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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
%
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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)
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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)
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
ARC FundARC Fund
Investment in R&D
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
ARC FundARC Fund
International transfer of innovation - FDI
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
www.bia-bg.comwww.bia-bg.com
Financing of innovation
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
Bulgarian Industrial AssociationBulgarian Industrial AssociationUNION OF THE BULGARIAN BUSINESSUNION OF THE BULGARIAN BUSINESS
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
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