Bulgaria – Your Investment Destination in Europe

1. Bulgaria – Your Investment Destination in Europe Shanghai 20 November 2012 Mr. Delian Dobrev Minister of Economy, Energy and Tourism Republic of Bulgaria Ministry of Economy, Energy and Tourism

2. 0 Bulgaria at a glance: Location and key data • Area: 110,910 sq. km • Number of Inhabitants (2011): 7.4 mln • Capital and Largest City: Sofia • Other Cities: Plovdiv, Varna, Bourgas, 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 Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

3. 0 Bulgaria is a main transport and transit center and is only 3 hours flight from all major destinations in Europe, Russia and the Mediterranean region Russia and CIS EU and EFTA Turkey and Middle East Strategic geographic location Major transport corridors pass through Bulgaria Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

4. 0 Why invest in Bulgaria ”the culture of impunity that once plagued Bulgaria has largely gone“ May 27, 2010 • Political and business stability • EU member since 2007 • NATO member since 2004 • WTO member since 1996 • Currency board backed by IMF • Among the lowest budget deficits and government debts in the EU • Low cost of doing business • Favorable tax regime • Lowest operational costs within the EU • Access to markets • European Union / European Free Trade Association • Russia and CIS • Turkey / Middle East • Educated and skilled workforce • Government Incentives • Shortened administrative procedures • Preferential acquisition of state or municipal land • Financial support for professional training / education • Infrastructure subsidies • Individual administrative services „While governments across the euro-zone periphery are on the ropes or have been felled by the economic crisis, Prime Minister Boyko Borisov's government has drawn international accolades for cutting spending while maintaining high levels of public support.” September 10, 2011 Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

5. 4 Why invest in Bulgaria Advantages • 10 % effective corporate income tax rate • 10 % effective flat personal income tax rate • Equipment imports for projects over € 5 M exempted from VAT • 5% withholding tax on dividends and liquidation quotas (0% for EU tax • residents) • 68 Double Taxation Avoidance Treaties including EU, China, Russia and USA; 66 Agreements on mutual protection and promotion of foreign investments Taxes • Skilled labour • Lowest labour cost per hour in EU • Employer-friendly labour laws • Standard labor contracts with 1-month severance and 20 days vacation Labor • Stable and independent government policies • Bulgaria is not subject to current Eurozone legislation • Financial stability pact ensuring continued low taxation and stable fiscal • policy Government policies • 24-hour customs at the warehousing locations • Virtual consulate (online visa approval and issue of travel documents) • Visa-free transit to non-EU countries Customs & visas Infrastructure • Focus on development of infrastructure – 7 highways currently under construction • 70% of allocated road, rail and industrial zone infrastructure development funds still available Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 4

6. 1 Bulgarian economy has kept on growing despite the financial and economic difficulties in Europe and worldwide Bulgarian economy has outperformed EU average for the last 10 years In absolute terms, exports have grown about 4 times since 2000 22 Real GDP growth (%) 20 18 16 14 12 0.4% 10 8 6 Bulgaria 4 EU-27 Exports (€ bn.) 2 0 2003 2005 2007 2009 2011 2013 Source: Bulgarian National Bank Source: Eurostat Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism Ministry of Economy, Energy and Tourism

7. 0 Bulgaria’s exemplary financial stability has continued after the crisis In 2011, Bulgaria had one of the lowest budget deficits in EU Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011 BG Aa1 Egypt Greece United States A1 Estonia Japan United Kingdom Spain Poland Lithuania Baa1 France India Bulgaria Netherlands Hungary Euro Area Ba1 Ireland Italy Turkey Czech Republic Denmark Austria B1 Brazil China Turkey Germany Caa1 Greece Sweden Budget deficit (% of GDP) Ca Switzerland 01/10 04/10 07/10 10/10 01/11 04/11 07/11 10/11 Hungary Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

8. 0 Government financial indicators are remarkable not only in the region, but on a pan-European scale Average government debt (2006-2011) Greece Italy Belgium Portugal Hungary France Germany United Kingdom Malta Austria Iceland Ireland Cyprus Netherlands Finland Poland Spain Sweden Turkey Norway Croatia Slovakia Denmark Lithuania Czech Republic Slovenia Latvia Romania Bulgaria Luxembourg Estonia -11% -10% -6% -5% -4% -3% -2% -1% 0% 1% 15% 16% Average budget deficit/surplus (2006-2011) Source: Eurostat Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

9. % The composition of FDI in Bulgaria has changed lately towards manufacturing and other sustainable sectors Total FDI (€mln) 1,103 903 980 1,851 2,736 3,152 6,222 9,052 6,728 2,437 1,151 1,746 Finance, real estate, trade Manufacturing, energy, high tech services, other sectors 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Bulgarian National Bank Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

10. 4 Investments by Chinese companies in Bulgaria Chinese companies that have already chosen Bulgaria as an investment location: Economic sectors with highest potential for attracting Chinese investments: • Huawei and ZTE : • Huawei Bulgaria Branch opened in 2005 and has become one of the main suppliers to Bulgaria telecom industry • ZTE opened its office in Sofia in 2001. It operates successfully on the Bulgarian market, providing telecommunication equipment and network solutions • Great Wall/ Litex Motors: • Litex Motors factory near Lovech is the only assembly plant for Chinese automobiles in Europe • Production started in 2012. Maximum capacity of 50 000 cars annually • Three models covering various market segments are being assembled in Bulgaria • Tianjin State Farms Agribusiness Group Company • In 2011 the Chinese company rented 20 000 decares of agricultural land in Northwestern Bulgaria • All of its agricultural production (maize, lucerne, sunflower) is exported to China • The company is considering further expansion of its activities in Bulgaria in the field of agriculture (wine production; animal breeding) • In recent years many Chinese companies have invested in renewable energy • Electronics and electrical engineering • Machine building • Automotive industry • IT and BPO • Transport & Logistics • Agriculture and food processing industry • Chemical industry Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

11. 0 The EU and China – two of the biggest traders in the world Facts on EU-China cooperation EU-China trade picture • China is the second largest economy and biggest exporter in the world • China has become the fastest growing market for European exports • China and the EU are trading more than € 1 billion euro every day • By 2015, 90 % of world growth will be generated outside Europe, with a third from China alone • At the 15th EU-China Summit held on 20 September 2012, both sides agreed to launch negotiations on a bilateral investment agreement as soon as possible. • EU-China trade has increased dramatically in recent years • China is now the EU’s 2nd trading partner behind the USA and the EU is China’s biggest trading partner (2011): • EU Imports Partners:EU Exports Partners • 1. China (€ 292 bn) 1. USA (€ 261 bn) • 2. Russia (€ 198 bn)) 2. China (€ 136 bn) • 3. USA (€184 bn) 3. Switzerland (€ 122 bn) • EU-China main trading goods • EU imports from China are dominated by industrial goods: machinery and transport equipment, and manufactured articles. • EU exports to China are also concentrated on industrial products: machinery and transport equipment, manufactured goods and chemicals. Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

12. 0 China is our biggest trading partner in Asia • In 2011 trade between Bulgaria and Asia totalled USD 4.7 bn, with Bulgarian exports amounting to USD 2.2 bn – up 22 % from 2010. The largest increase of Bulgarian exports was to China (62%), India(53%) and Japan (42%) • In the third quarter of 2012 China became our second largest trading partner among non-EU countries, after Turkey • Exports to China have increased nearly 33 times and imports 7 times since 2002 Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

13. 0 Trade in goods between Bulgaria and China (2011) Exports to China were dominated by refined copper and copper ores Imports from China were quite diverse There is scope for expanding Bulgarian exports to China of agricultural and food products, wine, essential oils, perfumery and cosmetics, dairy products, machinery and other commodities. Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

14. 4 Many leading multinational companies have chosen Bulgaria as a location for their production and high-tech services Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

15. 4 Infrastructure projects in Bulgaria Zagora Airport: EU - China Logistics Hub Project Needs By 2020 EU transport hubs will not be able to handle all incoming air traffic Zagora Airport • Air cargo increase • 5.8 M tonnes increase in air cargo to and from the EU • 78% of which comes from Asia • Available capacity will fall short by 5 M tones • Passengers increase • 307 M increase in passengers to and from the EU • 26% of which comes from Asia • Available capacity will fall short by 150 M passengers • The new Zagora Logistics Hub offers excellent location • 3 hours by plane to all EU locations; • 24 hours by truck to all EU locations • Central location at the intersection of three EU transport corridors • 3-hour drive to Turkey, Greece, Romania, Serbia, Macedonia • Intermodal capabilities: air, rail and road transport • Room for ten-fold expansion • Good weather conditions • Fast customs and visa processing for countries with EU visa regimes • Infrastructure • Existing air, road and rail infrastructure currently upgrade • E-80 Highway (EU transit Corridor No 8; 1km from the airport) • Railway (EU transit Corridors No 8 and No 10; electrified; 1km from airport) • Land availability • New logistics centers will be necessary to address the new air traffic, especially between Asia and the EU Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 14

16. 4 Zagora Airport: EU - China Logistics Hub Why Zagora Airport Zagora Logistics Hub Overview • Expand current airport to become large international transit hub • Area: 5 km2 current area (expansion planned) • Cargo capacity: 250, 000 tonnes per year • 2 runways handling Boeing 747 and Airbus 380 • Passenger capacity: 10 -20 M per year • Combined Air/Road/Rail cargo terminal • Large free trade industrial zones and assembly facilities • Specialized customs/ visa handling • Permanent Trade Expo for Chinese manufacturers • Zagora will serve as a major distribution hub for the EU – China air traffic • Distribute traffic to smaller airports in the EU, CIS, North America and Middle East • Fast track visa and customs service • Provide additional landing slots for wide-body aircraft ZagoraLogistics Hub Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 15

17. 4 Infrastructure projects in Bulgaria Port of Varna - General Information Key part of important domestic and international logistical chains Growth Potential • The biggest port complex in Bulgaria • A convenient bridge for traffic of goods between: Europe, Russia, Ukraine, Caucasus, Central Asia, Middle and Far East • The port can be used during the whole year • Modern equipment and specialized terminals: Varna East; Varna West ; Varna Rail Ferry Complex • Operating link in the logistical chain “river – rail – sea” for transit traffic to/from Central Europe routed via the Danube Port of Ruse and the Ruse – Varna Railway Line • Part of Comprehensive Trans-European Transport Network – opportunity for European funding • Part of Pan-European Transport Corridor VIII • Strong industrial hinterland, good rail and road access; excellent conditions for transit traffic between Europe, the Middle and Far East and TRACECA Corridor • Easy and convenient access to the national road network • Certified in accordance with the ISPS Code requirements Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 16

18. 4 Port of Varna Port Terminals - Technical Parameters and Future Development Varna West Varna East Ezerovo Thermal Power Station Petrol VarnaRail Ferryboat Berths 17 13 3 3 2 Total Berth Length (m) 3 062 2 072 530 300 400 Open (m2) storage area 340 000 115 000 4 200 - - Warehouse (m2) 36 000 23 400 - - - Equipment 25 Electric Portal Cranes 18 Electric Portal Cranes, 2 Portainers 6 Electric Portal Cranes - - Commodities General Cargo, Bulk Cargo, Liquid Cargo, Ro-Ro, Containers General Cargo, Bulk Cargo, Containers, Passengers coal Oil products Ro-Ro Plans for port development and PPP: • Hub port – Capacity to handle Post Panamax container ships, 6 750 TEU, L – 300 m, B – 40 m., H – 14.5 m. • Construction of Grain Terminal on the North Coast of the Varna Lake – Capacity 1,85 mln. t. • Expansion of the container terminal – Varna West – Adding capacity of 100 thousand TEU. • Construction of terminal for liquid dangerous goods – Varna West – Capacity of 1.2 mln. t. • Construction of passenger terminal and business center – Varna East • Under preparation for concession:Port Terminal of Varna West, Varna Rail Ferryboat Complex, Dangerous Goods Terminal, Ezerovo Thermal Power Station, Petrol Terminal Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 17

19. 4 Infrastructure projects in Bulgaria Port of Burgas - General Information Traffic and Infrastructure significance • A connecting point between Pan-European Transport Corridor VIII and TRACECA • The nearest largest port to Bosphorus • Serves the big industrial centers, located in the South of the Balkan Mountain • Services a great part of the transit flows coming from Western Balkan and Central European countries • Trakia Motorway and the Plovdiv – Burgas Railway are the main transport links to the port • Included in the Core Trans-European Transport Network – opportunities for European funding • Easily accessible to the sea • The port can be used during the whole year • Modern equipment and specialized terminals: Burgas East; Burgas West; Burgas East 2; Bulk Cargo Terminal • Certified in accordance to the ISPS Core requirements Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 18

20. 4 Port of Burgas Port Terminals - Technical Parameters and Future Development Burgas East Burgas East Bulk Cargo Terminal Burgas East 2 Burgas West Nessebar Berths 14 7 3 5 3 Total Berth Length (m) 1 965 820 715 890 410 Open (m2) storage area 50 000 35 000 42 225 191 000 12 000 Warehouse (m2) 35 000 5 328 - 11 000 + 7 000 - Equipment - 23 Electric Portal Cranes 7 Electric Portal Cranes 11 Electric Portal Cranes - Commodities General Cargo, Bulk Cargo General Cargo, Bulk Cargo, Liquid Cargo, Ro-Ro, Containers Bulk Cargo, Containers General Cargo, Bulk Cargo, Liquid Cargo, Ro-Ro, Containers Passengers Plans for port development and PPP: • Terminal 2B – for General Cargo • Terminal 3 – for Ro-Ro and ferryboat transportation • Terminal 4 – for containers handling • Construction of passenger terminal in Burgas East, as part of the SUPER BURGAS Project • Under preparation for concession: Burgas-West Port Terminal, Nessenar Port Terminal Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 19

21. 4 Infrastructure projects in Bulgaria Black See Motorway The project is of both national and international importance due to its potential to significantly improve connections between Bulgaria, Albania, Macedonia, Italy and other EU countries to the west of Bulgaria • National Significance • Will improve route between the west and eastof the country • Links to A-1 Trakia motorway and A-2 Hemus motorway • International Significance • Five Pan European Corridors pass through the country: IV, VII, VIII, IX, X • Improvements are contained within Pan-European corridor VIII – linking Durres, Tirana, Skopje, Sofia, Stara Zagora, Burgas and Varna • Economic Context • Link to Varna and Burgas ports – key strategic gateways for trading partners such as Ukraine, Russia and Turkey • Burgas – home of the biggest oil refinery in SEE • The section is currently served by road which is mostly single carriageway and running through many towns and villages • Close to the coast, the section links many resorts between Varna and Burgas • Preferred option – 94.8 km section of new lane motorway Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 20

22. 4 Black See Motorway Cost Benefit Analysis, Financial and Public-Private Partnership Cost Benefit Analysis Project Partnership • Net Present Value: € 857.48 m • Economic Internal Rate of Return: 21.28 % • Economic Benefit to Cost Ratio: 4.73 • Evaluation used – multi-modal transportation model • /The Bulgarian Transport Model/: • people movement • movement of freight • Total project costs - € 722.6 m • € 474.3 m of this amount = construction costs • The analysis shows that the project is a strong performer in economic terms • No sources of income have been included in the analysis - further study needs to be performed • National Company Strategic Infrastructure Projects – entity responsible for the project • Preferred form for development – public-private partnership • Period – 35 years • Parties – Bulgarian state and a strategic investor • Bulgarian state does not provide any state or bank guarantees or guarantee traffic volume • Private partner shall bear all risks and costs Министерство на икономиката, енергетиката и туризма Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism 21

23. 4 Potential investment locations in Bulgarian industrial zones The industrial zones in Bulgaria offer attractive conditions for establishing production, warehousing, logistics and other activities at a very competitive prices - 14 functioning zones, with active local and foreign investors - 21 zones, either with fully or mostly developed infrastructure and ready to be invested in - 27 zones under development Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

24. 4 National Company Industrial Zones - Strategic partner for investors in Bulgaria National Company Industrial Zones “NCIZ” is a state-owned company specialized in: • Industrial park development • Management of Industrial zones and • Innovation centers • Provision of additional services Main activities: • Development of industrial zones in line with the latest standards • Encouragement of investments in sectors with high added value • Creation of favourable conditions for investment • Total of 8 projects • 4 969 500 m² total area • 841 580 m² built area • 225 500 m² open warehouses • Three developed industrial zones: Ruse; Vidin; Svilengrad • Five zones on early stages of development: Sofia; Burgas; • Karlovo; Pleven/ Telish; Varna West Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

25. 0 Travel & Tourism – important and growing industry • Facts and figures: • International and domestic tourism revenues form 10.5 % of GDP • In 2011 revenues from international tourism totalled 2 852.4million euros • 8 712 821 foreign visitors in 2011, of which 6 328 023tourists • 4.6 % annual growth in international tourist arrivals in 2011 • What do we offer: • Excellent climate and environmental conditions • Unique combination of seaside, mountains and mineral water • Long lasting tradition in balneology and spa tourism (more than 600 mineral springs) • Ancient history and unique cultural heritage • Nine cultural sites in the UNESCO list • Vivid customs and friendly people • Bulgaria is well known for its valley of roses; Bulgarian rose oil is one of the main ingredients used in high quality perfumes all over the world • Unique experiences throughout the whole year • Affordable prices Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

26. 0 Bulgaria – emerging golf destination • International Association of Golf Tour Operators’ award in 2012 – • “Undiscovered Golf Destination” • 7 operational golf courses,situated near the Black see coast or in the foot of the mountains, designed by some of the biggest names in golf – Gary Player, • PaulMcGinley, Ian Woosnam, Peter Harradine • excellent leisure, treatment and wellness facilities • VIP treat • gourmet establishments • shopping outlets • Professional Golfers Association • certified instructors • Residential property and rent Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism

27. 4 Ministry of Economy, Energy and TourismSofia 1052, 8 Slavyanska Str.Phone: + 3592 940 7001Fax: +3592 987 21 90E-mail: e-docs@mee.government.bgWeb: www.mee.government.bg Welcome to Bulgaria! Министерство на икономиката, енергетиката и туризма Ministry of Economy, Energy and Tourism