BULGARIA – THE NEW GATEWAY TO EUROPE AND ASIA

Ivailo Kalfin

Deputy Prime Minister аnd Minister оf Foreign Affairs

June, 2008

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Bulgaria is on the crossroad of the main Pan European Corridors

9

4

710

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Integration and proximity of markets

EU membership and the strategic geographic location of Bulgaria provide easy access to the leading regional and world markets

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For over 100 years the Republic of Bulgaria and the United States of America have enjoyed diplomatic relations.

These relations are at their highest level since their establishment.

The high intensity of the political dialog is a proof of the strong partnership between Bulgaria and the United States of America.

Why Bulgaria – Political Relations with USAWhy Bulgaria – Political Relations with USA

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Excellent political relations between Bulgaria and USA - reasons:

- Political stability due to Bulgaria's NATO membership /March 29th, 2004/ and the accession to the EU /January 1st, 2007/;

- Stable economic perspective and growing credit rating of Bulgaria and its institutions;

- Common positions on various international issues;

Why Bulgaria – Political Relations with USAWhy Bulgaria – Political Relations with USA

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- Bulgaria and the United States of America stand together in the fight against terrorism;

- Bulgaria actively participates in military missions and has a close security partnership with the USA and other anti-terrorist coalition partners;

- Republic of Bulgaria demonstrates strong commitment to all international obligations;

- Bulgaria is a reliable and predictable partner in the international arena.

Why Bulgaria – Political Relations with USAWhy Bulgaria – Political Relations with USA

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Stable economic environment

10 % corporate income tax (lowest in EU together with Cyprus); 0% for manufacturing companies in areas with high unemployment

10 % personal income tax, flat rate

The lowest operational costs in Europe

Well educated and highly skilled labour force

22% of population hold university degree

45,000 Bulgarian students in Europe. Second largest group after China

Governmental support to priority investment projects

Excellent climate, natural scenery, food and hospitality

Why Bulgaria – Basic Economic Data

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Bulgaria is full of investment opportunities waiting to be discovered…

Business opportunities

A.T. Kearney Global Retail Development Index results

19th

17th

13th

12th

7th

5th

2nd in world

Russia

Ukraine

Latvia

Bulgaria

Turkey

Slovenia

Croatia

Industries with rapid annual growth

– Financial services

- Consumer credit up by 31,8%, mortgages up by 75,4%

- Media, Advertising, IT, Telecom (up by 20%)

– Retail (up by 20%)

- 4th in Europe and 12th in world in the 2007 A.T. Kearney GRD Index

– Real estate (up by 30%)

– Pharma and healthcare (up by 50%)

Fragmented market

– Opportunity for consolidation, M&A activities

Seed financing, start-ups

– Excess and growing demand for early stage company financing

– Opportunity for private equity fundsSource: A.T. Kearney Global Retail Development Index; Global finance

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…in its people Bulgaria has an invaluable asset

Well-educated and affordable labor force

2nd in the world in international IQ tests

47 universities with 32,000 students graduating every year:

– 28% with business related degrees

– 63% with IT related degrees

Good language literacy (English, German, French, Spanish and Russian)

Average monthly salary as low as 221 EUR

Legal minimum monthly wage in Bulgaria is 113 EUR

Source: PWC Bulgaria, The Sofia Echo, InvestBulgaria Agency – Value Scope Bulgaria, Sofica

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Bulgaria’s improving infrastructure is enhanced by the access to the Black Sea

Good infrastructure

Access to the Black Sea and world oceans through its 2 large ports and 470 km of waterways

4 international airports, 131 paved airports and 4 heliports

7,300 km of railways and 20,000 km of roads

EU-backed investments into infrastructure development

– Access to 9.3bn EUR in EU financing until 2013 (structural and cohesion funds, funds for rural development)

Three GSM operators and ADSL internet

Source: EBRD country factsheet, CIA The World Factbook, Wikipedia, InvestBulgaria Agency - Bulgaria Investment Guide 2007, www.enviropea.com

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Bulgaria is growing at a rapid pace while keeping labor cost low ...

1.2

2.3

1.6

2.8 2.7

5.0

6.66.2 6.1 6.2

0

1

2

3

4

5

6

7

2003 2004 2005 2006 2007

EU 15 Bulgaria

GDP growth comparison Labor cost

23.3 24.0 24.7 25.2 25.7

1.4 1.5 1.6 1.7 2.1

0

5

10

15

20

25

30

2003 2004 2005 2006 F 2007 F

EU 15 Bulgaria

Bulgaria’s accession into the EU will ensure long term sustainable GDP growth

Source: Bulgaria Investment Guide 2007, InvestBulgaria Agency, Eurostat

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... and its growth outperforms other countries in the entire European Union also in the long term

2.4 2.4

6.0 6.2

0

1

2

3

4

5

6

7

2008 2009

EU 27 Bulgaria

GDP growth forecast (2007 – 2009)

Industrial growth forecast1) (2007 – 2009)

177.1 180.8

143.0137.4

0

20

40

60

80

100

120

140

160

180

200

2008 2009

EU 27 Bulgaria

GD

P g

row

th (

%)

Ind

us

tria

l g

row

th (

%)

Bulgaria has a stable forecast for GDP and industrial growth

Notes: (1) Malta doesn’t provide information about industrial growth, year 2000 = 100%Source: Eurostat

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A lot has been achieved, our competitiveness is continuously improving

38

29

4841

Economicefficiency

Governmentefficiency

Businessefficiency

Infrastructure

World Competitiveness Yearbook 2007 –

overall position 41

World Competitiveness Yearbook 2008 –

overall position 39

3138

54

41

Economicefficiency

Governmentefficiency

Businessefficiency

Infrastructure

41

39

Source: IMD, Centre for democracy research

Due to significant improvement of performance, Bulgaria moves in 2008 two places up in the global list of competitiveness

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Source: BNB, IBA

Record inflow of FDI in 2006 & 2007, EUR m

Greenfield+Expansion

5 961 6 109

3 1522 736

1 851

9809031 103866

1999 2000 2001 2002 2003 2004 2005 2006 2007

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4.2

6.3

8.3

5.5

9.3

5.4

14.2

7.5

1.7

5.04.7

2.6

8.1

4.56.0

7.1

5.34.0

3.0 3.6

23.6

21.1

BULGARIA CZECHREP

HUNGARY LATVIA POLAND ROMANIA UKRAINE SERBIA SLOVAKIA SLOVENIA TURKEY

2006 2007 F

FDI to GDP, %, 2006 – 2007F

Source: Bank Austria Creditanstalt

Bulgaria leads CEE countries in terms of FDI to GDP indicator

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1259.0

1459.1

1515.6

1602.4

4019.1

4619.8

4679.0

5112.4

Other

Telecom

Electricity, gas and water

Construction

Trade

Finance

Manufacturing

Real estate

Source: BNB, IBA

21%21%

19%19%

19%19%

17%17%

7%7%

6%6%

6%6%

FDI stock by sectors, 1998 – 2007, EUR m

5%5%

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Source: BNB, IBA

Austria the Netherlands Greece Un. Kingdom

Belgium &

Luxemburg

15%

3662.6

11%

2687.2

10%

2404.5

9%

2140.4

5%

1349.3

Germany Cyprus USA Hungary Italy

5%

1227.3

5%

1199.1

4%

1029.1

4%

950.2

4%

923.6

FDI stock by country,1996-2007, %, EUR m

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InvestorInvestor SectorSector

Solvey (Belgium) Chemistry

Lukoil (Russia, Netherlands) Refinery & Petrochemicals production

Cumerio (Belgium, Netherlands) Copper smelting

Miroglio (Italy, Germany) Textile

Sise Cam (Turkey) Glass Industry

Heidelberger Zement (Germany) Cement Industry

Viohalco (Greece) Metal products

Liebher Hausgeraete (Germany) Refrigerators

Carlsberg (Denmark) Brewery

EPIQ (Belgium) Electronics

Top Foreign Manufacturing Investors (between $24 & $580 m)

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Top US Investors in Bulgaria

real estate

BULGARIAN-AMERICAN PROPERTY MANAGEMENT

BULGARIAN-AMERICAN PROPERTY MANAGEMENT (26)

packaging industryALKOA PACKAGING BULGARIAALKOA (30)

ITHP-BulgariaHP (52)

cable TVEUROCOM CABLESOROS FUNDS (15)

televisionBTVNEWS INC. (23)

restaurantsMcDonalds BULGARIA McDonalds (23)

tobaccoSOCOTAB BULGARIASOCOTAB (26)

food industryKRAFT FOODS BULGARIA KRAFT FOODS (36)

hotelHILTON SOFIAHILTON INTERNATIONAL (40)

bankingBULGARIAN-AMERICAN CREDITBANK, USA

BULGARIAN-AMERICAN ENTERPRISE FUND (94)

financePOSHTENSKA BANKAALICO/CEN (111)

plumbing, sanitationsIDEAL STANDARD, VIDIMAAMERICAN STANDARD (240)

telecommunicationsBTK AD(ADVENT INTERNATIONAL) through VIVA VENTURES (433)

energyTEZ MARITZA EAST 1AES (1 400)*

ActivityBulgarian companyInvestor/investment amount USD

mln.

*Project under implementationSource: InvestBulgaria Agency

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Sufficient acquisition of the EU funds is another important priority for stimulating the economy

1802%1 601

23%

1 80023% 2 003

22%

1 21315%

1 23415%

OP “Development of the Competitiveness”

OP “Human Resources Development”ОP “Transport"OP “Environment"ОP “Regional Development"OP “Administrative Capacity"

OP “Technical Assistance"

The Ministry of Economy and Energy runs Operational Program “Competitiveness” with a Budget of EUR 1.2 billion

Priority 1: Economic development based on knowledge and innovation activities (budget – EUR 246 million or 21%)

Priority 2: Increasing production efficiency and development of favorable business environment (budget – EUR 593 million or 51%)

Priority 3: Provision of financial resources for business development (budget – EUR 200 million or 17%) Priority 4: Strengthening of the Bulgarian economy's position in

international markets (budget – EUR 87 million or 7.5%) Technical support (budget – EUR 34 million or 3%) Considerable financial support for SMEs

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Examples of those who already have discovered their opportunity in Bulgaria

“Very well educated, talented and committed workforce, large talent pool, very competitive cost structure, European culture, good English skills, short flight times and almost no time difference from Western Europe…” - Dr. Peter Kurpic, Senior Vice President NetWeaver Foundation SAP AG

“The combination of existing and proven local expertise, the excellent academic facilities and the strength of the Bulgarian economy, made Sofia an ideal choice for further investment in our global mixed-signal engineering capabilities.” – Nelly Pergoot, Managing Director, AMI Semiconductor (USA)

“Political and economic stability, the qualified labor force and the cost structure” – Gilles Bernard, Executive Director of EPIQ (Belgium)

Source: InvestBulgaria Agency – Bulgaria Investment Guide 2007, ValueScope Bulgaria, http://neveq.com

“…among the reasons why HP had chosen Bulgaria were the high level of education in terms of technical

skills and languages, good infrastructure and investor-friendly legislation.“ – Tino Canegrati, HP Global

Delivery General Manager

YOURLOGOHERE

The list of foreign companies in Bulgaria is growing quickly!

Global companies are gaining insight in advantages of doing business in Bulgaria

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THANK YOU FOR YOUR ATTENTION!

IVAILO KALFIN

Deputy Prime Minister and Minister of Foreign Affairs

www.mfa.government.bg