1. Foreign Direct Investments in Bulgaria and the Business Climate

2. Source: Bulgarian Foreign Investment Agency 34 102 211 163 256 636 620 819 1001 694 500 Foreign Direct Investment (USD m, 1992-2002E)

3. Source: Bulgarian Foreign Investment Agency Inflow of Foreign Investment (by Sector, % and USD m, 1998-2001)

4. Source: Bulgarian Foreign Investment Agency Inflow of Foreign Investment by Country (USD m, until 11/2002)

5. Privatisation Law Privatisation Law –completely new law embodying new philosophy –state-owned stakes in some 1,600 enterprises are declared open for privatisation –no preferences for employee-management buyouts –limited deferred payments –concentration of privatisation process in a specialised body- the Privatisation Agency –new Post-Privatisation Control Agency Privatisation (1)

6. Privatisation achievements Privatisation achievements –Biochim Bank –DZI (insurance) Forthcoming major deals Forthcoming major deals –Bulgartabac (tobacco) –BTC (telecommunications) –DSK Bank –Electricity distribution companies Privatisation (2)

7. Source: Privatisation Agency Privatisation Revenues (EUR m, 01/1997-12/2002)

8. In May 2002, the Government opted for the removal of 20% (c. 72 out of 360) of the existing licensing, permit and registration regimes, and for the simplification of another 33% (c. 120 out of 360) of them In May 2002, the Government opted for the removal of 20% (c. 72 out of 360) of the existing licensing, permit and registration regimes, and for the simplification of another 33% (c. 120 out of 360) of them About half of the changes have already been implemented About half of the changes have already been implemented A new Law on the Regulation of Economic Activity, waiting for approval, will regulate the introduction of new registration and permit regimes A new Law on the Regulation of Economic Activity, waiting for approval, will regulate the introduction of new registration and permit regimes Business Climate and Reduction of Bureaucracy (1)

9. An upsweep in the activity of the courts with regard to companies An upsweep in the activity of the courts with regard to companies Radical reform of the Company Act (Commercial Code) in its section on liquidation and insolvency procedures Radical reform of the Company Act (Commercial Code) in its section on liquidation and insolvency procedures According to Transparency International data, in the period 1998-2001 Bulgaria has moved from the 66 th to the 47 th place in the list based on the international index of corruption perceptions According to Transparency International data, in the period 1998-2001 Bulgaria has moved from the 66 th to the 47 th place in the list based on the international index of corruption perceptions Business Climate and Reduction of Bureaucracy (2)

10. * Higher figures show improvement * Transparency International Index WEF Corruption Subindex Ranking Source: Transparency International, World Economic Forum Global Competitiveness Report 2002-2003 International Corruption Indicators (1998-2002)

11. Source: EU Commission Negotiations on EU Accession Progress of the candidate countries in the negotiation process by 18/11/2002

12. Bulgarias secondary education is among the best in the world in recent years: 5 th in the world in sciences, 11 th in mathematics Bulgarians rank second in international IQ tests (MENSA International) Bulgarians are among the top university students worldwide (2 nd in the world in SAT scores) Many students abroad A top-quality MBA (Master of Business Administration) program starting in 2003 EducationEducation

13. IT Certified Professionals (Top 10 Countries in % of Population) Source: Global IT IQ Report of March 2002 of Brainbench, Inc. The data for the population is taken from the mid-2001 estimates of U.S. Census Bureau, International Database and The World Factbook, 2000.

14. Electronics & Electrical Engineering Electronics & Electrical Engineering Strategic sector with priority in long-term development programs Strategic sector with priority in long-term development programs Potential for more than 200 enterprises with possible specialisation in: Potential for more than 200 enterprises with possible specialisation in: –Electrical engineering, Computer and office facilities, Electronics, Radio engineering and communication equipment, Household appliances, Defense industry Source: Bulgarian Foreign Investment Agency

15. IT and Telecoms Cross-point for telecommunications traffic from Europe to the Middle East and Asia Cross-point for telecommunications traffic from Europe to the Middle East and Asia Regulatory framework harmonised with EU standards Regulatory framework harmonised with EU standards By rate of development in 2000, Bulgarian market for mobile telephone services ranked 5 th among CEE countries; over 1.5m mobile phone subscribers By rate of development in 2000, Bulgarian market for mobile telephone services ranked 5 th among CEE countries; over 1.5m mobile phone subscribers Telephone switch exchange manufacturing presents another opportunity Telephone switch exchange manufacturing presents another opportunity Source: Bulgarian Foreign Investment Agency

16. EnergyEnergy Stable legal and regulatory framework harmonised with EU standards. Stable legal and regulatory framework harmonised with EU standards. Positioning of Bulgaria as a reliable country for the provision of future transit of oil, natural gas and electric power and as a dispatching and market centre in the region Positioning of Bulgaria as a reliable country for the provision of future transit of oil, natural gas and electric power and as a dispatching and market centre in the region Introduction of clear and sustainable market rules and a clear schedule for the opening of the internal and external energy market to competition Introduction of clear and sustainable market rules and a clear schedule for the opening of the internal and external energy market to competition Infrastructure projects expected to form the major investment inflow and contribute most to economic growth Infrastructure projects expected to form the major investment inflow and contribute most to economic growth Power generation and distribution companies offered for sale Power generation and distribution companies offered for sale Investments expected until 2005 USD2.5-5.8bn

17. Transport and Logistics Strategic geographic location Strategic geographic location Infrastructure comprising more than 37,000 km road, including 416 km highways Infrastructure comprising more than 37,000 km road, including 416 km highways 6,500 km railways, more than 64% electrified 6,500 km railways, more than 64% electrified Two main ports, servicing over 60% of foreign trade Two main ports, servicing over 60% of foreign trade The Danube River and the Black Sea as international water roads The Danube River and the Black Sea as international water roads Five international airports Five international airports Source: Bulgarian Foreign Investment Agency

18. LeisureLeisure Established holiday destination for Germans, Scandinavians, British and East Europeans: 2.756m tourists for 2001 Established holiday destination for Germans, Scandinavians, British and East Europeans: 2.756m tourists for 2001 USD1.2bn revenues in 2001, USD1.3-1.5bn expected in 2002 USD1.2bn revenues in 2001, USD1.3-1.5bn expected in 2002 Bulgaria is one of the few European destinations with strong growth in tourism in 2002 Bulgaria is one of the few European destinations with strong growth in tourism in 2002 Wide range of products: Beach/Recreation, Winter Sports, Spa/Health, Culture/Museum/Monasteries, Nature/Activity, Touring, Conference Wide range of products: Beach/Recreation, Winter Sports, Spa/Health, Culture/Museum/Monasteries, Nature/Activity, Touring, Conference Source: Bulgarian Foreign Investment Agency

19. Textile and Clothing One of the oldest and fastest developing sectors One of the oldest and fastest developing sectors Some 3,000 enterprises, accounting for 22% of exports Some 3,000 enterprises, accounting for 22% of exports Opportunity for productivity gains by investment in modern equipment Opportunity for productivity gains by investment in modern equipment Main partners and consumers include Germany, France, Italy, Belgium, USA, Canada and the Scandinavian countries Main partners and consumers include Germany, France, Italy, Belgium, USA, Canada and the Scandinavian countries Source: Bulgarian Foreign Investment Agency

20. Food Processing and Beverage Industry Excellent climate and natural conditions Excellent climate and natural conditions Established traditions Established traditions Famous for organic food production Famous for organic food production EU support program, SAPARD, extending EUR52m per year for 2001-2006 EU support program, SAPARD, extending EUR52m per year for 2001-2006 Up to 50% investment subsidy provided for private investment projects to Bulgarian registered companies, incl. with foreign participation Up to 50% investment subsidy provided for private investment projects to Bulgarian registered companies, incl. with foreign participation Source: Bulgarian Foreign Investment Agency

21. Cogged wheels, car seats Engines Car radiators, filters and batteries Driving axles, forgings, cogged wheels Pistons, piston rings Castings, wheel covers Steering mechanisms Wheel covers, non-ferrous metal castings Forgings Generators, starters, auto bulbs Batteries Forgings Fasteners, electronics Fasteners Section steel Castings Forgings, chassis Bearings Cast-iron castings Car tyres Batteries, car accessories Cogged wheels, castings Steel, tyres, rubber products, electronicscogged wheels Automotive Parts Production Locations

22. Selected Input Prices Steel prices Steel prices –section steel: 250-300 USD/ton –rolled steel: ­hot-rolled sheet iron: 280-300 USD/ton ­cold-rolled sheet iron: 320-350 USD/ton ­galvanised sheet iron: 390-420 USD/ton Electricity prices for industrial use - medium voltage (1kV- 60kV, including VAT, as of June 2002) Electricity prices for industrial use - medium voltage (1kV- 60kV, including VAT, as of June 2002) –peak: 0.070 EUR/kWh –day: 0.043 EUR/kWh –night: 0.027 EUR/kWh

23. Customs Regulations Customs Act harmonised with the EU Customs Code Customs Act harmonised with the EU Customs Code Inward processing preferences without or with limited collateral Inward processing preferences without or with limited collateral Option for local custom office for major industrial companies Option for local custom office for major industrial companies Option for simplified export/import customs declaration procedures Option for simplified export/import customs declaration procedures Option for inward processing under customs control Option for inward processing under customs control