News

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During the week, as an addition to the new “Regional profiles 2020”, the IME conducted a focused discussion on the development of North Bulgaria. The entire conversation can be traced here, and the presentation is available here. An overview of the discussion can be read on the pages of Capital weekly newspaper (see here). On February 9^th, 2021, the IME will conduct a discussion on the development of South Bulgaria as well.

A look at the North Bulgarian economies shows that the trajectory and the developmental models of the distinct regions differ. The clear leader in the Northeast, which besets the region’s indicators, is Varna, with GDP of 7.7 bln out of the 12.3 bln leva of the entire Northeastern region. Varna is also the only northern region, which has managed to attract people in the last decade. A combination of an influx of young and active citizens, a strong service sector, including traditional tourism, but also increasing number of digital companies, as well as developed industry, justify the good prospects for the spatial development of the marine capital.

In the Northern central region there is a particular polycentrism, as three districts - Ruse, Veliko Tarnovo and Gabrovo, define the development model. In the region as a whole, the role of manufacturing is greater than the national average. This is particularly evident in Gabrovo, where 45% of the gross value added is in industry. The services sector is progressing in all three districts, while the bigger Ruse and Veliko Tarnovo remain at the forefront. The better vertical integration of the three centers, and creating a link towards South Bulgaria is critical in the long-term development of the region.

While in the Northeastern and North central regions certain positive trends partly balance out the endemic problems, in the Northwest heavier challenges linger. In the context of the great demographic problem - depopulation and impaired age structure, the common tendency for inferior employment relative to the other regions, highlights these issues. In view of the size of the regional economies, and the figures purporting the gross value added, the developmental trajectory of the northwest will increasingly depend on the economies of Pleven and Vratza, and on the connectivity and the industrial progress of the wider periphery of the capital.

Although the country has seen substantial wage growth in all districts in recent years, regional differences persist. The Northeast region has the lead in salaries with higher wages in Varna city, as well as in the manufacturing sectors of municipalities in the near vicinity. We observe marked wage growth in the Northwestern and the North central regions, but in the former the effect of the nuclear power plant has to be accounted for, as it ‘weighs’ calculations of regional average.

Along with manufacturing, the development of digital services is key for Bulgaria’s economic growth. The Northeast features a continuous increase of the employed in the ICT sector, as Varna contests Plovdiv for the second place in digital services in the country, after Sofia. The bigger cities in the Northwest and North central region have also reported similar increases, albeit on a smaller scale. On the basis of the declared interest and expressed investment intentions, we can soon expect a more noticeable change in the North central region’s figures, especially in Ruse, Veliko Tarnovo and Gabrovo.

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We already reviewed the goal and main features of the social service “Domestic social patronage” (DSP), offered by the municipalities. The crisis and the state of emergency have demonstrated this service is an even more important tool in addressing the needs of the elderly and of citizens with special needs.

Following a thorough examination of the data received from the Agency of social assistance (ASA) and of all municipal budgets available for the last few years, we can now offer a more accurate depiction of DSP.

The Domestic social patronage has been acknowledged as one of the most comprehensive local level social services. It entails primarily food and medicine delivery, household services, special aid, social contact, etc. In recent years, DSP has provided support to nearly 40,000 people per annum. In 2019, it reached 37,943 people from around the country. The vacant places are 6,373, or 17% of the total capacity. Although in 33 municipalities the social service is not available, similar services are at place as a substitute.

The annual expenses of the social patronage amount to around 340 thousand leva on average per municipality, or 22 leva per person, according to data from the municipal budgets from 2019 and 2020. In the capital, the annual budget for DSP is close to 6 million leva (covering 1,658 people), in Varna – 3 million (550 people), in Burgas – 2 million (850 people), while in Plovdiv – 1 million leva for the 400 people covered.

There are notable distinctions among the different districts and municipalities which provide the service. Social patronage covers over 1000 per 100 thousand people of the population in the districts of Dobrich, Montana, Pleven and Razgrad. Conversely, in the districts of Smolyan, Kardjali and the capital, under 300 per 100,000 people from the pertinent population receive the aid. The proportion of people included as a share of those over 65, the main target group of DSP, reveals a similar picture. In the districts of Montana, Pleven and Razgrad around 50 out of every 1000 people over 65 are included in DSP, while in Smolyan and the Capital they hardly number 10.

The Domestic social patronage is particularly important for the everyday arrangements of people in need (mostly the elderly), but also limits social isolation, and is often better and cheaper alternative to their institutionalization.

The government awarded more than 250 million leva for “valuable municipal projects” in its last session. What is paradoxical about this decision is that the sum in question is greater than the common targeted subsidy for municipal capital expenditure in the budget for 2021. A single session of the government proved more important for local investments than the entire procedure of adopting the budget. Municipal investment, already dependent on state transfers, is growing increasingly reliant on manual control from the Council of Ministers as well.

It is not clear why the government should be concerned with the adoption of every single local investment. Be it a new park in Haskovo, a street renovation in Simitli, the building of a sport site in Aitos or landscaping of the city square in Elena – all of this apparently requires the ministers to get together on the 9^th of December, 2020 and give the green light. Is this is the optimal model for regional development? Not local self-governance, but a model imposed by the supreme administrator.

This entire resource for local investment, voted in “by emergency”, accounts for under 1% of tax revenue. In other words, if even a tenth of the 10% income tax actually remained on the local level, municipalities would have the funds to make these investments without having to wait for ministerial authorization. What is more, private funds allow much smarter management and long-term planning. The endless “asphalt” investments are to a certain extent the result of the December provisions model.

This is not to say that the knowledge economy, which we aspire to, does not require asphalt and basic infrastructure. What is clear, however, is the contrast between claims for “smart” investments – indicated in the Plan for the restoration and sustainability of the projects set out in the municipal program for the period 2021-2027, and the reality of the December provision, which has few if any tangencies with the transformation of the national economy. In this case, extremely centralized regional planning does not lead to intelligent decisions. Quite the opposite – the competition becomes to appropriate some money, and throw it at the painfully familiar “asphalt” investments.

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