investing in Macedonia 2011 The conference is supported by Foreword

Foreword HE Marija Efremova Macedonian Ambassador to the UK

n my capacity as Macedonia’s Macedonia’s development in the twenty representative to the UK, I am years since independence has been solid. Idelighted to join with Developing We have made many political, economic, Markets Associates and our sponsors in cultural and social reforms to create a welcoming you to this Investment Forum. better living environment for our people. I hope that this Forum will provide a useful We have faced significant political and source of information on Macedonia and economic challenges and successfully will make you aware of the wide array dealt with all. Now we look forward to of investment opportunities that the building on that solid foundation in the country has to offer. years to come.

In the past, Macedonia was mainly seen as a mysterious country with plenty of history that rarely anyone visited. HE Marija Efremova Fortunately, this situation is rapidly Macedonian Ambassador changing, as more and more travelers to the UK discover in Macedonia a picturesque land of lakes and mountains, able to satisfy summer and winter tourists alike.

Tourism is an important contributor to Macedonia’s economic growth. It is, though, not the only one. In today’s Forum, we want also to highlight other facets of Macedonian’s economic growth and in doing so promote awareness and interest among potential investors of opportunities in sectors as diverse as services, manufacturing and agriculture.

2011 | INVESTING IN Macedonia 1 Introduction

Introduction by Atam Sandhu, Chief Executive Developing Markets Associates

n behalf of Developing Markets And since independence Macedonia has Associates and the Embassy of sought to play its part in international Othe Republic of Macedonia, it forums and organisations and now looks is a great pleasure to welcome you all forward to a time when the country takes today to this, the first-ever Macedonia- its place within the European Union and UK Investment Forum, staged here at in NATO. Painters’ Hall, a venue steeped in history and located in the heart of the City Macedonia is a parliamentary democracy, of London. with a responsible executive and judiciary and financial institutions able to build We are honoured to welcome to a strong and healthy macro-economic London a very senior delegation from environment. For investors, Macedonia the Government of Macedonia, led by offers stability and opportunity and His Excellency Prime Minister Nikola since independence it has strived to Gruevski and several prominent cabinet create an open economy, introducing ministers as well as the country’s reforms in its tax system and successfully investment agency all of whom will be combating inflation. Indeed, in 2009 the addressing the conference today. World Bank named Macedonia as the fourth ‘best reformatory state’ out of 178 For some of you this Forum may be countries surveyed – an indication of the your first encounter with the Republic progress of steady economic growth and of Macedonia. If so, I hope that by the international cooperation. end of the day you will have a much better idea of its role as an independent Lastly, allow me to express my sincere Balkan state, its resilient economy and gratitude to HE Marija Efremova, the investment opportunities which now Ambassador of Macedonia to the UK present themselves. and our distinguished sponsors for helping to make today’s event a reality; It is twenty years since the people of and to assure you of my firm belief that Macedonia held the historic referendum the presentations you will see today and which was to pave the way for the the dialogue and discussions that will establishment of Macedonia as an emerge can mark the next chapter in the independent republic and its withdrawal building of ever closer relations between from the then Yugoslav Federation. Macedonia and UK investors. This withdrawal was achieved through peaceful means and in the years since other political and economic tensions which could so easily have destabilised a fledgling nation state have been resolved Atam Sandhu, Chief Executive through dialogue and the rule of law. Developing Markets Associates

2 INVESTING IN Macedonia | 2 011 CONTENTS

Contents 04 Economic Overview 14 Agriculture 16 Energy and Mining 18 Infrastructure 21 Manufacturing 23 TOURISM 25 Political HISTORY 27 SPONSORS 28 programme Publisher: Chris Gerrard Contributors: Gary Ginsberg, Tom Minney, Roger Martin and Moin Siddiqi Art Director: Steven Jones Conference Team: Deanne Lintorn, Rebecca Isaacs, Frazer Lang, Alison Hamilton Conference Directors: Leon Isaacs, Atam Sandhu

Correspondence Developing Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TU email: [email protected] | web: www.developingmarkets.com | www.moneymove.org | wwwsendmoneypacific.org DMA acknowledge the assistance of all the individuals and organisations who have contributed to this publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Embassy of The Republic of Macedonia, the Government of Macedonia or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher. Published by Developing Markets Associates Ltd (DMA). Printed by Woodrow Press. Picture credits: Invest Macedonia, iStock.

© Developing Markets Associates Ltd

2011 | INVESTING IN Macedonia 3 Economic Overview

The emerging Macedonia primed for growth By MOIN SIDDIQI, economist

he Republic of Macedonia, Macedonia is an open economy, highly 08, with total national output swelling located in the heart of southern integrated into international trade, with from MKD272.46bn to MKD412bn T central Europe, has been on a total trade-to-GDP ratio of 93% at the (US$9.84bn), representing 10.2% five- a continuous path of structural and end of 2010. Agriculture and industry had year compound annual growth. However, fiscal reforms in the last decade, geared been the two most important sectors of Macedonia’s robust growth was halted towards integration into the European the economy in the past, but the services by global downturn, which affected Union (EU). After a lengthy period of sector has gained the lead in recent years. commercial activity, although the banking transition and concerted efforts at nation The young country boasts a proven record sector proved resilient thanks to prudent building following the disintegration of the of macroeconomic stability, reflected regulations and limited exposure to global Yugoslav Federation in 1991, Macedonia in single-digit inflation, a stable national capital markets. Nonetheless, real GDP has managed to emerge from a turbulent currency – the Denar (MKD) pegged shrunk by 0.9% in 2009 before recovering period as a stronger and more efficient to the Euro – sustainable public finances to 1.8% in 2010 (see Table 1). economy. Successive governments of and comfortable import coverage of five differing political parties have largely months. Gross official foreign exchange Private transfers remain large as growing pursued sound macro-financial policies, reserves totalled EUR1.86bn (US$2.64bn) ties with the EU increase labour mobility. which have contributed to gradually as of August 8th 2011. Around 370,000 Macedonians are living accelerating economic growth and abroad, which represents roughly 18% helped the country weather the global Real GDP (inflation-adjusted) grew at of the population. According to the market storm of 2009. a healthy 5% a year between 2004- OECD, Macedonia is among the top 30

4 INVESTING IN Macedonia | 2 011 Economic Overview developing countries with respect to the highest remittances received as a percentage of GDP (11th) and with the highest remittances per capita (14th).

Based on the central bank (NBRM) figures, private transfers that include workers remittances, compensation of employees and migrant transfers (cash exchange), account for around 14% of GDP – equivalent to some US$1.3bn.

Despite many challenges, Macedonia has made great strides in strengthening its competitiveness for sustained growth, improving its business climate, improving transport and energy infrastructure and strengthening human capital. It has the potential for a diversified economy and for significant investments and exports, including automotive components, healthcare products and pharmaceuticals, agribusiness, and food processing, and metal products. Macedonia holds large deposits of low-quality coal and lead-zinc ores, as well as copper and chromium.

The contagious impact

Despite sound macro fundamentals, Macedonia, like its neighbours remains exposed to risks related to mounting concerns about a sovereign debt crisis debt crisis could lower the availability 2011, credit to the private sector grew by in the Eurozone and stuttering growth and increase the costs of foreign capital. 8% year-on-year, whilst deposits rose by in advanced (OECD) economies. The Moreover, tepid growth in the Eurozone more than 9%. Euro Area is its major trading partner, this year and next will reduce export Exports reported a hefty 44% surge in the first five months of 2011, fuelled Macedonia has managed to emerge from by robust demand for base metals and a turbulent period as a stronger and more some product diversification as a result of pre-crisis foreign direct investment. efficient economy Significantly, Macedonian government Eurobond yields have not been notably affected by turmoil in the Eurozone providing two-fifths of imports, whilst demand and capital inflows (remittances so far. The yield on Macedonia’s 2015 receiving almost half of total exports and foreign investment). EUR175mn Eurobond was 5 5% on from Macedonia in 2010. Principal export August 25 2011, similar to the average in markets in the EU are Germany, Italy, To date, however, indicators suggest a June and July and below the average for Greece, Spain and Belgium. relatively modest impact on Macedonia’s the previous months of the year. Spreads economic activity. GDP grew by about over German bonds, however, rose by The International Monetary Fund (IMF) 4-5% in the first-half of 2011, which almost 1 percentage point, as German warned: “If troubles in the periphery lead is broadly consistent with the IMF yields dropped with investor flight to to significantly weaker growth and more projection of annual growth of 3%. Private safe havens. Macedonia’s fiscal deficit distressed financial conditions in core investments are gradually recovering and domestic debt – projected in 2011 Eurozone economies, this would damage aided by a relaxed monetary policy, at 2.5% and 26%, respectively, of GDP, growth prospects in Macedonia and improved business confidence, and higher are moderate in regional comparison. could put renewed pressure on the fiscal public spending. A well-capitalised banking and external accounts.” The increased risk sector with ample liquidity has largely It should be noted that Macedonia has perceptions may also undermine growth mitigated the impact of the crisis. The very little reliance on Greece. Exposure prospects by keeping risk premiums capital adequacy ratio was reported at through trade channels is moderate, with elevated for a longer period. More broadly, 16.8% and non-performing loans (NPLs) 7% of 2010 exports destined for Greece. continued uncertainty related to the EU’s fell to 9.1% at end March 2011. As of mid- Moreover, Greece is not a major

2 011 | INVESTING IN Macedonia 5 Economic Overview

the 2010 Transparency International Corruption Perceptions Index, up from 84 in 2007 – an improvement for the third consecutive year – thus placing it in a better position than most of its Balkans peers. Corruption in the awarding of public sector contracts is perceived to be far less prevalent in Macedonia than in some neighbouring countries.

A closer compliance with EU Procurement Standards is improving transparency and predictability. The Parliament has approved a new public procurement law, and the government has established an independent appeals commission and independent public procurement bureau (PPB) under the Ministry of Finance. These improvements to the procurement system should help provide a level playing field for all domestic and foreign investors.

Following a comprehensive review of the judicial and legal framework, the court system is now better organised and new laws, including one on administrative procedure, are reducing the back-log of cases and strengthening the enforcement source of remittances or foreign direct Guillotine’ project allow entrepreneurs of court judgments. Similarly, a new investment (FDI) inflows. Even though to register a company in less than four bankruptcy law has helped reduce the the share of Greek-owned banks in total hours (costing just 42 euros). It takes six average court processing time from 43 to financial assets is high (similar to Bulgaria procedures and eight days to establish a 26 months. and Albania), the subsidiaries of Greek foreign-owned limited liability company, financial groups – including the No.1 bank which is faster than both regional and Attracting strategic in Macedonia (Stopanska Banka) – are OECD-wide average. There is, however, investors funded primarily by local deposits, with a minimum capital requirement of minimal funding from their parents, and MKD310,000 (US$6,832) for setting up UNCTAD figures show Macedonia they do not hold defunct Greek assets. foreign and domestic firms. received (net) FDI inflows of US$3.42bn over 2000-10, compared to merely A pro-business stance Corporate and personal income taxes US$233mn between 1992-99. are now at a flat rate of 10% (one of the Meanwhile, inward FDI stock has swelled Macedonia continues to rank favourably lowest rates in Europe) and capital gains from US$929mn in 2002 to US$4.49bn on a number of indices of business tax was abolished on January 1st 2009, in 2010 – representing a whopping 383% competitiveness and, most encouragingly, while no tax at all is levied on re-invested increase over the period. This year and is nearing the EU average. The 2011 Index profits. Other positive changes include the next, investors are expected to pour of Economic Freedom published by the strengthening of competition law, easing US$528mn and US$571mn, respectively, Heritage Foundation (US) ranks it the property registration (i.e. a title deed) by into various sectors of the economy, 55th freest market of 179 countries – an average of eight days, and amendments according to the IMF (see Table 2). the highest of Former Yugoslav Republics to the labour law have made hiring of and exceeding core EU members such as workers more flexible, which contrasts Macedonia has an open legal regime for France (64); Portugal (69); and Italy (87). with the situation in most central European the entry and establishment of foreign The World Bank’s 2011 Doing Business economies. A recent EBRD/World Bank investment. The majority of the sectors Indicators ranked Macedonia 38th out Business Environment and Enterprise are fully accessible and 100% foreign of 185 economies – the highest in the Performance Survey (BEEPS IV) found equity is permitted in local firms, except in Balkans region – up from 92 in 2006 (Table that typical red tape issues like tight labour transportation (see Table 5). The process 6). The World Bank named Macedonia as laws, business licensing and inspections of registering a foreign-owned liability the third overall ‘top reformer’ of 2010. and compulsory certification were not company takes one day. Following 2008 deemed to be obstacles for investors. amendments in the Law on Property, In recent years, the government has residents (citizens and legal entities) of slashed the red tape for businesses. For There has also been significant progress EU and OECD member countries may example, the ‘one-stop shop’ within the on tackling corruption. Macedonia was directly acquire ownership of residential Central Registry and a new ‘Regulatory ranked 62 (out of 180 countries) in and commercial properties in the same

6 INVESTING IN Macedonia | 2 011 Economic Overview way locals can. Direct right of ownership, long-term leases (up to 99 years) and concessions of either private or state owned land are permitted, the latter subject to the approval of the justice minister. Investors are free to maintain bank accounts in foreign currency.

The names of foreign companies operating in Macedonia include the UK’s Johnson Matthey, a world leader in advanced materials technology; Société Générale of France; Johnson Controls, the US auto components manufacturer; the Russian oil and gas giants – Lukoil and Gazprom; Mobilkom Austria; EVN (Austrian Utility); Turkish TAV (which won a 20-year EUR200mn airport concession tender in 2008); Hellenic Petroleum (Greece), Euromax Resources (Canada) and Swedish-based Siemens, among others.

The presence of multinationals operating either through Greenfield projects or through acquisitions and privatisation processes indicates that Macedonia has succeeded in nurturing a conducive business environment. They have all been attracted by a combination of factors, Macedonia has also established day’s drive from most central European such as relatively good transport and technological industrial development countries, thus manufacturers benefit communications networks and attractive zones, which are planned to become from low transportation costs for both tax schemes that ease doing business; hubs for clean manufacturing industries their products and parts. A developed strategic location (a gateway to the wider and the development of new transport network has helped promote EU-27 markets worth some US$16 technologies – thereby attracting more intra-regional trade. Central Eastern trillion); an abundant, flexible, skilled FDI. Fifty concession agreements have so Europe accounted for 46% of Macedonia’s labour force (which totalled 938,000 at far been signed to develop such zones, exports in 2010. end-2010). Wage levels are among the where investors are entitled to a 10-year Thanks to three multilateral and two bilateral free-trade accords, Macedonia Macedonia continues to rank favourably on a enjoys duty-free access to more than 650 million customers from the EU, the number of indices of business competitiveness European Free Trade Association (EFTA) and Central European Free Trade Area (CEFTA), as well as recently Turkey and lowest in Central Eastern Europe (see exemption on corporate income tax and Ukraine. In fact, over half of Macedonia’s Chart 4). Such advantages are expected a 50% cut in personal income tax for five total trade is with 27 EU countries. to encourage greater FDI inflows. years. They are also exempt from VAT and Macedonia has been a member of customs duties on goods, raw materials, the World Trade Organisation (WTO) Labeled as one of the top ten countries in equipment and machines. Land in these since 2003. the World Bank ‘Investing Across Borders zones is available for long-term lease of 2010’ report, this small nation of two million up to 99 years at concessionary rates. Supporting people is consistently trying to establish infrastructure itself as one of the regionally preferred Macedonia, strategically located in the tax jurisdictions. A number of tax reforms centre of southeast Europe, can attract An efficient infrastructure is a prerequisite and incentives for both domestic and ‘vertical’ FDI, which involves relocating for receiving higher FDI inflows, foreign investors have been introduced. parts of the production chains to low- whilst strengthening competitiveness. There are no capital controls – profits and cost locations and output is exported Infrastructural development (particularly dividends from inward investments, after to the investor’s home country and/or investments in new and rehabilitated the payment of corporation tax, can be regional markets. Sitting at the crossroad power generation capacity and improving transferred abroad. The country has signed of the major trans-European Corridors transport networks and their regional 40-plus double taxation treaties (DTTs) in 8 and 10, Macedonia is an ideal transit interconnection) is a priority after years recent years. and distribution centre. It is less than one of under-investment, in order to reduce

2 011 | INVESTING IN Macedonia 7 Economic Overview

sector. Macedonian Railways has been reformed to improve the financial viability, productivity and effectiveness of railway operations. The energy sector is also now more efficient. MEPSO (the public electric power transmission company) has increased the capacity of the transmission network by completing the power transmission line to Greece, and restoring 38 transformer plants throughout the country, including the main power transformation station at Skopje. This work has led to a significant reduction of technical losses and an increase in the stability of power supply.

The Outlook

Macedonia has made tangible progress on key reforms, however, the country still faces significant institutional and economic pre-accession reform challenges.

Assuming a satisfactory resolution of the debt crisis in the five most-exposed EU countries (Greece, Italy, Ireland, Spain and Portugal), it is hoped that an upturn in key export markets along with continued progress in the EU accession process will contribute to the realisation of the country’s growth potential.

A key challenge is preserving sound policies that have delivered stability to the the costs of doing business, increase also plans to finance a significant part of economy in recent years. Real growth is returns to private investment and financing requirements by issuing debt on projected to accelerate to 5% over the facilitate exports. global capital markets. It recently unveiled medium-term, but could be higher if global an EUR8bn (US$10.7bn) investment trade picks up markedly. The prospects The government is keen to attract programme for the next seven years. for private investments, especially FDI, will private capital into infrastructure be boosted by closer EU integration and though concessions and public-private As a landlocked economy, Macedonia further efforts to address bottlenecks in partnerships (PPPs). The country has needs a well-developed road/rail network infrastructure, as well as improving access increased competition in the telecoms for its socio-economic development. Since and quality of higher education with sector and achieved progress in 1995, more than 200 kilometres of roads emphasis on science and technology unbundling the power sector, including have been rehabilitated and the average (particularly ICT) and providing advanced the privatisation of the electricity border entry and exit time has declined vocational training to enable youth to distribution company and its sale to EVN threefold (from 60 to 20 minutes, and compete successfully in global markets. (Austrian Utility). As elsewhere, effective from 20 to seven minutes respectively). tariff reforms based on cost-reflective Key elements of the domestic network Macedonia is a remarkably diversified basis and liberalisation are key for new are also part of the Trans-European economy that offers prospective investors investors to participate in the generation transport network (Corridor 8, which opportunities right across all sectors, and supply of electricity. connects the Durres Port in Albania including mining, base metals processing, with the Black Sea ports in Bulgaria and textile/apparel, chemicals and mechanical Macedonia needs substantial investments Corridor 10, which extends from Austria industry, automotive components, in energy, transportation, water and to Greece and Turkey). The government, renewable/clean energy, pharmaceuticals public services in order to catch up supported by EBRD, is implementing and medical devices, construction/ with EU member countries. While large a project to upgrade over 400 km of associated infrastructure, outsourcing, chunks of capital spending are likely to regional and local roads. agribusiness, tourism and ITC. Future be funded by official lenders the EBRD, prosperity depends fundamentally on European Investment Bank (EIB) and Similar progress is noticeable in the pace of EU accession and attracting International Bank for Reconstruction and railways. A new EU-compliant railway high-quality investments in industry and Development (IBRD), the government law has helped strengthen the entire services, as well as capacity building.

8 INVESTING IN Macedonia | 2 011 Economic Overview

Table 1: Key Macroeconomic & Financial Indicators Projections 2007 2008 2009 2010 2011 2012 2013 DOMESTIC ECONOMY Nominal Gross Domestic Product (GDP) (billions of Denar) 365.0 412.0 411.0 427.0 464.0 499.0 534.0 Nominal GDP Growth(1) 14.0 12.8 -0 2 4.0 8.6 7 5 7.0 GDP (in US$mn at current prices) 8,160 9,840 9,319 9,185 10,704 11,427 11,711 Real GDP Growth(1) 6.1 5.0 -0.9 1.8 3.0 3.7 4 2 Gross Fixed Capital Formation(2) 24.6 26.8 26.0 24.8 27.4 28.5 28 5 Industrial Production Growth (%)(1) 6 2 5.1 -8.6 -4.8 ––– Contributions to Output Growth (%) Domestic Demand 10.8 8.1 -4.1 -0.1 4.5 5.1 4.4 Net Exports -4.6 -3.1 3.2 1.9 -1 5 -1.4 -0 2

Consumer Price Inflation(1) 3 5 7.2 -0 2 2.1 4.4 2.0 2.0 Gross National Savings(2) 22.0 15.0 19.0 17.0 18.0 19.0 19.0 Government Fiscal Balance(2) 0.6 -0.9 -2.7 -2.5 -2 5 -2.2 -1.9 Gross Public Sector Debt(2) 24.0 20.6 23.8 24.6 26.3 28.2 27 5 Central Bank Rate (end-period) 6 5 6.5 6.5 5.0 4.0 Jun > > (1)Annual (%) change; (2)As (%) of GDP. > Expectations of rate hikes in tandem with trends in the Eurozone. Distribution of GDP (2010): Agriculture (11%); Industry (26%); and services (63%). Sources: NBRM; Ministry of Finance; World Bank and IMF estimates and protections.

Table 2: Balance of Payments & External Debt (in US$mn, unless otherwise indicated) Projections 2005 2007 2009 2010 2011 2012 2013 Exports, fob. 2,041 3,392 2,686 3,296 4,625 5,194 5,451 Imports, fob. 3,104 5,030 4,843 5,241 7,032 7,808 8,001 Merchandise Trade Balance -1,063 -1,638 -2,157 -1,945 -2,407 -2,614 -2,550 Total Foreign Trade (%) of GDP 86.0 103 2 80.8 93.0 109.0 113.7 114.8

Services (net) -33.6 34.4 40.1 78.3 117.8 114.2 114.7 Income (net) -115.0 -385.0 -82.4 -198.0 -233.0 -266 5 -259.2 Transfers (net) 1,052 1,383 1,601 1,803 1,931 2,005 2,013 Current Account Balance -159.3 -605.7 -598.8 -261.8 -593 -761 -681.7 As percent of GDP -2.7 -7.4 -6.4 -2.8 -5.5 -6.6 -5.8

Foreign Direct Investment, net 97.0 699.1 201.0 296.0 528.2 571.0 586.0 Portfolio Investment, net 0.8 -2.8 -51.3 -29.0 -46.8 466.7 43 2 Total Foreign Investment 97.8 696.3 149.7 267.0 481.4 1,038 629 2 As percent of External Deficit 61.4 115.0 25.0 102.0 81.2 136.4 92.3

Gross Official Forex Reserves 1,229 2,082 2,051 1,970 2,898 3,323 3,349 Gold (national valuation) 112.0 182.6 241.0 307.8 ––– Import-cover (months of imports FOB) 4.7 5.0 5.1 4.5 5.0 5.1 5.0

Total External Debt 2,971 4,161 5,505 5,517 5,804 6,092 6,355 Debt Stock (%) of GDP 49.6 51.0 59.7 60.1 54.2 53.3 54.2 External Debt (%) of Total Exports 116 2 98.8 155.1 131.0 128.5 124 5 120.0 Total Debt Service 253.0 692.0 357.0 410.0 417.0 647.0 567.0 Debt Service Ratio (%)(1) 10.0 16.4 10.0 9.7 9.2 13.2 10.7 (1)Scheduled interest and amortisation payments as a percent of total export earnings.

Major Trading Partners (Percent share of total trade to world, 2010). Exports: Germany (21%); Serbia (13%); Kosovo (12%); Italy (7.4%); Bulgaria (7.4%); Greece (6.7%). Imports: Germany (12%); Russia (11.5%); Serbia (9.2%); Greece (8.6%); Bulgaria (8.5%); UK (7.2%).

Sources: International Financial Statistics, the Direction of Trade (IMF), EBRD, NBRM, World Bank and IMF Staff projections.

KEY FACTS Area: 9,779 sq.mile. Population: 2.04mn (2010). Density: 205/sq. mile. The Capital: Skopje. GDP (purchasing power parity) – 2010: US$20bn. GDP per capita: US$4,592 (2010). Official Language: Macedonian. Form of Government: Parliamentary Republic. Currency (Oct 3 2011): 1 Euro = 60.88 Macedonian Denar (MKD); 1 US Dollar = 45.37 MKD. Major exports: Iron & steel, lead, chromium, wine, tobacco, apparel. Sovereign credit-rating: BB (Standard & Poor’s); BB+ (Fitch Ratings).

2 011 | INVESTING IN Macedonia 9 Economic Overview

Table 3: External Financing Requirements and Sources (US$mn) 2010 2011 2012 2013 FINANCING REQUIREMENTS 808 982 1,213 1,124 Current Account Deficit 532 655 670 690 Debt Amortisations 226 216 416 314 Reserves Changes 50 111 127 120

FINANCING SOURCES 808 982 1,213 1,124 Foreign Direct Investment (net) 330 388 420 446 Portfolio Investments 245 220 370 250 Disbursements 213 354 403 398 Other Capital 20 20 20 20 Source: World Bank.

Table 4: FDI Inflows to Macedonia (US$mn) (%) chg 2005 2006 2007 2008 2009 2010 2005-10 FDI Inflows (net)(1) 97.0 433.0 699.1 587.0 201.0 296.0 205.0 Total FDI Stock(2) 1,880 2,437 3,084 4,338 4,510 4,493 139.0 As (%) of GDP 31.4 37.2 37.8 44.1 48.4 49.0 – Sources: UNCTAD FDI database and International Financial Statistics.

(1)After repatriation of interest, profits and dividends (IPDs).(2) FDI stock represents the value of the share of affiliate enterprise at book value or historical cost, reflecting prices at the time when the investment was made and reserves (including retained profits) attributable to the parent firm, plus net indebtedness of the affiliate to the parent company.

Table 5: Investing Across Sectors Foreign Equity Ownership Index (100= full foreign ownership allowed) Country Score Regional average Global average Mining, Oil & Gas 100.0 96.2 92.0 Agriculture & Forestry 100.0 97.5 95.9 Light manufacturing 100.0 98.5 96.6 Telecommunications 100.0 96.2 88.0 Electricity 100.0 96.4 87.6 Banking 100.0 100.0 91.0 Insurance 100.0 94.9 91.2 Transportation 79.6 84.0 78.5 Media 100.0 73.1 68.0 Constr; Tourism, Retail 100.0 100.0 98.1 Healthcare, Waste mgt 100.0 100.0 96.0 Source: Investing Across Borders 2010, World Bank.

10 INVESTING IN Macedonia | 2 011 Economic Overview

Table 6: Macedonia, Business Data

Macedonia Eastern Europe OECD avg FYR & Central Asia Starting a business Procedures (number) 3.0 6.3 5.6 Duration (days) 3.0 16.3 13.8 Cost (% of GNI per capita) 2.5 8 5 5.3 Paid in min. capital (% of per capita) 0.0 12.3 15.3

Dealing with construction permits Procedures (number) 21.0 22.2 15.8 Duration (days) 146.0 250.1 166.3 Cost (% of income per capita) 1,601.4 645.5 62.1

Registering property Procedures (number) 5.0 5.6 4.8 Duration (days) 58.0 38.3 32.7 Cost (% of property value) 3.2 2.4 4.4

Paying taxes Payments (number per year) 40.0 41.7 14.2 Time (hours per year) 119.0 313.9 199.3 Profit tax (%) 6.2 9.8 16.8 Labour tax and contributions (%) 0.6 22.9 23.3 Other taxes (%) 3.8 8 5 3.0 Total tax rate (% of profit) 10.6 41.2 43.0

Trading across borders Documents for exports (number) 6.0 6.4 4.4 Time for exports (days) 12.0 26.7 10.9 Cost to export (US$ per container) 1,376.0 1,651.7 1,058.7 Documents for import (number) 6.0 7.6 4.9 Time for import (days) 11.0 28.1 11.4 Cost to import (US$ per container) 1,380.0 1,845.4 1,106.3

Enforcing contracts Procedures (number) 37.0 37.3 31.2 Duration (days) 370.0 402.2 517.5 Cost to enforce; in (%) of claim 33.1 26.7 19.2

Protecting investors Extent of disclosure index(1) 9.0 6.3 6.0 Extent of director liability index(1) 7.0 4.0 5 2 Ease of shareholder suits index(1) 4.0 6 2 6.8 Strength of investor protection index(1) 6.7 5 5 6.0

Getting credit Strength of legal rights index(1) 7.0 6.6 6.9 Depth of credit information index(2) 4.0 4.0 4.7 Public registry coverage (% adults) 39.4 13.1 8.0 Private bureau coverage (% adults) 0.0 21.3 61.0

Closing a business Time (years) 2.9 2.9 1.7 Cost (%) of estate 28.0 13.4 9.1 Recovery rate, cents on dollar 20.7 32.6 69.1

Macedonia, ranks (38) out of 183 economies on the ease of doing business. (1)(0-10) – Most 10; Least 0-1. (2)(0-6) – Scope and accessibility of credit information distributed by public credit registries and private credit bureaus; Most 6; Least 0-1.

Source: World Bank Doing Business 2011 report.

2 011 | INVESTING IN Macedonia 11 Economic Overview

CHART 1: Projected Growth for The Western Balkans Region in 2012 (percent) 6.0%

5.0% 5.0%

4.0% 3.5% 3.5% 3.7% 3.0% 3.0% 3.0%

2.0% 1.8%

1.0%

0.0% Albania Bosnia and Croatia Macedonia, Montenegro Serbia Kosovo Herzegovina FYR

Source: IMF, World Economic Outlook, September 2011.

CHART 2: Surge in Inward FDI Stock (US$ mn) 5000 4,493 4,338

4000

3000 2,437

2000

1,175 929 1000

0 2002 2004 2006 2008 2010 Source: UNCTAD World Investment Reports.

12 INVESTING IN Macedonia | 2 011 Economic Overview

CHART 3: Projected Net Inflows of FDI (Millions of Euros) 600 535 505 500 434 405 400

372 300

200

100

0 2011 2012 2013 2014 2015

Source: IMF staff estimates.

CHART 4: Regional Wage Levels in Perspective* 1500 1,439

1200 1,051

893 900 781 745 713 717 615 643 600 488

300

0 y enia roatia stonia Poland lovakia C epublic E S Slov osnia and R Hungar B Macedonia Montenegro zech Herzegovina C Source: The World Bank.

*Average Monthly Gross Salary in (Euros) of Selective Central Eastern European Countries in 2009

2 011 | INVESTING IN Macedonia 13 Agriculture

the country’s valuable reputation for environmentally-friendly production practices in an unpolluted environment.

Climate

The country enjoys an unusual and enviable combination of the Continental and Sub-Mediterranean, long warm summers followed by short and generally moderate winters. To these advantages can be added a fertile and responsive soil, supporting a range of food products.

These climatic factors provide particular benefits for greenhouse producers – whose products already command premium prices in European markets – and who can bring their products to the European market up to six weeks earlier than their major Western European competitors.

Location

Macedonia’s strategic position, straddling major European transport routes, with good access to existing regional markets, provides a fast and low-cost transportation and distribution network. Agriculture Operating costs Macedonia is one of the lowest-cost gribusiness and food processing Around 80% of cultivated land is in the producers in the region, with a skilled is traditionally one of the most hands of c.180,000 small-sized family workforce providing a ready supply of A important and strongest areas of farms, primarily in smallish parcels of 2.5- labour at competitive rates. The reliably the economy. Increased development and 2.8 ha. The majority of pastoral land is still warm summers particularly benefit investment is considered a government owned and managed by the state body, greenhouse producers, whose energy priority and the sector can anticipate the Public Enterprise of Pastures. costs are commensurately lower than substantial government support. many of their competitors. Crop production represents by far the Macedonia already receives World greater part of Gross Agricultural Output Markets Bank support in the development (70%), having increased in recent years. of its agricultural institutions and it is Major products for both the local and The country has a strong market anticipated that the EU accession process export markets include fresh and canned presence in all the former Yugoslav will provide further access to significant fruits and vegetables, bottled juices and republics, in other Balkan countries and financial and technical assistance. processed meat. in Russia and Ukraine.

Current conditions Following independence in 1991, trade Within the region itself, the increasing liberalisation and structural reforms proliferation of international supermarket Agriculture accounts for 16% of GDP allowed privately-owned enterprises retail outlets provides significant (when food processing is included) and to move to fill the gap created by the prospects for growth, creating a demand provides around 20% of employment in decline in the state food-processing for high-quality (graded and packed) fresh Macedonia. Almost half of the country’s sector, which had until then assumed and frozen products, which Macedonia total area consists of agricultural land, responsibility for all stages of processing is well-placed to meet. Significant with an approximately even split between and production. investment opportunities exist in the pastures and cultivated land (arable regional fruits and vegetables value chain, land, orchards, meadows and vineyards). The challenge to modernise is being and Macedonia can access and serve Agriculture plays a major part in the met with the development of new this expanding marketplace through country’s economy, with nearly half the products, advanced skills, technologies post-harvest handling, cold storage and population based in rural areas. and equipment – while maintaining distribution centres.

14 INVESTING IN Macedonia | 2 011 Agriculture

With government assistance, bolstered by Other important crops include: beans, increase the current number of over the development of advanced marketing onions, garlic, leeks, green peas, string seventy local wineries in total. skills, the country has made great strides beans, cauliflower, lettuce and aubergines in opening up new markets outside the (eggplants). More recently, broccoli, This expanding industry, looking to region, in particular in the burgeoning Brussels sprouts, Chinese cabbage and move into the top end of the market global ethnic food market. asparagus have also been introduced. – at a time when international demand increasingly seeks wines of ‘new origin’ – The existence of a growing demand from The existence of microclimates in provides diverse opportunities for direct communities of Eastern Europe and Middle the raised areas of the western part investment or for joint ventures with Eastern origin for foods produced using of the country has facilitated the local producers. traditional recipes has allowed Macedonian production of excellent fruit. An area of producers to explore significant new around 15,000 ha, containing some 7.6 Dairy markets outside of the region, including million fruit trees, produces 150,000 the US, Canada and Australia. tons per year – apples are by far the Milk and dairy products enjoy duty free largest crop, but there is also extensive access into EU markets, and domestic Investment production of plums, peaches, sour dairies also export to neighbouring opportunities cherries and pears. countries. The main product of the dairy farm sector is cows’ milk – while Boosted by government and international Winemaking many farmers maintain herds for both investment and assistance, the country milk and meat production, there is now offers excellent opportunities for Winemaking, predominantly based particular specialisation in high productive foreign investors across the industry’s in the Tikveš region, is a long-established milking cows. entire value chain, not only in primary industry that is still working towards production but encompassing modern its full potential. The production of The sector has undergone substantial post-harvest handling facilities, cold storage grapes and wine represents around modernisation over time, and investment distribution centres and logistics centres. 20% of GDP. in modern equipment and facilities has led to improvements in the efficiency and The Macedonian government has prioritised quality of production. the entire agribusiness and food-processing The domestic market is focused on traditional consumer products: soft white sector for investment and development cheese, yellow cheese, sour milk, whey, quark, and yoghourt.

While broad-based modernisation of At present, 18 international varieties of Significant opportunities exist to upgrade the industry continues, there remain grape – including Cabernet Sauvignon and the country’s dairy export profile. opportunities to invest in modern Chardonnay – are grown, together with There is high demand from the processing facilities to allow producers to the ancient Smedervka and Vranec grape international marketplace for high-quality add greater value to their products prior varieties, which represent 80% of total goats’ and sheep cheese that could be to export. grape production and are acknowledged met if milk and processing capacities for their quality. The Smedervka grape were developed. Some of the most attractive sub-sectors produces a quality dry white wine, while for inward investment are covered below: the Vranec variety produces a dry red Conclusion fruit and vegetables – production, storage, wine of complex aroma but subtle taste. distribution and processing – winemaking The Macedonian government has and the dairy sector (in particular sheep The combination of an ideal climate and prioritised the entire agribusiness and and goats’ cheese production). favourable soil conditions – comparable food-processing sector for investment to areas of France, Italy and Spain – allied and development, either through direct FRUIT AND Vegetables with longstanding Macedonian expertise investment or in the form of partnerships in viticulture, is the production of excellent with local producers. The most important sub-sector and one grapes for wines of increasing quality. that continues to expand: over 750,000 Government support and the ongoing tons of vegetables are produced on a Previously an exporter of cheaper provision of additional financial and total area of 60,000 ha. bulk wine, in recent years increased technical assistance from the World Bank investment has led to the establishment and as part of the EU accession process The principal crops are: tomatoes, of over twenty new small and medium- will underpin efforts to realise the peppers, cabbage, melons, watermelons, sized wineries, leading to an increase sector’s full potential. While challenges cucumbers and potatoes, as well as other in the export of more expensive high- remain in modernisation, marketing root crops. Macedonia is a net exporter quality bottled wines. The government and climate change adaptation, this of processed and preserved vegetables, recently offered fifty locations (with developing sector is highly promising including processed peppers and gherkins, the required infrastructure) intended and presents a broad range of exciting cucumbers and mushrooms. for wineries which should significantly investment opportunities.

2 011 | INVESTING IN Macedonia 15 Energy and Mining

are foreign-owned, after the general privatisation that followed independence in 1991. (For a production licence in the metallurgy sector, an application must be made to the Macedonian Department of Environment.)

Products include: ferrous alloys (including ferro-nickel and ferro-silica), rolled sheet steel, seamed tubing, aluminium bars, rods and profiles, lead, zinc, copper, gold and silver. The basic metals (iron and steel) constituted the largest export category in 2006.

While ferro-nickel is one of the principal products, production is dependent upon imported nickel and concentrates, processed at Feni Industries’ (Cunico Resources) Kavadraci plant.

Energy

The government has prioritised Energy and Mining development of this sector, and is committed to reducing the country’s growing dependence upon imported Mineral wealth Lignite is extracted by the state-owned fossil fuels and to encourage energy body AD ELEM from four surface mines, efficiency. Investment is welcomed in Macedonia has a complex geological feeding four coal-fired power plants. The both conventional and renewable energy structure and is rich in natural resources additional exploitation of the existing sources, with self-sufficiency in electrical including iron ore; copper; lead, zinc; mines at Suvodol and Brod-Gneotino energy the ultimate aim. nickel; gold; silver; asbestos and timber. is projected to prolong lignite supplies Rarer minerals, including quartzite and beyond at least 2030, and anticipated Domestic energy magnesite have also been found. development of lignite deposits at Zivojna supplies should extend supplies still further. Other resources extracted include: Thermal and hydro-electrical sources – bentonite; diatomite; feldspar; lime; talc; Metals and metal mostly state-owned – supply the lion’s share pumice; gypsum; sand; gravel; marble; products of the annual electricity generation figure travertine; and other decorative of about 6,000 GW/h. This provides about construction stones. The metal-processing industry and 80% of domestic electricity requirements metallurgy in general is a major employer: and the remaining 20% is imported. Growth in production over 11,000 people work in some aspect of metal production and processing. The state-owned lignite-fired thermal Copper concentrate (37.678 tons) Production in this sector is aimed almost plants have a capacity of around 800 MW production saw substantial increases in entirely at the export market and is an (supplying 5000 GW/h annually). Over 2010. Production of lead concentrate important source of overseas revenue. 675 MW of this derives from the three rose in 2010 to 55,802 tons. Raw steel plants at Bitola, which together supply production for 2010 grew steadily to There are around 150 small and medium- 70% of domestically-generated electricity. 468,289 metric tons hot and cold rolled sized production facilities. Almost all The Oslomej plant supplies the remaining steel products. Zinc production increased between 2009 and 2010, to 65,743 tons of concentrate and shipping ore. Case Study Macedonia’s only copper mine, at Bucim, 4 million metric tons of ore a year (and over For industrial minerals; carbonated stone is run by Solway Industries Ltd, part of the 40,000 metric tons of copper concentrate, (953.190 tons) and bentonite (7.084 Solway Investment Group, which has been containing gold and silver, are produced each tons) saw slight production increases in operating in Central and Eastern Europe year). Bucim’s copper concentrate is highly 2010. Gypsum production decreased in since 1992. Solway Industries acquired valued by European smelters as it does not 2010, to 143,118 tons. Bucim in 2005, winning an international contain impurities. The copper smelters of tender arranged by the Macedonian Serbia and Bulgaria are the destination of For Mineral fuels; lignite production government. The capacity of the plant is over most of the plant’s output. increased in 2010 to 6 583.074 tons.

16 INVESTING IN Macedonia | 2 011 Energy and Mining capacity, with 210 MW back-up provided at periods by the oil-fuelled Negotino complex. Case Study

Hydro-electric power is generated by In April 2011, it was announced that over 20 small and medium facilities with the European Bank for Reconstruction PCC DEG Renewables is a joint venture an installed capacity of over 537 WM and and Development (EBRD) will lend the between two German companies – PCC an annual supply figure of 1200 GW/h. Government EUR6mn for small hydro- SE and DEG-Deutsche Investitions-und- Most of the hydro-power plants are power plant development. The grant will Entwicklungsgesellschaft mbH – this go to Macedonian PCC Hydro DOOEL concern has a range of hydro-power state-owned. Skopje, owned by German renewable projects planned in the region in the next energy company PCC DEG Renewable two years. All liquid fuel and natural gas is imported. GmbH. Construction of four small hydro- Russian natural gas is brought to Skopje power plants is planned, with a total Source: Hydroworld.com news site via a pipeline from Bulgaria, and it is capacity of 4.1MW. anticipated that natural gas provision will increase as the distribution network develops. The country’s only oil refinery of clean, renewable hydro-power. hydro-power facilities is anticipated to is OKTA, in Skopje, owned by Hellenic The total estimated hydro-power be more than EUR1.6bn. Petroleum, which imports crude potential is 3900 terajoules (TJ) per petroleum by pipeline from Thessaloniki. year (3.6 TJ is equivalent to 1 GWh World Bank Initiatives of electricity). Market liberalisation The World Bank has engaged with the and restructuring Fully 70% of the technically available government to improve efficiency and hydro-electric potential is open for environmental sustainability in the energy Macedonia has signed the Energy investment, and large numbers of small sector, with a particular focus on the Community Treaty (ECT), bringing and medium-sized hydro-power projects construction of new hydro-power plants. together the EU’s 27 members and seven are already in train, with two large plants Balkan states including Moldova and (which will supply over 526MW in total) The International Finance Corporation Ukraine, and which envisages the creation planned for construction at Cebren and (IFC) is to provide technical advice and of an integrated energy market. The Galiste, on the Crna River, by 2020. financial assistance to banks to facilitate ECT’s objective is to attract investment lending to small hydro-power projects, in transmission networks and generating The Galiste and Cebren projects are implementing a new regional programme capacity, increase trade liberalisation currently out to tender and foreign to support investment in Macedonia, and promote energy efficiency. Full investor interest has been high: EVN AG Albania, and Bosnia and Herzegovina. The liberalisation of the Macedonian domestic – Austria; Energo Pro – Czech Republic; funds generated by this programme – market is anticipated by 2015. Edison – Italy; PPC – Greece; Strabag – ‘Renewable Energy in the Western Balkans Austria; CWE&CTGPC – PR of China; with a focus on Small Hydro-power Plants’ The state vertically integrated electricity Lanco – India; Komipo, KHNP, Kosep, – are expected to exceed US$300mn, company has been restructured in Daelim Industrial – Korea; AES Electric including $US30mn from the IFC, and will accordance with EU policies into four – United Kingdom; Porr – Austria; and support the construction of 100 small independent units: two for power Landsvirkjun – Iceland; all passed the pre- hydro-power plants in the Western Balkans. generation (JSC ELEM and JSC Negotino), qualification stage of the tender. one for transmission (JSC MEPSO) and The International Bank for Reconstruction one for distribution (JSC ESM). EVN A combined cycle gas fire and heating and Development (IBRD) will also offer (Austria) purchased 90% of the shares in facility of 230 MW in Skopje is in its additional finance aimed at upgrading the latter unit, in 2006, and privatisation, testing period and very soon will be Macedonia’s energy infrastructure. Major bolstered by increased private investment, commissioned. projects that have received support has seen notable gains in energy efficiency. include the extension of an electrical Privatisation of JSC MEPSO and JSC ELEM The Vardar River forms the largest river transmission line from Stip in Eastern has been deferred for the present. basin in the country and extensive hydro- Macedonia to Nis in Serbia, and the power plant construction is planned in construction of the proposed hydro- New projects the 2020-2030 period to include the power complex in Lukovo Pole is commissioning of facilities at Gredec and scheduled to receive support, the latter Government policy objectives include the Veles, and 10 smaller plants. designed to provide additional storage encouragement of additional investment for planned hydro-power facilities at in the exploitation of renewable energy, Recent tenders include one for the Mavrovo and Boskov Most. to include hydro-power, geo-thermal, wind, replacement of step-up and regulating solar and biomass. Over 400 sites have transformers at HPP Vrutok and HPP The main power transformation station in been identified by the government as Raven, as part of the government’s Skopje, together with 37 other units, has suitable locations for hydro-power plants. continuing programme of renewal been restored, and a power transmission and expansion. line to Greece has been finished, Macedonia’s mountains and rivers provide increasing the country’s energy stability an ideal environment for the expansion The total investment in all planned and reducing technical losses.

2 011 | INVESTING IN Macedonia 17 infrastructure

Macedonia since 1993. By August 2009 the EBRD had allocated EUR506mn and mobilised an additional EUR593mn of funding to 58 projects in the private and public sectors, including 85% debt. The 15% of equity investments is into banking and private local companies, including food producers and agribusiness. The total EBRD portfolio was 33% into transport, 25% in energy and 20% in financial institutions. In 2009 the European Investment Bank (EIB) allocated EUR239mn to back road transport, energy transmission and small and medium enterprises. By 2009 the World Bank had made loans of over US$1bn and grants of over US$170mn and its related International Finance Corporation (IFC) was backing private- sector investments. Bilateral donors include the USA, Germany, Italy, Japan and the Netherlands.

Transport is a key part of the Macedonian economy, contributing 8.6% to GDP (2008) and nearly 1 in 10 of the registered companies are listed as transport, storage and communications companies. Road transport dominates the transport sector, as in other countries, and this is structurally linked to the fact that main urban centres are relatively close, including Skopje, Veles, Infrastructure Kumanovo and Tetovo. ROADS oday’s Macedonia has forged to become part of the European family”. ahead steadily with creating a Macedonia is also bringing in European Corridor X runs from Salzburg in Austria Tmarket economy and developing standards in areas such as safety and to Thessaloniki in Greece and includes 172 its infrastructure, which includes transport pollution, harmonising road signs and km of North-South roads in Macedonia. It links to its neighbours. For instance it used markings to EU standards. Efforts are slowly has several branches under development, to have a highly profitable trade in early bearing fruit. In December 2005 Macedonia including road and rail. More than two- vegetables to Germany but its inherited won the status of candidate country for thirds of the length of the main road main land and rail export routes through accession to the European Union, which corridor is finished to modern highway Serbia became unreliable and expensive, provided a good impetus for development standards with remaining work estimated which affected the exports of fresh and funding of infrastructure in line with EU to be finished within four years. Funders vegetables. For this reason, linking to the systems. In October 2009 the European include the EBRD, which is also giving key pan-European road and rail corridors Commissioner recommended to start EU loans to improve infrastructure along it. VIII (east-west) and X (north-south, linking accession negotiations. Salzburg in Austria with the seaport at Corridor VIII, dubbed ‘the Motorway of Thessaloniki in Greece) is key to building The process increases the funding the Sea’, crosses the country East-West the economy. Macedonia is a central available for infrastructure and institutional and covers 304 km. It is considerably less crossroads and link on these transport development, including EU funds to advanced with only about a third built to corridors that bring Europe together, help with economic and institutional modern highway standards. The highway linking Western Europe with the Aegean reforms to help overcome pre-accession connects parts of South-Eastern Europe Sea (Corridor X) and from south-eastern challenges. There is also financial support where infrastructure is relatively weak, to western Europe (Corridor VIII). through a Western Balkans Investment linking the Adriatic (from Bari/Brindizi in Framework, backing from the European Italy) to Varna/Burgas and the Black Sea Minister of Transport and Communications Commission (EC) and from the Council via Sofia, Skopje, Tirana and Durres. It is Mile Janakieski wrote in the introduction for Europe Development Bank (CEB). ‘multi-modal’, bringing together sea and to the National Transport Strategy 2007- Other major funding sources include river ports, airports, roads and railways. It 2017 that the efforts are driven by the the European Bank for Reconstruction was estimated that work will last at least “aspirations of the Republic of Macedonia and Development (EBRD), active in until 2017.

18 INVESTING IN Macedonia | 2 011 infrastructure

The total roads in the country are The 307 km of rail on Corridor VIII will impressive, modern Skopje airport is near listed as 14,159 km, including 236 km connect Macedonia with Bulgaria and the intersection of the North-South and of expressways, 911 km of main roads, about half is operational. The work still East-West transport corridors and has 3,771 km of regional roads and 9,240 to be done includes the links to Bulgaria potential as a hub and logistics junction km of local roads, some in poor repair. At (25% of the total length) and Albania for Macedonia and the Balkans region. Air the time of writing, tenders were set to (20%, the new 62.6 km track from Kicevo transport freedoms are being opened to be published in November 2011 for the to Lin on the border). Prequalification encourage more traffic and the ministry latest phase of a project to reconstruct has been done to pick a consulting plans to set up more bus links to connect 25 local roads and 37 km of regional road firm to develop basic projects such as the airports with nearby cities. In the (Demir Kapija – Krnjevo), backed by the Kumanovo–Beljakovce with a target future, there could also be helicopter links World Bank and EBRD. The Agency for schedule to pick the firm to rehabilitate to leading hotels, resorts and hospitals. State Roads (ASR) is the body responsible the section in the second half of 2012 for planning, construction, maintenance and construction to begin in early 2013. In April 2008 the government launched and financing the roads, while public In the second half of 2013 construction a tender for a 20-year concession for the enterprise PE Makedonijapat does much will start on the section Beljakovce-Deve management, operation and maintenance of the maintenance on the primary roads Bair-border with Bulgaria and the railway of the airport systems. Turkey’s TAV won as contractor for ASR. ASR is mostly is to be finished by the end of 2019. it and TAV Havalimanları Holding A.Ş / financed through international loans and TAV Macedonia LTD Skopje has since grants, although there is some revenue The main line along Corridor X is a single- signed a 20-year concession agreement from car registration taxes, excise on track electrified line from Tabanovci to with MTC for the two airports and to build a new cargo airport in Stip.

Macedonia is investigating investments in ENERGY, POWER and renewable and sustainable energy POWER TRANSMISSION Macedonia used to import nearly half its fuel and toll road charges. In July 2008 Gevgelija via Skopje and Veles. According energy needs, and relies mostly on coal, the government launched a motorway to recent information from the Ministry followed by oil derivates, hydro energy network concession to construct, finance of Transport and Communication, bids and wood. There is limited oil production and maintain 560 km of motorways with are being assessed to pick a construction (estimated at 116 bbl/day), which is an estimated cost of EUR2.4bn. firm to overhaul rail sections Tabanovce- fraction of 19,000 bbl/day consumption. Kumanovo and Miravci-Smokvica on Energy production is high in carbon Car ownership is set to double from the Corridor X and this should conclude intensity and Macedonia is investigating last measure, estimated at 123 cars per in December 2011, while first quarter investments in renewable and sustainable 1,000 people (2004) to a forecast of 2012 is the target to pick a construction energy, including through a Western 217-264 cars per 1,000 people (2020). firm for the railway Nogaevci-Negotino. Balkans Sustainable Energy Direct Traffic on the main Corridor X route The aim is to increase speed to 100-130 Financing Facility (WeBSEDFF). was estimated to average 15,000 vehicles km/hr on many sections and improve a day in 2007, but is set to climb to infrastructure. Macedonia has joined the Reconstruction of the sector began 40,000 by 2020, although volumes inside ‘Cargo 10’ alliance, initially formed by with the division of the state-owned Macedonia are much lower. Slovenia, Croatia and Serbia, to expedite power monopoly Elektrostopanstvo freight on Corridor X. In October 2010 na Makedonija (ESM) into distribution, RAILWAYS the EBRD announced its first support generation and transmission segments in to rail in Macedonia when it allocated 2005. There is a growing capacity gap and As in other countries, rail in Macedonia EUR17.6mn to upgrade 53 km of track one focus in the energy sector includes has a long history, since the first rail track on three sections of Corridor X as well investments in new and rehabilitated from Skopje to Thessaloniki opened in as reforms and a feasibility study on the generation capacity, including improving 1873 and railways remain as important railway link to Bulgaria. the efficiency and environmental impact of to integrate Macedonia with European existing infrastructure. The 2010 estimate cargo and transport routes, including Other major projects underway include for electricity production was 6.8 billion pan-European corridors VIII and X. repairing and upgrading Skopje railway kilowatt-hours (kWh), and a further In 2010 there were 699 km of standard- station, automatic speed controls and 1.4 billion kWh was imported. Local gauge track and 226 km of wider gauge multi-modal transport nodes for loading production is mostly in thermal plants but (1.435 metre) electrified track, and more and unloading. also in hydro-electric facilities. Generation under construction on both corridors. Rail is by state-owned AD Elektrani na services are provided by public enterprises: AIR Makedonija (ELEM) and another state- Macedonian Railways Infrastructure – owned generator TEC Negotino. Skopje does management, construction, The main international airports are repair, maintenance, organisation and Alexander the Great Airport in Skopje On distribution, in 2006, the government regulation, while Macedonian Railways and St Paul the Apostle Airport in concluded the sale of 90% of ESM Transport AD – Skopje supervises the Ohrid, but there are another eight Distribution to Austria’s EVN AG for transport of people and goods. smaller airports with paved runways. The EUR225mn and a pledge to invest

2 011 | INVESTING IN Macedonia 19 infrastructure

EUR96mn more in boosting the country in South-East Europe whose population had access to improved infrastructure. The Austrians have brought network will be fully based on Internet drinking water supply. The total of 89% of expertise and capital to renovating Protocol (IP). All subscribers are to be the population with access to sanitation electricity distribution. The EBRD is transferred to the new platform by the facilities showed a bias in favour of among those backing EVN Macedonija, for end of 2013. towns where 92% had access, compared instance in 2008, it provided a EUR35mn to 82% in rural areas. One major loan alongside a matching loan from IFC Daniel Szasz, CEO of Makedonski water infrastructure project currently to finance the investment programme Telekom, said: “This investment is just underway, backed by the EIB, is for to upgrade the distribution network. a start of the EUR170mn investment EUR50mn to build water and sewerage In line with the Energy Community plan for the following years, of which systems in municipalities. So far 60 out of Treaty, the electricity market has been EUR150mn are in the fixed network. the 84 municipalities have submitted 108 liberalised for large industrial users since This project will provide the citizens with applications, which will also be screened January 2008. telecommunications solutions of the next by EIB and then tendered. Macedonia generation – innovative ways of usage of is building wastewater collection A transmission interconnection with the unlimited possibilities offered by the and treatment facilities and waste Bulgaria was finished in December 2008. Internet.” It includes completely replacing disposal units in line with European existing digital telephone exchanges and Union legislation. Oil is imported from Greece and installing an integrated device in the processed at the oil refinery Okta. EBRD homes of customers that previously did Lake Ohrid is a key tourist attraction and backs the Thessaloniki-Skopje Crude Oil not use broadband Internet until now could also be a water-based transport Pipeline Project. The country’s main gas (those using it already have the device) hub, using lakeside ports. Macedonia has nine spa towns and resorts.

The US Agency for International Development CONSTRUCTION AND has been backing the ‘Macedonia Connects’ URBAN DEVELOPMENT project to make Macedonia the first all- The country is organised into 84 municipalities (opštini), of which ten broadband wireless country in the world constitute the city of Skopje, which is by far the biggest city and has 40% of the urban population. The country has pipeline stretches 268 kilometres from so they can connect home telephone, 13 towns and cities with populations a connection to the Russian transit gas MaxTV, computer, laptop, smart phone over 50,000 and of these four are in the pipeline at Deve Bair on the eastern and new types of televisions, webcams, Skopje region, while the Eastern region border but natural gas consumption of internet radios and other home devices. has no large towns or cities. Skopje is 117 million cubic metres remains only The US Agency for International also continuing to grow faster than the a tiny percentage of the energy used. Development (USAID) has been backing national average. The pipeline is run by a joint stock the ‘Macedonia Connects’ project to company called GA-MA which was make Macedonia the first all-broadband Tourism and property development are founded in 2006 to manage the gas wireless country in the world. key drivers of construction and Gazit transport and owned by the government Globe, World of Princess & Ramada and ‘Makpetrol’ AD Skopje, the largest According to the Ministry of Education hotels, Marriott Hotels and Resorts, company licensed for distribution and and Sciences, 461 primary and secondary Soravia Group and Hypo Group supply of oil derivates. Macedonia has schools are connected to the Internet. An Alpe are among firms currently listed plans to use more compressed natural Internet service provider called On.net as busy with construction projects. gas (CNG) in public buses and there is has created a MESH network to provide The Ministry of Transport and a CNG filling station for buses in Skopje wireless services in the 11 largest cities/ Communications and some municipalities and infrastructure is to be added on towns. On ICT development Macedonia auction land for construction projects several national bus routes. ranked 53 out of 152 countries in 2010 such as hotels, light industrial use, wineries, (based on an ICT Development Index commercial buildings and housing TELECOMS and IT figure of 4.98) and it was estimated using an electronic auction system. that there were 1.9 million mobile Initial prices have been cut to encourage In 2001 the government sold the fixed- phone subscribers and 442,000 fixed the auctions. line telecoms monopoly, Makedonski lines. There were estimated to be 115 Telekomunikacii (MakTel), to Matav telephone lines (mobile and fixed) for Macedonia is a fast-growing country (Hungary, owned by Deutsche Telekom). every 100 people and an estimated 1.06 busy with transformation. With the help On 4 October 2011, Makedonski million Internet users. of international backers and driven by Telekom announced it was starting a the urge to integrate into the European capital investment programme worth WATER Union, it is pushing ahead with major EUR14mn to modernise the network projects that will see it regaining its with multi-media next generation The national water supply is already important position in the heart of south- technologies, making Macedonia the first advanced, and by 2008 virtually all the eastern Europe.

20 INVESTING IN Macedonia | 2 011 Manufacturing Manufacturing

acedonia boasts well- established manufacturing M industries in the automotive component sector, pharmaceuticals, clothing, textiles and leather.

Automotive component manufacturing

The largest sub-sector, automotive component manufacturing, presents excellent opportunities for outside investment. The advantages offered by an established industry (founded in the 1960s to supply the then Yugoslavian producer Zastava), the existence of a cost- competitive environment, a highly-qualified and flexible workforce and Free Economic Zone initiatives have already led to a number of companies being purchased by overseas investors in the course of recent privatisation initiatives.

Manufacturers supply quality components – in compliance with automotive standards TS 16949 and ISO 9001 – to growing European, Russian, Turkish and African markets, supported in most cases by free trade agreements. An ideal strategic location, close to Central and Eastern Europe and Turkey, Macedonia also presents advantages for transport and distribution.

Automotive manufacture encompasses a range of components for cars, buses, trucks and locomotives, with particular focus on high value to weight and labour-intensive products. Safety systems Hepos is an international award winner (airbags and seat belts) comprise the and exports 99% of its product to over Case Study largest portion of the export trade in 51 countries across the globe. It is one this sector, but other significant exports of the largest Macedonian exporters to The Department of Mechanical include; electronics (controllers, sensors); China and has signed contracts worth Engineering in Skopje provided precision engineered and plastic products, US$4mn to supply braking equipment for training in Java and C++ in aluminium and zinc die-casting and grey the Pakistan railway network. anticipation of the needs of Johnson iron casting components. Controls, which has constructed a US$40mn facility in The Technological Underpinned by a rigorous system Development Zone ‘Skopje1’, There is also a wide subcontracting of secondary and tertiary technical designed for the manufacture of base for engineering and manufacturing education, the country provides a ready electronic automotive components. in a range of processes including supply of highly-skilled graduates in machining, forging, die-casting and plastic engineering and related disciplines. With injection moulding. nearly half of the population under 30 has encouraged inward investment by years old, overseas investors can feel working in co-operation with investors to One of the local success stories is MZT confident that the supply of energetic, produce customised courses – these will Hepos AD Skopje, which primarily loyal, motivated and trained professionals ensure graduates can meet the specific produces railway brake systems. MZT can be maintained. The government skill levels required by the employer.

2 011 | INVESTING IN Macedonia 21 Manufacturing

Technological functions. The manufacture of finished The principal export markets for Industrial Development generic products forms the backbone Macedonian apparel manufacturers are Zones of the industry. Germany, Greece, the Netherlands, the UK and the USA. The Technological Industrial Development The sector has a long history, expanding Zones (TIDZs – or Free Economic Zones) over time to its current enviable position The industry shares the advantages of were established by the government to of supplying products to over 30 countries. other sectors, offering a skilled workforce, incentivise inward investment. In the period 1998-2007, exports competitive rates, strategic location, more than doubled from EUR14mn to speedy turn-round times and high-quality TIDZs are designed to support new EUR30mn. At the end of the same period, production and development to the business activity by providing prepared almost 1,600 people were employed in highest international standards. industrial sites and pre-constructed the pharmaceutical manufacturing sector. This flexible and diverse industry offers the full range of services Our experience has been positive, Ministry, including Cut-Make, Cut-Make-Trim and Full Package Services contract Invest Macedonia and others superb. This will be manufacturing. Long experience and Johnson Matthey’s ‘mega-European’ plant for the tradition provides the essential value- added element for those seeking to next decades outsource or establish joint ventures with Macedonian manufacturers.

factories complete with infrastructure, There are a number of highly successful The potential for industry growth as well as general support services. pharmaceutical manufacturers in encompasses the manufacture of An impressive range of incentives on Macedonia, including Alkaloid, Jaka 80, cotton thread and fabric, wool yarn, customs, tax and other matters are also Replekpharm and Galafarm. All offer a fabric and knitted fabric, as well as offered to facilitate development. wide range of products and export to garments. While direct overseas the region and beyond. investment is encouraged, overseas Inward investment has also been attracted investors are presented with a by the low cost of construction offered Clothing, Leather broad variety of opportunities to by Macedonian companies – factories can and Textiles provide direct investment or to forge be built to meet international standards strategic alliances. quickly and at competitive prices: 170- These are Macedonia’s traditional 225EUR/m2 is the average cost. Added to industrial sectors and together form the The Macedonian footwear industry is this, utility prices for industry – e.g. water, country’s second largest export industry. also a major employer, with a strong electricity and natural gas are amongst export tradition in ladies/men’s leather the lowest in Europe. In 2006, the apparel manufacturing shoes, and a reputation for high quality industry alone provided nearly 23% of outdoor and fashionable footwear. In recent years, major global players such the country’s total exports. The industry Contract manufacturing provides the as Johnson Controls and Johnson Matthey employs around 40,000 people in more principal – though not exclusive – source have constructed large facilities focused than 1,400 companies. of production. on the export market:

As well as automotive components, the Case Study machinery and electrical equipment sector includes a bus manufacturer, producers of The leading Pharmaceutical company new registrations granted to Alkaloid in in Macedonia is Alkaloid, now 75 years 2007, 130 were for foreign markets. electrical equipment, household appliances, old. Like many of the most successful and the wood, plastic and furniture Macedonian companies, Alkaloid Alkaloid’s Institute for Development and processing industries. These industries has strong international links and Quality Control was launched in March have attracted increasing local and foreign manufactures products under licence 2009. Around 9 million euros have been investment. An example is American from global players, including Pfizer, Sanofi invested in the Institute, which is equipped with cutting-edge laboratory and pilot company Kemet that recently announced Avensis and Hoffman La Roche. manufacturing equipment. its investment in capacitor production A kaloid employs 1250 staff in Skopje facility in Macedonia. and in its overseas subsidiaries (in Serbia, In April 2009, Alkaloid signed a Partnership where there are also production facilities, agreement with the globally-respected Pharmaceuticals in Montenegro, Kosovo, in Albania, Bosnia manufacturer of dialysers and consumable and Herzegovina, Croatia, Slovenia, material for hemodialysis, NIPRO Corporation from Osaka, Japan. The Macedonian pharmaceutical industry Switzerland, Bulgaria, Romania, Ukraine, in the Russian Federation and USA.) is another sector that benefits from the Alkaloid is currently ranked sixth in ready availability of a skilled and motivated A kaloid exports (2010 figures) 56% of its pharmaceutical manufacturers in workforce, employed in a range of production to 27 countries. Of the 150 Southeast Europe. engineering, technical and quality control

22 INVESTING IN Macedonia | 2 011 tourism

of lakes’ because of its numerous tectonic, glacial, and man-made lakes, about fifty in Tourism all. The mountains, many rising over two thousand metres, present impressive, or the first time visitor to Balkans’. There are few countries in spectacular landscapes. The great variety Macedonia, the experience that the world which can boast within their of plant and animal species, have resulted F they are entering a remarkable frontiers natural pillars that were formed in some areas being proclaimed national country starts early. Arriving at the over ten million years ago; a 3,800 year parks and. In one case, a designated national airport the visitor is ushered old megalithic observatory to rival UNESCO world heritage site. Macedonia into a vast, futuristic building of glass Stonehenge; Hellenic cities, Roman and boasts three national parks of which the and steel that could serve as a museum of modern art in any city. Wide roads then transport our visitor to the There are few countries in the world which can country’s capital of Skopje and straight into the city’s buzzing boast within their frontiers natural pillars that nightlife – a thriving young capital were formed over ten million years ago enjoying the evening hours of a warm autumn Mediterranean climate. For many tourists this introduction is Byzantine mosaics and basilicas; Ottoman largest, Mavrovo, is home to several to a Macedonia of today – yet ahead still mosques; and Orthodox churches and river valleys, waterfalls, caves and other lie the country’s rich scenery, incredible monasteries. Macedonia is a veritable formations giving many opportunities architecture and hidden history. treasury of culture and beauty. for hiking, fishing, mountaineering, horse riding and cycling. The country also hosts It is not without reason that Macedonia The country is also rich in water a further thirty three nature reserves, is often referred to as the ‘Pearl of the resources. It is sometimes called ‘the land mainly for wildfowl.

2 011 | INVESTING IN Macedonia 23 tourism

still financially competitive in respect of other destinations in Europe, Macedonia looks set to enjoy considerable growth in its tourism sector over the next few years.

To meet the growing numbers of tourists, Macedonia is undertaking an ambitious programme of development. Currently there are some 90 hotels available in addition to ten camps, two tourist settlements and over 27,000 beds in the private sector: a total number of some 80,000 beds. The majority of this accommodation is unsurprisingly located in the most popular tourist destinations of Lakes Ohrid, Prespa and Doiran but the plans call for a significant expansion.

Indeed, tourism and property development are the key drivers of the current construction programme. International companies such as Gazit Globe, World of Princess & Ramada hotels, Marriott Hotels and Resorts, Soravia Group and Hypo Group Alpe are among the firms currently busy with construction projects across the country.

Eco-tourism and rural tourism are also bring explored further, along with themed routes and trails to appeal to special interests. Small businesses, working independently or in concert, are beginning to emerge to service this To meet the growing numbers of tourists, growing sector. For the discerning tourist Macedonia is Macedonia is undertaking an ambitious an amalgam of delights: mountains and programme of development lakes, sun and snow, and a climate that can vary between Mediterranean in the South and continental in the North. Many visitors choose to visit Macedonia’s several winter sports centres, of which To this natural beauty can be added a key beauty sites such as the area around the best known is the ski resort of five-thousand year history of successive Lake Ohrid and its towns of Ohrid and Popova Sapka at Mount Sar, where all civilizations, all of which have left their Struga . The Lake is one of the oldest the necessary facilities exist for sports stamp on the country, and a relaxed pace in the world, while the town of Ohrid and recreation. of life which may seem more like that of claims the world’s longest continuous another age to a stressed and harassed human settlement, stretching back seven With its natural paradise of magnificent businessman. Nevertheless, Macedonia is thousand years into Neolithic times. For mountains, lakes and rivers, amidst a also very much a country of the twenty those with an historical interest there grandeur of rich historical ruins and first century, as testified by its new are some five thousand archeological villages that have remained practically national airport. sites to explore, scattered across the unchanged for centuries, Macedonia country, including those at the town of remains one of Europe’s last great As Macedonians like to point out, the Stobi and in the capital, Skopje. Other undiscovered countries. Nevertheless the country may have been where St Paul tourists may follow the example of many country is beginning to enjoy a significant first introduced Christianity to Europe visitors down the centuries, and come increase in its number of visitors. and where the Cyrillic script was born for the healing waters and treatments at Together they have helped to make – thanks to the efforts of Saint Clement the several spa towns in the country. For tourism one of the largest contributors and Saint Naum – but Macedonia is those preferring more physical pursuits, to the national revenue. Easily accessible also the place which boasts the first Macedonia also offers a ski season that from all points abroad, boasting all the wireless internet countrywide coverage can often extend into May. There are amenities of the western world, and yet of 95 per cent.

24 INVESTING IN Macedonia | 2 011 Political History

Bulgarian control was being extended over the Slavic tribes in an around Macedonia. Around the 9th century these tribes accepted Christianity as their religion. Over the following four centuries control of the region switched regularly between the Bulgarian, Byzantine and Serbian empires according to their strength at any one time. In 1389, however, the Ottoman Turks inflicted such a crushing defeat on Serbia that for the next five centuries the central Balkans fell under Turkish rule.

In the nineteenth century, mirroring uprisings elsewhere in Europe, several nationalist movements arose with the goal to establish an autonomous Macedonia. In 1878, when Russia defeated Turkey, the region of Macedonia was ceded to Bulgaria under the Treaty of San Stefano. The Western Powers, however, fearful of Russia’s influence, forced Bulgaria to return Macedonia to Ottoman rule. Nevertheless Macedonia’s nascent nationalism was galvanised. In 1903 came the Ilinden-Preobrazhenie Uprising against the Ottomans which, after some initial successes, including the forming of the ‘Krushevo Republic’, was crushed with much loss of life. Nevertheless, the uprising and the forming of the Krushevo Republic are considered the cornerstone and precursors to the eventual establishment of the Macedonian state.

Nine years later, the Balkan Wars of 1912 and 1913 led to Greece and Serbia dividing Macedonia between themselves. In 1918, with the end of World War One and the dissolution of the Ottoman Empire, the Kingdom of the Serbs, Croats A Political history and Slovenes was officially established, into which the Kingdom of Macedonia was acedonia is a name born in 168 BCE, Rome incorporated the region incorporated. In 1929 this new country the earliest days of antiquity. In within its own Empire, establishing the was renamed the Kingdom of Yugoslavia, M the 4th century BC, following Province of Macedonia in 146 BCE. By the with provinces known as ‘banovinas’. the territorial gains made by Philip II of time of Diocletian, some four hundred What is Macedonia today became known Macedon against the various tribes of years later, the province had been as the ‘Vardar Banovina’. Nevertheless, the region, his son Alexander the Great subdivided, with most of the country’s Macedonian nationalists continued completed the work of his father in modern boundaries falling within what the struggle against the new rulers, uniting the region before moving from was then known as Macedonia Salutaris. as a result of which the interwar his homeland to establish the greatest When the Roman Empire finally split in government banned both the empire in the ancient world. the 4th century AD, Macedonia came Macedonian language and the name under the Eastern Empire, ruled from Macedonia. In World War II, the Axis This proved a brief flowering of Constantinople. Over time, while Greek powers overran the region and Vardar ascendancy for the country. Following remained the dominant language in the Banovina was divided between Bulgaria the break up of Alexander’s empire, south, as it had since the sixth century and Italian-occupied Albania. Many Macedonia was destined to lose its BCE, in Macedonia itself Latin made Macedonian nationalist elements joined independence, becoming more often a significant inroads. Josip Broz Tito’s partisans leading the staging post for various invaders. Indeed, communist resistance to German Macedonia would have to wait over two Slav peoples began settling in the area occupation. With the success of the thousand years for full independence. In in the 7th century AD, at the time when Communist-led Government in 1946

2 011 | INVESTING IN Macedonia 25 Political History

the Federal Republic of Yugoslavia of Thessaloniki to trade. The embargo was Macedonia also hopes to join NATO was born and the People’s Republic lifted in November 1995 after Macedonia before the end of the decade. The of Macedonia became one of the six changed its flag and agreed to discuss its Republic is also a member or signatory to provinces of the new Republic. name with Greece. a number of international organisations and protocols. In 1943, it had been agreed by Tito’s To date, there has been no resolution Communists that postwar Macedonia of this issue. Certain countries, such as GOVERNMENT would have full republic status in a the UK, use the term the ‘Republic of future Yugoslavia. With the end of World Macedonia’ for bilateral and internal Macedonia is a parliamentary democracy War II, therefore, came the hope that purposes and the name ‘Macedonia’ is with an executive government composed Macedonians might at last unify their increasingly being used internationally, of a coalition of parties from the peoples, a hope encouraged by the despite Greek objections. In multilateral unicameral legislature and an independent Greek Communist Party and by Bulgaria’s fora such as the EU or UN the term, the judicial branch with a constitutional court.

The Macedonian parliament is the country’s Macedonia became an official candidate for EU legislative body, making, proposing and membership in December 2005 and has been adopting laws. Members are elected for a mandate of four years through a general steadily progressing towards that goal election. Each Macedonian citizen above 18 years can vote.

recognition of its Macedonian minorities. ‘Former Yugoslav Republic of Macedonia’ The President of the Republic is elected The Stalin-Tito split of 1948, and the end remains the official term. every five years and he or she can of the Greek civil war in 1949 put an end be elected twice at most. The role is to such hopes. Nonetheless, there was Macedonia had remained at peace through mostly ceremonial; executive power some acknowledgement of Macedonian the Yugoslav wars of the early 1990s. in Macedonia is exercised by the culture. In 1952 the first Macedonian However, it was seriously destabilised government, whose prime minister is the grammar was published. An independent by the Kosovo War in 1999, when an most politically powerful person in the Macedonian Orthodox Church – estimated 360,000 ethnic Albanian country. The members of the government for so many centuries under Greek refugees from Kosovo took refuge in the – elected for four years – are chosen by Orthodox control – was also reinstated. country. Although they departed shortly the Prime Minister. The current holder is Indeed, over the following 40 years, in after the war ended, issues arose with the Nikola Gruevski who is serving his third comparison with other East European country’s ethnic Albanian minority which consecutive term in office. states, Yugoslavia prospered. Its citizens sought better representation on both were free to travel and worship as they political and cultural fronts. In April 2009, presidential and local wished and the country was opened as a elections in the country were carried tourist destination. In February 2001 agitation escalated out peacefully, which was crucial for into armed conflict in western Macedonian aspirations to join the EU, With the break up of Yugoslavia at the Macedonia. Hostilities did not last The ruling conservative VMRO-DPMNE beginning of the 1990s, Macedonia again long. With the signing of the Ohrid party won the local elections. Their sought its own freedom. On 8 September Framework Agreement in August 2001, candidate, Gjorgi Ivanov, was elected as 1991 Macedonians held a referendum the Macedonian government agreed the new Macedonian president. on independence, with 95.05% voting to greater political participation for the in favour. This led to a new Constitution Albanian minority, official recognition of An early parliamentary election was held on 17th November, under which the the Albanian language, and an increase on 5 June, 2011. International observers ‘Republic of Macedonia’ was proclaimed in the number of ethnic Albanian police assessed the election as ‘competitive, as a sovereign and independent state. officers throughout the country. In August transparent and well administered’. 2004, Macedonia’s parliament passed The ruling VMRO-DPME coalition Greece worried that this development legislation redrawing local boundaries won the most seats but not an overall implied territorial claims over Aegean and giving greater local autonomy majority. For the first time, too, the Macedonia, which Greece had obtained in to ethnic Albanians in areas where Macedonian diaspora voted for their 1913, withheld diplomatic recognition of they predominate. own representatives – one each drawn and demanded that Macedonia find another from Europe and Africa, North and South name. At Greek insistence, Macedonia was Macedonia became an official candidate America, and Asia and Australasia As a forced to use the ‘provisional’ title, the for EU membership in December 2005 result the new Macedonian Parliament Former Yugoslav Republic of Macedonia and has been steadily progressing towards has 123, rather than 120, MPs. (FYROM) in order to be admitted to that goal, although the name issue with the UN in April 1993. When the USA Greece remains extant. An important Local government functions are divided (following six EU countries) recognised the milestone towards EU membership came between 78 municipalities. The capital, FYROM in February 1994, Greece declared at the end of 2009, when Macedonian Skopje, is governed as a group of ten an economic embargo against Macedonia citizens were granted the right to visa- municipalities collectively referred to as and closed the Aegean Macedonian port free travel within the Schengen zone. the “City of Skopje”.

26 INVESTING IN Macedonia | 2 011

programme

UK-Macedonia Investment Forum 19th October 2011 Painters’ Hall, London

8.00am – 9.00am 12.30pm – 1.45pm Registration and refreshments Networking Lunch

9.00am – 9.15am 1.45pm – 2.30pm Welcome and Introduction Official Welcome – HE Prime Minister Nikola Gruevski Atam Sandhu, CEO of Developing Markets Associates and HE Marija Efremova, Macedonian Jan Fischer, Vice President, European Bank for Ambassador to the UK Reconstruction and Development (EBRD)

9.15am – 10.30am 2.30pm – 4.00pm Setting the Scene – ‘Macedonia – Europe’s newest Investing in Information Communications business partner’ Technology Chair – HE Christopher Yvon, British Ambassador Chair – Atam Sandhu, Chief Executive, Developing to Macedonia Markets Associates • Hon Vele Samak, Minister for Foreign Investments, • Hon Bill Pavlevski, Minister for Foreign Government of the Republic of Macedonia Investments, Government of the Republic of • Visar Fida, CEO, Invest Macedonia Macedonia • Viktor Mizo, Director, Free Zones Authority • Hon Vladimir Pesevski, Deputy Prime Minister, • Aleksandra Ruzin, Executive Director, Eurolink Government of the Republic of Macedonia • Ian Godwin, Director, Johnson Matthey • Slagjan Mihajlovski, CEO, Infinte Solutions Q & A Session Q & A Session

10.30am – 11.00am 4.00pm – 4.30pm Refreshments Break Closing remarks • Hon Vladimir Pesevski, Deputy Prime Minister, 11.00am – 12.30pm Government of the Republic of Macedonia Investing in Infrastructure, Energy and Natural Resources 4.30pm – 6.00pm Chair – Mr Jean Marc Peterschmitt, Managing Gala Reception Director, Central and South Eastern Europe, EBRD • Hon Vladimir Pesevski, Deputy Prime Minister, Government of the Republic of Macedonia • Hon Valon Saracini, Minister for Economy, Government of the Republic of Macedonia • Mark Gustafson, President and CEO, EurOmax Resources • Mark Bryant, Director, Binani

Q & A Session

28 INVESTING IN Macedonia | 2 011 The conference is supported by