UN APOYO TECNOLOGICO PARA LAS MATEMATICAS

This period is characterised by fundamental changes o f conditions and factors influencing the development o f the Bulgarian economy:

• The transition from market to a centrally planned economy was accomplished by nationalisation o f private property. The management of the economy was based on central planning and foreign trade became a state monopoly. The period was

marked by the implementation of an active economic restructuring policy, targeted at accelerated industrialisation, which also affected the commodity composition of exports.

The agricultural nature of the Bulgarian economy gradually diminished, and a great variety o f industrial branches started to develop: machine building, light industries, chemical industry, power engineering. The range of newly adopted, produced and exported industrial products was continuously growing.

The membership of the country in Comecon led to a fast reorientation o f exports from Western Europe to the markets o f Eastern Europe and the Soviet Union. The high concentration of exports to Germany very soon was replaced by an equally high concentration o f exports to the Soviet economy, which continued during the entire period. Czechoslovakia, Poland, Romania, Hungary and the German Democratic Republic also had leading positions in the geographic structure of Bulgarian exports. The second significant group o f trading partners included the Federal Republic of Germany and the other countries o f Western Europe.

After coming to power at the end o f World War II the Bulgarian communist regime started a programme o f rapid industrialisation. The first five year plans produced high rates o f economic growth, supported by the USSR through supplies o f cheap raw materials and markets for Bulgarian goods. In the longer term, this development created many o f the deep-seated problems, which began to surface in the 1980s and contributed to the subsequent economic crisis. The familiar ills of weak producer incentives, slow pace o f technological change, misallocation o f resources without regard to efficiency and quality were all factors that shaped Bulgarian industrial development.

The deep structural changes in the economy provided the context for the development of Bulgarian foreign trade. Imports and exports grew significantly, becoming increasingly geared towards supplying Comecon countries with food and manufactured goods in

exchange for energy and other raw materials. Certain branches of industry were specifically chosen for development under the specialisation schemes o f Comecon. In the early socialist years, such industries were chemical fertilisers, food processing and electrical equipment. While providing a ready market for Bulgarian goods this resulted in isolation of large parts of the Bulgarian economy fi*om international competition and increased the vulnerability of manufacturing to developments in other Comecon countries, and especially the USSR.

The development o f foreign trade in the 1980s is o f particular interest for this study, as it provides the background for analysing Bulgarian foreign trade during the first years of economic transition. There are several problems in analysing trade in this period. As pointed out in a study by the World Bank (1991), Bulgarian trade data fi-om the socialist period are reported in “currency leva”, which was an administratively determined and non-transparent exchange rate. The currency lev was not the same as the official exchange rate, which was itself administratively determined. The overall effect of using the currency lev was to significantly undervalue trade denominated in U.S. Dollars (with non-Comecon countries) and overvalue trade with Comecon countries.

Tarr (1992) uses a method of recalculating Bulgarian trade statistics in order to show a more realistic picture o f the relative importance of Comecon and non-Comecion trade towards the end o f central planning. The unadjusted trade data is re-evaluated by adopting a common exchange rate for all the Comecon countries, equal approximately to the Hungarian cross exchange rate o f about 1 US$ for 2 Transferable Roubles (TR) (table 2.9).

Table 2.9: Bulgarian foreign trade: alternative estimates of the share of Comecon

Trade Value at nominal TR/$ cross rate

T rade Value at uniform TR/$ cross rate

% Exports % Imports % Exports % Imports

Comecon 83 73 61 46

Non-Comecon 17 27 39 54

Total 100 100 100 100

Source: Tarr (1992)

The revaluation of the statistical data dramatically reduces Bulgarian exports (by 22 per cent) and imports (by 27 per cent) for Comecon and increases them by the same rate for non-Comecon trade.

More detailed alternative estimates of Bulgarian foreign trade flows are provided in a study by the World Bank (1991). First, trade data for the period 1985-89, supplied by the Bulgarian Ministry o f Foreign Economic Relations is converted into percentage shares o f each trading block (Comecon and Non-Comecon). Then, these percentages are reconverted into US Dollar values, using the US Dollar value for total trade in the balance o f payments. In order to derive a US Dollar value for total Comecon trade the study uses the aggregate transferable rouble estimate in the Comecon balance o f payments, converted into US Dollars at the commercial rate.

Here, the World Bank estimates are converted into percentages and compared with the official data from the Bulgarian statistical yearbook. The results are shown in Table 2.10.

Table 2.10: Percentage breakdown o Bulgarian foreign trade in values 1985 1986 1987 1988 1989 World Bank estimates Exports Imports Comecon 67.9 70.1 68.1 61.9 62.1 Non-Comecon 32.1 29.9 31.9 38.1 3T9 Comecon 65.9 65.3 62.5 54.4 51.6 Non-Comecon 34.1 34.7 37.5 45.6 48.4 Official Bulgarian statistics

Exports Comecon 75.8 81.7 81.5 8&6 84

Non-Comecon 24.2 18.3 18.5 17.4 16

Imports Comecon 75.5 75.8 7&9 75.3 73.7

Non-Comecon 24.5 24.2 21.1 24.7 26.3

Difference Exports

-7.9 -11.6 -13.4 -20.7 -21.9

Imports -9.6 -10.5 -16.4 -20.9 -22.1

Sources: World Bank, Statisticheski godishnik na N.R. Bulgaria (Statistical yearbook o f the People’s Republic o f Bulgaria)

The World Bank estimates for 1989 roughly correspond with the figures presented by Tarr. It is notable, that the discrepancy between the World Bank and the Bulgarian statistical yearbook increases substantially towards the end of the 1980s, suggesting that exchange rates used in Bulgarian statistics were increasingly inadequate for the last years of the decade. For example, Bulgarian statistics for the period 1985-89 show a substantial increase in the share of Comecon for Bulgarian exports and only very slight decrease (1.8 per cent) for imports. For the same period. World Bank estimates show a decrease in the Comecon share of Bulgarian trade with 5.8 per cent for exports and 14.3 per cent for imports.

Bulgaria’s foreign trade and payments system had substantial differences for the Comecon and non-Comecon countries. As Dobrinsky, Markov, Nikolov and Yalnazov (1995) point out, there was little (if any) substitutability in Bulgarian manufacturing exports to Comecon and to the West European markets. Even within the same sectors, products going to the West and those going to the East were completely different in quality and standards.

In the 1980s chemicals, machine building and increasingly electronics had priority as a part of the Comecon plan for country specialisation. During the 1980s 90 per cent of exports to the Comecon market were industrial goods, mainly machinery (particularly fork-lift trucks,), electro-mechanical products, electronic equipment (including

computers), and chemicals. The share of food and agriculture products declined from 25 per cent at the beginning o f the 1980s to about 13 per cent. This reflected both the poor performance of agriculture and the diversion o f some o f Bulgaria’s more competitive products (such as wine for example) to Western markets.

By the end o f the 1980s, when Comecon still existed, a unique system o f regional co­ operation and division o f labour had been developed. It was based on the specific model o f mutual trade between the member-states which was in fact a framework of Centralised Bilateral Barter (CBB) agreements. The main objective o f the CBB was to create a preferential regime for the bilateral reciprocal trade and thus, simultaneously to play the role o f a protective barrier against competition, which could emerge either from the world market or from the eventual multilateralisation o f trade relations among the Comecon countries.

The impact o f the CBB protectionism can be summarised in the following way:

• deterioration o f the quality of processed goods traded in the region, with substantial deviations from world industry standards;

• significant discrepancies in the price structures o f regional trade in comparison to world price structures. Compared to world prices, regional price levels o f raw materials and energy were relatively lower and price levels o f machines and equipment were relatively higher.

This is why at the outset of the transition process, the specific product structure of reciprocal trade caused serious disparities in the regional Comecon market. Bulgaria was in a very weak position in its economic relations with the former USSR because it was a net importer of high quality raw materials, fuels and energy, and a net exporter of relatively low quality manufactured goods which, in the short run, could not be reoriented to the world market.

The data in Table 2.11 shows the structure o f specialised machinery and electronics exports for the Bulgarian economy in the 1980s. It is notable that during the 1970s and the 1980s the share o f specialised machinery and equipment was constantly growing: in 1970, 1975, 1980 and 1985 it reached respectively 33.0 per cent, 44.8 per cent, 45.3 and 50.1 per cent o f exports (Foreign Trade of Bulgaria, 1989). Moreover, two o f the commodity groups - computer engineering, and hoisting equipment and forklifl trucks have a share o f more than 60 per cent o f the specialised exports. Such figures suggest that large amounts o f capital, R&D, as well as highly qualified human resources were concentrated in these spheres.

Table 2,11: Structure of Bulgarian machinery and electronics exports in the 1980s

Commodity group 1980 1985 1988

mln. lev % Mln. lev % Mln. lev %

Total 1789.7 100.0 3679.3 100.0 3572.4 100.0