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Challenges and Opportunities in the Transport and Logistics Sector
The transport and logistics sector is striving to maintain its position as a leader in transportation services across Europe. Bulgarian companies are engaged in a continuous struggle for fundamental rights, such as access to the single market and the free movement of goods. The pressure on this industry is significant and exacerbated by poor infrastructure, a lack of workforce, incomplete integration into the Schengen Area, and increasing restrictions due to the Green Deal.
“We have become accustomed to transitioning from one election to another, yet substantial changes for the industry remain elusive. With each new government and transportation minister, we find ourselves reiterating the same concerns that we previously shared with their predecessors. We always encounter understanding; our proposals are deemed reasonable, relevant, important, significant, and feasible, but… there are no actions taken. We expect the new ministers of transport, regional development, electronic governance, and finance to take initiatives that will pave the way for the growth of the transport, freight, and logistics sectors,” states Associate Professor Momchil Antov, director of the National Association of Bulgarian Freight Forwarders.
Aspirations Amidst Challenges
The sector has high ambitions but faces considerable obstacles. Businesses are eager to move towards digitalization to streamline processes, improve infrastructure, and enhance not just roads but also railways, which are currently inadequate. The ports are unable to handle the entire cargo traffic, highlighting the necessity for intermodal terminals.
The digitalization of supply chains has been an ongoing process for several years. The transport sector cannot afford to remain detached from this evolution. However, the digital transformation of processes is still awaiting better times as the flow of documentation persists in outdated methods, instead of adopting electronic waybills. The industry is prepared for this transition, but changes are needed in the Road Transport Act, the VAT Act, and several other regulations that stipulate paper documents with signatures and stamps, requiring copies to be presented to every controlling authority. This innovation demands adjustments in the legal framework.
Learning from Global Best Practices
“In the West, ‘the wheel has already been invented.’ We are not seeking something revolutionary; we merely wish to keep pace with those administrations and companies that are already leveraging such conveniences,” insists Associate Professor Antov. He highlights that the Protocol on Road Freight Transport, which introduces the electronic waybill, was ratified by Bulgaria back in 2011. However, there has been no progress in its implementation so far. Germany ratified this document last year, and just a few months later, the electronic waybill became a reality. Greece recently confirmed the protocol’s validity in its territory and is expected to introduce the electronic waybill soon.
“In Bulgaria, actions are often merely imitated, but no one is willing to engage in real work. It is not enough to simply replace the term ‘paper’ with ‘electronic’; new rules and procedures must be developed, along with state-controlled systems. Such a move entails a shift in the philosophy of certain processes. There are European regulations on Electronic Freight Transport Information (eFTI) that must be implemented in our country within a year. However, Bulgaria is in no rush to take action,” concludes Antov.
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Challenges in the Logistics Sector
The persistent delays by responsible entities within Bulgarian institutions, along with the uncertainty and instability of the political landscape, are significant factors driving large investments in logistics to bypass our country. This sentiment is echoed by the National Association of Bulgarian Shippers (NABU). The absence of a clear vision and strategy at the national level for the development of the Transport and Logistics sector discourages potential investors from expressing any interest.
High Toll Fees and Infrastructure Issues
Toll fees are excessively high and do not correspond with the quality of infrastructure, which is inadequate to handle the existing traffic on international routes within our territory. Regulatory bodies should monitor truck overloads more effectively. In response to increased toll charges, transport companies have remarked, “You want to sell us a cake, but you’re offering an empty box.” The supply chain extends from the loading point to the final unloading destination. Besides poor road conditions, another major issue is the border crossing points (BCPs), where transport can be delayed for hours or even days.
Delays and Inefficiencies
There are numerous reasons for these delays, including insufficient infrastructure capacity and systems not tailored to the traffic flow, along with human factors. Consequently, transporting a freight truck from Sofia to Bucharest can take up to three days. The fact that we are not part of the land Schengen area is just one of the reasons for such delays. Certain types of control measures could be relocated away from the BCPs. According to Associate Professor Momchil Antov, these points could be digitized and automated to function based on risk analysis.
Need for Optimization
According to NABU, the systems and regulatory bodies themselves are not effectively interacting. It is high time to optimize these processes. To foster better sector development and facilitate the free movement of trucks, the circle of approved economic operators (AEOs) should be expanded, as they enjoy a special status with customs. They benefit from simplified procedures due to their proven loyalty and adherence to regulations. In Bulgaria, there are only around 100 companies on this list, most of which are multinational shipping firms.
Proposals for Improvement
The main request is to establish a special lane (Green Corridors) at the five primary BCPs for AEOs, allowing their goods to pass without stopping, provided they have been pre-declared. This would validate businesses’ efforts to create their own control systems, train their employees, and establish robust protocols. Another beneficial suggestion is the implementation of a “Single Window” service.
Railway Infrastructure and Market Trends
The railway infrastructure is in poor condition, with almost no remaining demand for freight rail transport. The focus has shifted largely to transit passages, as many companies relying on rail services have ceased operations. The port of Thessaloniki has built an intermodal terminal in Sofia’s Ilianzi district, known as a dry port, but this rail connection still lacks the necessary traffic volume.
Global Market Conditions
On a global scale, there has been a noticeable contraction in the demand for such services over the past year, characterized by reduced production and consumption, along with supply chain challenges. Tightened consumption, rising prices, and difficulties faced by maritime transport and logistics in certain areas are evident. Additionally, military conflicts are reshaping transport routes. The concern now extends beyond merely delivering cargo from point A to point B; it encompasses the duration of delivery as well.
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Rising Costs in the Transportation Sector
The costs associated with road transportation are on the rise due to increasing fuel prices, toll fees, and the necessity to modernize fleets. As salaries climb and competition intensifies, the financial landscape for transportation companies is becoming more challenging. Despite these hurdles, Bulgarian logistics and transport firms remain competitive in terms of pricing, while maintaining high service quality.
Addressing Imbalances in the Industry
The initiative known as “Mobility Package” aims to balance the discrepancies between companies that adhere to higher operational standards and those that attempt to circumvent them. The sector has demonstrated resilience and adaptability, responding effectively to various challenges. Service prices are in a constant state of flux, reflecting the industry’s ability to learn quickly and exhibit flexibility. Companies are thriving “in spite of,” rather than “thanks to,” certain forms of support and protection.
Embracing Digital Transformation
Many companies operate at a high level, with a majority having digitized their processes. There’s an expectation for governmental bodies to follow suit. Some businesses are even exploring automated warehousing solutions. However, a significant issue remains: the government lacks a cohesive strategy for economic development, which adversely affects every sector and organization.
The Financial Impact of Schengen Delays
Financial statistics reveal a staggering loss of 1 billion BGN annually for the transport sector due to Bulgaria’s partial acceptance into the Schengen Area. This delay severely hampers growth and progress.
Challenges in Workforce Recruitment
Despite offering attractive salaries of around 3200 euros for international drivers, the industry faces a critical shortage of workforce. Few are willing to endure long waits at border crossings, and hiring foreign workers is complicated by bureaucratic hurdles. Document verification processes can take up to six months, further exacerbating the workforce issue.
Infrastructure Woes and Their Consequences
Poor infrastructure poses a significant challenge for transportation companies. Currently, land transport is limited to only two bridges over the Danube, while at least four are needed. In the coming two years, crossings will become even more difficult due to repairs needed on the bridge at Ruse.
Essential Projects and Ongoing Issues
A tunnel under the Petrohan Pass is deemed crucial, yet it remains an unfulfilled promise from politicians over the years. Additionally, the 170-180 km stretch of road leading to the Danube Bridge-2 near Vidin has been a long-standing issue, with various governments pledging upgrades that have yet to materialize. This stretch accounts for more than 70% of the sector’s accidents annually, contributing not only to economic losses but also tragically resulting in the loss of human lives.
Environmental Regulations and New Challenges
The Green Deal and efforts to reduce harmful emissions through new restrictions without adequate investment support represent yet another challenge for the industry. The balance between achieving environmental goals and maintaining operational viability is a pressing concern for transportation companies.
