Bulgaria – investment climate and business opportunities 2012

% Macroeconomic indicators show consistent pre-crisis economic growth and quick post-crisis recovery Real GDP Growth Inflation (HICP) Bulgaria EU-27 Bulgaria EU-27 0.4% 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 Unemployment FDI Inflow Bulgaria EU-27 € mln. 9,052 9.2% 6,222 6,728 6.9% 6.3% 2,736 3,152 2,437 1,209 1,341 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 Source: Bulgarian National Bank, Eurostat

FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors FDI by host country, 1996-2011 (€ mln.) FDI flows by industry, 1996-2011 (€ mln.) (1) Netherlands 6,018 Real Estate 8,204 (2) Austria 5,809 Finance 7,652 (3) Greece 3,664 Trade 6,522 (4) UK 2,733 (5) Germany 2,523 Manufacturing 6,479 (6) Cyprus 2,257 Construction 2,705 (7) Russia 1,486 Energy 2,699 (8) USA 1,283 Telecom 2,260 (9) Italy 1,279 (10) Hungary 1,272 Other 2,664 Source: Bulgarian National Bank

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

Bulgaria enjoys one of the most stable political and economic environments in Southeastern Europe Bulgaria is a member of some of the most prestigious political organizations European Union member since 2007 NATO member since 2004 WTO member since 1996 Strong commitment to political reform and transparency has earned praise from leading media and experts worldwide Stable currency Bulgarian Lev has been pegged to the Euro since the adoption of the currency in 2002 Currency board backed by IMF „While governments across the euro- zone periphery are on the ropes or have been felled by the economic crisis, Prime Minister Boyko Borisov's government has drawn international accolades for cutting spending while maintaining high levels of public support.” September 10, 2011 Standard & Poor's ratings agency raised its short-term foreign and local currency sovereign credit ratings on Bulgaria to 'A-2' from 'A-3' based on its recently adopted methodology. The agency also affirmed our 'BBB' long-term foreign and local currency sovereign credit ratings.The outlook is stable. August 10, 2012

Government financial indicators are remarkable not only in the region, but on a pan-European scale Average government debt (2006-2011) Greece Italy Belgium Portugal France Hungary Germany United Kingdom Malta Iceland Austria Ireland Cyprus Poland Spain Netherlands Finland Turkey Sweden Croatia Norway Slovakia Denmark Lithuania Slovenia Czech Republic Latvia Romania Bulgaria Luxembourg Estonia -11% -10% -6% -5% -4% -3% -2% -1% 0% 1% 15% 16% Average budget deficit/surplus (2006-2011) Source: Eurostat

Bulgarian economy maintains its excellent performance despite global challenges % BG Budget deficit for 2011, % of GDP Expected real GDP growth, 2012 Egypt Slovenia -1.4% Greece United States Hungary -0.3% Japan United Kingdom EU-27 0.0% Spain Poland Czech Republic 0.0% France India United Kingdom 0.5% Netherlands Euro Area Bulgaria 0.5% Italy Czech Republic Romania 1.4% Denmark Austria Slovakia 1.8% Brazil China United States 2.0% Turkey Germany Lithuania 2.4% Sweden Switzerland Poland 2.7% Hungary Source: Eurostat, The Economist, National Statistics

k Bulgaria is the only country in Europe with a credit rating upgrade by Moody’s in 2010 and 2011 Aaa Estonia A1 Baa1 Bulgaria Spain Hungary Ba1 Turkey B1 Cyprus Latvia Caa1 Ireland Lithuania Iceland Portugal Greece Ca 01/10 04/10 07/10 10/10 01/11 04/11 07/11 10/11 01/12 04/12 07/12 10/12 Source: Moody’s

Bulgaria has one of the lowest business costs in Europe (1) taxes and labor costs Lowest corporate income tax rate in Central / Eastern Europe Most competitive cost of labor in Central / Eastern Europe Monthly wage, nominal, € / month December 2011 Bulgaria (*) 10% Bulgaria Romania 16% Romania Hungary 19% Serbia Slovakia 19% Hungary Czech Rep 19% Slovakia Poland 19% Poland Croatia 20% Czech Republic Turkey 20% Croatia 1,048 Slovenia 20% Slovenia 1,520 * 0% tax rate for manufacturing companies in regions with low employment Source: Eurostat; Bank Austria

Bulgaria has one of the lowest business costs in Europe (2) energy costs and rent Bulgarian cost of electricity for industrial users is 70% of the European average Office rents in Bulgaria are among the lowest in Europe €/kWh, 2011 € / sq. m / year, Q2 2011 Estonia Sofia Bulgaria Zagreb Romania Bucharest Turkey Budapest Germany Prague EU average Warsaw Hungary Athens Czech Rep Istanbul Slovakia Moscow Source: Eurostat, CB Richard Ellis

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

The role of the European Union as a trade partner for Bulgaria has been growing consistently % Share of EU-27 exports has increased visibly since 1995 ... in absolute terms EU-27 exports have grown more than 7 times +39% 13,000 € mln 12,000 11,000 EU-27 10,000 9,000 8,000 7,000 Balkans 6,000 5,000 Asia 4,000 3,000 Other 28% 2,000 16% 15% 15% 16% 1,000 1995 2000 2005 2010 2011 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: National Institute of Statistics, Bulgaria

Educated and skilled workforce is among the main advantages of Bulgaria Almost 60,000 students graduate every year from over 50 universities Bulgaria has one of the highest proportions of students abroad from all European countries Business 19,480 Iceland 17.8% Social sciences 8,372 Ireland 14.2% Slovakia 10.2% Engineering 7,178 Bulgaria Education 3,677 Greece Health 3,166 Austria Law 1,553 Germany Architecture EU-27 average Agriculture Romania Other 12,684 Students in another EU / EEA country, % of all Czech Republic Source: National Institute of Statistics, Bulgaria

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 €10m €3.5 in regions with high unemployment and €2m 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 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 €25 + 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)

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: Mining Oil Alternative energy

Leading global investors have chosen Bulgaria as an FDI destination IT & BPO Mechanical and Electrical Engineering Construction Materials Telecom and Media Energy Finance

InvestBulgaria Agency InvestBulgaria Agency is a Government investment promotion arm, part of the Ministry of Economy, Energy and Tourism 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 14

InvestBulgaria Agency Sofia 1000, 31 Aksakov Str. Phone: (+359 2) 985 5500 Fax: (+359 2) 980 1320 E-mail: iba@investbg.government.bg Web: www.investbg.government.bg