-  41  -

either the disappearance or dramatic restructuring of global and vertically integrated firms. Thanks to new Internet technologies making possible to trace parts and components moving through chains of production spread over several countries and continents, vertically integrate firms have been replaced by supply chain structures connected through complex and borderless supply chains. These chains include not only product manufacturing but also the front-end customer contact and support services. They usually consist of several layers including parent companies, subsidiaries and subcontractors.

Until recently Bulgaria had remained outside the EU-based ‘producer-driven’ networks. But in 2001-03 there were significant changes indicating entry of Bulgarian producers into supply chains of both networks. Although Bulgaria inherited industrial structure favoring specialization in ICT products rather then automotive ones,<sup>20</sup> automotive sectors accounted in 1996 for 85 percent of total exports of producer-driven networks. ICT networks’ exports emerged as dominant in Bulgaria producer-driven networks’ exports first by default, i.e., automotive exports were falling faster than those of ICT products were until 2000, and subsequently thanks to stronger growth. Exports of ICT networks continued falling until 1999 and subsequently strongly rebounded (Table 30). So did exports automotive network, although they remained below their value in 1996.

**Table 30:** _Total exports of producer-driven networks in 1996-2003 (in millions of US dollars)_

||1996|1997|1998|1999|2000|2001|2002|2003|
|---|---|---|---|---|---|---|---|---|
|||(<br>|in millio<br>|ns of U<br>|S dollar<br>|s)<br>|||
|Exports of ICT Network products (in million of US dollars|20.6|19.8|14.2|**13.3**|16.7|21.4|27.1|45.5|
|Exports of Automotive Network|113.6|79.7|61.6|67.8|**40.4**|45.5|48.4|61.8|
|Total|134.2|99.5|75.8|81.1|57.1|66.9|75.5|107.3|
|_Memorandum:_||(|inperce|nt)|||||
|Share of IT network in total producer networks' exports|15.3|19.9|18.7|16.3|29.2|31.9|35.9|42.4|
|Share of the EU-25|51.0|44.6|57.4|65.0|58.3|56.8|46.4|66.4|
|_of which: CEEC-8_|_14.4_|_17.1_|_14.7_|_9.9_|_9.6_|_8.5_|_6.5_|_7.5_|
|Share of ROW|34.5|38.3|27.9|25.0|32.1|34.6|47.1|26.1|

Source: Computations based on UN COMTRADE Statistics.

Post-1999 developments in Bulgaria’s trade in producer network products flag its return to trends prevailing in other CEEC-10 economies and worldwide. First, in line with worldwide trends, Bulgaria’s trade in ICT network products has displayed much stronger dynamics than that in automotive network. While the value of automotive exports stood still in 2003 at 54 percent of its peak level in 1996, but 50 percent above this level in 2000, the value of ICT exports was more than twice higher than in 1996 and more than three times higher than in 1999 (Table 30).

Second, Bulgarian firms have become increasingly integrated into EU-based networks of production and distribution but only during the 2000-03 period. Indeed, its earlier geographical patterns suggested continuation of former CMEA links even during the initial stages of transition in 1991-95, which, however, collapsed once reforms would begin taking hold in CIS economies. The emergence of hard-budget constraint and the shift in demand towards more sophisticated products crowded out Bulgarian suppliers. CIS imports accounted for 45 percent of Bulgarian exports of ICT network products in 1996, while the EU-15 together with CEEC-9 took only 28 percent of them. Their aggregate share rose to 60 percent in 1999, with the value of Bulgarian exports around one-third higher than in 1996. In contrast, CIS-oriented exports collapsed in 1999.

20 In 1990 Bulgaria had a less developed automotive sector than in former Czechoslovakia or Poland, but its electrical equipment sector—one of the major players in ICT network trade—was as developed as that in Hungary. But while its share in total manufacturing output in 1989 was 8 percent in both Bulgaria and Hungary, a decade later its share fell to 4 percent in Bulgarian output and rose to 24 percent in Hungary (Szanyi 2004).