Bulgaria – investment climate and business opportunities

Bulgaria is only 3 hours flight from all major destinations in Europe, Russia and the Mediterranean region Strategic geographic locationMajor transport corridors passing through Bulgaria EU and EFTA Russia and CIS Turkey and Middle East

Macroeconomic indicators Real GDP GrowthInflation (HICP) Unemployment FDI Inflow Source: Bulgarian National Bank, Eurostat % % 2007 EU-28Bulgarian , , , , , , ,222 € mln. EU-28Bulgarian * April 2014* % * April

FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors Source: Bulgarian National Bank FDI by host country, (€ mln.)FDI flows by industry, (€ mln.) Telecom Construction Energy Manufacturing Trade Finance Real Estate Other (10) Switzerland (9) Italy (8) USA (7) Russia (6) Cyprus (5) UK (4) Germany (3) Greece (2) Austria (1) Netherlands6333.4

Government financial indicators are remarkable not only in the region, but on a pan-European scale -5%-4%-3%-2%-13%-12%-11%-1%15%1%0% Turkey Croatia Norway Denmark Czech Republic Bulgaria Belgium Iceland United Kingdom Poland Austria Netherlands Malta Sweden Finland Slovakia Slovenia Romania Portugal Average budget deficit/surplus ( ) -7%-6% Germany Hungary Luxembourg Lithuania Latvia Cyprus Italy France Spain Greece Ireland Estonia Source: Eurostat Average government debt ( )

Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011 *The TE credit rating is driven by a model created at Trading Economics. Source: Trading Economics Rating Country credit ratings comparison Q Country S&P RatingMoody's ratingFitch Rating TE Rating* Czech RepublicAA-StableA1StableA+Stable79.28Stable PolandA-StableA2StableA-Stable67.41Stable ItalyBBBNegativeBaa2NegativeBBB+Negative62.09Negative BulgariaBBBNegativeBaa2StableBBB-Stable54.24Stable SpainBBB-StableBaa3NegativeBBBNegative52.55Negative CroatiaBB+StableBaa3NegativeBBB-Negative48.85Stable MacedoniaBBStable BB+Stable47.5Stable RomaniaBB+StableBaa3NegativeBBB-Stable47.35Stable TurkeyBB+StableBa1PositiveBBB-Stable44.58Stable HungaryBBStableBa1NegativeBB+Stable42.58Stable SerbiaBB-Negative BB-Negative40Negative UkraineBNegativeCaa1NegativeBStable28.75Negative

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 Other Agriculture860 Architecture833 Law1 553 Health3 166 Education3 677 Engineering7 178 Social sciences8 372 Business Bulgaria has one of the highest proportions of students abroad from all European countries Czech Republic2.1% Romania2.2% EU-27 average2.8% Germany3.1% Austria4.7% Greece5.8% Bulgaria8.3% Slovakia10.2% Ireland14.2% Iceland17.8% Students in another EU / EEA country, % of all  53 Universities, colleges and higher schools (6 with technical sciences)  Bulgarian students in foreign countries  24.6 % of population hold university degree  7 % of the workforce has engineering degrees  45.5 % from the population in Bulgaria speak at least one foreign language  English language studied by ≈ 85 % of students Key facts about education in Bulgaria

Bulgaria has one of the lowest business costs in Europe Gas prices for industrial users in Europe Source: Eurostat Hungary Romania Turkey Germany Estonia Bulgaria Czech Rep EU average Slovakia €/kWh, 2013€/Gigajoule, 2013 Electricity prices for industrial users in Europe EU average Austria Poland Bulgaria Czech Republic Italy Germany France Spain

Bulgaria has one of the lowest business costs in Europe Average gross annual salaries in industry and services Source: Eurostat €, 2011 Lowest corporate income tax rate in Europe Germany30% Slovakia23% Estonia21% Turkey20% Croatia20% Czech Rep19% Hungary19% Romania16% Bulgaria10% EU average24% %, 2014 Netherlands Germany United Kingdom EU average Slovakia Hungary Latvia Romania Bulgaria Denmark56 299

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 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)

Attractive FDI sectors  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: −Mineral water −Tourism −Balneology −Alternative energy

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 (0% in high unemployment areas) −10% personal income tax −Lowest cost of labor within EU −Favorable office rents and low cost of utilities  Access to markets −European Union / EFTA −Russia −Turkey / Middle East  Educated and skilled workforce  Government incentives

Leading global investors have chosen Bulgaria as an FDI destination IT developmentBack office operations Chemical and metal Industry EngineeringFood

InvestBulgaria Agency 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 is a Government investment promotion arm, part of the Ministry of Economy and Energy

InvestBulgaria Agency Sofia 1000, 31 Aksakov Str. Phone: (+359 2) Fax: (+359 2) Web: