Swot analysis en

Ministry of Economy, R. Bulgaria

German Agency for Technical Co-operation (GTZ)

Center for Economic Development (CED)

Analysis of the Bulgarian Technology Development

Working Paper

All rights reserved. No part of this publication may be reproduced in any form or by any means, electronic, mechanical, photocopying or otherwise without quoting the project name “Macroeconomic Framework for Technological Development in Bulgaria” - Ministry of Economy, the financing organisation GTZ, and the main analysis developer - Center for Economic Development.

Sofia

January, 2001

Table of contents

Methodological Notes 7

Importance of the Technological Development for Bulgarian Competitiveness 9

Competitiveness of the Technological Environment in Bulgaria 14

Economic Analysis 20

Analysis of the statistics data in the general macro-economic framework for Bulgaria 1996 – 2000 compared to selected European countries 20

Bulgarian Foreign Trade in High Tech Products 28

Importance of the sector of small and medium-sized enterprises (SMEs) for the Bulgarian economy 31

Factors for Technology Development 33

Policy and Legislation in High Technologies (with emphasis on the information technologies) 33

Education and Technological Development in Bulgaria 45

The Financial System and Technological Development in Bulgaria 49

Fiscal Policy in Bulgaria Compared to Selected European Ccountries 55

Small and medium-sized enterprises 62

Sector Analyses 65

Software Industry 65

Microelectronics 77

Biotechnology 89

Automation 100

Appendix 1 Competitiveness Ranking of Technology and Infrastructure - Tables 113

Appendix 2 Aggregated Statistical for Bulgarian Economy and Technologies Development - Tables 117

Appendix 3 Detailed Analysis of Technology and R&D Related Statistical Data Compared to Selected European Countries 125

Appendix 4 Statistical Data for Foreign Trade of Bulgaria with Technological Products - Tables 137

Appendix 5 Statistical data for SMEs in High-tech Sectors - Tables 140

Appendix 6 Foreign Trade Regime of Bulgaria 143

Appendix 7 Overview of the Bulgarian Tax System 147

List of Tables and Figures

Table 1 Competitiveness Balance of Bulgarian Economy 13

Table 2 Degree of digitalisation of the telecommunication network by 31.12.1998 (in %) 17

Table 3 Factors restricting investment decisions in the industry in 2001 (Relative share of enterprises - %) 25

Table 4 Number of computers in the schools 46

Table 5 SWOT of Bulgarian Banking Sector 51

Table 6 SWOT of Bulgarian capital market 53

Table 7 Proposals for improvement of financial environment for technology companies 54

Table 8 Liability of VAT registration in EU member states 58

Table 9 The biggest IT market centers are represented in the following table: 66

Table 10 Number of IT companies on the Bulgarian market 66

Table 11 Structure of the turnover as per size of the enterprise 67

Table 12 Operative profitability of a company as per size of the enterprise (BGN) 67

Table 13 Computer Hardware Import 68

Table 14 Bulgaria ICT Market Characteristics (August 2000) 69

Table 15 Foreign Companies in Bulgaria 69

Table 16 Y2000 IT events in Bulgaria 70

Table 17 List of companies providing back-end microelectronics services 80

Table 18 List of units created in Bulgarian Biotechnology Sector 91

Table 19List of organisations performing R&D in biotechnology 96

Table 20 Relative share of measured parameters in the automation of continuous technological processes (%) 101

Table 21 Major types of automation means and devices for enterprises working under continuous technological process 101

Table 22Total production volume of automation means and devices, indices 102

Table 23 Scientists working within the Automation sector 109

Table 24 Producers and importers of technical automation means and devises 111

Table 25 Bulgarian companies for automation systems 111

Table 26 Foreign companies – producers of technical automation means and systems 112

Table 27 Technology - related competitiveness ranking 113

Table 28 Competitiveness indicators in telecommunications and Internet 114

Table 29 Competitiveness indicators in transport infrastructure 115

Table 30 Bulgaria: key macroeconomic and technology related indicators, 1991-1999 117

Table 31 Gross domestic product, growth rates, 1999-2000 (corresponding period of the previous year = 100, %) 118

Table 32 Key macroeconomic and technology related indicators on 13 candidate countries, 1998 119

Table 33 High-tech sector value added in Bulgaria, 1996-1998 121

Table 34 Production of the industrial enterprises and establishments, growth rates 1996-2000 123

Table 35 Production of the industrial enterprises and establishments by selected activity groupings, 1996-1998 124

Table 36 R&D expenditure in the period 1993 – 1998 / million Lv/ 125

Table 37 R&D expenditure in candidate countries for EU membership and in EU, 1990 – 1998 / million ECU/ 125

Table 38 Bulgarian foreign trade in High-tech products - Export&Import 137

Table 39 Bulgarian trade balance with high tech products 137

Table 40 High-tech Products in first 50 export commodities 137

Table 41 High-tech Products in first 100 export commodities 138

Table 42 Main markets of Bulgarian high tech export by products 139

Table 43 Distribution of enterprise by number of employed, economic sectors and activity groupings in 1998 140

Table 44 Distribution of employed by size of enterprises, economic sectors and activity groupings in 1998 140

Table 45 Turnover structure by size of enterprises, economic sectors and activity groupings in 1998 141

Table 46 Average turnover per enterprise by size of enterprises, economic sectors and activity groupings in 1998 141

Table 47 Average turnover per employed by size of enterprises, economic sectors and activity groupings in 1998 average per the activity grouping = 100 142

Table 48 Operational probability by size of enterprises, economic sectors and activity groupings in 1998 (lv.) 142

Figure 1 Economic Creativity Formation Mechanism 10

Figure 2: Technology Index: Competitiveness Ranking 2000 11

Figure 3 Technology Transffer: Competitiveness Ranking 2000 12

Figure 4 Innovation Index: Competitiveness Ranking 2000 12

Figure 5 Energy intensity of GDP, toe per 1000 US$ in 1990 prices 18

Figure 6 Electricity intensity of GDP, kWh per 1000 US$ in 1990 prices 19

Figure 7 Share of Total Economy Gross Value Added, % 23

Figure 8 Production of the Industrial Enterprises and Establishments, Growth Rates 1996-2000 (since the beginning of the year over the corresponding period of the previous year, %) 24

Figure 9 Distribution of the planned 2001 investments by type 25

Figure 10 Annual growth R&D Expenditures, % 27

Figure 11 Software purchases (m US$ ) 65

Figure 12 IT firms in Bulgaria 66

Figure 13 IT Market Development in Bulgaria, 1995-2001*, (USD m) 71

Figure 14 IT Market Development in Bulgaria by Category, 1995-2001* 71

Figure 15 Automation expenses in different economic sectors 106

Figure 16 R&D expenditure by sector of performance in 1998 126

Figure 17 R&D expenditure in business enterprise sector in 1998, % 126

Figure 18 R&D Intensity in high tech sectors 127

Figure 19 R&D intensity in 1998 and annual real growth of GDP, 1995 - 1999 128

Figure 20 R&D expenditure as a percentage of GDP in 1998 129

Figure 21 R&D personnel as a percentage of labour force in 1998 130

Figure 22 R&D personnel by sector of performance in Bulgaria 130

Figure 23 R&D personnel in high tech sectors 131

Figure 24 Employment growth rate in high technology industries and services, 1996 - 1998 132

Figure 25 Employment in high tech sectors in Bulgaria 132

Figure 26 Unemployment rate in high technology industries and services 133

Figure 27 Expenditure of acquisition of tangible fixed assets in high-tech sectors 135

Figure 28 Foreign direct investments in high-tech industries 135