Stanislav Popdonchev, Deputy Chairman of BIA: The support with working capital is mostly successful
The highly controversial 60/40 is also the most used measure
Are the current anti-crisis actions of the government functional and where are the inconsistencies? We questioned numerous businesses and representatives of employers' organizations that have direct access to the authorities. Here are the answers:
We used the 60/40 measure twice
Eng. Slavin Yanakiev, executive director of the foundry company "Progress" - Stara Zagora
"Progress" exports directly over 70% of its production. The company's main customers are Bosch, Danfoss, Interpump Hydraulics, Casappa, and others. The company is a major supplier of the equipment for 80% of Bulgarian engineering: "M + C Hydraulic", "Kaproni", "Balkan Echo", "ZMM Sliven", "Modul Byala", "Hraninvest HMK" and others. "Progress" employees are 500, and the annual income before the corona crisis varied between BGN 35 - 40 million. We have twice used the measure 60/40 and it helped us pay the staff's full salaries. It helped us avoid the release of employees, although in some months last year the drop in sales was between 30% and 40%, and in general - about 20%. We have orders for 2021, but they are more limited compared to the previous two years. We work in unclear conditions, supply and demand are not in their usual sizes. The aim of 2021 is to survive, for now, we do not have profit in mind, we rather care about stabilization.
Even if we receive help from the state, it is still insignificant
Vanya Ivanova, owner of the Vanilla Kitchen, a Sofia-based confectionery, and pastry studio
We have applied for support under the measure, which should've helped by 10%-20% of the turnover of the affected companies by the partial lockdown, but so far we have no feedback on whether we have been approved. I feel very insecure because of the whole situation with the corona pandemic and the lockdown. We found the turnover in the studio dropped by over 50% because it being practically shutdown. Two of the eight employees in the company were on forced leave. Thankfully, our landlords turned out to be extremely kind people and we didn't have to pay rent for the time when were out of business, and our company remained safe since we launched our products to health food stores. Even if we receive support from the state under this measure, it will be negligible.
In my opinion, the state can do more to facilitate the hiring of employees, the payment of benefits for the unemployed, because in practice we are prevented from working for reasons beyond our control.
The state aids work, the VAT deduction also helped
Aladdin Harfan, owner of Aladdin Foods
The economic measures our company used are 60/40 and the aid of BGN 290 per employee. We have not taken advantage of further programs, which affect companies with up to 250 employees, because we employ nearly 700 people and are accordingly a large enterprise. Thanks to the aid and despite the big drop in turnover over the past year, the company managed to retain its employees and even maintain a good level of profit. One of the main factors that helped make a profit was the reduction of VAT on some of our activities. This has greatly relieved taxpayers as Aladdin Foods emerge from the unloyal competition in the gray sector in the industry, which is, in fact, our main competitor in the market.
I cannot hide my surprise that statistics show that a mere 20% of our colleagues have applied for the most accessible government program, which is the unconditional grant of 20% of the turnover of small and medium-sized catering establishments. Aladdin Foods can't take advantage of it because of the large number of employees we have, but most of our competitors could, and yet they don't. The distrust of state institutions and the fear of "inspections" or, in other words, their placement in the gray sector, hinder business en masse from access to aid, which in my opinion is more than sufficient. My advice to colleagues in the industry is not to accept state institutions and their employees as enemies but to rather trust them because they have the means to support us.
Working capital support is successful
Stanislav Popdonchev, Deputy Chairman of BIA
Economic measures to overcome subsequent closures depend on the sectors that will be affected and the period during which companies will not be able to operate. They cannot differ from the two main types of measures applied so far - to maintain employment and to provide liquidity support.
At the end of last year, the NCTS held a meeting, at which we discussed the parameters and duration of the measures for maintaining employment, which later gained publicity as "60/40" and "BGN 24 per day". BIA stated its general support for the two projects proposed by the Minister of Labor and Social Welfare, given the intended changes to the Labor Code. They would allow a permanent settlement of the issue of the obligations of employers in the so-called suspension of work during a declared state of Emergency or a similar situation, as well as the right to compensation of employees in these cases. Unfortunately, the proposals to amend the Labor Code have not yet been submitted to the Labor Law Commission.
The budget for 2021 envisages the employment measures to function until the end of September 2021, for which BGN 600 million have been set aside.
We find the procedure of the Ministry of Economy and the NRA providing working capital support to be a success. One week after the deadline for submitting the project proposals, nearly 30% of the approved companies received funding. This is the fastest model through which the aid reaches the business, and we believe that it will be re-implemented if necessary.
The state can carry part of the fixed costs of the business
Vasil Velev, AIKB
Most resources are used under the 60/40 scheme, but this measure is certainly not effective enough. It works for companies with a small turnover drop but is practically meaningless for those with large losses. At the same time, there is no need to support something that has no future. For example, "Mini Maritsa East" is the largest recipient of subsidies by 60/40 which is ridiculous.
Measures need to change to respond to the current business reality. One of our joint proposals with the unions is for the state to bear part of the fixed costs for companies with a drop in turnover over 30%. It's about salaries, utilities, security, rents, etc. Depending on the size of the company, this support can reach up to 90%.
Obviously, the measures will be terminated at some point, but that depends on how the various sectors of the economy recover. For example, for some companies, this may be a fact in the middle of the year, but for others - such as the tourism and restaurants brach, the recovery may take much longer.
We need proactive investment promotion policies
Lyubomir Stanislavov, Executive Director of BRAIT
Creating a sustainable business that can not only navigate through the many waves of the pandemic but can also get through any natural or human disasters, is on the agenda both in Bulgaria and around the world. Now is the time for the business to look at how it has adapted to the current situation and decide on which of these adaptations it wants to build on in the future. If we look at past economic and global crises, it is clear that the companies investing in innovation are the ones that succeed.
According to BRAIT, Bulgaria reaches the limits of its investment development as a destination for outsourcing processes with a low and medium level of complexity. Our country is facing increasingly fierce competition from the rapidly transforming economies of Greece, Romania, and the Visegrad Four, which are redirecting labor and capital from low value-added sectors to high-tech industries and ICT.
In our opinion, the current global economic crisis is a unique chance for Bulgaria to take advantage of both the processes of near-shoring and countercyclical development of certain economic sectors.
The wise use of our resources and potential will guarantee the future economic stability of Bulgaria. It is necessary to undertake proactive policies both to attract foreign investors in high-tech sectors and to stimulate local entrepreneurship by correcting institutional shortcomings mainly in the field of education, as well as by supplementing market shortcomings mainly in terms of access to financing.
