Information and Communication Technologies in Bulgaria

1
Information and Communication Technologies in
Bulgaria

• NEDELCHO NEDELCHEV
• Deputy Minister
• Ministry of Transport and Communications
• IT Conference, 19 October 2004
• SYSTEMS 2004

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Bulgaria most attractive FDI location in CEE

• Best EU accession status
• Transparent rules practices
• NATO member, political stability
• Low inflation - 2003 average inflation was 2.3
• Low budget deficit 0 in 2003
• No currency fluctuations Bulgarian lev pegged
  to the euro
• High real GDP growth
• High levels of education skills
• Competitive labour, rent and construction costs
• Best in CEE quality of labour / cost ratio

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Gross Domestic Product (EUR bn)
Source National Statistics Institute
4
GDP Dynamics 7 consecutive years of growth
Source Bulgarian National Bank
5
Foreign Direct Investment, USD mil
Source Bulgarian Investment Agency, Bulgarian
National Bank
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Doing Business in Bulgaria (1)

• Taxes and tariffs
• Corporate profit tax down from 28 (2001) to
  15 (2005)
• Industrial commodity groups, such as ICTs and
  components, energy
• sources, raw materials, medicines and others,
  are treated with zero rate of customs duties
• 0 VAT rate on exports of software
• WTO membership since 1996
• European Union Association Agreement
• EFTA agreement
• CEFTA membership
• Bilateral effective free trade agreements
• Personal taxation top rate dropped from 38
  (2001) to 24 (2005)

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Doing Business in Bulgaria (2)

• Rent
• Boom in the offering of real estate from EUR 8
  to 20 / sq.m
• Telecom services
• 2 active GSM networks, 3-rd in progress
• 85 of households covered by the fixed network
• Digitalisation 45 by end 2004, 80 by end of
  2007
• 20.5 of the population estimated to have
  Internet access in 2004
• Over 3,000 km of optical transmission lines
• Transport links
• Daily direct flights to most European countries
• Five international transport corridors crossing
  Bulgaria

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Telecom Market

• Mobile
• First GSM operator Mobiltel 2.8 mil subs
• Second GSM operator Globul 1.2 mil subs
• NMT operator Mobikom 100 K subs
• Third GSM license BTC, part of privatization
  of the incumbent, start operations in April
  2005
• Forthcoming licenses UMTS licenses to be issued
  in early 2005
• Mobile market in 2003 recorded 10.9 y-o-y
  growth
• Penetration - 50 end of 2004, expected to reach
  75 in 2008

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Telecom Market

• Fixed telephony-
• on the road of liberalization
• Incumbent BTC privatized in June 2004 in a
  landmark for CEE private equity deal, total
  effect of privatization proceeds plus investment
  of over euro 1.1 billion
• 12 new operators of fixed voice service have been
  licensed (as of August 2004)
• Reference interconnect offer /RIO/ approved in
  June 2004
• Local loop unbundling effective from Jan 2005

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Telecom Market Internet Users
Source ICT Development Agency
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Telecom Market Legal and Regulatory Framework

• New Telecommunications Law - fully harmonized
  with 2000 acquis and partially with 2002 acquis
• Transparent regulatory system
• Significantly shortened terms and procedures for
  license issuing have been introduced
• Decreased number of activities that require
  individual licenses
• Law on the Electronic Document and Electronic
  Signature
• Law on the Protection of Personal Data
• Convention on Cyber Crime

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Telecom market - investments

• Foreign Direct Investments in Communications,
  1998 June 2004

USD 6.556 mil
USD 1.049 mil
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Telecom market - conclusions

• Both mobile and fixed markets still have high
  growth potential
• Large investments expected in every segment
• New market entrants in mobile, fixed, satellite
  to fuel growth and competition
• Telecom market in Bulgaria is of interest for
• Investors
• Vendors
• Service and applications providers

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ICT Highlights

• More than 1,000 small and medium sized IT
  enterprises
• Traditions (35 years of experience) in this area
• Very well developed educational system in
  electronics, engineering and computer sciences
• Areas of competitive advantage
• Software computer system software, networking
  software and web-design, CAD/CAM/CAE software,
  telecommunications and wireless development
  software, application software, firmware
• Hardware computer and systems assembling,
  digital and analog printed circuits design, PCB
  manufacture, analog mixed engineering
• Microelectronics design ASICs, front-end and
  back-end microelectronic activities
• Automation systems for industrial automation

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Wide range of specializations of the Bulgarian
ICT companies
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IT Quality through Certifying of Companies and
Specialists

• Over 100 ICT companies certified under the ISO
  9000
• 15 companies certified under the ISO 14000
• In January 2004 the European Software Institute
  (ESI) launched a Regional ESI Center of
  Excellence in Bulgaria
• Bulgaria was chosen out of other Eastern
  European countries to lead this project and host
  an ESI Center because
• Bulgaria has remarkable specialists in software
  development
• Bulgarian industry is ready to adopt modern
  certification and quality standards to operate
  globally
• ICT sector is a national priority and the
  Bulgarian government is committed to develop the
  software industry

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ESI Center Bulgaria (1)

• Mission
• Develop industry competitiveness on the Balkan
  and Eastern European countries.
• Bulgaria - center of excellence and leading
  technologies
• Target area
• Bulgaria and the Eastern European countries
• Target Groups
• IT companies and specialists
• IT-intensive companies and organizations
• State institutions and departments
  (e-government)
• Citizens e-awareness, e-government, IT
  penetration

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ESI Center Bulgaria (2)

• How can ESI Center Bulgaria help the ICT sector
  to increase its competitiveness?
• Support businesses to increase value added in
  their operations through implementation of
  latest good practices in
• Quality management Capability Maturity Model
  Integration (CMMI)
• Strategic management Balanced IT Score Cards
  (BITS)
• Increased productivity of SW intensive
  development processes
• Support universities in design and execution of
  modern practical oriented software engineering
  programs
• Rise awareness in the society and motivate
  citizens to increase their general IT knowledge
  level

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Investing in ICT in Bulgaria Case studies

• SAP, Germany SAP Labs Bulgaria, Sofia (2000)
• Focused on developing a leading-edge J2EE
  Application Server
• Largest FDI in the software development sector
• SAP Labs Bulgaria employs more than 250 people
• EPIQ, Belgium EPIQ Electronic Assembly,
  Botevgrad (1997)
• Core business activities transferred to Bulgaria
• 1,000 employees and 8,000 sq. m production area
• Electronic and module assembly, development and
  manufacture of plastic injection moulds factory
  automation equipment
• Bulgarian Telecommunications Company (BTC)
• Investor Advent International, USA
• Price EUR 280 mil for 65
• Investment of EUR 700 mil in the next 5 years

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Reasons to invest in Bulgaria

• Cutting-edge expertise in a multitude of ICT
  areas
• High growth rate of Internet users, mobile phone
  subscribers and Internet services suggests
  opportunities for future growth in the ICT sector
• Availability of new technologies promoted by
  public ventures and investments
• Integrated chain from academic research and
  discovery to global market launch
• Strategic location

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Investors in Bulgaria will find

• Institutional support for major investment
  projects
• Robust legal framework, focused on attracting and
  protecting foreign investment
• Among the lowest costs of doing business in
  Europe
• Low regulatory obstacles and start up costs
• Highly educated workforce
• Excellent labour quality / labour cost ratio