-  44  -

2000 and continued its upward movement through 2001-03. This was not the case of only two other exceptions to the general trend of increasing significance of parts—Latvia and Lithuania. The share of parts was consistently falling through 1999-03 in spite of a 20 percent average annual growth per year over 2000-03. Exports of final products simply grew faster.

Second, like most other CEEC-10 and SEE-participants of ICT networks, Bulgarian firms have been shifting towards specializing mostly in assembly operations. For most of them, the share of final products in ICT exports has significantly increased indicating the shift towards final production. Countries that succeeded in expanding exports of final products have also increased imports of IT parts. So has Bulgaria, which provides indications of the emergence of similar pattern of specialization in assembly operations. On the other hand, countries whose firms remain mostly outside ICT supply chains, i.e., from Albania, Croatia, and Macedonia, tend to produce parts rather than final products.

**D** **_._** _Other forms of outsourcing: exports of parts and other engineering products together with parts_

The ‘producer-driven’ network analysis, confined to immediate inputs and final products of IT and automotive products, does not capture all intra-product trade. Some additional insights into developments in this trade can be obtained by examining specialization patterns in Bulgaria’s trade with the EU in parts and engineering intermediate and final products not covered by network trade analysis. The list of products includes two groups: products defined explicitly as parts in four-digit SITC 7. Rev. 2 and SITC 8 (e.g., parts of clocks, cameras, and other optical equipment) hereafter referred to as ‘other parts;’ and ‘other parts and products’ including also machinery equipment products together with respective parts (e.g., hydraulic motors and parts, electrothermic appliances and parts).

How does Bulgaria score on this count? Two observations can be derived from data reported in Table 33. First, EU-oriented exports of these products have recorded strong and steady growth since 1997. The value of exports of parts not covered by network analysis increased 4.2 times between 1997 and 2003; they grew at an average compound rate of 24 percent per year over this period; and their share in EU external imports increased 3.4 times from 0.08 percent to 0.26 percent. If anything, this indicates the emergence of well-established commercial relations based on a stable participation in outsourcing by EU firms.

**Table 33** _: Exports of parts and other engineering products and their share in EU external imports and Bulgaria’s EU-oriented exports in 1996-2003 (in millions of US dollars and percent)_

||1996|1997|1998|1999|2000|2001|2002|2003|Change 2003<br> over 2001|
|---|---|---|---|---|---|---|---|---|---|
|Parts not covered by networks|26.8|26.0|33.4|44.1|50.7|60.7|79.6|110.2|82%|
|Other engineering products andparts|36.1|35.5|44.4|46.2|47.9|61.5|88.7|118.5|93%|
|TOTAL ABOVE|62.9|61.5|77.8|90.3|98.6|122.2|168.3|228.7|87%|
|Imports of parts as percent of exports|130|117|117|110|99|100|82|87|-13%|
|Share in EU external imports|0.09%|0.09%|0.09%|0.12%|0.13%|0.17%|0.24%|0.29%|75%|
|Share in Bulgaria’s EU-oriented exports|2.9%|2.6%|3.1%|3.8%|3.5%|3.9%|5.1%|5.4%|37%|

Source: Derived from EU trade data as reported to the UN COMTRADE database.

Second, the 2001-03 period witnessed significant acceleration of exports of both parts and other engineering products together with parts. This has not been because of appreciation of Euro vis-à-vis US dollar, as the increase in the value of exports of 87 percent in 2003 over 2001 accompanied a similar increase in Bulgaria’s share in EU-external imports increasing 75 percent over this time. These products have driven the recent expansion in Bulgaria’s EU-oriented exports, as their share in Bulgaria’s exports increased from 3.7 percent in 2000-01 to 5.4 percent in 2003.