bulgaria – investment and business opportunities july 2011
TRANSCRIPT
Bulgaria – Investment and Business Opportunities
July 2011
Bulgaria offers the best of both worlds – a key strategic location, bridging Europe and Asia, low corporate tax and political and economic stability and the lowest business operational costs in the EU
• Bulgaria has a strategic geographic location. Its position on the European continent allows investors to reach the entire market of the European Union and the markets of central and eastern Europe, which represent a total population of 853 million.
• With its parliamentary republican political system, the political situation in Bulgaria is stable and the legislature, the executive and the judiciary are independent of the parliament. As of Jan1, 2007, Bulgaria is a part of the European Union and has harmonized its legal system in line with the EU requirements. In April 2004, the country became member of NATO.
• Foreign investment in Bulgaria has never been so dynamic and so massive. During recent years, a significant number of international companies have opened offices in Bulgaria - Solvay, Umocore, Italcemente Group, Liebherr, Kraft, Nestle, American Standard, Philip Morris, Metro, Lindner, Praktiker and SAP to name but a few. As a result of a liberal financial policy and continuous economic growth, Bulgaria has become very attractive to foreign investments. In addition, local companies are also increasing their share of business in Bulgaria and abroad.
Page 2
2 736 3 152
6 222
9 052
6 686
3 382
1 360
Page 3
Macroeconomic indicators show consistent growth in the years leading up to the global financial crisis
Real GDP Growth Inflation
Unemployment FDI Inflow
2004 2005 2006 2007 2008 2009 2010
€ mln.
Source: Bulgarian National Bank, Eurostat
3.4%
-5.5%
6.2%6.4%6.5%6.2%6.6%
20112010
0.2%
200920082007200620052004
EU-27
4.6%
2.4%2.8%
12.3%
8.4%7.3%
5.0%6.1%
20112010200920082007200620052004
EU-27 EU-27
* April 2011* Q1 2011
EU-27
* April 2011
9.2%9.1%9.1%10.7%
12.2%
9.3%
201020092008
6.3%
2007
6.9%
20062005 20112004
Despite the global ecnomic downturn , Bulgaria’s investment climate is good and the countries economic performance indicators are positive.
• Macroeconomic and financial stability:• Real GDP growth rate - -5.0% (2009) • Inflation Rate, annual change - 0.6% (2009) • Unemployment Rate - 9.1% (2009) • No currency risk, local currency is pegged to Euro • Budget surplus for the previous 5 years (-3.9% for 2009) • Investment grade credit rating by major rating agencies• Local and International Agreements to safeguard FDIs• Government and EU funding for many industries
Page 4
Visible signs exist that the Bulgarian economy is emerging rapidly from the crisis
4,500
4,000
3,500
3,000
0
+44%
Q4 2010
Q3 2010
Q2 2010
Q1 2010
Q4 2009
Q3 2009
Q2 2009
Q1 2009
Q4 2008
Q3 2008
Q2 2008
Q1 2008
+66%
+6%
Exports (€ mln.)
3.4%3.8%
-0.8%
6.5%6.4%6.9%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Q3 2008
Q4 2008
4.8%
Q1 2008
-4.6%
Q1 2011
Q2 2009
Q4 2009
Q2 2010
-6.0%
Q4 2010
0.0%
Q3 2009
Q1 2010
-6.7%
Q1 2009
-0.4%
-3.3%
Q3 2010
Q2 2008
Real GDP growth (% annual basis)
Source: National Institute of Statistics, Bulgaria
Role of Bulgaria as FDI location has grown significantly for the last 10 years
2006 2007 2008 20091999 2000 2001 2002 2003 2004 2005
Czech Republic
Romania
Hungary
Bulgaria
Slovakia
Croatia
0
1,000
10,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Inward FDI per country (€ mln.)
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FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors
Source: Bulgarian National Bank
FDI by host country, 1996-2010 (€ mln.) FDI flows by industry, 1996-2010 (€ mln.)
Telecom 1,955
Energy 2,492
Construction 2,608
Trade 6,425
Manufacturing 6,552
Finance 7,422
Real Estate 8,419
Other 2,376(10) Italy 1,221
(9) Russia 1,229
(8) USA 1,337
(7) Hungary 1,362
(6) Cyprus 2,229
(5) Germany 2,646
(4) UK 2,948
(3) Greece 3,763
(2) Austria 5,183
(1) Netherlands 5,740
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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
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Bulgaria enjoys one of the most stable political and economic environments in Southeastern Europe
• Bulgaria is a member of some of the most prestigious political organizations
– European Union member since 2007
– NATO member since 2004
– WTO member since 1996
• Strong commitment to political reform and transparency has earned praise from leading media and experts worldwide
• Stable currency
– Bulgarian Lev has been pegged to the Euro since the adoption of the currency in 2002
– Currency board backed by IMF
”the culture of impunity that once plagued Bulgaria has largely gone“
May 27, 2010
“The Bulgarian economy looks to be stabilizing after weathering the recent financial crisis better than most of its neighbors”
“the government has earned accolades from Western economists”
July 20, 2010
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Government financial indicators are remarkable not only in the region, but on a pan-European scale
Budget surplus / deficit has consistently outperformed regional and European averages
Source: Eurostat
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
2005 2006 2007 2008 2009
Bulgaria
Euro Area
CEE average
Bulgarian government debt is 3rd lowest in Europe
7%Estonia
68%UK
78%Hungary
24%Romania
115%
79%
Greece
Euro area
73%Germany
35%Czech Republic
Bulgaria 15%
Government debt, % of GDP
Page 11
Bulgaria has one of the lowest business costs in Europe(1) Taxes and Labor Costs
Lowest corporate income tax rate in Central / Eastern Europe
* 0% tax rate for manufacturing companies in regions with low employment
Most competitive cost of labor in Central / Eastern Europe
Average wage, € / month Oct 2010
Source: Eurostat; CEIC
10%Bulgaria (*)
16%Romania
19%Hungary
19%
Turkey 20%
20%
Czech Rep 20%
Slovakia
Croatia
Croatia
445
Czech Republic
713
Poland
772Slovakia
806
Hungary
1,044
Serbia
1,022
Romania
Bulgaria
Slovenia 1,488
332
431
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Bulgaria has one of the lowest business costs in Europe(2) Energy costs and Prime Location Office Rent
Bulgarian cost of electricity for industrial users is 67% of the European average
Source: Eurostat, CB Richard Ellis
0.142
0.122
0.106
0.098
0.095
0.081
0.064
0.059Estonia
Bulgaria
Romania
EU average
Germany
Czech Rep
Hungary
Slovakia
€/kWh, 2009
Office rents in Bulgaria are among the lowest in Europe
629
396
355
276
252
240
234
200
177
Moscow
Istanbul
Bucharest
Warsaw
Budapest
Athens
Zagreb
Prague
Sofia€ / sq. m /
year,Q1 2010
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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
EU and EFTA
Rus
sia
and
CIS
Turkey and
Middle East
The role of the European Union as a trade partner for Bulgaria has been growing consistently
11%
6% 6% 7%
16%
21%18%
15%
56% 60% 64%
44%
Other
Asia
Balkans
EU-27
2009
14%
2005
16%
2000
17%
1995
29%
Share of EU-27 exports has grown by 50 percentage points since 1995
1994 1996 1998 2000 2002 2004 2006 2008 2010
€ mln
9,000
6,000
5,000
4,000
3,000
8,000
2,000
10,000
1,000
0
7,000
... in absolute terms EU-27 exports have grown approximately 5 times
Page 14
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An educated and skilled workforce is among the main advantages of Bulgaria
Almost 60,000 students graduate every year from over 50 universities
Source: National Institute of Statistics, Bulgaria
860
833
12,684Other
19,480Business
8,372Social sciences
7,178Engineering
3,677Education
3,166Health
1,553Law
Architecture
Agriculture
Bulgaria has one of the highest proportions of students abroad from all European countries
2.1%
2.2%
2.8%
3.1%
4.7%
5.8%
8.3%
17.8%Iceland
14.2%Ireland
10.2%Slovakia
Bulgaria
Greece
Austria
Germany
EU-27 average
Romania
Czech RepublicStudents in another EU / EEA country, % of all
The government supports specific industries under the Investment Promotion Act (IPA) Derelli Company Ltd can help you make the most of this
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• 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
– Individual administrative services
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
– €25 + 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)
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Page 18Source: Deloitte Consulting; United Nations (UNCTAD)
• Services:– Information technology
– Public Sector
– Transport and tourism
• Industry:– Electronic and electrical equipment
– Machine building
– Metal processing
– Chemical Industry
• Resources:– Mining
– Oil
– Alternative energy
Attractive FDI sectors
Leading global investors have chosen Bulgaria as an FDI destination
IT & BPO
(Business Process
Outsourcing)
Mechanical and Electrical
Engineering
Construction Materials
Telecom and Media
Energy Finance
Our Consultancy Services:
• Macroeconomic data on Bulgaria and the Bulgarian Security Industry – all aspects from manufacturing and sales to guarding and identification of key business opportunities
• Legal and Tax Advice – everything you need to know about setting up a business here –we’ll advise you on and undertake on your behalf
• Business Intelligence and Statistical Data
• Recommendation and evaluation of investment projects
• Identification of potential suppliers, contract manufacturers and joint-venture partners
• Personalized admin,tax,legal servicing and practical assistance from local and international experts
• Liaison with central and local governments
• Liaison with branch chambers and NGOs, liaison with the Government investment promotion Agency, part of the Ministry of Economy, Energy and Tourism
Derelli Company Ltd
DERELLI Company Ltd.
Sofia 1202, 21 Rodopi Str.
Phone: (+359 2) 479 56 56
Fax: (+359 2) 479 79 01
E-mail: [email protected]
www.derelli.eu