Ivaylo Moskovski: Bulgarian Minister of Transportion & ICT – Concessions Equal Best Opportunities

Bulgarian Minister of Transportation, IT and Telecommunications: Ivaylo Moskovski

 

Representing the largest ministry in Bulgaria’s seven-month old government, reappointed Minister of Transportation, IT and Communications, Ivaylo Moskovski, outlines the best current opportunities for the American investor in the next year or two. Although his ministry represents a 3-for-1 most of these investments exist within the transportation sector via direct concessions, for instance, the proposed privatization of the Sofia International Airport or indirectly through American technology providers offering their products or services supporting the modernization of the country’s air, sea and Danube River ports. It’s clearly a time of great movement within the new government, from energy to transportation, and with the support of the EU Bulgaria has the potential to become an epicenter of quality investments so long as the business climate remains steady and e-governance prevails by way of  implementation. All things are pointing to that, at the moment. Let’s take a peek into Minister Moskovski’s insights during our exclusive one-on-one interview from June 12th, 2015:  

 

Minister Moskovski, your position is a rather heady post. Please offer a brief on the ministries and its various functions.

We cover many modes of transport, namely, the policies affecting them and their operational efficiencies. This work is naturally associated with other entities; for instance, the subway system is managed by the Sofia municipality and roads are handled by the Ministry of Regional Development and Public Works. Our ministry handles all ports, sea and air, as well as the railways.

I suppose we should jump right into it. What are some opportunities for the foreign investor in the transportation sector, indeed, ones that also benefit your people?

Bulgaria has a unique advantage in that it is home to five pan-European transport corridors, importantly the Danube River. This comes with challenges though. We need to continuously provide a reliable network that serves broader Europe, so in this sense we are perpetually developing projects for the ports and rail system. Importantly for your readers we have a Transport Master Plan which outlines the details of all these projects, consequently, by a US firm.

Are these projects funded through the state, the EU or PPP?

We use various options to finance these projects. For rail and road we mainly use EU Structural Development funds and with sea and air ports we rely on concession policies which can mean wholly private investment or through PPP. According to Bulgarian legislation the maximum period of concession is for 35 years.

Currently we have several highway projects with many of them apart or connecting to the various pan-European corridor routes. In regards to railway we are working on accommodating a 200 kph system and working on new signaling and next year there will be a project available for new rolling stock.

 

 At the moment we are preparing the concession for the Sofia Airport and currently we have a letter of intention from an American firm interested in the concession for the Gorna Oryahovitsa Airport, located north of center in the country. Their additional intention is to construct an aircraft recycling facility which they claim will create as many as 500 jobs, so we are hoping that will become a successful project.

 

Although you have basically three ministries under one it seems transportation takes up most your energy. IT in Bulgaria has developed as a strong source of FDI for the country. Any developments to speak of in that regard?

Transportation is the most critical at this point. At this point IT possibilities relate to the transport sector. For example, with railways we use ERTMS system for signaling and on the Danube we use river information systems and for the seaports we have the VTMS system. At the moment the World Bank is implementing a toll system on the highways; so there are opportunities in technology that will stem from our modification of the infrastructure in Bulgaria. Many of these are under implementation.

Now, to speak generally of the IT sector we are provisioning a plan for broadband access across the whole country and there is the e-government project. We are establishing an e-identification project, integration of public registrars and various e-services (e.g. e-health). Regarding the latter, we provide the platform but it is on the municipalities or other ministries to implement and manage the system. Our ministry is the contracting authority, so I can say that this is a great place for investors to enter as contractors to develop these services as they are outsourcable.

Great to hear. So most investment opportunities within your ministry are through PPP and tendering.

Yes.

What are some success stories that can act as a confidence boasting precedent for future American investors?

The American firm I mentioned earlier, AECOM, is worthy to note as their work on the Master Plan has created a solid base that will allow us to further develop our projects through best practices which will ultimately benefit future investors. This was something that took place for a period of over three years. The results have been established at an institutional level and adopted by the government and approved by the European Commission.

Our cost effective and implementation of the Sofia Subway System has been a good success as well. It has been a very challenging process due to the many archaeological sites discovered along. Even with this we have, over the last 7-8 years, managed to build over 40km of underground lines. Other successful investments include the successful concession of the Varna and Burgas airports to Germany’s Fraport. At the moment we are preparing the concession for the Sofia Airport and currently we have a letter of intention from an American firm interested in the concession for the Gorna Oryahovitsa Airport, located north of center in the country. Their additional intention is to construct an aircraft recycling facility which they claim will create as many as 500 jobs, so we are hoping that will become a successful project.

This concession is still open for bidders then?

We have almost finished the pre-concession analysis and maybe next month [July, 2015] we will release the tender. We will inform you so you can reach out to your readers.

What is the timeline regarding the Sofia Airport concession?

We are hoping that by the end of the year we will launch the tender procedure. Until then the Airport is run by the State.

The current government is only 7 months into its mandate; what would you consider the foremost accomplishment your team could achieve if we fast forward to the end of the mandate in about 3-4 years’ time?

Our railway system has always been a hot topic and previous governments have implemented reforms that unfortunately were unsuccessful. As a result, we are very much focused on fixing many of these lingering issues and stabilizing our railway system in order to provide a quality network for commercial activity and our citizens. This stabilization would absolutely be a large victory for the country and the primary goal for our ministry in this mandate.

Indeed, the railway system is a large drain on the country’s finances with many of its state-run companies operating at losses. How important is your relationship with the EU and access to its funding mechanisms in your ability to achieve that goal? 

Let’s look at it in context. You can see in your own country [the US] that railways are regaining popularity and there are many companies with historic and significant experience in the industry, especially in signaling and overhead lines, and I see ourselves really cooperating with some of those companies as we continue to reach milestones in the railway systems re-development. In fact, it is no coincidence that a few years ago Warren Buffet invested in your rail system.

What are the obstacles that will eventually arise in obtaining your number one goal of railway stabilization?

In order to stabilize there are many things that must happen in parallel; firstly, settling the National Railway Company’s [carrier BDZ] debt to its creditors. We have also established a 7-year plan for the rehabilitation of the sector and this includes BDZ and the National Railway Infrastructure Company and this plan is currently being reviewed at the Ministry of Finance and will then be filed at the National Assembly for approval. The details of this plan are extensive and include BDZ’s debt and realizing the investment program for key projects funded by the EU and a system to regulate the charges for road and rail. This is important because at the moment because charges for the roads are far less than for rail. One way of accomplishing this is by reconciling the difference between what a bus company pays yearly, which is about 500 leva to use the roads, and what a train coach pays, which is in the thousands. Still another component of the plan is related to BDZ cargo arm which is currently at the Privatization Agency. Provided there is enough interest from abroad we will sell this portion of the business.

We’ve brought up a lot of interesting material for our readers to consider. As a final note before parting ways today, please afford our American investor’s a concise message as Bulgaria’s Minister of Transportation and ICT on ‘why’ Bulgaria.

For US companies Bulgaria offers many advantages. We have the lowest tax system in Europe, this is a fact. Aside from a recent isolated incident, we possess a stable financial sector and worth noting again is our very unique location accommodating the five pan-European transit routes. Finally, and never to be considered an afterthought, is Bulgarian hospitality.

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