Bulgaria – investment climate and business opportunities

Bulgaria – geographic location

EU and EFTA

Rus

sia

and

CIS

Turkey and

Middle East

Strategic geographic location in South-East Europe

Offers direct access to markets like: EU, Russia, Turkey and The Middle East

5 Pan-European transport corridors pass through Bulgaria

Why invest in Bulgaria?

Political and business stability− EU member

− Currency board

− Low budget deficit and government debt

Low cost of doing business− 10% corporate tax rate (0% in high unemployment areas)

− 10% personal income tax

− Lowest cost of labor within EU

− Favorable office rents and low cost of utilities

Access to markets− European Union / EFTA

− Russia

− Turkey / Middle East

Educated and skilled workforce

Government incentives

Macroeconomic indicators

Real GDP Growth Inflation (HICP)

Unemployment FDI Inflow

Source: Bulgarian National Bank, Eurostat

0.9%0.8%1.8%

-5.5%

6.2%6.4%6.5%

2013201220112010

0.4%

2009200820072006 2014*2013

0.4%

201220112010200920082007

20142013201220112010

9.2%

20092008

6.3%

2007

EU-28Bulgarian EU-28Bulgarian

2013

1,156

2012

1,141

2011

1,330

2010

1,151

2009

2,437

2008

6,728

2007

9,052

2006

6,222

€ mln.EU-28Bulgarian

* September

* September

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

Source: Bulgarian National Bank

FDI by host country, 1996-2013 (€ mln.) FDI flows by industry, 1996-2013 (€ mln.)

3405.3

Telecom 2015.2

Construction 2878.9

Energy 3779.3

Trade 6833.8

Real Estate 7431.8

Finance 7508.8

Manufacturing 7683.5

Other(10) Switzerland 1367.5

(9) Italy 1402.7

(8) USA 1443.4

(7) Russia 1849.1

(6) Cyprus 2097.4

(5) UK 2369.8

(4) Germany 2815.3

(3) Greece 3537.5

(2) Austria 5639.3

(1) Netherlands 6376.3

Government financial indicators

Source: Eurostat

 0%

 10%

 20%

 30%

 40%

 50%

 60%

 70%

 80%

 90%

 100%

 110%

 120%

 130%

 140%

Greece

Ireland

Estonia

Germany

DenmarkCzech Republic

Bulgaria

Belgium

Average budget deficit/surplus (2007-2012)

Poland

-6% -5% -4% -3% -2%-13% -12% -11% -1%

Latvia

Cyprus

Italy

Romania

Hungary

MaltaNetherlands

Austria

Portugal

Lithuania

Luxembourg

Spain

FranceIceland

United Kingdom

Sweden

-7%

FinlandSlovakia

Slovenia

15%1%0%

Turkey

CroatiaNorway

Average government debt (2007-2012)

Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011

*The TE credit rating is driven by a model created at Trading Economics.

Source: Trading Economics Rating

Country credit ratings comparison Q2 2014

Country S&P Rating Moody's rating Fitch Rating TE Rating*

Czech Republic AA- Stable A1 Stable A+ Stable 79.28 Stable

Poland A- Stable A2 Stable A- Stable 67.41 Stable

Italy BBB Negative Baa2 Negative BBB+ Negative 62.09 Negative

Bulgaria BB+ Stable Baa2 Stable BBB- Stable 54.24 Stable

Spain BBB- Stable Baa3 Negative BBB Negative 52.55 Negative

Croatia BB+ Stable Baa3 Negative BBB- Negative 48.85 Stable

Macedonia BB Stable     BB+ Stable 47.5 Stable

Romania BB+ Stable Baa3 Negative BBB- Stable 47.35 Stable

Turkey BB+ Stable Ba1 Positive BBB- Stable 44.58 Stable

Hungary BB Stable Ba1 Negative BB+ Stable 42.58 Stable

Serbia BB- Negative     BB- Negative 40 Negative

Ukraine B Negative Caa1 Negative B Stable 28.75 Negative

The lowest taxes in EUCountry comparison

CountryIncome Tax (%) Social Security (%)

VAT (%)Corporate Individual Employer Employee

Bulgaria(*) 10 10 17,9-18,5 12,9 20

Serbia 15 10-20 16,9 16,9 20

Romania 16 16 28,45 16,5 24

Hungary 10/19 16 28,5 18,5 27

Czech Rep. 19 22 34 11 21

Poland 19 18/32 22,14 13,7 23

Turkey 20 15-35 27 15 18

Slovakia 23 19-25 34,8 13,4 20

UK 23 0-45 13.8 12 20

Italy 27,5 23-43 30 10 21

Spain 30 24,75-52 29,9 6,35 21

Germany30-33

(effective)14-45 19,7 20,6 19

France 33,33 5,5-41 50 20 19,60

Source: Worldwide-tax

Bulgaria has one of the lowest business costs in Europe

Gas prices for industrial users in Europe

Source: Eurostat

0.124

0.101

0.094

0.090

0.090

0.089

0.086

0.084

0.080

Hungary

Romania

Turkey

Germany

Estonia

Bulgaria

Czech Rep

EU average

Slovakia

€/kWh, 2013€/Gigajoule, 2013

Electricity prices for industrial users in Europe

12.23

11.03

10.65

10.56

10.53

10.17

10.06

9.89

9.00

EU average

Austria

Poland

Bulgaria

Czech Republic

Italy

Germany

France

Spain

Salaries in Bulgaria

Source: IBA Analysis, National Statistics Institute

Average salary by position, EUR per month

Labour cost / Salary

% of the Gross Salary

Top Management

ManagementR&D

EngineersTechnicians Skilled labor

Unskilled labor

In EUR, per month

Low High Low High Low High Low High Low High Low High

Net Salary Employee

77,1% 924 1925 576 770 539 693 347 462 285 385 216 270

Gross Salary Employee

100% 1200 2500 750 1000 700 900 450 600 370 500 280 350

Total Cost for Company

117,9% 1415 2948 884 1179 825 1061 531 707 436 590 330 413

Average gross salary by region, EUR per month

Statistical region North-West North Central North-East South-East South-West South Central

2013.09 326 330 369 370 505 331

536

3595

4236

5044

9033

9095

10469

10779

13735

18843

20291

31322

38581

Physical and chemical sciences

Manufacturing and processing

Agriculture, forestry and aquacultures

Computing

Mathematics and statistics

Architecture and building

Personal services

Law

Humanities

Teacher training and education science

Health

Social and behavioural science

Engineering and engineering trades

Business and administration 67113

TOTAL: 283 959 (‘Bachelor’, ‘Master’, ‘Doctor’)

Students in Bulgaria by narrow field of education in universities and colleges in 2012/13 academic year

Source: National Statistics Institute

A big number of students study in universities in Europe and USA

Bulgaria has highly-qualified, well-motivated, flexible and multilingual labour force

53 Universities, colleges and higher schools

494 Vocational gymnasiums and colleges

80000 Bulgarian students in foreign countries

24,6% Population hold university degree

7% Workforce has engineering degrees

45,5% Population speak at least one foreign language

85% Students studied English

Total number of higher schools* 53

Universities and equivalent higher schools 45

Colleges 29

Independent colleges 8

Colleges, at the universities and equivalent higher schools

21

*Incl. universities and equivalent higher schools and independent colleges

2

3

2

2

2

3

3

6

12

1

Blagoevgrad

Sofia 6

Plovdiv

Burgas

Varna

Veliko Tarnovo

1

Number of universities in some of the biggest cities

Business field Technical sciencesOther

Source: National Statistics Institute

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 €2.5m

− €1m in regions with high unemployment and €0.5m 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

− Labor cost 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

− €25m + 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)

Attractive FDI sectors

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:− Mineral water

− Tourism

− Balneology

− Alternative energy

Leading global investors have chosen Bulgaria

IT development Back office operations

Chemical and metal Industry

Engineering Food

Invest Bulgaria Agency

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

InvestBulgaria Agency

Sofia 1000, 31 Aksakov Str.

Phone: (+359 2) 985 5500

Fax: (+359 2) 980 1320

E-mail: iba@investbg.government.bg

Web: www.investbg.government.bg