Strategizing the Future: Bulgaria’s National Industrial Strategy for Manufacturing and Mining Sectors
Bulgaria’s manufacturing and mining sectors are facing serious challenges due to global economic shifts and rising competition. High energy consumption and largely outdated equipment make these sectors particularly vulnerable. This article explores the need for a comprehensive National Industrial Strategy, aligned with European Union priorities, including the European Green Deal and the Net-Zero Industry Act, to increase sustainability, competitiveness, and innovation in these critical sectors. Petar Murginski’s analysis provides insights into the strategic measures and their potential impacts. For expert advice on leveraging EU funding opportunities to stay ahead in the green transition, contact Dimitar Ganev, Deloitte’s Gi3 Director in Bulgaria.
Introduction
The manufacturing and mining sectors are key to Bulgaria’s economy, contributing significantly to industrial production and employment. However, these sectors are currently challenged by high energy consumption, to some extent by outdated equipment, and a heavy reliance on fossil fuels. According to the 2023 European Semester Country Report for Bulgaria, 63% of the country’s energy mix is made up of fossil fuels, while the share of renewables is only 15%. Additionally, Bulgaria has one of the lowest circular economy rates in Europe – only 4.8% material reuse compared to an EU average of 11.5%, according to the latest estimate from the 2022 Eurostat Circular Economy Report.
Despite these challenges, Bulgaria has significant potential in critical raw materials and green technology adoption. The country’s strategic position in the European supply chain remains underutilized, and there are substantial regional disparities in productivity and infrastructure. According to the 2022 National Statistical Institute GDP Data, the Sofia Capital region alone generates 41% of the national GDP. To address these issues, Bulgaria needs to develop a comprehensive National Industrial Strategy focusing on reducing carbon emissions, enhancing energy efficiency, and promoting circular economy.
Objectives of the Strategy
The primary objective of Bulgaria’s National Industrial Strategy should be to facilitate the country’s transition towards greener, more innovative, and technologically advanced industries. The strategy should aim to increase competitiveness by promoting resource efficiency, digitization, and circular economy practices. It should establish a roadmap for aligning Bulgaria’s industrial growth with EU policies, such as the Critical Raw Materials Act, and set clear policy objectives to empower the Bulgarian Ministry of Economy and Industry to implement reforms that enhance productivity, attract investment, and secure strategic autonomy.
Key Findings
· Current State Analysis:
The mining industry is a cornerstone of Bulgaria’s economic development, contributing significantly to the country’s stability, security, and energy independence. Bulgaria is a leading producer of minerals such as copper, gold, and lignite. In 2022, the total mineral production reached 126.6 million tonnes, an 8% increase from the previous year, with a total output value growing by 16% according to the Bulgarian Ministry of Energy. Lignite mining rose by 28%, and ore mining by 13% due to increased copper production. The sector’s output value reached €2.2 billion, driven by higher production and raw material prices.
The manufacturing sector also plays a critical role, ending 2022 with a positive financial result of over €6 billion, contributing 58.3% of the total. However, industrial production has declined in early 2024, marking the first negative growth in two years. According to the National Statistical Institute, from 2018 to 2021, the sector showed fluctuations in production and employment. Production values rose from €33.5 billion in 2018 to €36.3 billion in 2021. Value added per employee increased from €14 thousand in 2018 to €16.4 thousand in 2021, reflecting improvements in productivity despite a decrease in the number of employees.
· Technological Gaps and Supply Chain Vulnerabilities:
The analysis revealed significant technological gaps and supply chain vulnerabilities in both sectors. High energy consumption per unit of production and outdated equipment make these industries particularly vulnerable. Bulgaria’s heavy dependence on fossil fuels reinforces these vulnerabilities. According to the 2023 European Semester Country Report for Bulgaria, modernization of equipment and processes is essential to increase efficiency and reduce carbon emissions. Investment in new technologies and infrastructure is crucial to overcoming these challenges. In addition, supply chain disruptions, especially of critical raw materials, present a significant risks to industrial stability.
· Potential for Green Technology Adoption:
Despite the challenges, there is considerable potential for adopting green technologies. Bulgaria’s strategic position and its rich mineral resources provide opportunities for sustainable development. The strategy emphasizes the importance of enabling zero-emission technologies and promoting circular economy. Policies that support innovation and the adoption of green technologies are critical to this transition. Moreover, investing in renewable energy sources and improving energy storage solutions can significantly enhance the sustainability of these sectors.
Strategic Recommendations
· Modernization and Sustainability Measures:
To address the identified challenges, the strategy shall propose several measures for modernization and sustainability. Modernizing existing infrastructure and adopting new technologies to improve energy efficiency and reduce emissions is crucial. Implementing circular economy practices to enhance resource efficiency and material reuse is also essential. Encouraging innovation through investment in research and development, and supporting companies in the green technology sector, will be vital for sustainable growth.
· Policy Recommendations:
The strategy shall include specific policy recommendations to support the transition towards a greener economy. Providing incentives for the adoption of zero-emission technologies and supporting projects that contribute to carbon neutrality should be a priority. Encouraging the circular use of critical raw materials and supporting recycling initiatives to reduce waste and improve resource efficiency is also important. Enhancing the development of industrial parks to attract investment and support the growth of high-tech and sustainable industries is another key recommendation.
· Development of Industrial Parks:
The strategy should emphasize the importance of developing industrial parks as hubs for innovation and sustainable growth. This shall include upgrading infrastructure within industrial parks to support advanced manufacturing and green technologies, creating favorable conditions for attracting strategic investors focused on high-tech and high-value industries, and addressing regional disparities by developing industrial parks in less developed areas to promote balanced economic growth.
Implementation and Impact
· Steps for Implementation:
The strategy shall outline a clear roadmap for implementation, including engaging with key stakeholders, such as government ministries, industry associations, and enterprises, to ensure the strategy is grounded in practical insights and reflects a broad spectrum of interests. Establishing a monitoring and evaluation framework shall be essential to track progress and secure the successful implementation of the strategy. The strategy could also maintain flexibility to adapt based on ongoing feedback and changing conditions.
· Expected Outcomes and Benefits:
The implementation of such a National Industrial Strategy is expected to yield several benefits. These include enhanced competitiveness with improved productivity in Bulgaria’s manufacturing and mining sectors. Sustainable growth with increased adoption of sustainable practices should lead to reduced carbon emissions and enhanced energy efficiency. Additionally, the strategy should aim to attract greater foreign and domestic investment, particularly in high-tech and green technology sectors. It should also reduce regional disparities through the development of industrial parks and infrastructure improvements across the country.
Linking to EU Funding Opportunities
Bulgaria’s National Industrial Strategy should be closely linked to various EU funding initiatives that can support its implementation. To name a few:
· Strategic Projects under the Critical Raw Materials Act:
The Critical Raw Materials Act, effective as of 23 May 2024, calls for applications for Strategic Projects aimed at increasing EU capacity and diversifying imports to mitigate supply risks. Eligible projects may focus on extraction, processing, recycling, or substitution of materials. These strategic projects could take place in the EU or in third countries. The application process is streamlined for compliance with environmental and social governance (ESG) standards, offering priority status in national and European administrative and judicial procedures. It provides single points of contact across Member States and sets specific timeframes for issuing permits – up to 27 months for extraction and up to 15 months for processing and recycling. The status of a strategic project also ensures the possibility for regional and national authorities to make use of funding from the European Development Fund and the Cohesion Fund to support the relevant project, in line with the new Strategic Technologies for Europe Platform (STEP) Regulation. The first application deadline is 22 August 2024. Once applications are submitted, they will undergo a thorough evaluation process, with decisions announced by the end of 2024.
The Innovation Fund supports innovative technologies and large-scale projects aimed at decarbonizing Europe’s industry. The fund focuses on projects with significant potential for reducing greenhouse gas emissions and promoting sustainable economic growth. It provides support for cutting-edge technology innovations, including general decarbonization initiatives, zero-emission manufacturing technologies, carbon capture, utilization, and storage (CCUS) technologies, and green hydrogen projects, which play a critical role in achieving climate neutrality. The 2024 calls for proposals are anticipated to open in November 2024, with the application deadline expected to be in April 2025. Additionally, the Innovation Fund Auction, part of Europe’s broader green journey, aims to boost renewable hydrogen production through EU funding, emphasizing efficient financial mechanisms and tangible results.
The LIFE Programme focuses on environmental and climate action, providing funding for projects that contribute to sustainable industrial practices and reduce carbon emissions. The program prioritizes nature conservation, environmental protection, climate action, and clean energy transition projects. Successful projects funded under LIFE have implemented circular economy and renewable energy solutions, significantly reducing emissions and enhancing energy efficiency. The program also supports biodiversity, environmental governance, and information dissemination initiatives. The 2024 calls for proposals opened in April 2024, with deadlines for various project types in September 2024. A notable recent example is the 2023 LIFE RECAD project by KCM AD, the largest lead and zinc producer in Bulgaria with a significant presence in Southeast Europe and the Black Sea region. The project received EU grant funding of €2.1 million with the assistance of Deloitte Bulgaria. Its aim is to create an innovative wastewater treatment and metal recovery facility, promoting a circular economy and improving environmental health.
Conclusion
Bulgaria’s National Industrial Strategy for Manufacturing and Mining sectors shall outline a path forward for addressing significant challenges due to global economic shifts and rising competition. By aligning with EU priorities such as the Green Deal and the Net-Zero Industry Act, the strategy should emphasize the need for increased sustainability, competitiveness, and innovation. This comprehensive approach aims to reduce carbon emissions, enhance energy efficiency, and promote circular economy practices. The strategy could leverage EU funding opportunities like the Strategic Projects under the Critical Raw Materials Act, LIFE Programme, and the Innovation Fund to encourage sustainable growth, attract investment, and promote balanced regional development.
For a deeper understanding and assistance in navigating the complex landscape of EU funding programs for environmental sustainability, entities are encouraged to connect with Deloitte Bulgaria’s Gi3 team. Our expertise is tailored to support organizations and leaders in effectively leveraging these funding opportunities to advance their sustainability goals. Let us work together to build a brighter, greener future for Bulgaria’s manufacturing and mining sectors.
*Disclaimer: This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.
