In mid-July 2011, it does not appear that the security issues – or the overall situation of Bulgaria’s defence industry – have changed significantly. The country faces no obvious threat from inter-state aggression and very limited threat from non-state terrorists. However, BMI’s Security Rating with respect to criminal risk is one of the lowest in Europe. In part because of its geographic location, with easy access to Eastern Europe and the Middle East and mainly because of low levels of governance, Bulgaria is a hub for organised crime and illegal trafficking of drugs, arms and people. This will not be affected by the outcome of the presidential election that is due to take place in October, or by the (likely slow) growth of the economy.
Recent developments in the defence industry include the government’s acknowledgement that it may look to sell its stake in Arsenal and renegotiate contracts (so that the Defence Ministry buys less or pays less) with (at least) two major Western European suppliers of materiel – Daimler Chrysler and Eurocopter. The first of these suggests that the government needs the money that it could raise from selling its holding in the country’s largest arms producer more than it needs the control that comes with its 36% stake. The contract renegotiations highlight how the Defence Ministry remains short of cash.
On one hand, the defence White Paper which was approved by Bulgaria’s parliament last year envisages a reduction in size in the country’s defence establishment, together with a wholesale reorganisation and modernisation so that all three armed services are inter-operable with their counterparts in other NATO countries. On the other, the defence industry consists mainly of small companies providing small arms and light weapons – and/or a surprising array of (relatively low technology) civilian products to (overwhelmingly) foreign customers. In theory, the Defence Ministry will involve the indigenous producers in the modernisation of Bulgaria’s armed forces. In reality, it remains to be seen how they will be involved.
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Executive Summary 5
SWOT Analysis 6
Bulgaria Security SWOT 6
Bulgaria Defence Industry SWOT 7
Bulgaria Political SWOT 7
Bulgaria Economic SWOT 8
Bulgaria Business Environment SWOT 8
Global Political Outlook 9
Table: Election Timetable 13
Europe Security Overview 25
Political Risk Analysis – The Strategic Outlook For The 2010s 25
Security Risk Analysis 32
BMI’s Security Ratings 32
Table: Europe Security Risk Ratings 32
Table: Europe State Terrorism Vulnerability To Terrorism Index 33
Bulgaria’s Security Risk Ratings 34
City Terrorism Rating 34
Table: BMI’s Central And Eastern Europe And Central Asia City Terrorism Index 35
Political Overview 37
Domestic Politics 37
Table: Political overview 39
Security Overview 40
Internal Security Situation 40
Table: Regional Insurgent Groups 40
External Security Situation 41
Bilateral And Multilateral Security Relations 42
Armed Forces And Government Expenditure 43
Armed Forces Modernisation 2010-2014 43
International Deployment 45
Weapons Of Mass Destruction 45
Market Overview 46
Industry Trends And Developments 46
Table: Key Players In Bulgaria’s Defence Sector, 2010 47
Industry Forecast Scenario 48
Armed Forces 48
Table: Bulgaria’s Armed Forces, 2000-2008 (‘000 personnel, unless otherwise stated) 48
Table: Bulgaria’s Available Manpower for Military Services (2008-2015) 48
Government Expenditure 49
Table: Bulgaria's Defence Expenditure – Changing % Of GDP (US$mn), 2008-2015. 49
Table: Bulgaria’s Defence Expenditure Scenario – Changing % Of GDP (US$mn), 2008-2015 50
Defence Trade 51
Table: Bulgaria's Defence Imports, 2008-2015 (US$mn) 51
Macroeconomic Forecast 51
Table: Bulgaria – Economic Activity, 2007-2015 53
Company Profiles 54
Arcus 54
Arsenal 55
BMI Methodology 56
How We Generate Our Industry Forecasts 56
Defence Industry 56
City Terrorism Rating 57
Table: Methodology 59
Sources 60
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