Boyko Takov, BSMEPA: 90% of Companies in Bulgaria Are Micro, However Generating a Little Over 1/3 of Revenues in the Sector
Boyko Takov is the Executive Director of Bulgarian Small and Medium Enterprise Promotion Agency (BSMEPA).
Boyko Takov, PhD, has more than 12 years of experience in business management. He also has experience in state institutions, and for 4 years he has held an expert position in the Executive Agency "State Property of the Ministry of Defense" at the Ministry of Defense. From 2008 to 2012, he held the position of Executive Director and Member of the Board of Directors in the Bulgarian office of a leading South Korean energy company.
Over the years, he has held managerial positions in some of the most developed areas of business, and investment management, projects and finance are only part of his biography in the field of agriculture, energy and infrastructure.
Mr. Takov, you have recently made several analyses - on the state of SMEs, on foreign markets. What do they show and what are the conclusions?
Some time ago we presented several analyses and studies, starting their preparation before the pandemic, but in some of them we managed to cover the initial consequences.
The analysis of the state of SMEs is based on statistical information and data, which did not allow us to cover the real situation with COVID-19. What can be concluded from the observed period is that the sector of small and medium-sized enterprises demonstrates steady growth in all indicators - number of enterprises and employees, gross value added, net sales, turnover. Their structure is also preserved in terms of size - over 90% of them are micro-enterprises. It is noteworthy that despite the large share of micro-enterprises - 93%, and their share of about 42% in employment, they generate just over 1/3 of revenue in the sector, which shows relative vulnerability.
Viable micro-enterprises need support for stability and growth. The gross value added of SMEs registered an increase of 40% from 2013 to 2017. It is important to note that the priority sectors – technology-intensive production and knowledge-intensive services, increased by 1% over the last years in the period 2014-2019. This is the highest growth compared to all other sectors, but it is still insufficient currently.
With regard to the import and export of SME products, it is noted that import still prevails, which is an indicator that companies could be worked on for their internationalization in order to create sustainability in their development. A positive trend is the increase in absolute values and as a relative share of trade, mainly with EU countries.
In this line of thought, what does the analysis of international markets that you made show then?
The analysis shows a lot of statistical data and information made in different sections and from which many conclusions can be drawn. It shows potential markets, our competitive economies, the markets in which we are positioned and growth can be sought, opportunities that we can take advantage of due to the pandemic situation, and the shocks caused by it, as well as much more information that could be useful to our companies.
It can be seen, for example, that Bulgaria and some CEE countries specialize in the supply of medical and measuring instruments, occupying historically significant positions in developed industrial countries such as Switzerland, the United States and Japan.
Another interesting point is that Bulgaria is among the global leaders in the production of electric bicycles. Bulgarian producers of various plastic products, including packaging, as well as paper and cardboard, have already competitive advantages in sales in developed markets outside the region.
Viewed from another angle, for example, Germany shows that it is driving the relocation of production processes in Central and Eastern Europe, most notably in goods for intermediate consumption, including plastic and metal products, electrical equipment, machinery and equipment, car parts.
As we know, Germany is our largest trading partner. On the other hand, in Spain and France the relocation of production along the value chain in the automotive, electronics and mechanical engineering sectors is also aimed at North African countries, which makes them competitors for Bulgarian export-oriented enterprises.
Another interesting line of development that is observed is that in recent years traditionally developed industrial economies are gradually giving way to the European market of machinery and equipment - especially Japan, the United States and Switzerland. Their place is being filled by new Asian producers such as Malaysia and Vietnam, as well as by CEE suppliers. This process is likely to intensify as part of a possible reorientation of strategies towards near-shortening and concentrating a larger share of value chain processes within the EU.
In this process, it can be said that our competition will be Poland, to a lesser extent the Czech Republic and Hungary, and Romania in some sectors follows a similar trajectory. The data show that Bulgaria and other countries in the region are rapidly gaining market share in the supply of some electrical equipment and components, including batteries, printed circuit boards, electric heaters, etc., with the main competitors in this sector being non-EU suppliers, mainly China and other Asian countries.
The information from the analysis will be very useful for us, regarding the activity of the Agency, as well as our initiative Export Hub Bulgaria. Unfortunately, our projects that support our SMEs in the direction of internationalization are almost impossible to implement due to the situation in the world. That is why we are re-adjusting and started to do online events, both with foreign countries and with a focus on increasing the competence of SMEs.
The first non-physical trip abroad is scheduled for the beginning of October, with a trade mission to Croatia with a visit to several cities. If the situation does not develop in a negative way, with the closure of borders and subsequent lockdown, we will pay visits with Bulgarian companies to other European countries.
You mentioned also business research?
The national survey, which we conducted among 500 companies, gives us a snapshot that also covered the COVID-19 situation. We wanted to use the survey to see what the needs and problems of the business are, as well as to see what they would like to receive from EA SME.
In this respect, the most desired activities in which SMEs expect support are: connecting companies with (potential) partners, both abroad and in the country, presenting them to foreign markets, consulting, training, etc. We also sought feedback on topics related to Industry 4.0, and the results show that companies are not very familiar with the topic and need more information and training of employees in order for their professional qualifications to match the innovations.
Regarding the business environment, for example in relation to human resources, the lack of qualified employees is cited as a major obstacle by 42% of entrepreneurs. Despite the fact that with the crisis around COVID-19, the labour market in Bulgaria will change significantly, the problem with qualification remains valid - not only the number of employees, but also potential candidate employees.
New requirements will probably be added to it, such as higher skills for working in a digital environment and remote teamwork. Interestingly, areas such as "digitalization", "business services and information efficiency", "cooperation and connectivity networks" and "intellectual property" are significantly less mentioned as deterrents.
It would be great if they are sufficiently developed, but also neglecting them as factors for business development can be an indicator of a problem. Due to the current situation, it can be seen that the expectations regarding digitalization and cybersecurity are growing, their development will be key for all companies on their way to stabilization and growth.
In summary, SMEs expect the greatest support for access to EU funding, including for innovation, higher efficiency of administrative services, support for targeted investment in innovation, and a legal framework for this. The qualifications of the people are among the most frequently mentioned, as is the legal framework for the use of a flexible and mobile workforce.
What lies ahead for the Agency based on the findings of these analyses and studies?
There is a lot of work ahead in the areas that we outline and in which we want the Agency to develop, namely more training, analysis, consultation, awareness, conferences, webinars for SMEs.
The conclusions are many and we will take them into account in our upcoming activities, both in terms of those in the country and in terms of those abroad.
We are working on several interactive platforms that will give us the opportunity to support our SMEs in different directions, we have many ideas for partnerships and initiatives with particular and operational benefits for companies, which we will start announcing very soon.
We will activate new communication channels through which to reach the companies. We will do more consultations and research to go into more detail and eleborate on the finetuning of our future activities. We will identify the needs of the companies in order to offer them the services they request./Econ.bg
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