The Republic of North Macedonia signed the Prespa Agreement on June 17, 2018, resolving a decades-long name dispute with Greece and opening the possibility of fulfilling its aspirations to join the EU and NATO. The NATO member states’ permanent representatives signed North Macedonia’s NATO Accession Protocol on February 6, and 11 countries have ratified the Protocol as of April 2019. On May 29, 2019, the European Commission recommended the European Council open accession negotiations with North Macedonia based on the progress achieved and sustained momentum on reforms. EU member states will decide whether to open accession negotiations with North Macedonia in summer or fall 2019. Progress towards EU and NATO membership has resulted in positive economic growth, with a 2018 fourth quarter GDP boost of 3.7 percent, and increases in FDI. Since the establishment of the current government in June 2017, 17 separate investments, worth a combined total of around USD 175 million, now exist at varying stages of development. On April 2, 2019, Greece and North Macedonia signed a series of bilateral agreements on defense, energy, civil aviation, and technology.
Attracting FDI is one of the government’s main pillars of economic growth and job creation. No laws or practices exist that discriminate against foreign investors. In 2019, a number of countries and foreign companies announced investments in the country and new operations in the free economic zones knows as Technological Industrial Development Zones (TIDZ). In the past, North Macedonia’s competitive labor costs, proximity to European car manufacturers, and cooperative government assistance attracted foreign auto parts companies. The government’s attitude towards FDI, as well as policies it has in place, are conducive to U.S. investment, and a number U.S. companies successfully operate in North Macedonia.
The 2019 World Bank’s Doing Business Report ranked North Macedonia the 10th best place in the world for doing business, up one spot from the year before. Fitch affirmed North Macedonia’s BB credit rating and S&P affirmed its credit rating of the country at BB- with a stable outlook. Transparency International ranked North Macedonia 93rd out of 180 countries in its 2019 Corruption Perception index, up 14 spots from the prior year.
North Macedonia’s legal framework for foreign investors is largely in line with international standards, and foreign investors are generally treated the same as domestic investors in similar circumstances. North Macedonia has simplified regulations and procedures for large foreign investors operating in its TIDZ. Large foreign companies operating in the zones generally report positive experiences doing business and good relations with government officials. However, the country’s overall regulatory environment is complex, and frequent regulatory and legislative changes, coupled with inconsistent interpretations of the rules, create an unpredictable business environment that allows for corruption. The government generally implements laws, but there are reports that some officials engaged in corruption, and some NGOs assess the government’s dominant role in the economy created opportunities for corruption. The current government has pledged to enhance transparency and rule of law.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||93 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||10 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||84 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$43||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$4,880||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
2. Bilateral Investment Agreements and Taxation Treaties
North Macedonia does not have a bilateral investment or double taxation treaty with the United States.
North Macedonia has concluded an Agreement for Promotion and Protection of Foreign Direct Investments with the following countries: Albania, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, the Czech Republic, Egypt, Finland, France, Germany, Hungary, India, Iran, Italy, Luxembourg, Malaysia, Montenegro, the Netherlands, North Korea, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Taiwan, Turkey, and Ukraine.
North Macedonia is a signatory of three multilateral Free Trade Agreements: the Stabilization and Association Agreement (SAA) with the EU member-states, giving North Macedonia duty-free access to 650 million consumers; the European Free Trade Agreement (EFTA) with Switzerland, Norway, Iceland, and Liechtenstein; and the Central European Free Trade Agreement (CEFTA) with Albania, Bosnia and Herzegovina, Moldova, Montenegro, Serbia, and Kosovo. Bilateral Free Trade Agreements are in force with Turkey and Ukraine.
There are no recent or upcoming changes to the tax regime that will concern foreign investors. No U.S. companies operating in North Macedonia have raised tax concerns with U.S. Embassy officials.
4. Industrial Policies
Both the Law on Technological Industrial Development Zones (TIDZs) and the Law on Financial Support of Investments offer incentives to investors. Investors in the TIDZs are eligible for tax exemptions for a period of up to 10 years of operation in proportion to the size of investment and number of employees. Investors in the TIDZs are exempt from paying duties for equipment and machines as well as municipality tax for construction. The land lease rate is symbolic, and investors are eligible for a 10 percent grant for the cost of construction of a plant and new machinery, as well as a grant for improving competitiveness. North Macedonia’s legislative framework for FDI is generally harmonized with EU state aid regulations.
The salaries of employees working for TIDZ employers are exempt from personal income tax for a period of up to ten years after the first month in which the employer starts paying out salaries.
Foreign Trade Zones/Free Ports/Trade Facilitation
North Macedonia currently has 15 free economic zones in various stages of development throughout the country. The Directorate for Technological Industrial Development Zones (http://fez.gov.mk/ ) is responsible for establishing, developing, and supervising 14 of them, including seven fully operational TIDZ: Skopje 1 and 2, Prilep, Stip, Kicevo, Struga and Strumica. The Tetovo TIDZ is a public-private partnership. U.S. companies operate in TIDZs throughout North Macedonia: ARC Automotive (Skopje 1), Aptiv (Skopje 1), Kemet (Skopje 1), Gentherm (Prilep), Lear (Tetovo), and Adient (Stip and Strumica). The Dura Automotive project in TIDZ Skopje 1 is under construction.
Performance and Data Localization Requirements
North Macedonia does not impose performance requirements, such as mandating local employment (working level or management level) or domestic content in goods or technology, as a condition for establishing, maintaining, or expanding an investment. Foreign investors in the TIDZ may employ staff from any country. In 2016, North Macedonia simplified the procedure for expatriates to obtain permission to live and work in the country.
North Macedonia does not impose a “forced localization” policy for data. The government does not prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country. U.S. Embassy Skopje is not aware of any requirements for foreign IT providers to turn over source code and/or provide access to encryption. Furthermore, there are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country. However, based on the new EU General Data Protection Regulation (GDPR), which came into force in May 2018, North Macedonia’s Directorate for Personal Data Protection is preparing amendments to the Law on Personal Data Protection to harmonize North Macedonia’s laws with the new EU regulations.
Depending on the sector and type of investment, various government authorities oversee and assess the fulfillment of investment promises made by foreign direct investments (FDI). The government entities include the Agency for Foreign Investments and Export Promotion (InvestNorthMacedonia), the Directorate for Technological Industrial Development Zones (TIDZs), and the Ministry of Economy.
There is no discriminatory export or import policy affecting foreign investors. Almost 96 percent of total foreign trade is unrestricted. Current tariffs and other customs-related information are published on the website of the Customs Administration (http://www.customs.gov.mk/index.php/en/ )
5. Protection of Property Rights
Laws protect ownership of both movable and real property, but implementation of the laws is inconsistent. Mortgages and liens exist and are regularly used, and the recording system is reliable. Highly centralized control of government owned “construction land,” the lack of coordinated local and regional zoning plans, and the lack of an efficient construction permitting system continues to impede business and investments. Over the past few years, however, the government has improved the cadaster system, which has increased the security and speed of real estate transactions. Over 97 percent of real estate records are digitized. The World Bank’s 2019 Doing Business Report ranked North Macedonia 46th out of 190 for the ease of registering property, two places up from 2018, and 13th for the ease of dealing with construction permits.
Land leased or acquired by foreign and/or non-resident investors is regulated by the Law on Ownership and Other Real Rights. EU and OECD residents have the same rights as local residents in lease or acquisition of construction land or property, whereas non-EU and non-OECD residents’ property ownership is regulated under terms of reciprocity. Foreign residents cannot acquire agricultural land in North Macedonia. Foreign investors may acquire property rights for buildings used in their business activities, as well as full ownership rights over construction land through a locally registered company. If the foreign company registers a local company, it can acquire land with full ownership rights similar to a domestic company.
Purchased land belongs to the owner and even if it remains unoccupied, cannot revert to other owners such as squatters. The exception to this is agricultural land granted by government as concessions. If the consignee does not use the land per the agreement, then the government can cancel the concession and take back possession of the land.
Intellectual Property Rights
As an EU candidate country, North Macedonia must harmonize its intellectual property rights (IPR) laws and regulations with EU standards and demonstrate adequate enforcement of those laws. The European Commission’s 2018 report on North Macedonia confirmed the country’s legislative framework has a sufficient level of alignment with the EU acquis, but its collective management systems needs further improvement. The report recommended North Macedonia step up efforts to investigate and prosecute infringements of IPR, improve coordination among the law enforcement institutions through establishing an information platform for exchange of data, and raise public awareness on the importance of protecting IPR according to international best practices.
Responsibility for IPR is distributed among numerous institutions. The State Office of Industrial Property governs patents, trademarks, service marks, designs, models, and samples. A very small unit within the Ministry of Culture administers the protection of authors’ rights and other related rights (e.g., music, film, television). The State Market Inspectorate is responsible for monitoring markets and preventing the sale of counterfeit or pirated goods. The Ministry of Interior is responsible for IPR-related crimes committed on the Internet. The Customs Administration has the right to seize suspect goods to prevent their distribution pending confirmation from the rights holder of the authenticity of the goods. The National Coordination Body for Intellectual Property periodically organizes interagency raids to seize counterfeit products, but it usually focuses on small sellers in open-air markets. Measures taken by the coordination body are rare and mostly target infringement of trademarks.
While North Macedonia has most necessary IPR laws in place, infringements of IPR are frequent, and protection of IPR by the court system should be improved. Prosecutors and judges in both civil and criminal cases are aware of IPR but lack adequate experience due to the small number of IPR cases and so do not have specialized courts to handle IPR cases. Many rights holders do not pursue legal action, as IPR infringers usually lack the financial resources to pay damages anyway. Courts reportedly are reluctant to find accused infringers of IPR guilty due to the criminalization of counterfeiting and stiff mandatory minimum sentences for small distributors of counterfeit goods. The penalties for IPR infringement range from 30 to 60 days closure of businesses, monetary fines of up to EUR 5,000, (USD5,624), or a prison sentence of up to five years. North Macedonia does not track and report cumulative statistics on IPR infringement or seizures of counterfeit goods, and therefore lacks a credible enforcement record. North Macedonia is not listed in the U.S. Trade Representative Special 301 Report or the Notorious Markets List. However, the government currently uses, and has used for the past ten years, unlicensed Microsoft software. In early 2018, the government initiated talks to resolve the issue.
North Macedonia joined the World Intellectual Property Organization (WIPO) in 1993 and in 1994 became a member of WIPO’s Permanent Committee of Industrial Property Protection Information. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/