InvestBulgaria AgencyInvestBulgaria Agencywww.investbg.government.bgwww.investbg.government.bg

Bulgaria – your investment decisionBulgaria – your investment decision

Dr. Stoyan StalevDr. Stoyan StalevExecutive DirectorExecutive Director

“UBCCE Third Business Forum”12-13 November 2009

Strategic location Why Bulgaria Macroeconomic Indicators FDI Inflow Highly Skilled Labor Force Comparison between

Bulgaria and Europe Business Sectors of Highest

Potential for Investors Our achievements in figures Investment Promotion Act Investment Incentives in

Bulgaria InvestBulgaria Agency

Structure of the Presentation

Pan-European Transport Corridors

9

4

7

10

8

Market access

EU membership and NATO membership Currency board EU’s most favourable taxes:

•10% corporate income tax rate• 0% in high-unemployment areas•10% flat tax rate on personal income

Europe’s most competitive operational costs Well-educated and highly-skilled labour force 45,000 Bulgarian students in Europe Government financial support for priority investment

projects Linking Europe and Asia Excellent climate, natural scenery, food and

hospitality

Why Bulgaria

Source: Bulgarian National BankSource: Bulgarian National Bank

GDP (annual real growth rate,%), 2002-2009

2009*

* January - June 2009

4.5 5.06.6 6.2 6.3 6.2

-4.9

6.0

2002 2003 2004 2005 2006 2007 2008

Source: Bulgarian National BankSource: Bulgarian National Bank

Inflation, (annual change, %), 2004 - 2009

* January - September 2009* January - September 2009

4.06.5 6.5

12.5

7.8

0.2*

2004 2005 2006 2007 2008 2009

Source: Bulgarian National BankSource: Bulgarian National Bank

Unemployment rate (%), 2003 - 2009

* January - September 2009* January - September 2009

13.512.2

10.79.1

6.9 6.38.0*

2003 2004 2005 2006 2007 2008 2009

Source: BNB, IBASource: BNB, IBA

Record FDI inflow in 2006 – 2008, EUR m

* Preliminary Data, *** Preliminary Data, ** January January –– August August

Greenfield+Expansion

866 1 103 903 9801 851

2 7363 152

6 222

8 596

6 549*

1 952**

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

FDI to GDP, %, 2007 – 2008FDI to GDP, %, 2007 – 2008

Source: BNB, Bank Austria CreditanstaltSource: BNB, Bank Austria Creditanstalt

Bulgaria leads CEE countries in terms of FDI to GDP indicator

6.0

0.8

6.85.4 5.8 6.1 6.2

4.43.4

4.93.4 3.3 3.0

6.6 5.8 5.4

2.50.7

2.5-0.8

29.7

19.2

BULGARIA CZECHREP

HUNGARY LATVIA POLAND ROMANIA UKRAINE SERBIA SLOVAKIA SLOVENIA TURKEY

2007 2008

FDI stock by sector, 1998 – 2008, %, EUR m

Quelle: BNB, IBAQuelle: BNB, IBA

22%22%

19%19%

19%19%

16%16%

7%7%

6%6%

5%5%

6%6%1886.9

1766.6

1931.2

2247.5

5509.0

6274.3

7469.9

6477.5

Other

Telecom

Electricity, gas and water

Construction

Trade

Manufacturing

Finance

Real estate

Source: BNB, IBA

Austria the Netherlands Greece Un. Kingdom Germany

16%

5367.7

12%

4145.7

9%

3074.4

8%

2710.0

7%

2229.4

Cyprus

Belgium &

Luxemburg USA Hungary Italy

5%

1726.2

5%

1612.0

4%

1285.8

3%

1171.3

3%

1105.4

FDI stock by country,1996 – 2008, %, EUR m

Treaty for avoidance of double taxation

between Bulgaria and Greece

Treaty for encouragement and reciprocal

protection of investments

Greece investments (1996-2008)

3074.4 EUR m

The biggest investments are in Finance

and Telecom

Greece investments in Bulgaria

Greece investment stock by years, EUR million, 2004 - 2008

Source: BNBSource: BNB

Greece investment stock in Bulgaria as of end of 2008 amounts to Greece investment stock in Bulgaria as of end of 2008 amounts to EURO 3074.4 EURO 3074.4 millionmillion, According to the FDI Stock by countries , According to the FDI Stock by countries Greece is ranked 3rdGreece is ranked 3rd

179.6

324.2

533.5

802.3

395.4

2004 2005 2006 2007 2008

Trade between Bulgaria and Greece

The trade between Bulgaria and Greece for 2008 amounts EUR 2676 m

Source: BNBSource: BNB

794891

10731230

1508

668735

9671126 1168

2004 2005 2006 2007 2008

Export to Greece Import from Greece

25022

2862

12005

8253

23764

132869

12992

681

493

4175

10124

39594

14288

262

528

4901

10307

61262

Russian

Italian

Spanish

French

German

English

Sofia

Plovdiv

Varna

Source: National Statistics Institute

Language education in upper secondary general schools by city, 2008/2009

~ 39,000 – Total number of students enrolled in IT and

Engineering related programs

Sofia Gabrovo

Rousse

Varna

Plovdiv

1699516995

41324132

35923592 43234323

49244924

Students enrolment in vocational schools & technical universities for 2008/2009

Bulgaria

Comparison between Bulgaria and Europe

Strong Fiscal Policy and Stable CurrencyStrong Fiscal Policy and Stable Currency

General Government Balance, %General Government Balance, %

Source: Economist Intelligence Unit, IBASource: Economist Intelligence Unit, IBA

Hungary Romania SlovakiaCzech

Republic

*0% Forecast for 2009-5.7%

-2.3% -2.2%-1.6%

3.5%

-3.8% -3.4%

-2.2% -2.0%

3.0%

2007 2008 E

Source: Economist Intelligence Unit Source: Economist Intelligence Unit

Comparison between Bulgaria and Europe

Average monthly wages, Q2 2008, EURAverage monthly wages, Q2 2008, EUR

261

463

744 790

945

Bulgaria Romania Slovakia Hungary CzechRepublic

Comparison between Bulgaria and Europe

10%

16% 16%19% 20% 20%

Bulgaria Romania Hungary Slovakia CzechRepublic

Turkey

Source: IBASource: IBA

* 0% for manufacturing companies in areas with high unemployment* 0% for manufacturing companies in areas with high unemployment

Corporate income tax rateCorporate income tax rate, , 20092009

Source: EUROSTATSource: EUROSTAT

Price level indices for all consumer goods and services, 2008, (EU27=100)

100

51

6269 70 70 72

83

99104 105

111

EU 27

Bulga

ria

Roman

ia

Polan

d

Hungar

y

Slova

kia

Czech

Rep

ublic

Slove

nia

Unite

d Kin

gdom

Germ

any

Italy

Franc

e

Attractive sectorsAttractive sectors Major investors supported by Major investors supported by InvestBulgaria Agency InvestBulgaria Agency

Electrical engineering Mechanical engineering Electronics Automotive parts manufacturing Chemical Industry

Solvay (Belgium) Aurubis (Germany) Liebherr (Germany) Lufthansa Technik (Germany) Montupet (France) Italcementi (Italy) Sise Cam (Turkey) Stomana Industry (Greece) Miroglio (Italy) Knauf (Austria) Ixetic (Germany) Schneider Electric (France)

Competitive advantagesCompetitive advantages Export oriented sectors The lowest operational cost in EU Highly skilled labour force

•7% with engineering degree•EUR 280 total average monthly

compensation (Q4 2008)

Manufacturing

OpportunitiesOpportunities Major projects supported by Major projects supported by InvestBulgaria Agency InvestBulgaria Agency

Wind parks Solar plants New nuclear PP Modernization and construction of new TPPs Biomass Biofuel

7 wind park projects 3 projects for modernization and construction of new TPPs 2 Biomass projects 3 Biofuel projects

Competitive advantagesCompetitive advantages Skilled labour force Availability of natural resources Favorable climate conditions Harmonized legislation with the EU’s

RES electricity production to double (from 6% to 12%) by 2010 Administrative and economic incentives for RES energy production

Energy Sector

IT & BPO

OpportunitiesOpportunities Main Players in Bulgaria Main Players in Bulgaria Software development IT support centers F/A shared service centers Contact centers

IT•Software AG (Germany) •Microsoft (USA)•Hewlett Packard (USA)•IBM (USA)•Nemetschek (Germany)•Johnson Controls (USA)•SAP Labs Bulgaria (Germany)•CISCO (USA)

BPO•60K (UK)•Sutherland (USA)•IBM (USA)•OPI Global (USA)•Hewlett Packard (USA)•C3i (USA)

Competitive advantagesCompetitive advantages Skills availability Strong traditions in IT development Reliable telecom infrastructure Europe's most competitive wages Reasonable office prices 9.71% share of the GDP for 2008 (second fastest growing sector in the country)

Real estate & Tourism

OpportunitiesOpportunities Major projects supported by Major projects supported by InvestBulgaria Agency InvestBulgaria Agency

Development ofDevelopment of• trade centers trade centers • business parks business parks • residential parksresidential parks• convention centersconvention centers• winter resorts winter resorts • balneology and SPA tourism balneology and SPA tourism • rural and alternative tourismrural and alternative tourism

Golf tourismGolf tourism Construction of luxury hotelsConstruction of luxury hotels

23 trade centers projects23 trade centers projects 6 business park projects6 business park projects 9 golf projects9 golf projects 5 winter resort projects5 winter resort projects 5 5 balneology and SPA tourismbalneology and SPA tourism

Competitive advantagesCompetitive advantages Real Estate is the fastest growing sector in the countryReal Estate is the fastest growing sector in the country FDI inflow in Real Estate amounts to EUR 19FDI inflow in Real Estate amounts to EUR 190000 mln. in 2008 mln. in 2008

(EUR (EUR 74097409 mln. (22%) for the period 1998 – 200 mln. (22%) for the period 1998 – 20088) )

Our achievements in figures

Source: IBASource: IBA

We are assistingWe are assisting 112121 certified investment certified investment

projects projects

EURO 9EURO 9..88 bln planned investments bln planned investments

5353 80800 0 new jobs will be creatednew jobs will be created

August 2004 – September 2009August 2004 – September 2009

Investment Promotion Act

Promotion for initial investment in the following sectors

Manufacturing industry

Production of electricity from renewable sources

Computer technologies

Research and development

Education

Human health care

Investment classifications under the investment promotion act, (€ Million)

Region or Sector Class B Class AGeneral

8 - 16 >16

In municipalities with unemployment rate equal or more than the country average 4 - 8 >8

In high-tech activities in the manufacturingindustry for the whole country 4 - 8 >8

In high-tech activities in the services, computer technologies and R&D sectors for the whole country

2.8 – 5.6 >5.6

Investment classes A and B depending on the value, region and sector allocation of the investment

All classes (A&B) Information services and shortened administrative services

Preferential treatment upon acquisition of a right of ownership and limited real rights over real estate – private state or private municipal property

Financial support for vocational training of employees for the needs of the investment project

A class Individual administrative services

Infrastructure support to the borders of the investment project site

Incentives under the Investment Promotion Act

No sector restrictions

Council of Minister decision

Conditions:

investment more than 50 Million Euro

or investment in depressed regions

or investment in High-Tech

or investment in industrial zone construction

Incentives

VIP treatment

Special Incentive Package

Priority Investment Projects

10% corporate income tax;

0% for manufacturing companies in areas with high unemployment

10% personal income tax, flat rate

Opportunity for R&D expenditure write-off

Depreciation of 2 years for computers and new manufacturing equipment

2-year VAT exemption for imports of equipment for investment projects over € 5 million, creating at least 50 jobs

5% withholding tax on dividends and liquidation quotas (0% for EU tax residents)

Up to 1 year minimum salary and reimbursement of social/health care security for employing young people and disadvantaged people through the Employment Agency

Investment incentives in Bulgaria

InvestBulgaria Agency is the Government investment promotion arm, part of the Ministry of Economy and Energy.

IBA services: Macroeconomic data on Bulgaria Legal advice Data on operational costs Regional information: industrial zones and infrastructure, data on

unemployment, skilled labour force and level of education Recommendation of investment project sites Identification of potential suppliers, contract manufacturers and

joint-venture partners Personalized administrative servicing Liaison with central and local governments Liaison with branch chambers and NGOs

InvestBulgaria Agency

InvestBulgaria AgencySofia 1000, 31 Aksakov Str.Phone: (+359 2) 985 5500Fax: (+359 2) 980 1320E-mail: iba@investbg.government.bg Web: www.investbg.government.bg