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economies.<sup>19</sup> This was also the fastest growing value chain among buyer-driven chains, with its share in total EU-oriented exports increasing from 78 percent in 1996 to 83 percent in 2000. In 2001-03, exports of both footwear and furniture chain products and parts grew faster than TC exports. The share of TC in total ‘buyer-driven’ network exports fell to 80 percent in 2003, while that of footwear to 14 percent up from 12 percent in 2000 and that of furniture to 6 percent up from 5 percent.

Entry of Bulgarian firms into ‘buyer-driven’ value chains has been significantly delayed in comparison to other CEEC-10 economies and except for TC chain, no other chain has emerged as a lever of Bulgaria’s export growth. In fact, until 2001 exports of both footwear and furniture chains remained stagnant. Exports of footwear grew in line with total EU-oriented exports, with their share in Bulgaria’s exports at around 5 percent (Table 28). Furniture network had the strongest growth between 2001 and 2003, with the value of its exports almost doubling.

How competitive have producers from ‘buyer-driven’ networks been in EU markets? Exporters of products and parts of ‘buyer-driven’ chains have been competitive in EU markets, as their respective shares in EU external imports increased rather significantly especially in 2000-03 for furniture and footwear producers. Their share in EU external imports grew consistently through 1996-99 mainly because of impressive performance of TC network towering over exports from other ‘buyer-driven’ chains. While the growth in share of Bulgarian TC products in EU imports remained roughly the same of around 7-8 percent per year during both the 1996-99 stagnation and 2000-03 expansionary phases, exporters of products of other chains did not make any significant in-roads in EU markets in 1996-2000. The share of footwear in EU imports was in 2003 38 percent higher than in 2000 and that of furniture products 37 percent higher. In both networks, producers of parts have outperformed suppliers of final products in terms of gains in market share. The same applies to TC network, with textiles registering much stronger gain (95 percent) than clothing (25 percent over 2000). Exporters of parts saw their share increase 73 percent between 2001 and 2003 (Table 28).

The shift towards parts is indicative that Bulgaria ceases to be mostly an assembly shop for EU firms taking advantage of available cheap labor force. While without the survey of firms in sectors or access to input-output tables it is impossible to give an unambiguous answer to this assessment, an examination of trade data tabulated in Table 15 offers some clues. Developments within each chain suggest slightly different answers. While data point to the development of backward linkages in footwear and furniture chains, no clear conclusion can be drawn in reference to TC value chain.

The TC at first involves cut-make-trim (CMT) tasks, possibly followed by a move to FOB, i.e., firm providing the fabric itself and charging for the final garment rather than earning only a processing fee. The ability to shift to FOB critically depends on the price and quality of domestically available fabrics. Their absence weakens competitiveness of domestic producers. The TC trade data do not suggest the fall in import intensity, the share of imported fabrics in total TC exports, which usually accompanies the shift to FOB operations. Yet, it would be impossible to conclude that (a) there is shortage of domestically available high quality fabrics and (b) that simple CMT operations continue to expand in the Bulgarian garment sector. Consider the following: The importance of imported inputs for final exports, as measured by imports of textiles as percent of exports of clothing and textiles, slightly increased in TC chain from 50 percent in 2000-01 to 55 percent in 2002-03. While no firm conclusions can be drawn on the basis of such a crude measure, this may suggest lack of significant progress in the development of backward 19 While negative growth rates of exports from Croatia were probably caused by the loss of competitiveness due to growing wages, the reasons for steeper contraction in exports from Serbia/Montenegro may relate to its troubled relations with the EU until 2001and adverse business climate.