Country Listing

Bulgaria Table of Contents


Obstacles to Industrial Growth

In 1989 the domestic market still featured little or no competition. Over 80 percent of exports went to Comecon countries, and 75 percent of that total went to the Soviet Union. This situation insulated the computers, industrial robots, microprocessors, and other high-technology exports of Bulgarian industry from the market competition that would require backing by substantial investment in research and development. Bulgaria thus developed a practice of expending a small proportion of its national income on applied science, even compared with other East European states.

Falling productivity was a major problem in a number of key industries. Many of these industries were inherently uncompetitive, and attempts to raise productivity through large-scale production concentrated industrial and research facilities into enormous enterprises that further reduced industrial flexibility. Unprofitability made Bulgarian industry dependent on a system of widespread state subsidies. It was reported at the BCP Central Committee plenum in December 1989 that a quarter of all state companies had received state support during the year, totaling 7 billion leva--almost a quarter of the national income. Machine building, one of Bulgaria's key export industries, became a problem area for the economy in the 1980s. Because it was the chief consumer of the overpriced, low-quality output of the metallurgical industry, the machine industry eventually became unprofitable as well. In 1990 Balkancar, the country's biggest company, one of its most successful exporters, and another major customer of the metallurgy enterprises, lost money for the first time.

A critical economic policy decision in the late 1980s was Zhivkov's special emphasis on several energy-intensive industries, despite the inadequacy of domestic energy supply. In the early 1990s, the new regime faced a choice of dismantling many of those enterprises, finding less expensive energy sources to keep them running, or acquiring enough hard currency to upgrade their technological level and make them less energy-intensive. To further complicate industrial policy, beginning in 1991 the Soviet Union began charging market prices in hard currency for its oil and gas.

Finally, emergence of a significant, fast-growing environmental movement cast the tradeoff of environmental quality for economic growth in starkly negative terms. Barring substantial technical aid (most likely from the West) to reduce industrial waste, public demand for environmentally sound economic policy stood as a formidable obstacle to industrial expansion.

Data as of June 1992