EU-Report Accession Bulgaria
Progress made since the last Regular Report
Since the last Regular Report, Bulgaria has made further progress in the implementation of its
SME policy and in building up a state support system for business promotion. Efforts to improve
the business environment have continued.
As regards SME policy, in March 2002 the government adopted a new National Strategy for
Promotion of SMEs, covering the period 2002-2006. This aims to improve the business environment.
In April 2002, Bulgaria endorsed the European Charter for Small Enterprises as the basis for its
action to support and develop small enterprises. The European Charter, adopted by the European
Council in June 2000, is the reference document in the field of enterprise policy within the
socio-economic strategy set up at the Lisbon European Council. The reporting process on the
implementation of the European Charter in Bulgaria started in May 2002.
Bulgaria has made further progress with the improvement of the business environment. The
concept of ``one-stop-information desks'' has been further developed and pilot projects
have been established. Co-ordinated efforts at government level continue to examine and
subsequently reduce the number of licensing requirements for SMEs. In June 2002, the Council of
Ministers approved suggestions from the inter-institutional task force, which examined 360
licensing, permit and registration regimes, to remove 74 and simplify a further 120 regimes.
Dialogue between the public administration and the business community has intensified since the
last Regular Report but remains limited.
Access to finance remains an important obstacle to the development of SMEs in Bulgaria.
However, the situation shows signs of improvement with the further consolidation of the
macro-economic framework, also thanks to increased competition among a growing number of
commercial banks entering the sector of SME lending. Some progress has been made in this area
because of Government support schemes for SMEs, including state guarantees for bank loans, but
these are still in the inception phase and the number of beneficiaries has so far remained
limited. However, a number of banks operating in Bulgaria still seem reluctant to extend credits
due to remaining difficulties in getting guarantees.
The Ministry of Economy and the Agency for SMEs are responsible for developing and
implementing SME policy. The Bulgarian Export Promotion Centre was merged with the Trade Research
Institute in early 2002 to become the Bulgarian Trade Promotion Agency.
There is no progress to report over the last year as regards the SME definition applied by
Bulgaria, which is not yet fully in line with the recommendations of the European Commission.
Overall assessment
While Bulgaria's policy towards SMEs is broadly in line with the principles and objectives
of EU enterprise policy, lack of resources and co-ordination, as well as unclear perspectives in
the institutional organisation for SMEs, have limited the effective implementation of SME
policy.
The business environment in Bulgaria still requires improvement. A dense fabric of viable SMEs
is essential for attracting investors. Particular attention should be given to the way in which
implementing legislation affecting company creation and business activities is effectively
applied, notably areas such as taxation (e.g. where increased patent taxes have a particularly
negative effect on SMEs). There is a need to tighten law enforcement by improving the efficiency
of the administrative and judicial system and to create incentives for informal businesses to
legalise themselves. The most important issues affecting the Bulgarian business environment have
been identified through effective dialogue between the policy-making institutions and the
business community and should now be addressed. Further efforts are still needed to improve
information to enterprises, especially in relation to the changes made by the Government to
business and taxation legislation. It is also important to define a mechanism for assessing the
remaining barriers affecting micro and small businesses. The Agency for SMEs also needs further
strengthening in this area.
The central body responsible for the formulation and co-ordination of enterprise and SME
policy is the Ministry of Economy. While the basic structures have been established at national
and local level (e.g. chambers of commerce, professional chambers, branch associations and
regional development agencies), the administrative structure for this sector remains fragmented
and inadequately co-ordinated, and therefore its actions have often limited impact on the
business community. The future of governmental organisations which seek to support SME
development, such as the SME Agency, needs to be ensured and their functioning significantly
improved in order to prepare Bulgaria's SME sector for integration into the European Union.
Enhanced co-operation and coordination among these structures would allow them to provide more
effective support to companies.
The absence of solid business organisations representing the interests of smaller businesses
remains a problem. The Ministry of Economy and the SME Agency should take a more active role in
developing the capacity of business associations and ensure their transparent consultation in all
matters of policy relevant to their members. The translation of the results of sectoral analyses
into coherent SME strategies would also benefit from systematic consultation among public and
non-governmental structures representing SME interests.
Some further adjustments to the SME definition will be necessary.
Conclusion
In its 1997 Opinion, the Commission concluded that the basic structures for SMEs were in place
in Bulgaria, but that several years would be necessary to overcome the barriers for private
sector growth in Bulgaria by means of determined efforts to stabilise the macro-economic
environment, simplify legislation and administrative routines so as to make it more SME-friendly,
strengthen support infrastructure, improve the tax environment and develop SMEs' access to
financing.
Since the Opinion, Bulgaria has made good progress in stabilising the economic environment,
reducing and stabilising taxation, introducing more legislative certainty, formulating SME
policy, and improving the business environment. Its policy towards SMEs is broadly in line with
the approach promoted at EU level.
Negotiations in this chapter are provisionally closed. Bulgaria has not requested any
transitional arrangements in this area. Bulgaria is generally meeting the commitments it has made
in the accession negotiations in this field.
Bulgaria should focus further efforts on resolving the remaining uncertainties, notably in the
legislative and taxation areas, reinforcing delivery mechanisms for promoting entrepreneurship to
make them fully operational, and ensuring appropriate co-ordination between the various bodies
concerned, including at local level, on implementation and enforcement of legislation.
© EU Commission -- 2003-03-30
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