Tuesday, September 9, 2014

The Industrial and Logistics Park in Burgas, Bulgaria

The Industrial and Logistics Park in Burgas, Bulgaria

By Petya Krastanova

Bulgaria is the least developed country in the European Union. Despite the funding absorbed through Cohesion and Structural funds, the disparities between the capital region and the rest of the country are still widening. Measures for stimulating economic activity in the lagging regions should be taken and I believe that the seaside city of Burgas can serve as a good example of progress in this direction.

Burgas is the fourth largest city in Bulgaria. It is situated on the Black sea coast and it has the biggest sea port and the second biggest airport in the country. It is an important industrial, transport, cultural, and tourist center. The biggest manufacturer in the region – Lukoil Neftochim Burgas is the largest oil refinery in South-Eastern Europe and the largest manufacturing plant on the Balkans. However, several years ago the city municipality announced its plans to increase further the economic importance of Burgas through the development of its new project – an industrial and logistics park.

 The park is built in the area of a former swamp and it has good connections to the Burgas airport (10km), the port of Burgas (4km), and Trakiya highway (11km) – the main highway which connects it to the capital Sofia. A big advantage of the park’s location is the fact that it is situated next to a railway cargo station and it has a direct railway connection to the port of Burgas. The good transport connections of the industrial park can assure lower transport costs for the goods produced in the park. This project was initiated by the city municipality because of the strong belief that the newly build industrial zone can create employment (estimations point to at least 2000 new jobs), improve the business environment in the region, develop modern infrastructure, and diversify the city economy through the creation of new production lines and the introduction of new services. The services offered for investors in the park are quite diverse but accent is put on institutional support, fast administrative services, assistance with all the necessary documentation and permits for launching a project, professional services and consulting, intermediary activities.

From an urban economics perspective there are several distinguishable advantages of the creation of the industrial park. It will introduce investment stimuli and modern technical infrastructure satisfying the needs of the businesses. As a result, producers will have high accessibility to international distribution channels and improved market access. The park will stimulate the concentration of interrelated activities, it will create a business environment with a high concentration of financial, manufacturing and human resources, and it will improve the access of firms to labor pools, new technologies, R&D centers and possibilities for the establishment of joint ventures. Therefore, there will be a spillover of knowledge, information, technological innovation, business culture and experience resulting in an overall increase in firms’ productivity and a better economic performance of the region.
 The aforementioned advantages are a result from the urbanization economies of an agglomeration. This means that firms from different industries will be able to benefit from the concentration of shared resources, competitors and customers. However, agglomeration economies may have negative externalities caused by the clustering of firms and people. Such externalities can be congestions and pollution. The Burgas municipality has taken this treat into account and tries to implement measures that will if not prevent then at least reduce the occurrence of negative externalities. For instance, only ecologically friendly productions are favored. Recently, the German company Bayer expressed its wish to buy a parcel in the industrial park and build an insulation plant. After the municipality got familiar with the production process and the high risk of pollution, it cancelled the deal. Furthermore, regular control and high sanctions are stipulated for firms that throw their waste in the area of the industrial park. 

The industrial park does not aim at creating a specific cluster, but rather to attract investors from different production fields, thus creating a diversified urban agglomeration. So far several investors have bought parcels there – a Polish company producing yachts, and several Bulgarian companies engaged in logistics services and the production of pet food. It is expected that by April 2014 around 300 job positions will be created. Still, most of the parcels in the industrial park are not sold out yet and the city municipality hopes to attract investors from high-tech industries such as electronics and logistics. There is an ongoing national campaign trying to promote the industrial park within Bulgaria and abroad and so far mainly investors from Russia, China, Vietnam, and other Asian countries have expressed a strong interest. This fact is not surprising since Bulgaria has a strategic location and can serve as a connecting point between Europe and Asia. Many investors see the opportunity to start production in the country where taxes and production costs are low, and then export their goods into the EU market.  But only time will tell whether the industrial and logistics park in Burgas will serve the purpose with which it was created and whether it will lead to growth and prosperity in the region.

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