business climate and investment opportunities in the republic of macedonia

Republic of Macedonia

BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIESJune, 2013

2Agency for Foreign Investments and Export Promotion www.investinmacedonia.com

Why Macedonia?

Investment

Incentives

Competitive

Workforce

Excellent Infrastructu

re

Investor - friendly

Government

Competitive

Location

Higher Profits & Increased Competitiveness


Location and Transport Infrastructure

• Two Pan-European corridors:– East-West Corridor 8– North-South Corridor 10

• Road network: 9,205 km

• Railway network: 900 km

• Two international airports: – Skopje – Ohrid

• International ports*:– Thessalonica (Greece): 250

km– Durres (Albania): 300 km

* Distance from Skopje


• Political, monetary and macroeconomic stability• Strategically located for future business

expansion• First country in SEE to sign a SAA with the EU in

2001• EU and NATO candidate country• FTAs with numerous countries• Business oriented Government• Welcoming and decisive government ready to

serve investors

Political and Economic Outlook


Foreign Investment Regime

• Macedonian Constitution guarantees fair treatment of foreign investors

• Complete protection of the ownership rights of foreign investors

• Republic of Macedonia is member of MIGA(Multilateral Investment Guarantee Agency)

• Investment protection treaties with numerous countries

• 100% foreign ownership of a company allowed• No restrictions for repatriation of profits


BEST CONSECUTIVE REFORMER OVER THE PAST THREE YEARS IN SOUTH EASTERN EUROPE

Based on the World Bank’s Doing Business Reports in 2011, 2012 and 2013

4th IN TOTAL TAX RATEEASE OF PAYING TAXES

2012PwC and World Bank Group Study

3rd BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2010 Report

5th BEST IN STARTING A BUSINESS RANKINGSWorld Bank’s Doing Business 2013

Report

3rd BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2012 Report


Ease of Doing Business 2013 Global Rank

2335

46 51 54 55 65 66 71 7284 86

126


Best Countries for Business 2012

Forbs Magazine Global Rankings

2337 38 41 43 45 46 47 49 52

60

85 90


2012 Index of Economic Freedom

World Rankings

Macedonia Albania Bulgaria Slovenia Montenegro Croatia Serbia Greece

4357 61 69 72

83 89

119


Ease of Paying Taxes 2012

Total Tax Rate World Rankings

Maced

onia

Monte

negro

Bosn

ia an

d Her

zegov

ina

Bulgaria

Croat

ia

Serb

ia

Slove

nia

Turk

ey

Poland

Roman

ia

Czec

h Republic

Hungary

4 21 28 3654 63 68

102 112 119137 143


AVERAGE GROSS SALARY IN 2012 € 498 per month

CURRENCYMacedonian Denar pegged to the

DM/€for the last 15 years (€1= MKD 61.3)

EXPORT BY YEAR (US$ bn)

INFLATIONLow inflation: avg < 2% annually over the last 10

years2008: 8.3%; 2009: -0.8%; 2010: 1.6%; 2011: 3.9%;

2012:3,3%

Source: National Bank of the Republic of Macedonia

CREDIT RATINGS 2011Standard & Poor’s: BB

Fitch: BB+BUDGET DEFICIT & STATE DEBTBudget Deficit, 2011: 2.6 % of GDP

State Debt, 2012: 32.1% of GDP

FDI BY YEAR (US$ m)

GDP GROWTH(%)

Economic Indicators

2006 2007 2008 2009 2010 2011 2012

5.0 6.1 5.0

-0.92.9 2.8

0,3

2007 2008 2009 2010 2011 2012

699 587

197 211410

132


27%

25%

24%

23%

20%

20%

20%

18%

18%

40%

35%

32%

19%

17%

16%

16%

15%

10%

21%

20%

20%

19%

19%

19%

19%

16%

10%

Unbeatable Fiscal Benefits

Corporate Income Tax

Personal Income Tax (highest rate)

General VAT Rates

• 10% Corporate & Personal income tax (among lowest in Europe)• 0% Tax on retained earnings• Double taxation treaties with many European countries• 0% tax for operation in a Technological Industrial Development Zone• Real estate taxes at 2% - 4%• VAT at 18%, with 5% on specific items• FTAs with EU, EFTA, CEFTA countries; Turkey and the Ukraine; providing

access to over 650m customers

Romania

Czech Republic*

Macedonia*

Slovakia

Ukraine

Poland

Hungary

TurkeyCroatia

Czech R.*Romania*

Slovakia

Ukraine

Poland

Hungary

Turkey

Croatia

Macedonia*

MacedoniaTurkey

Romania

Slovakia

Czech RepublicUkrainePoland

CroatiaHungary


2008

2009

2010

2011

2012

21.2%

19.0%

18.0%

18.0%

18.0%

9.2%

7.5%

7.3%

7.3%

7.3%

1.6%

1.4%

1.2%

1.2%

1.2%

0.5%

0.5%

0.5%

0.5%

0.5%Pension Insurance Health Insurance Employment Insurance

Macedonia

Turkey

Poland

Serbia

Croatia

Hungary

Czech Republic

Slovakia

Ukraine

Romania

Social Security ContributionsMacedonia - Social Security Contributions

Comparison - Social Security Contributions

Source: PricewaterhouseCoopers (Taxes at a glance 2012), National Investment Promotion Agencies

27%

27%

28.4%

32.5%

27%

27%

31.2% - 34.1%

48.6%

37.2%

44.5% - 55.7%

33.5%

44%

39.8% - 49.7%

45%

37.2%


Source: The Vienna Institute for International Economic Studies (wiiw)

Average gross monthly salary (€) in selected countries of Central and

Eastern Europe in 2012

Average Gross Monthly Salary

Maced

onia

Serb

ia

Bosn

ia an

d Her

zegov

ina

Monte

negro

Hungar

y

Slova

kia

Polan

d

Esto

nia

Czec

h Republic

Croa

tia

Slove

nia

€498 €508€660 €727 €771 €800 €846 €889

€993 €1,048

€1,525


Competitiveness for Investments in Macedonia

Price Level Index for Construction

Price Level Index for Investments

Source: Eurostat, December 2012

Mace-donia

Romania Bulgaria Serbia Turkey Croatia Turkey Poland Czech Republic

Slovenia Slovakia EU27 Average

56 59 62 63 66 70 72 81 85 85 88 100

Maced

onia

Serbia

Roman

ia

Bulgar

ia

Turk

ey

Croa

tia

Hungar

y

Poland

Slovak

ia

Czec

h Republic

Slove

nia

EU27

Avera

ge

39 42 42 46 49 56 61 73 74 74 80100


Sustainable Work Force Supply

• 41.5% of population under 30• High intellectual capital

– 85+% of high school graduates enrolled in universities in 2008– Multiple vocational high schools in each city

• Tailor-made training programs through Vocational Schools or Universities• 6% of GDP spent on education

Number of enrolled students in Colleges and Universities

Number of graduates in Colleges and Universities

2007 2008 2009 2010 2011

8,36010,839 10,232 11,197

9,802

2007/2008 2008/2009 2009/2010 2010/2011 2011/2012

64,254 63,43757,894

64,77958,747


Excellent Language Skills

• Every child in Macedonia begins to learn English in the first grade of primary school

• Two foreign languages are mandatory in high school: English, and either German, French, or Russian

• English is also taught for two years at University level• Regional languages (Serbian, Croatian, Bulgarian, Albanian

and Greek) are widely spokenForeign Languages Studied

Students in Primary Schools, % of Total

Students in Secondary Schools, %

of TotalEnglish 98% 96%French 18% 32%German 6% 21%Italian - 2%Russian 1% 2%Turkish 3% 2%

Source: State Statistical Office of the Republic of Macedonia (Education 2009/2010) and Ministry of Education and Science

INVESTMENTOPPORTUNITI

ES

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Machine and Automotive componentsICTMedical Devices and PharmaceuticalsAgribusiness and Food ProcessingEnergy sectorReal Estate & ConstructionTextileTourism

Investment OpportunitiesTarget Sectors


• Existing engineering and manufacturing tradition

• Legacy of skills available to new investors• Component production started in the

1960’s to supply Zastava, Serbia• Companies primarily supply the

aftermarket• Johnson Controls, Johnson Matthey,

Kemet, Teknohose, (Free Economic Zones), Kromberg & Schubert, Hi-Tech to supply OEM’s

• Markets are Europe, Russia, Turkey, Africa• Most companies have ISO 9001 / TS

16949 quality certification

Investment OpportunitiesMachine and Automotive Components Industry


• Best telecommunication networks in the region – the system is 100% digital

• Leading multinational hardware and software suppliers (Microsoft, HP, IBM) have local sales and support services in Macedonia

• 100,000 PCs for every school child; free internet sessions provided by the government

• IT skills shortage in Western economies and growing demand for outsourcing services – Macedonia can be your solution!

• Availability of well-educated staff at competitive costs

• Quality assurance and standardization procedure intitialized

Investment OpportunitiesICT Sector


• Existing pharmaceutical industry exports to over 30 countries worldwide

• Strong educational system, with an abundance of medical and pharmacy graduates

• Supportive regulatory environment • Licensing arrangements in place with

many of world’s leading pharmaceutical companies

• Availability of serviced industrial sites• Manufacturing tradition

Investment OpportunitiesHealthcare Sector, Medical Devices and Pharmaceuticals


• Unique combination of Continental and Sub-Mediterranean climates

• Environmentally friendly production practices

• Technologies for food processing• Excellent access to regional markets• Strong reputation for quality food

productsThe greatest investment

opportunities:• fruits and vegetables – production,

storage distribution and processing industries

• wine production• sheep and goat cheese production

Investment OpportunitiesAgribusiness and Food Processing Industry


Investment OpportunitiesTextile sector

• Esteemed reputation of Macedonian textile producers on the European Union market

• High flexibility and readiness to adapt to the demands of foreign markets

• Exceptional relation between product quality and costs

• Modern equipment• 1-2 days distance to European Union

markets• Foreign investment welcomed in the

ready-made clothing and knit production industries


Summer Destinations

• Numerous tectonic, glacial and man-made lakes, 50 in total

• Large Ohrid, Dojran and Prespa lakes• Wartersports, archeological, wine, eco

and rural tourism• In 2011, increase in foreign tourists

from EU of 38%Winter Destinations• Over 45 mountain peaks over 2.000m • Around 70% of the territory is

mountainous, many locations have more than 100 days of snow

• Opportunities for development and enhancements of hotels and resorts on many locations

Investment OpportunitiesTourism


Historical and Culture Heritage• 4,293 archeological sites• 992 churches and monasteries• 23,000 icons (2nd most valuable

collection in the world)• 228 mosques, inns, Turkish baths

and old bazaars, • 47 towers and fortresses

Spa tourism• Territory rich with geothermal

waters• More than 60 thermal springs• Identified locations for construction

of new spa centers and hotels

Investment OpportunitiesTourism

Investment OpportunitiesTechnological Industrial Development Zones - TIDZs


Free Zone TetovoArea Size: 95 ha;Distance from Skopje - 35 km

Free Zones Skopje 1 & 2Area Size: 145 + 95 ha;E-75 Highway;Next to the Int’l Airport Free Zone Stip

Area Size: 208 ha;The largest Free Zone; Excellent logistic support

Free Zone RadovisArea Size: 10 ha;Main Road M6

Free Zone StrumicaArea Size: 23 ha;

Free Zone GevgelijaArea Size: 50 ha;85 km from the port of Thessaloniki

Free Zone PrilepArea Size: 68 ha;Between Prilep and Bitola (4th and 2nd largest city)

Free Zone StrugaArea Size: 30 ha;Next to the Int’l Airport;170 km from Durres port

Free Zone KicevoArea Size: 30 ha

Free Zone RankovceArea Size: 40 ha;Corridor 8



Infrastructure Benefits• Electrical grid outlet, new power substation in place• Telecommunications network• Central heating• Lighting• Fire safety system - Airport Fire Department minutes

away• Security monitoring system• Water, sewage and waste treatment plant• Gas pipeline, etc.



• Free connection to utilities• Subsidy of up to €500,000 towards building costs• Green Customs Channel available at border for rapid export from

Zone to EU countries• Land in a TIDZ in Macedonia is available under long-term lease for a

period of up to 99 years


TAXTAX RATES

TIDZs Outside TIDZs

Corporate tax 0%for the first 10 years 10%

Personal income tax

0% for the first 10 years 10%

Value added tax 0% 18%

Property tax 0.1% - 0.2% 0.1% - 0.2%

Excise taxes 0% 5% - 62%

PRODUCTCUSTOMS DUTY

TIDZs Outside TIDZs

Raw materials 0% Up to 15%

Equipment 0% 5% - 20%

Fiscal Benefits


TIDZ “Skopje 1”

JOHNSON CONTROLS

• $40mn automotive components plant;• 150 employees initially – increasing to

500;• Integrated circuits

JOHNSON MATTHEY

• €55mn investment

• over 500 employees

• catalyst production

TEKNOHOSE ANNOUNCING BEGINNING OF

CONSTRUCTION WORK IN TIDZ “SKOPJE 1”

KEMETSIGNING OF THE AGREEMENT

PRODIS GROUP ANNOUNCING BEGINNING OF

CONSTRUCTION WORK IN TIDZ “SKOPJE 1”

VAN HOOL ANNOUNCING BEGINNING OF CONSTRUCTION WORK IN TIDZ

“SKOPJE 2”


TIDZ “Stip”

PROJECT SCOPE• 2nd project in Macedonia• $20mn Investment• 1400 employees• Construction of cut & trim plant for

car seats

CONSIDERED COUNTRIES• Macedonia, Moldova and Tunisia


Investment Projects outside of TIDZs

SIZE OF INVESTMENT

• €20mn• 2000 employees• Production of cable

installations• Start of operations Q2

2012

SIZE OF INVESTMENT

• over $4mn• 150 new full time jobs +

300/350 new seasonal jobs

• Tobacco facility in Kavadarci


“Macedonia offers the company just-in-time delivery and minimal freight costs.”Philippe Simon

VP of Global ElectronicsJohnson Controls

“We are very satisfied with the support provided by the Macedonian Government and its institutions and Bitola municipality. The decision for investment in Macedonia represents an important step in our expansion as part of the strategy for international output.”

Martin PassernManaging Director

Kromberg & Schubert

“This will be JM’s ‘mega-European plant’ and the largest ever single investment project.”

Colin Jaffray, Director, Strategic Planning

Johnson Matthey PLC

“Macedonia was chosen because of its international competitiveness, because of our positive existing corporate experience here and above all because of the support and professionalism that we have received from all Government institutions during the analysis process.”

Steven MeylemansProject Manager Johnson Controls

What They Said

AT YOUR SERVICE


• One-stop shop and project management approach

• VIP Investment tour• Locations• HR Companies, construction, real estate, tax

advisory and consulting• Universities and Reference Company visits• Creating linkages with local and central

Governments• Navigate the legal requirements• Ensure success!

Invest Macedonia at Your Service…

Thank You!AGENCY FOR FOREIGN INVESTMENTS

AND EXPORT PROMOTION OF THE REPUBLIC OF MACEDONIA

ul.Nikola Vapcarov br. 71000, Skopje

Republic of MacedoniaTel.: + 389 2 3100 111Fax: + 389 2 3122 098

[email protected]

www.investinmacedonia.com

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