Viktor Mizo CEO, Free Zones Authority May, 2015
Why Macedonia? Competitive Location Excellent Infrastructure Competitive Workforce Investment Incentives Investor - friendly Government Higher Profits & Increased Competitiveness
Location and Transport Infrastructure NORWAY SWEDEN Two Pan-European corridors: East-West Corridor 8 North-South Corridor 10 Road network: 9,205 km Railway network: 900 km IRELAND Two international airports: Skopje Ohrid International ports*: Thessalonica (Greece): 250 km Durres (Albania): 300 km PORTUGAL DENMARK UNITED KINGDOM NETHERLANDS GERMANY BELGIUM LUXEMBOURG FRANCE SWITZERLAND SPAIN ITALY CZECH REPUBLIC AUSTRIA SLOVENIA CROATIA POLAND SLOVAKIA HUNGARY BOSNIA AND HERZ. SERBIA MONTENEGRO KOSOVO ALBANIA LITHUANIA MACEDONIA GREECE ESTONIA LATVIA UKRAINE ROMANIA BULGARIA BELARUS MOLDOVA RUSSIA TURKEY * Distance from Skopje AFRICA MALTA
Free Trade Agreements Free Trade Agreements provide access to markets in 41 countries with 650 million consumers EU European Union (28 countries) EFTA European Free Trade Association (4 countries) CEFTA Central European Free Trade Agreement (7 countries) Bilateral Free Trade Agreements with: Turkey and Ukraine
Stable Macroeconomic Indicators REAL GDP GROWTH RATE (%) INFLATION 5.1 6.5 5.5 3.4 2.3 2.7 3.8 4.0 4.2 Low inflation: avg < 2% annually over the last 14 years -0.4-0.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*2016* EXPORT GROWTH RATE (%) 29.2 30.9 26.8 16.6 8.9 3.6 15.1 10.7 11.0 CURRENCY Macedonian Denar pegged to the DM/ for the last 20 years ( 1= MKD 61.5) -28.2-2.8 AVERAGE GROSS SALARY IN 2014 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* FDI (% of GDP) 509 per month 383 per month in manufacturing 8.3 6.3 5.9 4.6 3.1 3.1 2.1 2.3 1.5 3.7 4.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* CREDIT RATINGS Standard & Poor s: BB-, Stable Outlook Fitch: BB+, Stable Outlook Source: SSO and MoF; * Projection
Financial System Sound and stable financial system No spillover of the world financial crisis on Macedonia 15 banks with capital adequacy ratio of 15.7% Macedonian banks are highly liquid with credit to deposit ratio bellow 1 (0.9) 76.2% share of foreign in total bank capital Some of the banks operating in Macedonia are: - French Societe Generale Bank - Austrian Sparkasse Bank - German ProCredit Bank - Dutch-Turkish Halk Bank
Sustainable Public Finances Moderate size of Government and fiscal policy that supports economic growth Total revenues 29.6% of GDP Total expenditures 32.9% of GDP Prudent fiscal policies Budget balance -3.3% of GDP General Government Debt 36.0% of GDP As % of GDP Invest Macedonia - Agency for Foreign Source: Investments MoF; *Projection Total Revenues Total Expenditures Budget balance 2007 32.1 31.5 0.6 2008 32.9 33.8-0.9 2009 31.0 33.6-2.6 2010 30.2 32.6-2.4 2011 29.5 32.0-2.5 2012 29.6 33.4-3.8 2013 28.1 31.9-3.9 2014 27.8 32.0-4.2 2015* 29.6 32.9-3.3 23.5 20.5 General Government Debt (% of GDP) 23.6 24.1 27.7 33.7 34.2 38.2 36.0 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015
Lowest taxes in Europe Lowest Flat Tax on Profit 10% Lowest Flat Tax on Income 10% Tax on Reinvested Profit 0% Reduction of social contributions Total rate of 26.5% in 2014 Pension and disability insurance 18% Health insurance 7.3% Unemployment insurance 1.2% Corporate Tax rate is 0%, when companies decide to reinvest profits in new investments Social contributions have been reduced from 32% to 26.5% 8
Unbeatable Fiscal Benefits in Europe Corporate Income Tax Personal Income Tax SLOVAKIA 22% CROATIA %40-%12 TURKEY 20% TURKEY %35-%15 CROATIA 20% POLAND %32/%18 POLAND 19% SLOVAKIA %25/%19 CZECH REPUBLIC 19% CZECH REPUBLIC %22/%15 HUNGARY 19% UKRAINE %17/%15 UKRAINE 18% ROMANIA 16% ROMANIA 16% HUNGARY 16% MACEDONIA 10% MACEDONIA 10% First in the World with lowest Total Tax Rate of 7.4%, VAT at 18%, with 5% on specific items Low customs duties - weighted effective customs tariff rate is 1.75% 46 Double Taxation Avoidance Treaties signed 40 Treaties for Promotion and Protection of Investments signed
Continuous implementation of Regulatory and Administrative Reforms Regulatory reform One-Stop-Shop: 4 hours company registration Regulatory Guillotine Electronic One-Stop-Shop for customs permits and licenses Single window: Improving interoperability between government institutions Liberalization of real-estate market Foreigners free to purchase real estate and construction land Simplification of procedures for obtaining construction permits from 21 to 3 steps Benefits for foreign nationals Foreign nationals that invest 400,000 have the opportunity to obtain Macedonian citizenship Foreign nationals that purchase real estate in amount of over 40,000 can obtain residence permit in Macedonia
9 years continuously among the Best Reformers in the World Rank of Macedonia on the Ease of Doing Business Indicator World Bank s Doing Business Reports 2006-2015 94 5th BEST REFORMER IN THE WORLD 2005-2013 World Bank s Doing Business Report 2014 92 34 30 2006 2008 2011 2015 2014 2007 31 th IN THE WORLD Best Countries for Business 2014 Forbes Magazine Improvement (places) 51 places 51 Improvement (places) 2014 31 places 31 2007 63 rd IN THE WORLD Global Competitiveness Index 2014-2015 World Economic Forum
Ease of Doing Business 2015 Global Rank 30 32 37 38 39 44 48 51 54 55 62 65 71 91 96 120 142
Paying Taxes 2015 World Rankings THE LOWEST TOTAL TAX RATE IN THE WORLD 7.4% 156 165 177 36 42 49 52 56 66 87 88 89 100 105 108 119 7
European Cities and Regions of the Future 2014/15 TOP 5 EUROPEAN REGIONS - COST EFFECTIVENESS Rank Region Country 1 Ohrid-Struga Macedonia 2 Stara Zagora Bulgaria 3 Sremska M. Serbia 4 Vojvodina Serbia 5 Indjija Serbia Average annual salary for an unskilled, semiskilled and skilled worker ( ) Annual rent for prime grade A office and industrial space ($ per m²) Rate for a four- or five-star hotel in the city centre ($) TOP 5 SMALL EUROPEAN CITIES COST EFFECTIVENESS Rank City Country 1 Skopje Macedonia 2 Plovdiv Bulgaria 3 Pleven Bulgaria 4 Burgas Bulgaria 5 Varna Bulgaria Judging Criteria Minimum wage ( per hour) Cost of establishing a business and construction permits (absolute value using gross national income from WDG) Cost of registering a property (percentage of property cost) Petrol prices ( per litre) TOP 5 MICRO EUROPEAN CITIES COST EFFECTIVENESS Rank City Country 1 Stip Macedonia 2 Veles Macedonia 3 Liepaja Latvia 4 Jelgava Latvia 5 Zajecar Serbia Cost of electricity ( per kilowatt hour) Cost to export and import ($ per container) Corporation tax rate and VAT Total tax rate, percentage of profit Country PPP/exchange rate
Major recent investors in Greenfield sites 30M; up to 500 employees; Production of equipped PCBs for Mercedes, VW, BMW, Renault, Ford, Skoda, PSA Plant 1, TIDZ Skopje 1: 80M; 350+ employees; Exhaust catalyst manufacturer supplying all OEM plants in Europe; The biggest exporter from Macedonia Plant 2, TIDZ Skopje 1: 65M; 300 employees; Set to double production 30M; 500 employees; Production of capacitors for automotive components and industrial applications (consolidation of European footprint) 25M; 600 employees; Production of buses & coaches for the USA and EU markets; Major bus manufacturer in Europe Plant 1: 10M; 150 employees; Production of armored high-pressure rubber hoses; Plant 2: 11M; 150 employees; Double the capacity and triple the production 12M; 160 employees; Production of homeopathic pharmaceuticals, vitamins and minerals 10M; 200 employees; Global leader in paper surface treatments and polymeric films 10M+; Ramp-up of up to 400 people; Production of shock absorbers for industrial and railway vehicles 15M; 400 employees; Production of inflators for vehicle airbags for European market; Technical center 10M; 100 employees; Production of brake discs for the European market
Major recent investors in Greenfield sites 20M ; Rump-up of up to 2,000 employees; Plant for production of seat and steering wheel heaters and seat climate technologies 35M; 600 employees; 15,000 m² plant; Production of PCBs, plastic and molded containers and final assembly (Daimler, BMW and Audi) 350M; 5,600 employees; Production of textile garments and distribution of fabrics 30M; 2,500 employees in 7 plants; Production of interconnect products for automotive, telecommunications and aerospace industries Over 15M; 1,000 employees; 15,000 m² plant for production of Airbag Cushions and Modules 20M; 1,700 employees; Cut & trim plant for car seats 70M+ in six years ( 35M investment in phase 1); 1,000 employees; Plant for production of technologically advanced mechatronic and electronic products 12M; 600 employees; Production of industrial woven fabrics (insulating materials for construction, automotive and aerospace industries) 15M; 1,000 employees; Production of high-quality cables, solenoids and mechatronic systems 25M; 3,500 employees; Production of electric wires and cable harnesses for European carmakers 10M; 150 employees; Wire harness automotive supplier; Production of automotive cables and wires 35M; 4,900 employees; Plant for production of wiring harness and electrical management systems
PROJECT SCOPE 2nd project in Macedonia 20M investment 1,700 employees Construction of cut & trim plant for car seats CONSIDERED COUNTRIES Serbia, Romania, Bulgaria, Moldova, Ukraine, Tunisia, Morocco and Macedonia Macedonia was chosen because of its international competitiveness, because of our positive existing corporate experience here and above all because of the support and professionalism that we have received from all Government institutions during the analysis process. Steven Meylemans Project Manager Johnson Controls 17.10.2011 - CORNERSTONE LAYING CEREMONY FOR JOHNSON CONTROLS PLANT IN TIDZ STIP 20.01.2014 - JOHNSON CONTROLS WAS THE FIRST FOREIGN COMPANY THAT HAD DECIDED TO LAUNCH ITS SECOND INVESTMENT IN MACEDONIA
A Country Selection 10 Countries Considered Countries with existing C&S locations Excluded due to cost, distance, risk Investigated for potential new location Selection criteria Significant cost labor advantage compared to existing sites. Excludes EU members and plants with existing C&S plant Reasonable logistics and distance to seat assembly plants excludes Middle East Bosnia Serbia Moldova Ukraine Bulgaria Sufficient level of business friendliness and stability. Excludes Belarus, and at the moment most of Northern Africa Morocco Albania Montenegro Tunisia Macedonia
A Country Selection Macedonia Offers Best Balance Of Cost And Business Friendliness Country Cost Labor cost Index, CZ=100 Inflation* Percent p.a. Business friendly** Rating, higher = better Comments Moldova 14 12 45 High inflation. Low investment incentives. Lack of skilled workforce Tunisia 18 5 59 Attractive, but currently instable maybe later Ukraine 21 19 41 High inflation, very negative business climate Albania 22 3 Not researched Macedonia 22 3 76 Cost competitive & business friendly, attractive subsidies, good skill base Morocco 27 3 107 Logistically disadvantaged, currently overcapacities Bulgaria 32 9 75 Relatively high labor cost with unfavorable investment benefits Serbia 33 14 79 Subsidies will not compensate for high and rising labor cost Montenegro 37 9 Not researched Very small country, largely focusing on tourism Bosnia 43 4 50 No cost advantage compared to existing JCI plants * 2005-2010, forecast for labor cost increase 2010-15 available for Tunisia (6.8%), Macedonia (4.6%), Ukraine (16.8%), Bulgaria (10.1%) ** Reflects infrastructure, business climate, automotive foreign direct investment Sources: EIU; Mercer; Laborsta; Worldbank; ANIMA; Johnson CIA; Ernst Controls & Young; Global Insight ; WEF; Trim Change Office
PROJECT SCOPE 80M automotive components plant 350+ employees in phase 1 CONSIDERED COUNTRIES Reviewed: Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovenia, Romania, Ukraine, Czech, Poland, Hungary, Slovakia Initial choice: Czech Republic, Macedonia a Late entrant WHY MACEDONIA Macedonia scores best for labour, slightly lower on logistics Labour availability looking very good for Skopje Our experience has been positive, Invest Macedonia, Ministry and others superb Colin Jaffray, Director, Strategic Planning, Johnson Matthey PLC This will be JM s mega-european plant and the largest ever single investment project
PROJECT SCOPE 2nd project in Macedonia 65M investment 300 additional employees Set to double production JOHNSON MATTHEY COVERS ONE-THIRD OF THE GLOBAL MARKET OF CATALYSTS FOR LIGHT AND HEAVY DUTY VEHICLES Johnson Matthey has been present in Macedonia since 2010, producing six million world-class catalysts, being the country's number one exporter. The expansion comes as a response to the rapidly increasing demand for more sophisticated and complex catalysts and the effort undertaken by the Macedonian Government to welcome and fully support our initial investment. Larry Pentz Executive Director on Environmental Technologies Johnson Matthey
INVESTMENT OPPORTUNITIES Free Zones Tourism & Real Estate Agribusiness Energy Infrastructure
TECHNOLOGICAL INDUSTRIAL DEVELOPMENT ZONES (TIDZs) FREE ZONES
Financial Times/fDi Magazine Global Free Zones of the Year 2014 Winners Technological Industrial Development Zone Skopje awarded Best Zone for Large Tenants within Europe in fdi Magazine s Global Free Zones of the Year 2014 report Global Free Zones of the Future 2012/2013 Winners fdi Magazine s Global Ranking of Economic Zones reported Technological Industrial Development Zones Skopje 1&2 in the top 50 Free Zones of the Future 2012/2013
Investment Opportunities Technological Industrial Development Zones - TIDZs Fiscal Benefits TAX TIDZs TAX RATES Outside TIDZs PRODUCT TIDZs CUSTOMS DUTY Outside TIDZs Corporate tax 0% for the first 10 years 10% Equipment 0% 5% - 20% Personal income tax 0% for the first 10 years 10% Value added tax 0% 18% Property tax 0% 0.1% - 0.2% All incentives are in line with EU regulations Excise taxes 0% 5% - 62% Connection to utilities, complete infrastructure is available No municipal utility tax Customs outpost in the zones Subsidy of up to 500,000 towards construction costs Land in the TIDZ is available under long-term lease for a period of up to 99 years Training and job creation grants
The Free Zone Authority at Your Service Identification of project specific location factors Cost analysis Identification of supplier base Detailed due diligence Locations, operational costs and competitiveness One-stop-shop and project management approach Design and infrastructure approvals Issuing building and operational permits Customs outpost in the Zone Zone infrastructure maintenance and upgrade Business opportunities analysis One-stop-shop Our Services Creating linkages Aftercare University linkages Reference company linkages Recruitment agencies linkages Organization of meetings with legal advisors and financial partners Labor availability, HR companies and consulting Ensure success! Support with relevant tax and customs issues Assistance in acquiring visas/work permits Coordination and support in contacts with other state and local authorities
Opportunities in Tourism Government measures, policies and specific projects Reducing VAT on tourism from 18% to 5% Promotion of sites for construction of hotels, facilities and Tourism Development Zones International branding - Macedonia Timeless Campaign Tour Operator and airline subsidies ( 10-65 per tourist) Increase in overnight stays of tourists from EU of of 25% in 2012, and 8.6% in 2013 What they say? Best in Travel 2014: Top 10 countries not to be missed Macedonia was ranked among the 10 countries destined for an epic year, whether they re hosting festivals, cutting the ribbon on new attractions or simply raising their game for travelers World Economic Forum - Travel & Tourism Competitiveness Report 2013 "Attitude of population toward foreign visitors" MACEDONIA 4 th most friendly country in the world 52 Places to Go in 2015 (Macedonia ranked10 th )
Tourism Development Zones Three Tourism development zones near the three tectonic lakes Ohrid and Dojran Three Tourism development zones in the mountain regions of Shar Planina, Kozuf and Galicica State-owned land Construction of hotels and hotel complexes, sport and recreational centers, amusement and aqua parks and etc. Tourism development zones: Ohrid Lake (1 Zones) Galicica (Ski Center) Popova Shapka (1 Zone) Kozuf (Ski Center) Dojran Lake (2 Zones)
Why invest in Agribusiness in Macedonia? The most important economic sector of Macedonia One of the fastest growing industries with an over 10% increase in the last three years Largely opened doors to the new markets by applying EU safety standards Support by a well developed educational system consisting of 7 faculties and 10 high schools specializing in the agriculture field Agriculture land under State ownership Unique combination of Continental and Sub-Mediterranean climates, soil characteristics and irrigation capacity 3,200 hectares state owned land in blocks of 20-200 hectares in the best agriculture regions of the country Green houses and geothermal energy Subsidizing agricultural production
Agricultural regions in Macedonia The greatest investment opportunities Fresh fruits and vegetables: - Production - Purchasing and Distribution Centers - Processing Industry Wine Industry Sheep and goat cheese production Organic food Oriental aromatic tobacco
Investment Opportunities Energy Sector Construction of national gas transport system (value 350M) PPP with the National Power Producer ELEM for the construction of a combined cycle heat and power plant (value 250M) An ongoing tender under the auspices of the IFC advisory services for two large HPP Cebren and Galiste (value 600M) Rehabilitation of the existing hydropower plants (value 100M) HPP Boskov Most and Lukovo Pole (value 170M) Privatization of the minority share (up to 49%) of the state owned electricity generation company ELEM (book value 1.2B) Construction of three new 400 kv overhead lines (value 60M) New SCADA, (re)construction of more than 200 km of numerous 110 kv overhead lines (value 45M) Potential for numerous small HPP s (up to 10 MW) Bogdanci wind park, 16 wind turbines with total capacity of 36.8 MW and annual energy production of 100 GW (value 55M)
Investment Opportunities Motorways Sections for concessions A. Skopje - Blace (24 km) B. Gostivar - Kicevo (42 km) Sections under construction A. Demir Kapija - Smokvica (28.2 km) B. Skopje - Stip (53.5 km) C. Kicevo Ohrid (65 km) A B B C A Other Motorways Reconstruction and modernization of existing and building of new regional motorways and local roads with support of EBRD and the World Bank
Investment Opportunities Railway Transportation Railway connection between Macedonia and Bulgaria Corridor 8 Eastern Section: Reconstruction of the railroad section Kumanovo-Beljakovce with length of 30 km Construction of the railroad section Beljkakovce-Kriva Palanka toward Bulgarian border with length of 60 km Total construction cost estimated at 420M EBRD participates in the project realization Modernization Modernization of the railway on Corridor X financed by EBRD (54 km) Renewal of the passenger transport fleet and procurement of 150 train cars of various types for freight transport Rehabilitation and upgrade of the railway station in Skopje
Summary: Why to Invest in Macedonia? EU & NATO Candidate Status Macroeconomic and financial stability Prudent fiscal policies that support economic growth Free trade to 650 million market Attractive tax package and Incentives in Free Economic Zones Young, available and competitive work force (41% of population under 30, excellent language skills) Consistent and predictable policies Exceptional track record in reforms Among top reformers according to WB Doing Business Solid Infrastructure (Trans European Corridors 8 & 10) Business friendly government
Thank You DIRECTORATE FOR TECHNOLOGICAL INDUSTRIAL DEVELOPMENT ZONES Partizanski Odredi 2 PO Box 311 1000 Skopje Republic of Macedonia Tel.: + 389 2 3111 166 Cell: + 389 70 390011 Email: viktor.mizo@fez.gov.mk Website: www.fez.gov.mk