for industrial sector Manufacturing of medical, precision and optical apparatus and instruments Annex to the EXPORT STRATEGY

Transcription

1 Annex to the EXPORT STRATEGY for industrial sector Manufacturing of medical, precision and optical apparatus and instruments Executive agency for promotion of small and medium enterprises 2012 This project is co-financed by the European fund for Regional Development through Operational programme Development of the competitiveness of the Bulgarian economy

2 This document was developed under project BG161РО PROMOTION OF THE INTERNATIONALIZATION OF THE BULGARIAN ENTERPRISES. Beneficiary: Executive agency for promotion of small and medium enterprises This document was developed with the financial support of Operational programme Development of the competitiveness of the Bulgarian economy co-financed by the European fund for Regional Development. The overall responsibility of the document s content lies with the Executive agency for promotion of small and medium enterprises and under no circumstances it can be accepted that this document reflects the official statement of the European Union and the Contract authority. 2 P a g e

3 Contents SITUATIONAL ANALYSIS AND DEVELOPMENTS WITHIN THE INDUSTRIAL SECTOR IN BULGARIA EXPORT ORIENTATION OF THE SECTOR GOODS AND MARKETS WITH AN EXPORT POTENTIAL COMPETITIVENESS OF PRODUCTS AND SERVICES FROM THE SECTOR WHEN EXPORTED ON INTERNATIONAL MARKETS MACROECONOMIC CHARACTERISTICS OF PRIORITY BULGARIAN EXPORT MARKETS. BILATERAL TRADE RELATIONS SUMMARISED RESULTS FROM THE ANALYSES (SWOT, PESTEL) BARRIERS TO THE INTERNATIONALISATION OF ENTERPRISES FROM THE SECTOR FINANCIAL ANALYSIS RESULTS FROM THE SOCIOLOGICAL SURVEYS AND PUBLIC DISCUSSIONS BIBLIOGRAPHY AND STATISTICAL SOURCES: P a g e

4 List of Tables Included: Table 1 Value added in the manufacturing industry (%) Table 2. High-technological exports (intra ЕU-27), % of total exports by Member States Table 3. High-technological exports (outside of ЕU-27), % of total exports by Member States Table 4. Investment in industrial sector Manufacturing of medical, optical and other precision equipment in the years of economic growth Table 5. Employees by industrial sector and activity (for all sizes of enterprises, by the IV quarter of the corresponding year) number Table 6. Industrial production indexes seasonally adjusted (by the month of December of the corresponding year) 2005 = Table 7. Main economic performance indicators for the manufacturing industry in the timeframe Table 8. Productivity, value added and employment provided by SMEs in sector С26 ( ) Table 9. Turnover indexes of domestic (Bulgarian) industrial sales (by the month of December of the corresponding year) 2005 = Table 10. General price indexes reported by manufacturers (by December of the respective year), 2005= Table 11. Main economic performance indicators for SMEs in sector С26 for Table 12. Main economic performance indicators for SMEs in sector С26 for Table 13 Number of SMEs in sector C26 by regions Table 14 Employment by regions in SMEs within sector C Table 15 Total export of the Bulgarian manufacturing industry ($ million, at current prices) Table 16 Table 16. General data, foreign trade in sector С26 in the period Table 17 Turnover indexes of export industrial sales (by the month of December of the corresponding year) 2005 = Table 18 Bulgarian exports Medical, precision and optical apparatus and instruments Table 19 Share of the medical, precision and optical exports in the total industrial export for P a g e

5 Table 20 Value of exported medical, precision and optical apparatus for the period Table 21 Number of Bulgarian micro enterprises exporting computer, electronic, optical and precision products (С26) Table 22 Number of Bulgarian small enterprises exporting computer, electronic, optical and precision products (С26) Table 23 Number of Bulgarian medium enterprises exporting computer, electronic, optical and precision products (С26) Table 24 SME export of specific product groups within medical, precision and optical Table 25 A list of Bulgarian export markets for product group Optical, photo, technical, medical, etc. apparatus (code: 90 by ITC, Geneva) thousand Euro Table 26 Index of exported values for product group Optical, photo, technical, medical, etc. apparatus (code: 90 by ITC, Geneva) thousand Euro Table 27 Product groups manufacturing and sales for Table 28 A list of significant Bulgarian export markets reporting growth for the period for product group Optical, photo, technical, medical, etc. apparatus (code: 90) Table 29 Leading export markets (top 30) for medical, precision and optical apparatus (ITC code 90) with an accentuated growth in Table 30 Coefficient of specialisation of the Bulgarian industry in the sector Optical, medical and precision apparatus (ITC code 90) Table 31 Specialisation coefficients (revealed comparative advantage) in industrial sectors in EU and World s largest economies for Table 32 Belgium: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Table 33 Germany: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Table 34 Italy: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Table 35 Russian Federation: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Table 36 USA: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between P a g e

6 Table 37 Leading export markets for product groups and a share of the total global imports Table 38 Leading export markets and the position of Bulgaria (medical and other instruments) Table 39 Leading export markets and the position of Bulgaria (precision measuring equipment) Table 40 Leading export markets and the position of Bulgaria (apparatus for auto tuning and control) Table 41 GDP per capita at market prices, expressed in PPS (euro) Table 42 Main economic indicators for Germany and its bilateral trade relations with Bulgaria Table 43 Price levels of some products in product group 90, imported by Germany Table 44 Main economic indicators for Belgium and its bilateral trade relations with Bulgaria Table 45 Price levels of some products in product group 90, imported by Belgium Table 46 Main economic indicators for France and its bilateral trade relations with Bulgaria Table 47 Price levels of some products in product group 90, imported by France Table 48. Main economic indicators for Italy and its bilateral trade relations with Bulgaria Table 49 Price levels of some products in product group 90, imported by Italy Table 50 Main economic indicators for Austria and its bilateral trade relations with Bulgaria Table 51. Price levels of some products in product group 90, imported by Austria Table 52 Main economic indicators for Turkey and its bilateral trade relations with Bulgaria Table 53 Main economic indicators for the USA and its bilateral trade relations with Bulgaria Table 54 Main economic indicators for China and its bilateral trade relations with Bulgaria Table 55 Main economic indicators for Russia and its bilateral trade relations with Bulgaria Table 56 Main economic indicators for Japan and its bilateral trade relations with Bulgaria Table 57 SWOT analysis Table 58 Output data: financial analysis of 11 SMEs from the sector Manufacturing of medical, precision and optical apparatus and instruments, (BGN thousand) Table 59 Net profit margin coefficient Table 60. Return on Equity (ROE) ratio Table 61 Return on Assets (ROA) ratio P a g e

7 Table 62 Efficiency ratio indicator Table 63 Financial autonomy ratio Table 64 Indebtedness ratio Table 65 Liquidity radios Table 66. Location of the SMEs in the sociological survey Table 67. Distribution of the surveyed enterprises according to the number of employees in Table 68 Annual turnover of the surveyed enterprises Table 69 Priority measures for promoting SMEs in the sector Table 70 Assessment of the abilities and knowledge of employees in the surveyed SMEs Table 71 Changes in turnover of SMEs for the period (basis 2007 = 100 %) Table 72 Number of SMEs according to the share of self-sustained exports for Table 73 Table 73. Evaluation of the importance of barriers (obstacles) to SME and overall sectoral export efforts for (in %) Table 74 Evaluations of the respondents to the degree of importance of factors tied to export success (in %) Table 75 Potential markets, according to the managers of the surveyed SMEs Table 76. Changes in export performance of the enterprise in the next 5 years (in %) Table 77 Frequence of use of some information sources (in %) Table 78 Evaluation of the effect on the SME export performance of the services provided by the BSMEPA (in %) Table 79 Share of exports carried out via web-sites (in %) P a g e

8 List of Graphs Included: Figure 1 Production indexes in sector С26: Manufacturing of electrical and optical equipment (before 2008) Figure 2 Production indexes of medical, precision and optical equipment (before 2008) Figure 3 Leading 5 importers of Bulgarian manufacturing production from sector 90 by STC of ITC (optical, photo, technical, medical etc. apparatus) for the period Figure 4 General graphic outlook of growth trends in exported values in production group Optical, photo, technical, medical, etc. apparatus (ITC code 90) Figure 5 Indexed GDP per capita in PPS for leading export markets (EU-27=100) Figure 6 Indexed comparative price levels for the leading export markets Figure 7 Average change in turnover within the surveyed companies by years (in %) Figure 8. Export markets for SMEs in the survey Figure 9. Percentile distribution of exports according to the number of export markets P a g e

9 Abbreviations used: BAEI Bulgarian Agency for Export Insurance BCCI Bulgarian Chamber of Commerce and Industry BIA Bulgarian Industrial Chamber BICM Bulgarian Industrial Chamber of Machine-building BSMEPA Bulgarian Small and Medium Enterprise Promotion Agency EC European Commission EU (EU-27) European Union (EU s 27 Member States) GDP Gross Domestic Product ITC International Trade Centre (Genève), a joint agency of the UN MEET Ministry of Economics, Energy and Tourism MEYS Ministry of Education, Youth and Science MLSP Ministry of Labour and Social Policy NAVET National Agency for Vocational Education and Training NGO Non-governmental organisation NSI National Statistical Institute OP Operational Programme OPC Operational Programme Competitiveness OP HRD Operational Programme Human Resource Development OPRD Operational Programme Regional Development PESTEL Political, economic, social, technological, ecological and legal macro analysis SME Small and medium enterprises SP Sectoral Programme STC Standard Trade Classification SWOT Strengths, weaknesses, opportunities, threats analysis UN United Nations 9 P a g e

10 SITUATIONAL ANALYSIS AND DEVELOPMENTS WITHIN THE INDUSTRIAL SECTOR IN BULGARIA According to current data small and medium enterprises in Bulgaria represent 99.7% of all the active enterprises in the non-financial sector (with a similar 99.8% among Member States of the EU). Perceivably a frequent emphasised priority for the executive and legislative authorities on a national and European level, traditional economic analysis and policy in their support are marked with a clear shift in the tone, recommendations and overall intensity in the last three years. The underlying reason is comprehensible: the global financial and consequently almost ubiquitous economic crisis that has unfolded. It is quite natural that the new range of industrial and market indicators required imminent short-term corrective measures. Just as it is necessary to plan accordingly for mid- and long-term perspectives. Not infrequently we have heard the opinion of leading experts that the crisis could represent a chance for Bulgaria. In order to stand a chance for a long-term growth of the entire industry a specific national comparative advantage needs to be located. And in the absence of one (or an insufficiently pronounced one) what could be done is to invest in the programmed development of a comparative advantage of production which could stimulate the overall competiveness of the Bulgarian economy. A large portion of its growth could be built around the identified spheres and industrial branches. With an appropriately developed legislative, political and institutional framework the creation of new and promotion of existing enterprises in the priority manufacturing sectors could improve significantly the position of small and medium enterprises on the international markets. Such a policy of stimulated competitiveness needs to stand out especially in the industrial sectors with higher added value of production and labour productivity, with hightechnological branches of the manufacturing industry being among the most suitable. Since the very beginning we turn out attention to the manufacturing industry, not only because it (and a specific branch of it!) is the subject of our analysis, but also because the basis of the export potential of the country which in turn statistically represents the true driving force behind national GDP creation is formed namely by the manufacturing industry. It corresponds on 10 P a g e

11 an average annual level to about 60% of the entire production volume in Bulgaria and about 18% of the added value. However, available data shows that this productivity still represents one of the lowest percentages within the EU. Even compared to the newer Member States. Table 1 Value added in the manufacturing industry (%) EU / / Bulgaria / / Data source: Eurostat The subject of our in-depth analysis sector C26 of the STC-2008, Manufacturing of computer and communication equipment, electronic and optical products and its subsector in particular, Manufacturing of medical, precision and optical apparatus and instruments are emphatically high-technological in their nature, depending essentially on a knowledge-based economy, research and technological know-how, investments in contemporary equipment and innovative development. We should start by pointing out that in none of the 28 administrative districts of the country sector C26 falls within the leading five economic activities, irrespective of the number and size of the enterprises. And as a whole the Bulgarian manufacturing industry is characterised by a relatively low rates of added value of production and it falls behind in its technological support and modernisation of the manufacturing processes. Even as the share of high-technological exports of the Bulgarian industry has shown a considerable rate of growth in the last 15 years, the following data sets show that it still stays near the bottom end of the rankings among EU-27 countries both in its export within the EU and towards third countries with such percentages that are only comparable to those of Latvia and Lithuania (and only recently with some of the countries most severely affected by the crisis such as Portugal and Spain). 11 P a g e

12 Table 2. High-technological exports (intra ЕU-27), % of total exports by Member States Belgium 5,5 6,3 6,3 6,4 7,8 8,6 8,7 7,4 7,3 7,1 6,9 6,2 6 6,2 7,8 Bulgaria n/a 2,9 2,7 2,2 1,9 1,6 1,5 2,3 2,5 2,2 3,1 4 3,7 3,6 4,1 Czech Rep. 4,6 5,3 6,4 7,3 6,9 6,5 8,4 11,3 11,5 12,9 10,7 11,9 13,2 13,4 14,3 Denmark 8,1 9,1 9, ,8 12,2 11,9 13,4 11,6 11,2 12,9 10,6 9,5 8,3 9,1 Germany 10,8 10,8 11,9 12,8 13,3 15,2 14,4 14,2 13,5 14,1 13, ,8 11,4 12,9 Estonia 4 7,2 7, , ,3 11,1 10,5 10,8 11,7 8,1 9,4 8,8 7,8 Ireland 32 37,4 35, ,2 42, ,1 29,9 27, ,8 21,1 18,4 Greece 3,4 3,4 3,4 4,2 5,3 7,4 6,8 6,2 7,6 8,7 7,3 7,2 5,4 5,2 5,5 Spain 4,5 4,9 4,5 4,6 5,4 5,8 5,7 5,3 5,4 5 5,1 4,6 3,9 3,6 4 France 10,6 11,6 12,7 13,3 18,4 21,1 21,2 18,3 17, ,6 14,2 12,2 13,1 16 Italy 6,8 6,8 6,8 6,9 6,9 8 7,8 7,2 6,1 6 6,2 5,6 5 4,8 5,4 Cyprus 2,5 2,4 2,6 2,5 2,7 2,8 3,4 3 3,8 14,1 36,4 23,5 16,4 23,8 23,5 Latvia 1,6 2,7 2,6 1, ,5 1,5 1,7 2 2,4 3,1 3,3 4 4,8 Lithuania 1 1,4 1,7 1,9 1,8 2,1 2,6 2,1 3,3 2,4 2,7 4,8 8,4 6,2 6,2 Luxembourg n/a n/a n/a n/a 16,2 21,8 29,7 25,7 31,1 31,9 40,7 42, ,8 42,5 Hungary 4,8 4,1 16,1 16,5 17,4 21,5 20,7 21,3 21,8 20,6 17, ,3 15,9 18,7 Malta 56, ,7 36, ,4 35,1 35,9 38,4 35,4 41,7 33,1 28,3 28,4 Netherlands 13, ,9 19,1 21,4 22,7 21,8 18,3 18,2 18, ,8 17,8 15,9 18,2 Austria 7,4 7,4 9,1 9,4 10,1 12, ,9 14,2 13,8 10,7 10,1 9,9 9,4 10 Poland 1,5 1,8 1,5 1,7 1,8 1,9 2,3 2 2,4 2,4 2,9 2,7 2,7 4 5,4 Portugal 4 2,4 2,7 2,9 4,1 3,7 4,9 4,2 4, ,9 2,5 2,6 2,6 Romania 1,1 1,1 0,8 1,4 3,1 5,7 5,7 3,3 2,9 3,1 3,4 4,2 3,7 5,8 8,2 Slovenia 2,4 2,5 2,7 2,9 2,9 3,4 3,1 3,1 3,2 3,4 2,7 3,1 2,9 3,8 4,3 Slovakia 2,4 2,5 2,9 3 3,3 2,6 3 2,5 3,4 4,7 6,2 5,7 4,8 5,2 5,8 Finland 12,1 13,1 15,6 19,2 19,7 22,3 18,5 19,1 16, ,6 13,8 14,2 16,2 13,5 Sweden 9,7 11, ,2 14,8 14,3 9,4 9 9,3 10,2 10,5 10,5 10,2 8,8 10,6 UK 21,1 20,8 19,7 23,5 26, , ,5 20,9 20,2 28,9 13,7 12,6 14,5 Data source Eurostat Last update Explanation Percentages given represent share of high-technological production out of the total national exports. High-tech products hereby include (except sector C26) product groups such as space apparatus, chemical and nonelectric machines, military equipment. 12 P a g e

13 Table 3. High-technological exports (outside of ЕU-27), % of total exports by Member States EU-27 15,7 15,7 16,5 18,1 20,4 21,4 21,2 18,9 18,6 18,5 18,7 16,6 16,1 15,4 16,9 Belgium 6 6 6,2 7,3 7,9 9 9,8 7,8 7,7 7,1 7,5 8,1 8,7 8,9 11,7 Bulgaria n/a 1,9 1,9 1,5 1,5 1,7 2,2 3 3,7 3,2 2,6 2,3 3,2 3,5 5,5 Czech Rep. 7,2 12,9 11,1 10,7 14,6 15,3 13,4 18,3 18,3 18,5 17,3 17,8 19,7 18,1 20,5 Denmark 11,9 11,6 14,7 13,6 16,6 19,7 18,7 18,7 17,9 18,3 19, ,8 16,3 18,9 Germany 13,2 13,3 13, ,8 17,6 18,3 16,8 17,1 17,7 17, ,2 14,2 15,9 Estonia 4,1 3,8 2,6 3,1 3,7 3,6 7,4 4,3 4,2 6,8 5,3 7,9 4,1 4,6 4,9 Ireland 35, ,7 44,2 37,7 36,5 36,8 33,9 29,9 31, ,5 29,1 29,7 27,8 Greece 2,2 2,4 2,5 5,6 5,7 7,6 5,2 7,1 7,4 4,2 3,7 3 3,6 6,8 8,5 Spain 9,5 9,1 7,8 7,9 7,6 7,9 7,3 7 7,3 7,6 7,1 5,8 5 5,5 6,2 France 23,9 21,8 25,2 27,9 34,4 33,5 33,5 28,5 27,9 27,9 30,4 24,9 25,2 25,6 26 Italy 8,4 7,9 7,2 8,2 8,7 9,5 9,9 9,8 8,8 8,9 8,1 7,6 7,5 7,6 8,6 Cyprus 9,2 8,7 2,6 3,6 5,9 3,4 4,8 4 4,8 19,6 18,5 16,3 10,2 8,5 13,2 Latvia 4,9 3,8 5,7 4,9 3,4 3,2 5 4,8 6,7 7,2 6 7,1 8 6,1 6,4 Lithuania 3,3 2,9 2,8 2,2 2,9 3,9 3,9 3,2 2,5 3,4 4,2 4,4 5,5 7,1 5,2 Luxembour g n/a n/a n/a n/a 7,3 12,7 14,2 17,1 17,2 6,9 14,5 22,9 20,6 23,7 37 Hungary 4,7 4,2 5,7 18,5 30,3 31,4 20,3 22,3 25,1 28,2 30,2 33,1 36,7 35,9 35,4 Malta 57,5 70,1 62, , ,6 75,9 74,1 71,1 62,2 66,8 62,1 58,9 56,9 Netherlands 19,7 22,6 18,1 27, ,2 24,3 20,5 21,4 20,7 21,1 20, ,2 19,1 Austria 9,2 9,1 11,4 11,5 17,5 19,6 19,6 21,2 18,9 17,3 18, ,4 14,5 16 Poland 4,1 3,8 3,4 4,7 4,3 6,9 4,5 4,4 4,3 4,1 4,4 4,7 4,3 5,1 7 Portugal 6,9 9,2 7,8 6, , ,6 21,7 22, ,1 17,2 6,8 Romania 3,2 1,9 1,2 1,7 2,1 1,8 2,7 2,4 4,6 2,9 2, ,4 8,1 Slovenia 5,6 7,8 6,6 7,1 6,1 7,2 8,9 8,7 11,4 9 7,6 8,1 8,6 8,2 8,3 Slovakia 7,8 8,7 6 6,6 5 4,9 4,9 3,9 3,7 4,8 8 6,9 6 5,4 5,9 Finland 12,8 14,5 16,7 18,5 22,5 25,5 25,1 23,8 26,9 25,8 30,2 23,9 21,9 18,7 14,4 Sweden 18,1 18,9 20,7 21, ,3 21,2 20,4 18,6 19,7 19,5 17, ,2 20,7 UK 24,4 24,5 26,7 26,1 28,2 30, ,4 25,8 25,6 24,8 22,3 20,8 18,5 22,7 Data source Eurostat Last update Explanation Percentages given represent share of high-technological production out of the total national exports. High-tech products hereby include (except sector C26) product groups such as space apparatus, chemical and nonelectric machines, military equipment. 13 P a g e

14 Again according to Eurostat data in the rankings of most specialised countries (by value added) in different sectors of the manufacturing industry, Bulgaria stands out as the second most specialised in textile, leather and shoe manufacturing (after Romania). While in the sector Electrical equipment, optical and precision apparatus the leading in such specialisation are countries such as Finland and Hungary, and volume-wise the rankings are topped by Germany and France. In Bulgaria the most significant industries in terms of value added and specialisation ratings are construction and media/communications (volume-wise, and as we can see not even manufacture related), and at the same time our specialisation falls on textile and leather industries, as well as network supply of energy. The second one also not manufacture related. We can clearly outline the lack of priority development in high-technological sectors. Crucial in such a set of circumstances is the retardation in this respect of SMEs (although this regards a general trend in apparent differences with larger enterprises within the EU-27). C26 is the third most important European manufacturing sector in terms of value added (after basic metals and metallic products, followed by petroleum and chemical products) but the Electric, electronic, precision and optical equipment is characterised by relatively large enterprises that achieve a higher-than-average productivity. Datasets validate this trend before the crisis, just as they do nowadays. In Bulgaria during the years of continuous and stable growth, before the crisis with 2005 being a peak year among most of the industries we notice that C26 is among the sectors that fall behind in their growth prospects. To be more specific, the data for the manufacturing of medical, precision and optical apparatus and instruments according to the NSI corresponds to 0,6% of overall manufacturing industrial output, creating 0.9% of the value added and providing 1,0% of all employment in the non-financial sector. The gap from the main EU competitors is considerable just as a comparison, the average value of the 27 countries points to a share of 2,1% of the manufacturing industry. 14 P a g e

15 Table 4. Investment in industrial sector Manufacturing of medical, optical and other precision equipment in the years of economic growth All types of enterprises ЕС27 (2005) Share of exports in overall sales (%) Share of added value of production (%) Gross investment in durable assets (million euro) Gross investment in machinery and equipment (million euro) Investment coefficient (gross investment/value added, %) R&D expenditures (million euro) Profit rate (%) Share of gross operating excess in value added (%) Data source: NSI The above table illustrates the efforts of owners and upper management of the enterprises to make up for the perceivable disparity in the creation of added value which is among the dominant characteristics of high-technological production. Any decent indicators of investment intentions (with an emphasis on the inverse relation with the increasing added value) are limited primarily on durable assets, such as machinery and equipment. A policy which would have effect on said differences in the immediate production processes, technology support and peripheral activities. On the other hand to influence the potential and perspectives for a sustainable growth in competitiveness undoubtedly one needs investment in R&D, namely where committing any resources is thought apparently not so pressing and/or impossible at the moment in time. Existing alternatives license purchase, royalty payments, sub-contracting functions with leading technological developers are all valid strategical solutions for raising the general competitiveness and the key importance of innovative development that is characteristic of the sector in question. In order to gain an insight into some numerical outlines of the general state of sector C26 Manufacturing of computer and communication equipment, electronic and optical products, the more narrowly defined economic activity Manufacturing of medical, precision and optical apparatus and instruments and their development trends in the last decade, we will present some dynamic time series of publicly available statistics that will be analysed and will render an account of the principal and most influential recent tendencies. 15 P a g e

16 Table 5. Employees by industrial sector and activity (for all sizes of enterprises, by the IV quarter of the corresponding year) number IV IV IV IV IV IV IV IV IV IV IV III* Industry overall Manufacturing industry Manufacturing of computer technologies, electronic and optical products Structure (%) Industry overall Manufacturing industry 85 85,7 86,29 86,87 87,4 87,89 88,43 88,19 88,29 87,16 86,89 86,988 Manufacturing of computer technologies, electronic and optical products 2,00 1,83 1,71 1,66 1,67 1,72 1,78 1,66 1,60 1,57 1,60 1,40 Manufacturing industry Manufacturing of computer technologies, electronic and optical products Data source: NSI 2,35 2,13 1,98 1,91 1,91 1,96 2,02 1,88 1,81 1,80 1,84 1,61 16 P a g e

17 Table 6. Industrial production indexes seasonally adjusted (by the month of December of the corresponding year) 2005 =100 year by month XII XII XII XII XII XII XII XII XII XII XII X* Industry overall 83,2 81,3 83,9 95,7 110,1 117,6 117,7 124,7 114,1 100,2 106,9 105,8 Manufacturing industry 70,6 66,2 74, ,2 115,6 123,2 122,3 109,8 93, ,3 Manufacturing of computer technologies, electronic and optical products Data source: NSI 79,5 104,8 154,3 111,8 102,6 190,6 103,4 113,8 108,2 137,2 155,9 120,1 Figure 1 Production indexes in sector С26: Manufacturing of electrical and optical equipment (before 2008) Data source: Eurostat Such trends are easily comparable to the data about the growth in production in our specific area of interest Manufacturing of medical, precision and optical apparatus and instruments : 17 P a g e

18 Figure 2 Production indexes of medical, precision and optical equipment (before 2008) Data source: Eurostat As we can observe in the presented tables and graphs, regardless of the phases of current economic development the analysis of the data shows a relatively stable (even if gradual and not always consistent) and lasting increase in the production indexes, with the main tendency being that fewer and fewer employees prove sufficient to maintain and even expand current levels of industrial production in the sector. One logical explanation of the presented statistics could be found in the increased average labour productivity per employee, as well as the overall manufacturing productivity in the sector. And indeed, the data confirms trends which speak of growing average productivity with generally all manufacturing enterprises presenting figures that relate proportionally to those of the SMEs alone. Table 7. Main economic performance indicators for the manufacturing industry in the timeframe Class Number of enterprises total Out of which: SME Turnover BGN thousands Out of which: SME P a g e

19 Value added (according to factored costs) BGN thousands Out of which: SME Employees number Out of which: SME Labour productivity BGN thousands 13,1 13,2 15,0 Out of which: SME 11,2 13,2 15,0 Data sources NSI and Eurostat For small and medium enterprises in sector C26 Manufacturing of computer and communication equipment, electronic and optical products and accorgindly in the segmented economic activity Manufacturing of medical, precision and optical apparatus and instruments, after all, the change in the above discussed indicators appears to have been even less positive during the crisis years. According to Eurostat data: Table 8. Productivity, value added and employment provided by SMEs in sector С26 ( ) Number of SMEs in sector С Labour productivity (, thousands) 9,4 8,8 Value added as a share of manufacturing industry (%) 2,2 1,9 Share of employment provided by the manufacturing industry 1,6 1,5 Data sources Eurostat Taking note of the practically inconsiderable differences with the data provided by the NSI for the same period, the trend that has confirmed itself is one of stagnation and lowered general productivity in SMEs in the sector. At least until 2010 when amidst the continually falling employment numbers we begin to notice an increase in value added, with the corresponding higher average labour productivity in those same SMEs. If they continue to report lower export volumes but higher total turnover for the sector, only a stabilised internal market demand could contribute to offsetting the negative trends in export performances. Table 9. Turnover indexes of domestic (Bulgarian) industrial sales (by the month of December of the corresponding year) 2005 = 100 year by month XII XII XII XII XII XII XII XII XII XII XII X* Industry overall 83,6 87,7 104,7 94,8 114,9 126,7 142,7 168,9 178,1 150,0 161,4 155,5 Manufacturing industry 75,7 75,6 82,5 88,8 110,0 122,4 144,0 155,7 157,4 135,6 136,9 139,5 19 P a g e

20 Manufacturing of computer and communication equipment, electronic and optical products Data source: NSI 82,3 105,9 154,7 130,2 108,5 219,9 120,5 124,7 116,5 108,9 143,0 71,1 Domestic market turnover figures confirm the peak 2005 in relation to the overall growth that is characteristic of the decade, with the considerable decrease in 2008 and 2009 and the relative recovery in What really stands out within the datasets is the difference with the general industrial turnover indexes lower values almost throughout and especially after 2005 when it is even more pronounced in comparison with the average numbers of the manufacturing industry as a whole. We can find confirmation of the recovery trends in domestic market turnover for 2010 but that can be attributed to a number of factors, amongst which we can also cite the average price indexes reported by the manufacturers: Table 10. General price indexes reported by manufacturers (by December of the respective year), 2005=100 year by month XII XII XII XII XII XII XII XI* Industry overall 93,9 105,2 114,2 125,9 126,2 127,3 142,8 149,5 Manufacturing industry 93,9 104,8 112,2 123,3 117,6 121,5 135,9 142,9 Manufacturing of computer equipment, electronic and optical products Data source: NSI 95,1 104,8 106,9 105,1 106,5 103,8 110,5 110,8 Given the higher average production value (which hers does not show a leading role typically attributed to a high-technological segment and lags behind in its growth compared to the manufacturing industry as a whole) we cannot be sure whether this is due to the rise in the quality of produced goods, or merely to the higher raw material, energy and overall production prices. What we can me more tempted to affirm, however, is that if we aim at achieving a strategic and long term development and growth of a high-technological manufacturing sector with aspirations to global competitiveness, then domestic consumption can merely represent a temporary and short-lived remedy. Objectively speaking, expectations of a sustainable growth of the industrial sector in question are related mostly to improved indicators in the exported production 20 P a g e

21 and ever higher added value, both of which should be able to assure conditions for growth and development of the enterprises in the sector. Trade sector (STC-code) Table 11. Main economic performance indicators for SMEs in sector С26 for 2009 Enterprises Turnover Value added (according to factored costs) Employees Exports Labour productivity BGN thousand Number BGN thousand BGN thousand , confidential 272 confidential none confidential confidential 102 confidential confidential confidential 35 confidential Trade sector (STC-code) Table 12. Main economic performance indicators for SMEs in sector С26 for 2010 Enterprises Turnover Value added (according to factored costs) Employees Exports Labour productivity BGN thousand Number BGN thousand BGN thousand , confidential confidential confidential confidential confidential confidential confidential 24 confidential The data is elaborated according to Structural Business Statistics methods NSI 21 P a g e

22 The above tables show specific data for the analysed industrial sector Manufacturing of medical, precision and optical apparatus and instruments. It encompasses codes 26.5 Manufacturing of devices and apparatus for measuring, testing and navigation; manufacturing of watches/clocks, 26.6 Manufacturing of emitting electromedical and therapeutic apparatus, 26.7 Manufacturing of optical devices and elements, and photographic equipment and 26.8 Manufacturing of magnetic and optical storage media, non-recorded (according to STC-2008). The total number of small and medium enterprises decreases from 153 to 144. This holds true also for the number of employees (from 2527 to 1964). In the sectors where we have access to all relevant information regarding turnovers, exports and value added we can see that the previously defined trends confirm the conclusions made about the overall state of sector C26 Manufacturing of computer and communication equipment, electronic and optical products maintaining stable turnovers and value added (given she decrease in employment provided) with a relative reduction in export values for Data for the sector development in the last decade on the other hand also describes another stable trend for the period in question an almost uninterrupted increase in the share of exported production out of the total volumes manufactured: from barely 13,7% in 2003 to 42,4% in 2005, to the considerable 74,8% in This undoubtedly emphasises the dominant export orientation of most enterprises in the sector. (Given the fact that Bulgaria s main trade partners for this type of production are Euro-zone countries we can comprehend the net drop in overall exported value by 33,5% in 2010). After what we perceive has been an essential re-orientation in the trade strategies of the enterprises in the sector, nowadays the share of exports (out of the total sales) has exceeded the average percentage that is reported by the manufacturing industry and as such we can definitely count this orientation not as a trend but as a characteristic trait of the sector. In the subsector within sector C26 Manufacturing of computer and communication equipment, electronic and optical products that is the subject of our more narrow analysis (medical, optical, precision) the enterprises with micro and small sizes are the more frequently reported ones. General economic and market changes affect more profoundly their stability and the precarious demand of the recent years on the global markets, as well as the difficulties in entering and re-positioning, are a more than expected consequence and proof of their vulnerability. All of this stresses the importance and need of a longterm strategic orientation of the sector to sustainable models of development and an accent on the innovative character of this type of production. 22 P a g e

23 A more in-depth analysis of the structure, trends and the product groups included in the exported production is available further down in the present Annexes. In the above-described definitive re-orientation to the export markets (and the inevitably increased quality requirements) Bulgarian SMEs from the sector report a slow but stable growth in the share of produced added value. Reaching 30,6% in 2005, this percentage is considerably higher than the average one produced by the Bulgarian manufacturing industry. And after a period of relative stagnation we record values of 30,9% in 2009 and 31,8% in Thus, however, we confirm the previously mentioned gap with EU manufacturing performances by roughly 10% on all average yearly indicators during the decade. The necessary stable improvement in the ratio value added to production manufactured could position more successfully Bulgarian enterprises on the global markets; but for that to happen we need a lasting and systematic improvement of the technological, but above all of the innovative and R&D support of the manufacturing process. With view to achieving this technological and ideological development of the sector, the enterprises need to plan for certain investment expenditures. Despite some hardship in finding specific investment data for the subsector in question, general data for sector C26 Manufacturing of computer and communication equipment, electronic and optical products reveals investments (both in fixed assets and R&D) that peak in 2007, a significant decrease in 2008 and 2009, with a slight stabilisation in When funds and resources are insufficient within the enterprises themselves of course, partnering with foreign companies and attracting direct foreign investment in the necessary areas are both valid and inviting scenarios for small and medium enterprises. (The capabilities of the SMEs themselves in investing in fixed assets alone are manyfold smaller.) Here also we have NSI data that shows for the entire sector Manufacturing of computer and communication equipment, precision and optical products a considerable stagnation in direct foreign investment in the enterprises: 62,13 million for 2008; 60,92 million for 2009 and 68,48 million for 2010 compared to levels of 193,67 million for the same category of manufacturing according to data for The intensity of investment in the industrial sector in question may be lower than the average reported by the manufacturing industry in general due to the absence of heavy machinery and extensive production facilities; what is relied upon is labour-intensive activities and the related advantages deriving from lower labour costs. Undeniably however, the trend that speaks of lower 23 P a g e

24 shares of expenditures in acquiring equipment and especially the extremely low investment in any type of intellectual and innovative technological developments is among the serious problems that enterprises have to solve in terms of their mid- and long-term prospects of development and competitiveness improvements. At the present such a comparative advantage (based purely on labour-intensiveness and occasional import of contemporary equipment that may cover basic existing criteria) could have its role and weight in forming the present export positions of the SMEs in the sector. But with the continuous growth of labour costs when factoring in all social security allowances and deductions, tax-related and other perceivable negative fiscal burdens (especially having in mind the overall European state of public debt) such manufacturing needs to become more capital-intensive in order to survive. This leads us to the impending need to define and access alternative sources of financing, flexible financial engineering and strategic participation in joint partnerships and projects that share expenditures leading to growth and investment in the necessary areas, and that ultimately give access to diversified outside sources of financial support. In this case we mean principally the European Operational and Structural Programmes, the Framework Programmes for science and cooperation and innovation; but also various forms of production cooperation, as well as purely financial instruments offered by specialised funds and European financial consortia such as the apposite JEREMIE instrument, created in support of small and medium enterprises and functioning since the end of 2011 in Bulgaria. Increasing the presently set 2% that is appropriated for R&D-related financing in all of the Bulgarian Operational Programmes combined would also represent a noticeable advance. And as far as indicators for profitability (returns, profit, operating excess, etc.) there is an applicable separate section on financial analysis of SMEs manufacturing medical, precision and optical products. Let us now turn our attention to some of the data for the regional distribution and development of enterprises in the sector on a (both SMEs and large ones). According to MEET data for 2011 the industrial sector manufacturing computer technology, electronic, optical and precision products (C26) encompasses about 1,2% of the total industrial manufacturing in the country and created roughly 1,4% of the added value in the industry. The salary levels in the sector are considered average compared to national distributions: average monthly remuneration by the end of 24 P a g e

25 2010 amounted to BGN 697 and the sector provided about 1,8% of the employment in the manufacturing industry. Actively producing companies in the sector are thought to be around 1200, with 363 of them considered SMEs by the end of Almost half of all the enterprises are situated on the territory of the South-West and South-Central planning region (NUTS II level). As we mentioned earlier, the total number of SMEs for the specifically defined and analysed sector of interest is 144 by the end of 2010; however we do not have data for the regional distribution of these enterprises. Human resource development for the sector is supported as a result of the functioning 20 higher education institutions,121 professional secondary-school institutions and 7 private colleges. For micro, small and medium enterprises manufacturing computer, electronic, optical and precision products (coinciding with sector C26 according to STC-2008) we have the following data by Eurostat on their regional distribution: Table 13 Number of SMEs in sector C26 by regions Bulgaria (total) North-West North-Central North-East South-East South-West South-Central Not overlooking the marginal differences in the data provided by Eurostat and the national statistic sources (3 SME, most likely due to differences in statistical calculation methods), we can clearly find confirmation in two of the anticipated trends. The first one is that in the most-developed region in the country, the South-West, we have the strongest presence and accordingly the conditions for development of a high-technology manufacturing activity such as the one in question. The necessary human resources, material, infrastructural and overall conditions and requirements for development of the enterprises reflects 25 P a g e

26 on the extremely low sectoral activity and presence in the least developed Bulgarian (and according to Eurostat data, in the entire EU) region: the North-West. The other easily perceivable trend is that out of the 391 total SMEs in the sector at the beginning of the crisis (2008) we have a drop to 383 in 2009, and according to NSI even 363 in Besides the overall decrease in the number of enterprises, we also have a sharp reduction in the total employment provided by them: Table 14 Employment by regions in SMEs within sector C26 Share of the sector in the total manufacturing employment Change in the number of employees (%) Bulgaria (total) 1,6 1,5-16,5 North-West 0,5 0,6-10,1 North-Central 1,1 1-22,3 North-East 0,9 0,9-14 South-East 0,2 0,2-7,3 South-West 2,9 2,7-15 South-Central 2,1 1,8-18,6 Data source: Eurostat Separate data for the SMEs divided according to their regional productivity, added value and indexes of production and sales we do not have at our disposal, and we thing it highly likely that the overall SME data from the sector will find their direct proportional statistical reflection in the regional distribution of the same trends as well. 26 P a g e

27 EXPORT ORIENTATION OF THE SECTOR We now turn our attention to the export orientation of the Bulgarian manufacturing industry, sector C26 Manufacturing of computer and communication equipment, electronic and optical products and the medical, optical and precision production in particular. A starting point will be some general data tracing the volume of exported goods and services by the manufacturing industry in the last few years which are thought to confirm the analysis made so far a decrease in 2008 with a slight recovery in 2010: Table 15 Total export of the Bulgarian manufacturing industry ($ million, at current prices). For the year: Total global exports ($ million, at then current prices) Source: WTO The stable growth in the exports of sector C26 Manufacturing of computer and communication equipment, electronic and optical products goes along the same yearly trends, with the last decade showing a decrease in the exported volumes at the end of 2008 and entire The partial recovery concerns 2010, while in 2011 the Bulgarian manufacturing industry from the sector has the opportunity to finally approach a zero trade balance, having in mind the increase in the exported production compared to the lack of improvement in the domestic consumption of this category of goods. Table 16 Table 16. General data, foreign trade in sector С26 in the period year Export FOB Import CIF Balance Trade volume +/- % thousands %share +/- % thousands %share +/- % thousands +/- % thousands 2000 / ,6 / ,6 / / , , ,6 38, ,9-45, , , , ,7-1, ,8 9, , , , ,8 5, ,6 1, , , , ,8 25, ,7-29, , , , ,9-0, ,3 17, , , , ,1 20, ,3 9, , , , ,3 9, ,2 20, , , , ,3 24, ,3-57, , ,3 %share 27 P a g e

28 2009-9, ,5-17, ,6 30, , , , ,5-8, ,3 84, , ,4 2011* **33, ,5 **11, ,2 **304, **21, ,3 * data until September 2011 ** Compared to September 2010 Data sources: NSI and MEET Similarly to the domestic consumption for the sector, we have a series of indexed data for the turnover of exported production on the foreign markets by the industry as a whole, as well as the sector in particular: Table 17 Turnover indexes of export industrial sales (by the month of December of the corresponding year) 2005 = 100 year by month XII XII XII XII XII XII XII XII XII XII XII X* Industry (total) 64,2 55,0 73,5 69,3 91,5 112,2 120,6 139,3 97,0 110,3 176,9 203,2 Manufacturing industry 60,4 53,7 73,0 68,5 91,9 110,1 119,8 140,0 98,3 113,8 180,0 205,7 Manufacturing of computer and communication technology, electronic and optical products Data source: NSI 77,8 83,7 114,0 64,1 94,9 111,0 124,0 127,5 121,4 155,6 335,6 238,0 A comparison of the domestic and export performance shows that consumption of such high-technology goods ultimately has contracted more nationally and the enterprises in the sector cannot maintain high turnovers merely by domestic sales. And while 2010 is marking a general increase (for both domestic and exported volumes), recovery for the levels of sales on the global markets is quite pronounced and reports exceptional indexed improvements according to Bulgarian national statistics: from 155,6 during the crisis 2009 (naturally compared to the traditionally peak industrial 2005); passing through turnover index values of 335,6 for 2010 (again at 2005=100); and only in the first ten months of 2011 we record turnover indexes of 238. This data given the not so exceptional production and demand indexes globally speak of a considerably improved positioning of our enterprises that form the sector s industrial activity. Narrowing the present analysis to the exported Bulgarian medical, precision and optical apparatus and instruments we notice the expected similar trends of growth until 2008, stagnation (with a slight decrease) in 2009 and recovery in P a g e

29 Table 18 Bulgarian exports Medical, precision and optical apparatus and instruments year amounts (BGN thousands) , , , , , , , , , ,1 Data source: ITC, Genève * Data for total sectoral exports does not include services Despite improved turnovers and overall better performance of the enterprises in the analysed industrial sector, the share of such a high-technological export within the Bulgarian manufacturing industry remains at a secondary rate of importance in the total manufacturing export for the period the sub-sectoral share is under 1,5%. Compare it to basic manufacturing productions such as fuel, chemical and distillation products, as well as the immediately following primary copper and copper product manufacturing we the two sectors combined report a share of over 23% of the total industrial export of Bulgaria in Such data allot high-technology production sectors quite a low position in the priority rankings of the Bulgarian manufacturing industry. Table 19 Share of the medical, precision and optical exports in the total industrial export for Product category Share of total industrial export values, %, for: Total industrial export, % For comparison: Fuels, oils, distillation products For comparison: Copper and copper items Optical, photographic, technical, medical and precision equipment Data source: UN, ITC Regarding specific values of the analysed export categories, according to the International Trace Centre in Geneva (a joint cross-institutional UN agency) the data points to quite a modest total value, keeping in mind that the following numbers include all categories of Bulgarian 29 P a g e

30 enterprises that export Optical, photo, technical, medical, etc. apparatus or, alternatively, code 90 under the nomenclature of the same institute. Code/Sector Total industrial export '90. Optical, photo, technical, medical etc. apparatus Table 20 Value of exported medical, precision and optical apparatus for the period Export values by years, thousand ,703,749 6,077,625 6,660,502 7,983,158 9,426,235 12,021,319 13,551,132 15,282,366 11,832,901 15,519,394 31,943 39,144 48,679 60,540 82, , , , , ,905 Data source: ITC (UN) The latest data for 2011 is reported to be 278,420 (278 million) euro. Going back to the precisely defined subject of this analysis SMEs in the sector it appears that not many enterprises from this category export their production. Eurostat data, divided into micro, small and medium Bulgarian enterprises which export their products and services (in turn divided into intra and extra EU-27 exports) relates the overall situation in the sector. Table 21 Number of Bulgarian micro enterprises exporting computer, electronic, optical and precision products (С26) year Within EU, number of enterprises Value (Euro thousand) Outside of EU, number of enterprises Value (Euro thousand) Data source: Eurostat Table 22 Number of Bulgarian small enterprises exporting computer, electronic, optical and precision products (С26) year Within EU, number of enterprises Value (Euro thousand) Outside of EU, number of enterprises Value (Euro thousand) Data source: Eurostat 30 P a g e

31 Table 23 Number of Bulgarian medium enterprises exporting computer, electronic, optical and precision products (С26) year Within EU, number of enterprises Value (Euro thousand) Outside of EU, number of enterprises Value (Euro thousand) Data source: Eurostat Such statistics confirms our observations so far that outline a general decrease in the exported production of SMEs from the sector in 2009 compared to And in two thirds of the cases (exception made for newly created micro enterprises) the trend points to a loss in relative competiveness and consequent closing of some small and medium exporting companies. As a verification of the above-mentioned conclusions we shall present data from the NSI as well for two specific product sub-groups; their total average decrease in value exported on the international markets merely corroborates the difficulties that SMEs from the sector are experiencing: STC code section number Table 24 SME export of specific product groups within medical, precision and optical Product groups ,1 Meters, testing and navigation apparatus; manufacture of clocks ,4 Optical devices and elements and photo- equipment Data source: NSI SME export, 2009, (BGN thousand) SME export, 2010, (BGN thousand) Share of SME in the total export of the industrial sector, 2009, % Share of SME in the total export of the industrial sector, 2010, % ,47 9, ,69 2,12 Below we present tables of dynamic data series for reported values of the most significant Bulgarian export markets for industrial sector Optical, photo, technical, medical etc. apparatus (ITC code 90). 31 P a g e

32 Importers Table 25 A list of Bulgarian export markets for product group Optical, photo, technical, medical, etc. apparatus (code: 90 by ITC, Geneva) thousand Euro Exported value in 2001 Exported value in 2002 Exported value in 2003 Exported value in 2004 Exported value in 2005 Exported value in 2006 Exported value in 2007 Exported value in 2008 Exported value in 2009 Exported value in 2010 World 31, , , ,540 82, , , , , , Belgium 1, , , , , , , , , , Germany 7, , , , , , , , , , Italy 3, , , , , , , , , , USA 1, , , , , , , , , , Russian Federation , , , , Austria 1, , , , , , , , , , Switzerland , , , , , , , , Czech Republic , , , , Poland , , , , United Kingdom 1, , , , , , , , , Romania , , , , , Hong Kong, China , Turkey , , , , , Netherlands 1, , , , , , , , , , Sweden 3, , , , , , , , , , India , , ,424.9 China 1, , , , , , , France 1, , , , , , , , Greece , , Hungary , , , Spain , , , , Slovakia , FYROMacedonia , , , , Denmark , , , Kazakhstan , Canada Serbia , , Ukraine , , Portugal Israel Jordan Iran (Islamic Rep.) Mexico Japan Saudi Arabia P a g e

33 Table 26 Index of exported values for product group Optical, photo, technical, medical, etc. apparatus (code: 90 by ITC, Geneva) thousand Euro Importers Index of exported values for: (2009=100) Exported value for 2010 (Euro thousand) World , Belgium , Germany , Italy , USA , Russian Federation , Austria , Switzerland , Czech Republic , Poland , United Kingdom , Romania , Hong Kong, China ,329 3, Turkey , Netherlands , Sweden , India ,424.9 China , France , Greece , Hungary , Spain , Slovakia , FYROMacedonia , Denmark , Kazakhstan Canada Serbia Ukraine Portugal Israel Jordan Iran (Islamic Rep.) Mexico Japan Saudi Arabia Data source: ITC After a review of the above tables we can define Bulgaria s largest export market for the delineated sector 90 of trade activity (optical, photo, technical, medical, etc. products). Among the first ten are Belgium, Germany, Italy, USA, the Russian Federation, Austria, Switzerland, the Czech Republic, Poland and the UK. We can clearly see that 7 out of the 10 leading markets are EU 33 P a g e

34 Member States, while Switzerland is an EFTA member, and the remaining two countries are among the World s largest economies and traditionally pursued markets. Herewith we present also the graphical expression of the biggest Bulgarian export markets for product sector 90. We can observe that Belgium has shown a remarkable increase as a trade partner and importer for the sector, especially after Germany, on the other side, remains currently second placed but continues to maintain a stable growth over the last decade. Figure 3 Leading 5 importers of Bulgarian manufacturing production from sector 90 by STC of ITC (optical, photo, technical, medical etc. apparatus) for the period Data source: ITC After the definition of the strongest and most stable traditional importers of Bulgarian production from sector Manufacturing of medical, precision and optical apparatus and instruments, the present analysis shall focus on the products (or services) with an export potential and advantages, as well as the identification of possible export destinations for Bulgarian SMEs from the sector. 34 P a g e

35 GOODS AND MARKETS WITH AN EXPORT POTENTIAL An initial list of the product groups within sector C26 Manufacturing of computer and communication equipment, electronic and optical products reveals that it encompasses four major production groups: electrical equipment, medical technology, office and computing equipment, as well as radio and television equipment. Because of this more widely outlined manufacturing sector we can cite specific products included such as electronic elements and printed (circuit) boards, computer technology, radio-, tv-, and telecommunication equipment, even some consumer electronics. But the production lines which are of our specifically defined interest within the sub-sector to be analysed are: meters, testing and navigation apparatus; manufacture of clocks (and parts thereof); electro-medical, emitting and therapeutic apparatus; optical instruments, elements and photographic equipment; magnetic and optical storage media (or codes 26.5, 26.6, 26.7 and 26.8 according to КИД-2008, as they were identified above in these annexes). Table 27 Product groups manufacturing and sales for 2010 Name of position Compasses, incl. for navigationl other navigation devices/apparatus Telemeters, theodolites and tachymeters; other devices and apparatus for geodesy, hudrography, oceanography, hydrology, meteorology and geophysics Radiolocation and radio-probing devices, radio-navigation apparatus and devices for radio remote control Instruments for measuring of electric variables without a registering device Devices and apparatug for measuring and verification of other electric parameters, not elsewhere defined NCEA code Manufactured Quantity (number) Quantity (number) Total sales Value, BGN thousand (no VAT or excise taxes added) Confidential information Confidential information Confidential information Confidential information P a g e

36 Densimeters, areometers, hydrometers, thermometers (without medical ones), pyrometers, barometers, hygrometers and psychrometers Instruments and apparatus for physical and chemical analyses, not elsewhere defined Gas, liquid or electricity counters Cycle or production counters, N/A 111 N/A taximeters; speedometers and tachometers; stroboscopes Thermostats, manostats and other devices and apparatus for automatic control and checkup N/A Parte for devices and apparatus for automatic control and checkup and for instruments and measuring machinery n.e.d. Instruments and apparatus for measuring, registering and reporting of time; clock switches and other devices, allowing the activation of a mechanism at a specific time, provided with a clockwork or with synchronous motor Liquid chrystal devices; lasers, without laser diodes; other optical devices and elements, n.e.d Confidential information Confidential information Confidential information Confidential information Dentistry instruments and apparatus Syringes, needles, catheters, tubes and similar instruments; ophtalmological and other instruments and apparatus, n.e.d Confidential information Data source: NSI These product groups are marked by a change in demand that follows the world and local trends of economic and social development. What we have to be able to point out and what should receive its due attention when planning mid-term measures within the present strategy are the countries which have reported considerable growth in their demand for products from the analysed groups. 36 P a g e

37 Table 28 A list of significant Bulgarian export markets reporting growth for the period for product group Optical, photo, technical, medical, etc. apparatus (code: 90) Importers Exported growth in value between , % Exported growth in value between , % Exported value in 2010, Euro thousand World , Hong Kong, China , , Norway , Uzbekistan 1, Jordan South Africa Luxembourg Lebanon Lithuania Cyprus Mexico Saudi Arabia Italy , Azerbaijan Latvia Iran (Islamic Republic of) China , Singapore Turkey , Chinese Taipei Republic of Korea Sweden , Slovakia , Portugal United Kingdom , Netherlands , Canada India ,424.9 Spain , France , United States of America , Ukraine Germany , Belgium , Finland Czech Republic , Japan Israel Poland , Data source: МТЦ 37 P a g e

38 The conclusions we can draw from the above numbers is that besides our traditional and principal trade partners for the analysed product group (most of the leaders in the trade rankings continue to report growth, amongst which Italy and the UK) in a strategical perspective worth noting are the trends in successful positioning and occupying ever wider shares (corresponding to increased demand) on markets such as the Czech Republic, France, Slovakia among the European ones; but climbing the rankings and requiring attention are trade relations with China (Hong Kong quoted separately but just as important), India, Iran, Uzbekistan and Jordan among the Asian partners; as well as the increasing importance of trade exchanges with Turkey and Canada. Last subject of topical attention but likely to be just as important are the export markets which present themselves as the largest in global terms (leading countries); and those amongst them that report significant net growth in demand over the last few years (in this case data for the period ) and where Bulgarian enterprises currently do not have strong enough export positions. Table 29 Leading export markets (top 30) for medical, precision and optical apparatus (ITC code 90) with an accentuated growth in Importers Growth in imports , % Growth in imports , % Growth in imports , % Total imported value, 2010, Euro thousand World N/A N/A N/A 347,100,646 China ,716,119 USA ,040,262 Germany ,281,585 Japan ,936,568 France ,767,563 Netherlands ,389,997 Republic of Korea ,358,263 United Kingdom ,170,472 Hong Kong ,388,678 Italy ,635,898 Canada ,451,962 Chinese Taipei ,862,056 Mexico ,683,979 Belgium ,336,258 Singapore ,344,563 Spain ,081,630 Australia ,938,264 Switzerland ,749,597 Brazil ,560,024 Russian Federation ,521,010 Poland ,126, P a g e

39 Malaysia ,610,705 Thailand ,164,651 Sweden ,147,091 India ,095,269 Austria ,764,33 Turkey ,588,858 Czech Republic ,276,396 Denmark ,956,378 Saudi Arabia ,009 1,841,458 Data source: ITC After classifying all export markets in groups of largest at present and traditional (for Bulgaria); those with the largest considerable growth rates among the above; as well those in a global perspective (especially reporting increased demands!), on which Bulgarian enterprises are not well positioned, we can infer and combine said export markets in a list that represents a priority ranking for Bulgarian companies from the analysed sector: Belgium, Germany, Italy, China (+Hong Kong), Turkey, Japan, Republic of Korea, Canada, Taiwan, USA, Russian Federation, Austria, Switzerland, Singapore, Mexico, France, India, Czech Republic, Poland, the United Kingdom, Australia, Brazil, Malaysia, Thailand, Sweden, Saudi Arabia, Slovakia, Canada, Jordan, Iran. Undoubtedly, it is necessary to seek comparative production and market advantages which may position permanently the Bulgarian enterprises from the sector on those same markets that undergo a positive economic development and currently increase their demand in this category of high-technological product groups. 39 P a g e

40 COMPETITIVENESS OF PRODUCTS AND SERVICES FROM THE SECTOR WHEN EXPORTED ON INTERNATIONAL MARKETS. What is widely known in economics and market studies as a comparative advantage (usually of production) is a principle that affirms the superior position of a given country or an enterprise when manufacturing a specific product (or in a wider definition, offering a service). This advantage exists as a result of a better resource combination material, human resource, technological support or any other type of factor that conditions the better final price efficiency of the country of enterprise which is said to have the comparative advantage. For Bulgarian manufacturing we have factored in among the comparative advantages of production mainly the low labour costs; and we also have in place some logistic (basically geographic), energy and other minimal resource advantages. The entire picture of competitiveness and specialisation according to comparative advantages could be emphasised by standardised coefficients such as the popular Balassa one. 40 P a g e

41 Specialisation, Index Lafay year Operational programme Development of the Specialisation and industrial productiveness Table 30 Coefficient of specialisation of the Bulgarian industry in the sector Optical, medical and precision apparatus (ITC code 90) Export ( thousand) Share of total export (%) Increase in export value (%) Increase in export volume (%) World increase in export value (%) World increase in export volume (%) Number of exported products Share of top 3 products (%) Share of top 3 export markets (%) Net trade balance ( thousand) Balassa index (comparative advantage coefficient) Total manufacturing industry 90 Optical, medical, precision apparatus Total manufacturing industry , ,6 29, , ,8 56, , ,7 27, Opt/med/prec. apparatus , ,3 62, Total manufacturing industry , ,1 31, Opt/med/prec. apparatus , ,2 65, Total manufacturing industry , ,2 31, Opt/med/prec. apparatus , ,0 63, Total manufacturing industry , ,0 32, Opt/med/prec. apparatus , ,0 53, Source: ITC 41 P a g e

42 Table 31 Specialisation coefficients (revealed comparative advantage) in industrial sectors in EU and World s largest economies for P a g e

43 Careful analysis of the above table reveals that Bulgarian industry reports higher comparative advantages in more labour-intensive sectors or those that rely on large industrial complexes and basic processing of resources. High-technological sectors cede in the specialisation rankings to almost all EU-27 countries and are comparable only with those of India, Brazil and Russia. In our efforts to evaluate various perspectives in the development of markets for the sector in question, as well as to outline strategic goals and measures for the SMEs in the branch to follow, we need to position Bulgarian exporters in the overall trend regarding growth of production, exports and competiveness for the economic activity analysed. 43 P a g e

44 Figure 4 General graphic outlook of growth trends in exported values in production group Optical, photo, technical, medical, etc. apparatus (ITC code 90) 44 P a g e

45 Colour coding facilitates outlining some of the general tendencies, such as the exceptional growth in total exported values that has marked the development of some African and almost all Asian countries, along with exporters from Central and South America. A substantial increase is noted in most Central and Eastern-European countries. Good indicators receive the export placement of industries in the same sector from the USA, Canada, Australia and most of South America and Western Europe. In this line of thought we should point out the apparent commitment of the mentioned regions and countries in investing and programming their development and competitive positioning on the markets for Medical, precision and optical apparatus and instruments. Thus representing ever more effectively direct competitors for the Bulgarian SMEs from the sector on the already dynamic global markets. Maintaining and expanding current market positions in the sector could be preferentially achieved through a systematic and planned strategical development, following a precise Action Plan and abiding by a set of categorised and quantifiable indicators for its implementation and frequent evaluation. Before attempting to expand to new market positions, however (listed above as perspective and potential markets), the sustainable development of the enterprises in the sector requires maintaining present traditional partners and the good working relations in place. That is why it is essential to pay the necessary attention to the direct competitors not only generally present on the global markets for the sector s product groups but also to those that are particularly exporting such production to Bulgaria s leading priority markets. Hence, dynamic progressions of percentage changes in the values of imported production for sector 90 (ITC code) will be presented for the leading five Bulgarian export markets: Belgium, Germany, Italy, USA and the Russian Federation. 45 P a g e

46 Table 32 Belgium: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Exporters Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported value in 2010, Euro thousand World ,336, United States of America ,743, Germany ,492.7 Netherlands , France , United Kingdom , Luxembourg , Ireland , Switzerland , Japan , China , Spain , Italy , Mexico , Israel , Denmark , Bulgaria , Singapore , Sweden , Hungary , Canada , Czech Republic , Poland , Slovakia , Austria ,947.4 Finland , Philippines , Malaysia , Dominican Republic , Republic of Korea , Portugal , Brazil , Thailand , Costa Rica , Romania , Tunisia , Source: ITC 46 P a g e

47 Table 33 Germany: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Exporters Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported value in 2010, Euro thousand World ,281, United States of ,720, America Japan ,576, Switzerland ,412, China ,552, France ,427, Netherlands ,116, United Kingdom ,002, Hungary , Italy , Austria , Belgium , Czech Republic , Ireland , Denmark , Poland , Malaysia , Mexico , Singapore , Republic of Korea , Sweden , Spain , Thailand , Canada , Chinese Taipei , Philippines , Israel , Slovakia ,927 Finland , Romania , Hong Kong, China ,185.2 Portugal , Indonesia , Russian Federation , Bulgaria , Brazil , Source: ITC 47 P a g e

48 Table 34 Italy: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Exporters Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported value in 2010, Euro thousand World ,635, Germany ,045, Netherlands ,098, United States of America , France , China , Belgium , United Kingdom , Switzerland , Ireland , Japan , Sweden , Spain , Denmark ,360.8 Czech Republic , Austria , Slovenia , Hungary , Mexico , Canada , Republic of Korea ,091.6 Finland , Poland , Thailand ,976.2 Israel , Romania , Chinese Taipei , Slovakia , Singapore , Malta , Malaysia , Luxembourg , Brazil , India , Bulgaria ,078 Norway , Source: ITC 48 P a g e

49 Table 35 Russian Federation: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Exporters Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported value in 2010, Euro thousand World ,521, Germany ,067, USA , China , Japan , France , Italy , United Kingdom , Switzerland , Republic of Korea , Ukraine , Ireland , Austria ,412 Denmark , Canada , Israel , Finland , Poland , Slovakia , Chinese Taipei 1, , Czech Republic , Spain , Belgium , Mexico , Thailand , Singapore , Australia ,137.5 Hungary , India , Lithuania , Uzbekistan , , Portugal , Slovenia , Romania , Bulgaria , Turkey , Source: ITC 49 P a g e

50 Table 36 USA: growth of imports from principal trade partners for product group Optical, photo, medical, etc. apparatus (ITC code 90) between Exporters Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported growth in value between , % Imported value in 2010, Euro thousand World ,040, Mexico ,655, Germany ,566, China ,481,271.2 Japan ,694, Ireland ,838, United Kingdom ,089, Canada ,949, Switzerland ,798, France ,628, Malaysia ,064, Singapore ,794.6 Netherlands ,465.4 Chinese Taipei ,335.9 Costa Rica , Australia , Denmark , Sweden , Dominican Republic , Thailand , Austria , Philippines , India , Hungary , Spain , Poland , New Zealand , Viet nam , Romania , South Africa , Turkey , Slovakia ,689.5 Lithuania , Estonia , Bulgaria , Slovenia , Source: ITC After careful consideration of the above presented data on the percentage changes of exported production by the sector Medical, precision and optical apparatus and instruments we can infer the clearly outlined trend that certain countries (which in overall trade volumes and concerned importing partners qualify as direct competitors for Bulgarian enterprises in the sector) 50 P a g e

51 are experiencing a successful change of positioning and having ever larger market shares, as well as bigger volumes of exported production. This is especially the case of Central and Eastern-European countries, some Latin American countries, and Central and Eastern-Asian ones. Considering the fact that the analysed markets are among the leading importers on the market and no less Bulgarian traditional and largest partners the need to implement systematic investment and structural measures is obvious, in order to recover from the present delay in repositioning wherever specific enterprises consider that there may be one. Even with generally positive trends in the percentage changes which Bulgarian companies experience in their exported production, a development of a mid- and long-term approach is among the priorities of the sector. And as for our direct European competitors, we can safely regard some bench marketing analysis to be able to lead us to the adoption and use of the best practices in the business, and as such is practically indispensable. What facilitates to a great extent the elaboration of such measures is the overall policy and priorities of the European community. As we may see further in the herewith applied chapters on the strategic approach and planning, it follows to a great extent the economic principles of sustainable development of European SMEs that have at their basis a knowledge-based economy, investments in innovations and scientific developments, technological updates and human resource VET programmes all of which should raise the general European competitiveness and perspectives for a long-term upward economic development. In the last decade the Bulgarian national authorities have repeatedly emphasised their commitment to prioritise various forms of support to such development, with the ultimate goal of the present strategy being namely defining concrete measures and steps in that direction. Given the available information from national sources we can interpret how the Bulgarian enterprises are positioned at the high-technology global markets and to deduce the necessary conclusions: which areas and in what way could we plan to stimulate the sector and its enterprises. According to MEET data we have information on the leading export markets on a global scale for some product groups from the analysed sector. Leading global markets frequently coincide with the leading Bulgarian export partners. Percentage shares out of the total global import are 51 P a g e

52 noted within the product groups, and there is data on how much of that is satisfied by Bulgarian exports. Table 37 Leading export markets for product groups and a share of the total global imports Position Medical, surgical, dental Germany 27,4% Italy 7,6% Poland 7,4% Switzerland 5,5% Turkey 4,5% and other instruments Densimeters, hydro-, thermo-, Belgium 88.3% USA 5,0% Germany 3,3% Spain 0,8% Czech 0,3% pyro-, barometers Rep. Instruments and apparatus for tuning and control UK 15,1% Russia 13,5% Sweden 12,1% Germany 8,8% Italy 7,8% Data sources: UN and MEET, 2011 Market shares that the Bulgarian manufacturing industry from the sector occupies are the following: Among the first five positions of the leading export markets for medical, surgical, dental and other instruments (combining for 52,4% of the total imports globally) Bulgaria has a markedly low share Table 38 Leading export markets and the position of Bulgaria (medical and other instruments) Export markets Germany Italy Poland Switzerland Turkey BG position and % 52 / 0,0% 36 / 0,1% 22 / 0,6% 25 / 0,2% 38 / 0,1% Data sources: UN and MEET, 2011 Among the first five positions of the leading export markets for precision measuring apparatus (densimeters, hydrometers, thermometers, pyrometers, etc.), combining for 97,7% of the total imports globally (with Belgium only responsible for 88,3% of the World s imports) Bulgarian industry has reported much better indicators Table 39 Leading export markets and the position of Bulgaria (precision measuring equipment) Export markets Belgium USA Germany Spain Czech Rep. BG position and % 1 / 54,5% 13 / 1,2% 6 / 5,5% 31 / 0,0% 19 / 0,4% Data sources: UN and MEET, 2011 Among the leading export markets for instruments and apparatus for automatic tuning and control (with a total share of 57,2%) the Bulgarian manufacturing industry has its share but again, not very high 52 P a g e

53 Table 40 Leading export markets and the position of Bulgaria (apparatus for auto tuning and control) Export markets UK Russia Sweden Germany Italy BG position and % 27 / 0,3% 21 / 0,8% 23 / 0,7% 38 / 0,1% 26 / 0,5% Data sources: UN and MEET, 2011 In conclusion we need to emphasize the three main groups of target markets which may provide conditions for a sustainable development and growth for the Bulgarian small and medium (as well as large) enterprises in the sector. First and foremost attention has to be given to the main and traditional trade partners especially the leading ten with view of maintaining a considerable base for the export volumes. Following are the markets that globally represent leading importers for the sector and on which the Bulgarian enterprises are not currently well represented (with a priority, again, falling on the leading dozen). Out of these two groups naturally a big portion of the countries are overlapping, a fact that only stresses their importance. The third group is made up of the export markets that over the past few years (three could be considered sufficient) have reported a stable rise in demand and respective imports of foreign production from the sector; which is a sign of lasting trends in the increase of potential volume of imported production. Leading countries in this ranking also merit strategic attention and systematic trade placement efforts. 53 P a g e

54 MACROECONOMIC CHARACTERISTICS OF PRIORITY BULGARIAN EXPORT MARKETS. BILATERAL TRADE RELATIONS In order to achieve a clearer understanding of the overall economic state and particular traits of the export markets that we have come to define as priority ones for the examined Bulgarian industrial sector, hereby we present an overview of the leading countries in this ranking five that are Member States of the EU, as well as five that are outside its borders. The most significant markets presenting themselves with a larger increase in the export shares of Bulgarian SME of the sector Manufacturing of medical, precision and optical apparatus and instruments are: Within the EU: Belgium, Germany, France, Italy, Austria; Outside the EU: China, Turkey, the Russian Federation, the USA and Japan. Current data and characteristics for most of the studied markets could be found at the National Export Portal maintained by the BSMEPA. The figure that follows presents graphically the indexed GDPs at Purchasing Power Parity (or Standard) per capita of the leading export markets as per data for December P a g e

55 Figure 5 Indexed GDP per capita in PPS for leading export markets (EU-27=100) Data source: Eurostat Relevant for the understanding of these markets are also the comparative price levels of consumption, indexed and compared to the average price level within the EU: 55 P a g e

56 Figure 6 Indexed comparative price levels for the leading export markets Operational programme Development of the Data source: Eurostat As for the leading European markets, their purchasing power per capita is presented numerically with GDP levels at market prices: Table 41 GDP per capita at market prices, expressed in PPS (euro). Year EU Eurozone (ЕU-17) Belgium Bulgaria Germany France Italy Austria Data source: Eurostat 56 P a g e