REPUBLIC OF BULGARIA Bulgarian Small and Medium Enterprises Promotion Agency

Transcription

1 REPUBLIC OF BULGARIA Bulgarian Small and Medium Enterprises Promotion Agency PROJECT BG161РО , PROMOTION OF THE INTERNATIONALIZATION OF THE BULGARIAN ENTERPRISES Проект BG161РО , НАСЪРЧАВАНЕ НА ИНТЕРНАЦИОНАЛИЗАЦИЯТА НА БЪЛГАРСКИТЕ ПРЕДПРИЯТИЯ This project is financed by the European fund for regional development through an Operational programme Development of the competitiveness of the Bulgarian economy Този проект е получил финансиране от Европейския фонд за регионално развитие чрез Оперативна програма Развитие на конкурентоспособността на българската икономика EXPORT STRATEGY Manufacture of rubber and plastic products June 2012

2 LIST OF ABBREVIATIONS EU BSMEPA MEET MRDPW SME ITC NCEA NSI OP OTEA European Union Bulgarian Small and Medium Enterprises Promotion Agency Ministry of Economy, Energy and Tourism Ministry of Regional Development and Public Works Small and Medium enterprises International Trade Centre National Classifier of Economic Activities National Statistical Institute Operational Programme Office of Trade and Economic Affairs 2

3 TABLE OF CONTENTS INTRODUCTION APPROACH FOR DEVELOPING THE EXPORT STRATEGY FOR SECTOR MANUFACTURE OF RUBBER AND PLASTIC PRODUCTS MAIN CONCLUSIONS FROM THE ANALYSIS OF THE CURRENT STATE SWOT AND LOED ANALYSES OF THE EXPORT PROCESS OF SMEs IN SECTOR MANUFACTURE OF PLASTIC AND RUBBER PRODUCTS OBJECTIVES STRATEGY FOR PROMOTION OF EXPORT OF SMES IN THE SECTOR ACTION PLAN SYSTEM FOR MONITORING AND CONTROL

4 INTRODUCTION The export strategy of sector Manufacture of rubber and plastic products is developed under Project BG161РО Promoting the internationalisation of the Bulgarian enterprises, Priority Axis 4 Strengthening the international market positions of Bulgarian economy of Operational Programme "Development of the Competitiveness of the Bulgarian Economy", pursuant to contract BG-161PO C00001 for providing direct grants under which the Bulgarian Small and Medium Enterprises Promotion Agency (BSMEPA) is an institutional beneficiary. The goal of the Export Strategy for sector Manufacture of rubber and plastic products is to provide support to the Bulgarian micro, small and medium-sized enterprises in the sector to enhance their competitiveness, degree of internationalization and entering or expanding the market positions of the Bulgarian products and particularly of these with higher value added. The Bulgarian state, represented by BSMEPA, The Ministry of Economy, Energy and Tourism (MEET) and other state institutions has identified the SME sector as particularly sensitive and at the same time as having crucial importance for economic life, deserving special attention. The diversity in the development of different economic sectors and the place of SMEs therein, as well as the national priorities related to the promotion of national exports, require the development of export strategies for particular sectors, one of them being the sector of Manufacture of rubber and plastic products. Focusing of the support and defining of precise benchmarks for state intervening through its institutions, on the one hand, and providing options for development to other participants in the process, on the other, will strengthen in a positive way the planning aspect of state activities and will at the end improve the performance of the sector. The successful implementation of the Export Strategy is expected to result in improvement of the process of going international and of the active expanding and strengthening of market positions of Bulgarian SMEs producing rubber and plastic products. At the export strategy development, the "Methodology for Strategic Planning" is taken into account prepared by the Council for Administrative Reform at the Council of Ministers of the Republic of Bulgaria. 4

5 1. APPROACH FOR DEVELOPING THE EXPORT STRATEGY FOR SECTOR MANUFACTURE OF RUBBER AND PLASTIC PRODUCTS The Export Strategy is a strategic document defining the medium-term goals and priorities of the export development of SMEs in sector Manufacture of rubber and plastic products. It is developed on the basis of the strategic planning approach, the skillful implementation of which has the following advantages: Creates an understanding among stakeholders on the trends and prospects for the future of sector Manufacture of rubber and plastic products. Establishes a common vision and consensus among stakeholders, by coordinating different initiatives in the selected targets. Identifies already undertaken or planned projects and actions. Strengthens partnership between government, business and other parties to solve complex problems in sector Manufacture of rubber and plastic products. In developing such a strategic document, it is of crucial importance to formulate properly the "owner" of the strategy, i.e. the institution or institutions who will be responsible for the overall implementation of the strategic document as well as for the different stages of strategic planning. In general, the development of strategic documents includes the following stages: Assignment Preparation Development Coordination Approval Implementation Evaluation Updating Each of these stages contains specific activities, some of which, such as assignment, preparation, development, coordination, approval and, at a later period, updating, are part of the project implementation under the contract mentioned above. Therefore, the principal owner of the export strategy is the Bulgarian Small and Medium Enterprises Promotion Agency (BSMEPA). For this reason, the goals, measures and actions set in the strategic document must first help BSMEPA improve the planning and implementation of activities related to the support of exports of SMEs in sector Manufacture of rubber and plastic products. This formal logic does not contradict to the fact that a significant number of institutions, businesses and even the population are involved as stakeholders and they might be influenced by means of different mechanisms, for example, the state institutions through the forms of coordination of strategic documents of such rank, and the branch associations and businesses by providing incentives to increase their export potential. It is of extreme importance for SMEs in the sector of Manufacture of rubber and plastic products to be able 5

6 to see a clear and predictable export supporting state policy, which, though in the medium run, will allow them to decide whether to benefit or not from the created opportunities. Technology of strategic planning The process of strategic planning encompasses the following steps: Identification of the stakeholders Analysis of the environment SWOT analysis Vision Goal setting Selection of an alternative a development strategy Action plan Monitoring system Each of these steps is characterized by some specifics, namely: Identification of the stakeholders. A stakeholder is any person or group that requires attention, can influence a decision, can contribute by resources or be affected by a certain decision. Involving stakeholders at an early stage of the strategic document development concerning the SMEs in sector Manufacture of rubber and plastic products can lead to a strongly expressed consensus on goals and a greater willingness to support decisions. Stakeholders of the Export Strategy for sector Manufacture of rubber and plastic products may involve various persons and organizations, such as companies, state institutions, producers associations, businesses, consumers of the products, NGOs and experts. The specifics of developing business supporting strategies is that prepared documents shall not favour some and/or discriminate other businesses. This is the reason why there was a pursuit for equality when involving business organizations and different branch associations, as well as a search for an opportunity that the majority of businesses could benefit from the analysis made. Analysis of the environment. The analysis of the environment (the conclusions of which serve as a basis for the SWOT analysis) allows the formulation of goals and priorities which shall align the efforts and shall not be dissociated from time and environment. Analyses are focused on: Current state of affairs of sector Manufacture of rubber and plastic products in Bulgaria, trends, dynamics and growth; Characteristics of export oriented SMEs, incl. regional distribution; State of the exports of goods and services; Analysis of goods and services with export advantages or export potential produced by sector Manufacture of rubber and plastic products ; Estimation of productions with the highest value added growth potential in the export of goods and services in which Bulgaria has a global market share; Size of the international market; Competitiveness of exports of goods and services, for existing and for potential foreign markets; 6

7 Share of products with origin from Bulgaria; Share of the Bulgarian exports of analyzed product groups in total imports on the global market; Leading importers in the sector; Value and volume of imports on certain foreign markets for a specified product group; Main suppliers on a certain market; Identification of barriers to internationalization of enterprises in sector Manufacture of rubber and plastic products and measures for their overcoming. Based on these analyses, the current problems and achievements of the sector shall be clearly defined, and some forecasts, opportunities and prospects for development shall also be motivated, such as: Achieving a significant growth of Bulgarian goods in total, and particularly of those with higher value added; Identification and prioritization of target markets by commodity groups; A forecast of exports and imports of goods and of trade balance in the next five and more years. Analyses are based on existing analytical and program documents, available statistical information and information from conducted surveys interviews and focus groups. The analysis of the environment describes the current situation of SMEs in Manufacture of rubber and plastic products and the export process, establishes the reasons that cause developmental problems, and sets the guidelines for future development. SWOT analysis. SWOT analysis allows the identification of the main internal factors defined as strengths and weaknesses and the main external factors, defined as opportunities and threats, and it also assists the formulation of strategic goals, priorities and measures. Using SWOT analysis prevents the setting of unattainable goals and priorities for export development of SMEs in Manufacture of rubber and plastic products over the period of the Strategy. Using SWOT analysis in the development of the Export Strategy has some specifics, as though BSMEPA is the strategy owner, the analysis is focused on the export process of SMEs in the sector Manufacture of rubber and plastic products and not the institution itself. LOED analysis. LOED analysis is an instrument used to show how to build on strengths, to overcome weaknesses, to seize opportunities and to protect against the threats identified by the SWOT analysis. Goal setting. Strategic planning focuses on critical issues, opportunities and problems faced by the export of SMEs in Manufacture of rubber and plastic products. It helps to distinguish really important decisions from decisions with temporary effects. Goal setting, by establishing a hierarchical tree of goals, is a working tool that allows detailing of the most common general goals to specific ones. Defining of the general strategic goal is particularly important for the future development of exports of SMEs in Manufacture of rubber and plastic products as it reflects the view of institutions and business for the future. The general strategic goal seeks to answer a single basic question: How should the export of SMEs in the sector look like in the long-term period according to the main institutions and stakeholders? 7

8 Reaching the level of specific goals makes it possible to answer the questions about who, what and when, so as to guarantee attaining of the goals set higher in the hierarchy. Selection of an alternative a development strategy. Once objectives are defined, ways are sought how to achieve them. Experience shows that this can be done in different ways, which represent different alternatives for development and achievement of the objectives. At this stage of strategic planning, different alternatives are evaluated from different perspectives and criteria, and as a result, an alternative is selected which then becomes a development strategy. Action plan. The selected strategy shall be supported by certain actions and measures, which are linked to terms, supervisors, performers and financial resources. The Action plan and the related measures therein transform this strategic instrument into daily work and implementation of the policy for supporting the export of SMEs in Manufacture of rubber and plastic products. Monitoring system. The last step of the strategic planning process is monitoring and evaluation of the progress in implementing the general and specific goals set in the export strategy and in the Action plan. Monitoring is important as it allows taking corrective actions, provided that progress is unsatisfactory or conditions change. It is also important that the progress in achieving general objectives is reported to the public and the business, so that they can estimate the work of relevant institutions and stakeholders in the implementation of the strategy. It should be noted that often the effects may not be visible or apparent, which hampers their measurability. Moreover, the impact is often a cumulative effect, and this may complicate further the analysis. This gives particular weight to monitoring, which is closely related to all stages of implementation of the Export Strategy - preliminary (ex ante), current (parallel with implementation) and subsequent (ex post) evaluation. In order to exercise monitoring of the implementation of the export strategy and to evaluate performance against the defined targets, it is necessary to use a set of indicators which should be determined in advance or early enough regarding the implementation of the strategic document, so as to use data received on them. In most cases, these will be targeted values which in aggregate will correspond to the goals of the strategic document. Monitoring provides the feedback that helps to assess the success or failure of the planning document. To perform the monitoring process, it is necessary to determine: Monitoring indicators (what will be observed); Frequency of monitoring and evaluation (when the relevant reports will be prepared); Responsibilities for monitoring and evaluation (who does what) and competences for decision-making to change (updating of the strategic document). INFORMATION SOURCES The following main information sources have been used in developing the export strategy: - National Statistical Institute - Information provided by BSMEPA - Information from the MEET 8

9 - Eurostat - International Trade Centre - Official electronic information sources - Information published by professional organizations in the sector - Information from the Bulgarian Industrial Association, the Bulgarian Chamber of Commerce and Industry and its regional divisions - Information from a survey carried out in the period 31 October to 28 November 2011 with senior management of 1 micro, 8 small and 15 medium-sized enterprises (total of 24), working in the sector, and the focus group discussion. Maximum objectivity of the conclusions has been pursued when processing the information. In most of the cases, the analyzed information applies to the sector as a whole, i.e. the information covers both SMEs and large enterprises, based on the assumption that if a Bulgarian company has been successful on certain markets, the same could be expected for another company as well, incl. from the group of SMEs. These specifics are explicitly emphasized during the analysis. 9

10 STRUCTURE OF THE EXPORT STRATEGY FOR SECTOR MANUFACTURE OF RUBBER AND PLASTIC PRODUCTS The structure of the Export Strategy for sector Manufacture of rubber and plastic products is based on the strategic planning approach which sets the general parameters of the strategic document. At the same time, a study was made of the structure of other institutional strategic documents, and they were estimated with regard to the following criteria: - providing opportunity for relatively easy access to the document through understandable and logical structuring of different parts; - presenting the content in an attractive and easy-to-understand manner accessible to non-specialists as well; - providing information thematically, i.e. structuring the material in a way that allows in-depth penetration of problems and analyses only if desired by the reader. The above mentioned criteria were met by several of the studied strategies and they contained two clearly distinguished separate parts, namely: 1. A main document, in which according to the above described technology of strategic planning the separate chapters are defined. 2. Appendices that contain the complete text of the analysis, including conclusions, transferred to the main document. This approach was chosen in structuring the Export Strategy for sector Manufacture of rubber and plastic products. Following consultation with stakeholders, the initial approach was slightly altered, as findings and conclusions in the main document were supplemented with specific data and visualized with graphs and diagrams, thus relieving users who do not intend to go in depth of the analyses included in the Appendices. 10

11 2. MAIN CONCLUSIONS FROM THE ANALYSIS OF THE CURRENT STATE This part contains the conclusions of different analyses, included in Analysis of the environment, one of the main steps in the technology of strategic planning. In application to this strategic document, the complete text of data and analyses is presented, on which basis the respective conclusions are drawn. The conclusions and the analyses themselves are structured in 6 parts, namely: STATE AND DEVELOPMENT OF THE SECTOR IN BULGARIA EXPORT ORIENTATION OF THE SECTOR GOODS WITH EXPORT ADVANTAGES AND POTENTIAL COMPETITIVENESS OF THE EXPORT OF GOODS ON FOREIGN MARKETS EXPORT PRIORITY PRODUCT GROUPS AND MAIN MARKETS BARRIERS TO THE INTERNATIONALIZATION OF SMALL AND MEDIUM ENTERPRISES AND MEASURES FOR THEIR OVERCOMING Conclusions are clearly structured according to the scope of the analysis, as first are presented those valid for the whole sector, including the companies, meeting the requirements, according to the classification for large enterprises, and second come the conclusions regarding small and medium-sized enterprises in the sector. STATE AND DEVELOPMENT OF THE SECTOR IN BULGARIA General information for the sector "Manufacture of rubber and plastic products. Manufacturing industry Manufacture of rubber and plastic products The dynamics of production and turnover of the enterprises in the sector, measured by the production and turnover indices, shows as a whole presence of positive trends in the sector in the period At the same time a significant deviation of the index of production of the sector from the level of the production in the manufacturing industry is observed in two directions: lower values in the case of decrease and higher values when there is a positive change of the indicators. The slower turnover index growth rate compared to the average for the manufacturing industry shows certain difficulties in terms of the realization of the production of the sector on the domestic market Index of Industrial Production

12 Manufacturing industry Manufacture of rubber and plastic products Turnover index on the domestic market Note: as of December of the given year, on a continuous basis Source: NSI The regional structure of companies in the sector is characterized by an uneven distribution of enterprises and employed by regions. The concentration of companies and employed is largest in the South Central region lowest in the North-Western region. Regional distribution of enterprises from the sector "Manufacture of rubber and plastic products" Source: Database 'Amadeus' MEET, 2011 SMEs in the sector "Manufacture of rubber and plastic products" In 2010 out of all SMEs in the manufacturing industry 6.35% operate in the sector "Manufacture of rubber and plastic products". The percentage reduction in the number of SMEs in the sector in 2010 compared to 2009 (over 7%) is higher than the average decrease in number of companies in manufacturing industry (4.6%).The registered downward trend in the number of SMEs is valid for all subsectors except for "Production of plates, sheets, tubes and profiles of plastics", which showed a growth of 9.6%. For 2010 the share of the employed in SMEs in the sector in all employed in SMEs in the manufacturing industry is 5.2%. However, for the sector Manufacture of rubber and plastic products the negative trend of decreasing employment in SMEs in 2010 compared to 2009 is shown in higher degree and with a faster rate of decline (-9%) compared to employment in SMEs in the manufacturing industry (-6.8%). In 2010, the SME sector provides 7.4% of the turnover and 6.4% of the value added of SMEs in the manufacturing industry. The registered growth of 9.2% of the turnover 12

13 compared to 2009 is higher than the average for the manufacturing industry (1.8%), while in terms of value added of SMEs in the sector a decrease of 6% is observed (compared to less than 1% decline on average for the manufacturing industry). The higher turnover rate than that of the value added shows that this type of production does not contain in itself highly innovative components. The industry is lagging behind in terms of innovation and high technology that is further confirmed by the fact that in 2010 labor productivity in the SMEs in the sector ( BGN), although higher than the productivity of SMEs in the manufacturing industry (11,421 BGN ) lags far behind the most high-performance sector - Manufacturing of pharmaceutical products ( BGN), where components such as research and innovation are most significant. In inner-sector aspect subsector "Manufacture of plastics products" creates the major share of employment, turnover and value added in the sector - respectively 87.1%, 86% and 84.5%. Within this subsector highest proportion has the manufacture of plastics, followed by the manufacture of builders' ware of plastics, n.e.s.. In subsector "Manufacture of rubber" a major contributor to employment, turnover and value added is the manufacture of other rubber products %, 13.6% and 15%. The sector has a well-prepared workforce that knows and is able to apply traditional good practices in manufacturing. This assessment stems from the relatively not very high priority of the measures for improving the qualification of the personnel referred to in the conducted survey. The findings of the conducted survey and the analysis of the financial state of SMEs with export potential indicate that the surveyed companies continue to experience difficulties in their activities and have still not overcome the negatives of the global financial and economic crisis, which results in deterioration of their financial performance after 2008, especially in terms of equity and profit. EXPORT ORIENTATION OF THE SECTOR General information for the sector "Manufacture of rubber and plastic products The volume of exports for 2010 ranks sector "Manufacture of rubber and plastic products" in seventh place among the sectors analyzed with a share in the total export of 2.6%. Sector's share in the total exports has remained relatively constant over the period In a dynamic plan, the reported increase of 0.4% in 2010 compared to 2001 shows that the production of rubber and plastic products has a potential for an increase in its export activity. The growth rate of the sector export during the analyzed 10 year period (322%) exceeds the total growth rate of the export of Bulgaria (272%) and the difference increases especially towards the end of the period. Within the sector the increase in the export of rubber is more significant (by 7.62%) compared to the export of plastic products (by 3.26%). The main reason is the decline 13

14 in the export of products used in construction, which was strongly influenced by the economic crisis. SMEs in the sector "Manufacture of rubber and plastic products" In both years of the analyzed period the share of SMEs in the export of sector "Manufacture of rubber and plastic products" is high % for 2009 and 49.5% in The registered decrease in the share of exports of SMEs in the overall increase in exports of the sector from 36% in 2010 compared to 2009 due to large enterprises, gives grounds to believe that small and medium enterprises in the sector are more seriously affected by the global financial and economic crisis and need purposeful state support. SMEs in the sector Manufacture of rubber and plastic products rank third in export volume in 2010 and fifth in terms of exports per one employed and per annual growth of exports in 2010 compared to 2009 among the sectors analyzed for which export strategies are developed 1, which is indicative for their export orientation. The presence of export-oriented SMEs in the sector is also confirmed by the results of the carried out survey according to which 75% of interviewed SMEs realize export with half of them exporting over 50% of the manufactured production. Enterprises, included in the sample, export directly without using commercial enterprises, or establishing joint business with other businesses, etc. PRODUCTS WITH EXPORT ADVANTAGES AND POTENTIAL General information for the sector "Manufacture of rubber and plastic products. Product groups that are manufactured and exported from sector "Manufacture of rubber and plastic products" are extremely numerous. Therefore the choice of product groups with export advantages and potential has been made on the basis of two criteria, namely: highest relative share in exports of the given product group, combined with an increase in the observed period. These criteria were applied for the sector as a whole, as no official statistical information for SMEs is available. Implementation of the selected criteria in data from the International Trade Centre gave grounds to determine the following 10 product groups that have export advantages and potential: Uncured rubber mixtures (without rubber with additives) Hoses of unhardened vulcanized rubber Pneumatic rubber tires, new 1 In the frame of Project BG161РО Promotion of the internationalization of the Bulgarian enterprises have been developed the export strategies for another 17 sectors of the manufacturing industry, which are considered to have export potential. The state, development and export orientation of sector Manufacture of rubber and plastic products is compared (where appropriate) to data of the rest of the sectors in order to outline their position and export possibilities. 14

15 Hygienic or pharmaceutical articles of vulcanized rubber Articles of vulcanized rubber other than hardened rubber, n.e.s. Monofilament with largest cross-sectional dimension> 1 mm Other plates, sheets, strip, foil from plastic Bathtubs, showers and sinks, bidets and other plastic products Packages, caps, lids and other devices for closures from plastic Builders' ware of plastics, n.e.s. The selection of product groups is confirming the conclusions of the Ministry of Economy Energy and Tourism, Department Economic Policy" in framing the country's export profile 2. The product groups: plastics monofilament products, plastic hygienic articles, plastic products and devices, builders ware, uncured rubber mixtures, hoses of vulcanized rubber, pneumatic rubber tires, are identified as the main ones, exported by sector "Manufacture of rubber and plastic products. The other two selected product groups also meet the criteria for export goods with export advantages and are therefore included in the analysis. The main findings of the analysis of the major exporters, the dynamics of exports, positioning of our country in terms of the value of exports for selected product groups in the sector are summarized in the following table: Commodity groups Uncured rubber mixtures (without rubber with additives) Hoses of unhardened vulcanized rubber Place in world exports by Place in world exports by 2010 Share in world exports by 2010 Share of exports of the world's leading exporter for 2010 by 2001 Share of exports of the world's leading exporter for 2010 by 2011 Growth of exports in 2010 compared to ,14% 4,01% 0,73% 1692% ,65% 0,30% 4,30% 1891% Pneumatic rubber tires, new Hygienic or pharmaceutical articles of vulcanized rubber Articles of vulcanized rubber other than hardened rubber, n.e.s. Monofilament with largest cross-sectional dimension> 1 mm Other plates, sheets, strip, foil from plastic ,01% 0,23% 0,08% 257% ,12% 0,47% 1,12% 431% ,20% 0,19% 1,26% 1053% ,16% 0,18% 3,01% 2935% ,13% 0,53% 0,77% 573% html 15

16 Commodity groups Bathtubs, showers and sinks, bidets and other from plastic Packaging, caps, lids and other devices for closures from plastic Builders' ware of plastics, n.e.s. Place in world exports by Place in world exports by 2010 Share in world exports by 2010 Share of exports of the world's leading exporter for 2010 by 2001 Share of exports of the world's leading exporter for 2010 by 2011 Growth of exports in 2010 compared to ,16% 0,70% 5,35% 1327% ,21% 1,04% 1,75% 490% ,12% 0,09% 0,68% 1562% Source: International Trade Centre and own calculations The data show that Bulgaria is holding the best position among world exporters, in the field of product groups "Monofilament with largest cross-sectional dimension> 1 mm" and " Bathtubs, showers and sinks, bidets and other from plastic " - the 14 th and 21 st place respectively in These two product groups have the highest share in the export of the leading exporter in 2010 (respectively 3.01% and 5.35%). The smallest share in world exports and lowest ranking among the world's exporters has product group Pneumatic rubber tires (69 th place and 0.08% share in the export of the world's leading exporter), probably due to the significant number of global competitors. In all products, chosen for the analysis, an outrunning growth rate in the Bulgarian exports is observed, that exceeds substantially the increase in the value of the world exports of the relevant products, indicating strong demand for products produced in Bulgaria in the period SMEs in the sector "Manufacture of rubber and plastic products" The abovementioned data for the analyzed product groups apply in general for all enterprises in the sector, not only for SMEs. The lack of sufficient statistical information makes it impossible to identify SMEs in the export of the analyzed product groups. The results of the conducted survey show that the main products exported by Bulgarian SMEs in 2010 are PVC profiles, PVC and aluminum windows, baby bottles, containers (for biscuits and sweets, for cosmetic products, salads, etc.), plastic details, pumps for liquid soap, flexible connections for water and gas, decorative capsules, laminated tubes, medical disposable products, insulation panels of EPS, pipes, garbage bags with ties, injection molded products, which corresponds to the estimated profiles of small and medium enterprises. According to all interviewed senior representatives of the SMEs in the sector, the available manufacturing capacity is significant, which in combination with the unified willingness of the management teams to realize the export of products, manufactured by their enterprises, outlines a highly favorable picture for the development of the export of the sector. Assessment of the interviewed companies is that the export of final products with more specific properties prevails (in the proposed classification - raw materials and semi manufactured products and final product), with high degree of processing and value added 16

17 respectively. One can make the assumption that this is the niche in which SMEs would have more serious success in exports. The above conclusion is confirmed by the fact that in the opinion of the respondents as critical (most important) factors for the success of exports of SMEs the high level of technology, training of personnel and logistical support to exports from the state are indicated. COMPETITIVENESS OF THE EXPORT OF GOODS AND SERVICES ON FOREIGN MARKETS General information for the sector "Manufacture of rubber and plastic products. The main markets of the analyzed ten product groups are in the EU, namely: - Uncured rubber mixtures - The main markets are Austria, Belgium and Finland. - The product with the largest export to the leading market - Austria is " Uncured rubber mixtures in the form of plates, sheets or strip (excl. Rubber mixed with carbon black or silica, and mixtures of natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums). - Our main competitors on the Austrian market are companies from Germany, France, The Netherlands and Belgium - Significant decline in the value of the Austrian trade balance in 2010 makes this a promising market for Bulgaria, especially since in 2010 our country occupies 6% share of the Austrian market. - Hoses of unhardened vulcanized rubber - The main markets are Spain, Germany, Poland, Estonia and the UK. - The main product in this product group with the largest export to the leading market - Spain is "pipes and hoses of vulcanized rubber (excl. hardened rubber), reinforced or otherwise combined only with metal, with accessories." - Our main competitors in the leading market are companies from Germany, France, Poland, Italy and Czech Republic. - The trade balance of the Spanish market is negative as in 2010 the imports of the country increased and reached values close to those before the financial and economic crisis. In this sense, the Spanish market remains an important export destination for Bulgaria, especially in combination with an increasing share of Bulgarian imports in the country. - Pneumatic rubber tires, new - The main importers of Bulgarian production are Germany and France. - The main product in this product group with the largest exports to Germany is "pneumatic tires, of rubber of a kind used on motor vehicles (including station wagons and racing cars)," which though has a very low share in this market. 17

18 - Our main competitors in the market are companies from France, Czech Republic, Slovakia, Poland and Spain. - A positive factor for the Bulgarian export to Germany is the registered increase in the value of total imports, which combined with the increase in the share of Bulgarian import in the country predetermines the gain of better position among importers of the analysed product group in the Federal Republic. - Hygienic or pharmaceutical articles of vulcanized rubber - The main market for this product group is the UK. - The main product with the largest export to the leading market, the UK, is "hygienic or pharmaceutical articles, incl. pacifiers, of vulcanized rubber (excluding hardened rubber) with or without fittings of hard rubber, not included elsewhere (except contraceptives, clothing and accessories, incl. gloves, for all purposes)," while the volume of the import is relatively small compared to the total import of UK. - Our main competitors in the leading market are companies from China, USA, Germany, Thailand and India. - A gradual increase in the value of import and the negative trade balance of UK provide opportunities for an increase of Bulgarian export to the UK. - Articles of vulcanized rubber other than hardened rubber - The main markets are Germany, Poland and Italy. - The main products in this product group with the largest export to the leading market - Germany are "articles of vulcanized rubber not included elsewhere (except hardened rubber and those of cellular rubber) ", but imports of this product is very small compared to the total import of Germany. - Our main competitors in the leading market are Italy, Czech Republic, France, Poland and Turkey. - The trade balance of Germany for the analyzed product group is positive with a growth trend. However, import of the Federal Republic is increasing and in 2010 its value exceeds the pre-crisis level. This factor, combined with the growing share of Bulgarian import, reinforce the importance of the German market as an important export destination for our country. - Monofilament with largest cross-sectional dimension> 1 mm - The major markets are Romania, Ukraine and Moldova. - The main product in this product group with the largest export to the leading market - Romania is "Plastic Monofilament, whose largest cross-sectional dimension exceeds 1 mm (monofilaments), rods, sticks and profile shapes, even surface- processed but not otherwise processed by polymers of vinyl chloride." - Our main competitors in the market are leading companies from Germany, Turkey, Poland and France. - As a whole, the Romanian market is dependent on the imported monofilament fibers with the largest cross-sectional dimension> 1 mm. The total imports of Romania decreased over the past two years, but Bulgaria's position (among the main five suppliers of the market) determines the importance of the Romanian market for Bulgarian exports of the analyzed commodity group. 18

19 - Other plates, sheets, strip, foil from plastic - The main markets are Italy, Poland, Germany, France and Romania. - The main product in this product group with the largest exports to the leading market - Italy, is "plates, sheets, foil and strip, of plastics (poly (methyl methacrylate)), not reinforced, laminated, supported or otherwise combined with other materials, without further treatment or only surface-worked or cut to shape. - Our main competitors in the leading market are companies from Germany, Belgium, Britain, France and the Netherlands. - Significant volumes of imports and exports of other plates, sheets, strip, foil, of plastic of the Italian market during the period show that it is highly competitive and open. This, combined with the registered increase in imports over the past year, are factors that are positive for the Bulgarian export of the product group to Italy. However, one must take into account the fact that Poland is also a perspective destination for export of our products - the volume of Bulgarian exports increased in 2010 compared to 2009 and is similar to that of our leading export market. - Baths, showers and sinks, bidets and other from plastic - The main markets are Germany and Italy. - The main product in this product group with the largest export to the leading market - Germany is plastic seats and covers for toilet seats. - Our main competitors in the leading market are companies from China, Switzerland, Italy, the Netherlands and Denmark. - Although German exports of baths, showers and sinks, bidets and other of plastic is higher than imports, Bulgaria has over 5% share of the total imports in Germany and this share increased in 2010 compared to This, combined with the fact that imports in the Federal Republic return to pre-crisis levels, is a positive factor for Bulgarian exports and makes this a promising market in the future. - Packaging, caps, lids and other devices for closures from plastic - The main markets are Germany, Romania, The Netherlands and Greece. - The product with the largest exports in this product group in Germany is "Sacks and bags, including cones, of polymers of ethylene", while the most likely reason is the vast market and high consumer demand in this country. - Our main competitors in the leading market are companies from the Netherlands, Switzerland, France, Poland and China. - German exports of packaging, caps, lids and other devices for closures, from plastics is higher than the imports which, however, are significant. This market is important and promising for the Bulgarian export due to the increase in the value of both the total imports of Germany, and the share of Bulgarian imports in the Federal Republic observed. - Builders' ware of plastics, n.e.s. - The main market for Bulgarian export of this product group is Romania. 19

20 - The product with the largest exports in this product group in Romania is "plastic doors, windows and their frames and thresholds for doors." Despite the decline in construction, the export of this product increases. - Our main competitors in the leading market are companies from Germany, Hungary, Italy and Poland. - Romania is dependent on the import of Builders' ware of plastics for construction. However, over the past two years a decrease is registered in the value of imports made by our northern neighbor. Since Romania is a key market for the Bulgarian export of this product group, Bulgaria must make an effort to preserve the registered increase in the share of Bulgarian imports in the total Romanian imports in the future as well. The data for our main markets show that exports of the analyzed product groups is concentrated in several markets - Germany, Italy, Poland and the UK, with which we have established contacts, and traditional relations, and in Romania, Greece and Macedonia, where the geographical proximity factor is added. Given that the negative effects from the global economic crisis have not been overcome yet, measures to promote exports should be focused on expanding our presence in the main priority markets. Although for fewer product groups, the volume of exports in value terms to non-eu countries is similar to that to EU countries, for example: Monofilament with largest cross-sectional dimension> 1 mm - Ukraine and Moldova, Other plates, sheets, strip, foil from plastic Turkey, Builders' ware of plastics, n.e.s. - Serbia. Estimates of development by 2015 are prepared for each of the analyzed product groups. Simulations of the trend lay on establishing the analytical form of the function through which regularities in the development of exports of each product group in are expressed, and estimating the values of the parameters of the function used. In modeling exports, linear or logarithmic regression is used depending on the regularities manifested in the output period. Regressions are calculated by using the values for each year, not just in the first and last year of the period. The obtained results are presented on the following figure. 20

21 Forecast for the development of exports by product groups by Hoses of unhardened vulcanized rubber Articles of vulcanized rubber Uncured rubber mixtures Pneumatic rubber tires, new Hygienic articles of vulcanized rubber Packages from plastic Other plates, foil from plastic Monofilament with largest cr.sect.dim.> 1 mm Bathtubs, showers from plastic Builders' ware of plastics, nes Source: International Trade Centre and own calculations 21

22 SMEs in the sector "Manufacture of rubber and plastic products" The data from the conducted survey of SMEs confirms the obtained results for the priority export destinations - the main markets for the companies surveyed are in EU countries. Next come the rest of the European countries and the Balkan countries. The main advantages of the competitors of the surveyed SMEs are mainly associated with the following two aspects: First, better production and technical base and the related thereto lower cost of production, lower prices and higher quality; Second, a more favorable regulatory environment, strong state support and better business climate. Therefore, the advantages of the competitors are related to exactly those factors that surveyed firms assess as critical for exports. The implementation of measures, aimed at the reduction of the differences between the Bulgarian SMEs and their competitors both in terms of improving their technical and technological level, as well as in the field of strengthening state support for exports, is necessary. The competitiveness of the Bulgarian rubber and plastic products is determined by the fact that the majority of enterprises in the industry, according to respondents, have clear and well grounded export strategies, have launched new product on the market after 2007, have international certificates and own brand. Unfavorable factor leading to lower competitiveness are the underdeveloped R&D activities. Where R&D is carried out, innovations are aimed at expansion of existing enterprise, followed by diversification of the production of the existing enterprise by adding new additional products. The expectations of two-thirds of the interviewed companies for the next period are, that the export will increase, albeit with a slower rate. Companies planning to start export declare that this will happen in 2012 or the following year. The findings and conclusions give grounds to expect that over the next five years the export of Bulgarian products of rubber and plastic produced by SMEs will increase and at the end of the five year period it is expected that the export of Bulgarian SMEs in the sector will amount to more than 400 million BGN. 22

23 EXPORT PRIORITY PRODUCT GROUPS AND MAIN MARKETS The carried out analysis of the product groups in the sector gives grounds to determine the leading priority export product groups and specific markets. The selection is made based on criteria: share in the export of the sector, growing exports in the period , share on the global market and concentration of SMEs in the subsector. The main markets in 2010, main suppliers and their market share is given for each of the selected commodity groups. The data used are taken from the International Trade Centre. Products from the group "Manufacture of products from rubber Uncured rubber mixtures (without rubber with additives) Austria Finland Romania Germany (63.5%) France (7%) Netherlands (6,5%) Bulgaria (6.0%) Belgium (5%) Sweden (41.2%) Germany (10.7%) Italy (10.6%) Belgium (8%) Bulgaria (7.2%) Germany (62.9%) Czech Republic (11.7%) Poland (7%) France (4%) Italy (2.8%)... Bulgaria (0.3%) 23

24 Hoses of unhardened vulcanized rubber Spain Germany Poland Germany (19%) France (14.4%) Poland (8.3%) Italy (7.9%) Czech Republic (7.6%)... Bulgaria (4.2%) Hungary (12.8%) Italy (12.6%) Czech Republic (12.3%) Poland (11%) Romania (7%)... Bulgaria (1.1%) Germany (33.2%) Italy (18.3%) Czech Republic (8.7%) Turkey (5.7%) China (5.5%)... Bulgaria (1.3%) Products from the group "Manufacture of products from plastics" Monofilament with largest cross-sectional dimension> 1 mm Romania Ukraine Moldova Germany (42.5%) Turkey (17.6%) Poland (15%) France (5%) Bulgaria (4.8%) Poland (31%) Germany (24%) China (22.6%) Turkey (5.4%) Russia (5%) Bulgaria (3.7%) China (26.7%) Bulgaria (24.3%) Turkey (14.5%) Poland (11.4%) Germany (8.8%) 24

25 Bathtubs, showers and sinks, bidets and other plastic products Germany Italy UK China (17.8%) Switzerland (10%) Italy (9.7%) Netherlands (9%) Denmark (7.7%)... Bulgaria (5.5%) Germany (48%) China (12.8%) Poland (8.6%) Egypt (6.3%) Bulgaria (4.1%) China (37.4%) Germany (14.3%) Netherlands (9%) France (7%) South Africa (3.4%)... Bulgaria (1.3%) The companies that have proved to be leading importers into the above mentioned main markets for Bulgaria for rubber and plastics products, are international companies, ranking among the largest producers and exporters of the analyzed products. In conclusion, the main markets for the product groups produced by the sector "Manufacture of rubber and plastic products" are in the European Union. Among them the most important markets are Germany, Italy, Spain, Britain, Poland, with which traditional trade relations exist. In countries such as Romania and Greece an additional favourable factor is the geographical proximity. The strengthening of the market positions of SMEs, producing rubber and plastics products, on traditional markets, the entering into new markets and the improvement of the image of Bulgarian goods require purposeful support and assistance from the responsible institutions (MEET together with the BSMEPA). Possible measures for promoting exports to traditional markets and entering new markets may include: Preparation of situation reports for the relevant markets and research on the consumption of specific products; Ensuring access of SMEs in the sector to actual and useful information (market analysis, distribution channels, customs and tariff regimes, etc.) towards promotion and support of exports; Providing support to participate in business delegations and business forums with international participation in order to create contacts and attract partners and customers; Supporting the participation of foreign visitors (producers and users) at the Bulgarian trade fairs and exhibitions; 25

26 Development of models for entering new markets for SMEs in the sector, according to the specifics of the products, such as subcontracts, cooperation with producers of raw materials abroad, engineering contracts, distribution through the local (for the corresponding country) distribution network and more. Creation and distribution of information and advertising materials, catalogues and analyses to promote and advertise the products of sector "Manufacture of rubber and plastic products" abroad. Support for the participation of Bulgarian manufacturers in leading for the industry international exhibitions and fairs. BARRIERS TO THE INTERNATIONALIZATION OF SMALL AND MEDIUM ENTERPRISES AND MEASURES FOR THEIR OVERCOMING The barriers to internationalization of SMEs and the measures, the companies prefer for overcoming them and for promoting exports are identified and analyzed through the conducted sociological survey. For the specific enterprise Barriers (obstacles) Very serious obstacle Serious obstacle Not a serious obstacle Not an obstacle High production costs of goods and services 29,2% 33,3% 20,8% 16,7% High export realization expenditures 4,2% 25,0% 45,8% 25,0% Not high enough quality of the goods and services 8,3% 33,3% 16,7% 41,7% Lack of qualified staff to ensure quality over a 4,2% 37,5% 37,5% 20,8% longer period Lack of experience in the foreign trade activity 8,3% 37,5% 29,2% 25,0% Language barriers 8,3% 29,2% 25,0% 37,5% Unfavorable business environment in Bulgaria 37,5% 29,2% 16,7% 16,7% High risk on the various foreign markets 12,5% 54,2% 16,7% 16,7% Customs and non-customs restrictions imposed by 12,5% 25,0% 33,3% 29,2% other countries Lack of support by the Bulgarian state for the export 41,7% 37,5% 8,3% 12,5% Source: Sociological survey conducted with representatives of the SME sector, 2011 The most significant barriers to the export of SMEs in the opinion of the interviewed CEOs are related to: 1) lack of support by the Bulgarian state for the export, 2) unfavorable business environment in Bulgaria, 3) increased risk on the various foreign markets. As for the sector in general the responses do not differ significantly. It may be noted, however, that 86% of respondents underline the absence of state support as the most serious obstacle to the export of the sector. Almost all factors internal for the SMEs (skilled and experienced staff, quality of the products, etc.). are not reported as a barrier to the export, which indicates that the 26