BULGARIA – THE NEW GATEWAY TO EUROPE AND ASIA Ivailo Kalfin Deputy Prime Minister аnd Minister оf Foreign Affairs June, 2008

Integration and proximity of markets Bulgaria is on the crossroad of the main Pan European Corridors 9 4 7 10 8 EU membership and the strategic geographic location of Bulgaria provide easy access to the leading regional and world markets

Why Bulgaria – Political Relations with USA 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 USA 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 USA - 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 – Basic Economic Data 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

Bulgaria is full of investment opportunities waiting to be discovered… Business opportunities 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 funds A.T. Kearney Global Retail Development Index results Source: A.T. Kearney Global Retail Development Index; Global finance

…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

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

Bulgaria is growing at a rapid pace while keeping labor cost low ... GDP growth comparison Labor cost Bulgaria’s accession into the EU will ensure long term sustainable GDP growth Source: Bulgaria Investment Guide 2007, InvestBulgaria Agency, Eurostat

... and its growth outperforms other countries in the entire European Union also in the long term GDP growth forecast (2007 – 2009) Industrial growth forecast1) (2007 – 2009) GDP growth (%) Industrial growth (%) 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

A lot has been achieved, our competitiveness is continuously improving World Competitiveness Yearbook 2007 – overall position 41 World Competitiveness Yearbook 2008 – overall position 39 39 41 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

Record inflow of FDI in 2006 & 2007, EUR m Source: BNB, IBA

Bulgaria leads CEE countries in terms of FDI to GDP indicator FDI to GDP, %, 2006 – 2007F Source: Bank Austria Creditanstalt

FDI stock by sectors, 1998 – 2007, EUR m 21% 19% 19% 17% 7% 6% 6% 5% Source: BNB, IBA

FDI stock by country,1996-2007, %, EUR m 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 1227.3 1199.1 4% 1029.1 950.2 923.6 Source: BNB, IBA

Top Foreign Manufacturing Investors (between $24 & $580 m) Sector 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 US Investors in Bulgaria real estate BULGARIAN-AMERICAN PROPERTY MANAGEMENT BULGARIAN-AMERICAN PROPERTY MANAGEMENT (26) packaging industry ALKOA PACKAGING BULGARIA ALKOA (30) IT HP-Bulgaria HP (52) cable TV EUROCOM CABLE SOROS FUNDS (15) television BTV NEWS INC. (23) restaurants McDonalds BULGARIA McDonalds (23) tobacco SOCOTAB BULGARIA SOCOTAB (26) food industry KRAFT FOODS BULGARIA KRAFT FOODS (36) hotel HILTON SOFIA HILTON INTERNATIONAL (40) banking BULGARIAN-AMERICAN CREDIT BANK, USA BULGARIAN-AMERICAN ENTERPRISE FUND (94) finance POSHTENSKA BANKA ALICO/CEN (111) plumbing, sanitations IDEAL STANDARD, VIDIMA AMERICAN STANDARD (240) telecommunications BTK AD (ADVENT INTERNATIONAL) through VIVA VENTURES (433) energy TEZ MARITZA EAST 1 AES (1 400)* Activity Bulgarian company Investor/investment amount USD mln. *Project under implementation Source: InvestBulgaria Agency

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

The list of foreign companies in Bulgaria is growing quickly! Global companies are gaining insight in advantages of doing business in Bulgaria 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) YOUR LOGO HERE “Political and economic stability, the qualified labor force and the cost structure” – Gilles Bernard, Executive Director of EPIQ (Belgium) “…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 The list of foreign companies in Bulgaria is growing quickly! Source: InvestBulgaria Agency – Bulgaria Investment Guide 2007, ValueScope Bulgaria, http://neveq.com

THANK YOU FOR YOUR ATTENTION! IVAILO KALFIN Deputy Prime Minister and Minister of Foreign Affairs www.mfa.government.bg