Bulgaria – investment climate and business opportunities June 2012

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 , , , , , , , ,736 € mln. EU-27Bulgaria

Role of Bulgaria as FDI location has grown significantly for the last 10 years Inward FDI per country ($bn.) Source: UNCTAD Greece Croatia Bulgaria Macedonia Slovakia Hungary Romania Czech Republic Serbia 0

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.) Telecom2,260 Energy2,699 Construction2,705 Manufacturing6,479 Trade6,522 Finance7,652 Real Estate8,204 Other2,664 (10) Hungary1,272 (9) Italy1,279 (8) USA1,283 (7) Russia1,486 (6) Cyprus2,257 (5) Germany2,523 (4) UK2,733 (3) Greece3,664 (2) Austria5,809 (1) Netherlands6,018

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

Bulgaria enjoys one of the most stable political and economic environments in Southeastern Europe Bulgaria is a member of some of the most prestigious political organizations –European Union member since 2007 –NATO member since 2004 –WTO member since 1996 Strong commitment to political reform and transparency has earned praise from leading media and experts worldwide Stable currency –Bulgarian Lev has been pegged to the Euro since the adoption of the currency in 2002 –Currency board backed by IMF ”the culture of impunity that once plagued Bulgaria has largely gone“ May 27, 2010 „While governments across the euro- zone periphery are on the ropes or have been felled by the economic crisis, Prime Minister Boyko Borisov's government has drawn international accolades for cutting spending while maintaining high levels of public support.” September 10, 2011

Government financial indicators are remarkable not only in the region, but on a pan-European scale Lithuania Latvia Cyprus Italy -6%-5%-4%-3%-2%-11%-10% Average budget deficit/surplus ( ) 16%15%1%0% Turkey Croatia Norway -1% Iceland United Kingdom Sweden Finland Slovakia Slovenia Romania Portugal Poland Austria Netherlands Malta Hungary Luxembourg France Spain Greece Ireland Estonia Germany Denmark Czech Republic Bulgaria Belgium Source: Eurostat Average government debt ( )

Source: Eurostat, The Economist, National Statistics BG Hungary Switzerland Sweden Germany Finland Turkey China Brazil Austria Denmark Slovakia Italy Euro Area Netherlands Czech Republic India Slovenia Latvia France Poland Spain Japan United Kingdom United States Greece Egypt Ireland Budget deficit for 2011, % of GDP Expected real GDP growth, 2012 Slovenia Hungary EU-27 Czech Republic United Kingdom Bulgaria 2.4% 2.7% Romania Slovakia United States Lithuania Poland -1.4% -0.3% 0.0% 0.5% 1.4% 1.8% 2.0% Bulgarian economy maintains its excellent performance despite global challenges

Bulgaria is the only country in Europe with a credit rating upgrade by Moody’s since the beginning of /1107/1105/1103/1101/1109/1007/1005/1003/1001/10 Turkey Lithuania Ireland Hungary Greece Estonia Bulgaria 11/10 Source: Moody’s Portugal Latvia Iceland Cyprus Aa1 A1 Baa1 Ba1 B1 Caa1 Ca

Bulgaria has one of the lowest business costs in Europe (1) taxes and labor costs Lowest corporate income tax rate in Central / Eastern Europe * 0% tax rate for manufacturing companies in regions with low employment Most competitive cost of labor in Central / Eastern Europe Monthly wage, nominal, € / month December 2011 Source: Eurostat; Bank Austria Turkey20% Poland19% Czech Rep19% Slovakia19% Hungary19% Romania16% Bulgaria (*)10% Slovenia20% Croatia Slovenia 1,520 Croatia 1,048 Czech Republic Poland Slovakia Hungary Serbia Romania Bulgaria

Bulgaria has one of the lowest business costs in Europe (2) energy costs and rent Bulgarian cost of electricity for industrial users is 70% of the European average Source: Eurostat, CB Richard Ellis Czech Rep Hungary EU average Germany Turkey Romania Bulgaria Estonia Slovakia €/kWh, 2011 Office rents in Bulgaria are among the lowest in Europe Moscow Athens Warsaw Prague Budapest Bucharest Zagreb Sofia Istanbul € / sq. m / year, Q2 2011

Bulgaria is only 3 hours flight from all major destinations in Europe, Russia and the Mediterranean region Strategic geographic locationMajor transport corridors passing through Bulgaria EU and EFTA Russia and CIS Turkey and Middle East

The role of the European Union as a trade partner for Bulgaria has been growing consistently Other Asia Balkans EU % % % % % Share of EU-27 exports has increased visibly since ,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 10,000 1, € mln ,000 12,000 13, %... in absolute terms EU-27 exports have grown more than 7 times Source: National Institute of Statistics, Bulgaria

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 12,684Other 19,480Business 8,372Social sciences 7,178Engineering 3,677Education 3,166Health 1,553Law Architecture Agriculture Bulgaria has one of the highest proportions of students abroad from all European countries 17.8%Iceland 14.2%Ireland 10.2%Slovakia Bulgaria Greece Austria Germany EU-27 average Romania Czech Republic 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 €10m –€3.5 in regions with high unemployment and €2m 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 –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 –€ 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 Resources: –Mining –Oil –Alternative energy Attractive FDI sectors

Leading global investors have chosen Bulgaria as an FDI destination IT & BPOMechanical and Electrical Engineering Construction Materials Telecom and Media EnergyFinance

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

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