Europe & Central Asia
Bulgaria risk report
There is a high risk of corruption in many sectors in Bulgaria. A lack of autonomy and transparency in the judicial system has weakened corruption investigations and property rights, encouraged public official impunity, and has created an uncertain investment environment. Kickbacks and bribes plague the public procurement sector, eradicating fair market competition and resulting in fewer opportunities for foreign investors. Companies face demands for facilitation payments and bribery when registering businesses or accessing public utilities. The Criminal Code prohibits various types of corruption, including extortion, trading in influence, facilitation payments and bribery of foreign officials. Facilitation payments and gifts are formally prohibited, but do occur frequently. The complex but lacking legal framework and weak enforcement hamper the country's ability to effectively combat corruption.
Judicial system Very high risk
There is a high risk of corruption in Bulgaria's judiciary. Companies report low trust in the independence of the institution and the efficiency of the legal framework when it comes to settling disputes and challenging regulations is rated as poor (GCR 2017-2018). Bribes and irregular payments in return for favorable judicial decisions are common (GCR 2015-2016). A significant majority of citizens perceive the judicial independence to be fairly bad or bad (JS 2017). The judiciary remains the least trusted institution in Bulgaria; corruption is widespread and undue political and business influence is common (ICS 2017; GRECO 2015). The busiest courts in Sofia have serious backlogs, constricted resources, and follow inefficient procedures that combined hamper the administration of justice (ICS 2017). While Bulgaria has a satisfactory legal framework to allow for prosecution of corruption offenses, the lack of results is attributed to weaknesses in investigative and judicial practice (ECCVM 2017). Appointment procedures at the highest levels of the judiciary are non-transparent and uncompetitive (NiT 2017). Allegations of corruption and influence peddling have only been investigated following internal and external pressure (HRR 2016).
Investment disputes are lengthy, and often require intervention from the highest level of government, particularly investment disputes filed in Sofia may take several years to settle (ICS 2017). Investors report that jurisprudence is inconsistent and that legislation is used to deter competition from foreign investors (ICS 2017). Foreign arbitral awards can be enforced in Bulgaria (ICS 2017). Enforcing a contract in Bulgaria takes longer than elsewhere in the region, but the costs required are significantly lower than the regional average (DB 2018). Bulgaria has signed the New York Convention of 1958 and is party to the International Center for the Settlement of Investment Disputes (ICSID).
Police Very high risk
There is a high risk of corruption when dealing with Bulgaria's police. Corruption and impunity are widespread within Bulgaria's police; the government has mechanisms to investigate and prosecute abuses, but the implementation is lacking (HRR 2016). Companies report insufficient confidence in the reliability of police services and they attribute significant costs to crime and theft (GCR 2017-2018). Three-quarters of businesses pay for security in Bulgaria (ES 2013). Almost a third of Bulgarian respondents identify the police as corrupt, while less than two in every ten surveyed report to have paid a bribe to police officers (GCB 2017). Organized crime in Bulgaria is enabled by corruption in the public administration, judiciary, police, and customs (ECCVM 2017).
Public services Very high risk
Bulgaria's public services are affected by corruption, and foreign companies can expect demands for bribery and facilitation payments. Over two-thirds of companies indicate that bribery is a widespread practice in Bulgaria (EY 2017). Almost a fifth of companies report gifts and informal payments being necessary to "get things done", especially when obtaining operating licenses and electrical connections (ES 2013). Corruption and inefficient government bureaucracy constitute the two most problematic factors for doing business in Bulgaria (GCR 2017-2018). One-third of citizens perceive public officials and civil servants to be corrupt, while less than one in every ten surveyed report to have paid a bribe to a public official (GCB 2017). Corruption at the lower levels of government remains a problem (ECCVM 2017). Efforts to combat corruption in the civil service have not been systemic, but only targeted at individual cases (BTI 2016). Officials in all branches of government reportedly engage in corrupt practices with impunity (ICS 2017).
Starting a business takes more steps and more than double the time required elsewhere in the region (DB 2018). Obtaining a construction permit takes a few more steps than the regional average, but significantly less time is required (DB 2018).
Land administration High risk
There is a moderate to high risk of corruption in Bulgaria's land administration. Investors report insufficient confidence in the protection of property rights (GCR 2017-2018). Almost a fifth of companies expect to give gifts to get a construction permit (ES 2013), and almost half of citizens surveyed believe that corruption and bribery are widespread among officials issuing building permits (SESC, Feb. 2014). A number of high profile corruption cases in Bulgaria have involved the sale of public property and other land transactions (BTI 2016). The 2004 Investment Promotion Act provides for equal treatment for foreign and domestic investors; it also provides incentives that help investors purchase land (ICS 2017). Expropriation is allowed under Bulgarian law in cases where a public need cannot be met by other means (ICS 2017). Compensation is legally required to be done at fair market value (ICS 2017). Expropriation actions may also be appealed at the Supreme Administrative Court on the basis of the legality of the action, the appraisal of the property, or the amount of compensation (ICS 2017).
Registering property requires more steps than the regional average and takes roughly the same time as elsewhere in the region (DB 2018).
Tax administration High risk
There is a moderate to high risk of corruption when dealing with Bulgaria's tax administration. Companies indicate that irregular payments and bribes occur in the process of paying taxes (GCR 2015-2016). Tax rates and tax regulations are cited by businesses as problematic factors for doing business (GCR 2017-2018). Weak compliance with Bulgaria's tax laws contribute to a large informal economy and opportunities for corruption (BTI 2016). The anti-corruption unit embedded in the Ministry of Finance's inspectorate has only limited powers to address corruption in the customs and tax administration (EUACR 2014).
While the number of times companies pay tax each year in Bulgaria is slightly lower than the regional average, companies spend more than double the amount of time on filing taxes compared to elsewhere in the region (DB 2018).
Customs administration Very high risk
There is a high risk of corruption when dealing with Bulgaria's customs administration. Businesses indicate that irregular payments and bribes are common when dealing with imports and exports (GETR 2016). More than two-thirds of respondents believe that abuse and corruption are widespread among customs officials (Eurobarometer, Feb. 2014). Burdensome import procedures, tarrifs, and corruption at the border are cited as the most problematic factors for importing (GETR 2016). The time predictability of import procedures is insufficient and the efficiency of the clearance process is rated as poor (GETR 2016). Notwithstanding, dealing with imports and exports is far less costly and time-consuming than the regional average (DB 2018).
Corrupt customs officials are known to exchange bribes with organized crime groups and smugglers (European Commission, Feb. 2014). Numerous border officials were arrested in 2016 for taking bribes from human traffickers (Sofia Globe, Dec. 2016).
Public procurement Very high risk
Public procurement is widely recognized as carrying particularly high risks in Bulgaria, with conflicts of interest, kickbacks and bribery being frequently reported (ECCVM 2017; ICS 2017). Diversion of public funds and favoritism in the decisions of government officials are common (GCR 2017-2018). Likewise, bribes and irregular payments in the process of awarding public contracts and licenses are common (GCR 2015-2016); almost a third of companies expect to give gifts to procurement officials in order to secure government contracts (ES 2013). More than half of all companies report of corruption preventing them from winning tenders (European Commission, Feb. 2014). Among the main risks of corruption are the concentration of market power in the hands of the public administration, the lack of effectiveness of procurement procedures, the lack of integrity and control of procurement officials and bodies, political interference in the work of the Public financial Inspection Agency (PFIA), structural governance deficiencies, and too many frequent changes to the legal framework of public procurement (CSD 2015, CSD 2017).
The use of single-bidding contracts, in which contracts may be tailored to a single party, are an important corruption risk in Bulgaria (CSD 2017). In fact, evidence shows a concentration of public procurement among larger companies, and the channeling of certain procurement contracts to specific companies (CSD 2015). The award of large road and energy infrastructure development projects, are reportedly heavily affected by political patronage (CSD 2015). Evidence of corruption in such projects, along with projects involving high-level public officials are rarely investigated or prosecuted (ICS 2017). Companies convicted of violating procurement regulations, are excluded from future tenders (CSD 2015).
Bulgaria's interim government found in February 2017 that over half of the defense procurement contracts signed in 2016 contained irregularities and nine of the contracts are being investigated for fraud (Reuters, Feb. 2017). Former Defense Minister Nikolay Nenchev has been charged with misuse of office for failing to implement a contract struck with Russia for the repair of Bulgaria's Soviet-era jets (Reuters, Feb. 2017). Nenchev has also been charged with pressuring a subordinate in a procurement contract that ended up costing the state EUR 127,000 (Reuters, Feb. 2017).
Bulgaria's Criminal Code criminalizes active and passive bribery, extortion, trading in influence, money laundering, abuse of officе and embezzlement. The code also prohibits bribery of foreign officials and facilitation payments. There is no formal threshold for the value of gifts before they are considered to be bribes (CMS 2016). Penalties for corruption offenses range from one to 15 years imprisonment and penalties up to EUR 10,000 as well as confiscation of any benefits gained from the act of corruption (CMS 2016). There is no corporate liability for corruption offenses; only individuals can be prosecuted (CMS 2016). Money laundering is addressed in the Measures against Money Laundering Act. The Civil Servants Act and the Law on Preventing and Detecting Conflicts of Interest regulate conflicts of interest in the public service. The Law on Protection of Competition and the Public Procurement Act address corruption in public procurement. The Law on Political Parties provides for anti-corruption measures that guarantee transparency and accountability of political party funding. The Code of Administrative Procedure is aimed at limiting opportunities for corruption and establishing an efficient system of administrative justice. Bulgaria has included a section on the ethical conduct of parliamentarians in its Rules of Procedures, such as prohibiting MPs from receiving gifts that exceed one-tenth of their basic monthly salary (GRECO 2015). The Rules of Procedures also stipulates the declaration of assets for MPs. There is no single law providing protection for whistleblowers; various laws including the Criminal Code and Administrative Procedure Code provide some general and indirect provisions, generally only applicable to civil servants (WLG 2016). Enforcement of anti-corruption legislation suffers from a weak institutional framework and a corrupt judicial system (ICS 2017).
To address these weaknesses and to respond to EU criticism, the government established a specialized anti-corruption body in each branch of the government, with inspectorates under the Council of Ministers and all regional offices to deal with allegations of corruption (NiT 2015). These bodies are described as fragmented, susceptible to political influence and having limited power (GRECO, May 2015). A draft law to set up a single, unified anti-corruption authority had not been adopted at the time of review (ECCVM 2017). Bulgaria has ratified the United Nations Convention against Corruption (UNCAC) and the OECD Anti-Bribery Convention.
The Constitution of Bulgaria protects freedoms of speech and of the press, which are generally respected in practice (HRR 2016). Concerns exist that the growing and nontransparent concentration of media ownership, corporate and political pressure, and government control of media resources is leading to a decrease in pluralism in the media environment (HRR 2016; BTI 2016). The political and business connections of media outlet owners are contributing to self-censorship among journalists (BTI 2016). Individuals are generally able to criticize the government without official reprisal, but individuals are more hesitant to criticize local governments in rural areas (HRR 2016). Journalists have faced threats and assaults, including from politicians and powerful interests (FotP 2016). Government officials have filed defamation suits against journalists, but courts tend to rule in favor of press freedom in such cases (FotP 2016). Bulgaria's media environment is considered 'partly free' (FotP 2017).
Freedoms of assembly and association are protected by the Constitution and generally respected (HRR 2016). Bulgaria's civil society is reasonably developed, and a small number of civil society organizations (CSOs) are actively involved in the fight against corruption (BTI 2016). CSOs are accorded an important role by the government in the process of deliberating and determining policy (BTI 2016). Many think tanks are funded entirely by foreign donors (BTI 2016). Public support to CSOs is limited, many citizens are wary of trusting CSOs (BTI 2016).
- World Bank: Doing Business 2018.
- World Economic Forum: Global Competitiveness Report 2017-2018.
- US Department of State: Investment Climate Statement 2017.
- European Commission: EU Justice Scoreboard 2017.
- European Commission: Progress in Bulgaria under the Co-operation and Verification Mechanism 2017.
- Ernst & Young: EMEIA Fraud Survey 2017.
- Transparency International: Global Corruption Barometer 2017.
- Center for the Study of Democracy: Evaluating Governance and Corruption Risks in Bulgaria 2017.
- Freedom House: Freedom of the Press 2017.
- Freedom House: Nations in Transit - Bulgaria 2017.
- Reuters: "Bulgaria's New Interim Government Finds Many Irregular Defense Contracts", 17 February 2017.
- Freedom House: Freedom of the Press 2016.
- CMS: Guide to Anti-Bribery and Corruption Laws 2016.
- World Law Group: Global Guide to Whistleblowing Programs 2016.
- Bertelsmann Foundation: Transformation Index 2016.
- World Economic Forum: Global Enabling Trade Report 2016.
- US Department of State: Human Rights Report 2016.
- Sofia Globe: "Looking Back at 2016 in Bulgaria: Border Police Scandals Galore", 8 December 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- GRECO: Fourth Evaluation Round - Evaluation Report Bulgaria 2015.
- Freedom House: Nations in Transit - Bulgaria 2015.
- European Commission: On Progress in Bulgaria under the Co-operation and Verification Mechanism, 28 January 2015.
- Center for the Study of Democracy: Anti-Corruption Policies Revisited - The Bulgarian Public Procurement Market: Corruption risks and dynamics in the construction sector, March 2015.
- European Commission: EU Anti-Corruption Report 2014.
- European Commission: EU Anti-Corruption Report 2014 - Annex Bulgaria.
- European Commission: Eurobarometer Special Surveys, February 2014.
- World Bank & IFC: Enterprise Surveys 2013 - Bulgaria.