The2017WorldBank’sDoingBusinessReportrankedMacedoniathe11thbestplaceintheworldfordoingbusiness,downonespotfromthepreviousyear.FitchaffirmedMacedonia’sBBcreditrating,butupgradeditsoutlooktopositive,andS&PaffirmeditscreditratingofthecountryatBBwithastableoutlook.TransparencyInternationalrankedMacedonia107thoutof180countriesinitsCorruptionPerceptionindex,down17spotsfrom2016.
LargeforeigncompaniesoperatingintheTIDZsgenerallyreportpositiveexperiencesdoingbusinessinMacedoniaandgoodrelationswithgovernmentofficials.However,underthepreviousgovernmentsmallinvestorsanddomesticfirmsallegedthatthenrulingpartyVMRO-DPMNEawardedgovernmenttenderstocompanieslinkedtotherulingparty,extortedfundsfromcompanies,pressuredcompaniestohirepartyloyalists,retaliatedagainstbusinessesbelievedtobesupportiveofoppositionpoliticalparties,andattemptedtotakeoverindependentfirmsthroughgovernmentharassment.Thenewgovernmenthasvowedtoendpoliticalinterferenceintheprivatesectorandfreebusinessesfrompoliticalpressurewithmixedresultsthusfar.
Macedonia’slegalframeworkforforeigninvestorsisgenerallyinlinewithinternationalstandards.Macedoniagenerallytreatsforeigninvestorsaswellasdomesticinvestorsinsimilarcircumstances.Undertheformergovernment,domesticandforeigncompaniesexpressedconcernsaboutalackoflegalstability,predictability,andruleoflaw.Lawsgoverningbusinessactivitywerefrequentlychanged,oftenwithoutconsultationwiththebusinesscommunity,andthelegalchangesretroactivelyapplied.Thejudicialsystemwasinefficientandsubjecttopoliticalinterference,andremainssubjecttoinfluencebypoliticalparties.Corruptionwaswidespreadandlargelywentunpunished.Thereareallegationsthatthecurrentgovernmentcoalitioncontinuestoinfluenceandpressurethejudiciary.Whilethenewgovernmenthaspledgedtoenhancetransparencyandruleoflaw,itwilltaketimeandwillneedtoovercomethedeep-seatedcultureofstatecapture,cronyism,andcorruption.
Table1
Measure
Year
Index/Rank
WebsiteAddress
TICorruptionPerceptionsIndex
2017
107of180
WorldBank’sDoingBusinessReport“EaseofDoingBusiness”
11of190
GlobalInnovationIndex
61of127
U.S.FDIinpartnercountry(MUSD,stockpositions)
2016
USD110
WorldBankGNIpercapita
USD4,980
1.OpennessTo,andRestrictionsUpon,ForeignInvestment
PoliciesTowardsForeignDirectInvestment
LimitsonForeignControlandRighttoPrivateOwnershipandEstablishment
Foreigninvestorscaninvestdirectlyinallindustryandbusinesssectorsexceptthoselimitedbylaw.Forexample,investmentintheproductionofweaponsandnarcoticsissubjecttogovernmentapproval.Investorsinsomesectorssuchasbanking,financialservices,insurance,andenergy,mustmeetcertainlicensingrequirementsthatapplyequallytobothdomesticandforeigninvestors.Foreigninvestmentmaybeintheformofmoney,equipment,orrawmaterials.Underthelaw,ifassetsarenationalized,foreigninvestorshavetherighttoreceivethefullvalueoftheirinvestment.Thisprovisiondoesnotapplytonationalinvestors.
OtherInvestmentPolicyReviews
BusinessFacilitation
OutwardInvestment
Macedoniadoesnotrestrictdomesticinvestorsfrominvestingabroad,butitdoesnotpromoteorprovideincentivesforoutwardinvestments.Publiclyreportedoutwardinvestmentsaresmall,worthapproximatelyUSD81million,themajorityofwhichareintheBalkansregionandtheNetherlands.
2.BilateralInvestmentAgreementsandTaxationTreaties
MacedoniadoesnothaveabilateralinvestmentordoubletaxationtreatywiththeUnitedStates.
MacedoniahasconcludedanAgreementforPromotionandProtectionofForeignDirectInvestmentswiththefollowingcountries:Albania,Austria,Belarus,Belgium,BosniaandHerzegovina,Bulgaria,China,Croatia,theCzechRepublic,Egypt,Finland,France,Germany,Hungary,India,Iran,Italy,Luxembourg,Malaysia,Montenegro,theNetherlands,NorthKorea,Poland,Romania,Russia,Serbia,Slovakia,Slovenia,Spain,Sweden,Switzerland,Taiwan,Turkey,andUkraine.
MacedoniaisasignatoryofthreemultilateralFreeTradeAgreements:theStabilizationandAssociationAgreement(SAA)withtheEUmember-states,givingMacedoniaduty-freeaccessto650millionconsumers;theEuropeanFreeTradeAgreement(EFTA)withSwitzerland,Norway,Iceland,andLiechtenstein;andtheCentralEuropeanFreeTradeAgreement(CEFTA)withAlbania,BosniaandHerzegovina,Moldova,Montenegro,Serbia,andKosovo.BilateralFreeTradeAgreementsareinplacewithTurkeyandUkraine.
Therearenorecentorupcomingchangestothetaxregimethatwillconcernforeigninvestors.NoU.S.companiesoperatinginMacedoniahaveraisedtaxconcernswithPost.
3.LegalRegime
TransparencyoftheRegulatorySystem
MacedoniahassimplifiedregulationsandproceduresforlargeforeigninvestorsoperatingintheTIDZ.However,Macedonia’soverallregulatoryenvironmentiscomplexandnontransparent.Frequentregulatoryandlegislativechangesandinconsistentinterpretationsoftherulescreateanunpredictablebusinessenvironmentthatenablescorruption.Untilrecently,thegovernmentnegotiatedtheincentivetermsusedtoattractforeigninvestorstotheTIDZinconfidentialnegotiations,andthetermswerenotpublicized.Recently,thegovernmenthaspublishedallincentivesforbusinessesoperatinginMacedonia,whichwillbestandardizedandavailabletodomesticandinternationalcompanies.However,companiesworthmorethanUSD1billionthatwanttoinvestinMacedoniacannegotiatetermsdifferentfromthestandardincentives.Thegovernmentcanoffercustomizedincentivepackagesiftheinvestmentisofstrategicimportance.Thelegalregulatoryandaccountingsystemsusedbythegovernmentareconsistentwithinternationalnorms.
Rule-makingandregulatoryauthoritiesresidewithingovernmentministries,regulatoryagencies,andparliament.Almostallregulationsmostrelevanttoforeignbusinessesareonthenationallevel.Businesses,thepublic,andNGOsplayalimitedroleinthelegislativeandregulatorydevelopmentprocess.Regulationsaregenerallydevelopedinafourstepprocess.First,theregulatoryagencyorministrydraftstheproposedregulations.Theproposalisthenpublishedforpublicreviewandcomments.Afterpubliccommentsareconsideredandproperlyincorporatedintothedraft,itissenttothecentralgovernmenttobereviewedandadoptedinanofficialgovernmentsession.Oncethegovernmenthasapprovedthedraftlaw,itissenttoparliamentforfulldebateandadoption.Legislationisrarelyreviewedonthebasisofscientificordata-drivenassessmentstoassesstheimpactofthelegislation.
Thereisnoonecentralizedlocationthatmaintainsacopyofallregulatoryactions.Allnewlyadoptedregulations,rules,andgovernmentdecisionsarepublishedintheOfficialGazetteoftheRepublicofMacedoniaaftertheyareadoptedbythegovernment,parliament,orsignedbythecorrespondingministerordirector.Publiccommentsarenotpublishedormadepublicaspartoftheregulation.
MacedoniaacceptsInternationalAccountingStandards,whicharetransparentandconsistentwithinternationalnorms.However,MacedoniahasnotyetaligneditsnationallawwithEUdirectivesoncorporateaccountingandauditing.
Thecurrentgovernmenthaspromisedtoregularlycommunicateandconsultwiththebusinesscommunityandotherstakeholdersbeforeamendingandadoptinglegislation.ItpledgedtousetheUniqueNationalElectronicRegisterofRegulations(ENER),anonlineplatformintendedtofacilitatepublicparticipationinpolicymaking,toincreasetheminimumcommentperiodfrom20to30days,tominimizetheuseofshortparliamentaryproceduresinlawmaking,andtoincludeaphase-inperiodforlegalchangestoallowenterprisestoadapt.Keyinstitutionsinfluencingthebusinessclimatewillstartpublishingofficialandlegally-bindinginstructionsforimplementationoflaws.Theseinstitutionswillbeobligedtopublishallrelevantlaws,by-laws,andinternalproceduresontheirwebsites.
InFebruary2018,thegovernmentadoptedanewStrategyforPublicAdministrationReformandActionPlan,whichfocusesonpolicycreationandcoordination,strengtheningofpublicservicecapacities,andincreasingaccountabilityandtransparency.
InternationalRegulatoryConsiderations
Macedoniaisnotapartofanyregionaleconomicbloc.AsacandidatecountryforaccessiontotheEU,itisgraduallyharmonizingitslegalandregulatorysystemwithEUstandards.AsamemberoftheWTO,MacedoniaregularlynotifiestheWTOCommitteeonTechnicalBarrierstoTradeofproposedamendmentstotechnicalregulationsconcerningtrade.MacedoniaratifiedtheTradeFacilitationAgreement(TFA)inJuly2015(OfficialGazette130/2015),becomingthe50thoutof134membersofWTO.InOctober2017,thegovernmentformedaNationalTradeFacilitationCommittee,chairedbytheMinisterofEconomy,whichincludes22memberinstitutions.TheCommitteehelditsfirstsessioninMarch2018toidentifyareasthatneedharmonizationwithTFA.
LegalSystemandJudicialIndependence
Macedonia’slegalsystemisbasedoncivillawwithadversarial-styleelements.Thecountryhaswrittencommerciallawandcontractlaw.Therearespecializedcourtsthathandlecommercialandcontractualdisputesbetweenbusinesses.Contractsarelegallyenforcedbycivilandadministrativecourtrulings,andsporadically,withmediation.Enforcementactionsareappealableandadjudicatedinthenationalcourtsystem.Casesinvolvinginternationalelementscanbedecidedininternationalarbitration.
InJuly2015,parliament,withoutallowingpubliccomment,introducedobligatorymediationindisputesbetweencompaniesuptoUSD16,871invalueasapreconditionbeforegoingtocourt.Companiescomplainthemeasure,whichwentintoeffectFebruary1,2016,imposesadditionalcostsandprotractsenforcementofcontracts.
NumerousinternationalreportshavecitedMacedonia’sfailuretofullyrespecttheruleoflaw.Politicalinterference,inefficiency,favoritism,prolongedprocesses,andcorruptioncharacterizethecountry’sjudicialsystem.EnforcingcontractsandresolvingcommercialdisputesinMacedonia’scourtsystemistime-consuming,costly,andsubjecttopoliticalpressures.
LawsandRegulationsonForeignDirectInvestment
TheTradeCompaniesLaw
LawonPrivatizationofState-ownedCapital
Foreigninvestorsareguaranteedequalrightswithdomesticinvestorswhenbiddingonsharesofcompaniesownedbythegovernment.Therearenolegalimpedimentstoforeigninvestorsparticipatingintheprivatizationofdomesticcompanies.
ForeignLoanRelationsLaw
Thislawregulatesthecreditrelationsofdomesticentitieswiththoseabroad.Specifically,itregulatesthetermsbywhichforeigninvestorscanconverttheirclaimsintodeposits,sharesorequityinvestmentswiththedebtororbank.TheForeignLoanRelationsLawalsoenablesrescheduleddebttobeconvertedintoforeigninvestmentincertainsectorsorinsecondarycapitalmarkets.
LawonInvestmentFunds
TheLawonInvestmentFundsgovernstheconditionsforincorporationofinvestmentfundsandinvestmentfundmanagementcompanies,themannerandsupervisorycontroloftheiroperations,andtheprocessofselectingadepositorybank.Thelawdoesnotdiscriminateagainstforeigninvestorsinestablishingopen-endedorclosedinvestmentfunds.
LawonTakeoverofShareholdingCompanies
Thelawregulatestheconditionsandproceduresforpurchasingmorethan25percentofthevotingsharesofacompany.Thecompanymustbelistedonanofficialstockmarket,haveatleast25employees,andhaveinitialcapitalofEUR2million.ThislawdoesnotapplytosharesincompaniesownedbytheRepublicofMacedonia.
LawonForeignExchangeOperations
Thislawestablishesthetermsforcapitaltransactions.Itregulatescurrentandcapitaltransactionsbetweenresidentsandnon-residents,transfersoffundsacrossbordersaswellasallforeignexchangeoperations.Allcurrenttransactions(e.g.,alltransactionsthatareeventuallyregisteredinthecurrentaccountofthebalanceofpayments,suchastradeandprivatetransfers)offoreignentitiesareallowed.Therearenospecificrestrictionsfornon-residentswishingtoinvestinMacedonia.Foreigninvestorsmayrepatriatebothprofitsandfundsacquiredbysellingsharesafterpayingregulartaxesandsocialcontributions.Incaseofexpropriation,foreigninvestorshavetherighttochoosetheirpreferredformofreimbursement.
ProfitTaxLaw
Thecorporateprofittaxrateis10percent.Atthebeginningof2006,thegovernmentamendedtheProfitTaxLawandintroducedawithholdingtaxonincomeofforeignlegalentities.Thewithholdingtaxisappliedtoincomefromdividends,interest,managementconsulting,financial,technical,administrative,research,anddevelopmentservices,leasingofassets,awards,insurancepremiums,telecommunicationservices,authorfees,andsportsandentertainmentactivities.Incomefromalloftheseactivitiesissubjecttoa15percentwithholdingtaxrate,exceptforincomefrominterestandrentproceedsfromtheleasingofrealestate,whicharetaxedata10percentrate.ThiswithholdingtaxdoesnotapplytolegalentitiesfromcountriesthathavesignedanagreementtoavoiddoubletaxationwithMacedonia.TheUnitedStatesdoesnothavesuchanagreementwithMacedonia.
LaborLaw
LawonFinancialDiscipline
LawonFinancialSupportofInvestments
InFebruary2018,thegovernmentpassedtheLawonFinancialSupportofInvestments.Itisstillpendingparliament’sapproval.Thislawprovidesfinancialassistancetoeligibleforeignanddomesticbusinesses.
CompetitionandAnti-TrustLaws
ExpropriationandCompensation
AccordingtotheConstitutionofMacedoniaandtheLawonExpropriation(OfficialGazette95/12,131/12,24/13,and27/14),propertyunderforeignownershipisexemptfromexpropriationexceptduringinstancesofwarornaturaldisaster,orforreasonsofpublicinterest.UndertheLawonExpropriation,thestateisobligedtopaymarketvalueforanypropertyexpropriated.Ifthepaymentisnotmadewithin15daysoftheexpropriation,interestwillaccrue.Theseregulationshavebeenstrictlyfollowed.Thegovernmenthasnotundertakenanymeasuresthathavebeenallegedtobe,orcouldbearguedtobe,indirectexpropriation,suchasconfiscatorytaxregimesorregulatoryactionsthatdepriveinvestorsofsubstantialeconomicbenefitsfromtheirinvestments.
DisputeSettlement
ICSIDConventionandNewYorkConvention
MacedoniaisapartytotheConventionontheSettlementofInvestmentDisputesbetweenStatesandNationalsofOtherStates(ICSIDConvention)andtheEuropeanConventiononInternationalCommercialArbitration.Additionally,Macedoniahaseithersignedonto,orhasinheritedbymeansofsuccessionfromtheformerYugoslavia,anumberofbilateralandmultilateralconventionsonarbitrationincludingtheConventionEstablishingtheMultilateralInvestmentGuaranteeAgency(MIGA);theNewYorkConventionof1958ontheRecognitionandEnforcementofForeignArbitralAwards;theGenevaProtocolonArbitrationClausesfrom1923;andtheGenevaConventiononEnforcementofForeignArbitrationDecisions.
InApril2006,theLawonInternationalCommercialArbitrationcameintoforceinMacedonia.ThislawappliesexclusivelytointernationalcommercialarbitrationconductedinMacedonia.Anawardfromarbitrationunderthislawhasthevalidityofafinaljudgmentandcanbeenforcedwithoutdelay.AnyawarddecisionfromarbitrationoutsideMacedoniaisconsideredaforeignarbitralaward,andisrecognizedandenforcedinaccordancewiththeNewYorkConventionof1958ontheRecognitionandEnforcementofForeignArbitralawards.
Investor-StateDisputeSettlement
Macedoniaacceptsbindinginternationalarbitrationindisputeswithforeigninvestors.ForeignarbitrationawardsaregenerallyrecognizedandenforceableinMacedoniaprovidedtheconditionsofenforcementsetoutintheConventionandtheLawonInternationalPrivateLaw(OfficialGazetteoftheRepublicofMacedonia,No.87/07andNo.156/2010)aremet.Sofar,thecountryhasbeeninvolvedinthreereportedinvestor-statedisputesbroughtinfrontofinternationalarbitrationpanels.NoneofthosecasesinvolvedU.S.citizensorcompanies.LocalcourtsrecognizeandenforceforeignarbitrationawardsissuedagainsttheGovernmentofMacedonia.Thecountrydoesnothaveahistoryofextrajudicialactionagainstforeigninvestors.
InternationalCommercialArbitrationandForeignCourts
Macedoniaacceptsinternationalarbitrationdecisionsoninvestmentdisputes.Thecountry’sLawonInternationalCommercialArbitrationismodeledontheUnitedNationsCommissiononInternationalTradeLaw(UNCITRAL)ModelLaw.Localcourtsrecognizeandenforceforeignarbitralawardsandthejudgmentsofforeigncourts.Alternativedisputeresolutionmechanismsareavailableforsettlingdisputesbetweentwoprivatepartiesbutseldomutilized.APermanentCourtofArbitration,establishedin1993withintheEconomicChamberofMacedonia(anon-governmentbusinessassociation),hastheauthoritytoadministerbothdomesticandinternationaldisputes.MacedoniarequiresmediationindisputesbetweencompaniesuptoEUR15,000(USD18,360)invaluebeforecompaniescangotocourt.
ThereisnotrackingsystemofcasesinvolvingSOEsinvolvedininvestmentdisputesinMacedonia,andpostisnotawareofanyparticularexamples.
BankruptcyRegulations
Macedonia'sbankruptcylawgovernsthesettlementofcreditors'claimsagainstinsolventdebtors.Bankruptcyproceedingsmaybeinitiatedoverthepropertyofadebtor,beitalegalentity,anindividual,adeceasedperson,jointpropertyofspouses,orbusiness.However,bankruptcyproceedingsmaynotbeimplementedoverapubliclegalentityorpropertyownedbytheRepublicofMacedonia.TheWorldBank’sDoingBusinessReportfor2018ranksMacedonia30thoutof190countriesforeaseofresolvinginsolvency.
4.IndustrialPolicies
InvestmentIncentives
BoththeLawonCustomsandtheLawonProfitTaxesofferincentivestoforeigninvestors.Foreigninvestorsareeligibleforprofittaxexemptionsforprofitsgeneratedduringthefirstthreeyearsofoperationinproportiontotheamountofforeigninvestmenton:allprofitsreinvestedinthecompany,profitsinvestedinenvironmentalprotection,andprofitsinvestedin"underdeveloped"regionsofthecountry.Companieswithatleast20percentforeigncapitalareexemptfromcustomsdutiesforthefirstthreeyearsaftertheirregistration.Thefollowingadditionalbenefitsarealsoavailabletoforeigninvestors:a10percentflattaxforcorporateprofitsandpersonalincome;relieffromlocaltaxesandfees;ataxexemptionfordutiesonimportedgoods,rawmaterials,andequipment/machines;andsymboliclandleaserate.Country’slegislativeframeworkforFDIisgenerallyharmonizedwithEUstateaidregulations.
ForeignTradeZones/FreePorts/TradeFacilitation
PerformanceandDataLocalizationRequirements
Macedoniadoesnotimposeanyperformancerequirements,suchasmandatinglocalemployment(workingormanagementlevel)ordomesticcontentingoodsortechnology,asaconditionforestablishing,maintaining,orexpandinganinvestment.ForeigninvestorsintheTIDZmayemploystafffromanycountry.In2016,Macedoniasimplifiedtheprocedureforexpatriatestoobtainpermissiontoliveandworkinthecountry.
Macedoniadoesnotimposea“forcedlocalization”policyfordata.Thegovernmentdoesnotpreventorundulyimpedecompaniesfromfreelytransmittingcustomerorotherbusiness-relateddataoutsidethecountry.PostisnotawareofanyrequirementsforforeignITproviderstoturnoversourcecodeand/orprovideaccesstoencryption.Furthermore,therearenomeasuresthatpreventorundulyimpedecompaniesfromfreelytransmittingcustomerorotherbusiness-relateddataoutsidethecountry.However,basedonthenewEUGeneralDataProtectionRegulation(GDPR),whichwillbeimplementedstartinginMay25,2018,Macedonia’sDirectorateforPersonalDataProtectionispreparingamendmentstotheLawonPersonalDataProtectiontoharmonizeMacedonia’slawswiththenewEUregulations.
Dependingonthesectorandtypeofinvestment,variousgovernmentauthoritiesoverseeandassessthefulfillmentofinvestmentpromisesmadebyFDIs.ThegovernmententitiesincludetheAgencyforForeignInvestments(InvestMacedonia),theDirectorateforTechnologicalIndustrialDevelopmentZones(TIDZs),andtheMinistryofEconomy.
5.ProtectionofPropertyRights
RealProperty
Lawsprotectownershipofbothmovableandrealproperty,butimplementationofthelawsisinconsistent.Mortgagesandliensexistandareregularlyused,andtherecordingsystemisreliable.Highlycentralizedcontrolofgovernmentowned"constructionland,"thelackofcoordinatedlocalandregionalzoningplans,andthelackofanefficientconstructionpermittingsystemcontinuestoimpedebusinessandinvestments.Overthepastfewyears,however,thegovernmenthassignificantlyimprovedthecadastersystem,whichhasincreasedthesecurityandspeedofrealestatetransactions.Over97percentofrealestaterecordsaredigitized(Source:January–June2017Semi-AnnualReportoftheAgencyforRealEstateCadastreofMacedonia).TheWorldBank’s2018DoingBusinessReportranksMacedonia48thoutof190fortheeaseofregisteringproperty,thesamepositionithadin2017.
Landleasedoracquiredbyforeignand/ornon-residentinvestorsisregulatedbytheLawonOwnershipandOtherRealRights.EUandOECDresidentshavethesamerightsaslocalresidentsinleaseoracquisitionofconstructionlandorproperty,whereasnon-EUandnon-OECDresidents’propertyownershipisregulatedundertermsofreciprocity.ForeignresidentscannotacquireagriculturallandinMacedonia.Foreigninvestorsmayacquirepropertyrightsforbuildingsusedintheirbusinessactivities,aswellasfullownershiprightsoverconstructionlandthroughalocallyregisteredcompany.Iftheforeigncompanyregistersalocalcompany,itcanacquirelandwithfullownershiprightssimilartoadomesticcompany.
Purchasedlandbelongstotheownerandevenifitremainsunoccupied,cannotreverttootherownerssuchassquatters.Theexceptiontothisisagriculturallandgrantedbygovernmentasconcessions.Iftheconsigneedoesnotusethelandpertheagreement,thenthegovernmentcancanceltheconcessionandtakebackpossessionoftheland.
IntellectualPropertyRights
AsanEUcandidatecountry,Macedoniamustharmonizeitsintellectualpropertyrights(IPR)lawsandregulationswithEUstandardsanddemonstrateadequateenforcementofthoselaws.TheEuropeanCommission’s2017reportonMacedoniaconfirmedthecountry’slegislativeframeworkhasasufficientlevelofalignmentwiththeEUacquis–withtheexceptionofcopyrights,wheretheregulationofcollectivemanagementorganizationsrequiresfurtherimprovement.ThereportrecommendedMacedoniastepupeffortstoinvestigateandprosecuteinfringementsofintellectualproperty,reinforcecapacityandcoordinationamongtheauthoritiesinchargeofimplementingtheintellectualpropertylaws,andimproveconsultationofstakeholderswhendraftinglegislation.
ResponsibilityforIPRisdisbursedamongnumerousinstitutions.TheStateOfficeofIndustrialPropertygovernspatents,trademarks,servicemarks,designs,models,andsamples.AverysmallunitwithintheMinistryofCultureadministerstheprotectionofauthors’rightsandotherrelatedrights(e.g.,music,film,television,etc.).TheStateMarketInspectorateisresponsibleformonitoringmarketsandpreventingthesaleofcounterfeitorpiratedgoods.TheMinistryofInteriorisresponsibleforIPR-relatedcrimescommittedonline.TheCustomsAdministrationhastherighttoseizesuspectgoodstopreventtheirdistributionpendingconfirmationfromtherightsholderoftheauthenticityofthegoods.TheNationalCoordinationBodyforIntellectualPropertyperiodicallyorganizesinteragencyraidstoseizecounterfeitproducts,butusuallyfocusesonsmallsellersinopen-airmarkets.
6.FinancialSector
CapitalMarketsandPortfolioInvestment
Macedonia’scapitalmarketismodestinturnoverandcapitalization.TheestablishmentoftheMacedonianStockExchange(MSE)in1995madeitpossibletoregulateportfolioinvestments.Followingthe12.5percentrisein2016,marketcapitalizationin2017acceleratedby17.8percenttoUSD2.7billion.Themainindex,MBI10,increasedby18.9percent,reaching2,539pointsatyear-end.Foreignportfolioinvestorsaccountedforanaveraged17.4percentoftotalMSEturnover,0.3percentagepointslessthanin2016(Source:MSE)Theauthoritiesdonotdiscriminateagainstforeignportfolioinvestmentsinanyway.
Thereisaneffectiveregulatorysystemforportfolioinvestments,andMacedonia’sSecuritiesandExchangeCommission(SEC)licensesallMSEmembersfortradinginsecuritiesandregulatesthemarket.In2017,thetotalnumberoflistedcompanieswas128,sevenmorethanayearago,andtotalturnoverjumpedupby56.7percent(Source:MSE)Overallliquidityofthemarketismodestcomparedtointernationalstandards.IndividualsgenerallytradeattheMSEasindividuals,ratherthanthroughinvestmentfunds,whichhavebeenpresentsince2007.
Therearenolegalbarrierstothefreeflowoffinancialresourcesandportfolioinvestments.TheCentralBankrespectsIMFArticleVIIIanddoesnotimposerestrictionsonpaymentsandtransfersforcurrentinternationaltransactions.Creditisprovidedatmarketratestobothdomesticandforeigncompanies.
MoneyandBankingSystem
TheInternationalMonetaryFundassessedinitsregularNovember2017reportthatMacedonia’sbankingsectorishealthy,well-capitalized,andprofitable.Domesticcompaniessecurefinancingprimarilyfromtheirowncashflowandfrombankloans,duetothelackofcorporatebondsandothersecuritiesascreditinstruments.
FinancialresourcesarealmostentirelymanagedthroughMacedonia’sbankingsystem,consistingof15banksandacentralbank.Itisahighlyconcentratedsystem,withthethreelargestbankscontrolling57.8percentofthebankingsector’stotalassetsofaboutUSD8.8billion,andcollecting70percentoftotalhouseholddeposits.ThetwolargestcommercialbanksinthecountryhaveestimatedtotalassetsofaboutUSD1.6billioneach.Thetensmallestbanks,whichhaveindividualmarketshareoflessthan5percent,accountforone-fourthoftotalbankingsectorassets.Foreignbanksorbranchesareallowedtoestablishoperationsinthecountryatequaltermsasdomestic,subjecttolicensingfromthecentralbank.In2017,foreigncapitalremainedpresentin14ofMacedonia’s15banks,andwasdominantin11banks,controlling70.3percentoftotalbankingsectorassets,78.1percentoftotalloans,and69.4percentoftotaldeposits(Source:NationalBankoftheRepublicofMacedonia).
AccordingtotheNationalBankoftheRepublicofMacedonia(NBRM–theCentralBank)thebankingsector’snon-performingloansattheendofthethirdquarterof2017(latestavailabledata)were6.6percentoftotalloans,droppingby0.9percentagepoints.Totalprofitsattheendofthethirdquarterof2017reachedUSD92million,whichwas7.5percentlowerthaninthesameperiodofthepreviousyear.
Banks’liquidassetsattheendofthethirdquarterof2017were29.5percentoftotalassets,whichwasonly0.2percentagepointslowercomparedtothesameperiodof2016,butstillremainedcomfortablyhigh.In2017NBRMconducteddifferentstress-testscenariosonbankingsectorsensitivitytoincreasedcreditrisk,liquidityshocks,andinsolvencyshocks,allofwhichshowedthatthebankingsectorishealthyandresilienttoshocks,withcapitaladequacyratioremainingwellabovethelegallyrequiredminimumofeightpercent.Actualcapitaladequacyratioofthebankingsectorincreasedfrom15.7inSeptember2016to16.2inSeptember2017,withnoneoftheindividualbankshavingaratiobelow10percent.
Therearenorestrictionsonaforeigner’sabilitytoestablishabankaccount.AllcommercialbanksandtheCentralBankhaveestablishedandmaintaincorrespondentbankingrelationshipswithforeignbanks.Thebankingsectordidnotloseanycorrespondentbankingrelationshipsinthepastthreeyears,norwerethereanyindicationsthatanycurrentcorrespondentbankingrelationshipsareinjeopardy.ThereisnointentionforimplementingorallowingtheimplementationofblockchaintechnologiesinbankingtransactionsinMacedonia.Also,alternativefinancialservicesdonotexistintheeconomy—thetransactionsettlementmechanismissolelythroughthebankingsector.
ForeignExchangeandRemittances
ForeignExchangePolicies
Macedonia'snationalcurrency,theDenar(MKD),isconvertibledomestically,butisnotconvertibleonforeignexchangemarkets.Therearenorestrictionsplacedonforeigninvestorsinconverting,transferringorrepatriatingfundsassociatedwithaninvestment.Conversionofmostforeigncurrenciesispossibleontheofficialforeignexchangemarket.Inadditiontobanksandsavingshouses,numerousauthorizedexchangeofficesalsoprovideexchangeservices.TheNBRMoperatestheforeignexchangemarket,butparticipatesonanequalbasiswithotherentities.Requiredforeigncurrencyreservesarespelledoutinthebankinglaw.Therearenorestrictionsonthepurchaseofforeigncurrency.
ParallelforeignexchangemarketsdonotexistinMacedonia,largelyduetothelong-termstabilityoftheDenar.TheNBRMispursuingastrategyofapeggedDenartotheEuroandhassuccessfullykeptitatthesamelevelsince1997.AccordingtoNBRMstatistics,theinflationislow,standingat1.4percentin2017.
RemittancePolicies
Therewerenochangesininvestmentremittancepolicies,andtherearenoplansforchangestotheregulations.TheConstitutionofMacedoniaguaranteesfreetransferandrepatriationofinvestmentcapitalandprofits.Bylaw,foreigninvestorsareentitledtotransferprofitsandincomewithoutbeingsubjecttoatransfertax.Investmentreturnsaregenerallyremittedwithinthreeworkingdays.TherearenolegallimitationsonprivatefinancialtransferstoandfromMacedonia.RemittancesfromworkersinthediasporarepresentasignificantsourceofincomeforMacedonia’shouseholds.In2017,netprivatetransfersamountedtoUSD0.8billion,accountingfor16percentofGDP.
SovereignWealthFunds
Macedoniadoesnothaveasovereignwealthfund.
7.State-OwnedEnterprises
Thereareabout120state-ownedenterprises(SOEs)inMacedonia,themajorityofwhicharepublicutilitiesinwhichthecentralgovernmentisthemajorityshareholder.The81localgovernmentsalsoownlocalpublicutilityenterprises.InMarch2018,thegovernmentestimatedthatabout8,600peopleareemployedinSOEs.SOEsoperateinseveralsectorsoftheeconomyincludingenergy,transportation,andmedia.Therearealsoindustriessuchasarmsproductionandnarcoticsinwhichprivateenterprisesmaynotoperatewithoutgovernmentapproval.SOEsaregovernedbyboardsofdirectorsconsistingofmembersappointedbythegovernment.AllSOEsaresubjecttothesametaxpoliciesasprivatesectorcompanies.SOEsareallowedtopurchaseorsupplygoodsorservicesfromtheprivatesectorandarenotgivenmaterialadvantagessuchaspreferentialaccesstolandandrawmaterials.
A2016reportbyTransparencyInternational-Macedoniacommentedthat“policydecisionsrelatedtoSOEsoftencomplywiththepoliticalneedsoftherulingpoliticalestablishment,suchasneedsforemployment…ratherthanwiththeactualneedsoftheSOEs.”Thenewgovernmentdeclareditwouldchangethatpractice,andtherehavenotbeenreportsofmassivehiresofpartymembersinSOEssincethegovernmenttookofficeinJune2017.MacedoniaisnotasignatorytotheOECDGuidelinesonCorporateGovernanceforSOEs.InFebruary2018,thegovernmentsentitsbidtotheWTOtoupgradeitsstatusfromobservertoafully-fledgedmemberoftheGovernmentProcurementAgreement(GPA).
PrivatizationProgram
Macedonia'sprivatizationprocessisalmostcomplete,andprivatecapitalisdominantinthemarket.Thegovernmentistryingtoselltworemainingstate-ownedloss-makingcompaniesinanon-discriminatoryprocessthroughinternationaltenders.Foreigninvestorsareallowedtoparticipateinprivatizationthroughapublicbiddingprocess.NeitherthecentralgovernmentnoranylocalgovernmenthasannouncedplanstofullyorpartiallyprivatizeanyoftheutilitycompaniesorSOEsintheirownership.
8.ResponsibleBusinessConduct
Responsiblebusinessconduct(RBC)isanascentconceptinMacedonia.ThegovernmenthasnottakenanymajormeasurestoencourageRBCandhasnotdefinedRBCorpoliciestopromoteorencourageit.Thegovernmenthasnotconducteda“NationalActionPlan”onRBCanddoesnotfactorRBCpoliciesintoitsprocurementdecisions.
Therehavenotbeenanyhigh-profilecontroversialinstancesofprivatesectorimpactonhumanrightsorresolutionofsuchcasesintherecentpast.Inthepast,thehostgovernmenthasfailedeffectivelyandfairlyenforceslawsrelatedtohumanrights,laborrights,consumerprotection,environmentalprotections,andotherlawsandregulationsintendedtoprotectindividualsfromadversebusinessimpacts.
MacedoniapassedtheLawonTradeCompaniesin2004andtheSecuritiesLawin2005thatgoverncorporategovernance.Togethertheselawsprovideacleardistinctionbetweentherightsanddutiesofshareholdersversustheoperationsandmanagementofthecompany.Shareholdersgenerallycannotbeheldliablefortheactsoromissionsofthecompany.
9.Corruption
Tofightcorruption,thegovernmentusesanautomatedelectroniccustomsclearanceprocess,whichallowsbusinessestomonitorthestatusoftheirapplications.Asaresultofweakperformanceandextendedproceduraldelays,thegovernmentabolishedtheCouncilforPublicProcurementin2018,inordertomakethepublicprocurementsystemmoreefficient.
Thegovernmentdoesnotrequireprivatecompaniestoestablishinternalcodesofconductprohibitingbriberyofpublicofficials.AnumberofNGOsfocusonanti-corruption;thegovernmentdoesnotprovideanyspecialprotectionstoNGOsinvolvedininvestigatingcorruption.MacedoniahasratifiedtheUNConventionagainstCorruptionandtheUNConventionagainstTransnationalOrganizedCrimeandhassignedtheOrganizationforEconomicCooperationandDevelopment's(OECD)ConventiononCombatingBribery.
ManybusinessesoperatinginMacedonia,includingsomeU.S.businesses,identifiedcorruptionasaproblemingovernmenttendersandinthejudiciary.Nolocalfirmsornon-profitgroupsprovidevettingservicesofpotentiallocalinvestmentpartners.Foreigncompaniesoftenhirelocalattorneys,whohaveknowledgeoflocalindustrysectorsandaccesstotheCentralRegistryandbusinessassociations,andcanprovidefinancialandbackgroundinformationonlocalbusinessesandpotentialpartners.
ResourcestoReportCorruption
Contactatgovernmentagencyoragenciesareresponsibleforcombatingcorruption:
StateCommissionforPreventionofCorruption
PublicRelations
DameGruev1
1000Skopje,Macedonia
+38923215377
dksk@dksk.org.mk
PublicProsecutionOfficeforFightingOrganizedCrimeandCorruption
ActingChief,Ms.GordanaSmakjoska
BoulevardKrsteMisirkovBB,SudskaPalata
+38923219884
gordanasmakoska@jorm.gov.mk
MinistryofInterior-OrganizedCrimeandCorruptionDepartment
DimceMircevbb
+38923143150
TransparencyInternational–Macedonia
President,Ms.SlagjanaTaseva
NaumNaumovskiBorce58
P.O.Box270
+38923217000
info@transparency.mk
10.PoliticalandSecurityEnvironment
Macedoniagenerallyhasbeenfreefrompoliticalviolenceoverthepastdecade,althoughinterethnicrelationsarestrainedattimes.However,protestersstormedparliamentandviolentlyattackedmembersaftertheelectionofanewspeakeronApril27,2017.Morethan100wereinjured,includingthenowprimeministerandsevenotherMPs.Thegovernmentisprosecutingover30individualschargedinorchestratingandcarryingouttheattack.Publicprotests,demonstrations,andstrikesoccursporadically,andoftenresultindisruptions,particularlynearthecenterofSkopje.
Thereisnowidespreadanti-Americanoranti-WesternsentimentinMacedonia.Therehavebeennoincidentsinrecentyearsinvolvingpolitically-motivateddamagetoprojectsorinstallations.ViolentcrimeagainstU.S.citizensisrare.Theftandotherpettystreetcrimesdooccur,particularlyinareaswheretouristsandforeignerscongregate.
11.LaborPoliciesandPractices
Foreigninvestors,especiallythoseinlabor-intensiveindustries,findMacedonia’scompetitivelaborcostsandhighnumberofEnglishspeakersattractive.Theaveragenetwagein2017wasUSD458permonth,butreportedlyabout60percentofworkersreceivewageslowerthanthataverage.InSeptember2017,theminimumwagewasraisedfromMKD10,080(USD183)toMKD12,000MKD(USD240)permonth.ThenewgovernmenthaspromisedtoraisetheminimumwagetoMKD16,000(USD320)bytheendofitsmandatein2020.
In2017,Macedonia’slaborforceconsistedof954,212people,ofwhich740,648(44.1percent)wereemployedand213,564(22.4percent)wereofficiallyunemployed.Macedonia’semployedlaborforceisroughly61percentmaleand39percentfemale.Thetotalunemploymentrateforyouthages15to24yearsoldwas44.4percent,down0.6percentfrom2016.About20percentoftheunemployedhaveuniversity-leveleducation(Source:StateStatisticalOffice).
Despitetherelativelyhighunemploymentrate,foreigninvestorsreportdifficultiesinrecruitingandretainingworkers.Positionsrequiringtechnicalandspecializedskillscanbeespeciallydifficulttofill,duetoamismatchbetweenindustryneeds,theeducationalsystem,andgraduates’aspirations.Manywell-trainedprofessionalswithmarketableskills,suchasITspecialists,choosetoworkoutsideMacedonia.Toaddressshortagesoffactoryworkers,thegovernmentencouragesthedispersaloflabor-intensivemanufacturinginvestmentstodifferentpartsofthecountryandcompaniesoftenbusinworkersfromotherareas.
Relationsbetweenemployeesandemployersaregenerallyregulatedbyindividualemploymentcontracts,collectiveagreements,andlaborlegislation.TheLawonWorkingRelationsisageneralactthatregulatesallformsofemploymentrelationsbetweenemployeesandemployers,retirement,lay-offs,andunionoperations.SeveranceandunemploymentinsurancearecoveredbytheLawonWorkingRelationsandtheLawonEmploymentandInsurance.Mostlabor-relatedlawsareinlinewithinternationallaborstandardsandgenerallywithinrecommendationsoftheInternationalLaborOrganization(ILO).Laborlawsapplytobothdomesticandforeigninvestments,andemployeesinbothsegmentsareequallyprotected.
Thelawestablishesa40-hourworkweekwithaminimum24-hourrestperiod,paidvacationof20to26workdays,andsickleavebenefits.Employeesmaynotlegallyworkmorethananaverageofeighthoursofovertimeperweekoverathree-monthperiodor190hoursperyear.Accordingtothecollectiveagreementfortheprivatesectorbetweenemployersandunions,employeesintheprivatesectorhavearighttoovertimepayat135percentoftheirregularrate.Inaddition,thelawentitlesemployeeswhoworkmorethan150hoursofovertimeperyeartoabonusofonemonth’ssalary.Althoughthegovernmentsetsoccupationalsafetyandhealthstandardsforemployers,thosestandardsarenotenforcedintheinformalsector,whichaccountedforanestimated22percentoftheemployed.
Tradeunionsareinterest-based,legallyautonomouslabororganizations.Membershipisvoluntaryandactivitiesarefinancedbymembershipdues.About20to25percentoflegallyemployedworkersaredues-payingunionmembers.Althoughlegallypermitted,therearenounionsinthefactoriesoperatinginthefreeeconomiczones.Mostunions,withtheexceptionofafewbranchunions,aregenerallynotindependentoftheinfluenceofthegovernmentofficials,politicalparties,andemployers.
Therearetwomainassociationsoftradeunions:TheUnionofTradeUnionsandtheConfederationofFreeTradeUnions.Eachassociationiscomprisedofindependentbranchunionsfromthepublicandprivatebusinesssectors.Bothassociations,alongwiththerepresentativesoftheOrganizationofEmployersofMacedoniaandrepresentativesfromrelevantministries,aremembersoftheEconomic–SocialCouncil.TheCouncilmeetsregularlytodiscussissuesofconcerntobothemployersandemployeesandreviewsamendmentstolabor-relatedlaws.
Therearetwomainagreementsforthepublicandprivatesectorsonthenationallevel.Nationalcollectiveagreementsintheprivatesectorarenegotiatedbetweenrepresentativelaborunionsandrepresentativeemployerassociations.ThenationalcollectiveagreementforthepublicsectorisnegotiatedbetweentheMinistryofLaborandSocialPolicyandlaborunions;currentlythegovernmentandunionshavestillnotagreedonacollectiveagreementforthepublicsector.Separatecontractsarenegotiatedbyunionbranchesattheindustryorcompanylevel.
Anout-of-courtmechanismforlabordisputeresolutionwasintroducedin2015withassistancefromtheILO,financedbytheEU.MacedonianlaborregulationscomplywithinternationallaborstandardsandareinlinewiththeILO.Besidestheraisingofminimumwagementionedabove,nonewlaborlawsorregulationswereenactedin2017.
12.OPICandOtherInvestmentInsurancePrograms
Financingandinsuranceforexports,investment,anddevelopmentprojectsaremadepossiblethroughagenciessuchastheU.S.TradeandDevelopmentAgency(TDA);theU.S.Export-ImportBank(EX-IM);theOverseasPrivateInvestmentCorporation(OPIC);theEuropeanBankforReconstructionandDevelopment(EBRD);theInternationalBankforReconstructionandDevelopment(WorldBank);theInternationalFinanceCorporation(IFC);theMultilateralInvestmentGuaranteeAgency(MIGA);andtheSoutheastEuropeEquityFund(SEEF).Mostofthefundingformajorprojectsisachievedthroughco-financingagreements,especiallyinthetransportationandenergyinfrastructuredevelopmentfields.
OPICandMIGAarethecountry'schiefinvestmentinsuranceproviders.OPICinsuranceandprojectfinancinghavebeenavailabletoinvestorsinMacedoniasince1996.OPIC'sthreemainactivitiesareriskinsurance,projectfinance,andinvestmentfunding.MIGAprovidesinvestmentguaranteesagainstcertainnon-commercialrisks(i.e.,politicalriskinsurance)toeligibleforeigninvestorswhomakequalifiedinvestmentsindevelopingmembercountries.
Althoughitsprimaryfocusisexportassistance,includingdirectloansandcapitalguaranteesaimedattheexportofnon-militaryitems,EX-IMalsoprovidesinsurancepoliciestoprotectagainstbothpoliticalandcommercialrisks.TDA,SEEF,theWorldBank,andtheEBRDfocusmoredirectlyonfinancingagreements.
13.ForeignDirectInvestmentandForeignPortfolioInvestmentStatistics
Table2:KeyMacroeconomicData,U.S.FDIinHostCountry/Economy
HostCountryStatisticalSource*
USGorInternationalStatisticalSource
USGorInternationalSourceofData:BEA;IMF;Eurostat;UNCTAD,Other
EconomicData
Amount
HostCountryGrossDomesticProduct(GDP)(MUSD)
USD11,339
USD10,900
ForeignDirectInvestment
USGorinternationalSourceofData:BEA;IMF;Eurostat;UNCTAD,Other
USD93
Hostcountry’sFDIintheUnitedStates(MUSD,stockpositions)
USD5
USD0
TotalinboundstockofFDIas%hostGDP
2.0
2.8
IMFestimate
*Source:StateStatisticalOffice(estimateddataonGDP);NationalBankoftheRepublicofMacedonia(dataonFDI).Dataispubliclyavailableonline,andispublishedimmediatelyuponprocessing(usuallywithalagofonequarter).
Table3:SourcesandDestinationofFDI
DirectInvestmentfrom/inCounterpartEconomyData
FromTopFiveSources/ToTopFiveDestinations(USDollars,Millions)
InwardDirectInvestment
OutwardDirectInvestment
TotalInward
4,909
100%
TotalOutward
81
Austria
598
12.2%
Serbia
54
66.7%
UnitedKingdom
547
11.1%
Netherlands
26
32.1%
Greece
488
9.9%
Bosnia&Herzegovina
21
25.9%
446
9.1%
Slovenia
12
14.8%
395
8.0%
RussianFederation
8
"0"reflectsamountsroundedto+/-USD500,000.
TheresultsfromtheInternationalMonetaryFund(IMF)oninwarddirectinvestmentpresentedinTable3differfromthedataprovidedbytheNBRMduetodifferentmeansofdeterminingthecountryoforiginofinvestments.Forexample,theIMFcreditsinvestmentstocountriesfromwherethetransactionsweremade,whereastheNBRMcreditsinvestmentstothecountrywherethetransactionsoriginated,ifthebankcandetermineit.AccordingtotheNBRM,asofend-2017,thelargestsourceofinwardFDIisAustriawithUSD700million(12.4percentoftotalinvestments),followedbytheNetherlandswithUSD643million(11.4percent),andGermanywithUSD612million(10.8percent).