Renewable Energy Equipment and Services in Bulgaria: A Strategic Reference, 2007 0497358506, 9780497358501, 9781429499385

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Renewable Energy Equipment and Services in Bulgaria: A Strategic Reference, 2007

Edited by

Philip M. Parker, Ph.D. Eli Lilly Chair Professor of Innovation, Business and Society INSEAD (Fontainebleau & Singapore)

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ii COPYRIGHT NOTICE ISBN 0-497-35850-6 All of ICON Group International, Inc. publications are copyrighted. Copying our publications in whole or in part, for whatever reason, is a violation of copyrights laws and can lead to penalties and fines. Should you want to copy tables, graphs, or other materials from our publications, please contact us to request permission. ICON Group International, Inc. often grants permission for very limited reproduction of our publications for internal use, press releases, and academic research. Such reproduction requires, however, confirmed permission from ICON Group International, Inc. Please read the full copyright notice, disclaimer, and user agreement provisions at the end of this report.

IMPORTANT DISCLAIMER

Neither ICON Group International, Inc. nor its employees can be held accountable for the use and subsequent actions of the user of the information provided in this publication. Great efforts have been made to ensure the accuracy of the data, but we cannot guarantee, given the volume of information, accuracy. Since the information given in this report is forward-looking, the reader should read the disclaimer statement and user agreement provisions at the end of this report.

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About Icon Group International, Inc. Icon Group International, Inc.’s primary mission is to assist managers with their international information needs. U.S.-owned and operated, Icon Group has field offices in Paris, Hong Kong, and Lomé, Togo (West Africa). Created in 1994, Icon Group has published hundreds of multi-client databases, and global/regional market data, industry and country publications. Global/Regional Management Studies: Summarizing over 190 countries, management studies are generally organized into regional volumes and cover key management functions. The human resource series covers minimum wages, child labor, unionization and collective bargaining. The international law series covers media control and censorship, search and seizure, and trial justice and punishment. The diversity management series covers a variety of environmental context drivers that effect global operations. These include women’s rights, children’s rights, discrimination/racism, and religious forces and risks. Global strategic planning studies cover economic risk assessments, political risk assessments, foreign direct investment strategy, intellectual property strategy, and export strategies. Financial management studies cover taxes and tariffs. Global marketing studies focus on target segments (e.g. seniors, children, women) and strategic marketing planning. Country Studies: Often managers need an in-depth, yet broad and up-to-date understanding of a country’s strategic market potential and situation before the first field trip or investment proposal. There are over 190 country studies available. Each study consists of analysis, statistics, forecasts, and information of relevance to managers. The studies are continually updated to insure that the reports have the most relevant information available. In addition to raw information, the reports provide relevant analyses which put a more general perspective on a country (seen in the context of relative performance vis-à-vis benchmarks). Industry Studies: Companies are racing to become more international, if not global in their strategies. For over 2000 product/industry categories, these reports give the reader a concise summary of latent market forecasts, pro-forma financials, import competition profiles, contacts, key references and trends across 200 countries of the world. Some reports focus on a particular product and region (up to four regions per product), while others focus on a product within a particular country.

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Table of Contents 1

INTRODUCTION & METHODOLOGY.............................................................................1

1.1

What Does This Report Cover?

1

1.2

How to Strategically Evaluate Bulgaria

1

1.3

Latent Demand and Accessibility in Bulgaria

3

2

RENEWABLE ENERGY EQUIPMENT AND SERVICES IN BULGARIA...................5

2.1

Latent Demand and Accessibility: Background

5

2.2

Latent Demand: Market Composition

5

2.3 Latent Demand: Dynamics 6 2.3.1 GDP Growth............................................................................................................................................... 6 2.3.2 Access to Credit ......................................................................................................................................... 6 2.4

Latent Demand: Leading Segments

7

2.5

Latent Demand: Statistical Data

7

2.6

Accessibility: The Structure of Competition

8

2.7 End Users 9 2.7.1 U.S. Equipment and Technologies ............................................................................................................. 9 2.7.2 Energy Efficiency Industry ...................................................................................................................... 10 2.8 Market Issues and Obstacles 10 2.8.1 Tariff Barriers........................................................................................................................................... 10 2.8.2 Non-Tariff Barriers................................................................................................................................... 10

3 FINANCIAL INDICATORS: STEAM, GAS AND HYDRAULIC TURBINES AND TURBINE GENERATOR SET UNITS .....................................................................................12 3.1 Overview 12 3.1.1 Financial Returns and Gaps in Bulgaria ................................................................................................... 13 3.1.2 Labor Productivity Gaps in Bulgaria........................................................................................................ 16 3.1.3 Limitations and Extensions ...................................................................................................................... 16 3.2 Financial Returns in Bulgaria: Asset Structure Ratios 17 3.2.1 Overview .................................................................................................................................................. 17 3.2.2 Assets – Definitions of Terms .................................................................................................................. 17 3.2.3 Asset Structure: Outlook .......................................................................................................................... 18 3.2.4 Large Variances: Assets ........................................................................................................................... 19 3.2.5 Key Percentiles and Rankings .................................................................................................................. 22 3.3 Financial Returns in Bulgaria: Liability Structure Ratios 35 3.3.1 Overview .................................................................................................................................................. 35 3.3.2 Liabilities and Equity – Definitions of Terms .......................................................................................... 35 3.3.3 Liability Structure: Outlook ..................................................................................................................... 37 3.3.4 Large Variances: Liabilities ..................................................................................................................... 38

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Contents 3.3.5

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Key Percentiles and Rankings .................................................................................................................. 41

3.4 Financial Returns in Bulgaria: Income Structure Ratios 52 3.4.1 Overview .................................................................................................................................................. 52 3.4.2 Income Statements – Definitions of Terms .............................................................................................. 52 3.4.3 Income Structure: Outlook ....................................................................................................................... 54 3.4.4 Large Variances: Income.......................................................................................................................... 55 3.4.5 Key Percentiles and Rankings .................................................................................................................. 58 3.5 Financial Returns in Bulgaria: Profitability Ratios 69 3.5.1 Overview .................................................................................................................................................. 69 3.5.2 Ratios – Definitions of Terms .................................................................................................................. 69 3.5.3 Ratio Structure: Outlook .......................................................................................................................... 71 3.5.4 Large Variances: Ratios ........................................................................................................................... 72 3.5.5 Key Percentiles and Rankings .................................................................................................................. 75 3.6 Productivity in Bulgaria: Asset-Labor Ratios 90 3.6.1 Overview .................................................................................................................................................. 90 3.6.2 Asset to Labor: Outlook ........................................................................................................................... 90 3.6.3 Asset to Labor: International Gaps........................................................................................................... 91 3.6.4 Key Percentiles and Rankings .................................................................................................................. 94 3.7 Productivity in Bulgaria: Liability-Labor Ratios 107 3.7.1 Overview ................................................................................................................................................ 107 3.7.2 Liability to Labor: Outlook .................................................................................................................... 107 3.7.3 Liability and Equity to Labor: International Gaps.................................................................................. 108 3.7.4 Key Percentiles and Rankings ................................................................................................................ 111 3.8 Productivity in Bulgaria: Income-Labor Ratios 122 3.8.1 Overview ................................................................................................................................................ 122 3.8.2 Income to Labor: Outlook ...................................................................................................................... 122 3.8.3 Income to Labor: Gaps ........................................................................................................................... 123 3.8.4 Key Percentiles and Rankings ................................................................................................................ 126

4 4.1

MACRO-ACCESSIBILITY IN BULGARIA ...................................................................137 Executive Summary

137

4.2 Political Risks 137 4.2.1 Economic Relationship with the United States ...................................................................................... 137 4.2.2 The Political System............................................................................................................................... 138 4.3 Marketing Strategies 138 4.3.1 Creating a Sales Office........................................................................................................................... 138 4.3.2 Creating a Joint Venture......................................................................................................................... 139 4.3.3 Agents and Distributors.......................................................................................................................... 140 4.3.4 Hiring Local Counsel ............................................................................................................................. 140 4.3.5 Checking Bona Fides.............................................................................................................................. 141 4.3.6 Distribution Channel Options................................................................................................................. 141 4.3.7 Franchising Activities............................................................................................................................. 142 4.3.8 Direct Marketing Options....................................................................................................................... 143 4.3.9 Selling Strategies.................................................................................................................................... 143 4.3.10 Product Pricing....................................................................................................................................... 144 4.3.11 Licensing Options .................................................................................................................................. 144

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Advertising and Trade Promotion .......................................................................................................... 145 Trade Promotion..................................................................................................................................... 147 Government Procurement....................................................................................................................... 147

4.4 Import and Export Regulation Risks 148 4.4.1 Adherence to Free Trade Agreements .................................................................................................... 148 4.4.2 Trade Barrier Risks ................................................................................................................................ 149 4.4.3 Restrictions on Imports .......................................................................................................................... 150 4.4.4 Controls on Exports................................................................................................................................ 150 4.4.5 Trade in Arms and Dual-Use Goods and Technologies ......................................................................... 150 4.4.6 U.S. Exports of Sensitive Technology to Bulgaria................................................................................. 151 4.4.7 Import Tariffs and License Requirements .............................................................................................. 151 4.4.8 Customs Regulations and Contact Information...................................................................................... 152 4.4.9 Entering Temporary Imports .................................................................................................................. 153 4.4.10 Additional Trade Issues.......................................................................................................................... 153 4.4.11 Labeling Issues....................................................................................................................................... 154 4.4.12 Warranty and Non-Warranty Repairs..................................................................................................... 154 4.4.13 Free Trade Zone Options........................................................................................................................ 154 4.5 Investment Climate 155 4.5.1 Openness to Foreign Investment ............................................................................................................ 155 4.5.2 Common Forms of Investment............................................................................................................... 156 4.5.3 Barriers to Direct Investment ................................................................................................................. 156 4.5.4 Privatization ........................................................................................................................................... 157 4.5.5 Concessions............................................................................................................................................ 157 4.5.6 Conversion and Transfer Policies........................................................................................................... 158 4.5.7 Expropriation and Compensation ........................................................................................................... 158 4.5.8 Dispute Settlement ................................................................................................................................. 158 4.5.9 Performance Requirements and Incentives ............................................................................................ 161 4.5.10 Right to Private Ownership and Establishment ...................................................................................... 161 4.5.11 Intellectual Property Risks ..................................................................................................................... 161 4.5.12 Transparency of the Regulatory System................................................................................................. 164 4.5.13 Capital Market Risks .............................................................................................................................. 165 4.5.14 Political Violence ................................................................................................................................... 166 4.5.15 Corruption .............................................................................................................................................. 166 4.5.16 Bilateral Investment Agreements ........................................................................................................... 167 4.5.17 OPIC and Other Investment Insurance................................................................................................... 167 4.5.18 Labor ...................................................................................................................................................... 167 4.5.19 Free Trade Zones and Free Ports............................................................................................................ 168 4.6 Trade and Project Financing 169 4.6.1 The Banking System .............................................................................................................................. 169 4.6.2 Foreign Exchange Control Risks............................................................................................................ 169 4.6.3 General Financing Availability .............................................................................................................. 169 4.6.4 Availability of GSM Credit Guarantees ................................................................................................. 169 4.6.5 Financing Export Strategies ................................................................................................................... 170 4.6.6 Financing from International Financial Institutions ............................................................................... 170 4.6.7 Types of Available Export Financing and Insurance ............................................................................. 171 4.6.8 Banks with Correspondent Banking Arrangements ............................................................................... 171 4.7 Travel Risks 171 4.7.1 Local Business Practices ........................................................................................................................ 171 4.7.2 Travel Issues........................................................................................................................................... 172 4.7.3 Work Week 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Contents 4.7.4 4.7.5 4.7.6

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Infrastructure for Conducting Business.................................................................................................. 173 Temporary Entry of Business Equipment and Materials........................................................................ 174 Country Data .......................................................................................................................................... 174

4.8 Key Contacts 174 4.8.1 U.S. Government Contacts ..................................................................................................................... 174 4.8.2 Trade and Industry Associations ............................................................................................................ 178 4.8.3 Bulgarian Government Contacts ............................................................................................................ 179 4.8.4 Major State Enterprises .......................................................................................................................... 182 4.8.5 U.S.-based Financial Institutions in Bulgaria ......................................................................................... 183 4.8.6 International Financial Institutions......................................................................................................... 184 4.8.7 Bulgarian Business Publications ............................................................................................................ 185 4.8.8 Important Web Sites about Bulgaria ...................................................................................................... 186 4.8.9 Bulgaria on the Internet.......................................................................................................................... 187

5

DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS .........189

5.1

Disclaimers & Safe Harbor

189

5.2

Icon Group International, Inc. User Agreement Provisions

190

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1 1.1

INTRODUCTION & METHODOLOGY WHAT DOES THIS REPORT COVER?

The primary audience for this report is managers involved with the highest levels of the strategic planning process and consultants who help their clients with this task. The user will not only benefit from the hundreds of hours that went into the methodology and its application, but also from its alternative perspective on strategic planning relating to renewable energy equipment and services in Bulgaria. As the editor of this report, I am drawing on a methodology developed at INSEAD, an international business school (www.insead.edu). For any given industry or sector, including renewable energy equipment and services, the methodology decomposes a country’s strategic potential along four key dimensions: (1) latent demand, (2) micro-accessibility, (3) proxy operating pro-forma financials, and (4) macro-accessibility. A country may have very high latent demand, yet have low accessibility, making it a less attractive market than many smaller potential countries having higher levels of accessibility. With this perspective, this report provides both a micro and a macro strategic profile of renewable energy equipment and services in Bulgaria. It does so by compiling published information that directly relates to latent demand and accessibility, either at the micro or macro level. The reader new to Bulgaria can quickly understand where Bulgaria fits into a firm’s strategic perspective. In Chapter 2, the report investigates latent demand and micro-accessibility for renewable energy equipment and services in Bulgaria. In Chapters 3 and 4, the report covers proxy operating proforma financials and macro-accessibility in Bulgaria. Macro-accessibility is a general evaluation of investment and business conditions in Bulgaria.

1.2

HOW TO STRATEGICALLY EVALUATE BULGARIA

Perhaps the most efficient way of evaluating Bulgaria is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to renewable energy equipment and services are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).

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Introduction & Methodology

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Framework for Prioritizing Countries Demand/Market Potential Driven Firm

High

Highest Priority

High Priority Latent Demand

Moderate Priority Low Priority

Low

Lowest Priority Low

High Relative Accessibility

Accessibility/Supply Averse Firm High Highest Priority High Priority Latent Demand

Moderate Priority Low Priority

Lowest Priority Low High

Low Relative Accessibility

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Introduction & Methodology

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In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market – neither a market-driven nor a costdriven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

1.3

LATENT DEMAND AND ACCESSIBILITY IN BULGARIA

This report provides a detailed overview of factors driving latent demand and accessibility for renewable energy equipment and services in Bulgaria. Latent demand is largely driven by economic fundamentals specific to renewable energy equipment and services. This topic is discussed in Chapter 2 using work carried out in Bulgaria on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for renewable energy equipment and services in Bulgaria. I use the term “micro” since the discussion is focused specifically on renewable energy equipment and services. Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Bulgaria. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Bulgaria. The numbers are only indicative of an average firm whose primary activity is in Bulgaria. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Bulgaria. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “steam, gas and hydraulic turbines and turbine generator set units”, as defined in Chapter 3. Again, while “steam, gas and hydraulic turbines and turbine generator set units” does not exactly equate to “renewable energy equipment and services”, it nevertheless gives an indicator of how Bulgaria compares to other countries for a proxy adjacent category along various dimensions. Chapter 4 deals with macro-accessibility and covers factors that go beyond renewable energy equipment and services. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Bulgaria: •

Openness to Trade in Bulgaria

•

Openness to Direct Investment in Bulgaria

•

Local Marketing and Entry Strategy Alternatives

•

Local Human Resources

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Introduction & Methodology •

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Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Bulgaria. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Bulgaria. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.

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2 2.1

RENEWABLE ENERGY EQUIPMENT AND SERVICES IN BULGARIA LATENT DEMAND AND ACCESSIBILITY: BACKGROUND

Bulgaria’s alternative and renewable energy sources hold great potential, but most will go unrealized for the foreseeable future due to a lack of financial and manpower resources and a comprehensive national plan. Diversification of the energy sector is nonexistent. In 2004, some 96% of Bulgaria’s primary energy supply came from fossil fuels (coal) and nuclear energy. Today, approximately 60-70% of Bulgaria’s energy is imported, primarily from Russia. The share of electricity produced by renewable energy sources (RES) varies between 4 and 11%. In 2005, RES contributed 10.8% of the country’s total electricity produced in comparison with only 4.5% in 2004, primarily due to an abundance of rain overflowing local river systems and fueling the country’s hydroelectric power plants. However, despite the dramatic short-term gain, Bulgaria must further develop and diversify its RES in order to alleviate the country’s overwhelming dependence on Russian energy imports.

2.2

LATENT DEMAND: MARKET COMPOSITION

The transposition of EC law into Bulgarian legislation is an important factor that has created the demand for products and services related to improving the energy efficiency and obtaining energy from renewable energy sources. Among the main objectives of the Bulgarian Law on Energy are to provide high quality and secure supply of energy, to promote the efficient utilization of energy and to provide favorable conditions for the sustainable development in the utilization of renewable energy sources. Implementing the Directive 2001/77/EC and Directive 2004/8/EC, a new chapter on renewable energy sources was added to the Law on Energy, which promotes the utilization of renewable energy sources and the cogeneration of heat and power to meet demand for heat on the Bulgarian market. According to Chapter 11 of the Law on Energy, the public provider, holder of an electricity supply license, is obliged to buy out the electricity generated by renewable energy sources at preferential rates. At a later stage, the state will also introduce a system for issuance and trade with green certificates based on the amount of energy produced from renewable energy sources. The transposition of Directive 2002/91/EC led to the adoption of the Energy Efficiency Act in 2004, which aims at “energy efficiency promotion through a system of measures and activities at various levels.” Since 1992 Bulgaria is also a party to the UN Framework Convention on Climate Changes and the subsequent Kyoto protocol, which was ratified in 1997. This document obliged the countries listed in Annex I of the Convention (which includes Bulgaria) to reduce greenhouse gas emissions within the period 2008-2012 against the baseline year 1990. In Bulgaria 75% of the gas emissions come from the energy sector. Significant part of the electricity in Bulgaria is generated by thermal power plants (TPPs)—which are the main source of sulphur dioxide and dust. 52% of the total amount of electricity is generated in 2003 by TPPs, while the share of nuclear energy produced is 40.6%. The share of the TPP generated energy will increase further after the closure of the 3rd and 4th reactor of Kozloduy Nuclear Power Plant on December 31 2006—in accordance with EU accession negotiations. Thus, in order to alleviate the negative effect on the atmosphere, Bulgaria have to undertake rigorous measures to reduce its energy consumption through improving the energy efficiency. Another possible option to fulfill the obligations pursuant the Kyoto protocol is to shift to renewable energy sources. The market for products and services in the RES field will therefore expand in the next few years. It is expected that in the next few years U.S. exporters offering technologies, knowhow and other consultancy services in the energy efficiency and RES areas will be able to expand their market in Bulgaria.

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Renewable Energy Equipment and Services

2.3

6

LATENT DEMAND: DYNAMICS

During the last decade the Bulgarian market has experienced a slow, but stable trend in GDP growth, which has favored market players in almost all sectors of the economy. The market for energy efficiency and renewable energy sources has been greatly influenced by the increased access to credits for households and businesses and the recently adopted policies by the government in the energy sector, pursuant negotiations with the European Union.

2.3.1

GDP Growth

The economic growth in Bulgaria resulted in higher disposable income for the households and increased working capital the businesses operate, which is a favorable trend for U.S. exporters in all sectors of the economy. However, so far this increase in the disposable income and capital did not lead to more efficient energy consumption. Businesses, an especially households, have invested their increased income in additional electrical appliances, which has resulted in a rapid increase in Final Energy Consumption. The following graph illustrates final energy consumption for the period 2000-2004 and a projection for the year 2005.

Although GDP is growing more rapidly than energy consumption, which means that the economy is gradually becoming less energy-intensive and more efficient in the utilization of energy, Bulgaria still lags behind all European countries. Currently, the Bulgarian economy consumes twice as much energy as the average for EU countries for the production of a unit of GDP. That situation has caused the adoption of a new Energy Strategy and National Longterm Program on Energy Efficiency. The new policies implementation will inevitably result in an increased demand for construction goods for improving the energy efficiency of buildings, energy preserving equipment as well as materials needed by Bulgarian investors, who intend to generate electricity from RES.

2.3.2

Access to Credit

During the last decade the Bulgarian banks have introduced better procedures, more flexible schemes and more favorable conditions for loan applications both for individuals and businesses. As a result of the increased competition in the bank sector, the interest rates for the different financial instruments offered by the banks have substantially dropped. The increased access to credit in Bulgaria will create favorable conditions for U.S. exporters of water and wind turbines, solar collectors, photovoltaic systems, electricity transformer equipment, isolation materials for buildings and other materials for reconstruction that decrease the amount of energy consumed, because households and businesses are provided with the opportunity to invest in more efficient, cheap and environmentally friendly utilization of the energy sources. www.icongrouponline.com

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Although energy from RES is cheaper than the electricity generated by TPPs, the initial investment in the specific equipment is very expensive, which creates barriers for the development of that market. The recent development of a facilitated procedure for investment loan application along with the drop in interest rates has created favorable conditions for Bulgarian and foreign investors, willing to invest in energy from renewable energy sources. The European Bank for Reconstruction and Development has recently started a new program for providing investment loans for investors in the RES sector. Several Bulgarian banks are implementing the program and offer loans for up to 1.5 million euro (about 1.75 million U.S. dollars) for investing in ecological energy. EBRD program also offers a subsidy between 7.5% and 20% from the total cost of the investment. Along with the generally relaxed credit policy of the banks for businesses, the increased number of options for financing of investment projects has created a favorable environment for the development of the RES sector in Bulgaria. The improved access to credit has also enhanced the disposable income factor at household level. The rise in prices of electricity, thermal energy and petrol has encouraged many households to consider investing in measures for improving the energy efficiency of their apartments and houses. Recently the Bulgarian government launched the Residential Energy Efficiency Credit Line, which provides households with loans and grants for improving the energy efficiency in their houses. All applicants for such a loan can apply for a grant to cover 20% (but not more than 850 euro) from their expenses in improving the energy efficiency. The program will end in December 2006 and is expected to help about 30,000 households improve the energy efficiency of their homes. The eligible technologies covered by the program are energy efficient windows, insulations, heat pump systems, biomass stoves and boilers, solar water heaters and hot water gas boilers.

2.4

LATENT DEMAND: LEADING SEGMENTS

Currently, Bulgaria is among the countries in Europe, less developed in the production of energy from RES. About 5% of the total energy produced in Bulgaria comes from water power plants and only 0.5% from wind, solar and geothermal sources of energy. The Bulgarian government is aiming the share of electricity consumption from renewable energy sources by 2010, to reach 11% of the total amount of energy produced. In addition, the government has also started measures for improving the energy efficiency of public buildings and providing specialized loans for the households for improving the isolation of their apartments and houses. The Bulgarian economy has a potential to produce 440,000 kWh of geothermal energy, 755 million kWh of hydropower and 30.65 million kWh of energy from biomass. Wind energy has a very high potential for development, especially along the Black Sea coast, where the wind is very strong. The state budget envisages allocating till 2020 more than 655 million BGN (about 390 million U.S. dollars, according to the current exchange rate) for insulation of buildings. The financing of that large-scale operation started in mid 2006 and the amount of state subsidies in this sector are planned to increase over the next 15 years. Companies operating in the RES sector are further encouraged to expand their activity within the country by a guaranteed by the GOB market and preferential prices for the energy they produce, as envisaged in the Bulgarian Law on Energy. Therefore it is expected that demand for water and wind turbines, solar collectors, photovoltaic systems, biogas installations and consulting services in the RES sector will substantially increase during the next few years, which will benefit U.S. exporters in this sector, because of their long-term experience in developing high-tech products at competitive prices.

2.5

LATENT DEMAND: STATISTICAL DATA

Renewable energy and energy efficiency have only recently become an important part on the agenda of the Bulgarian government. Thus, the domestic market is still unable to meet the increased demand for products and services in www.icongrouponline.com

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these subsectors of the economy. The total size of the market for RES and energy efficiency is estimated to some 510 million euro (5.8-11.7 billion U.S. dollars) per year. The following table shows estimates about market size and market shares of domestic and foreign producers for the period 2004-2006.

Market Size and Market Shares in Bulgaria, 2004-2006 (USD Millions) Total Market Size Total Market Share of Domestic Producers Total Market Share of Foreign Producers U.S. Import Market Share

2004 6,000 1,200 4,800 480

2005 7,000 1,750 5,250 525

2006 8,500 2,550 5,950 600

The data provided in the table is based on the assumption that 2005 has marked an increase in demand for products and services in the energy efficiency and RES sector which will lead to a 15% increase in market size. In 2006 the market will further increase with 20%. The reason for this substantial increase is the new residential energy efficiency credit facility and the program of the European Bank for Reconstruction and Development for investment loans in the renewable energy sector. Currently, Bulgaria relies mainly on imports to meet the increased demand in the energy efficiency and the renewable energy sources sector. Domestic production accounts for about 20% of the total market size and is focused on products for improving the energy efficiency of the buildings, production of hydropower, production of energy from biomass and solar energy. There are also a number of domestic private consultancy companies that provide services in the area of energy efficiency and renewable energy sources. However, Bulgaria’s dependency on imports from abroad will decrease in the future as more and more domestic companies become interested in the generation of renewable energy and energy efficiency products and services. German companies hold the largest part of the Bulgarian market for RES and energy efficiency products and services. Their market share is estimated to be about 35% of total market size. The reason for this dominance on the Bulgarian market is the German long-term experience in producing energy from renewable sources, which has helped German companies become more efficient and capable of offering goods at competitive prices. Italy, Greece and the USA have approximately equal market shares of about 10%. The fact that U.S. exporters have equal market shares with countries like Greece and Italy, which have the advantage of being closer to Bulgaria and paying substantially less transportation costs, implies that U.S. exporters have a large potential for expanding their market share in Bulgaria. U.S. companies in the energy efficiency and renewable energy sources sector can achieve competitive prices through establishing branches in Bulgaria, which would substantially decrease their transportation and labor costs and through providing options for financing to their customers. Other foreign players on the Bulgarian market are European companies, mainly from Belgium, Denmark, France, Spain, Finland, Switzerland and the Czech republic.

2.6

ACCESSIBILITY: THE STRUCTURE OF COMPETITION

The market for RES and materials for enhancing the energy efficiency in Bulgaria will definitely expand in the near future. The main reason for this expansion is the hike in prices of electrical and thermal energy, and thus encouraging the households and companies to invest in alternative sources of energy. Dropping the interest rates and the increased access to credit, which facilitated the Bulgarian consumers to bear the initial high cost for using alternative sources of energy and improving the energy efficiency of the buildings, helped the development of the energy efficiency sector in Bulgaria is. Another reason for the development of a market for alternative sources of energy is the target set by the Bulgarian government to increase the share of RES energy to 11% of the total energy produced in the country.

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Renewable Energy Equipment and Services

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Currently, there are several domestic companies that produce solar collectors and other elements of system for utilization of solar energy. Among them are Apex MM Ltd., Eco-solar Ltd., Renergy Group Ltd., 5040 Services Ltd., Starton and ESKO Energy project. There are also several companies that offer installations for water power plants as well as components and consulting services for such installations. Among them are Turbo C-Vidin and Hydroenergoproekt Ltd. Sofia. In Bulgaria there is also high potential for the development of the wind energy sector. Presently, there are no operating wind farms in Bulgaria; there are only separate wind turbines that some companies have built for their own needs. There are projects for wind farms in Bulgaria that have to pass through the Environmental Impact Assessment procedure. The companies that will offer energy from wind farms in Bulgaria in the near future are TESSA Energy Ltd., Universum Energy, which is a Bulgarian-German consortium, INOS 1, which operates in partnership with the Japanese corporation Mitsubishi, and Bulgarian Wind Power Plants, which is a daughter company of Societe Industrielle de l’Atlantique Ltd., France. With the support of the U.S. TDA grant a wind power plant is to be built in Karlovo. On June 21, 2004 the U.S. Ambassador to Bulgaria and the Mayor of Karlovo, signed a USD 384,500 grant agreement. The grant is earmarked for a feasibility study on proposed Pilot Wind Farm Project in the town of Karlovo where and the U.S. Electrotech Concepts Inc. is performing the study. There are two registered partnerships in the country for the production of energy from biomass and waste, which are located in the villages Tsalapitsa and Parvenets in the district of Plovdiv. There are also several Bulgarian private companies that offer consulting services in the RES and energy efficiency. These are the firms: Energoconsult Ltd., Stara Zagora, Energy Efficient Systems Ltd., Sofia, Company for Energy Saving AD, Sofia and Consulting Center for Sustainable Development Geopont-Intercom Ltd., and Varna. Most of the equipment and machinery in the RES and energy efficiency areas are imported. Wind turbines are imported mainly from Denmark and Germany, whereas solar collectors are imported from Switzerland and Germany. The Japanese corporation Mitsubishi and the French company Societe Endustriele d’Atlantique have also invested in renewable energy sources in Bulgaria. Solar collectors and boilers are imported from Germany, Greece, Italy and the Czech Republic. Heat pump systems are imported mainly from Germany and Austria. Insulation materials for buildings, energy-efficient windows, and energy-saving electrical appliances are imported mainly from European countries and the U.S. Despite the large market share of European producers in the energy efficiency and RES subsectors, the American exporters have favorable prospects for trade with Bulgarian distributors and representatives in that business. The long term experience and high-tech equipment, combined with the generally more efficient marketing techniques used by U.S. producers provide grounds for future expansion of U.S. presence on the Bulgarian market.

2.7

END USERS

The end users of equipment for RES are public and private companies that operating in this sector as well as enterprises from other industries that are interested in alternative, low-cost sources of energy. Some of the companies that work in the renewable energy sector are Fincom 2 Ltd. Plovdiv, Heliotech Kazanlak, Solar Energy Systems Ltd., Intiel Todorovi Co. Pomorie, INOS 1 Sofia, TESSA Energy Sofia, Bulgarian Wind Power Plants, Biomax Ltd., Ecotech-Rousse, Energy Utilization Biomass Association and Apex MM Co. These companies are potential users of wind and water turbines, solar collectors, photovoltaic systems, solar panels, hot water boilers, thermo regulators, biomass stoves and boilers and other systems and components of RES equipment.

2.7.1

U.S. Equipment and Technologies

The U.S. equipment and technologies in the RES field are preferred by the local end-users because of their competitive price, quality and power that can be generated from the alternative energy sources. Quite important are the options for financing of purchases through a credit or a bank guarantee with a decreased interest rate. Terms of

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Renewable Energy Equipment and Services

10

financing are very important, because the initial investment in RES systems is very high and there are very few companies on the Bulgarian market that could afford the products.

2.7.2

Energy Efficiency Industry

Insulation materials and products, energy-saving windows and energy-saving electrical appliances can be distributed not only to private and public companies and enterprises, but also to individual households. The rising price of electricity in Bulgaria has created favorable conditions for the development of the market for materials for improving the energy efficiency of the buildings and energy-saving equipment. The lower interest rate and increased availability of credit makes it easier for consumers to invest in energy efficiency improvement. The key competitive factors in the energy efficiency industry are the price and quality of the products, the amount of energy that is saved applying or using the products, the availability of funds for purchasing the products as well as the promotion and marketing techniques used by the producers.

2.8 2.8.1

MARKET ISSUES AND OBSTACLES Tariff Barriers

All products imported in Bulgaria are subject to a value added tax of 20%. The customs duties that apply to U.S. exporters are the Most Favored Nation (MFN) duties, which are levied to commodities coming from countries that are members of the World Trade Organization. Under MFN treatment, in the Customs Tariff for 2005 the average arithmetical rate of duties is 11.49% and 8.59% for imports of industrial goods. Energy sources, raw materials, medicines and some other goods are exempt from customs duties. The detailed tariffs for different commodities imported into Bulgaria are available at the Web site of Bulgaria’s Customs Agency: www.en.customs.bg/index_en.html. Services and products imported from EU member states enter the Bulgarian market with reduced customs duties or are exempt from tariffs, pursuant Bulgaria’s European Union association agreement. The Most Favored Nation customs tariff rates, which apply to the U.S., are generally higher than tariffs applicable to EU products. Tariffs that apply to U.S. exporters decrease their competitive advantage as compared to EU exporters, but U.S. producers in the energy efficiency and RES sector can still hold a substantial part of the Bulgarian market due to their economies of scale.

2.8.2

Non-Tariff Barriers

Besides tariff barriers to trade, U.S. exporters of products and services in the energy efficiency and RES sectors face additional barriers to trade with Bulgaria. A potential trade barrier is the necessity for U.S. manufacturers to use the European metric system/European standards, when designing products for export to Bulgaria. On the other hand, most corporations in the U.S. have long-term experience trading with Europe and are well prepared to meet the local standards. Another possible barrier to trade could be the lack of spare parts for their equipment and technology in Bulgaria. Thus, it is essential that U.S. exporters to Bulgaria should research the availability and compatibility of spare parts sold in Bulgaria and provide distribution channels for those spare parts on the local market. To be competitive on the Bulgarian market, equipment and materials exported from the USA should comply with the ISO quality standards.

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Renewable Energy Equipment and Services

11

Products in the energy efficiency sector in order to be competitive on the Bulgarian market, should meet certain requirements or criteria. Energy efficient windows should have a maximum U-value for the whole window less than 2 W/m²K as per EN ISO 10077-1 and Bulgarian Building Codes. The maximum U-factor for construction elements should be less than 0.5 W/m² K for walls, less than 0.3 W/m² K for roofs and less than 0.5 W/m² K for the floor. Biomass stoves and boilers should have a maximum output between 10 and 400 kW. In order to be competitive on the Bulgarian market solar water heaters should have CE Marking (EN 12975) or Accredited Bulgarian Solar Collector Testing Laboratory or Solar Keymark. Hot water gas boilers should comply with the standards laid down in EC Directive 92/42/EEC and heat pump systems should have a CE Marking or Accredited Bulgarian Heat Pump Testing Laboratory. Regarding language barriers, the American exporting companies have an advantage over their European competitors, because most of the company directors as well as individuals have at least working knowledge of English, which is not the same for the other languages. Nevertheless, availability of user guides and technical information about the products in Bulgarian could have a substantial positive impact on the volume of trade with U.S. exporters.

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12

3

3.1

FINANCIAL INDICATORS: STEAM, GAS AND HYDRAULIC TURBINES AND TURBINE GENERATOR SET UNITS OVERVIEW

Is Bulgaria competitive? With the globalization of markets, the increased mobility of corporate assets, and the need for productive human resources, this question has become all the more complex to answer. The financial indicators section was prepared to tackle this question by focusing on certain fundamentals: financial performance and labor productivity. Rather than focus on the economy as a whole, the analysis presented here considers only one sector: steam, gas and hydraulic turbines and turbine generator set units. We are essentially interested in the degree to which firms operating in Bulgaria have fundamentally different financial structures and performance compared to firms located elsewhere. With respect to this view of competitiveness, if one were to invest or operate in Bulgaria, how would the firm’s asset structure likely vary compared to a firm operating in some other country in Europe or average location in the world? In Bulgaria, do firms typically hold more cash and other short term assets, or do they concentrate their assets in physical plant and equipment? On the liability side, do firms operating in Bulgaria have a higher percent of payables compared to other firms operating in Europe, or do they hold a higher concentration of long term debt? The structure of the income statement is also telling. Do firms operating in Bulgaria have relatively higher costs of goods sold, operating costs, or income taxes compared to firms located elsewhere in the region or the world in general? Are returns on equity higher in Bulgaria? Are profit margins greater? Are inventories held longer? The financial indicators section was designed to answer these and similar questions that naturally affect one’s decision to invest or operate in Bulgaria. Again, we are particularly interested in steam, gas and hydraulic turbines and turbine generator set units, and not the economy as a whole. In many instances, people make all the difference. In addition to financial competitiveness, we consider the extent to which labor deployment and productivity in Bulgaria differs from regional and global benchmarks. In this case, we are interested in the amount of labor required to operate a typical business in Bulgaria and the likely returns on this human investment. What is the typical ratio of short-term and long-term assets to employee (employed in steam, gas and hydraulic turbines and turbine generator set units operations)? What are typical capital-labor ratios? How different are these ratios to those in Europe in general and the world as a whole? What are the average sales and net profits per employee in Bulgaria compared to regional benchmarks? The goal of this section is to assist managers in gauging the competitive performance of Bulgaria at the global level for steam, gas and hydraulic turbines and turbine generator set units. With the globalization of markets, greater foreign competition, and the reduction of entry barriers, it becomes all the more important to benchmark Bulgaria against other countries on a worldwide basis. Doing so, however, is not an obvious task. This report generates international benchmarks and measures gaps that might be revealed from such an exercise. First, data is collected from companies across all regions of the world. For each of these firms, data are standardized into comparable categories (assets, liabilities, income and ratios), by country, region and on a worldwide basis. From there, we eliminate all currency effects by standardizing within each category. Global benchmarks are then compared to those estimated for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria. Though we heavily rely on historical performance, the figures reported are not historical but are forecasts and projections for the coming fiscal year.

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Financial Indicators

3.1.1

13

Financial Returns and Gaps in Bulgaria

The approach used in this report to evaluate operating performance for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria is called "vertical analysis." For those unfamiliar with this type of analysis, frequently taught in graduate schools of business, the reader is recommended Jae K. Shim and Joel G. Siegel’s recent book titled Financial Management.1 In their discussion of financial statement analysis and ratios, Skim and Siegel (p. 4243), describe common-size statement (vertical analysis) as follows: A common-size statement is one that shows each item in percentage terms. Preparation of common-size statements is known as vertical analysis, in which a material financial statement item is used as a base value and all other accounts on the financial statement are compared to it. In the balance sheet, for example, total assets equal 100 percent, and each individual asset is stated as a percentage of total assets. Similarly, total liabilities and stockholders’ equity are assigned a value of 100 percent and each liability or equity account is then stated as a percentage of total liabilities and stockholders’ equity, respectively. … For the income statement, a value of 100 percent is assigned to net sales, and all other revenues and expense accounts are related to it. It is possible to see at a glance how each dollar of sales is distributed among various costs, expenses, and profits. The authors suggest that vertical analyses involve industry-based comparisons. Such a comparison “allows you to answer the question, ‘How does a business fare in the industry?’ You must compare the company’s ratios to… industry norms.” (p. 43-44) This approach is extended to country competitiveness (in this case Bulgaria) for a particular sector (in this case steam, gas and hydraulic turbines and turbine generator set units). This involves calculating country, regional and global norms. This introduction will describe the seven-stage methodology used to perform this analysis. Each stage should be seen as a working assumption behind the numbers presented in later chapters. Stage 1. Industry Classification. This stage begins by classifying the company into an industry. For this, we have relied on a combination of the North American Industry Classification System (NAICS pronounced “Nakes”), a relatively new system for classifying business establishments, and the older Standard Industrial Classification (SIC) system. Adopted in 1997, NAICS codes are the new industry classification codes used by statistical agencies of the United States. NAICS was developed jointly by the U.S., Canada, and Mexico to provide comparability in statistics about business activity across North America. After 60 years of service, the outdated SIC system was retired on October 1, 2000, leaving only the NAICS codes for official use. The NAICS classification system adds some 350 new industries and represents a revision to over 60% of the previous SIC industries. Despite its official retirement, the SIC system is still commonly used (and often reported in firm’s financial statements). For most companies in the world, classification within either the new NAICS or older SIC systems is a rather straight forward exercise. For some, however, it can be problematic. This is true for several reasons. The first being that the SIC or NAICS classification systems are rather broad for many product and industry categories (a firm’s products or services may be only a minor aspect of the classification’s definition). The second is that some firms’ activities span multiple codes. Finally, it is possible that a firm is classified by one source using its SIC code, and by another using its NAICS code, and by a third using both. Furthermore, some sources do not report either code, but instead use qualitative statements of the firm’s activities. Nevertheless, if one wishes to pursue a vertical analysis, some classification needs to take place which selects a peer group. In making this classification, one can rely on a number of sources. In some countries, firms must “self” classify in official periodic reports (e.g. annular reports, 10Ks, etc.) to public authorities (such as the Securities and Exchange Commission). These reports are then open for public scrutiny (e.g. EDGAR filings). In other cases, commercial data vendors or private research firms provide SIC/NAICS codes for specific companies. These include: •

Bloomberg - www.bloomberg.com

1

Skim and Siegel (2000), Financial Management published by Barron’s Educational Series, Inc. (BARON’S BUSINESS LIBRARY Series), ISBN: 0-7641-1402-6. www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators •

Datastream (Thomson Financial) - www.datastream.com

•

Dun & Bradstreet - www.dnb.com

•

Hoovers - www.hoovers.com

•

HarrisInfoSource - www.HarrisInfo.com

•

InfoUSA - www.infousa.com

•

Investext (Thomson Financial) - www.investext.com

•

Kompass International Neuenschwander SA. - www.kompass.com

•

Moody's Investors Service - www.moodys.com

•

Primark (Thomson Financial) - www.primark.com

•

Profound (The Dialog Corporation – A Thomson Company) - www.profound.com

•

Reuters - www.reuters.com

•

Standard & Poor's - www.standardandpoors.com

14

It is interesting to note that commercial vendors often report different qualitative descriptions and industrial classifications from one to another. These descriptions and classifications may also be different from those reported by the firm itself. Anyone hoping to perform a benchmarking study, therefore, has to make a judgment call across these various sources in order to determine a reasonable classification. In this report, we have decided a metaanalytic process, by combining various sources (including linking a classification’s keywords to qualitative descriptions of the firm’s product line). In cases of inconsistency, the most recent or globally comparable available is chosen. Again, the overall goal is to classify firms, which either produce similar products, offer similar services, or are in the same stage of the value chain for a particular industrial classification. In the case of this report, the SIC code selected is: 3511 which is defined as “steam, gas and hydraulic turbines and turbine generator set units”. This classification should be seen as a working assumption. In order to obtain a more detailed discussion of this classification, the reader is referred to the Web sites developed by the U.S. Census Bureau: http://www.census.gov/epcd/www/naics.html. Basic definitions and descriptions are provided at: http://www.census.gov/epcd/www/drnaics.htm#q1. A full correspondence table between SIC and NAICS codes, and detailed definitions are given at http://www.census.gov/epcd/www/naicstab.htm. Stage 2. Firm-Level Data Collection. A global search was conducted across over 20,000 companies in over 40 major economies, including Bulgaria, for those that report financials (balance sheet and income statements) and that are involved in steam, gas and hydraulic turbines and turbine generator set units. It should be noted that the publicdomain financials can be either historic or projections. It should also be noted that even historic figures can be modified in the future and often represent “estimates” of performance. Stage 3. Standardization. Once collected, public domain financial figures of firms identified in Stage 2 are standardize into comparable categories (assets, liabilities, and income). Again, these are limited to firms involved in some aspect of steam, gas and hydraulic turbines and turbine generator set units (i.e. are members of the value chain). From there, we eliminate all currency effects by standardizing within each category (creating ratios). In order to maintain comparability over time and across countries, vertical analysis is used. In the case of a firm’s assets, we treat the total assets as equaling 100, irrespective of the value of the local currency. All other assets are then calculated as a percent of total assets. In this way, the structure of the firm’s assets can be easily interpreted and compared with international benchmarks. For liabilities, total liabilities and equity are indexed to equal to 100. For the income statement, total revenue is indexed to equal 100, and all other figures are calculated as a percent of these figures. Stage 4. Filtering. Not all the firms selected in Stage 2 or the ratios calculated in Stage 3 are used for the country, regional or global benchmarks, as a number of companies are purposely dropped from the analysis. This is justified by the “outlier” phenomenon that plagues such analysis. The problem lies in that any given company in the benchmarking pool may be facing some exceptional event or may be organized in an exceptional way so as to make

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Financial Indicators

15

its ratios vastly different from the norm. By including such firms, the global benchmarks can be overly skewed. In many countries, firms are organized into holding groups. These groups nominally have very few employees (e.g. 4 to 25 employees), but have extremely large assets, liabilities, or revenues. As such, the inclusion or exclusion of firms having this form of management can affect the ratios and benchmarks reported. Likewise, some firms have no net sales, no assets, no liabilities, or ratios. Others have ratios that appear implausible for a normal or viable company. In order to not allow these firms to affect the global benchmarks, only those firms with reasonable financials have been chosen. Finally, in some countries, detailed financials are not available or are not comparable to either the company in question or the global norm (e.g. various forms of depreciation). In this case, only those which exist and are comparable are reported. The details, therefore, that comprise a given ratio or set of ratios may not be reported. This may lead to the addition of several ratios, not summing to the whole. Stage 5. Calculation of Global Norms. Once the filtering process has eliminated outliers, a final list of companies included is compiled. Based on this list, the ratios discussed in Stage 3 are calculated for every firm, and then averaged to create country, regional and global benchmarks. The world average is calculated using each country’s population as a weight. Stage 6. Projection of Deviations. The goal of this report is not only to estimate raw ratios or averages, but also to present the difference between Bulgaria and projected global averages for that same ratio. Furthermore, it can be insightful to know the location of each ratio within the distribution of the countries represented in Stage 5. These deviations, in fact, can be seen as projections or likely scenarios for the future. This is often true for two reasons. First, while a company’s financials change from year to year, its ratios are often stable. This is especially true for the country, regional and global benchmarks which represent averages across companies. From a purely Bayesian sense, the difference between the company’s recent ratios and the benchmarks are a reasonable prior for future deviations. This is true, even if the entire industry is hit by an external or exogenous shock, such as an oil crisis or economic slowdown. In other words, we assume that the structure of the variance in the industry’s financials remains stable. Second, many of the data are based on preliminary reports that might be changed in future filings. As forecasts, therefore, the numbers derived from these are also forecasts of past and future performance (with associated uncertainties). The calculation of the difference between a country’s ratios and the global benchmarks is meant to yield roughly approximate forecasts, or "useful measures". Within Europe, the reliability of estimates varies from one country to another for those ratios given in tables that report national averages. This is true because reliable source statistics are not available for all countries in Europe. Countries with the highest reliability, or sample sizes after filtering in Stage 4, include Denmark, France, Germany, and Netherlands. Others are generally econometrically extrapolated using models that use country characteristics (e.g. income per capita) as independent variables (i.e. countries having similar economic structures are assumed to have similar operating ratios). Again, the forecasts are based on the assumption of relative stability. This assumption has proven extremely robust in previous applications of this methodology (i.e. today’s weather is a good predictor of tomorrow’s weather, but not the weather three years from now). The results reported should be viewed as those for a “proto-typical” firm operating in Bulgaria whose primary activity is steam, gas and hydraulic turbines and turbine generator set units. Stage 7. Projection of Ranks and Percentiles. Based on the calculation of deviations, relative ranks and percentiles are calculated across the firms used in the benchmarks. The percentile estimates the percent of a representative sample of countries in the world having values of the ratio lower than Bulgaria. It is important to note that a percentile being high (or low) does not mean good (or bad) past, present or future financial performance. The reader must draw this conclusion on their own. The estimates provided were created to provide managerial insight, and not a recommendation with respect to particular investments within any country. We graphically report, for each part of the financial statement, the larger structural differences between Bulgaria and the regional and global benchmarks, and provide a summary table of ranks and percentiles. These are estimates for firm which would be involved in steam, gas and hydraulic turbines and turbine generator set units. A deviation from the global norm need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or perhaps signal a country's relative strength or weakness for the coming fiscal year.

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Financial Indicators

3.1.2

16

Labor Productivity Gaps in Bulgaria

In the case of labor productivity measures, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. The seven stage approach given above is used in a similar manner. We then report, for each part of the financial statement, the larger labor productivity gaps that Bulgaria has vis-à-vis the worldwide average (for steam, gas and hydraulic turbines and turbine generator set units). Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

3.1.3

Limitations and Extensions

Shim and Siegal (p. 60) stress that “while ratio analysis is an effective tool for assessing a company’s financial condition,” operating Bulgaria or any other country, “its limitations must be recognized.” They find that (p. 59) “no single ratio or group of ratios is adequate for assessing all aspects of a company’s financial condition” operating in a particular country. The authors note the following limitations associated with ratio analyses which apply to the global benchmarking and vertical analysis presented here (p.60): • Accounting standards or policies may limit useful comparisons across companies • Management accounting practices across companies and countries may not be performed in the same style • Ratios are static and do not reveal future trends • Ratios do not indicate the quality of the components used to calculate the ratios (i.e. ratios have ambiguous interpretations) • Reported ratios may not reflect real values • Companies may be highly diversified, limiting the comparability of their ratios to others • Industry averages or norms are approximate; finer industry definitions may be required for certain interpretations or comparisons • Financial statements and resulting ratios often mean different things to different people depending on their points of view or motivations. Again, all figures reported here are estimates, so due caution is required. The above caveats, and the fact that statements made in this report are forward-looking, requires that this point be emphasized. A number of intervening factors can have material effect on the ratios and variances forecasted. These include changes in a company's management style, exchange rate volatility, changes in accounting standards, the lack of oversight or comparability in accounting standards, changes in economic conditions, changes in competition, changes in the global economy, changes in source data quality, and similar factors.

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Financial Indicators

3.2 3.2.1

FINANCIAL RETURNS RATIOS

IN

17

BULGARIA: ASSET STRUCTURE

Overview

In this chapter we consider the asset structure of companies involved in steam, gas and hydraulic turbines and turbine generator set units operating in Bulgaria benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of assets is then presented for companies operating in Bulgaria and the average global benchmarks (total assets = 100 percent). For ratios where there are large deviations between Bulgaria and the benchmarks, graphics are provided (sometimes referred to as a financial “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis asset ratios are highlighted across countries in the comparison group.

3.2.2

Assets – Definitions of Terms

The following definitions are provided for those less familiar with the asset-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of assets, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Cash. Cash is typically defined as money on hand, on deposit with chartered bank, or held in the form of eligible securities.

•

Current Assets. Current assets are generally defined to be resources which are available, or can readily be made available, to meet the cost of operations or to pay current liabilities.

•

Intangible Other Assets. Intangible assets are generally understood to be nonphysical assets such as legal rights (patents and trademarks) recorded at their historical cost then reduced by systematic amortization.

•

Property Plant and Equipment - Net. Net PP&E equals the original cost of property, plant, and equipment (PP&E), less accumulated depreciation, depletion and amortization (DD&A).

•

Receivables (Net). Net receivables are defined as the net amount due to the company from private persons, businesses, agencies, funds, or governmental units which is expected to be collected in the form of moneys, goods, and/or services.

•

Short Term Investments. Short-term investments are investments which can be typically liquidated in less than one year.

•

Total Assets. Total assets are defined as the financial representation of economic resources, the beneficial interest in which is legally or equitably secured to a particular organization as a result of a past transaction or event.

•

Total Inventories. Total inventories are defined as the total amount of goods on hand.

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Financial Indicators

3.2.3

18

Asset Structure: Outlook

Using the methodology described in the introduction, the following table summarizes asset structure benchmarks for firms involved in steam, gas and hydraulic turbines and turbine generator set units in Bulgaria. To allow comparable benchmarking, a common index of Total Assets = 100 is used. All figures are current-year projections for companies operating in Bulgaria based on latest financial results available. Asset Structure Bulgaria Europe World Avg. _________________________________________________________________________________________________________

Cash & Short Term Investments Receivables (Net) Total Inventories Current Assets - Total Property Plant and Equipment - Net Other Assets Intangible Other Assets Total Assets

3.18 13.47 10.79 27.44 42.96 0.24 0.24 100.00

9.00 28.55 17.79 56.47 24.97 5.54 4.31 100.00

11.41 27.15 16.97 57.46 25.30 4.21 2.24 100.00

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

3.2.4

19

Large Variances: Assets

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large asset structure gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cash & Short Term Investments 15

11.41 9

10 5

3.18

0 -5 -8.23

-10 Bulgaria

Europe

World Average

Gap

Gap: Receivables (Net) 28.55

30 20

27.15

13.47

10 0 -10

-13.68

-20 Bulgaria

Europe

World Average

Gap

Gap: Total Inventories 17.79

20 15

16.97

10.79

10 5 0 -5

-6.18

-10 Bulgaria

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Europe

World Average

Gap

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Financial Indicators

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Gap: Current Assets - Total 56.47

60 40

57.46

27.44

20 0 -20 -30.02 -40 Bulgaria

Europe

World Average

Gap

Gap: Property Plant and Equipment - Net 50

42.96

40 24.97

30

25.3 17.66

20 10 0 Bulgaria

Europe

World Average

Gap

Gap: Other Assets 5.54

6

4.21

4 2

0.24

0 -2 -4 Bulgaria

Europe

World Average

-3.97 Gap

Gap: Intangible Other Assets 6 4.31 4 2.24 2 0.24 0 -2 Bulgaria

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Europe

World Average

-2 Gap

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Financial Indicators

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Gap: Total Assets 100

100

100

100 80 60 40 20

0

0 Bulgaria

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Europe

World Average

Gap

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Financial Indicators

3.2.5

22

Key Percentiles and Rankings

We now consider the distribution of asset ratios for steam, gas and hydraulic turbines and turbine generator set units using ranks and percentiles. What percent of countries have a value lower or higher than Bulgaria (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of asset structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical asset ratios are highlighted in additional tables. Asset Structure

Bulgaria

Rank of Total

Percentile

3.18 13.47 10.79 27.44 42.96 0.24 0.24 100.00

46 of 54 53 of 54 48 of 54 54 of 54 3 of 54 52 of 54 42 of 44

14.81 1.85 11.11 0.00 94.44 3.70 4.55

_________________________________________________________________________________________________________

Cash & Short Term Investments Receivables (Net) Total Inventories Current Assets - Total Property Plant and Equipment - Net Other Assets Intangible Other Assets Total Assets

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Cash & Short Term Investments Countries

Value (total assets = 100)

Rank

Percentile

22.46 22.29 22.10 20.17 19.72 19.10 18.47 17.20 16.72 16.48 16.28 15.53 15.50 14.82 14.36 14.17 12.80 12.66 12.64 12.39 11.85 11.41 11.40 11.25 10.76 10.72 10.48 9.83 9.66 9.45 9.31 8.53 6.36 6.27 5.03 4.50 4.42 3.68 3.02 2.94 0.74 0.70 0.50 0.50 0.40

1 2 3 4 5 6 8 9 10 11 12 14 15 16 17 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 35 37 38 39 41 43 44 45 46 47 48 49 50 51 53

98.11 96.23 94.34 92.45 90.57 88.68 84.91 83.02 81.13 79.25 77.36 73.58 71.70 69.81 67.92 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 33.96 30.19 28.30 26.42 22.64 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

Hong Kong Israel Ireland South Africa Indonesia Australia China South Korea Norway Singapore Japan USA Russia Canada Spain France Malaysia Taiwan Greece Switzerland Finland the United Kingdom Pakistan Czech Republic Philippines Luxembourg Argentina Belgium Italy Germany India Sweden Austria Thailand Denmark Hungary Netherlands Poland Peru New Zealand Brazil Chile Turkey Mexico Portugal

Asia the Middle East Europe Africa Asia Oceana Asia Asia Europe Asia Asia North America Europe North America Europe Europe Asia Asia Europe Europe Europe Europe the Middle East Europe Asia Europe Latin America Europe Europe Europe Asia Europe Europe Asia Europe Europe Europe Europe Latin America Oceana Latin America Latin America the Middle East Latin America Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

24

Cash & Short Term Investments (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total assets = 100)

Rank

Percentile

22.10 21.53 16.72 16.58 15.98 15.83 15.79 15.69 15.50 15.46 14.36 14.17 13.48 12.64 12.39 11.85 11.71 11.57 11.56 11.41 11.25 10.72 10.68 10.67 9.83 9.74 9.66 9.45 8.53 6.36 6.30 6.14 6.14 5.03 4.50 4.42 4.05 3.85 3.79 3.68 3.31 3.19 3.18 3.05 2.64 0.47 0.43 0.42 0.41 0.40 0.38

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Ireland Faroe Islands Norway Estonia Monaco Belarus Slovakia Iceland Russia Lithuania Spain France Slovenia Greece Switzerland Finland Malta Liechtenstein Isle of Man the United Kingdom Czech Republic Luxembourg Latvia Croatia Belgium Vatican City Italy Germany Sweden Austria San Marino Jersey Guernsey Denmark Hungary Netherlands Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Andorra Albania Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Portugal Cyprus

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

25

Receivables (Net) Countries

Value (total assets = 100)

Rank

Percentile

48.48 47.07 40.55 39.45 37.74 37.64 37.09 36.10 35.58 34.41 33.62 33.54 32.87 32.60 31.81 30.71 30.57 30.43 30.27 28.75 28.25 28.08 27.97 27.45 27.38 27.24 26.16 26.11 25.65 25.20 25.08 25.07 24.40 24.35 22.74 22.62 22.21 21.94 21.69 21.23 21.15 19.07 18.76 18.35 15.60

1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 40 41 42 43 44 45 46 47 51

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 3.77

Region

_________________________________________________________________________________________________________

Spain Portugal Greece India Turkey Mexico France Czech Republic Italy Philippines Argentina Netherlands Israel Ireland Malaysia Pakistan Austria the United Kingdom South Africa Denmark Sweden Norway Germany Japan Belgium Peru Finland New Zealand Brazil Singapore Switzerland Taiwan Chile South Korea Canada Hong Kong USA Russia Luxembourg China Thailand Hungary Indonesia Australia Poland

Europe Europe Europe Asia the Middle East Latin America Europe Europe Europe Asia Latin America Europe the Middle East Europe Asia the Middle East Europe Europe Africa Europe Europe Europe Europe Asia Europe Latin America Europe Oceana Latin America Asia Europe Asia Latin America Asia North America Asia North America Europe Europe Asia Asia Europe Asia Oceana Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

26

Receivables (Net) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total assets = 100)

Rank

Percentile

48.48 47.07 45.51 45.06 40.55 37.58 37.09 37.08 36.10 35.87 35.86 35.58 34.26 34.25 33.54 32.91 32.60 31.98 30.85 30.57 30.43 30.28 29.52 29.52 28.75 28.25 28.08 27.97 27.38 27.04 26.16 25.08 24.44 23.78 23.48 23.40 22.44 22.41 22.36 21.94 21.89 21.69 21.69 19.07 17.15 16.31 16.05 15.60 14.02 13.49 13.47

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Spain Portugal Slovenia Cyprus Greece Malta France Isle of Man Czech Republic Vatican City Romania Italy Latvia Croatia Netherlands Bosnia & Herzegovina Ireland Macedonia Serbia & Montenegro Austria the United Kingdom San Marino Jersey Guernsey Denmark Sweden Norway Germany Belgium Andorra Finland Switzerland Monaco Albania Estonia Liechtenstein Iceland Belarus Slovakia Russia Lithuania Faroe Islands Luxembourg Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

27

Total Inventories Countries

Value (total assets = 100)

Rank

Percentile

39.81 39.65 36.42 31.72 29.43 29.36 28.95 27.32 26.04 25.68 25.57 25.46 25.35 24.70 24.51 24.33 21.52 21.50 21.05 20.66 18.50 18.26 18.25 17.67 17.52 17.47 16.81 16.23 15.53 15.46 15.31 15.28 15.27 14.91 14.52 14.45 14.00 13.99 13.88 13.46 12.49 9.94 8.25 7.20 7.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 29 31 32 33 34 35 36 37 38 40 41 42 43 45 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 47.17 45.28 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 22.64 20.75 18.87 15.09 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Pakistan Peru South Africa Denmark Australia Portugal Italy New Zealand Germany Israel Brazil Ireland Netherlands France Finland Chile Sweden the United Kingdom Norway Thailand China USA Austria Switzerland Hong Kong Spain Belgium Greece South Korea Singapore Japan Luxembourg Hungary India Canada Czech Republic Philippines Russia Indonesia Argentina Poland Malaysia Taiwan Turkey Mexico

the Middle East Latin America Africa Europe Oceana Europe Europe Oceana Europe the Middle East Latin America Europe Europe Europe Europe Latin America Europe Europe Europe Asia Asia North America Europe Europe Asia Europe Europe Europe Asia Asia Asia Europe Europe Asia North America Europe Asia Europe Asia Latin America Europe Asia Asia the Middle East Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

28

Total Inventories (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total assets = 100)

Rank

Percentile

34.61 31.72 29.36 29.18 28.95 28.29 28.11 26.04 25.46 25.35 24.70 24.51 21.52 21.50 21.05 18.44 18.25 18.08 17.67 17.63 17.63 17.47 16.81 16.80 16.49 16.40 16.23 15.28 15.27 15.05 14.99 14.97 14.85 14.45 14.28 14.25 13.99 13.96 13.74 13.72 13.71 13.06 12.86 12.49 11.23 10.81 10.79 6.84 6.28 6.10 5.88

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Albania Denmark Portugal Vatican City Italy Andorra Cyprus Germany Ireland Netherlands France Finland Sweden the United Kingdom Norway Iceland Austria San Marino Switzerland Jersey Guernsey Spain Belgium Faroe Islands Liechtenstein Slovenia Greece Luxembourg Hungary Malta Monaco Estonia Isle of Man Czech Republic Belarus Slovakia Russia Lithuania Ukraine Latvia Croatia Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

29

Current Assets - Total Countries

Value (total assets = 100)

Rank

Percentile

86.90 83.62 82.93 82.17 80.55 76.94 76.42 75.70 71.16 70.76 69.08 67.43 66.94 65.90 65.79 64.46 64.18 63.35 62.69 62.23 62.21 60.13 60.12 60.06 59.39 59.01 58.46 58.29 57.88 57.61 56.81 56.68 56.05 55.66 54.70 54.01 53.99 53.70 52.68 51.37 49.83 45.44 45.32 38.85 31.77

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 41 42 44 45 46 51 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 22.64 20.75 16.98 15.09 13.21 3.77 0.00

Region

_________________________________________________________________________________________________________

South Africa Israel Ireland Pakistan Spain Portugal France Italy Greece Peru Denmark Norway Germany the United Kingdom India Finland Netherlands Czech Republic Hong Kong Japan Australia USA China Sweden Philippines Argentina South Korea Singapore Taiwan Switzerland New Zealand Austria Indonesia Canada Malaysia Belgium Brazil Thailand Russia Chile Luxembourg Turkey Mexico Hungary Poland

Africa the Middle East Europe the Middle East Europe Europe Europe Europe Europe Latin America Europe Europe Europe Europe Asia Europe Europe Europe Asia Asia Oceana North America Asia Europe Asia Latin America Asia Asia Asia Europe Oceana Europe Asia North America Asia Europe Latin America Asia Europe Latin America Europe the Middle East Latin America Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

30

Current Assets - Total (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total assets = 100)

Rank

Percentile

82.93 80.55 76.94 76.42 76.31 75.70 75.62 73.65 71.16 69.08 67.43 66.94 65.95 65.90 65.08 64.46 64.18 63.35 61.77 60.75 60.13 60.12 60.10 60.06 58.83 57.61 56.68 56.53 56.36 56.14 54.74 54.74 54.01 53.79 53.76 53.66 52.68 52.55 49.83 43.17 39.62 38.85 38.51 37.14 34.93 33.22 32.70 31.77 28.57 27.49 27.44

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Ireland Spain Portugal France Vatican City Italy Slovenia Cyprus Greece Denmark Norway Germany Malta the United Kingdom Isle of Man Finland Netherlands Czech Republic Albania Iceland Latvia Faroe Islands Croatia Sweden Andorra Switzerland Austria Monaco Estonia San Marino Guernsey Jersey Belgium Belarus Liechtenstein Slovakia Russia Lithuania Luxembourg Romania Bosnia & Herzegovina Hungary Macedonia Serbia & Montenegro Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

31

Property Plant and Equipment - Net Countries

Value (total assets = 100)

Rank

Percentile

60.82 49.74 42.66 40.91 40.59 40.39 35.78 35.48 33.50 32.37 30.55 29.91 29.40 29.17 28.69 28.27 28.01 27.84 27.32 27.30 26.60 25.17 24.64 24.45 24.30 23.31 23.18 22.56 22.36 21.41 20.81 17.57 16.34 15.64 15.45 14.57 14.37 11.74 11.73 9.11 9.04 7.99 6.76 5.72 5.71

1 2 3 4 5 6 7 8 11 13 15 16 18 19 20 21 22 23 24 25 26 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 79.25 75.47 71.70 69.81 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 47.17 45.28 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Hungary Poland Brazil Thailand Chile Philippines Singapore Indonesia Malaysia South Korea China Canada New Zealand Russia Netherlands Switzerland Taiwan Peru Australia Japan Austria the United Kingdom Sweden Luxembourg Hong Kong Denmark Finland Germany India USA Portugal Greece Norway Czech Republic Spain Argentina Italy Pakistan France Israel Ireland Belgium South Africa Turkey Mexico

Europe Europe Latin America Asia Latin America Asia Asia Asia Asia Asia Asia North America Oceana Europe Europe Europe Asia Latin America Oceana Asia Europe Europe Europe Europe Asia Europe Europe Europe Asia North America Europe Europe Europe Europe Europe Latin America Europe the Middle East Europe the Middle East Europe Europe Africa the Middle East Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

32

Property Plant and Equipment - Net (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total assets = 100)

Rank

Percentile

60.82 54.69 52.00 51.20 49.74 44.72 43.04 42.96 34.70 31.21 30.44 29.78 29.72 29.17 29.10 28.69 28.27 26.60 26.38 26.35 25.69 25.69 25.17 24.64 24.45 24.30 23.31 23.30 23.18 22.56 21.63 20.81 19.92 17.57 16.34 16.28 16.07 15.64 15.45 14.85 14.84 14.51 14.49 14.37 11.73 9.04 7.99 5.44 4.99 4.85 4.68

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Monaco Estonia Andorra Belarus Slovakia Russia Lithuania Netherlands Switzerland Austria Liechtenstein San Marino Jersey Guernsey the United Kingdom Sweden Luxembourg Albania Denmark Faroe Islands Finland Germany Iceland Portugal Cyprus Greece Norway Malta Isle of Man Czech Republic Spain Latvia Croatia Slovenia Vatican City Italy France Ireland Belgium Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

33

Intangible Other Assets Countries

Value (total assets = 100)

Rank

Percentile

29.27 14.53 12.58 12.03 10.07 9.91 9.72 8.97 8.70 8.28 7.83 7.20 6.94 6.74 6.71 6.10 4.97 3.59 2.56 2.34 2.19 2.17 2.08 2.01 2.01 1.98 1.94 1.50 1.35 1.15 1.04 0.89 0.54 0.33 0.31 0.31 0.27 0.27

1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 40 41

97.67 93.02 90.70 88.37 86.05 83.72 81.40 79.07 76.74 74.42 72.09 69.77 67.44 65.12 62.79 60.47 58.14 55.81 53.49 51.16 48.84 46.51 44.19 41.86 39.53 37.21 34.88 32.56 27.91 25.58 23.26 20.93 18.60 16.28 13.95 11.63 6.98 4.65

Region

_________________________________________________________________________________________________________

Belgium USA Canada Norway Switzerland Australia Sweden France Luxembourg Austria Finland Malaysia New Zealand Germany Italy the United Kingdom Denmark Singapore Spain Greece Israel Ireland Czech Republic Hong Kong Netherlands China Argentina South Korea Russia India Japan Peru South Africa Hungary Turkey Mexico Poland Thailand

Europe North America North America Europe Europe Oceana Europe Europe Europe Europe Europe Asia Oceana Europe Europe Europe Europe Asia Europe Europe the Middle East Europe Europe Asia Europe Asia Latin America Asia Europe Asia Asia Latin America Africa Europe the Middle East Latin America Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

34

Intangible Other Assets (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total assets = 100)

Rank

Percentile

29.27 14.68 12.03 10.07 9.72 9.39 8.97 8.70 8.28 8.20 8.00 8.00 7.83 7.19 6.77 6.74 6.71 6.10 4.97 3.48 2.56 2.40 2.34 2.17 2.17 2.14 2.08 2.01 1.98 1.98 1.93 1.44 1.38 1.37 1.35 1.35 0.77 0.33 0.30 0.30 0.29 0.28 0.27 0.27 0.26 0.25 0.25 0.24 0.24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

97.96 95.92 93.88 91.84 89.80 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 63.27 61.22 59.18 57.14 55.10 53.06 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 18.37 16.33 14.29 12.24 10.20 8.16 6.12 4.08 2.04 0.00

_________________________________________________________________________________________________________

Belgium Iceland Norway Switzerland Sweden Liechtenstein France Luxembourg Austria San Marino Jersey Guernsey Finland Andorra Vatican City Germany Italy the United Kingdom Denmark Monaco Spain Slovenia Greece Ireland Malta Isle of Man Czech Republic Netherlands Latvia Croatia Faroe Islands Estonia Belarus Slovakia Russia Lithuania Albania Hungary Ukraine Romania Gibraltar Georgia Poland Bosnia & Herzegovina Macedonia Serbia & Montenegro Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.3 3.3.1

FINANCIAL RETURNS RATIOS

IN

35

BULGARIA: LIABILITY STRUCTURE

Overview

In this chapter we consider the liability structure of firms operating in Bulgaria benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of liabilities and shareholder equity is then presented for the proto-typical firm operating in Bulgaria and the average global benchmarks (sometimes referred to as a financial “gap” analysis). The figure reflect firms involved in steam, gas and hydraulic turbines and turbine generator set units in Bulgaria. For ratios where there are large deviations between Bulgaria and the benchmarks, graphics are provided (total liabilities and equity = 100 percent). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis liability ratios are highlighted.

3.3.2

Liabilities and Equity – Definitions of Terms

The following definitions are provided for those less familiar with the liability-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of liabilities and equity, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accounts Payable. Accounts payable are defined as amounts owed on open account to private persons or organizations for goods or services received.

•

Common Equity. Common equity is defined to equal the company's net worth. It typically comprises capital stock, capital surplus, retained earnings, and, in some cases, net worth reserves. Common equity is the portion of total net worth belonging to the common stockholders. Synonyms which are often used for common equity are “common stock” and “net worth”.

•

Current Liabilities - Total. Total current liabilities are defined as the total amount of obligations which would require the use of current assets or other current liabilities to pay.

•

Current Portion of Long Term Debt. The current proportion of long term debt is typically defined as debt which is payable in more than one year.

•

Long Term Debt. Long-term debt is defined to be due in a period exceeding one year or one operating cycle, whichever is longer. Long-term debt can have an extended repayment period such as a many-year mortgage on land and buildings, or debt that's intended to be permanent such as bonds issued to investors.

•

Long Term Debt Excluding Capitalized Leases. Long term debt excluding capitalized leases is defined as debt which is typically due in a period exceeding one year or one operating cycle, whichever is longer, less capitalized leases (see Long Term Debt for exceptions). Capital leases are generally recorded as assets with liability at the current value of the lease payment.

•

Shareholders Equity. Shareholders equity is commonly defined to be the amount of total equity reserved for common and preferred shareholders.

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2007 Icon Group International, Inc.

Financial Indicators

36

•

Short Term Debt. Short term debt is generally defined as debt payable within one year.

•

Total Liabilities. Total liabilities are generally defined to include all the claims against a corporation. Liabilities include accounts and wages and salaries payable, dividends declared payable, accrued taxes payable, fixed or long-term liabilities such as mortgage bonds, debentures, and bank loans.

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2007 Icon Group International, Inc.

Financial Indicators

3.3.3

37

Liability Structure: Outlook

Using the methodology described in the introduction, the following table summarizes liability and equity structure benchmarks for firms involved in steam, gas and hydraulic turbines and turbine generator set units in Bulgaria. To allow comparable benchmarking, a common index of Total Liabilities & Shareholders Equity = 100 is used. All figures are current-year projections for companies operating in Bulgaria based on latest financial results available. Liability Structure Bulgaria Europe World Avg. _________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Total Liabilities Common Equity Other Appropriated Reserves Unappropriated Reserves Total Liabilities & Shareholders Equity

6.33 12.50 6.09 24.93 7.09 7.09 32.01 38.62 17.58 17.90 100.00

12.07 12.07 12.86 36.78 9.95 9.81 50.49 41.30 7.07 7.03 100.00

12.85 10.39 11.64 36.82 6.27 6.20 45.11 46.61 4.64 11.54 100.00

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.3.4

38

Large Variances: Liabilities

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large liability structure gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Accounts Payable 15 10

12.07

12.85

6.33

5 0 -5

-6.52

-10 Bulgaria

Europe

World Average

Gap

Gap: Short Term Debt & Current Portion of Long Term Debt 15

12.5

12.07 10.39

10 5

2.11

0 Bulgaria

Europe

World Average

Gap

Gap: Other Current Liabilities 12.86

15 10

11.64

6.09

5 0 -5

-5.55

-10 Bulgaria

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Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

39

Gap: Current Liabilities - Total 36.78

40 30

36.82

24.93

20 10 0 -10

-11.89

-20 Bulgaria

Europe

World Average

Gap

Gap: Long Term Debt 9.95 10 8

7.09

6.27

6 4 2

0.82

0 Bulgaria

Europe

World Average

Gap

Gap: Long Term Debt Excluding Capitalized Leases 9.81

10 8

7.09

6.2

6 4 2

0.89

0 Bulgaria

Europe

World Average

Gap

Gap: Total Liabilities 60 40

50.49

45.11

32.01

20 0 -13.1

-20 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

40

Gap: Common Equity 50 40

38.62

41.3

Bulgaria

Europe

46.61

30 20 10 0 -7.99 Gap

-10 World Average

Gap: Other Appropriated Reserves 20

17.58 12.94

15 10

7.07 4.64

5 0 Bulgaria

Europe

World Average

Gap

Gap: Unappropriated Reserves 20

17.9

15

11.54

10

7.03

6.36

5 0 Bulgaria

Europe

World Average

Gap

Gap: Total Liabilities & Shareholders Equity 100

100

100

100 80 60 40 20

0

0 Bulgaria

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Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

3.3.5

41

Key Percentiles and Rankings

We now consider the distribution of liability ratios for steam, gas and hydraulic turbines and turbine generator set units using ranks and percentiles. What percent of countries have a value lower or higher than Bulgaria (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of liability structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical liability ratios are highlighted in additional tables. Liability Structure

Bulgaria

Rank of Total

Percentile

6.33 12.50 6.09 24.93 7.09 7.09 32.01 38.62 17.58 17.90 100.00

50 of 51 20 of 54 42 of 54 48 of 54 35 of 49 34 of 49 47 of 54 39 of 54 7 of 50 5 of 38

1.96 62.96 22.22 11.11 28.57 30.61 12.96 27.78 86.00 86.84

_________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Total Liabilities Common Equity Other Appropriated Reserves Unappropriated Reserves Total Liabilities & Shareholders Equity

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

42

Accounts Payable Countries

Value (total liabilities & equity = 100)

Rank

Percentile

31.84 24.17 22.32 20.60 20.15 19.56 18.99 18.07 15.66 15.51 15.18 14.89 14.85 14.78 14.52 13.84 13.66 13.56 13.26 13.18 13.15 12.44 12.35 11.85 11.72 11.53 11.19 10.99 10.84 10.30 9.38 9.10 9.02 8.97 8.95 8.78 8.71 8.18 7.33 7.01 7.00 2.06

1 2 3 4 5 6 7 9 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 31 32 34 36 37 38 39 40 42 43 44 46 47 48 50

98.00 96.00 94.00 92.00 90.00 88.00 86.00 82.00 78.00 76.00 74.00 72.00 70.00 68.00 66.00 64.00 62.00 60.00 58.00 56.00 54.00 52.00 50.00 46.00 44.00 42.00 40.00 38.00 36.00 32.00 28.00 26.00 24.00 22.00 20.00 16.00 14.00 12.00 8.00 6.00 4.00 0.00

Region

_________________________________________________________________________________________________________

Belgium Italy Spain Philippines India France Brazil Chile Japan Hong Kong Singapore Greece Taiwan Netherlands the United Kingdom New Zealand Canada Norway Czech Republic Denmark South Korea Sweden Argentina Russia Australia Thailand Austria Indonesia Switzerland China Luxembourg Germany USA Hungary Malaysia Israel Ireland Finland Poland Turkey Mexico Peru

Europe Europe Europe Asia Asia Europe Latin America Latin America Asia Asia Asia Europe Asia Europe Europe Oceana North America Europe Europe Europe Asia Europe Latin America Europe Oceana Asia Europe Asia Europe Asia Europe Europe North America Europe Asia the Middle East Europe Europe Europe the Middle East Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

43

Accounts Payable (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total liabilities & equity = 100)

Rank

Percentile

31.84 24.37 24.17 22.32 20.95 19.56 14.89 14.87 14.78 14.72 14.52 14.33 13.80 13.62 13.56 13.26 13.18 12.68 12.58 12.58 12.44 12.10 12.07 11.85 11.82 11.19 11.08 10.84 10.80 10.80 10.12 9.38 9.11 9.10 8.97 8.71 8.18 8.06 7.67 7.55 7.33 6.66 6.59 6.34 6.33 6.12 5.94 5.73 1.80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

97.96 95.92 93.88 91.84 89.80 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 63.27 61.22 59.18 57.14 55.10 53.06 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 18.37 16.33 14.29 12.24 10.20 8.16 6.12 4.08 2.04 0.00

_________________________________________________________________________________________________________

Belgium Vatican City Italy Spain Slovenia France Greece Faroe Islands Netherlands Monaco the United Kingdom Andorra Malta Isle of Man Norway Czech Republic Denmark Estonia Latvia Croatia Sweden Belarus Slovakia Russia Lithuania Austria San Marino Switzerland Guernsey Jersey Liechtenstein Luxembourg Iceland Germany Hungary Ireland Finland Ukraine Gibraltar Georgia Poland Romania Moldova Kazakhstan Bulgaria Bosnia & Herzegovina Macedonia Serbia & Montenegro Albania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

44

Current Liabilities - Total Countries

Value (total liabilities & equity = 100)

Rank

Percentile

60.54 58.44 57.60 52.51 52.20 49.47 48.47 47.78 45.62 44.98 42.99 42.62 41.74 41.66 41.58 41.02 40.85 40.74 40.61 40.11 39.05 37.83 37.20 36.79 36.11 35.29 34.60 33.26 33.15 33.01 32.94 31.08 31.01 30.90 30.83 29.13 28.86 28.55 27.30 26.03 25.68 25.51 25.28 23.73 23.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 30 31 32 33 34 35 36 37 38 39 40 41 42 45 46 47 50 51

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 56.60 54.72 52.83 50.94 49.06 47.17 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 15.09 13.21 11.32 5.66 3.77

Region

_________________________________________________________________________________________________________

Brazil Spain Chile South Africa Pakistan Italy Portugal Taiwan Greece France Norway the United Kingdom Austria China India Denmark Turkey Mexico Czech Republic Belgium Netherlands Argentina Japan South Korea Finland Hungary Hong Kong Sweden Russia Switzerland Germany Israel Thailand Singapore Ireland Philippines Poland Luxembourg Peru USA Malaysia Australia Canada New Zealand Indonesia

Latin America Europe Latin America Africa the Middle East Europe Europe Asia Europe Europe Europe Europe Europe Asia Asia Europe the Middle East Latin America Europe Europe Europe Latin America Asia Asia Europe Europe Asia Europe Europe Europe Europe the Middle East Asia Asia Europe Asia Europe Europe Latin America North America Asia Oceana North America Oceana Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

45

Current Liabilities - Total (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total liabilities & equity = 100)

Rank

Percentile

58.44 54.86 49.87 49.47 48.47 46.40 45.62 44.98 42.99 42.62 42.28 41.74 41.73 41.34 41.02 40.61 40.31 40.31 40.11 39.05 38.81 38.55 38.53 36.11 35.62 35.47 35.29 34.61 33.85 33.77 33.39 33.26 33.18 33.15 33.07 33.01 32.94 31.73 30.83 30.80 30.17 29.96 29.71 28.86 28.55 26.30 25.95 24.97 24.93 24.58 23.83

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Spain Slovenia Vatican City Italy Portugal Cyprus Greece France Norway the United Kingdom Malta Austria Isle of Man San Marino Denmark Czech Republic Guernsey Jersey Belgium Netherlands Romania Latvia Croatia Finland Bosnia & Herzegovina Estonia Hungary Macedonia Belarus Slovakia Serbia & Montenegro Sweden Faroe Islands Russia Lithuania Switzerland Germany Ukraine Ireland Liechtenstein Gibraltar Monaco Georgia Poland Luxembourg Iceland Moldova Kazakhstan Bulgaria Andorra Albania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

46

Long Term Debt Countries

Value (total liabilities & equity = 100)

Rank

Percentile

32.68 21.19 19.31 19.13 19.04 18.79 18.33 16.39 16.33 14.29 14.18 13.29 13.18 11.75 10.94 10.59 10.56 10.49 10.03 9.83 9.49 8.50 8.45 8.32 8.20 7.99 7.66 7.48 7.35 6.23 5.50 4.53 3.69 3.63 3.09 2.75 2.56 2.32 1.69 1.55 1.53

1 2 3 4 5 6 7 8 9 12 14 15 16 17 18 19 20 21 22 23 25 26 27 28 29 30 32 33 34 35 37 38 40 41 42 43 44 45 46 47 48

97.92 95.83 93.75 91.67 89.58 87.50 85.42 83.33 81.25 75.00 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 54.17 52.08 47.92 45.83 43.75 41.67 39.58 37.50 33.33 31.25 29.17 27.08 22.92 20.83 16.67 14.58 12.50 10.42 8.33 6.25 4.17 2.08 0.00

Region

_________________________________________________________________________________________________________

New Zealand Belgium Portugal Finland Thailand Netherlands Sweden Switzerland Norway USA Luxembourg Denmark Australia Canada Taiwan Turkey Mexico Austria Hungary Germany the United Kingdom South Korea Japan France Poland India Russia Italy Spain Indonesia Singapore South Africa Hong Kong China Greece Czech Republic Argentina Malaysia Peru Israel Ireland

Oceana Europe Europe Europe Asia Europe Europe Europe Europe North America Europe Europe Oceana North America Asia the Middle East Latin America Europe Europe Europe Europe Asia Asia Europe Europe Asia Europe Europe Europe Asia Asia Africa Asia Asia Europe Europe Latin America Asia Latin America the Middle East Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

47

Long Term Debt (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total liabilities & equity = 100)

Rank

Percentile

33.84 21.19 19.31 19.13 18.79 18.48 18.33 16.39 16.33 15.30 14.44 14.18 13.29 10.49 10.39 10.13 10.13 10.06 10.03 9.83 9.49 9.23 9.02 8.97 8.66 8.58 8.44 8.32 8.20 8.19 7.82 7.80 7.66 7.64 7.54 7.48 7.38 7.35 7.10 7.09 6.90 5.33 3.54 3.09 2.86 2.82 2.75 2.61 2.61 1.53 1.47

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Andorra Belgium Portugal Finland Netherlands Cyprus Sweden Switzerland Norway Liechtenstein Iceland Luxembourg Denmark Austria San Marino Jersey Guernsey Romania Hungary Germany the United Kingdom Bosnia & Herzegovina Ukraine Macedonia Serbia & Montenegro Gibraltar Georgia France Poland Estonia Belarus Slovakia Russia Lithuania Vatican City Italy Moldova Spain Kazakhstan Bulgaria Slovenia Monaco Faroe Islands Greece Malta Isle of Man Czech Republic Latvia Croatia Ireland Albania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

48

Total Liabilities Countries

Value (total liabilities & equity = 100)

Rank

Percentile

67.94 67.25 67.09 66.15 64.53 64.47 63.76 63.36 61.47 60.67 60.17 60.05 58.24 57.68 57.21 57.04 56.88 56.64 56.35 53.05 52.06 51.92 51.65 50.71 50.38 49.75 49.19 48.53 45.83 45.42 45.32 44.29 43.73 41.26 40.01 39.43 38.81 37.78 37.07 35.30 35.01 31.52 30.75 29.75 29.13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30 31 32 34 35 38 39 40 42 43 44 45 46 47 48 49 51

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 43.40 41.51 39.62 35.85 33.96 28.30 26.42 24.53 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 3.77

Region

_________________________________________________________________________________________________________

Portugal Belgium Austria Spain Italy Germany Brazil Netherlands Sweden Chile Denmark Norway France Finland Taiwan New Zealand Switzerland South Africa the United Kingdom Pakistan Turkey Mexico India Thailand Japan Greece Luxembourg South Korea China USA Hungary Czech Republic Russia Argentina Australia Canada Hong Kong Singapore Poland Israel Ireland Indonesia Peru Malaysia Philippines

Europe Europe Europe Europe Europe Europe Latin America Europe Europe Latin America Europe Europe Europe Europe Asia Oceana Europe Africa Europe the Middle East the Middle East Latin America Asia Asia Asia Europe Europe Asia Asia North America Europe Europe Europe Latin America Oceana North America Asia Asia Europe the Middle East Europe Asia Latin America Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

49

Total Liabilities (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total liabilities & equity = 100)

Rank

Percentile

67.94 67.25 67.09 66.45 66.15 65.05 65.03 64.79 64.79 64.53 64.47 63.36 62.10 61.47 60.17 60.05 59.07 58.24 57.68 56.88 56.35 53.08 49.75 49.47 49.19 46.78 46.11 45.88 45.51 45.39 45.32 44.65 44.55 44.29 44.12 43.73 43.63 42.56 42.04 42.02 40.76 38.75 38.15 37.22 37.07 36.63 35.01 33.33 32.07 32.01 26.84

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Portugal Belgium Austria San Marino Spain Vatican City Cyprus Jersey Guernsey Italy Germany Netherlands Slovenia Sweden Denmark Norway Andorra France Finland Switzerland the United Kingdom Liechtenstein Greece Romania Luxembourg Estonia Malta Iceland Isle of Man Bosnia & Herzegovina Hungary Belarus Slovakia Czech Republic Macedonia Russia Lithuania Serbia & Montenegro Latvia Croatia Ukraine Gibraltar Georgia Faroe Islands Poland Monaco Ireland Moldova Kazakhstan Bulgaria Albania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

50

Common Equity Countries

Value (total liabilities & equity = 100)

Rank

Percentile

70.87 69.29 69.25 64.70 64.69 64.17 60.19 59.97 59.11 56.07 54.68 53.58 50.89 50.04 49.10 48.70 48.32 47.94 47.81 46.95 45.09 44.72 44.36 42.27 42.12 42.01 41.92 41.54 40.96 39.82 39.57 39.49 38.36 36.79 36.37 36.33 34.89 34.43 34.23 34.03 32.76 32.56 32.09 32.06 31.17

1 2 3 4 5 6 8 10 11 12 13 14 15 16 17 18 19 20 21 22 25 26 28 29 30 31 32 33 35 36 37 38 39 41 42 43 44 45 46 47 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 84.91 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 52.83 50.94 47.17 45.28 43.40 41.51 39.62 37.74 33.96 32.08 30.19 28.30 26.42 22.64 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Philippines Malaysia Peru Israel Indonesia Ireland Singapore Australia Hong Kong Canada Hungary USA China South Korea Thailand Japan India Turkey Mexico Pakistan Russia Poland Greece South Africa the United Kingdom Switzerland Taiwan New Zealand France Denmark Finland Czech Republic Norway Argentina Sweden Luxembourg Italy Brazil Germany Netherlands Chile Belgium Spain Portugal Austria

Asia Asia Latin America the Middle East Asia Europe Asia Oceana Asia North America Europe North America Asia Asia Asia Asia Asia the Middle East Latin America the Middle East Europe Europe Europe Africa Europe Europe Asia Oceana Europe Europe Europe Europe Europe Latin America Europe Europe Europe Latin America Europe Europe Latin America Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

51

Common Equity (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total liabilities & equity = 100)

Rank

Percentile

64.17 60.45 58.37 56.68 54.68 54.13 49.17 48.24 46.75 46.04 46.03 45.94 45.55 45.09 44.99 44.72 44.36 43.01 42.12 42.01 41.80 41.12 40.96 40.62 40.58 40.21 39.82 39.57 39.49 39.20 39.19 38.69 38.62 38.36 37.49 37.47 36.37 36.33 35.17 34.89 34.23 34.03 32.56 32.09 32.06 31.17 30.88 30.69 30.13 30.10 30.10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Ireland Albania Monaco Faroe Islands Hungary Iceland Ukraine Estonia Gibraltar Belarus Georgia Slovakia Romania Russia Lithuania Poland Greece Andorra the United Kingdom Switzerland Bosnia & Herzegovina Malta France Macedonia Isle of Man Moldova Denmark Finland Czech Republic Liechtenstein Serbia & Montenegro Kazakhstan Bulgaria Norway Latvia Croatia Sweden Luxembourg Vatican City Italy Germany Netherlands Belgium Spain Portugal Austria San Marino Cyprus Slovenia Guernsey Jersey

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

3.4 3.4.1

FINANCIAL RETURNS RATIOS

IN

52

BULGARIA: INCOME STRUCTURE

Overview

In this chapter we consider the income structure of companies operating in Bulgaria benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of income is then presented for the proto-typical firm involved in steam, gas and hydraulic turbines and turbine generator set units operating in Bulgaria and the average global benchmarks (total revenue = 100 percent). For ratios where there are large deviations between Bulgaria and the benchmarks, graphics are provided. Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis income ratios are highlighted across countries in the comparison group.

3.4.2

Income Statements – Definitions of Terms

The following definitions are provided for those less familiar with the income-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of income, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Amortization. Amortization generally refers to the depreciation, depletion, or charge-off to expense of intangible and tangible assets over a period of time. Amortization is commonly understood to be the taking as an expense (writing off) of the loss of value of an intangible asset such as a copyright, a patent, or a mailing list, in an accounting period.

•

Cost of Goods Sold (excluding depreciation). For retail companies, cost of goods sold is generally defined as the equivalent of starting inventory plus purchases minus ending inventory. In manufacturing, cost of goods sold is defined to equal the starting inventory plus the cost of goods manufactured minus ending inventory. Most pure service firms do not generally have cost of goods sold.

•

Depletion. Depletion is commonly defined to be included as one of the elements of amortization, and is understood to be the portion of the carrying value (other than the portion associated with tangible assets) prorated in each accounting period for financial reporting purposes.

•

Depreciation. Depreciation generally is defined as the expiration in the service life of fixed assets, other than depletable assets, attributable to wear and tear, deterioration, action of the physical elements, inadequacy and obsolescence. Depreciation is commonly defined as the portion of the cost of a fixed asset charged as an expense during a particular period. In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost. Through this process, the cost of the asset is ultimately charged off as an expense.

•

Earnings Before Interest and Taxes (EBIT). EBIT is a financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and non-operating profit before the deduction of interest and income taxes.

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53

•

Gross Income. Gross income is commonly defined as all the money, goods, and property received by the company that must be included as taxable income.

•

Interest Expense on Debt. Interest expenses on debt are those which are spent on current debt and added to the net income so avoid underestimating interest coverage.

•

Net Income Available to Common. Net income available to common is defined as the net income available to common stockholders.

•

Net Income Before Preferred Dividends. Net income before preferred dividends is generally calculated as the difference between total revenues and total expense prior to the granting of preferred dividends.

•

Net Sales or Revenues. Revenues or net sales are defined as payments made to and received by an entity. May take the form of taxes, user fees, fines, fees for service, and so on.

•

Operating Income. Operating income is generally defined to equal operating revenues less operating expenses. It typically excludes items of other revenue and expense such as equity in earnings of unconsolidated companies, dividends, interest income and expense, income taxes, extraordinary items, and cumulative effect of accounting changes.

•

Pretax Income. Pretax income is generally defined as income before tax deductions.

•

Selling, General & Administrative Expenses. Selling, general and administrative expenses are expenses independent from cost of sales for the purpose of illustrating the amount of the company's selling and administrative costs. Generally included in this figure are the costs of employees' salaries, commissions, and travel expenses; company payroll and office costs; and advertising and promotion.

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Financial Indicators

3.4.3

54

Income Structure: Outlook

Using the methodology described in the introduction, the following table summarizes income structure benchmarks for firms involved in steam, gas and hydraulic turbines and turbine generator set units in Bulgaria. To allow comparable benchmarking, a common index of Net Sales or Revenues = 100 is used. All figures are current-year projections for companies operating in Bulgaria based on latest financial results available. Income Structure Bulgaria Europe World Avg. _________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Operating Income Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Pretax Income Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

100.00 55.77 6.03 8.83 7.35 1.50 0.62 2.12 1.21 0.91 0.91 0.91 0.91

100.00 70.09 4.68 18.16 13.76 5.46 0.83 8.40 4.33 4.14 2.61 2.62 2.61

100.00 69.36 4.50 16.64 9.33 6.55 1.48 9.61 3.64 6.00 4.29 4.43 4.29

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

3.4.4

55

Large Variances: Income

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large income structure gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cost of Goods Sold (Excluding Depreciation) 70.09

80 60

69.36

55.77

40 20 0 -13.59

-20 Bulgaria

Europe

World Average

Gap

Gap: Depreciation, Depletion & Amortization 8 6.03 6

4.68

4.5

4 1.53

2 0 Bulgaria

Europe

World Average

Gap

Gap: Gross Income 18.16

20

16.64

15 10

8.83

5 0 -5 -7.81

-10 Bulgaria

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World Average

Gap

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56

Gap: Selling, General & Administrative Expenses 13.76

15 10

9.33 7.35

5 0 -1.98 -5 Bulgaria

Europe

World Average

Gap

Gap: Operating Income 8 6 4 2 0 -2 -4 -6

5.46

6.55

1.5

-5.05 Bulgaria

Europe

World Average

Gap

Gap: Earnings Before Interest and Taxes (EBIT) 8.4

10 5

9.61

2.12

0 -5 -7.49 -10 Bulgaria

Europe

World Average

Gap

Gap: Interest Expense on Debt 6

4.33

4 2

3.64

1.21

0 -2

-2.43

-4 Bulgaria

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World Average

Gap

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57

Gap: Pretax Income 6 6

4.14

4 2

0.91

0 -2 -4

-5.09

-6 Bulgaria

Europe

World Average

Gap

Gap: Net Income Before Extra Items/Prefer Dividends 6

4.29

4 2

2.61 0.91

0 -2 -3.38

-4 Bulgaria

Europe

World Average

Gap

Gap: Net Income Before Preferred Dividends 6

4.43

4 2

2.62 0.91

0 -2 -3.52

-4 Bulgaria

Europe

World Average

Gap

Gap: Net Income Available to Common 6

4.29

4 2

2.61 0.91

0 -2 -3.38

-4 Bulgaria

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Europe

World Average

Gap

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Financial Indicators

3.4.5

58

Key Percentiles and Rankings

We now consider the distribution of income ratios for steam, gas and hydraulic turbines and turbine generator set units using ranks and percentiles. What percent of countries have a value lower or higher than Bulgaria (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of income structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical income ratios are highlighted in additional tables. Income Structure

Bulgaria

Rank of Total

Percentile

100.00 55.77 6.03 8.83 7.35 1.50 0.62 2.12 1.21 0.91 0.91 0.91 0.91

51 of 53 17 of 54 48 of 53 42 of 47 47 of 54 30 of 54 50 of 54 39 of 54 49 of 54 44 of 54 44 of 54 44 of 54

3.77 68.52 9.43 10.64 12.96 44.44 7.41 27.78 9.26 18.52 18.52 18.52

_________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Operating Income Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Pretax Income Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

59

Cost of Goods Sold (Excluding Depreciation) Countries

Value (total revenue = 100)

Rank

Percentile

90.62 89.40 88.70 88.31 87.88 85.34 83.94 82.83 80.14 79.88 78.96 77.69 77.62 76.49 76.48 76.47 75.55 74.93 74.02 73.34 73.18 73.11 72.79 72.53 72.22 71.69 70.30 70.28 70.19 69.67 69.56 69.10 68.44 68.41 67.89 67.33 67.16 64.58 63.43 63.25 62.95 62.88 62.58 58.30

1 2 3 4 5 6 7 8 10 11 12 13 14 16 17 18 19 20 21 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 50

98.08 96.15 94.23 92.31 90.38 88.46 86.54 84.62 80.77 78.85 76.92 75.00 73.08 69.23 67.31 65.38 63.46 61.54 59.62 55.77 53.85 51.92 50.00 48.08 46.15 44.23 40.38 38.46 36.54 34.62 32.69 30.77 28.85 26.92 25.00 23.08 21.15 19.23 17.31 15.38 13.46 11.54 9.62 3.85

Region

_________________________________________________________________________________________________________

Philippines Belgium New Zealand Portugal Taiwan Denmark India France South Korea Spain Hungary South Africa Norway Austria Finland Australia Singapore Indonesia Canada Germany China Brazil Switzerland Peru Russia Japan Greece Netherlands Thailand Sweden Chile the United Kingdom Hong Kong Malaysia Israel Ireland Italy Poland Turkey Mexico Luxembourg USA Czech Republic Argentina

Asia Europe Oceana Europe Asia Europe Asia Europe Asia Europe Europe Africa Europe Europe Europe Oceana Asia Asia North America Europe Asia Latin America Europe Latin America Europe Asia Europe Europe Asia Europe Latin America Europe Asia Asia the Middle East Europe Europe Europe the Middle East Latin America Europe North America Europe Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

60

Cost of Goods Sold (Excluding Depreciation) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total revenue = 100)

Rank

Percentile

91.86 89.40 88.31 85.34 84.53 82.83 79.88 78.96 77.62 77.26 76.49 76.48 75.76 74.99 73.87 73.87 73.74 73.57 73.34 73.26 72.79 72.22 72.05 71.01 70.30 70.28 69.67 69.10 67.92 67.70 67.51 67.33 67.16 66.47 65.63 65.15 64.58 64.30 63.53 63.31 62.95 62.58 60.26 59.40 59.38 58.06 55.87 55.77 55.30 53.75 51.85

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Andorra Belgium Portugal Denmark Cyprus France Spain Hungary Norway Estonia Austria Finland San Marino Slovenia Jersey Guernsey Belarus Slovakia Germany Monaco Switzerland Russia Lithuania Ukraine Greece Netherlands Sweden the United Kingdom Liechtenstein Vatican City Gibraltar Ireland Italy Georgia Faroe Islands Malta Poland Isle of Man Iceland Albania Luxembourg Czech Republic Romania Latvia Croatia Moldova Kazakhstan Bulgaria Bosnia & Herzegovina Macedonia Serbia & Montenegro

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

61

Selling, General & Administrative Expenses Countries

Value (total revenue = 100)

Rank

Percentile

28.49 28.26 26.51 26.27 25.90 25.12 22.54 21.79 20.82 19.42 18.12 18.08 17.87 17.85 17.15 16.96 16.58 16.50 15.50 14.65 14.27 13.83 12.73 12.54 11.16 10.41 10.40 10.21 9.92 9.39 9.27 8.72 8.51 8.37 8.35 8.29 7.97 6.46 0.93

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 22 23 24 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 42 45

97.83 95.65 93.48 91.30 89.13 86.96 84.78 82.61 80.43 78.26 76.09 73.91 71.74 69.57 67.39 65.22 60.87 58.70 56.52 52.17 50.00 47.83 43.48 41.30 39.13 36.96 34.78 32.61 30.43 28.26 26.09 23.91 21.74 17.39 15.22 13.04 10.87 8.70 2.17

Region

_________________________________________________________________________________________________________

Israel Ireland Netherlands Peru USA the United Kingdom Sweden Italy Japan South Africa Turkey Mexico Thailand Finland Germany Canada Hong Kong Switzerland China France Luxembourg Malaysia Norway Greece Czech Republic Hungary Argentina Denmark Austria Australia South Korea Taiwan Poland Brazil Russia Singapore Chile Indonesia Philippines

the Middle East Europe Europe Latin America North America Europe Europe Europe Asia Africa the Middle East Latin America Asia Europe Europe North America Asia Europe Asia Europe Europe Asia Europe Europe Europe Europe Latin America Europe Europe Oceana Asia Asia Europe Latin America Europe Asia Latin America Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

62

Selling, General & Administrative Expenses (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total revenue = 100)

Rank

Percentile

28.26 26.51 26.17 25.12 22.93 22.54 21.97 21.79 17.85 17.22 17.15 16.50 15.90 15.80 15.39 15.36 14.82 14.65 14.27 12.73 12.54 11.62 11.47 11.16 10.60 10.59 10.41 10.21 9.92 9.82 9.58 9.58 9.36 8.94 8.90 8.76 8.53 8.51 8.51 8.35 8.33 8.04 7.65 7.36 7.35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

97.78 95.56 93.33 91.11 88.89 86.67 84.44 82.22 80.00 77.78 75.56 73.33 71.11 68.89 66.67 64.44 62.22 60.00 57.78 55.56 53.33 51.11 48.89 46.67 44.44 42.22 40.00 37.78 35.56 33.33 31.11 28.89 26.67 24.44 22.22 20.00 17.78 15.56 13.33 11.11 8.89 6.67 4.44 2.22 0.00

_________________________________________________________________________________________________________

Ireland Netherlands Iceland the United Kingdom Albania Sweden Vatican City Italy Finland Romania Germany Switzerland Faroe Islands Bosnia & Herzegovina Liechtenstein Macedonia Serbia & Montenegro France Luxembourg Norway Greece Malta Isle of Man Czech Republic Latvia Croatia Hungary Denmark Austria San Marino Jersey Guernsey Ukraine Estonia Gibraltar Georgia Belarus Poland Slovakia Russia Lithuania Monaco Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

63

Operating Income Countries

Value (total revenue = 100)

Rank

Percentile

13.67 11.79 11.49 11.22 11.15 11.12 11.05 9.82 8.69 8.64 8.46 7.86 7.83 7.64 7.42 7.41 7.00 6.96 6.87 6.52 6.45 6.40 6.27 6.10 5.94 5.61 5.30 5.16 4.51 3.95 3.86 3.72 3.67 3.52 3.17 2.78 2.54 2.12 1.73 1.50 1.39 0.95 0.69 -2.29 -2.31

1 2 3 4 5 6 7 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 31 32 34 35 36 38 39 40 42 43 44 45 46 47 48 50 51 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 81.13 79.25 77.36 75.47 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 49.06 47.17 45.28 43.40 41.51 39.62 35.85 33.96 32.08 28.30 26.42 24.53 20.75 18.87 16.98 15.09 13.21 11.32 9.43 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Spain Brazil Indonesia Chile Turkey Mexico Hong Kong Singapore South Africa India Malaysia Greece Netherlands New Zealand USA Canada Czech Republic South Korea Pakistan Argentina the United Kingdom Italy Russia France Belgium Sweden China Norway Thailand Japan Finland Portugal Switzerland Austria Luxembourg Denmark Germany Hungary Poland Philippines Taiwan Australia Peru Ireland Israel

Europe Latin America Asia Latin America the Middle East Latin America Asia Asia Africa Asia Asia Europe Europe Oceana North America North America Europe Asia the Middle East Latin America Europe Europe Europe Europe Europe Europe Asia Europe Asia Asia Europe Europe Europe Europe Europe Europe Europe Europe Europe Asia Asia Oceana Latin America Europe the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

64

Operating Income (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total revenue = 100)

Rank

Percentile

13.67 12.83 10.60 10.60 9.73 9.52 9.45 9.12 7.92 7.86 7.83 7.50 7.28 7.19 7.00 6.71 6.64 6.64 6.45 6.45 6.40 6.40 6.39 6.27 6.25 6.10 5.94 5.61 5.16 3.86 3.72 3.67 3.56 3.52 3.48 3.42 3.39 3.39 3.17 2.78 2.54 2.12 1.91 1.81 1.79 1.73 1.56 1.50 1.50 0.60 -2.29

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Spain Slovenia Faroe Islands Romania Bosnia & Herzegovina Monaco Macedonia Serbia & Montenegro Andorra Greece Netherlands Iceland Malta Isle of Man Czech Republic Estonia Latvia Croatia Vatican City the United Kingdom Belarus Italy Slovakia Russia Lithuania France Belgium Sweden Norway Finland Portugal Switzerland Cyprus Austria San Marino Liechtenstein Guernsey Jersey Luxembourg Denmark Germany Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Albania Ireland

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

65

Earnings Before Interest and Taxes (EBIT) Countries

Value (total revenue = 100)

Rank

Percentile

35.95 35.85 27.11 25.79 13.70 13.08 11.65 11.48 10.85 10.78 10.66 9.91 9.81 9.08 8.82 7.99 7.82 7.73 7.59 7.56 7.53 7.39 7.34 7.32 6.82 6.68 6.66 6.61 6.36 6.06 5.61 5.49 4.89 4.71 4.07 3.73 3.16 3.04 3.00 2.78 2.71 2.45 2.04 -1.63 -1.65

1 2 4 5 6 7 8 9 10 11 12 14 15 16 18 19 20 22 23 24 25 26 27 28 29 31 32 33 35 36 38 39 40 41 42 43 44 45 46 47 48 49 50 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 73.58 71.70 69.81 66.04 64.15 62.26 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 33.96 32.08 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Brazil Chile Spain Greece Czech Republic India Argentina Indonesia Malaysia Singapore Hong Kong New Zealand South Africa Italy Netherlands Thailand USA Canada France China South Korea Norway the United Kingdom Pakistan Sweden Russia Finland Taiwan Germany Austria Portugal Switzerland Luxembourg Belgium Denmark Australia Hungary Japan Peru Poland Philippines Ireland Israel

the Middle East Latin America Latin America Latin America Europe Europe Europe Asia Latin America Asia Asia Asia Asia Oceana Africa Europe Europe Asia North America North America Europe Asia Asia Europe Europe the Middle East Europe Europe Europe Asia Europe Europe Europe Europe Europe Europe Europe Oceana Europe Asia Latin America Europe Asia Europe the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

66

Earnings Before Interest and Taxes (EBIT) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total revenue = 100)

Rank

Percentile

34.16 31.35 30.47 29.39 13.70 13.08 12.86 12.13 11.97 11.65 11.05 11.05 9.61 9.41 9.40 8.05 7.99 7.82 7.67 7.53 7.32 7.07 6.82 6.75 6.73 6.66 6.61 6.59 6.36 5.61 5.49 5.44 5.30 5.30 4.89 4.71 4.68 4.39 4.07 3.73 3.16 3.00 2.70 2.57 2.53 2.45 2.36 2.21 2.12 2.12 -1.63

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Spain Greece Slovenia Malta Isle of Man Czech Republic Latvia Croatia Monaco Faroe Islands Andorra Vatican City Italy Netherlands Iceland France Norway Estonia the United Kingdom Belarus Slovakia Sweden Russia Lithuania Finland Germany Austria San Marino Guernsey Jersey Portugal Switzerland Cyprus Liechtenstein Luxembourg Belgium Denmark Hungary Ukraine Gibraltar Georgia Poland Albania Moldova Kazakhstan Bulgaria Ireland

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

67

Pretax Income Countries

Value (total revenue = 100)

Rank

Percentile

15.44 14.69 13.06 11.91 10.76 9.67 9.58 9.47 9.21 9.11 8.92 7.87 7.25 6.56 6.43 6.27 6.02 5.99 5.76 5.73 5.72 5.45 5.07 5.04 4.74 4.57 4.34 4.29 4.15 3.43 3.39 3.35 2.97 2.46 2.14 1.83 1.39 1.30 1.29 1.25 1.05 -1.98 -1.99 -6.48 -6.50

1 2 3 4 5 6 7 8 9 10 11 14 15 16 18 19 20 21 22 23 24 25 27 28 30 32 33 34 35 36 37 38 39 40 41 42 44 45 46 47 48 49 50 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 73.58 71.70 69.81 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 49.06 47.17 43.40 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 11.32 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Brazil Chile Spain Hong Kong Greece India Czech Republic Malaysia Singapore Indonesia Argentina South Africa New Zealand Canada USA Thailand France Italy Netherlands Norway the United Kingdom Pakistan South Korea China Sweden Russia Finland Germany Austria Switzerland Portugal Taiwan Luxembourg Belgium Japan Philippines Denmark Australia Hungary Peru Poland Ireland Israel Mexico Turkey

Latin America Latin America Europe Asia Europe Asia Europe Asia Asia Asia Latin America Africa Oceana North America North America Asia Europe Europe Europe Europe Europe the Middle East Asia Asia Europe Europe Europe Europe Europe Europe Europe Asia Europe Europe Asia Asia Europe Oceana Europe Latin America Europe Europe the Middle East Latin America the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

68

Pretax Income (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value (total revenue = 100)

Rank

Percentile

13.06 12.26 11.42 10.76 9.97 9.84 9.58 9.09 9.09 8.93 7.51 6.50 6.04 6.02 5.99 5.76 5.73 5.72 4.89 4.74 4.67 4.66 4.57 4.56 4.34 4.29 4.15 4.11 4.00 4.00 3.43 3.39 3.25 3.20 2.97 2.46 1.39 1.29 1.16 1.10 1.09 1.08 1.05 0.95 0.91 0.91 -1.98 -5.31 -5.51 -5.67 -6.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Spain Slovenia Faroe Islands Greece Malta Isle of Man Czech Republic Latvia Croatia Monaco Andorra Iceland Vatican City France Italy Netherlands Norway the United Kingdom Estonia Sweden Belarus Slovakia Russia Lithuania Finland Germany Austria San Marino Guernsey Jersey Switzerland Portugal Cyprus Liechtenstein Luxembourg Belgium Denmark Hungary Ukraine Gibraltar Albania Georgia Poland Moldova Kazakhstan Bulgaria Ireland Serbia & Montenegro Macedonia Bosnia & Herzegovina Romania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.5 3.5.1

69

FINANCIAL RETURNS IN BULGARIA: PROFITABILITY RATIOS Overview

In this chapter we consider additional financial ratios estimated for firms involved in steam, gas and hydraulic turbines and turbine generator set units operating in Bulgaria benchmarked against global averages. The chapter begins by defining relevant terms. Estimates are then presented for the proto-typical firm operating in Bulgaria compared to average global benchmarks. For ratios where there are large deviations between the average firm in Bulgaria and the benchmarks, graphics are provided. Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key ratios are highlighted across countries in the comparison group.

3.5.2

Ratios – Definitions of Terms

The following definitions are provided for those less familiar with financial ratio analysis. As this chapter deals with the global benchmarking of ratios, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accounts Receivables Days. The number of days' receivable sales generally correlates to the amount of the accounts receivables to the average daily sales on account. Accounts receivables days is often determined by dividing the gross receivables by (net sales/365).

•

Cash Earnings Return On Equity (%). Cash earnings return on equity generally measures the return of revenues to the shareholders. This ratio is generally calculated by dividing (net income before nonrecurring items minus preferred dividends) by the average common equity.

•

Cash Flow. Cash flow is generally defined as being equal to the company's net income plus the charge-off amounts for depreciation, depletion, amortization, extraordinary charges to reserves. These are bookkeeping deductions which are not paid out as cash.

•

Current Ratio. The current ratio is generally defined as a ratio of liquidity measuring the ability of a business to pay its current obligations when due. The current ratio is generally calculated by dividing total current assets by total current liabilities. Managers and lenders often want the current ratio to be 2.00 or greater. This ratio is often seen as an indication of short-term debt-paying ability. The higher the ratio, the more liquid the company.

•

Fixed Charge Coverage Ratio. The fixed charge coverage ratio is generally seen as an indication of the company's ability to cover its fixed charges. This ratio is typically determined by dividing recurring earnings excluding interest expense, tax expense, equity earnings, and minority earnings plus interest from rentals by interest expense including capitalized interest and interest from rentals.

•

Gross Profit Margin (%). The gross profit margin is typically defined to equals the difference, in percent, between net sales revenue and the cost of goods sold.

•

Inventories (# of Days) Held. Inventory days held is generally determined by dividing the ending inventory by (the cost of goods held/365). The number of days held results in the average daily cost of goods held.

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70

•

Inventory Turnover (%). Inventory turnover is used as a measure of the balance of inventory. It generally compares the amount of inventory with the total sales for the year. The ratio can reflect both on the quality of the inventory and the efficiency of management. Typically, the higher the turnover rate, the greater the likelihood that profits would be larger and less working capital bound up in inventory.

•

Net Margin (%). The net margin is the ratio of net income dollars generated by each dollar of sales.

•

Operating Profit Margin (%). Operating profit margin percent is the ratio of operating profit to net sales. Operating profit (loss) is income or loss before taxes calculated by the difference between total revenues and total expense disregarding the effects of any extraordinary transactions.

•

Quick Ratio. The quick ratio, also commonly known as the “acid test ratio”, is a refined current ratio and is often seen as a more conservative measure of liquidity. The quick ratio is generally determined by dividing cash and equivalents plus trade receivables by total current liabilities. The ratio shows the degree to which a company's current liabilities can be covered by the most liquid current assets. Financial management texts generally conclude that any value of less than 1 to 1 implies a reciprocal dependency on inventory or other current assets to liquidate short-term debt.

•

Reinvestment Rate - Total (%). The reinvestment rate is typically defined as the rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.

•

Return on Assets (%). Return on assets is generally used to measure a company's ability to use assets to create profit.

•

Return on Equity - Total (%). The return on total equity ratio is often seen to reflect the profitability of the company's operations after income taxes. Return on equity is often considered to be a good measure of the company's profitability. Tax laws and tax loss carryovers can affect the net income and therefore can also affect the return on equity.

•

Return on Invested Capital (%). The ratio of return on invested capital is typically defined as an evaluation of earnings performance without regard to the method of financing. This ratio measures the earnings on investment and is an indication of how well the company utilizes its asset base. Return on investment is a type of return on capital, therefore this ratio can be an indication of the company’s ability to reward investors who provide long-term funds and to attract future investors.

•

Working Capital. Net working capital equals the difference between total current assets and total current liabilities. Working capital often reflects a company's ability to expand volume and meet obligations. Since growth is usually one goal, the amount of working capital on this year's balance sheet should be greater than that of the previous year's. This is an efficiency, or turnover, ratio which benchmarks the rate at which current assets less current liabilities are used by the company in making sales. A low ratio can indicate a less profitable use of working capital in making sales. On the other hand, a very high ratio can indicate the company is wasting current assets which could be more efficiently deployed in production and in increasing sales and profits; or that the company my be undercapitalized, and thus vulnerable to liquidity problems in a period of weak business conditions.

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Financial Indicators

3.5.3

71

Ratio Structure: Outlook

Using the methodology described in the introduction, the following table summarizes ratio structure benchmarks for firms involved in steam, gas and hydraulic turbines and turbine generator set units in Bulgaria. All figures are current-year projections for companies operating in Bulgaria based on latest financial results available. Ratios Bulgaria Europe World Avg.

_________________________________________________________________________________________________________

Profitability Return on Equity - Total (%) Reinvestment Rate - Total (%) Return on Assets (%) Return on Invested Capital (%) Cash Earnings Return On Equity (%) Cash Flow % Sales Cost Goods Sold / Sales (%) Gross Profit Margin (%) Selling, General & Administrative Expense/Net Sales (%) Operating Profit Margin (%) Operating Inc / Total Capital (%) Pretax Margin (%) Net Margin (%) Total Asset Turnover (X) th USD Asset Utilization Inventory Turnover (%) Net Sales % Working Capital Capital Expenditure % Total Assets Capital Expenditure % Total Sales Leverage Total Debt % Total Capital Long Term Debt % Total Capital Equity % Total Capital Total Debt % Total Assets Common Equity % Total Assets Total Capital % Assets Fixed Charge Coverage Ratio Fixed Assets % Common Equity Working Capital % Total Capital Liquidity Quick Ratio Current Ratio Cash & Equivalents % Total Current Assets Receivables % Total Current Assets Inventories % Total Current Assets Accounts Receivables Days Inventories (# of Days) Held

1.56 1.56 1.52 2.01 13.48 7.86 55.77 8.83 7.35 1.50 2.28 0.91 0.91 0.64

8.41 0.54 5.54 8.99 19.12 7.04 70.09 18.16 12.56 5.46 11.46 4.14 2.62 1.00

11.23 4.31 7.52 11.23 13.86 8.76 69.36 16.64 8.76 6.55 13.01 6.00 4.43 0.97

3.60 18.08 5.67 6.23

5.77 7.78 6.00 8.77

5.42 0.95 4.74 7.07

23.77 10.95 59.68 19.59 38.62 45.71 1.24 78.56 3.88

31.57 17.99 72.70 21.96 41.37 52.70 16.50 67.92 36.06

23.33 11.25 79.34 16.58 46.61 54.37 61.22 67.16 33.69

0.47 0.78 8.19 34.67 27.77 57.67 49.87

1.13 1.67 14.55 47.48 29.19 108.30 80.22

1.20 1.75 18.14 44.00 27.67 110.57 99.11

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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2007 Icon Group International, Inc.

Financial Indicators

3.5.4

72

Large Variances: Ratios

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large ratio structure gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Return on Equity - Total (%) 15

11.23 8.41

10 5

1.56

0 -5 -9.67 Gap

-10 Bulgaria

Europe

World Average

Gap: Cost Goods Sold / Sales (%) 70.09

80 60

69.36

55.77

40 20 0 -13.59

-20 Bulgaria

Europe

World Average

Gap

Gap: Operating Inc / Total Capital (%) 15

11.46

13.01

10 5

2.28

0 -5 -10

-10.73

-15 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

73

Gap: Net Sales % Working Capital 20

18.08

17.13

15 10

7.78

5 0.95 0 Bulgaria

Europe

World Average

Gap

Gap: Equity % Total Capital 72.7

80

79.34

59.68 60 40 20 0 -19.66 Gap

-20 Bulgaria

Europe

World Average

Gap: Fixed Charge Coverage Ratio 100

61.22

50

16.5

1.24 0 -50

-59.98

-100 Bulgaria

Europe

World Average

Gap

Gap: Fixed Assets % Common Equity 80

78.56 67.92

67.16

60 40 11.4

20 0 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

74

Gap: Working Capital % Total Capital 36.06

40

33.69

20 3.88 0 -20 -29.81 -40 Bulgaria

Europe

World Average

Gap

Gap: Cash & Equivalents % Total Current Assets 18.14

20

14.55

15 10

8.19

5 0 -5 -9.95 Gap

-10 Bulgaria

Europe

World Average

Gap: Accounts Receivables Days 150 100

108.3

110.57

57.67

50 0 -50

-52.9

-100 Bulgaria

Europe

World Average

Gap

Gap: Inventories (# of Days) Held 99.11 100

80.22 49.87

50 0 -50 Bulgaria

www.icongrouponline.com

Europe

World Average

-49.24 Gap

2007 Icon Group International, Inc.

Financial Indicators

3.5.5

75

Key Percentiles and Rankings

We now consider the distribution of financial ratios for steam, gas and hydraulic turbines and turbine generator set units using ranks and percentiles. What percent of countries have a value lower or higher than Bulgaria (what is the ratio's rank or percentile)? The table below answers this question with respect to financial ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key financial ratios are highlighted in additional tables. Ratios

Bulgaria

Rank of Total

Percentile

1.56 1.56 1.52 2.01 13.48 7.86 55.77 8.83 7.35 1.50 2.28 0.91 0.91 0.64

46 of 54 43 of 54 50 of 54 50 of 54 36 of 54 26 of 54 51 of 53 48 of 53 41 of 47 47 of 54 52 of 54 49 of 54 44 of 54 50 of 54

14.81 20.37 7.41 7.41 33.33 51.85 3.77 9.43 12.77 12.96 3.70 9.26 18.52 7.41

3.60 18.08 5.67 6.23

47 of 54 3 of 54 20 of 54 23 of 54

12.96 94.44 62.96 57.41

23.77 10.95 59.68 19.59 38.62 45.71 1.24 78.56 3.88

35 of 54 35 of 49 49 of 54 27 of 54 40 of 54 47 of 54 49 of 54 17 of 54 52 of 54

35.19 28.57 9.26 50.00 25.93 12.96 9.26 68.52 3.70

0.47 0.78 8.19 34.67 27.77 57.67 49.87

52 of 54 54 of 54 44 of 54 47 of 54 30 of 54 47 of 54 47 of 54

3.70 0.00 18.52 12.96 44.44 12.96 12.96

_________________________________________________________________________________________________________

Profitability Return on Equity - Total (%) Reinvestment Rate - Total (%) Return on Assets (%) Return on Invested Capital (%) Cash Earnings Return On Equity (%) Cash Flow % Sales Cost Goods Sold / Sales (%) Gross Profit Margin (%) Selling, General & Administrative Expense/Net Sales (%) Operating Profit Margin (%) Operating Inc / Total Capital (%) Pretax Margin (%) Net Margin (%) Total Asset Turnover (X) th USD Asset Utilization Inventory Turnover (%) Net Sales % Working Capital Capital Expenditure % Total Assets Capital Expenditure % Total Sales Leverage Total Debt % Total Capital Long Term Debt % Total Capital Equity % Total Capital Total Debt % Total Assets Common Equity % Total Assets Total Capital % Assets Fixed Charge Coverage Ratio Fixed Assets % Common Equity Working Capital % Total Capital Liquidity Quick Ratio Current Ratio Cash & Equivalents % Total Current Assets Receivables % Total Current Assets Inventories % Total Current Assets Accounts Receivables Days Inventories (# of Days) Held

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

76

Gross Profit Margin (%) Countries

Value

Rank

Percentile

USA Turkey Italy Mexico Israel Ireland the United Kingdom Hong Kong Sweden Netherlands Malaysia Japan Peru Germany Thailand Switzerland South Africa China Canada Brazil Greece Singapore Luxembourg Chile Finland Australia Austria Norway Indonesia Czech Republic Spain South Korea Argentina Russia France India Hungary Denmark Poland Portugal Taiwan Belgium New Zealand Philippines

32.95 29.28 29.27 29.20 28.66 28.43 27.60 27.47 26.24 25.80 25.29 24.37 24.36 22.73 22.57 22.47 21.38 21.33 21.30 20.35 19.74 19.63 19.43 19.37 19.31 19.19 19.14 18.87 17.67 17.57 17.29 16.48 16.37 14.85 13.40 12.57 12.50 10.84 10.22 10.08 9.82 8.31 7.64 2.42

1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30 31 32 34 36 37 39 40 42 43 44 45 46 47 48 50 51

98.08 96.15 94.23 92.31 90.38 88.46 86.54 84.62 80.77 78.85 76.92 75.00 73.08 71.15 69.23 67.31 65.38 63.46 61.54 59.62 57.69 55.77 53.85 51.92 50.00 48.08 46.15 42.31 40.38 38.46 34.62 30.77 28.85 25.00 23.08 19.23 17.31 15.38 13.46 11.54 9.62 7.69 3.85 1.92

Region

_________________________________________________________________________________________________________

North America the Middle East Europe Latin America the Middle East Europe Europe Asia Europe Europe Asia Asia Latin America Europe Asia Europe Africa Asia North America Latin America Europe Asia Europe Latin America Europe Oceana Europe Europe Asia Europe Europe Asia Latin America Europe Europe Asia Europe Europe Europe Europe Asia Europe Oceana Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

77

Gross Profit Margin (%) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

Iceland Vatican City Italy Ireland Romania the United Kingdom Faroe Islands Sweden Netherlands Bosnia & Herzegovina Macedonia Serbia & Montenegro Germany Switzerland Albania Liechtenstein Greece Luxembourg Finland Austria Monaco San Marino Norway Guernsey Jersey Malta Isle of Man Czech Republic Spain Latvia Croatia Slovenia Estonia Belarus Slovakia Russia Lithuania France Hungary Ukraine Denmark Gibraltar Georgia Poland Portugal Cyprus Moldova Kazakhstan Bulgaria Belgium Andorra

33.29 29.51 29.27 28.43 27.82 27.60 26.34 26.24 25.80 25.53 24.81 23.93 22.73 22.47 21.27 20.97 19.74 19.43 19.31 19.14 19.03 18.96 18.87 18.49 18.49 18.29 18.05 17.57 17.29 16.68 16.67 16.23 15.89 15.16 15.13 14.85 14.82 13.40 12.50 11.24 10.84 10.68 10.52 10.22 10.08 9.65 9.19 8.84 8.83 8.31 7.92

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

78

Pretax Margin (%) Countries

Value

Rank

Percentile

Brazil Chile Spain Hong Kong Greece India Czech Republic Malaysia Singapore Indonesia Argentina South Africa New Zealand Canada USA Thailand France Italy Netherlands Norway the United Kingdom Pakistan South Korea China Sweden Russia Finland Germany Austria Switzerland Portugal Taiwan Luxembourg Belgium Japan Philippines Denmark Australia Hungary Peru Poland Ireland Israel Mexico Turkey

15.44 14.69 13.06 11.91 10.76 9.67 9.58 9.47 9.21 9.11 8.92 7.87 7.25 6.56 6.43 6.27 6.02 5.99 5.76 5.73 5.72 5.45 5.07 5.04 4.74 4.57 4.34 4.29 4.15 3.43 3.39 3.35 2.97 2.46 2.14 1.83 1.39 1.30 1.29 1.25 1.05 -1.98 -1.99 -6.48 -6.50

1 2 3 4 5 6 7 8 9 10 11 14 15 16 18 19 20 21 22 23 24 25 27 28 30 32 33 34 35 36 37 38 39 40 41 42 44 45 46 47 48 49 50 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 73.58 71.70 69.81 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 49.06 47.17 43.40 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 11.32 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Latin America Latin America Europe Asia Europe Asia Europe Asia Asia Asia Latin America Africa Oceana North America North America Asia Europe Europe Europe Europe Europe the Middle East Asia Asia Europe Europe Europe Europe Europe Europe Europe Asia Europe Europe Asia Asia Europe Oceana Europe Latin America Europe Europe the Middle East Latin America the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

79

Pretax Margin (%) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

Spain Slovenia Faroe Islands Greece Malta Isle of Man Czech Republic Latvia Croatia Monaco Andorra Iceland Vatican City France Italy Netherlands Norway the United Kingdom Estonia Sweden Belarus Slovakia Russia Lithuania Finland Germany Austria San Marino Guernsey Jersey Switzerland Portugal Cyprus Liechtenstein Luxembourg Belgium Denmark Hungary Ukraine Gibraltar Albania Georgia Poland Moldova Kazakhstan Bulgaria Ireland Serbia & Montenegro Macedonia Bosnia & Herzegovina Romania

13.06 12.26 11.42 10.76 9.97 9.84 9.58 9.09 9.09 8.93 7.51 6.50 6.04 6.02 5.99 5.76 5.73 5.72 4.89 4.74 4.67 4.66 4.57 4.56 4.34 4.29 4.15 4.11 4.00 4.00 3.43 3.39 3.25 3.20 2.97 2.46 1.39 1.29 1.16 1.10 1.09 1.08 1.05 0.95 0.91 0.91 -1.98 -5.31 -5.51 -5.67 -6.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

80

Quick Ratio Countries

Value

Rank

Percentile

Australia Hong Kong Malaysia Israel Ireland Indonesia Canada USA Singapore Japan Philippines South Korea Greece Germany Switzerland Norway France Russia Czech Republic India New Zealand Thailand Sweden Peru Finland Argentina Luxembourg Spain the United Kingdom Italy China Netherlands Denmark Portugal South Africa Belgium Turkey Mexico Austria Taiwan Pakistan Hungary Poland Brazil Chile

12.75 3.86 3.62 2.46 2.44 2.25 2.22 2.17 1.59 1.59 1.55 1.41 1.39 1.36 1.33 1.32 1.29 1.27 1.23 1.22 1.22 1.22 1.19 1.18 1.15 1.15 1.15 1.09 1.06 1.05 1.05 1.04 1.01 0.98 0.97 0.95 0.94 0.93 0.92 0.87 0.81 0.67 0.55 0.44 0.41

1 2 3 4 5 6 7 8 11 12 13 14 15 16 17 18 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 43 44 45 46 48 49 51 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 28.30 26.42 24.53 22.64 18.87 16.98 15.09 13.21 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Oceana Asia Asia the Middle East Europe Asia North America North America Asia Asia Asia Asia Europe Europe Europe Europe Europe Europe Europe Asia Oceana Asia Europe Latin America Europe Latin America Europe Europe Europe Europe Asia Europe Europe Europe Africa Europe the Middle East Latin America Europe Asia the Middle East Europe Europe Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

81

Quick Ratio (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

3.70 2.44 2.19 1.54 1.39 1.36 1.36 1.33 1.32 1.30 1.30 1.29 1.29 1.27 1.27 1.27 1.27 1.24 1.23 1.19 1.17 1.17 1.15 1.15 1.09 1.06 1.06 1.05 1.04 1.03 1.02 1.01 0.98 0.95 0.94 0.92 0.91 0.89 0.89 0.89 0.82 0.79 0.77 0.67 0.60 0.57 0.56 0.55 0.49 0.47 0.47

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Faroe Islands Ireland Iceland Monaco Greece Estonia Germany Switzerland Norway Belarus Slovakia France Malta Russia Lithuania Isle of Man Andorra Liechtenstein Czech Republic Sweden Latvia Croatia Finland Luxembourg Spain Vatican City the United Kingdom Italy Netherlands Albania Slovenia Denmark Portugal Belgium Cyprus Austria San Marino Jersey Guernsey Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

82

Current Ratio Countries

Value

Rank

Percentile

Australia Hong Kong Malaysia Israel Ireland Indonesia USA Canada Peru New Zealand Germany Japan Singapore Denmark Switzerland Philippines Thailand Sweden France Finland Norway South Korea Greece Luxembourg Netherlands Russia the United Kingdom Italy South Africa India Czech Republic Portugal China Pakistan Argentina Spain Austria Belgium Taiwan Turkey Mexico Hungary Poland Brazil Chile

13.84 4.39 4.29 3.49 3.46 3.24 3.18 3.02 2.88 2.39 2.34 2.22 2.15 2.07 2.04 2.04 1.98 1.97 1.93 1.92 1.91 1.91 1.84 1.77 1.74 1.72 1.70 1.69 1.67 1.67 1.64 1.59 1.58 1.57 1.53 1.43 1.40 1.36 1.28 1.11 1.11 1.10 0.90 0.89 0.85

1 2 3 4 5 6 7 9 10 11 12 14 15 16 17 18 19 20 21 22 23 24 25 26 28 30 31 32 33 34 36 37 38 39 41 43 44 45 46 47 48 49 51 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 83.02 81.13 79.25 77.36 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 47.17 43.40 41.51 39.62 37.74 35.85 32.08 30.19 28.30 26.42 22.64 18.87 16.98 15.09 13.21 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Oceana Asia Asia the Middle East Europe Asia North America North America Latin America Oceana Europe Asia Asia Europe Europe Asia Asia Europe Europe Europe Europe Asia Europe Europe Europe Europe Europe Europe Africa Asia Europe Europe Asia the Middle East Latin America Europe Europe Europe Asia the Middle East Latin America Europe Europe Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

83

Current Ratio (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

4.21 3.46 3.22 2.52 2.48 2.34 2.08 2.07 2.04 1.97 1.93 1.92 1.91 1.91 1.84 1.84 1.77 1.76 1.75 1.74 1.72 1.72 1.71 1.71 1.70 1.69 1.69 1.64 1.59 1.56 1.56 1.52 1.43 1.40 1.38 1.36 1.35 1.35 1.34 1.10 1.06 0.99 0.97 0.94 0.94 0.93 0.91 0.90 0.81 0.78 0.78

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Faroe Islands Ireland Iceland Albania Andorra Germany Monaco Denmark Switzerland Sweden France Finland Norway Liechtenstein Greece Estonia Luxembourg Belarus Slovakia Netherlands Russia Lithuania Vatican City Malta the United Kingdom Italy Isle of Man Czech Republic Portugal Latvia Croatia Cyprus Spain Austria San Marino Belgium Jersey Guernsey Slovenia Hungary Romania Ukraine Bosnia & Herzegovina Macedonia Gibraltar Georgia Serbia & Montenegro Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

84

Inventories % Total Current Assets Countries

Value

Rank

Percentile

Peru Australia Pakistan New Zealand Brazil Denmark Chile South Africa Hungary Germany Netherlands Portugal Italy Finland Sweden Thailand the United Kingdom Poland Austria France Switzerland China USA Israel Belgium Ireland Norway Canada Luxembourg South Korea Hong Kong Singapore Indonesia Japan India Russia Philippines Spain Greece Czech Republic Malaysia Argentina Turkey Mexico Taiwan

56.44 49.39 48.44 48.09 47.35 46.27 45.06 42.47 39.32 39.11 38.32 38.16 37.62 37.10 36.08 34.00 33.43 32.16 32.15 31.98 31.03 30.92 30.79 30.38 30.35 30.13 30.07 27.49 26.84 26.48 26.38 25.75 24.80 24.75 24.10 23.86 23.58 22.32 21.05 18.74 18.69 17.46 15.84 15.80 14.86

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 25 26 27 28 30 31 32 33 35 36 37 39 40 41 43 44 46 47 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 52.83 50.94 49.06 47.17 43.40 41.51 39.62 37.74 33.96 32.08 30.19 26.42 24.53 22.64 18.87 16.98 13.21 11.32 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Latin America Oceana the Middle East Oceana Latin America Europe Latin America Africa Europe Europe Europe Europe Europe Europe Europe Asia Europe Europe Europe Europe Europe Asia North America the Middle East Europe Europe Europe North America Europe Asia Asia Asia Asia Asia Asia Europe Asia Europe Europe Europe Asia Latin America the Middle East Latin America Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

85

Inventories % Total Current Assets (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

Andorra Albania Denmark Hungary Germany Netherlands Portugal Vatican City Italy Finland Cyprus Sweden Ukraine Gibraltar the United Kingdom Georgia Poland Austria France San Marino Iceland Jersey Guernsey Switzerland Belgium Ireland Norway Liechtenstein Moldova Kazakhstan Bulgaria Luxembourg Estonia Faroe Islands Monaco Belarus Slovakia Russia Lithuania Spain Greece Slovenia Malta Isle of Man Czech Republic Latvia Croatia Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro

49.80 49.26 46.27 39.32 39.11 38.32 38.16 37.92 37.62 37.10 36.53 36.08 35.36 33.62 33.43 33.10 32.16 32.15 31.98 31.84 31.11 31.05 31.05 31.03 30.35 30.13 30.07 28.96 28.91 27.82 27.77 26.84 25.52 25.30 24.97 24.36 24.30 23.86 23.80 22.32 21.05 20.96 19.51 19.25 18.74 17.79 17.78 15.05 13.81 13.42 12.95

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

86

Accounts Receivables Days Countries

Value

Rank

Percentile

Turkey Mexico Malaysia China Italy Greece Japan India Spain Israel Ireland Czech Republic France Argentina Portugal Peru Austria South Korea Singapore Netherlands Switzerland Norway Russia Germany Taiwan Denmark Sweden Hungary Hong Kong the United Kingdom Brazil Thailand Canada Finland Luxembourg Chile Philippines USA Belgium Poland Australia Indonesia New Zealand South Africa Pakistan

357.98 357.00 174.24 140.37 139.34 133.01 132.06 129.31 123.36 121.19 120.18 118.41 111.00 110.30 97.52 95.11 93.62 93.59 92.69 92.30 87.80 87.10 84.34 84.28 83.15 82.99 82.85 81.65 80.25 79.96 79.39 79.18 79.10 78.40 75.93 75.53 71.26 70.09 70.01 66.78 65.78 53.09 52.84 50.69 48.79

1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 44 47 48 49 51

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 16.98 11.32 9.43 7.55 3.77

Region

_________________________________________________________________________________________________________

the Middle East Latin America Asia Asia Europe Europe Asia Asia Europe the Middle East Europe Europe Europe Latin America Europe Latin America Europe Asia Asia Europe Europe Europe Europe Europe Asia Europe Europe Europe Asia Europe Latin America Asia North America Europe Europe Latin America Asia North America Europe Europe Oceana Asia Oceana Africa the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

87

Accounts Receivables Days (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Vatican City Italy Greece Spain Malta Isle of Man Ireland Czech Republic Slovenia Latvia Croatia France Portugal Austria Cyprus San Marino Netherlands Guernsey Jersey Estonia Monaco Switzerland Norway Belarus Slovakia Russia Germany Lithuania Albania Denmark Sweden Liechtenstein Hungary the United Kingdom Finland Faroe Islands Luxembourg Ukraine Iceland Belgium Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Andorra

340.13 312.13 303.36 292.63 140.47 139.34 133.01 123.36 123.28 121.66 120.18 118.41 115.80 112.40 112.35 111.00 97.52 93.62 93.35 92.73 92.30 90.41 90.41 90.22 89.88 87.80 87.10 86.11 85.91 84.34 84.28 84.14 83.02 82.99 82.85 81.93 81.65 79.96 78.40 76.95 75.93 73.43 70.80 70.01 69.81 68.74 66.78 60.04 57.78 57.67 54.72

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

88

Inventories (# of Days) Held Countries

Value

Rank

Percentile

Italy China Peru Israel Ireland Thailand Denmark Netherlands Australia Germany Japan Hong Kong Sweden France Brazil USA Malaysia the United Kingdom Chile Turkey Mexico Finland Switzerland Norway Austria South Korea South Africa Luxembourg Singapore Russia Hungary Spain New Zealand Indonesia Portugal India Pakistan Canada Poland Greece Czech Republic Argentina Taiwan Belgium Philippines

200.12 198.98 166.34 146.42 145.21 133.49 114.02 110.88 110.72 109.81 107.97 96.49 95.10 94.96 93.99 93.46 91.97 90.97 89.43 89.04 88.80 85.48 83.67 80.42 79.31 78.82 76.82 72.36 71.18 71.03 70.60 69.83 68.57 68.04 67.74 66.69 66.27 60.38 57.74 55.27 49.21 45.84 45.15 40.74 32.19

1 2 3 4 5 6 7 9 10 11 12 14 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 31 33 34 35 37 38 39 40 41 42 44 45 46 47 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 83.02 81.13 79.25 77.36 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 49.06 47.17 45.28 43.40 41.51 37.74 35.85 33.96 30.19 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 11.32 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Europe Asia Latin America the Middle East Europe Asia Europe Europe Oceana Europe Asia Asia Europe Europe Latin America North America Asia Europe Latin America the Middle East Latin America Europe Europe Europe Europe Asia Africa Europe Asia Europe Europe Europe Oceana Asia Europe Asia the Middle East North America Europe Europe Europe Latin America Asia Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

89

Inventories (# of Days) Held (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value

Rank

Percentile

Vatican City Italy Ireland Albania Denmark Netherlands Germany Sweden France Iceland Faroe Islands the United Kingdom Finland Romania Switzerland Norway Austria San Marino Liechtenstein Bosnia & Herzegovina Guernsey Jersey Estonia Macedonia Serbia & Montenegro Belarus Luxembourg Slovakia Russia Andorra Lithuania Hungary Spain Monaco Portugal Slovenia Cyprus Ukraine Gibraltar Georgia Poland Greece Moldova Malta Isle of Man Kazakhstan Bulgaria Czech Republic Latvia Croatia Belgium

201.74 200.12 145.21 145.20 114.02 110.88 109.81 95.10 94.96 94.42 92.53 90.97 85.48 84.60 83.67 80.42 79.31 78.56 78.08 77.64 76.60 76.60 75.99 75.45 72.79 72.52 72.36 72.36 71.03 71.01 70.86 70.60 69.83 69.02 67.74 65.56 64.84 63.49 60.37 59.44 57.74 55.27 51.92 51.23 50.55 49.96 49.87 49.21 46.71 46.69 40.74

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.6 3.6.1

90

PRODUCTIVITY IN BULGARIA: ASSET-LABOR RATIOS Overview

In this chapter, we consider numerous asset-labor ratios for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria benchmarked against global averages. Productivity and utilization ratios are presented for companies oprating in Bulgaria and the average global benchmarks for steam, gas and hydraulic turbines and turbine generator set units. For ratios where there are large deviations between Bulgaria and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain asset-labor ratios are highlighted across countries in the comparison group. In the case of asset-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. We then report the larger asset-labor ratio gaps for steam, gas and hydraulic turbines and turbine generator set units that Bulgaria has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

3.6.2

Asset to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria based on latest financial results available. Labor-asset Ratios ($k/employee) Bulgaria Europe World Avg. _________________________________________________________________________________________________________

Cash & Short Term Investments Receivables (Net) Total Inventories Current Assets - Total Property Plant and Equipment - Net Other Assets Intangible Other Assets Total Assets

1.73 7.35 5.88 14.96 23.42 0.13 0.13 38.52

19.81 80.12 37.20 140.04 45.86 11.38 8.54 244.38

21.26 46.74 23.18 93.95 31.94 6.15 3.80 162.19

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.6.3

91

Asset to Labor: International Gaps

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large labor-asset gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cash & Short Term Investments ($k/employee) 30 19.81

21.26

20 10

1.73

0 -10 -19.53 Gap

-20 Bulgaria

Europe

World Average

Gap: Receivables (Net) ($k/employee) 100 80 60 40 20 0 -20 -40

80.12 46.74 7.35

Bulgaria

Europe

-39.39 Gap

World Average

Gap: Total Inventories ($k/employee) 37.2

40 30

23.18

20 10

5.88

0 -10 -17.3

-20 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

92

Gap: Current Assets - Total ($k/employee) 140.04

150

93.95

100 50

14.96

0 -50 -78.99

-100 Bulgaria

Europe

World Average

Gap

Gap: Property Plant and Equipment - Net ($k/employee) 45.86

50 40 30

31.94 23.42

20 10 0 -8.52 Gap

-10 Bulgaria

Europe

World Average

Gap: Other Assets ($k/employee) 15

11.38

10 5

6.15 0.13

0 -5

-6.02

-10 Bulgaria

Europe

World Average

Gap

Gap: Intangible Other Assets ($k/employee) 8.54

10

3.8

5 0.13 0

-3.67

-5 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

93

Gap: Total Assets ($k/employee) 300

244.38 162.19

200 100

38.52

0 -100

-123.67

-200 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

3.6.4

94

Key Percentiles and Rankings

We now consider the distribution of asset-labor ratios using ranks and percentiles across . What percent of countries have a productivity indicator lower or higher than Bulgaria (what is the indicator's rank or percentile)? The table below answers this question with respect to asset-labor structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key asset-labor ratios are highlighted in additional tables. Asset Structure ($k/employee)

Bulgaria

Rank of Total

Percentile

1.73 7.35 5.88 14.96 23.42 0.13 0.13 38.52

50 of 54 46 of 54 50 of 54 52 of 54 36 of 54 52 of 54 41 of 44 49 of 54

7.41 14.81 7.41 3.70 33.33 3.70 6.82 9.26

_________________________________________________________________________________________________________

Cash & Short Term Investments Receivables (Net) Total Inventories Current Assets - Total Property Plant and Equipment - Net Other Assets Intangible Other Assets Total Assets

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

95

Cash & Short Term Investments Countries

Value ($K/employee)

Rank

Percentile

75.14 70.27 66.82 65.96 59.44 53.76 51.33 50.91 45.09 41.62 31.76 30.89 25.36 25.22 23.91 23.54 23.26 22.10 21.82 21.32 21.29 20.61 19.83 18.87 15.55 14.68 13.42 12.33 10.82 10.73 8.87 8.08 7.34 6.19 6.17 5.53 3.39 3.31 2.47 2.46 2.01 1.75 1.06 0.46 0.44

1 2 3 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 29 30 31 32 34 35 37 38 39 41 42 43 46 47 48 49 51 52 53

98.11 96.23 94.34 92.45 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 45.28 43.40 41.51 39.62 35.85 33.96 30.19 28.30 26.42 22.64 20.75 18.87 13.21 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Taiwan Australia USA South Korea Russia Japan Israel Ireland Norway China Canada Hong Kong Singapore France Greece Italy Germany Finland Switzerland South Africa Czech Republic the United Kingdom Argentina Luxembourg Spain Belgium Malaysia Sweden Indonesia Austria Pakistan Denmark Netherlands Turkey Mexico India Peru Thailand New Zealand Hungary Poland Philippines Portugal Brazil Chile

Asia Oceana North America Asia Europe Asia the Middle East Europe Europe Asia North America Asia Asia Europe Europe Europe Europe Europe Europe Africa Europe Europe Latin America Europe Europe Europe Asia Europe Asia Europe the Middle East Europe Europe the Middle East Latin America Asia Latin America Asia Oceana Europe Europe Asia Europe Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

96

Cash & Short Term Investments (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

67.50 63.59 60.69 60.55 59.44 59.30 50.91 45.09 29.62 25.22 24.59 23.91 23.73 23.54 23.26 22.16 22.10 21.87 21.82 21.29 20.61 20.37 20.21 20.20 18.87 15.55 14.68 14.60 12.33 10.73 10.63 10.36 10.36 8.08 7.34 5.88 5.39 5.24 5.06 2.96 2.56 2.46 2.21 2.10 2.07 2.01 1.81 1.74 1.73 1.06 1.01

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Iceland Estonia Belarus Slovakia Russia Lithuania Ireland Norway Faroe Islands France Monaco Greece Vatican City Italy Germany Malta Finland Isle of Man Switzerland Czech Republic the United Kingdom Liechtenstein Latvia Croatia Luxembourg Spain Belgium Slovenia Sweden Austria San Marino Guernsey Jersey Denmark Netherlands Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Albania Andorra Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Portugal Cyprus

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

97

Receivables (Net) Countries

Value ($K/employee)

Rank

Percentile

468.24 466.96 178.16 125.28 102.56 99.19 92.42 90.46 77.51 69.00 64.27 63.99 61.36 59.42 57.06 53.96 53.58 53.51 49.54 45.46 44.90 41.38 41.25 40.51 39.32 39.14 38.94 31.36 31.27 30.96 28.85 27.96 26.99 26.67 23.89 23.42 21.95 17.22 15.96 15.18 10.40 8.53 8.50 7.31 5.60

1 2 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 50

98.11 96.23 92.45 90.57 88.68 86.79 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 5.66

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan Portugal South Korea Italy Russia Japan Greece Czech Republic Argentina France Norway Germany Netherlands Israel Spain Ireland Denmark Switzerland Austria USA Sweden Malaysia Luxembourg Finland Belgium South Africa the United Kingdom Singapore Hong Kong Canada Peru China Pakistan India New Zealand Australia Brazil Chile Hungary Thailand Poland Indonesia Philippines

the Middle East Latin America Asia Europe Asia Europe Europe Asia Europe Europe Latin America Europe Europe Europe Europe the Middle East Europe Europe Europe Europe Europe North America Europe Asia Europe Europe Europe Africa Europe Asia Asia North America Latin America Asia the Middle East Asia Oceana Oceana Latin America Latin America Europe Asia Europe Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

98

Receivables (Net) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

444.89 408.27 396.79 382.76 125.28 119.92 99.99 99.19 98.87 94.37 94.15 92.42 92.21 77.51 71.83 70.89 69.00 65.49 65.46 63.99 61.36 59.42 57.06 53.58 53.51 50.30 49.54 45.46 44.90 44.47 43.36 43.36 42.42 41.80 41.25 39.32 39.14 38.94 31.27 30.02 27.66 23.56 22.73 10.40 9.35 8.89 8.75 8.50 7.65 7.36 7.35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Portugal Cyprus Vatican City Italy Estonia Belarus Slovakia Russia Lithuania Greece Malta Isle of Man Czech Republic Latvia Croatia France Norway Germany Netherlands Spain Ireland Slovenia Denmark Switzerland Austria San Marino Guernsey Jersey Liechtenstein Iceland Sweden Luxembourg Finland Belgium the United Kingdom Monaco Faroe Islands Albania Andorra Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

99

Total Inventories Countries

Value ($K/employee)

Rank

Percentile

89.29 89.04 80.46 78.14 77.12 69.50 63.82 53.05 49.54 45.66 41.73 41.73 39.46 39.14 38.80 38.38 36.62 34.00 31.28 30.97 30.78 30.56 27.27 27.05 26.11 25.85 23.91 23.43 23.25 22.96 21.66 20.54 20.40 19.71 18.28 15.90 15.35 15.13 10.77 8.33 8.03 7.95 6.81 6.20 2.28

1 2 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 39 40 41 42 43 44 45 46 49 52

98.11 96.23 92.45 90.57 88.68 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 7.55 1.89

Region

_________________________________________________________________________________________________________

Turkey Mexico Italy Portugal South Korea Russia Taiwan Denmark Japan France Netherlands Germany Israel Ireland Norway South Africa Peru Finland Switzerland Pakistan Sweden USA Austria Luxembourg Greece Australia Belgium China Czech Republic New Zealand Argentina the United Kingdom Singapore Canada Spain Brazil Hong Kong Chile Malaysia Hungary Thailand India Poland Indonesia Philippines

the Middle East Latin America Europe Europe Asia Europe Asia Europe Asia Europe Europe Europe the Middle East Europe Europe Africa Latin America Europe Europe the Middle East Europe North America Europe Europe Europe Oceana Europe Asia Europe Oceana Latin America Europe Asia North America Europe Latin America Asia Latin America Asia Europe Asia Asia Europe Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

100

Total Inventories (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

84.84 81.11 80.46 78.14 77.85 75.66 74.80 74.35 72.99 70.96 70.80 69.50 69.33 53.05 45.66 41.73 41.73 39.14 38.80 34.00 31.96 31.28 30.88 30.78 29.19 27.27 27.05 27.01 26.33 26.33 26.11 24.20 23.91 23.88 23.78 23.25 22.07 22.06 20.54 19.78 18.28 17.16 14.72 8.33 7.49 7.12 7.01 6.81 6.12 5.89 5.88

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Vatican City Italy Portugal Bosnia & Herzegovina Macedonia Cyprus Estonia Serbia & Montenegro Belarus Slovakia Russia Lithuania Denmark France Netherlands Germany Ireland Norway Finland Albania Switzerland Iceland Sweden Liechtenstein Austria Luxembourg San Marino Jersey Guernsey Greece Malta Belgium Isle of Man Andorra Czech Republic Latvia Croatia the United Kingdom Monaco Spain Slovenia Faroe Islands Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

101

Current Assets - Total Countries

Value ($K/employee)

Rank

Percentile

563.71 562.18 355.71 251.30 226.46 207.87 204.76 203.78 149.02 147.79 147.63 147.02 137.06 136.69 131.62 121.69 116.22 113.35 109.84 107.82 103.26 98.25 95.65 91.09 89.30 87.67 86.83 84.74 84.64 77.72 77.53 75.30 75.23 67.61 64.85 63.92 47.75 37.98 33.59 31.96 25.65 21.87 21.18 17.33 9.67

1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 40 41 42 43 44 46 47 50 52

98.11 96.23 92.45 90.57 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 22.64 20.75 18.87 16.98 13.21 11.32 5.66 1.89

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan South Korea Russia Italy Portugal Japan Israel Ireland USA Norway France Greece Germany Czech Republic Denmark Argentina Australia Netherlands Switzerland Finland China South Africa Luxembourg Spain Sweden Austria Canada Singapore Belgium the United Kingdom Hong Kong Peru Malaysia Pakistan New Zealand India Brazil Chile Indonesia Thailand Hungary Poland Philippines

the Middle East Latin America Asia Asia Europe Europe Europe Asia the Middle East Europe North America Europe Europe Europe Europe Europe Europe Latin America Oceana Europe Europe Europe Asia Africa Europe Europe Europe Europe North America Asia Europe Europe Asia Latin America Asia the Middle East Oceana Asia Latin America Latin America Asia Asia Europe Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

102

Current Assets - Total (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

535.60 491.52 477.70 460.80 242.26 231.22 230.69 226.46 225.93 209.55 207.87 204.76 196.00 149.14 147.79 147.02 137.06 136.69 131.62 126.69 125.02 121.69 116.22 115.50 115.45 107.82 103.26 98.25 96.36 89.30 87.67 86.83 84.74 83.94 82.31 81.84 81.84 77.53 75.37 75.30 72.14 59.02 49.45 21.18 19.05 18.11 17.83 17.33 15.58 14.99 14.96

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Estonia Belarus Slovakia Russia Lithuania Vatican City Italy Portugal Cyprus Iceland Ireland Norway France Greece Germany Malta Isle of Man Czech Republic Denmark Latvia Croatia Netherlands Switzerland Finland Liechtenstein Luxembourg Spain Sweden Austria San Marino Slovenia Guernsey Jersey Belgium Monaco the United Kingdom Faroe Islands Albania Andorra Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

103

Property Plant and Equipment - Net Countries

Value ($K/employee)

Rank

Percentile

149.59 128.39 115.70 81.21 70.98 70.79 66.34 59.06 55.39 55.01 54.74 47.34 44.97 43.98 41.51 40.65 40.57 38.07 37.53 35.70 35.49 34.02 33.99 33.16 33.00 31.76 29.73 27.12 26.54 26.10 25.25 24.71 22.51 20.39 18.60 16.22 14.54 14.19 13.41 13.30 11.91 10.38 9.13 6.58 6.27

1 2 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 31 32 33 34 35 36 37 38 40 42 43 44 46 47 48 50 51 52

98.11 96.23 92.45 90.57 88.68 86.79 84.91 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 20.75 18.87 16.98 13.21 11.32 9.43 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Taiwan South Korea Russia Japan Turkey Mexico Greece Czech Republic Portugal Argentina Switzerland Luxembourg China Germany Australia Malaysia Netherlands Austria USA Canada Finland Denmark Sweden Hungary Norway Italy Singapore Poland Brazil the United Kingdom Chile New Zealand Peru Thailand France Spain Hong Kong Indonesia Israel Ireland Belgium India Pakistan Philippines South Africa

Asia Asia Europe Asia the Middle East Latin America Europe Europe Europe Latin America Europe Europe Asia Europe Oceana Asia Europe Europe North America North America Europe Europe Europe Europe Europe Europe Asia Europe Latin America Europe Latin America Oceana Latin America Asia Europe Europe Asia Asia the Middle East Europe Europe Asia the Middle East Asia Africa

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

104

Property Plant and Equipment - Net (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

123.77 118.13 117.86 115.70 115.43 67.44 66.34 61.89 61.48 60.68 60.15 59.06 58.02 56.06 56.03 55.39 54.74 53.02 51.08 47.34 43.98 40.57 38.07 37.92 37.71 36.76 36.76 35.49 34.02 33.99 33.16 33.00 32.02 31.76 29.82 28.83 28.36 27.92 27.12 26.10 25.59 24.39 23.47 23.42 19.65 18.60 16.22 15.23 13.94 13.30 11.91

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Estonia Belarus Slovakia Russia Lithuania Romania Greece Bosnia & Herzegovina Malta Isle of Man Macedonia Czech Republic Serbia & Montenegro Latvia Croatia Portugal Switzerland Cyprus Liechtenstein Luxembourg Germany Netherlands Austria Iceland San Marino Jersey Guernsey Finland Denmark Sweden Hungary Norway Vatican City Italy Ukraine Monaco Gibraltar Georgia Poland the United Kingdom Andorra Moldova Kazakhstan Bulgaria Albania France Spain Slovenia Faroe Islands Ireland Belgium

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

105

Intangible Other Assets Countries

Value ($K/employee)

Rank

Percentile

48.49 29.65 29.55 19.59 18.57 18.47 16.88 15.30 15.07 14.60 14.10 13.21 12.49 10.50 8.82 8.76 7.26 6.46 6.02 5.84 5.81 5.80 5.76 5.22 4.27 3.87 3.86 3.77 3.23 2.97 2.83 2.35 0.68 0.57 0.46 0.18 0.15 0.12

1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 27 28 29 30 32 33 34 35 36 37 38 39 40 41

97.67 95.35 93.02 88.37 86.05 83.72 81.40 79.07 76.74 74.42 72.09 69.77 67.44 65.12 62.79 60.47 58.14 55.81 53.49 51.16 48.84 46.51 44.19 39.53 37.21 34.88 32.56 30.23 25.58 23.26 20.93 18.60 16.28 13.95 11.63 9.30 6.98 4.65

Region

_________________________________________________________________________________________________________

Belgium USA Norway France Italy Canada Switzerland Malaysia Sweden Luxembourg Austria Germany Finland Australia Denmark the United Kingdom Greece Czech Republic Argentina New Zealand Israel South Korea Ireland Russia Singapore Turkey Mexico Hong Kong Netherlands Japan Spain China Peru South Africa India Hungary Poland Thailand

Europe North America Europe Europe Europe North America Europe Asia Europe Europe Europe Europe Europe Oceana Europe Europe Europe Europe Latin America Oceana the Middle East Asia Europe Europe Asia the Middle East Latin America Asia Europe Asia Europe Asia Latin America Africa Asia Europe Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

106

Intangible Other Assets (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

48.49 29.96 29.55 19.59 18.72 18.57 16.88 15.75 15.07 14.60 14.10 13.97 13.62 13.62 13.21 12.49 8.82 8.76 7.26 6.73 6.64 6.46 6.13 6.13 6.05 5.76 5.59 5.33 5.32 5.22 5.21 4.14 3.67 3.61 3.37 3.28 3.23 3.16 2.83 2.65 0.59 0.18 0.16 0.16 0.15 0.15 0.13 0.13 0.13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

97.96 95.92 93.88 91.84 89.80 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 63.27 61.22 59.18 57.14 55.10 53.06 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 18.37 16.33 14.29 12.24 10.20 8.16 6.12 4.08 2.04 0.00

_________________________________________________________________________________________________________

Belgium Iceland Norway France Vatican City Italy Switzerland Liechtenstein Sweden Luxembourg Austria San Marino Jersey Guernsey Germany Finland Denmark the United Kingdom Greece Malta Isle of Man Czech Republic Latvia Croatia Andorra Ireland Estonia Belarus Slovakia Russia Lithuania Monaco Romania Faroe Islands Bosnia & Herzegovina Macedonia Netherlands Serbia & Montenegro Spain Slovenia Albania Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.7 3.7.1

107

PRODUCTIVITY IN BULGARIA: LIABILITY-LABOR RATIOS Overview

In this chapter we consider the liability-labor ratios of companies operating in Bulgaria benchmarked against global averages for steam, gas and hydraulic turbines and turbine generator set units. For ratios where there are large deviations between Bulgaria and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of productivity ratios is presented in the form of ranks and percentiles. Certain key liabilitylabor ratios are highlighted for steam, gas and hydraulic turbines and turbine generator set units across countries in the comparison group. Definitions of liability statement terms are given in Chapter 3. In the case of liability-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. I then report the larger liability-labor ratio gaps for steam, gas and hydraulic turbines and turbine generator set units that Bulgaria has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

3.7.2

Liability to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria based on latest financial results available. Labor-liability Ratios ($k/employee) Bulgaria Europe World Avg. _________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Total Liabilities Common Equity Other Appropriated Reserves Unappropriated Reserves Total Liabilities & Shareholders Equity

3.45 6.82 3.32 13.59 3.86 3.86 17.46 21.06 9.59 9.76 38.52

27.47 35.70 30.01 97.10 27.04 26.83 131.49 108.59 10.89 13.79 244.38

17.12 22.43 19.46 63.27 12.60 12.51 78.99 79.02 5.85 11.20 162.19

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.7.3

108

Liability and Equity to Labor: International Gaps

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large labor-liability gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Accounts Payable ($k/employee) 27.47

30

17.12

20 10

3.45

0 -10

-13.67

-20 Bulgaria

Europe

World Average

Gap

Gap: Short Term Debt & Current Portion of Long Term Debt ($k/employee) 35.7

40 30

22.43

20 10

6.82

0 -10

-15.61

-20 Bulgaria

Europe

World Average

Gap

Gap: Other Current Liabilities ($k/employee) 40

30.01

30

19.46

20 10

3.32

0 -10 -16.14

-20 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

109

Gap: Current Liabilities - Total ($k/employee) 97.1

100

63.27 50 13.59 0 -49.68 Gap

-50 Bulgaria

Europe

World Average

Gap: Long Term Debt ($k/employee) 27.04

30 20 10

12.6 3.86

0 -8.74 Gap

-10 Bulgaria

Europe

World Average

Gap: Long Term Debt Excluding Capitalized Leases ($k/employee) 26.83

30 20 10

12.51 3.86

0 -8.65 Gap

-10 Bulgaria

Europe

World Average

Gap: Total Liabilities ($k/employee) 131.49

150

78.99

100 50

17.46

0 -50

-61.53

-100 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

110

Gap: Common Equity ($k/employee) 150

108.59 79.02

100 50

21.06

0 -50

-57.96

-100 Bulgaria

Europe

World Average

Gap

Gap: Other Appropriated Reserves ($k/employee) 10.89

12

9.59

10 8

5.85

6

3.74

4 2 0 Bulgaria

Europe

World Average

Gap

Gap: Unappropriated Reserves ($k/employee) 13.79

15

11.2

9.76 10 5 0

-1.44

-5 Bulgaria

Europe

World Average

Gap

Gap: Total Liabilities & Shareholders Equity ($k/employee) 300

244.38 162.19

200 100

38.52

0 -100

-123.67

-200 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

Financial Indicators

3.7.4

111

Key Percentiles and Rankings

We now consider the distribution of liability-labor ratios using ranks and percentiles across . What percent of countries have a value lower or higher than Bulgaria (what is the indicator's rank or percentile)? The table below answers this question with respect to liability-labor ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key liabilitylabor ratios are highlighted in additional tables. Liability Structure ($k/employee)

Bulgaria

Rank of Total

Percentile

3.45 6.82 3.32 13.59 3.86 3.86 17.46 21.06 9.59 9.76 38.52

46 of 51 38 of 54 47 of 54 46 of 54 41 of 49 41 of 49 47 of 54 50 of 54 20 of 50 17 of 38 49 of 54

9.80 29.63 12.96 14.81 16.33 16.33 12.96 7.41 60.00 55.26 9.26

_________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Total Liabilities Common Equity Other Appropriated Reserves Unappropriated Reserves Total Liabilities & Shareholders Equity

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

112

Accounts Payable Countries

Value ($K/employee)

Rank

Percentile

87.40 87.02 86.79 71.13 57.18 52.99 51.53 41.59 32.27 30.19 25.93 25.15 25.00 23.85 22.39 21.64 21.11 20.86 19.28 18.81 18.61 18.34 16.74 16.67 15.82 15.07 13.03 12.19 11.82 11.64 11.56 11.47 11.24 11.22 10.99 8.68 4.89 4.58 4.36 4.00 3.36 1.00

1 2 3 5 6 7 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 44 47 50

98.00 96.00 94.00 90.00 88.00 86.00 82.00 80.00 78.00 76.00 74.00 72.00 70.00 66.00 64.00 62.00 60.00 58.00 56.00 54.00 52.00 50.00 48.00 46.00 44.00 42.00 40.00 38.00 36.00 34.00 32.00 30.00 28.00 26.00 24.00 22.00 20.00 18.00 16.00 12.00 6.00 0.00

Region

_________________________________________________________________________________________________________

Taiwan Turkey Mexico Italy South Korea Japan Russia Belgium France Norway Denmark Greece Spain Netherlands Czech Republic Sweden Singapore Argentina Switzerland Germany Hong Kong USA Canada Luxembourg Austria the United Kingdom Finland China Brazil New Zealand Israel Ireland Chile India Australia Malaysia Hungary Indonesia Thailand Poland Philippines Peru

Asia the Middle East Latin America Europe Asia Asia Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Asia Latin America Europe Europe Asia North America North America Europe Europe Europe Europe Asia Latin America Oceana the Middle East Europe Latin America Asia Oceana Asia Europe Asia Asia Europe Asia Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

113

Accounts Payable (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

82.68 75.88 73.74 71.71 71.14 71.13 55.12 52.61 52.49 51.53 51.41 41.59 32.27 30.19 25.93 25.15 25.00 23.85 23.47 23.31 23.00 22.39 21.64 21.25 21.24 20.47 19.28 18.81 18.53 17.99 17.84 16.67 15.82 15.67 15.28 15.28 15.07 13.03 12.05 11.47 4.89 4.40 4.18 4.12 4.00 3.59 3.46 3.45 0.87

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

97.96 95.92 93.88 91.84 89.80 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 63.27 61.22 59.18 57.14 55.10 53.06 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 18.37 16.33 14.29 12.24 10.20 8.16 6.12 4.08 2.04 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Vatican City Serbia & Montenegro Italy Estonia Belarus Slovakia Russia Lithuania Belgium France Norway Denmark Greece Spain Netherlands Slovenia Malta Isle of Man Czech Republic Sweden Latvia Croatia Monaco Switzerland Germany Iceland Liechtenstein Faroe Islands Luxembourg Austria San Marino Guernsey Jersey the United Kingdom Finland Andorra Ireland Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Albania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

114

Current Liabilities - Total Countries

Value ($K/employee)

Rank

Percentile

506.75 505.36 226.98 166.02 149.61 141.55 129.00 118.68 87.93 82.29 77.84 73.25 72.19 68.24 65.14 63.90 63.87 61.93 61.10 57.37 57.14 55.81 53.70 51.60 50.72 49.41 48.51 42.51 42.16 40.61 38.86 37.71 37.66 35.84 31.31 30.41 29.23 25.11 21.73 19.95 19.24 15.74 12.06 9.20 4.74

1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 42 43 44 45 46 49 52

98.11 96.23 92.45 90.57 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 7.55 1.89

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan South Korea Russia Italy Portugal Japan Norway Greece France Czech Republic Denmark Argentina China Spain Germany Netherlands Austria Belgium Switzerland South Africa Finland Sweden USA Luxembourg the United Kingdom Israel Ireland Pakistan Singapore Hong Kong Brazil Chile Canada Malaysia Peru Australia India New Zealand Hungary Poland Thailand Indonesia Philippines

the Middle East Latin America Asia Asia Europe Europe Europe Asia Europe Europe Europe Europe Europe Latin America Asia Europe Europe Europe Europe Europe Europe Africa Europe Europe North America Europe Europe the Middle East Europe the Middle East Asia Asia Latin America Latin America North America Asia Latin America Oceana Asia Oceana Europe Europe Asia Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

115

Current Liabilities - Total (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

481.48 441.85 429.42 414.23 160.05 152.76 152.41 149.61 149.26 142.70 141.55 129.00 123.49 87.93 82.29 77.84 76.27 75.26 73.25 72.19 69.53 69.50 63.90 63.87 61.93 61.10 60.52 59.98 59.00 59.00 57.37 57.14 53.70 53.32 51.60 51.24 49.41 48.51 42.16 37.69 36.16 25.52 20.66 19.24 17.31 16.45 16.20 15.74 14.15 13.62 13.59

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Estonia Belarus Slovakia Russia Lithuania Vatican City Italy Portugal Cyprus Norway Greece France Malta Isle of Man Czech Republic Denmark Latvia Croatia Spain Germany Netherlands Austria San Marino Slovenia Jersey Guernsey Belgium Switzerland Finland Liechtenstein Sweden Iceland Luxembourg the United Kingdom Ireland Monaco Faroe Islands Albania Andorra Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

116

Long Term Debt Countries

Value ($K/employee)

Rank

Percentile

131.37 131.02 93.29 51.38 42.58 38.37 32.88 31.75 29.79 27.66 27.47 26.88 26.22 25.89 25.76 25.46 21.50 21.03 18.72 17.44 16.90 16.06 15.56 14.71 14.38 11.39 9.59 8.36 7.00 5.47 5.36 4.50 4.47 4.22 4.19 3.52 3.29 3.26 3.01 2.10 1.07

1 2 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 22 23 24 25 26 27 28 29 30 31 32 34 36 37 38 39 40 41 42 43 44 45 48

97.92 95.83 91.67 89.58 87.50 83.33 81.25 79.17 77.08 75.00 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 54.17 52.08 50.00 47.92 45.83 43.75 41.67 39.58 37.50 35.42 33.33 29.17 25.00 22.92 20.83 18.75 16.67 14.58 12.50 10.42 8.33 6.25 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan Portugal South Korea Russia Belgium Norway Switzerland Netherlands New Zealand USA Japan Sweden Luxembourg Finland Italy Greece Czech Republic Argentina Denmark Austria France Germany Canada Australia the United Kingdom Spain Thailand Hungary South Africa Singapore Poland Israel Ireland Malaysia Hong Kong China India Indonesia Peru

the Middle East Latin America Asia Europe Asia Europe Europe Europe Europe Europe Oceana North America Asia Europe Europe Europe Europe Europe Europe Latin America Europe Europe Europe Europe North America Oceana Europe Europe Asia Europe Africa Asia Europe the Middle East Europe Asia Asia Asia Asia Asia Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

117

Long Term Debt (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

124.82 114.55 111.33 107.39 51.38 49.18 41.05 39.18 39.09 38.37 38.28 32.88 31.75 29.79 28.45 27.80 27.66 27.15 25.89 25.76 25.46 21.67 21.50 21.03 19.49 19.23 18.72 17.77 17.76 16.90 16.06 15.90 15.56 15.51 15.51 14.71 9.59 8.36 7.85 5.47 4.92 4.68 4.60 4.47 4.36 4.19 4.02 3.87 3.86 3.15 0.94

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Portugal Cyprus Estonia Belarus Slovakia Russia Lithuania Belgium Norway Switzerland Andorra Liechtenstein Netherlands Iceland Sweden Luxembourg Finland Vatican City Italy Greece Malta Isle of Man Czech Republic Latvia Croatia Denmark Austria San Marino France Guernsey Jersey Germany the United Kingdom Spain Slovenia Hungary Ukraine Gibraltar Georgia Poland Monaco Ireland Moldova Kazakhstan Bulgaria Faroe Islands Albania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

118

Total Liabilities Countries

Value ($K/employee)

Rank

Percentile

645.86 644.10 320.58 219.98 198.23 181.11 180.80 159.41 123.30 120.24 104.91 102.02 100.53 100.09 99.65 98.31 97.45 93.39 90.99 87.00 86.46 86.18 83.27 72.79 68.71 64.07 60.67 53.22 52.78 49.13 47.95 44.43 41.53 41.27 39.67 37.74 37.64 36.21 31.56 25.72 24.71 20.21 19.36 11.90 4.74

1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 49 52

98.11 96.23 92.45 90.57 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 7.55 1.89

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan South Korea Russia Italy Portugal Japan Germany Norway Greece France Denmark Austria Switzerland Belgium Netherlands Czech Republic Sweden Argentina USA Luxembourg Finland Spain China the United Kingdom South Africa Israel Ireland Canada New Zealand Singapore Hong Kong Pakistan Brazil Chile Australia Malaysia Peru India Hungary Poland Thailand Indonesia Philippines

the Middle East Latin America Asia Asia Europe Europe Europe Asia Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe Latin America North America Europe Europe Europe Asia Europe Africa the Middle East Europe North America Oceana Asia Asia the Middle East Latin America Latin America Oceana Asia Latin America Asia Europe Europe Asia Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

119

Total Liabilities (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

613.66 563.15 547.31 527.95 212.07 202.40 201.94 198.23 197.77 182.57 181.11 180.80 173.07 123.30 120.24 104.91 102.02 100.53 100.09 99.65 99.14 98.31 97.45 97.23 96.66 96.66 95.95 93.39 92.98 90.99 88.65 88.61 87.35 86.18 83.27 72.79 68.33 64.07 52.78 49.66 43.08 39.82 27.55 24.71 22.22 21.13 20.80 20.21 18.17 17.49 17.46

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Estonia Belarus Slovakia Russia Lithuania Vatican City Italy Portugal Cyprus Germany Norway Greece France Denmark Austria Switzerland San Marino Belgium Netherlands Malta Jersey Guernsey Isle of Man Czech Republic Liechtenstein Sweden Latvia Croatia Iceland Luxembourg Finland Spain Slovenia the United Kingdom Ireland Andorra Monaco Faroe Islands Albania Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

120

Common Equity Countries

Value ($K/employee)

Rank

Percentile

594.71 593.09 283.20 188.26 169.65 158.60 138.81 128.58 127.52 124.76 95.17 94.48 88.58 86.69 86.29 85.33 84.11 82.29 79.71 78.35 77.17 71.16 69.51 68.57 67.27 66.78 63.47 60.03 59.93 52.54 51.16 49.32 46.42 42.59 36.53 34.91 33.55 31.09 29.82 27.55 25.21 24.39 21.42 20.38 11.54

1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 42 44 45 46 48 50 52

98.11 96.23 92.45 90.57 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 9.43 5.66 1.89

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan South Korea Russia Japan USA Israel Ireland Australia Norway Greece Malaysia Canada Italy Portugal Czech Republic Switzerland China Argentina France Luxembourg Germany Singapore Finland Hong Kong Denmark Netherlands Peru Sweden Belgium the United Kingdom Austria South Africa Pakistan New Zealand Spain Indonesia Hungary India Thailand Poland Brazil Chile Philippines

the Middle East Latin America Asia Asia Europe Asia North America the Middle East Europe Oceana Europe Europe Asia North America Europe Europe Europe Europe Asia Latin America Europe Europe Europe Asia Europe Asia Europe Europe Latin America Europe Europe Europe Europe Africa the Middle East Oceana Europe Asia Europe Asia Asia Europe Latin America Latin America Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

121

Common Equity (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

565.06 518.55 503.97 486.14 181.49 173.22 172.82 169.65 169.25 140.23 127.52 95.17 94.48 87.57 86.99 86.41 86.29 85.33 84.11 82.29 81.68 79.83 79.80 77.17 76.78 71.16 69.51 67.27 66.50 64.03 63.47 60.03 52.54 52.31 51.16 49.32 46.42 45.98 44.83 44.83 36.16 33.55 31.50 29.82 26.81 25.49 25.10 24.39 21.92 21.10 21.06

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Estonia Belarus Slovakia Russia Lithuania Iceland Ireland Norway Greece Malta Vatican City Isle of Man Italy Portugal Czech Republic Switzerland Cyprus Latvia Croatia France Liechtenstein Luxembourg Germany Finland Monaco Faroe Islands Denmark Netherlands Sweden Albania Belgium the United Kingdom Austria San Marino Jersey Guernsey Andorra Spain Slovenia Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.8 3.8.1

122

PRODUCTIVITY IN BULGARIA: INCOME-LABOR RATIOS Overview

In this chapter we consider the income-labor ratios for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria benchmarked against global averages. For ratios where there are large deviations between the average firm operating in Bulgaria and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key income-labor ratios are highlighted across countries in the comparison group. In the case of income-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. We then report the larger income-labor ratio gaps for steam, gas and hydraulic turbines and turbine generator set units that Bulgaria has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

3.8.2

Income to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for steam, gas and hydraulic turbines and turbine generator set units in Bulgaria based on latest financial results available. Labor-income Ratios ($k/employee) Bulgaria Europe World Avg. _________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Operating Income Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Pretax Income Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

35.08 27.70 3.00 4.38 3.65 0.74 0.31 1.05 0.60 0.45 0.45 0.45 0.45

198.08 151.12 8.63 39.60 27.93 13.28 1.20 23.43 16.42 7.04 4.00 4.02 3.99

128.08 93.24 5.06 25.62 15.38 9.69 1.13 15.79 9.49 6.36 3.98 4.14 3.98

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

3.8.3

123

Income to Labor: Gaps

The following graphics summarize for steam, gas and hydraulic turbines and turbine generator set units the large labor-income gaps between firms operating in Bulgaria and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Net Sales or Revenues ($k/employee) 198.08 200 128.08

150 100 50

35.08

0 -50 -93 Gap

-100 Bulgaria

Europe

World Average

Gap: Cost of Goods Sold (Excluding Depreciation) ($k/employee) 200

151.12

150

93.24

100 50

27.7

0 -50

-65.54

-100 Bulgaria

Europe

World Average

Gap

Gap: Gross Income ($k/employee) 39.6 40 20

25.62 4.38

0 -20

-21.24

-40 Bulgaria

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Europe

World Average

Gap

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124

Gap: Selling, General & Administrative Expenses ($k/employee) 27.93

30

15.38

20 10

3.65

0 -10

-11.73

-20 Bulgaria

Europe

World Average

Gap

Gap: Operating Income ($k/employee) 13.28

15

9.69 10 5

0.74

0 -5 -10 Bulgaria

Europe

World Average

-8.95 Gap

Gap: Earnings Before Interest and Taxes (EBIT) ($k/employee) 30

23.43 15.79

20 10

1.05

0 -10 -14.74 -20 Bulgaria

Europe

World Average

Gap

Gap: Interest Expense on Debt ($k/employee) 20

16.42

15

9.49

10 5

0.6

0 -5 -10 Bulgaria

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Europe

World Average

-8.89 Gap

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125

Gap: Pretax Income ($k/employee) 10

7.04

6.36

5 0.45 0 -5

-5.91

-10 Bulgaria

Europe

World Average

Gap

Gap: Net Income Before Extra Items/Prefer Dividends ($k/employee) 4

3.98

4 2

0.45

0 -2 -3.53

-4 Bulgaria

Europe

World Average

Gap

Gap: Net Income Before Preferred Dividends ($k/employee) 6

4.02

4.14

4 2

0.45

0 -2 -4 Bulgaria

Europe

World Average

-3.69 Gap

Gap: Net Income Available to Common ($k/employee) 3.99

3.98

4 2

0.45

0 -2 -3.53

-4 Bulgaria

www.icongrouponline.com

Europe

World Average

Gap

2007 Icon Group International, Inc.

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3.8.4

126

Key Percentiles and Rankings

We now consider the distribution of income-labor ratios using ranks and percentiles across . What percent of countries have a value lower or higher than Bulgaria (what is the ratio's rank or percentile)? The table below answers this question with respect to income-labor ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key income-labor ratios are highlighted in additional tables. Income Structure ($k/employee)

Bulgaria

Rank of Total

Percentile

35.08 27.70 3.00 4.38 3.65 0.74 0.31 1.05 0.60 0.45 0.45 0.45 0.45

53 of 54 53 of 53 42 of 54 51 of 53 40 of 47 48 of 54 34 of 54 50 of 54 44 of 54 49 of 54 48 of 54 48 of 54 48 of 54

1.85 0.00 22.22 3.77 14.89 11.11 37.04 7.41 18.52 9.26 11.11 11.11 11.11

_________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Operating Income Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Pretax Income Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

127

Cost of Goods Sold (Excluding Depreciation) Countries

Value ($K/employee)

Rank

Percentile

853.22 388.78 306.09 298.54 297.72 275.82 226.16 205.13 195.15 192.75 183.90 181.64 173.87 166.87 154.77 148.01 147.81 144.11 142.21 138.02 130.19 125.85 122.99 121.96 117.95 113.63 108.57 106.86 101.13 100.45 99.62 97.70 90.30 90.09 85.39 58.03 47.81 45.74 45.49 44.83 39.22 37.34 33.69 32.08

1 2 3 4 5 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 39 40 41 42 43 45 46 47 49

98.08 96.15 94.23 92.31 90.38 84.62 82.69 80.77 78.85 76.92 75.00 73.08 71.15 69.23 67.31 65.38 63.46 61.54 59.62 57.69 55.77 53.85 51.92 50.00 48.08 46.15 44.23 42.31 40.38 38.46 36.54 34.62 32.69 30.77 28.85 25.00 23.08 21.15 19.23 17.31 13.46 11.54 9.62 5.77

Region

_________________________________________________________________________________________________________

Taiwan Portugal South Korea Turkey Mexico Russia South Africa Belgium Japan Norway Australia Italy France Denmark Singapore Germany Sweden Finland Switzerland USA Austria Peru Luxembourg Greece Netherlands New Zealand Czech Republic Spain Argentina Israel Ireland the United Kingdom Canada Hong Kong China Malaysia Brazil India Chile Indonesia Hungary Thailand Philippines Poland

Asia Europe Asia the Middle East Latin America Europe Africa Europe Asia Europe Oceana Europe Europe Europe Asia Europe Europe Europe Europe North America Europe Latin America Europe Europe Europe Oceana Europe Europe Latin America the Middle East Europe Europe North America Asia Asia Asia Latin America Asia Latin America Asia Europe Asia Asia Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

128

Cost of Goods Sold (Excluding Depreciation) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

388.78 372.15 295.08 283.65 281.63 280.98 275.82 275.18 260.30 252.98 244.04 205.13 192.75 183.11 181.64 173.87 166.87 150.08 148.01 147.81 144.11 142.21 139.43 132.71 130.19 128.96 125.73 125.73 122.99 121.96 117.95 117.67 113.03 111.55 109.86 108.57 106.86 103.05 103.01 100.32 99.62 97.70 86.39 39.22 35.27 33.53 33.02 32.08 28.84 27.75 27.70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Portugal Cyprus Estonia Romania Belarus Slovakia Russia Lithuania Bosnia & Herzegovina Macedonia Serbia & Montenegro Belgium Norway Vatican City Italy France Denmark Monaco Germany Sweden Finland Switzerland Iceland Liechtenstein Austria San Marino Guernsey Jersey Luxembourg Greece Netherlands Andorra Malta Isle of Man Albania Czech Republic Spain Latvia Croatia Slovenia Ireland the United Kingdom Faroe Islands Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

129

Selling, General & Administrative Expenses Countries

Value ($K/employee)

Rank

Percentile

85.31 85.08 80.20 60.93 55.92 50.19 46.12 43.04 42.68 37.87 35.50 34.27 33.88 33.19 32.31 30.88 30.70 26.55 26.43 26.40 26.26 20.61 20.42 19.08 17.66 17.22 16.99 15.82 15.22 12.28 10.88 9.72 5.47 5.21 5.17 4.25 4.23 3.31 0.34

1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 41 45

97.83 95.65 93.48 89.13 86.96 84.78 82.61 80.43 78.26 76.09 73.91 71.74 69.57 67.39 65.22 60.87 58.70 56.52 54.35 52.17 50.00 47.83 45.65 43.48 41.30 39.13 36.96 34.78 32.61 30.43 28.26 26.09 23.91 21.74 19.57 17.39 15.22 10.87 2.17

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan Netherlands USA Japan Italy Israel Ireland Norway Sweden South Korea Finland the United Kingdom Germany Russia Switzerland Luxembourg South Africa France Australia Denmark Canada Greece Austria Hong Kong Czech Republic Argentina China Peru Malaysia Singapore Brazil Chile Hungary Thailand Poland Indonesia Philippines

the Middle East Latin America Asia Europe North America Asia Europe the Middle East Europe Europe Europe Asia Europe Europe Europe Europe Europe Europe Africa Europe Oceana Europe North America Europe Europe Asia Europe Latin America Asia Latin America Asia Asia Latin America Latin America Europe Asia Europe Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

130

Selling, General & Administrative Expenses (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

81.05 74.38 72.29 69.73 60.93 56.49 46.50 46.12 42.68 37.87 35.50 33.88 33.19 33.03 32.31 31.53 31.46 30.88 30.81 30.70 28.65 26.55 26.40 20.61 19.08 17.68 17.66 17.49 17.45 17.05 17.05 16.99 16.51 16.12 16.12 10.72 9.42 5.17 4.65 4.42 4.35 4.23 3.80 3.66 3.65

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

97.78 95.56 93.33 91.11 88.89 86.67 84.44 82.22 80.00 77.78 75.56 73.33 71.11 68.89 66.67 64.44 62.22 60.00 57.78 55.56 53.33 51.11 48.89 46.67 44.44 42.22 40.00 37.78 35.56 33.33 31.11 28.89 26.67 24.44 22.22 20.00 17.78 15.56 13.33 11.11 8.89 6.67 4.44 2.22 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Netherlands Iceland Vatican City Italy Ireland Norway Sweden Finland the United Kingdom Estonia Germany Belarus Slovakia Russia Lithuania Switzerland Liechtenstein Luxembourg France Denmark Greece Malta Austria San Marino Isle of Man Guernsey Jersey Czech Republic Faroe Islands Latvia Croatia Albania Monaco Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

131

Operating Income Countries

Value ($K/employee)

Rank

Percentile

52.50 52.36 28.13 25.37 25.35 22.09 18.71 17.95 17.23 16.36 15.88 14.98 13.40 12.72 11.93 11.74 11.12 11.08 10.83 10.17 10.16 9.79 9.52 8.80 8.67 8.61 8.13 7.79 7.71 7.41 7.34 6.99 6.76 6.41 6.24 5.37 3.63 2.69 1.05 0.86 0.56 0.54 -2.21 -3.72 -3.75

1 2 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 40 42 46 47 48 49 51 52 53

98.11 96.23 92.45 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 20.75 13.21 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico South Korea Taiwan Russia Netherlands South Africa USA Spain Portugal Norway Italy Greece France Czech Republic Pakistan Argentina Belgium Canada Japan Singapore New Zealand the United Kingdom Hong Kong China Finland Sweden Malaysia Brazil Switzerland Chile Germany Austria Luxembourg Denmark India Indonesia Thailand Hungary Poland Philippines Australia Peru Ireland Israel

the Middle East Latin America Asia Asia Europe Europe Africa North America Europe Europe Europe Europe Europe Europe Europe the Middle East Latin America Europe North America Asia Asia Oceana Europe Asia Asia Europe Europe Asia Latin America Europe Latin America Europe Europe Europe Europe Asia Asia Asia Europe Europe Asia Oceana Latin America Europe the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

132

Operating Income (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

49.88 45.78 44.49 42.92 27.12 25.88 25.82 25.35 25.29 22.09 18.13 17.23 16.36 16.18 15.88 15.66 15.10 14.98 13.40 12.72 12.42 12.26 11.93 11.33 11.32 11.08 10.14 9.86 9.52 8.61 8.44 8.13 7.41 6.99 6.91 6.76 6.69 6.53 6.53 6.41 6.24 1.05 0.95 0.90 0.89 0.86 0.77 0.75 0.74 -1.93 -3.72

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Estonia Belarus Slovakia Russia Lithuania Netherlands Iceland Spain Portugal Slovenia Norway Cyprus Vatican City Italy Greece France Malta Isle of Man Czech Republic Latvia Croatia Belgium Andorra Monaco the United Kingdom Finland Faroe Islands Sweden Switzerland Germany Liechtenstein Austria San Marino Jersey Guernsey Luxembourg Denmark Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Albania Ireland

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

133

Earnings Before Interest and Taxes (EBIT) Countries

Value ($K/employee)

Rank

Percentile

169.22 168.76 44.85 29.31 26.41 22.51 21.53 20.45 20.42 20.00 19.28 18.96 18.18 17.73 17.18 16.94 16.87 15.00 13.89 12.62 11.63 11.41 11.29 10.92 10.22 9.79 9.78 9.76 9.74 9.68 9.46 9.18 8.30 8.18 7.52 6.98 6.55 3.48 3.28 2.97 1.49 1.22 0.76 -2.68 -2.70

1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 36 37 38 39 40 41 42 43 48 49 50 52 53

98.11 96.23 92.45 90.57 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Taiwan South Korea Russia Netherlands Portugal Norway Greece USA Italy South Africa Czech Republic Brazil Spain Argentina Chile France Germany Finland New Zealand Pakistan Canada Australia Singapore the United Kingdom Austria Sweden Hong Kong China Switzerland Malaysia Belgium Luxembourg Japan India Denmark Thailand Peru Indonesia Hungary Poland Philippines Ireland Israel

the Middle East Latin America Asia Asia Europe Europe Europe Europe Europe North America Europe Africa Europe Latin America Europe Latin America Latin America Europe Europe Europe Oceana the Middle East North America Oceana Asia Europe Europe Europe Asia Asia Europe Asia Europe Europe Asia Asia Europe Asia Latin America Asia Europe Europe Asia Europe the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

134

Earnings Before Interest and Taxes (EBIT) (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

160.78 147.55 143.40 138.33 28.26 26.97 26.91 26.41 26.35 22.51 21.53 20.61 20.45 20.42 20.20 19.44 19.28 18.93 18.68 18.18 17.26 17.25 17.18 16.13 15.00 13.89 12.62 12.04 9.91 9.79 9.78 9.76 9.68 9.46 9.44 9.44 9.34 8.82 8.30 8.18 6.55 2.86 1.49 1.34 1.27 1.25 1.22 1.10 1.05 1.05 -2.68

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Romania Bosnia & Herzegovina Macedonia Serbia & Montenegro Estonia Belarus Slovakia Russia Lithuania Netherlands Portugal Cyprus Norway Greece Iceland Vatican City Italy Malta Isle of Man Czech Republic Latvia Croatia Spain Slovenia France Germany Finland Andorra Monaco the United Kingdom Austria Sweden San Marino Switzerland Jersey Guernsey Faroe Islands Liechtenstein Belgium Luxembourg Denmark Albania Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Ireland

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

135

Pretax Income Countries

Value ($K/employee)

Rank

Percentile

34.08 20.39 18.65 18.38 18.09 17.50 16.49 16.47 16.31 14.94 14.68 14.61 13.67 12.10 11.65 10.11 10.09 9.70 9.60 9.54 9.32 9.29 8.98 8.57 8.40 8.23 8.23 7.64 7.12 6.72 6.35 6.26 6.16 6.04 3.35 3.00 2.39 1.24 0.68 0.64 0.52 -3.20 -3.23 -30.51 -30.60

1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30 31 32 33 34 35 36 37 38 40 44 45 46 48 49 50 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 16.98 15.09 13.21 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Taiwan South Korea Netherlands Russia USA Norway Greece South Africa Spain Portugal Czech Republic Italy Argentina France Germany Canada Brazil Finland Chile Singapore Pakistan New Zealand the United Kingdom Australia Hong Kong Malaysia China Austria Switzerland Sweden Belgium India Luxembourg Japan Denmark Thailand Indonesia Peru Philippines Hungary Poland Ireland Israel Mexico Turkey

Asia Asia Europe Europe North America Europe Europe Africa Europe Europe Europe Europe Latin America Europe Europe North America Latin America Europe Latin America Asia the Middle East Oceana Europe Oceana Asia Asia Asia Europe Europe Europe Europe Asia Europe Asia Europe Asia Asia Latin America Asia Europe Europe Europe the Middle East Latin America the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

Financial Indicators

136

Pretax Income (Steam, Gas and Hydraulic Turbines and Turbine Generator Set Units) Countries in Europe

Value ($K/employee)

Rank

Percentile

19.66 18.76 18.72 18.65 18.38 18.33 18.28 17.50 16.49 16.31 15.31 15.28 15.08 14.94 14.73 14.68 14.61 14.30 13.93 13.93 12.10 11.65 9.70 9.62 9.25 8.98 8.06 7.64 7.57 7.38 7.38 7.12 6.72 6.64 6.35 6.16 3.35 1.08 0.64 0.58 0.55 0.54 0.52 0.47 0.45 0.45 -3.20 -25.01 -25.93 -26.68 -29.07

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 5.88 3.92 1.96 0.00

_________________________________________________________________________________________________________

Estonia Belarus Slovakia Netherlands Russia Lithuania Iceland Norway Greece Spain Slovenia Malta Isle of Man Portugal Vatican City Czech Republic Italy Cyprus Latvia Croatia France Germany Finland Andorra Monaco the United Kingdom Faroe Islands Austria San Marino Guernsey Jersey Switzerland Sweden Liechtenstein Belgium Luxembourg Denmark Albania Hungary Ukraine Gibraltar Georgia Poland Moldova Kazakhstan Bulgaria Ireland Serbia & Montenegro Macedonia Bosnia & Herzegovina Romania

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

2007 Icon Group International, Inc.

137

4 4.1

MACRO-ACCESSIBILITY IN BULGARIA EXECUTIVE SUMMARY

Bulgaria’s commercial climate offers political stability, strong economic growth, a highly qualified work force, strategic location and low costs. Although it has been a long time and sometimes painful process, Bulgaria is successfully transforming itself into a market economy. While the domestic market is relatively small, Bulgaria is an excellent launching pad for sales into the European Union, Russia, Turkey and the Middle East. The general attitude in Bulgaria is pro-American and the Bulgarian market is very receptive to American goods and services. The government is also committed to a conservative fiscal policy. As a result, the country has enjoyed low inflation, a consolidated budget deficit below 1.0 percent, declining external debt and stable foreign exchange. The government has also cut personal income tax rates and corporate profit taxes, and abolished taxation on the capital profits in the bond and securities trade. The Bulgarian market has moved away from its traditional trade relations with Russia and become more oriented towards the EU, the Unites States, Turkey and the Middle East. The EU countries are now Bulgaria’s main export destination (56%) and a major source of foreign direct investment (67%). The Association Agreement between Bulgaria and the EU, a prelude to eventual EU membership, enables most goods to move between these two parties at zero or close to zero tariffs. This can be a great advantage to U.S. companies with production facilities in Bulgaria intended for export into the EU. However, it also a disadvantage for U.S. exporters with European competitors in the Bulgarian market. U.S. products only receive Most Favored Nation tariff rates, which are almost always higher than the tariffs applicable to EU products. Bank privatizations and increased competition between the newly private banks has dramatically increased access to credit for small and medium enterprises. Nonetheless, international financing of major infrastructure projects remains essential, and Bulgaria is still very dependent on financing from multilateral banks and other non-Bulgarian sources. Financing from the Export-Import Bank of the United States (Eximbank) is now available to finance certain U.S. exports to both state-owned and private Bulgarian enterprises. The Overseas Private Investment Corporation (OPIC) is also interested in financing projects in Bulgaria. While the commercial climate is, in general, very positive, there still are factors that inhibit U.S.-Bulgarian trade and investment. Persistent high unemployment and low wages limit consumer purchasing power. An ineffective judicial system and an inadequate rule of law environment have had a negative impact on business activities. Government bureaucracy is improving, but it can still present frustrating delays and unreasonable burdens on investors and exporters. However, despite these issues, Bulgarians are eager to have greater access to American goods and services and there are excellent opportunities for those companies willing to enter and develop this expanding market.

4.2 4.2.1

POLITICAL RISKS Economic Relationship with the United States

Since the fall of Communism at the end of 1989, numerous bilateral agreements have been signed between Bulgaria and the United States. In the areas of aviation and defense these include the Civil Aviation Security Agreement of 1991, an agreement by the United States International Military Education and Training (IMET) Program (1992), and a Memorandum of Cooperation on Defense and Military Relations (1994).

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Agreements on postal matters include a Memorandum of Understanding on the INTELPOST service (1990) and the International Express Mail Agreement (1991). Other trade-related agreements include a 1993 agreement on trade in textiles and textile products, the Investment Incentive Agreement (1991). On February 1, 1999, a bilateral Memorandum of Understanding came into force providing for tax-free treatment of U. S. Government assistance.

4.2.2

The Political System

Following the removal of long time communist leader Todor Zhivkov in 1989, Bulgaria has been a parliamentary republic ruled by a democratically elected government. A new constitution was enacted in 1991, which lays out the basic rights and obligations of citizens and is the basis for Bulgaria’s legal system. The constitution guarantees freedom of association including the right to form political parties. The constitution provides for the separation of powers amongst the executive, judicial and legislative branches and a system of checks and balances. The President is the head of state. The presidency is empowered to conclude international treaties and to schedule parliamentary (or National Assembly) elections. The President is also the commander-in-chief of the armed forces. The National Assembly is a unicameral legislative body that consists of 240 members who are elected for a term of four years. Failure to follow through on reform measures through most of the 1990’s led to the rapid downward spin of the economy which in turn seriously affected the living standards of all Bulgarians. Between 1989 and 1997 there were eight governments in Bulgaria. By giving local groups without management ability priority in the privatization process and access to questionable loans, this cronyism spread weakness throughout the economy causing the banking system to nearly collapse in May 1996. The BSP-led government’s slow progress in implementing reforms and mishandling of the economy led to a host of financial, social and economic problems which reached crisis level in late 1996. In February 1997, after several weeks of escalating public protests televised worldwide over the government’s handling of the economy, the government agreed to step down and was replaced by a caretaker government that moved quickly to stabilize the economy in March 1997 by concluding a $510 million standby arrangement with the IMF to help pull the country out of crisis. In April 1997, a reform-minded coalition headed by Union of Democratic Forces (UDF) won an absolute majority in parliamentary elections.

4.3 4.3.1

MARKETING STRATEGIES Creating a Sales Office

Businesses may establish a representative office for information gathering activities. A representative office is not viewed as a legal entity in Bulgaria. Certain restrictions are placed on the office’s activities. The Commercial Code and the Foreign Investment Law define the various forms of economic associations and regulate their foundation, organization, and termination. While it is possible to register a branch of a foreign entity in Bulgaria, the most common type of organization for foreign investors is a limited liability company (OOD). The procedure for establishing a company in Bulgaria requires registration with the local district court. Registration documents generally include: •

Application

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•

Certificate of Incorporation of the parent company

•

By-laws of the parent company

•

Minutes of a meeting of the parent company at which the resolution for establishment of a subsidiary in Bulgaria is passed

•

A founding act (by-laws) of the Bulgarian subsidiary

•

A letter, issued by the Statistics Institute, confirming the uniqueness of the name of the Bulgarian subsidiary in the district covered by the respective registration court.

•

Specimens of the signatures of the manager

•

Declaration of the management

•

Bank receipt attesting to authorized capital on deposit in a Bulgarian bank

•

Receipt of paid state fees for registration and publication in the State Gazette.

As of May 2001, the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Document has been applied in Bulgaria. Therefore, legalization is no longer necessary. However, in order to be certified in Bulgaria, foreign public documents must be translated and bear an Apostille. The subsequent registrations with the Statistics Institute, the Social Security Institute and the tax authorities should be completed as follows: •

Statistics Institute - within three days as of receiving the court decision for the registration of the company

•

Tax authorities - within fourteen days as of receiving the court decision for the registration of the company

•

Social Security Institute - there is no statutory term for this registration

Registration with the Bulgarian Chamber of Commerce and Industry (BCCI) is optional, but useful, since BCCI issues certificates-of-origin for products. VAT registration is done separately from the general tax registration, and is subject to a number of conditions such as VAT taxable turnover equal to or exceeding BGN 50,000 (fifty thousand). Under the latest amendments of the Law on VAT (effective July 1, 2002), within fifteen days of receiving the VAT registration certificate a company must open a VAT account (i.e. a bank account) under the control of the tax authorities. This account should be used for receiving and paying the VAT amounts payable to or by the company. The VAT account may not be used for payment of or as a security for any other obligations apart from the ones stipulated in the Law on VAT. Similar registration procedures as well as other statutory requirements apply to establishing other legal entities such as joint stock companies (ADs), general partnerships (SDs) and limited partnerships (KDs).

4.3.2

Creating a Joint Venture

There are several laws that govern joint ventures with foreign participation, including the Law on Foreign Investment (hereinafter referred to as the Foreign Investment Law), and the Commercial Code. Joint ventures with state-owned companies (i.e., wholly owned by the Bulgarian State) must be approved by the Council of Ministers or by the relevant minister, as the case may be. The “Regulations for the Regime of Exercising the State’s Rights in Commercial Companies with State Equity Participation”, promulgated in June 2003, provides the authority for the Council of Ministers or for the respective ministers, as the case may be, with respect to exercising State’s rights over shares or stock in commercial companies. www.icongrouponline.com

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The negotiation phase usually addresses the evaluation of existing assets and contribution of the foreign partner. The foreign contribution can be in cash, capital in-kind and/or know-how. The contribution of the local partner is usually in long-term assets (i.e., existing equipment, facilities, etc.). Other usually discussed issues are: labor issues (employment guarantees), future business and marketing plans and management contracts. In kind contributions to the capital of an OOD, AD or a company limited by shares (KDA) are always subject to evaluation by three court appointed experts, regardless of whether such a contribution is made at the establishment of the company, or in view of a subsequent increase of the company’s capital. No evaluation by experts is required In the event of monetary contribution to the capital of the company. Joint ventures with private companies do not follow the same procedures. No government involvement or approval is necessary. After completion of negotiations, the entity must be registered with the relevant court provided that the joint venture company assumes the legal form of a commercial company. If a new legal entity is created, an evaluation of the assets must be performed by a three court-appointed experts provided that any of the participants in the joint venture company makes in-kind contribution against acquisition of share capital. If the party that makes the in-kind contribution is not satisfied with the experts’ evaluation, such a party is entitled to participate in the joint venture company with cash contribution. The most successful American joint venture in Bulgaria has been the one formed by American Standard and the Bulgarian Vidima Ideal. American Standard has since bought out its Bulgarian partner and built its biggest factory in the world, which exports bathroom fixtures throughout Europe.

4.3.3

Agents and Distributors

U.S. exporters, especially small and medium size enterprises, will most likely choose to enter the Bulgarian market through an agent or distributor. This is because the small size of the Bulgarian market, distance and language differences will make it unattractive to set up a branch or subsidiary at the outset. Even some well-known large American companies are currently represented in Bulgaria by an agent for these reasons. In considering a potential agent or distributor, common sense prevails: a U.S. company should not automatically sign up the first Bulgarian company that contacts them, and a due diligence background check of a potential business partner, plus frequent visits by the export sales manager, are essential.

4.3.4

Hiring Local Counsel

Bulgarian law stipulates that representation in court and before administrative agencies must be performed by a duly licensed member of the Bulgarian Bar Association, who are independent practitioners in law firms or who are certain employees of corporations. Bulgaria does not allow foreign lawyers to practice in Bulgarian courts, except in criminal cases while accompanied by a Bulgarian lawyer, on a reciprocal basis by agreement with the other country. In the case of a corporation, representation may be either by an authorized senior executive of the firm such as executive director, or by an employee who has passed the practical examination of the Ministry of Justice and who has a power of attorney from the corporation to represent it as “in-house counsel.” A Bulgarian patent representative who specializes in intellectual property rights and who is admitted to practice before the Bulgarian Patent Office is also essential for preparing documents to protect intellectual property rights. Some lawyers are patent representatives. Other services such as filing of corporate documents with the courts, legal opinions, and legal consultations, are in practice performed by self-styled “legal consultants,” whose qualifications and experience may vary widely as the

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field is entirely unregulated. Some legal consultants may be former in-house counsel. Attorneys who are members of the Bulgarian Bar Association also provide such services. Many Bulgarian law firms have already established relationships and associations with foreign law firms, including American affiliates. Additionally, some of the larger international accounting and consultancy firms have established legal departments which perform some of the services offered by a law firm. A foreign counsel may be used to review documents and to provide general advice as to joint venture or privatization negotiations.

4.3.5

Checking Bona Fides

There is only one internationally recognized credit reporting agencies in Bulgaria, Credit Reform Bulgaria, headquartered in Germany, although there are new companies that have advertised their ability to check corporate references and provide corporate financial data.

4.3.6

Distribution Channel Options

Retailing Bulgaria’s retail sector is dominated by small-scale shops. With the privatization of the state-owned shops and newmarket-entry following the end of Communism in 1989, the predominant part of retail trade is already in private hands. Shop owners are quickly gathering experience in modern marketing and sales promotion. Nearly 100 percent of the food sales are handled by private shops and vendors. Fruits and vegetables are typically sold at open-air, nonrefrigerated public markets. Bulgaria’s first modern retailer, Stambouli, a Cyprus-based company. began operating dollar stores in Bulgaria in 1984. In the early 1990’s, they introduced the first modern general retail stores in Bulgaria, the nationwide Bonjour chain. Local supermarket and food stores such as Oazis, Elemak and Fantastiko were the first modern supermarkets selling both Bulgarian and imported food products. Currently, large foreign food market chains such as Billa (Germany/Austria), Ramstore (Turkey) and others have entered the market. All of these stores utilize contemporary shelving displays, refrigeration display, and even point-of-sale promotions. Except for their relatively small size, these stores increasingly resemble mid-range supermarkets in the United States. A rapidly growing group of retailers include the nationwide networks of gasoline stations operated by Shell, OMV and Lukoil. These offer simple automotive service repairs, car wash, minimarkets, and in many cases, food service operators such as McDonalds or Happy restaurants. Big changes to Bulgaria’s retailing structure started in 1999, when the German firm METRO, the second-largest retailer in the world after Walmart, opened its first cash-and-carry membership store in Sofia. METRO carries a wide variety of direct-imported consumer items, including many U.S. brands. METRO has expanded throughout Bulgaria, and its entry into the market has been followed by the Greek consumer goods chain store Ena, the German/Austrian Billa, the UK franchiser of Picadilly supermarkets chain, the Turkish Ramstore and the French do-it-yourself supermarkets chain Mr. Bricolage. Larger cities outside Sofia have one or two stores on the scale of a department store, although many of these are now out of business. These stores typically retail nonperishable consumer products such as household appliances, furniture, apparel, personal care/hygiene items, and consumer electronics.

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While Bulgaria does not have shopping malls, there are increasing numbers of shopping streets, shopping arcades and co-located stores. Recent examples of this trend in Sofia are the renovated TSUM, formerly a department store, now several floors of fashionable shops; the Centralni Hali, formerly a vegetable market, now two floors of a wide variety of food and clothing shops, plus a food court; and Vitosha Boulevard, Graf Ignatiev Street, Solunska Street and the renovated Pirotska Street, all of which have many fashionable shops. Regional cities typically have a pedestrian-only shopping area in the center of the city. Consumer-oriented trade shows and seasonal bazaars are an important part of the retail scene. The Christmas Bazaar at the National Palace of Culture in Sofia lasts almost two months and features hundreds of booths--actually small shops--on six floors of the complex, turning it into a temporary shopping mall, packed with consumers. Frequent sector-specific bazaars such as food shows and consumer electronics shows do a big business as well.

Wholesaling While each product sector has its own distribution channels, overall the transformation of the industrial products and raw material market segments is much slower paced. Bulgaria’s wholesale sector is characterized by fragmentary development. Previously, wholesaling of Bulgarian products was handled by manufacturers who distributed products directly to retailers, and imports were handled by large state-owned enterprises. Some wholesale operations were established in the consumer sector. Now the wholesaling sector is increasingly composed of private companies. An example is the Ilientsi warehouse and storage facility located in Sofia’s northwest industrial zone. Food and nonfood retailers throughout the country purchase substantial quantities through Ilientsi. Many wholesalers focus on the distribution of imported products. Trade liberalization encouraged many new companies to enter trading activities. An array of companies has entered the market and expanded distribution and services. The introduction of marketing concepts and information technologies is not only accelerating but is facilitating the transformation.

4.3.7

Franchising Activities

Unknown in Bulgaria in 1989, franchising has spread to ten industry sectors in Bulgaria. The first franchise operations were little more than stores or distribution licenses for trademarked products. From the bottling of PepsiCola, the establishment of KFC Chicken, Pizza Hut, Dunkin Donut shops and Office 1 Superstore, and stores featuring well-known European clothing brands, over the past several years franchising have also appeared in the executive recruiting and other services fields. The Bulgarian retail market is now ready for the many products and services that are typically marketed and sold in foreign-based franchise stores. Bulgarian consumers are looking for retailers that can provide a consistent selection of quality products, reasonable prices and good service. An important study has shown that profitable sectors with a relatively fast return of investment are tourism, the food industry, construction, and services. Potential in the service and food sectors include printing/photocopying, automotive product retailing and car rental, laundry and dry cleaning, hardware and retail stores, baked foods, candy and snacks, business aid & services, fast foods, head hunters and hotels & motels. The best opportunities are in the big cities (Sofia, Varna, Plovdiv, Burgas) where the population has a relatively high level of disposable income. Best prospect sectors for U.S. franchisers include automotive products and services; food - restaurants, hotel and motels; laundry and dry-cleaning; and employment services. Good opportunities exist in the following sectors: convenience stores; food -ice cream and yogurt; hardware stores; printing and photocopying services; specialty retail stores; commercial and residential cleaning. Other possibilities exist in the following sectors: equipment rental centers; eye care and optical center; food -baked foods, candy and snacks; and educational services. Despite franchising being a new concept for the Bulgarian business community, the Bulgarian legal system accommodates franchise agreements. Laws on labor relations are clearly spelled out, leases can be freely negotiated, and laws protect trademarks, patents and copyrights. www.icongrouponline.com

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The primary challenge in establishing franchises is obtaining sites. In urban areas, especially Sofia, it is sometimes difficult to locate and lease properties at an affordable cost. Difficulties in finding locations with clear titles also creates complications and delays in finding sites. Recently, some Bulgarian franchisers have entered the market: Policontact (employment services), Piccadilly (retail stores), Happy Bar & Grill (food restaurants), and Sanita (medicine distribution) started their business in Varna and so far they quite successful. The International Executive Service Corps (IESC), a U.S. Agency for International Development (USAID)-funded organization, works with Bulgarian companies, matching them with potential U.S. franchise owners. In addition, there is a Bulgarian Franchise Association.

4.3.8

Direct Marketing Options

Direct marketing is relatively new to Bulgaria. There are few, if any Bulgarian mail-order catalogs. Vacuum cleaners and cosmetics are being sold fairly successfully door-to-door. Companies employ different marketing techniques. An Austrian company is currently using television home shopping “infomercials” to sell kitchen tools and appliances not available in local shops. Home demonstrations are not popular and have generated little success. Avon and the Swedish company Oriflame report success in the direct sale of cosmetics. Limitations to expansion of telemarketing are poor telephone service in rural areas (not everyone has a telephone) and unreliable mail deliveries. There are also no toll-free telephone services offered by BTC. For the time being, direct marketing techniques may have more relevance to larger urban areas. According to industry professionals, the population of smaller towns is suspicious of direct marketing to end-users. In less populated areas where contact between people is infrequent, door-to-door selling is viewed as a way to socialize. Direct marketing through catalogs, telemarketing and the Internet from the United States to Bulgaria is still quite difficult. Few Bulgarians have credit cards, and with residual lack of confidence in the banking system and undeveloped banking infrastructure, debit cards are just now coming into popularity. Together with the low purchasing power, the high cost of shipping and lack of security for parcels and mail at most homes, catalog shopping and Internet shopping from the United States is in its infancy.

4.3.9

Selling Strategies

Bulgarian consumers and companies have low purchasing power, which means that price is a major consideration in developing a market strategy. While some customers may prefer to “buy Bulgarian,” frequently there is no Bulgarian manufacturer or it is recognized that the Bulgarian supplier does not have the capacity or the quality of product to meet the customers’ needs. So frequently the contest is among American, European and Asian suppliers. American companies are widely recognized for their quality and reasonable price, and value sells well in Bulgaria. Market statistics are essential to choosing specific marketing strategies, but the Bulgarian market can be complex and difficult to gauge. Market size statistics are almost nonexistent. Available statistics are usually unreliable and do not assist in accurately predicting market responses. While low official disposable income statistics might initially discourage market entry, the size of the unofficial economy and inferences from observing actual sales activity paints a brighter picture. First-hand observation on the streets and in the shops is essential for gauging the amount of actual economic activity in Bulgaria. Selling to state-owned companies, like selling to the government anywhere, has its own advantages and difficulties. As Bulgaria privatizes, American companies are advised to focus on the private sector. The growth of the private

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sector augers well for foreign businesses that are accustomed to selling products based on price, product quality and after-sales service. In the private segment of the economy, marketing techniques will not vary greatly from other foreign countries. Some techniques for developing greater product awareness include developing close relationships with professionals and non-profit organizations, as in the pharmaceutical, health care and medical equipment sectors, sponsoring research, participating in trade shows and events, and placing advertisements or writing articles in professional journals. Some companies have chosen sponsorship of game shows or events.

4.3.10

Product Pricing

Importers typically mark-up prices 50 percent to wholesalers, who then mark-up their goods another 100 percent. Thus the end price to the consumer can be as much as 300 percent the import price. However, there are great variations, depending on the product, and prices of many goods are 25 percent less than prices in the United States and the European Union. Price supports and state subsidies are being stripped away. The 1997 amendment to the Regulation for Implementing the Law on Prices substantially decreased the number of items subject to limited price control. The products affected are primarily basic necessities. All other prices are directly negotiated between the manufacturer and the distributor. Price competition is becoming more intensive. Realignment of prices has already occurred in many instances. Consumer demand is price elastic in Bulgaria. Due to low per capita income and purchasing power, consumers are highly price sensitive. However, consumers are willing to spend more in return for higher quality. Most people have generally restricted their purchasing to basic necessities. Imported products are typically higher priced than locally produced goods. Pent-up demand for goods not previously available is responsible for some sustained demand for imports. Despite the disparities in purchasing power, a number of imported products in Bulgaria are actually more expensive than the same or similar products sold in stores in the United States. U.S. manufacturers considering export to Bulgaria should look closely at ways to cut transportation and distribution costs for selling to Bulgaria so that Bulgarian customers can benefit from the wide variety and attractive prices of American products.

4.3.11

Licensing Options

Since Bulgarian companies do not have ready access to good financing, it might be difficult for a U.S. company to find a Bulgarian company able to invest large sums to acquire a production license or new manufacturing capability for an American product. However, enterprises with existing and suitable manufacturing capacity and good markets might be eager to take on the manufacturing of an American product. This might be a good market strategy for a U.S. company with high labor costs and product prices that are too high for Bulgarian customers. Production for Bulgaria’s market in Bulgaria, with its low labor costs, might enable market entry. Caution is advised, however, as in any transfer of technology. The Law on Obligations and Contracts and the Commercial Code sets forth the rules for making a licensing contract.

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145

Advertising and Trade Promotion

Advertising Options Advertising is quickly becoming a key marketing tool in Bulgaria. Today, nearly all companies in Bulgaria engage in some form of advertising. The following advertising media are preferred by Bulgarian companies (in descending order): printed media, both newspapers and magazines, radio, outdoor billboards/signs, event sponsorship, trade shows, sales promotion literature, and last, television. Television is becoming more and more important but the price of commercial airtime is simultaneously rising. While it is more than affordable for foreign companies, it is still expensive for many Bulgarian companies. Because of the cost, the leading users of television advertising are mainly foreign-affiliated companies, especially those specializing in consumer products. It may be necessary for a U.S. supplier to assist their Bulgarian agent or distributor in coping with the cost of television commercials. Advertising is regulated by the 1998 Law on the Protection of Competition. This law prohibits advertisements, which disseminate misleading information to consumers or malign the reputation of competitors. Separate legislation regulates advertising for specific products. Article 35 of the Law on Tobacco and Tobacco Products explicitly prohibits any advertising of tobacco products with the exception of point-of-sale promotions. This provision appears not to be enforced, given ubiquitous advertising of cigarettes in all the media. The Pharmaceutical Law prohibits the marketing and advertising of pharmaceuticals that are not registered in Bulgaria. Advertising content for registered pharmaceuticals must be pre-approved by the Executive Agency on Pharmaceutical Products (the registration authority). There are about thirty companies that provide a full range of professional advertising services. These companies have formed an advertising association, and there is at least one other association comprised of smaller companies. These companies have tried to influence the media to pay attention to international advertising norms and ethics. These firms persuaded the television stations to broadcast cigarette commercials only after 10 p.m. instead of during prime TV viewing hours when minors are watching. These companies are also in regular contact with the Parliamentary Committee on Television and Radio, which is charged with proposing new regulatory legislation. The Government of Bulgaria recognizes that the country does not advertise itself effectively as a tourist destination abroad. The budget for a national advertising campaign have been limited. However, the government intends to establish an Agency for National Information and Advertising to coordinate national advertising campaigns.

Daily Newspapers 24 Hours 47, Tsarigradsko Chausse Boulevard 1504 Sofia Phone: (359)(2) 942-2514 Fax: (359)(2) 942-2819 Banker 5B, Tsvetna Gradina St. 1421 Sofia Phone: (359 2) 658-305; 963-0585 Fax: (359 2) 963-0624; 963-2028 E-mail: [email protected] Web site: www.banker.bg Capital P.O. Box 198 www.icongrouponline.com

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20 Ivan Vazov Street, floor 3 1000 Sofia Phone: (359)(2) 981-5816 Fax: (359)(2) 980-9439 E-mail: [email protected] Web site: www.capital.bg Pari 47A, Tsarigradsko Chausse Boulevard 1504 Sofia Phone: (359)(2) 943-3147 Fax:(359)(2) 943-3188 E-mail: [email protected] Web site: www.pari.bg Standart 113A, Tsarigradsko Chausse Boulevard IPK Rodina 1113 Sofia Phone: (359)(2) 974-3142, 91-975 (477; 482) Fax: (359)(2) 76-2877 E-mail: [email protected] Web site: www.standartnews.com Trud (Labor Daily) 119, Ekzarh Yosif St. 1000 Sofia Phone: (359)(2) 921-4142, 921-4143, 921-4144 Fax: (359)(2) 921-4226 E-mail: [email protected]

Weekly Journals 168 Hours 47, Tsarigradsko Chausse Boulevard 1504 Sofia Phone: (359)(2) 942-2732, 942-2731, 942-2735 Fax: (359)(2) 942-2824 E-mail: [email protected] Bulgarian Business News (English Edition) 47, Tsarigradsko Chausse Boulevard 1504 Sofia Phone: (359)(2) 943-3058 Fax: (359)(2) 433-9249 E-mail: [email protected] Bulgarian Economic Outlook (English Edition) 49, Tsarigradsko Chausse Boulevard 1124 Sofia Phone: (359)(2) 926-2215, 926-2340 www.icongrouponline.com

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Fax: (359)(2) 986-2289 e-mail: [email protected]; [email protected] Web site: www.bta.bg The Sofia Echo (published in English) Sofia Echo Media Ltd. 9A San Stefano Street, 3d Fl. 1504 Sofia Phone: (359)(2) 944-1426, 435-011, 464-097 Fax: (359)(2) 944-3937 E-mail: [email protected] Web site: www.sofiaecho.com

4.3.13

Trade Promotion

In January 1999, Bulgaria acceded to CEFTA. The country is also a member of the Balkan Regional Center for Trade Promotion. Bulgaria is conducting negotiations for liberalization of mutual trade with all neighboring states and has concluded trade agreements with most Mediterranean countries. Bulgaria has a number of industry specific trade shows. Many U.S. products are displayed through agents, distributors and dealers. These shows offer a very good opportunity for U.S. companies to gain market exposure and expand distribution in Bulgaria. Supplying Bulgarian retailers, particularly outside of Sofia, may need assistance in designing point-of-sale promotions. Foreign companies may have to advise their agents and distributors how to educate retailers on shelving displays, product location, promotional campaigns and promotional literature. Bulgarian consumers expect good after-sales service and customer support when purchasing products. New private companies understand the importance of customer support and follow through on promises. Companies expect support from the U.S. exporter when purchasing imported products. Given that prices are generally higher and their limited budgets are already stretched, service and support by their suppliers are mandatory in their view. Emphasis on customer support is an initial step in developing customer loyalty. Most American companies operating in Bulgaria provide training to their distributors/agents. In many cases, agents and distributors are trained in the United States in order to communicate the firm’s distinctive corporate policies, behavior and standards.

4.3.14

Government Procurement

Within the context of the Bulgaria’s accession to the EC, the public procurement law has been substantially revised to comply with EC rules and practices. The list of public procurement assignees has been increased by adding the state and municipal hospitals, the National Insurance Institute, The National Health Insurance Fund and the Bulgarian Embassies abroad.

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The requirement that only a trading company can receive an order through public procurement has been changed and now companies who are involved in scientific-research activity or other types of activities can also participate. A new procedure for delivery of goods, traded on the stock exchange also has been implemented. There is a differentiation between the guarantee for participation in a tender procedure and the guarantee for fulfillment of a contract for public procurement. The guarantee for participation cannot be more than 5% of the value of the order and the guarantee for the fulfillment of the contract cannot be more that 10% of the contract value. In order to make the criteria for evaluation of the proposals clearer, the assigning organizations/companies have to include in the tender documents the methodology for evaluation of the proposals. According to the complaint system set up by the Procurement Law complaints by a contractor may be field to the procuring entity concerned, provided that this action is taken within seven days of the announcement of the award of contract. Selling to state-owned companies can be even more difficult than selling to private companies. Selling to stateowned companies and other state entities still depends on cultivating relationships. Many foreign companies complain that state-owned company officials may request some form of kick-back or bribe which American companies may not offer, pursuant to the U.S. Foreign Corrupt Practices Act. Public procurement financed by international financial institutions such as the EBRD or World Bank offers the best opportunity for transparent purchasing decisions based on price and other competitive factors. Pursuant to the loan guidelines, tenders must be open and transparent. Results of the tender evaluation process are subject to the review and final approval of the financing institution. In general, the Bulgarian public procurement system meets the EU requirements. Substantial work has been undertaken to enhance the national procurement system. These efforts have streamlined enforcement of the law, strengthened the powers of the procurement staff and introduced control and monitor procurement procedures. Bulgaria purchases around $860 million in goods and services annually. Public procurement opportunities are published on the Web site of the Council of Ministers of the Republic of Bulgaria: http://www1.government.bg/rop.

4.4

IMPORT AND EXPORT REGULATION RISKS

Bulgaria became a member of the World Trade Organization in December 1996.

4.4.1

Adherence to Free Trade Agreements

In March 1993, Bulgaria signed an Association Agreement with the European Union under which the EU and Bulgaria will eliminate tariffs asymmetrically with the EU reducing tariffs at an accelerated rate. Agricultural concessions are applied on a reciprocal basis. The Europe Agreement is also calling for the harmonization of Bulgaria’s laws and institutions with those of the European Union in preparation for eventual full membership.

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In July 1993, Bulgaria joined the European Free Trade Agreement (EFTA). The provisions of the EFTA Agreement mirror those of Bulgaria’s Association Agreement with the European Union. Since then, the majority of EFTA member countries have opted to join the EU. Bulgaria joined the World Trade Organizations in December 1996 and the Central European Free Trade Agreement (CEFTA) in January 1999. A free trade agreement between Bulgaria and Turkey took effect in January 1999. Bulgaria has signed and enforced Free Trade Agreements with: Turkey FYROM Estonia Lithuania Israel Croatia

Enforced in 1999 Signed in 1999 Enforced in 2002 Enforced in 2002 Enforced in 2002 Enforced in 2002

The U.S.-Bulgaria bilateral trade (BIT) agreement, in place since 1991, provides mutual most-favored-nation (MFN) status. In order to prevent this agreement from conflicting with any conditions required by Bulgaria’s entry into the EU, negotiations are underway to revise this agreement. The United States gave Bulgaria unconditional MFN treatment in October 1996.

4.4.2

Trade Barrier Risks

Tariff Barriers Products imported from the European Union with a Form EUR 1 certificate are subject to reduced customs duties or exempt entirely in accordance with Bulgaria’s European Union association agreement. In contrast, U.S. products only receive Most Favored Nation customs tariff rates, which are almost always higher than tariffs applicable to EU products. This has placed some dutiable U.S. products at a comparative disadvantage. U.S. Government policy is to urge Bulgaria to reduce its tariffs for non-EU products. One benchmark for reduction would be the level of the European Union’s Common External Tariff, which in almost all cases is lower than Bulgaria’s tariffs. Customs duties on agricultural goods and inputs and distilled spirits are also of concern to U.S. exporters. Preferential treatment applies to some tobacco varieties, mainly for those imported from Argentina, Brazil, India and Zimbabwe.

Non-Tariff Barriers Bulgaria’s non-tariff barriers are described in the annual National Trade Estimate report issued by the Office of the U.S. Trade Representative each March 31. U.S. exports to Bulgaria are hampered by the Pan-European cumulation system, particularly the removal of the availability of customs duty drawback on products originating in the United States and other non-participants in the cumulation system. Under this recently introduced system, customs duties on U.S.-origin inputs, that are used in the production of goods subsequently exported under preferential trade agreements involving the EU, Bulgaria and other countries, are no longer refunded. In general, Bulgaria’s customs regulations and policies are often reported to be cumbersome, arbitrary and inconsistent. Other major concerns are irregular implementation of Bulgaria’s 1997 public procurement law and privatization procedures, and protection of U.S. intellectual property rights.

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Tariff Rates Bulgaria follows the Harmonized System (HS) adopted by the Customs Cooperation Council. Tariffs range between 5 percent and 40 percent on industrial products and 5 percent and 70 percent for agricultural products. Since 1998, average Bulgarian import tariffs have been reduced significantly at the beginning of each year. Tariffs in areas of concern to U.S. exporters - including poultry legs and other agricultural goods and distilled spirits - remain relatively high. Import duties are ad valorem for agricultural products; some products such as meat have minimum import duties in ECU per metric ton. Bulgaria’s tariff schedules consist of two columns of rates. The column 1 rate applies to the 118 countries that qualify for preferential duty rates. Column 2 is equivalent to Most-Favored Nation (MFN) status. Forty-two countries, including the United States, are subject to column 2. Approximately 80 percent by value of Bulgaria’s total imports receive column 2 treatment.

4.4.3

Restrictions on Imports

Bulgaria prohibits imports of ozone-depleting products, ivory, rare birds, and other internationally banned products.

4.4.4

Controls on Exports

Export Licensing A limited number of goods are subject to administrative control, stemming from Bulgaria’s compliance with international agreements and specific domestic legislation. Registration (automatic license) and permits (administrative license) required by some commodity groups for export are issued by the Ministry of Economy. Permits are required for export of gold, silver, platinum, opiates, nuclear materials, explosives, arms, endangered species of animals and plants, and some herbicides. Registration of export of five commodities including kerosene and diesel oil is required. Only licensed dealers may export weapons. Bulgaria maintains quotas on the export of textiles and apparel to Canada and the United States; permits for export in these cases are required. Details about the annually established quotas, carryover and carry forward arrangements could be accessed through the Ministry of Economy Web site at www.mi.government.bg.

4.4.5

Trade in Arms and Dual-Use Goods and Technologies

Bulgarian Customs supervises control over the export, import, re-export and transit arms and dual-use goods and technologies. Bulgarian regulations follow the EU list of dual-use goods, which integrates the control lists of the Wassenaar Arrangement, missile technology control regime, nuclear suppliers group and the Australian group, and the Wassenaar arrangements munitions list. This list includes goods and technologies in the nuclear weapon, chemical and biological warfare and missile areas. A permit for each transaction (import, export and re-export) and transit with dual-use goods and arms issued by the Commission for Control and Permission for Foreign Transactions in Arms and Dual-use Goods and Technologies of the Ministry of Economy required regardless of destination. The requirements are as follows: Export:

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Bulgarian export control authorities require a completed export permit form, import license, end-user certificate with non-re-export clause issued by the competent authorities of the country of end-user, and end-use and end-user statement for each export. The applicant is obliged to provide a certificate verifying the actual delivery of equivalent document by the end-user confirming customs clearance of goods within 3 months after the date of entry.

Re-Export In addition to the requirements for export, a permit for re-export by the competent bodies of the state of initial supplier is required.

Import The applicant is obliged to submit a completed import permit form, and in case of dual-use goods, an end-use and end-user statement and delivery verification certificate after the customs clearance of goods is also required.

Transit Transportation Transit of goods such as arms or radioactive, explosive, inflammable, oxidizing, toxic, infectious or corrosive substances, require a transit permit. A completed form shall be presented by the shipper or an authorized party to the Commission no later than 15 days before the entry of goods into Bulgaria. Transit transportation of other dual-use goods requires a transit statement, which must be presented to Customs upon entry into and exit from Bulgaria. More information on dual use and arms export control is available from the following departments at the Ministry of Economy: •

Dual-use Goods Export Control: phone/fax: (359) (2) 987-0549

•

Arms Export Control: phone/fax (359) (2) 989-6794

Customs officials may make on-the-spot checks of goods being exported to ensure compliance with applicable regulations.

4.4.6

U.S. Exports of Sensitive Technology to Bulgaria

U.S. exporters should consult the U.S. Department of Commerce, Bureau of Export Administration, for specific export licensing requirements concerning exports of sensitive high-technology products to Bulgaria.

4.4.7

Import Tariffs and License Requirements

There are no import taxes. However, all imports are subject to a 20 percent Value Added Tax (VAT) levied at the time of customs clearance. Some commodities are also subject to excise duties. The U.S. Embassy has had no complaints on record from U.S. exporters that Bulgaria’s import license regime has negatively affected U.S. exports. Bulgaria’s import licensing regime is subject to frequent change.

Registration The list of goods subject to registration is changed quite often. In principle, the purpose of registration is to monitor the movement of some “sensitive” goods such as textiles and metals (subject to export registration), or of food products which have been in short supply on the domestic market for a certain period: some types of meat, dairy www.icongrouponline.com

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products, sunflower and vegetable oils. These products will receive an automatic license within one day of receipt of application in the Ministry of Trade and Tourism and Ministry of Agriculture. Applicants are required to present a certificate from the court in which their incorporation was registered and a certificate of tax registration. Other substantiating documentation may be required: a contract, pro forma invoice, order, tax number, certificate of origin, veterinary certificate and/or a certificate of quality. Additional and detailed information could be accessed through the Web site of the Ministry of Economy at www.mi.government.bg/trade/polit.html.

Authorizations (Licenses) Decree Number 307 and Decree 233 stipulate the foreign trade regime of Republic of Bulgaria. Certain products must receive authorization prior to importation. This is a non-automatic licensing process. Authorization, in the form of an import license, is normally issued within two days of the Ministry’s receipt of the application. Applicants are required to present certificates from the court and tax registrations as well as supporting documents. Imports of pharmaceuticals also require a copy of the license for wholesale trade. Appeals following the Ministry of Economy denial of a license must be made in writing to the Minister of Economy within five days after the issuance of the decision. The Minister is required to render a final opinion within five days of receipt of the appeal.

Import Quotas Several decrees state that certain goods are subject to quotas where the tariff is reduced or waived completely. The sizes of the quotas are determined by calendar year. Quota allocations are distributed by the Ministry of Trade and Tourism through a tendering process or auction. No single applicant may receive a quota allocation larger than 35 percent of the total. Quota recipients may be required to place a deposit or a performance bond issued by a bank. Quota allocations are not transferable. Goods that are subject to duty-free or reduced tariff-rate-quota regimes require certified, simplified customs declarations for import, or a favorable resolution in writing from the principal ministry or department. Currently products subject to temporarily duty free quotas are insecticides and fungicides, paper and pulp, wheat and sunflower oil. Products subject to reduced duty quotas are beef, poultry, pork, milk and dairy products, some vegetables and vegetable seeds, barley, corn, rice, canned meat, crude sugar from sugar cane, confections, and some alcoholic beverages.

4.4.8

Customs Regulations and Contact Information

Bulgaria’s customs regulations are based on the 1998 Customs Act, which replaces the former 1960 Customs Act. The new Act generally corresponds to the provisions of the European Community Customs Code. Customs valuation is based on the transaction value - the price actually paid or payable for the goods when sold for export to Bulgaria, defined in Bulgarian levs. The dutiable value is CIF, consisting of the purchase price, transportation costs, insurance charges, commissions, royalties, license fees and all other expenditures associated with the transport (e.g., loading and unloading) for delivery to the Bulgarian border. Goods may be declared by a customs declaration, by designated simplified procedures such as a simplified customs declaration, a commercial or other document, or by entry in the records of the declarer, or by data-processing entry or other approved method. The customs authorities may carry out post-clearance examination of relevant documents or data.

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The law sets out procedures concerning transit, customs warehousing, inward processing, processing under customs control, temporary import, and outward processing. The law provides for public and private bonded warehouses. U.S. companies may direct inquiries to the following: General Customs Agency Director: Assen Assenov 1, Aksakov Street 1000 Sofia Phone: (359)(2) 9859-4443/98 591 Fax: (359)(2) 980-6897

4.4.9

Entering Temporary Imports

Products may be imported into Bulgaria on a temporary basis as long as they are not prohibited by law. The rules on temporary imports are contained in the Regulation for Application of the Law on Customs. Article 58 allows entry of samples and products for trade exhibitions. The term of entry cannot exceed six months although a request for extension can be made. Customs duties will not be levied if a letter of guarantee from a Bulgarian organization is presented vouching for eventual return of the goods or payment of duties. Bulgaria is a party to the Customs Convention on Carnet (ATA) for Temporary Import of Goods. Presentation of an ATA carnet, or TIR carnet, facilitates the process. An entry carnet may be obtained from a local chamber of commerce in the United States. Carnets are usually valid for 1 year and list the products to be imported on a dutyfree basis. The carnet must be presented upon entry into Bulgaria. Customs will stamp the carnet thereby validating it. Upon departure, the carnet must again be presented for validation, confirming that the product is being transported out of Bulgaria. Failure to re-export the goods results in application of the duties. The Regulations also provide for the temporary import of products and equipment. Article 15 lists 15 categories. For example, equipment for repairs, finishing, processing and testing may be imported temporarily duty-free. Any goods intended for re-export, such as textiles and apparel, may also enter duty-free. Article 51 establishes time limits from 3 months to one year for re-export. In practice, Customs requires a deposit equivalent to the assessed duties or a bank guarantee during the temporary import period.

4.4.10

Additional Trade Issues

Import Requirements The Regulations for the Application of the Law on Customs require a certificate of origin, commercial invoice, insurance invoice, bill of lading, and packing list for all imported and exported products. In some cases additional information may be required such as receipt of payment of customs processing fees, bill of health (depending upon products), and certificate of import/export (authorization or license). Agricultural products require a certificate of quality and origin, a veterinary or phyto-sanitary certificate, and other applicable health and safety certificates. If imports are sourced from the European Union, a movement certificate (Form EUR 1) is necessary if the products are to qualify for reduced duties (pursuant to the terms of the Association Agreement). Form EUR 2 should also be included if the shipment is valued below ECU 5,110. Products sourced from member countries of the European Free Trade Agreement (EFTA) -- Norway, Switzerland and Iceland -- require an exporter’s declaration in order to qualify for reduced tariff rates.

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Upon arrival, products for human consumption should be analyzed in approved local laboratories in cooperation with local authorities. The State Agency for Standards and Metrology strictly enforces Bulgarian quality standards, which do not always coincide with generally accepted international standards. Foreign certificates may or may not be considered adequate. After approval is issued, the commodities may be sold on the local market.

Local Standards The 1964 Law on Standardization and Metrology, as amended, together with the Regulation for Implementation of the Law, sets forth the legal requirements for product standards and quality control in Bulgaria. The State Agency for Standardization and Metrology is the designated authority for developing national standards. The Committee on Standardization reports to the Council of Ministers. In certain areas, product and sector-specific standards are issued by other ministries or agencies. The State Agency for Standardization and Metrology is the competent authority for testing and certification of all products except pharmaceuticals, food and telecommunications equipment. The Agency issues approvals attesting to electrical safety and functional characteristics. The Department for Certification and Management Quality Control, within the Committee, handles all testing and certification. In addition to the application, the Department requires a Bulgarian translation as well as certificate(s) of approval from the corresponding home testing authority and a certificate identifying the testing protocol. The fee levied for the testing and certification process is BGN 50-70 per application. The entire testing and certification process requires at least one month. Certificates are valid for two years. The State Agency for Standardization and Metrology shares responsibilities for food products with the Ministries of Agriculture and Health. The responsible authority for pharmaceuticals is the Bulgarian Drug Agency (for pharmaceutical products and implants) and/or Ministry of Healthcare (for medical equipment), which establishes standards and performs testing and certification and is also responsible for drug registration. Approval for any equipment interconnected to Bulgaria’s telecommunications network must be obtained from the State Telecommunications Commission.

4.4.11

Labeling Issues

The 1995 Law on Prices regulates labeling and marking requirements. Labels must contain the following information in Bulgarian: quality, quantity, ingredients, certification authorization number (if any), and manner of storage, transport, use or maintenance. The product must be clearly marked with the date of production, expiration date and the warranty period.

4.4.12

Warranty and Non-Warranty Repairs

When a product is sent out of Bulgaria for repairs, the value of the repaired or replacement part is dutiable.

4.4.13

Free Trade Zone Options

Duty Free Trade Zones (FTZ) were established in Bulgaria in 1987 under Decree No. 2242 “On The Duty Free Zones and its Regulations for Application.” The new Customs Act, whose provisions do not replace those of Decree No. 2242, renamed the six duty-free zones “free zones.” The Customs Act also states that goods located in the free zones and free warehouses are not considered as being in the customs duty of Bulgaria and are not subject to customs

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duty. Free zones must have access control at fixed entrance and exit points. New construction within the free zones is to be undertaken in conformity with the customs authorities. Foreign, including U.S., individuals and corporations, and Bulgarian companies with 1 percent or more foreign ownership may set up operations in a free zone. Thus foreign-owned firms have equal or better investment opportunity in the zones as compared to Bulgarian firms. There are at present six operational “free zones” in Bulgaria: Ruse and Vidin ports on the Danube, Plovdiv, Svilengrad (near the Turkish border), Dragoman (near the Yugoslav border), and Burgas port on the Black Sea. All of them are owned by joint stock companies or a state-owned company owned by the government of Bulgaria. The government provided land and infrastructure for each zone. Plovdiv, the only inland free zone, is the most profitable, with 24 investment projects. The Burgas FTZ has the largest warehousing and automotive distribution facilities in Bulgaria, and is used by more than 100 foreign and joint venture companies including Samsung and Daewoo. Limited manufacturing is conducted in both the Plovdiv and Ruse FTZs. All forms of production and trade activities and services may take place in the free zones. Foreign goods delivered to the free zones for production, storage, processing or re-export are VAT and duty exempt. Bulgarian goods may also be stored in free zones with permission from the customs authorities. Convertible foreign currency may be used, and revenues can be transferred abroad freely without any restrictions. Administrative procedures relieve the investor’s need to contact local authorities directly. Production and labor costs are low with well-trained and highly qualified labor available. All the zones are located on strategic trade rail, road and/or water trade routes. The free trade zones in Bulgaria have attracted a number of foreign investors to undertake processing and trade activities - Hyundai Co., Daewoo Co., KIA Motors, CITCO, Schwarzkopf, Henkel, Landmark Chemicals Ltd., Group Schneider, and BINDL Energie Systeme GmbH.

4.5 4.5.1

INVESTMENT CLIMATE Openness to Foreign Investment

Bulgaria has a liberal foreign investment law, and attracting foreign investment is one of the government’s top priorities. American investment is particularly welcome. The government is focusing on development of promising sectors of the economy, including energy, tourism, information technology, transportation and telecommunications, and agriculture. Bulgaria has enjoyed macro-economic stability since the introduction of a Currency Board arrangement in 1997. Unemployment remains high (around 15 percent) but is declining, and wages are still low (around 140 U.S. dollars per month on average). As a result there is considerable incentive to attract investment that will create good jobs. Many municipalities are prepared to grant concessions or other favorable treatment for significant investments. Bulgaria offers the combination of a well-educated workforce and low wages. The country is well situated in the center of the Balkan region, although transportation infrastructure requires extensive upgrades. The 1997 Law on Foreign Investment established the Foreign Investment Agency as the government’s coordinating body for foreign investment. The law extends national treatment to foreign investors, guarantees compensation in the event of expropriation, and allows the repatriation of profits. The law explicitly recognizes intellectual property and securities as a foreign investment.

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Common Forms of Investment

Foreign investment typically assumes one of the following forms: establishing a joint venture with existing companies, state-owned or private; acquiring a company through privatization; setting up a new (greenfield) venture; or making a portfolio investment. Portfolio investment has been minimal given the relative lack of development and inefficiencies of the capital markets. The most common type of organization for foreign investors is a limited liability company. Other forms are companies limited by shares (joint stock companies), joint enterprises, business associations, general partnerships, limited partnerships, and sole proprietorships. The 1991 Commercial Code, as amended, defines the various forms of economic associations and regulates their foundation, organization, and termination. While the Commercial Code regulates commercial and company law, the 1951 Law on Obligations and Contracts, as amended, regulates civil transactions. These laws are generally deemed adequate for commercial transactions. The law does not limit the extent or amount of foreign participation in companies. Foreign companies have the right to open deposit accounts in hard currency and Bulgarian leva (BGN). Foreign companies are permitted to engage in various forms of business activity including the acquisition of shares in companies, with some restrictions. Prospective U.S. investors should consult appropriate legal counsel for up-to-date legal information before signing any contracts. Local companies where foreign partners have controlling interests must obtain prior approval (licenses) to engage in certain activities: production and export of arms/ammunition; banking and insurance; exploration, development and exploitation of natural resources; and acquisition of property in certain geographic areas. Only firms with over 50 percent Bulgarian participation can be licensed for international trade in arms. The Law on the Special Purpose Investment Companies (SPIC Law), promulgated in the State Gazette on May 20, 2003, provides for two special types of public investment companies: for investments in real estate and for investments in receivables. A SPIC is a pool of assets (real estate or receivables) which are purchased with funds raised by the SPIC by means of publicly offered securities. Since the price of the SPIC securities will depend exclusively on the performance of its assets, the SPIC Law provides for considerable protections of the SPIC assets and their fair valuation. As a SPIC is viewed as a pass-through structure, at least 90 percent of its net income must be distributed to shareholders. The idea is that SPICs shall be exempt from corporate tax and only its shareholders shall be taxed on the dividends received. However, the tax laws are not yet amended to grant tax exemption of SPICs.

4.5.3

Barriers to Direct Investment

The problems most often cited by foreign investors in Bulgaria are: government bureaucracy; poor infrastructure; frequent changes in the legal framework; low domestic purchasing power; a banking system averse to lending; the protracted privatization process; and corruption. In addition, ineffective rule of law, especially in the judicial system, limits investor confidence in the ability of the courts to enforce contracts, ownership and shareholders rights, and intellectual property rights. There is also a perception that it is difficult to have judicial decisions enforced. The Foreign Investment Law removed most restrictions on acquisition of land by locally-registered companies with majority foreign participation. However, the constitutional prohibition against ownership of land by foreign individuals remains in force. This must eventually be changed to comply with European Union accession requirements.

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Privatization

The Privatization and Post-privatization Act of March 13, 2002, which repealed the 1992 Law on the Transformation and Privatization of State and Municipal-owned Enterprises, governs Bulgaria’s privatization process. Privatization of all state-owned companies is administered by the Privatization Agency (PA). The new law made all remaining state-owned enterprises (about 1,783 valued at 25 billion BGN) available for privatization, with the exception of 97 strategic enterprises such as Kozloduy Nuclear Power Plant and Bulgargaz, the natural gas distributor. Foreign companies, including state-owned foreign companies, may purchase Bulgarian state-owned firms, and the government has emphasized its openness to foreign capital. The 2002 Privatization law instituted a Post-privatization Control Agency under the authority of the Council of Ministers tasked to oversee the implementation of privatization contracts. In view of the GOB’s intention to preserve non-price privatization commitments (employee retention, technology transfer, environmental liability and investment) in the privatization selection criteria, this new body may create an extra burden for private businesses. With the new privatization legislation, creditors are no longer required to claim their receivables within six months from the start of the SOE privatization. While the government maintains that the six-month period had discriminated between creditors, the new policy may endanger the successful development of privatized companies and lead to lower privatization prices if the PA fails to make available all information concerning SOEs under privatization. On February 27, 2003, Parliament adopted amendments to the Privatization Law which identified 15 state-owned companies with strategic importance to the country, for which the Council of Ministers would name the winning bidder in a decision paper, subject to approval by the National Assembly. Such decisions would not be subject to judicial review or the approval of the PA’s Supervisor Board. However, on April 18 the Constitutional Court declared part of the amendments to be unconstitutional, throwing the new privatization procedure into question.

4.5.5

Concessions

Under the 1995 Law on Concessions, the state is authorized to give “a particular right of using projects, public and state property, as well as giving permits to carry out activities for which a state monopoly is established by law.” Article 4 of the Law lists thirteen sectors in which the state may, on the basis of a concession agreement, grant private investors a partial monopoly in activities normally reserved for the central and/or local governments. These include the construction of roads, ports and airports; power generation and transmission; mining; petroleum exploration/drilling; telecommunications; forests and parks; beaches; and nuclear installations. Concessions are awarded on the basis of a tender and are issued for up to 35 years. Concessions can be extended but shall not exceed 50 years, although the former concession holder can legally be preferred in issuing a new concession for the same object/activity if all other conditions and terms offered by different competitors in the tender are equal or less advantageous. The Concessions Law was amended in July 1997 to permit build-operate-transfer deals, give priority for minerals exploitation to the holders of exploration licenses, and reconcile conflicting procedures for privatization and concession. Since 1998, Parliament has passed legislation arranging for concessions in telecommunications, energy, mining, waters, ports, airports, roads and railways.

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Conversion and Transfer Policies

Under Article 27 of the Foreign Investment Act, there are no restrictions on the transfer of investment-related funds. Foreign investors can purchase foreign currency and transfer it abroad showing documents for paid taxes. This requirement pertains also to foreign nationals working in Bulgaria. The U.S. Embassy has received no complaints from U.S. investors pertaining to transfers and remittances. In 1999, Bulgaria replaced its outdated and fragmented foreign currency legislation and liberalized current international transactions in line with IMF Article VIII obligations. Transfers are governed by the Foreign Currency Act (1999) effective January 1, 2000, Regulation on the Export and Import of Bulgarian Leva and Foreign Currency in Cash, Precious Metals and Stones (1999), Regulation on Trans-Border Transfers and Payments (1999), and Regulation on Registration by the BNB of Transactions between Residents and Non-residents (1999). Under amendments to the 1999 Foreign Currency Act approved by Parliament on June 19, 2003, Bulgarian citizens as well as foreigners may take in cash Bulgarian leva and foreign currency of up to BGN 25,000 or its foreign exchange equivalent out of the country without documentation. However, the import or export of leva and foreign currency between BGN 5,001 and BGN 25,000 or its foreign exchange equivalent must be declared at customs. Export of amounts larger than BGN 25,000 must be accompanied by a declaration about the source of these funds and supported by documents certifying that the person does not owe taxes. Foreigners are permitted to export in cash as much currency over the foreign currency equivalent of BGN 25,000 as they have imported into Bulgaria without the tax certificate. The law also stipulates that transfers and payments abroad may be executed only through bank transfers. Transfers over BGN 25,000 for current international payments (imports of goods and services, transportation, interest and principal payments, insurance, training, medical treatment and other purposes defined in Bulgarian regulations) must be supported by documentation showing the need and purpose of such payments.

4.5.7

Expropriation and Compensation

According to Article 26 of the Foreign Investment Law, property can be expropriated on the grounds of a law “for exceptionally important state purposes.” Owners must be compensated with nearby property of equal value at current prices. Monetary compensation is also permitted with the consent of the property’s owner. Expropriation actions can be appealed to the Supreme Court with regard to the basis for the expropriation action, property appraisal and method of compensation. There have been no cases of expropriation since enactment of the Foreign Investment Law. In its Bilateral Investment Treaty (BIT) with the United States, Bulgaria committed itself to international arbitration in the event of expropriation and other investment disputes.

4.5.8

Dispute Settlement

The Judicial System Bulgaria’s 1991 Constitution serves as the foundation of the legal system and creates an independent judicial branch. The judicial system consists of three levels of courts: 124 regional courts exercise jurisdiction over administrative, civil and criminal cases. Above them, 29 district courts (including the Sofia City Court) have original jurisdiction in civil cases where claims exceed 10,000 BGN, in serious criminal cases and in other cases as determined by law. The district courts are also vested with the authority of appellate review for regional court decisions. On the highest level

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are the Supreme Court of Cassation and the Supreme Administrative Court. The Supreme Court of Cassation has jurisdiction over all civil and criminal cases, and hears appeals on issues of law. The Supreme Administrative Court rules on the legality of acts by the Council of Ministers and the ministries. The Supreme Courts hear cases in threejudge panels, whose decisions may be appealed to a five-judge panel of the same court. Decisions by five-judge panels of the Supreme Courts are final and binding. The Constitutional Court stands apart from the Supreme Courts. This court issues binding interpretations of the constitution; rules on challenges regarding the constitutionality of laws and acts; rules on international agreements prior to Parliamentary ratification; and reviews domestic laws to determine consistency with international legal norms. Bulgarian law provides for juries only in criminal cases. Under Bulgarian procedural law first-instance civil cases are brought before one judge in the regional or the district court, depending on the case (see Art. 105 (2) of the Civil Procedure Code). Administrative sanctions are appealed before the regional courts and the appeals are reviewed by one judge (see Art. 63 (1) of the Administrative Offences and Sanctions Act). Administrative acts are subject to administrative and court appeal.

Execution of Judgments To execute judgments, a final judgment must be obtained so that the court can order payment; make a judicial request to perform an act or abstain from acting; or order the surrender of possession of property/goods. To obtain payment, complicated foreclosure proceedings must be initiated. The court of first instance must be petitioned for a writ of execution (based on the judgment). The issuance of a writ enables seizure of assets. If the party is seeking a judicial request to act or abstain from acting, the final judgment must be brought before an executive judge. The executive judge has the authority to issue fines of up to 500 leva. The judge possesses the authority to resort to the police in instances such as the vacating of property and, possibly, for the surrendering of possessions. In practice, Bulgarian and foreign observers caution that the proceedings for the execution of judgments under the Code of Civil Procedure remain slow and unpredictable. Foreign judgments can be executed in Bulgaria. Execution depends on reciprocity as well as on the basis of bilateral or multilateral agreements, as determined by an official list maintained by the Ministry of Justice. The U.S. does not currently have reciprocity with Bulgaria, so Bulgarian courts are not obliged to honor decisions of U.S. courts. All foreign judgments are handled by the Sofia City Court, which must determine that the judgment does not violates public decrees, standards or morals before the foreign judgment can be executed. There are also cases defined by the Civil Procedure Code (real estate issues, binding decisions on the same case issued by a Bulgarian court) in which judgments cannot be executed even if they conform to Bulgarian laws or morals. In practice, execution of judgments is subject to delays, sometimes resulting from corruption and inefficiency in the judicial system.

Bankruptcy Laws The 1994 Law on Bankruptcy provides for reorganization or rehabilitation of the company, attempts to maximize asset recovery, and provides for fair and equal distribution among all creditors. The law applies to all commercial entities, except public monopolies or state-owned companies established by a special law. As of December 28, 2002, bank bankruptcies are regulated under the Bank Bankruptcy Act, while insurance company bankruptcies are regulated by the 1996 Insurance Act. Under Part IV of the Commercial Code, bankruptcy proceedings can be initiated by the debtor or by creditors. The debtor is obliged to declare bankruptcy within 15 days of becoming insolvent. Where insolvency is determined, the court appoints an interim trustee. The trustee is responsible for representing and managing the company, taking inventory of property and assets, identifying the creditors, convening the creditors and developing a recovery plan. www.icongrouponline.com

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At the first meeting of the creditors, a trustee is nominated; in most cases this is simply a reaffirmation by the creditors of the court appointed trustee. Commercial Code amendments passed by Parliament on June 12, 2003, affect the legal regime of insolvency as a ground for starting bankruptcy proceedings. Non-performance of a money obligation must be established by an adjudicated precedent (res judicata) before the bankruptcy court determines whether the debtor is insolvent. However, the amendments add a presumption of insolvency where the debtor has not performed an obligation within 60 days of maturity or where the debtor is only able to pay the claims of certain creditors. Creditors must declare the debts owed to them within one month of the start of bankruptcy proceedings. The trustee then has seven days to compile a list of debts. A rehabilitation plan(s) or a scheme of distribution (in cases of liquidation) must be proposed no later than the date that the court approves the list of debts. The court must rule on admittance of the plan within seven days. The absence of trained trustees has been a problem in the past. The June 2003 amendments provide for examinations for individuals applying to become trustees, but implementation of this requirement is contingent on the adoption by several ministries of a special regulation. The amendments also provide for annual training courses for trustees. Liquidation of assets is an area that was overhauled by the June 2003 amendments. The main objective was to establish a legal framework for selling assets that takes into account the character of bankruptcy proceedings, thus avoiding the need to apply the Civil Procedure Code. The new regime includes rules requiring a greater degree of publicity for asset sales. The June 2003 amendments limit the possibility of bringing appeals against judicial decisions made during bankruptcy proceedings.

International Arbitration Pursuant to its Bilateral Investment Treaty (BIT) with the United States, Bulgaria has committed to a range of dispute settlement procedures starting with notification and consultations. Bulgaria accepts binding international arbitration in disputes with foreign investors. In 1990, the Bulgarian Chamber of Commerce and Industry (BCCI) established the Court of Arbitration (Regulations for the Application of Decree 56 on Business Activity, Articles 144-151). Arbitration is voluntary and regulated by the 1988 Law on International Commercial Arbitration, which is fully in compliance with the United Nations Commission on International Trade Law (UNCITRAL) Model Law. Contracts with Bulgarian companies typically call for dispute settlement at the Court, although arbitration in a third country is also possible. In April 2001, Parliament amended the Law on International Commercial Arbitration to allow an international arbiter to participate in arbitration when a foreign owned company is involved. However, the court will be in Bulgaria and the official language of the arbitration will be Bulgarian (BCCI can provide interpreters). Arbitral decisions may also be executed through the judicial system. The party must petition the Sofia City Court for a writ of execution. Foreclosure proceedings may also be initiated. Bulgaria is a member of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the 1961 European Convention on International Commercial Arbitration. Bulgaria is also a signatory of the International Center for Settlement of Investment Disputes (ICSID) convention and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. ABA/CEELI supported the establishment of a Court of Arbitration -- an ADR center for domestic business disputes - at the Bulgarian Industrial Association (BIA). Both Courts of Arbitration at the BIA and BCCI have rules for mediation.

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Performance Requirements and Incentives

Bulgaria does not impose export performance or local content requirements as a condition for establishing, maintaining or expanding an investment. The law does not specifically restrict hiring of expatriate personnel, but residence permits are often difficult to obtain. A June 1999 law regulating gambling imposes additional requirements on foreigners organizing games of chance. Foreigners can receive a license to establish a casino in a hotel only if they satisfy one of the following conditions: 1) purchase or construction of a hotel rated four-star or higher; or 2) investment of at least USD 10 million and employment of at least 500 workers in economic activities unrelated to gambling. The Bulgarian Foreign Investment Agency, which is the first-line contact point for prospective foreign investors, actively assists small and large foreign investors upon inquiry. EU policy requires that Bulgaria treat foreign and domestic investors identically in terms of incentives and governing regulations. The Government of Bulgaria follows that general policy. In January 2003, the GOB introduced tax incentives for investments in regions with high unemployment. The Corporate Income Tax Act stipulates that production companies enjoy 100 percent exemption of the corporate income tax for a five-year period if: •

Production facilities are located in municipalities with unemployment exceeding by 50 percent the unemployment for the last year;

•

80 percent of the annual average number of the employees working under a labor contract are locally employed; and

•

Companies have no tax and social security arrears.

4.5.10

Right to Private Ownership and Establishment

The Constitution (Article 19) states that the Bulgarian economy “shall be based on free economic initiative.” The government has created the legal framework in which private entities can establish and own business enterprises engaging in profit-making activities save those expressly prohibited by law. Bulgaria’s Commercial Code guarantees and regulates the free establishment, acquisition and disposition of private business enterprises. Competitive equality is the standard applied to private enterprises in competition with public enterprises with respect to access to markets, credit, and other business operations, such as licenses and supplies.

4.5.11

Intellectual Property Risks

Bulgarian law protects the acquisition and disposition of property rights. In practice, the protection of property rights is subject to difficulties in varying degrees. Bulgarian intellectual property legislation has been strengthened recently, and now includes modern patent and copyright laws and criminal penalties for copyright infringement. Until 1998, Bulgaria was the largest source of pirated CDs (music and software) in Europe and was one of the world’s leading exporters of pirated goods. For this reason, Bulgaria was placed on the U.S. Trade Representative’s Special 301 Priority Watch List in 1998. In 1998, enforcement improved considerably with the introduction of CDproduction licensing. In recognition of the significant progress made by the Bulgarian government in improving protection of intellectual property, the U.S. Trade Representative removed Bulgaria from all Special 301 Watch Lists in April 1999.

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Although the situation has in many respects improved, the government still lacks sufficient institutional capacity and coordination to effectively address major enforcement problems, especially in combating organized crime groups and in prosecution. Many industrial groups currently have intellectual property disputes before the Government of Bulgaria. Bulgaria is a member of the World Intellectual Property Organization (WIPO) and a signatory to the following agreements: •

Paris Convention for the Protection of Intellectual Property;

•

Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcast Organizations;

•

Geneva Phonograms Convention;

•

Madrid Agreement for the Repression of False or Deceptive Indications of Source of Goods;

•

Madrid Agreement on the International Classification and Registration of Trademarks;

•

Patent Cooperation Treaty;

•

Universal Copyright Convention;

•

Bern Convention for the Protection of Literary and Artistic Works;

•

Lisbon Agreement for the Protection of Appellations of Origin and their International Registration;

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Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purpose of Patent Protection;

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Nairobi Treaty on the Protection of the Olympic Symbol;

•

Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks;

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Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks;

•

Strasbourg Agreement Concerning the International Patent Classification;

•

Locarno Agreement Establishing an International Classification for Industrial Designs;

•

WIPO Copyright Treaty; and

•

WIPO Performances and Phonograms Treaty.

Copyrights The 1993 Law on Copyright and Neighboring Rights protects literary, artistic and scientific works. Article 3 provides a full listing of protected works including computer programs (which are protected as literary works). The Law distinguishes between moral and economic rights. The use of protected works is prohibited without the authorization of the author except in those instances enumerated in Article 23. In 2000 the Bulgarian parliament adopted amendments to the law extending the copyright term of protection from 50 years to 70 years after the author’s death. The new term of protection is retroactive, i.e., a term of protection that expired at the moment of approval of the amendments is revived within the frameworks of the 70-year term of protection. For films and other audio-visual works, copyrights are protected during the lives of director, screenplaywriter, cameraman, or the author of dialogue or music plus 70 years. Other amendments to the law enable copyright owners to file civil claims to suspend the activities of pirates, confiscate equipment and pirated materials, enhance border control over pirated material, introduce a new

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neighboring right for film producers, and harmonize Bulgarian legislation with the Association Agreement with the European Union. The Copyright Office of the Ministry of Culture is responsible for copyright matters in Bulgaria. The National Film Center is responsible for enforcing intellectual property rights with regard to films and videos. Remedies for violations are provided in civil law. However, under the Penalty Code, copyright infringement was originally considered only a misdemeanor subject to nominal fines.

Patents On June 27, 2002, Parliament approved amendments to Bulgaria’s 1993 Law on Patents (the “Patent Law”). These amendments harmonize Bulgarian patents law with EU law in the areas of application for European patents and “utility model patents” (for inventions, which have a limited degree of inventiveness and a relatively short life span). Bulgaria joined the Convention on the Grant of European Patents (European Patent Convention) on July 1, 2002. On January 31, 2002, Parliament ratified the 1973 Convention on the Grant of European Patents and the 2000 Act Revising the Convention. Bulgaria grants the right to exclusive use of inventions and utility models for 20 years and 10 years, respectively, from the dates of patent application filings. Inventions eligible for patent protection must be new as a result of innovation and have industrial applications. Article 6 lists items not considered inventions. Utility models are defined as “objects with structural and technological features relating to an improved construction, form and spatial combination of elements of articles, tools, mechanisms, equipment and parts thereof, materials and other items for industrial or home use.” The independent Patent Office is the competent authority with respect to patent matters. Chapter IV of the patent law, Articles 34-53, describe the application procedures and the examination process. Applications are submitted directly to the Patent Office. Compulsory licensing may be ordered under certain conditions: the patent has not been used within four years of filing the patent application or three years from the date of issue; the patent holder is unable to offer good justification for failing to sufficiently supply the national market; or declaration of a national emergency. Patent infringement is punishable with the imposition of fines of up to 1,000 leva. Disputes are reviewed by specialized panels convened by the President of the Patent Office. Parties dissatisfied with the outcome must initiate action in the Sofia City Court within three months of the panel’s decision. In 1996, Parliament approved the Protection of New Types of Plants and Animal Breeds Act. The Certificate allows for a term of protection of 25 years for annual plants and 30 years for perennial plants and animal breeds. The term of protection starts from its date of issuance by the Patent Office as specified in the law. In 1998, Parliament ratified the 1991 International Convention for the Protection of New Varieties of Plants (UPOV).

Data Exclusivity Responding to long-standing industry concerns, the GOB included a provision to provide data exclusivity (protection of confidential data submitted to the government to obtain approval to market pharmaceutical products) in its Drug Law, which took effect on January 1, 2003.

Trademarks In September 1999, Parliament passed a series of laws on trademarks and geographical indications, industrial designs and integrated circuits in accordance with TRIPs requirements and government’s EU Association Agreement. The 1999 Trademarks and Geographical Indications Act, which repealed the 1967 Law on Trademarks and Industrial Designs, regulates the establishment, use, cession, suspension, renewal and protection of rights of trademarks, collective and certificate marks, and geographic indications. www.icongrouponline.com

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Registration is refused or the existing registered trademark is cancelled if a trademark constitutes a reproduction or an imitation or if it creates confusion with a well-known trademark as stipulated by the Paris Convention and the Trademarks and Geographical Indications Act. Applications for registration must be submitted to the Patent Office under specified procedures. Right of priority, with respect to trademarks that do not differ substantially, is determined based upon application first filed in compliance with information required in Article 32. Right of priority is also established based on the timing of a request made in one of the member countries of the Paris Convention or of the World Trade Organization. To exercise the right of priority, the applicant must file a request within six months of the date of original filing. A trademark is normally granted within three months of filing of a complete application. Refusals can be appealed in the Sofia City Court within three months of the notification of the decision. The right of exclusive use of a trademark is granted for ten years from the date of submitting the application. Requests for extension of protection must be filed during the final year of validity but not less than six months from expiration. Failure to use a mark during a five-year period results in protection being terminated. Infringement of trademarks is a problem in Bulgaria for many U.S. manufacturers. While the law allows for confiscation of offending products, infringement is deemed a misdemeanor under the Penal Code and subject to a nominal fine, which does not act as a deterrent to illegal activities. In addition, U.S. and European businesses have complained about the lack enforcement of court judgments against trademark infringement. However, the competition law provides for fines of up to 500,000 leva for companies, which use misleading packaging, trademarks or other signs, which injure the interests of competitors. In Bulgaria, trademark and service-mark rights and rights to geographic indications arise only with registration at the Bulgarian Patent Office or an international registration mentioning Bulgaria; and do not arise simply with “use in commerce” of the mark or indication. Under Bulgarian law, legal entities cannot be held criminally liable. So the criminal penalties for copyright infringement and willful trademark infringement are likewise limited, in comparison with the enforcement mechanisms available under U.S. law.

4.5.12

Transparency of the Regulatory System

Taxation Issues The 1999 Tax Procedure Code regulates registration procedures of tax liable persons, collection of taxes and state receivables, and tax administration. The General Tax Administration Directorate, along with regional and local tax offices, is vested with the authority to assess liabilities and to collect taxes. The main tax laws govern income and corporate profits taxes. Personal income tax rates increase progressively from 15 to 29 percent. There are four income brackets, with a nontaxable minimum personal monthly income of 110 Bulgarian leva. Foreign individuals residing in Bulgaria are subject to Bulgarian income tax rates on their worldwide income. There is a 20 percent single-rate value-added tax (VAT). Both physical and legal persons with a taxable income of 75,000 leva are obliged to register for VAT purposes. VAT registration is voluntary for persons with taxable income of between 50,000 and 75,000 leva. All goods and services are subject to VAT except exports, international transport, and precious metals supplied to the central bank. VAT payments are generally rebated when goods are resold. Excise taxes are levied on tobacco, alcoholic beverages, fuels, certain types of automobiles, gambling equipment, coffee and tea.

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Foreign investors have asserted that widespread tax evasion combined with the failure of the authorities to enforce collection from large state-owned companies places foreign investors at a disadvantage. Another problem underscored by investors is the frequent revision of tax laws, sometimes without sufficient notice. However, in conjunction with its IMF agreement, the government is strengthening tax collections and limiting tax arrears of stateowned enterprises. Government officials have also indicated their long-term intention to lower marginal rates as tax collection improves.

Regulatory Environment An abundance of licensing and regulatory regimes, their sometimes arbitrary interpretation and enforcement by the bureaucracy, and the incentives thus created for corruption, have long been seen as an impediment to investment.

Competition Policy The 1998 Law on the Protection of Competition (the “Competition Law”) is intended to foster the establishment and maintenance of a competitive market. The Competition Law forbids monopolies, agreements of companies in restraint of competition, trade restrictive practices, abuse of a dominant market position, and unfair competition, and seeks to promote consumer protection. A company is presumed to have a dominant position if it controls 35 percent or more of the relevant market. A company with a dominant market position is prohibited from: certain pricing practices, limitation of manufacturing development to the detriment of consumers, discriminatory treatment of competing customers, tying contracts to additional and unrelated obligations, and use of economic coercion to cause mergers. The Law prohibits four specific forms of unfair competition: misrepresentation with respect to goods or services; misrepresentation with respect to the origin, manufacturer and other features of goods or services; and the use or disclosure of someone else’s trade secrets in violation of good faith commercial practices. The law also prohibits “unfair solicitation of customers” (promotion through gifts and lotteries), which may create difficulties for some foreign advertisers.

4.5.13

Capital Market Risks

Since October 1997, the Bulgarian Stock Exchange (BSE) has operated under a license by the Securities and Stock Exchange Commission (SSEC), pursuant to the 1995 Law on Securities, Stock Exchanges and Investment Companies. The 1999 Law on Public Offering of Securities regulates issuance of securities, securities transactions, stock exchanges, and investment intermediaries. Comprehensive amendments to the Law on the Public Offering of Securities, 99 in number, which became law in June 2002, establish significant rights for minority shareholders of publicly owned companies in Bulgaria. In addition, they create an important foundation for the adoption of international best practices corporate governance principles in public companies. As a result Bulgaria now has one of the best securities laws in Europe. Over the last couple of years, the infrastructure of the stock exchange has been substantially improved, including the establishment of an official index (SOFIX). New trading instruments -- government bonds, corporate bonds, Bulgarian Depositary Receipts, and privatization through the stock exchange, municipal and mortgage-backed bonds, and Bulgarian Depository Receipts -- have been introduced. Nonetheless, the stock exchange still lacks attractive securities and faces low liquidity.

Government Securities The government does finance government expenditures by accessing capital markets. On a weekly basis the Ministry of Finance holds an auction of Treasury bills. The bills are typically short-term (3-month, 6-month and 1year maturities). Commercial banks are the primary purchasers of these instruments. Foreign banks can participate www.icongrouponline.com

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in the treasury market only through a Bulgarian bank or the branch of a foreign bank, which is duly licensed in Bulgaria. The foreign bank transfers the money, which is then converted into leva to make the purchase. The foreign bank must open a leva account (referred to as a “custody account”) for transactions. This lev account cannot be used as a standard deposit bank account. A foreign currency account can be opened but it is not obligatory. The Foreign Investment Law defines securities, including treasury bills, with maturities over 6 months as investments. The purchase must be registered with the Ministry of Finance. Repatriation of profits is possible after presenting documentation that the taxes have been paid.

4.5.14

Political Violence

There have been no incidents in recent years involving politically motivated damage to projects or installations. Rather, violence in Bulgaria is primarily criminally motivated.

4.5.15

Corruption

Bulgaria has taken numerous steps, in terms of laws and legal instruments, to combat corruption. In practice, however, the human trafficking, drug and contraband smuggling systems that contribute to corruption in Bulgaria have yet to be broken, while the inefficient judicial system has yet to be fixed. The Bulgarian public generally holds the police, judges, customs agency and political parties in low regard, due to the perceived extent of corruption in those areas. Bribery is a criminal act under Bulgarian law for both the giver and the receiver. Penalties range from one to fifteen years imprisonment, depending on the circumstances of the case, with confiscation of property added in more serious cases. In very grave cases, the Penal Code specifies prison terms of 10 to 30 years. The 1996 Money Laundering Law also applies to bribes. Bribing a foreign official is a criminal act. There have been trials and convictions of enterprise managers, prosecutors and law enforcement officials for corruption. While Bulgarian tax legislation does not explicitly disallow the deduction of bribes in the computation of domestic taxes, deductions connected with bribery and other illegal activities are not permitted. Bulgaria has a 1996 Law for Measures against Money Laundering and in 1998 was one of the first non-OECD nations to ratify the OECD Anti-Bribery Convention. It is a member of the OECD’s anti-bribery working group. Parliament amended the Penal Code to implement some provisions of the Convention and is considering further amendments to bring Bulgaria into full compliance. Bulgaria has also ratified the Convention on Laundering, Search, Seizure and Confiscation of Proceeds of Crime and the Civil Convention on Corruption. Under the Stability Pact Anti-Corruption Initiative, Bulgaria has committed to: •

Sign, ratify and implement the Council of Europe Criminal Law Convention on Corruption;

•

Apply the Twenty Guiding Principles for the fight against corruption by the Committee of Ministers of the Council of Europe; and

•

Implement the forty recommendations of the Financial Action Task Force on Money Laundering (FATF).

Although the Bulgarian government has achieved some successes in the fight against organized crime and corruption, many observers believe that corruption and political influence in business decision-making continue to be significant problems in Bulgaria’s investment climate.

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Bilateral Investment Agreements

As of January 2003, Bulgaria has signed foreign investment promotion and protection treaties or agreements with Albania, Algeria, Argentina, Armenia, Austria, Belarus, Belgium-Luxembourg, China, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Georgia, Germany, Greece, Great Britain and Northern Ireland, Hungary, India, Iran, Israel, Italy, Kazakhstan, Kuwait, Lebanon, Libya Macedonia, Malta, Moldova, Mongolia, Morocco, Netherlands, Nigeria, Pakistan, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sudan, Sweden, Switzerland, Syria, Tunisia, Turkey, Ukraine, the United States, Uzbekistan, Vietnam, Yugoslavia. Bulgaria signed a Bilateral Investment Treaty (BIT) with the United States, which guarantees national treatment for U.S. investments and creates a dispute settlement process. The BIT also includes a side letter on protections for intellectual property rights. Currently the U.S., EU and Bulgaria are discussing possible revisions to the BIT to address issues that have arisen in the course of Bulgaria’s EU accession process.

4.5.17

OPIC and Other Investment Insurance

In 1991, the Overseas Private Investment Corporation (OPIC) and the Government of Bulgaria signed an Investment Incentive Agreement, which governs OPIC’s operations in Bulgaria. OPIC provides project financing and political risk insurance to U.S. investors making long-term investments in emerging markets. OPIC also supports a number of privately owned and managed private equity funds, including a regional fund for Southeast Europe created as part of the U.S. Southeast Europe Initiative. OPIC provides project financing through direct loans and loan guaranties that provide medium- to long-term financing to ventures involving significant equity and/or management participation by U.S. businesses. OPIC offers American investors insurance against currency inconvertibility, expropriation and political violence. Political risk insurance is also available from the Multilateral Investment Guarantee Agency (MIGA), which is a World Bank affiliate, as well as from a number of private U.S. companies.

4.5.18

Labor

Bulgaria’s workforce officially consists of 3,249,000 highly educated and skilled men (53 percent) and women (47 percent). The literacy rate in Bulgaria is 93 percent. A high percentage of the workforce has completed some form of secondary, technical, or vocational education. Many Bulgarians have strong backgrounds in engineering, medicine, economics and the sciences, but there is a shortage of professionals with Western management skills. The aptitude of workers and the relative low cost of labor are considerable incentives for foreign companies, especially those which are labor intensive, to invest in Bulgaria. Employer tax obligations and benefits (clothing allowance, bonuses, etc.) can add more than 50 percent to the nominal wage. Bulgaria’s 1991 Constitution (Article 49) recognizes workers’ right to join trade unions and organize. In theory, the National Tripartite Cooperation Council (NTCC) provides a forum for dialogue among government, management, and trade unions such as cost-of-living adjustments. Bulgaria has two large trade union confederations, the Confederation of Independent Trade Unions of Bulgaria (CITUB) and Podkrepa (“Support”). CITUB, the successor to the trade union integrated with the former Communist Party, has long since severed its ties to the socialists, whereas Podkrepa is an independent confederation. There are few restrictions on trade union activity and the confederations operate freely, but the workforce in smaller firms and elsewhere in the emerging private sector is often not represented by trade unions.

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Under the 1986 Labor Code, as amended, employer and employee relations are regulated by employment contracts, which may be agreed upon through collective bargaining. The Code extends what some complain are excessive protections for workers. For instance, maternity and post-natal child care requirements dictate that employers hold positions for nearly three years while the employee continues to receive payments from the social security fund. The Code also addresses worker occupational safety and health issues, establishes a minimum wage (determined by the Council of Ministers) and prevents exploitation of workers, including child labor. The Code clearly delineates employer rights, strengthening management’s hand in disciplining the workforce. Unresolved disputes between labor and management can be referred to the courts, but resolution is often subject to delays. In March 2001, the Labor Code was overhauled to address labor market rigidities and to bring labor legislation into compliance with the EU requirements. The amendments to the Labor Code simplify additional work procedures, restrict mandatory leaves and relax procedures for implementing collective redundancies. However, collective labor contracts at the sectoral or branch level remain binding for all enterprises of the sector or branch. The minimum annual paid leave is 20 days. Neither foreign companies nor Bulgarian companies having majority foreign-control are exempt from the requirements of the Labor Code. Articles 29-32 of the Foreign Investment Law cover employment relations and social security contributions for Bulgarian and foreign employees. The Embassy is not aware of any significant violations on the part of the Bulgarian Government with respect to ILO Conventions protecting worker rights.

4.5.19

Free Trade Zones and Free Ports

The Duty Free Trade Zones (FTZs) were established in Bulgaria in 1987 under Decree No. 2242 “On the Duty Free Zones and its Regulations for Application.” The Law on Customs, effective January 1999, renamed the six duty-free zones “free zones.” The law specifies that the free zones must have access control at fixed entrance and exit points. New construction within the free zones is to be undertaken in conformity with the customs authorities. Foreign, including U.S., individuals and corporations, and Bulgarian companies with 1.0 percent or more foreign ownership may set up operations in a free zone. Thus, foreign-owned firms have equal or better investment opportunity in the zones as compared to Bulgarian firms. There are at present six operational “free zones” in Bulgaria: Ruse and Vidin ports on the Danube, Plovdiv, Svilengrad (near the Turkish border), Dragoman (near the Yugoslav border), and Burgas port on the Black Sea. All of them are owned by joint stock or state-owned companies. The government provided land and infrastructure for each zone. All forms of production and trade activities and services may take place in the free zones. Foreign goods delivered to the free zones with purpose of production, storage, processing or re-export are VAT and duty exempt. Bulgarian goods may also be stored in free zones with permission from the customs authorities. Convertible foreign currency may be used, and revenues can be transferred abroad freely without any restrictions. Administrative procedures relieve the investor’s need to contact local authorities directly. Production and labor costs are low with well-trained and highly qualified labor available. All the zones are located on strategic trade rail, road and/or water trade routes. The free trade zones in Bulgaria have attracted a number of foreign investors to undertake processing and trade activities, including Hyundai, Daewoo, KIA Motors, CITCO, Schwartskopf, Henkel, Landmark Chemicals Ltd., Group Schneider, and BINDL Energic Systeme GmbH.

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TRADE AND PROJECT FINANCING The Banking System

Although Bulgaria is predominantly a cash economy, the use of debit and credit cards is increasing. The increase is mainly due to two factors, one being that many state organizations have started crediting monthly salaries to the debit cards of their employees, while many banks lumped a debit card with the provision of other services like loans and deposits. Development of services for consumers, such as debit cards, started within the last couple of years, while personal checks are almost unknown and unused as a method of payment for locals. However, payment by debit cards is accepted in some of the retail chain of shops and gas stations and is gaining increasing popularity. Checks and credit cards are used mainly by foreigners. The Bulgarian National Bank (BNB) operates independently of the government and reports directly to Parliament. The BNB regulates the banking system, but, under the Currency Board Arrangement, has no discretion in setting monetary or exchange rate policy. There are 34 commercial banks in Bulgaria; twenty eight are fully licensed and authorized to engage in international transactions and six are branches of foreign banks in Bulgaria. The Bulgarian-American Credit Bank, wholly owned by the Bulgarian-American Enterprise Fund, has been fully licensed since December 30, 1998. Foreigners hold approximately 73% of the total banking capital. Citibank is the only U.S. bank with an office in Bulgaria. According to the Bulgarian National Bank, the largest banks in terms of total assets were Bulbank, United Bulgarian Bank and DSK Bank (the former State Savings Bank). There are no state-owned banks in Bulgaria. The privatization of the banking sector handled by the Bank Consolidation Company is considered to have been the most successful privatization in Bulgaria.

4.6.2

Foreign Exchange Control Risks

International financial remittances in payment of imports into Bulgaria are generally allowed. The export of hard currency by commercial entities, including juridical persons and sole traders, is permitted only by bank transfer. Transfers for current international payments (imports of goods and services, transportation, interest and principal payments, insurance, training, medical treatment and other purposes defined in Bulgarian regulations) must be supported by documentation such as invoices, certificates, or transport documents, to the transferring bank.

4.6.3

General Financing Availability

Commercial financing is beginning to become more available for private companies and consumers in Bulgaria and commercial banks are giving credits much easier than they did several years ago.

4.6.4

Availability of GSM Credit Guarantees

GSM credit guarantees are not available for Bulgaria.

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Financing Export Strategies

Depending on the source of financing, trade and investment projects receiving financing support range from the export of nuclear reactor control equipment to the establishment of a bakery, a yogurt factory, and an ice-cream distributorship . Financing is also available to strengthen banks, and for infrastructure projects such as reconstruction of electrical generating stations, waterworks and roads. Again, depending on the source of financing, projects can range from $10,000 to more than 100 million dollars.

4.6.6

Financing from International Financial Institutions

Financing of U.S. investment projects in Bulgaria is available from the EBRD, World Bank, Overseas Private Investment Corporation (OPIC), and several other U.S.-based and other organizations. Participation of a multilateral bank such as the EBRD in a project also assists exporters through the requirement of open competitive tendering procedures which enables U.S. suppliers to bid, as well as helps the procuring entity to get the best value for its money.

European Bank for Reconstruction and Development The European Bank for Reconstruction and Development (EBRD), whose largest shareholder is the U.S. Government, has a number of programs available to U.S. investors. The Bank makes loans as well as takes equity stakes in infrastructure projects. It will be increasingly focusing on private-sector development in Bulgaria. It also mandates open competitive tenders in procurements, which give U.S. companies opportunities to supply goods and services. The EBRD has an office in Sofia. The EBRD has also started an investment fund that will invest in smalland medium-sized businesses in the Balkan region.

International Bank for Reconstruction and Development (World Bank) While the International Bank for Reconstruction and Development (World Bank) does not give loans for privatesector investments, its procurement procedures enable U.S. exporters to bid on public procurement contracts. To date, approved projects are in the energy, telecommunications, residential heating, railways, health, environmental and public administration sectors. The World Bank has an office in Sofia.

European Investment Bank The European Investment Bank (EIB) is the most important source of EU project financing for U.S. companies, as they can participate in most tenders involving EIB loans of its own resources. Trans-European Network (TEN) energy, telecommunications and transport sectors are priorities for the EIB. Loans for Bulgaria include ECU 60 for construction of a new passenger terminal and apron at Sofia Airport.

Multilateral Investment Guarantee Agency The Multilateral Investment Guarantee Agency (MIGA) is part of the World Bank Group. Its purpose is to encourage foreign investment in developing countries by providing investment guarantees (political risk insurance) against the risk of currency transfer, expropriation, war, civil disturbance and breach of contract by the host government.

PHARE Program/ISPA The European Union’s PHARE Program delivers financial and technical assistance in key sectors of the beneficiary governments’ efforts to restructure their economies toward a market-oriented system, and contributes to creating the www.icongrouponline.com

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administrative, regulatory, financial and commercial framework. The European ISPA funds are grants to help bring Bulgaria’s infrastructure up to European levels as part of the European Union accession process. Some American companies may qualify for PHARE- and ISPA-funded contracts if they have subsidiaries in Europe that qualify as European companies pursuant to EU definitions.

4.6.7

Types of Available Export Financing and Insurance

Trade finance options for Bulgarian importers are still limited. In most instances, Bulgarian companies assume the full financial burden in purchasing goods. Some companies use Letters of Credit (LCs). In trying to make sales in Bulgaria, U.S. companies may have to develop creative payment schemes, which may increase the risk of the transactions. To offset that risk, it is necessary to develop a strong client relationship. There are a number of methods used to settle payment in Bulgaria: cash in advance, letter of credit used in conjunction with a documentary draft (time or sight), promissory note, documentary collection or draft, open account and consignment sales. As with U.S. domestic transactions, a major factor determining the method of payment is the degree of trust in the buyer’s ability and willingness to pay. Because of the protection it offers to the American exporter and the Bulgarian importer, an irrevocable letter of credit (L/C) payable at sight is commonly used for settlement of international payments. Another payment option is the use of documentary collection or open account with international credit insurance which, unlike the letter of credit, allows the importer’s line of credit to remain open. At the same time, this option protects the exporter if the buyer goes bankrupt or cannot pay.

4.6.8

Banks with Correspondent Banking Arrangements

Contact information for all Bulgarian banks may be found on the Bulgarian National Bank http://www.bnb.bg Web site. Some Bulgarian banks may have 100 or more U.S. correspondent banks, and some U.S. banks may have correspondent relations with more than one Bulgarian bank. As banking relationships can change quickly, the best source of current information on correspondent banking arrangements is the banks themselves.

4.7 4.7.1

TRAVEL RISKS Local Business Practices

Bulgarians are less formal than Western Europeans from dress to the manner of their business contacts. Meetings, including lunches or dinners, are used as an opportunity to get acquainted and as a basis for developing a relationship of trust. Companies use stand-up evening receptions at hotels, restaurants, trade shows, and even museums and auto showrooms for public relations and to solidify business relationships. Businesspeople may go without a jacket or tie or wear casual clothes in summer. One charming but confusing custom is that head movements indicating agreement or disagreement are reversed in Bulgaria. The rocking of the head from left-to-right, often with a slight smile, means “yes” while nodding up-anddown indicates “no.” But with foreign language fluency growing, some Bulgarians will use head movements in typical Western fashion. Therefore, it is best to clarify the situation by obtaining a verbal response.

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Travel Issues

A visa is not required for U.S. citizens visitors using regular passports to enter and stay in the country for a total of 30 days within a six-month period. Travelers who intend to stay more than 30 days, or travelers using official or diplomatic passports, must secure a Bulgarian visa from a Bulgarian embassy/consulate prior to arrival. The fees connected with the extension of a visitor’s 30-day stay in the country are much higher than the visa fees. As of December 1, 2001, all foreign citizens traveling to Bulgaria must present valid evidence of health insurance to the Bulgarian border authorities in order to be admitted into the country. The insurance should be valid for the duration of the traveler’s stay in Bulgaria. All travelers are required to register with the regional passport office for foreigners of the police within 48 hours after their arrival in the country and to inform the office about any change in their address. Registration is taken care of by the proprietor for those staying at a hotel, a private boarding house or an apartment rented through an accommodation company. The Bulgarian authorities do not consider a copy of the passport sufficient. Visitors should carry their passport with them at all times. For further information concerning entry requirements, travelers should contact the Embassy of the Republic of Bulgaria at 1621 22nd St., NW., Washington, DC. 20008, Web site http://www.bulgaria-embassy.org, phone (202) 483-5885 (main switchboard 202-387-7969) or the Bulgarian Consulate in New York City. Bulgarian law requires that travelers entering Bulgaria with more than 5000 Bulgarian leva or the equivalent in foreign currency (around $3,000) or travelers checks declare the money/checks upon arrival to customs officials. Travelers entering Bulgaria at Sofia Airport and carrying currency in excess of the above amount use the red (“Something to Declare”) line and not the green (“Nothing to Declare”) line, even if specifically invited into the green line by a customs official. Travelers should carry their passport with them at all times. Travelers are subject to arbitrary document checks by the police, and persons traveling without proper identification may be detained while their right to be in the country is verified. Taxi drivers at Sofia airport often refuse to run their meters and charge arbitrary fees. Visitors should expect to pay $15-$20 for this ride, although much more expensive than the meter rate. Travelers who pre-negotiate a fare can avoid the more outrageous overcharging. An alternative is to call ahead for a taxi or use the city bus from the airport. The Sheraton, the Hilton and the Radisson SAS hotels offer shuttle bus pick-up. Preliminary reservation is requested. Because incidents of pilferage of checked baggage at Sofia airport are common, travelers should not include items of value in checked luggage. Petty street crime, much of which is directed against foreigners, and auto theft, continue to be problems. Pickpocket and purse snatching attacks on the street or in public buses and trams are frequent occurrences, as is theft from automobiles, where thieves smash windows to remove valuables left in sight. While violent crimes against persons are generally low throughout Bulgaria, visitors should exercise caution when approached by strangers or before walking in unfamiliar neighborhoods. American citizens visiting Bulgaria are encouraged to register at the Consular Section of the U.S. Embassy in Bulgaria and obtain updated information on travel and security within Bulgaria. The Embassy’s Web site address is www.usembassy.bg. Visitors should exchange cash or travelers checks at banks or exchange bureaus. Some exchange bureaus charge commissions on both cash and travelers check transactions which may be high or not clearly posted. Damaged or very worn U.S. dollar bank notes are often not accepted at banks or exchange bureaus. Major hotels accept credit cards, but most shops and restaurants do not. ATM cash machines are increasing in numbers in Sofia and other major cities, but bank cards, debit cards and credit cards should be used with caution due to the potential for fraud or other criminal activity. Although Bulgarian physicians are trained to a very high standard, most hospitals and clinics are generally not equipped and maintained at U.S. or West European standards. Basic medical supplies are widely available, but specialized treatment may not be obtainable. Visitors must pay cash for medical and health services. While there are

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no vaccinations or special health warnings at this time, travelers should check with their physicians or the State Department for the latest advisory.

4.7.3

Work Week

Bulgarians work a 40-hour week with businesses open from about 8:30 - 9:00 a.m. Monday through Friday. During the summer months, scheduling meetings late on Fridays may be difficult as workers tend to leave early for weekend getaways. As in the rest of Europe, business activity grinds to a near halt during the latter part of July and most of August when many Bulgarians take their extended summer holidays.

4.7.4

Infrastructure for Conducting Business

Sofia is served by major European airlines including Air France, Alitalia, Austrian Airlines, British Airways, Czech Airlines, Lauda Air, LOT, Lufthansa, MALEV, Olympic, and Turkish Airlines. Bulgaria Air, the national carrier, is currently operating international flights with limited aircraft. Bulgaria Air also offers domestic service between Sofia and Varna and Burgas. Hemus Air flies to short-range domestic and regional destinations. Destinations to other parts of the country may be reached by car, bus or train. Car rental from Hertz and Avis is also available. Sofia has a comprehensive bus, tram and trolley system. Tickets cost BGN 0.50 and can be purchased in newspaper kiosks or special ticket stands. Large baggage also needs a ticket. Daily, five-day, and monthly cards are also available. Passengers are on the “honor system” and expected to validate their own tickets after boarding. Occasionally, plainclothes inspectors make spot checks, imposing BGN 5.00 fines on those traveling without tickets. Sofia’s subway reaches from the suburb of Lyulin to the center of the city, but it is of yet of little use to the business traveler. Taxis are more than affordable -- most destinations around the center of the city can be reached for little more than $1. Slightly higher rates apply at night. It is advisable to call ahead to a reputable taxi company for radio dispatch for personal security as well as to avoid overcharges. The majority of hotels in Bulgaria are at the 2- and 3-star level. In Sofia, there are four international-class hotels: Sheraton Sofia Hotel Balkan, Radisson Sofia, Sofia Hilton and the Kempinski Hotel Zografski. Other hotels include the Ambassador Hotel and Castle Hrankov Hotel (both 15 minutes from the city-center) and the Park Hotel Moskva. The Maria Luiza and Gloria Palace are two other smaller hotels centrally located. The Pliska and Grand Hotel Bulgaria are lower in price but vary substantially from the top tier hotels in terms of services, comfort and quality. The Princess Hotel (formerly Novotel) has been renovated and is currently under new management. BTC has installed much of central Sofia with digitally-switched telephone lines allowing direct-dial international calls to the rest of Europe and the United States from hotels, offices and residences. AT&T, MCI and Sprint all have access numbers in Bulgaria for credit card and collect calls. In some parts of the country, telephoning can be difficult, as many rural areas still have only old analog switches. Food in Bulgaria is abundant and many good restaurants exist in the larger cities. A growing number of very attractive small private restaurants and hotels are also opening in the smaller cities and villages. It is possible to have a good meal for well under $15. Bulgarian is a Slavic language that uses the Cyrillic alphabet. In business, the usage of English is increasing. Nearly all Bulgarians have some level of Russian language comprehension. German and French are also widely spoken.

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Temporary Entry of Business Equipment and Materials

Personal items brought in temporarily by travelers such as laptop computers, software, and exhibition materials should be declared upon arrival. Travelers should declare jewelry, cameras, and other valuables upon arrival in order to avoid difficulties when departing. The declaration form should be presented to Customs upon departure.

4.7.6

4.8 4.8.1

Country Data Population: Religions: Government System: Language: Length of Work Week

7,977,646 Orthodox Christian, Moslem, Jewish Constitutional Parliamentary Democracy Bulgarian 40 hours

Sources:

National Statistical Institute

KEY CONTACTS U.S. Government Contacts

U.S. Embassy - Sofia Ambassador: James W. Pardew Deputy Chief of Mission: Jeffrey Levine 1, Saborna Street 1000 Sofia Phone: (359)(2) 937-5100 Fax: (359)(2) 989-2200 Web site: http://www.usembassy.bg All mail from the United States to the respective sections of the U.S. Embassy in Sofia should be addressed to: U.S. Embassy Sofia Department of State 5740 Sofia Place Washington, DC 20521-5740 All packages, courier deliveries and other mail should be sent to: U.S. Embassy Sofia 1, Saborna Street 1000 Sofia The following are contact information and office locations for important sections of the U.S. Embassy in Sofia: U.S. Commercial Service Sofia Commercial Attaché: Reginald A. Miller Senior Commercial Specialist: Uliana Kanelli

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Commercial Specialist: Tsvetanka Kolarova Commercial Specialist: Georgi Peev Commercial Assistant: Emily Taneva NDK Administrative Building - 5th Floor 1, Bulgaria Square 1414 Sofia Phone: (359)(2) 963-4062, 963-2014 Fax: (359)(2) 980-6850 E-mail: [email protected] Web site: http://www.usatrade.gov/bulgaria Foreign Agricultural Service Agricultural Attaché: Holly Higgins Agricultural Specialist: Mila Boshnakova NDK Administrative Building - 5th Floor 1, Bulgaria Square 1414 Sofia Phone: (359)(2) 951-5561, 963-1247, 951-5587 Fax: (359)(2) 981-6568 E-mail: [email protected] Web site: http://www.fas.usda.gov Department of State Political-Economic Counselor: Bradley Freden Economic Officer: Eric Jones 1, Saborna Street 1000 Sofia Phone: (359)(2) 937-5100 Fax: (359)(2) 981-8977 U.S. Agency For International Development (USAID) AID Representative: Debra McFarland Chief, Private Enterprise Office: David Lieberman Project Development Officer: Ivanka Tsankova NDK Administrative Building - 5th Floor 1, Bulgaria Square 1414 Sofia Phone: (359)(2) 951-5670; 951-5381 Fax: (359)(2) 964-0102 U.S. Information Service Public Affairs Officer: Mathew Lussenhop 18, Vitosha Street 1000 Sofia Phone: (359)(2) 980-4838, 980-3667 Fax: (359)(2) 980-3646 E-mail: [email protected] Web site: http://www.usis.bg

U.S. Government Offices in Southeast Europe Export-Import Bank of the United States Margaret Kostic, Director - Southeast Europe www.icongrouponline.com

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Structured and Trade Finance Division Hebrangova 11/II 1000 Zagreb, Croatia Phone: (385)(1) 492-1677 Fax: (385)(1) 492-1900 E-mail: [email protected] Web site: http://www.exim.gov The Overseas Private Investment Corporation (OPIC) John F. Moran, Director, Business Development U.S. Embassy Zagreb Andrije Hebranga 11/2 10000 Zagreb, Croatia Phone: (385)(1) 461-0777 Fax: (385)(1) 455-3126 E-mail: [email protected] Web site: http://www.opic.gov U.S. Commercial Service Zagreb, Croatia Commercial Attaché: Beryl Blecher U.S. Embassy Zagreb Andrije Hebranga 11/2 10000 Zagreb, Croatia Phone: (385)(1) 492-3777 Fax: (385)(1) 492-1900 E-mail: [email protected] U.S. Commercial Service Athens, Greece Commercial Attaché: Walter Hage 91 Vasilissis Sophias Avenue 101 60 Athens, Greece Phone: (30)(10) 720 2303 or 2302 Fax: (30)(10) 721 8660

U.S. Government Agencies Trade Information Center (TIC) Phone: (800) USA-TRADE Fax: (202) 482-4443 U.S. Department of Commerce, Market Access and Compliance Jonathan Kimball Office of Bulgaria, Room 3319 Washington, DC Phone: (202) 482-4915 Fax: (202) 482-4505 E-mail: [email protected] U.S. Department of Commerce, Central and East European Business Information Center (CEEBIC) Jennifer Gothard Washington, DC Phone: (202) 482-2645 Fax: (202) 482-3898 www.icongrouponline.com

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E-mail: jennifer [email protected] The Overseas Private Investment Corporation (OPIC) Ms. Barbara Brereton, Manager CEE Investment Promotion - OPIC 1100 New York Avenue, NW Washington, DC 20572 Phone: (202) 336-8617 Fax: (202) 408-5145 Program Information: Phone: (202) 336-8799 Fax: (202) 408-9859 Web site: http://www.opic.gov Trade and Development Agency Andrea Lupo, Country Manager 1000 Wilson Boulevard Suite 1600 Arlington, VA 22209 Phone: (703) 875-7159 Fax: (703) 875-4009 E-mail: [email protected] Web site: http://www.tda.gov U.S. Department of State Bulgaria Desk Officer: Debra Smith Office of South Central European Affairs Phone: (202) 647-4850 Fax: (202) 647-0555 E-mail: [email protected] Office of the Coordinator for Business Affairs J. Frank Mermoud 2201 CSt., NW Washington DC 20520-5820 Phone: (202) 647-1625 Fax: (202) 647-3953 E-mail: [email protected] U.S. Department of Agriculture Foreign Agricultural Service Trade Assistance and Promotion Office Leslie Burket, Manager Phone: (202) 720-7420 Fax: (202) 690-2489 Small Business Administration Office of International Trade Manuel A. Rosales, officer 409 3rd Street, SW Washington, DC 20416 Phone: (202) 205-6720 Fax: (202) 205-7272 E-mail: [email protected] www.icongrouponline.com

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178

Trade and Industry Associations

American Chamber of Commerce in Bulgaria President: Ken Lefkowitz Executive Director: Valentin Georgiev Business Park Sofia Building 2, floor 6 Mladost 4 Area 1715 Sofia Phone: (359)(2) 976-9565, 976-9566 Fax: (359)(2) 976-9569 E-mail: [email protected] Web site: http://www.amcham.bg Bulgarian Chamber of Commerce and Industry President: Mr. Bozhidar Bozhinov 42, Parchevich Street 1000 Sofia Phone: (359)(2) 987-3629; 987-2631/35 Fax: (359)(2) 987-32-09 U.S. Desk Officer: Ms. Mariana Tancheva E-mail: [email protected] Web site: http://www.bcci.bg Bulgarian International Business Association Executive Director: Ms. Adriana Sukova-Tosheva 55, Stamboliiski Boulevard 1000 Sofia Phone: (359) (2) 988-6776, 981-9169 Fax: (359) (2) 981-9564 E-mail: [email protected] Web site: http://www.biba.bg Bulgarian Industrial Association Chairman: Mr. Bozhidar Danev Director, International: Branimir Handjiev 16-20, Alabin Street 1000 Sofia Phone: (359)(2) 932-0911, 932-0914, 932-0922 Fax: (359)(2) 987-2604 E-mail: [email protected]; [email protected] Web site: http://www.bia-bg.com Bulgarian Building and Construction Chamber Mr. Simeon Pashov, Chairman Ms. Vanya Shopova, Chief of Secretariat 23, Chumerna Street 1202 Sofia Phone: (359)(2) 988-9585, 988-9355, 988-9356 Fax: (359)(2) 988-6880, 9886881

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E-mail: [email protected] Web site: http://www.bbcc-bg.org Bulgarian Association for Information Technologies & nbsp; Mr. Vasil Vasilev, Chairman Ms. Marieta Popova, Executive Director 13 Shipka Street 1504 Sofia Phone: (359)(2) 946-1513 Fax: (359) (2) 946-1451 E-mail: [email protected]; [email protected] Web site: http://www.bait.bg Bulgarian Franchising Association Mrs. Lyubka Kolarova, Director 30, Ivan Vazov Street 9010 Varna Phone: (359) (52) 601-043 Fax: (359)(52) 601-043 E-mail: [email protected], [email protected] Web site: http://www.bulfa.net

4.8.3

Bulgarian Government Contacts

Ministry of Economy Minister: Ms. Lidiya Shuleva (also Deputy Prime Minister) 8, Slavianska Street 1040 Sofia Phone: (359)(2) 980-1282 Fax: (359)(2) 988-5532 E-mail: [email protected] Web site: http://www.mi.government.bg Ministry of Agriculture, Forestry and Agrarian Reform Minister: Mr. Mehmed Dikme 55, Hristo Botev Boulevard 1040 Sofia Phone: (359)(2) 985-11222, 985-11199 Fax: (359)(2) 981-9173 E-mail: [email protected]; [email protected] Web site: http://www.mzgar.government.bg Ministry of Environment and Waters Minister: Ms. Dolores Arsenova 67, William Gladstone Street 1000 Sofia Phone: (359)(2) 940-6222, 988-2577 Fax: (359)(2) 986-2533 E-mail: [email protected] Web site: http://www.moew.government.bg Ministry of Energy and Energy Resources

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Minister: Mr. Milko Kovachev 8, Triaditza Street 1040 Sofia Phone: (359)(2) 980-6303, 988-5932 Fax: (359)(2) 986-5703 E-mail: [email protected]; [email protected] Web site: http://www.doe.bg Ministry of Finance Minister: Mr. Milen Velchev 102, Rakovsky Street 1040 Sofia Phone: (359)(2) 985-92020, 985-92001 Fax: (359)(2) 987-2053 E-mail: [email protected]; [email protected] Web site: http://www.minfin.government.bg Ministry of Health Minister: Mr. Slavcho Bogoev 5, Sveta Nedelia Square 1000 Sofia Phone: (359)(2) 987-5051, 93 01 101 Fax: (359)(2) 981-0627 E-mail: [email protected]; [email protected] Web site: http://www.mh.government.bg Ministry of Regional Development and Public Works Minister: Mr. Valentin Tserovski 17-19, Kiril and Metodius Street 1000 Sofia Phone: (359)(2) 940-5517, 9804848 Fax: (359)(2) 983-5685 E-mail: [email protected] Web site: http://www.mrrb.government.bg Ministry of Transport and Communications Minister: Mr. Nikolay Vasilev 9, Dyakon Ignatii Street 1000 Sofia Phone: (359)(2) 988-1230, 940-9402, 949-2834, 988-5329 Fax: (359)(2) 987-3916 E-mail: [email protected] Web site: http://www.mtc.government.bg Deputy Minister (Aviation): Ms. Krasimira Martinova 9, Dyakon Ignatii Street 1000 Sofia Phone: (359)(2) 940-9406 Fax: (359)(2) 981-9798 Deputy Minister (Ground Transport): Ms. Anelia Krushkova 9, Dyakon Ignatii Street 1000 Sofia www.icongrouponline.com

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Phone: (359)(2) 940-9410 Fax: (359)(2) 988-5094 Deputy Minister (Telecommunications): Mr. Nedelcho Nedelev 9, Dyakon Ignatii Street 1000 Sofia Phone: (359)(2) 940-9408 Fax: (359)(2) 988-0230 Ministry of Culture Minister: Mr. Bozhidar Abrashev 17, Alexander Stamboliiski Street 1000 Sofia Phone: (359)(2) 987-5648, 980-5384, 989-4838 Fax: (359)(2) 981-8145, 9873658 Web site: http://www.culture.government.bg Ministry of Defense Minister: Mr. Nikolay Svinarov 3, Dyakon Ignatii Street 1000 Sofia Phone: (359)(2) 922-0922, 987-9562, 988-5885 Fax: (359)(2) 987-3228 E-mail: presscntr@ md.government.bg Web site: http://www.md.government.bg Ministry of Interior Minister: Mr. Georgi Petkanov 29, Shesti Septemvri Street 1000 Sofia Phone: (359)(2) 982-2014, 982-3754 Fax: (359)(2) 982-2047, 987-7967 E-mail: [email protected]; [email protected]; [email protected] Web site: http://www.mvr.bg Road Executive Agency Executive Director: Mr. Pavel Dikovski 3, Macedonia Blvd. 1606 Sofia Phone: (359)(2) 952-17-68 Fax: (359)(2) 951-5422 E-mail: [email protected] Web site: http://www.rea.bg Foreign Investment Agency President: Mr. Pavel Ezekiev 31, Aksakov Street 1000 Sofia Phone: (359)(2) 980-0918, 985-5505 Fax: (359)(2) 980-1320 E-mail: [email protected] Web site: http://www.bfia.org Privatisation Agency www.icongrouponline.com

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Executive Director: Mr. Ilia Vasilev 29, Aksakov Street 1000 Sofia Phone: (359)(2) 987-7579; 987-3249; 980-9827 Fax: (359)(2) 981-6201, 981-1307 E-mail: [email protected] Web site: http://www.priv.government.bg Communications Regulation Commission Chairman: Mr. Georgi Alexandrov 6, Gurko St. 1000 Sofia Phone: (359)(2) 949-2335 Fax: (359)(2) 987-0695 E-mail: [email protected] Web site: http://www.crc.bg Bulgarian Institute for Standardization Chairman: Mr. Ivelin Burov 21, Shesti Septemvri Street 1000 Sofia Phone: (359)(2) 988 5043/ 980 8920 Fax: (359)(2) 980-6317 E-mail: [email protected]; [email protected] National Customs Agency Director: Mr. Assen Assenov 1, Aksakov Street 1040 Sofia Phone: (359)(2) 9859-4210, 9859-4443 Fax: (359)(2) 980-6461 E-mail: [email protected] Web site: http://www.customs.bg Patent and Trademark Office Director: Ms. Tsonka Taushanova 52-B G. M. Dimitrov Street 1040 Sofia Phone: (359)(2) 970-1302 Fax: (359)(2) 870-8325 E-mail: [email protected] Web site: http://www.bpo.bg

4.8.4

Major State Enterprises

Bulgarian National Bank Governor: Mr. Svetoslav Gavriiski (term finished but still governing) 1, Battenberg Sq. 1000 Sofia Phone: (359)(2) 91459, 914-51200 Fax: (359)(2) 980-2425, 980-6493

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E-mail: [email protected] Web site: http://www.bnb.bg Bulgarian State Railroad Company Director: Mr. Georgi Neshev 3, Ivan Vazov Street 1080 Sofia Phone: (359)(2) 981-1110, 987-6983, 932-4515 Fax: (359)(2) 987-7151, 981-6558 E-mail: [email protected] Web site: http://www.bg400.bg/bdz Bulgarian Telecommunications Company Executive Directors: Mr. Ivan Spasov and Mr. Boyko Dimitrachkov 8, General Totleben Street 1606 Sofia Phone: (359)(2) 949-4725, 954-9926 Fax: (359)(2) 951-5355, 954-9780 E-mail: [email protected] Web site: http://www.btc.bg National Electric Company Chairman: Mr. Angel Minev 5, Veslets Street 1040 Sofia Phone: (359)(2) 986-0944, 54909 Fax: (359)(2) 988-5931 E-mail: [email protected] Web site: www.nek.bg Bulgargaz Chief Executive Director: Mr. Kiril Gegov 66, Pancho Vladigerov Blvd, Lyulin -2 PO Box 3 1336 Sofia Phone: (359)(2) 984-251 (operator), 925-0359 Fax: (359)(2) 925-0401 E-mail: [email protected]; [email protected] Web site: http://www.bulgargaz.bg; http://www.bulgargaz.com

4.8.5

U.S.-based Financial Institutions in Bulgaria

Bulgarian American Enterprise Fund Mr. Frank Bauer, President 333 West Wacker Dr., Suite 2080 Chicago, Illinois 60 606 Phone: (312) 629-2500 Fax: (312) 629-2929 E-mail: [email protected] Mr. Thomas Higgins Managing Director

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3, Shipka Street Sofia 1504, Bulgaria Phone: (359)(2) 943-3077, 943-3036, 946-0119 Fax: (359)(2) 946-01-18 E-mail: [email protected] Web site: http://www.baefinvest.com SEAF-Fund Ms. Magdalena Kovalska, Director General 22 Zlaten Rog Str. Floor 8, office 20 1407 Sofia Phone: (359)(2) 917 4950 Fax: (359)(2) 917 4951 E-mail: [email protected] Web site: http://www.seaf.bg Citibank N.A. - Sofia Branch Mr. Plamen S. Iltchev, Country Representative 2, Maria Luisa Blvd. TSUM Business Center 1000 Sofia Phone: (359)(2) 917-5100 Fax: (359)(2) 981-9914 E-mail: [email protected]; [email protected] Web site: http://www.citigroup.com/bulgaria

4.8.6

International Financial Institutions

European Bank for Reconstruction and Development Mr. John Chomel-Doe, Director, Bulgaria Sofia Resident Office 17, Moskovska Street 1000 Sofia Phone: (359)(2) 932-1414 Fax: (359)(2) 932-1441 E-mail: [email protected] Web site: http://www.ebrd.com European Investment Bank Mr. Max Messner 100, Boulevard Konrad Adenauer L-2950 Luxembourg Phone: (352) 4379-3150 Fax: (325) 4379-3189 E-mail: [email protected] ; [email protected] Web site: http://www.eib.org Multilateral Investment Guarantee Agency 1818 H Street, N.W. Washington, D.C. 20433

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Phone: (202) 458 9292 Fax: (202) 522-2630 Web site: http://www.miga.org PHARE Program Mr. Luciano D’erman, Head of PHARE and ESPA 9 Moskovska Str. Sofia 1000 Phone: (359)(2) 933-5252, Fax: (359)(2) 933-5233 E-mail: [email protected] Web site: www.evropa.bg The World Bank Mr. Oscar de Bruyn Kops, Country Manager 36, Dragan Tsankov Street World Trade Center, block A, 5th Fl. 1057 Sofia Phone: (359)(2) 969-7229 Fax: (359)(2) 971-2045 E-mail: [email protected] Web site: www.worldbank.bg

4.8.7

Bulgarian Business Publications

Infobusiness (published in English) Bulgarian Chamber of Commerce and Industry 42, Parchevich St. 1058 Sofia Phone: (359) (2) 987-2631 Fax: (359) (2) 987-3209 E-mail: [email protected] Web site: http://www.bcci.bg Bulgarian Foreign Trade (published in English) 3A “165” Str., Izgrev 1797 Sofia Phone: (359) (2) 700-100, 70-51-52, 71-71-47 Fax: (359) (2) 708-338, 70-51-54 E-mail: [email protected]

Online Versions of Bulgarian Publications •

http://www.bta.bg: Bulgarian Telegraph Agency

•

http://www.pari.bg: Pari newspaper

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http://www.capital.bg: Capital newspaper

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http://www.banker.bg: Banker newspaper

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•

http://www.standartnews.com: Standart newspaper

•

http://www.zone168.com: Monitor newspaper

•

http://www.mediapool.bg: News Online

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http://www.sofiaecho.com: The Sofia Echo weekly newspaper in English

•

http://www.mobikom.com/sofia_westnews/Business/business.htm: The Sofia Western News monthly magazine in English

4.8.8

Important Web Sites about Bulgaria

•

http://www.mac.doc.gov/eebic/countryr/bulgaria.htm: CEEBIC Homepage for Bulgaria

•

http://www.usembassy.bg: U.S. Embassy Sofia Web site

•

http://www.e-expousa.doc.gov: E-Expo USA Homepage

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http://www.sce.doc.gov: Showcase Europe Homepage

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http://cscentraleurope.org: Commercial Service Offices in Central and Eastern Europe

•

http://www.govrnment.bg: Government of the Republic of Bulgaria

•

http://www.nsi.bg: National Statistical Institute

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http://www.bulgaria-embassy.org: Bulgarian Embassy in Washington, DC

•

http://www.amcham.bg: The American Chamber of Commerce in Bulgaria

•

http://www.bcci.bg: Bulgarian Chamber of Commerce and Industry (BCCI)

•

http://www.bia-bg.com: Bulgarian Industrial Association

•

http://www.bi.bia-bg.com: BIC Capital Market including and database of more than 8,000 Bulgarian companies

•

http://www.travel-bulgaria.com: Information about travel to Bulgaria

•

http://www.dir.bg: Information on business and the economy, cities and regions, health care, computers and Internet, art, science and education, legal issues, news and media, services, sport, travel and tourism

•

http://www.bulgaria.com: Information on business, services, travel, government, history, arts

•

http://www.online.bg: Information on Bulgarian business, politics, news and media, Sofia’s stock exchange

•

http://www.bfia.org: Information on investment, business guide, business law, privatization, capital market, infrastructure projects and tenders from the Bulgarian Foreign Investment Agency

•

http://www.investdb.net: Information on investment openings in Southeast Europe from the Bulgarian Foreign Investment Agency and the Bulgaria Economic Forum

•

http://www.b-info.com: Collection of news about Bulgaria from the national and regional periodicals, radio and TV stations

•

http://www.ngo.bg: Non-governmental organizations in Bulgaria

•

http://www.news.bg: News about politics, economy, society

•

http://www.bulgaria.com/welkya/cyrillic/keyboard.html: Phonetic Bulgarian Cyrillic keyboard driver

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http://www.omda.bg/engl/common/bg_servers.htm: Information links about Bulgaria

4.8.9

Bulgaria on the Internet

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The President of Bulgaria: www.president.bg

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Bulgarian Government: www.government.bg

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National Assembly: www.parliament.bg

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Ministry of Economy: www.mi.government.bg

•

Ministry of Transport and Communications: www.mtc.government

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Ministry of Finance: www.minfin.government.bg

•

Ministry of Agriculture and Forestry: www.mzgar.government.bg

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Internal Affairs Ministry: www.mvr.bg

•

Privatisation Agency: www.priv.government.bg

•

Foreign Investment Agency: www.bfia.org

•

Bulgarian Trade Promotion Agency: www.bepc.government.bg

•

Bulgaria Economic Forum: www.biforum.org

•

Center for Mass Privatization: www.bulgarianspace.com/cmp

•

Bulgarian National Bank: www.bnb.bg

•

National Statistical Institute: www.nsi.bg

•

Bourse Information Company: www.bic.bia-bg.com

•

Bulgarian Stock Exchange: www.bse-sofia.bg

•

Bulgarian Industrial Association: www.bia-bg.com

•

Bulgarian Chamber of Commerce and Industry www.bcci.bg

•

Bulgarian International Business Association: www.bol.bg/biba

•

Bulgarian Academy of Science: www.bas.bg

•

Diplomatic and Consular Missions of the Republic of Bulgaria: bul-embassies.hit.bg/home_en.htm:

•

Business Portal on SEEurope: www.seeurope.net

•

General information: www.online.bg

•

General information: www.bulgaria.com

•

General information: www.dir.bg

•

The content Bulgarian Portal: www.hotmonitor.com

•

Bulgarian Economic Portal: www.econ.bg

•

Bulgarian Travel Guide: www.travel-bulgaria.com

•

General information: www.bol.bg

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General information: www.hit.bg

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5 5.1

DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS DISCLAIMERS & SAFE HARBOR

Summary Disclaimer. This publication ("Report") does not constitute legal, valuation, tax, or financial consulting advice. Nor is it a statement on the performance, management capability or future potential (good or bad) of the company(ies), industry(ies), product(s), region(s), city(ies) or country(ies) discussed. It is offered as an information service to clients, associates, and academicians. Those interested in specific guidance for legal, strategic, and/or financial or accounting matters should seek competent professional assistance from their own advisors. Information was furnished to Icon Group International, Inc. ("Icon Group"), and its subsidiaries, by its internal researchers and/or extracted from public filings, or sources available within the public domain, including other information providers (e.g. EDGAR filings, national organizations and international organizations). Icon Group does not promise or warrant that we will obtain information from any particular independent source. Published regularly by Icon Group, this and similar reports provide analysis on cities, countries, industries, and/or foreign and domestic companies which may or may not be publicly traded. Icon Group reports are used by various companies and persons including consulting firms, investment officers, pension fund managers, registered representatives, and other financial service professionals. Any commentary, observations or discussion by Icon Group about a country, city, region, industry or company does not constitute a recommendation to buy or sell company shares or make investment decisions. Further, the financial condition or outlook for each industry, city, country, or company may change after the date of the publication, and Icon Group does not warrant, promise or represent that it will provide report users with notice of that change, nor will Icon Group promise updates on the information presented. Safe Harbor for Forward-Looking Statements. Icon Group reports, including the present report, make numerous forward-looking statements which should be treated as such. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995, and similar local laws. Forward-looking statements involve known and unknown risks and uncertainties, which may cause a company's, city's, country's or industry's actual results or outlook in future periods to differ materially from those forecasted. These risks and uncertainties include, among other things, product price volatility, exchange rate volatility, regulation volatility, product demand volatility, data inaccuracies, computer- or software-generated calculation inaccuracies, market competition, changes in management style, changes in corporate strategy, and risks inherent in international and corporate operations. Forward-looking statements can be identified in statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate,'' "estimate," "expect,'' "project,'' "intend,'' "plan,'' "feel", "think", "hear," "guess," "forecast," "believe," and other words and terms of similar meaning in connection with any discussion of future operating, economic or financial performance. This equally applies to all statements relating to an industry, city, country, region, economic variable, or company financial situation. Icon Group recommends that the reader follow the advice of Nancy M. Smith, Director of SEC's Office of Investor Education and Assistance, who has been quoted to say, "Never, ever, make an investment based solely on what you read in an online newsletter or Internet bulletin board, especially if the investment involves a small, thinly-traded company that isn't well known … Assume that the information about these companies is not trustworthy unless you can prove otherwise through your own independent research." Similar recommendations apply to decisions relating to industry studies, product category studies, corporate strategies discussions and country evaluations. In the case of Icon Group reports, many factors can affect the actual outcome of the period discussed, including exchange rate volatility, changes in accounting standards, the lack of oversight or comparability in accounting standards, changes in economic conditions, changes in competition, changes in the global economy, changes in source data quality, changes in reported data quality, changes in methodology and similar factors. Information Accuracy. Although the statements in this report are derived from or based upon various information sources and/or econometric models that Icon Group believes to be reliable, we do not guarantee their accuracy, reliability, quality, and any such information, or resulting analyses, may be incomplete, rounded, inaccurate or condensed. All estimates included in this report are subject to change without notice. This report is for informational purposes only and is not intended as a recommendation to invest in a city, country, industry or product area, or an offer or solicitation with respect to the purchase or sale of a security, stock, or financial instrument. This report does not take into account the investment

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objectives, financial situation or particular needs of any particular person or legal entity. With respect to any specific company, city, country, region, or industry that might be discussed in this report, investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the information in this report. Investing in either U.S. or non-U.S. securities or markets entails inherent risks. In addition, exchange rate movements may have an effect on the reliability of the estimates provided in this report. Icon Group is not a registered Investment Adviser or a Broker/Dealer.

5.2

ICON GROUP INTERNATIONAL, INC. USER AGREEMENT PROVISIONS

Ownership. User agrees that Icon Group International, Inc. ("Icon Group") and its subsidiaries retain all rights, title and interests, including copyright and other proprietary rights, in this report and all material, including but not limited to text, images, and other multimedia data, provided or made available as part of this report ("Report"). Restrictions on Use. User agrees that it will not copy nor license, sell, transfer, make available or otherwise distribute the Report to any entity or person, except that User may (a) make available to its employees electronic copies of Report, (b) allow its employees to store, manipulate, and reformat Report, and (c) allow its employees to make paper copies of Report, provided that such electronic and paper copies are used solely internally and are not distributed to any third parties. In all cases the User agrees to fully inform and distribute to other internal users all discussions covering the methodology of this Report and the disclaimers and caveats associated with this Report. User shall use its best efforts to stop any unauthorized copying or distribution immediately after such unauthorized use becomes known. The provisions of this paragraph are for the benefit of Icon Group and its information resellers, each of which shall have the right to enforce its rights hereunder directly and on its own behalf. No Warranty. The Report is provided on an "AS IS" basis. ICON GROUP DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RELATING TO THIS AGREEMENT, PERFORMANCE UNDER THIS AGREEMENT, THE REPORT. Icon Group makes no warranties regarding the completeness, accuracy or availability of the Report. Limitation of Liability. In no event shall Icon Group, its employees or its agent, resellers and distributors be liable to User or any other person or entity for any direct, indirect, special, exemplary, punitive, or consequential damages, including lost profits, based on breach of warranty, contract, negligence, strict liability or otherwise, arising from the use of the report or under this Agreement or any performance under this Agreement, whether or not they or it had any knowledge, actual or constructive, that such damages might be incurred. Indemnification. User shall indemnify and hold harmless Icon Group and its resellers, distributors and information providers against any claim, damages, loss, liability or expense arising out of User's use of the Report in any way contrary to this Agreement. © Icon Group International, Inc., 2007. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution. Text, graphics, and HTML or other computer code are protected by U.S. and International Copyright Laws, and may not be copied, reprinted, published, translated, hosted, or otherwise distributed by any means without explicit permission. Permission is granted to quote small portions of this report with proper attribution. Media quotations with source attributions are encouraged. Reporters requesting additional information or editorial comments should contact Icon Group via email at [email protected]. Sources: This report was prepared from a variety of sources including excerpts from documents and official reports or databases published by the World Bank, the U.S. Department of Commerce, the U.S. State Department, various national agencies, the International Monetary Fund, the Central Intelligence Agency, and Icon Group International, Inc.

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END

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