US ambassador in Sofia Nancy McEldowney addressed the American Chamber of Commerce in Bulgaria on November 12 on the theme of `economic partnership in times of global insecurity'. Edited extracts:

With a very few exceptions, analysts in Bulgaria and the United States have come largely to the same conclusion and that is that Bulgaria will not be as heavily impacted (by the global financial crisis) as some and perhaps many other countries.

This is partly due to the size and the level of development of the economy here, but it is also due, and I think we need to give credit here, it is also due to sound policies, including heavy capitalisation of the national bank, strict adherence to the currency board, and maintenance of fiscal surpluses.

At the same time, there are still factors that are of concern, including a very high current account deficit that is by some estimates 25 per cent of GDP, as well as a heavy reliance on foreign direct investments to cover that deficit. Now, we have a number of economic experts in this room, including some deputy ministers of finance, and I suspect we will have some good debate about this issue.

But I want to stress my assessment, and this is also the assessment that I know many of you share and an assessment that has recently been put out by the US department of treasury, and that is that the Bulgarian economy has shown very, very impressive performance in recent years, and that this country has reaped some very important benefits. Bulgaria is a commercial success story and the American companies who are represented here today, who have had excellent experience in this country are great evidence of that success story. This is an attractive market with a skilled workforce, a strategic location, and an extremely favourable tax structure. These are very important assets and they are assets that have been used to the advantage of Bulgaria in very wise ways.

These are difficult circumstances and the way of doing business in the past, relying on the assets that we relied in on in the past, is no longer enough. All of us must resist the urge to simply hunker down and assume that this storm, the hurricane of the international crisis, can pass over our heads and hope that we will be left untouched by the difficulties. Because one way or the other, we will all feel the impact. And to respond to this, to address that impact and to get in front of it, governments must adapt even more aggressive programmes than have been implemented in the past, even more aggressive strategies and policies for growth and development. And I believe we can and should use the lessons of this crisis, use the difficulty of this crisis, as an opportunity to make essential changes and as a catalyst for progress.
Now, I want to talk to you about what some of these aggressive strategies for progress and change might be and we can debate these today and as we go forward in the weeks ahead.

Vision
But before I talk about strategy, I want to talk a little bit about vision. And I want to share with you a vision that I have been developing in the short time I have been here, about the kind of future economic development for Bulgaria that is conceivable, that is possible, and I think that is desirable.

It's a vision of Bulgaria that serves as a corporate regional headquarters for countries that work throughout this area. It is a vision of Bulgaria that is a hub for transportation, distribution, a Bulgaria that is dynamic, that is driving what happens in the economic scene throughout, not just in this country, but in the neighbours and the broader region. It is a vision of this country that serves as an engine for growth and dynamism throughout the Balkans, throughout the Black Sea, and beyond. It is a vision, and here is something that my staff has heard I think already a little too much, it is a vision of Bulgaria that is one of, if not the easiest and most attractive places to do business in this entire region.

And I will tell you quite honestly that when I have talked about this vision in the past, I have been told by some that it is impossible. I have been told by some: "Oh come on, please get serious. That is too ambitious, that is too optimistic. You don't understand the challenges here." And to these critics and the skeptics and the pessimists what I respond, what I argue, is that Bulgaria not only can, but it should and must set its sights this high. And that with the help of the people in this room and with the assets that we have talked about already, it certainly is a vision that is achievable.

But to help put some reality behind this rhetoric and also to show you that I think this vision is achievable, I want to touch on three main tracks, three strategy areas, three short-term reforms that I think are both practical and achievable, that can help take us toward this goal.

And the first one, which I think will receive a ready audience in the American Chamber of Commerce, is boosting foreign investment. Now, there are concrete steps that can be taken perhaps not today, but tomorrow, that could be done easily and could offer real-time payoff.

For example, and we can get into this, the government should immediately resolve outstanding commercial disputes with companies already invested here. Many of these disputes have continued for too long, and the shape of the solution is clear for everyone who is involved. The government can also and should also quickly fix the structural problems - the bureaucratic delays and the all-too-often inconsistent communication that have frustrated some potential investors in the past. Greatly sharpening and intensifying the work of InvestBulgaria would be one big step in the right direction. Another positive move would be the establishment and the effective functioning, and they must go together, of one-stop shops in each of the relevant ministries.

Incentives
But there is another step that the government could take that I believe would have even more significant impact and that is the implementation of a much more aggressive programme to attract new investors and to encourage those already here to do even more. And that is a programme of incentives. Incentives that would include expansion of the first class investor programme and a lowering of the 70 million leva requirement. But it is an expansion of incentives that would also include maximum use of national and EU incentives, such as subsidies and grants under the structural and cohesion funds, as well as exemptions from customs duties and VAT taxes. In the increasingly tight competition for capital and for investment, Bulgaria can and must make the opportunities here even more attractive and demonstrate an even greater commitment to the investor. You know and I believe that American investors want to come to Bulgaria - this is a great place for them to invest and they will come here if the advantages are made more attractive and if their confidence level that they can achieve what they need to achieve here, if that confidence reaches the right level. So that's what we need to achieve together.

But making that vision that I articulated a reality would take more than foreign investment. It will also take a focus on growing and greatly liberalising the domestic economy. Here is what I would recommend, and we can talk about other programmes that would help this as well. But in the first instance, intensive focus needs to be placed on the cultivation of small and medium-sized enterprises and fostering of innovation. Innovation that pervades the economy and pervades society. One immediate step that could help small- and medium-enterprises, that could help SMEs, is greater transparency in public procurement. Simply putting out systematically and in advance, basic information about tenders and timelines and technical requirements would have a significant impact on small companies. And a national drive toward greater innovation needs to be implemented with specific steps to cultivate and reward creativity.

What I would like to see, and what I believe Bulgaria is ready for, is to place itself on a trajectory, on a pathway toward transformation, into a knowledge-based economy, with public policies that generate new ideas, new efficiencies, and new solutions. That's the pathway into the future and that's what will help us take this economy and this country toward the kind of vision that I think we share for the future.

`Iron grip'
But there is a third element here that we need to talk about honestly, and that this country needs to tackle seriously, and that I think everyone in this room knows better than I. And that is the need to end corruption and organised crime. Bulgaria simply must break free of the iron grip that corruption and organised crime holds on this country. The strength of this economy and the wellbeing of this society depend on it.

Now I know and you know that I am not talking about action plans or working groups or public conferences. What I am talking about is concrete action. I know and you know that the oligarchs who sit as if they were above the law instead need to sit in jail cells behind bars. And senior government officials, whether they are in the executive, the legislature, or the judiciary, who are guilty of misusing their power and betraying the public trust need to be punished in a way that is commensurate with their crimes.

Now, I want to also speak very honestly with you about this. This needs to happen not because the American ambassador makes a speech, not because a bureaucrat in Brussels writes another report. It needs to happen because it is essential for the future of this nation and because the people of this country and people who care about this country want it to happen and know that it is the right thing.

The money that goes into the hands of corrupt government officials and into the secret bank accounts of mob bosses is money that is stolen from the citizens of this country. It is money that is urgently needed to inject healthy and lasting growth into this economy, and it is precisely now, during a global financial crisis, that Bulgaria cannot afford any more losses - in money, in credibility, and international standing.

Breaking this vicious cycle will position this country, the people in it, and the friends of this country - the people in this room - to achieve enormous progress in every aspect of the economy, of politics, and of society.

Now, this is, admittedly, an ambitious agenda. It is an optimistic vision, that together we can take these three measures - boosting international foreign investment, energising and liberalising the economy, making this a place that is driven as a knowledge-based economy that is driven by innovation, and also asserting the rule of law so that people no longer can suggest that this is a difficult place to do business. These are tough, they will take political will and it will also require the help of friends. But I believe that this country has that political will. This country can use that political will and make the changes that are necessary. And Bulgarians can believe in and count on the friendship of the United States as they go forward in this effort. I have said before, and it bears repeating at every opportunity, that the United States is unwaveringly committed to the partnership with Bulgaria. That is a statement that is extremely important as we look at tackling tough issues. But we are categorically clear about the fact that we will walk together as trusted friends and as genuine partners, with this country and the people of this country, on a journey that goes forward into a future of greater prosperity and greater stability.

And I also know that the American companies who are represented in this room today and American companies who are present throughout this country are also equally committed to the partnership with Bulgaria. American companies, who bring the world's finest corporate practices, state-of-the-art technology, and a principled commitment to improving the wellbeing of citizens throughout this nation, are an integral part of the very bright future of this country.