1. 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.

2. 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.

3. Scope of the study Countries: Romania Bulgaria Bosnia & Herzegovina
Croatia
Serbia
Albania
South Central Europe population:
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 :

4. 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

5. 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

6. 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

7. South Central Europe captures 25% of FDI projects in CEE
Number of FDI projects
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

8. An industrial attractiveness
Distribution of FDI projects in South Central Europe (nb of FDI projects, )
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

9. Business services and software in the top 5
Top sectors by number of FDI projects attracted ( )
Market share
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

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

11. 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…

12. 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 Respondents: 103
Total > 100%: many possible answers

13. 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 jobs created over the past five years WE
SCE
CEE
SCE WE
CEE
Ernst & Young SCE attractiveness survey Respondents: 203
Total > 100%: many possible answers

14. 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 Respondents: 203
Total > 100%: many possible answers

15. 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 Respondents: 203
Total > 100%: many possible answers
Source: Ernst & Young’s 2009 European attractiveness survey

16. 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 Respondents: 203
Total > 100%: many possible answers

17. 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…

18. 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 Respondents: 203
Total > 100%: many possible answers
Source: Ernst & Young European Investment Monitor 2009

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

20. 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 Respondents: 203
Total > 100%: many possible answers

21. 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 Respondents: 203
Total > 100%: many possible answers

22. 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 Respondents: 203
Total > 100%: many possible answers

23. 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 Respondents: 203
Total > 100%: many possible answers

24. 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 …

25. Contacts Marc Lhermitte Fabrice Reynaud John Mystakidis
Ernst & Young
International Location Advisory Services
Marc Lhermitte
Partner
Fabrice Reynaud
Senior Manager
John Mystakidis
Country Managing Partner
Vincent Raufast
Senior Consultant
Elena Litova
Marketing coordinator
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