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Information and Communication Technologies in Bulgaria. NEDELCHO NEDELCHEV Deputy Minister Ministry of Transport and Communications IT Conference, 19 October 2004 SYSTEMS 2004. Bulgaria – most attractive FDI location in CEE. Best EU accession status Transparent rules & practices

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Information and Communication Technologies in Bulgaria

NEDELCHO NEDELCHEV

Deputy Minister

Ministry of Transport and Communications

IT Conference, 19 October 2004

SYSTEMS 2004


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Bulgaria – most attractive FDI location in CEE

  • Best EU accession status

  • Transparent rules & practices

  • NATO member, political stability

  • Low inflation - 2003 average inflation was 2.3%

  • Low budget deficit – 0% in 2003

  • No currency fluctuations – Bulgarian lev pegged to the euro

  • High real GDP growth

  • High levels of education & skills

  • Competitive labour, rent and construction costs

  • Best in CEE quality of labour / cost ratio


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Gross Domestic Product (EUR bn)

Source: National Statistics Institute


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GDP Dynamics: 7 consecutive years of growth

Source: Bulgarian National Bank


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Foreign Direct Investment, USD mil

Source: Bulgarian Investment Agency, Bulgarian National Bank


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Doing Business in Bulgaria (1)

  • Taxes and tariffs

    • Corporate profit tax – down from 28% (2001) to 15% (2005)

    • Industrial commodity groups, such as ICTs and components, energy

      sources, raw materials, medicines and others, are treated with zero rate of customs duties

    • 0% VAT rate on exports of software

    • WTO membership since 1996

    • European Union Association Agreement

    • EFTA agreement

    • CEFTA membership

    • Bilateral effective free trade agreements

    • Personal taxation: top rate dropped from 38% (2001) to 24% (2005)


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Doing Business in Bulgaria (2)

  • Rent

    • Boom in the offering of real estate – from EUR 8 to 20 / sq.m

  • Telecom services

    • 2 active GSM networks, 3-rd in progress

    • 85% of households covered by the fixed network

    • Digitalisation: 45% by end 2004, 80% by end of 2007

    • 20.5% of the population estimated to have Internet access in 2004

    • Over 3,000 km of optical transmission lines

  • Transport links

    • Daily direct flights to most European countries

    • Five international transport corridors crossing Bulgaria


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Telecom Market

Mobile

  • First GSM operator: Mobiltel– 2.8 mil subs

  • Second GSM operator: Globul – 1.2 mil subs

  • NMT operator: Mobikom – 100 K subs

  • Third GSM license: BTC, part of privatization of the incumbent, start operations in April 2005

  • Forthcoming licenses: UMTS licenses to be issued in early 2005

    Mobile market in 2003 recorded 10.9% y-o-y growth

    Penetration - 50% end of 2004, expected to reach 75% in 2008


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Telecom Market

Fixed telephony-

on the road of liberalization

  • Incumbent BTC privatized in June 2004 in a landmark for CEE private equity deal, total effect of privatization proceeds plus investment of over euro 1.1 billion

  • 12 new operators of fixed voice service have been licensed (as of August 2004)

  • Reference interconnect offer /RIO/ approved in June 2004

  • Local loop unbundling effective from Jan 2005


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Telecom Market Internet Users

Source: ICT Development Agency


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Telecom Market Legal and Regulatory Framework

  • New Telecommunications Law - fully harmonized with 2000 acquis and partially with 2002 acquis

  • Transparent regulatory system

    • Significantly shortened terms and procedures for license issuing have been introduced

    • Decreased number of activities that require individual licenses

  • Law on the Electronic Document and Electronic Signature

  • Law on the Protection of Personal Data

  • Convention on Cyber Crime


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Telecom market - investments

Foreign Direct Investments in Communications, 1998 – June 2004

USD 6.556 mil

USD 1.049 mil


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Telecom market - conclusions

  • Both mobile and fixed markets still have high growth potential

  • Large investments expected in every segment

  • New market entrants in mobile, fixed, satellite to fuel growth and competition

  • Telecom market in Bulgaria is of interest for:

    • Investors

    • Vendors

    • Service and applications’ providers


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ICT Highlights

  • More than 1,000 small and medium sized IT enterprises

    • Traditions (35 years of experience) in this area

    • Very well developed educational system in electronics, engineering and computer sciences

  • Areas of competitive advantage

    • Software – computer system software, networking software and web-design, CAD/CAM/CAE software, telecommunications and wireless development software, application software, firmware

    • Hardware – computer and systems assembling, digital and analog printed circuits design, PCB manufacture, analog mixed engineering

    • Microelectronics – design ASIC’s, front-end and back-end microelectronic activities

    • Automation – systems for industrial automation



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IT – Quality through Certifying of Companies and Specialists

  • Over 100 ICT companies certified under the ISO 9000

  • 15 companies certified under the ISO 14000

  • In January 2004 the European Software Institute (ESI) launched a Regional ESI Center of Excellence in Bulgaria

    Bulgaria was chosen out of other Eastern European countries to lead this project and host an ESI Center because:

    • Bulgaria has remarkable specialists in software development

    • Bulgarian industry is ready to adopt modern certification and quality standards to operate globally

    • ICT sector is a national priority and the Bulgarian government is committed to develop the software industry


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ESI Center Bulgaria (1)

Mission:

  • Develop industry competitiveness on the Balkan and Eastern European countries.

  • Bulgaria - center of excellence and leading technologies

    Target area:

  • Bulgaria and the Eastern European countries

    Target Groups

  • IT companies and specialists

  • IT-intensive companies and organizations

  • State institutions and departments (e-government)

  • Citizens – e-awareness, e-government, IT penetration


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ESI Center Bulgaria (2)

How can ESI Center Bulgaria help the ICT sector to increase its competitiveness?

  • Support businesses to increase value added in their operations through implementation of latest good practices in:

    • Quality management – Capability Maturity Model Integration (CMM®I)

    • Strategic management – Balanced IT Score Cards (BITS)

    • Increased productivity of SW intensive development processes

  • Support universities in design and execution of modern practical oriented software engineering programs

  • Rise awareness in the society and motivate citizens to increase their general IT knowledge level


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Investing in ICT in Bulgaria: Case studies

  • SAP, Germany – SAP Labs Bulgaria, Sofia (2000)

    • Focused on developing a leading-edge J2EE Application Server

    • Largest FDI in the software development sector

    • SAP Labs Bulgaria employs more than 250 people

  • EPIQ, Belgium – EPIQ Electronic Assembly, Botevgrad (1997)

    • Core business activities transferred to Bulgaria

    • 1,000 employees and 8,000 sq. m production area

    • Electronic and module assembly, development and manufacture of plastic injection moulds & factory automation equipment

  • Bulgarian Telecommunications Company (BTC)

    • Investor – Advent International, USA

    • Price – EUR 280 mil for 65%

    • Investment of EUR 700 mil in the next 5 years


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Reasons to invest in Bulgaria

  • Cutting-edge expertise in a multitude of ICT areas

  • High growth rate of Internet users, mobile phone subscribers and Internet services suggests opportunities for future growth in the ICT sector

  • Availability of new technologies promoted by public ventures and investments

  • Integrated chain from academic research and discovery to global market launch

  • Strategic location


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Investors in Bulgaria will find …

  • Institutional support for major investment projects

  • Robust legal framework, focused on attracting and protecting foreign investment

  • Among the lowest costs of doing business in Europe

  • Low regulatory obstacles and start up costs

  • Highly educated workforce

  • Excellent labour quality / labour cost ratio


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