BulgariaInvestment Climate in Selected Industry Sectors

Shanghai

November 2012

1,283

2,257

2,523

2,733

3,664

5,809

6,018

1,486

(8) USA

(7) Russia

(5) Germany

(6) Cyprus

(4) UK

(3) Greece

(2) Austria

(1) Netherlands

Other 2,664

Telecom 2,260

Energy 2,699

Manufacturing 6,479

Trade 6,522

Finance 7,652

Real Estate 10,901

FDI by host country, 1996-2011 (€ mln.)

FDI flows by industry, 1996-2011 (€ mln.)

FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors, but new opportunities exist

• Services:

– Transport and Logistics

– Information technologies

– Outsourcing of business

processes

– Health and tourism related to

healthy lifestyle

• Manufacturing:

– Transport equipment and

machine building

– Electronics and Electrical

engineering

– Chemical industry

– Food and Agriculture

Economic sectors with high investment potential

Page 2

Overview of the Electrical Engineering and Electronics sector

Sector snapshot

• Sector volume production increased almost 3.5 times in 2009, compared to 2000

• The sector generates about 14% of total exports and main export partners are Germany, Italy, Spain, France and Turkey

• More than 75% of the produced electronic equipment in Bulgaria is exported

• About 30 000 University students are enrolled in related majors

• About 45 000 people employed in over 2 300 companies in the sector

23%

3%

7% 7%

8%

25%

11%

6%

6%

2%2%

Wires and cables

Electric heaters

PCBs

Panels,El.tables

Telephone devices

Integrated circuit

Transformers

Electrical apparatus

Industrial Batteries

Other

Radio and TV equipment

1890s

Siemens participated in building the telegraph

network in Bulgaria

1972

The first Bulgarian made space

equipment was launched into space

1985

The peak of the industry – manufacturing of

modern computers. Electronics comprise

25% of Bulgarian manufacturing. 130 000

people are engaged in the industry

1988

Bulgaria manufactures more than 40%

of the mainframes and personal

computers in Eastern Europe

2010 Revenues were over €1.5 bn, the

highest since 1990

Page 3

• Since 1997 Festo Bulgaria has been specializing in manufacturing of sensors and sensor applications

• Operates two manufacturing facilities in Sofia and Smolyan with more than 400 employees

• Currently expanding the production facilities in order to meet the increased demand

• Holds 35% market share of the world wire harnesses for the automotive industry

• Yazaki Bulgaria main customers are the automotive manufacturers in France and Spain

• Yazaki Bulgaria,which employs more than 3000 people, has not only an assembly department, but also an engineering division

• Global leader in power and automation technologies and electrical equipment

• ABB operates in Bulgaria through 3 companies in 5 production locations producing mainly high and medium voltage electrical equipment

• ABB companies in Bulgaria export their products in Russia, Iraq, Romania, Mexico, Brazil, Sweden, Norway, China, Germany, France.

Leading global companies in the sector operate in Bulgaria

• In 1997 Hyundai Heavy Industries took over the Bulgarian state owned Elprom-Trafo Company which has been well-known manufacturer of Power Transformers and Tap Changers.

• The company employs now more than 670 people and produces power transformers, on load and off circuit tap changers.

Page 4

Overview of the Chemical industry in Bulgaria

Sector snapshot:

• Many foreign and local companies develop successful business in the country. The total amount of their investments is over €1.5bn.

• In Bulgaria, €100 of labor cost investments generate €148 of output

• After 1990, the majority of Bulgarian enterprises were purchased by foreign investors, which led to the modernization of technical and production facilities.

• Exports of main products have risen by almost 50% in 2010. Main partners are UK, Russia, Italy, Germany and Serbia

239

305123

178

Organic Chemicals

Chemicals and Chemical Products

Paper and Paper Products

Rubber and Plastic Products

Mineral or Chemical Fertilizers

Non-Metal Mineral Products

Inorganic Products

2010

1,137

936593

273

130

2009

823

9360

56

209

43

Exports,

Mln. €

1901One of the first foreign investments in the country – a shoe polish factory in Ruse – now Orgachim

1954 The soda ash factory in Devnia was built, now the biggest facility of Solvay Group in Europe

1997 Solvay, Belgium bought 60% of the soda factory in Devnia. Today, this is Europe’s biggest soda ash factory in Europe.

1997, 1998, 2004 Holcim, Titan, Italcementi Group modernized cement factories

1980 The chemical industry enterprises generated 17.1% of total industrial output and 20.8% of country’s exports.

Page 5

• Agropolychim is one of the leading manufacturers of nitrogen and phosphorus fertilizers in the region

• About 400 ths tons exported to Europe, America, Middle East and Asia in 2010

• The plant for production of plaster boards and gypsum fiber board panels was established in 1993

• To date, investment totals € 85m, over 190 employees and two factories in Bulgaria

• Solvay’s biggest European factory for manufacture of soda ash with a capacity of 1.5 million tons per year

• 85% of company’s output is exported to Eastern and Western Europe, Russia, the Middle East, South America, Asia and Africa.

• Sisecam (Trakiya Glass) is the largest greenfield manufacturing investment in Bulgaria

• The plant produces glassware, fl at glass, household glassware, mirrors and car glass factories

• Clients include IKEA, Coca Cola, Indesit, Bosch, Audi, BMW

Leading corporations have already chosen Bulgaria as an investment location

Page 6

5%5%

35%

6%

1%2%3%

4%5%

10%

11%

13%

Others

Printing machines

Calculating devices

Automatic machines

Agriculture machines

Air-conditioning and purifying machines

Liquid pumps

Ball, roller and needle bearings

Parts for lifting machines and loaders

Armature items

Refrigerators, freezers

Engines and Parts for engines

Overview of the Mechanical Engineering and Machine Building sector

Sector snapshot• The industry generates revenues of € 1.03 bn • FDI growth in the sector is 134 % in 2010 compared to 2007.

An average annual FDI volume in the last 5 years is around EUR 65 mln.

• 11% of the university students are enrolled in related specialties

• Employs more than 50 000 people working in more than 1500 companies

• Generates about 15% of total exports and main export partners are Germany, Russia, Italy and France

1878

Arsenal (military products) was founded in 1878 in the town of Ruse as first factory meant to serve the newly created Bulgarian Army.

1957

Beginning of production of forklift trucks

in Sofia.

1969

In Plovdiv began the assembling of

Renault 8 and Renault 10.

2008

German company Lufthansa Technik

opened maintenance facility for repair and overhaul of aircrafts like Airbus A320 family and the Boeing 737 series.

2012

Start of the production in car manufacturing plant established by Litex Motors Corporation in cooperation with the Chinese Great Wall Motor Co.

Page 7

• In 2008, Lufthansa opened an aircraft repair facility at Sofia airport, the only base of the company in Eastern Europe

• State-of-the-art hangars and equipment. Over 500 workers

• D-checks, the most extensive scheduled maintenance is carried in Bulgaria

• Innovative and powerful know-how in the development and production of technical solutions for locking and latching systems.

• Delivers its products to the most auto producers in Europe

• In the process of doubling its capacities and staff in Bulgaria

• One of the world’s leading manufacturers of hydraulic and vacuum equipment for vehicles

• The factory near Plovdiv is the company’s 2nd largest

• Clients include Mercedes, BMW, Porsche, and Audi

• Greenfield project, completed in only 11 months

Bulgaria as a production hub has attracted world leaders in the sector

• Montupet is a leading supplier of automotive aluminum parts

• Greenfield investment project in Ruse for €80m

• Bulgarian plant produces engine heads for Audi’s 4- and 6-cylinder engines and for the whole series “Q” of Audi.

Page 8

Overview of the Transport & Logistics sector

Bulgaria has:• 6 Motorways, some under development• 230 railway stations with capability for loading/unloading cargo• 4 international airports• 2 major seaports on the Black Sea• 4 major river ports on the Danube• About 3 000 university students graduate from transport and

logistics related majors per year

294

198

628

1 317

1 237

1 417

1 511

441

1 659

212

332

303

268

187

550

234

416

198

587

257

303

403

493

202

538

363

597

364

668

804

Serbia

Spain

Russia

Hungary

Ukraine

Greece

Macedonia

Italy

Belgium

China

UK

Poland

133

France630

Germany

1 047

Netherlands

1 142

Turkey

1 341

Austria

1 418

Romania

3 127

USA

2 237

Import 2010, EUR mln Export 2010, EUR mln

Major trade partners 1866

The first railway track (224 km) started operation between Ruse and Varna

1991 - 1995

Major European/global sector companies entered in Bulgaria, such as DHL Willi Betz, In Time

2006

Sofia Airport, the largest passenger and cargo airport in Bulgaria, opened a Second Terminal constructed by STRABAG.

2010

Yana Intermodal Terminal opened near Sofia, at the crossroad of 3 pan-European corridors , serving the European and the Central Asian markets

Page 9

Bulgaria has one of the lowest business costs in Europe

Lowest corporate income tax rate in Europe

Source: Eurostat; Savills

Turkey 20%

Croatia 20%

Czech Rep 19%

Slovakia 19%

Hungary 19%

Romania 16%

Bulgaria 10%

Cost of electricity for industrial users is 70% of the EU average

0.083

Bulgaria 0.068

Estonia 0.065

Slovakia 0.127

Czech Rep 0.100

Hungary 0.100

EU average* 0.092

Germany 0.089

Turkey 0.083

Romania

€/kWh, 2012

11,070

10,000Germany

Spain

UK 11,400

Poland 5,000

Czech Rep. 5,000

France 5,000

Greece 4,000

Hungary 3,000

Romania 2,000

Bulgaria 1,595

Lowest cost of agricultural land in the European Union

€ / ha, 2008

Page 10

* 2011

Over 50 universities enroll about 285 000 students.17% of Bulgarian students are in industry-related majors

Sofia

Plovdiv

Pleven

Ruse

Varna

Burgas

Blagoevgrad

Pernik

Silistra

Shumen

V.Tarnovo

Svishtov

Stara Zagora

Gabrovo

Universities:

Multiprofiled

Technical

Medical

Economical

Pravets

KardzhaliSmolian

Page 11

Sofia Technical University

23, 000 students

Sofia University of Chemical Technology

and Metallurgy

4,000 students

Angel Kunchev University (Ruse)

8,500 students

Varna Technical University

8,000 students

Bulgaria offers a variety of potential and existing well connected investment locations

Northwest Bulgaria

• Lowest costs of doing business

• Proximity to Central and Western Europe

• New Vidin-Kalafat bridge

Sofia region

• Availability of skilled labor

• Over 20 universities• Sofia airport

Plovdiv region

• Main industrial location for multinationals

• Well developed industrial zones

Black Sea region

• Burgas and Varna ports• Tourist locations• Availability of skilled

workforce

North Central region

• Transport links via Romania

• Industrial background

South Central region

• Proximity to Turkish border and Burgas ports

• Industrial and energy hub

Page 12

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:

– Partial reimbursement of labor costs

– Shortened administrative procedures

– Preferential acquisition of state or municipal land

– Financial support for professional training / education

– Infrastructure subsidies

– Individual administrative services

• Priority projects (exceeding € 50m and creating at least 200 new working places for a 3-year period) receive additional support.

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

industrial projects. 50% for R&D.

Page 13

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