1. Bulgarian Small and Medium Enterprises Promotion Agency PREPARATION FOR EU ENTRY BY DEVELOPING SUSTAINABLE SME IN BULGARIA

2. Bulgarian Small and Medium Enterprises Promotion Agency Encouragement of Start-ups Promotion of SME Development Increasing the SME Competitiveness Promotion of SMEs in Bulgaria:

3. Bulgarian Small and Medium Enterprises Promotion Agency Total number of SMEs in 2003: 220 000 Share of SMEs in Number of Enterprises: 99,1% Share in private sector employment: 60.3% Share in gross value added (GVA): 34% Share in foreign trade: 29% SME Direct Foreign Investment: 31% SME Share in total volume of commodity exchange: 39% SIGNIFICANCE OF THE SME SECTOR IN BULGARIA

4. Bulgarian Small and Medium Enterprises Promotion Agency SMEs by SECTORS 1. Agriculture, fishery, forestry- 3.45% 2. Mining industry- 0.08% 3. Processing industry- 11.73% 4. Electricity, gas and water supply and distribution - 0.07% 5. Construction -3.87% 6. Trade, car repairing and home appliances - 50.64% 7. Hotels, boarding and catering - 9.42% 8. Transport, communications, travel agencies - 7.59% 9. Financing, loans and insurance- 0.71% 10. Real estate operations, renting- 9.02% 11. Education- 0.67% 12. Health care and veterinary- 0.59% % 13. Other operations and services- 2.06%

5. Bulgarian Small and Medium Enterprises Promotion Agency Simplification of administrative and legislative environment Simplification of administrative and legislative environment Financial environment improvement Financial environment improvement Innovations and technological development support Innovations and technological development support Global market integration of SMEs Global market integration of SMEs Improvement of the access to information and services Improvement of the access to information and services Provision of conditions for SME development in regional aspect Provision of conditions for SME development in regional aspect Encouragement of the entrepreneur spirit and skills Encouragement of the entrepreneur spirit and skills NATIONAL STRATEGY ON SME PROMOTION 2002-2006

6. Bulgarian Small and Medium Enterprises Promotion Agency New Legislation on SME Law on the amendment of the Law on Small and Medium Enterprises was adopted by the National Assembly and came into force on 24 August 2004 Main objectives: Improvement of the co-ordination of the SME policy Full harmonisation of the definition for SME with 96/280/EU recommendation: except for the ceilings for the annual turnover and the balance sheet value with the SME Law the SME definition is completely aligned with the EC Recommendation Creation of a mecanism to ensure the provision of a full package of public services as close as possible to the enterpreneur: in compliance with the Law a merger of SME Agency with the Trade Promotion Agency into an Executive Agency for Small and Medium Enterprises Promotion with the Minister of Economy.

7. Bulgarian Small and Medium Enterprises Promotion Agency The Law provides for two major groups of measures for SME promotion: First major group: encouraging the creation of SME, under the conditions and criteria of the law on State Aid when the latter is applicable, through: creation of appropriate conditions for access to capital, incl. provision of financing for SME, providing loan guarantees for SME, development of projects; Second major group: promotion of development and increase of competitiveness of SME through: development of projects, directed towards promotion the distribution of technologies and innovations, realization of projects for increase in competitiveness of enterprises by increase in their productivity.

8. Bulgarian Small and Medium Enterprises Promotion Agency Simplification of the legislative and administrative environment Improvement of the business environment through streamlining of the existing regulatory regimes (licensing, permission and registration) – under the implementation of recommendations approved by the government to alleviate and eliminate some 192 regimes where 160 regimes are already in process of elimination or alleviation; The Law on Reduction of Administrative Regulation and Administrative Control (adopted on 4 June 2003). The law stimulates general systematized rules for implementation and reduction to a realistic extent of the administrative regulation and control of economic activities by introducing unified definitions for the types of regimes and setting up clear limits of administration competences; Adoption of Conception (Decree 878/2002) for Improvement of Administrative Service in the context of one-desk service principle and basic model of the same principle.

9. Bulgarian Small and Medium Enterprises Promotion Agency Access to finance The Project Guarantee fund for microcrediting of investment projects, credits for small companies starting family business and economic activities of self-employed individuals is implemented by the Ministry of Labour and Social Policy. The maximum loan lended to SME is increased from 7500 up to 10000 in the year 2004. Encouragement bank was incorporated as a fully state-owned institution with the special purpose of providing in priority medium- and long-term financing to the Bulgarian small and medium-sized enterprises (SMEs) and of promoting Bulgarian export. The Banks loan portfolio is formed entirely by loans granted to SMEs. An agreement for a guarantee line amounting to 7 million was signed between the European Investment Fund (EIF) and the Encouragement Bank. The credit line aim is to lend credits to SME on relieved conditions. The amount has been increased to 21 million in 2004. It should be pointed out that Encouragement Bank is the first financial intermediary among all candidate countries for accession to the EU, which was approved by the European Commission and EIF. -

10. Bulgarian Small and Medium Enterprises Promotion Agency Access to finance (2) In 2004 the Ministry of Economy started the project Competitive Start-up Business Creation (Project 100) with the support of UNDP as a component of Project Employment through business support – JOBS. The project has been implemented in four districts – Shumen, Vidin, Silistra and Dobrich, which were determined by particular criteria for unemployment level and standard of living. In 2005 the project except in the above four districts – Shumen, Vidin, Silistra and Dobrich will be also implementing in four new districts - Montana, Pazardjik, Sliven and Yambol;

11. Bulgarian Small and Medium Enterprises Promotion Agency European Charter for Small Enterprises In June 2002 the European Council has adopted the European Charter for Small Enterprises, which defines ten areas of actions in order to establish a favourable environment for small and medium-sized enterprises as: access to finance, getting more out of the single market, enterprises technical capacity improvement etc. In April 2002 in Maribor, Slovenia, Bulgaria together with the rest of the candidate countries has joined the Charter and expressed its interest to participate in the reporting process. The process of reporting is a tool for evaluation of the progress achieved according to the Charter and dissemination of the good practices. The Agency for Small and Medium-sized Enterprises was the coordinator of the Bulgarian Charter reports preparation. The final report 2005 shall be presented to the European Commission in September 2005.

12. Bulgarian Small and Medium Enterprises Promotion Agency Multiannual Programme for Enterprise and Entrepreneurship, in particular for SMEs (2001-2005) The Council of Ministers of Bulgaria adopted a Decision (185/1 April 2002) for the participation of Bulgaria in the Multiannual Programme and appointed the Agency for Small and Medium-sized Enterprises as a National coordinator for the Multiannual Programme since the main programmes objectives continues to be the SMEs support; Bulgaria takes part in EC Multiannual Programme through BEST initiative (Business Environment Simplification Task Force), which aims to compare the business environments of the member-countries and candidate-countries in order to outline the best practices; Providing better and faster access of business to services, programmes and nets of EU and improving their coordination is realized through the net of 8 Bulgarian Euro-Info Centres Network, financed by the Multiannual programme. ( Bulgarian Euro Info Centres in Sofia, Plovdiv, Stara Zagora, Yambol, Sandanski, Rousse, Dobrich and Vratsa).

13. Bulgarian Small and Medium Enterprises Promotion Agency Global market integration of SME Bulgarian SMEs Competitiveness PHARE Project started its implementation by the beginning of 2005. Projects purpose is the promotion of sustainable development of the Bulgarian enterprises and improvement of their competitiveness; The projects objectives, i.e. improvement of the competitiveness of the Bulgarian enterprises from the production sector and preparing them to resist the competitive pressure of EU will be achieved through purposeful support to areas of their activities related to the future EU integration of Bulgaria (achievement of harmonization of the production processes with the European ecological standards, requirements for labour and job safety, implementation of systems for quality management, good laboratory practices, good production practices, increase of the energy efficiency, stimulation of sustainable development of enterprises in priority sectors and in slow regions.

14. Bulgarian Small and Medium Enterprises Promotion Agency Global market integration of SME Within the framework of Working Program on the implementation of National Strategy for encouragement of SME development (2002-2006) started the project Providing assistance to SME in meat producing and meat processing industry for the Hazard Analysis and Control of Critical Points (HACCP) introduction – pilot project, funded through the Ministry of Economy budget; The Project Providing assistance to SME in milk processing industry for the Hazard Analysis and Control of Critical Points (HACCP) introduction started in May 2005 through the same scheme (as the previous one).

15. Bulgarian Small and Medium Enterprises Promotion Agency Innovations and Technological Development On the ground of understanding that competitive advantage in industry is achieved through creation, introduction and dissemination of innovation and in order to pursue purposeful policy for innovation and R&D promotion, The Council of Ministers adopted in September, 2004, Innovation strategy of Republic of Bulgaria and measures for its implementation; Funds amounting to BGN 5 million are available for the implementation of the first measure in the Innovation strategy – Establishment of National Innovation Fund (NIF). The operational goals of the fund are: to subsidize part of the costs for market-oriented applied research, R&D projects intended to be implemented in the industry; fulfill the measurements stated in the Innovation strategy; to make use of the opportunities which are provided in the Bulgarian Law on State Aid to support the innovative companies. - Encouragement of the researches designed to the industry as well as the cooperation between the research organizations, the universities and the companies; - Improvement of the financing of innovations, by setting up mechanisms for attraction of private capitals; - Promotion of the companies innovative activities and the introduction of technologies; - Stimulation of the creation of clusters in traditional sectors for Bulgaria etc.

16. Bulgarian Small and Medium Enterprises Promotion Agency Sofia 1000, 1, Sveta Nedelya Sq. tel: (359 2) 9329 273; fax: (359 2) 980 5869 e-mail: office@sme.government.bg web-site: http://www.sme.government.bg