REPUBLIC OF MACEDONIA - COUNTRY PROFILE

GEOGRAPHY Macedonia is located in the heart of Southeastern Europe . It shares a border with to the south, to the east, and to the north, and to the west. The country is 80% mountainous, rising to its highest point at Mt. Korab (peak 2,764 m).

Area : total: 25,713 sq km land: 25,433 sq km water: 280 sq km

Population : 2,02 million (latest census in 2002)

Ethnic groups: PEOPLE • Macedonian 65% • Albanian 25% • Turkish 4% • Roma (Gypsies) 3% • other 3%

Religions: • Macedonian Orthodox 67%, • Muslim 30%, • Others 3%,

Type: Parliamentary democracy. Constitution: Adopted November 17, 1991; effective November 20, 1991. Amended January 6, 1992. Government Independence: September 8, 1991 (from Yugoslavia). Branches: Executive --prime minister (head of government), council of ministers (cabinet), president (head of state). Legislative --unicameral parliament or Sobranie (120 members elected by popular vote to 4-year terms from party lists based on the percentage parties gain of the overall vote in each of six election units, with 20 seat per unit). Judicial -- Supreme Court, State Judicial Council, Constitutional Court, Public Prosecutor's Office, Public Attorney. Legal system is based on civil law; judicial review of legislative acts.

The economic performance of the Macedonian economy is expressed Economy through stable GDP growth of around 5%, low inflation rate of 2-3% on average, fiscal discipline confirmed by the international financial institutions and a well-functioning coordination between fiscal and

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GDP (purchasing power parity) : $18.59 billion (2009 est.) GDP - real growth rate : -0.7% (2009) GDP - per capita (PPP) : $9,000 (2009 est.) Labor force : 915,000 (2009 est.) Unemployment rate : 35% (2009 est.) Inflation rate (consumer prices) : 0.3% (2009 est.)

Agriculture - products : grapes, wine, tobacco, vegetables, fruits; milk, eggs Industries: food processing, beverages, textiles, chemicals, iron, steel, cement, energy, pharmaceuticals

Transport Infrastructure

Two Pan-European corridors - East-West Corridor 8, Investments - North-South Corridor 10 opportunities Road network: 9,205 km Railway network: 900 km Two international airports: - Skopje , - Ohrid International ports - Thessalonica (Greece) : 250 km - Durres (Albania) : 300 km

Investment Incentives 10% flat corporate and personal income tax 0% tax on retained earnings

Foreign Investment Policy

• Macedonian Constitution guarantees fair treatment of foreign investors • Complete protection of the ownership rights of foreign investors • Investment protection treaties with numerous countries • 100% foreign ownership of a company allowed • No restrictions for repatriation of profits

• 10% Corporate & Personal income tax (among lowest in Europe) • 0% Tax on retained earnings • Double taxation treaties with many European countries • 0% tax for operation in a Technological Industrial Development Zone • Real estate taxes at 2% - 5% • VAT at 18%, with 5% on specific items • FTAs with EU, EFTA, CEFTA countries; and the ; providing access to over 650m customers

INVESTMENT OPPORTUNITIES BY SECTORS

Macedonia is a small, but rather diversified economy. The sectors identified as having the most investment and/or export potential include:

- automotive components

2 - information communications technology - healthcare products (pharmaceuticals and medical devices) - agribusiness and food processing industry - mechanical industry - clothing, textiles and leather - tourism - metals and metal products - chemicals - energy - construction and mineral resources - tobacco and cigarettes - real estate.

AUTOMOTIVE Macedonia has had a history of auto component manufacturing. In the COMPONENTS recent privatization process, a number of companies have been bought SECTOR by overseas investors and continue to produce a range of components for cars, buses, trucks and locomotives. Existing component manufacturers in Macedonia supply to the European, Russian, Turkish and African markets, amongst others. Investors in Macedonia can freely export to a market of over 650 million people. The automotive industry in these markets is particularly buoyant as global players over the last ten years have invested over €20 billion in car manufacturing in Central and alone, and further investment is anticipated. Macedonia offers a particularly cost-competitive operating environment for auto component manufacturing. The labor force is well educated, flexible and has a strong work ethic. The educational system is willing to collaborate with incoming investors in finding ways to meet their skills needs, as demonstrated by one of the major universities training 165 students in Java and C++ in anticipation of the needs of Johnson Controls, which has constructed a $40 million facility outside Skopje to manufacture electronic automotive components. INFORMATION Macedonia has an excellent supply of well-educated IT experts at among COMMUNICATIONS the lowest labor costs in the region. Some 500 IT graduates are produced TECHNOLOGY (ICT) annually in the Universities. A software engineer with 1 to 2 years experience costs between €400 to €500 per month. The telecommunications system is first class and is regarded as the best in the region.

A number of international companies such as Seavus (), Netcetera (), M Soft () are successfully developing software in Macedonia for the export market and others are providing 24/7 telephone customer support for major multi-national IT companies. With a well established pharmaceutical industry, Macedonia is supplying primarily finished generic products to over 30 countries in the region and HEALTHCARE beyond. The country has a strong educational bias towards the medical PRODUCTS and healthcare professions, with a surplus of qualified medical doctors and pharmacists emerging from the education system every year.

The salary levels of qualified medical staff are substantially lower than those of comparable staff in the EU, to the extent that medical tourism is constantly on the rise. The regulatory environment in Macedonia is highly supportive of new healthcare investments AGRIBUSINESS AND The agribusiness and food processing sector is traditionally one of the FOOD PROCESSING strongest sectors of Macedonia’s economy. The Government views its development as one of its strategic priorities, and is ready to commit substantial support for trade and investment in the sector. Macedonia’s

3 INDUSTRY EU accession process will involve substantial technical assistance and investment support funds dedicated to the sector.

The sector’s numerous competitive advantages include a unique combination of Continental and Sub-Mediterranean climates, environmentally friendly production practices, sound food processing technologies, highly qualified labor available throughout the rural areas, very good access to regional markets and a reputation for quality food products.

There are excellent opportunities for investment in fruits and vegetables - production, storage, distribution and processing industries, together with wine production and sheep and goat cheese production.

Clothing, Textiles With a long, rich tradition in clothing and textiles, this sector is the and Leather second largest export industry in Macedonia. The competitive export advantages include short delivery periods, flexibility of delivery size together with exceptional value for money. In addition to garments, there is manufacturing potential for cotton thread and fabric, wool yarn, fabric and knitted fabric. The country offers potential not only for new foreign direct investment, but also for outsourcing, strategic alliances and joint ventures with many local well established companies. Tourism The Republic of Macedonia is a veritable treasury of culture and art, hosting numerous historical monuments throughout the country. The cultural heritage, combined with a temperate climate, beautiful landscape and unmatched hospitality, makes Macedonia an attractive area with great tourist ambitions to become a top destination for foreign visitors. As a continental country influenced by a Mediterranean climate, Macedonia has great potential for the development of both summer and winter tourism. The unpolluted air, soil and water create a unique milieu for eco tourism, placing Macedonia on the top of offers by the world’s most popular eco-tourism operators. With over 1,000 churches and monasteries, as well as more then 4,200 archaeological sites, Macedonia is among the leaders in cultural tourism in Europe. Metals and Metal Investment attractiveness of the metal and metal products sector is Products related to its export potential. In 2006, the basic metals (mainly iron and steel) represented the largest export category. The sector is comprised of some 150 small and medium-sized enterprises, employs over 9,000 employees, and is almost entirely in foreign ownership. The main products include rolled sheet steel, aluminum bars, rods and profiles, ferrous alloys, seamed tubing and ferrous-nickel products, lead, zinc, copper, gold and silver. Energy Sector Energy sector development is a priority in Macedonia, with 70% of the technically available hydro potential open for investment. Numerous investment opportunities exist and the Government encourages investment in both traditional and renewable energy projects. Construction Macedonia has a well developed construction industry recognized internationally for its skilled personnel and use of modern technology, particularly in civil engineering and hydro construction. The country is a major supplier of construction labor to Central and Eastern Europe, the Middle East and .

FDI FLOW BY YEAR Foreign Direct Investments

4 Foreign Direct

Investments Year (in USD m)

2009 330,1 (est)

2008 598.5 2007 699.1 2006 424.2 2005 97.0 2004 323.0 2003 117.8 2002 105.6

Macedonia has free trade agreements with Ukraine, Turkey, and the European Free Trade Association countries. Bilateral agreements with Albania, , , Serbia, , UN Mission in Kosovo (UNMIK), and were replaced with the membership in the Central European Free Trade Agreement (CEFTA), which the other countries joined in December 2006.

The trade exchange by products in 2009 shows that in the exports the most significant products are iron and steel products (flat-rolled products), clothes, ferro-nickel and petroleum oil preparations. In the Foreign trade imports, the most significant products are crude petroleum oils, electricity and motor vehicles for transport of persons.

In 2009, the most important trade partners were the EU 27 countries (56.2%) and the West Balkan countries (37.2%), and in the import the most important trade partners were the EU 27 countries(52.2%) and the Developing countries (26.7%). According to the total commodity international trade volume, Republic of Macedonia’s most important trade partners are , Serbia, Greece, and Russia (45.6% from the total commodity international trade exchange).

Exports : $2.691 billion (2009) $3.978 billion (2008)

Exports - commodities : food, beverages, tobacco; textiles, miscellaneous manufactures, iron and steel

Exports - partners : Germany 16.7%, Serbia 12.5%, Kosovo 11.7%, Greece 10.8%, Bulgaria 8.1%, Italy 8.1%, Croatia 5.7% (2009)

Imports : $5.043 billion (2009) $2.631 billion (2008)

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Import - commodities : machinery and equipment, automobiles, chemicals, fuels, food products

Import - partners : Germany 10.3%, Russia 9.8%, Greece 8.7%, Serbia 7.9%, Italy 7.2%, China 5.7%, Turkey 5.0%, Bulgaria 4.8%, 3.8%, (2009)

Countries with the highest scope of the commodity exchange with the Republic of Macedonia

TOTAL TRADE

SCOPE IN MIL. COUNTRY US$

Germany 967,8 Serbia 734.6 Greece 729.2

Italy 579,7 Bulgaria 459.6 Kosovo 324.2 China 292,6 Turkey 291,5 Croatia 271,1 Slovenia 225,1

EXPORT BY YEAR

EXPORT Export in USD m 2009 2,691.5 2008 3,978.2 2007 3,356.2 2006 2,400.7 2005 2,042.3 2004 1,675.8 2003 1,366.9

Source: State Statistical Office

EXPORT BY COUNTRY, 2008

Countries with the highest scope of the commodity exchange

with the Republic of Macedonia

COUNTRY Export in USD m Germany 450.4 Serbia 337.6 Kosovo 314.5 Greece 290.0 Italy 217.0 Bulgaria 216.9

6 Croatia 152.7 Bosnia and Herzegovina 86.6 Albania 83.9

Source: State Statistical Office

International trade scope of the Republic of Macedonia with CEFTA countries in the period January-June 2010 is 729,6 millions US $. Export value of goods is 447,7 millions US $ and the import value is 282 TRADE WITH CEFTA millions US $. Trade surplus with the CEFTA countries in the period January - June 2010 is 165.8 millions US $.

In 2009 trade exchange between Macedonia and CEFTA countries has reached total value of 1.600,7 million of US$, where export amounts 1.000,4 million of US$, while import value is 600,4 million of US$.

Diagonal cumulation

Besides the Republic of Macedonia (June 2009), the Republic of Montenegro (March 2010) and the Republic of Serbia from September 2010 joins the diagonal cumulation of origin with the Republic of Turkey and the EU. Macedonia, Montenegro, Serbia, Turkey and the EU are currently in sub-regional free trade zone, whose duty free or preferential trade is formatted with bilateral free trade agreements with Turkey and the Stabilization and Association Agreements with the EU. The possibility of using the suitability of common production in which inputs and outputs are with or without preferential duty, should strengthen the competitive capacity of the Region and also to show the degree of readiness of individual CEFTA countries, and thus the CEFTA region to EU integration.

Economic Chamber of Macedonia

Economic Chamber of Macedonia, the oldest and largest Business Association in the country, founded since 1922

Certificate of Registration ISO 9001:2008, The British Standards Institution /BSI/

Business associate in the world of business v Concept of a private-law model of Chamber v Voluntary membership v 15.000 members (currently) v Оrganization Forms

v 4 Аssociations / 19 Associations v 54 Groups v 15 Regional Chambers / 11 Regional Offices v 3 Joint Chambers v 9 Business Councils v 4 Associations and 19 Associations оrganized within the Economic Chamber of Macedonia

7 1. Маcedonian Energy Association – MEA 2. Маcedonian Mining Association - MAR 3. Маcedonian Metals Association - MAM 4. Маcedonian Association of Products Packers and Environmental Protection - МАP

15 RЕGIONAL CHAMBERS

More than 180 Agreements on Cooperation signed by the Economic Chamber of Macedonia with foreign chambers, and domestic institutions and organizations

INTERNATIONAL MEMBERSHIP of the Economic Chamber of Macedonia v International – ICC ( 1994) v Eurochambres (2003) v GS1 - EAN International v Association of the Balkan Chambers - ABC v Balkan Center for Trade Promotion - BCTP v Central European Initiative - CEI v South Eastern Cooperation Initiative – SECI….

Economic Chamber of Macedonia

Call center (02) 15 0 15 Phone: ++ 389 2 3244000 Fax: ++ 389 2 3244088 E-mail:[email protected] www.mchamber.mk

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