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Bulgaria - Industry
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.
Bulgarian heavy industries, mostly machine building, chemicals, and electronics, were concentrated in relatively few production centers. Important machine tool plants were the Bolshevik Tool Plant at Gabrovo, the Nikola Vaptsarov Combine at Pleven, and the Radomir Heavy Equipment Plant in southwest Bulgaria. The Electronic Materials Processing and Equipment Scientific-Production Combine was a combined scientific and industrial center at Sofia. Electronic instrument production centers were located at the Plovdiv Power Electronics Plant, the Shabla Electromechanical Plant on the northeast coast, the Stara Zagora Industrial Robot Plant, the Pravets Instrument Plant in the southwest, and the Petkov Instrument Plant at Turgovishte. Major chemical and petrochemical producers were the Industrial Petrochemical Plant at Pleven (specializing in vehicle lubricants and oils), the Burgas Petrochemical Combine (plastics), the Vratsa Industrial Chemical Combine (chemical fertilizers), and four chemical plants at Dimitrovgrad. Bulgaria also built large numbers of ships, many for Soviet customers, at its Ruse and Varna shipyards on the Black Sea. The Shumen Vehicle Plant assembled LIAZ-Madara heavy trucks in a three-way arrangement with the Liberac Auto Plant of Czechoslovakia and the Soviet Union.
The cost of Bulgaria's industrial growth was substantial. Besides environmental problems, the commitment to heavy industry came at the expense of light industry--especially food processing and textiles--and agriculture. These were sectors in which prewar Bulgaria had relatively high production potential. But de-emphasis held the official annual NMP growth figures for light industry and agriculture to 7.5 and 2.8 percent, respectively, between 1956 and 1988.
In the postwar command economy, the chief beneficiaries of this emphasis were the chemical, electronics, and machinery industries. Their respective share of total industrial production rose from 1.9, 0, and 2.4 percent in 1939 to 8.8, 14.4, and 15 percent in 1988. Similar statistics indicate big drops in production shares for the food processing and textiles industries--from 51.2 to 23.3 percent, and from 19.8 to 5.1 percent, respectively, in the same period.
Besides the unchanging commitment to heavy industry, two other major trends appeared in postwar industrial policy. The first was steady and substantial support for a basic ferrous metals industry, regardless of cost, in order to reduce dependence on imports. The second was an effort to produce machinery competitive in international markets, with special emphasis on electrical equipment.
A result of the first policy was the Kremikovtsi Metallurgical Complex. In 1954 Soviet-supported geological surveys indicated major new deposits of higher quality iron ore that would support a second complex to supplement the existing V.I. Lenin Ferrous Metals Combine at Pernik. Although the deposits were actually found to be inadequate, the extremely expensive Kremikovtsi plant finally opened in 1963 and used Soviet iron ore to produce over half of the national production of steel and iron through 1978.
The Kremikovtsi complex brought numerous problems. By the mid1970s , over 75 percent of its ore and coking coal was imported. Costs were inflated by premium wages paid to maintain the labor force and by delays in construction and delivery. Production at Kremikovtsi consistently failed to meet planned targets, and less than three-quarters of plant capacity was used. The enterprise never showed a profit; in 1989 it lost 99.5 million leva despite receiving 600 million leva in state subsidies. Using 15 percent of the country's total energy output, Kremikovtsi generated only 1 percent of national income in the late 1980s.
The strategy of heavy equipment production for export fared better than did metallurgy in the 1970s and 1980s. In fact, the most competitive Bulgarian industries were those most committed to export markets. The machine building and electronics industries averaged 16 percent growth between 1960 and 1980 while their combined share of export value jumped from 13 to 55 percent from 1960 to 1982. The primary exports in these sectors were forklift trucks and electrical hoisting gear produced by the Balkancar enterprise. Computer equipment and chemicals also showed improved export performance.
Bulgaria's postwar industrialization was clearly positive in some sectors. Two notable examples were the construction of electric power plants in the 1950s, which made possible the nationwide spread of industry, and the development of an electrical equipment industry that produced exportable products. Nonetheless, as the 1980s drew to a close, it became increasingly clear that even the most competitive sectors had serious problems that the BCP's halfway reforms could not solve. After the initial postwar climb, four decades of socialist central planning had left the industrial sector in a very poor state.
From 1956 through 1988, industrial production rose an average of 8.9 percent per year according to official figures, but the actual rates declined steadily during the thirty-three year period. The annual average rate of industrial growth for the periods 1956- 60, 1961-70, 1971-80, and 1981-8 was 15.5, 11.6, 7.5, and 4.4 percent, respectively. By the late 1980s, Bulgarian industry had completely exhausted the advantages it had used in earlier decades to post impressive growth statistics.
You can read more regarding this subject on the following websites:
Industry of Bulgaria - Wikipedia
Bulgaria Country Studies index
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