general political and economic information investment opportunities in bulgaria

InvestBulgaria Agencywww.investbg.government.bg

Bulgaria Investment reviewThe 10th CIFIT, Xiamen, P.R. China, September 2006

Dr. Stoyan StalevExecutive Director


General political and economic information

Investment opportunities in Bulgaria

Chinese - Bulgarian Cooperation

Investment Encouragement Law

Case studies

InvestBulgaria Agency – your partner in Bulgaria

Main topics


Reasons to invest in Bulgaria?

Highly-skilled, multilingual workforce at Europe’s most competitive wages

Stable and predictable business and political environment

The lowest operational costs and tax rates in a European market economy

Industrial goods traded duty free between Bulgaria and EU, EFTA, CEFTA and Turkey

EU membership on January 1, 2007 gives access to markets of over 500 million consumers

Seamless administrative services through InvestBulgaria Agency

Excellent climate, natural scenery, food and hospitality


Predictable business environment

4.9%

4.1%4.5%

5.7%

5.5%

5.5%5.0%

7.2%6.1%

2.3%

5.8%

7.4%

2001 2002 2003 2004 2005 2006F

GDP growth Inflation, avg

Budget balance (2000 - 2006E)

Real GDP growth & Inflation, avg (2000 - 2006E)

Sources: National Statistics Institute, Ministry of Finance, AEAF

-1.01% -0.87%-0.65%

0.00%

1.71%

3.18%3.00%

2000 2001 2002 2003 2004 2005 2006F


Others 33.1%

UK 4.3%

Hungary 4.3%

Italy 6.2%

Germany 7.7%

Greece 9.7%

Austria 19.5%

USA 4.6%

Sw itzerland 4.4%

Netherlands 6.1%

Manufacturing19%

Trade13%

Tourism & real estate

8%

Other21%

Electricity, gas & water supply

8%Telecommunic

ations13%

Finance18%

FDI inflow in Bulgaria 1999-2005P, USD m

Sources: BNB, InvestBulgaria Agency, EIU

FDI stock by sector, 1998 – 2005P

FDI stock by country, 1992 – 2005P

FDI to GDP

Record inflow of non-privatization FDI in 2004, continuing in 2005

9708131,102819

0500

100015002000250030003500

1999 2000 2001 2002 2003 2004 2005P

Greenfield investment, reinvestment, additional investment Privatisation

3,443

2,2232,097

8.3%

6.5%

8.5%

6.0%5.3%

4.8%

3.1%3.4%3.9%

10.1%

Bulgaria Czech Rep Slovakia Hungary Romania

2005E 2006-2007F, avg


Investor Sector

1 Solvey (Belgium) Chemistry

2 Lukoil (Russia, Netherlands) Refinery & Petrochemicals production

3 American Standard (USA, Netherlands) Sanitary fixtures and fittings

4 Umicore (Belgium, Netherlands) Copper smelting

5 Miroglio (Italy, Germany) Textile

6 Sise Cam (Turkey) Glass Industry

7 Heidelberger Zement (Germany) Cement Industry

8 Bareck Overseas (Cyprus) Glass Industry

9 Viohalco (Greece) Metal products

10 Carlsberg (Denmark) Brewery

Top foreign manufacturing investors (between $24 & $580 m)


Top foreign manufacturing companies in Bulgaria

Ciments Francais, France

Wabo, Germany

Brandtex, Denmark SKF, Sweden

E.Walters, UK

Hyundai, Korea Curtis, USA Coca Cola, Greece

Swedish Match

Chipita, Greece Miroglio, Italy

Heidelberger Zement Kuhn, Germany

ABB, Sweden

DRS Ahed Technology, USA

Carlsberg, Denmark

Videoton, Hungary Brewinvest, Greece

Brandtex, Denmark

Miroglio, Italy

Menderes, Turkey

Arkomat, Turkey

Miroglio, Italy Raumer, Italy Simest, Italy

Actavis, Iceland Holdex, Netherlands

New Mode, Italy

Rollmann, Germany Frana, Switzerland

IPS, Netherlands

Knauf, Austria

Dewavrin, France

Acid & Fertilizer, Belgium Solvay, Belgium Italcementi

Holcim, Switzerland

Palfinger, Austria

Luxcraft, Israel

Actavis, Iceland

Grammer, Germany

Sparky, Germany American Standard, USA Hamberger, Germany Provimi, Netherlands ABB, Sweden

Planzee Tizit, Austria

Ruse Shipyard, Germany Sparky, Germany Lifton, Sweden

Roca, Spain

Actavis, Iceland Amylum, Belgium

Shell Gas, UK Linde, Germany

Liebherr, Germany

Dundee Precious Metals, Canada Umikore, Belgium

Interbrew, Belgium mining

metal production

construction materials

machine building

electrical engineering

chemical industry

textile and apparel

food processing

wood processing & paper industry

EPIQ, Belgium

Safil, Italy Fererro, Germany

Interbrew, Belgium

Lukoil, Russia Kronospan, Austria Interbrew, Belgium

Delta, Greece Petreco, UK Hayat, Turkey

Dundee Precious Metals, Canada

Schneider Electric, France

Bramac, Austria

Provimi, Netherlands

Alfa Wood, Greece Netherlands

FAF Metal, Turkey Carlsberg, Denmark

Sisecam, Turkey

Mayr Melnhof, Slovenia

Atusa, Spain

Sizas, Italy Siemens, Germany

Festo, Germany Viohalco, Greece

Danone, France Nestle, Switzerland

Kraft Foods, USA

Montex, Italy

Wabo, Germany

S&B Holding, Germany

Dino Nobel, Norway


Business sectors of highest potential for foreign investors?

Sector Competitive advantages Opportunities

Manufacturing:

1. Electrical engineering

2. Mechanical engineering

3. Electronics

4. Automotive parts manufacturing

Traditions

Availability of skilled personnel - 7% of the workforce with engineering university degree

Reasonable labor cost - $1.13 total hourly compensation for manufacturing workers (2005)

Availability of suppliers

Greenfield operations targeting the EU market

Acquisition of existing companies

Contract manufacturing for electromechanical assembly, machining and EMS

BPO Reliable telecom infrastructure

Talent pool of qualified multilingual IT and F/A professionals

Reasonable office prices

IT support centers

F/A shared service centers


Investment opportunities and projects for potential investors (1)

Environment

Chemical and biological treating of wastewater

Installations for reducing heavy metals and pollutingorganic emissions

Reconstruction of the existing installation capacities in metallurgy

Recycling of scraps and garbage

Modernization of central heating system

Power engineering

Modernization of existing TPPs

Building of new HPPs and privatization of the existing ones

Building of the NPP Belene

Biomass and biofuel

Wind parks

Transport and logistic

Logistic centers

Modernization of autoparks in the country

Development of private transport companies

Modernization and concession of ports in Varna, Bourgasand along the Danube river

Privatization of Bulgarian marine forces

Privatization of Bulgaria Air

Infrastructure

Highway "Hemus" (concession)

Highway "Cherno More" (concession)

Modernization of railway infrastructure


Investment opportunities and projects for potential investors (2)

Utility services

Health services

Information technologies

Administrative information networks

Wireless Internet access

Tourism

Construction of luxury hotels

Development of winter resorts

Development of balneology and SPA tourism

Development of rural and alternative tourism

Golf tourism

Real estate

Development of trade centers

Industry

Privatization of Bulgartabac JSC

Digital mechanics

Production of spare parts

Production automation

Defense

Modernization of textile and clothing factories

Modernization of food processing industry

Building of industrial zones

Construction of parking lots in Sofia


Chinese Investment in Bulgaria

Total FDI stock as of Q1 2006 – USD 8.7 m

FDI inflow in 2005 amounts to USD 1.1 million

China ranks 30th in the FDI per country ranking

263 Chinese companies are registered in Bulgaria

China is the 11th largest trading partner of Bulgaria worldwide and the largest among Asian countries

Strong bilateral trade relations - 55% growth in trade exchange volumes marked in 2005

Reciprocal encouragement and protection of investments agreement, dated 1989

Protocol amending and supplementing the Agreement on Avoiding Double Taxation, dated 1989


Flat rolled products of iron and non-alloyed

steel, 43%Refined copper, 22%

Copper craps, 9%

Copper stone , 4%Aluminum craps,

5%

Leading commodity groups in the trade between Bulgaria and China

Radio apparatus , 8%

Air Conditioners , 3.2%

Shoes , 2.9%El. boilers, 2.6%

Information equipment, 11%

Export to China Import from China

Strong bilateral trade relations – trade exchange volume for 2005 amounts to USD 779.9 m marking growth of 55%. Export to China rose by 95% for the same period

Sources: MEE


Date InvestorBulgarian company

ActivityInvestment,

USD mJobs Location

Feb.2004

Huawei Technologies Co ltd

Huawei Bulgaria EOOD

Telecom n.a 108 Sofia

Mar. 2004

Chongqing Lifan Weili Appliances

Levee Electric Appliances JSCo

Air Conditioners manufacturing

11 280Town of Pravetz

Oct. 2003

SVA Group Co ltd SVA BG ltdTV sets and DVD players manufacturing

1.4 40Town of Veliko

Tarnovo

2001ZTE Corporation Co ltd

ZTE Corporation Bulgaria ltd

Telecom n.a 13 Sofia

Top Chinese Investors in Bulgaria

Sources: MEE, InvestBulgaria Agency


Investment incentives in Bulgaria

15% corporate income tax (expected to be decreased to 12% as of 1 Jan 07);

0% for manufacturing companies in areas with high unemployment

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

7% withholding tax on dividends and liquidation quotas (0% for EU tax

residents holding at least 20% of the Bulgarian company)

24% highest bracket for personal income tax (monthly income over € 300)

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 Encouragement Law

Equal treatment of Bulgarian and foreign investors

Preferential treatment for larger manufacturing or service providing investment projects, implemented within 3 years

3 classes investments according to project value:

1st class - over BGN 70 million (€ 36 m)

2nd class – between BGN 40 - 70 million (€ 20 - 36 m)

3rd class - between BGN 10 - 40 million (€ 5 - 20 m)

All classes benefit from faster administrative service as well as information service

Individual administrative services for 2nd and 1st class investors

Infrastructure support to the borders of the investment project site together with facilitated land acquisition for 1st class investors


EPIQ Electronic Assembly, Botevgrad (1997), property of EPIQ Group, Belgium

12,500 sq.m manufacturing facility 2,000 employees (2006) Electronic assembly, module assembly, development and manufacture

of plastic injection moulds & factory automation equipment Automotive market served:

Electronic modules for Delphi and Valeo

Sensors for waste gases temperature measurement for SAAB, FIAT, BMW and Mac

Infrared sensors for compartment temperature control Consumer electronics market served: Tefal, Rowenta, De Longhi Strong revenues growth: from € 14 million in 2001 to € 61 in 2005 75% of R&D EPIQ Group’s task force is located in Bulgaria

Case study: EPIQ Electronic Assembly


SVA Group is among the top 10 leading Chinese companies in the electronics and IT industry

SVA Group investment to Bulgaria is the very first investment of the company in Europe

In Oct 2003 the Bulgarian company SVA-BG was registered

In 2005 started the construction of a factory for CRT TVs, LCD monitors and LCD TVs, DVD players, Plasma TVs and Home theaters under the brand SVA near the town of Veliko Tarnovo

Operations started in June 2006

The company has invested USD 1.2 m in 1 assembly line with total installed capacity of 100,000 units per class per year

Plan to purchase another 2 assembly lines with total installed capacity of 200,000 units per year

Case study: SVA Group


Huawei Technologies develops the core of the 3rd GSM network in Bulgaria, licensed to the Bulgarian Telecommunications Company

60% of the base stations in the system

100% core networks

100% intelligent networks

Won BTC national fixed-line network optimization project

Won a pilot project of BTC for New Generation Networks

Won the tender of GLOBUL UMTS project for UTRAN part, and phase 1 project is under construction.

Spare Part Centre, established in 2005, servicing the whole Central East European Region

New R&D center and a professional training center is to be established

Revenues are expected to increase from USD 35 m in 2005 to USD 45 m in 2006

Expected investments for 2006 – USD 6 m

Jobs – 40 Chinese and 68 Bulgarian employees

An Asian hi tech success story: Huawei in Bulgaria.


IBA: an “OEM” to investors

IBA services:

Macroeconomic data on Bulgaria

Comparative macroeconomic information

Legal advice

Data on operational costs

Regional information related to unemployment data, availability of skilled labor force, education level, infrastructure, foreign investors, industrial zones, free premises

Identification of potential suppliers, contract manufacturing or joint venture partners

Creating linkages with local university / school community

Creating linkages with central and local governments

InvestBulgaria Agency

1000 Sofia, Bulgaria, 31, Aksakov Str.

Tel: (+359 2) 985 5500

Fax: (+359 2) 980 1320

E-mail: [email protected]

Web: www.investbg.government.bg

general political and economic information investment opportunities in bulgaria

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