Hope on Horizon for Taiwan-Bulgaria Ties?

Despite reticence from Sofia on closer relations with Taipei, trade officials and businesspeople on both sides remain optimistic about progress. 

Something unusual is afoot in the Balkans. Countries in the region, which previously would never have dreamed of irking China, have begun to show a willingness to speak out on and engage with Taiwan.

In no small part, this development stems from the perception that Beijing’s much-vaunted “Cooperation between China and Central and Eastern European Countries” (China-CEEC) project is all but defunct.

The initiative, which was touted as a mechanism for boosting investment, infrastructure, and trade cooperation under the rubric of Beijing’s Belt and Road Initiative, was originally informally known as the “17+1” before the withdrawal of the Baltic states in northeastern Europe reduced it to “14+1.”

Although none of the Balkan nations has expressed a desire to follow suit, Albania’s Prime Minister Edi Rama summed up the general growing disdain for the 14+1 when he in February 2023 announced that the initiative had yielded “zero” benefits for his country.

The following month, the first-ever parliamentary delegation from the Balkans arrived in Taipei. Featuring legislators from Kosovo, Romania, and North Macedonia, the group’s visit was an indication of a shifting stance toward Taiwan from within the region. 

Then, in November, a delegation from the European Parliament-Taiwan Friendship Group arrived. Comprising members of the European Parliament (MEPs) from countries as diverse as Slovakia and Spain, the group was led by its first vice-chair, Bulgarian MEP Andrey Kovatchev. The participation of a Bulgarian politician in such a visit was noteworthy, given Sofia’s longstanding reluctance to ruffle feathers when it comes to Taiwan.

“Bulgaria was one of the oldest diplomatic buddies of China,” says Ruslan Stefanov, director of the economic program at the Center for the Study of Democracy, a Sofia-based think tank. “And while Bulgaria hasn’t been a central focus for China, imports-wise, we’ve seen Chinese tech and business coming in.”

Among the more eye-catching deals, says Stefanov, was a US$94 million agreement between Navibulgar, Bulgaria’s largest shipowner, and the Export-Import Bank of China in 2018 for the financing of six newbuild bulk carriers. The following year, China inked a US$135.5 million contract with the China Machinery Engineering Corporation – part of a state-owned conglomerate – for infrastructure development at Bulgaria’s Black Sea port city of Varna.

Despite these investments, which Beijing has touted as evidence of fruitful cooperation under the 14+1, Stefanov says the relationship remains restricted.

“I wouldn’t say there is a strategic policy of engaging or not engaging with China,” he says. “Rather, whenever there have been any approaches by China, they’ve been reciprocated in one way or another.”

Several 14+1 proposals have fallen by the wayside, including the planned concession of Plovdiv Airport in Bulgaria’s second biggest city to the Chinese state-owned HNA Group. Following the collapse of the US$98 million deal, which was scheduled to be inked in 2016, HNA filed for bankruptcy in 2021. The aviation conglomerate’s chairman and its CEO were both subsequently arrested by Chinese authorities on unspecified charges. Elsewhere, a plan to extend China’s Black Sea influence to Burgas, a port city south of Varna, has thus far failed to come to fruition.

Investigations by European Union regulators into anti-competitive practices have also caused Chinese companies to withdraw from lucrative public infrastructure projects in Bulgaria. A recent example was a US$337 million tender by CRRC Qingdao Sifang Locomotive – the world’s largest rolling stock manufacturer – to supply and maintain 20 electric push-pull trains over a 15-year period. The probe into suspected state subsidies, announced by Brussels in February, resulted in CRRC abandoning its bid the following month.

These setbacks, says Stefanov, are unlikely to presage a rift between Sofia and Beijing. “I don’t think Bulgaria would even think about derisking with respect to China,” he says.

Stefanov notes that Bulgarian leaders are notoriously cautious when it comes to the two regional powers, Russia and Turkey, “for obvious reasons.” Although China has historically had far less influence on Sofia, the Bulgarian government “only reluctantly turns around when there is big support from the population.”

With most Bulgarians unconcerned with or unaware of Chinese human rights issues, let alone the threat posed by Beijing’s soft power maneuvers within Bulgaria, there is little motivation for policy change, says Stefanov. “The population has these myths about China’s ancient history and glory,” he says.

He notes the insidious influence of the Confucius Institute of Sofia in this regard. This branch of the United Front-linked “cultural and educational” program maintains a presence in around 60 educational institutes across 17 Bulgarian municipalities. 

“People don’t hear the bad stuff, including the details of what has happened between China and Taiwan,” he says. “On both a political and household level, people see how the Chinese react so vehemently [to Taiwan] and these huge displays of military might, and they are intimidated.”

In the short-term, even directives from Brussels are unlikely to affect the situation.  

“We’ll be laggards when it comes to implementing any decisions taken on the EU level,” says Stefanov. With this in mind, he does not see a window of opportunity opening for Taipei any time soon. Any improvement, he says, would be minor and “would only be transactional and not value driven.”

Speaking under condition of anonymity, another Bulgarian think-tanker supports this assessment, based on discussions with Bulgarian diplomats and foreign ministry officials. Having raised the question of “an intensification of engagement with Taiwan” among CEECs and the potential for Sofia to adopt “a more nuanced position on their One China policy,” she speaks of the “extreme reluctance” of the meeting’s participants to even discuss the issue.

“For this reason, I believe it is not viable to expect Bulgaria to move forward with an opening of a trade office in Taipei,” she says.

Despite this gloomy prognosis, some observers are more hopeful of progress, particularly on trade and investment.

Kovatchev, the MEP who led the friendship group delegation to Taipei, notes that there is increasing interest from Taiwanese companies in establishing production facilities in Bulgaria’s free trade zones. During his visit – his third to Taiwan – Kovatchev held meetings with then-President Tsai Ing-wen, former President Ma Ying-jeou, and other officials from across the political spectrum.

“There was discussion of how we could boost economic ties,” says Kovatchev. “Of course, there is hesitance over the reaction if we try to be braver, but I think there are good signs.”

He points to the efforts of the Taiwan External Trade Development Council (TAITRA) office in Sofia in promoting business-to-business relations, and he echoes Rama’s view of the 14+1 as yielding negligible benefits. “The idea that doing something with Taiwan would jeopardize Chinese investments [makes no sense],” he says. “There aren’t really any important Chinese investments.”

The challenge, as he sees it, is developing a better understanding of one another’s business cultures and determining which areas are ripe for cooperation.

“We’re still terra incognito for Taiwan,” he says. “We don’t know them, and they don’t know us, so we need to establish something concrete – even if only potential areas for projects.”

One business leading the way is Davmore, a Taiwanese OEM manufacturer of bicycle frames and components in the process of establishing a factory in Sofia. Tim Chen, the company’s founder, says that Davmore had been supplying customers in Bulgaria for several years before the decision to establish a manufacturing base in the country was made. He says his experience as a supplier helped him come to grips with local working culture. 

“The first three years were really difficult,” he says. “Even though we had years of expertise, our Bulgarian partners didn’t want to follow our advice and adopt the SOP.” Things eventually become “more stable” as both sides adjusted to the others’ working practices, Chen says.

This view is supported by Shane Tsai, director of TAITRA Taiwan Trade Center in Sofia. “I think it’s important that the Bulgarians get to understand how we run our plants,” he says. “Then, in the future, both sides will get how to work together better.”

Both Tsai and Chen highlight the relative “competitive advantage” that Bulgaria offers in terms of wages, though they also note the almost 20% hike in the minimum monthly wage that kicked in at the beginning of the year.  

There is also the view of Bulgaria and the CEECs in general as a potential gateway for Taiwanese companies seeking to crack the EU market. These considerations helped convince another Taiwanese manufacturer to relocate his textile production facilities from neighboring Turkey to the free trade zone at the border town of Svilengrad in 2020. The key attraction was the favorable tax situation, which the businessperson contrasts with the opaque, unwieldy, and, in his view, corrupt system in Turkey.

“It’s only three hours from my factory in Istanbul,” says the individual, who prefers to remain anonymous for fear of reprisals by the Turkish authorities. “And they have a clear, fair system,” he adds, referring to the EU’s harmonized VAT regulations. 

Unfortunately, a series of increasingly harsh anti-dumping measures introduced by the Turkish government have hampered his progress, with Turkish officials conducting inspections of the premises in Svilengrad. “They claim I am cheating and that the products are finished items,” he says. “But these are raw materials, so they shouldn’t be taxed at this high rate.”

Having initially been enthusiastic about the prospects for his operations in Bulgaria, he now worries whether they are sustainable. “I’m not sure how long I can go on like this if something doesn’t change,” he says.

Veselin Todorov, founder and CEO of VVT Engineering, says his visit to Taiwan in November
helped broaden his view of the market. Photo: Courtesy of Veselin Todorov

From the Bulgarian side, Taiwan represents an untapped opportunity. “Everyone knows Taiwan is a very special place from a development perspective,” says Veselin Todorov, founder and CEO of VVT Engineering, a company providing consultancy, design, construction, and maintenance services for photovoltaic plants.

Todorov visited Taiwan in November to attend Resilience Taiwan 2023 in Taipei. The event serves as a platform connecting international buyers with Taiwanese suppliers from various industries, including green energy.  “It was great for me to visit the country and see how business is done there,” says Todorov, who is also chairman of Solar Academy, an association that brings together government, business, and academia in the renewable energies sector. “It helped broaden my view.”

Aside from the event, Todorov participated in several meetings with industry experts and potential suppliers of components, making contacts that he feels will be “very useful with time.” He says that Taiwan is perfectly placed to assist with Bulgaria’s green transition.

“What impressed me was that – despite the distance – some of [the Taiwanese] already knew quite a bit about Bulgaria and the economic situation there,” he says. “The people I met were very curious and innovative, and I think we can definitely generate profit for both countries in the future.”