Foreign trade in quagmire

Foreign trade turned out one of the worst hit sector by the financial downturn. Official statistics shows that Bulgaria’s exports for the first eleven months of 2009 declined 24.3% to EUR 10.803 billion. For the same period imports amounted to EUR 14.530 billion, down 34.6% year on year.
The drop in imports was bigger than in exports, Veselin Iliev, head of international economic cooperation at the Bulgarian Industrial Association (BIA), said. On the face of it, the smaller trade deficit seems to be good news but that has disadvantages. The problem is that end consumption, and especially investment, fell, he explained.
Reasons
The blow would have been cushioned if Bulgaria had done its job in the past 20 years of transition. Knowledge-based economy remained just a slogan, Veselin Iliev pointed out. The bulk of Bulgaria’s exports are products of low value added and low innovative potential. Therefore the economy is much more sensitive to the price fluctuations on the global markets of raw materials and resources. According to Iliev the slump in Bulgarian exports is mainly due to the drop in metal prices. At the end of last year export volumes fell by half and prices also declined. There is some stabilisation at present but metals are low-value-added products.
Share
Value-added products make up just 14 to 16% of Bulgaria’s exports. Fuels are the key low-value-added goods. Bulgaria is not so rich in natural resources and Neftochim should not be the nation’s export leader, Veselin Ilieva underscored. Other key export products, e.g. unrefined copper, are also of low value added. The technology is such that gold is extracted outside this country, Iliev explained.
Bulgaria is a global leader in the export of provisionally preserved cherries. The paradox is that there is no packaging technology in Bulgaria, so the cherries are exported, packaged and then re-imported as a more expensive product. Bulgaria is also a big exporter of coriander. Strangely, coriander is exported mainly to India, which is the world’s first and biggest producer. Duck products and lavender essential oils are also key export commodities. Higher-value-added exports include electronics and products for the ordinance industry.
Markets
A leading export destination a couple of years ago, Italy is now Bulgaria’s fifth biggest partner. Greece, Germany, Turkey and Romania are also key markets for Bulgarian goods. Not enough attention is paid to markets like Russia and Ukraine. Twenty years ago Bulgaria exported lamb meat to the Arab countries, now the meat is exported to Italy, Croatia and Greece, re-exported to France and then sold to the Arab countries.

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