Case study from Sofia, Bulgaria, on threats and possible measures shared between key industries, clusters & regional authorities

By: Teodora Jilkova
Created: 15 April 2020 - 09:04
Updated: 15 April 2020 - 09:04

Over the last two weeks, Sofia Investment Agency,  Innovative Sofia, together with the direct participation of the Sofia Deputy Mayor for digitalization, Mr. Vladimir Danailov, have been organising online meetings with a number of industry cluster and associations in Sofia, Bulgaria. 

The group e-met with the Bulgarian Startup Association (BESCO), the Association for Innovation, Business Excellence, Services and Technology (AIBEST), the Bulgarian Association of Software Companies (BASSCOM), the Bulgarian Employers’ Association Innovative Technologies (BRAIT), the Health and Life Sciences Cluster and the AI Cluster Bulgaria, the Digital Health and Innovation Cluster Bulgaria, the Bulgarian Convention Bureau, the Association of Commercial Building Owners in Bulgaria and others. 

The key topics were the threats and opportunities for the local economy, the opportunities for business-to-city collaboration during and after COVID-19, as well as specific possible measures (at municipal and national level) to help rebuild the business ecosystem. 

A brief summary of the visible threats and possible solutions that has have been shared so far by the businesses:

 The situation:

  • The ICT sector expects losses from corporate clients both abroad and in Bulgaria, because of the economic crisis.
  • The impact on foreign enterprises in aviation, automotive and other high-tech industries has a direct negative effect on suppliers, subcontractors and co-innovation partners in Sofia.
  • Companies in a development phase are expected to freeze their investment plans, which will have a negative impact not only on the IT industry in Sofia, but also on the startup environment, which could lead to layoffs of staff in the most affected companies and the shrinking of the number of employees in the sector by 30% - 50%.
  • There is even greater risk for product companies due to the current lack of investment.
  • The congress and event sector, which attracts about 52% of tourists in Sofia, currently brings virtually zero revenues because of the postponement and cancellation of events. COVID-19 is expected to have a huge negative effect on the workforce in the sector, while the sector also supports a number of subcontractors (on average, 200-300 companies are involved in the organisation of major forums), that would also experience losses along the chain.
  • New construction is expected to be put on hold this year.
  • Reduced or no revenue is generated by business premises because of closed facilities and offices. Within lease of new premises, there are expectations for an outflow of IT companies, while the already leased ones could be freed, and this is precisely the sector which maintains the most stable share in office space transactions. 

 Possible measures proposed by the businesses:

  • Interest-free loans for companies with no redundancies and more preferential terms for those who hire new staff.
  • No cancellations of already awarded funding or contracts under operational programs in order to continue investment in innovative projects.
  • In the healthcare sector, funds to the contractual partners could be paid a few months in advance and then deducted in stages.
  • Development of a local action plan for the event industry that will play a key role in positioning the city as a competitive location and restoring business momentum after the crisis.
  • Sofia-based companies dealing with big data, business intelligence, artificial intelligence, telemedicine, cybersecurity, automation and robotics of business processes, clinical trials and more, should be engaged in a working group to develop a three- or five-year plan to implement working digital models for the healthcare sector. This will help Sofia to become one of the first innovative, bold cities in which processes in the healthcare sector are digitized. Thus, the city will attract experts and companies from abroad and the working models will be an example for other Bulgarian cities, while Sofia will be able to position itself as one of the most innovative cities in Europe.
  • Temporarily exemption of property owners from taxes or reduced taxes and fees.
  • Making the city administration a conduit of business ideas at the state level and a facilitator of messages and ideas.
  • Reviewing the regulatory framework for a faster implementation of e-government and e-services at national level. 
  • Using the capacity of the local technology sector for the benefit of the state, the city and the society. 

Currently, the government authorities are working on various scenarios and possible solutions to offer to businesses and we will keep monitoring and updating the section.