The European Union is an excellent alternative to our former markets

InterviewSouth-East European INDUSTRIAL Мarket - issue 1/2007

Mr. Daskalov, would you present the activities, market orientation and future priorities of Multiprocessor Systems Ltd.?

Multiprocessor Systems Ltd. was founded by 18 scientific associates of the former Central Institute of Computing Technique and Technologies (CICTT) in September 1990 immediately after economic changes in Bulgaria took place. The company was established by the main body of a team with long standing and successful design, production and market background that allowed the company to develop further its technology know-how in the field of high performance computer systems. The design know-how of the founders was built with the help of much resources and efforts in the course of many market oriented successful years and the company was expected to start making big money as a result of the leadership it had won in the respective market niche as well as thanks to the rather well-deployed for its time high technology capabilities– the annual turnover of its long ago gained and well developed specific market share was about 120 million dollars. Furthermore, the founders of the company have long ago proven their ability to make large profits and be winners in strong competition with large and powerful mainly foreign state structures in the years of large-scale and strong markets.

However, as it is well known, instead of materializing the frivolous mass strivings for fast and rapid growth during the economic changes in Bulgaria the avalanching development of a huge environmental and economic cataclysm was unexpectedly and irresistibly tolerated that made collapse completely and raze to the ground the entire Bulgarian industry not only as a linked system of markets and production capacities but as an available array of comparatively independent more or less effective and highly technological for its time and clients industrial units. Ice age set in Bulgarian economy for a long period of time as a result of the collapse. Unfortunately, the spell of economic warming started showing up after 15 long years and after complete replacement of that generation of engineers that could inspire life in Bulgarian industry and bring back its power. Of course, under the circumstances given the primary task of the company was entirely changed and its main objective became the preservation rather than development of its rather high technological level as compared to the constantly rising wave of high computer technologies.

How do you assess the current position of the company and what are the roads to its future development?

Despite all hardships and specific conditions that the company faced the balance today shows that it succeeded in following the line of active preservation till the moment of inevitable economic warming and setting in of better days for Bulgarian economy, when the team of founders could again unfold its full capabilities proven in the years to solve all kinds of complicated professional tasks and overcome successfully marketing issues. Thanks to the:

• continuous implementation of real projects,

• contribution of large funds to the continuous technological renewal and

• the enormous efforts of all partners and employees (no distinction was made between the two groups of the company based on caste belonging)

the company succeeded in keeping constant high level of technological and professional qualification for successful solution of the most complicated engineering tasks of the real market. This constantly maintained high technological and professional level will remain the main company feature henceforth and it will ensure its leading position in the never ending competition on the road of real professional life in the branch. Finally, it is important to note that instead of 18 employees 17 years ago today the company employs more than 100 experienced and highly qualified experts in computer hardware and software. Besides, a manufacturing department of 40 people was founded as a part of the company.

Therefore, in this particular case the aim of preserving the creative spirit of one of the high technology computer oasises of the old state could comparatively easily be achieved. However, as far as the company genuine development is concerned – it still lies ahead. Since the development of each Bulgarian company is inseparably linked and largely dependant on the development of the state it unfortunately cannot advance much ahead and aside from the rest of the state.

Recently Bulgaria and Rumania joined the European Union. Do you believe membership will influence favorably the local manufacturers of the two countries?

Of course, I do. Before joining the European Union the industries of Bulgaria and Rumania missed the markets they had lost after the economic and political changes. Beyond any doubt the European Union is an excellent alternative to our former markets but at the same time we cherish no illusions in this respect because this is an entirely different world, where nobody is welcomed with open arms. Therefore, even when a local product range meats the European market requirements (which presently is a fairly rare and difficult to achieve event by our countries) its occupation of the respective market niche requires long time, funds and patience. Therefore, the first realistic prognosis in this respect cannot be anything but pessimistic. Few will succeed and their success will be a matter of luck rather than anything else because, frankly speaking, none of the remaining circumstances will be in their favor.

However, things are different, when the word goes for cooperation with proven on these markets big or small players and not for standalone market break-through. In case of cooperation the availability of qualified local work force, more or less well equipped work locations and service and transportation infrastructure the success is almost secure. However, this is possible if the corresponding European or world market player is looking for a partner.

As it is well known our new European economic allies have long ago started carefully studying the possibilities for their potential stepping into the new European territories on the Balkans. Some of their estimates of the local conditions in the period before our joining of the European Union are known as well; for example, the biggest German power giant RWE moved out of Bulgaria after five year long presence and attempts to start serious business with the conclusion that here exist „immature structures” that cannot be adequately cooperated with. Well known are the attempts of other big players in the field of electronics and electric equipment. For example, 15 years ago IBM built a big plant for disc production on a bare field in Hungary despite the availability of huge and still alive production capacities and qualified human resources at DZU in Stara Zagora that could satisfy the needs of half of Europe. Siemens, despite its attempts in the course of several years to build a plant in Bulgaria for the production of telecommunication equipment that was planned long ago had to move it to Greece. Such failures are already impossible. The membership of Bulgaria in the European Union will change radically the unfavorable estimates and cooperation with European and world giants will become fully possible and successful. If, of course these giants can easily find and create locally what they need. Therefore, the advantage of Bulgaria as an industrial country resulting from its EU membership is clear and indisputable. But what else can small private companies like ours benefit except for friendly acquisition by a giant?

From my point of view the advantage can be as follows. When world and European giants decide to move in the country they always maintain positive balance of their newly opened subsidiaries toward the surrounding competitive environment. Thus they soon recruit comparatively well qualified local work force. Payment in local subsidiaries will never be equal to the payment in the mother-company. Nobody will benefit from equal payments. After all, the primary motivation of industrial giants here is the low cost of the local product to begin with and not the high content of hemoglobin in it. However, in order to ensure the presence of some hemoglobin they maintain a bit higher payment than the rest of the branch. Thus the balance they maintain in relation to the local companies will be well grounded; therefore the differences with their local competitors will not be overwhelmingly big. And here comes the benefit; if these differences can be more or less overcome the local experts can be satisfied with the payment in the local companies and stay there. This probable situation together with partnership and cooperation with industrial giants in some cases can serve as a powerful stimulus to the development of local industry, which can thus integrate in the common European industrial mechanism. This is the good scenario. We need not talk about the bad one; it is clear and we have been experiencing it in the course of more than 15 years.

One convincing confirmation of the good scenario materialization is local industry rapid development in China, where the above depicted balance picture is similar to the one that is most probably to be established in the new European territories of Bulgaria and Rumania. A well known fact is that all big world and European companies wish to operate and expand their presence on Chinese territory. Therefore, under the circumstances given partnership with our two countries can be competitive to the Chinese one bearing in mind the long distances, customs difficulties and local personnel qualification. However, we should not cherish any illusions in relation to the provisional strength of the above mentioned favorable conditions, it is not always valid. One good example in the relation is the qualification. Today in Bulgaria it is very difficult to find good software programmers, milling-machine operators are even rarer. Despite everything said above we hope that after joining the European Union, when world and European giants choose future production or scientific and technological developments in some cases we can be potentially good alternative to the Chinese.

Finally, let us not forget something very important, we should not put the horse before the cart because the state should radically change its role in order to make more probable the materialization of the good scenario.

Are there good opportunities for market realization of Bulgarian electrical products in other countries from the region?

No, because to differ from us they protect their own interests. In Turkey, for example, there are requirements related to power thefts that force manufacturers to make specific products intended for that region only. None of the big players manufactures such products and on the Turkish market sell only Turkish manufacturers. In India the situation is even more drastic and not only in relation to thefts. Some requirements of the Indian standard, for example with regard to measurement accuracy of some specific energy types or stability against high energy discharges are far more drastic than the European ones. We spent more than two years on the development of a full product range for this market. There are no drastic requirements in Serbia that cannot be overcome except that distant reading has to be implemented with electric cables (There will not be any European standard on this matter until 2009). However, there is something very interesting; for five years already all big state tenders end without success. We need not mention Russia at all; there the protective customs barrier for domestic electrometers was reduced from 40 to ... 20% only few years ago.

Do Bulgaria in particular and the region as a whole have the necessary engineering potential and financial security to conduct successful research and development activities?

Unfortunately, my answer at the moment is no. As I stressed at the beginning our industry is coming out of the ice age and it will need a long time to recover. Joining the European Union will change radically the process of recovering and the good news in this relation is that substantial help can come from the new European and governmental funds that are now accessible to Bulgarian industry. For example, the innovation fund of the Ministry of Economy and Energy or the new seventh frame program of the European Union. They define tasks and fund the achievement of objectives that could bring through the engineering brain of the country. Because a critical mass of people and ideas that can raise and sustain the level of creative potential necessary for Bulgarian recovery can be formed only around important and interesting tasks. Another requirement, of course, is the availability of adequate financial support. Beyond any doubt, when the membership of Bulgaria in the European Union is gradually filled with content these two requirements will be better met.