Bulgarian Industrial Association Georgi Shivarov, Vice President The 4 th Vienna Economic Forum 5 – 6 November 2007

Bulgarian Industrial Association Bulgarian Industrial Association Georgi Shivarov, Vice PresidentGeorgi Shivarov, Vice President

The 4The 4thth Vienna Economic Forum Vienna Economic Forum5 – 6 November 20075 – 6 November 2007

• Innovation investment in Bulgaria remains related primarily to the transfer of knowledge from the EU through foreign direct investment and import of capital goods.

• R&D expenditures are relatively low (0.50% of GDP).

• The financial system of the country is growing rapidly but still fails to offer specific innovation financing instruments.

• The expectations are for the trend of increased R&D investment to continue in the next few years under the influence of the additional financing from the EU funds and the more active private sector.

Innovation investment in Bulgaria

Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS

ARC FundARC Fund

0,6

2

1,8

5

0,5

2

1,8

3

0,5

1

1,8

3

0,5

7

1,8

4

0,5

7

1,9

0

0,5

20

,79

1,8

91

,94

0,4

70

,80

1,9

31

,98

0,4

90

,79

1,9

31

,98

0,5

00

,80

1,9

21

,97

0,5

10

,81

1,9

01

,95

0,5

0

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

1,60

1,80

2,00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

BG EU-10 EU-25 EU-15

INVESTMENT IN R&D, % OF GDP

%


ARC FundARC Fund

R&D EXPENDITURES IN BULGARIA

5 9 89 128 134 139 139 158 173 194 208

0,62%

0,52% 0,51%0,57%

0,52%0,47% 0,49% 0,50% 0,51% 0,50%

0,57%

0

100

200

300

400

500

600

700

800

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

1,40%

R&D spending (BGN mn) R&D spending (% of GDP)


ARC FundARC Fund

89 73186 527

91 100112 733 118 085

129 819133 800

167 100

188 200

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

200 000

1999 2000 2001 2002 2003 2004 2005 2006 2007

GOVERNMENT BUDGET SPENDING FOR THE ‘SCIENCE’ BUDGET LINE


ARC FundARC Fund

BG

N th

ousa

nd

PROJECTED GROWTH OF THE R&D EXPENDITURES ACCORDING TO THE NATIONAL INNOVATION STRATEGY

186231

282321

363410

461516

579647

7220,54%

0,64%

0,74%0,80%

0,90%0,95%

1,00%1,05%

1,10%1,15%

0,85%

0

100

200

300

400

500

600

700

800

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

1,40%

R&D expenditure (BGN mn) R&D expenditure (% of GDP)


ARC FundARC Fund

Investment in R&D


ARC FundARC Fund

• R&D expenditures in Bulgaria increase but they are still four times lower than the EU-15 average level.

• The structure of R&D expenditures in Bulgaria is strongly imbalanced.

• The share of the public sector in their financing and implementation is twice higher than that of businesses or higher education.

• Ninety percent of R&D expenditures in Bulgaria go for operational needs, mainly staff salaries and maintenance of the equipment in the public sector.

STRUCTURE OF R&D EXPENDITURES BY INSTITUTIONAL SECTORS IN BULGARIA

67,0%

12,5%

9,7% 9,2%

21,9%

0,2% 0,3% 1,0%

23,6%

64,6%

20,0%

70,1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bulgaria (2003)

Bulgaria (2004)

EuropeanUnion (EU-15)

Higher Education

Government

Enterprises

Non-commercialorganizations


ARC FundARC Fund

STRUCTURE OF R&D EXPENDITURES BY SOURCES OF FINANCING IN BULGARIA

65,8%

34,7%

6,3% 6,0%10,7%

28,2%

54,6%

26,8%

66,9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bulgaria (2003)

Bulgaria (2004)

European Union(EU-15, 2003)

Foreign, non-commercialorganizations,higher education

Government

Enterprises


ARC FundARC Fund

STRUCTURE OF R&D EXPENDITURES BY ECONOMIC ITEMS (1995 – 2004)

4,6%

95,4%

6,4%

93,6%

4,1%

95,9%

4,6%

95,4%

10,3%

89,7%

0%

20%

40%

60%

80%

100%

1995 2001 2002 2003 2004

Acquisition of fixed assets Operating costs


ARC FundARC Fund

STRUCTURE OF THE OPERATING COSTS FOR R&D BY TYPES OF RESEARCH IN BULGARIA

0,25

0,55

0,20

0,30

0,51

0,19

0,29

0,50

0,21

0,38

0,47

0,16

0,33

0,50

0,17

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2001 2002 2003 2004

Experimentalresearch

Applied research

Basic research


ARC FundARC Fund

R&D SPENDING BY FIELDS OF SCIENCE IN BULGARIA

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

200 000

2000 2001 2002 2003 2004

Social sciencesand humanities

Agriculturalsciences

Medical sciences

Technicalsciencies

Natural sciences

BG

N th

ousa

nd


ARC FundARC Fund

International transfer of innovation - FDI


ARC FundARC Fund

• The inflow of foreign investment has grown steadily in Bulgaria, remaining the major source for technological renovation of the country. The share of foreign direct investment (FDI) in the gross capital formation has been some 40 % in Bulgaria for the last eight years - twice higher than in the EU-8.

• Most FDI are directed towards the most innovative sector in the country - financial intermediation – as well as towards logistics, transport, ITC and real estate. The share of manufacturing in FDI has decreased.

2849

1694

1317

890

856

757

723

710

682

352

341

324

201

1588

381

912

689

0 500 1000 1500 2000 2500 3000

AUSTRIA

NETHERLANDS

GREECE

UK

ITALY

GERMANY

BELGIUM & LUX.

CYPRUS

USA

HUNGARY

SWITZERLAND

CZECH REP.

IRELAND

SPAIN

FRANCE

RUSSIA

TURKEY www.bia-bg.comwww.bia-bg.com

FOREIGN DIRECT INVESTMENT INFLOW IN BULGARIAFOREIGN DIRECT INVESTMENT INFLOW IN BULGARIA BY COUNTRIES IN EURO MILLION (1992- 2006) BY COUNTRIES IN EURO MILLION (1992- 2006)

Countries

Export

%

Import

%

Foreign Direct

Investments %

Position by competitiveness

WEF 2007 Bulgaria 79 / -5 pos.

Innovation capacity in 2006

Bulgaria – 85

IITTAALLYY 1133,,11%% 99,,88%% 55,,33%% 4466 // ++11 3311

GGEERRMMAANNYY 1100,,22%% 1144,,66%% 55,,22%% 55 // ++22 33

TTUURRKKEEYY 1100,,00%% 66,,00%% 11,,22%% 5533 // ++55 4422

GGRREEEECCEE 99,,99%% 55,,77%% 99,,22%% 6655 // --44 4455

BBEELLGGIIUUMM 66,,00%% 11,,44%% 44,,99%% 2200 // ++44 1144

FFRRAANNCCEE 44,,55%% 55,,33%% 22,,00%% 1188 // --33 1133

UUSSAA 44,,55%% 22,,33%% 44,,22%% 11 44

RROOMMAANNIIAA 33,,55%% 00,,44%% 00,,00%% 7744 // --11 7733

SSPPAAIINN 33,,44%% 22,,11%% 22,,11 2299 3300 UUNNIITTEEDD KKIINNGGDDOOMM

22,,55%% 22,,44%% 77,,66 99 // --77 1100

TTOOTTAALL:: 6677,,99%% 5522,,55%% 4411,,99%%

Top 10 biggest Bulgarian partners in foreign tradeTop 10 biggest Bulgarian partners in foreign tradeTop 10 biggest Bulgarian partners in foreign tradeTop 10 biggest Bulgarian partners in foreign trade


www.bia-bg.comwww.bia-bg.com

Financing of innovation


ARC FundARC Fund

• The own resources of enterprises continue to be the main source of financing for their innovation activities in 2006, followed by banks and domestic and foreign partners. Banks and EU funds scored the highest growth among the sources of financing

• The specialized instruments for innovation financing such as venture capital funds are practically unknown to Bulgarian innovative enterprises. The development of the local capital market, the accumulation of resources in long-term financial instruments and the entry of EU funds are expected to lead to the emergence of the first national venture capital instruments in 2007-2008.

• The market orientation of the Bulgarian The market orientation of the Bulgarian innovation system is in its infancy: Bulgarian innovation system is in its infancy: Bulgarian enterprises show low levels of innovativenessenterprises show low levels of innovativeness

• The innovation, R&D and technological products The innovation, R&D and technological products develop separately in the national economy. develop separately in the national economy. From structural perspective their interrelations From structural perspective their interrelations remain weakremain weak

Our conclusions


ARC FundARC Fund

• The national innovation system is shaped and The national innovation system is shaped and influenced primarily by the integration and influenced primarily by the integration and financing in the European innovation networks financing in the European innovation networks and the changes in the of public innovation and the changes in the of public innovation policy and financingpolicy and financing

• The main constraints for the development of the The main constraints for the development of the national innovation system are the lack of national innovation system are the lack of suitable sources of financing in short-run and thesuitable sources of financing in short-run and thelack of skilled human capital in the long-runlack of skilled human capital in the long-run

Our conclusions


ARC FundARC Fund

• The national innovation system has started to The national innovation system has started to improve its performance, which is a clear improve its performance, which is a clear signal that the time for more decisive action in signal that the time for more decisive action in this domain has begunthis domain has begun.

Our conclusions


ARC FundARC Fund

Our proposals

• Improvement of the coordination between the Improvement of the coordination between the national strategic documents, policies, national strategic documents, policies, administrative and financial instruments which administrative and financial instruments which influence the national innovation systeminfluence the national innovation system

• Fine tuning of the innovation resources from the Fine tuning of the innovation resources from the EU Structural and Cohesion Funds within the EU Structural and Cohesion Funds within the country and coordination with other programs at country and coordination with other programs at the European levelthe European level

• Provision of greater political, administrative and Provision of greater political, administrative and financial resources for developing and financial resources for developing and implementing a national innovation policyimplementing a national innovation policy


ARC FundARC Fund

The main objective of the national policy for The main objective of the national policy for management of the innovation resources coming management of the innovation resources coming from the EU Funds, the national budget and the from the EU Funds, the national budget and the EU Framework Programs in Bulgaria should be EU Framework Programs in Bulgaria should be the development of "institutional instruments" the development of "institutional instruments" which improve:which improve:

• links with the world technology frontierlinks with the world technology frontier• links with markets (and sophisticated customers)links with markets (and sophisticated customers)• supply of needed skills, services and other inputssupply of needed skills, services and other inputs• the local innovation system and networkthe local innovation system and network

Our proposals


ARC FundARC Fund

Bulgarian Industrial Association Bulgarian Industrial Association Georgi Shivarov, Vice PresidentGeorgi Shivarov, Vice President

The 4The 4thth Vienna Economic Forum Vienna Economic Forum5 – 6 November 20075 – 6 November 2007

Documents

Bulgarian Industrial Association Georgi Shivarov, Vice President The 4 th Vienna Economic Forum 5 – 6 November 2007