By Misko Taleski
Last week, top Macedonian officials were in Bunardzik – a free economic zone outside Skopje – to participate in a cornerstone laying ceremony for a new pharmaceutical plant.
The Russian company Prodis, part of the Protek holding group, is investing 5 million euros in the production facility, which is expected to create around 300 jobs. It is the latest sign that the Macedonian government’s efforts to attract foreign investment and build economic growth are bearing fruit.
“The development of the free economic zones, particularly in Skopje, Tetovo and Bitola, is a goal through which we are trying to attract investments from other countries, but also from domestic companies,” Economy Minister Valon Sarachini told SETimes.
University American College professor Tome Nenovski agrees, arguing fiscal freedom and a 10% flat tax make for a very favourable business and investment environment.
“It translates into low land prices for investors and a policy of no capital gains tax and no personal income tax,” Nenovski told SETimes.
He also said the government offers investors an “investment premium” to repay 50% of the cost once a production facility is completed. Such was the case in attracting the US firm Johnson Controls.
There are additional investment enticements such as retirement and social security insurance, Nenovski said.
Protek Group’s investment follows the recent purchase of Macedonian IK Bank by the Turkish Halkbank in July.
“We decided to invest in Macedonia because of the stable banking system and economy,” Halkbank executive director in Skopje Judzel Inan said at a press conference.
Two German investments are also in the works in the automotive sector. The government estimates they will create 5,000 new jobs, overtaking previous German investments.
Kromberg & Schubert is to invest in a production facility for vehicle parts in Bitola. The name of the second firm has not been revealed, but it is expected to produce electrical units for vehicles.
The Turkish company Sisedzam, one of the world’s largest manufacturers of glass and glass products, is about to complete its investment analysis. Sisedzam’s investment is estimated to be between 50m and 60m euros.
By introducing a new minister for investment, Bill Pavleski, the government expects to further boost investment. Pavleski is a Harvard-trained MBA and a veteran of Hewlett Packard, where he has dealt with Fortune 1,000 companies.
Moreover, Macedonia’s Agency for Investment Promotion appointed an additional six promoters in the United States, Great Britain, Turkey, Belgium, Canada and France, strengthening current activities.
Last February, the government adopted a package of reform laws to improve the conditions for work in construction, by reducing paperwork, associated costs and time needed to obtain documents.
“Some of the measures are directed to additionally reduce bureaucracy, costs and procedures for obtaining documents, permits and licenses. Also, towards introducing digital management of businesses, digital application for documents, strengthening trade via the internet, etc., to reduce firms’ costs and time,” Sarachini said.
Still, there are several challenges the government must tackle.
“Economic dispute cases stretch needlessly long in the courts and that remains an issue for investors. Another issue is the long time needed to close a firm and to collect debts owned. The government will also have to increase its efforts to root out corruption present in some pockets,” Nenovski said.
Economists say the outlook for Macedonia is positive. National Bank of Macedonia estimates an overall GDP growth of 3.5% in 2011.