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BULGARIA – PROSPECTIVE LOCATION FOR FOREIGN DIRECT INVESTMENTS

BULGARIA – PROSPECTIVE LOCATION FOR FOREIGN DIRECT INVESTMENTS. Elena PISHTOVKOLEVA, Director Investment Policy Ministry of Economy and Energy 27-28 November 200 7. CONTENTS. FDI Statistics Investment Competitiveness of Bulgaria Prospective Sectors Incentives Industrial Zones.

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BULGARIA – PROSPECTIVE LOCATION FOR FOREIGN DIRECT INVESTMENTS

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  1. BULGARIA – PROSPECTIVE LOCATION FOR FOREIGN DIRECT INVESTMENTS Elena PISHTOVKOLEVA, Director Investment PolicyMinistry of Economy and Energy27-28 November 2007

  2. CONTENTS • FDI Statistics • Investment Competitiveness of Bulgaria • Prospective Sectors • Incentives • Industrial Zones

  3. MACROECONOMIC TRENDS Source: NSI, EUROSTAT • High and constantly rising economic growth • Bulgaria is among CEE leaders • Industry – main growth engine

  4. MACROECONOMIC TRENDS CREDIT RATINGS Source: Мinistry of Finance Since 2000 the credit rating of Bulgaria has been raised over 25 times.

  5. FOREIGN DIRECT INVESTMENT Source:Bank Austria Creditanstalt

  6. FOREIGN DIRECT INVESTMENT Source: BNB

  7. FOREIGN DIRECT INVESTMENT 4364 3 807* 3 103 2736 1 856 1003 980 903 866 * 1.-9.2007 Source: BNB, IBA Record inflow of non-privatization investments in 2005-2007

  8. FOREIGNDIRECT INVESTMENT IN BULGARIA BY COUNTRIES, %, EUR mln. 1996 – 2006 Source: BNB

  9. FOREIGN DIRECT INVESTMENTS IN BULGARIABYINDUSTRY, %1998 – 2006

  10. FOREIGN DIRECT INVESTMENTS in 2007

  11. INVESTMENT COMPETITIVENESS • A.T. Kearney’s Global Services Location Index /March 2007/: Bulgaria - 9th worldwide and 1st in Europe in terms of investment attractiveness • UNCTAD’s World Investment Report 2007:Bulgaria - 7th worldwide in terms of FDI Performance

  12. INVESTMENT COMPETITIVENESS MOST PROSPECTIVE SECTORS FOR INVESTMENT • Services sector: IT, RES, transport and tourism • Industry sector: electronics, mechanical and electrical engineeringand steel processing • Primary sector: mining and quarrying, petroleum products UNCTAD’S SURVEY (2007-2008) OUTLINE THE MAIN COMPETITIVE ADVANTAGES OF BULGARIA • Products for lower volume niches • Goods and services with average and high level of value added • In shorter term – investments in energy, transport and infrastructure • In medium and long term – greenfield investment, acquisitions and merges. Most prospective sectors: mechanical engineering, electronics, ICT, BPO DELOITTE’S SURVEYOUTLINE

  13. TAX POLICY • Corporate Tax Rate – 10% as of 1.1.2007 • 0% corporate tax rate in 138 municipalities with high unemployment rate • 10% flat tax rate on personal incomes as of 1.1.2008 • Reduction of the social security burden by 6 percentage points as of 2006 and allocation of over USD 384 mln. for use by the business • Increased depreciation rate to 50% for purchasing new production and technology equipment, machinery, software and hardware

  14. UNEMPLOYMENT RATES - MUNICIPALITIES Source: Employment Agency over 50% than average over 35% than average

  15. Promoted economic activities • In the industrial sector: manufacturing industry, energy production from renewable energy sources • In the sector of services: high tech activities in the field of computer technologies; research and development activities, as well as in the field of education and humanitarian health services Classes of Investment • Class A – over 36 EUR mln. • Class B – over 21 EUR mln. Opportunities for reduction of the thresholds for: • Investments in municipalities with high unemployment • High-tech production and services LAW on INVESTMENT PROMOTION

  16. LAW on INVESTMENT PROMOTION Incentives Shorter terms of administrative service Individual administrative service Property rights to real estate with state or municipal ownership Financial support for construction of public infrastructure Financial support for training for acquiring professional qualification

  17. Trans-European transport corridors crossing Bulgaria

  18. INDUSTRIAL ZONES State or Municipal OwnershipPrivateOwnership

  19. 637 322 1671 635 - Number of university graduates, 2005 6677 247 • Technical universities • Vocational upper secondary schools with Machine building and Heavy metal industry related programs • Vocational Electrical Engineering upper secondary schools • Vocational Electronics upper secondary schools Vocational schools and technical universities in Bulgaria Source: IBA

  20. Graduation from universities IT and engineering programs in Bulgaria BA+MA, 2005 Total science graduates – 9000 Total IT & engineering graduates - 6677 Source: IBA

  21. Average monthly wages and salaries of the employees under labour contract by economic activities in 2007* (BGN) Source:NSI * - Preliminary Data

  22. 2007 SPECIAL 301 REPORT OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE „Bulgaria has been removed from the Watch List due to improvements in IPR enforcement efforts and passage of IPR legislation in response to heightened engagement with the United States.” Protection of Intellectual Property Rights the Case of Bulgaria

  23. Map of top foreign manufacturers in Bulgaria Sparky Lifton Texaco (Orgahim) SET Rousse Shipyard (German company) Bramac Silistra Vidin Knauf Rousse Mayr Melnhof Amylum Actavis Provimi Nikopol Dobrich Razgrad Solvay Italcementi Acid and Fertilizer Linde Gas Atusa Luxcraft FAF Metal Carlsberg Montana Holcim Palfinger American Standard ABB Effebiesse Hamberger Provimi Pleven Shoumen Targovishte Vratsa Cherven Bryag Sparky Bijlsma Kaspichan Devnya Festo Hyundai Siemens Kraft Nestle Coca Cola Heineken Viohalco Danone Coats Maser Holding Melexis Roca Sisecam Varna Lovech Delta Alfa Wood EPIQ Nicoletti Botevgrad Teteven Sevlievo Planzee Tizit Dolni Chiflik Trudovets Troyan Grammer Gabrovo Actavis Umicore Kastamonu Entegre Miroglio Gabrovo Miroglio Pirdop Sopot Gorno Sahrane Lukoil Kronospan Interbrew Elin Pelin Sofia Kazanluk Sliven SKF Arkomat (VW) Miroglio Bourgas Kazichene Chipita Nova Zagora Radomir Swedish Match Kuhn Stara Zagora Kostenets Videoton Heineken Dupnitsa TKM Fruit & Juice Actavis Stamboliiski Plovdiv Dewavrin Perushtitsa Parvomay Schneider Electric Blagoevgrad Carlsberg Liebherr Socotab Linde Gas Safil Fererro Interbrew Haskovo Razlog Interbrew Magnetic Head Technology Gotse Delchev Rollmann ABB Petrich Source:IBA

  24. Korean Investment to SE Europe Source: Korea Eximbank

  25. Attractive sectors for Korean investmentsin Bulgaria • Automotive Industry • Mechanical engineering • Electronics • ICT • Energy • Food processing

  26. Quality of human capital • Education levels among Europe top 5% • 7% of workforce has engineering degrees • English studied by 70% of students • Motivated and entrepreneurial attitude Quality of business environment • Strong institutional support for foreign investors • No restrictions to capital flows Quality of life • Excellent all-season outdoor recreation • Diverse cultural heritage and art activities • World renown food and beverages Gateway to Europe and Asia High and sustainable growth of the economy Favourable business environment 10% corporate tax rate (lowest in EU) 10% flat personal incomes tax rate /1.1.2008/ Investment incentives for qualified investment Among lowest operational cost in a European market economy Duty free agreements covering markets with 550 mln. customers Double Taxation Avoidance Treaty with Korea Why Bulgaria?

  27. REPUBLIC OF BULGARIAMINISTRY OF ECONOMY AND ENERGY INVESTMENT POLICY DIRECTORATE TEL: +359-2-940-7461 FAX: +359-2-980-5109 www.mee.government.bg

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