1. CCMI Conference, Sofia, 6-7 October 2008
Restructuring of the Bulgarian sector of electrical engineering Dr. Rumen Atanasov Bulgarian Association of Electrical Engineering and Electronics
Good morning to everybody! My name is Rumen Atanasov. I am CCMI Delegate, but today at this conference I am in the role of the President of the Bulgarian Association of Electrical Engineering and Electronics. From this position I’ll try to inform you about the situation and the trends in the sector of the Electrical Engineering and Electronics in this country.
Bulgaria, Latvia, Lithuania and Slovakia – Comparison of industrial transition models
CCMI Conference, Sofia, 6-7 October 2008

2. The Sector of the El. Eng. and Electronics
Employed in the ELECTRA sector as % of the employed in industry
share in WGDP and EE sector
The leading sector after WW2
The basis of the technology development in the last 60 years
It is the leading European industry
The most important for the Bulgarian industry, defines the technological level of the whole machining industry.
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3. The Electrical Engineering in Bulgaria has a long history The roots
1878/79 – first electrical lighting system; facilities for telegraph network delivered by SIEMENS
1888/99 – first electrified factories, collieries
1900/02 – first hydroelectric PS with 7 kV transmission line; first thermal PS; tramway in Sofia starts to roll
1909/19 – regular import of bulbs & utility material from Austria. SIEMENS wins tender for first 3000 posts distribution telephone exchange; permanent representation agencies of SIEMENS-SCHUCKERT for HV technique and SIEMENS-RHEINIGER for medical equipment
1920/35 – “Bulgarian Ltd Company for electricity-SIEMENS” inaugurated; regular import of radio receivers; first X-ray device imported; production start of small electric motors, dynamos, transformers, lighting fixtures, cables, bulbs, switchgear; first 320 kVA transformer
1934/45 – construction of automatic telephone exchanges; high-frequency installations; repair workshops for radio sets, telephone and telegraph appliances, el. motors, transformers, heating devices
Завършвайки, бих желал да Ви обърна внимание на някои интересни исторически факти, които показват корените на българската електротехника. Виждате, че основите й са поставени от големите западноевропейски фирми, особено SIEMENS. Първите поколения инженери са следвали в Германия, Италия, Франция, Чехия, пренасяйки у нас манталитета на европейския инженер.
Електротехническият сектор в България има дълга история и традиции, развивал се е по-естествен начин, никога не е губил връзката си с водещите западни индустрии. Това, по мое дълбоко убеждение, е от изключителна важност и е главната причина тази индустрия да успя да се преструктурира относително успешно и да запази присъствието си на световните пазари.
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4. Subsectors included (acc. NACE codes)
29.41 Manufacture of portable hand held power tools
29.71 Manufacture of electric domestic appliances
31.1 Manufacture of electric motors, generators and transformers
31.2 Manufacture of electricity distribution and control apparatus
31.3 Manufacture of insulated wire and cable
31.4 Manufacture of accumulators, primary cells and primary batteries
31.5 Manufacture of lighting equipment and electric lamps
31.61 Manufacture of electrical equipment for engines and vehicles
33.3 Manufacture of industrial process control equipment
Speaking about the sector of electrical engineering, I’d like to precise the scope of the sector. We intend it accordingly the NACE classification as we can see on this slide.
Subsectors not included
Office technique, computers and other electronic facilities
Communication technique
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5. Development in Bulgaria after WW2
Specialists obtaining higher education in Germany, Italy, France, Czechoslovakia available
Administrated market of the former Soviet Union orientated development
Natural way of development without ill-founded political solutions
Presence of some subsectors (electric motors, transformers, cables, batteries) on the free markets
Intensive development of specific subsectors in the eighties, licenses from leading companies
State monopoly on export and import; sales of manufacturers used to be prerogative of the state
Exorbitant industrial development
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6. The period after 1990
Disappearance of administrated markets: internal and COMECON
Suspension of supply sources of raw materials, components and elements
Drastic decrease in production, closure of enterprises
Former state-owned factories performed social functions maintaining redundant personnel
Difficult access to capital – as a result loss also of free markets
Liberalization of the trade
Establishment of many small and micro enterprises, initially in the field of services
Start of privatization of the big state-owned factories
Different forms of privatization, in many cases owners without ideas about development of the factory – profiting from assets only
Restructuring – ownership, markets, products, management
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7. Now 100% private industry
The former state-owned enterprises of the electrical engineering industry are utilizing only 30-35% of their previous capacity. Some of them are not-existing anymore. In the last years – new technologies, new equipment (usually second hand). Personnel is optimized. During the last 3-4 years, a process to discover “real owners” of the factories is running
A great number of newly established (after 1990) SMEs; new technology, new facilities
In the last 5-6 years – investment into new production sites & buildings, new equipment even into some of the former state-owned factories
The sector comprises about 590 enterprises, 350 of them – actively operating; 20 are large (more than 300 wplcs), the rest – small and medium
Labor force in the sector – about employees
Restructuring still not completed, clusters – in highly introductory phase
The privatization of the former state factories started in 1997 and …
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8. The most important for the sector - FDIs USD m
Companies 85; Private persons 124
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9. Factories of important foreign investors (former state-owned factories)
ABB: MV&LV switchgear; 250 wplcs
HYUNDAI HEAVY IND.: power trafos, tap-changers; 600 wplcs
SCHNEIDER: LV breakers (the old one)
SPARKY: el. hand tools; 1300 wplcs
SET: PCBs; 280 wplcs
MHT: magnetic heads; 200 wplcs
DZU-VIDEOTON: small household appl’s, el.mech. devices; 650 wplcs
NAYDEN KIROV: LV installation products; 300 wplcs
AROS QUALITY: small trafos; 290 wplcs
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10. Factories of important foreign investors (green field projects)
ABB: 2 factories; LV, 150 workers.; now 3th LV/MV, 600 wplcs, start May 2009; 4th planned
LIEBHERR: fridges, 1500 wplcs; R&D center, 30 eng.
SCHNEIDER: new (2nd) factory, LV breakers, 800 wplcs
EPIQ: PCB assembling; 2000 wplcs
MELEXIS: PCB assembling; 200 wplcs
FESTO: sensors for automation; 200 wplcs
SIEMENS: HV measurement transformers
ARKOMAT: automotive wire harnesses, 600 wplcs
NURSAN: automotive wire harnesses
CURTIS: el. motor-control for forklifts; 140 wplcs
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11. The success stories of FDI
The sector had a good reputation amongst global leaders: with the start of privatization SIEMENS, ABB, SCHNEIDER, EPIQ, SPARKY, HYUNDAI (well knowing the sector) came to Bulgaria and bought up the state-owned factories
Subsequently, a series of green field projects were realized and were successfully developed
For the last years - $137 million FDI. This is a very small amount against the background of the total FDI in this country. However, production FDI drive into the country new products and respective markets, new technologies, new management, new industrial mentality
Production FDIs are generating a new industry of sub-suppliers in the region, natural clusters
Some new, very large and important industrial areas have been stimulated and established in our country
In general – all FDIs in new production enterprises are success stories.
And yet why?
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12. FINANCIAL STABILITY Currency board since 1997
The Central Bank does not act as a lender to government and commercial banks
The exchange rate to foreign reserve currency (EURO) is strictly fixed, 1 € = 1,95583 BGN
The Central Bank will issue only one unit of local currency for each unit of foreign reserve currency it has in its vaults
The country has not the ability to set monetary policy according to domestic considerations
POLITICAL STABILITY
Starting the presentation, I’d like to emphasize on some important for the business, in my opinion, national characteristics.
Firstly, Bulgaria is in the regime of Currency board since 1997, after the notorious dramatic hyper inflation.
The Central Bank is not acting as a lender to government and commercial banks.
The exchange rate to the EURO is fixed, 1 € = 1,95583 BGN; initially it was bound to the DM.
In general, the country has not the ability to set a monetary policy according to domestic demands.
Secondly, we are a NATO member since 2004, all political parties support NATO and EU memberships, no ethnical problems – I’m referring to the situation in the Balkan region.
NATO member country since April 2004
EU member country since January 2007
All political parties support NATO and EU membership
No ethnical problems
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13. FAVORABLE INVESTMENT CLIMATE
Corporate Tax: %
Manufacturing companies in high-unemployment municipalities: %
EU TECHNICAL LEGISLATION IN FORCE
Transposed directives: LVD, EMC, R&TTE, ATEX, Machinery, lifts, gas appliances, simple pressure vessels, pressure equipment, toys, NAWI, refrigeration appliances, hot water boilers, noise emission, etc.
WEEE (effective from );
RoHS (effective from );
Batteries (since 2005)
Transitional period - Directives on medical devices
Most enterprises ISO9000 certified by TUV, SGS, LR, BVQi
In the last years the different governments and political parties were united in the continuous reduction of the taxes and this had any doubt positive impact on the industry and, pay attention, on the income of the state budget with higher tax collecting.
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14. WELL EDUCATED AND HIGHLY SKILLED LABOR FORCE
43 Universities; graduates (BA or MA) annually
350 vocational technical colleges, graduates annually
Bulgarian students in foreign countries
THE LOWEST PRICE LEVEL IN EU !!!
The population has, generally speaking, a good basic education. 90% of the population are Christians. A great number of young people emigrated in the last years. I hope and believe that part of the 30 thousand students abroad will strengthen the Bulgarian industry in the future. This should be of paramount care for the state.
Further, it is well known that Bulgaria has the lowest laborforce fares in Europe, not only in the EU.
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15. Price Level Indices 2005 (%)
Annual average gross wages, EE sector BG, EUR
This is EUROSTAT comparison for 2 thousand and five, in 2007 there was relatively fast growth of the salaries, the phenomena is connected to the high level of inflation exited perhaps with wrong economical and political decisions.
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16. Monthly emoluments in electrical engineering sector, large cities, EUR, 2006
Position
Gross salary
Total cost
Low-skilled worker
110
136
Skilled worker
190 to 300
236 to 372
Engineer (MSc)
330 to 450
409 to 558
Manager
400 to 500
496 to 620
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17. Productivity rises, but still too unsatisfactory
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18. Labor productivity in 2006 – GDP per employee on PPP basis as a percentage of the EU–27 average
Top 5 states
Bottom 5 states
Country
% of the EU-27 average
Luxembourg
183.3
Poland
61.5
Belgium
134.9
Lithuania
58.5
Ireland
132.1
Latvia
52.8
France
125.2
Romania
38.3
Austria
121.1
Bulgaria
35.3
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19. Important el. eng. sub-sectors
Power equipment (transformers, switchgear)
Motors, generators, alternators
Cables and wires
Batteries, start and traction
LV apparatus, building installation products
Control, measurement and automation devices and systems
Industrial electronics, PCBs, electronic modules and systems
Automotive parts
Lighting fixtures
Optical devices
Household appliances
Sub suppliers (plastics, metal parts, ceramics etc.)
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20. Production and export, EUR m
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21. Production of electric motors, batteries, switchgear
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22. Export of assembled PCBs, € m
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23. Production of electrical household appliances, pcs
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24. Import of electrical household appliances, pcs
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25. Human resources
Proportion of the population aged 25–64 with completed secondary education
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26. Proportion of the population aged 25–64 with higher education
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27. University graduates in science and technology per 1,000 population in the age group 20–29
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28. Lifelong learning – proportion of the population aged 25–64 involved in training and education
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29. Number of graduates in electrical engineering subjects, There are 5 technical universities and 65 vocational schools with el. eng. & electronic disciplines
Subject
Bachelor
Master
Total
Mech. engineering
247
113
360
El. engineering 24
El. devices
130 34
164
El. installation
263
106
369
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30. State economic strategy
According to “STRATEGIC TRENDS OF BULGARIAN ECONOMY”, published July 2007 by the Ministry of Economy and Energy:
DELOITTE’S SURVEY - most perspective sectors and competitive advantages in Bulgaria are: IT, outsourcing, electrical engineering and electronics;
UNCTAD’S SURVEY 2007/ electrical engineering and electronics is most perspective industrial sector for investments in Bulgaria
Sector strategy
A “National Strategy for the Development of the Electrical Engineering Industry in Bulgaria up to 2013” was jointly elaborated with the Ministry of Economy and Energy. Yearly Action plans.
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31. R&D expenditures in ELECTRA (% of the GVA)
R&D expenditures, % of GDP
n.a. ?
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32. NIF - Projects financed by
Bulgarian National Innovation Policy
NIF - Projects financed by
NIF Session
Projects
Submitted
Projects Selected
Success Rate %
Agreed Subsidy ( BGN m)
Average Value of the Financed Project ( BGN)
1st session
118 43 36
6,7
2nd session
120 67 56
8,3
3rd session
146
108 74
16,6
4th session
168
102 61
16,9
The National Innovation Fund is a major financial instrument for the promotion of innovation activities in the country. Its strategic objective is to enhance the competitiveness of the Bulgarian economy. The Fund finances projects, including research and/or experimental projects aimed at the introduction of new or improved products and services.
The overall activities of the National Innovation Fund (NIF) are administered by the Bulgarian Small and Medium Enterprises Promotion Agency (BSMEPA).
The financing of the Fund from the budget increased steadily from 5.5 million levs in 2005 to 7 million levs in 2006 and 12 million levs in The financing envisaged for 2008 is 20 million levs.
Over the period 2005–2007, four competitive sessions were held. A total of 320 projects were approved at those sessions in various economic sectors, both traditional and high-tech ones.
The table shows that the number of proposals was increasing. The average value of the financial support per project remained more or less unchanged (approximately150,000 levs).
Since businesses are required to provide 50 % co-financing, the total resources provided and generated by the Fund for the development of innovative ideas in industry amounted to 50 million levs. This has helped alleviate Bulgaria’s lagging behind the rest of the EU.
Projects’ leading sectors
ICT %
electronics and electrical eng %
biotechnologies & food industry %
mechanical eng. & metal processing %
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33. Other instruments to promote innovations
Voucher scheme;
Techno-starter scheme;
Tax incentive scheme;
Loan guarantee scheme;
Venture capital scheme
The National Innovation Council promotes the dialogue between the government institutions in charge of the development and implementation of innovation policy, and the representatives of science, education and business.
In October 2007, the National Innovation Council held a meeting dedicated to the financial instruments for promoting innovation applicable in Bulgaria, and the findings and recommendations in the 2006 Annual Report on the Bulgarian National Innovation Policy.
Another report presented at the meeting focused on the creation of financial incentives for innovation. It was developed within the follow-up of the Bulgarian–Dutch project on the National Strategy for Science and Technology Development and Innovation and the Programme for its Implementation financed by the Dutch Government. The report suggests the following financial schemes for the promotion of innovation in Bulgaria:
Voucher scheme intended to assist enterprises in their efforts to obtain expert assistance in resolving their technological problems.
Techno-starter scheme aimed at students, faculty and researchers willing to establish their own technology-based company. The objective is to commercialise the knowledge acquired in research and education.
Tax incentive scheme oriented to enterprises which have R&D activities.
Loan guarantee scheme aimed at innovative enterprises in order to facilitate their access to financial resources without reducing the financial accountability of the borrower.
Venture capital scheme intended for high-tech enterprises with growth potential. Specific measures can be introduced for start-ups.
TOP technological institutes with the objective to establish and develop centres of knowledge and excellence in important industrial sectors and to facilitate the interaction between research organisations, researchers and businesses.
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34. But !?
Lisbon 2010
BG 2003
Nat’l Str. 2006
Nat’l Str. 2010
R&D % GDP 3
0,43
0,45
0,51
Share of business for R&D 67 22
18,8 23
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35. Social Dialogue
Sector councils for social collaboration with the Ministry of Economy and Energy
Law on health preserving and safe conditions of work, including a separate system for social dialogue at national, sector, regional, company level
Two trade-union partners of the Association.
A collective labor agreement is signed for the EE-industry between the sector organizations of employers (NCEEB) and the trade unions
Very strange!. The dialogue between employers and trade unions is far more spontaneous and constructive than between business and the state administration.
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36. Thank you for your kind attention
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