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. 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. 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;
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. 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. 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. 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. 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. 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. Location (cont.)
Raw materials arrive to Black Sea
via Volga river, then cross Black Sea
and continue via Danube river
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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