ARC FUND / Publications / The 2017 report examines the technological interconnectedness of the national economy at European and global scale

The 2017 report examines the technological interconnectedness of the national economy at European and global scale

The leading theme of the annual national report 2017 is the technological interconnectedness of the national economy at European and global scale. Special emphasis is placed on the automotive and related industries, where Bulgaria is an attractive hub for foreign investors not only from the position of a systems integrator, but also as an R&D centre and source of new technological solutions.

And in 2017, Bulgaria is the only EU member state (an island of stability) that has not registered any progress in innovation potential for the last seven years. This is according to the European Innovation Scoreboard 2017. In 2016, for the first time in the last seventeen years, R&D expenditure decreased in absolute terms by almost 14% against a backdrop of increasing GDP. And while the country’s entrepreneurial potential remained locked in low-tech activities, and at a much higher rate than in 2015, Sofia became the third entrepreneurial destination after London and Dublin with 146 start-ups (with a backlog since 2004) supported by accelerators. These are some of the findings in the annual report of the Applied Research and Communications Fund.

“Ten years after Bulgaria’s accession as a full member of the EU and on the eve of the Bulgarian Presidency of the Council of the EU, the benefits for innovative businesses in the country are visible. Under such conditions it is a matter of national effort to create the desired image of the country and to work for a higher position in the European competitive space. But there are no national examples to support and multiply the effect achieved with EU funds. The main barrier is the factor “Corruption”, commented prof. Theodora Georgieva from the Applied Research and Communication Foundation.

According to the EC’s composite index for measuring member states’ progress in the digital economy and information society, Bulgaria has serious deficits in the areas of “Human capital”, “Internet usage”, “Integration of digital technologies” and “Provision of digital services” by the public administration.

In 2017, the National Innovation Fund held its 8th Session with great delay. The National Research Fund continues to underperform, and funding for the Entrepreneurship Centres established at several technical and technological universities has been discontinued.

However, the expert team of the report points out that there has been a significant increase in payments from operational programmes supporting innovation and entrepreneurship. The administrative capacity of the state and local administration in dealing with EU programmes and in providing services to business is also improving.

Bulgaria also moves from 38th to 36th place according to the Global Innovation Index 2017. Our country is second only to China in the group of middle-to-high income countries, which are at the top of the ranking. In 2017, for the first time, a Bulgarian project won funding under Phase 2 of the Horizon 2020 SME Instrument. Enterprises are the only sector that continued to invest increasing resources in innovation and R&D personnel in 2016.

According to a representative sample of Bulgarian enterprises that have undergone an innovation management assessment procedure for the period 2015-2017, 95% of the innovative enterprises surveyed invest part of their R&D budget in long-term oriented projects. Nearly 70% of the surveyed enterprises rely to some extent on external markets to validate the success of their innovation projects.

The ICT sector continues to grow rapidly, accounting for 4% of jobs, 4% of revenues and 9.3% of value added in the economy. It remains an “anchor” for talent. The sector’s share of total exports reached 14% in 2016. The growth was mostly driven by an increase in automotive electronics exports, but also in more business process outsourcing. The trend is expected to continue in the coming years.

Outside the ICT sector, Bulgarian enterprises lag significantly behind the European average on almost all e-business indicators monitored by the European Commission. Bulgaria registers the lowest share of revenues of enterprises generated through the internet – less than 4%, compared to the EU average of 16.4%. The population has low levels of digital skills and poor experience with online shopping.

Experts expect the automotive sector to follow the ICT sector model in terms of employment and value added. In a decade, the automotive sector has grown threefold in terms of turnover, assets and number of employees and fourfold in terms of value added produced. It generated a total turnover of more than EUR 2 billion and employed more than 33 thousand people in approximately 170 enterprises in 2016.

“Our country has not yet succeeded in positioning itself as an outsourcing destination for R&D and innovation-intensive manufacturing in this sector, as it is in terms of ICT. However, considering the history of the Bulgarian ICT sector and the role of those companies in it that are related to the automotive industry, it can be said that the Automotive sector has a chance to establish the country as a suitable destination for innovation-intensive manufacturing in the next five to ten years,” concludes Dr. Todor Galev, an expert at the Applied Research and Communication Fund.

The report was presented during the 13th National Innovation Forum under the auspices of President Rumen Radev. It was organized by the Applied Research and Communications Fund, ARC Consulting, Enterprise Europe Network – Bulgaria, the Representation of the European Commission in Bulgaria, the Innovation Centre of the Bulgarian Academy of Sciences with the support of the Directorate General for Internal Market, Industry, Entrepreneurship and SMEs of the European Commission, the Executive Agency for Small and Medium-sized Enterprises of the European Commission and in media partnership with the Bulgarian National Television, the magazine “Ikonomika” and the online portal

The full text of the summary with graphs and tables can be found in the attached file.

Read the full text of the 2017 report in Bulgarian here.