Interview | The energy transition must happen in a natural and economically sound manner

Levon Hampartzoumian is a banker, financier and chairman of the Bulgarian Forum of Business Leaders, and former chairman of the Management Board of the Association of Banks in Bulgaria.

We talked to him in his capacity as a lecturer at the "Opportunities for Entrepreneurship in Stara Zagora" seminar and discussed the culture of entrepreneurship in Bulgaria, and the challenges and the opportunities that the adoption of the euro will provide.

Mr. Hampartzoumian, in your public appearances, you often remind people that Bulgaria has effectively been in the eurozone since 1997 due to its Currency Board. Given this fact, what can Bulgarian entrepreneurs expect when the euro is officially introduced as our national currency?

They can expect fewer costs because transaction costs will decrease; de facto, there will be no currency conversion fees. According to a rough estimate, in Bulgaria, this is a cost of about half a billion leva (250 million euros) per year, maybe a little more.

Plus, there will be a positive effect on the country’s reputation, on its credit rating and on all other things that depend, in one way or another, on these factors. The conditions for lending to businesses will improve - and this is not just about interest rates, but also the assessment of business risk. The political risk decreases, so Bulgarian companies will be treated more favorably.

These are the biggest effects.

The other thing is that we will have a higher degree of integration into the core of the European Union, which is important for us, if you will, from a reputational point of view.

How will the euro specifically affect the competitiveness of Bulgarian companies operating on the European market, and will it encourage entrepreneurial activity in Bulgaria and in what way?

Entrepreneurial activity will not be encouraged by the currency system in which economic success or failure is measured, but it will facilitate entrepreneurs in their endeavors.

We shouldn't connect them directly.

There won't be any drama with the capabilities of Bulgarian entrepreneurs when they start working with euros, but it will be a little easier for them.

But this may actually improve their competitiveness because there will be fewer obstacles.

Theoretically, yes, but if they rely only on that, nothing will improve.

Would you then say that becoming part of the eurozone is more important as a process than as an outcome?

We see this every day.

The process implies a more efficient economy, more rational administrative procedures, a functioning judicial system, and property title, and these are things that will not cease to be a challenge for the Bulgarian economy and the Bulgarian state.

But still, the process of joining the eurozone certainly has a disciplining effect.

You’ve said, talking about competitiveness, that companies shouldn't rely solely on currency to do everything on their behalf...

It shouldn't. The euro will only be a component. The main things that will matter are entrepreneurship, high economic efficiency, and people's qualifications.

So, I say again, the euro is simple if we imagine it as a task – the euro is not an exclusive thing between the main players, but something shared between volunteers who want to help.

And what are the most significant obstacles facing entrepreneurs in Bulgaria?

The main obstacles are the heavy administrative procedures, which we see every day. You also see corruption - its expression on the economic activity of companies is like an additional tax.

Corruption reduces the economic efficiency of companies in Bulgaria and creates conditions in which foreign capital, if it can avoid Bulgaria, does so. And Bulgarian investors may also start to think about going somewhere where it will be easier for them, which is also happening.

The other is the title of ownership, which is not very well protected, because shadowy, state-supported mafia actors can make the business income tax much higher than the 10% stated by the law by taking over the company in some fraudulent way.

So, putting administrative court procedures in order is also a very important task, for which society must pressure the administration and politicians to make it happen.

What do you think our entrepreneurial environment lacks to make it more attractive and sustainable? Is this only related to the size of the market, or do you see other deficits?

It lacks an educated and qualified workforce; a positive attitude in society towards entrepreneurs, since in most cases they are seen as exploiters, swindlers; and simplified administrative procedures.

The main thing is also to have a predictable environment, because there are successful economies with high taxes, but also unsuccessful economies with low taxes.

We need to be a successful economy, which means a predictable environment for doing business. When you can predict the things that happen in the environment – ​​starting from organization, labor relations, taxes, administrative procedures, control and all those things – when they work well, predictable, doing business is a breeze.

When they are not well organized and are inefficient, and may even be corrupt, the environment becomes unpleasant, regardless of the factors, such as low taxes, good climate, and others, that attract people. But the other factors are strong enough to repel this interest.

Stara Zagora is one of the regions most affected by the energy transition in Bulgaria. What is the role of business in the region's adaptation to the new economic realities?

I hope we will be rational in terms of energy policies in Europe and in Bulgaria in particular. This means that these quick and accelerated plans to close coal mines and power plants, in my opinion, are already out of fashion.

Some will admit it, others won't, but I think things need to be reworked to be made more rational, so we don’t get ahead of ourselves.

You saw it this winter too – if it weren't for the energy capacities existing around Stara Zagora, we would probably have had problems. It is not out of the question that this will happen in the future.

Yes, we will build new hydroelectric dams and, perhaps, nuclear power plants, but everything will take time.

Until then, it would be better for the energy sources that are 100% in our hands, such as the entire power-generating complex around Stara Zagora, to remain operational and even be modernized.

There are both extremely modern facilities there, and those that need heavy upgrading. But for this modernization to happen, which costs a lot of money, there must be a vision as well.

So, I hope that in the new order of things in Europe we will have enough political courage to ask for it and get it. At least as much as they did in Poland, for example, or as much as they did in the Czech Republic.

I hope we really have that courage.

I hope so, after all, there are voters living in Stara Zagora, right?

Does the local government have tools to support entrepreneurship in the area?

The main thing is that it shouldn't get in the way of entrepreneurs. If it manages that, then that will be the greatest support because it will lead to quick decision-making and simple administrative procedures.

If you look at the successful businesses in Bulgaria, they are not based on any grand strategies or support from the government. They were founded by enterprising people who had managed to find the right niche and sometimes even reached global leadership in certain sectors.

That’s why the local government should be kind, competent and almost invisible.

You will be a lecturer at the "Entrepreneurship Opportunities in Stara Zagora" seminar, which focuses on the search for alternative opportunities in the context of the transformation of the region and the exit from coal. Why is the topic important, in your opinion?

First of all, there are either alternatives or possibilities, there is no point in combining them tautologically.

You see for yourself – diversification is important, but I say again, it should happen when we are technologically ready for it. If we are not ready and only rely on subsidies that are already running out, then there is no need for it. We need to do it wisely, so that the replacement of power-generating capacities occurs in a natural, economically justified way.

Our previous plans were too accelerated, without taking into account the realities of the economy and the market, or even the available technology.

Co-funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the Managing Authority. Neither the European Union nor the Managing Authority can be held responsible for them.

Translated by Tzvetozar Vincent Iolov