Challenges and Opportunities for the Knowledge Economy in Bulgaria by Sophia Kassidova Deputy Minister of Economy World Bank KE Conference, Paris 19-22.

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Presentation transcript:

Challenges and Opportunities for the Knowledge Economy in Bulgaria by Sophia Kassidova Deputy Minister of Economy World Bank KE Conference, Paris Feb 2002

Bulgaria - Stability and Growth Political stability: consensus on EU and NATO membership Macroeconomic stability currency board since 01/07/1997: BGN 1=EUR low interest rates: base interest rate around 4.5% low inflation: 4.8% in 2001 (preliminary data) Dynamic economic growth: 5.8% in 2000 and 4.9% for 2001 (estimate, source: Ministry of Economy) IMF Program World Bank Country Assistance Strategy National Anti-corruption Strategy and Programme for its Implementation Strategy for Energy Sector Development Ministry of Economy

Macroeconomic Indicators 4.9 Source: Ministry of Finance

GDP Growth: Bulgaria/CEE Countries Bulgaria E2002F2002F-05F Pessimistic prognosisOptimistic prognosis BulgariaHungarySloveniaCroatiaPolandCzech Republic SlovakiaRomania GDP Growth in CEE Countries in 2001 (%)

Total Tax Burden (% GDP) Source: Ministry of Finance

Personal Income Tax Rates/Brackets 29% 28% 24% 18% Source: Ministry of Finance

Background  Tradition of excellence in ICT production. Specialization under COMECON (50%) - PCs, processors, peripherals, teleprocessing systems and devices, etc.  In 1989 share of electronics and telecoms -- 25% of industrial production. Sector employed 130,000 people, incl. 8,000 highly qualified engineers.  Bulgaria’s ICT industry suffered seriously after  Macroeconomic stabilization since 1997 made ICT one of the most dynamic sectors of economy.

ICT Infrastructure Strengths Telephone penetration rate: 36 phone lines per 100 people Households with installed telephone lines: 75% Mobile telephones: 20% of population and exponentially growing Cable TV penetration: 48% of population ISP is liberalized and competitive Weaknesses Households with PCs: 8.5% Regional disparities (i.e. less access in rural areas) Telecom monopoly

Internet Access Dynamics

Internet Affordability (in $)

Where Internet is Used ? YesNoDK/NA Home30,264,65,2 Friends, relatives19,874,06,3 School, university16,775,08,3 Work41,753,15,2 Public places46,949,04,2

Bulgaria - Education Bulgaria’s secondary education is among the best in the world: 5 th in the world in sciences, 11 th in mathematics (World Bank and The Economist ranking) Bulgaria’s secondary education is among the best in the world: 5 th in the world in sciences, 11 th in mathematics (World Bank and The Economist ranking) Bulgarians rank second in international IQ tests (MENSA International) Bulgarians rank second in international IQ tests (MENSA International) Bulgarians are among the top university students worldwide (2 nd in the world in SAT scores) Bulgarians are among the top university students worldwide (2 nd in the world in SAT scores) Many students abroad – Brain Drain Many students abroad – Brain Drain

ICT in Education Growing penetration of ICT in schools - no. of PCs at secondary schools doubled in Currently - 5,643 computers and 989 computer labs in 1016 secondary schools Some 20,000 computers at 48 universities. Average of 11 students per PC All universities have access to Internet. 45 (out of 48) have Internet sites 6,485 students in ICT doctoral degree students

Recent Developments in Knowledge Economy ICT employment in 2000 increased by 100% yoy Global crises in IT markets in 2001 did not significantly affect employment and IT business in Bulgaria Outsourcing, incl. by major IT firms is predominant type of IT business First signs of following patterns similar to Southeast Asia in assembling and hardware production

Challenges and Potential for Development Small level of PC and Internet penetration Low purchasing power Banking and financial intermediation needs to increase Insufficient venture capital Public spending for R&D is increasing – 3.8% in 2001, 4.1% in 2002

…... Potential for Development Qualified workforce UNDP 2001 TAI (Technology Achievement Index) measures Bulgaria as a potential technology leader Regulatory framework is largely harmonized with the EU one E-signature law is in place

…... Potential for Development ICT is a tool to overcome the gap with developed economies ICT keeps the economy open and globally integrated Political will to support the sector

Future Steps Е-government -- efficient and unbiased public administration is conducive favorable business climate Tax concessions for big FDI in the sector Finalize structural reforms

Future Steps Technology and Innovation National Strategy under preparation Accelerating penetration of ICT in all spheres of the economy and society ICT as a tool to bring innovation curricula and teaching and research methods