Cause and Effect in European Politics and Law

Bulgaria 2020 – Searching for a New Economic Engine

Ralitsa Kovacheva, March 21, 2012

euinside`s analysis, dedicated to education as a priority in the strategic framework of the National Programme for development “Bulgaria 2020”, reveals that quality education is the crucial factor for development of high added value economy and for increase of competitiveness. Let's see, however, where the Bulgarian economy is headed to, according to the “Bulgaria 2020” strategy.

Bulgarians often complain that their wages are much lower than the European. Brussels argues that they are even high, measured on the basis of productivity. Why is that so? According to the analysis accompanying the strategy, "the industry and services in the field of computer technology are the engine of economic development, because they compete in a globalised market and the servicing sectors like trade, energy, transport, construction, health care, education and others depend on their competitiveness."

However, nearly half of those employed in the industry are in sectors dependent on cheap labour (mostly textiles and clothing production). Sectors related to the use of natural resources form the largest share of the industry’s gross added value. Both groups of sectors have a significant share of Bulgarian exports, but they have limited potential for development and no possibility to increase the workers' incomes. However, even in sectors dependant on cheap labour, Bulgarian productivity is much lower than EU average – the annual added value of a worker in our country is between 2.5 and 6,000 euros, against 15 to 40,000 euros in the EU.

The capital intensive industry generates 48% of exports, especially in sectors like precious and nonferrous metals, refined petroleum products, ferrous metals and basic chemicals. These sectors allow high productivity, as they are technologised, but cannot provide additional employment. Given the lack of significant domestic capital, they could rely only on foreign investment. Therefore Bulgaria has to rely on sectors related to innovation, where there is both potential and traditions - computer technology, engineering, production of medicines and health technologies. Here comes precisely the role of education, which is expected to provide highly skilled workforce. "The information technology sector is characterised by high growth rates, but at present it suffers from a lack of sufficiently trained personnel with technical education."

According to the strategy, the state commits to support the development of a highly advanced industrial base and innovative infrastructure, promote innovation and research activity. Specific objectives within this priority are to increase labour productivity and the number of employed in promising sectors, reduce the resource input in production processes, increase exports of high technology products and attract investment in sectors with high added value. In this respect, an important step would be the adoption of a law for innovation and development of an innovation strategy for smart specialisation 2013-2020, that is one of the statutory prerequisites for planning funds under the EU operational programmes for the next programming period 2014-2020.

Public administration reform is also an important element in the search for competitiveness of the economy - on the one hand to manage public funds more effectively and, on the other, to create favourable business environment. It is envisaged to reduce the current 28 districts to no more than 12, and district administration to conduct local governance, implement regional policy and participate more actively in planning and absorption of EU funds. As part of administrative reform, the strategy provides for the state budget to become "result oriented" - planning and implementation to be based on individual programmes aimed at concrete results. This is another age-old promise of many Bulgarian governments, which has never seen the light of day. The strategy even dares dream about "conducting annual reviews of the effectiveness and efficiency of each programme by the Ministry of Finance and publishing the results of these reviews on the Internet."

E-government is a constant priority in all Bulgarian strategic and programming documents. The analysis cites Eurostat data from 2009, according to which only 40% of the 20 basic public services in Bulgaria are available online. This is the worst result in the entire EU ant it is much lower than the EU average of 73.8%. In 2010 only 15% of the population between 16 to 74 years use the Internet to communicate with authorities and almost 60% of companies (only in Romania this percentage is lower). Given that, it is no wonder that the strategy plans by 2020 Bulgaria to finally enter the 21st century: administrations to apply a uniform data model and to maintain communication connection to ensure interoperability between information systems in public administration, and to move entirely to electronic records and e- government.

However, in order to land hard back to the present, let`s see Priority 7: Development of adequate energy infrastructure, support for increasing resource efficiency and reducing energy dependence. Once again, the strategy recognises that Bulgaria is entirely dependant on the Russian Federation in terms of imports of natural gas, crude petroleum and nuclear fuel. And once again, in another document, the government announces the need to diversify sources and routes of natural gas supply, primarily by building interconnections with neighbouring countries. Money for such connections were granted to Bulgaria by the European Commission already after the gas crisis in 2009. It is curious that participation in the Russian project South Stream is placed among the ways to diversify natural gas supplies, together with the European gas pipeline "Nabucco". The Government is also committed to promote "geological surveys of new conventional and unconventional oil and gas fields."

The strategy contains all objectives and tasks in the field of energy, that should be achieved by Bulgaria under its European membership, like reaching 16% of renewable energy in gross final consumption and the creation of integrated internal energy market. Plenty of attention is paid to energy efficiency, and also rehabilitation and modernisation of electric, gas and heating networks are planned.

Agriculture must also be modernised and achieve greater efficiency and productivity, because its "labour productivity is about 4 times lower than the total for the economy, which is contributing significantly to the low incomes in agriculture (about 40% below the national average)." With regard to European funding, Bulgaria will continue to rely on the direct payments system in the next programming period. Tobacco growers will be encouraged to combine tobacco with livestock breeding or perennials cultivation. The strategy also provides for "promoting the development of organic agriculture" through the effective use of EU funds under the first and second pillar of the Common Agricultural Policy (CAP). Farmers will be encouraged to introduce environmentally friendly practises, which is important, given that the Commission's proposal provides for 30% of the CAP money to go for green measures.

The strategy sets another priority, that is highlighted at European level too: sustainable integrated regional development and use of local potential. It includes measures to support small and medium enterprises, promoting regional and cross-border cooperation and integrated sustainable urban development, improving quality of life in rural areas, development of sustainable tourism.

As Tomislav Donchev, the minister for EU funds management, told euinside, based on the strategy "Bulgaria 2020", after it is being discussed and finally adopted, the text of the operational programmes, regional and municipal strategies and regional development plans will be prepared, that ultimately should be materialised into concrete projects in the next seven-year European budget.