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Bulgaria – investment climate and business opportunities

Bulgaria – investment climate and business opportunities. Sofia October 2013. Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery. Real GDP Growth. Inflation (HICP). Bulgaria. EU-27. Bulgaria. EU-27. 6.5%. 12.0%. 6.4%. 6.4%. 6.2%. 1.8%.

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Bulgaria – investment climate and business opportunities

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  1. Bulgaria – investment climate and business opportunities Sofia October 2013

  2. Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery Real GDP Growth Inflation (HICP) Bulgaria EU-27 Bulgaria EU-27 6.5% 12.0% 6.4% 6.4% 6.2% 1.8% 7.6% 0.8% 7.4% 0.4% 6.0% 3.4% 3.0% 2.5% 2.4% -5.5% 2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012 FDI Inflow Unemployment € mln. Bulgaria EU-27 9,052 11.4% 10.7% 10.4% 6,728 6,222 9.1% 9.1% 9.2% 6.9% 6.3% 3,152 2,437 1,478 1,315 1,151 2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012 Source: Bulgarian National Bank, Eurostat

  3. FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors FDI by host country, 1996-2012 (€ mln.) FDI flows by industry, 1996-2012 (€ mln.) (1)Austria 5,799 Real Estate 7,990 (2) Netherlands 5,710 Finance 7,604 (3) Greece 3,569 Manufacturing 6,750 (4) Germany 2,702 Trade 6,698 (5) UK 2,578 Energy 3,522 (7) Russia 1,750 Construction 2,891 (9) Italy 1,395 Telecom 2,209 (10) Hungary 1,311 Other 2,915 Source: Bulgarian National Bank

  4. The total value of Italian direct investment to Bulgaria is €1.4 bn from 1996 until 2013 FDI have peaked in 2007. Last two years the biggest investments are in the construction sector Six economic sectors represent about 97% of all Italian investments Italian FDI (€ mln) Other 5% Construction 9% 11% Real Estate Trade, repair and maintenance 12% 20% Finance 41% Manufacturing Source: Bulgarian National Bank Source: Bulgarian National Bank

  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

  6. Government financial indicators are remarkable not only in the region, but on a pan-European scale Average government debt (2007-2012) Greece Italy Belgium Portugal Iceland France Hungary Ireland Germany United Kingdom Austria Malta Netherlands Cyprus Poland Spain Turkey Finland Denmark Slovakia Latvia Czech Republic Sweden Norway Slovenia Croatia Romania Lithuania Bulgaria Luxembourg Estonia -13% -12% -11% -7% -6% -5% -4% -3% -2% -1% 0% 1% 15% Average budget deficit/surplus (2007-2012) Source: Eurostat

  7. Bulgarian economy maintains its excellent performance despite global challenges BG Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011 Budget deficit for 2012, % of GDP 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% Lithuania France -4.5% Bulgaria Netherlands -4.1% Spain Poland -3.7% Ireland Denmark -3.6% Turkey Euro Area -3.3% Portugal Italy -3.0% Hungary -2.8% Austria -2.6% Cyprus Brazil -2.5% Turkey -2.0% Hungary China -1.6% Iceland Sweden 0.0% Latvia Switzerland 0.0% Greece Germany 0.1% 01/10 07/10 01/11 07/11 01/12 07/12 01/13 Source: The Economist, Finance Ministry, Moody’s Page 7

  8. Bulgaria has one of the lowest business costs in Europe Lowest corporate income tax rate in Europe Cost of electricity for industrial users is 70% of the EU average Lowest cost of agricultural land in the European Union €/kWh, 2012 € / ha, 2011 Romania 1,616 Bulgaria 0.078 Bulgaria 10% Bulgaria 1,671 Estonia 0.082 Romania 16% Slovakia 3,343 Romania 0.083 Czech Rep. 3,621 Hungary 19% Turkey 0.096 Poland 3,671 Slovakia 19% Czech Rep 0.103 Greece 4,000 Hungary 0.108 Czech Rep 19% France 6,909 EU average 0.124 Belguim 8,079 Croatia 20% Slovakia 0.127 Germany 9,193 Turkey 20% Germany 0.130 Netherlands 9,472 Source: Eurostat; Savills Page 8

  9. Educated and skilled workforce is among the main advantages of Bulgaria Almost 60,000 students graduate every year from over 50 universities Bulgaria has one of the highest proportions of students abroad from all European countries Iceland 17.8% Business 19,480 Ireland 14.2% Social sciences 8,372 Slovakia 10.2% Engineering 7,178 Bulgaria 8.3% Education 3,677 Greece 5.8% Health 3,166 Austria 4.7% Law 1,553 Germany 3.1% Architecture EU-27 average 2.8% Agriculture Romania 2.2% Other 12,684 Students in another EU / EEA country, % of all Czech Republic 2.1% Source: National Institute of Statistics, Bulgaria

  10. 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 €2.5m • €1m in regions with high unemployment and €0.5m 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

  11. Biggest investors are supported through a priority investment scheme • Priority projects can be related to all sectors of the economy, which do not contradict regulation 800/2008 of the European Commission • Subsidies not allowed in mining, primary agriculture production, and shipbuilding • Priority projects should exceed €50m and create at least 200 new working places for a 3-year period • €25m + 100 working places for certain manufacturing projects • €10m + 50 working places for high-tech services and R&D • Priority projects receive all benefits for certified investors, as well as the following: • Lowest possible costs for the acquisition of government and municipal land + waived taxes for land status changes • Working group for project support is assigned by the Council of Ministers • Financial grant scheme for up to 10% of the investment project cost (50% for R&D)

  12. Which economic sectors have the highest potential for attracting Italian investors ? • 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

  13. Leading global investors have chosen Bulgaria as an FDI destination Page 13

  14. InvestBulgaria Agency InvestBulgaria Agency is a 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

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

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