The Challenges of Competitiveness
A b s t r a c t
The analysis relies on information from the last Global Competitiveness Report and the Global Information Technology Report of the World Economic Forum, publications of Eurostat, of the Vienna Institute on Comparative Economic Studies and personal research. The reports of the World Economic Forum cover 102 countries, of which 23 advanced, 28 at a medium level of development, 6 OPEC members and 47 underdeveloped countries. Bulgarian performance should be compared mainly with the EU members and the candidate countries.
The objective of this analysis is to identify where is the Bulgarian economy in terms of competitiveness and development of Information and communication technologies, compared to the EU members and the applicant countries. On this basis conclusions are made and recommendations are put forward for the economic policy of the state on promoting competitiveness over the years prior to and immediately after accession to the EU, expected for 2007.
On the growth competitiveness index Bulgaria ranks 59th in the overall ranking. Bulgaria is however the last, or among the last of the EU members and applicant countries. Even 15-20 less developed countries are positioned better than Bulgaria.
On the business competitiveness index Bulgaria ranks 75th and is the last among the EU members and the candidate countries and is overtaken even by 20-30 less developed countries. This is a worrying signal for Bulgaria.
Bulgaria ranks last among EU members and applicant countries on implementation of the Lisbon strategy on competitiveness. On labour productivity per person employed Bulgarian level is 30,2% of the EU-15 level – again the last among the members and the candidate countries. Romania is ahead with 31,5% and Turkey even better with 36,2%.
The product composition of the Bulgarian output and exports is typical for an underdeveloped country. Approximately 80-85% are low technology goods, 10-15% - medium technology goods and only 2-3% - high technology goods. The average Bulgarian export prices for EU by commodity groups are 25-35% of the average import prices of the Community for the respective commodity group.
Bulgaria ranks 67th on the networked readiness index and lags behind not only of the EU members and the applicant countries, but also behind 15-20 less developed countries. This is even more alarming signal, because those who lag behind in ICT, lag behind in everything.
Important conclusions are derived from the analysis and urgent action by the state and the business community is recommended. The Government must adopt proactive macro- and micro economic policies. More concrete analysis and recommendations are made for the budget policy, comparing two fundamental approaches – passive and active. Proactive budget policy is recommended. It comprises more flexible policy on the budget deficit, which tolerates a deficit of 2,5-3,0% of GDP: budget incentives for investment in infrastructure, healthcare, education, R&D, environment protection. Urgent tough measures are needed for improvement of tax collection and curtailment of crime and corruption. More flexible policy on utilization of the fiscal reserve and on public indebtedness is also desirable. The major objective of budget policy over the following 5-10 years should be the highest possible convergence of Bulgaria to the EU on GDP, productivity, incomes and competitiveness instead of strict budget balance at any price. The budget policy must serve the fundamental interests of the Bulgarian people, and not the vice versa as it is now.