bulgaria – your investment destination in europe

Bulgaria – Your Investment Destination in Europe

Ministry of Economy, Energy and Tourism

Shanghai20 November 2012

Mr. Delian DobrevMinister of Economy, Energy and TourismRepublic of Bulgaria

Министерство на икономиката, енергетиката и туризма 2

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


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


EU and EFTA

Rus

sia

and

CIS

Turkey and

Middle East

Strategic geographic location Major transport corridors pass through Bulgaria


Why invest in Bulgaria


”the culture of impunity that once plagued Bulgaria has largely gone“

May 27, 2010

„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

• 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

Министерство на икономиката, енергетиката и туризма 5 Министерство на икономиката, енергетиката и туризма 5Ministry of Economy, Energy and Tourism

• 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

Labor • Skilled labour

• Lowest labour cost per hour in EU

• Employer-friendly labour laws

• Standard labor contracts with 1-month severance and 20 days vacation

Why invest in BulgariaAdvantages

• 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

• Focus on development of infrastructure – 7 highways currently under construction

• 70% of allocated road, rail and industrial zone infrastructure development funds still

available

Infrastructure

Taxes


Source: Bulgarian National Bank

Bulgarian economy has kept on growing despite the financial and economic difficulties in Europe and worldwide


2000 2002 2004 2006 2008 2010 2012

22

20

2

18

14

12

10

6

4

0

16

8

Bulgarian economy has outperformed EU average for the last 10 years

In absolute terms, exports have grown about 4 times since 2000

Exports (€ bn.)

1.9%1.7%

-5.5%

6.2%6.4%6.5%6.4%6.7%

5.5%

0.5%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

20052003 2011 20132007

0.4%

2009

Bulgaria

EU-27

Source: Eurostat

Real GDP growth (%)



Bulgaria’s exemplary financial stability has continued after the crisis


-8.4%

-5.6%

-3.8%

-8.6%

1.2%

0.8%

0.2%

-1.0%

-1.4%

-1.6%

-2.6%

-2.6%

-3.7%

-3.9%

-4.3%

-4.8%

-5.3%

-5.4%

-8.2%

-8.7%

-10.0%

-10.0%

Brazil

Austria

Denmark

Czech Republic

Italy

Euro Area

Netherlands

India

France

Poland

Spain

United Kingdom

Japan

United States

Greece

Egypt

BG

Hungary

Switzerland

Sweden

Germany

Turkey

China

In 2011, Bulgaria had one of the lowest budget deficits in EU

Budget deficit (% of GDP) 04/10 07/1110/10 04/1101/1107/1001/10

Turkey

Lithuania

Ireland

Hungary

Greece

Estonia

Bulgaria

10/11

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

Aa1

A1

Baa1

Ba1

B1

Caa1

Ca


Source: Eurostat

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%

-4% -3%

Average budget deficit/surplus (2006-2011)

-6% -5% -2%-11% -10% -1% 16%15%1%0%

TurkeyCroatia Norway

IcelandUnited Kingdom

SwedenFinland

Slovakia

Slovenia

Romania

Portugal

Poland

Austria

Netherlands

MaltaHungary

Luxembourg

LithuaniaLatvia

Cyprus

Italy

France

Spain

Greece

Ireland

Estonia

Germany

DenmarkCzech Republic

Bulgaria

Belgium

Average government debt (2006-2011)


Source: Bulgarian National Bank

The composition of FDI in Bulgaria has changed lately towards manufacturing and other sustainable sectors


67% 68%

53% 50%

66%

44%40%

27%

19%24%

100%

66%

33% 32%

47% 50%

34%

56%60%

73%

81%76%

34%

2011

1,851 2,736 3,152 6,222 9,052 6,728 2,437 1,151 1,746903

2005 2006

980

2007 20082003 2004 2009 20102000 2001 2002

1,103

Finance, real estate, trade

Manufacturing, energy, high

tech services, other sectors

Total FDI (€mln)


Investments by Chinese companies in Bulgaria


• 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

Chinese companies that have already chosen Bulgaria as an investment location:

Economic sectors with highest potential for attracting Chinese investments:


The EU and China – two of the biggest traders in the world


• 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.

Facts on EU-China cooperation

• 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.

EU-China trade picture


China is our biggest trading partner in Asia


12.460.3

36.971.9 78.0

101.7157.3 136.8

250.0

404.7

137.4

279.4

467.0

708.0

961.0

832.6

1110.5

628.4653.8

942.8

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Export ($ mln.) Import ($ mln.)

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


Trade in goods between Bulgaria and China (2011)


Exports to China were dominated by refined copper and copper ores

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.

Item %

Refined copper and copper alloys 68.1

Copper waste and scrap 8.0

Copper ores and concentrates 4.2

Copper mattes; cement copper 2.3

Boards, panels, consoles and other bases for electric control and distribution of electricity

1.9

Lead ores and concentrates 1.7

Organo-sulphur compounds 1.4

Aluminium waste and scrap 1.3

Automatic regulating and controlling instruments and apparatus

1.0

Other 10.1

Imports from China were quite diverse

Item %

Semiconductor devices 10.3

Air-conditioning machines 2.9

Parts and accessories for motorcycles and bicycles

2.6

Electric water heaters and electric space heating apparatus

2.5

Telephone sets 2.4

Ball or roller bearings 2.4

Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks

2.2

Flat-rolled products of iron or non-alloy steel

1.9

Toys 1.8

Other 71.0


Many leading multinational companies have chosen Bulgaria as a location for their production and high-tech services


IT & BPO Mechanical and Electrical

Engineering

Construction Materials

Telecom and Media

Energy Finance

Министерство на икономиката, енергетиката и туризма 15 Министерство на икономиката, енергетиката и туризма 15

Infrastructure projects in Bulgaria Zagora Airport: EU - China Logistics Hub


By 2020 EU transport hubs will not be able to handle all incoming air traffic

• 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

New logistics centers will be necessary to address the new air traffic, especially between Asia and the EU

Zagora Airport

• 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

Project Needs


Zagora Airport: EU - China Logistics HubWhy Zagora Airport


• 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

Zagora Logistics Hub Overview

Zagora Logistics Hub

Zagora Logistics Hub


Infrastructure projects in Bulgaria Port of Varna - General Information


Key part of important domestic and international logistical chains

• 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

Growth Potential

• 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


Port of Varna Port Terminals - Technical Parameters and Future Development

Berths

Total Berth Length (m)

Open (m2) storage area

Warehouse (m2)

Equipment

Commodities

Varna West Varna EastEzerovo Thermal

Power StationPetrol

Varna Rail Ferryboat

3 062

340 000

36 000

25 Electric Portal Cranes

General Cargo, Bulk Cargo, Liquid Cargo, Ro-Ro, Containers

17 13

2 072

115 000

23 400

General Cargo, Bulk Cargo, Containers,

Passengers

18 Electric Portal Cranes, 2 Portainers

3

530

4 200

-


coal

3

300

-

-

-

Oil products

2

400

-

-

-

Ro-Ro

• 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

Plans for port development and PPP:


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


Port of Burgas Port Terminals - Technical Parameters and Future Development

Berths

Total Berth Length (m)

Open (m2) storage area

Warehouse (m2)

Equipment

Commodities

Burgas EastBurgas East Bulk Cargo Terminal

Burgas East 2 Burgas West Nessebar

1 965

50 000

35 000

-

General Cargo, Bulk Cargo

14 7

820

35 000

5 328



3

715

42 225

-


Bulk Cargo, Containers

5

890

191 000

11 000 + 7 000



3

410

12 000

-

-

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


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 east of 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


Black See Motorway Cost Benefit Analysis, Financial and Public-Private Partnership


Cost Benefit Analysis

• 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

Project Partnership

• 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


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


National Company Industrial Zones - Strategic partner for investors in Bulgaria


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

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

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 25Ministry of Economy, Energy and Tourism

Travel & Tourism – important and growing industryFacts and figures:

• International and domestic tourism revenues form 10.5 % of GDP

• In 2011 revenues from international tourism totalled 2 852.4

million euros

• 8 712 821 foreign visitors in 2011, of which 6 328 023 tourists

• 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 26Ministry of Economy, Energy and Tourism

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,

Paul McGinley, 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


Ministry of Economy, Energy and TourismSofia 1052, 8 Slavyanska Str.Phone: + 3592 940 7001 Fax: +3592 987 21 90 E-mail: [email protected]: www.mee.government.bg


Welcome to Bulgaria!

mailto:[email protected]

http://www.mee.government.bg/

bulgaria – your investment destination in europe

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