35
ENTREPRENEURSHIP IN THE TRANSITION TOWARDS MARKET ECONOMY
readiness to start up a business of ones
own is especially high among the unem-
ployed.
The share of those employed in the
private sector and mostly the number of
private employers and self-employed
people indicate a growth in entrepreneur-
ship in the last years. According to ob-
servations of manpower, the number of
private employers and the self-employed
grew from 292.9 thousand in October
1993 to 314.6 thousand in June 1995.
About 40,000 unpaid family members
also take part in entrepreneurial activi-
ties. As a whole, the two groups comprise
about 11 per cent of the countrys em-
ployed, and some 9.5 per cent of the able-
bodied population. In practice the num-
ber of entrepreneurs is bigger because
some of those registered as hired labo-
urers in the private sector take part in
the companys management as partners
or family members.
The share of the privately employed
is expected to skyrocket following the
privatization of large state enterprises. The
mass privatization and the buying-out of
enterprises by workers and managers will
boost entrepreneurship.
The amount of the populations
money income obtained from entrepre-
neurial activities is another quantity in-
dicator of the development of entrepre-
neurship. The official statistic records of
observations of household budgets show
incomes from entrepreneurship to be
low. The high share of incomes from per-
sonal farms, however, also comprises re-
sults from unregistered entrepreneur-
ship. Part of the able-bodied population
work under a labour contract or are reg-
istered as unemployed, but they also re-
ceive incomes from entrepreneurship.
According to statistical data incomes
from real estate management and sale
are symbolic.
Table 3.2.
People employed according to economic sectors and
the form of economic activity (in %)
Employed in sectors 1990
1991
1992
1993
1994
1995
Employed in the state
and cooperative sector
94.1
89.9
82.3
71.7
64.0
59.3
Employed in the
private sector
5.9
10.1
17.7
28.3
36.0
40.7
Of these:
- hired laborers
n.a.
n.a.
n.a.
11.2
16.1
17.3
- employers and
self-employed
n.a.
n.a.
n.a.
9.8
8.6
10.4
- unpaid family workers
n.a.
n.a.
n.a.
1.4
0.9
1.2
TOTAL
100.0
100.0
100.0
100.0
100.0
100.0
Total average monthly income per household member from
some sources for the 1992-1994 period
Sources
1992
1993
1994
Leva
%
Leva
%
Leva
%
Total income,
1336
100.0
1986
100.0
3297
100.0
incl. from:
- entrepreneurship
29
2.2
48
2.4
103
3.1
- personal farms
283
21.2
400
20.2
855
25.9
Incomes from property and from entrepreneurship
The prevailing unlandlordlike
attitude towards real estate, in-
cluding restituted property, is
evidenced by the very low share
of the median monthly per
capita income from real estate.
In 1992 it accounted for 0.2 per
cent of the total income, and
in 1993 and 1994 for 0.6 per
cent. This income is received
by a comparatively small group
of people. The income from
property sales has dropped for
the same period.
The share of
households that rely on addi-
tional income from entrepre-
neurship as sole proprietors or
partners, farming excluded, is
17.2 per cent, from paid ser-
vices - 20.8 per cent, and from
sale of farm produce - 22.8 per
cent.
Box 3.1.
Table 3.3.
HUMAN DEVELOPMENT REPORT ! BULGARIA 1996
36
The share of the private sector in the
gross domestic product is an indirect indi-
cator of the development of entrepreneur-
ship. The estimates
of the level of this in-
dicator vary from 40 to 45 per cent of the
private sectors share in the 1995 gross do-
mestic product. Private business has the
highest
share in trade,
restaurant and ho-
tel-keeping, car transport, construction and
services. These spheres are preferred as
they are less costly to organize and allow
for a quick turnover of capital.
The share
of the private sector in the formation of
budget and social funds revenues is smaller
than its share in the GDP generated.
3.3. Types of entrepreneurs
The qualitative characteristics of en-
trepreneurial stratum are a key component
of the assessments of the present state of
small business in Bulgaria and the pros-
pects of its development. In motives and
ways of starting entrepreneurial activities,
in the origin of the start-up capital, in their
economic and social status, the entrepre-
neurs can be divided into four major
groups:
The first group comprises workers,
administrators, engineers and technicians
from the state and municipal enterprises
that engaged in entrepreneurship in the
field they had been working in prior to the
onset of reforms. Already while employed
in the state sector many of them worked
on their own either in the state company
or outside it. This moonlighting was pos-
sible mostly in the field of trade, services,
tourism and transport. The accumulated
income, managerial and production expe-
rience provided a good starting point for
entrepreneurship. The success of this group
of entrepreneurs was partly due to the fact
that they have attracted customers of their
former state enterprise by offering them
lower prices in the start of their private
business. Because of the economic uncer-
tainty some entrepreneurs kept working at
the state firms. They were thus able to use
the installations, equipment and quite of-
ten, materials for their private business.
Bulgarian nationals who had left the
country years ago can be conditionally
ranked among these entrepreneurs. Upon
their return to Bulgaria some of them in-
vested their savings in businesses where
they had accumulated expertise during their
emigration. The same group also comprises
Bulgarian nationals who work on contracts
abroad - athletes, musicians, actors, etc.,
but who invest part of their incomes in en-
trepreneurship in Bulgaria.
The second group of entrepreneurs has
sprang up as a result of the implementa-
tion of restitution laws. These laws restored
the right to ownership of land, built real
estate and industrial enterprises. Because
of the lengthy period between nationaliza-
tion and restitution, the management of
restituted objects was mostly undertaken
by the heirs of former owners. The numer-
ous heirs with various interests and atti-
tudes, as well as the different place of resi-
dence of owners and the location of the
restituted property restrict the growth of
this group of entrepreneurs. Yet there are
instances of continuity in restoring the
former activity in restituted objects, as well
as a revival of trade marks.
From state employment towards private business
ers. Yet they are well aware of
the unfavourable environment.
The interest rate of credits is
too high. The number of insol-
vent customers is growing.
There are clients who black-
mail them to pay lower fees, or
not pay at all. They have to
share their income with clerks
and customs officers so as to
overcome bureaucratic ob-
stacles. All this prevents A.H.
and his sons to invest in their
own company.
Box 3.2.
A.H. has worked for 30 years
as a driver of a taxi truck in a
large city. His two sons were
also drivers.
In the early nine-
ties the three of them registered
a transport services firm. Their
work expanded, so they re-
placed their old truck by two
heavy-duty trucks. They have
their regular clients and are
continuously on the road in Eu-
rope and Asia. They want to
expand their business by buy-
ing more trucks and hire work-