1. Financial and social effects of the economic crisis on Apparel Industry in Bulgaria Presentation of Hristina Krasteva Member of the Board of BAATPE Bratislava 18-19.06.2009 With the support of

2. General Economic Environment in Bulgaria for the first quarter of 2009 (flash estimation data of National statistics) GDP average decline on annual basis (-3.5%), decline in industrial sector (-12,2%) Inflation 1,3% from the beginning of 2009, 5,7% for first 3 months on annual basis Unemployment rate 6,4% for the first 3 months of 2009, no changes in comparison of 2008 according to official statistic, increasing to 7,04 in May (261 000 people officially registered) Salary cost: Average salary increasing for the first 3 months of 2009 compared to the same period of 2008 – 16,3% from 247EUR (2008) to 288 EUR (2009) Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

3. General Economic Environment in Bulgaria for the first quarter of 2009 FINANCIAL RESOURCES companies do face greater problems and stricter requirements to have access to credit: - decrease of credit limits; - increase of guarantees requested (till 200%) In April 2009, the average interest rate (for credits lower then 1 million EUR) was: –for credits in BGN 11,25% (+0.61) –for credits in EUR 10,13% (+1.28) spread between the average lending rate and the average borrowing rate for commercial lending is between 5 - 6% Significant increasing of Intercompany liabilities - about 150-170 million of BGN(+40%) Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

4. Short terms expectations for clothing industry in Bulgaria : Continues reduction of the market for clothes Continues presser from Asian and Turkey companies Continues Increasing of production cost (energy, labour, services) High expenditure for covering EU standards and customers’ demands Reduction of size of the sales orders, increasing the diversity of the garments In result - failures of many companies (especially in SME sector) Main Competitive Advantage for clothing companies in order to resist will be: FLEXIBILITY AND ORIENTATION TO INOVATIONS HIGH QUALITY OF THE PRODUCTS IN ACCSEPTABLE COST LEVEL HIGH EFFECTIVENESS AND OPTIMIZATION OF THE EXPENDITURE SHORT PRODUCTION AND DELIVERY TIME Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

5. Reaction to counteract the effects of the crisis at association level Good practical example of BAATPE BAATPE (Bulgarian Association of Apparel and Textile Producers and Exporters) is a non-profit employers association, founded 10 years ago, with about 200 members – export-orientated companies, organizations and individuals related to the textile production Mission of BAATPE To help ensure health and sustained growth of the Bulgarian apparel and textile industry and to assist its members in raising their competitiveness Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

6. Reaction to counteract the effects of the crisis at association level Good practical example of BAATPE Information services: Assisting members with information on industry and fashion, foreign market regulations and requirements, marketing information, legal matters Caring out sectoral surveys and market analysis Issuing monthly and weekly bulletin Organizing conferences and trainings Guidance in EU Funds applications Organizing Annual meetings of Association’s members Business missions B-Gate exhibitions (Balkan Gate Apparel and Textile Exhibition ) Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

7. Reaction to counteract the effects of the crisis at association level Good practical example of BAATPE Lobbing activities: Together with other industrial associations BAATPE is working on: reducing administrative regulations on business and improving law frame and whole business environment promoting Bulgaria as a best place to produce high quality clothes, at acceptable cost level and in short delivery time Recent initiatives - forcing government and institutions: to give preferences for local companies in case of public orders’ auctions to start to pay partial compensation for part time workers to reconsider the project proposals for EU program “Competitiveness” from sector “Textile and Clothes” Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

8. Reaction to counteract the effects of the crisis taken at state level: National Guarantee Fund (80 millions BGN to guarantee 50% of credits for SME) Bulgarian Export Insurance Agency (600 million of BGN capacity for 2009) Payment of partial compensation for part time workers (6,7 millions of BGN total fund, 120 BGN per person per moth for no more then 3 months) Conclusions: Low degree of effectiveness of measures taken till now. Now the country is in a pre-election period and institutions are in a position of waiting for new guidance Financial and social effects of the economic crisis on Apparel Industry in Bulgaria

9. Thanks for your attention! Bratislava 18-19.06.2009