Bulgaria Should Increase Productivity to Reach EU Levels, World Bank Report Says

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If Bulgaria wants to get closer to the income levels of the other EU member states, it should increase its annual productivity rate to 5 per cent, a recent World Bank report entitled "Speeding Up the Convergence of Bulgaria: Challenges to Raising Productivity" said.

The report was presented Monday by World Bank experts at the Council of Ministers in the presence of Finance Minister Plamen Oresharski, Education Minister Daniel Vulchev and Administrative Reform Minister Nikolai Vassilev, BTA reports.

To meet this challenge, Bulgaria should speed up the existing programs for reforms in certain areas. The document outlines four areas of work: product markets across the country, labor market, human resources development, research and development activities system.

Besides competition, companies in Bulgaria have no big stimuli to introduce new technologies, says the report. The regulations, which restrict the introduction of companies to the market or decrease its leaving, could hinder the introduction of new technologies, as well as the spreading of new technologies through decreasing the competition pressure. This means that the policies in support of competition, the external orientation, the flexible regulation of product markets and the new foreign investments play a key role in maintaining a quick growth of productivity.

Studies show that the competitive product markets and the flexible labor markets complement each other. The improvement of the performance of both markets simultaneously will probably have bigger effect on productivity than the individual improvements of every market, the World Bank says.

The efficient product markets are essential for increasing productivity and employment, the report adds. If in these areas Bulgaria applies the policies of the Organization of Economic Cooperation and Development (OECD) member states its productivity could grow by almost 2 per cent every year, which is twice higher than the rates of the recent past.

To increase their productivity, the companies need innovation, introduction of existing and new technologies, products and business processes. The investments in the research and
development have a positive effect on the productivity rate and facilitate the transfer of technology by helping companies to learn about novelties in the technology area. One of the factors, which might help this happen, is the availability of a strong competitive environment, but in the context of coordinated activities of the academic, researchers' and
business communities of Bulgaria.

Under the Lisbon strategy's objectives for this field, every country should increase its expenditures for research and development by 3 per cent of GDP, and two thirds of the funds have to be provided by the private sector. Currently Bulgaria spends less that 1 per cent of GDP annually in this field and the bigger part of the money are coming from the public sector - the national budget.

The availability of highly qualified, technically literate and adapting labor force is essential for the efficient introduction and adaptation of new technologies and is becoming more important with Bulgaria approaching the technology limit. The fact that knowledge turns into a more and more important growth engine in the globalization era underlines the importance Bulgaria to place at its disposal a labor force, which has the required skills, the World Bank added.

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