analysis of export industries – bulgaria · 2019-07-22 · after bulgaria's accession to the...

BalkanMed E-Business Pages

Human Resources Development Agency – Russe, Bulgaria

Analysis of Export Industries – Bulgaria

ANALYSIS OF THE EXPORT SECTORS ON THE TERRITORY OF THE REPUBLIC OF BULGARIA AND THE OPPORTUNITIES OF SMALL, MEDIUM AND LARGE ENTERPRISES FOR EXPORT ACTIVITIES - NEEDS,

CONDITIONS FOR IMPLEMENTATION, DIFFICULTIES, OPPORTUNITIES FOR ASSOCIATION

1

ANALYSIS OF THE EXPORT SECTORS ON THE TERRITORY OF THE REPUBLIC OF BULGARIA AND THE

OPPORTUNITIES OF SMALL, MEDIUM AND LARGE ENTERPRISES FOR EXPORT ACTIVITIES - NEEDS,


REPORT

November 2018

[ 7 ]



2

CONTENT INTRODUCTION ............................................................................................................................ 3 BULGARIA EXPORTS ................................................................................................................. 4 BULGARIA EXPORTS IN 2015 .............................................................................................. 4 BULGARIA EXPORTS IN 2016 .............................................................................................. . 11 BULGARIA EXPORTS IN 2017 .............................................................................................. 17 BULGARIA EXPORTS IN 2018 .............................................................................................. 21 SWOT ANALYSIS OF EXPORT IN BULGARIA ............................................................ 31 EXISTING ASSOCIATIONS WITH THE PARTICIPATION OF SMALL, MEDIUM AND LARGE ENTERPRISES AND ANALYSIS OF THEIR ACTIVITY .............................................................................................................................................

33

SHORT AND LONG-TERM PROSPECTS FOR DEVELOPMENT AND EXPANSION OF BULGARIAN EXPORT .........................................................................

36

RECOMMENDATIONS TO ENTERPRISES .................................................................. 38 DEMAND OF RAW MATERIALS/SEMIMANUFACTURE/COMPONENTS . 39 OPPORTUNITIES FOR COOPERATION OF SMALL AND MEDIUM ENTERPRISES IN ORDER TO START EXPORT ACTIVITY AND/OR INCREASE ITS SHARE ..............................................................................................................

42

BIBLIOGRAPHY ............................................................................................................................. 46

[ 8 ]



3

INTRODUCTION Bulgaria ranks 21st in the European Union in Gross Domestic Product (GDP) in 2016. The country is in a currency board arrangement that binds the national currency to the euro. Bulgaria has an open market economy, a medium-sized private sector and a relatively small domestic market. After Bulgaria's accession to the EU, there is a steady process of alignment with community incomes, which has been considerably slowed down in the years of the global economic crisis but has accelerated again in the last three years. In 2016, the country's economy grew by 3.9%, ranked fourth in this indicator among all EU Member States. The main driver of growth was exports, which exceeded the January pre-crisis levels even in 2011. In 2016, its share in GDP is 64%. The real growth in exports of goods from 7.9% in 2016 is the third highest in the EU, and this is realized in conditions of unstable external environment. In recent years Bulgaria's trade has illustrated a stable and steady growth rate. Surveys of the Bulgarian Chamber of Commerce and Industry show an increased interest of the companies in expanding Bulgaria’s cooperation abroad. China is one of the most desirable destinations for business contacts, shows a result of a BCCI poll, and exports of the country to the Asian country grow by 36 per cent in 2017, reaching 1.2 billion BGN. Refined copper, copper and electrical parts are among the leading goods in Bulgarian exports to China. The main trade partners of the country remain the EU countries - 66 per cent of Bulgaria's exports. There is a great potential for impressive growth in exports, especially with non-EU countries - for these third countries, trade volumes are not so large.

[ 9 ]



4

Photo:www.novinite.com

BULGARIA EXPORTS BULGARIA EXPORTS IN 2015

For 15 years Bulgarian exports have increased fourfold, but for some groups of goods the increase is significantly higher. Exported car parts increased 33 times, electronics 12, and the nipple - 13 times. This shows an analysis of the Bulgarian exports in the period 2001-2015, prepared by the Center for Foreign Economic Cooperation at BIA. The analysis, however, notes that Bulgaria alone in CEE has raw materials among the leading export goods. The increase in Bulgarian exports is due to 2/3 of the increase in the quantities of exported goods and 1/3 of the growth in export prices. The exchange rate of the US dollar against the lev influences Bulgaria's exports in the short term - exports are able to adapt to the changes in the dollar exchange rate, but with some delay. During the 15-year period from 2001 to 2015, the US dollar exchange rate had a greater impact on

[ 10 ]



5

commodities (commodities) and almost did not affect commodities with higher added value. For 15 years (2001-2015), Bulgarian exports, measured in US dollars, have grown fourfold, with declines being recorded only in 2009 and 2015. By comparison, for the same 15-year period the growth of world imports was 1, 6 times, with the largest importers in 2015 being the US and China. Leading markets for Bulgarian goods are Germany and Italy, followed by our Balkan neighbors Turkey, Romania and Greece. Exports to China, Poland, the Czech Republic and Egypt marked a significant growth, with a more noticeable retreat in exports to the US and to Macedonia. Trends The export of electronics and electrical engineering is ahead, with the growth of almost 12-fold for 15 years and climbing from 7th on the 2nd place on the export list; Also, the cereals are grown 13 times their exports, the oil seeds 12 times, the pharmaceutical products 11 times, the glass and the glassware 12 times; The highest growth was registered by exports of transport equipment and their details - 33 times. Significantly above the average height are copper and copper products, plastic products, furniture and lighting fixtures, weapons and ammunition. Below average growth of exports are made of wood, without furniture. The goods in groups of "clothing and textiles" and "iron and steel" are fairly weak and falling. Worldwide Imports of ores and concentrates, pharmaceuticals, oilseeds, animal fats, precious stones and metals, fertilizers, cocoa products, coffee, food, honey and copper products, fruits, fodder, essential oils, nickel, iron and steel. Less demand in world markets and even decline are seen in machinery and equipment, vehicles, organic chemicals, knitwear and ready-made clothing, fish products, paper and board, wood, toys, cotton, tobacco and cigarettes, books.

[ 11 ]



6

Qualitative changes Exports of goods with higher added value are growing. In 2001, around 36% of exports were on raw materials and products with a very low processing rate, before the crisis in 2008 - about 33%, and in 2015 - 30%: • Petroleum products continue to have a leading role in exports, with new production leading to an increase in oil exports of almost 400 times. • Due to deeper processing, the proportion of unrefined anode copper decreases at the expense of the refined cathode. • Wheat and oilseed sunflower have a growth of 15-16 times, maize - 40, rape - 110 times, but this is due to the chosen subsidy model in the Bulgarian agriculture. • Exports of ores and concentrates of precious metals are growing 412 times, targeting countries with lower environmental and labor standards where they are mainly processed to gold. • For 15 years, medications are climbing from 11th to 3rd. • Insulated wire exports climb from 18th to 7th and increase 10 times. Electrical equipment parts ascend from 129 to 10 with a 42-fold increase. • An increased export of finished cars is due to both modest national production and re-export of high-end cars, mainly to Germany and, to a lesser extent, to Turkey. • There is a lot of growth in several electronic and electrical products, refrigerators, sheet plastics, bicycles, rubber tubes, televisions (mainly Italy and then the UK). Major markets for commodities with higher added value are Germany, Italy, France, but our products are built there and then are being realized all over the world. Bulgaria could increase its exports to developed countries by becoming a subcontractor of their companies and joining global supply chains, the analysis said.

[ 12 ]



7

The main groups of goods and services in the Bulgarian export list with relatively high added value are: - Components for automotive and mechanical engineering such as hydraulics, machine assemblies, accumulators, bearings, cables, electrical and electronic products, electric hand tools; - Refrigerators, freezers and sanitary faience; computing machines; - Some pharmaceutical and medical devices; - Optical products, sensors; - Some software products for process management, games; - Amateur Radio, Snowboard, Bicycles. The increased competitiveness is mainly due to international companies in Bulgaria, and less to local firms. The quality characteristics of Bulgarian exports are catching up with the average European indicators, but not fast enough. As before, Bulgaria is a leader in the export of some niche products. That should be the further specialization - product, not sectoral, analysts recommend. Bulgaria andCentral-Eastern Europe The comparison between the performance of Bulgaria and other Central and Eastern European countries (CEE) - Croatia, the Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia shows: • Relatively uniform growth in cereal exports and pharmacy; • CEE has a significantly higher growth in exports of tobacco products and Bulgaria - in exports of electronics and electrical engineering, transport equipment and parts, oilseeds and glass; • There are no raw materials in CEE among the top 5 groups of commodities, fuel in Bulgaria, copper products (third position) and grain (fifth position). No one in CEE, except Bulgaria, exports ores and slags.

[ 13 ]



8

• Among the leading products in CEE, which do not fall in the top 20 of the Bulgarian export list, are rubber products, optical and medical equipment, paper and board, ships, meat, toys, shoes. The comparison between Bulgaria, Romania and Slovakia shows that: • Bulgaria outpaces Romania and Slovakia in terms of growth in fuel exports (although Romania has substantial own reserves, its exports to fuels are only 4th in importance), clothing, furniture and lighting, glass, aluminum products. • Romania and Slovakia have a better growth in machinery and grain. In addition to these groups of goods, Romania impresses with exports of pharmaceuticals, vehicles, oilseeds and tobacco products. • In Slovakia, the top three groups of goods in the export sector are vehicles and parts for them, electrical engineering and electronics (up 13 times), and machinery and parts. These three groups account for 60% of Slovak exports, which is an example of intelligent specialization. Export of raw materials The large share of exports of raw materials and commodities with a very low degree of processing is indicative of distorted inter-sectoral links.

[ 14 ]



9

Conclusions Export by sector Little Bulgaria is among the world's top 3 exporters for ten kinds of goods. The country is also in the global trio in three of the 20 largest value groups of products that have an external market. In 2015, the country ranks first in sales of oilseed meals and retained strong positions in unrefined honey, duck meat and provisionally preserved cherries. Bulgaria is second and petroleum oils. The negative side of this is that these products are almost unprocessed and could have been exported a century ago. The positive thing is that Bulgaria is moving ahead in the ranking of some specific auto parts and electronics, which are already more value-added products.

Raw materials are exported not because they have better prices on foreign markets, but because there is no buyer for them in Bulgaria. Bulgaria is close to its export limit - there is hardly anything more to offer in the foreign markets. Investments in new services and new goods production are needed. It is necessary to develop horizontal cooperation within the country for further processing of the products and increase of the added value. Increasing exports with higher added value requires that state support be redirected towards deeper and further processing of products. State support is also necessary for encouraging the inclusion of Bulgarian production in global supply chains. The EU market is not dynamic enough. To maintain export growth, an increased presence on other markets is needed. By bringing the Western Balkans closer to EU membership, their competition will grow both in Bulgarian markets and in attracting quality investments. The trend towards increasing the technological level of production will increase the demand for medium and highly skilled labour. On the other hand, the surplus of unskilled labour will increase, according to the experts.

[ 15 ]



10

In 2015, the country has improved its global exposure to exporters, rising from 65th to 64th among over 200 countries. Analysts conclude that increased competitiveness is mainly due to international companies in Bulgaria and less to local firms. Bulgarian goods with the highest place in world exports Place 2015 Goods Export (million

dollars) Place 2014

1 Flours of oilseeds 40.297 2 2 Unrefined honey 760,997 2 2 Petroleum oils 402,951 2 Duck liver / meat 64.003 2

2 Cherries, provisionally preserved 20.195 2

3 Oil-bearing sunflower 402,462 2 3 Reinforced rubber pipelines 99.709

3 Seats and covers for toilet tops 59.124 3

3 Copper sheet 24.969 4

3 Non-reinforced rubber pipelines 5.167

Leading goods in the export of Bulgaria

Description Export (million dollars)

Change 2015/2014 (%)

Place in world exports

Refined cathode honey 1172.488 -14 14 Light petroleum derivatives 989.48 -29 37

Unrefined anode honey 760,997 -18 2 Other petroleum derivatives 682,658 -49 43

Medications in doses 670,555 -18 30 Wheat 605,964 -7 12

[ 16 ]



11

Electricity 601.259 14 14 Petroleum oils 402,951 -6 2 Sunflower seeds 402,462 -19 3 Car wiring sets 386.932 8 20 Electrotechnical equipment 291,658 23 20

Ores and concentrates of precious metals 278.348 -12 4

Copper concentrates 228.468 -19 24 Cigarettes 226.6 -24 21 Maize 208.39 -44 11 Soda ash 206.058 -17 4 Sunflower oil, raw 183.707 -1 5 Resistors 164,714 19 6 Processors, controllers 143.307 -9 30 Bicycles 143.063 -1 10

BULGARIA EXPORTS IN 2016

Bulgarian exports in 2016, measured in euro, mark an absolute record of 23.6 billion euros.Compared to the base year of 2001, the increase was 4 times.Bulgaria is ranked 62th among exporters.The groups of goods with the largest exports are electrical and electronics, fuel and electricity, machinery and apparatus. For the period 2012-2016, Bulgarian exports, measured in US dollars, decreased by 2%, while world imports declined by 4%. These trends are different for groups of goods, according to a survey prepared by the Center for External Economic Cooperation at BIA. The best is the export of electronics and electrical engineering with an average annual growth of 7%, with a world import growth of 1%. Exports of machines and apparatus also rose by 2%, while world imports declined by 2%. For these two important commodity groups, in some cases also for cereals, Bulgarian exporters gain market share and shift their competitors

[ 17 ]



12

to global markets. Losses are fuels and honey, where we lose market share and international prices are rising. Sixth and seventh in our export list are clothing and pharmacy, but there we lose market positions, followed by parts and assemblies of vehicles and plastic products, winning market positions. Experts estimate is the export of special production (about 808 million dollars), which is a growth of about 57% compared to 2015. The unsuccessful oil seeds have also been lost. Very high and constantly growing exports are registered under Chapter 99 Goods not classified elsewhere. Export Overview by Goods Goods with the highest value in our export list are cathode-ray copper , despite falling exports and losing market positions. There are light fuels, including heavy fuels, wheat and medication. These 5 goods account for 15.1% of our exports. More than 1% of exports are electricity, anodic honey, oilseed sunflower, cable car kits, electrical panels, ores and concentrates of precious metals, biodiesel. Among the leading products, a very large increase in market share (positive difference between our exports and our partners' imports) has parts for electrical panels - 36%, and biodiesel - 205% (biodiesel growth 2016/2015 - 495%). Rapidly growing oil, electronic components, electronic games, car seats, machine aggregates. All of them outpaced world imports by over 20%. Losers, apart from honey and fuels, among the more significant commodities are: oil-bearing sunflower, copper ores, and cigarettes. The growth potential, according to International Trade Center ITC Geneva, is greatest in pharmaceuticals, cathode, sunflower seeds, wheat, anode honey, maize, rapeseed and other low added value products (excluding pharmacy).

[ 18 ]



13

How is Bulgaria the most successful? Goods in Bulgaria , sorted by location in world exports, show some resilience. There is a new leader: Bulgaria ranks first in the world in export of clothing and shoes with asbestos threads. The only buyer is Poland, according to Bulgarian statistics, but Poland does not report imports from Bulgaria of this commodity. The export of reinforced rubber pipes and duck meat is gaining momentum. The Coriander, in which Bulgaria has been in the first or second place in the world for many years , marks a gradual decline, mainly at the expense of increased exports from Russia. The diversification of the markets is one of the problems facing the export of Bulgaria . According to the Herfindahl-Hirschman Index (HHI), a moderate concentration occurs at index values of 0.10 to 0.18, and over 0.18 is considered to be over-concentrated. Thus among the leading goods there is an excessive concentration of cathode copper, medium fuel, anode copper, car kits, copper ores, electrical components (HHI 0.64), cigarettes (0.51 ), bicycles, rapeseed , electronics, lead, steel rods, hydraulic motors, zinc, coach tubes, tractors (0.95 ), automatic circuit breakers, car seats and much more. According to the expert estimate, about 50% of the country's exports are classified as overly concentrated and without sufficiently diversified markets. Tractors, for example, are exported almost entirely to Romania, but Romania reports twice as much imports of tractors from Bulgaria. Table 1: Bulgarian exports of leading commodity groups to world imports

Goods group (according to the

chapters of the customs tariff)

Export million

USdollars

Growth of Bulgarianimports

2012-2016

Growth of worldimports

2012-2016

85 Electrical engineering and electronics

2532 7% 1%

27 Fuel, electric current 2406 -15% -19% 84 Machines and Apparatus

2083 2% -2%

74 Copper and copper products

1682 -12% -9%

10 Cereals 1112 -4% -6%

[ 19 ]



14

Losers, apart from honey and fuels, among the more significant commodities are: oil-bearing sunflower, copper ores, and cigarettes. Growth potential, according to ITC, is greatest in pharmacy, cathode honey, sunflower seeds, wheat, anode honey, maize, rapeseed and other low added value products (excluding pharmacy).

When deepening the study, for example on the potential of wheat, it appears that Bulgaria has average prospects compared to other leading exporters:

[ 20 ]



15

Similar is the picture with most commodities with a sufficient degree of diversification in the markets. Table 2: Bulgaria's place in the world export of the respective commodity

Goods 2014 2015 2016 000US$ Garments and shoes with asbestos - - 1 21 797 Reinforced rubber pipelines - 3 2 124 533 Cherries, temporary preserved 2 2 2 20 511 Duck liver 2 2 2 13 964 Unrefined anode copper 2 2 3 458 736 Oil-bearing sunflower 2 3 3 409 625 Rapeseed 4 4 3 145 055 Seats and covers for toilet tops 3 3 3 68 241 Duck meat - - 3 23 939 Soy flour 2 1 3 20 806 Copper sheet 4 3 3 16 116 Calcined soda 3 4 4 201 452 Ores and concentrates of precious metals 3 4 4 293 097 Leaf tobacco 4 4 4 164 710 Coriander seeds 2 4 6 10 873

[ 21 ]



16

Findings

The exchange rate of the US dollar against the lev has an effect on exports in the short term. Bulgarian exports manage to adapt to the changes in the course. Gradual changes in the course did not affect commodities with higher added value.

Groups of goods in the Bulgarian export list with relatively high added value are:

- Components for automotive and mechanical engineering such as hydraulics, machine assemblies, accumulators, bearings, cables, electrical and electronic products, electric hand tools;

- Refrigerators, freezers and sanitary faience; computing machines;

- Some pharmaceutical and medical devices;

- Optical products, sensors;

- Some software products for process management, games;

- Amateur Radio, Snowboard, Bicycles.

Major markets for commodities with higher added value are Germany, Italy, France, but our products are built there and then are being realized all over the world.

Bulgaria can increase its exports to developed countries by becoming a subcontractor for their companies and joining global supply chains. Over time, knowledge and skills will be acquired for wider self-entry into global markets under their own brand and development.

The increased competitiveness is mainly due to international companies in Bulgaria, and less to local firms. Regardless of the benefits of foreign investors, a number of raw materials and materials are not processed sufficiently deeply and the kilogram prices of Bulgarian exports are comparatively low. Rather, the exception is the case of embedded Bulgarian developments, regardless of the origin of the investments.

[ 22 ]



17

BULGARIA EXPORTS IN 2017 In 2017 Bulgaria's export to the EU increased by 10.8% compared to 2016 and amounted to BGN 34 518 700 000. Bulgaria's main trading partners are Germany, Italy, Romania, Greece, Belgium and France, which make up 67.5% of the EU Member States, according to the National Statistical Institute (NSI). In December 2017, exports to the EU increased by 2.7% compared to the corresponding month of the previous year and amounted to BGN 2 507 800 000. For exports of Bulgaria to the EU, allocated according to the Standard Foreign Trade Classification, in 2017, compared to 2016, the largest growth was registered in the sectors "Fats, oils and waxes of animal and vegetable origin" (30.3%) and " , classified mainly by type of material "(23.9%). The largest decline was observed in "Non-alcoholic and alcoholic beverages and tobacco" (14.8%). Bulgaria's EU imports in 2017 increased by 11.2% compared to the previous year and reached BGN 37 794.7 million at CIF prices. The largest is the value of goods imported from Germany, Italy, Romania, Spain and Greece. In December 2017, Bulgaria's imports from the EU Member States increased by 7.0% compared to December 2016 and amounted to BGN 3 280 700 000. For EU imports allocated according to the Standard Foreign Trade Classification, in 2017, the largest percentage increase was recorded in the Unfurnished (raw) non-consumable (excluding fuels) sector (45.6%) compared to 2016. Decrease was observed only in "Fats, oils and waxes of animal and vegetable origin" (5.6%). The foreign trade balance (export FOB - import CIF) of Bulgaria to the EU for 2017 is negative and amounts to BGN 3 276.0 million. At FOB / FOB prices (after elimination of transport and insurance costs on imports of goods) the balance is also negative and amounted to BGN 950.6 million. Machinery and parts for them are becoming the main export group in Bulgarian exports. It represents almost a quarter of the total value of goods sold abroad in the past year and in absolute terms it reaches BGN 12 billion. Exports of items from this group increased by almost 12% in 2017 compared to a year earlier, data from National Statistical Institute.

[ 23 ]



18

By comparison, in 2007 Bulgarian exports were dominated by raw materials - fuels, copper, pig iron, iron and steel. While commodities with higher added value are gradually coming to the fore in Bulgaria's foreign trade, primary products also continue to be reBGNnt. For example, the largest contribution to export growth in 2017 is copper and copper, followed by iron, iron and steel. Thus, the total amount of Bulgarian exports in 2017 reached 52.2 billion BGN, which is a growth of almost 11%. Strong trade with the EU , but the pace slows down And in 2017 the strongest market for Bulgaria is the EU - the main trade partners of our country remain the EU countries - 66 per cent of the ex port of Bulgaria . Goods exported to the Old Continent are for BGN 34.5 billion, which is 10.8% above the level of the previous year. The largest engine is sales of copper and copper. At the same time, the volume of goods sold in this group increased by 26.4%, thus the total contribution to the export growth reached 3.7 percentage points. The largest commodity group, however, is machinery, apparatus and parts for it, which account for one fifth of total exports to the EU during the year. For comparison, a decade earlier was copper and the textile industry. Bulgaria's strongest trading partner during the year is Germany, where the sales amount reaches just over 7 billion BGN, or 11.7% above the level of 2016. The machines, apparatus and parts of them cover BGN 2 billion of the value and are decisive for the increase with the copper products. Belgium, however, has a larger contribution to total exports. Here the value of sales increases by over 72% to nearly 2.2 billion BGN. The reason is copper - the prices of the raw material increase and the quantities sold are twice and a half above the level of 2016. Although Bulgarian goods in EU countries continued to grow on an annual basis, the pace slowed from 15.3% in November to just 2.8% a month later. In November 2017, honey has been a contributor to growth, with both quantities and prices growing. The amount of sales for the month reached BGN 304.4 million, which is 44% above the level a year earlier. Another

[ 24 ]



19

factor in favor of the positive change are machines, apparatuses and parts that contribute a total of 3.1 pp. to the increase for the month. At the same time, however, sales of cigarettes decreased by 44% to BGN 13.6 million, while weaker exports of medicines and clothing reduced growth by another 0.6 pp. The market outside the union shrinks

There is a great potential for impressive growth in exports, especially with non-EU countries - for these third countries, trade volumes are not so large. Sales of goods to non-EU countries in January 2017, however, recorded the largest decline since May 2016 - 16.3% on an annual basis. The strong turnaround in exports to the EU (annual growth of 27.7%) managed to offset the negative trend, bringing total exports in January 2018 to an annual growth of 12.3%. According to NSI data, the decrease to third countries comes mainly from the sales of fuels, which decrease in times. This is also explained by the weaker trade with Turkey, which is a major product market. The reason is probably the smaller volume of sales as the raw material rises from 2017.

By data up to September 2017, we ranked fifth among the Balkan countries in terms of exports - ahead of us are Greece, Turkey, Romania, Slovenia. By 2017, we ranked fifth in the Balkans by the size of GDP. Only Greece, Turkey, Romania and Slovenia are ahead of Bulgaria. Studies of B ULGARIAN T argovsko- P ndustrial P ala show an increased interest of the companies to expand cooperation abroad. China is one of the most desirable destinations for business contacts, shows a result of a BCCI survey, and our exports to the Asian country grow by 36 per cent in 2017, reaching 1.2 billion BGN. Refined copper, copper and electrical parts are among the leading goods in Bulgarian exports to China. The visits of the citizens of the neighboring countries of Bulgaria represent almost 44 per cent of all who visited Bulgaria in 2017. On red December 2017 is the second consecutive month in which exports to non-EU countries are declining. The decrease of 6.2% comes mainly from the

[ 25 ]



20

lower quantity of cereals sold and in particular wheat. Copper products also have a negative contribution. Although the price of non-ferrous metals in international markets is upwards from 2016, the quantities exported by Bulgaria drop drastically - by 30% in December compared to a year earlier. Looking at the year as a whole, however, the sales of copper goods increased by 18.7% and, along with the higher price of the raw material, this contributed 3.4pp. to total growth for the year. Plus, exports of "specific goods" include weapons and ammunition, printed publications, works of art and others (2.9 pp). Cast iron, iron and steel products added another 3.9 p. , but here's a catch. Given that the increase comes from a specific type of pipes that were imported 2-3 years ago from Russia, it is probably the unfortunate South Stream. That is, it is about re-export, and not about value-added production produced in the country . Exports to third countries are most significant in terms of fuel equivalent to 2.8 billion BGN, or 16% of the total in 2017. However, year-on-year sales decreased by 7.8% due to less exported quantities. Where do Bulgarian goods go? Bulgaria's largest trading partner outside the EU at the end of the year is Turkey again, with Bulgarian goods sold for over BGN 4 billion (10% up from 2016). One fourth of the sum comes from fuel trade, and another from the sales of copper and lead goods. A second place is Russia with 1.4 billion BGN, but much of the value is the pipes. Over 900 million BGN is the sum of Chinese copper products sold - the country is one of the largest users of non-ferrous metal in the world. Thus, the state ranks as third largest trading partner of Bulgaria outside the EU with 1.2 billion BGN total sales value.

Findings

In recent years Bulgaria's trade has illustrated a stable and steady growth rate. Bulgaria is the second largest producer of four types of goods, with

[ 26 ]



21

exports earning over 68 million dollars or more than 114 million BGN in 2017. Bulgaria is the second largest producer of fresh duck meat, duck liver, canned cherry, as well as asbestos clothing and shoes designed for use in extreme working conditions. The Bulgarian export is gradually turning to products with higher added value. It is positive that a consensus has already been formed between the Balkan countries to participate in the international tourism market with joint packages involving visits to several countries in the region at the same time. Bulgaria's persistence in integrating the Western Balkans and economic convergence is an important step in deepening trade relations and implementing joint infrastructure projects to drive growth in the region.

BULGARIA EXPORTS IN 2018

In January 2018, Bulgaria's exports to the EU increased by 26.9% compared to the same month of 2017 and amounted to BGN 3 094.3 million. Bulgaria's main trading partners are Germany, Italy, Romania, Greece, France and the Netherlands, which account for 69.1% of exports to EU Member States. In the case of Bulgaria's exports to the EU, allocated according to the Standard Foreign Trade Classification, in January 2018 compared to the same month of the previous year, the largest growth was recorded in the sectors "Unprocessed (raw) materials unfit for consumption (excluding fuels)" (93.2%) and "Fats, oils and waxes of animal and vegetable origin" (64.5%). The largest decline was observed in 'Mineral fuels, oils and related products' (39.0%). Imports of Bulgaria from the EU in January 2018 increased by 21.7% compared to the same month of the previous year and amounted to BGN 3,226.3 million at CIF prices. The largest is the value of goods imported from Germany, Italy, Romania, Spain and Greece. For EU imports, allocated according to the Standard Foreign Trade Classification, in January 2018, compared to the same month of 2017, the largest percentage increase was recorded in 'Mineral fuels, oils and related products' (48.9%) . No decrease was observed in any of the sectors.

[ 27 ]



22

The foreign trade balance (export FOB - import CIF) of Bulgaria to the EU in January 2018 is negative and is worth BGN 132.0 million . At FOB / FOB prices (after elimination of transport and insurance costs on imports of goods) the balance is positive and amounts to BGN 73.0 million. In the period January - February 2018, Bulgaria's exports to third countries decreased by 20.9% compared to the same period of the previous year and amounted to BGN 2 240.9 million. Bulgaria's main trading partners are Turkey, China, the United States of America, the former Yugoslav Republic of Macedonia, Serbia and the Russian Federation , accounting for 56.7% of exports to third countries. In February 2018, Bulgaria's exports to third countries decreased by 24.8% compared to the same month of the previous year and amounted to BGN 1 142.9 million.

Export to third countries

Source: NSI

[ 28 ]



23

In the period January - February 2018, for the exports of Bulgaria to third countries , allocated according to the Standard Foreign Trade Classification, the highest growth compared to the same period in 2017 was recorded in "Machinery, Equipment and Vehicles" (19.9% ) and "Items classified mainly by type of material" (15.2%). The largest drop was recorded in 'Mineral fuels, oils and related products' (68.9%) and 'Non-alcoholic and alcoholic beverages and tobacco' (52.8%). Bulgaria's imports from third countries increased by 9.3% in January-February 2018 compared to the same period of the previous year and amounted to BGN 3 483.4 million (at CIF prices). The largest value is the value of the goods imported from the Russian Federation, Turkey, China and Serbia. In February 2018, Bulgaria's imports from third countries increased by 2.9% compared to the same month of the previous year and amounted to BGN 1 654.2 million.

Imports from third countries

Source: NSI

[ 29 ]



24

In the case of imports from third countries allocated according to the Standard Foreign Trade Classification, the highest percentage increase was recorded in the sectors "Fats, oils and waxes of animal and vegetable origin" in the period January - February 2018 compared to the same period in 2017 (61.0 %) and "Machinery, equipment and vehicles" (40.8%). A drop was observed only in 'Mineral fuels, oils and related products' (17.1%). The foreign trade balance (exports of FOB (CIF imports) of Bulgaria to third countries in the period January - February 2018 was negative and amounted to BGN 1 242.5 million . At FOB / FOB prices (after elimination of transport and insurance costs on goods import) the balance is also negative and is worth BGN 984.7 million. In February 2018, the foreign trade balance (FOB exports - CIF imports) with third countries was negative and amounted to BGN 511.3 million. Bulgaria's trade with third countries and the EU - in total Between January and February 2018 Bulgaria exported goods totaling BGN 8,020.5 million, and compared with the same period of the previous year, exports increased by 2.9%. In February 2018, total exports amounted to BGN 3,828.2 million and decreased by 5.3% compared to the same month of the previous year. Between January and February 2018, the country imported goods totaling BGN 9 620.9 million (at CIF prices), or 11.1% more than the same period in 2017. In February 2018 total imports increased by 3.1% compared to the same month of the previous year and amounted to BGN 4 565.4 million. The total foreign trade balance (FOB exports - CIF imports) was negative during the period January - February 2018 and amounted to BGN 1,600.4 million. At FOB / FOB prices (after elimination of transport and insurance costs on imports of goods), the balance between January and February 2018 was also negative and amounted to BGN 992.1 million. In February 2018, the total foreign trade balance (FOB exports - CIF imports) was negative and amounted to BGN 737.2 million. At FOB / FOB prices the balance is also negative and amounts to BGN 471.2 million.

[ 30 ]



25

Foreign trade of Bulgaria and some macroeconomic indicators

The accession of Bulgaria to the European Union gives rise to structural changes in the economy. Trade turnover (sum of exports and imports of goods) permanently exceed the value of gross domestic product (GDP), excluding the crisis years 2009 and 2010.

The export-to-GDP ratio is gradually rising from around 42% in 2007 to 53% in 2017.

[ 31 ]



26

Despite the favorable development of exports, the growth of corporate taxes that companies pay for their operations on the domestic and foreign markets is clearly lagging behind.

Positive change is the declining role of oil exports. Over the period considered, total exports grew almost double, while exports of petroleum products decreased by 5% in value terms and by 6% in quantitative terms. Logically, fuel exports for the third consecutive year are giving way to the country's leading export list.

[ 32 ]



27

The two main petroleum products on the export list of Bulgaria are fuels and oils. The graph shows that there is no direct proportionality between the value of the export of fuel and the average international price.

When exporting oil, there is no price relationship. By 2014, oil exports are in minimum volumes.

[ 33 ]



28

The import-to-GDP ratio is an export-backward trend and gradually decreases from around 68% in 2007 to 60% in 2017.

For the period 2007 to 2017, imports from non-EU countries grew by 4%, while duties and customs duties collected remain within the same limits. P uring this period, virtually no change in the amount of customs duties.

[ 34 ]



29

Against this background, a deeper study is needed to explain the change in the ratio between imports and VAT and excise duties collected (both for imports and domestic sales). VAT is a flat rate, but the VAT collected has grown by 41%, which is more than the growth of imports but less than GDP growth, which is 55%. Excise, whose rate is constantly growing and the base is expanding, also grows less than GDP - by 50%.

Findings

In general, export is becoming an important driver of growth. Fluctuations in oil and fuel prices have no significant impact on total export volumes as Bulgaria exports more and more products with higher added value (fuels are shifted from their leading position in exports of electrical and electronics products and are closely followed by machine-building production). The negative trade balance gradually narrows. There is no logical explanation why the collection of duties is drastically behind imports, and why VAT and excise duty collection is lagging behind GDP growth.

[ 35 ]



30

SWOT ANALYSIS OF EXPORT IN BULGARIA Strengths Weaknesses • Stable macroeconomic environment and low direct taxes • Sustainable economic and financial environment (including macro framework, banking system, stock exchange) • Prudent and predictable fiscal policy • Flexibility and good distribution policy - quality products at competitive prices • Existence of qualified specialists • High share of the population with secondary and higher education • Breaking down the negative trends in technology in Bulgaria • Businesses increasingly understand the need for R&D for better competitiveness • A comprehensive network of universities • Traditions in the production of raw materials • Favorable climatic conditions and natural resources for the development of agriculture and tourism • Developed heavy industry • High growth rate of knowledge-intensive sectors of the economy

• Low labor productivity and resource efficiency of the economy • A significant proportion of entrepreneurs have insufficient marketing, financial, accounting and legal knowledge • Low level of technology and innovation in the country • Tough access to financial resources, especially for emerging companies • Low level of IT in the education system - high level of ICT qualification and lack of motivation of teachers to use ICT in the educational process • Low level of participation of the population in various forms of lifelong learning • Unfavorable demographic trends • Negative export trends - low export diversification and declining exports to third countries • Low R&D expenditure in the economy • High dependence of the economy on imports of resources and energy and a low degree of diversification of the import of energy resources • Low energy efficiency in production and living • The orientation of the mass tourism product towards the low-income segment of the tourist market • Lack of broadband Internet

[ 36 ]



31

access for a significant part of the country's territory and population • Low Intellectual Property

Opportunities Threats • The Bulgarian market is open and competitive • Reducing the costs of participating in the international transfer of knowledge, technology and goods • Expanding new technology sectors such as the Internet, multimedia, e-commerce, biotechnology • Much of the export is for European markets • Limited th domestic market and lack th new markets opens possibilities for new markets abroad • Young people's interest in high technology • Understanding by government authorities of the importance of the Information Society (National ICT Education Strategy) • Presence of European funds for business development • Existence of business supporting European networks for internationalization • Change in user needs • Unused opportunities for association between SMEs • Attracting foreign direct investment into science-intensive sectors of the economy

• "Brain Drain" • Low level of R & D expenditure, especially in business • Poor preparation for globalization and lack of established VT centers and parks • Poor cooperation between universities, research organizations and business • Education is not practical • Difficult realization of the labor market out of the educational system due to its low quality • Young people, after their dissemination, emigrated from the country • H Oujda constant training • Deepening unfavorable demographic trends and intensifying their negative effects on the labor market and social systems • Change in user needs • Risk of high damage caused by natural disasters and accidents due to unsupervised infrastructure; • Challenges caused by climate change • Significant increases in food prices due to climate change and the expansion of the biofuel industry globally. • Significant increases in the prices of resources (including energy) and their share in the cost of industrial

[ 37 ]



32

• Specialization in high-tech sectors using highly qualified workforce • Wide development of the financial engineering instruments in the country and increasing the importance of the public-private partnership • Development of alternative forms of tourism and new tourism products • Asserting the country as a producer of organic agricultural products

production • Loss of markets for Bulgarian companies due to competition from countries outside the European Union • Loss of Bulgarian tour operator markets due to increased global competition between tourist destinations

EXISTING ASSOCIATIONS WITH THE PARTICIPATION OF SMALL, MEDIUM AND LARGE ENTERPRISES AND ANALYSIS OF THEIR ACTIVITY

The main associations with the participation of small, medium and large companies in Bulgaria are 35, as follows: Bulgarian Association of Software Companies / BASSCOM / The Bulgarian Association of Information Technologies (BAIT) Cluster Information and Communication Technologies (ICT) Bulgarian Association of Electrotechnics and Electronics (BASEL) The Bulgarian Branch Chamber of Electronic Industry and Informatics (BBKEPI) Bulgarian Chamber of Commerce - Machine Building Bulgarian Association of Metallurgical Industry (BAMI) Bulgarian Branch Chamber of Energy Engineers Bulgarian National Association of Essential Oils, Perfumery and Cosmetics Branch Chamber of the Wood and Furniture Industry National Vine and Wine Chamber Union of Processors of Fruit and Vegetables

[ 38 ]



33

Union of producers of vegetable oils and butter products in Bulgaria Association of Dairy Processors in Bulgaria Association of Meat Processors in Bulgaria Association of Soft Drink Producers BAHPI - Bulgarian Association of Food and Drink Industry Branch Chamber of Industrial Bakers Federation of Bakers and Confectioners in Bulgaria Union of Sugar and Sugar Producers Union of Bulgarian millers Union of Brewers in Bulgaria Union of Poultry Breeders in Bulgaria Bulgarian Chamber of Chemical Industry Branch Chamber of the pulp and paper industry Bulgarian Association of Manufacturers and Exporters of Clothing and Textile (BAATPE) House of the Bulgarian Fashion National Association "Hotel, Restaurant, Cafeteria" (HoReCa) Bulgarian Hotel and Restaurant Association Chamber of Builders in Bulgaria National Real Estate Association (NRPA) Association of Bulgarian Pharmaceutical Manufacturers Union of the Printing Industry in Bulgaria Bulgarian Doors and Windows Association Bulgarian Association for Forwarding, Transport and Logistics Every branch of the economy has both common interests and common issues and it is good to have a professional organization that clearly identifies them and engages with their competent resolution. In governing bodies of successful trade unions usually attract professionally proven socially responsible. people, with a lot of knowledge and experience. Through them, both interests and problems more easily reach the

[ 39 ]



34

institutions and have a greater chance of being resolved. Conversely, it is also important that when a problem arises in the state, institutions first turn to sectoral organizations for competent opinion. Put summaries shteno, branch organizations are necessary bridge between government and business. The oldest branch structures date back to the 1990s - when each ministry has its own branch union. Since 1990 the business community in Bulgaria has undergone constant changes and experiments. Everything is new - laws, rules, structures. For many, the private sector, it turned in and only possible solution after the cuts and liquidation of enterprises and institutions. Hundreds registered tons businesses to avoid social security contributions and taxes. And we both face th to the avalanche barriers. Entrepreneurs initiation watt e and look for people of the same "energy level" similar problems and experience in the drilling of walls of obstacles. This is a motive for creating various business associations aimed at counteracting the pressure of the state. Some of the trade unions gradually start to gain experience and to perform the functions, for which they are called. A strong presence among the industry unions was marked by the Association of Producers and Retailers of Wines and Spirits. This is one of the oldest business associations - it was founded in 1991. It succeeded in achieving enviable success - the elaboration of a modern law on wine and spirits. It regulates the powers of the National Vine and Wine Chamber, whose status is a dream of many business associations. Part of the professional associations created by the line ministries of the centrally planned economy, also fought to gain independence (electronics, mechanical engineering). With the development of associations some of them have become true representatives of the entire business in the industry and others are provoking the creation of alternative and competitive associations. Others have existed (and continue to exist) to serve the personal interests of their creators and/or presidents. This has led to the Bulgarian syndrome of the twin associations. For example, bakeries and confectioners, honey producers and exporters, software companies and the computer industry have three business formations and/or associations.

[ 40 ]



35

The union of private hotel and restaurant owners in Bulgaria (now the Bulgarian Hotel and Restaurant Association) is among the high-ranking business associations. The association offers a variety of services, including facilities for obtaining credits and finding clients. It stimulates its members through annual awards - best restaurateur, hotelier, manager, investment of the year. In Bulgaria, however, there is still no law on branch organizations, which hinders their work very much and somewhat depreciates their importance. In many of the developed European countries, branch organizations are recognized by law and membership of companies is a must. An example of this is Austria and Germany. Rights and obligations are clearly laid down. They have been given serious responsibilities and have been monitored and controlled by both their members and state and municipal structures. As an example of their active and socially significant activity, their participation in the evaluation of the applicants for the supply of foodstuffs for public procurement can be mentioned. Serious compromises with quality are observed in Bulgaria. In Bulgaria due to lobbying interests, such participation is unthinkable. Another big problem and somewhat compromising the activity of the branch organizations in Bulgaria is that in some sectors they are numerous, competing, working at regional level and often serving private interests. This is defined as not serious by specialists, with only organizations with a national reach having the chance for success. SHORT AND LONG-TERM PROSPECTS FOR DEVELOPMENT AND EXPANSION OF BULGARIAN EXPORT In order for Bulgarian exports to be successful, it is necessary to focus the attention of economic policy on: • improving the quality of human resources and infrastructure; • increasing productivity; • introduction of innovative production approaches; • making development and research work an integral part of the production process, which will allow the deployment of new technologies;

[ 41 ]



36

• ensuring a transparent and functioning administrative structure facilitating business; • ensuring intellectual property protection and property rights. To put it differently, micro- and macroeconomic reform is needed to help reach the ultimate goals of achieving high and sustainable economic growth. In order to make fuller use of the advantages of the EU's common trade policy, besides adapting the Bulgarian export to the commodity structure of the Union's exports, it is necessary to adapt the export of Bulgaria to its geographic direction. The main directions of Bulgarian and EU export should be, if not fully synchronized, at least similar. Then the measures that the EU is taking to liberalize trade and improve the access of European goods to foreign markets will have a more real positive effect on the export of Bulgaria. There is currently a discrepancy in both the export commodity structure and the priority export directions of Bulgaria and the EU. There is a short-term opportunity for dynamising Bulgarian exports in the developing economies, both large and smaller. With the progress of the integration of the Bulgarian economy into the EU economy, the opportunities for the Bulgarian exporters to benefit from the liberalization achieved on the main geographical directions, on which the Union exports are realized, are expanded. In this respect, in the longer term, there are large reserves for the growth of Bulgarian exports to the US, Japan, Canada and some other developed economies. At the same time, some features of the geographical structure of Bulgarian exports outside the EU will be preserved. In the first place, the role of traditional trade and economic partners, which have been steadily present in Bulgaria's foreign trade for decades, such as Turkey and Russia, will be preserved. Another feature that could lead to a faster growth of Bulgarian exports to non-EU countries, especially in large developing economies, is the increase in agricultural exports, making use of the instruments of the Common Agricultural Policy more actively.

[ 42 ]



37

It should be borne in mind that local producers are faced with a high competitive pressure from EU producers due to the higher quality and standard of products originating in the EU, which poses a challenge to the diversity of their product structure, their efficiency and quality of production. If they are able to benefit from increased competitive pressure from European manufacturers and exporters through continuous improvement of manufactured products through the introduction of new technologies obtained both through foreign direct investment and through the work of innovation units in the individual company or joint ventures in the long run, their competitiveness on the European and world markets will improve. However, this will depend, above all, on their ability to open new "niche markets" and to increase the efficiency and quality of their production. And this is possible through greater specialization, the use of new technologies and application of innovative approaches and through the collaboration aiming at working together to enter external markets. RECOMMENDATIONS TO ENTERPRISES The following recommendations to enterprises wishing to carry out export activities are based on the presented trends and analyses of Bulgarian exports over the last four years and aim to identify the ways, methods and directions that Bulgarian enterprises can implement and follow in order to increase their competitiveness and their ability to successfully exit and stay in foreign markets: 1. Improving market research capability and opening new "niche markets"; 2. Improvement of manufactured products; 3. Flexible product policy to increase responsiveness to changes in consumer demand; 4. Increasing efficiency and quality of production - introducing quality standards and increasing productivity; 5. Implementation of new technologies and implementation of

[ 43 ]



38

innovative approaches in the organization and production of the company; 6. (if possible) Opening innovation units in the company itself or within a group of companies to take advantage of the scale; 7. Intellectual property development - trademark registration; 8. Investing in human resources and providing additional training for the staff; 9. Associations for collaborative work (production and/or scientific research) to enter external markets - creation/participation in clusters; 10. Collaboration with research organizations and institutes in the country and abroad; 11. Finding business partners abroad through the services of existing European business support networks; 12. Participation in international brokerage events, company missions and exhibitions in the country and abroad.

DEMAND OF RAW MATERIALS/SEMIMANUFACTURE/COMPONENTS

As indicated in the first part of this study, Bulgarian imports are growing by importing mainly mineral fuels, oils, fats, machinery, equipment and vehicles, as well as fruits and vegetables. This shows that the Bulgarian economy does not produce enough raw materials to meet the needs and that there is no state support in some production areas . The need for import of basic raw materials, as well as machinery and equipment necessary for the production of goods, inevitably increases their cost. Raw material prices on world markets, on the other hand, are constantly fluctuating and rising. The introduction in recent years of restrictions on exports of some raw materials by some countries, which are of exceptional importance as rare earth metals (e.g., praseodymium and neodymium and

[ 44 ]



39

some other chemical elements and minerals considered for important because of increasing their use in new technologies) is added to the volatility of prices. These restrictions, as well as other barriers to sustainable supply of raw materials, pose a real challenge to European industry and consumers and is to be overcome. The high cost of raw materials is among the main problems for enterprises, ranking right after the limited access to credit, which is traditionally the number one problem for SMEs not only in Bulgaria. Therefore, the attention of Bulgarian enterprises should be focused on the resource efficiency, which is one of the main drivers of competitiveness. According to the available data, the cost of raw materials accounts for an average of 40 % of the total production costs of European manufacturing companies, which increases to 50 % with the addition of energy and water costs, against only 20 % labour costs. Increasing resource efficiency actually requires a combination of a value chain based approach with the use of complex technical solutions at the enterprise level. It is believed that as a result of improved resource efficiency across the value chain, material costs could be reduced by 17-24% by 2030. Additionally, currently in the EU 60 % of all wastes are not recycled, composting or re-used, suggesting huge waste of valuable resources and missing significant business opportunities for small and medium-sized enterprises that can implement and sell environmentally friendly products, services and solutions. Business opportunities can also be created through enhanced integration of business-to-business models and green technologies into existing and emerging SMEs across sectors, including in the service sector. Improving the resource efficiency of SMEs has enormous potential for reducing production costs and increasing productivity, and hence lead to their successful realisation in foreign markets. At EU level, better use of resources is expected to generate an overall saving potential for European industry of EUR 630 billion per year. Too few

[ 45 ]



40

SMEs in Bulgaria and Europe are generally aware of this opportunity. In addition, SMEs are not getting enough support in their efforts to realize potential savings through improved resource efficiency. This can not only lead to deepening productivity gaps between companies in Europe that improve resource efficiency and those that do not, but will also weaken the competitiveness of European businesses as a whole, as well as the chances of many SMEs to ensure good positions in the world value creation chains. European SMEs are generally aware that resource efficiency is good, given that 75% of EU SMEs have reported an increase in their material costs over the past five years. At least 93% of EU SMEs have taken at least one action to increase their resource efficiency, and in most cases these are low-cost actions. However, only 42% of SMEs that have taken measures to improve resource efficiency have reported a reduction in their production costs. This shows the need of guidelines for SMEs to ensure the cost-effectiveness of investment in resource efficiency. At European level there are significant differences between Member States regarding the level of resource efficiency in the manufacturing sector. The use of energy and the generation of waste in a given type of production varies considerably between individual production companies in different European countries. Improving resource efficiency requires specialized knowledge that SMEs do not usually have, so they need guidance to identify the possible long-term benefits of upgrading their processes and organization in order to increase their resource efficiency. In addition, SMEs seeking funding for large-scale initial investments in energy efficiency sometimes find that financial intermediaries consider this area as a high-risk area. It is therefore important that SMEs are first and foremost encouraged to seek appropriate advice to improve their resource efficiency in targeted campaigns and, secondly, advice services to be provided in the regions, where the SMEs are from. OPPORTUNITIES FOR COOPERATION OF SMALL AND MEDIUM ENTERPRISES IN ORDER TO START EXPORT ACTIVITY AND/OR INCREASE ITS SHARE

[ 46 ]



41

The Bulgarian economy still has a weak export potential generated by SMEs because they still do not find enough niches on international markets. However, there are opportunities for competitive clusters in the country, as about 20% of enterprises assign certain stages of the production process to other enterprises. 1. Creating local and regional clusters

In Bulgaria, in recent years, in some sectors, cluster development has been sought, including through state support, as a means of gaining a competitive advantage, for example, to optimize costs or reach the required volume of production, making entering new markets more competitive. But also here is the uncertainty about the sufficient vitality of the existing clusters. In its 2016 publication, Dr. Monika Moraliyska from the University of National and World Economy (UNWE) points out that there is a view that cross-border cooperation in the Southeast European region can be promoted at micro-economic level (at company level) through the creation of cross-border business clusters by undertaking collaborative efforts in R&D to develop and implement innovations (Grupe and Kušić, 2005). She also quotes other authors, according to which the core of a regional economic agglomeration is precisely the competitiveness, so each region must emphasize on the creation and consolidation of strong industrial agglomerations (Porter, 2003; Cortright, 2006). A strong business cluster formed by neighboring countries could boost industrial growth in the region by facilitating operational efficiency, capital investment and innovation, which in turn will lead to increased productivity and job creation (Porter, 1990). Companies and organizations involved in a cluster generally have a higher competitiveness because business contacts with other cluster members are developing them in more favorable conditions. In terms of global development, the territorial development and geographical borders of clusters overcome administrative or sectoral constraints, because the relationships and dependencies between the cluster participants are constantly changing.

[ 47 ]



42

The advantages of the cluster approach and the benefits from its creation are associated with:

• Increasing productivity (through sharing of common resources, access to more and better information, achieving synergies, access to public goods, etc.), faster development of innovation (e.g. through joint research) and the creation of new companies (by filling market niches and expanding the cluster);

• Adaptability of clusters to the dynamic needs of the market. Clusters encourage communities to focus their efforts on existing productions and help cities and districts to focus their own economic development;

• The ability of strong clusters to help attract foreign investment. If they become lead centers for their industry, they attract key national and foreign investors;

• Benefits for small and growing businesses, for which cluster localisation close to competitors and their related industries can help them grow faster, be recognized and win a place on the market. In addition, group cluster purchases can also achieve economies of scale. Networks can be established along the supply chain. Experts also explain the usefulness of daily business contact with similar businesses. In addition, within the cluster, there may be discussions between members about their unique competitive advantages and the future challenges facing the sector.

The creation of a SME cluster with the participation of at least three of the neighboring Balkan countries could be considered as an innovative mechanism to promote entrepreneurship, business cooperation and competitiveness in all neighboring countries in the region. Ideas, such as the one on the development and validation of the Balkan brand - a trademark for the region, are well suited to the clustering approach's logic and tools. From this point of view, considering the creation of a regional cluster in an industry where countries have or could have competitive advantages as a region that is successful on European and world markets deserves deep attention and analysis by the government and the business.

[ 48 ]



43

Clusters require close interaction between entrepreneurs and institutions and cooperation at local and regional level. Thus, clustering can be done in many of the areas relevant to small and medium enterprises, for example in education and training, infrastructure and logistics, emerging markets, R&D, in the field of competition, and in the field of human resources. The potential for building clusters to mobilize local economies should be seen by national governments as a tool to promote economic growth in the SEE region. Such good practices have been observed in recent years in the European Union countries of Central and Eastern Europe such as Slovenia, Slovakia, Poland, Hungary and the Czech Republic, Dr. Monika Moraliyska also points out. 2. Finding business partners abroad through the services of existing European business support networks

There are different European and other networks that are geared to supporting the process of internationalization of businesses. The largest is the Enterprise Europe Network set up by the European Commission, which helps businesses innovate and grow on an international scale The Network is active in more than 60 countries worldwide. It brings together 3,000 experts from more than 600 member organisations – all renowned for their excellence in business support. In Bulgaria, the network is represented by 12 organizations in Sofia, Plovdiv, Stara Zagora, Yambol, Ruse, Dobrich, Vratsa and Sandanski. The business services that the Enterprise Europe Network offers are personalised services to each business. Each organization knows the local business environment and have contacts for business opportunities worldwide. The services are targeted both to the needs and the capabilities of the particular company and to specific sectors, and the network’s expert groups cover all key economic sectors, from healthcare to agrofood, from intelligent energy to fashion and textile. The types of Enterprise Europe Network services are:

• Support in establishment of international partnerships - by maintaining the world largest database of business, technology and project offers, participation in company missions and brokerage events;

[ 49 ]



44

• Advice for international growth - related to legislation in other countries and any market information related to specific countries;

• Support for business innovation - solution-driven services to help companies turn their innovative ideas into international commercial successes. The Network also provides support to SMEs in the following areas: • raising awareness and skills related to internationalization; • enhancing capacity in innovation management and participation in Horizon 2020; • successful partnerships in the fields of science, participation in European research programs, innovation, technology transfer, production, and trade; • participation in public consultations and reporting on specific EU policies, measures and legislative initiatives. All the services of the network are free of charge and the use of them by ambitious Bulgarian SMEs wishing to enter the international markets would certainly bring them only benefits for their businesses.

[ 50 ]



45

BIOBLIOGRAPHY 1. https://eu2018bg.bg/bg/economy 2. "Bulgaria's exports to the EU are increasing by over 26%", http://news.bg, 12 April 2018 3. "Exports grew by almost 11% last year", www.capital.bg , author: Lilia Ignatova , February 11, 2018 4. "Almost a quarter of the Bulgarian exports are on machines and parts", www.capital.bg, author: Lilia Ignatova, March 13, 2018 5. "NSI: In 2017, Bulgaria's EU exports grew by 10.8% compared to 2016", http://www.focus-news.net/news/2018/03/13/2498982/nsi-prez-2017-g-iznosat-na-balgariya-za-es-narastva-s-108-spryamo-2016-g.html, March 13, 2018 6. "Bulgaria is fifth in export on the Balkans", www.manager.bg , 26 February 2018 7. "Bulgaria's record exports - what are we most successful with?", www.expert.bg, July 21, 2017 8. "4 Goods Where Bulgaria is a Leader in Exports in the World", www.novinite.com, 10 August 2018 9. "BIA: Bulgarian exports grew four times for 15 years", www.investor.bg, 16 June 2016, Nadezhda Bocheva, Bulgarian Industrial Chamber 10. "Bulgaria is in the top 3 in the export of ten goods", www.capital.bg, Bulgarian Industrial Chamber, 19 July 2016 11. "Bulgarian Exports in 2016", Bulgarian Industrial Chamber, Author: Veselin Iliev, July 2017 12. "Foreign Trade of Bulgaria and Some Macroeconomic Indicators", Bulgarian Industrial Chamber, Author: Veselin Iliev, April 2018 13. https://www.eufunds.bg 14. http://ced.bg/bg/, Macroeconomic Framework for Technology Promotion in Bulgaria 15. https://fermer.bg, "Stoyko Kirovsky: Unfortunately, there is no law on the branch organizations in Bulgaria", 16 July 2018 16. "The Birth Forces of Branch Organizations", www.capital.bg, author: Mara Georgieva, 30 October 2000 17. "Bulgaria's foreign trade with the European Union - competitiveness of exports and the effects of trade liberalization on imports", Desislava Velinova, Agency for Economic Analyzes and Forecasts, 2006

[ 51 ]



46

18. "Some problems in Bulgaria’s adapting to the Common EU trade policy", author: Hadjinikolov, http://hadjinikolov.pro, 2010 19. Regional business clusters as a form of cooperation between the countries of Southeastern Europe, Dr. Monika Moraliyska, UNWE, 2016 20. "Small and Medium Enterprises", abstract, author: Miroslav Gospodinov 21. Green Action Plan: Helping SMEs to turn green challenges into business opportunities, Commission Communication, 2014 22. CCMI / 091 Commodity Markets and Raw Materials, OPINION of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Meeting the challenges of commodity markets and raw materials, COM (2011) 25 final

[ 52 ]

analysis of export industries – bulgaria · 2019-07-22 · after bulgaria's accession to the...

Documents