South Central Europe attractiveness survey Focus Bulgaria Public presentation 18 March 2010 Good morning, It’s a pleasure to be here and to present the key findings for the Ernst & Young South Central Europe attractiveness survey 2009 for the World Bank. This survey analyses the attractiveness of South Central Europe for foreign investment.

Reality of FDI in South Central Europe Methodology Reality of FDI in South Central Europe Perception of South Central Europe and future attractiveness Focus on Bulgaria To begin with, I’ll give a short description of the methodology of the survey.

Scope of the study Countries: Romania Bulgaria Bosnia & Herzegovina Croatia Serbia Albania South Central Europe population: 57 801 245 inhabitants GDP (purchasing power parity) 621 billion $ GDP growth between 5,1% and 7,2% in 2008 Bosnia & Herzegovina Kosovo Macedonia Moldova Montenegro The South Central Europe Attractiveness survey covers 10 countries :

An image and reality approach Image: 203 international business leaders interviewed by the CSA research firm in October 2009 Call centers R&D HQ Shared services centers Manufacturing Back offices Logistics … Reality: Foreign Direct Investment projects (FDI) tracked across 43 European countries since 1997 This is a unique survey, combining opinions and reality. Opinions: we interviewed 203 global business leaders on their views and opinions about the attractiveness of South Central Europe and their investment plans. Reality: based on what actually happened in the region over the past five years, as reported by E&Y’s European Investment monitor. European Investment Monitor® is an Ernst & Young database powered by Oxford Intelligence

A sample representative of all business models Location Sectors Industry Consumer 30% 32% Out In 51% 49% 12% 8% Telecoms and high-tech 15% Pharma 2% Business services Other Nationality Size Asia Northern America 60% 11% 7% 18% 3% > 1.5 B€ 15% As you can see from this slide, we provide a unique observation of foreign investment, a realistic view from a real-life panel: investors operating in and out of the region, small companies and multinationals, from different countries and from different sectors. < 150 M€; Nordic countries Western Europe 47% From 150 M€ to 1.5 B€ 37% Central and Eastern Europe

Reality of FDI in South Central Europe Methodology Reality of FDI in South Central Europe Perception of South Central Europe and future attractiveness Focus on Bulgaria Now, let’s talke a look at the reality of FDI in South Central Europe

South Central Europe captures 25% of FDI projects in CEE Number of FDI projects 2004-2008 25% 75% 1,239 FDI projects 120,471 jobs created As you can between 2004 and 2008, South Central Europe attracted 25% of the FDI in Central and Eastern Europe, creating over a hundred and twenty thousand jobs At European level, SCE market share reaches 7% Source: Ernst & Young European Investment Monitor 2009

An industrial attractiveness Distribution of FDI projects in South Central Europe (nb of FDI projects, 2004-2008) 78% 70% 62% 63% Industrial activities* 55% 45% Services 38% 37% 30% As you can see on this slide, South Central Europe attracts primarily industrial, labor intensive activites. In 2008, 63% of the projects are made of manufacturing and logitics activites. 22% 2 004 2 005 2 006 2 007 2 008 *Industrial activities includes manufacturing and logistics Source: E&Y European Investment Monitor 2009

Business services and software in the top 5 Top sectors by number of FDI projects attracted (2004-2008) Market share 2004-2008 Automotive 11% Food 9% Non-metallic mineral products 8% Business Services 7% Software 6% Machinery & Equipment 5% Financial intermediation 5% Although FDI in SCE is dominated by industrial activities, when we take a look at the top sectors of investment, we see hi-value added sectors in the top 5. Business services and software account for 13% of FDI projects into SCE over the past five years. Electronics 4% Other transport services 4% Chemicals 4% Source: Ernst & Young European Investment Monitor 2009

Germany, the #1 investor in South Central Europe Top 5 origin countries for FDI projects in SCE (2004-2008) 15% 12% 188 8% 8% 143 5% 103 94 64 Germany USA Austria France Italy Source: Ernst & Young European Investment Monitor 2009

Reality of FDI in South Central Europe Methodology Reality of FDI in South Central Europe Perception of South Central Europe and future attractiveness Focus on Bulgaria Now having heard the actual FDI situation, let’s take a look at the perception of foreign investors of the region…

A middling perception of performance for investors outside SCE Most attractive regions for FDI in 2009 Western Europe 47% Central Europe 38% Russia, Ukraine, Belarus 24% South Central Europe 21% Baltic countries 17% Nordic countries 15% Northern Africa 13% Ernst & Young SCE attractiveness survey 2009 - Respondents: 103 Total > 100%: many possible answers

A strong industrial appeal SCE most attractive region for manufacturing and logistics Manufacturing Logistics 27% 26% 19% 14% 22% 20% 2 1 3 2 1 3 Firstly, as we previously discussed, the region does have a strong industrial appeal. …for manufacturing activities (27%...) and for logistics (SCE ranked 2nd most attractive region). Logistics in CEE >> 360 projects and 13 506 jobs created over the past five years WE SCE CEE SCE WE CEE Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

But promising credibility on shared services centers Top countries to locate a Shared Services Center, within Central, South Central Europe and North Africa 26% Czech Republic Hungary 23% Croatia 22% Bulgaria 20% Romania 11% Poland 9% Estonia 8% Although the region is primarily perceived as an industrial location, some countries show promising potential in attracting shared services centers. Croatia, Bulgaria and Romania are in the top 5 locations for SSC, just behind CEE leaders as the Cz Rep and Hungary. Serbia 7% Latvia 6% Egypt 5% Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

Loyalty of foreign investors Intentions to develop or expand activities in SCE Can't say European average 6% Yes 40% No 50% 44% Now, what is the current outlook for the region? As you can see from this graph, half of our panel have investment plans in South Central Europe in the next three years Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers Source: Ernst & Young’s 2009 European attractiveness survey

Reforms wanted: infrastructure and labor skills Most important investments to make, among those eligible for EU funds Transport and telecommunication infrastructure 49% 34% Labor skills level Administrative efficiency 22% 17% R&D environment and innovation Still, our panel expressed strong expectations when it comes to reforms, specifically on transportation and telecommunication infrastructure and labor skills level. Business parks 16% Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

Reality of FDI in South Central Europe Methodology Reality of FDI in South Central Europe Perception of South Central Europe and future attractiveness Focus on Bulgaria Now having heard the actual FDI situation, let’s take a look at the perception of foreign investors of the region…

Most attractive SCE countries for FDI Bulgaria, as a challenger in SCE Most attractive SCE countries for FDI PERCEPTION REALITY ( number of FDI 2004 – 2008) Bulgaria Serbia 49% 23% 13% Romania 1 2 3 Croatia 40% Romania 39% Bulgaria 34% Serbia 33% Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers Source: Ernst & Young European Investment Monitor 2009

A clear industrial profile Industrial and services distribution of FDI (nb of FDI projects, 2004-2008) Industrial activities Job creation Automotive, 23% Construction, 15% Electrical, 12% Service 58% 42% Source: Ernst & Young European Investment Monitor 2009

But promising credibility on business support services Top countries for SSC (within Central, South Central Europe and North Africa) Top 3 SCE countries for call centers Romania 1 2 3 Bulgaria Croatia 14% 21% 18% Czech Republic 26% Hungary 23% Croatia 22% Bulgaria Although the region is primarily perceived as an industrial location, some countries show promising potential in attracting shared services centers. Croatia, Bulgaria and Romania are in the top 5 locations for SSC, just behind CEE leaders as the Cz Rep and Hungary. 20% Romania 11% Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

A hub potential to be developed through logistics centers? Most attractive SCE countries for logistics centres 18% 16% 16% 16% Croatia Bulgaria Romania Serbia Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

Wanted: more friendly business environment Measures to improve Bulgaria’s attractiveness Eradicate corruption and bureaucracy 30% Improve communication infrastructure 21% Ensure political environment stability 14% Implement more flexible administrative procedures 14% Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

Bulgaria: the greatest confidence asset Confidence in the improvement of the attractiveness over the next three years Bulgaria 54% Romania 51% Croatia 49% Serbia 44% Macedonia 38% Ernst & Young SCE attractiveness survey 2009 - Respondents: 203 Total > 100%: many possible answers

Challenges ahead How to further compete with Romania and Central Europe? How to cultivate the service and Hub potential of Bulgaria? How to turn the greater level of confidence into real projects? How to improve business environment? Finally, I’d like to conclude with 4 key challenges which we believe SCE should address to improve its attractiveness for FDI …

Contacts Marc Lhermitte Fabrice Reynaud John Mystakidis Ernst & Young International Location Advisory Services Marc Lhermitte Partner marc.lhermitte@fr.ey.com Fabrice Reynaud Senior Manager fabrice.reynaud@fr.ey.com John Mystakidis Country Managing Partner vincent.raufast@fr.ey.com Vincent Raufast Senior Consultant Elena Litova Marketing coordinator elena.litova@bg.ey.com This divider slide can be modified to contain an image. To create a picture divider slide, duplicate this master slide and create a new master slide. Customize the Output shape as described below. The image contained on the divider slide can be changed to suit the specific section. The image is created by filling an AutoShape with an image. To do this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder and follow these steps. The image should have a ratio of 5:3 to ensure it does not appear distorted. Acceptable images for importing into the Output shape are relevant color photography which follows the principles laid out on The Branding Zone. Black and white images or illustrations should never be imported into this area. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Output shape and select Format AutoShape From the Fill menu, under the Color and Lines tab, click on the drop-down arrow next to Color and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Output shape. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click Ok to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Output shape should now be visible on the divider slide http://www.ey.com/FR/fr/Services/Advisory/European-attractiveness-survey