What can make a Swiss company invest in Bulgaria?

Danail Alekov

Oursourcing the production in Bulgaria helps a West - European company to maintain competitive prices on the market. The low production expenses in our country however are just a little portion of the factors, which are decisive in the assessment of the outside resource using destination.
I met with Thomas Dalla Vecchia from OBAL Ltd, Berne/Switzerland, specialized in technical products as machine building, metal parts, assemblings at the Bulgarian –Swiss economical forum in Zurich, which took place in the middle of last month. He has a Master’s degree in management and marketing on the international business, and over the last twenty years he works with companies from Central and Eastern Europe. For this long period he encountered the Bulgarian and the other Balkan nations’ mentality from up close, which is why today he helps his compatriots, who have intentions in investing in Bulgaria.
It turns out that the low production expenses are not enough for a Swiss investor to choose a subcontractor in Bulgaria. “The basic reasons are six, each one of them equally important, so the low production expenses often only 1/6th in making a decision”, says Thomas:

Dalla Vecchia emphasizes on the notorious Swiss mentality (for example decisions take a good while of time), which is often times hard to understand from the Bulgarian businessmen. And vice versa – the Swiss are not familiar with the Balkan mentality. Thomas helps his associates in overcoming the social and cultural differences between the two countries. When we look for Asian partners, we take extra time to overcome the cultural differences, says Dalla Vecchia. But when we work with partners from Eastern Europe we initially think they are just like the rest of the European countries. The cultural differences must not be underestimated in any case. This is also the reason for many projects to fail.
Even though many Swiss companies have preserved their market share and their competitive power thanks to outside resource using in Eastern – Europe, the social attitude is often critical towards exporting of the production in other countries. According to some assertions in the motherland of Dalla Vecchia, the cheap markets, known as LCC (Low Cost Countries) destroy the work places in Switzerland. To prove otherwise, Dalla Vecchia gives a real example with a Swiss company, which works with a subcontractor in Bulgaria and more particularly in the Ruse region. From loyalty to the partners he’s working with, he doesn’t mention names, that’s why he calls the company “Muller” JSC.
“Muller” JSC is a producer of machines in Switzerland for many years. Many different components and parts are necessary for the production of these machines, which the firm produces in its own halls in Switzerland or through subcontractors. The machines themselves are being put together in Switzerland and after that they get exported to the countries from the Euro zone. The correlations between the market cost and the production expenses are very well calculated and optimized, but the firm wants to keep maintaining competitive prices. That however is questionable, because of two main reasons. First – the production of the parts is very expensive in Switzerland, and second – the varying course of the frank to the euro. If the separate components keep being produced in Switzerland, it is impossible for the production costs to be lowered. After thorough inside evaluation and analysis, “Muller” JSC comes to the conclusion that it is best to export the production of the parts on the markets in Central and Eastern Europe. After merely twelve months of work with the Bulgarian subcontractor, the Swiss company is pleased with the results and is fully prepared for the future challenges on the markets. The work places in Switzerland are being kept in long term.
Obviously the exporting of part of the production in Central and Eastern Europe doesn’t destroy the work places in Switzerland. Dalla Vecchia had published this example in the December edition of the high – authority Swiss magazine SEC INFO, published by the Trading Chamber Switzerland – Central Europe (Chambre de Commerce Suisse – Europe Centrale). There are seventeen countries in the chamber, so that the potential Bulgarian subcontractors must offer really good conditions to win the trust of their Swiss partners. The problem for the Bulgarian companies springs up from when the native contractors approach a deal profitable for both countries with mistrust, in search of better conditions. Then the investors orientate to some of the other sixteen countries with which the chamber is in relations with.
The production of parts for the needs of machine – building is one of the sectors, which mostly relies on outside resource using. Besides through subcontractors represented by Bulgarian companies, there are also examples of Swiss contractors who personally came to Bulgaria to build their own factory. Since 2007 in Stara Zagora the Swiss firm “Oscar Rüegg Bulgaria”, property of Eduard Häni, is working successfully. Metal blowmoulded pieces with high complicity are being put together in the factory for the car industry, in total 190 different pieces. The yearly income comes up to 3 million Lv. As the company provides work for 86 people. Eduard Häni himself states that he is extremely happy with the conditions and the quality of work.

Sofia-Zurich