Weekly Briefing, Vol. 32, No. 2 (BG), September 2020
Bulgarian National Innovation System – Condition and Weaknesses
Legal base of the formation of Bulgarian National Innovation System
The establishment and development of National Innovation System in Bulgaria is based on several regulations. The most important of them are: “The Innovation Strategy of the Republic of Bulgaria” (2004), “National Strategy for Development of Research 2020” (2011), the “Innovation strategy for intelligent specialization of the Republic of Bulgaria 2014-2020” as well as the “National Strategy for Development of Scientific Research 2017-2030 “Better Science for a Better Bulgaria”, launched in June 2017. These normative acts formally regulate the existence of innovation policy, the main administrative bodies involved in its formulation and implementation, as well as the structures providing funding for this type of policy (these are mostly the Research Fund and the National Innovation Fund). At the same time, the analysis of the data related to the Bulgarian innovation development show a completely different picture.
At the end of the second decade of the XXI century, Bulgaria is at one of the lowest levels in terms of innovation potential and national competitiveness. In the 2019 issue of the European Innovation Scoreboard, Bulgaria ranks second to last in the EU-28 with an Innovation Index of 0.235. This result, as well as the progress made since 2011, rank the country at the bottom of so called “modest innovators”, ahead only of Romania (0.165). The EU average index (0.525) is twice as high, while the index of innovation leader Sweden (0.713) is three times the result for Bulgaria. According to most of the science development and innovation indicators Bulgaria is not among the countries making progress. Despite the low starting positions, the country continues to “move modestly” forward, which, in comparative terms, contributes to its “stable” falling behind.
Although the existing available statistical data covers only the years until 2019 it shows clear tendency which is rather negative than positive and the current development with the social and economic impact of the COVID 19 pandemic will make this picture even worse. The data show that businesses – especially SMEs – in Bulgaria lag significantly behind in the introduction of innovative practices. At the same time, there is still no national strategy for Bulgaria’s involvement in the so called “Industry 4.0” to guide the country’s overall policy in this regard, despite the conceptual document approved by the government in 2017, outlining the vision for the necessary policy changes.
Structure of the Bulgarian National Innovation system
The Bulgarian R&I system is composed of (non-integrated) public and private segments. The public segment comprises of the state-owned higher (or tertiary) educational institutions (i.e. universities, whose system can be described as unitary, but transforming into dual with the new Law on Higher Education), public research organizations (mainly the two leading academies – Bulgarian Academy of Sciences (BAS) and the Agricultural Academy (AA), both guided by separate laws) and other public research institutes (centres/labs) under different sectoral ministries or agencies. The private segment covers private performers, which could be higher institutions (i.e. private universities), private research organizations (including registered as non-profit NGOs) or enterprises, involved in R&D&I. The private non-profit sector is relatively weak, but applied research is increasingly carried out in smaller private sector organizations – private universities and private research institutions. The funding of the non-profit institutions is most often directed towards research-related activities, not R&D per se.
The system is highly centralized in terms of regulation and control, and the regions, the districts and the municipalities have limited responsibilities in the area of higher education, R&D and innovation policy. The competences have been clearly divided between the Ministry of Education and Science (oriented towards the public segment) and the Ministry of Economy (dealing with the private sector). Similarly, policies are devised and implemented separately, whilst funding and support primarily depend on the type of beneficiary, not the R&I field or the opportunities for joint projects and initiatives. The most serious challenge for the country’s R&I system thus is the continuous lack of integrated policy instruments, including shared R&I infrastructures, which play an increasingly important role in the advancement of knowledge and technology. They are the key instrument to stimulate public-private partnerships and also to create and stimulate markets.
One of the reasons and at the same time consequences of the practical dysfunction of the Bulgarian National Innovation System is the fact that the Bulgarian economy is dominated by sectors with low added value and narrow technological capabilities. About 75% of exports are formed from processed raw materials, low-tech products and products without significant added value. Basically, innovations form a very small part of the country’s industry.
Expenditures on research, development and innovation
One of the indicators in which Bulgaria is experiencing serious difficulties in catching up with the more developed European economies is the state of investments in research and development and innovation.
Although during the last few years there is a very light upward trend, R&D expenditure in the private sector amounted to 0.53% of GDP within the last few years (compared to the EU average of 1.36%). Private R&D funding is mainly focused on applied research and experimental development in sectors such as pharmaceuticals, medicine, ICT and does not provide funding for capital expenditures and human resources.
Expenditure on research and development in the public sector is among the lowest in the EU. In 2017, they amounted to only 0.21% of GDP, far below the EU average of 0.69%.
In the structure of R&D expenditures by fields of science in the last few years, the largest relative share has the expenditures for research work in the field of technical sciences – 57.6%, or BGN 476.9 million, followed by medical and health sciences with a share of 17.4%, or BGN 144 million, and natural sciences – 14.1%, or BGN 116.4 million.
In 2018, R&D spending in Bulgaria in absolute terms reached BGN 827.621 million, which is an increase of just over 8% on an annual basis. However, as GDP growth amounts to the same value, the share of R&D spending to GDP remains at the level of 0.75% as in 2017, or exactly half of the national 2020 target of 1.5%. For the third consecutive year, government spending on R&D as a share of GDP remains at 0.17%, the lowest level for the whole period after 2000. The government subsidy of BGN 182.841 million for R&D in absolute amount represents an annual growth of just under 4% and is again compensated by an increase in business sector R&D spending. In 2018, enterprises spent a total of BGN 594.800 million (11% annual growth) on R&D, equivalent to 0.54% of GDP. Compared to other institutional sectors, only the increase in business sector R&D spending is able to outpace GDP growth and form an increasing relative share.
After Bulgaria’s accession to the EU, the main driving force for business has been the ability to use European structural funding through operational programs. In fact, over 88% of foreign-source R&D funding is allocated to enterprises. Since the launch of the OP Science and Education for Smart Growth, this applies to universities and research units, which receive respectively 6.6% and 3.7% of R&D funding from abroad.
There is a strong need to further support the integration and Europeanization of the Bulgarian science, research and innovation. The system deficiencies so far stem from both insufficient national public resources allocated to R&I and inadequate participation and success of national actors in EU framework and other programs and initiatives. It has become clear that participation of Bulgaria in EU Research and Innovation Strategies for smart specialization and European Strategy Forum on Research Infrastructures have led to improved coordination and cooperation among government, industry, education and research institutions.
Weaknesses and strengths of the Bulgarian national innovation system
According to the statistics the leading scientific areas in Bulgaria are: Physics and astronomy, Engineering sciences and Medicine.
Among the weaknesses inherent in the state policy for creation and development of the Bulgarian national innovation system we should note the following:
- Lack of strategic vision and focus for development of a unified policy on innovation and research;
- Sectoral fragmentation of the goals and priorities in this policy, expressed in the fragmentation of powers between two ministries plus a number of other institutions;
- As a result – inconsistent and sporadic funding, as well as inconsistency in the involvement of private institutions dealing with the topic.
There are, nevertheless, some areas in which Bulgaria has shown significant progress since 2011:
- Broadband internet coverage – 78% growth, which is however not enough to reach the EU-28 average. The indicator reflects the number of enterprises using broadband internet at over 100 Mbps and is seen as an expression of the digital potential of business and a factor for the full use of ICT in the process of creating products and services, B2B and B2C interaction.
- New doctorate graduates – 71%, with a 2018 result 1/3 below the EU-28 level.
- Design applications – 70%, and 2018 level 20% above the EU-28 average.
Traditionally the Bulgarian ICT sector is one with the strongest innovation potential indications. This is why it experienced steady growth in the last twenty years. Within the last years the sector accounted for 4.4% of the revenue and 4.6% of the employment in the Bulgarian economy. For the whole period the fastest growing ICT sub-sectors in terms of revenue have been “Computer programming, consultancy and other ICT service” and “Wholesale of computer, electronic and telecommunication equipment and software”. The IT sector employs around 120,000 people, 2/3 of which are in the outsourcing industry (information & technology and business processes).
Conclusion
With the aim of focusing and centralizing the national policy in the field of innovation and research in September, 2020, the Government approved a decree establishing a “State Agency for Research and Innovation” as a specialized body at the Council of Ministers for the development and implementation of the policy on research, innovation and technology transfer. This Agency should deal with the strategic planning, management, financing and management of research and innovation programs and conduct and supports structural reforms in the area. Essentially a new policy that aims to maximize the effectiveness of activities in favor of the transformation of the Bulgarian economy into one based on knowledge, innovation and technology.
The Bulgarian economy has a chance to take advantage of the current situation, but it must become more innovative and more productive in terms of new technological and organizational solutions. It is therefore important that the field of research and innovation is treated as a subject of structured national policy. Let’s hope that the role of the new Agency will be fulfilled, namely to concentrate and make sense of national efforts in this direction.