FEATURE-Foreign investors leave worried Bulgarians behind

* Foreign investment plunges, prompting public anger

* Fresh capital from China, Middle East no cushion yet

* People blame government, but labour elsewhere is cheaper

By Tsvetelia Ilieva

STAMBOLIYSKI, Bulgaria, July 1 (Reuters) - For Gergana Gecheva, laid off when Bulgaria's biggest paper mill closed in her hometown this month, the situation is clear: "This town is dying," she says. "Change has to start from the top."

The 48-year old had worked for 30 years in the mill when its owner, South African-based Mondi, shut it because global recession had slashed demand.

First opened in 1957, it had been a provider of indirect work to one in three people in this impoverished town of 12,000 in the Thracian valley some 120 km (75 miles) south of Sofia.

It's the same story in small towns across Bulgaria: foreign firms are packing up and quitting one of the newest, poorest, and most remote corners of the European Union just as it heads to a parliamentary election.

"No-one thought it would come to this," said Gecheva, looking at the deserted yard of the mill in Stamboliyski in silence broken only by an occasional train at the station.

In a town developed as a food-processing centre in the 1930s, the only other big employer -- a communist-era canning factory -- closed last decade.

The people of Stambolyiski and economists blame government incompetence for the fact the Balkan country was unprepared for crisis, lacking high-end manufacturing and at the mercy of fast-moving producers and developers.

They say Bulgaria is vulnerable because it did not take advantage of a recent economic boom to spruce up infrastructure or tackle corruption and crime.

Foreign cash inflows have halved to 995 million euros ($1.38 billion) in the first four months from a year earlier. Some Chinese and Middle Eastern investment is trickling in, but economists expect foreign direct investment to at least halve to about 3-3.5 billion euros for the full year.

The crisis has not yet been as painful as in Latvia or Hungary, but a survey in early June by state-funded pollster NPOC found 38 percent of Bulgarians were afraid they would lose their jobs in the next six months and more than half had scrapped plans for summer holidays or home improvements.

The Socialist-led government, headed according to opinion polls for defeat in the July 5 elections, says unemployment currently at 7 percent will stay below 10 percent.

It argues that years of prudent fiscal policies and an accumulation of 22.7 billion levs of hard currency reserves, over 30 percent of GDP, will cushion the economy.