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General political and economic information Investment opportunities in Bulgaria

Bulgaria Investment review The 10 th CIFIT, Xiamen, P.R. China, September 2006 Dr. Stoyan Stalev Executive Director. Main topics. General political and economic information Investment opportunities in Bulgaria Chinese - Bulgarian Cooperation Investment Encouragement Law Case studies

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General political and economic information Investment opportunities in Bulgaria

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  1. Bulgaria Investment reviewThe 10th CIFIT, Xiamen, P.R. China, September 2006Dr. Stoyan StalevExecutive Director

  2. Main topics • General political and economic information • Investment opportunities in Bulgaria • Chinese - Bulgarian Cooperation • Investment Encouragement Law • Case studies • InvestBulgaria Agency – your partner in Bulgaria

  3. Reasons to invest in Bulgaria? • Highly-skilled, multilingual workforce at Europe’s most competitive wages • Stable and predictable business and political environment • The lowest operational costs and tax rates in a European market economy • Industrial goods traded duty free between Bulgaria and EU, EFTA, CEFTA and Turkey • EU membership on January 1, 2007 gives access to markets of over 500 million consumers • Seamless administrative services through InvestBulgaria Agency • Excellent climate, natural scenery, food and hospitality

  4. Predictable business environment Real GDP growth & Inflation, avg(2000 - 2006E) Budget balance (2000 - 2006E) Sources: National Statistics Institute, Ministry of Finance, AEAF

  5. Record inflow of non-privatization FDI in 2004,continuing in 2005 FDI inflow in Bulgaria 1999-2005P, USD m FDI stock by country, 1992 – 2005P FDI to GDP FDI stock by sector, 1998 – 2005P Sources: BNB, InvestBulgaria Agency, EIU

  6. Top foreign manufacturing investors (between $24 & $580 m)

  7. Top foreign manufacturing companies in Bulgaria

  8. Business sectors of highest potential for foreign investors?

  9. Investment opportunities and projects for potential investors (1)

  10. Investment opportunities and projects for potential investors (2)

  11. Chinese Investment in Bulgaria • Total FDI stock as of Q1 2006 – USD 8.7 m • FDI inflow in 2005 amounts to USD 1.1 million • China ranks 30th in the FDI per country ranking • 263 Chinese companies are registered in Bulgaria • China is the 11th largest trading partner of Bulgaria worldwide and the largest among Asian countries • Strong bilateral trade relations - 55% growth in trade exchange volumes marked in 2005 • Reciprocal encouragement and protection of investments agreement, dated 1989 • Protocol amending and supplementing the Agreement on Avoiding Double Taxation, dated 1989

  12. Leading commodity groups in the trade between Bulgaria and China Export to China Import from China Strong bilateral trade relations – trade exchange volume for 2005 amounts to USD 779.9 m marking growth of 55%. Export to China rose by 95% for the same period Sources: MEE

  13. Top Chinese Investors in Bulgaria Sources: MEE, InvestBulgaria Agency

  14. Investment incentives in Bulgaria • 15% corporate income tax (expected to be decreased to 12% as of 1 Jan 07); 0% for manufacturing companies in areas with high unemployment • Opportunity for R&D expenditure write-off • Depreciation of 2 years for computers and new manufacturing equipment • 2-year VAT exemption for imports of equipment for investment projects over € 5 million, creating at least 50 jobs • 7% withholding tax on dividends and liquidation quotas (0% for EU tax residents holding at least 20% of the Bulgarian company) • 24% highest bracket for personal income tax (monthly income over € 300) • Up to 1 year minimum salary and reimbursement of social/health care security for employing young people and disadvantaged people through the Employment Agency

  15. Investment Encouragement Law • Equal treatment of Bulgarian and foreign investors • Preferential treatment for larger manufacturing or service providing investment projects, implemented within 3 years • 3 classes investments according to project value: • 1st class - over BGN 70 million (€ 36 m) • 2nd class – between BGN 40 - 70 million (€ 20 - 36 m) • 3rd class - between BGN 10 - 40 million (€ 5 - 20 m) • All classes benefit from faster administrative service as well as information service • Individual administrative services for 2nd and 1st class investors • Infrastructure support to the borders of the investment project site together with facilitated land acquisition for 1st class investors

  16. Case study: EPIQ Electronic Assembly • EPIQ Electronic Assembly, Botevgrad (1997), property of EPIQ Group, Belgium • 12,500 sq.m manufacturing facility • 2,000 employees (2006) • Electronic assembly, module assembly, development and manufacture of plastic injection moulds & factory automation equipment • Automotive market served: • Electronic modules for Delphi and Valeo • Sensors for waste gases temperature measurement for SAAB, FIAT, BMW and Mac • Infrared sensors for compartment temperature control • Consumer electronics market served: Tefal, Rowenta, De Longhi • Strong revenues growth: from € 14 million in 2001 to € 61 in 2005 • 75% of R&D EPIQ Group’s task force is located in Bulgaria

  17. Case study: SVA Group • SVA Group is among the top 10 leading Chinese companies in the electronics and IT industry • SVA Group investment to Bulgaria is the very first investment of the company in Europe • In Oct 2003 the Bulgarian company SVA-BG was registered • In 2005 started the construction of a factory for CRT TVs, LCD monitors and LCD TVs, DVD players, Plasma TVs and Home theaters under the brand SVA near the town of Veliko Tarnovo • Operations started in June 2006 • The company has invested USD 1.2 m in 1 assembly line with total installed capacity of 100,000 units per class per year • Plan to purchase another 2 assembly lines with total installed capacity of 200,000 units per year

  18. An Asian hi tech success story: Huawei in Bulgaria. • Huawei Technologies develops the core of the 3rd GSM network in Bulgaria, licensed to the Bulgarian Telecommunications Company • 60% of the base stations in the system • 100% core networks • 100% intelligent networks • Won BTC national fixed-line network optimization project • Won a pilot project of BTC for New Generation Networks • Won the tender of GLOBUL UMTS project for UTRAN part, and phase 1 project is under construction. • Spare Part Centre, established in 2005, servicing the whole Central East European Region • New R&D center and a professional training center is to be established • Revenues are expected to increase from USD 35 m in 2005 to USD 45 m in 2006 • Expected investments for 2006 – USD 6 m • Jobs – 40 Chinese and 68 Bulgarian employees

  19. IBA: an “OEM” to investors IBA services: • Macroeconomic data on Bulgaria • Comparative macroeconomic information • Legal advice • Data on operational costs • Regional information related to unemployment data, availability of skilled labor force, education level, infrastructure, foreign investors, industrial zones, free premises • Identification of potential suppliers, contract manufacturing or joint venture partners • Creating linkages with local university / school community • Creating linkages with central and local governments InvestBulgaria Agency 1000 Sofia, Bulgaria, 31, Aksakov Str. Tel: (+359 2) 985 5500 Fax: (+359 2) 980 1320 E-mail: iba@investbg.government.bg Web: www.investbg.government.bg

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