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Bulgaria – investment climate and business opportunities
Sofia
October 2013
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
2012
0.8%
2011
1.8%
2010
0.4%
2009
-5.5%
2008
6.2%
2007
6.4%
2006
6.5%
2005
6.4%
2012
2.4%
2011
3.4%
2010
3.0%
2009
2.5%
2008
12.0%
2007
7.6%
2006
7.4%
2005
6.0%
2012
11.4%
2011
10.4%
2010
9.2%
2009
9.1%
2008
6.3%
2007
6.9%
2006
9.1%
2005
10.7%
EU-27Bulgaria EU-27Bulgaria
20122007
1,478
2011
1,315
2010
1,151
2009
2,437
2008
6,728
9,052
2006
6,222
2005
3,152
€ 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, 1996-2012 (€ mln.) FDI flows by industry, 1996-2012 (€ mln.)
Other 2,915
Telecom 2,209
Construction 2,891
Energy 3,522
Trade 6,698
Manufacturing 6,750
Finance 7,604
Real Estate 7,990
(10) Hungary 1,311
(5) UK
(9) Italy 1,395
(7) Russia 1,750
2,578
(4) Germany 2,702
(3) Greece 3,569
(2) Netherlands 5,710
(1)Austria 5,799
Page 4
The total value of Italian direct investment to Bulgaria is €1.4 bn from 1996 until 2013
94,33
51,19
100,09
379,54
163,94
25,07
87,8171,21
126,55
180,9138,78
42,98
-51,13
2000 2002 2004 2006 2008 2010 2012
FDI have peaked in 2007. 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 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
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
-4% 1%-3% -2%-13% -12% -11% 15%-1% 0%-6%-7% -5%
Spain
Greece
Ireland
Estonia
Germany
DenmarkCzech Republic
Belgium
Romania
Portugal
Poland
AustriaNetherlands
Malta
Hungary
Turkey
Lithuania
Latvia
Cyprus
Italy
France
Average budget deficit/surplus (2007-2012)
Croatia
Bulgaria
Norway
Iceland
United Kingdom
Sweden
FinlandSlovakia
Slovenia
Luxembourg
Source: Eurostat
Average government debt (2007-2012)
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
Turkey 20%
Croatia 20%
Czech Rep 19%
Slovakia 19%
Hungary 19%
Romania 16%
Bulgaria 10%
Cost of electricity for industrial users is 70% of the EU average
Netherlands 9,472
Germany 9,193
Belguim 8,079
France 6,909
Greece 4,000
Poland 3,671
Czech Rep. 3,621
Slovakia 3,343
Bulgaria 1,671
Romania 1,616
Lowest cost of agricultural land in the European Union
€ / ha, 2011
Page 8
Germany 0.130
Slovakia 0.127
EU average 0.124
Hungary 0.108
Czech Rep 0.103
Turkey 0.096
Romania 0.083
Estonia 0.082
Bulgaria 0.078 €/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
860
833
Agriculture
Architecture
Law 1,553
Health 3,166
Education 3,677
Engineering 7,178
Social sciences 8,372
Business 19,480
Other 12,684
Bulgaria has one of the highest proportions of students abroad from all European countries
2.1%Czech Republic
Romania 2.2%
EU-27 average 2.8%
Germany 3.1%
Austria 4.7%
Greece 5.8%
Bulgaria 8.3%
Slovakia 10.2%
Ireland 14.2%
Iceland 17.8%
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 + 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
Which economic sectors have the highest potential for attracting Italian investors ?
Leading global investors have chosen Bulgaria as an FDI destination
IT development Back office operations
Chemical and metal Industry
Engineering Food
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
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