Bulgaria’s challenges on its way to becoming a member of the EU could be split into three issues: firstly, the low degree of employment of the working population at 50.6% in 2002 in comparison to 31% on average within the EU, which implies the existence of unofficial employment that neglects tax payments and the existence of high dependency of elder citizens that require social security payments, thus worsens the situation; secondly, the bureaucratic market-entrance system with complex procedures for business registration neglects the quick birth of business innovations, thus implies slow start-ups and neglects a potentially higher economic growth; and thirdly, decreased competition between domestic industries from the same network (i.e. institutional separation of an infrastructure provider from a service provider from the same industry), thus making them inefficient and uncompetitive when exposed to the EU’s single market. Each issue will be divided in sub-issues and discussed and evaluated in detail by using factual figures.
Major labour market reforms were essential for Bulgaria as the rates were significantly worse than the average of the EU levels and the EU Lisbon targets. Despite the cumulative decrease by 3.1% from 1999 until 2003, 52.5% of the working population was exploited in comparison to the EU average at 55.9%, and only 30% of the elder worked. Such figures could be accounted due to the existence of informal employment or self employed farmers operating for themselves, thus not documented as employed individuals, or individuals subsisting themselves through informal housing economies. The existence of two labor markets was apparent (formal and informal), therefore Bulgaria had to implement different employment policies in comparison to the members, but “the limited budgetary funds available in those countries, call for a restrictive selection of affordable policy measures” Economic Policy Committee (EPC) (2004, pp. 13). The tax-benefit was abused by 30 to 35% of its recipients in 2004, part of that figure was employed informally while being formally unemployed and the rest refused to work, implying lack of productivity, in 2002 the average was 31% of the EU15 average. The Bulgarian government as a candidate favored decentralized decisions that would only favor the employers by encouraging negotiations between enterprises and trade unions, but with the existence of informal employment that accounted between 25 to 40% of the GDP, lowers the amount of protected individuals, whilst creating unfair competition due to lower wages and causes governmental losses as they are not taxed. According to EPC (2004) Bulgaria could encourage formal employment by lowering income tax on low-wage earners or implying compulsory registration measures on labor contracts or promoting the benefits of being unionized. It was estimated that 22 000 Bulgarians emigrate each year due to unemployment, the lack of creation of new opportunities domestically worsens the situation, therefore stimulates the “brain drain” that indirectly implies decrease in the potential creation of innovations and their exportation due to the constant outflow of literate individuals, therefore increasing the ratio of dependent individuals and negatively affecting the current account deficit, which stood at 8.5% of the GDP in 2003, therefore according to EPC (2004) forcing the “sending” country (Bulgaria) to increase the rate of its catching up process and develop the labor market.
Bulgaria’s business environment was not favored by
