Bulgaria the Right EU Location

8/4/2019 Bulgaria the Right EU Location

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Bulgaria investment climate and business

opportunities

February 2011


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Page 2

Macroeconomic indicators show consistent growth inthe years leading up to the global financial crisis

4.5% 5.0%6.6% 6.2% 6.3% 6.2% 6.0%

-4.9%

2002 2003 2004 2005 2006 2007 2008 2009

Real GDP Growth

4.0%

7.0% 6.5%

12.5%

7.8%

0.6%

4.5%

2004 2005 2006 2007 2008 2009

Inflation

12.2%

10.7%9.1%

6.9% 6.3%

9.1% 9.2%

Unemployment

2004 2005 2006 2007 2008 2009

9801 851

2 7363 152

6 222

9 052

6 686

3 382

FDI Inflow

2002 2003 2004 2005 2006 2007 2008 2009

mln.

Source: Bulgarian National Bank

2010

2010


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Page 3

Consistent strong performance, compared to the CentralEuropean region and EU-27

-6%

-4%

-2%

0%

2%

4%

6%

8%

2005 2006 2007 2008 2009 2010 2011

Bulgaria

EU-27

GDP growth has outperformed the EU average and isforecasted to speed up again after the crisis

Source: Eurostat; Moodys

Bulgaria and Estonia are the only two countries in EU-27 with net positive rating action by Moodys since 2009

Upgrade or outlook raise

Rating / outlook downgrade

2 rating / outlook downgrades

3+ rating / outlook downgrades


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Role of Bulgaria as FDI location has grown significantlyfor 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.)


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

Source: Bulgarian National Bank

FDI by host country, 1996-2009 ( mln.) FDI flows by industry, 1996-2009 ( mln.)

Telecom 1,729

Energy 2,172

Construction 2,481

Trade 6,319

Manufacturing 6,958

Finance 7,273

Real Estate 8,253

Other 2,902(10) Russia 1,088

(9) Italy 1,170

(8) Hungary 1,276

(7) USA 1,310

(6) Cyprus 1,921

(5) Germany 2,526

(4) UK 3,037

(3) Greece 3,420

(2) Netherlands 4,643

(1) Austria 5,904


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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


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

Budget surplus / deficit has consistentlyoutperformed regional and European averages

Source: Eurostat

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2005 2006 2007 2008 2009

Bulgaria

Euro Area

CEE average

Bulgarian government debt is 3rd lowest in Europe

7%Estonia

68%UK

78%Hungary

24%Romania

115%

79%

Greece

Euro area

73%Germany

35%Czech Republic

Bulgaria 15%

Government

debt, % of GDP


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Page 9

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 Q2 2010

Source: Eurostat; CEIC

10%Bulgaria (*)

16%Romania

19%Hungary

19%

Turkey 20%

20%

Czech Rep 20%

Slovakia

Croatia

730

730

705

456

451

327

1,099

1,483

Bulgaria

Serbia

Romania

Slovakia

Hungary

Croatia

Czech Rep

Slovenia


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

Bulgarian cost of electricity for industrialusers 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 lowestin Europe

629

396

355

276

252

240

234

200

177

Moscow

Istanbul

Bucharest

Warsaw

Budapest

Athens

Zagreb

Prague

Sofia / sq. m / year,Q1 2010


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

Strategic geographic location Major transport corridors passingthrough Bulgaria

EUandEFTA

Russia

and

CIS

Turkeyand

MiddleEast


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The role of the European Union as a trade partner forBulgaria 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 50percentage 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 havegrown approximately 5 times

Page 12


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Educated and skilled workforce is among the mainadvantages of Bulgaria

Almost 60,000 students graduate every year fromover 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 ofstudents 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 Republic

Students in another EU

/ EEA country, % of all


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The government supports specific industries under theInvestment Promotion Act (IPA)

Page 14

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


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Biggest investors are supported through a priorityinvestment 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)

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Attractive FDI destinations

Services:

Information technology

Public Sector

Transport and tourism

Industry:

Electronic and electrical equipment

Machine building

Metal processing

Resources:

Mining

Oil

Alternative energy

Source: Deloitte Consulting; United Nations (UNCTAD)


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Major foreign investors in Bulgaria

Information Technology & Business Process Outsourcing

SAP Labs (Germany) the Company has been operating for more than 7

years on the Bulgarian market and employs more than 470 software

developers

HewlettPackard, IBM, Sony, Microsoft, Coca Cola, and other companies

have set up service support and call centers in Bulgaria

Mechanical and Electrical Engineering

Liebherr (Germany) the Company has invested more than 80 mln in its

Bulgarian production facilities near Plovdiv

Schneider Electric (France) Schneider has set up a greenfield plant in Maritsa

Industrial zone (near Plovdiv) for production of electric distribution products ABB (Switzerland) the Company has been operating for more than 10 years in

Bulgaria and has invested recently 25 mln in a greenfield manufacturing plant

for low voltage equipment

Montupet (France) the European leader in the manufacture of cylinder heads

for engines set up a a greenfield plant in Ruse industrial zone, ~ 80 mln


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Construction Materials

Holcim (Switzerland) the leading cement producer has invested 70

mln in Bulgaria Sisecam (Turkey) the Turkish glass producer has invested more than

380 mln in 4 production facilities in Bulgaria

Saint-Gobain (France) the company has started building a 100 mln

greenfield plasterboard factory in Gabrovo

Italcementi (Italy) Italcementi has started an 250 mln modernization

project of its cement-producing factory in Bulgaria

Telecom and media

AIG Global Investment (USA) the Group has acquired 65% of the Bulgarian

Telephone Company for 1.08 bn

Telekom Austria acquired the largest mobile operator, Mtel, for 1.2 bn

MTG (Sweden) acquired the second most popular TV channel, Nova TV, for

620 mln

CME acquired three television channels for 110 mln


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Energy

CEZ (Czech Republic) the company has invested more than 150 mln

in the energy distribution network and 200 mln in acquiring energy

generating units in Bulgaria

E.ON (Germany) the company has invested more than 80 mln in the

energy distribution network in Bulgaria

EVN (Austria) the company has invested more than 220 mln in the

energy distribution network in Bulgaria

Enel (Italy) the company has invested 700 mln in HPP Maritsa-Iztok 3

AES (USA) the company has undertaken HPP Maritsa-Iztok 1 project,

worth 1.3 bn


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InvestBulgaria Agency is a Government investmentpromotion 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 andinfrastructure, data on unemployment, skilled labourforce and level of education

Recommendation of investment project sites

Identification of potential suppliers, contractmanufacturers and joint-venture partners

Personalized administrative servicing

Liaison with central and local governments

Liaison with branch chambers and NGOs

InvestBulgaria Agency


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InvestBulgaria Agency

Sofia 1000, 31 Aksakov Str.Phone: (+359 2) 985 5500

Fax: (+359 2) 980 1320

E-mail: [email protected]: www.investbg.government.bg

Documents

Bulgaria the Right EU Location