UPDATES for EXPORT STRATEGY for industrial sector MANUFACTURING OF ELECTRIC MACHINES AND APPARATUS

Transcription

1 UPDATES for EXPORT STRATEGY for industrial sector MANUFACTURING OF ELECTRIC MACHINES AND APPARATUS Executive Agency for Promotion of Small and Medium Enterprises 2014

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. Expertise team: Nadezhda Georgieva Yordanova Eva Simeonova Radeva Katerina Traykova Georgieva

3 TABLE OF CONTENTS: INTRODUCTION 8 UPDATED DATA REGARDING THE STATE OF THE ART ANALYSIS OF THE EXAMINED INDUSTRY AND SECTOR IN QUESTION 10 UPDATED STATISTICS ABOUT MARKETS AND EXPORTED PRODUCT GROUPS 46 OTHER FACTORS INFLUENCING THE ACTUAL STATE AND PROSPECTS OF THE SECTOR AND ITS EXPORT PERFORMANCE 52 CONCLUSIONS AND RECOMMENDATIONS FOR THE DEVELOPMENT OF THE EXPORT POTENTIAL OF SME FROM THE SECTOR AND THE SPECIFIC ECONOMIC ACTIVITY 58 BIBLIOGRAPHY AND STATISTICS SOURCES 63

4 LIST OF TABLES INCLUDED: Table 1 Industrial Investment activity, measured in %, October 2013 г.* Table 2 Overall industrial production output (excluding construction) Table 3 Percentage changes in industrial production output 2013 (until November 2013) Table 4 Survey of overall industrial business trends Table 5. Overall labour expenditures index, Table 6 Changes in the overall labour expenditures, over the previous period Table 7 Key indicators for Bulgaria latest available data: December 30, Table 8 Sector С (manufacturing industry): Overall economic indicators Table 9 Enterprises according to the number of their employees Table 10 Regional distribution of enterprises and employees in the manufacturing industry Table 11 Employees under labour contract or official work relationships according to economic activities Table 12 Employees under labour contract or official work relationships according to economic activities Table 13 Indexes of industrial production output 2011 Seasonally adjusted. 2010= Table 14 Indexes of industrial production output 2012 Seasonally adjusted. 2010= Table 15 Indexes of industrial production output 2013 Seasonally adjusted. 2010= Table 16 Indexes of the domestic market turnover for Bulgarian industry and Sector C27 in particular. 30 Table 17 Indexes of the foreign market turnover for Bulgarian industry and Sector C26 in particular = Table 18. Exports according to the Standard International Trade Classification (SITC), in BGN Table 19 Exports according to the Combined Nomenclature (CN), in BGN Table 20 Exports according to the NCEA-2008, in BGN Table 21. Trade performance index Electronic components : Bulgaria Table 22. Trade performance index Electronic components : Bulgaria Table 23 Manufacturing and sales, quantity and value

5 Table 24 Manufacturing and sales, quantity and value Table 25 Main economic indicators of SME in the sector, Table 26 Main economic indicators of SME in the sector, Table 27 Leading 10 importers of Bulgarian production from Sector 85 by ITC classification (electric and electronic) for the period Table 28 List of leading importers for Bulgarian production of Sector 85 by ITC classification (electric and electronic products) for the period Table 29 Leading products exported by Bulgaria in group 85 (under ITC classification electric and electronic) for the period thousand 50 Table 30 Difficulties experienced in manufacturing (relative share of enterprises) Table 31 Labour force and education Table 32 Observing business trends in industry

6 LIST OF GRAPHS INCLUDED: Graph 1 Comparison Bulgaria EU: percentage changes in the GDP per capita in relation to the previous year (in Euro) Graph 2. Comparison Bulgaria extra-eu countries: percentage changes in the GDP per capita in relation to the previous year (in Euro) Graph 3. Yearly change in industrial production output (excluding construction) Graph 4. Domestic industrial producer price index Graph 5. Change in the total export value to EU over the years 2012 and Graph 6. Change in the total export value for third countries Graph 7. Change in the total exported value by Bulgaria Graph 8. Bulgarian total foreign trade balance ( million) Graph 9. Top 5 importers of Bulgarian production from sector 85 under ITC classification (electrical and electronic products) for the period thousand 46 Graph 10. Top 5 importers of Bulgarian production from sector 85 under ITC classification (electrical and electronic products) for the period thousand 47 Graph 11. Share of early education and training leavers, and a national target for Graph 12 Proportion of population aged years old having completed higher education - and a national target for Graph 13. Anticipated business conditions in industry over the next 6 months (timeframe 2000 November 2013) Balance, % (26.3=long-term average) 58

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

8 INTRODUCTION The export strategy for industrial sector Manufacturing of electric machines and apparatus is developed in implementation of Project BG161РО Promotion of the internationalization of Bulgarian enterprises under Priority Axis 4 Strengthening the international market positions of Bulgarian economy within Operational Programme Development of the competitiveness of the Bulgarian economy, in compliance with Contract BG-161PO C00001 for direct granting of financial assistance, according to which the Bulgarian Small and Medium Enterprises Promotion Agency (BSMEPA) is a specific institutional beneficiary. Completed in its initial version in 2012, the export strategy for industrial sector Manufacturing of electric machines and apparatus aims to enhance the competitiveness of the Bulgarian micro, small and medium enterprises in the sector, to facilitate their entry and expansion of international market positions, to assist with concrete measures and policies the improvement of their product and image placement in key economic sectors, particularly those with higher added value. The market analysis, an examination of the state of market trends and a comprehensive analysis of the market actors have led to the outlining of specific measures for influencing and strengthening the competitiveness of the Bulgarian enterprises in their international efforts, as well as an improvement in the export-oriented manufacturing of the Bulgarian companies from the sector. The present update is an overview of developments in the outlined processes and factors within the past year and a half that have shaped the Export Strategy. Citing the latest publically available data from national and international sources, this document aims to trace any possible changes on a global or regional level that might have occurred or respectively the confirmation of the already emphasised trends. Where necessary, and under the form of expert recommendations, alternative markets, changes in key product characteristics and demand trends will be suggested, along with related useful information regarding products and their markets.

9 Information sources When developing the export strategy we have used the following information sources: - National Statistical Institute; - Information provided by BSMEPA; - Information from MEET; - Bulgarian National Bank data; - Eurostat; - International Trade Centre; - Information published in relation to international forums and events; - Official electronic information sources; - Information provided by the Bulgarian Industrial Chamber and the Bulgarian Chamber of Industry and Commerce, as well as their regional divisions.

10 UPDATED DATA REGARDING THE STATE OF THE ART ANALYSIS OF THE EXAMINED INDUSTRY AND SECTOR IN QUESTION The situational analysis in the Export strategy is one of the essential steps in the strategic planning process. Available data was presented in graphic and tabulated form in the Resume document, while an extensive Appendix with the prepared analyses was the statistical and factual basis for the proposed conclusions. When updating such data and trends we will be guided by the top down principle, as we analyse the publically available information regarding the following circumstances and categories that exert their influence directly and indirectly: Macroeconomic environment Manufacturing industry Sectoral specifics of the examined industrial branch MACROECONOMIC ENVIRONMENT In Bulgaria, as much as all over Europe and its third-party trade partners, the situation over the past 18 months does not suggest a complete overcoming of the economic and financial crisis. The recovery of the most important global trade and industrial powers proceeds at a slight yet stable rate. And inasmuch this development evokes moderate optimism for the bigger economies, latest data shows that a stable growth cannot yet be forecasted, along with recovered levels of industrial and trade operations and related security of investment. Meanwhile the Bulgarian rates of recovery are still almost stagnating and the forecasts of government services, BNB, NSI as well as those of prominent international financial and research organisations register an economic growth of percent annually for the Bulgarian economy.

11 Optimistic forecasts for the next two years for an increase of about and more than 2 % growth definitely provide some hope of a medium-term upswing in the industrial and export performance of the Bulgarian economy in total, while in some sectors such may either be registered in the short-term or not noted at all for the next year or two. Some of the characteristic difficulties experienced in Central and Eastern Europe, as well as the Balkans as a whole, could well be compensated to an extent by the fact that the Bulgarian economy and markets are closely linked with the ones within the European Union; and to a large extent with those of other traditional trade partners. This transitive relation in a mid-term aspect will produce its lasting stabilising effects on the internal Bulgarian economic development and hence on the Small and Medium Enterprises that at the moment (and traditionally) are susceptible to even small fluctuations in the macro- and microeconomic environment, and foreign trade determinants. Following are some essential indicators that present an overview of the current macroeconomic situation in Bulgaria, as much as the one in its trade partners. Graph 1 Comparison Bulgaria EU: percentage changes in the GDP per capita in relation to the previous year (in Euro). EU Data source: Eurostat Bulgaria

12 Graph 2. Comparison Bulgaria extra-eu countries: percentage changes in the GDP per capita in relation to the previous year (in Euro). EU-27 Bulgaria Turkey USA Japan Data: Eurostat It is necessary to note that the statistic data and trends for EU (here and below) do not include the data for the Reoublic of Croatia which has become a member of the EU on 1 January Naturally, for both of the above graphs the values for 2014 and 2015 are estimated projections according to Eurostat forecast according to the current and expected factors that influence GDP and the conditions for economic development of the examined countries (and EU). In that respect however the foreseen trend is in unison with the expected development presented in the Strategy both for GDP and most other macroeconomic factors that influence directly and indirectly the examined industrial branch. To sum up, we could mark some current indicators according to the NSI: 0.3% inflation for December 2013

13 0.7% GDP growth for the third quarter of 2013 over the same period of % employment rate (15-64 years of age) in the third quarter of 2013, 0.5% higher than the same period of % unemployment rate in the third quarter of 2013, which presents an increase of 0.5% compared to the same period of the previous year. Current industrial output index for November 2013 grows by 0.2% compared to the previous month and 2.8% compared to the same month of the previous year. The index of overall industrial producer prices for November 2013 grows by 0.1% when compared to the previous month, and decreases by 3.7% when compared to the same month of The abovementioned macroeconomic conditions influence directly the investment behaviour of industrial enterprises. Table 1 Industrial Investment activity, measured in %, October 2013 г.* Indicators Growth of investment in industry (during the current year in 12,3-9,1-36,9-26,4-20,0 4,3 7,2 relation to the previous one) Distribution of planned investment (current year according to following production groups): - Manufacturing of durable goods 2,2 2,3 1,5 1,2 1,9 1,5 1,8 - Manufacturing of non-durable consumer goods 17,7 18,1 15,6 15,1 18,6 17,0 14,0 - Energy and water-related sectors 35,3 40,8 50,5 52,4 44,0 43,2 42,7 - Production of intermediate consumption goods 38,7 32,2 26,3 26,2 27,3 30,4 34,6 - Production of investment goods 6,0 6,4 6,1 5,1 7,6 7,2 (incl. automobiles, trailers, and semi-trailers) 6,1 - Other goods 0,1 0,2 0,0 0,0 0,6 0,7 0,8 Expected growth of industrial investment -2,1-8,7-10,6 18,1 17,4 27,0 (in the next year compared to the current one) -9,3 Distribution of planned investment (next year according to following production groups): - Manufacturing of durable goods 2,0 1,6 1,7 1,5 1,7 1,4 2,2 - Manufacturing of non-durable consumer goods 16,0 17,3 11,7 12,5 13,2 10,3 12,8 - Energy and water-related sectors 39,9 39,2 54,8 55,7 44,3 51,1 53,4 - Production of intermediate consumption goods 35,1 35,1 26,9 26,4 35,5 31,5 24,8 - Production of investment goods 6,9 6,6 4,9 3,9 5,0 5,0 6,4 (incl. automobiles, trailers, and semi-trailers) - Other goods 0,1 0,2 0,0 0,0 0,3 0,7 0,4 Data source: NSI * Forecast value for Survey conducted October 2013.

14 It is noteworthy that the structure and distribution of the investment activity remain absolutely constant compared to the previous few years, surpassing them in size (including the previous 2012), but in contrast, the attitude remains negative for 2014 with an expected 9.3% decline in the industrial investments. Reasons can be sought in other socio-economic factors, as from previously presented macroeconomic data such a perspective is not justified. Respectively according to the preservation ( and the growth in the last year) of the investments made we should expect their influence on industrial output, its absolute or indexed statistical change. Table 2 Overall industrial production output (excluding construction) Index 2010=100 (seasonally adjusted) I.2013 II.2013 III.2013 IV.2013 V.2013 VI.2013 VII.2013 VIIIX.2013 IX.2013 X.2013 XI.2013 Eurozone, (17 countries) (s) EU (s) EU (s) Bulgaria (p) Data: Eurostat s Eurostat forecast p temporary value The percentage change over the previous months is presented in the following: Table 3 Percentage changes in industrial production output 2013 (until November 2013) Previous month=100 (seasonally adjusted) I.2013 II.2013 III.2013 IV.2013 V.2013 VI.2013 VII.2013 VIIIX.2013 IX.2013 X.2013 XI.2013 Eurozone, (17 countries) (s) EU (s) EU (s) Bulgaria (p) Data: NSI And in order to have a clearer picture we attach the following graph which traces the yearly changes in the Bulgarian industrial production output for the period :

15 Graph 3. Yearly change in industrial production output (excluding construction) Data: NSI Last data November 2013 yoy % Year-over-year change. We can see that in the beginning of 2013 as well as in its end the levels are above zero and are comparable to the ones of mid-2011 which were already outlined in the Export Strategy itself for the industrial branch in question. It is clear, however, that a great part of 2013 has passed in search of the right direction and stabilization of the production in the industry as a whole. On the other hand every quarter the same State institute measures the current and forecast industrial and business trends in Bulgaria, related below. To a great extent the feedback and answers of the managers showed persistence of major trends in the annual quarters (dynamics, direction and volume). Particularly important, however, are the positive balance rates of the new orders, the expectations for export and the overall competitiveness by own evaluation in comparison to the last two quarters of the previous 2012 when the attitudes and the data show a negative balance.

16 Table 4 Survey of overall industrial business trends Indicators Month of year I IV VII X I IV VII X I IV VII X I IV VII X I IV VII X I IV VII X I IV VII X 6,6 6,0 6,2 5,2 5,9 6,1 5,7 5,7 5,2 5,0 4,3 4,8 5,5 5,4 5,3 5,3 5,7 5,5 5,4 5,2 6,1 5,2 4,6 4,5 5,5 Production assurance with orders Numbe r of months 73,5 72,9 69,1 71,0 73,5 74,4 73,0 72,7 68,4 66,7 63,9 65,1 64,5 68,5 67,9 71,1 70,5 70,1 72,0 69,4 71,9 69,9 71,3 69,5 71,4 Average industrial % 5,0 2,8 2,9 2,9 4,3 0,5-0,1 5,4 5,3 4,4 9,1 8,9 11,7 8,0 14,8 13,1 7,1 10,0 9,1 6,7 10,1 7,0 7,9 10,3 11,8 capacity load Excess % industrial prod. balance 18,8 17,2 16,1 9,8 9,4 8,5 13,0 4,6-14,4-32,5-26, (j) (k) (l) -4,0-4,4-7,8-0,1-1,4 2,9-3,8 24,1 24,6 15,1 15,6 13,3 12,3 10,0 20,1 3,9,8 capacities Inflow of new % orders over past balance 10,5 15,6 17,7 13,3 13,6 15,3 14,8 13,9-5,6-0,2 2,7 4,7 2,9 3,2 14,7 2,5 5,8 13,3 10,8 13,2 2,8 12,2 6,8 6,3 5,4 (m) (n) (o) 9,5 2,7,2 three months Export expectations % over next three balance 12,7 8,9 9,7 6,9 6,9 3,8 11,0 2,1 1,3-7,8-10,5-4,1 - (p) (q) (r) - -6,8-7,8-0,1-2,2 1,2 0,1-0,7-2,7-0,5 0,2-1,6 0,5 12,8 3,3,4,8 months Competitiveness position at % domestic balance 13,2 6,2 8,0 6,4 4,9 4,7 7,6 0,4-0,1-7,7-9,8-2,3 - (s) (t) (u) - -1,6-1,4 2,1 1,8 0,5 1,7 1,8 1,1 1,7-1,9-3,8-0,6 11,9 4,1,2,7 market Competitiveness position at EU countries market % balance 12,8 5,0 6,3 2,5 5,0 0,0 4,3-5,0-2,2-6,7-4,7-6,4-11,1-4,9-1,5-1,6 0,4-1,4 1,4-4,9-2,0-1,2-3,9-3,2-0,4 (a),5 (d) 8,0 (g),3 (b),8 (e) 9,5 (h) 0,0 (c),5 (f) 9,8 (i),9 (v) (w) (x) - 4,3 1,1,6

17 We should duly notice that for most of the mid- and long-term indexed data of the National Statistical Institute there has been a new reference year introduced It lies as much in the middle of the economic and financial crisis years, as it is at the beginning of sorts for the initial upturn in the overall condition of public and private finances, and as such represents a new reference and strategic planning point. One of the few differences in this approach is represented by the below data for the overall labour-related expenditures of the employers for the past year, with a reference year Such statistics show that compared to 2008 the increase in these expenditures is of about a third (and for the services reaches about 50%). The reason behind it could be sought in the mid-term restructuring of the labour force planned layoffs, compensation payments and social security provisions, other measures. It is obvious however that within a given yearly quarter the differences are not major; that they represent a slow increase in the expenditure category. And kept noticeably lower level from the second half of 2011 onwards. Table 5. Overall labour expenditures index, Index 2008 = 100. Seasonally adjusted Economic activities I quarter IІ quarter IІІ quarter IV quarter I quarter IІ quarter IІІ quarter Overall 133,7 136,2 138,4 140,9 140,3 141,6 142,6 Industry 127,7 128,3 130,5 131,7 133,3 133,6 135,4 Services 140,8 145,4 148,1 150,4 148,4 149,5 149,9 Manufacturing industry 127,4 129,4 130,8 132,7 134,1 134,9 136,7 Table 6 Changes in the overall labour expenditures, over the previous period. Seasonally adjusted Economic activities I quarter IІ quarter IІІ quarter IV quarter I quarter IІ quarter IІІ quarter Overall 2,0 1,9 1,6 1,8 (a) -0,4 (b) 0,9 (c) 0,7 Industry Services Manufacturing industry Data source: NSI 0,9 0,5 1,7 1,0 (d) 1,2 (e) 0,2 (f) 1,4 3,9 3,3 1,9 1,5 (g) -1,3 (h) 0,7 (i) 0,3 1,0 1,6 1,1 1,5 (j) 1,1 (k) 0,6 (l) 1, ,4 4,2 1,0 1,1

18 This essential part of any current expenditure combined with the investment behaviour of the entrepreneurs gives an idea of the current business conditions of the industrial enterprises and their prospects in a short- and mid-term plan. A more comprehensive picture of their expenditures is presented by the producer price index (on the domestic market), the rates of which influence to a large extent their competitiveness especially in relation to current inflationary processes both at home and among the trade partners. The producer price index for products sold on the domestic market as one of the indicators of overall expenditures in industry in November 2013 at the level of the previous month, while in the manufacturing industry that number was 0.3% higher. Overall the price levels remain the same or decrease compared to the beginning of the year. On a yearly basis however, the domestic producer price index for October 2013 decreased by 3.9% compared to the same month of The prices in the minning industry (with 10.3%), in the manufacturing industry by 3.1%, as well as in the production and distribution of electricity, heat and gas with 4.9%. which is expected to be reflected in the costs of the individual industrial sectors. As we can see, the change in the manufacturing prices in the country has a direct impact on the total inflation the values for 2012 of the average annual inflation in Bulgaria(reported to be 2.2%) are around and below those for Central and Eastern Europe (Hungary 5.7%, Poland 3.7%, Romania 3.4%), and are usually comparable to those of the Eurozone and EU countries as a whole (respectively 2.5 % and 2.6%). We can also note however that not only the manufacturing prices but also the prices for energy resources in industrial production lead to a decrease in the values. The inflation in Bulgaria calculated by Eurostat for 2013 reaches 0.4%. For comparison in Hungary it is 1.7%, Poland 0.8%, and Romaniq is still at levels of 3.2%. Even in the Eurozone and EU the annual inflation for 2013 is still 1.4% and 1.5% resoectively. Not surprisingly according to the conjuncture inquiry of NSI from December 2013 the majority of the industrial entrepreneurs do not foresee a change in the level of selling prices over the next few months.

19 Graph 4. Domestic industrial producer price index Total industry Extractive industry Manufacturing industry Production and distribution of electric, thermal energy and gas Data: NSI At the end of the present macroeconomic analysis of the state of the art and prospects of industrial and trade developments, we will present the financial effect that the listed circumstances exercise over Bulgarian foreign trade itself regarding trade of goods and cash flows towards and from the EU, as well as those towards and from third countries outside the European Economic Area. According to the NSI in the period January October 2013 the total Bulgarian exports for the EU increase by 9.5% when compared to the same period of the previous year and amount to BGN 21.9 billion.

20 Graph 5. Change in the total export value to EU over the years 2012 and (compared to the same month of the previous year) Data: BNB On the other hand, despite slowing down its growth rate, in comparison to 2011 and the first quarter of 2012 the Bulgarian imports from EU grow by 2.7% in 2013 for the period January October compared to the same period of the perevious year (BGN 25.0 billion at CIF prices that is, with included Insurance and Freight). The present levels of negative foreign trade balance only for the first 10 months of 2013 amounts to BGN million (at export FOB and import CIF). Main trade partners in both directions remain Germany, Italy, Romania, Greece and France (this group imports 67.6% of the total exports towards the EU). We also have data for the periof January November 2013, according to which the Bulgarian exports for third (non-eu) countries increases by 3.6% when compared to the same period of 2012 and is worth BGN 15.9 billion.

21 Graph 6. Change in the total export value for third countries (compared to the same month of the previous year) Data: BNB Bulgarian imports from third countries decrease by 0.6% for the first 11 months of 2013 compared to the same period of the previous 2012 and amount to BGN 18.8 billion (at CIF prices). The main trade partners outside the EU remain the same: Turkey, China, Russia, Ukraine, and Serbia. Likewise the Bulgarian foreign trade balance is negative at BG million (considering FOB-exports and CIF imports). By final data for the period January-November 2013 Bulgaria has exported goods for a total value reaching BGN 40.3 billion, which represents an increase of 7.1% for the period.

22 Graph 7. Change in the total exported value by Bulgaria (in relation to the same month of the previous year) Data: BNB Total imports (for the period January-November 2013) amount to BGN 46.5 billion (CIF prices) and represents an 1.1% increase. The overall foreign trade balance (FOB exports CIF imports) remains negative and only for the studies period amounts to BGN million, an decrease of BGN million compared to the first 11 months of Even at FOB/FOB price levels (after eliminating transport and insurance costs) the negative trade balance decreases almost by half and reaches BGN million. The total trade balance of Bulgarian enterprises can clearly and easily be traced in the following graphical representation:

23 Graph 8. Bulgarian total foreign trade balance ( million) Exports Imports Trade balance Data source: BNB Latest data: October 2013 We can deduce from the above graph that after the considerably improved average levels of export performance of the Bulgarian industry in 2011, during the past 2012 and 2013 one can note a slow-down in recovery; the latter can nonetheless be considered a permanent stabilising and a relative increase of the levels achieved. The problems that remain are: the faster growth of imports (hence the related growth in the negative foreign trade balance); as well as the industries that are leading in terms of total value exported while representing branches with low added value of production in fact the ones lagging behind in volume, as well as annual growth are sectors such as machinery, equipment and finished products, compared to the leading mineral fuels, raw and crude materials. As a conclusion to this chapter we will present the following representation of the latest available data for manufacturing, individual consumption, labour market, international transactions and trade balance, as well as price levels over the past three years.

24 Table 7 Key indicators for Bulgaria latest available data: December 30, Operational Programme Development of the yoy% - Year-over-year rate of change. Data source: NSI

25 MANUFACTURING INDUSTRY The industrial and market indicators presented above have their inevitable and specific influence over the manufacturing industry. We already had the opportunity to observe and analyse some of the indicators and business trends in the industry above. Now we will examine the main economic indicators for the so-called Sector C. Table 8 Sector С (manufacturing industry): Overall economic indicators. Category Eurostat code Number of enterprises Turnover BGN thousands Manufactured production BGN thousands Added value at factor cost BGN thousands Purchases of goods and services BGN thousands Total staff expenditures BGN thousands Wage costs BGN thousands Number of employees Source: NSI We are witnessing a slow recovery, confirmed by the latest data, the same trend that we had already established last year. While in 2008 the turnover of the manufacturing industry exceeded BGN 50 billion we see that in the last two years similar levels are being reached, along with those of added value and total manufactured production (and is slowly increasing every year). The only significant difference 5 years later is that the manufacturing industry had been providing employment for 639 thousand people at the end of This represents a drop of about 115 employees, with enterprises nevertheless being able to maintain almost identical and even higher levels of production while at the same time they spend just as much on their employees and their remuneration. To a large extent this can mean an optimisation of the production processes, such as the one emphasised originally at the time of Strategy elaboration. The trend is only consolidated, as the enterprises are preparedness and adequate planning to use their production capacities at a higher workload in anticipation of additional orders from the domestic or international markets. The above macro analysis of the industrial state of the art and business trends has shown that

26 similar decisions have led from levels of 64-65% average workload of production capacities in 2009 to about 71-72% by the third quarter of 2011 (for 2013 the average utilization of the industrial capacity is 69.7%). This data, however, needs to be analysed in its direct relationship with investment plans, order provisions and the management of human resources and any related expenditures by examining enterprises individually. When dividing industrial enterprises according to the number of their employees we see the following data (considering that the first four types are the strict subject matter of our analysis: micro, small and medium enterprises). Table 9 Enterprises according to the number of their employees Category Number of enterprises Turnover BGN thousand Added value at factor cost BGN thousand Number of employees Data: NSI Eurostat code Total 2012 Types according to the number of employees This data to a large extent confirms the conclusions already made about the structure of the Bulgarian manufacturing industry over the past few years. As for the regional distribution for the same year, statistics report the following data: Table 10 Regional distribution of enterprises and employees in the manufacturing industry Category 2012 Bulgaria North central Northwest Statistical regions Northeast Southeast South-west South central Number of local enterprises Wages and salaries BGN thousand Number of employees Data source: NSI

27 And although these numbers reveal a minor difference of 181 enterprises (0.6%) in the total number when representing the regional industrial structure, undoubtedly we see a confirmation of the already known and expected tendency. The least industrially and economically developed region is the North-West (and North Bulgaria in general), while the considerably higher levels of employment and income naturally appeal to and attract more highly qualified staff in the South-West, as well as in South Bulgaria in general. The forecast for this trend is only to consolidate itself further, as the mid-term scope of our strategies and the reference frame of the manufacturing industry s export performance does not foresee a significant change. SECTORAL SPECIFICS OF THE EXAMINED INDUSTRIAL BRANCH Now is the time to point out again that the economic activity that is analysed within the Export Strategy Manufacturing of electrical machines and apparatus is part of the separate Sector C27 within the NCEA-2008 classification of economic activities, Manufacturing of electric equipment. The analysed economic activity encompasses the sub-sectors with the respective codification 27.1 Manufacturing of electric motors, generators, transformers and apparatus for management and distribution of electricity, 27.2 Manufacturing of storage batteries and accumulators, 27.3 Manufacturing of insulated wires and wiring devices, 27.4 Manufacturing of lamps and lighting fixtures, 27.5 Manufacturing of domestic appliances и 27.9 Manufacturing of other electric equipment. Table 11 Employees under labour contract or official work relationships according to economic activities Number at the end of the month. Economic activities Eurostat code Quarters of 2012 І ІІ ІІІ IV Industry total B_TO_E Manufacturing industry C Manufacturing of electric equipment C

28 Table 12 Employees under labour contract or official work relationships according to economic activities Number at the end of the month. Economic activities Eurostat code Quarters of 2013 І ІІ ІІІ IV Industry total B_TO_E Manufacturing industry C Manufacturing of electric equipment C Data: NSI Below we find the indexes of industrial production within the same Sector C-27 based on the new reference frame of the NSI compared to Table 13 Indexes of industrial production output 2011 Seasonally adjusted. 2010=100 Economic Eurostat Months of activities code І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ I Industry total B_TO_E36 106,5 106,5 105,9 106,3 106,3 104,0 106,5 104,1 106,2 107,0 106,0 103,6 111,0 Manufacturing industry Manufacturing of electric equipment C 107,2 106,1 105,1 103,1 104,8 104,1 105,9 104,0 107,3 106,6 104,6 102,6 108,7 С27 109,3 110,6 106,1 101,5 103,3 106,4 109,8 109,5 102,7 104,3 114,3 107,9 138,2 Table 14 Indexes of industrial production output 2012 Seasonally adjusted. 2010=100 Economic Eurostat Months of activities code І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ I Industry total B_TO_E36 103,6 102,1 104,0 104,7 106,1 106,0 105,7 107,3 105,3 105,0 106,7 109,7 111,0 Manufacturing industry C 103,6 101,1 105,0 106,7 107,3 106,8 105,1 106,3 103,9 104,5 105,8 105,6 108,7 Manufacturing of electric equipment С27 108,1 110,7 118,0 128,2 129,8 131,2 126,8 125,2 127,1 129,7 129,4 141,0 138,2 Data: NSI Table 15 Indexes of industrial production output 2013 Seasonally adjusted. 2010=100 Economic activities Eurostat code Months of 2013 І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Industry total B_TO_E36 110,6 105,5 103,7 103,9 101,7 102,5 104,4 104,9 105,5 107,0 107,2 Manufacturing C industry 109,2 107,4 104,5 106,6 102,6 103,4 106,2 105,8 106,8 109,2 109,6 Manufacturing of С27 electric equipment 130,9 125,4 121,8 121,9 127,0 137,6 131,8 141,8 131,2 132,5 137,8 Data: NSI

29 We can definitely conclude that the values are comparable for the past two years, with the trend representing a slow and sustainable growth, even if an unstable one, reaching peak indexed values only in the second half of In 2013 there is consolidation of the reached levels as well as timely management of production capacities and resources, rather than a substantial growth. In the table below we present the indexed data for the domestic and foreign markets turnover in the last three years and in particular the ones for the Sector in question.

30 Table 16 Indexes of the domestic market turnover for Bulgarian industry and Sector C27 in particular = 100. Economic activities Eurostat code Months of 2011 І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Industry total B_TO_E36 105,7 104,8 113,1 107,2 105,7 107,1 111,9 116,5 114,1 116,8 122,6 125,3 Manufacturing industry C 85,6 92,3 106,4 106,1 108,5 114,2 116,3 122,1 121,9 118,5 116,1 113,4 С27 76,7 91,5 95,5 74,4 89,2 103,5 114,1 114,1 118,2 133,7 149,2 129,4 Manufacturing of electric equipment Months of 2012 І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Industry total B_TO_E36 107,0 108,3 114,2 106,3 107,9 111,2 120,4 115,5 111,9 111,9 120,1 126,8 Manufacturing industry C 87,2 87,2 106,9 108,4 111,4 116,3 124,5 122,5 118,8 115,7 119,8 109,8 С27 82,7 77,2 105,1 97,0 119,8 130,5 120,5 118,1 115,6 132,8 125,1 119,0 Manufacturing of electric equipment Months of 2013 І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Industry total B_TO_E36 110,4 103,0 108,1 106,0 101,6 101,5 115,2 112,4 106,2 114,1 112,5 Manufacturing industry C 90,3 91,3 100,8 114,8 111,2 110,9 125,5 121,4 116,7 122,9 113,7 Manufacturing of С27 electric equipment 99,6 96,5 86,6 96,1 92,3 104,3 109,2 111,1 111,6 111,4 112,1 Data: NSI We see again that by the end of 2011 and during certain months of 2012 the domestic market turnover for Sector С27 reaches considerably high values but hardly manages to hold these levels for a long time, with the beginning of 2013 there is consistently lower turnover on the internal market in Sector C27. Among the problems shared (as we ll see below) by the SME managers is namely the deficient domestic demand, translated into such irregular and insufficient orders.

31 Table 17 Indexes of the foreign market turnover for Bulgarian industry and Sector C26 in particular = 100. Months of 2011 Eurostat Economic activities code І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Industry total B_TO_E36 113,4 109,7 142,6 127,3 127,6 135,0 130,9 131,9 128,2 127,7 128,5 104,6 Manufacturing industry C 114,1 110,6 143,7 127,2 127,7 136,4 129,2 134,2 125,8 126,7 130,9 101,6 С27 101,6 104,9 118,7 109,7 106,9 120,7 108,4 104,1 111,0 113,1 115,0 102,5 Manufacturing of electric equipment (m) Months of 2012 І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Industry total B_TO_E36 118,3 114,5 133,7 132,7 149,3 129,7 144,1 136,1 127,4 141,5 139,6 112,3 Manufacturing industry C 118,2 112,9 134,3 133,7 150,5 129,8 144,6 136,2 126,0 142,1 141,5 112,0 С27 93,9 92,2 118,0 106,3 122,3 121,6 129,7 108,7 122,3 145,8 135,0 120,3 Manufacturing of electric equipment (n) Months of 2013 І ІІ ІІІ ІV V VІ VІІ VІІІ ІX X ХІ ХІІ Data: NSI Industry total B_TO_E36 146,2 126,6 129,7 149,9 132,5 128,8 150,8 135,9 134,2 138,4 142,8 Manufacturing industry C 149,2 129,1 132,6 154,8 135,7 131,4 154,1 136,9 136,1 140,7 143,6 Manufacturing of С27 (x) (y) 1 electric equipment 3 1 3, 2 9, 9 Again, here we confirm the validity of the above comment on levels higher (on average) than the monthly 2010 ones but with inconsistent peaks,

32 mostly towards the end of 2012 and in the middle of At the and of the last year we do not manage to reach the levels of the export turnover of the previous Let us now see the total figures for the exports and imports of Sector C27 presented by the NSI and the ITC according to different classifications. Table 18. Exports according to the Standard International Trade Classification (SITC), in BGN * TOTAL Electric machines, apparatus and devices, nes, parts thereof Data: NSI * Latest data: October 2013 Table 19 Exports according to the Combined Nomenclature (CN), in BGN * TOTAL Electric and electronic machines and apparatus; recording and playing apparatus for sound and/or imaging; electric materials; parts and accessories Data: ITC and NSI * Latest data: October 2013

33 Table 20 Exports according to the NCEA-2008, in BGN TOTAL Electric equipment Data: NSI

34 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Of course the total data for the manufacturing industry s export levels needs to and does coincide while the different classifications of the sectors lead to different final numbers. Any definitive comparisons in that respect with the original Export Strategy although any representations of a different cross section can enrich the analysis with data provided by different classifications needs to be done on the basis of the NCEA-2008, the one that the NSI and most of the enterprises themselves are mostly working with. According to the data for the first 10 months of 2013, however, (in each of the three classifications), the value of the exported production from the studied sector reaches and exceeds the values of the previous 2012 In many cases alternative groupings of product groups from overlapping types of economic activity in the framework of a larger sector can give us a valuable insight into the export competitiveness of the Bulgarian enterprises. One such sectional view is represented by the Trade Performance Index below. The International Trace Centre (Genève) offers an other elaborate perspective into the export performance of certain goods produced by the manufacturing industry, together grouped under the Electronic components label. In the said category we find namely: electrically powered machinery and parts; electric switches, relays and circuits; electricity distributing equipment; transistors, valves; domestic electric equipment; other electric machinery. Of course we have several other products falling within the same category this is not a narrowly defined product like the one we would need for this analysis. However it definitely gives a notion of the export performance of the thus grouped industry output. General Profile Table 21. Trade performance index Electronic components : Bulgaria Position in 2010 for Current Indicator Description El. components (Value) 141 El. components (Rank) N Number of exporting countries for the ranking in the sector G1 Value of exports (in thousand US$) 1,683,508 G2 Export growth in value, p.a. (%) 15% 25 G3 Share in national exports (%) 5% G4 Share in national imports (%) 6% G5 Relative trade balance (%) -8% G6 Relative unit value (world average = 1) 1.2 P1 Net exports (in thousand US$) -297, P2 Per capita exports US$/inhabitant) Page 34 of 63

35 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Index P3 Share in world market (%) 0.14% 44 P4a Product diversification (N of equivalent products) P4b Product concentration (Spread) 36 P5a Market diversification (N of equivalent markets) P5b Market concentration (Spread) 20 C1 Relative change of world market share p.a (%) % Change for Change Index Индикатори, включени в таблицата C1a Competitiveness effect, p.a. (%) % 32 C1b Initial geographic specialisation, p.a. (%) % 67 C1c Initial product specialisation, p.a. (%) % 65 C1d Adaptation effect, p.a. (%) % 70 C2 Matching with dynamics of world demand 94 A Absolute change of world market share (% pts p.a) % 15 P Average Index: Current Index 28 C Average Index: Change Index 83 General Profile Table 22. Trade performance index Electronic components : Bulgaria Position in 2010 for Current Index Change for Change Index Indicators included in chart N Описание на индикатора Електрически компоненти (стойности) Number of exporting countries for the ranking in the sector 138 Електрически компоненти (ранкинг) G1 Value of exports (in thousand US$) 1,717,089 G2 Export growth in value, p.a. (%) 9% 30 G3 Share in national exports (%) 6% G4 Share in national imports (%) 7% G5 Relative trade balance (%) -16% G6 Relative unit value (world average = 1) 1,4 P1 Net exports (in thousand US$) -694, P2 Per capita exports US$/inhabitant) P3 Share in world market (%) 0.14% 44 P4a Product diversification (N of equivalent products) P4b Product concentration (Spread) 28 P5a Market diversification (N of equivalent markets) P5b Market concentration (Spread) 12 C1 Relative change of world market share p.a (%) % C1a Competitiveness effect, p.a. (%) % 26 C1b Initial geographic specialisation, p.a. (%) % 101 C1c Initial product specialisation, p.a. (%) % 29 C1d Adaptation effect, p.a. (%) % 103 C2 Matching with dynamics of world demand 61 A Absolute change of world market share (% pts p.a) % 12 P Average Index: Current Index 28 C Average Index: Change Index 57 Data: ITC We can see from the above data a slight but noticeable net growth. The industry s adaptability to the global market demand is slowly decreasing but the country is improving the diversification of products and conquering slightly larger volumes of the world market. The Page 35 of 63

36 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия production as well as the markets undergo a slight improvement. Bulgaria is still a net importer of such goods with high added value. The industry branch grouped this way reports the low adaptability to the markets; however that can be attributed to problems with financing, employees and innovation all of which are already known from last year s strategic document; and they also influence the competitiveness coefficient shown in the above table. As a whole, however, we do not report a substantial change in the period. Sector C27 Manufacturing of electric equipment in its entirety, as well as its sub-sector Manufacturing of electric machines and apparatus are relatively high-technological in their essence. They depend on research and technological know-how, investment in up-to-date equipment and the implementation of innovative technologies for the manufacturing development. The examined economic activity is performing stably in its exports but is not amongst the leading ones. The economic activity in sector Manufacturing of electric machines and apparatus takes up about 6.51% of the overall industrial export of Bulgaria for 2012 according to the SITC classification, or 5.26% according to the NCEA-2008, a source from which the sector much more specifically overlaps with the analysed economic activity. For 2013 data shows that this share even rises up to 7.3% according to SITC or 5.8 % according to the NCEA The industrial sector in question still does not belong to the leading ones but definitely the enterprises that operate in it (as a whole, not only SME) improve their export performance in Let us however narrow down even more the product categorization and present data for the sales registered by the branch according to the last available NSI statistics: Page 36 of 63

37 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Table 23 Manufacturing and sales, quantity and value Type of product Measuring unit NCEA-2008 code Electric motors, power output <= 37.5 W, and other DC motors, DC generators Other AC motors, singlephase Other AC motors, power output <= 750 W, multiphase Other AC motors, power output > 750 W but <= 75 kw multiphase Other transformers, power output <= 16 kva Other transformers, power output > 16 kva Ballast current resistances for discharge lamps or tubes, static converters, other inductors Parts for electric motors, generators, electric generating sets and rotary converters Apparatus for interrupting, splitting, protecting, switching or connecting circuits to a voltage > V Circuit-breakers for voltage <= V Other apparatus for el. circuit protection for a voltage <=1 000 V Relays for voltage <= В Boards, panels, consoles, desks, cabinets and similar, equipped with 2 or more devices for interruption or protection of el. circuits, for voltage <= V Boards, panels, consoles, desks, cabinets and similar, equipped with 2 or more devices for interruption or protection of el. circuits, for number number number number number number number BGN thousand number number number Produced Total Sales Quality Quantity Value, BGN thousand (excl.vat & excise tax) x x number number number Page 37 of 63

38 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия voltage > V Lead-acid accumulators for starting number piston engines Lead-acid accumulators, excluding those for starting number piston engines Parts for electric accumulators, BGN thousand incl. their separators x x Coaxial cable and other kg coaxial electric conductors Other electric wires and isolated cables kg for voltage <= V Other interrupters for number voltage <= V Plugs, sockets and other apparatus for switching or protecting electrical circuits, number for a voltage <= V Insulation plastic fittings kg Halogen lamps and tubes, number incl. tungsten, excluding ultravioletor infrared-ray ones number (a) Discharge lamps, lamps and ultraviolet or infrared lamps, arc lamps Electric night-time and desktop lamps number Illuminated advertisement lamps, nameplates, signs and the like Chandeliers and other electric lighting fittings for ceilings or walls, excluding number number Page 38 of 63

39 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия ones used for lighting public open spaces or thoroughfares Spotlights/projectors number Lighting parts BGN thousand x x Electric water and number immersion heaters Other ovens, cookers, el. hot number plates, incl. tables for heat treatment of food, grills and barbecues Parts for domestic electric BGN thousand appliances x x Non-electric domestic number cooking appliances and plate warmers, of iron, steel or copper Other household appliances number on gas or other liquid or solid fuels Parts for non-electric BGN household appliances thousand x x Electric machines and apparatus with specific functions, nes Electrical insulators, insulating parts for machines, equipment and electrical installations, electrical conduit tubing Indicator panels with liquid crystal displays or light emitting diodes; electric equipment for sound or visual signalling Electrical machinery and apparatus for soldering or welding (even with cutting action), electric machines and apparatus for hot spraying of metals or cermets Parts for other el. equipment; el. parts for machines, nes Data: NSI BGN thousand kg kg number BGN thousand x x x x Page 39 of 63

40 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Table 24 Manufacturing and sales, quantity and value Type of product Measuring unit NCEA-2008 code Electric motors, power output <= 37.5 W, and other DC motors, DC generators Other AC motors, singlephase Other AC motors, power output <= 750 W, multiphase Other AC motors, power output > 750 W but <= 75 kw multiphase Other transformers, power output <= 16 kva Other transformers, power output > 16 kva Ballast current resistances for discharge lamps or tubes, static converters, other inductors Parts for electric motors, generators, electric generating sets and rotary converters Apparatus for interrupting, splitting, protecting, switching or connecting circuits to a voltage > V Circuit-breakers for voltage <= V Other apparatus for el. circuit protection for a voltage <=1 000 V Relays for voltage <= В Boards, panels, consoles, desks, cabinets and similar, equipped with 2 or more devices for interruption or protection of el. circuits, for voltage <= V Boards, panels, consoles, desks, cabinets and similar, equipped with 2 number number number number number number number BGN thousand number number number Produced Total Sales Quality Quantity Value, BGN thousand (excl.vat & excise tax) x x number number number Page 40 of 63

41 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия or more devices for interruption or protection of el. circuits, for voltage > V Lead-acid accumulators for starting number piston engines Lead-acid accumulators, excluding those for number starting piston engines Parts for electric accumulators, BGN thousand incl. their separators x x Coaxial cable and other kg coaxial electric conductors Other electric wires and isolated cables kg for voltage <= V Other interrupters for number voltage <= V Plugs, sockets and other apparatus for switching or protecting electrical circuits, for a voltage <= 1 number V Insulation plastic fittings kg Halogen lamps and tubes, number incl. tungsten, excluding ultravioletor infrared-ray ones number (a) Discharge lamps, lamps and ultraviolet or infrared lamps, arc lamps Electric night-time and desktop lamps number Illuminated advertisement lamps, nameplates, signs and the number Page 41 of 63

42 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия like Chandeliers and other electric lighting fittings for ceilings or walls, excluding ones used for lighting public open number spaces or thoroughfares Spotlights/projectors number Lighting parts BGN thousand x x Electric water and number immersion heaters Other ovens, cookers, el. number hot plates, incl. tables for heat treatment of food, grills and barbecues Parts for domestic electric BGN thousand appliances x x Non-electric domestic number cooking appliances and plate warmers, of iron, steel or copper Other household number appliances on gas or other liquid or solid fuels Parts for non-electric BGN household appliances thousand x x Electric machines and apparatus with specific functions, nes Electrical insulators, insulating parts for machines, equipment and electrical installations, electrical conduit tubing Indicator panels with liquid crystal displays or light emitting diodes; electric equipment for sound or visual signalling Electrical machinery and apparatus for soldering or welding (even with cutting action), electric machines and apparatus for hot spraying of metals or cermets Parts for other el. equipment; el. parts for machines, nes BGN thousand kg kg number BGN thousand x x x x Page 42 of 63

43 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия For certain product groups the NSI does not possess exhaustive data. Despite all that we can see that for the years 2011 and 2012 the levels of production output are maintained or increased, with notable growth being reported for the production of household equipment and sockets and the electric machine parts. There is a slight decrease in the production of lead acid batteries and various types of cables, while still both commodity groups have traditionally been well covered in the export of the sector. As for the product sub-groups, for most of them we possess exhaustive data which aids us in analysing the most precise section that concerns the present survey namely the main economic indicators for SME in the economic activity in question. NCEA code Table 25 Main economic indicators of SME in the sector, Economic activity Enterpr ises Turnover Added value at factor costs Employees BGN Number B G N thousand Number thousand MANUFACTURING OF ELECTRIC EQUIPMENT Manufacturing of electric motors, generators and transformators, and apparatus for control and distribution of electric energy 27.2 Manufacturing of accumulator batteries and accumulators Export 27.3 Manufacturing of insulated cable and wiring devices Manufacturing of fiber optic cables Manufacturing of other electric and electronic conductors and cables Manufacturing of electric wiring Manufacturing of lamps and lighting fixtures Manufacturing of domestic appliances Manufacturing of domestic appliances Manufacturing of non-electric domestic appliances Manufacturing of other electric equipment Data source: NSI Page 43 of 63

44 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия NCEA code Table 26 Main economic indicators of SME in the sector, 2012 Economic activity Enterpr ises Turnover Added value at factor costs Employees Number B G N thousand Number Export BGN thousand MANUFACTURING OF ELECTRIC EQUIPMENT Manufacturing of electric motors, generators and transformators, and apparatus for control and distribution of electric energy Manufacturing of accumulator batteries and accumulators Manufacturing of insulated cable and wiring devices Manufacturing of fiber optic cables Manufacturing of other electric and electronic conductors and cables Manufacturing of electric wiring Manufacturing of lamps and lighting fixtures Manufacturing of domestic appliances Manufacturing of domestic appliances Manufacturing of non-electric domestic appliances Manufacturing of other electric equipment Data source: NSI As we can see, there is an increase of the overall number of small and medium enterprises that produce electric machines goes down. In 2011 there are 467 SME reported, in The total number of employees, however, rises from 8675 to 9289, as this is a little more than 7 percent and could be see as a proof for the good condition of the SMEs in the sector. What needs to also be pointed out is that there is an overall increase of 12.5%, the turnover with one fifth and the value added increases with 30%. We could definitely deduce that the marketing and the overall performance on behalf of these SMEs has a significant improvment, keeping in mind that about 8% of the enterprises in the category did not survived after The value added for 2011 of the examined SMEs has been calculated to reach BGN , which for the reported 8675 employees results in BGN average yearly labour productivity. The values grow to BGN in 2012, which for the reported 9289 employees would mean an individual labour productivity of BGN on a yearly basis, or a 21-percent rise in the individual average labour productivity which justifies the hired staff during the analysed year. Page 44 of 63

45 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия We should once again emphasise that for the strategical and long-term development of the sector one should consider a potential improvement in demand (especially domestic) a mere temporary and short-term remedy. Objectively speaking the enterprises which have survived and improved their indicators, listed above, need to continue along the undertaken path of sustainable development which could bring about further improvement in indicators and in the exported production: an ever higher added value, while for internal growth and development the enterprises need to implement innovations, a topic on which we ve written at large in last year s export strategy. Page 45 of 63

46 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия UPDATED STATISTICS ABOUT MARKETS AND EXPORTED PRODUCT GROUPS As far as the markets for the above-described production are concerned, hereby we present the graphical expression of last year s five leading export markets for Bulgarian production in sector 85 (according to the ITC classification). We see that Germany had registered a substantial growth as a trade partner and importer for the sector (especially after 2004), while Italy remained second, despite experiencing a stable and continuing growth for the past decade. Graph 9. Top 5 importers of Bulgarian production from sector 85 under ITC classification (electrical and electronic products) for the period thousand Germany Italy France Spain Turkey Data: ITC When updating the same ranking and its data we see the following: Page 46 of 63

47 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Graph 10. Top 5 importers of Bulgarian production from sector 85 under ITC classification (electrical and electronic products) for the period thousand Germany Romania France Italy Turkey As a result of a slight overall increase in the last two years in the exported production from sector 85 according to ITC Germany nonetheless remains a leading partner, while France and Italy switch places and go slowly down, and Romania turns out to be the second most important importer after noting a remarkable increase in the last two years and reaching the import levels of Germany. Herein we provide information for the top 10 importers and clear trends in their commercial behavior and import for the year quarters in the last three years. IMPORTER S Table 27 Leading 10 importers of Bulgarian production from Sector 85 by ITC classification (electric and electronic) for the period Euro thousand. Importe d value 2011-Q1 357, World total Germany 61, Importe d value 2011-Q2 350, Importe d value 2011-Q3 330, Importe d value 2011-Q4 463, Importe d value 2012-Q1 317, Importe d value 2012-Q2 341, Importe d value 2012-Q3 370, Importe d value 2012-Q4 Importe d value 2013-Q1 413, , Importe d value 2013-Q2 422, Importe d value 2013-Q3 430, , , , , , , , , , , France 41, , , , , , , , , , , Romaniq 15, , , , , , , , , , , Italy 47, , , , , , , , , , ,939.2 Page 47 of 63

48 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Netherlands 6, , , , , , , , , , ,611.8 Turkey 15, , , , , , , , , , , Spain 13, , , , , , , , , , , Hungary 6, , , , , , , , , , , Czech 5, , , , , , , , , , ,156.8 Republic Poland 9, , , ,742 9, , , , , , , Data: ITC Among the countries (worldwide) that report a noticeable growth in their imports in the product category are the following: Table 28 List of leading importers for Bulgarian production of Sector 85 by ITC classification (electric and electronic products) for the period IMPORTERS Growth of imported value b/n Growth of imported value b/n Growth of imported value b/n Q and Q1 2013, Q and Q2 2013, Q and Q3 2013, % % % Imported value for Q3 2013, Euro thousand, World Total , Germany , Italy , Romania , Netherlands ,611.8 Poland , Switzerland , China , Serbia , ОАЕ , Data: ITC Among the markets that are not listed for the past year as being potentially good prospects for Bulgarian exports in the sector the ones that stand out are the Netherlands and Malaysia, but even more than that is Nigeria with its more than 28 fold import growth reported for the past year. A potential new market for Bulgarian products from the sector. Page 48 of 63

49 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия And in the end, again according to the ITC, we ll present the change in the main product groups under code 85 that were exported in the period , which are contained in the narrowly defined economic activity of interest Electric machines and apparatus. Page 49 of 63

50 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Table 29 Leading products exported by Bulgaria in group 85 (under ITC classification electric and electronic) for the period thousand Code Product category Exported Exported Exported value value 2010 value '8544 Insulated cables/wires 270, , , '8507 Electric accumulators 124, , , '8536 Electric switching devices 84, , , (e.g. fuses, switches) up to 1000 V '8504 Electrical transformers, static converters 78, , , (e.g. rectifiers) '8537 Boards and panels, equipped with 2 or more switches or fuses 64, , ,701.6 '8538 Parts for boards, panels, switches and fuses 55, , , '8533 Electric resistor (including rheostats) and similar 1, , , Data: ITC According to the above data we see that for 2012 the product group could not maintain the levels of 2011 (at least not according to the ITC), while we note an increase in the exported value of switches and fuses, electric boards and panels, resistors and rheostats. It is appropriate to underline once again the specialisation of the Bulgarian industry as a whole and of the SMEs in the sector in particular that is mostly developed in producing parts and components for bigger and more complex products of the electric and electronic industry. The problems and challenges that had been taken note of for the past few years are still in place. From the MEET 2012 report on Comparative advantages (for 2012) of Bulgarian exporting enterprises (and their respective manufacturing and export specialisation) we can see that the high-technological activities with similar advantages represent a very small share of Bulgarian industry. This trend has been already established and analised in the Export Strategy for the sector in question; and we will simply hereby emphasise again that out of 18 product groups analised there are national comparative advantages applicable to only three: photographic and cinematographic products; cinematographic film; and farmaceuticals. They represent a total of 2.5% of all Bulgarian exports while all the 18 examined product groups amount to 6.0%. A similar table with the main product groups and their competitive advantages of production has been already presented in the main Strategy for promotion of the export Page 50 of 63

51 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия performance of the analised sector and namely in its Annexes. The methogology applied is the same here comparing the Balassa index or respective comparative advantage of production. On the other hand the MEET survey does show that there are many more types of hightechnology activities that have the potential to develop into sectors with a comparative advantage. Besides equipment and apparatus for measuring, testing and nagivation, there are those that belong to the telecommunications equipment, farmaceuticals, monitors and projectors, especially because of their extended presence on the world markets. From the group defined as averagely high-technological activities there are those that according to the same Balassa coefficient Bulgaria possesses such comparative advantages with regards to electrical cables and wires (2.4), electrical motors and generators (1.6), domestic electrical appliances (1.4). What is also important is the fact that the total volume of exports is larger for electrical cables and printed circuit boards within the group. These are traditionally strong performing high-technological sectors, while the volume of imported production continues to grow on a global level. Despite that we are considerably behind in terms of competitiveness in producing electrical cables and wires when considering the leader Romania, as well as Serbia and Turkey. For electrodomestic appliances we are also behind leading EU members such as Slovenia and Poland, but also behing Turkey ad Serbia. Given the coefficient of 0.8 we can safely claim that a continuous and methodical policy for development of the production of electric transformers, converters, electrical coils and chokes could lead to achieving certain comparative advantages. The same value is currently valid for electrical machines and apparatus as a whole (but with a higher share in the country s exports, 1.1%), while for both product groups what is of importance is the extensive presence on the international markets. The market for electrical transformators and converters is influenced significally by the Balkan countries (with Croatia as a leader), as well as most of the recent Member states, and Austria. Page 51 of 63

52 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия OTHER FACTORS INFLUENCING THE ACTUAL STATE AND PROSPECTS OF THE SECTOR AND ITS EXPORT PERFORMANCE Outside and beyond the purely economic considerations of the manufacturing industry development and the economic activity in question, we should briefly analyse possible changes in factors such as: Social developments Political framework and state of affairs Smart specialisation national and regional planning Among the most important social processes that influence directly the industry and the competitiveness of Bulgarian business are social processes such as labour market and educational developments. Given the still rising unemployment (see data presented above) one of the expected consequences is that more qualified and educated personnel find employment more easily. What is also natural is that employers themselves require and expect such human resources with view of improving their competitiveness on the global market. The National Statistical Institute as we already mentioned above also carries out its quarterly surveys regarding difficulties that entrepreneurs experience in their manufacturing activity and in industrial production in general. The last such survey is dated December Page 52 of 63

53 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия Table 30 Difficulties experienced in manufacturing (relative share of enterprises) Factors that impede the activities of the enterprises: Insufficient domestic demand % 42,6 Insufficient foreign demand % 30,9 Competitive imports % 16,1 Labour shortages, including qualified % 9,8 Material and/or equipment shortages % 3,2 Energy shortages % 0,5 Financing difficulties % 20,4 Weaknesses in economic legislation % 21,4 Insecure economic environment % 57,9 Others % 30,7 No difficulties % 5,2 Data: NSI It is more than comprehensible that economic and financial barriers such as insufficient demand, insecure economic environment and financing problems would be leading in priority and critical influence on the productivity and competitiveness of exports of SMEs in Bulgaria. Societal problems, however, are immediately following: weaknesses in economic legislation and shortages of qualified labour force. Both have been already reported in the principal document of the export strategy for the sector and the industry as a whole. Let us see, however, data from the NSI for the past years regarding the educational and qualification state of the art in Bulgaria. Table 31 Labour force and education. Labour force Total share of early education and training leavers (%) 11,8 12,5 Relative share of young people (20 24) with at least 86,7 85,8 secondary-school degree (%) Population years of age (thousands) 1020,3 1000,3 Completed higher (university) degree 277,5 272,5 Completed secondary school degree (including professional and trade schools) 560,5 332,9 556,5 318,3 Completed primary school degree 133,4 122,1 Completed elementary school degree 48,9 49,2 Data source: NSI Page 53 of 63

54 ОП Развитие на конкурентоспособността на българската икономика г., Приоритетна ос 4.2. Укрепване на международните пазарни позиции на българската икономика Проект BG161РО Насърчаване на интернационализацията на българските предприятия At the time of completion of the present update there are still no representative data for 2013 in the above categories here, but we can compare the data with the objectives of the national level. Graph 11. Share of early education and training leavers, and a national target for 2020 Data: NSI Graph 12 Proportion of population aged years old having completed higher education - and a national target for 2020 Data: NSI Page 54 of 63