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Bulgaria – your gateway to EU Bulgaria-Korea business forum, 14. December 2010, Sofia Dimitar Nikolov Marketing Director InvestBulgaria Agency www.investbg.government.bg Structure of the Presentation Strategic location Why Bulgaria Macroeconomic Indicators FDI Inflow Korean Investments in Bulgaria Highly Skilled Labor Force Comparison between Bulgaria and Europe Business Sectors of Highest Potential for Investors Investment Promotion Act Investment Incentives in Bulgaria InvestBulgaria Agency Pan-European Transport Corridors 9 4 7 10 8 Bulgaria – strategically located as a bridge between Europe and Asia Strategic geographic location Major transport corridors passing through Bulgaria Why Bulgaria EU membership and NATO membership Currency board EU’s most favourable taxes: • 10% corporate income tax rate • 0% in high-unemployment areas • 10% flat tax rate on personal income Europe’s most competitive operational costs Well-educated and highly-skilled labour force 45,000 Bulgarian students in Europe Government financial support for priority investment projects Linking Europe and Asia Excellent climate, natural scenery, food and hospitality Bulgaria at a glance GDP Growth, % Inflation, % 12,5 6,6 4,5 6,2 6,3 6,2 5,0 6.0 6,5 7,8 6,5 3,9* 4,0 0,6 2009 2004 2005 2006 2002 2003 2004 2005 2006 2007 2008 2007 2008 2009 2010 * October 2010 Greenfield+Expansion Unemployment, % -4,9 FDI inflow, EUR Mio. 9 052 12,2 6 686* 6 222 10,7 9,1 9,1 6,9 9 6,3 2 736 3 282* 3 152 1 851 2004 2005 2006 2007 2008 * October 2010 2009 2010 866 1 103 903 980 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * Preliminary Data Source: Bulgarian National Bank Remarkable government financial indicators on regional and even on a pan-European scale Bulgarian government debt is 3rd lowest in Europe Estonia Bulgaria 7% Budget surplus / deficit has consistently outperformed regional and European averages 3% 2% 15% 1% Romania Czech Republic 24% 0% -1% 35% -2% UK Germany 68% -3% Bulgaria -4% 73% -5% Hungary 78% -6% Euro area Greece 79% Euro Area -7% 115% -8% 2005 2006 2007 2008 CEE average 2009 Source: Eurostat Credit rating Foreign currency Agency Japan Credit Rating Agency Fitch Standard& Poor’s Moody’s Date Local currency Longterm Shortterm Outlook Longterm Shortterm Outlook BBB - Stable BBB+ - Stable 30 April 2009 BBB- F3 Negative BBB - Stable 1 Dec 2009 BBB A-3 Stable BBB A-3 Stable Baa3 - Positive Baa3 - Positive 22 Oct 2010 31 August 2010 Source: Ministry of Finance Record FDI inflow in 2006 – 2008, EUR m Greenfield+Expansion 9 052 6 686 6 222 2 736 3 282* 3 152 1 851 866 1 103 903 980 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * Preliminary Data Source: BNB, IBA Decreasing FDI inflow in 2009-not a Bulgarian phenomenon SEE level Global level FDI decrease.% FDI decrease,% Bulgaria Romania Russia 41 55 45 53 36 France 63 Ukraine 57 Japan 54 Czech Serbia USA 52 Brazil China India 50 3 19 Source: UNCTAD Bulgaria leads CEE countries in terms of FDI to GDP indicator FDI to GDP, %, 2008 – 2009 19,6 9,5 6,6 5,3 4,8 BULGARIA SERBIA 5,8 4,1 5,0 3,8 ROMANIA UKRAINE 3,0 2,3 POLAND 2,2 CZECH REP 2008 3,0 2,0 2,5 1,8 3,0 2,5 1,3 1,2 HUNGARY SLOVAKIA TURKEY LATVIA 1,0 -1,7 SLOVENIA 2009 Source: BNB, Bank Austria Creditanstalt FDI stock by country,1996 – 2009, %, EUR m Austria the Netherlands Greece Un. Kingdom Germany 16% 12% 9% 8% 7% 5903.8 4642.7 3419.7 3036.7 2526.3 Cyprus USA Hungary Italy Russia 5% 3% 3% 3% 3% 1921.1 1310.2 1276.4 1170.0 1088.1 Source: BNB, IBA FDI stock by sector, 1996 – 2009, %, EUR m Real estate 8252.7 7272.6 Finance 6762.5 Manufacturing 6319.0 Trade Construction Electricity, gas and water Telecom Other 2480.9 2172.0 1728.6 2390.7 22% 19% 18% 17% 7% 6% 5% 6% Source: BNB, IBA Korean investments in Bulgaria Korean Investments (1996 – Q3 2010) - 34.3 EUR Million; according to the FDI Stock by countries Korea is ranked 52th The biggest Investments in Electrical Engeneering, Renewable Energy, Trade Bilateral Treaty on encouragement and reciprocal protection of investments between Bulgaria and Korea Convention for the avoidance of double taxation between the two countries Trade between Bulgaria and Korea (BGN m) 169* 148 144 80 64 53 84* 31 2007 2008 2009 Export to Korea 2010 Import from Korea * October 2010 Source: NSI Hyundai Heavy Industries Co. 1997 Hyundai Heavy Industries Korea privatized Bulgarian wellknown manufacturer of Power Transformers and Tap Changers “Elprom Trafo” Manufacturer of electrical components: power transformers, tap changers, equipment for photovoltaic power stations 80% export of the production, mainly to Russia, Romania, USA etc. About 650 employees 2009 the company won a project granted by European Funds for improvement of competitiveness of large enterprises Educated and skilled workforce – one of the key 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 Business 17.8% 19,480 Ireland Social sciences 14.2% 8,372 Slovakia Engineering 10.2% 7,178 Bulgaria Education 8.3% 3,677 Greece Health Law 3,166 1,553 Architecture 833 Agriculture 860 Other Austria 12,684 5.8% 4.7% Germany 3.1% EU-27 average 2.8% Romania 2.2% Czech Republic 2.1% Source: NSI Language education in upper secondary general schools by city, 2008/2009 132869 English 61262 39594 23764 10307 10124 German French Spanish Italian Russian 8253 4901 4175 12005 528 493 Sofia Plovdiv Varna 2862 262 681 25022 14288 12992 Source: National Statistics Institute Comparison between Bulgaria and Europe Corporate income tax rate, 2010 19% 19% 19% 20% Czech Republic Turkey 16% 10% Bulgaria Rom ania Hungary Slovakia * 0% for manufacturing companies in areas with high unemployment Source: IBA Comparison between Bulgaria and Europe Average monthly wages, Q2 2010, EUR 1099 705 730 Slovakia Hungary 456 327 Bulgaria Romania Czech Republic Source: CEIC, Eurostat Bulgaria has one of the lowest business costs in Europe Bulgarian cost of electricity for industrial users is 67% of the European average Office rents in Bulgaria are among the lowest in Europe €/kWh, 2009 Estonia Bulgaria Romania EU average Germany 0.059 Sofia Zagreb 0.064 0.081 Hungary Slovakia 200 Bucharest 234 Budapest 240 Prague 252 0.095 0.098 Warsaw Czech Rep € / sq. m / year, Q1 2010 177 0.106 Istanbul 0.122 0.142 Athens Moscow 276 355 396 629 Source: CB Richard Ellis, Eurostat Manufacturing Attractive sectors Electrical engineering Mechanical engineering Electronics Automotive parts manufacturing Chemical Industry Competitive advantages Export oriented sectors The lowest operational cost in EU Highly skilled labour force • 7% with engineering degree • EUR 336 total average monthly compensation (Q4 2009) Major investors supported by InvestBulgaria Agency Solvay (Belgium) Aurubis (Germany) Liebherr (Germany) Lufthansa Technik (Germany) Montupet (France) Italcementi (Italy) Sise Cam (Turkey) Stomana Industry (Greece) Miroglio (Italy) Knauf (Austria) Ixetic (Germany) Schneider Electric (France) Focus on innovations Opportunities Competitive advantages Electronic devices and technologies Highly-skilled workforce available Electrical engines, incl. electromobiles Strong traditions in IT Waste treatment facilities development and in pharmacy LED lights Europe's most competitive wages Government measures Increasing of R&D expenses from 0,5 to 2% from GDP until 2020 Adopting an Innovation Act (in process) Establishing venture capital funds (EU Program JEREMIE - € 200 Mio.) Stimuli for R&D investment in the Investment Promotion Act Harmonized legislation with EU’s High productivity rate and strong GVA growth Export oriented sectors Energy Sector Opportunities Major projects supported by InvestBulgaria Agency Wind parks 11 wind park projects Solar plants 3 solar park projects New nuclear PP Modernization and construction of new TPPs Biomass and Biofuel 3 projects for modernization and construction of new TPPs 2 Biomass projects 3 Biofuel projects Competitive advantages Skilled labour force Availability of natural resources Favorable climate conditions Harmonized legislation with the EU’s RES electricity production to double (from 10% to 20%) by 2020 Administrative and economic incentives for RES energy production ICT & BPO Opportunities Software development IT support centers F/A shared service centers Contact centers Competitive advantages Skills availability Strong traditions in IT development Reliable telecom infrastructure Europe's most competitive wages Reasonable office prices 11-12% ICT share of the GDP for 2009 Main Players in Bulgaria IT • Software AG (Germany) • Microsoft (USA) • Hewlett Packard (USA) • IBM (USA) • Nemetschek (Germany) • Johnson Controls (USA) • SAP Labs Bulgaria (Germany) • CISCO (USA) BPO • 60K (UK) • Sutherland (USA) • IBM (USA) • OPI Global (USA) • Hewlett Packard (USA) • C3i (USA) Investment Promotion Act Promotion for initial investment in the following sectors: From industrial sector: • Manufacturing From the sector of services: • Computer programming, consultancy & information services activities • Scientific R & D and activities of head offices • Education • Human health care activities • Warehousing and support activities for transportation Investment classifications under the investment promotion act, (€ Million) Investment classes A and B depending on the value, region and sector allocation of the investment Region or Sector Class B Class A General 5 - 10 >10 In municipalities with unemployment rate equal or more than the country average 2 – 3.5 >3.5 2 – 3.5 >3.5 1–2 >2 In high-tech activities in the manufacturing industry for the whole country In high-tech activities in the services, computer technologies and R&D sectors for the whole country Incentives under the Investment Promotion Act All classes (A&B) • Information services and shortened administrative services • Preferential treatment upon acquisition of a right of ownership and limited real rights over real estate – private state or private municipal property • Financial support for vocational training of employees for the needs of the investment project A class • Individual administrative services • Infrastructure support to the borders of the investment project site Priority Investment Projects All sectors of the economy, with the exception of the restrictions imposed by EU Regulation 800/2008 Council of Ministers approval Conditions – priority status depending on the value, jobs created and region allocation of the investment Criteria for classification of the priority investment projects Investment value (Euro m) Jobs General 50 200 In industrial zone construction and its development into industrial park 35 100 In municipalities with unemployment rate equal or more than the country average 25 100 In high-tech activities in the manufacturing industry for the whole country 25 100 15 50 10 50 Region or Sector of the investment In construction of a technological park In education, human healthcare, IT and R&D activities, professional activities, culture Priority investment projects – incentives All the incentives for class A and B Special Incentives for priority investment projects: • Institutional support • Financial grants up to 50% for R&D and high-tech services and up to 10% for manufacturing projects • State tax exemption for changing the land zoning • Possibility for acquisition of real estate private state or private municipal property without a tender and at a price, not lower than the tax assessment of the property • Possibility for public-private partnership with municipalities, universities and public companies Investment incentives in Bulgaria 10% corporate income tax; • 0% for manufacturing companies in areas with high unemployment 10% personal income tax, flat rate 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 5% withholding tax on dividends and liquidation quotas (0% for EU tax residents) Up to 1 year minimum salary and reimbursement of social/health care security for employing young people and disadvantaged people through the Employment Agency InvestBulgaria Agency InvestBulgaria Agency is a Government investment promotion arm, part of the Ministry of Economy, Energy and Tourism. 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 InvestBulgaria Agency Sofia 1000, 31 Aksakov Str. Phone: (+359 2) 985 5500 Fax: (+359 2) 980 1320 E-mail: [email protected] Web: www.investbg.government.bg