# Presentation: 204676

## U.S. Commercial Service

**“****The New EU 2: Bulgaria & Romania”**

**Notes:**
Bulgaria and Romania share a common border, which you can easily drive across by car. 
From the capital city of Sofia, Bulgaria to the capital of Bucharest, Romania it is about a 6 hour drive. 
Rather than thinking of a market of almost 8 million and another market of 22, we’d like you to consider the combined market of about 30 million consumers...also known as the “New EU 2”!

## Why Bulgaria and Romania?

- Following 7 years of preparation, Bulgaria & Romania became full members of the EU 1/1/07
- Both are strategic partners in strategic locations
- Both are NATO Members & signed Defense Cooperation Agreements
- Both enjoy a Pro American environment
- Together they have a combined GDP of over 13%

## More EU does not mean less US!

- EU Membership = improved business climate, lower tariffs & customs duties for US products, new trade opportunities
- Single largest economic entity in the world
- Total bilateral trade with last 10 new EU members states increased 60% ’03 – ‘06 & US exports almost doubled
- Enter EU through the most economic alternative & access $30 BILLION in structural funds over next 7 years!

**Notes:**
8.5 billion USD Bulgaria, 20.5 billion USD Romania, 
6th enlargement bringing total number of EU members states to 27.
Weakened dollar means far more competitive prices for US products overseas, especially in the area of capital goods manufacturing where German is our biggest competitor. 
It order to access the EU structural funds, a US firm must have an presence in an EU country. Bulgaria and Romania currently offer the most competitive option.

## Why Bulgaria?U.S. Exports to Bulgaria

-       		       42% increase in 2005-2006

**Notes:**
Strong economic growth of 5,5%, stable political and macroeconomic environment, fixed exchange rate EUR/BGN
The Bulgarian market is receptive to American products, services and technologies 
Financing available from Ex-Im Bank and OPIC
Trade flows in 2005: Positive trade balance for the U.S. - Export to Bulgaria – 463,4 mln. $, Import from Bulgaria – 363,8 mln $ according to the Bulgarian Statistical Institute

## Why Bulgaria? 

*FDI by Country of Origin 1992-2005 (millions of USD)*
* *
*Greece           1,167.6*
*Austria            1,143.1*
*Netherlands      708.9*
*Germany           701.3*
*Italy                   677.8*
*Belgium             493.6*
*Hungary            465.0*
*USA                  404.0** *
*Note: US FDI in 2004 alone was over 400 million USD*

*	**Key U.S. Investments*
*-- AES, Maritsa East I, 500 in a 1.3 bn. project *
*-- American Standard, Ideal Standard, 200*
*-- Alcoa*
*-- Johnson Controls*
*-- Tishman International*
*-- GE Real Estate, 80*
*-- Bulgarian American Enterprise Fund, 71*
*-- Alico, Bulgarian Post Bank, 55*
*-- Kraft Foods, Kraft Foods Bulgaria, 36*
*-- Coca Cola, Coca Cola Hellenic Bottling, 35*
*-- Socotab, Socotab Bulgaria, 32*
*-- McDonald’s, McDonald’s Bulgaria, 23*
*-- World Trade Company, Radisson Hotel, 17.7*
*-- Soros Funds, Eurocom Cable TV, 15.1*
*-- Seaboard Overseas, Vinprom Ruse, 15*
*-- News Inc., television, bTV**, 12** *

**U.S. FDI in Bulgaria**

**Notes:**
Today  the largest foreign investor in Bulgaria is a U.S. company, the largest real estate investor is a U.S. firm.
There are many success stories with U.S. SME with operations in Bulgaria. 

## Why Romania?

**- Second largest market in CEE after Poland**
**- Skilled labor force: IT, engineering & English **
**  ****speakers **
**- One of most biologically diverse countries in **
**  ****Europe. Rich natural resources: oil, gas, fertile land**
**- Extensive maritime & river routes with 4****th**** largest **
**  ****port in region**
**- Corporate and individual income tax cut from**
**   ****40 to a flat tax of 16%.**

**Notes:**
When we recently met with Bill Gates who traveled to Romania for the inauguration of Microsoft’s Global Technology Center we asked him Why Romania? He talked about the impressive language and engineering skills of Romanians. 
Romanian is second only to English as the most often heard language spoken on Microsoft’s Seattle campus where over 300 Romanians are employed. In the IT sector up to 80 percent of employees speak English. 
Per capital Romania has more engineers than India or China. 
Romanians like doing business with Americans. 
The Foreign Corrupt Practices Act is our best friend. They know the deal will be a clean one and we actually get very few complaints from US firms doing business here. 
Romania is also an extremely safe country. Although as the country becomes easier to transit, unfortunately that will likely change as well.

## Why Romania?

- 2006: 7.7% GDP, 7th consecutive year of economic expansion. Economy driven by balanced mix of consumption and investment
- Estimated 1 billion barrels of oil equivalents of gas and oil, 4th largest reserves in Europe after Norway, Britain and Denmark.
- 2006: 4.8% inflation
- Standard & Poor’s, Moody’s, Fitch give Romania: “investment grade”

**Notes:**
Romania is considered to be one of the most dynamic markets in the region. 
After years of recession in the 1990s, Romania's economy has expanded rapidly since 2000, with the gross domestic product growing to 7.7 percent in 2006. 
Romania, a country once ravaged by the effects of double digit inflation, now has inflation under control.

## Why Romania? 

**	****           ****US Exports / Investment**
**In ’06 FDI reached a record US$ 12 billion, up 75% over 2005. Most**
**attractive FDI destination in SEE.****   **
**US, UK and Czech Republic in 11****th**** place (each with the same 2.5%)**
**in exports, following Germany, Italy, Russia, France, Turkey, China,**
**Austria, Hungary, Kazakhstan, Poland.**
**      **
**US is in 7****th**** place (4.45%) in investment following:    **
**Netherlands, Austria, France, Germany, Italy & UK**
**	****	**

**Notes:**
The US still has a great deal of room for growth in terms of exports to Romania. 
According to Ernst & Young, Romania will preserve its regional leadership role as the most attractive destination for FDI in South Eastern Europe for the next three years. 
The survey was carried out among 200 multinational companies, 65 of which will expand to Romania in the future based on skilled and relatively cheap labor, flexibility of labor legislation, increased productivity, low profit taxes and investment location availability.  

## Why the “New EU 2: Bulgaria & Romania”?

-     Top Sectors for Export & Investment
-  Automotive Parts and Service Equipment
-   Aviation equipment and Services
-   Building  Products
-   ICT
-   Power Equipment and Services
-   Medical Equipment
-   Pollution Control
-  Tourism Infrastructure
-   Franchising
-   Safety and Security / Defense

**Notes:**
Top sectors driven by EU requirements and market / infrastructure needs, which are exactly the same in both markets. 

## Automotive Parts and Services

- Steady growth of new car imports and sales
- High demand for spare parts and analyzing and testing equipment due to the average age of cars

**Notes:**
BULGARIA:
50% in 2005 and 40% in 2004 +Story about an 8 year waiting list for a Trabant or Lada
Now rising incomes are creating demand.
Large number of driving schools
ROMANIA: 
Strong automotive supply chain thanks to 3 passenger car and commercial vehicle manufacturers; Dacia Renault, Daewoo, Roman Brasov.
Ford and GM have introduced letter of interest in the upcoming privatization of a Romanian automotive plant. That will have an extremely positive effect on the automotive supply chain, which is already booming.
In the first 10 months of ’06, imports of cars increased by 91% over the previous year.  
Beginning Jan. 1 Romania can now import used cars, resulting in an increased need for spare parts.

## Aviation Equipment and Services

- USTDA airport studies in both countries
- Must upgrade all airports to meet European & US safety and security standards
-  Demand for aviation, runway systems, air traffic control equipment, safety and security

**Notes:**
Bulgaria:
Airport concessions (Varna and Burgas) awarded to Fraport – soon to start work on capital improvements
Need for upgrades to meet European and US safety and security standards
USTDA grant for technical assistance
ROMANIA:
First direct flight between US and Romania begins June 6th with Delta’s Bucharest/JFK flight four times a week. From JFK 40 connecting cities.
17 regional airports and 3 international.
Security upgrades for the two international airports will require approximately 45 million dollars worth of investments. 

## Building Products

-  Most visible growth sectors in Bulgaria & Romania
-  Rapid expansion of housing market due to availability of credit and foreign investment
-  Large investments in commercial and industrial construction

**Notes:**
BULGARIA:
Transformation of downtown and resort areas
Incorporation of new technology, material and styles in construction processes
Need for western management and services
World of Concrete IBP
ROMANIA:
Romania is being described as a “property investment hotspot”.
In March ’07, construction market grew 33% over March ’06, fastest growth rate of the sector in 17 years. Just to give you an idea, cement producers tripled their cement sales in the first quarter of this year and construction represents 7 to 8% of GDP.
One of the legacies of  Nicolae Ceausecu, who ruled Communist Romania until 1989, are the standardized block of grey, concrete blocks of flats, often found right next to an architectural gem which herald back to the days when Romania was known as Little Paris. Bucharest was once described to me as a “city where you can still catch glimpses of glory beneath a patina of decay.” 
Foreign investors are focused on office buildings, hotels, shopping centers and hypermarkets. 
Half of the real estate investments in Romania are destined for the rural

## ICT

- Strong demand for wireless and cable equipment, 3G, Internet services and VoIP, computers and peripherals
- Deregulation of the telecommunications market
- Launch of 3G and  Wi-Max networks

**Notes:**
BULGARIA:
BTC privatization by a US firm in 2004 jump-stared major transformation in telecom
79% mobile penetration, 3 GSM operators
All major US IT companies represented
Opportunities to leap-frog generations of technologies
EU funded IT infrastructure and e-government initiatives
ROMANIA:
Fixed phone service represents 34% of total market and is still dominated by Romtelecom, former state-owned operator.
Mobile telephony represents 62% of market. Main operators are Orange and Vodaphone but US firms present in wireless, cable and mobile communications. 
Romania imports 70% of the local software and about 75% of those products are of American origin. 
There are approximately 10,000 local software companies

## Power Equipment and Services

-  Need to find secure sources of energy
-  Privatizations and rehabilitation of existing facilities
-  New thermal, nuclear, and alternative sources planned
-  EU requirements  to increase percentage of electricity from renewable sources

**Notes:**
BULGARIA:
Bulgaria has traditionally prided themselves on being an electricity exporter, however that is changing.....
Big need for investment and technologies in the energy sector for energy independence, efficiency and alternative energy sources
Many large US companies here already
Need for technologies to increase efficiency and alternative sources of supply
ROMANIA
Romania has plans to undertake a major rehabilitation and privatization program of the energy sector.
In 2010 Romania will be one of the EU member states with the highest share of electricity produced from alternative energy sources, according to EU statistics bureau. GE Energy providing wind turbines for the one of the largest wind farms projects in Europe in the Port of Constanta.
Total investments required to upgrade Romania’s existing power facilities is an estimated 10 billion dollars. 
Examples include a 1.4 billion dollar investment needed in the second unit of the Cernavoda nuclear plant, 1 billion dollars needed for the completion of 21 hydropower plants, the privatization of electricity distribution and the rehabilitation of thermal power plants.
Tom and Maria are going to talk about the Pan European Oil Pipeline that will run from Constanta to Trieste that will help meet increased oil demands.

## Medical Equipment

-  Public hospital purchases financed by the Government
-  Appearance of the first private hospitals and clinics with state-of-the-art equipment

**Notes:**
BULGARIA:
Public vs. private clinics
Opportunities for used equipment
Private Takuda hospital brought GE medical into the market in a permanent way
ROMANIA
Huge pent up demand; Romania has one of the lowest per capita health care rates in Europe
80% of all medical devices are supplied by imports with Germany and the USA are the leading suppliers, accounting for over 50% of all imports.
Private health care is experiencing steady growth, taking advantage of the gaps and inflexibility in the public system.  Many private clinics are extending their services that were once available only in large public hospitals. 

## Pollution Control

-  Massive investments in environmental infrastructure: water, waste water, solid and hazardous waste management, large combustion plant air quality
-  $11.7 billion: Bulgarian water sector
-  $40 billion: Romanian environmental protection * *

**Notes:**
BULGARIA
Legacy of Communism and requirements of the EU make environmental technologies one of the most promising sectors of opportunity
Municipal water treatment – little to non-existent
Sofia Water Company - concession model to bring in private capital
Solid waste problems magnified by corruption and organized crime
Recycling in its infancy
Companies need big investment plans (steel mills; thermal power plants; etc)
USTDA funded orientation visits and study tours
IBPs
AWWA,  June 24-28, Toronto, Canada
Environmental Trade mission in October, 2007
ROMANIA:    
Romania needs investments totaling 40 billion dollars to implement EU environmental protection standards between now and 2018.    
World Bank, European Bank for Reconstruction and Development (EBRD) and EU funds are available to support government investments in environmental infrastructure.  Private industry also holds excellent sales potential as they conform to EU environmental standards. Almost all the technologies needed for these environmental upgrades will have to be imported.   

## Environmental Trade MissionOctober 1-5, 2007Turkey, Bulgaria, Romania

-          	Pre-screened, individualized appointments with potential  	business partners
-       	Country Market Briefings
-         	Meetings with Key Government Officials
-         	Logistical Support (interpreters, ground transportation)
-         	Networking and U.S. Ambassador’s Reception
- 	Technical Site Visit
-           Pre-Departure Counseling and Follow up Assistance
-      Interested? http://www.buyusa.gov/environmental/tbrtm

**Notes:**
BULGARIA
Legacy of Communism and requirements of the EU make environmental technologies one of the most promising sectors of opportunity
Municipal water treatment – little to non-existent
Sofia Water Company - concession model to bring in private capital
Solid waste problems magnified by corruption and organized crime
Recycling in its infancy
Companies need big investment plans (steel mills; thermal power plants; etc)
USTDA funded orientation visits and study tours
IBPs
 – Waste Expo, Atlanta, Georgia, May 7-10, 2007
-  AWWA,  June 24-28, Toronto, Canada
Environmental Trade mission in October, 2007
ROMANIA:       Romania plans an estimated $35 billion on upgrading environmental infrastructure to EU standards. 
·        Best sales prospects for U.S. exporters in Romania: water and wastewater treatment technologies, solid and hazardous waste management and large combustion plant air quality control. 
·        EU funds are available to support government investments in environmental infrastructure.  Private industry also holds excellent sales potential as they conform to EU environmental standards. Almost all the technologies needed for these environmental upgrades will have to be imported.   

## Tourism Infrastructure

-  High growth in the tourism sector: Black Sea beaches mountain ski resorts, Danube Delta
-   Need for improved tourism infrastructure and increased standards for international clients

**Notes:**
BULGARIA:
Bulgaria was summer playground for Soviet elite.
Now a playground for West European tourists on low-cost package tours
Tourism infrastructure services needed as Bulgaria make a gradual transition to attract the first-class tourist and business traveler.
ROMANIA:
On January 1st, Romania’s state owned airline, Tarom, held a monopoly on all domestic flights. Now we enjoy low cost direct flights to London, Lisbon and Barcelona, etc. Suddenly foreign tourists are flooding into Romania, driving strong growth in a sector filled with needs. You can fly round trip Paris – Bucharest for less than 140 dollars.
Carpathian mountains, Black Sea, Danube Delta, and of course Transylvania. The medieval city of Sibiu was declared one of Europe’s cultural capital this year, which might help explain why it enjoys one of the highest rates of foreign investments. 

## Safety and Security/Defense

- Banks, airports, ports, power plants, border stations need safety and security upgrades
- Modernization of Armed Forces to meet NATO interoperability requirements
-  Establishment of U.S. Army joint-training facilities with bilateral DCA

**Notes:**
BULGARIA
Now Bulgaria makes part of the EU’s eastern external border.
The result is a high demand for security and defense solutions and equipment.
Other government spending in document and electronic security underway.
U.S. Army will be establishing joint training facilities in Bulgaria – current RFI for contractor to build and lease facilities (approx $60 million)
ROMANIA:
Increased need for safety and security upgrades as a result of NATO membership and increased troop presence as well as EU compliance needs.
Romanian Army has its biggest budget in history, almost 3 billion dollars to be spent on a comprehensive plan to restructure and modernize Armed Forces.
The US Military will spend an estimated 34 million dollars to modernize an existing military base in Romania that will accommodate upwards of 2,000 troops. Tenders are being awarded now for construction and services. We are organizing another Contracting seminar in October. Let me know if you are interested. Further information is available on our website.

## Franchising

- In the _Bulgarian_ news: McDonalds, Berlitz, ERA, Century 21, Remax, Mathnasium, KFC, Dunkin’ Donuts, Pizza Hut
- In the _Romanian_ news: Starbucks, Ruby Tuesday’s, Howard Johnson’s, Hertz, Budget, Best Western, Fast Track Kids
- Opportunities: hotel/restaurant management, fast food services, stationary, specialty retail stores, automotive products and services, education, and more.

**Notes:**
BULGARIA:
Newest addition to our top prospects due to recent market developments.
Also many Bulgarian banks and funds looking to lend for franchise purchases.
Challenges in:
income levels
Legal environment (IPR)
Understanding of business model and willingness to spend $100,000 or more to start a franchise.
ROMANIA:
In ’98 Romanian GOV established very flexible legal franchise framework welcoming some 350 franchisors currently present in the market. 
By the end of 2007 the number of franchises is expected to reach 500, 70% international and the remaining Romanian.
Most successful in Romania are retailers and service providers which require less investment. 

## Recognize these names?

**	**
**	****All of these firms have a presence in the “New EU 2”**
**	****3M, AIG, Alcoa, Amway, Avon, Bunge, Cargill, Cisco, Citibank, Coca-Cola, Colgate Palmolive, Ernest & Young, Delphi, General Electric, HBO, Honeywell Garret, Howard Johnson’s, HP, IBM, Johnson Controls, Kodak, Kraft, Lockheed Martin, McDonald’s, Microsoft, Motorola, New Century Holdings, Oracle, Philip Morris, Proctor and Gamble, Qualcomm, RAEF, Solectron, Timken, UPS, Visa, Washington Group, Xerox...to name a few!  **
**	****Your firm could be next!**

**Notes:**
Obviously, the list is far too long to include them all but it grows longer by the day. 
Before you take the plunge however consider the following:
So now is the time to consider joining the New EU 2.  But you need to plan your market entry carefully since....
Bulgaria and Romania on both on USTR’s Special 301 watch list for IPR protection weaknesses.
Organized crime groups still control some segments of the economy (gambling, parking, trash removal, etc) in Bulgaria and Romania is considered one of the most corrupt countries in the world.
Our products and services can help you navigate the market (Run through popular programs as a wall to manage market risks)
CCG/market research and counseling essential to understand business climate issues (corruption, transparency, IPR)
Contact facilitation services essential to find the right partner (critical to success)
We always recommend a due diligence background check before signing an agreement with a New EU 2 partner (ICP and Diligence).
Your New EU 2 buyers have access to Exim Bank through two Bulgarian and Romanian banks.
CS Sofia and CS Romania leads a very active commercial advocacy program for U.S. bidders on government tenders, and for policy action.

## How to Do Business in the “New EU 2”

**Work with your USEAC, use the New EU 2 CG, **
**	****market research, Gold Keys, ICPs **
**Find a distributor, agent or JV partner**
**Hire a law firm, PR firm**
**Show respect for the culture**
**Learn a few words; Da! Nu! Merci!**
**Try the food **
**	**
**  ****(In Romania...don’t ask about Dracula!)**

**Notes:**
In order to access that 30  billion dollars in EU Structural Funds you have to have a partner in the EU. Why not establish that footprint in the New EU 2 which offer the most competitive prices in the EU. Hopefully, you are all following the steps outlined above. 
New EU 2 Commercial Guides worldwide available on line now.
Doing business here is not like doing business in the US, more formal, need greater follow up, need US!

## BulgariaUS Ambassador to Bulgaria Road Show: May 2006US Presidential Visit: June 10-11, 2006AWWA: June 24-28, Toronto, CanadaBulgaria and Romania Environmental TM: Turkey, Bulgaria, Romania: Oct. 1-5, 2007 http://www.buyusa.gov/environmental/tbrtm.htmlRomaniaMilitary Contracting Seminar: October 2006 Nato Summit: April 2-4, 2008US Ambassador to Romania Road Show: Feb. 2008

**“****New EU 2” Upcoming Events**

**   ****Can your firm afford to miss out on ****	****	****	****the“New EU 2”?**

**                    **_**Good Luck! **_
**   **
**    ****Bulgarian – Uspeh           Romanian - Succes**
**                    **_**Thank you!**__** **_
**Bulgarian – Blagodaria        Romanian – Multumesc **
- _[www.buyusus.gov/bulgaria](http://www.buyusus.gov/bulgaria)_**        ****www.buyusa.gov/romania**

**Notes:**
Both of our teams were trained in Brussels on EU issues. Call us to find out how we can help you tap into a multitude of EU resources including the Commercial Service EU and American Chamber of Commerce EU.