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Investment Opportunities in Sofia
“GROWS BUT NEVER AGES”
Sofia:
Investment Opportunities
Speaker: Minko Gerdjikov
Date: March 24th 2009
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“GROWS BUT NEVER AGES”
About Sofia
Quick Facts
• Produces 34% of Bulgaria’s GDP (€12.2 Bn as of 2008)
Population 1.6MM (including suburbs and exurbs);
• 730K highly motivated, qualified and flexible workforce;
• Unemployment rate of 1,3%;
• Administrative, cultural, research and business center;
• Current mayor: Boyko Borisov.
National Assembly Square
National Gallery of Art
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Economic Growth
The Sofia region is the country’s most dynamic cluster of economic activity, characterised by high
workforce productivity and GDP per capita levels, as well as impressive GDP growth.
GDP Growth 2001-2010
37.8
EUR Billions1
35.6
GDP – Sofia
Highlights
33.8
GDP – Rest of the Country
29.0
24.9
25.3
23.5
21.9
22.4
19.9
15.2
11.0
16.6
11.8
19.3
17.8
16.9
12.6
14.1
15.1
9.7
11.4
12.2
12.9
4.8
5.1
5.8
6.8
8.4
4.2
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sofia’s share
of national
GDP (%)
27.6
29.1
28.8
29.3
`31.0
33.3
33.4
33.8
34.1
34.2
Sofia’s GDP
per capita 2
3.6
4.1
4.2
4.8
5.5
6.8
7.8
9.2
9.9
10.2
• Sofia accounts for 16% of the
country’s population but produces
34% of the national GDP
• Sofia’s GDP growth rate has
consistently exceeded the national
average; even within financial crisis
conditions a growth of 2.5-3% is
anticipated.
• Sofia’s GDP per capita is currently
at 72% of EU average and expected
to exceed 80% by 2015
Forecast
1 Subject
to rounding error
2 EUR Thousands
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Economic Profile
Sofia’s a high-growth, services-oriented economy is driven primarily by the dynamic private sector.
Highlights
GDP by Sector, 2008
• Services account for 74% of
Sofia’s GDP compared to the
national average of 60%
EUR Billions
TOTAL
€ 11.5
Trade &
Repair
6.2
Processing
1.5
Transportation &
Communications
1.1
Property Mgt &
Business Services
0.9
Secondary
Construction
Other
• Small & Medium Size
Enterprises (SMEs) generate
71% of all sales
0.7
Tertiary
Electricity
Gas &Water
Hospitality &
Catering
• The private sector generates
94% of all services and 87% of
other sales
74%
25%
0.5
Primary
0.1
100% = € 11.5 Bn
0.4
= High-Growth Sector
• The construction, real estate,
business services,
transportation and telecoms
sectors account for the largest
share of growth in recent
years and continue to attract
investments
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Sofia’s Unique Investor Benefits
Sofia’s strategic location and broad talent pool makes it uniquely positioned to benefit foreign investors.
Human Capital
• Sofia’s 730K workforce is highly qualified, motivated, and flexible
Tertiary
Primary
Secondary
None
• The capital hosts 20 of Bulgaria’s 42 universities (93,000 students and 12,800
faculties)
• Center of academic & applied research (including 58 institutes &
laboratories affiliated with the Bulgarian Academy of Sciences)
• Average annual wage is €4 050 (€336 per month)
25%
43%
56%
50%
• Productivity of labor growing at 13-18% per year
• Unemployment rate of 1.3% (among the lowest in Europe)
• 65.2% of Sofia’s 1.6MM population are people of working age
18%
5%
Sofia
Sofia
Bulgaria
Bulgaria
Workforce Education Levels
Strategic Location
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• Easy 2-hour flights from all Central European Capitals
• 295 regular flights per week, operated by 20 foreign and 6 Bulgarian
airlines and flying to over 40 international destinations
• Located in the geographic center of the Balkan Peninsula and a natural
entry point into the Middle East
• Unique intersection of three Pan-European
transport corridors (Corridor
1
IV, VIII, X)
4
7
10
8
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Foreign Investment Flows
In 2008, Sofia attracted 68% of all FDI in Bulgaria. The current level of FDI is expected to decline in the
coming years, particularly in sectors such as financial infrastructure, real estate (industrial and
commercial buildings, business parks), technology, and transportation infrastructure.
FDI in Sofia by Source Country, 1996-2008
FDI in Sofia by Sector, 2008
EUR Billions
EUR Billions
Country
Austria
Cumulative Amount
Sofia = € 3.7
TOTAL
1.7
€ 5.4
€ 4.6
The Netherlands
3.6
Greece
2.9
Great Britain
2.7
Germany
1.9
Cyprus
1.5
Luxembourg
1.4
Hungary
1.2
USA
1.1
Italy
1.0
Switzerland
1.0
Ireland
0.9
Spain
0.9
Russia
0.8
Czech Republic
0.8
Others
3.5
Total
€ 29.8
1.4
Financial Services
1.0
Real Estate & Business Services
0.7
Trade & Repair
0.3
Construction
Transport & Communication
Manufacturing Industry
Other
0.2
0.1
0.05
FDI – Sofia
FDI – Rest of the country
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An Impressive Investor Roster
In the past few years, Sofia’s favorable business climate, strategic endowments, and favorable tax code
have attracted a range of international business leaders, operating in attractive sectors such as
telecommunications, financial services, utilities, electronics, and IT.
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Municipal Governance & Policy Priorities
Sofia’s predictable political environment, sound fiscal policy, and stable governance have helped it earn a
credit rating of BB+/Positive (Standard & Poor’s 2007), one of the highest in the region. There has been a
broad political consensus on the need to attract and support foreign investors, to which Sofia
Municipality has been a reliable and efficient partner.
Municipal Spending Priorities (2009)
Municipal Budget Growth
100% = € 516 MM
EUR Millions
516
Education
323
240
22%
32%
Public Utilities
Capital
Expenditures
16%
30%
2005
2007
2009
Other
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Municipal Economic Strategy
Municipal Development Priorities
• Promotion of sustainable growth and knowledge-based economy
• Development and modernisation of the transportation services, public,
and business infrastructures
• Improvement of the living conditions and the quality of the
environment
Municipal Action Plans
• Integrated waste management system
• Project for the sewage sector: construction of sewage in the districts of
“Ovcha kupel”, “Vitosha” etc.
• Extension of the underground, reconstruction, expansion and
maintenance of the road network
• Construction of 2 schools, 8 kindergardens, construction and
refurbishment of hospitals and other public facilities
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Forecoming tenders – part of the investment programme of Sofia
Municipality for 2009
Target
Budget (BGN)
Construction of underground parking lots at Tube Stations 8 and 11 from
the Metrodiameter 2
7 000 000
Metropoliten – Sofia, from Tube Stations 13 to 19
37 000 000
Implementing new street and traffic lighting
1 332 000
Construction and extensions to kindergardens (Poduiane, Krasno Selo,
Ljulin, Oborishte, Ilinden, Ovcha Kupel, Pancharevo)
26 090 000
Design and construction of a waste-recycling plant
352 049 400
Installation and utilisation of waste gas from Suhodol depot
1 500 000
Developing projects for equipment for treating the waste of Sofia
12 845 580
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Privatisation Tenders & Public Commissions
Due to the shrinkage of the real estate market the municipal privatisation programme is limited.
However, because of the need of income, this programme shall continue its fulfillment, with projected
revenue realised by privatisation transactions of BGN 10.8 million.
Current & Pending Privatisation Tenders
Target
“BKC centre” EAD
Share
100%
Description
The Company specialises in maintaining, repairs and
reconstruction of buildings, public utilities, communal funds
etc.
Pending tender scheduled for March 2009 /BGN 5.2 million/
67%
The Bank has a long-term credit rating (BB-) and a short-term
credit rating (B) /Standard & Poor’s 2008/. The maintenance of
the rating of the Bank, minding the current financial situation,
reflects its successful management and good financial
standing.
100%
Management of municipal buildings & plots. The Company
is able to provide for privatisation around 600 real estates.
“Obshtinska banka” AD
(Municipal Bank)
“Sofiiski imoti” EAD
(Sofia Real Estate)
Subway operations & infrastructure
“Metropoliten” EAD
100%
Performs exploitation services of the underground in Sofia;
tutors personnel and brings to operation the newly constructed
sections; conducts control over the investment as well as the
projecting and construction phases.
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Target
Share
Description
Investment audit & engineering
“Sofinvest” EOOD
100%
Municipal company, which realises the investment
functions of the Sofia Municipality, including the
organisation of the research, the designing and
construction, implementation of the investor’s control,
engineering and social infrastructure of Sofia
Landscaping; park maintenance
“Ozeleniavane” EAD
100%
“V i K” EAD
100%
“Lozana” EAD
100%
A company, which has experience in the production of
metal products and recycling of plastics.
“Sportna Sofia 2000” EAD
100%
Specialises in managing, development and renting out
sporting equipment and property
“Galatea 2002” EAD
100%
Granting for privatisation of sea and mountain recreation
centres
100%
Public companies, which run, maintain and rent out open
and closed trading areas.
Specialises in planting, maintenance of green areas, parks,
public and private plots in the capital.
Water & sewage (subsidiary activities)
Specialises in maintaining the sewage infrastructure
“Pazari Iztok” EAD,
“Pazari Sever” EAD,
“Pazari Iug” EAD
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The financial role of the European Union. Projects financed by EU
funds and European Investment Bank
Extension of the Underground
• Construction of new segments: “Nadezhda” –
Blvd. “Patriarch Evtimii” – Blvd. “Cherni Vrah” at
a total amount of BGN 483.4 mln. /BGN 308 mln.
from Operational Programme “Transport”/ undergoing construction;
• Construction of new segments: “Mladost” – Blvd.
“Tzarigradsko Shosse” – “Nadezhda” – “Obelia”
at a total amount of BGN 220 mln. including a
50% co-financing with a loan from the European
Investment Bank – first stage has started.
Waste management
• Construction and implementation of a system for
treatment of waste at a total amount of EUR 183
mln. /BGN 360 mln./. It is expected to be financed
by Operational Programme “Okolna Sreda”, loan
from the European Investment Bank, municipal
and national financing – under preparation;
• Closing and re-cultivating of a waste depot “Dolni
Bogrov” – EUR 23 mln. /BGN 45 mln./ by OP
“Okolna Sreda” and municipal financing – under
preparation.
Water and Sewage
• Integrated project for the water sector of Sofia – it is
financed under ISPA programme at a total amount
of EUR 58.5 mln. /BGN 116 mln./ - undergoing
construction;
• Construction of 4 main sewage collectors in the
Ovcha Kupel district – BGN 10.5 mln. under
Operational Programme “Okolna Sreda”
/”Environment”/ – signed contract;
• Preparing a project for the construction of sewage
network in “Manastirski Livadi – Iztok”,
“Triadica”, “Gurdova Glava”, and “Vitosha”
districts – preparation stage.
Others
• Approved projects by OP “Human Resources”
• Prepared and submitted projects under OP
“Regional Development” – for refurbishment of
schools, public houses, municipal roads, subways,
and areas between blocks of appartments;
• Prepared and submitted projects under OP
“Administrative Capacity” for the e-management
of the Municipality;
• Participation of the Sofia Municipality in projects
under programme URBACT II, INTERREG IV C,
SEE, 7th Framework Programme etc.
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Sofia Municipality’s Action Plan Concerning Mitigating the Negative
Effects From the Financial Crisis
Improving the activities of the Municipality, impacting
on the local economy
•Improving the system of consent and licensing regimes, easing the
procedures and shortening the technical time needed for servicing
the investors and traders;
•Expanding, within the agreeable limits of the Guarantee Fund for
SMEs programme;
•Speeding up and directing the investment programme of the Sofia
Municipality and that of the Council for Management of the
Municipal Guarantee Fund towards the infrastructural projects
with the highest public significance;
•Improving the city’s surroundings, creating (both directly and
indirectly) jobs and directing the regional construction industry’s
work force towards specialised Municipal programmes;
Fiscal Discipline and Administrative
Capacity
•Packet of measures for increasing the
effectiveness of collecting local fees and
taxes;
•Increasing the effectiveness and the
profitability of the municipal property,
companies and trading units;
•Procedures for improving the
administrative capacity, mainly of those
municipal units responsible for public
procurement procedures and EU
programmes’ projects.
•Expanding the scope of activities, subject of Public Private
Partnership for development and management of important
infrastructural projects;
•More and larger projects and programmes for co-financing of the
structural funds of EU;
•Developing the potential for regional cooperation for the
implementation of regional projects in the Southwest region
(railway, roads, telecommunications etc.), which increase the
attractiveness of the area for investors.
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Thank you for the attention!
Minko Gerdjikov
Deputy Mayor of Finance
Sofia Municipality
Тel: +359 2 987 70 79
E-mail: [email protected]
Web site: www.sofia.bg
“GROWS BUT NEVER AGES”
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