ERAWATCH Country Reports 2013: Bulgaria

The Republic of Bulgaria has been a Member State of the European Union since 2007. Its economic development has been framed by a Currency Board Arrangement (binding the national currency to the euro) since 1997. Recent development is characterised by slow economic growth. Preliminary GDP data for 2013 indicates a slight pick-up in growth in the second half of the year. Growth was driven by net exports and a surge in public expenditure, whereas household consumption contracted. Annual growth is projected to have reached 0.6% in 2013. This remains well below the estimated potential growth rate of the economy. Going forward, the economic recovery is expected to be more broad-based, with domestic demand forecast to reinforce the export-driven growth momentum. GDP growth is forecast to reach 1.7% in 2014 and 2% in 2015. The recovery is expected to be slow compared to many other converging economies, as a significant population decline (due to ageing and emigration) continues to erode the growth potential. GDP per capita is 47% of EU28 (2012). In 2012 R&D spending in Bulgaria grew in absolute terms by 17,6% compared to 2010, yet in GDP terms it is not significant - from 0.60% to 0.64%. This is far from the national target of 1.5%. The share of government budget appropriations or outlays on research and development as % of total general government expenditure is 0.71, which is twice less than EU28 -1.42 (2012). The EU funding has become the most important for the country. The recent trends of decentralization of the research system in terms of sectors financed have appeared, but still not in terms of research output. The government sector’s share in funding research and development (R&D) decreased from 58.3% in 2008 to 36.6% in 2011. Nevertheless more than 50% of the Bulgarian scientific publications have come from only one research organization of this sector with concentration of national research potential The innovation system is operating below its potential, whether measured by the system’s inputs, outputs, or by the contribution of innovation to economic growth. The Global Competitiveness Report 2012-2013 of the World Economic Forum ranks Bulgaria 97th of a total of 144 countries in terms of innovations and excellence in business factors and 92nd under the innovation development indicator. This is not surprising given the low level of funding for R&D and innovation (92nd in private business investment in R&D) and the loose links between education, research organizations and the business, which puts the country at the 117th place in interaction between universities and industry in the field of R&D and innovations. According to the same report, the country is at the 65th place in innovation capacity and 98th in availability of scientists and experts in the field. According to the European Innovation Ranking in 2013, Bulgaria ranks last among the Member States and is a member of the group of the modest (shy) innovators. Relative strengths of Bulgaria were detected under some of the indicators in the field of human resources, intellectual property (the country is at relatively advanced positions (47th) in ‘patent pending’ and economic effects, and the worst results were in financing and support, networks and entrepreneurship, intellectual property and innovation (creative) results, i.e. in the same areas Bulgaria shows both strengths and weaknesses. This fact determines the innovation system of the country as unbalanced, while the practice of the leading countries in terms of innovation shows that a balanced innovation system is a prerequisite for success. The latest R&I policy developments are affected by the elections of a new Parliament and respectively – Government and their will to contribute to a better R&I performance of the country. They concern the following initiatives: 1. Ministry of education and science, taking into account the exceptional interest of the scientific community on important issues related to the development of research, open debate on: National strategy for Scientific research – February, 2014;Rules for the FUND “Scientific Research” – February, 2014; Law on Higher education - March,.2014; Road map for research infrastructure development – November, 2013; draft of an operational programme (OP), called “Science and Education for Smart Growth 2014-2020” (version 1.11.2013). Some of the tangible goals laid down in this OP include: a gradual increase of R&D spending in Bulgaria up from the current level (0.64%) to 1.5% of GDP by 2020, a decrease in the rate of schools dropouts to 11%, and an increase of the number of people with a university degree in the age group 24-30 up to 36%. 2. Ministry of economy and energy has opened a debate on: National strategy for smart specialization – draft, November, 2013; draft of the OP "Innovation and competitiveness” (version 8.10.2013), which is directed to the achievement of dynamic competitive development of the economy, based on the innovations, optimization of the manufacturing chains and sectors with high added value. Main structural challenges that face national R&I policy in 2013 could be summarised as follow: - Overcoming low R&D intensity and increasing attractiveness if research carrier. From 2000 there is established a clear upward trend in the total R & D funding . However, the R & D intensity almost does not change and remains one of the lowest levels in the EU. - Definition and subordination of funding priorities. The growth of foreign R & D investment in the business sector from 2010 is accompanied by the withdrawal of the state investment in R & D - Increasing effectiveness of the R&I funding. Increase over eight times the investments and holding a larger volume R & D in the business sector after 2010 did not result in a significant increase in the share of high-tech exports, or to more requests and registration of intellectual property. Effectiveness of R & D investment in the business is small, and in the public sector they are not prioritized and therefore insufficiently effective. Assessment of the match between the national priorities and the structural challenges. There is no clear match between the national priorities and the structural challenges. The national progress towards Innovation Union Commitments. The Government put in significant efforts to meet IU commitments. Most of its activities are in progress. Main finding of the national progress towards delivery of the ERA. One joint research agenda addressing grand challenges was implemented. Some sources point out that collaborative research activities have increased.