Foreign direct investment (FDI) during the transition from a planned to a market economy: The case of Bulgaria (1989-2001)

The main focus of this thesis is to provide an analysis of foreign direct investment inflows during the Bulgarian transition period from a planned to a market economy. The macroeconomic development, the legal framework, the privatisation deals and foreign participation in the Bulgarian banking system have been examined in the years 1989-2001 under the scope of FDI. Bulgaria has gone through significant changes in the years in question, initiated with the abolishment of communism in 1989 and the country's effort to become a market economy. FDI, on the other hand is an economic activity that assists countries in transition with a significant inflow of capital, technology and knowledge. The author analysed the reasons for the low FDI inflows in Bulgaria paying attention to the delayed transition, adverse initial conditions of the country, geographical distance from western countries, political instability and governmental inability and limited macroeconomic development. The analysis is also based on the consideration of Bulgarian historical elements, the legacy of the communist regime, the legal framework, the policies and reforms that have been used in the privatisation of state owned enterprises (SOEs) and in the banking system, and reference to the special role of Greek FDI outflows in Bulgaria has been made. Using a questionnaire survey we specified the most important incentives and barriers that an MNE considers when it decides to establish an FDI project in Bulgaria. The results were of great significance since we conclude that there is a "regionalisation" in the determination of FDI inflows in Bulgaria (dominant Greek investment interest). Moreover, with the help of a statistical analysis it was found that the sector that each MNE belongs to plays a decisive role in the determination of Bulgarian FDI inflows