Bulgaria – investment climate and business opportunities Seoul March 2013 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 Page 2 Bulgaria at a glance Geography, landmarks and economic overview Kozloduy NPP Veliko Tarnovo Rousse Dobrudja Belogradchik Balchik Sofia Varna Sunny Beach Sozopol Maritza Iztok Sandanski Bansko Plovdiv Page 3 Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery Real GDP Growth Inflation (HICP) Bulgaria EU-27 Bulgaria EU-27 6.6% 6.4% 6.5% 6.4% 6.2% 12.0% 1.7% 0.4% 7.4% 7.6% 6.1% 6.0% 3.4% 2.5% 3.0% -5.5% 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 Unemployment FDI Inflow 12.2% Bulgaria EU-27 € mln. 9,052 10.7% 10.4% 9.2% 9.1% 9.1% 6,222 6,728 6.9% 6.3% 3,152 2,736 2,437 1,209 1,341 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 Source: Bulgarian National Bank, Eurostat Page 4 FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors FDI by host country, 1996-2011 (€ mln.) FDI flows by industry, 1996-2011 (€ mln.) (1) Netherlands 6,018 Real Estate 8,204 (2) Austria 5,809 Finance 7,652 (3) Greece 3,664 Trade 6,522 (4) UK 2,733 (5) Germany 2,523 Manufacturing 6,479 (6) Cyprus 2,257 Construction 2,705 (7) Russia 1,486 Energy 2,699 (8) USA 1,283 Telecom 2,260 (9) Italy 1,279 (10) Hungary 1,272 Other 2,664 Source: Bulgarian National Bank 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 Average government debt (2006-2011) 130% 120% Greece 110% Italy 100% 90% Belgium 80% Portugal France Hungary 70% Germany United Kingdom Malta Iceland Austria 60% Ireland Cyprus 50% Poland Spain Netherlands Finland Turkey Sweden 40% Croatia Norway Slovakia 30% Denmark Lithuania Slovenia Czech Republic 20% Romania Latvia Bulgaria Luxembourg 10% Estonia 0% -11% -10% -6% -5% -4% -3% -2% -1% 0% 1% 15% 16% Average budget deficit/surplus (2006-2011) Source: Eurostat Page 7 Bulgarian economy maintains its excellent performance despite global challenges BG Budget deficit for 2012, % of GDP Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011 Egypt -10.9% Japan -9.8% United Kingdom -8.3% Spain -8.0% Greece -7.0% United States -7.0% Estonia India -5.6% Czech Republic -5.0% France -4.5% Netherlands -4.1% Lithuania Poland -3.7% Bulgaria Denmark -3.6% Euro Area -3.3% Hungary Italy -3.0% Ireland -2.8% Hungary Turkey Austria -2.6% Brazil -2.5% Turkey -2.0% China -1.6% Sweden 0.0% Switzerland 0.0% Germany 0.1% Greece 01/10 04/10 07/10 10/10 01/11 04/11 07/11 10/11 Source: Eurostat, The Economist, National Statistics Page 8 Bulgaria has one of the lowest business costs in Europe Lowest corporate income tax rate Cost of electricity for industrial Office rents in Bulgaria are in Europe users is 70% of the EU average among the lowest in Europe Estonia 0.062 €/kWh, € / sq. m / year, Bulgaria 10% 2011 Sofia 168 Q2 2011 Bulgaria 0.064 Zagreb 191 Romania 16% Romania 0.080 Bucharest 234 Hungary 19% Turkey 0.086 Budapest 240 Slovakia 19% Germany 0.090 Prague 252 EU average 0.092 Warsaw 312 Czech Rep 19% Hungary 0.104 Athens 336 Croatia 20% Czech Rep 0.110 Istanbul 339 Turkey 20% Slovakia 0.123 Moscow 724 Source: Eurostat; Savills Page 9 Educated and skilled workforce is among the main advantages of Bulgaria Sofia University Bulgaria has one of the highest proportions of • Established 1888 students abroad from all European countries • 25,000 students • Laboratories run by IBM, Oracle; • Affiliate center of Harvard University Iceland 17.8% Ireland 14.2% American University in Bulgaria Slovakia 10.2% • Liberal arts educational institution • Among the most famous American Bulgaria 8.3% universities in Central and Eastern Europe Greece 5.8% • 63% international students Austria 4.7% Germany 3.1% Sofia Technical University • 14,000 students EU-27 average 2.8% • Department of German engineering education (joint project of Bulgarian and German governments) and English Romania 2.2% engineering education Students in another EU Czech Republic 2.1% / EEA country, % of all Source: InvestBulgaria, Eurostat Page 10 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 Attractive FDI sectors • 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 Page 13 Leading global investors have chosen Bulgaria as an FDI destination IT development Back office Chemical and metal Engineering Food operations Industry Page 14 InvestBulgaria Agency Sofia 1000, 31 Aksakov Str. Phone: (+359 2) 985 5500 Fax: (+359 2) 980 1320 E-mail: [email protected] Web: www.investbg.government.bg.