Bulgaria Presentation For Japanese Investors

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Bulgaria Presentation For Japanese Investors

  1. 1. Introduction to Investment opportunities in Bulgaria Adamant Capital Partners AD Sofia, December 2008 October 2008
  2. 2. Contents Trade relations EU-Japan; Business optimization opportunity; Bulgaria overview; Main strategic advantages of Bulgaria; Case study- Yazaki Bulgaria EOOD;
  3. 3. Trade relations EU-Japan  The compound GDP of EU and Japan amounts of around 40% of the total World GDP  The total trade between EU and Japan is around € 125 bn on an year base  The EU exports to Japan in 2007 are 43.8 bn (3.5% from the EU total exports)  The Japan exports to EU in 2007 are 78.1 bn (5.5% from the total Japan exports)  The main sectors of Japan exports to EU are: o Machinery o Electrical Machinery o Transport equipment o Chemicals o Manufactured Goods
  4. 4. Business optimization opportunity Japanese companies invest in production plants in Bulgaria Main advantages for Japanese companies to produce in Bulgaria: EU COMMON MARKET Bulgarian subsidiaries of Japanese companies start to sell their goods on the • Part of the Common EU market common EU market • Cheapest Cost of Energy • Cheapest Labor cost • Corporate tax 10% • Cheapest transport (via Danube river) • Faster time to EU market
  5. 5. Bulgaria Summary • Member of EU; • Strategic location; • Lowest labor cost in EU; • Availability of qualified work force; • Lowest energy costs in EU; • Lowest corporate tax in EU: 10%; • On the road of raw materials from Russia and Kazakhstan;
  6. 6. Bulgaria overview Map 1: Europe & Bulgaria
  7. 7. Bulgaria overview  Full member of EU since 01.01.2007. The Country’s territory is 110 910 sq. km. and it’s population is 7 680 000 people  Adopted currency board in 1997 and fixed the exchange rate of the local currency (Lev) to the Euro  Investment grade credit rating (BBB-)  Average growth of GDP of 6% per year  Average monthly salary of 250 euro  Main sectors of the economy: o electrical engineering, electronics, automotive, real estate, mechanical engineering, food & beverage, IT & telecommunications, Business process outsourcing, energy and non metallic mineral products
  8. 8. Bulgaria overview (cont.) Bulgaria, real GDP growth, % YoY GDP Per Capita, % of EU 27 in PPS 2007 EU27, real GDP growth, % YoY Ireland Bulgaria, GDP per capita, % of EU 27 in PPS Austria 7.0 50.0 6.0 45.0 Denmark 5.0 40.0 Finland 4.0 35.0 3.0 Germany 2.0 30.0 25.0 Spain 1.0 0.0 20.0 EU (27 countries) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008f Cyprus Source: ACP Research; Eurostat Czech Republic Portugal Slovakia • Bulgarian GDP has grown steadily since 1999 mainly as a result of increased consumer demand, domestic Lithuania and foreign direct investments and increased exports Poland Bulgaria • Bulgarian GDP is converging to the EU 27 average 0.0 50.0 100.0 150.0 200.0 250.0 300.0 Source: Eurostat
  9. 9. Bulgaria overview (cont.) Business start-up Corruption Percentage Unemployment Average gross monthly Country Index, 2007 Procedures, no. Duration (days) rate, %, 2007 salary, Q4 2007, EUR Bulgaria 4.1 9 32 6.9 233 Croatia 4.1 8 40 11.2 896 Cz. Rep. 5.2 10 17 6.6 782 Hungary 5.3 6 16 8.1 802 Poland 4.2 10 31 14.9 690 Romania 3.7 6 14 6 474 Slovakia 4.9 9 25 10.8 550 Source: Transparency International, World bank, EIU, National Banks, Statistics offices & Investment agencies GVA by sub-sectors, 2006 FDI inflow 2002 – 2007, mln USD 9,000 Other services 8,000 Transport 7,000 Finance 6,000 5,000 Industry 4,000 Construction 3,000 2,000 Mining & quarrying 1,000 Agriculture 0 2002 2003 2004 2005 2006 2007 0% 10% 20% 30% 40% 50% 60% 70% Source: Bulgarian Investment Agency Source: Bulgarian Investment Agency
  10. 10. Bulgaria overview (cont.) Matrix of inward FDI performance and potential High FDI performance Low FDI performance High FDI potential Bahamas, Bahrain, Belgium and Luxembourg, Argentina, Australia, Austria, Belarus, Canada, Germany, Botswana, Brazil, Brunei Darussalam, Bulgaria, Greece, Iceland, Islamic Rep. of Iran, Italy, Japan, Jordan, Chile, China, Costa Rica, Croatia, Cyprus, The Kuwait, Lebanon, Libyan Arab Jamahiriya, Malaysia, Malta, Czech Republic, Denmark, Dominican Republic, New Zealand, Norway, the Oman, the Philippines, Poland, Estonia, Finland, France, Hong Kong (China), Hungary, Ireland, Israel, Kazakhstan, Latvia, the Republic of Korea, the Russian Federation, Saudi Lithuania, Mexico, the Netherlands, Panama, Arabia, Taiwan Province of China, Thailand, Ukraine, Portugal, Qatar, Singapore, Slovakia, Slovenia, United Arab Emirates, the United Kingdom and the United Spain, Sweden, Switzerland, Trinidad and Tobago, States. Tunisia and Viet Nam. Low FDI potential Albania, Angola, Armenia, Azerbaijan, Bolivia, Algeria, Bangladesh, Benin, Burkina Faso, Cameroon, the Colombia, Congo, Equator, Ethiopia, Gambia, Democratic Republic of the Congo, Cote d’Ivoire, Egypt, El Georgia, Guyana, Honduras, Jamaica, Mali, Salvador, Gabon, Ghana, Guatemala, Guinea, Haiti, India, Mongolia, Morocco, Mozambique, Namibia, Indonesia, Kenya, Kyrgyzstan, Madagascar, Malawi, Nicaragua, Nigeria, Peru, Republic of Moldova, Myanmar, Nepal, Niger, Pakistan, Papua New Guinea, Romania, Sudan, Syrian Arab Republic, TFYR Paraguay, Rwanda, Senegal, Sierra Leone, South Africa, Sri Macedonia, Togo, Uganda, the United Republic of Lanka, Suriname, Tajikistan, Turkey, Uruguay, Uzbekistan, Tanzania and Zambia. Venezuela, Yemen and Zimbabwe. Source: UNICAD
  11. 11. Main strategic advantages of Bulgaria  Location;  Low operational costs; Availability of experienced workforce;  Favorable taxation system;  Industrial zones and cheap plots suitable for Greenfield industrial investments (the example of Russe Region);  Market dimension (EU common market);  Government incentives for investments;
  12. 12. Location ...5 out of 10 Pan European Corridors pass trough Bulgaria… • Pan-European Transport Corridor № 4 (Dresden/Nurnberg – Prague – Vienna/Bratislava – Budapest – Kraiova – Constanta/Sofia –Thessaloniki/Plovdiv – Istanbul) • Pan-European Transport Corridor № 7 (Internal waterway Rein-Main-Danube) • Pan-European Transport Corridor № 8 (Durres – Tirana – Kaftan/Kafasan – Skopje – Deve Bair – Gyueshevo – Sofia – Plovdiv – Bourgas – Varna) • Pan-European Transport Corridor № 9 (Helsinki – Saint Petersburg – Moscow/Pscow – Vitebsk – Kiev – Lyubashevka – Kishinew – Bucharest – Rousse – Dimitrovgrad – Alexandroupolis) • Pan-European Transport Corridor № 10 (Salzburg – Lyubliana – Zagreb – Belgrad – Nish – Scopje – Veles – Thessaloniki: with divergence Nish – Sofia)
  13. 13. Location (cont.) Raw materials arrive to Black Sea via Volga river, then cross Black Sea and continue via Danube river
  14. 14. Location (cont.) Raw materials arrive in Bulgaria by ships (via Volga river, Black Sea and Danube) from Russia and other rich raw materials countries Production is done in factories near Danube river in Bulgaria Final production is transported via Danube river to Western Europe Map 3: Pan European Transport Corridors 14
  15. 15. Location (cont.) - Strategic location - Availability of sea, river and road transport - Within 500 km from Sofia live over 90 mln people - A network of international motorways crosses the country - Presence of vital connections to the countries of Western Europe, Russia, Minor Asia, the Adriatic, the Aegean and the Black Sea Map 2: Pan European Transport Corridors in Bulgaria
  16. 16. Location (cont.) • Bulgaria is located on the road of the raw materials coming from Russia and Kazakhstan • Pan-European Transport Corridor № 7 (Internal waterway Rein-Main-Danube) is particularly important for production sites in Bulgaria • The production materials arrive from the raw materials rich countries via Black Sea and Danube river; production is done in plants near Danube river; products and goods are transported via Danube river up to Hungary, Austria, Germany and other European target markets • Bulgaria is in the middle between the raw materials market (east) and the consumer market (west); it is a convenient production destination for Japanese companies
  17. 17. Low labor costs Average annual wages and salaries of the employees under • Average gross monthly labour contract by economic activity groupings in 2007 in euro Total Public Sector Private sector wage EUR 256 Total 2,642 3,199 2,434 • 22% of the population Food Products, agricultural and fisheries product processing 1,855 2,426 1,744 holds University Degree Mining and quarrying 4,352 6,219 3,702 • Educated workforce and Manufacturing 2,350 3,973 2,313 Electicity, gas and water supply 4,567 4,584 4,532 availability of specialists in construction 2,172 3,020 2,147 the field of manufacturing Trade, repair of motor vehicles and sector personel and household goods 2,140 4,124 2,133 Hotels and restaurants 1,641 2,236 1,606 Transport, storage and communication 3,266 3,489 3,107 Financial intermediation 5,853 7,379 5,788 Real estate, renting and business activities 3,070 3,077 3,069 Public administration, compulsory social security 3,906 3,906 X Education 2,657 2,631 3,458 source: National Statistical Institute
  18. 18. Low energy costs (cont.) Natural gas prices for large industrial standard consumers 418 600 GJ per year (EUR per GJ); All taxes included 2007 EU (27 countries) 8.7500 EU (15 countries) 8.8000 Euro area 8.6800 Belgium 7.4200 Bulgaria 5.3845 Czech Republic 7.0880 Denmark 7.1765 Germany 11.2100 Estonia 5.0624 Latvia 6.0410 Lithuania 6.4643 Hungary 10.3256 Poland 8.0197 Portugal 5.4300 Romania 8.3394 Slovenia 8.8300 Slovakia 8.8820 Turkey 7.8411 source: Eurostat Source: Eurostat
  19. 19. Low energy costs (cont.) Electricity prices for large industrial standard consumers 24 GWh per year (EUR per kWh); All taxes included 2007 EU (27 countries) 0.0904 EU (15 countries) 0.0911 Euro area 0.0937 Belgium 0.0939 Bulgaria 0.0588 Czech Republic 0.0793 Estonia 0.0447 Italy 0.1283 Cyprus 0.1209 Latvia 0.0519 Lithuania 0.0632 Hungary 0.1012 Malta 0.0617 Poland 0.0688 Romania 0.0894 Slovenia 0.0813 Slovakia 0.1053 Turkey 0.0666 Norway 0.0621 source: Eurostat Source: Eurostat
  20. 20. Favorable taxation system Corporate tax % • Corporate tax: 10%; Personal tax: 10%; Austria 25 Bulgaria 10 • 5 year taxation exemption for companies, who Belgium 34 invest more than 5 mln euro in one year period. Czech Republic 21 Estonia 21 The exemption is possible in the following sectors: France 34.34 agriculture, manufacturing industry, production, Germany 30-33 high tech, infrastructure; Greece 25 Hungary 20 • Interest expenses are deductable up to 75% from Italy 27.5 earnings; Ireland 12.5 Poland 19 • Taxation of dividends: 5%; Slovakia Slovenia 19 22 • Infragroup earnings are not subject to any sort of Spain 30 taxation; UK 28 20
  21. 21. Industrial zones (the example of Russe Region) Labor force Breakdown of labor force in Russe Region 2007 Labor force Total ('000) 118.9 Employed ('000) 105.4 Unemployed ('000) 13.6 People not in labor force ('000) 104.8 Activity rate (%) 53.2 Employment rate (%) 47.1 Unemployment rate (%) 11.4 Educational level of employed people (%) 2006 Total 100 Higher education 25.8 Upper secondary Total 62.2 Technical and Vovational 53.2 Lower Secondary or lower 12 Map 4: Bulgaria and Russe Region Source: Bulgarian Investment Agency • Area of the Region: 2,803 sq. km. • GDP of the Region: EUR 616.1 mln • Population: 253,008 people • GDP Per Capita: EUR 2,398 • Unemployment rate: 11,4% • Pan European Corridors 7 and 9 • Average annual wage (EUR): 1,885 converge in Russe. River transport via Danube available
  22. 22. Industrial Park Russe (Russe region) • The city of Ruse is an ancient cultural and transport center of Bulgaria and the Balkans • Convenient transport connection between Western Europe - South- eastern Europe - Asia and the Caucasus countries (Armenia, Azerbaijan) Pic 2: Port Russe Pic 3: Port Russe Map 5: Transport Corridors
  23. 23. Industrial Park Russe (cont.) • Area: 64 ha; • Water, electricity and gas are available • Master Development Plan: available • Geotechnical survey: available Industrial Zone Russe • Immediate proximity to Port Russe (the biggest Bulgarian port on Danube) • Access via road, Railway and water • 70 km from the airport of Bucharest Map 6: Port Russe and Industrial Zone Russe
  24. 24. Market dimension (EU common market) • Bulgaria is full member of EU since 2007; • It is part of the common EU market for goods and services; • Production made in Bulgaria is not subjected to any kind of custom fees or other taxes related to access to the EU market; • Bulgaria becomes attractive investment destination, due to the low cost of production and the free access to the EU market;
  25. 25. Government incentives for investments Bulgaria Real GDP growth, 2002-2007; Total GDP- EUR 28.9 bn (2007) • The structure of the Bulgarian economy is 7 6 characterized by strong inflow of FDIs 5 4 • In periods of global positive economical trend, 3 2 the Bulgarian economy enjoys strong growth 1 and dynamic investment activity 0 2002 2003 2004 2005 2006 2007 • In periods of global downturn, as the current Source: Bulgarian Investment Agency one, the risk of economical slowdown remains FDI to GDP, %, 2006 – 2007 E high 25 20 • For this reason, the Government is favorable 15 10 to sustain business activities and to promote 5 2006 FDIs with different investment incentives like 0 2007 taxation exemption and others Source: Bulgarian Investment Agency
  26. 26. Case study- Yazaki Bulgaria • Yazaki Bulgaria EOOD is a subsidiary of Yazaki Corporation – Japan; • Core business of Yazaki Corporation: wire harnesses and other components for the automotive industry; • The company has plants in 39 countries and over 200 000 employees all over the World; • It produce in Bulgaria electrical wire harnesses for the automotive industry; • The main export markets of Yazaki Bulgaria EOOD are France and Spain; • The production plant of Yazaki Bulgaria is located in Industrial zone Yambol; The whole property of the company is 50 000 sq. m. and the TBA of the factory is 24 250 sq. m. • Currently there are 1 800 people employed in the producing plant
  27. 27. Case study- Yazaki Bulgaria (Cont.) Main reasons for Yasaki to set up a factory in Bulgaria: • Overall competitive costs; • Availability of proper labor force; • Stable political environment; • Fast administrative services; • EU membership of Bulgaria; o Free travel of people; transportation of materials, goods and equipment within EU;
  28. 28. Contact Details Mailing Address: Adamant Capital Partners AD Securities Mr. Nikolay Stoev 76A, James Bourchier Blvd. Brokerage T: +359 2 422 5994 Hill Tower Building M: +359 888 5688 22 1421-Sofia, Bulgaria E: nikolay.stoev@adamantcapital.eu E: nstoev@bloomberg.net T: +359 2 963 4510, +359 2 422 5970 T (UK): +44 20 33 84 1302 F: +359 2 422 5973 Research Mr. Deyan Nikolov Contacts: T: +359 2 422 5996 CEO Mr. Bojidar Kounov M: +359 884 9554 46 E: deyan.nikolov@adamantcapital.eu T: +359 2 422 5972 E: nikolov@bloomberg.net M: +359 884 7777 08 E: bojidar.kounov@adamantcapital.eu E: bojidar@bloomberg.net Corporate Mr. Jivko Stoimenov Finance T: +359 2 963 3075, +359 2 422 5970 F: +359 2 422 5972 COO Mr. Miroslav Velikov M: +359 884 5976 54 T: +359 2 422 5992 E: jivko.stoimenov@adamantcapital.eu M: +359 886 7177 00 E: miroslav.velikov@adamantcapital.eu Advisory Ms. Radostina Tsvetanova E: mvelikov@bloomberg.net EU Funds T: +359 2 963 3075, +359 2 422 5980 M: +359 898 572520 E: r.tsvetanova@adamantcapital.eu

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