C a s e S t u d y

Development of an economic zone in Pazardzik

Summary

This municipal project to develop an economic zone in the city of Pazardzikis aimed at finding sustainable solutions to the problems of small and medium-sized enterprises (SMEs), as well as at achieving several of the goals incorporated in the municipal development plan. The idea for the project came about during cooperation between the municipality of Pazardzik and the city of West Bend, Wisconsin, USA.

Problem Statement

As the old industrial zone in Pazardzik was running out of capacity and was undergoing privatization, SMEs faced the problem of leasing or building their own production facilities. The growing number of requests for the lease or purchase of available municipal lots clearly indicated the need to create opportunities for entrepreneurs to obtain facilities. Creating a new economic zone to satisfy SMEs' needs for production, storage, and commercial facilities is a direct application of European and global best practices in relations between local govern ment and business.

Project Description

The mayor of Pazardjik, municipal employees, the partners from West Bend, and represen tatives of the PazardzikRegional Economic Development Agency worked together on the development of the economic zone in Pazardjik. We presented to the West Bend represen tatives one of the goals of the municipal development plan; namely, to create conditions for finding sustainable solutions to SME problems. We and our West Bend partners concluded that the development of a modern economic development zone in the city would help achieve this goal. The West Bend experts provided comprehensive information on similar zones that have been built in their city and, based on their rich experience, recommended the use of a marketing approach in the development of the zone.

Our West Bend partners strongly recommended that we start by collecting general statistical data on existing SMEs in the region. Pazardjik's municipal experts were skeptical about this data collection and considered it a waste of time and effort. Our West Bend partners, however, managed to convince us that without a detailed database of companies and their activities we would not be able to draw a realistic picture of the business environment, and therefore, would not be able to effectively identify the target groups. Our partners' recom mendation turned our efforts in a radically different direction, which in turn resulted in faster development of the project.

After collecting data about existing companies, we analyzed the data to identify major busi nesses by industry and industries that need to be encouraged. In other words, the analysis identified the target groups and determined the needs of these groups that would be met by the creation of the economic zone. The goal of our analysis was to identify the project's social and financial effects on the municipality; namely, that the development of SMEs would reduce unemployment and generate more revenues for the municipal budget.

At the first meeting of SME representatives and the joint Bulgarian-American project team, we presented the project and received feedback on entrepreneurs' needs. The entrepreneurs demonstrated great interest in purchasing land for their businesses. We discussed the lot size that would be of interest to SMEs, which allowed us to effectively divide the zone in parcels. Another important issue that we discussed was whether the entrepreneurs would prefer to finance everything at their expense or to have the municipality provide the infrastructure prior to the sale of lots. The business representatives expressed a preference for the latter. Our direct contact with the interested parties allowed us to successfully collect crucial information both on their needs and on the financing mechanism for development of the zone.

After analyzing the entrepreneurs' feedback, we identified the vision statement for the zone and initiated a promotional campaign. First, we developed a marketing brochure to promote the zone. In developing the brochure, our goals were to make the content readable and concise and to communicate the messages the target audience was looking for. We devel oped the outline in cooperation with our West Bend partners, using similar brochures pub lished by West Bend as a model. An artist and an architect were involved in the design of the brochure.

Identifying the most effective means of reaching the target audience was vital for the mar keting process. In all, we disseminated 1,000 brochures. As our American partners recom mended, we made direct mailings to all representatives of the target groups. We also disseminated the brochure through banks, as banks have frequent contact with entre preneurs and are aware of their problems. The brochure turned out to be a very effective marketing tool, and the feedback that resulted from the brochure helped us to initiate the next step toward the creation of the economic zone.

We continued the active dialogue between the project team and the interested parties. We also held a meeting with bank representatives to study the opportunities for direct involve ment of banks and for external funding.

The successful completion of the project requires the establishment of a business entity that will be responsible for the overall project. This entity should be a municipal corporation that will oversee the development of the zone and the reconstruction of the commercial and entertain ment section of Svoboda Park. In our case, the municipal corporation will act as a strategic investor. The corporation will divide the 170-decare lot into parcels and will sell the parcels to SMEs. At the same time, the corporation will build the infrastructure, a duty-free warehouse, and a showroom. We believe that this is the only way to successfully implement the project and achieve the goals of the municipal development plan.

The parcels will be sold using all legal forms of sale. The most attractive parcels will be sold through a bid; the parcels in the middle section of the zone will be sold at an auction; and the least attractive parcels may be sold through direct negotiations. We adopted this varied approach to sales in order to provide opportunities to all interested companies.

The construction of infrastructure, the duty-free warehouse, and the showroom will be funded by a municipal bond issue. The municipal corporation will act as a developer, thus eliminating the need for a private developer to make a profit. The municipal corporation's oversight will ensure that construction will be completed on time and will meet quality stan dards. The corporation will use the proceeds from the sale of parcels to finance a leasing program for machinery, installa tions, and construction sites, which will be available to the companies in the zone.

Implementation Timeline

The process of changing the land use is underway. We have submitted the papers to the Ministry of Agriculture, and they are pending approval, which we expect to have by mid-July 2002. In the meantime, the municipality will submit a proposal for the estab lishment of the corporation to the Pazardzik Municipal Council.

The construction of infrastructure will take six months. Construction will be carried out when the corporation receives the funds from the bond issue. The sale of parcels will begin when the infrastructure is in place.

Solutions Overview and Specific Results

Working on a joint project was an excellent opportunity to exchange expertise and informa tion. Our joint efforts have produced several significant results:

n We reached consensus on the development of the economic zone and began developing an economic development strategy.

n We learned skills in applying more effective work methods, such as teamwork, strategic planning, marketing tools to promote new ideas, and openness to new, innovative ideas.

n The project created opportunities for cooperation among private businesses, govern ment, and nongovernmental organizations.

Benefits

The implementation of the economic zone project will support SME development in the region, which will result in the creation of new jobs and the generation of more revenues for the muni cipal budget. The processes used in the project created new opportunities for a constructive dialogue with business representatives. Finally, the municipal employees have learned new, more effective work methods and have begun to apply them.

Conclusion

Pazardjik's geographic location between the two largest cities in Bulgaria, Sofia and Plovdiv, is favorable for the development of SMEs in light industry, such as food processing and furniture making, and in services. Currently, there are no prominent companies in heavy industry within the municipality.

The economic zone will create favorable conditions for the sustainable development of the SME sector. The project will encourage private entrepreneurs from neighboring municipalities and regions to relocate their businesses to the municipality of Pazardjik.

The development of the economic zone, through preferences for SMEs, will provide greater revenues from local taxes and fees. The zone will create new jobs that will generate both sales and tax revenues. This will in turn result in greater public confidence and support for other municipal projects aimed at solving acute social problems.