Macedonia sweetens investment climate

27/05/2010

Experts believe that by implementing reform-oriented macro-economic policy and setting the right business climate, Macedonia will increase foreign direct investment.

By Goran Trajkov for Southeast European Times in Skopje – 27/05/10

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Johnson Controls is one company that has invested in Macedonia. [Tomislav Geor-giev/SETimes]

International institutions like the IMF and World Bank continue to recognise Macedonia's business progress, having ranked it the world's third reformer in 2008-2009, according to the Bank's Doing Business Report 2010. Analysts agree that the country's efforts to improve the investment climate are noteworthy.

"Macedonia instituted a flat individual income and corporate tax rate of 10%, and abolished the capital gains tax, which makes it one of the most competitive business environments in Europe," Heritage Foundation Center for International Trade and Economics Director Terry Miller told SETimes.

The country's reforms in labour market flexibility and regulation of investment enabled its economy to achieve one of the highest score improvements in the Foundation's 2010 Index of Economic Freedom.

Among other measures to woo investors, Macedonia reduced the minimum administrative requirements. It introduced a modern electronic real estate cadastre, a system for electronic tax payment, a one-stop-shop for company registration and border trading.

Analysts believe the banks' recent announcement of plans to lower interest rates is another positive signal.

The government has aggressively sought investment opportunities, such as during Prime Minister Nikola Gruevski's December visit to Turkey, where he was accompanied by a delegation of business leaders. At the Macedonian-Turkish Business Forum, the CEOs of several hundred Turkish and Macedonian companies explored opportunities.

Soon after, Turkish Foreign Minister Ahmet Davutoglu characterised the entry of the Turkish company TAV in Macedonia as a "special opening for Turkey and for TAV". He added, "We will support investors from today onward to invest even more."

The Macedonian government recognised a particularly valuable opportunity at the Shanghai 2010 Expo last month. A high-level delegation, headed by Parliament Speaker Trajko Veljanovski, met with Chinese President Hu Jintao, Vice President Xi Jinping and Parliament Speaker Wu Banguo.

"The co-operation between our two states will broaden even more in different fields and we are prepared to strengthen our activities ... especially economic co-operation," Veljanovski said.

FON University Economics Professor Mirko Tripunovski explained that in addition to the government's macro-economic reform policy, the opening of the second free economic zone at Bunardzik, near Skopje, and the entry of US companies Johnson Controls and Johnson Metty signal the beginning of a new phase.

Chairman and CEO of Johnson Controls John Barts confirmed he is satisfied with the condi-tions in which his company operates. "The Macedonian government has been extremely committed and I would like to thank its officials for their work in supporting our effort," he said.

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"Many other firms are finishing their projects and expect to conclude the last agreements, which shows that gradually, room for entry of foreign companies opens," Tripunovski told SETimes.

He also expects investors who had put projects on hold due to the economic crisis to reactivate them soon.

However, there are challenges. "The problem of not quite efficient government and institutional bureaucracy remains. The situation is similar in the courts as well," FON Associate Professor Marija Zarezankova-Potevska told SETimes. She explained the government is making every effort to address the challenges, but of particular importance are efforts to root out corruption -- a sign things are moving in the right direction.

"Foreign investors most often want to have a region-wide coverage and many are already in the Balkans and cover Macedonia. What remains is to point out to them links that are attractive for Macedonia," said Zarezankova-Potevska.

This content was commissioned for SETimes.com.
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