Economic Benefits of Schengen Area: What Bulgaria Is Missing (Again)

CC 0

Once again, it has become clear that Bulgaria shall not be joining the Schengen agreement for some time, mostly due to the distrust in the work of our institutions and their ability to effectively guard the outer border of the visa-free area.

Apart from the deeper European integration and the further inclusion to the “rich country club,” the accession to the Schengen Area could provide a couple of specific benefits to the Bulgarian economy, which are as follows:

  • More trade with the other Schengen area members. Removing the last standing barriers to trade with the remainder of the EU (and some countries out of it) means higher trade volumes with all other member states. The assessments of this effect vary a lot – one study from last decade estimates annual growth in trade of 0,1%, and the German institute IFO states that bringing back border control in the EU would decrease trade volumes by a staggering 3%.
    Even if we assume that joining the Schengen Area would bring about as little as a 1% increase in trade with other EU members, this will amount to an additional BGN 700 million (or EUR 350 million) in exports and imports per year. From a government perspective, larger trade volumes also mean higher tax revenues.
  • Smaller expenses and less uncertainty for exporters. Currently, waiting on the borders accounts for considerable additional costs for exporters and transport firms (according to some estimates – BGN 100 million annually). One must also consider the misuse of resources – trucks waiting idly at customs offices cannot be utilized for other transportations. Joining Schengen would also limit uncertainty – the lack of border control makes it simpler to precisely estimate the time for transporting goods.
  • Easier and shorter travel for passengers. In 2021 the number of travels of Bulgarian citizens in other EU countries was a little over 700 thousand, but in the years before the pandemic, they were many more – 4,2 million in 2019 alone. Even if we assume that removing border controls shortens travel time by 20 minutes (oftentimes it takes much longer), the collective saved time will amount to 1,4 million hours per year, which could be spent more productively.
  • Higher growth potential for border regions. Easing travel with neighboring Schengen countries could create cross-border business opportunities. This would be especially valid in the case of Romania joining the agreement as well, due to the small distance between the Bulgarian ports of Ruse and Silistra and the Romanian economic center Bucharest, which is not being fully utilized because of the border control on the Danube bridges.
  • New job market opportunities. Joining the Schengen Area opens new job opportunities both for Bulgarians and foreign citizens willing to work here. Given the growing scarcity of workers in the Bulgarian economy, making it easier for foreigners to join the domestic labor market is of high priority.
  • Limiting administration and checks. Despite the need for administrative services and checks on the non-Schengen borders, the government budget would experience significant cost reductions from not providing them on the border with Greece (and probably Romania) and at international airports. This would allow for productivity gains for our border customs.

It is also important to note that none of these benefits is one-time. On the contrary, they all contribute to deeper economic integration among European countries, which means that any subsequent delay of Bulgaria’s accession equates to additional forgone opportunities for our economy. Therefore, joining the Schengen Area should be a key priority, alongside fixing the issues, which have been stopping us from doing so until now.

Continue exploring:

Employee Price Updated in Three Countries

Ukraine’s Economy: Current Situation and Challenges

Adrian Nikolov