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The shift towards the EU-15 or more generally pan-European countries as sources of imports that began to take place in the post-1996 crisis environment appears to have been related with first signs of industrial restructuring. Privatization and improvements in investment climate have prompted businesses to restructure and modernize their industrial base. Consider the following. First, the share of manufactures in Bulgaria’s exports has significantly increased. It grew from 52 percent in 1996 to 62 percent in 2000 and 84 percent in 2003 (Table 10 above). Furthermore, the weight of traditional inputs in Bulgaria’s imports has continued falling.

Second, this has been accompanied by the shift towards imports of manufactured products with higher technology content. Table 11 tabulates Bulgaria’s imports of manufactures from Pan-European free trade area for industrial products filtered in terms of technology. We use a simple taxonomy developed by Landesman and Stehrer (2003), modified in two respects: First, we restrict its application to manufactured products identified in Standard International Trade Classification as containing items 5 through 8 minus 68. Foods and feeds as well as other traditional production inputs are thus not taken into account. Second, we merge together two categories—low technology and labor intensive activities and resource intensive activities— under a single heading of low technology products. In consequence, the taxonomy is limited to low technology products and medium to high tech products. The former category includes textiles and clothing, wood products, most chemicals, tires, etc. The latter include machinery and equipment, transport equipment, and electrical and optical equipment, pharmaceuticals, etc. The results presented in Table 11 show that medium to high technology products, accounting for around 60 percent of total manufactured imports from the Pan-European area, have expanded faster since 1997 than imports of low technology products.

**Table 11** : _“Technology content” of Bulgaria’s manufactured imports from Pan-European area in 19962003 (in millions of US dollars and percent)_

||1996|1997|1998|1999|2000|2001|2002|2003|Index,1999|Index,2003|
|---|---|---|---|---|---|---|---|---|---|---|
||||(in mi|llions of|US dol|lars)|||1997=100|2000=100|
|Low-technology products|773|820|865|988|1,184|1,413|1,593|2,243|120|189|
|Medium to high tech products|1,128|1,096|1,452|1,845|1,962|2,526|2,830|3,859|168|197|
|Total|1,902|1,917|2,316|2,834|3,146|3,940|4,422|6,102|148|194|
||||(in<br>|terms o <br>|fpercen<br>|t)<br>|||||
|Low-technology products|41|43|37|35|38|36|36|37|81|98|
|Medium to high techproducts|59|57|63|65|62|64|64|63|114|101|
|**Memorandum:**Share of Pan-|Europea|n impor|ts||||||||
|in Bularia's manufactured|||||||||||
|g<br>imports|78|78|77|81|82|83|83|82|104|100|
|in Bulgaria's total imports|23|22|34|47|41|49|49|51|212|126|

Source: Own calculations based on Bulgaria's reporting to UN COMTRADE database.

Another indication of some progress in industrial restructuring is the improvement in Bulgaria’s net exports of machinery between 1999 and 2003. Exports of machinery in terms of their imports increased from 38 percent in 2001 to 42 percent in 2003 (Table 12). Taking into account that the value of these imports in 2003 was 83 percent above their 2000 level, this strikes one as quite an impressive export performance. It appears that the “EU-15-connection” has been crucial not only as a supplier but also as a buyer accounting for more than 50 percent of turnover in machinery and automobiles and parts. Consider that both exports of machinery and automobiles and parts grew fastest in terms of their imports from the EU. This was not because of falling imports from the EU as these increased in 2000-03 by 105 percent (machinery) and 85 percent (automobiles and parts).