January 2013 MINISTRY OF FOREIGN AFFAIRS OF THE REPUBLIC OF MACEDONIA Minister, H.E Nikola Poposki REPUBLIC OF MACEDONIA: BUSINESS CLIMATE.

January 2013January 2013

MINISTRY OF FOREIGN AFFAIRS OF THEMINISTRY OF FOREIGN AFFAIRS OF THEREPUBLIC OF MACEDONIAREPUBLIC OF MACEDONIA

Minister, H.E Nikola PoposkiMinister, H.E Nikola Poposki

REPUBLIC OF MACEDONIA:REPUBLIC OF MACEDONIA: BUSINESS CLIMATEBUSINESS CLIMATE

Why Macedonia?Why Macedonia?

InvestmeInvestment nt

IncentiveIncentivess

CompetitivCompetitive & e &

EducatedEducatedWorkforceWorkforce

Excellent Excellent InfrastructuInfrastructu

rere

Investor - Investor - friendlyfriendly

GovernmenGovernmentt

CompetitivCompetitivee

LocationLocation

Higher Profits & Increased Competitiveness

Location and Transport Location and Transport InfrastructureInfrastructure

• Two Pan-European corridors:

– East-West Corridor 8

– North-South Corridor 10

• Road network: 4,370 km

• Railway network: 925 km

• Two international airports:

– Skopje

– Ohrid

• International ports*:

– Thessalonica (Greece): 80 km

– Durres (Albania): 150 km

* Distance from Border

Political and Economic OutlookPolitical and Economic Outlook

• Political, monetary and macroeconomic stability

• Strategically located for future business expansion

• First country in SEE to sign a SAA with the EU in 2001

• EU and NATO candidate country

• FTAs with numerous countries

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

Based on the World Bank’s Doing Business Reports in 2010 , 2011 and 2012

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

Based on the World Bank’s Doing Business Reports in 2010 , 2011 and 2012

3rd BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2010 Report

3rd BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2010 Report

5th MOST TAX FRIENDLYCOUNTRY IN THE

WORLDForbes Magazine

5th MOST TAX FRIENDLYCOUNTRY IN THE

WORLDForbes Magazine

4th IN TOTAL TAX RATEEASE OF PAYING TAXES

2012PwC and World Bank Group Study

4th IN TOTAL TAX RATEEASE OF PAYING TAXES

2012PwC and World Bank Group Study

3rd BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2012 Report

3rd BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2012 Report

Ease of Doing Business 2012 Global Rank

2012 Index of Economic Freedom

World Rankings

Ease of Paying Taxes 2012

Total Tax Rate World Rankings

PwC and World Bank Group Study

Foreign Investment RegimeForeign Investment Regime

• Macedonian Constitution guarantees fair treatment of foreign investors

• Complete protection of the ownership rights of foreign investors

• Republic of Macedonia is member of MIGA

(Multilateral Investment Guarantee Agency)

• Investment protection treaties with numerous countries

• 100% foreign ownership of a company allowed

• No restrictions for repatriation of profits

Economic IndicatorsEconomic Indicators

AVERAGE GROSS SALARY IN AVERAGE GROSS SALARY IN 20112011

€ 497 per month

CURRENCYCURRENCY

Macedonian Denar pegged to the DM/€

for the last 15 years (€1= MKD 61.3)

EXPORT BY YEAR (US$ bn)

INFLATIONINFLATION

Low inflation: avg < 2% annually over the last 10 years

2007: 2.3%; 2008: 8.3%; 2009: -0.8%; 2010: 1.6%; 2011: 3.9%

Source: National Bank of the Republic of Macedonia

CREDIT RATINGS 2011CREDIT RATINGS 2011Standard & Poor’s: BB

Fitch: BB+

BUDGET DEFICIT & STATE DEBTBUDGET DEFICIT & STATE DEBTBudget Deficit, 2011: 2.6 % of GDPState Debt, Q2.2012: 29 % of GDP

FDI BY YEAR (US$ m)

GDP GROWTH(%)

Unbeatable Fiscal BenefitsUnbeatable Fiscal Benefits

Corporate Income Corporate Income TaxTax

Personal Income Tax Personal Income Tax ((highest rate)highest rate)

General VAT General VAT RatesRates

* Flat rateSource: PricewaterhouseCoopers (Taxes at a glance 2012), National Investment Promotion Agencies

• 10% Corporate & Personal income tax (among lowest in Europe)• 0% Tax on retained earnings• Double taxation treaties with many European countries• 0% tax for operation in a Technological Industrial Development

Zone• Real estate taxes at 2% - 4%• VAT at 18%, with 5% on specific items• FTAs with EU, EFTA, CEFTA countries; Turkey and the Ukraine;

providing access to over 650m customers

Romania

Czech Republic*

Macedonia*

Slovakia

Ukraine

Poland

Hungary

Turkey

Croatia

Czech R.*Romania*

Slovakia

Ukraine

Poland

Hungary

TurkeyCroatia

Macedonia*

Macedonia

Turkey

Romania

Slovakia

Czech RepublicUkraine

Poland

CroatiaHungary

Social Security ContributionsSocial Security Contributions

Macedonia - Social Security ContributionsMacedonia - Social Security Contributions

Comparison - Social Security Comparison - Social Security Contributions Contributions

Source: PricewaterhouseCoopers (Taxes at a glance 2011), National Investment Promotion Agencies

2727%%

2727%%

28.428.4%%

32.532.5%%

2727%%

2727%%

31.2% - 31.2% - 34.1%34.1%

48.648.6%%

37.237.2%%

44.5% - 44.5% - 55.7%55.7%

33.533.5%%

44%44%

39.8% - 39.8% - 49.7%49.7%

45%45%

37.237.2%%

Average Average Gross Gross Monthly SalaryMonthly Salary

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

Average gross monthly salary (€)

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

Eastern Europe in 2011

Competitiveness for Investments in Competitiveness for Investments in MacedoniaMacedonia

Price Level Index for Construction

Price Level Index for Investments

Source: Eurostat, December 2010

Sustainable Work Force SupplySustainable Work Force Supply

• 41.5% of population under 3041.5% of population under 30

• High intellectual capitalHigh intellectual capital

– 65% increase in total number of undergraduate degrees in 2009 compared to 2006

– 85+% of high school graduates enrolled in universities in 2008

– Multiple vocational high schools in each city

• Tailor-made training programsTailor-made training programs through Vocational Schools or Universities

• 6% of GDP spent on education6% of GDP spent on education

Number of enrolled students Number of enrolled students in Colleges and Universities in Colleges and Universities

Number of graduates Number of graduates in Colleges and Universities in Colleges and Universities

Excellent Language SkillsExcellent Language Skills

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

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

• English is also taught for two years at University level

• Regional languages (Serbian, Croatian, Bulgarian, Albanian and Greek) are widely spoken

Foreign Languages Foreign Languages StudiedStudied

Students in Students in Primary Schools, % Primary Schools, %

of Totalof Total

Students in Students in Secondary Schools, Secondary Schools,

% of Total% of Total

English 98% 96%

French 18% 32%

German 6% 21%

Italian - 2%

Russian 1% 2%

Turkish 3% 2%Source: State Statistical Office of the Republic of Macedonia (Education 2009/2010) and Ministry of Education and Science

• Business oriented Government

• Welcoming and decisive government ready to serve investors

Cooperative institutions Cooperative institutions

Governmental Agency “Invest Governmental Agency “Invest Macedonia” at Your Service…Macedonia” at Your Service…

• One-stop shop and project management approach

• VIP Investment tour

• Locations

• HR Companies, construction, real estate, tax advisory and consulting

• Universities and Reference Company visits

• Creating linkages with local and central Governments

• Navigate the legal requirements

• Ensure success!

T h a n k Y o uT h a n k Y o u

MINISTRY OF FOREIGN AFFAIRS OF THE REPUBLIC OF MINISTRY OF FOREIGN AFFAIRS OF THE REPUBLIC OF MACEDONIAMACEDONIA

DIRECTORATE OF ECONOMIC DIPLOMACYDIRECTORATE OF ECONOMIC DIPLOMACYFilip II Makedonski 7Filip II Makedonski 7

1000 Skopje1000 SkopjeTel. Tel. 389 2 3389 2 3 123 044 123 044Fax. Fax. 389 2 389 2 3 115 7903 115 790

E-mail:E-mail: [email protected]:web: www.mfa.gov.mk www.mfa.gov.mk

AGENCY FOR FOREIGN INVESTMENTS AND EXPORT AGENCY FOR FOREIGN INVESTMENTS AND EXPORT PROMOTION OF THE REPUBLIC OF MACEDONIAPROMOTION OF THE REPUBLIC OF MACEDONIA

Nikola Vapcarov 7Nikola Vapcarov 71000 Skopje1000 Skopje

Tel.: Tel.: + 389 2 31+ 389 2 3100 11100 111Fax: + 389 2 3122 098Fax: + 389 2 3122 098

e-mail: e-mail: [email protected]@investinmacedonia.comweb: web: www.investinmacedonia.comwww.investinmacedonia.com

AT YOUR SERVICEAT YOUR SERVICE AT YOUR SERVICEAT YOUR SERVICE