Bulgarian Foreign Investment AgencyBulgarian Foreign Investment AgencySofia, March 2003Sofia, March 2003

Attracting Foreign Investment

Annex 3

Our focus todayOur focus today

1. FDI in Bulgaria : track record and issues

2. Role of BFIA in improving FDI climate

3. Current BFIA projects for improving FDI

Source: Bulgarian Foreign Investment Agency; KPMG

592669

400636464

80 77180 215

34

137

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1992 1994 1996 1998 2000 2002EPrivatisationGreenfield investment and reinvested profits

34

102

211163

256

636 620

819

1001

694

500

Drivers of FDI into BulgariaDrivers of FDI into Bulgaria

Factorspositive negative

•Emerging market•Skilled labour•Customer base in the region•Geographic location•Lack of competition•EU membership prospects•Former business contacts•NATO membership

•Purchasing power•Corruption•Legal system•Bureaucracy•Crime•Investment risk•Inexperienced managerial staff• Lack of infrastructure

FDI in Bulgaria (USD m 1992-2002E)

612749

1,4102,391

2,6862,888

2,8894,536

4,577

5,8036,579

7,64821,894

22,82427,667

49,122

0 10,000 20,000 30,000 40,000 50,000

Moldova

Albania

Belarus

Slovenia

Latvia

Lithuania

Estonia

Bulgaria

Ukraine

Slovakia

Croatia

Romania

Hungary

Russia

Czech Rep.

Poland

Source: Bulgarian Foreign Investment Agency

FDI underperformance relative to C&EEFDI underperformance relative to C&EE

FDI by country (USD m, 1992-2002FDI by country (USD m, 1992-2002))

92138156220

306340

574781

1,0741,075

1,1961,269

1,4621,926

2,0852,686

0 500 1,000 1,500 2,000 2,500 3,000

UkraineBelarusRussia

AlbaniaMoldovaRomaniaBulgaria

LithuaniaLatvia

SlovakiaSlovenia

PolandCroatiaEstonia

HungaryCzech Rep.

FDI per capita (USD m, 1992-2001FDI per capita (USD m, 1992-2001))

Economic development: the Big PictureEconomic development: the Big Picture

ChallengesAchievements

• Political stability – EU, NATO

• Macroeconomic stability– GDP growth

• Fiscal stability– Inflation

– Forex reserves

– Debt management

• Unemployment

• Trade deficit

• Bureaucracy– Administrative barriers

– Start-up procedures

– Time-to-market

• Image of Bulgaria abroad

BFIA role in improving economic developmentBFIA role in improving economic development

BFIA PROPOSALSWHAT INVESTORS WANT

• Less bureaucracy:– Less red tape

– Fewer administration institutions to deal with

• Minimize chances for corruption

• Simpler business legislation– Presently 16 laws regulating

investment

• Fair competition

• One-stop-shop for investors:– Minimize contacts between

investors / administration

– Act as a Development Agency

• Consolidate laws related to investment– A new Investment

Encouragement Law

– Pilot Law: Industrial Zones

• Attract high quality investors who will promote best practice

BFIA’s mission as a catalyst of FDIBFIA’s mission as a catalyst of FDI

1. One-stop-shop for investors

− eliminate bottlenecks in state administration

− shorten time-to-market

2. Legislative initiative

3. Build an image of Bulgaria as a preferred investment destination

– promote a new image of Bulgaria across the business community

– conduct direct marketing with “high probability” investors

4. Match potential business partners and facilitate B-to-G relationship

BFIA projects needing donor assistanceBFIA projects needing donor assistance

1. Institutional building of the BFIA

− Currently Bulgarian government contributing c. BGN 0.5 mln

− Additional resource needed to materialize the “One-stop-shop”

2. Regulatory framework for economic development− Investment Encouragement Law and the Industrial Zones Law

3. Targeted promotion of Bulgaria− Marketing budget and marketing strategy