Cross Border Trade Between Bulgaria And Its Neighbors: Political, Economic And Social Aspects

Overview of Bulgaria

Discuss about the International Business Across Borders for Technological Influences.

As discussed by Beverelli, Fiorini and Hoekman (2017), cross border trade refers to the buying and selling of the goods and services between the neighbouring countries with the seller being in one country and buyer in another country. The country selected in this study is considered with Republic of Bulgaria. The report aims to address the various aspects of political, economics, socio-cultural and technological influences/benefits of the country. In addition to this, the natsional resource and factor endowments which creates competitive advantage has been also discussed in the report. Some of the different types of the other discussions include the Foreign currency and exchange influences in Republic of Bulgaria. The final section of the scope of discussions have been included in the existing level of foreign direct investment (Bown and Crowley 2016).

Republic of Bulgaria is situated in the south eastern Europe which is bordered by “Romania to the north, Serbia and Macedonia to the west, Greece and Turkey to the south, and the Black Sea to the east”. The total area covered by the country is “110,994 square kilometres (42,855 sq mi)” and discerned as the 16th-largest country. The total population of the country has been further seen with 7.2 million which is predominantly urbanised and concentrated in the administrative centres across 28 provinces. A majority of the commercial and cultural activities are considered in the capital and largest city, Sofia. The strongest contributions to the economy are evident with “heavy industry, power engineering, and agriculture” which mainly relies on the local natural resources. Rumen Radev is appointed as the fifth democratically elected president who is sworn in for a five-year term in January 2017. It has been further discerned that eastern Balkans is undergoing slow and painful transition as per the market economy since the culmination of communist rule (Pickles et al. 2015).

The present political system of the country has been further seen to be based on the adoption of “democratic constitution in 1991”. The political system encompasses of “unitary parliamentary republic” with a high degree of the “political, administrative, and economic centralisation”. The prehistoric culture was initiated on the current Bulgarian lands during the Neolithic era. It has been further discerned that Bulgaria spends only 0.95% of the GDP on research and development. It needs to be further understood that chronic underinvestment in the research since 1990 has forced many scientific professionals to exit the country. Therefore, the country scores low in terms of the “innovation, competitiveness and high-value added exports”. The central areas of the research have been further seen to be based on the significant nature of the research which has been considered with the development in the fields of “energy, nanotechnology, archaeology and medicine” (Bown 2014).

Political System

Bulgaria is relatively considered as endowed with arable land with various preconditions related to the plant growing rather than livestock raising and forestry. In 1994, the plant growing has accounted for 52% of total agriculture. This is further considered with the main form of the competitive advantage for the country. The infrastructure is closely related to the economic growth and competitiveness along with the economic growth. The country has been further seen to engage in the international competition and heavily investing in the improving local infrastructure (Kim et al. 2018).

The national resource of the country is depicted with “The Bulgarian Academy of Sciences (BAS)” which is considered as a leading scientific establishment for the Bulgarian researchers. In addition to this, the Chronic underinvestment in the research has been seen with the creating competitive advantages in the country. The various types of the factors in terms of the historical aspect is considered with the major schools of economic theory: “Classical theory; Neoclassical theory; Keynesian economic theory” (Cororaton and Orden 2016).

Bulgaria is seen to choose currency board for attaining monetary stabilization.  The currency board further recognises the budgetary constraints which leads to real appreciation. The exchange rate strategies in the country has been determined with high inflation and main transformation process has been seen to be applied in terms of the anchoring the entire system during a situation of economy stabilization followed with hyperinflation. Consequently, it has been further determined that the country has experienced high inflation with deep depreciation. The central bank has considered experiences from the currency reserves with a limited success. For instance, in March 1994 the central bank attempted at stabilization of the exchange rate and depreciation charged against the dollar. The appreciation of the real exchange rate is seen with the convergence of the “upward movement in its equilibrium value, not a loss in competitiveness”. Several types of other important depictions from the empirical research has been able to suggest that the convergence process is seen as per the trading activities in both the economies irrespective of their exchange rate regime and currency board regimes (Chowdhury et al. 2017).

The existing trade policies in Bulgaria is depicted with operations in four free trade zones. The trade zones of the country have been further seen to be based on the main highways. In addition to this, “Trakia economic zone” is outside Plovdiv which is having great success in attracting more than 100 companies till date. In addition to this, the “National Industrial Zones Company” has been established to support the creation of such zones and parks which has allowed stable FDI inflow. The companies are presently seen to be operating in the industrial zone in Vidin, lying in the Northwest region and mainly concentrating on the high unemployment existing in the country. In 2004, “Investment Promotion Act” is considered with primary legislations providing the appropriate investment incentives to the investors in Bulgaria which has been stipulated with “equal treatment of foreign and domestic investors”. The company creates investment incentives by assisting the investors in purchasing the municipal or “state owned land without tender, provides state financing for basic infrastructure”. The trade barrier in Bulgaria has been considered with the Poor IP protection which requires greater transparency and predictability in the regulatory environment (Pomeranz et al. 2015).

Resource Endowments

The “foreign direct investment” in the country surpassed by 45.90 EUR Million in February 2018. The average FDI is seen with 182.58 EUR Million from 1996 to 2018 which is recognised with an “all time high of 1018.40 EUR Million in December of 2007 and a record low of -414 EUR Million in September of 2010”. Despite of the exceeding FDI in terms of the USD 9.8 billion in 2008, the inflows in the FDI to Bulgaria have dried up since 2009 when the country suffered the impacts of “global economic crisis” and the “Eurozone crisis”. This is especially seen to be evident with the Greece being the traditional investor in Bulgaria. Post FDI it has been further discerned that the “FDI flows have stagnated and accounted for USD 1,774 million in 2015”. As per the “World Economic Forum (WEF) 2017” the country ranks 50^th in terms of the “Global Competitiveness Index” (Kütük and Akbostanci 2016).

The uncertainty in the Europe is depicted with recent political events and by rising “populism” is a cause for real apprehension. The EU leaders needs to bolster unity in Europe thereby providing the roadmap for the effective integration and supporting values and principles of the Single Market. It is also important for the country to attract the right talent and skills. The innovation in the country also needs to be prioritised which will be able to bolster the different types of the trading activities within the country. This initiative will be also conducive in encouraging competition and enhancement of efficiency. The improving initiatives are associated to the opportunities for the entrepreneurs which has been also regarded as an important factor for the emphasising on the start-up calls during several instances of bankruptcy. This initiative will also ensure greater access to finance and promotion of small business (Williams, Franic and Dzhekova 2015).

Conclusion

The main findings of the study related to the general overview of the country have depicted that a majority of the commercial and cultural activities are considered in the capital and largest city, Sofia. In addition to this, the present political system of the country has been further seen to be based on the adoption of “democratic constitution in 1991”. It has been further considered as “unitary parliamentary republic” with a high degree of the “political, administrative, and economic centralisation”. The main resource of the country is discerned with excellence in the agriculture sector. In 1994, the plant growing has accounted for 52% of total agriculture. This is further considered with the main form of the competitive advantage for the country. Bulgaria is seen to choose currency board for attaining monetary stabilization.  The currency board further recognises the budgetary constraints which leads to real appreciation. The exchange rate strategies in the country has been determined with high inflation. The various types of the existing trade policies in Bulgaria is depicted with operations in four free trade zones. The trade zones of the country have been further seen to be based on the main highways. In addition to this, “Trakia economic zone” is outside Plovdiv which is having great success in attracting more than 100 companies till date.

References

Beverelli, C., Fiorini, M. and Hoekman, B., 2017. Services trade policy and manufacturing productivity: The role of institutions. Journal of International Economics, 104, pp.166-182.

Bown, C., 2014. Temporary trade barriers database: Update through 2013. World Bank. Available at: https://econ. worldbank. org/ttbd/, June.

Bown, C.P. and Crowley, M.A., 2016. The empirical landscape of trade policy. In Handbook of Commercial Policy (Vol. 1, pp. 3-108). North-Holland.

Chowdhury, A., Liu, X., Wang, M. and Wong, M.S., 2017. Institutions in International Trade: The Effect of GATT/WTO Membership on Trade Volatility and Trade Volatility Co-movement.

Cororaton, C.B. and Orden, D., 2016. GII Working Paper No. 2016-1 Preliminary Report: Potential Economic Effects of the Reduction in Trade Barriers in the Transatlantic Trade and Investment Partnership.

Kim, I.S., Milner, H.V., Bernauer, T., Osgood, I., Spilker, G. and Tingley, D., 2018. Web Appendix Firms’ Preferences over Multidimensional Trade Policies: Global Production Chains, Investment Protection and Dispute Settlement Mechanisms.

Kütük, M.M. and Akbostanci, E., 2016. Do regional trade agreements actually increase Turkey’s foreign trade?. METU Studies in Development, 43(1), p.257.

Pickles, J., Plank, L., Staritz, C. and Glasmeier, A., 2015. Trade policy and regionalisms in global clothing production networks.

Pomeranz, K., Northrup, C.C., Bentley, J.H., Topik, S., Eckes Jr, A.E. and Manning, P., 2015. Encyclopedia of World Trade: From Ancient Times to the Present: From Ancient Times to the Present. Routledge.

Williams, C.C., Franic, J. and Dzhekova, R., 2015. Explaining the undeclared economy in Bulgaria: An institutional asymmetry perspective. South East European Journal of Economics and Business, 9(2), pp.33-45.