1. COMPETITIVENESS OF THE BULGARIAN ECONOMY AND ENERGY
Petar Dimitrov
Minister of Economy and Energy
June 2008

2. FINANCIAL STABILITY Currency Board since 1st July 1997
Bulgarian currency rate fixed to the Euro
Foreign reserves of € million of the Bulgarian National Bank up to 30 April 2008
Resources of € million for the Fiscal budget, calculated on the basis of programmed currency rates as of 31 March 2008
Budget surplus of € 547 million as of 31 March 2008

3. MACROECONOMIC ENVIRONMENT
УВАЖАЕМИ ДАМИ И ГОСПОДА,
Какво ни дава основание да си поставяме такива високи цели и задачи? Реално изпълними ли са те? Имат ли своето „материално покритие”, имат ли обективната база, от която могат да бъдат стартирани?
Мога с пълна увереност да отговоря позитивно на тези въпроси. Основание за това ми дават два важни аргумента. На първо място, това е нашето пълноправно членство в ЕС и всички произтичащи от това политически и социалноикономически ангажименти, отговорности и предимства. На второ място, това е достигнатата у нас през последните години макроикономическа стабилност и икономически резултати.
Икономическите успехи на България през последните години се обуславят от поддържането на макроикономическа и финансова стабилност, което е необходимо условие за икономически просперитет и висока конкурентоспособност. Тези успехи са базирани на постигнатите високи макроикономически показатели и резултати:
Ръстът на БВП е висок и устойчив. За периода г. средната му стойност е 5.4 %. По данни на НСИ постигнатият икономически растеж през 2006 г. е 6.1 %. Бързо развиващият се частен сектор и инвестициите са основен двигател за постигнатия висок икономически растеж през последните години. Инвестициите в основен капитал отбелязаха ръст от 17.6 %, което определи и нарастването на техния относителен дял от БВП до 26.2 % през 2006 г.
Source: NSI, EUROSTAT, Ministry of Finance
High and constantly rising economic growth
Bulgaria is among the leaders of CEE countries
The main contributor to the GDP growth is the industrial sector

4. MACROECONOMIC ENVIRONMENT
Low levels of unemployment rate (under 7%)
УВАЖАЕМИ ДАМИ И ГОСПОДА,
Какво ни дава основание да си поставяме такива високи цели и задачи? Реално изпълними ли са те? Имат ли своето „материално покритие”, имат ли обективната база, от която могат да бъдат стартирани?
Мога с пълна увереност да отговоря позитивно на тези въпроси. Основание за това ми дават два важни аргумента. На първо място, това е нашето пълноправно членство в ЕС и всички произтичащи от това политически и социалноикономически ангажименти, отговорности и предимства. На второ място, това е достигнатата у нас през последните години макроикономическа стабилност и икономически резултати.
Икономическите успехи на България през последните години се обуславят от поддържането на макроикономическа и финансова стабилност, което е необходимо условие за икономически просперитет и висока конкурентоспособност. Тези успехи са базирани на постигнатите високи макроикономически показатели и резултати:
Ръстът на БВП е висок и устойчив. За периода г. средната му стойност е 5.4 %. По данни на НСИ постигнатият икономически растеж през 2006 г. е 6.1 %. Бързо развиващият се частен сектор и инвестициите са основен двигател за постигнатия висок икономически растеж през последните години. Инвестициите в основен капитал отбелязаха ръст от 17.6 %, което определи и нарастването на техния относителен дял от БВП до 26.2 % през 2006 г.
Source: National Employment Agency
Decrease of the unemployment rate by 5.25 % compared to the end of 2004
Financial backing of Euro 1.2 bln for investments in human resources under the “Human Resources Development” Operational Program

5. INTERNATIONAL POSITION OF BULGARIA
Business conditions – classification of the World Bank
Country
2006
2007
2008
BULAGRIA 59 54 46
Romania 71 55 48
Slovenia 56 53
Turkey 84 65 57
Macedonia 94 95 75
Serbia 86
Croatia
134
120 97
Greece
111
100
Approx. for the Balkans 91 82
Source: World bank – Doing Business
Now Bulgaria is ranked:
46th among 178 countries in terms of business conditions according to the World Bank Doing Business Report
39th in terms of competitiveness out of 55 top economies, according to the International Institute for Management Development (IMD)
79th among 131 countries in terms of competitiveness according to the World Economic Forum, Davos

6. CREDIT RATING Moody's Standart& Poors Fitch 27.09.1996
Japan Credit Rating Agency
Aaa
AAA
... … A3 A
Baa1 A-
Baa2
BBB+
Baa3
BBB
Ba1
BBB-
Ba2
BB+
Latest credit rating assigned
Ba3 BB B1
BB- B2 B+ B3 B
First credit rating assigned C D
Investment rating
Fitch has confirmed the long-term credit rating of Bulgaria, however the long-term credits perspective has been lowered from stable to negative. Fitch has revised the Region outlook due to the change of macroeconomic conditions.
Subinvestment rating
Source: Ministry of finance
An investment rating was assigned to Bulgaria for the first time in Since 2005 the international credit rating agencies have increased Bulgaria’s credit rating 13 times.

7. FOREIGN TRADE , (USD bn)
Source: BNB
The Bulgarian exports increased more than three times since 1999 and in 2007 г. amounted to USD 18.4 bn

8. Major export destinations 2006/2007 (USD million)
Структурата на износа по страни през 2006 г. се оглавява от Турция (11.4% от общия износ), за разлика от предходната година, когато водеща е била Италия - сега на второ място с 10.1%. Следват Германия (9.6%), Гърция (8.8%), Белгия (6.5%) и др. Първите пет страни обхващат 46.4% от износа (срещу 47.7% през предходната година). Първите десет страни обхващат 64.9% от износа (срещу 66.0% през предходната година), първите двадесет страни обхващат 79.6% (срещу 79.4% през предходната година) и т.н. Очертава се слаба тенденция на деконцентрация (пренасочване) на износа от водещите десет страни.
Source: NSI

9. BILATERAL TRADE TURNOVER WITH USA
Структурата на износа по страни през 2006 г. се оглавява от Турция (11.4% от общия износ), за разлика от предходната година, когато водеща е била Италия - сега на второ място с 10.1%. Следват Германия (9.6%), Гърция (8.8%), Белгия (6.5%) и др. Първите пет страни обхващат 46.4% от износа (срещу 47.7% през предходната година). Първите десет страни обхващат 64.9% от износа (срещу 66.0% през предходната година), първите двадесет страни обхващат 79.6% (срещу 79.4% през предходната година) и т.н. Очертава се слаба тенденция на деконцентрация (пренасочване) на износа от водещите десет страни.
Source: NSI
In 2007 Bulgarian export for the USA came up to USD million and decreased by 0.2% as compared to the year The import from the USA amounted to USD million, or decreased by 30.4% as compared to the same period of the year The trade balance is positive for Bulgaria and amounts to USD million.

10. STRUCTURE OF TRADE TURNOVER WITH USA
BY SECTORS FOR 2007
Export from Bulgaria
(%)
Petrol oils and oils from bituminous minerals, other than crude ones
35.2
Products from food processing industry
11.2
Textiles
10.6
Machines and Equipment
10.2
Products from chemical industry
8.0
Optical and photographer’s instruments
4.2
Base metals and articles
2.8
Live animals
2.7
Plaster and cement articles
2.2
Other
12.8
Import from USA
(%)
Mineral products
40.5
Machine and Machinery
26.3
Transport facilities
8.4
Products from chemical industry
4.8
Optical and photographer’s instruments
4.2
Products from food processing industry
3.9
Base metals and articles
2.9
Plastic articles
2.2
Textiles
1.1
Other
5.8
Source: MEE

11. FAVORABLE BUSINESS CLIMATE
Bulgaria is ranked 2nd in the Business climate rating for EU-27 (after Denmark)
Source: Association of European Industrial Chambers

12. FAVORABLE BUSINESS CLIMATE
According to the World Bank Report Bulgaria is ranked 1st among 178 countries in successful implementation of tax reforms for the period
10% corporate tax since 2007 (34.3% in 1999)
0% corporate tax in 138 municipalities with unemployment rate higher than the average level
0% capital gains tax
5% dividend tax from January 1, 2008
Lower social security burden with 6 percentage points in 2006 and by other 3 percentage points since October 1, 2007
10% “flat tax” of incomes of physical persons since 2008

13. CORPORATE TAX FOR 2008 (%)
Source: EU Taxation Database, World Wide Taxes -

14. PERSONAL INCOME TAX FOR 2008 (MAXIMUM RATE %)
Source: EU Taxation Database, World Wide Taxes -

15. SOCIAL INSURANCES PAID BY THE EMPLOYER IN 2006
(% of total employer’s expenses, incl. salaries, insurances, compensations, tuition’s expenses ,etc) *
Source:Eurostat
*Note: In 2007 social security burden paid by the employer is reduced by 2.5%

16. LABOR COST
AVERAGE MONTHLY EXPENDITURES FOR THE EMLOYERS IN 2006 (incl. salaries, insurances, compensations, etc)
Source: Eurostat

17. FOR FINAL INDUSTRIAL CONSUMERS
ELECTRICITY PRICES IN 2007
FOR FINAL INDUSTRIAL CONSUMERS
(EURO/ kWh)
Source: Eurostat

18. FOR FINAL INDUSTRIAL CONSUMERS
NATURAL GAS PRICES IN 2007
FOR FINAL INDUSTRIAL CONSUMERS
(EURO/GJ)
Source: Eurostat

19. Source: A.T. Kearney 2007 Global Services Location Index
INVESTMENT CLIMATE
Source: A.T. Kearney 2007 Global Services Location Index
According to the report of A.T. Kearney from 2007 Bulgaria is ranked 9th in the World and 1st in Central and Eastern Europe as most attractive country for business;
According to UNCTAD Bulgaria takes 7th place as the most attractive investment destination. Bulgaria has moved up in this rating by 14 places in comparison with the 2005 report. 19

20. FOREIGN DIRECT INVESTMENTS
Source: BNB and Bank Austria Creditanstalt
Preliminary data
expectations
Source: BNB

21. BULGARIA LEADS CEE COUNTRIES IN TERMS OF FDI TO GDP INDICATOR

22. FDI STOCK BY SECTORS, 1998 – 2007, Total for the period 24 266 Euro mln.

23. INVESTMENT PROMOTION LAW
Focusing on the following sectors of economic activities:
Industrial Sector
Processing industry;
Power generation from renewable energy resources.
Services sector
High tech activities in the field of computer technologies;
Research and development activities;
Education;
Healthcare.
Two classes of investment „А” and „B”
Minimum amount of investments in a single project
for class А – 70 mln BGN (~56 mln USD)
for class B – 40 mln BGN (~32 mln USD)

24. INVESTMENT PROMOTION LAW CLASSIFICATION OF INVESTMENTS
DEPENDING ON THE REGION
In municipalities with unemployment rate of 35% or higher than the national, the minimum required amount is:
 for class A mln BGN (~28 mln USD)
 for class B mln BGN (~16 mln USD)
In municipalities with unemployment rate of up to 35% higher than the national, the minimum required amount is:
 for class А mln BGN (~ 36 mln USD)
 for class B mln BGN (~ 20 mln USD)
DEPENDING ON THE ECONOMIC SECTOR
Minimum amount of investments in high tech production - two times lower:
 for class А mln BGN (~28 mln USD)
for class B mln BGN (~16 mln USD)
The minimum required amount in high tech activities in the services sector is three times lower:
 for class А - 24 mln BGN (~19 mln USD)
 for class B - 14 mln BGN (~11 mln USD)

25. INVESTMENT PROMOTION LAW ENCOURAGEMENT MEASURES
Shorter terms of administrative service (for class А or class B)
Individual administrative service (for class А) – the measure is implemented by the Invest Bulgaria Agency before central authorities of the executive power and in the rest of the cases by the territorial authorities of the executive power;
Acquisition of property rights or establishment of limited rights to real estate – private state or municipal property” (for class А or class B);
Financial assistance for construction of public infrastructure for class A and for accomplishment of two or more certified investment projects in the boundaries of an industrial zone; implementation of the two classes in certain conditions. The accent is posed on the industrial;
Financial assistance for training for acquiring professional qualification to persons 29 years old or younger, including trainees from Bulgarian universities employed as new recruits in the investment project.

26. US DIRECT IMVESTMENTS IN BULGARIA
FDI in Bulgaria , , USD million
Source: NSI
For the period the USA ranked 8th among the investors in Bulgaria in terms of FDI amount – USD bln

27. US INVESTMENTS IN BULGARIA
(total USD m.)
Major US Investments in Bulgaria
American Standard (production of sanitary faience), USD 239,7 m.
Hilton (hotel), USD 39,7 m.
Craft Foods (chocolate factory), USD 38 m.
MacDonald's, USD (fast food chain)23 m.
News Incorporated (tv channel) USD 22,8 m.
World Trade Company /Gort Securities UK/ (Radisson Hotel), USD 17.7 м.
Westinghouse –modernization of 5 & 6 energy units of NPP “Kozlodui” (completed)
Ongoing projects with US participation in Bulgaria
AES Corporation – construction of a new 670 MW TPP within “Maritza East 1” TPP (for the period ) – the biggest “green” investment of AES in SEE, worth more than USD 2 bln.
Textron –offset agreement (signed in November 2007) for USD 20,4 m. ”green” investment in the construction of Low-voltage equipment Factory
Honeywell - modernization of 1,2 and 4 energy units of TPP “Maritza East 2” for USD16,9 m. (started 2006)
Hewlett Packard- “Global service centre” for its clients in Europe, Africa and Near East.
Microsoft is to open in Bulgaria a free online software support centre, covering SEE
Microsoft, Cisco Systems and Siemens – are to launch soon a centre for innovations

28. INVESTMENT COOPERATION BETWEEN BULGARIA AND USA
Forthcoming US projects in Bulgaria
AES-Bulgaria plans to build a 120 MW Wind Power Park for USD 250 m.
Tishman International Companies” plans to invest in a Logistics and Business Centre more than USD 300 m.
Honeywell– plans to open a centre for assembling of industrial automation systems
CISCO – plans to open a fund for investment in IT SMEs in CEE, including Bulgaria
Possibilities for future US investment in Bulgaria
In 2008 will commence a Special Public Procurement Award “Development of Communication and Information Means” (Offset Project №9) for the modernization of the Bulgarian Armed Forces, USD 300 m.
- ITT Corporation, Lockheed Martin and General Dynamics are interested to participate
In 2010 the Offset Project № 3 “Acquisition of a new multiple-role fighter” for the modernization of the Bulgarian Armed Forces is to be started.
- Lockheed Martin and Boeing have presently expressed interest to participate.
Global Environment Fund has included Bulgaria in its long-term plans for investment in renewable energy sources and water treatment plants in Bulgaria.
Bulgarian-American Investment Fund and its Bulgarian –American Credit Bank provides funds for investment in Bulgaria (mainly in the field of tourism and SMEs) with a capital USD 70 m.

29. SUFFICIENT ACQUISITION OF THE EU FUNDS IS ANOTHER IMPORTANT PRIORITY FOR STIMULATING THE ECONOMY
The Ministry of Economy and Energy runs Operational Program “Competitiveness”
with a Budget of EUR 1.2 billion
Priority 1: Economic development based on knowledge and
innovation activities (budget – EUR 246 million or 21%)
Priority 2: Increasing production efficiency and development of
favorable business environment (budget – EUR 593 million or 51%)
Priority 3: Provision of financial resources for business development (budget – EUR 200 million or 17%)
Priority 4: Strengthening of the Bulgarian economy's position in
international markets (budget – EUR 87 million or 7.5%)
Technical support (budget – EUR 34 million or 3%)
Considerable financial support for SMEs

30. SIGNIFICANT PROJECTS UNDER IMPLEMENTATION
(valued over 8 bln. euro)
Construction of a new nuclear capacity at the site of Belene nuclear power plant –Euro 4 bln;
Construction of spare capacity plant at Maritza East 1 thermal power plant – Euro 1.3 bln;
Rehabilitation and installation of flue gas desulphurization plants in Units 1-4 and increase of the production capacity of Units 5 and 6 at Maritza East 2 thermal power plant – Euro 190 mln.;
Rehabilitation and modernization of Maritza East 3 thermal power plant – Euro 800 mln.;
Construction of hydro power plant Tsankov Kamak – Euro 220 mln;

31. ENERGY PROJECTS UNDER STUDY
Construction of hydro power complex Nikopol (Bulgaria) – Turnu Magurele (Romania) – Euro 1.5 bln;
Construction of hydro power complex Silistra (Bulgaria) – Kalarash (Romania) – Euro 1.2 bln;
Construction of Gorna Arda Cascade and Tundja Dam;
Construction of Maritza East 4 thermal power plant.

32. ELECTRICITY INTERCONNECTION PROJECTS
(Under implementation) Construction of electricity interconnection between Bulgaria and Macedonia: substation Chervena Mogila (Bulgaria) – substation Shtip (Macedonia).
(Planned) - Extension of electricity interconnections towards Albania to Italy /European Corridor N 8/
(Planned) Construction of second electricity interconnection between Bulgaria and Serbia (Vidin – Bor).
(Planned) Construction of second electricity interconnection between Bulgaria and Greece: substation Maritsa East (Galabovo, Bulgaria) – substation Filippi or Nea Santa (Greece)
Bor
Vidin

33. NABUCCO PROJECT ROUTE & TECHNICAL DATA
Pipeline diameter: 56” (1422 mm)
Distance: km
Investment: 8 billion €
Maximum transport capacity: 31 bcm/y

34. “SOUTH STREAM” PROJECT POSSIBLE ROUTES OF THE BRANCHES & TECHNICAL DATA
NORTH HU RU SR BG IT
Transport capacity: 31 bcm/y
Under discussion - 2 branches “SOUTH” and “NORTH”
Offshore part RU-BG – 900 km
Max. deep: 2000 m
Singed MoU Eni-Gazprom
Signed agreements of Russia with:
Bulgaria, Serbia, Hungar, Greece
Total amount of the investment: Euro 12 bln.
SOUTH GR

35. REGIONAL GAS INFRASTRUCTURE PROJECTS
1. GAS PIPELINE BULGARIAN (BG) GRID – TURKEY – GREECE INTERCONNECTOR 2. REGIONAL LNG TERMINAL (BG & SEE REGION) 3. DUPNITZA – NIS GAS PIPELINE (BG-SR) 5. RUSE – GIURGU GAS INTERCONNECTION (BG-RO)
Giurgu 4
Ruse
Nis 3
Dupnitsa 1
Haskovo
LNG 2

36. OIL TRANSPORT INFRASTRUCTURE PROJECTS
Oil pipeline Bourgas- Alexandroupolis
Length of the pipeline- 290 km, BG territory km;
Pipe diameter – 900 mm (36”);
Capacity: 0.75 M barrels/day (35 M tons/y);
2 pump stations;
Trilateral agreement Bulgaria-Greece-Russia signed and ratified;
IPC establishment - February 2008;
Expected: Start of the construction by the end of 2008.

37. OIL TRANSPORT INFRASTRUCTURE PROJECTS
Oil pipeline Bourgas– Vlore (along the European Corridor No. 8 route)
Length of the pipeline – 900 km;
On Bulgarian territory – 480 km;
Pipe diameter – 900 mm (36“);
Capacity: 0.75M barrels/day (35 M tons/y);
4 pump stations;
Convention Albania-Bulgaria-Macedonia signed and ratified.

38. OUTLOOK FOR THE PERIOD 2008 - 2010
INDICATOR
2008
2009
2010
Real growth of GDP
6.2%
6.5%
6.9%
Average annual inflation
(harmonised index of consumer prices)
4.4%
3.7%
Unemployment
6.1%
Current account, € bn
-6.9
-7.7
-8.2
Current account, % of GDP
-21.1%
-21.0%
-20.0%
FDI, € bn
(average annual rate of 8%)
7.0
7.6
8.2
Source: Agency for Economic Analysis and Forecasting. FDI – prognosis of MEE
It is expected that the dynamic and ascending development of the Bulgarian economy will continues.
The economic growth rate is envisaged to exceed 6% annually.
According to the forecast in the end of the period the average annual inflation rate will drop to 3.7%.
The unemployment rate will remain 7%.
The current account deficit will remain 21% of GDP.
In order to cover the current account deficit FDI should increase annually by 8%

39. The list of foreign companies in Bulgaria is growing quickly!
GLOBAL COMPANIES ARE GAINING INSIGHT IN ADVANTAGES OF DOING BUSINESS IN BULGARIA
Examples of those who already have discovered their opportunity in Bulgaria
“Very well educated, talented and committed workforce, large talent pool, very competitive cost structure, European culture, good English skills, short flight times and almost no time difference from Western Europe…” - Dr. Peter Kurpic, Senior Vice President NetWeaver Foundation SAP AG
“Political and economic stability, the qualified labor force and the cost structure” – Gilles Bernard, Executive Director of EPIQ (Belgium)
YOUR LOGO HERE
“…among the reasons why HP had chosen Bulgaria were the high level of education in terms of technical skills and languages, good infrastrucutre and investor-friendly legislation.“ – Tino Canegrati, HP Global Delivery General Manager
“Over the past several years, we have proven that Bulgaria is a competitive, productive place to do business with a lot of talented and well trained people. As we look to expand here in Sofia we plan to continue hiring the best and the brightest people that Bulgaria has to offer.” – Eric Dumas, Director of Tumbleweed Communications Bulgaria
“The combination of existing and proven local expertise, the excellent academic facilities and the strength of the Bulgarian economy, made Sofia an ideal choice for further investment in our global mixed-signal engineering capabilities.” – Nelly Pergoot, Managing Director, AMI Semiconductor (USA)
The list of foreign companies in Bulgaria is growing quickly!
Source: Invest Bulgaria Agency – Bulgaria Investment Guide 2007, Value Scope Bulgaria,

40. THANK YOU FOR YOUR ATTENTION! Ministry of Economy and Energy