bulgaria general presentation july 2011

Bulgaria – investment climate and business opportunities

July 2011

Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery

Real GDP Growth Inflation

Unemployment FDI Inflow

Source: Bulgarian National Bank, Eurostat

3.4%

-5.5%

6.2%6.4%6.5%6.2%6.6%

2011 Q1

2010

0.2%

200920082007200620052004

3.0%2.5%

12.0%

7.6%7.4%6.0%6.1%

201020082007200620052004 2009

* May 2011

9.2%9.1%9.1%10.7%

12.2%

6.9%

200620052004 2007 2011

8.9%

201020092008

6.3%

EU-27Bulgaria EU-27Bulgaria

1,6392,412

6,728

9,052

6,222

3,1522,736

2004 20072005 2010200920082006

€ mln.EU-27Bulgaria

Visible signs exist that the Bulgarian economy is emerging rapidly from the crisis

4,500

4,000

3,500

3,000

0

+44%

Q4 2010

Q3 2010

Q2 2010

Q1 2010

Q4 2009

Q3 2009

Q2 2009

Q1 2009

Q4 2008

Q3 2008

Q2 2008

Q1 2008

+66%

+6%

Exports (€ mln.)

3.4%3.8%

-0.8%

6.5%6.4%6.9%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Q3 2008

Q4 2008

4.8%

Q1 2008

-4.6%

Q1 2011

Q2 2009

Q4 2009

Q2 2010

-6.0%

Q4 2010

0.0%

Q3 2009

Q1 2010

-6.7%

Q1 2009

-0.4%

-3.3%

Q3 2010

Q2 2008

Real GDP growth (% annual basis)

Source: National Institute of Statistics, Bulgaria

Role of Bulgaria as FDI location has grown significantly for the last 10 years

2006 2007 2008 20091999 2000 2001 2002 2003 2004 2005

Czech Republic

Romania

Hungary

Bulgaria

Slovakia

Croatia

0

1,000

10,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Inward FDI per country (€ mln.)

Source: UNCTAD

FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors

Source: Bulgarian National Bank

FDI by host country, 1996-2010 (€ mln.) FDI flows by industry, 1996-2010 (€ mln.)

Telecom 1,955

Energy 2,492

Construction 2,608

Trade 6,425

Manufacturing 6,552

Finance 7,422

Real Estate 8,419

Other 2,376(10) Italy 1,221

(9) Russia 1,229

(8) USA 1,337

(7) Hungary 1,362

(6) Cyprus 2,229

(5) Germany 2,646

(4) UK 2,948

(3) Greece 3,763

(2) Austria 5,183

(1) Netherlands 5,740

Why invest in Bulgaria?

• Political and business stability– EU and NATO member

– Currency board

– Low budget deficit and government debt

• Low cost of doing business– 10% corporate tax rate

– Lowest cost of labor within EU

• Access to markets– European Union / EFTA

– Russia

– Turkey / Middle East

• Educated and skilled workforce

• Government incentives

Bulgaria enjoys one of the most stable political and economic environments in Southeastern Europe

• Bulgaria is a member of some of the most prestigious political organizations

– European Union member since 2007

– NATO member since 2004

– WTO member since 1996

• Strong commitment to political reform and transparency has earned praise from leading media and experts worldwide

• Stable currency

– Bulgarian Lev has been pegged to the Euro since the adoption of the currency in 2002

– Currency board backed by IMF

”the culture of impunity that once plagued Bulgaria has largely gone“

May 27, 2010

“The Bulgarian economy looks to be stabilizing after weathering the recent financial crisis better than most of its neighbors”

“the government has earned accolades from Western economists”

July 20, 2010

Government financial indicators are remarkable not only in the region, but on a pan-European scale

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

3%2%1%0%-1%-2%-3%-4%-5%-6%-7%-8%-9%

average debt (2004-2009)

average budget (2004-2009)

16%

TurkeyCroatia

Norway

Iceland

United KingdomSweden Finland

SlovakiaSlovenia

Romania

Portugal

Poland

Austria

Netherlands

MaltaHungary

Luxembourg

LithuaniaLatvia

Cyprus

Italy

France

Spain

Greece

Ireland

Estonia

Germany

DenmarkCzech Republic

Bulgaria

Belgium

Source: Eurostat

Bulgaria has one of the lowest business costs in Europe(1) taxes and labor costs

Lowest corporate income tax rate in Central / Eastern Europe

* 0% tax rate for manufacturing companies in regions with low employment

Most competitive cost of labor in Central / Eastern Europe

Average wage, € / month March 2011

Source: Eurostat; CEIC

Turkey 20%

Czech Rep 19%

Slovakia 19%

Hungary 19%

Romania 16%

Bulgaria (*) 10%

Croatia 20%

Slovenia 1,524

Croatia 1,065

Czech Republic 956

Poland 878

Slovakia 809

Hungary 802

Romania 493

Serbia 480

Bulgaria 352

Bulgaria has one of the lowest business costs in Europe(2) energy costs and rent

Bulgarian cost of electricity for industrial users is 67% of the European average

Source: Eurostat, CB Richard Ellis

0.142

0.122

0.106

0.098

0.095

0.081

0.064

0.059Estonia

Bulgaria

Romania

EU average

Germany

Czech Rep

Hungary

Slovakia

€/kWh, 2009

Office rents in Bulgaria are among the lowest in Europe

629

396

355

276

252

240

234

200

177

Moscow

Istanbul

Bucharest

Warsaw

Budapest

Athens

Zagreb

Prague

Sofia€ / sq. m /

year,Q1 2010

Bulgaria is only 3 hours flight from all major destinations in Europe, Russia and the Mediterranean region

Strategic geographic location Major transport corridors passing through Bulgaria

EU and EFTA

Rus

sia

and

CIS

Turkey and

Middle East

The role of the European Union as a trade partner for Bulgaria has been growing consistently

11%

6% 6% 7%

16%

21%18%

15%

56% 60% 64%

44%

Other

Asia

Balkans

EU-27

2009

14%

2005

16%

2000

17%

1995

29%

Share of EU-27 exports has grown by 50 percentage points since 1995

1994 1996 1998 2000 2002 2004 2006 2008 2010

€ mln

9,000

6,000

5,000

4,000

3,000

8,000

2,000

10,000

1,000

0

7,000

... in absolute terms EU-27 exports have grown approximately 5 times

Educated and skilled workforce is among the main advantages of Bulgaria

Almost 60,000 students graduate every year from over 50 universities

Source: National Institute of Statistics, Bulgaria

860

833

12,684Other

19,480Business

8,372Social sciences

7,178Engineering

3,677Education

3,166Health

1,553Law

Architecture

Agriculture

Bulgaria has one of the highest proportions of students abroad from all European countries

2.1%

2.2%

2.8%

3.1%

4.7%

5.8%

8.3%

17.8%Iceland

14.2%Ireland

10.2%Slovakia

Bulgaria

Greece

Austria

Germany

EU-27 average

Romania

Czech RepublicStudents in another EU / EEA country, % of all

The government supports specific industries under the Investment Promotion Act (IPA)

• Investments must be related to the following sectors:

– Manufacturing

– Research & development

– Education

– Healthcare

– High-tech services

– Warehousing and logistics

• Minimum investment amounts must exceed €10m

– €3.5 in regions with high unemployment and €2m for

investment projects in high-tech services

• Benefits for certified investors include:

– Shortened administrative procedures

– Preferential acquisition of state or municipal land

– Financial support for professional training / education

– Infrastructure subsidies

– Individual administrative services

Biggest investors are supported through a priority investment scheme

• Priority projects can be related to all sectors of the

economy, which do not contradict regulation 800/2008

of the European Commission

– Subsidies not allowed in mining, primary agriculture

production, and shipbuilding

• Priority projects should exceed €50m and create at

least 200 new working places for a 3-year period

– €25 + 100 working places for certain manufacturing

projects

– €10m + 50 working places for high-tech services and R&D

• Priority projects receive all benefits for certified

investors, as well as the following:

– Lowest possible costs for the acquisition of government

and municipal land + waived taxes for land status changes

– Working group for project support is assigned by the

Council of Ministers

– Financial grant scheme for up to 10% of the investment

project cost (50% for R&D)

• Services:– Transport and Logistics

– Information technologies

– Outsourcing of business processes

– Health and tourism related to healthy

lifestyle

• Industry:– Transport equipment and machine

building

– Electronics and Electrical engineering

– Chemical industry

– Food and Agriculture

• Resources:– Mining

– Oil

– Alternative energy

Attractive FDI sectors

Leading global investors have chosen Bulgaria as an FDI destination

IT & BPO Mechanical and Electrical

Engineering

Construction Materials

Telecom and Media

Energy Finance

InvestBulgaria Agency is a Government investment promotion arm, part of the Ministry of Economy, Energy and Tourism

IBA services:

• Macroeconomic data on Bulgaria

• Legal advice

• Data on operational costs

• Regional information: industrial zones and infrastructure, data on unemployment, skilled labour force and level of education

• Recommendation of investment project sites

• Identification of potential suppliers, contract manufacturers and joint-venture partners

• Personalized administrative servicing

• Liaison with central and local governments

• Liaison with branch chambers and NGOs

InvestBulgaria Agency

InvestBulgaria Agency

Sofia 1000, 31 Aksakov Str.

Phone: (+359 2) 985 5500

Fax: (+359 2) 980 1320

E-mail: [email protected]

Web: www.investbg.government.bg