-  45  -

While it may be premature to make predictions, developments in this trade may indicate the future pattern of Bulgaria’s firms’ integration into EU and global markets—integration going beyond ICT and automotive networks but still involving sophisticated engineering products and stable commercial relations with major world producers.

# **E** _. Concluding observations_

Although Bulgarian firms’ involvement in EU-based ‘buyer-driven’ global value chains still towers over ‘producer-driven’ networks and engineering products covered by EUoutsourcing, there are clear signs of ongoing transformation as revealed in Bulgaria’s export basket. Bulgarian exports related to participation in global value chains account now for almost half of EU-oriented exports up from around one-third in 1996-97 (Table 34). ‘Buyer-driven’ exports accounted for 84 percent of these exports in 2003 down from an average of 88 percent in 1997-2001. This share fell mainly due to the expansion in exports of other parts and engineering products.

**Table 34** : _Composition of EU-oriented exports of network products and other parts in 1996-2003 (in percent)_

||1996|1997|1998|1999|2000|2001|2002|2003|
|---|---|---|---|---|---|---|---|---|
|Buyer-driven' networks|84.9|88.6|88.0|86.6|87.3|88.2|85.0|84.0|
|_of which: TC_|_66.3_|_69.0_|_71.9_|_70.8_|_72.4_|_72.6_|_68.3_|_67.4_|
|Producer-driven' networks|6.3|3.7|3.9|4.2|3.7|2.9|3.4|4.2|
|_of which: ICT_|_1.2_|_1.4_|_2.0_|_2.4_|_2.1_|_1.6_|_2.2_|_2.8_|
|Otherparts and engineering products|8.9|7.6|8.1|9.2|9.0|8.9|11.6|11.8|
|Memorandum: Share in Bulgaria's EU-<br>oriented exports|32.2|33.5|37.6|41.4|38.6|44.0|44.2|45.5|

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

Although exports from ‘buyer-driven’ chains continued to grow faster than total EUoriented exports in both 1996-99 and 2000-03, two significant changes have been occurring. First, textiles and clothing ceased to be the levers of ‘buyer-driven’ exports in 2000-03, although their export growth—driven increasingly by textiles—has remained impressive at an average annual growth rate of 13 percent. Second, furniture was the most dynamic export in 2002-03. The share of T&C products in ‘buyer-driven’ network exports fell from 82 percent in 1998-2001 to 80 percent in 2002-03 due to the surge in exports of furniture network products in 2002 and 2003. The share of furniture exports in total ‘buyer-driven’ networks’ exports grew from 4 percent in 1997-2001 to 6 percent in 2002-03.

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. Bulgaria inherited industrial structure favoring specialization in ICT products rather then automotive ones,<sup>22</sup> yet 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 because of stronger growth. Exports of ICT networks continued falling until 1999.

In all, the ongoing shift towards furniture (or more exactly furniture parts) within ‘buyerdriven’ networks’ exports, towards ICT final products and automotive parts within ‘producer22 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).