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Bulgaria – investment climate and business opportunities
June 2012
Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery
Real GDP Growth Inflation (HICP)
Unemployment FDI Inflow
Source: Bulgarian National Bank, Eurostat
1.7%
-5.5%
6.2%6.4%6.5%6.4%6.6%
20112010
0.4%
200920082007200620052004
3.4%3.0%2.5%
12.0%
7.6%7.4%6.0%6.1%
200620052004 20112010200920082007
10.4%9.1%9.1%
10.7%12.2%
20112010
9.2%
20092008
6.3%
2007
6.9%
200620052004
EU-27Bulgaria EU-27Bulgaria
2011
1,341
2010
1,209
2009
2,437
2008
6,728
2007
9,052
2006
6,222
2005
3,152
2004
2,736
€ 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
-1
9
8
7
6
5
4
3
2
14
13
12
11
10
1Macedonia
Slovakia
Hungary
Romania
Czech Republic
201020092008200720062005200420032002200120001999
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, 1996-2011 (€ mln.) FDI flows by industry, 1996-2011 (€ mln.)
Telecom 2,260
Energy 2,699
Construction 2,705
Manufacturing 6,479
Trade 6,522
Finance 7,652
Real Estate 8,204
Other 2,664(10) Hungary 1,272
(9) Italy 1,279
(8) USA 1,283
(7) Russia 1,486
(6) Cyprus 2,257
(5) Germany 2,523
(4) UK 2,733
(3) Greece 3,664
(2) Austria 5,809
(1) Netherlands 6,018
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
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
LithuaniaLatvia
Cyprus
Italy
-6% -5% -4% -3% -2%-11% -10%
Average budget deficit/surplus (2006-2011)
16%15%1%0%
TurkeyCroatia Norway
-1%
IcelandUnited Kingdom
SwedenFinland
Slovakia
Slovenia
Romania
Portugal
Poland
Austria
Netherlands
MaltaHungary
Luxembourg
France
Spain
Greece
Ireland
Estonia
Germany
DenmarkCzech Republic
Bulgaria
Belgium
Source: Eurostat
Average government debt (2006-2011)
Source: Eurostat, The Economist, National Statistics
1.2%
0.8%0.2%
-1.0%-1.7%-1.7%
-1.8%-2.7%
-3.6%-3.9%-4.0%
-4.0%-4.0%-4.2%
-4.6%-4.9%
-5.0%-5.4%
-5.8%-6.0%
-6.5%
-8.3%-8.8%-9.0%
-9.1%-10.0%-10.1%
BG
HungarySwitzerland
SwedenGermany
FinlandTurkeyChinaBrazil
AustriaDenmarkSlovakia
ItalyEuro Area
NetherlandsCzech Republic
IndiaSlovenia
LatviaFrancePolandSpainJapan
United KingdomUnited States
GreeceEgypt
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%
0.0%
0.5%
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 2010
09/1107/1105/1103/1101/1109/1007/1005/1003/1001/10
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
Turkey 20%
Poland 19%
Czech Rep 19%
Slovakia 19%
Hungary 19%
Romania 16%
Bulgaria (*) 10%
Slovenia 20%
20%Croatia 995
876
792
758
518
363
350
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
0.123
0.110
0.104
0.092
0.090
0.086
0.080
0.064
0.062
Czech Rep
Hungary
EU average
Germany
Turkey
Romania
Bulgaria
Estonia
Slovakia
€/kWh, 2011
Office rents in Bulgaria are among the lowest in Europe
724
339
336
312
252
240
234
191
168
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 location Major transport corridors passing through Bulgaria
EU and EFTA
Rus
sia
and
CIS
Turkey and
Middle East
The role of the European Union as a trade partner for Bulgaria has been growing consistently
9%6%6%
12%
8%
16%18%21%
16%
14%
61%60%56%
44%
62%
Other
Asia
Balkans
EU-27
2010
15%
2005
15%
2000
16%
1995
28%
2011
16%
Share of EU-27 exports has increased visibly since 1995
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
10,000
1,000
0
201020082006200420022000199819961994
€ mln
2012
11,000
12,000
13,000
+39%
... 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
860
833
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
2.1%
2.2%
2.8%
3.1%
4.7%
5.8%
8.3%
17.8%Iceland
14.2%Ireland
10.2%Slovakia
Bulgaria
Greece
Austria
Germany
EU-27 average
Romania
Czech RepublicStudents 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
– €25 + 100 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 & BPO Mechanical and Electrical
Engineering
Construction Materials
Telecom and Media
Energy Finance
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
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