BULGARIA SHOULD STOP INVESTING IN LOW VALUE-ADDED SERVICES AND PRODUCTION

Bulgaria has suffered less from the Covid crisis than other countries. Although the value of Bulgarian exports has somewhat declined from about $ 33 billion in the previous two years to just under $ 32 billion, the country is rising in the world rankings of exporters and now ranks 58th  according to data from 2020. For comparison, in 2019, Bulgaria was ranked 60th in the hierarchy of world exporters. One of the main reasons for this surprising result is that many Bulgarian exports go to EU member states. Veselin Iliev, Director General of "International Economic Relations" - BIA, stated on Bloomberg TV.

"Every manufacturer strives to have a wide range of suppliers from different places and under different conditions. Some may pay more to ceratin providers, but it is important to have different options if something goes South. What we call plan B."

According to Veselin Iliev, western European producers' plan B has had a favourable effect on Bulgaria. When supplies from Asia and Africa were cut off, they approached Central and Eastern Europe.  It is important to note that Bulgaria exports semi-finished products or raw materials, both of which take place in the final production stages in the enterprises in Western Europe. However, the final product brings high added value, and it has been said for years that Bulgaria has to strive toward not exclusively exporting raw materials. Vesselin Iliev believes that we can observe a positive trend, but we are progressing rather slowly. The lack of a clear policy on a governmental level is one of the reasons for the tempo of the Bulgarian economy.

"For a long time, we promoted ourselves as the cheapest place with the most inexpensive labour. Subsequently, we became the poorest with the lowest incomes but with the most energy-intensive production. It turned out that this type of advertising is not attractive for either Bulgarian or foreign investors. "

Vesselin Iliev points out that Bulgaria is one of the largest exporters of electronic products, but we are not the largest manufacturer of electronic products. To a large extent, the companies dealing with electronics and technology invest in Bulgaria but do not produce a final product, but only a part of it. "We do not compose a whole car, but just an airbag or a seat." The reason - producers are deceived by the low incomes in Bulgaria, which is not even so. Labour costs in Bulgaria are growing exponentially and are already outpacing labour productivity, which makes us uncompetitive. 

"Soon, we will have to find another factor advantage just to survive in the market."

However, even the airbags and boards still bring some added value to the product that Bulgaria exports. The problem comes from another place - that one of our most expensive export products per kilogram concentrates on precious metals. They are a fundamental raw material, which shows an inability to higher calibre productivity. Vesselin Iliev shared that to change this, the state should direct resources to the industries in the country that have the highest added value and not to those that produce basic raw materials. Malls are one of the examples where many resources are directed to low added value production, and in addition, labour is lost, which could otherwise go to high value-added producers.

The state's efforts should also be focused on education and qualification because currently, there is a shortage of IT specialists and engineers, but many people have qualifications for work in low value-added industries. The state must restructure its priorities so that even people who work abroad in companies creating a product with low added value want to return to Bulgaria. Abroad, they will probably have learned how to give more weight to their product per unit of working time.

"The state must stimulate thinking people who have ideas that are practically feasible so that they can implement them."