2010 Invest In Macedonia

April, 2010April, 2010

Why Macedonia?Why Macedonia?

InvestmeInvestment nt

IncentiveIncentivess

CompetitivCompetitivee

WorkforceWorkforce

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, and - North-South Corridor 10

• Road network: 9,205 km

• Railway network: 900 km

• Two international airports:

- Skopje - Ohrid

• International ports*: - Thessalonica (Greece) : 250

km - Durres (Albania) : 300 km

* Distance from Skopje

Political and Economic OutlookPolitical and Economic Outlook

• Political, monetary and macroeconomic stability

• Strategically located for future expansion

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

• EU and NATO candidate country

• FTAs with numerous countries

• Business oriented Government

(re-elected in June 2008 with a 4 year term)

• Welcoming and decisive government ready to serve investors

Improved Business ClimateImproved Business Climate

• Regulatory Guillotine – Flagship project for improving the country’s business environment

• “Silence is consent”, “Cutting red tape”

• Reduced administration fees, time limits, documentation

• "One-Stop-Shop" system for company registration

• "One-Stop-Shop" for cross border trading

• Modernized electronic real estate cadastre

• Foreign companies and foreign citizens can directly own construction land in Macedonia

• Electronic payment of taxes

• A cut in social contributions

• Liberalization of visa regime

4th BEST REFORMERIN THE WORLD

World Bank’s Doing Business 2008 Report

4th BEST REFORMERIN THE WORLD


BEST EUROPEAN ECONOMIC

DEVELOPMENT REGION 2008

Institute of Transport Management, UK

BEST EUROPEAN ECONOMIC

DEVELOPMENT REGION 2008

Institute of Transport Management, UK

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

Based on the World Bank’s Doing Business Report 2008 , 2009 and 2010

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

Based on the World Bank’s Doing Business Report 2008 , 2009 and 2010

3rd BEST REFORMERIN THE WORLD


3rd BEST REFORMERIN THE WORLD


5th MOST TAX FRIENDLYCOUNTRY IN THE WORLD

Forbes Magazine

5th MOST TAX FRIENDLYCOUNTRY IN THE WORLD

Forbes Magazine

2009Tax Misery & Reform

Index

Ease of Doing Business Global Rank

Index of Economic Freedom World Rankings

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

CURRENCY CURRENCY

AVERAGE GROSS SALARY IN AVERAGE GROSS SALARY IN 2008 2008

€ 430 per month

Macedonian Denar pegged to the DM/€

for the last 10 years (€1= MKD 61.3)

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

(2003: 1.2%, 2004: -0.4%, 2005: 0.5%, 2006: 3.2%, 2007: 2.3%, 2008: 8.3%)

INFLATION INFLATION

2003 2004 2005 2006 2007 2008

FDI BY YEAR (US$ m)

Year

EXPORT BY YEAR (US$ bn)

Year 2008

REAL GDP GROWTH RATE (%)

2003 2004 2005 2006 2007Year 2008

1.41.7

2.02.4

3.4

3.9

117.8

323.0

97.0

424.2

699.1587.0

2.8

4.1 4.1 4.05.0

5.9

2007

Unbeatable Fiscal BenefitsUnbeatable Fiscal Benefits

Corporate Income TaxCorporate Income TaxMACEDONIA*

POLAND

SLOVAKIA

10%

19%

19%

20%CROATIA

20%CZECH R.

ROMANIA 16%

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

MACEDONIA*CZECH R.*

10%

15%

35%

ROMANIA* 16%

32%

TURKEY

SLOVAKIA 19%

45%CROATIA

POLAND

General VAT General VAT RatesRatesCZECH R.MACEDONIA

CZECH R.

ROMANIA

POLAND

18%

19%

19%

22%

CROATIA 22%

SLOVAKIA 19%

*Flat rate

Source: PriceWaterhouseCoopers (Taxes at a glance 2009), National Investment Promotion Agencies

20%TURKEY

TURKEY 18%HUNGARY 16% + 4%

36%HUNGARY

HUNGARY 20%

25%UKRAINE

30%UKRAINE

UKRAINE 20%

• 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; Turkey and the Ukraine; providing access to over 650m customers

Social Security ContributionsSocial Security Contributions

Macedonia - Social Security ContributionsMacedonia - Social Security Contributions

Comparison - Social Security Comparison - Social Security ContributionsContributionsMacedonia 27%27%

Poland 31.2% - 34.1%31.2% - 34.1%

Slovakia 48.6%48.6%

37.2%37.2%Croatia

Romania 41.2% - 41.2% - 52.4%52.4%

Czech R. 45%45%

18%

15%

19% 7.5%

7.3%

6%

1.4%

1.2%

1%

28.4%28.4%

27%27%

22.5%22.5%

2009

Current

2011

Pension insurance Health insurance Employment insurance

21.2% 9.2% 1.6%

32.5%32.5%2008

Turkey 33.5%33.5%

49%49%Hungary

Ukraine 40.4% - 40.4% - 53.3%53.3%

Source: PriceWaterhouseCoopers (Taxes at a glance 2009), National Investment Promotion Agencies

0.5%

0.5%

0.5%

0.5%

Additional health insurance

Average Monthly Gross SalaryAverage Monthly Gross Salary

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

* Average gross monthly salary in manufacturing industry

Average gross monthly salary

€ change y-o-y in %

Average monthly gross salary in selected Average monthly gross salary in selected countries of Central and Eastern Europe in countries of Central and Eastern Europe in

2008 2008

Sustainable Work Force SupplySustainable Work Force Supply

• 45% of population under 3045% of population under 30

• High intellectual capitalHigh intellectual capital > 35% increase in total number of undergraduate degrees in 2007 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

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 91% 94%

French 22% 32%

German 13% 21%

Italian - 2%

Russian 1% 2%

Turkish - 1%Source: State Statistical Office of the Republic of Macedonia (Education 2008/2009)

INVESTMENTINVESTMENTOPPORTUNITIESOPPORTUNITIES

Investment OpportunitiesInvestment Opportunities

Target SectorsTarget Sectors

• Machine and Automotive components

• ICT

• Medical Devices and Pharmaceuticals

• Agribusiness and Food Processing

• Energy sector

• Real Estate & Construction

• Textile

• Tourism

Investment Opportunities

Machine andMachine and Automotive Components Automotive Components IndustryIndustry

• Existing engineering and manufacturing tradition

• Legacy of skills available to new investors

• Component production started in the 1960’s to supply Zastava, Serbia

• Companies primarily supply the aftermarket

• Johnson Controls, Johnson Matthey, Montupet, Iskra, V.Orlandi, Borteknik Otomotiv (Free Economic Zone), Hi-Tech to supply OEM’s

• Markets are Europe, Russia, Turkey, Africa

• Most companies have ISO 9001 / TS 16949 quality certification


ICT SectorICT Sector

• Best telecommunication networks in the region – the system is 100% digital

• Leading multinational hardware and software suppliers (Microsoft, HP, IBM) have local sales and support services in Macedonia

• 100,000 PCs for every school child; free internet sessions provided by the government

• IT skills shortage in Western economies and growing demand for outsourcing services – Macedonia can be your solution!

• Availability of well-educated staff at competitive costs

• Quality assurance and standardization procedure intitialized

Investment OpportunitiesHealthcare Sector Medical Devices and Pharmaceuticals

• Existing pharmaceutical industry exports to over 30 countries worldwide

• Strong educational system, with an abundance of medical and pharmacy graduates

• Supportive regulatory environment

• Licensing arrangements in place with many of world’s leading pharmaceutical companies

• Availability of serviced industrial sites

• Manufacturing tradition


Agribusiness and Food Processing IndustryAgribusiness and Food Processing Industry

• Unique combination of Continental andSub-Mediterranean climates• Environmentally friendly production practices• Technologies for food processing• Excellent access to regional markets• Strong reputation for quality food products

The greatest investment The greatest investment opportunities:opportunities:• fruits and vegetables - production, storage, distribution and processing industries• wine production• sheep and goat cheese production


Textile sectorTextile sector

• Esteemed reputation of Macedonian textile producers on the European Union market

• High flexibility and readiness to adapt to the demands of foreign markets

• Exceptional relation between product quality and costs

• Modern equipment

• 1-2 days distance to European Union markets• Foreign investment welcomed in the ready-made clothing and knit production industries

Historical and Culture HeritageHistorical and Culture Heritage• 4,293 archeological sites with rare antiquities of

great spiritual significance• 992 churches and monasteries, 150,000 m2

fresco painting, 23,000 icons (4-th most valuable collection in the world), 240 iconostases, and other church items carved in wood

• 228 mosques, inns, Turkish baths and old bazaars

• 47 towers and fortresses

Land of LakesLand of Lakes• Around 1,100 water springs and more than 60

thermal springs tapped at several spas• Most attractive rivers: Vardar flows to the Aegean

sea, Crn Drim flows to the Adriatic see, Radika, Crna Reka, Lepenec, Pcinja and others

• Three larger lakes (Ohrid, Dojran and Prespa) and a number of smaller lakes

Ski ResortsSki Resorts• Biggest ski resorts: Mavrovo, Popova Shapka,

Kozuf


TourismTourism


Energy sectorEnergy sector

Strategic Projects 2009-Strategic Projects 2009-2014 2014

New Mines New Mines Capacities Capacities

Thermo Power Thermo Power PlantsPlants

Hydro Power Hydro Power PlantsPlants

GasificationGasification

High Voltage Power High Voltage Power LinesLines

Renewable EnergyRenewable Energy

Number of Projects: 9Types of projects: new mines capacities

Number of Projects: 8Types of projects: - revitalisation and improvement of the capacities of existing TPPs, - construction of new TPP, NPP and GPP

Number of Projects: 6Types of projects: - revitalisation of existing HPPs, - construction of new HPPs

Number of Projects: 2Types of projects: - Construction of new HV power lines- Development of existing HV power lines

Number of Projects: 2Types of projects:- construction of windmills- construction of small HPPs

Number of Projects: 1Types of projects:- construction of gasification network

Financial sources: Financial sources: Concessions, PPP’s and credits secured by sovereign guarantees

Strategic Projects 2009-Strategic Projects 2009-20142014

Roads Roads RailwaysRailways

Number of Projects: 12

Types of projects: - reconstruction and construction

of regional roads- reconstruction and construction

of local roads- design and construction of motorways

Number of Projects: 4

Types of projects: - construction of rail line towards

Bulgaria- design and construction of rail line towards Albania - revitalisation, modernization and

upgrade of rail lines

Financial sources: Financial sources: State budget, Concessions, IBRD, EBRD, EIB


Transport sectorTransport sector


Technological Industrial Development Technological Industrial Development Zones - TIDZs Zones - TIDZs

• Electrical grid outlet, new power substation in construction

• Telecommunications network

• Central heating

• Lighting

• Fire safety system - Airport Fire Department minutes away

• Security monitoring system

• Water, sewage and water treatment plant

• Gas pipeline, etc.

Infrastructure BenefitsInfrastructure Benefits



• Free connection to utilities• Subsidy of up to €500,000 towards building costs

• Green Customs Channel available at border for rapid export from Zone to EU countries

• Land in a TIDZ in Macedonia is available under long-term lease for a period of up to 99 years

TAXTAX

TAX RATESTAX RATES

TIDZsTIDZs Outside Outside TIDZsTIDZs

Corporate tax 0%for the first 10 years

10%

Personal income tax

0% for the first 10 years

10%

Value added tax 0% 18%

Property tax 0% Up to 1%

Excise taxes 0% 5% - 62%

PRODUCTPRODUCT

CUSTOMS DUTYCUSTOMS DUTY

TIDZsTIDZsOutside Outside TIDZsTIDZs

Raw materials

0% Up to 15%

Equipment 0% 5% - 20%

Fiscal BenefitsFiscal Benefits



JOHNSON MATTHEYJOHNSON MATTHEY

TIDZ “Skopje 1”TIDZ “Skopje 1”

Signing of the Memorandum of Understanding between

Mr. Majus, CFO and Prime Minister GruevskiMay 2008

Signing of the Memorandum of Understanding between

Prime Minister Gruevski and Mr.Sesok, CEOMay 2008

JOHNSON CONTROLSJOHNSON CONTROLS

• $ 40m automotive components plant;• 150 employees initially – increasing to 500;• First phase production – mainly integrated circuits for German and French markets.

• €55 million investment• over 500 employees• catalyst production

TIDZ “Skopje 1”TIDZ “Skopje 1”

Signing of the Memorandum of Signing of the Memorandum of UnderstandingUnderstanding

between Mr.between Mr.AtikAtik and Prime Minister Gruevski and Prime Minister GruevskiSeptember 2008September 2008

TRIVEW HIT CO, LTDTRIVEW HIT CO, LTD

Signing of the Memorandum of Understanding between Mr. Machelin and Prime Minister

GruevskiSeptember 2008

Signing of the Memorandum of Signing of the Memorandum of UnderstandingUnderstanding

March 2009March 2009

• €9 million investment• 100 employees initially – increasing to 300• Production: LCD monitors and TVs , computers

AT YOUR AT YOUR SERVICESERVICE

Invest Macedonia at Your Service…Invest 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!

Thank YouThank You

AGENCY FOR FOREIGN INVESTMENTS AGENCY FOR FOREIGN INVESTMENTS OF THE REPUBLIC OF MACEDONIAOF THE REPUBLIC OF MACEDONIA

Tel.: Tel.: + + 1 312 846 10271 312 846 1027Fax: + 1 312 846 1072Fax: + 1 312 846 1072

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

121 W Wacker Dr suite 2036121 W Wacker Dr suite 2036Chicago, IL 60601Chicago, IL 60601

Documents

2010 Invest In Macedonia