-  34  -

Not all products among 141 high performers are new exports, although they appear to come from restructured production capacities. In fact, most of them were exported before 200003 and often enjoyed significant presence in EU markets as measured by shares in EU external import demand. All of them, however, saw their shares plunging in 1996-99 and subsequently fortunes reversed in 2000-03. While in 1997-98 four four-digit SITC products had the share in EU external imports exceeding 2 percent, their number fell to one in 1999-2000, and increased to 8 in 2001, 14 in 2002 and 15 in 2003. These were not tiny exports in terms of value. The number of products with the value of exports exceeding US$ 5 million rose from between five and seven in 1996-2000 to 13 in 2001, 22 in 2002 and 32 in 2003.

How does the composition of these exports in terms of factor content intensities compare to the composition of Bulgaria’s total EU-oriented exports in 2003? The most striking difference is much lower share of unskilled labor intensive products among ‘fast growers’ and a much larger share of capital intensive products. The differences are staggering especially for the latter accounting for almost half of fast growers in 2003. Among capital intensive products machinery (SITC 7) emerged as the major driver accounting for 36 percent of fast growers’ EU-destined exports.

Hence, it appears that the process of industrial restructuring has been going on and only now begins to influence overall export performance. In line with trends observed in other CEEC10 economies, capital intensive products have been emerging as the levers of export growth.

# **E** **_._** _Factors content of EU-oriented exports and level of technology_

Examination of Bulgaria’s export offer in terms of technologies embodied in Bulgaria’s products exported to the EU provide further evidence pointing to, on the one hand, the dominance of low-tech labor intensive products and signs of ongoing modernization of Bulgaria’s industrial base. We use a simple classification, developed by Landesman and Stehrer (2003), filtering Bulgaria’s export oriented into three broad categories: (1) low technology and labor intensive activities, (2) resource intensive activities, and (3) medium- to high-technology production activities. In contrast to its earlier application (see Section 3.C), we include resource intensive products, and we do not restrict the analysis to manufactures but include all other products— industrial and agricultural alike. Resource intensive sectors consist of manmade fibers, wood and wood products, coke, refined petroleum products and nuclear fuels, mineral products, and chemicals.

**Table 26:** _Composition of exports by the type of technology involved in their production, their share and export specialization index and their changes in 1996-2003 (in percent)_

||1996 1997|1998 1999|2000|2001|2002|2003|Change|Index, 1999|Index 2003|
|---|---|---|---|---|---|---|---|---|---|
|**Share in Bulgaria's EU-or**|**iented exports**||||||in 2003|1996=100|2000=100|
|Low-tech labor intensive|40.9 41.6|43.8<br>46.4|39.9|45.2|47.5|44.8|-5.8|113|112|
|Resource intensive|36.9 37.7|35.9<br>31.0|37.8|30.8|25.3|26.1|3.2|84|69|
|Medium- to high tech|13.5 11.2|12.6<br>16.0|13.9|14.4|17.8|19.1|7.2|119|137|
|**Share in EU external imp **|**orts**|||||||||
|Low-tech labor intensive|0.59 0.65|0.71<br>0.73|0.76|0.91|0.97|1.02|4.6|123|134|
|Resource intensive|0.68 0.73|0.69<br>0.58|0.76|0.70|0.60|0.68|13.1|85|89|
|Medium- to high tech|0.33 0.27|0.28<br>0.35|0.31|0.34|0.42|0.44|5.7|106|144|
|**Export Specialization in E**|**U markets**|||||||||
|Low-tech labor intensive|2.06 2.14|2.28<br>2.62|2.57|2.80|2.81|2.74|-2.5|128|106|
|Resource intensive|2.35 2.40|2.21<br>2.07|2.58|2.14|1.73|1.82|5.4|88|71|
|Medium- to high tech|0.09 0.08|0.09<br>0.10|0.09|0.11|0.15|0.16|13.3|102|182|

Source: Own calculations based on EU-15 trade data reported to the UN COMTRADE database.

As expected, the specialization profile in EU markets, as obtained through running the trade data through the above discussed “technology” filter, does not diverge overall from the export basket in terms of factor intensities. Its export basket embodies mainly resource and labor