Bulgaria – investment climate and business opportunities

Seoul

March 2013

Page 2

Bulgaria at a glance

Location and key data

• Area: 110,910 sq km (42,823 sq mi)

• Number of inhabitants (2011): 7.4 mln

• Capital and largest City: Sofia

• Other cities: Plovdiv, Varna, Burgas, Ruse, Stara

Zagora, Pleven, Veliko Tarnovo

• Natural Resources: oil, gas, coal, iron ore, copper,

lead, zinc, antimony, chromite, gold, silver,

magnesium, nickel, pyrite, marble, limestone, salt,

arable land

• Major industries: electricity, water and gas supply;

food, beverages and tobacco; machinery and

equipment; base metals, chemical products, coke,

refined petroleum

• Currency: Lev (BGN). Fixed exchange rate with

Euro.

• EU Member since 2007, NATO Member since 2004

• Government type: parliamentary republic

• Last government elections: July 2009

Dobrudja

Sandanski

Bansko

Veliko Tarnovo

Belogradchik

Kozloduy NPP

Sofia

Bulgaria at a glance

Geography, landmarks and economic overview

Page 3

Maritza Iztok

Balchik

Varna

Sunny Beach

Sozopol

Rousse

Plovdiv

Macroeconomic indicators show consistent pre-crisis

economic growth and quick post-crisis recovery

Real GDP Growth Inflation (HICP)

Unemployment FDI Inflow

Source: Bulgarian National Bank, Eurostat

1.7%

-5.5%

6.2%6.4%6.5%6.4%6.6%

20112010

0.4%

200920082007200620052004

3.4%3.0%2.5%

12.0%

7.6%7.4%6.0%6.1%

200620052004 20112010200920082007

10.4%9.1%9.1%

10.7%12.2%

20112010

9.2%

20092008

6.3%

2007

6.9%

200620052004

EU-27Bulgaria EU-27Bulgaria

2011

1,341

2010

1,209

2009

2,437

2008

6,728

2007

9,052

2006

6,222

2005

3,152

2004

2,736

€ mln.EU-27Bulgaria

Page 4

FDI in Bulgaria comes mostly from EU countries and is

concentrated in four main sectors

Source: Bulgarian National Bank

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

Telecom 2,260

Energy 2,699

Construction 2,705

Manufacturing 6,479

Trade 6,522

Finance 7,652

Real Estate 8,204

Other 2,664(10) Hungary 1,272

(9) Italy 1,279

(8) USA 1,283

(7) Russia 1,486

(6) Cyprus 2,257

(5) Germany 2,523

(4) UK 2,733

(3) Greece 3,664

(2) Austria 5,809

(1) Netherlands 6,018

Page 5

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

Page 6

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%

120%

130%

Lithuania

Latvia

Cyprus

Italy

-6% -5% -4% -3% -2%-11% -10%

Average budget deficit/surplus (2006-2011)

16%15%1%0%

TurkeyCroatia Norway

-1%

IcelandUnited Kingdom

Sweden

Finland

Slovakia

Slovenia

Romania

Portugal

Poland

Austria

Netherlands

Malta

Hungary

Luxembourg

France

Spain

Greece

Ireland

Estonia

Germany

DenmarkCzech Republic

Bulgaria

Belgium

Source: Eurostat

Average government debt (2006-2011)

Page 7

Source: Eurostat, The Economist, National Statistics

Budget deficit for 2012, % of GDP

Bulgarian economy maintains its excellent performance

despite global challenges

0.0%

0.0%

0.1%

-1.6%

-2.0%

-2.5%

-2.6%

-2.8%

-3.0%

-3.3%

-3.6%

-3.7%

-4.1%

-4.5%

-5.0%

-5.6%

-7.0%

-7.0%

-8.0%

-8.3%

-9.8%

-10.9%

BG

Egypt

Japan

United Kingdom

Spain

Greece

United States

India

Czech Republic

Italy

Hungary

Austria

Brazil

Turkey

China

Sweden

Switzerland

Germany

Euro Area

Denmark

Poland

Netherlands

France

Hungary

Greece

Estonia

Bulgaria

04/10

Turkey

07/10 10/10 01/11 04/1101/10 07/11 10/11

Lithuania

Ireland

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

Page 8

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

Slovakia 0.123

Czech Rep 0.110

Hungary 0.104

EU average 0.092

Germany 0.090

Turkey 0.086

Romania 0.080

Bulgaria 0.064

Estonia 0.062 €/kWh,

2011

Office rents in Bulgaria are among the lowest in Europe

Page 9

724

Istanbul 339

Moscow

Athens 336

Warsaw 312

Prague 252

Budapest 240

Bucharest 234

Zagreb 191

Sofia 168€ / sq. m / year,

Q2 2011

Page 10

Educated and skilled workforce is among the main

advantages of Bulgaria

Sofia University• Established 1888

• 25,000 students

• Laboratories run by IBM, Oracle;

• Affiliate center of Harvard University

American University in Bulgaria• Liberal arts educational institution

• Among the most famous American

universities in Central and Eastern

Europe

• 63% international students

Sofia Technical University• 14,000 students

• Department of German engineering

education (joint project of Bulgarian and

German governments) and English

engineering education

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

Czech Republic 2.1%

Romania 2.2%

EU-27 average 2.8%

Germany 3.1%

Austria 4.7%

Greece 5.8%

Bulgaria 8.3%

Slovakia 10.2%

Ireland 14.2%

Iceland 17.8%

Students in another EU

/ EEA country, % of all

Source: InvestBulgaria, Eurostat

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

Page 11

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

– Labor cost subsidies

– Individual administrative services

Page 12

• 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

Attractive FDI sectors

Page 13

Leading global investors have chosen Bulgaria as an

FDI destination

IT development Back office

operations

Chemical and metal

Industry

Engineering Food

Page 14

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