Transcript Bulgaria Investment review

Bulgaria Investment review
The 10th CIFIT, Xiamen, P.R. China, September 2006
Dr. Stoyan Stalev
Executive Director
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
Predictable business environment
Real GDP growth & Inflation, avg (2000 - 2006E)
7.4%
6.1%
5.8%
7.2%
5.5%
5.7%
4.9%
4.1%
5.5%
5.0%
4.5%
2.3%
2001
2002
2003
2004
GDP growth
2005
2006F
Inflation, avg
Budget balance (2000 - 2006E)
3.18%
3.00%
1.71%
2000
2001
-1.01%
-0.87%
2002
-0.65%
0.00%
2003
2004
2005
2006F
Sources: National Statistics Institute, Ministry of Finance, AEAF
InvestBulgaria Agency
www.investbg.government.bg
Record inflow of non-privatization FDI in 2004, continuing in 2005
FDI stock by country, 1992 – 2005P
FDI inflow in Bulgaria 1999-2005P, USD m
Others 33.1%
3,443
3500
3000
2500
2000
1500
1000
500
0
Austria 19.5%
2,223
2,097
819
1,102
970
813
UK 4.3%
1999
2000
2001
2002
2003
2004
Greenfield investment, reinvestment, additional investment
2005P
Greece 9.7%
Hungary 4.3%
Sw itzerland
4.4% USA 4.6%
Privatisation
Germany 7.7%
Italy 6.2%
Netherlands
6.1%
FDI stock by sector, 1998 – 2005P
FDI to GDP
Manufacturing
19%
10.1%
8.3%
8.5%
6.5%
6.0%
3.4%
Bulgaria
Czech Rep
2005E
Other
21%
5.3%
4.8%
3.9%
3.1%
Slovakia
2006-2007F, avg
Finance
18%
Hungary
Tourism & real
estate
8%
Romania
Electricity, gas
& water supply
8%
Sources: BNB, InvestBulgaria Agency, EIU
InvestBulgaria Agency
www.investbg.government.bg
Trade
13%
Telecommunic
ations
13%
Top foreign manufacturing investors (between $24 & $580 m)
Investor
Sector
1
Solvey (Belgium)
Chemistry
2
Lukoil (Russia, Netherlands)
Refinery & Petrochemicals production
3
American Standard (USA, Netherlands)
Sanitary fixtures and fittings
4
Umicore (Belgium, Netherlands)
Copper smelting
5
Miroglio (Italy, Germany)
Textile
6
Sise Cam (Turkey)
Glass Industry
7
Heidelberger Zement (Germany)
Cement Industry
8
Bareck Overseas (Cyprus)
Glass Industry
9
Viohalco (Greece)
Metal products
10
Carlsberg (Denmark)
Brewery
InvestBulgaria Agency
www.investbg.government.bg
Top foreign manufacturing companies in Bulgaria
Bramac, Austria
Knauf, Austria
Ruse Shipyard, Germany
Sparky, Germany
Lifton, Sweden
IPS, Netherlands
Actavis, Iceland
Amylum, Belgium
Mayr Melnhof, Slovenia
Atusa, Spain
Luxcraft, Israel
Palfinger, Austria
Holcim, Switzerland
Sparky, Germany
EPIQ, Belgium
Sisecam, Turkey
American Standard, USA
Hamberger, Germany
Provimi, Netherlands
ABB, Sweden
Actavis, Iceland
Sizas, Italy
Siemens, Germany
Festo, Germany
Viohalco, Greece
Danone, France
Nestle, Switzerland
Kraft Foods, USA
Heidelberger Zement
Kuhn, Germany
Actavis, Iceland
Holdex, Netherlands
New Mode, Italy
Carlsberg, Denmark
Hyundai, Korea
Curtis, USA
Coca Cola, Greece
Dundee Precious Metals, Canada
Miroglio, Italy
Umikore, Belgium
Raumer, Italy
Arkomat, Turkey
Simest, Italy
Miroglio, Italy
SKF, Sweden
Chipita, Greece
E.Walters, UK
Miroglio, Italy
Dino Nobel, Norway
Swedish Match
Videoton, Hungary
Brewinvest, Greece
Shell Gas, UK
Safil, Italy
Fererro, Germany
Linde, Germany
Interbrew, Belgium
Liebherr, Germany
Schneider Electric, France
Dewavrin, France
Alfa Wood, Greece
Netherlands
Brandtex, Denmark
Lukoil, Russia
Kronospan, Austria
Interbrew, Belgium
Interbrew, Belgium
Menderes, Turkey
Brandtex, Denmark
S&B Holding, Germany
ABB, Sweden
Delta, Greece
Petreco, UK
Hayat, Turkey
Ciments Francais, France
DRS Ahed Technology, USA
Montex, Italy
Wabo, Germany
FAF Metal, Turkey
Carlsberg, Denmark
Acid & Fertilizer, Belgium
Solvay, Belgium
Roca, Spain
Italcementi
Wabo, Germany
Planzee Tizit, Austria
Grammer, Germany
Provimi, Netherlands
Rollmann, Germany
Frana, Switzerland
Dundee Precious Metals, Canada
InvestBulgaria Agency
www.investbg.government.bg
mining
metal production
construction materials
machine building
electrical engineering
chemical industry
textile and apparel
food processing
wood processing & paper industry
Business sectors of highest potential for foreign investors?
Sector
Competitive advantages
Manufacturing:

1. Electrical
engineering
2. Mechanical
engineering


3. Electronics
Opportunities
Traditions

Availability of skilled personnel
- 7% of the workforce with
engineering university degree

Reasonable labor cost - $1.13
total hourly compensation for
manufacturing workers (2005)

Greenfield operations
targeting the EU market
Acquisition of existing
companies
Contract manufacturing
for electromechanical
assembly, machining
and EMS
4. Automotive parts
manufacturing

BPO
Reliable telecom infrastructure
IT support centers
Talent pool of qualified
multilingual IT and F/A
professionals
F/A shared service
centers
Availability of suppliers
Reasonable office prices
InvestBulgaria Agency
www.investbg.government.bg
Investment opportunities and projects for potential investors (1)
Power engineering
Transport and logistic
Modernization of existing TPPs
Logistic centers
Building of new HPPs and privatization of the existing ones
Modernization of autoparks in the country
Development of private transport companies
Building of the NPP Belene
Biomass and biofuel
Modernization and concession of ports in Varna, Bourgas
and along the Danube river
Wind parks
Privatization of Bulgarian marine forces
Privatization of Bulgaria Air
Environment
Infrastructure
Chemical and biological treating of wastewater
Highway "Hemus" (concession)
Installations for reducing heavy metals and polluting
organic emissions
Highway "Cherno More" (concession)
Reconstruction of the existing installation capacities in
metallurgy
Modernization of railway infrastructure
Recycling of scraps and garbage
Modernization of central heating system
InvestBulgaria Agency
www.investbg.government.bg
Investment opportunities and projects for potential investors (2)
Utility services
Industry
Health services
Privatization of Bulgartabac JSC
Information technologies
Digital mechanics
Administrative information networks
Production of spare parts
Wireless Internet access
Production automation
Tourism
Defense

Construction of luxury hotels

Development of winter resorts

Development of balneology and SPA tourism
Modernization of food processing industry

Development of rural and alternative tourism
Building of industrial zones

Golf tourism
Construction of parking lots in Sofia
Modernization of textile and clothing factories
Real estate
Development of trade centers
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
Leading commodity groups in the trade between Bulgaria and China
Export to China
Aluminum craps,
5%
Import from China
Copper stone , 4%
El. boilers, 2.6%
Shoes , 2.9%
Copper craps, 9%
Refined copper,
22%
Flat rolled
products of iron
and non-alloyed
steel, 43%
Information
equipment, 11%
Air Conditioners
, 3.2%
Radio apparatus
, 8%
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
InvestBulgaria Agency
www.investbg.government.bg
Top Chinese Investors in Bulgaria
Date
Investor
Bulgarian
company
Activity
Investment,
USD m
Jobs
Feb.
2004
Huawei
Technologies Co
ltd
Huawei Bulgaria
EOOD
Telecom
n.a
108
Sofia
Mar.
2004
Chongqing Lifan
Weili Appliances
Levee Electric
Appliances JSCo
Air Conditioners
manufacturing
11
280
Town of
Pravetz
Oct.
2003
SVA Group Co ltd
SVA BG ltd
TV sets and DVD
players
manufacturing
1.4
40
Town of
Veliko
Tarnovo
2001
ZTE Corporation
Co ltd
ZTE Corporation
Bulgaria ltd
Telecom
n.a
13
Sofia
Sources: MEE, InvestBulgaria Agency
InvestBulgaria Agency
www.investbg.government.bg
Location
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
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
www.investbg.government.bg
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
InvestBulgaria Agency
 Creating linkages with local university /
school community
1000 Sofia, Bulgaria, 31, Aksakov Str.
 Creating linkages with central and local
governments
Fax: (+359 2) 980 1320
Tel: (+359 2) 985 5500
E-mail: [email protected]
Web: www.investbg.government.bg
InvestBulgaria Agency
www.investbg.government.bg