Supporting SMEs in Bulgaria

Across Europe, small and medium-sized enterprises (SMEs) employ around 100 million people and produce over half of the EU’s GDP. SMEs are key players in the Bulgarian economy as well, providing employment to over 75% of the workforce and generating 65% of the value added. They make significant contributions to inclusive economic and social well-being at both national and regional levels.

Recognising their value, the Bulgarian authorities worked to create an enabling environment for enhanced SME productivity, innovative performance and overall competitiveness. Specific measures were implemented to alleviate administrative burden and facilitate regulatory compliance. Yet compared to their EU peers, Bulgaria still had significant gaps in some key areas, such as skills and innovation, the green and circular economy, and the promotion of entrepreneurship.

The Bulgarian Ministry of Economy together with the European Commission wanted to: 

• strengthen their strategic framework for SMEs, in alignment with the EU’s ‘SME strategy for a sustainable and digital Europe’, and 
• ensure effective horizontal coordination and involvement of all relevant public authorities in the country.  

The ambition involved cross-sectoral and cross-institutional development of policy priorities and supporting measures, with the objective to improve the business environment for SMEs and support their economic growth. 

For 12 months, the PwC team worked with the Ministry of Economy, other national authorities in Bulgaria and the European Commission to study in depth the specific challenges and needs of the SME sector and to develop the new National Strategy for SMEs for 2021-2027.

We started with a comprehensive analysis, identifying the drivers and obstacles for SME growth from both a sectoral and regional perspective. It involved a national survey of 500+ SMEs, multiple in-depth interviews and a series of regional interactive workshops with a wide range of stakeholders. This approach allowed us to construct a rich analytical and evidence-based foundation and substantiate the future strategic framework.

The analysis and corresponding strategy focused on the following six strategic priorities that would allow SMEs to expedite their growth:

• enhancing entrepreneurship and start-up creation, including entrepreneurial education and support for family businesses, crafts and other niche entrepreneurial activities
• securing appropriate access to markets, thus promoting internationalisation as well as stronger penetration in domains such as public procurement
• providing access to finance in both start-up and growth stages of development, assessing the need for targeted SME financial instruments
• closing the gap in digitalisation and skills by creating the relevant conditions for awareness raising and access to appropriate education and training
• creating a better regulation and business environment in all areas that still create high administrative burden, information asymmetries and disproportionate costs for SMEs
• strengthening the focus on green & circular economy, including demand for green investments, identification of new market opportunities and improving cost efficiency.

The resulting National Strategy supports SMEs in their efforts to be innovative, digitally up to date, sustainable and export oriented by fostering the right environment for their development.

Bulgarian SMEs face a number of serious challenges to their economic development and potential realisation, which has only been exacerbated by the COVID-19 pandemic. They rank lower in competitiveness than their European peers and have insufficient share in high-tech industries and knowledge-intensive services compared to the EU average. Additionally, there is considerable polarisation of SME development at the regional level. 

The National Strategy for SMEs introduces targeted measures to stimulate development of entrepreneurship, provide better access to finance, strengthen internationalisation, foster skill development, promote digitalisation, increase focus on environmental opportunities and strengthen innovation. It also tackles regional disparities by creating conditions for larger numbers and more competitive SMEs in underdeveloped regions, including by encouraging social and inclusive entrepreneurship.

The public dialogue and discussions triggered by the project enhanced the overall visibility of the SME agenda, which should continue to be in the focus of policy making for years to come. The engagement of various institutional stakeholders clearly signalled the need for horizontal alignment and partnership as a prerequisite for successful implementation. 

With these measures in place, there is every opportunity for higher economic growth and income among SMEs in the future.