Plovdiv, Bulgaria’s second biggest city, has been continuously inhabited since the 6th millennium BC. Now, building on its rich heritage, the city is transforming into an innovative and modern business outsourcing and industrial destination.
Emerging Europe spoke to Ivan Totev, Mayor of Plovdiv, about how the city contributed to Bulgaria’s success of becoming the Offshoring Destination of The Year 2015 and what makes the city an attractive investment destination.
Plovdiv, one of Europe’s oldest cities is now an important industrial centre in the country and wants to become a fast-growing outsourcing and IT destination. What makes the city an ideal place for these sectors in particular?
Yes, it is true that the city of Plovdiv is one of the oldest cities in Europe and, furthermore, one of the oldest continuously inhabited cities in the world. It was confirmed in an official ranking by the Daily Telegraph. This is our significant history which we are proud of.
Now, Plovdiv Region has become the industrial hub of the country where manufacturing is responsible for 52 per cent of the local GDP. Simultaneously, the IT and outsourcing sector (IT, ITO, BPO, SSC) have grown rapidly, following the nationwide trend of the entire sector’s development.
Plovdiv has all the necessary favourable conditions for business development — a great location, very good logistics links, availability of human resources and appropriate educational institutions as well as a well-functioning, efficient and friendly to business administration. The combination of all these factors undoubtedly turned the city into one of the most attractive places to invest in Bulgaria and the potential of the region is bound to expand even more.
Bulgaria has recently become the Offshoring Destination of The Year 2015. What is Plovdiv’s share in the country’s achievement already?
We pride in all the awards in 2015. Already at the end of 2014, we officially climbed to the top position, according to AT Kearney’s rankings. Then, Bulgaria was declared the most preferred location for outsourcing in Europe. At that time our country was the only one of the continent which climbed to the top 10 in the global ranking of the most attractive outsourcing destinations.
But let’s return to the question. Bulgaria is the winner of the 2015 European Outsourcing Association Awards (EOAA) in the “Offshoring Destination of the Year“ category. This was announced during the official EOA Awards ceremony on October 8, 2015 in Lisbon, Portugal. On top of that, in November, Bulgaria won the UK’s National Outsourcing Association (NOA) Award “Offshoring Destination of the Year 2015”. The award was received by the Chairman of the Bulgarian Outsourcing Association in London.
Here, in particular, Plovdiv has successfully developed as the second most attractive outsourcing destination in the country, after the capital Sofia, in the past three-four years. The current number of employees in the IT & BPO sector comes close to 4,500 and taking into account the development trend it is set to double in the next five years.
There are already almost 60 companies operating in the sector in Plovdiv. We have a series of successful examples of major companies, which after a strong growth in the capital, have decided to open a second office in Plovdiv, e.g. Scale Focus, Sofica Group /TeleTech Holdings Inc./Aii Data Pro, Bulpros, Telus International, 60K, StangaOne, etc.
There are also many companies from the industry, which decided to start their first and leading office in Plovdiv without having strong positions in Sofia: Programista (SevOne), Viscomp, Reward Gateway, and many others.
Plovdiv even set a precedent in the country with Speedflow, an Ukrainian software company, which recently shifted its core business (main operations and team) to Plovdiv. We are proud that a big part of the Ukrainian team successfully have moved already and started working towards its expansion here in the city.
All these companies are examples of the successful development of the outsourcing industry in Plovdiv and prove the positioning of our region on the international market.
The growing number of significant brands from the sector as well as the prestigious awards that Bulgaria received shows a wide recognition of the level of skilled workers and good business practices that we have.
What are the city’s advantages over other outsourcing destinations in the SEE region as well as in Eastern Europe?
The main advantage of Bulgaria as an outsourcing destination is that we are a part of the largest developed market — the European Union, and share the harmonised legislation of the common market. The national economy is characterised by macroeconomic stability and predictability. The fixed exchange rate to the euro also reduces risk and creates a predictable environment.
Unlike many other European countries, the Bulgarian government has refrained from raising taxes on business, which has had a positive impact on the business environment. Moreover, Bulgaria has the lowest rates of corporate and personal income tax in the EU — both are 10 per cent. So companies that choose Bulgaria to start operations achieve some of the biggest savings and realise the lowest operating costs in the EU.
But you asked about Plovdiv in particular. It is the second most important city in Bulgaria according to its demographic characteristics. The city attracts workforce from a larger region that is inhabited by 1.3 million people living in the city or within a commutable distance (up to an hour by car).
Plovdiv has a highly developed educational system of nationwide renowned high schools and nine universities, which serve as a good sourcing pool for well-prepared workers. Moreover, the educational system is getting more adaptable and open to cooperation with business, introducing joint courses, internships and industry oriented programmes.
Plovdiv holds many logistic advantages, where the city is a major link in the chain of the transport routes connecting Europe and Asia and an intersection of three Pan-European corridors (IV, VIII and X). There are direct highways connected Plovdiv with Istanbul and the Black Sea ports to the east. Plovdiv Airport, located in the region, is a hub for charter and cargo flights, and the Sofia International Airport is just a bit more than an hour by car.
You mentioned the corporate tax rate before. How about other costs businesses need to think about such as labour costs compared to other Eastern European destinations?
The cost of the local labour market is optimal for the sector. The ratio quality-salaries of the young talents in the IT&BPO sector is one of the best in Eastern Europe. The rents for office buildings are significantly more affordable compared to other major Bulgarian cities and to those in other countries in the SEE region as well as in Eastern Europe. The differences are between two and three times lower compared with the rents in Warsaw, Prague, Budapest, Bratislava, Belgrade, Bucharest, etc.
All these factors, together with the fact that the labour market is not characterised by such strong competition for talents as in Sofia, give a serious advantage to our city.
Besides, Plovdiv is appraised as a city with a higher quality of life (due to less traffic and urban stress, possibilities for reaching the workplace by bicycle, good public transport, etc.). The employees in Plovdiv enjoy the city and its potential for well-being, sports, culture and arts.
Last but not least, the process of emerging a favourable ecosystem for IT and outsourcing was identified by the local authorities as one of the priorities of the city development. We follow a proactive policy to support and facilitate every stable and solid investment in Plovdiv Region.
Plovdiv, as each and every city around the world, has its challenges. What would be the biggest challenge for your city?
The motto of the city of Plovdiv is “Ancient and Eternal” and this phrase indicates the biggest challenge for us, which is to continue developing the potential we inherited from the antiquity. The multicultural and historical heritage of the city must be preserved and promoted in order to get the popularity it deserves.
We are proud of the fact that Plovdiv was declared the Bulgarian host of the European Capital of Culture for 2019 after a strong competition with other major cities in Bulgaria. As a European Capital of Culture the city is obliged to present not only the Plovdiv Region but also the entire country to Europe and to the world. We are going to concentrate a lot of our efforts to achieve that. The competition itself was a big challenge, but the practical realisation of this project is not less important. The goal is all this hard work to fructify in a long term and the outcome to be multiplied in the years to come.
Our responsibility, mine and my team’s, is to provide all residents, who have chosen Plovdiv for their own place to live, work and create with a high quality of life in all aspects. Therefore, we must work actively to attract new investors and to optimise the business climate, to improve and to create a better and more flexible municipal administration. In this way Plovdiv will remain eternal.
Now coming back to the sectors, the outsourcing and ICT sectors are not the only ones that are thriving in the city. What other industries are present in Plovdiv already?
Plovdiv has a stable economy with many foreign investors and an investment activity that remained high even after the crisis. Unlike other regions in Bulgaria, Plovdiv has a well-balanced mix of manufacturing and services. Plovdiv’s specialty is the production of metals and metal parts, chemical products, machinery and equipment. In recent years the automotive industry has grown rapidly.
One of the most prominent representatives in the region is Magna Powertrain, the second largest supplier of automotive equipment globally, William Hughes, ABB, Sensata Technologies, Liebherr-Hausgeräte, Socotab, Schneider Electric, Ferrero Group, Shell Gas, Zobele, Mecalit, Techno Aktaş and many others.
The region has a long tradition in the production of computers, electrical and optical equipment as well as furniture, paper and wood. Plus, the food industry has a strongest position here compared to other regions in Bulgaria. The services sector is also well developed with over 86,000 employees.
The Municipality of Plovdiv is a part of Trakia Economic Zone (TEZ), which is the largest economic project in Bulgaria and the first area for public priority support, involving nine municipalities, six industrial zones and the two main business clusters in Plovdiv. So far we have attracted investment worth over €1.1 billion.
TEZ has an area of 10.7 million square metres thanks to the unification of six separate industrial zones. For the last two decades, the economic zone attracted more than 120 companies, 80 of them are foreign and given jobs to 13,000 people. Just at the moment in TEZ, three new plants are being built at over €100 million.
Besides being an attractive investment destination, Plovdiv is also becoming a successful tourist location. The recent years have resulted in the number of tourists growing by 15 per cent.
The intensified marketing activities and the prestigious world ranking of Lonely Planet, according to which Plovdiv is in top 10 cities to visit in 2015, provide the potential for sustainable growth in the coming years.
When it comes to investors, is there a specific nation that favours your location?
Bulgaria has a large number of successful investment projects in the manufacturing sector (mainly machine engineering and automotive) and logistics from North America (Canada, USA), Asia and most from Western Europe. We have a concentration of many German and Italian companies, but also Turkish ones due to our proximity to Istanbul. All of them have one thing in common: they all have very strong positions on the international market.
The truth is that we need a more comprehensive marketing campaign at the international level. We need to participate in more international forums where we are able to create direct contacts with business representatives and consulting teams
In this regard, we have built a basis in the past 3-4 years and we will continue to work hard in the following years. As the CEO from one outsourcing company told me recently: “Plovdiv is a hidden treasure”. And it’s true. Once you start operating in the region, you will see that we have all the prerequisites and that things happen in the right way.