Bulgaria – investment climate and business opportunities Sofia October 2013

Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery Real GDP GrowthInflation (HICP) Unemployment FDI Inflow Source: Bulgarian National Bank, Eurostat % % % % % % % % % % % % % % % % % % % % % % % % EU-27BulgariaEU-27Bulgaria , , , , ,728 9, , ,152 € mln. EU-27Bulgaria

FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors Source: Bulgarian National Bank FDI by host country, (€ mln.)FDI flows by industry, (€ mln.) Other2,915 Telecom2,209 Construction2,891 Energy3,522 Trade6,698 Manufacturing6,750 Finance7,604 Real Estate7,990 (10) Hungary1,311 (5) UK (9) Italy1,395 (7) Russia1,750 2,578 (4) Germany2,702 (3) Greece3,569 (2) Netherlands5,710 (1)Austria5,799

Page 4 The total value of Italian direct investment to Bulgaria is €1.4 bn from 1996 until 2013 FDI have peaked in Last two years the biggest investments are in the construction sector Manufacturing Finance Trade, repair and maintenance Real Estate Construction Other Six economic sectors represent about 97% of all Italian investments Source: Bulgarian National Bank 41% 20% 12% 11% 9% 5% Italian FDI (€ mln)

Why invest in Bulgaria? Political and business stability –EU and NATO member –Currency board –Low budget deficit and government debt Low cost of doing business –10% corporate tax rate –Lowest cost of labor within EU Access to markets –European Union / EFTA –Russia –Turkey / Middle East Educated and skilled workforce Government incentives

Government financial indicators are remarkable not only in the region, but on a pan-European scale -4%1%-3%-2%-13%-12%-11%15%-1%0%-6%-7%-5% Spain Greece Ireland Estonia Germany Denmark Czech Republic Belgium Romania Portugal Poland Austria Netherlands Malta Hungary Turkey Lithuania Latvia Cyprus Italy France Average budget deficit/surplus ( ) Croatia Bulgaria Norway Iceland United Kingdom Sweden Finland Slovakia Slovenia Luxembourg Source: Eurostat Average government debt ( )

Source: The Economist, Finance Ministry, Moody’s Budget deficit for 2012, % of GDP Bulgarian economy maintains its excellent performance despite global challenges BG Germany 0.1% Switzerland 0.0% Sweden 0.0% China -1.6% Turkey -2.0% Brazil -2.5% Austria -2.6% Hungary -2.8% Italy -3.0% Euro Area -3.3% Denmark -3.6% Poland -3.7% Netherlands -4.1% France -4.5% Czech Republic -5.0% India -5.6% United States -7.0% Greece -7.0% Spain -8.0% United Kingdom -8.3% Japan -9.8% Egypt -10.9% 01/1307/1201/1207/1101/1107/1001/10 Cyprus Bulgaria Ireland Greece Estonia Turkey Spain Portugal Lithuania Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011 Page 7 Latvia Iceland Hungary

Bulgaria has one of the lowest business costs in Europe Lowest corporate income tax rate in Europe Source: Eurostat; Savills Turkey20% Croatia20% Czech Rep19% Slovakia19% Hungary19% Romania16% Bulgaria10% Cost of electricity for industrial users is 70% of the EU average Netherlands9,472 Germany9,193 Belguim8,079 France6,909 Greece4,000 Poland3,671 Czech Rep.3,621 Slovakia3,343 Bulgaria1,671 Romania1,616 Lowest cost of agricultural land in the European Union € / ha, 2011 Page 8 Germany0.130 Slovakia0.127 EU average0.124 Hungary0.108 Czech Rep0.103 Turkey0.096 Romania0.083 Estonia0.082 Bulgaria0.078 €/kWh, 2012

Educated and skilled workforce is among the main advantages of Bulgaria Almost 60,000 students graduate every year from over 50 universities Source: National Institute of Statistics, Bulgaria Agriculture Architecture Law1,553 Health3,166 Education3,677 Engineering7,178 Social sciences8,372 Business19,480 Other12,684 Bulgaria has one of the highest proportions of students abroad from all European countries 2.1%Czech Republic Romania2.2% EU-27 average2.8% Germany3.1% Austria4.7% Greece5.8% Bulgaria8.3% Slovakia10.2% Ireland14.2% Iceland17.8% Students in another EU / EEA country, % of all

The government supports specific industries under the Investment Promotion Act (IPA) Investments must be related to the following sectors: –Manufacturing –Research & development –Education –Healthcare –High-tech services –Warehousing and logistics Minimum investment amounts must exceed €2.5m –€1m in regions with high unemployment and €0.5m for investment projects in high-tech services Benefits for certified investors include: –Shortened administrative procedures –Preferential acquisition of state or municipal land –Financial support for professional training / education –Infrastructure subsidies –Labor cost subsidies –Individual administrative services

Biggest investors are supported through a priority investment scheme Priority projects can be related to all sectors of the economy, which do not contradict regulation 800/2008 of the European Commission –Subsidies not allowed in mining, primary agriculture production, and shipbuilding Priority projects should exceed €50m and create at least 200 new working places for a 3-year period –€25m working places for certain manufacturing projects –€10m + 50 working places for high-tech services and R&D Priority projects receive all benefits for certified investors, as well as the following: –Lowest possible costs for the acquisition of government and municipal land + waived taxes for land status changes –Working group for project support is assigned by the Council of Ministers –Financial grant scheme for up to 10% of the investment project cost (50% for R&D)

Services: –Transport and Logistics –Information technologies –Outsourcing of business processes –Health and tourism related to healthy lifestyle Industry: –Transport equipment and machine building –Electronics and Electrical engineering –Chemical industry –Food and Agriculture Which economic sectors have the highest potential for attracting Italian investors ?

Leading global investors have chosen Bulgaria as an FDI destination IT developmentBack office operations Chemical and metal Industry EngineeringFood Page 13

InvestBulgaria Agency is a Government investment promotion arm, part of the Ministry of Economy and Energy 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

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