13 December 2012 | 14:02


Pursuant to Art. 101, para. 1 of the Constitution of the Republic of Bulgaria


I am referring back to the National Assembly the Act amending the Investment Promotion Act, approved by the 41st National Assembly on November 29 2012

Published in Sofia on December 12 2012


For referring back to the National Assembly provisions of the Act amending the Investment Promotion Act, adopted by the National Assembly on November 29 2012

Honorable Members,

I welcome the desire of MPs to create new legal measures to improve the investment climate in Bulgaria. Investment promotion is crucial to improving the business environment in a way that ensures the predictability and stability of business relations. These conditions cannot be achieved in a single action. It is necessary to carry out comprehensive administrative reform to create a responsible, informed and capable administration. We must remove bureaucratic obstacles to entrepreneurship and reduce the administrative burden. An important incentive for entrepreneurs who decide to invest in Bulgaria is the state of our judicial system and guarantees that the state provides for the protection of rights and legitimate interests. These are areas in which our country should continue reforms, giving them priority. All of these build an image of our country as a place where it makes sense to invest. The Investment Promotion Act aims to add to these conditions, specific measures and incentives that the state provides to attract more investors.

Now that Bulgaria and the world are in crisis, we must fight for every investor. I am convinced that investment promotion is a priority about which there is a national consensus. In the law that has been adopted, there are provisions that I approve and welcome: the introduction of incentives aimed at creating and maintaining jobs in economically disadvantaged regions and high technology activities, enabling the promotion of local investment of municipal significance. The crucial importance of this process for the development of Bulgaria prompts me to draw your attention to some of the clauses of the law as adopted which I regard as not fully conforming to the overall concept of the law - to increase investment activity in a country in conditions of crisis.

With respect to § 24 of the Act amending the Investment Promotion Act

One area in which the state should increase its efforts to encourage investment is intellectual property. In this sector, an enabling environment requires predictability and stability. It is important that all the conditions under which the state will support this type of investment are governed by law. The provisions of Art. 27 of the Investment Promotion Act provide no clear legislative content. The lack of conditions and measures to encourage such investment in effect leads to uncertainty in the law. Moreover, paragraph 2 of the same article expressly excludes the application of the third and fourth chapters of the Act that govern specific measures to promote investment. I suppose that this exclusion is motivated by the desire to create specific measures for these investments. It should be borne in mind that many of the possible measures are those that require a legal framework - forms of state aid, opportunties for tax relief. This would be in line with the efforts of the state to ensure a transparent and predictable business environment and stimulate the economy and public sector.

Further, state support for investment in this sector must also satisfy some additional conditions. The law should guarantee unequivocally that the incentives will not adversely impact on the state budget. This is yet an additional reason to believe that it is essential that these relations are regulated by law. The diversity of subjects of intellectual property and investment opportunities in this area requires further analysis. We need a clear vision of how government support will be combined with the need to stimulate Bulgarian culture.

Incentives must comply with state aid rules laid down in Art. 107 and accord with the Treaty on the Functioning of the EU. Under the principles of Union law, this Treaty is effective law in each member state and has priority over domestic legislation in the event of a conflict.
As a member of the EU, Bulgaria has to comply with policies for promotion of European works and the standards for European and other films. Member States use public resources to attract film production to their territories. It is good for Bulgaria to attract those productions which have a positive effect on the national audiovisual sector, the use of the infrastructure and Bulgarian teams, maintaining and improving the quality of human resources and technology. Common European policy requires that the establishment of additional guarantees of competition in this sector is done rather on the basis of quality and price, and not through government subsidies.

With respect to § 32, paragraph 2, b.a, “cc” of the Amendments to the Investment Promotion Act

Paragraph 32, item 2 b.a, "cc" of the Act amending the Investment Promotion Act item 16 creates art. 25, Paragraph 1 of the Foreigners in the Republic of Bulgaria Act. I consider that this new text does not contribute to the main objective of the law - to encourage investment. It introduces unreasonably high requirements for granting a residence permit in Bulgaria – people that “paid into the capital of a Bulgarian company no less than four million leva as partners or shareholders holding registered shares and no less than 50 percent of the capital, as a result of which investments were made to acquire new tangible and intangible assets in the amount of not less than four million leva and at least 50 jobs created for Bulgarian citizens supported for the duration of the stay, certified by the Ministry of Economy, Energy and Tourism”. The new conditions create an additional obstacle to foreign investors. An analysis of similar provisions in EU Member States shows that they are incomparably more relaxed in respect of requirements which give a right of residence in return for investment.

Moreover, global practice has made the regulations on residence (temporary or permanent) a very effective tool for encouraging investment in poorer areas and those with higher unemployment. The three poorest regions in the European Union are in Bulgaria and I believe that the law can provide part of the mechanism to change that fact.

Economic reality today justifies the urgent need for emergency implementation of appropriate policies to create a favorable investment environment. In this environment, simply removing the existing obstacles is not enough. It is necessary to create conditions providing easy, stable and fast options for doing business in Bulgaria. This is the minimum prerequisite that the state must provide to motivate foreign investors to prefer this country. I believe that this goal is not achieved by the amendments to the Foreigners in the Republic of Bulgaria Act.
The new requirement of Art. 25, para. 1, item 16 is in contradiction with some of the other texts of the law. An example is the fact that on the one hand, the law provides for the possibility to grant permission for permanent residence if one million leva is invested in a credit institution under a trust, while for real investments, it is also required to perform a number of legal and factual actions and there is a requirement for four million leva and 50 jobs.

The purpose of this Act must be achieved without prejudice to the other conditions of the law. The need to encourage anyone who wants to do business and create jobs in Bulgaria to oppose in any way the national security is wrong. I do not accept the thesis that it is possible to promote investments that come at the expense of any compromise with national security. The Foreigners in the Republic of Bulgaria Act provides sufficient safeguards for national security and the security of the European Union. Analysis of the law shows that permission to reside in the country, no matter for what period, is provided after taking into account the opinion of the authority competent to protect national security. The law provides ample possibility both for the deprival of the right of residence and the imposition of penalties on foreigner who in any way threatens the security of the country (deportation from Bulgaria, expulsion, prohibition of entry and prohibition from leaving the territory). These are legal mechanisms aimed at ensuring security, and their application does not depend on the length of residence or the amount of the investment as a condition to allow residence.

With this in mind, I consider that the creation of additional requirements and raising the criteria for investors to obtain permanent residence permits does not correspond to the interests of the country and the declared priorities in this area.

With respect to § 34 of the Act amending the Investment Promotion Act

In § 34 changes are made to the Bulgarian Citizenship Act by creating a new Article 14a. This provides conditions by which a person who is not a Bulgarian citizen and meets the requirements of Art. 12, Nos. 1 and 3 of the same Act may acquire Bulgarian citizenship through naturalization.

Regarding Bulgarian citizenship, the approach should be different, because by nature the institution of citizenship is radically different from the right of residence. Moreover, the modern conception of the rights of foreigners, which is reflected in art. 19, para. 3 and art. 26, para. 2 of the Bulgarian Constitution and all of our law, is that in practice the two categories - a national and a foreigner with permanent residence – are very close. The only differences between the status of the two is in the right to hold certain public offices and some of the political rights remaining reserved for Bulgarian citizens. These minor differences lead to the conclusion that in terms of the ability to invest in Bulgaria, the status of permanent resident in the country provides the necessary conditions, rights and guarantees. There is no direct link to any of the individual rights that are characteristic only for citizens of Bulgaria and the ability to successfully do business in the country. On this principle, I think that citizenship cannot in itself help to encourage investment, unlike the provision for residence.

It is important when regulating the legal opportunity to acquire citizenship by naturalization, to take into account its nature as a political and legal relationship between the individual and the state. This relationship has a lasting and stable character and from it derive those specific rights and obligations relating to the institution of citizenship. The determination of whether to grant citizenship or not, can not be based on financial reasons. The performance of an investment does not imply in itself the creation of a lasting political and legal relationship between the individual and the state. The Bulgarian Citizenship Act art. 12 provides general conditions, which when present allow a person to acquire Bulgarian citizenship through naturalization. It may be possible to envisage a facilitated way in which citizenship is acquired by individuals who have invested in the country, but taking into account the complex nature of citizenship and the bonds that created this institution. The acquisition of citizenship by naturalization should provide an opportunity to evaluate each particular case, and then in terms of the impact on the Bulgarian society, without this being connected to quantitative indicators. Most important here are the merits of the individual for the Republic of Bulgaria and the interest that the state has, in creating through naturalisation, a political and legal link between the state and the citizen.

Honorable members

Given the above reasoning, led by the desire to for us to succeed in attracting investment and convinced of its extraordinary significant for the country and pursuant to Art. 101, para. 1 of the Constitution of the Republic of Bulgaria, I am referring back to the National Assembly the provisions of § 24, § 32, item 2, b.a, "cc" and § 34 of the Act amending the Investment Promotion Act.

Rosen Plevneliev