IBDE

MACEDONIA [i] has made a substantial economic and political progress, since its successful bid for indepen-dence from the Former Yugoslavia in 1991. Today, Macedonia's political and security situation is stable. The country has joined WTO in 2003. The country is also a member of other important international organizations such as: IMF, OSCE, CEI, EBRD, FAO, and many other international organisations. The country is progressing in meeting the Copenhagen criteria in order to join the European Union. Macedonia has signed the Stabilization and Association Agreement with the European Union in 2001. On 14 October 2009 the European Commission recommended to the European Council to adopt a decision to start negotiations with Macedonia on the terms of its accession. However, due the name dispute with its neighbour and EU member, Greece has prevented the official start of accession talks. On November 2009, the Council of EU granted Macedonian’s visa liberalization.

Macedonia is located in the central Balkan Peninsula in the Southern Europe. The country shares land borders with Kosovo to the northwest, Serbia to the north, Bulgaria to the east, Greece to the south and Albania to the west. It has a population of 2.1 million of which 64.2% are Macedonians, 25.2 % Albanians, 3.9% Turkish, 2.7% Roma, 1.8% Serb and 2.2% other minorities.

In spite of its small size, the country has a lot to offer to potential foreign investors. Foreign investors in Macedonia benefit from its;

·         strategic location

·         highly qualified work force,

·         developed infrastructure,

·         modern telecommunication,

·         attractive Tax package

·         stable currency and banking sector

·         liberal regime for foreign investment

Strategic Location

Located at the cross road of the Southern Eastern Europe, Macedonia is considered as an ideal transit and distribution center for products of European Market. The country has access to the two large Pan-European Corridors 8 and 10, which link Macedonia with other countries in the region while strengthening the capacity of the Macedonian transport network.

Macroeconomic stability

Macedonia is an open economy, well integrated into international trade, with a total trade-to-GDP ratio of 81.6% at the end of 2009. Before world financial crisis Macedonia saw strong track record of macroeconomic stability and generally prudent macroeconomic policies, nonetheless, the global financial crisis has hit Macedonia in 2009. According to the 2010 EU progress report on Macedonia the economic output in the country declined by 0.8%. However, according to World Bank the economy in the country registered a positive growth rate in the last quarter of 2009 and that the economy is projected to grow between 1 and 2 percent during the 2010 due to continued fiscal expansion and carefully managed monetary policy.  

Labour work force

Macedonia offers well qualified, educated and ethical work force. The monthly gross salary average is €430. Main languages spoken in the country are Macedonian (official language) and Albanian (official language in some parts of the country). English is widely spoken among the people in Macedonia as well as other languages of the region such as Serbian, Bulgarian, Croatian, Slovenian and Greek. It has a relatively young population 45% under 30.

Attractive Tax package 

In order to stimulate foreign and domestic investments the country has introduced a very attractive tax package with a flat rate tax of 10% in corporate income tax and personal tax income while corporate tax on retained earnings is set at 0%. Macedonia’s VAT stands at 18% general tax rate and 5% preferential tax rate. In order to avoid double taxation of foreign companies Macedonia has signed numerous double taxation agreements with around 30 countries.

Simple and quick registration of business 

Macedonia has introduced a one-stop-shop system to quicken business licensing and registration procedures. This system has enabled foreign investors to register their businesses within 4 hour and by visiting one office. According to the Doing Business 2010 Report, Macedonia has made it easier to start a business - it takes only 3 days and 3 procedures to start a business.

Free Trade

Macedonia has a free trade regime. The country has signed three multilateral agreements (SAA with the EU, EFTA, and CEFTA) and two bilateral agreements (Turkey and Ukraine). These agreements give Macedonia duty free access to more than 650 millions of customers from the EU member-states, the CEFTA and EFTA countries as well as from Turkey and Ukraine.

Liberal regime for foreign investment

Macedonia recognizes the importance of foreign investments; in this regard it has taken major steps in the protection of foreign investors. In Doing Business 2010 Report Macedonia is ranked 20 overall for protecting investors. Macedonia has signed investment protection treaties with 28 countries and is in negotiations with 10 more. The Company Law is the primary law regulating business activity in Macedonia. This Law offers foreign investors the same treatment as local companies. The Constitution of the Republic of Macedonia guarantees an investor’s right to property. Therefore, foreign investors may acquire property rights for buildings and for other immovable assets to be used for their business activities, as well as full ownership rights over construction land through a locally registered company.

Foreign Direct Investments

As a result of a growing interest in Macedonia’s investment potential, a number of international companies  operate successfully in the country. Foreign investors include Johnson Matthey (UK), Mobilkom Austria (Austria), EVN (Austria),  T-Home (Germany), Societe Generale (France), Johnson Controls (USA), the National Bank of Greece (Greece), Hellenic Bottling Company S.A. (Greece), QBE Insurance Group Limited (United Kingdom), Mittal Steel (Netherlands), Duferco ( Switzerland), and Titan Group (Greece). The worldwide economic crisis has also hit Macedonia which resulted in a strong drop in the level of foreign investments in 2009.

Banking sector 

From the total number of banks in the Republic of Macedonia, fourteen are owned by foreign shareholders, out of which four are owned by foreign banks (as of 30 September 2008).  The National Bank supports the economic policy and the financial stability of the country without jeopardizing the realization of the main objective of the market economy. The National Bank is responsible for the stability of the national currency (Macedonian Denar), general liquidity of the banking system, liquidity in the payments abroad, holding and managing the foreign exchange reserves; regulating the payment system as well as the implementation of monetary policy. The banking sector allows foreign companies in Macedonia to open and maintain bank accounts in foreign currencies.

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