investors if we take into consideration the proximity of well developed agrarian regions and availability of relatively cheap labor. Unqualified labor in Siven is about 40% cheaper compared to Sofia and about 30% lower in price than the one in Bourgas. Respectively, the purchasing power of one lev here is stronger compared to the capital city and some of the largest cities in the country. The economic activity is indicated by the number of building permits which for the past 12 months up to June 2006 are 340, with total floorage of almost 170 thousand square meters. For comparison, relative to the population of Sliven that is even more dynamic than Sofia and Plovdiv. Half of the new construction volume belongs to residential buildings which is indicative of the potential of the local demand and the development of credit services in Sliven. 3

4 Contents Access to land for business purposes...5 Transport infrastructure...6 Energy and gas supplies...7 Water supply and sewerage system...7 Labor supply and cost of labor...8 Regulatory regimes...9 Local taxes...11 Busiess information,facilitation and services...12 Sliven in Error! Bookmark not defined. Recommended services

5 Access to land for business purposes As a result of the high level of industrialization in the past, currently the municipality of Sliven has a large industrial zone with low intensity of utilization. This means that on this territory divided into estates owned by different companies, there is an opportunity for situating of new production capacities. The advantages of establishing businesses on developed industrial zone are basically two. On one hand, one can avoid the procedures of the Territorial Regulation Law in changing formal use of the land. On the other hand, the basic infrastructural connections are already constructed and available in the zone access to gas supply, water, electricity and sewerage system. A research of the main investors in the municipality indicates that part of the properties are offered for sale by their current owners. Nevertheless, we have to register the fact that sales prices are substantially higher than the average ones for agrarian land (about euros per square meter) in the region. This is among the reasons why part of the investors prefer to establish their factories on the green field, incurring the procedures for regulation of the properties and construction of missing infrastructural connections. The municipality as owner also provides land for investment purposes. These terrains are basically used for the construction of commercial centers. The practice is as follows: the investor receives land against investment in the city s infrastructure, in other words the deals are in the form of barter trading. In some cases, the municipality sells properties without existing infrastructure where the investor develops the land and eventually sells it to new owners. Local investors estimates show that Sliven has sufficient number of unoccupied estates, even in the downtown area. Part of the explanation lies in the transfer of land to the municipality from its recent owner the Ministry of Defense. According to estimates of local investors and municipality representatives, the procedures for change of legal use of lands do not pose any problems to the owners and in most cases are completed in a month. The area Sinite Kamani is a natural park and publicly state owned property, which limits new construction. This, on the other hand, impedes the development of the area into a tourist attraction, because the construction of hotels and other facilities for relaxation as well as infrastructure is limited. 5

6 Transport infrastructure Transport infrastructure in the region is relatively well developed; with entirely constructed road system of a total length of km. Approximately 61% of the roads are fourth grade (municipal) ones which need full rehabilitation. Sliven is on the path of two first grade roads with international importance: E 773: Bourgas Sliven Orizovo (Sofia Serbia) E 871/I 6: Kiustendil Sofia Kazanlak Sliven Bourgas We could expect that the forthcoming construction of Trakia highway which is going to pass through the territory of the municipality is going to create beneficial conditions for the economic development of the region. Nevertheless, currently the condition of transport infrastructure in Bulgaria is considered one of the major obstacles for the attraction of foreign investments, especially in the material production branches. Furthermore, two main railroad lines pass along the territory of Sliven, serving industrialtransportation and tourist purposes: Sofia Karlovo Sliven Bourgas (highway line No. 3) Sofia Plovdiv Stara Zagora Kremen Yambol Bourgas (highway line No. 8) The relative proximity to the Bourgas harbor and airport (114 km) could be considered as beneficial precondition for development of businesses and investments. Apart from that, Barshen airfield is located near Sliven. Although currently not functioning, it has the potential to be used for the purposes of commercial and agricultural aviation. 6

7 Energy and gas supplies According to local experts and investors, the condition of the electricity system on the territory of the municipality is good and will advantage the establishment of new industrial facilities and capacities. The access to natural gas in the industrial zone is relatively easy, which is a precondition for the establishment of investors with high energy intensity of the production process. 14 enterprises are gasified in Sliven. The total length of the gas transportation system is m. The gasification of the buildings of the Municipal Bazaar, of one school and hospital is planned to be conducted soon. Water supply and sewerage system There are no filtration facilities for drinking water on the territory of the Sliven. The guarantee for reliable and normal water supply for the city necessitates the construction and exploitation of filtration facility for drinking water (a project costing around 10 million. euro). The waste water is channeled to Filtration station for waste waters only in the city of Sliven. The sewerage system in part of the central zones in Sliven is not constructed. The allocated 22.8 million euros from the ISPA program are for the reconstruction of the Filtration station for waste waters and also for the three stages in the reconstruction of the existing sewerage system and the construction of new one. According to ViK Sliven (The Water and Canal Company), all properties in regulation have access to drinking water. Currently the investor bears all expenses if he wants to be connected to the water supply system at places where there is no such access. A change in the normative settlement is planned, stipulating that only ViK will be conducting these construction activities at tariffs approved by the municipal council. This may facilitate the procedure but the representatives of the business have objective suspicions for increase in the expenses for this type of service given the support for the ViK company monopoly. Large investors are unanimous on the positive view for the existing ViK infrastructure in and around the industrial zone as well as for the expenses on water and waste water drainage. Some companies maintain their own filtering stations but the majority use the common sewer and filtration facilities of ViK company against payment. 7

8 Labor supply and cost of labor Sliven still offers relatively cheaper labor in comparison to the major Bulgarian cities. Sliven offers about 35% cheaper labor than Sofia and about 28% less expensive labor compared to Bourgas. This is a comparison of the cost of basic (unqualified) labor and does not reflect differences in cost of labor stemming from workers experience, skills etc. According to the official statistics the average wage in Sliven in Q is 343 leva in stateowned firms and the budget sector and 235 leva in the private sector. Unofficial research for the average wages in the larger cities shows that the wages in the private sector are undervalued by about 30 50%. We expect that the average wage in the private sector to be at least 300 leva. The majority of our conversations with employers confirm this expectation for now. Anecdotal evidence points at net income for unqualified personnel of 330 leva in the sphere of service in the private sector. Apparently it is much easier to find basic (unqualified) labor in Sliven than human resources for company s administration. Currently we do not have any poll data to confirm or reject these theses. However in similar cities ( in terms of migration processes) like Pazardjik, Vratza and Gabrovo the payment for people at the beginning of their careers at such positions is about 30 35% higher than the average figures for unqualified labor. For Sliven we expect the starting salary for administrative position in a private firm to be about 200 leva. Cost of labor index in selected cities (Sofia= 100) Sofia=100 Bourgas 90.1 Varna 95.7 Plovdiv 78.8 Sliven 63.6 Sofia Stara Zagora 70.3 Iambol 62.5 Source: Industry Watch and Vitosha Research. Biggest Cities Review: Regular report on cost of labor. Spring

9 Regulatory regimes The level of transparency in taking decisions is high the municipal council meetings are public, all normative acts are accessible both in the municipality building as well as on web pages of the municipality. All separate procedures on administrative regimes are sufficiently explained in detail on the web pages of the municipality. The information contains a list of required documents, time terms, fees as well as the name of responsible department. The Municipality of Sliven administers several types of regulation of business activity: 1. Control over commercial units, including restaurants and places for dining and tourist units. The Municipality offers the following administrative regimes: Permit for temporary trade Registration of units for distillation of fermented fruit materials Permits for work in flexible working time in places for trade and tourism Certification of registry books for trade of ferrous and non ferrous metals and their derivatives 2. The application of The Territorial Regulation Law connected with the city planning, control on investment engineering and construction. Since year 2000 a Center for informational and administrative services for citizens is functional in Sliven municipality administration. It does not work entirely on the principle of one stop shop, but processes are substantial part of the communication between the citizens and the municipality. Its major use is connected with the services for territorial development. 3. Regulation of external advertising on the territory of the municipality. In compliance with the Ordinance for advertising activity on the territory of the Municipality of Sliven, the advertising materials are applied for a project approved by the municipality. The content of the project is determined by the Chief Architect. The related bureaus and office in the process of approval are Municipal properties, Territorial Regulation Department and the chief architect. In certain cases approval is required also from Traffic Police Department. The mayor can organize auctons for distribution of advertising materials in the central and downtown parts of the city as well as along the major highways passing by the city of Sliven. Municipal fee is charged for the occupation of municipal space for advertising purposes. 4. Registration in the sphere of agriculture. The Municipality is responsible for the administration of the following regimes: Registration of agricultural and forestry equipment (As per Ordinance 26 of November 19, 1998 of the Ministry of Agriculture). Certification of inquiry card of agricultural producers. Registration for exercising of private veterinary practice and issuance of certificate 5. Regimes in the sphere of ecology. The Municipality is responsible for the administering of the following regimes: Permit issue for cutting of decorative trees and bushes in private and municipal estates Verification and response to complaints from citizens and firms regarding problems with the preservation of the environment Conformation of requests declarations for payments of waste collection fee on the base of quantity The Municipal council processes requests for relief from tax for waste collection fee 9

10 Conformation of requests for change of containers for waste collection fee Conformation of requests for transportation of redundant ground mass They could give opinions (but not necessarily) on notifications for conducting of investment intents Provides opinion on petition for usage of water or water objects ( Notification of public access) Permission of passing through green fields (in the case of construction line) All forms necessary for certifications and permissions as well as use of administrative services are accessible on the web pages of the municipality. The administration capacity is sufficient for the current level of business activity. The delays in issuance of given documents are minimal and in most cases the terms are adhered to. 10

11 Local taxes The size and the method of determining the fees for household waste materials is the major problem. We have detected two main differences when comparing Sliven with two neighboring towns (Yambol and Stara Zagora). Firstly,in the other towns it is possible to determine the tax after considering the quantity of collected and treated litter. In Sliven, it is also possible for the firms to contract directly with the waste collection company, but this does not relieve them from depot taxes. Furthermore, if the production is outside of the populated area, the firm is not included in the common waste gathering (in other words it does not pay waste tax). It transports away its litter and pays only for the depot service. Secondly, when the size of the tax is determined on the basis of tax appraisal of the estate, its level in Sliven is substantially higher than he other two cities. It is 9/1000 compared to around 7/1000 for the rest. We have to emphasize that this manner of tax determination affects negatively these business activities occupying large spaces but not producing large volume of waste. Thus the Municipality punishes the clean productions and indirectly benefits theses businesses that generate more waste although occupying smaller area. Sliven collects the highest taxes for use of municipal market places. This affects the decisions of the agricultural producers who have choice to offer their products on different markets in the region.the taxes for air open markets and the trade of other types of goods and services on the markets affect the behavior of the producers in a similar way. The high level of these types of taxes could divert the small businesses to other regional centers with similar local demand. Selected local taxes, comparison with the neighboring regional cities Iambol Sliven Stara Zagora Household garbage taxes residential 2 for for for 1000 non residential 6,82 for for for 1000 according to quantity About 3 leva per cubic meter About 4.2 leva per cubic meter Taxes for collection of quarry materials (sand, gravel, etc.) 0,40 lv. per cubic meter 0,20 lv per cubic meter 0,20 lv per cubic meter Tax for sale of agricultural production on the municipal markets, in leva per square meter per month 11, Issuance of plan for real estate property Conformation of projects and building permits 7, lv. + 1,10 lv per square meter 2% of the value of the project, 5 lv minimum Permits for trade with tobacco products (city of Sliven) starting per year commercial objects per year public places, 3 stars Permit for trading with alcohol (city of Sliven) per year commercial objects per year public places, 3 stars lv. + 0,90 lv per square meter Business information, facilitation and servicing The sources for standardized business information are limited. Despite the availability of large volume of regularly updated database for the Sliven economy in the regional NSI office, the 11

12 fact is that in its bigger part this information does not reach the businesses that are interested in the region. The largest firms in the region claim that they do not rely on the information provided by the municipality. Some of the foreign investors rely on information by their respective embassies in Sofia, rather than on the local authorities in Sliven. There are some cases in which the municipality failed to do their job even in passing information from the central authorities to the local business. There is no specialized business press in Sliven. The journalists themselves admit that there are rather passive intermediaries of information initiated by some of the large companies which are sending press notifications regarding particular occasions. Business services are well developed in the spheres of law consulting and legalizing. There are 8 notaries in town and according to the local court s web page there are 130 lawyers registered in Sliven. Similar is the case with the financial services too. The majority of the biggest Bulgarian banks are represented with offices on the territory of the city of Sliven. The connections between the regional NSI office and the local administration are sufficiently strong to achieve relatively easy and inexpensive development of informational security and availability for the business. NSI has at its disposal a large part of the information necessary for the business planning of the region. But this information in its bigger part remains unused, not because it is not needed, but because it is not available and accessible to the business in its entirety. 12

13 Sliven in 2011 This is our first endeavor to structure in the form of forecast the projections of the entrepreneurs in the region; the needs form foreign investments and the expectations for integration into the international markets. The future of the region will be mostly determined by the companies strategies of the leading firms as well as by the visions of the leaders among the investors and entrepreneurs. Counter to some expectations, most probably the true restructuring of the Sliven economy is yet to come. We expect that the coming years will be notably dynamic not only in terms of accumulation of basic capital, but also in terms of transfer of resources between the separate firms and industries. The main expected developments up to 2011 include: Gradual contraction of some of the textile productions. Such scenario is also possible for some of the heavy productions. Parallel to this, we expect expansion of the food production sector. This is going to stimulate the development of the agriculture in the regiontraditional, but apparently deteriorating sector for the past years. We expect that the productivity of labor to grow at 6% yearly in real terms. At the same time, the real cost of labor will be also growing (at similar, if not the same rate). The competitive advantages of the cheap labor resource most probably will be depleted in the next 5 7 years. The construction of Trakia highway to Bourgas will have a decisive importance for the attraction of investments in the region. The improved structure and the increased traffic of cargoes will generate new opportunities. Most probably there is going to occur a cluster of services (tracking, warehousing, transport), rather than an industrial cluster in the region. Further integration with Iambol is inevitable. This will happen as a result of the common access to an international highway. It is also probable that the more agriculturally developed Iambol to be a valuable neighbor for Sliven where the food production industry seems to be the sure thing in the coming years The municipality will hardly manage to organize an event of the region to artificially stimulate the development. Still it is responsible for the improvement of the access to land, the maintenance of satisfactory infrastructure and favorable business climate. Constantly increasing number of firms realize the gains form training their personnel on their own initiative. This could happen also through mutual initiatives courses and training outsourced to local structures specialized in this particular sphere. The business will rely less and less on qualified staff from the local schools. Major importance will have basic knowledge (like knowledge of English language) and skills (like quick adaptability), not exclusively skills to operate a given machine, as it has been in the past. The Municipality will have to start communicating with the business more closely. Problems like hidden subsidizing of garbage collection will not remain unattended and will soon attract the public attention. Most probably, this will require more active local media as a intermediaries in the dialogue. 13

14 The gasification of the city will play a key role in the improvement of the living standard. This will have indirect effects on the entire economy in the region. The demonopolization of gas supplies will probably pose first hand problems to the businesses. The development of the Bourgas airport as an international destination will positively affect the openness of Sliven to the world. Sliven is still an isolated place form a global point of view and in terms of access to international crossroads. Currently the trip through the Istanbul airport still remains the most convenient one. The development of the tourist business seems possible. But this sector will hardly become an economic growth generator. The tourism in Sliven should be regarded as facilitator for more investments and international integration rather than main source of income. Demilitarization is still very important for Sliven in terms of eventual vacation of valuable terrains on behalf of the Ministry of Defence. It is going to be a rather sluggish process which most probably would occur in the coming 10 years. Sliven will continue to be an exporter of basic labor and importer of managerial and specialized skills personnel. The import of entrepreneurial skills and energy will be also important. These skills will occur in a stable and favorable investment environment Still the financial sector and the sector for business services (legal services, intermediaries, real estate services etc.) are yet to develop dynamically. Particularly important will be the development of intermediary services in the labor market. The Labor Bureau will be most probably supported by private endeavors in its activity. 14

15 Recommended services Legal, registration and administrative services Krasimir Nedev Lawyer , Petia Petkova Lawyer , Stanimir Kombalov , , Dora Slavova Lawyer , Notary Dimcho Nenov Accounting and tax consulting Accounting firm Jasmin Ekaterina Gerogieva , Information technologies and internet Data M Plant , office@datamplant.com Sliven net , , office@sliven.net Iradeum Trading LLC , Financial services Raiffeisen Bank Sliven branch Real estate agencies Materov , officе@materov.bg 15

16 PR and Media AUKS Business information Business incubator Sliven, , Regional statistical bureau Sliven (NSI) Labor bureau Sliven, Courses and training Professional training center at the Regional Economic Development Center in Sliven , , Tourism, hotels and restaurants Tourist information bureau Sliven Hotel Empire Manager Others Hotel complex "Château Alpia" tur.com Manager Reception 16