Bulgaria's Black Sea port city of Varna is a transport nexus and the home of some of Bulgaria's largest industries. A positive multiplier effect is taking place as companies invest in the region, with projects for shopping malls, office complexes and logistics centres.

This month, rating agency Standard & Poor's (S&P) announced that it had raised its long-term issue credit rating for Varna to BB+ from BB, declaring the city's outlook "stable" and praising its "improved operating performance".

"The upgrade follows the significant improvement in Varna's operating performance in 2006, in line with other Bulgarian municipalities," S&P credit analyst Marcin Gdula told the Bulgarian media.

While Bourgas remains the biggest Bulgarian port, large retailers and other major firms have been drawn to Varna due to its more numerous workforce.

Unemployment is reported at about three per cent, roughly a third of the national average. Its population estimate of 357 000 is thought by many to underestimate the high number of seasonal workers living in the city in the summer, and the fact that Varna is the centre of a large conurbation stretching along the Black Sea coast into the Thracian hinterland, which has led many to describe it as Bulgaria's second city, a title traditionally held by Plovdiv.

The rating announcement comes at a time when companies and the Government are becoming aware of Varna's potential. It is a large port at the Black Sea end of Pan-European Transport Corridor VIII, which leads across the Balkans to the Albanian coast and Italy. It is one of 10 crucial corridors in Central and Eastern Europe that have been identified by the EU and national governments as priority areas for investment.

The Hemus Highway, which will link Varna with Sofia as part of the corridor, is currently under construction, with 129km out of 443km completed, including a section from Varna to the city of Shoumen. The Government, which plans to ask the European Bank of Reconstruction and Development (EBRD) support for financing, hopes it will have chosen a new contractor for the remaining section by the end of the year.

Some experts in the real estate sector told OBG that Varna is a more dynamic place to invest than the capital Sofia.

UK-listed Orchid Developments has announced it will start the construction of a $131.6 million complex in central Varna in the autumn. The construction is slated to take two years and has grown beyond original plans.

Eli Egosi, adviser to Orchid Mall Varna, told local press that the shopping mall would amount to 45 000 sq m of retail area, with the potential to expand to 50 000. The shopping mall is part of a larger planned scheme of 150 000 to 200 000 sq m, including retail, office space, leisure and high-end residential projects.

Varna is also seeing success as a tourism destination. The province achieved a total of 4.74 million tourists last year, 3.99 million of which were foreign tourists. The main attractions are the beach resorts, but Varna's grand architecture and surrounding countryside are also attracting interest. British Airways, Malev and Austrian Airlines currently fly to the city, with budget operators said to be eyeing the destination as well.

Tourism development in the province has been so rapid that the mayor, Kiril Yordanov, has banned new construction in several areas for fear of overdevelopment. This may indicate a shift towards middle-to-top-end tourist development that is being seen nationwide.

Andrew MacDowall is editorial manager of the Oxford Business Group in Bulgaria.
www.oxfordbusinessgroup.com