Executive Summary

Foreign investors largely postponed or cancelled potential new foreign direct investment (FDI) throughout 2017 due to political uncertainty. Macedonia formed a new, reform-oriented government on May 31, 2017, that publicly committed to putting the country back on the path to EU and NATO integration. Macedonia’s new government has actively sought FDI, offering generous incentives for projects that create jobs. In the past, foreign investors included foreign auto parts companies attracted by Macedonia’s competitive labor costs, proximity to European car manufacturers, and cooperative government assistance. During 2017, no new foreign investors opened operations in the free economic zones called Technological Industrial Development Zones (TIDZ). However, one large U.S. company already operating in one TIDZ successfully opened a new manufacturing operation in a second TIDZ. The new government recently announced in early 2018 that 10 new foreign-owned companies, mostly from Turkey, will open new operations in the TIDZs. The government published incentives to attract foreign investors and announced it will try to create links between domestic companies and the supply chains of foreign companies operating in the TIDZs. The new government’s attitude toward FDI, as well as policies it has in place, are conducive to U.S. investment, and a number of U.S. companies successfully operate in Macedonia.

The 2017 World Bank’s Doing Business Report ranked Macedonia the 11th best place in the world for doing business, down one spot from the previous year. Fitch affirmed Macedonia’s BB credit rating, but upgraded its outlook to positive, and S&P affirmed its credit rating of the country at BB with a stable outlook. Transparency International ranked Macedonia 107th out of 180 countries in its Corruption Perception index, down 17 spots from 2016.

Large foreign companies operating in the TIDZs generally report positive experiences doing business in Macedonia and good relations with government officials. However, under the previous government small investors and domestic firms alleged that then ruling party VMRO-DPMNE awarded government tenders to companies linked to the ruling party, extorted funds from companies, pressured companies to hire party loyalists, retaliated against businesses believed to be supportive of opposition political parties, and attempted to take over independent firms through government harassment. The new government has vowed to end political interference in the private sector and free businesses from political pressure with mixed results thus far.

Macedonia’s legal framework for foreign investors is generally in line with international standards. Macedonia generally treats foreign investors as well as domestic investors in similar circumstances. Under the former government, domestic and foreign companies expressed concerns about a lack of legal stability, predictability, and rule of law. Laws governing business activity were frequently changed, often without consultation with the business community, and the legal changes retroactively applied. The judicial system was inefficient and subject to political interference, and remains subject to influence by political parties. Corruption was widespread and largely went unpunished. There are allegations that the current government coalition continues to influence and pressure the judiciary. While the new government has pledged to enhance transparency and rule of law, it will take time and will need to overcome the deep-seated culture of state capture, cronyism, and corruption.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 107 of 180 http://www.transparency.org/
World Bank’s Doing Business Report “Ease of Doing Business” 2017 11 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2017 61 of 127 https://www.globalinnovation
U.S. FDI in partner country (M USD, stock positions) 2016 USD 110 http://www.bea.gov/
World Bank GNI per capita 2016 USD 4,980 http://data.worldbank.org/

Policies Towards Foreign Direct Investment

Attracting FDI is one of the government’s main pillars of economic growth and job creation. There are no laws or practices that discriminate against foreign investors. In March 2018, the government passed its “Plan for Economic Growth” (http://vlada.mk/PlanEkonomskiRast ), which provides substantial incentives to foreign companies operating in the 15 free economic zones (Technological Industrial Development Zones – TIDZ). The incentives include a variety of measures including job creation subsidies, capital investment subsidies, and financial support to exporters. Also, Macedonia is a signatory to multilateral conventions protecting foreign investors and is party to a number of bilateral investment protection treaties, though none with the United States.

Two government ministers and multiple agencies promote Macedonia as an investment destination. InvestMacedonia – the Agency for Foreign Investments and Export Promotion, http://www.investinmacedonia.com , is the primary government institution in charge of facilitating foreign investments. It works directly with potential foreign investors, provides detailed explanations and guidance for registering a business in Macedonia, provides analysis on potential industries and sectors for investing, provides information on business regulations, and publishes reports about the Macedonian market. The Directorate for Macedonia’s TIDZs, http://fez.gov.mk/ , also assists foreign investors interested in operating in the free economic zones. It manages all administrative affairs of the free economic zones and assists foreign investors in developing their physical facilities.

The government maintains contact with large foreign investors through frequent meetings and formal surveys to solicit feedback. Large foreign investors can also directly and easily contact government leaders for assistance to resolve issues. The Foreign Investors Council, http://www.fic.mk/home.nspx , advocates for foreign investors and suggests ways to improve the business environment.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors can invest directly in all industry and business sectors except those limited by law. For example, investment in the production of weapons and narcotics is subject to government approval. Investors in some sectors such as banking, financial services, insurance, and energy, must meet certain licensing requirements that apply equally to both domestic and foreign investors. Foreign investment may be in the form of money, equipment, or raw materials. Under the law, if assets are nationalized, foreign investors have the right to receive the full value of their investment. This provision does not apply to national investors.

InvestMacedonia conducts screening and due diligence review of FDI in a non-public procedure. The main purpose of the screening is to ensure economic benefit for the country and to protect national security; the process does not disadvantage foreign investors. More information about the screening process is available directly from InvestMacedonia, at: http://www.investinmacedonia.com . U.S. investors are not disadvantaged or singled out by any of the ownership or control mechanisms, sector restrictions or investment screening mechanisms.

Other Investment Policy Reviews

There has been no third-party review of the government’s investment policy in the past three years. The World Trade Organization’s (WTO) last review of Macedonia’s trade policy was published in 2014, available at the following website: https://www.wto.org/english/tratop_e/tpr_e/tp390_e.htm . There is no OECD investment policy review available on Macedonia. The most recent United Nations Conference on Trade and Development (UNCTAD) investment policy review on Macedonia, from March 2012, is available at the following website: http://unctad.org/en/PublicationsLibrary/diaepcb2011d3_en.pdf . The International Monetary Fund (IMF) and the World Bank have assessed aspects of the government’s policies for attracting foreign investment in their regular country reports.

Business Facilitation

All legal entities in the country must register with the Central Registry of Macedonia. Foreign businesses may register a limited liability company, single-member limited liability company, joint venture, joint stock company, as well as branches and representative offices. There is a one-stop-shop system that enables investors to register their businesses within a day by visiting an office, obtaining the information from a single location, and addressing an employee. Once the company is registered with the Central Registry it is valid for all other agencies. In addition to registering, some businesses must obtain additional working licenses or permits for their activities from relevant authorities. More information on business registration documentation and procedures is available at the Central Registry’s website: http://www.crm.com.mk . All investors may register a company online at: http://e-submit.crm.com.mk/eFiling/en/home.aspx . Applications must be submitted by an authorized registration agent. The online business registration process is clear and complete, and available for use by foreign companies.

Outward Investment

Macedonia does not restrict domestic investors from investing abroad, but it does not promote or provide incentives for outward investments. Publicly reported outward investments are small, worth approximately USD 81 million, the majority of which are in the Balkans region and the Netherlands.

Macedonia does not have a bilateral investment or double taxation treaty with the United States.

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.

Macedonia is a signatory of three multilateral Free Trade Agreements: the Stabilization and Association Agreement (SAA) with the EU member-states, giving 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 place 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 Macedonia have raised tax concerns with Post.

Transparency of the Regulatory System

Macedonia has simplified regulations and procedures for large foreign investors operating in the TIDZ. However, Macedonia’s overall regulatory environment is complex and nontransparent. Frequent regulatory and legislative changes and inconsistent interpretations of the rules create an unpredictable business environment that enables corruption. Until recently, the government negotiated the incentive terms used to attract foreign investors to the TIDZ in confidential negotiations, and the terms were not publicized. Recently, the government has published all incentives for businesses operating in Macedonia, which will be standardized and available to domestic and international companies. However, companies worth more than USD 1 billion that want to invest in Macedonia can negotiate terms different from the standard incentives. The government can offer customized incentive packages if the investment is of strategic importance. The legal regulatory and accounting systems used by the government are consistent with international norms.

Rule-making and regulatory authorities reside within government ministries, regulatory agencies, and parliament. Almost all regulations most relevant to foreign businesses are on the national level. Businesses, the public, and NGOs play a limited role in the legislative and regulatory development process. Regulations are generally developed in a four step process. First, the regulatory agency or ministry drafts the proposed regulations. The proposal is then published for public review and comments. After public comments are considered and properly incorporated into the draft, it is sent to the central government to be reviewed and adopted in an official government session. Once the government has approved the draft law, it is sent to parliament for full debate and adoption. Legislation is rarely reviewed on the basis of scientific or data-driven assessments to assess the impact of the legislation.

There is no one centralized location that maintains a copy of all regulatory actions. All newly adopted regulations, rules, and government decisions are published in the Official Gazette of the Republic of Macedonia after they are adopted by the government, parliament, or signed by the corresponding minister or director. Public comments are not published or made public as part of the regulation.

Macedonia accepts International Accounting Standards, which are transparent and consistent with international norms. However, Macedonia has not yet aligned its national law with EU directives on corporate accounting and auditing.

The current government has promised to regularly communicate and consult with the business community and other stakeholders before amending and adopting legislation. It pledged to use the Unique National Electronic Register of Regulations (ENER), an online platform intended to facilitate public participation in policymaking, to increase the minimum comment period from 20 to 30 days, to minimize the use of short parliamentary procedures in lawmaking, and to include a phase-in period for legal changes to allow enterprises to adapt. Key institutions influencing the business climate will start publishing official and legally-binding instructions for implementation of laws. These institutions will be obliged to publish all relevant laws, by-laws, and internal procedures on their websites.

In February 2018, the government adopted a new Strategy for Public Administration Reform and Action Plan, which focuses on policy creation and coordination, strengthening of public service capacities, and increasing accountability and transparency.

International Regulatory Considerations

Macedonia is not a part of any regional economic bloc. As a candidate country for accession to the EU, it is gradually harmonizing its legal and regulatory system with EU standards. As a member of the WTO, Macedonia regularly notifies the WTO Committee on Technical Barriers to Trade of proposed amendments to technical regulations concerning trade. Macedonia ratified the Trade Facilitation Agreement (TFA) in July 2015 (Official Gazette 130/2015), becoming the 50th out of 134 members of WTO. In October 2017, the government formed a National Trade Facilitation Committee, chaired by the Minister of Economy, which includes 22 member institutions. The Committee held its first session in March 2018 to identify areas that need harmonization with TFA.

Legal System and Judicial Independence

Macedonia’s legal system is based on civil law with adversarial-style elements. The country has written commercial law and contract law. There are specialized courts that handle commercial and contractual disputes between businesses. Contracts are legally enforced by civil and administrative court rulings, and sporadically, with mediation. Enforcement actions are appealable and adjudicated in the national court system. Cases involving international elements can be decided in international arbitration.

In July 2015, parliament, without allowing public comment, introduced obligatory mediation in disputes between companies up to USD 16,871 in value as a precondition before going to court. Companies complain the measure, which went into effect February 1, 2016, imposes additional costs and protracts enforcement of contracts.

Numerous international reports have cited Macedonia’s failure to fully respect the rule of law. Political interference, inefficiency, favoritism, prolonged processes, and corruption characterize the country’s judicial system. Enforcing contracts and resolving commercial disputes in Macedonia’s court system is time-consuming, costly, and subject to political pressures.

Laws and Regulations on Foreign Direct Investment

The Constitution of the Republic of Macedonia provides for free transfer and repatriation of investment capital and profits by foreign investors. Under Macedonia’s law, foreign and domestic investors have equal opportunity to participate in the privatization of remaining state-owned assets. There is no single law regulating foreign investments, nor a “one-stop-shop” website that provides all relevant laws, rules, procedures, and reporting requirements for investors. Rather, the legal framework is comprised of several laws including the Trade Companies Law; the Securities Law; the Profit Tax Law; the Customs Law; the Value Added Tax (VAT) Law; the Law on Trade; the Law on Acquiring Shareholding Companies; the Foreign Exchange Operations Law; the Payment Operations Law; the Law on Foreign Loan Relations; the Law on Privatization of State-owned Capital; the Law on Investment Funds; the Banking Law; the Labor Law; and the Law on Financial Discipline. An unofficial English language version of the consolidated Law on Technological Industrial Development Zones (free economic zones) is available at the following link: http://makemigration.readyhosting.com/Regulativa/pdf/Slobodni_ekonomski_zoni.pdf . No new major laws, regulations, or judicial decisions related to foreign investment passed during the past year. However, in May 2018 the Parliament passed a new Law on Financial Support of Investments, available at the following link http://www.economy.gov.mk/Upload/Documents/Nacrt%20Zakon%20za%20finansiska%

The Trade Companies Law

This is the primary law regulating business activity in Macedonia (http://www.mse.mk/Repository/UserFiles/File/Misev/Regulativa/Zakoni%20ENG/LL_CG_
). It defines the types of companies allowed to operate in Macedonia, as well as procedures and regulations for their establishment and operation. All foreign investors are granted national treatment, and are entitled to establish and to operate all types of private and joint-stock companies. Foreign investors are not required to obtain special permission from state-authorized institutions other than what is customarily required by law.

Law on Privatization of State-owned Capital

Foreign investors are guaranteed equal rights with domestic investors when bidding on shares of companies owned by the government. There are no legal impediments to foreign investors participating in the privatization of domestic companies.

Foreign Loan Relations Law

This law regulates the credit relations of domestic entities with those abroad. Specifically, it regulates the terms by which foreign investors can convert their claims into deposits, shares or equity investments with the debtor or bank. The Foreign Loan Relations Law also enables rescheduled debt to be converted into foreign investment in certain sectors or in secondary capital markets.

Law on Investment Funds

The Law on Investment Funds governs the conditions for incorporation of investment funds and investment fund management companies, the manner and supervisory control of their operations, and the process of selecting a depository bank. The law does not discriminate against foreign investors in establishing open-ended or closed investment funds.

Law on Takeover of Shareholding Companies

The law regulates the conditions and procedures for purchasing more than 25 percent of the voting shares of a company. The company must be listed on an official stock market, have at least 25 employees, and have initial capital of EUR2 million. This law does not apply to shares in companies owned by the Republic of Macedonia.

Law on Foreign Exchange Operations

This law establishes the terms for capital transactions. It regulates current and capital transactions between residents and non-residents, transfers of funds across borders as well as all foreign exchange operations. All current transactions (e.g., all transactions that are eventually registered in the current account of the balance of payments, such as trade and private transfers) of foreign entities are allowed. There are no specific restrictions for non-residents wishing to invest in Macedonia. Foreign investors may repatriate both profits and funds acquired by selling shares after paying regular taxes and social contributions. In case of expropriation, foreign investors have the right to choose their preferred form of reimbursement.

Profit Tax Law

The corporate profit tax rate is 10 percent. At the beginning of 2006, the government amended the Profit Tax Law and introduced a withholding tax on income of foreign legal entities. The withholding tax is applied to income from dividends, interest, management consulting, financial, technical, administrative, research, and development services, leasing of assets, awards, insurance premiums, telecommunication services, author fees, and sports and entertainment activities. Income from all of these activities is subject to a 15 percent withholding tax rate, except for income from interest and rent proceeds from the leasing of real estate, which are taxed at a 10 percent rate. This withholding tax does not apply to legal entities from countries that have signed an agreement to avoid double taxation with Macedonia. The United States does not have such an agreement with Macedonia.

Labor Law

All individual employment contracts and collective agreements signed between unions and employers are regulated by this law. The Labor Law (http://www.lexadin.nl/wlg/legis/nofr/eur/arch/mac/laborlaw.pdf ) regulates the implementation of rights, obligations, and responsibilities of the employee and employer. A general collective agreement clarifies and often enhances the basic rights and benefits provided for in the Labor Law. In addition, there are collective agreements applicable in some industries or sectors, which further specify relations between employers and employees in those industries.

Law on Financial Discipline

Effective from May 1, 2014, this law regulates timely payment of liabilities between private sector legal entities, and liabilities stemming from business relations between private sector and public sector legal entities (http://www.ujp.gov.mk/files/attachment/0000/0766/Zakon_za_finansiska_disciplina_215_07.
). Under the law, private entities must settle payment liabilities within 60 days of the day when the liability occurred. Failure to comply with the provisions of the law provides for high fines both for legal entities and for the responsible person.

Law on Financial Support of Investments

In February 2018, the government passed the Law on Financial Support of Investments. It is still pending parliament’s approval. This law provides financial assistance to eligible foreign and domestic businesses.

Competition and Anti-Trust Laws

The Commission for Protection of Competition (CPC) is responsible for enforcing the Law on Protection of Competition. The CPC issues opinions on draft legislation that may impact competition. The CPC reviews the impact on competition of proposed mergers and can prohibit a merger or approve it with or without conditions. The CPC also reviews proposed state aid to private businesses, including foreign investors, under the Law on Control of State Aid (Official Gazette 145/10) and the Law on State Aid (Official Gazette 24/03). The CPC determines whether the state aid gives economic advantage to the recipient, is selective, and adversely influences competition and trade. More information on the CPC’s activities is available at: http://www.kzk.gov.mk/eng/index.asp . There were no significant competition cases during the past year.

Expropriation and Compensation

According to the Constitution of Macedonia and the Law on Expropriation (Official Gazette 95/12, 131/12, 24/13, and 27/14), property under foreign ownership is exempt from expropriation except during instances of war or natural disaster, or for reasons of public interest. Under the Law on Expropriation, the state is obliged to pay market value for any property expropriated. If the payment is not made within 15 days of the expropriation, interest will accrue. These regulations have been strictly followed. The government has not undertaken any measures that have been alleged to be, or could be argued to be, indirect expropriation, such as confiscatory tax regimes or regulatory actions that deprive investors of substantial economic benefits from their investments.

Dispute Settlement

ICSID Convention and New York Convention

Macedonia is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and the European Convention on International Commercial Arbitration. Additionally, Macedonia has either signed on to, or has inherited by means of succession from the former Yugoslavia, a number of bilateral and multilateral conventions on arbitration including the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA); the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards; the Geneva Protocol on Arbitration Clauses from 1923; and the Geneva Convention on Enforcement of Foreign Arbitration Decisions.

In April 2006, the Law on International Commercial Arbitration came into force in Macedonia. This law applies exclusively to international commercial arbitration conducted in Macedonia. An award from arbitration under this law has the validity of a final judgment and can be enforced without delay. Any award decision from arbitration outside Macedonia is considered a foreign arbitral award, and is recognized and enforced in accordance with the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral awards.

Investor-State Dispute Settlement

Macedonia accepts binding international arbitration in disputes with foreign investors. Foreign arbitration awards are generally recognized and enforceable in Macedonia provided the conditions of enforcement set out in the Convention and the Law on International Private Law (Official Gazette of the Republic of Macedonia, No. 87/07 and No. 156/2010) are met. So far, the country has been involved in three reported investor-state disputes brought in front of international arbitration panels. None of those cases involved U.S. citizens or companies. Local courts recognize and enforce foreign arbitration awards issued against the Government of Macedonia. The country does not have a history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

Macedonia accepts international arbitration decisions on investment disputes. The country’s Law on International Commercial Arbitration is modeled on the United Nations Commission on International Trade Law (UNCITRAL) Model Law. Local courts recognize and enforce foreign arbitral awards and the judgments of foreign courts. Alternative dispute resolution mechanisms are available for settling disputes between two private parties but seldom utilized. A Permanent Court of Arbitration, established in 1993 within the Economic Chamber of Macedonia (a non-government business association), has the authority to administer both domestic and international disputes. Macedonia requires mediation in disputes between companies up to EUR15,000 (USD 18,360) in value before companies can go to court.

There is no tracking system of cases involving SOEs involved in investment disputes in Macedonia, and post is not aware of any particular examples.

Bankruptcy Regulations

Macedonia’s bankruptcy law governs the settlement of creditors’ claims against insolvent debtors. Bankruptcy proceedings may be initiated over the property of a debtor, be it a legal entity, an individual, a deceased person, joint property of spouses, or business. However, bankruptcy proceedings may not be implemented over a public legal entity or property owned by the Republic of Macedonia. The World Bank’s Doing Business Report for 2018 ranks Macedonia 30th out of 190 countries for ease of resolving insolvency.

In addition to commercial banks and the National Bank of Macedonia serving as credit monitoring authorities, Macedonian Credit Bureau (http://www.mkb.mk/en/MKBPogled.aspx ) serves as a credit bureau.

Investment Incentives

Both the Law on Customs and the Law on Profit Taxes offer incentives to foreign investors. Foreign investors are eligible for profit tax exemptions for profits generated during the first three years of operation in proportion to the amount of foreign investment on: all profits reinvested in the company, profits invested in environmental protection, and profits invested in “underdeveloped” regions of the country. Companies with at least 20 percent foreign capital are exempt from customs duties for the first three years after their registration. The following additional benefits are also available to foreign investors: a 10 percent flat tax for corporate profits and personal income; relief from local taxes and fees; a tax exemption for duties on imported goods, raw materials, and equipment/machines; and symbolic land lease rate. Country’s legislative framework for FDI is generally harmonized with EU state aid regulations.

Foreign Trade Zones/Free Ports/Trade Facilitation

Macedonia currently has 15 free economic zones in various stages of development throughout the country. The Directorate for Technological Industrial Development Zones (TIDZ) ( http://fez.gov.mk) is responsible for developing and supervising 14 of them, including three fully operational TIDZ in the capital (Skopje 1, 2 and 3). The Tetovo TIDZ is a public-private partnership. U.S. companies operate in TIDZs throughout Macedonia: Cap-Con Automotive Technologies (Skopje), Aptiv (Skopje), Kemet (Skopje), Key Safety Systems (Kichevo), Gentherm (Prilep), Lear (Tetovo), and Adient (Stip and Strumica).

Performance and Data Localization Requirements

Macedonia does not impose any performance requirements, such as mandating local employment (working 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, Macedonia simplified the procedure for expatriates to obtain permission to live and work in the country.

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. Post 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 will be implemented starting in May 25, 2018, Macedonia’s Directorate for Personal Data Protection is preparing amendments to the Law on Personal Data Protection to harmonize 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 FDIs. The government entities include the Agency for Foreign Investments (InvestMacedonia), 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 (Source: Macedonia’s Customs Administration Authority). Current tariffs and other customs-related information are published on the website of the Customs Administration, http://www.customs.gov.mk/en/DesktopDefault.aspx .

Real Property

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 significantly improved the cadaster system, which has increased the security and speed of real estate transactions. Over 97 percent of real estate records are digitized (Source: January – June 2017 Semi-Annual Report of the Agency for Real Estate Cadastre of Macedonia). The World Bank’s 2018 Doing Business Report ranks Macedonia 48th out of 190 for the ease of registering property, the same position it had in 2017.

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 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, 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 2017 report on Macedonia confirmed the country’s legislative framework has a sufficient level of alignment with the EU acquis – with the exception of copyrights, where the regulation of collective management organizations requires further improvement. The report recommended Macedonia step up efforts to investigate and prosecute infringements of intellectual property, reinforce capacity and coordination among the authorities in charge of implementing the intellectual property laws, and improve consultation of stakeholders when drafting legislation.

Responsibility for IPR is disbursed 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, etc.). 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 online. 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 usually focuses on small sellers in open-air markets.

While Macedonia has most necessary IPR laws in place, protection of IPR by the court system should be improved. Prosecutors and judges in both civil and criminal cases are aware of IPR laws, but lack adequate experience due to the small number of IPR cases and the lack of 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 EUR5,000, (USD 5,795), or a prison sentence of up to five years. Macedonia does not track and report cumulative statistics on IPR infringement or seizures of counterfeit goods. Macedonia is not listed in the Office of the United States Trade Representative (USTR) Special 301 Report or theUSTR Out-of-Cycle Review of Notorious Markets. However, the government currently uses, and has for the past ten years, unlicensed Microsoft software. In early 2018, the government initiated talks to resolve the issue.

Macedonia joined the World Intellectual Property Organization (WIPO) in 1993 and in 1994 became a member of the Permanent Committee of Industrial Property Protection Information of WIPO. 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/ 

Capital Markets and Portfolio Investment

Macedonia’s capital market is modest in turnover and capitalization. The establishment of the Macedonian Stock Exchange (MSE) in 1995 made it possible to regulate portfolio investments. Following the 12.5 percent rise in 2016, market capitalization in 2017 accelerated by 17.8 percent to USD 2.7 billion. The main index, MBI10, increased by 18.9 percent, reaching 2,539 points at year-end. Foreign portfolio investors accounted for an averaged 17.4 percent of total MSE turnover, 0.3 percentage points less than in 2016(Source: MSE) The authorities do not discriminate against foreign portfolio investments in any way.

There is an effective regulatory system for portfolio investments, and Macedonia’s Securities and Exchange Commission (SEC) licenses all MSE members for trading in securities and regulates the market. In 2017, the total number of listed companies was 128, seven more than a year ago, and total turnover jumped up by 56.7 percent (Source: MSE) Overall liquidity of the market is modest compared to international standards. Individuals generally trade at the MSE as individuals, rather than through investment funds, which have been present since 2007.

There are no legal barriers to the free flow of financial resources and portfolio investments. The Central Bank respects IMF Article VIII and does not impose restrictions on payments and transfers for current international transactions. Credit is provided at market rates to both domestic and foreign companies.

Money and Banking System

The International Monetary Fund assessed in its regular November 2017 report that Macedonia’s banking sector is healthy, well-capitalized, and profitable. Domestic companies secure financing primarily from their own cash flow and from bank loans, due to the lack of corporate bonds and other securities as credit instruments.

Financial resources are almost entirely managed through Macedonia’s banking system, consisting of 15 banks and a central bank. It is a highly concentrated system, with the three largest banks controlling 57.8 percent of the banking sector’s total assets of about USD 8.8 billion, and collecting 70 percent of total household deposits. The two largest commercial banks in the country have estimated total assets of about USD 1.6 billion each. The ten smallest banks, which have individual market share of less than 5 percent, account for one-fourth of total banking sector assets. Foreign banks or branches are allowed to establish operations in the country at equal terms as domestic, subject to licensing from the central bank. In 2017, foreign capital remained present in 14 of Macedonia’s 15 banks, and was dominant in 11 banks, controlling 70.3 percent of total banking sector assets, 78.1 percent of total loans, and 69.4 percent of total deposits (Source: National Bank of the Republic of Macedonia).

According to the National Bank of the Republic of Macedonia (NBRM – the Central Bank) the banking sector’s non-performing loans at the end of the third quarter of 2017 (latest available data) were 6.6 percent of total loans, dropping by 0.9 percentage points. Total profits at the end of the third quarter of 2017 reached USD 92 million, which was 7.5 percent lower than in the same period of the previous year.

Banks’ liquid assets at the end of the third quarter of 2017 were 29.5 percent of total assets, which was only 0.2 percentage points lower compared to the same period of 2016, but still remained comfortably high. In 2017 NBRM conducted different stress-test scenarios on banking sector sensitivity to increased credit risk, liquidity shocks, and insolvency shocks, all of which showed that the banking sector is healthy and resilient to shocks, with capital adequacy ratio remaining well above the legally required minimum of eight percent. Actual capital adequacy ratio of the banking sector increased from 15.7 in September 2016 to 16.2 in September 2017, with none of the individual banks having a ratio below 10 percent.

There are no restrictions on a foreigner’s ability to establish a bank account. All commercial banks and the Central Bank have established and maintain correspondent banking relationships with foreign banks. The banking sector did not lose any correspondent banking relationships in the past three years, nor were there any indications that any current correspondent banking relationships are in jeopardy. There is no intention for implementing or allowing the implementation of blockchain technologies in banking transactions in Macedonia. Also, alternative financial services do not exist in the economy—the transaction settlement mechanism is solely through the banking sector.

Foreign Exchange and Remittances

Foreign Exchange Policies

Macedonia’s national currency, the Denar (MKD), is convertible domestically, but is not convertible on foreign exchange markets. There are no restrictions placed on foreign investors in converting, transferring or repatriating funds associated with an investment. Conversion of most foreign currencies is possible on the official foreign exchange market. In addition to banks and savings houses, numerous authorized exchange offices also provide exchange services. The NBRM operates the foreign exchange market, but participates on an equal basis with other entities. Required foreign currency reserves are spelled out in the banking law. There are no restrictions on the purchase of foreign currency.

Parallel foreign exchange markets do not exist in Macedonia, largely due to the long-term stability of the Denar. The NBRM is pursuing a strategy of a pegged Denar to the Euro and has successfully kept it at the same level since 1997. According to NBRM statistics, the inflation is low, standing at 1.4 percent in 2017.

Remittance Policies

There were no changes in investment remittance policies, and there are no plans for changes to the regulations. The Constitution of Macedonia guarantees free transfer and repatriation of investment capital and profits. By law, foreign investors are entitled to transfer profits and income without being subject to a transfer tax. Investment returns are generally remitted within three working days. There are no legal limitations on private financial transfers to and from Macedonia. Remittances from workers in the diaspora represent a significant source of income for Macedonia’s households. In 2017, net private transfers amounted to USD 0.8 billion, accounting for 16 percent of GDP.

Sovereign Wealth Funds

Macedonia does not have a sovereign wealth fund.

There are about 120 state-owned enterprises (SOEs) in Macedonia, the majority of which are public utilities in which the central government is the majority shareholder. The 81 local governments also own local public utility enterprises. In March 2018, the government estimated that about 8,600 people are employed in SOEs. SOEs operate in several sectors of the economy including energy, transportation, and media. There are also industries such as arms production and narcotics in which private enterprises may not operate without government approval. SOEs are governed by boards of directors consisting of members appointed by the government. All SOEs are subject to the same tax policies as private sector companies. SOEs are allowed to purchase or supply goods or services from the private sector and are not given material advantages such as preferential access to land and raw materials.

There is no published registry with complete information on all SOEs in the country, but basic information is available at: http://komspi.mk/%d1%98%d0%b0%d0%b2%d0%bd%d0%b8%d0%bf%d1%80%d0%

A 2016 report by Transparency International-Macedonia commented that “policy decisions related to SOEs often comply with the political needs of the ruling political establishment, such as needs for employment… rather than with the actual needs of the SOEs.” The new government declared it would change that practice, and there have not been reports of massive hires of party members in SOEs since the government took office in June 2017. Macedonia is not a signatory to the OECD Guidelines on Corporate Governance for SOEs. In February 2018, the government sent its bid to the WTO to upgrade its status from observer to a fully-fledged member of the Government Procurement Agreement (GPA).

Privatization Program

Macedonia’s privatization process is almost complete, and private capital is dominant in the market. The government is trying to sell two remaining state-owned loss-making companies in a non-discriminatory process through international tenders. Foreign investors are allowed to participate in privatization through a public bidding process. Neither the central government nor any local government has announced plans to fully or partially privatize any of the utility companies or SOEs in their ownership.

Responsible business conduct (RBC) is a nascent concept in Macedonia. The government has not taken any major measures to encourage RBC and has not defined RBC or policies to promote or encourage it. The government has not conducted a “National Action Plan” on RBC and does not factor RBC policies into its procurement decisions.

There have not been any high-profile controversial instances of private sector impact on human rights or resolution of such cases in the recent past. In the past, the host government has failed effectively and fairly enforces laws related to human rights, labor rights, consumer protection, environmental protections, and other laws and regulations intended to protect individuals from adverse business impacts.

Macedonia passed the Law on Trade Companies in 2004 and the Securities Law in 2005 that govern corporate governance. Together these laws provide a clear distinction between the rights and duties of shareholders versus the operations and management of the company. Shareholders generally cannot be held liable for the acts or omissions of the company.

The American Chamber of Commerce in Macedonia has a committee on Community Engagement and Responsible Business Conduct, which organizes seminars on relevant topics and maintains an online database of corporate social responsibility (CSR) activities carried out by over 260 companies in 2015-2017 at http://csr.amcham.com.mk/ . The government does not take any measures to encourage adherence to the OECD Due Diligence Guidance for Responsibility Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. Macedonia does not participate in the Extractive Industries Transparency Initiative.

Macedonia has laws intended to counter bribery, abuse of official position, and conflicts-of-interest; government officials and their close relatives are legally required to disclose their income and assets. However, enforcement of anti-corruption laws has at times been weak and selectively targeted government critics and low-level offenders. There have been credible allegations of corruption in law enforcement, the judiciary, and many other sectors. All members of the State Commission for Prevention of Corruption (https://www.dksk.mk/index.php?id=home ), established in 2002 to prevent corruption and conflicts of interest, submitted their resignations in March 2018, after media reported on excessive and fraudulent travel invoicing. The Special Prosecutor’s Office (SPO) was established in 2015 to investigate cases linked to a wiretapping scandal that revealed extensive abuse of office by public officials, including alleged corruption in public tenders. Transparency International ranked Macedonia 107th out of 180 countries on the 2017 Corruption Perception Index. The new government formed in May 2017 vowed to combat corruption and abuse of power, reform public procurement to eliminate pre-arranged tenders for favored companies, and depoliticize state institutions.

To fight corruption, the government uses an automated electronic customs clearance process, which allows businesses to monitor the status of their applications. As a result of weak performance and extended procedural delays, the government abolished the Council for Public Procurement in 2018, in order to make the public procurement system more efficient.

The government does not require private companies to establish internal codes of conduct prohibiting bribery of public officials. A number of NGOs focus on anti-corruption; the government does not provide any special protections to NGOs involved in investigating corruption. Macedonia has ratified the UN Convention against Corruption and the UN Convention against Transnational Organized Crime and has signed the Organization for Economic Cooperation and Development’s (OECD) Convention on Combating Bribery.

Many businesses operating in Macedonia, including some U.S. businesses, identified corruption as a problem in government tenders and in the judiciary. No local firms or non-profit groups provide vetting services of potential local investment partners. Foreign companies often hire local attorneys, who have knowledge of local industry sectors and access to the Central Registry and business associations, and can provide financial and background information on local businesses and potential partners.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

State Commission for Prevention of Corruption
Public Relations
Dame Gruev 1
1000 Skopje, Macedonia
+389 2 321 5377

Public Prosecution Office for Fighting Organized Crime and Corruption
Acting Chief, Ms. Gordana Smakjoska
Boulevard Krste Misirkov BB, Sudska Palata
1000 Skopje, Macedonia
+389 2 321 9884

Ministry of Interior – Organized Crime and Corruption Department
Dimce Mircev bb
1000 Skopje, Macedonia
+ 389 2 314 3150

Transparency International – Macedonia
President, Ms. Slagjana Taseva
Naum Naumovski Borce 58
P.O. Box 270
1000 Skopje, Macedonia
+389 2 321 7000

Macedonia generally has been free from political violence over the past decade, although interethnic relations are strained at times. However, protesters stormed parliament and violently attacked members after the election of a new speaker on April 27, 2017. More than 100 were injured, including the now prime minister and seven other MPs. The government is prosecuting over 30 individuals charged in orchestrating and carrying out the attack. Public protests, demonstrations, and strikes occur sporadically, and often result in disruptions, particularly near the center of Skopje.

There is no widespread anti-American or anti-Western sentiment in Macedonia. There have been no incidents in recent years involving politically-motivated damage to projects or installations. Violent crime against U.S. citizens is rare. Theft and other petty street crimes do occur, particularly in areas where tourists and foreigners congregate.

Foreign investors, especially those in labor-intensive industries, find Macedonia’s competitive labor costs and high number of English speakers attractive. The average net wage in 2017 was USD 458 per month, but reportedly about 60 percent of workers receive wages lower than that average. In September 2017, the minimum wage was raised from MKD10,080 (USD 183) to MKD12,000 MKD (USD 240) per month. The new government has promised to raise the minimum wage to MKD16,000 (USD 320) by the end of its mandate in 2020.

In 2017, Macedonia’s labor force consisted of 954,212 people, of which 740,648 (44.1 percent) were employed and 213,564 (22.4 percent) were officially unemployed. Macedonia’s employed labor force is roughly 61 percent male and 39 percent female. The total unemployment rate for youth ages 15 to 24 years old was 44.4 percent, down 0.6 percent from 2016. About 20 percent of the unemployed have university-level education (Source: State Statistical Office).

Despite the relatively high unemployment rate, foreign investors report difficulties in recruiting and retaining workers. Positions requiring technical and specialized skills can be especially difficult to fill, due to a mismatch between industry needs, the educational system, and graduates’ aspirations. Many well-trained professionals with marketable skills, such as IT specialists, choose to work outside Macedonia. To address shortages of factory workers, the government encourages the dispersal of labor-intensive manufacturing investments to different parts of the country and companies often bus in workers from other areas.

Relations between employees and employers are generally regulated by individual employment contracts, collective agreements, and labor legislation. The Law on Working Relations is a general act that regulates all forms of employment relations between employees and employers, retirement, lay-offs, and union operations. Severance and unemployment insurance are covered by the Law on Working Relations and the Law on Employment and Insurance. Most labor-related laws are in line with international labor standards and generally within recommendations of the International Labor Organization (ILO). Labor laws apply to both domestic and foreign investments, and employees in both segments are equally protected.

Employment of foreign citizens is regulated by the Law on Employment and Work of Foreigners: http://mtsp.gov.mk/content/pdf/zakoni/Zakon_vrabotuvanje_stranci_21715.pdf . There is no limitation on the number of employed foreign nationals or the duration of their stay. Work permits are required for foreign nationals, and an employment contract must be signed upon hiring. The employment contract, which must be in writing and kept on the work premises, should address the following provisions: description of the employee’s duties, duration of the contract (finite or indefinite), effective and termination dates, location of the work place, hours of work, rest and vacation periods, qualifications and training, and salary and pay schedule.

The law establishes a 40-hour workweek with a minimum 24-hour rest period, paid vacation of 20 to 26 workdays, and sick leave benefits. Employees may not legally work more than an average of eight hours of overtime per week over a three-month period or 190 hours per year. According to the collective agreement for the private sector between employers and unions, employees in the private sector have a right to overtime pay at 135 percent of their regular rate. In addition, the law entitles employees who work more than 150 hours of overtime per year to a bonus of one month’s salary. Although the government sets occupational safety and health standards for employers, those standards are not enforced in the informal sector, which accounted for an estimated 22 percent of the employed.

Trade unions are interest-based, legally autonomous labor organizations. Membership is voluntary and activities are financed by membership dues. About 20 to 25 percent of legally employed workers are dues-paying union members. Although legally permitted, there are no unions in the factories operating in the free economic zones. Most unions, with the exception of a few branch unions, are generally not independent of the influence of the government officials, political parties, and employers.

There are two main associations of trade unions: The Union of Trade Unions and the Confederation of Free Trade Unions. Each association is comprised of independent branch unions from the public and private business sectors. Both associations, along with the representatives of the Organization of Employers of Macedonia and representatives from relevant ministries, are members of the Economic – Social Council. The Council meets regularly to discuss issues of concern to both employers and employees and reviews amendments to labor-related laws.

There are two main agreements for the public and private sectors on the national level. National collective agreements in the private sector are negotiated between representative labor unions and representative employer associations. The national collective agreement for the public sector is negotiated between the Ministry of Labor and Social Policy and labor unions; currently the government and unions have still not agreed on a collective agreement for the public sector. Separate contracts are negotiated by union branches at the industry or company level.

An out-of-court mechanism for labor dispute resolution was introduced in 2015 with assistance from the ILO, financed by the EU. Macedonian labor regulations comply with international labor standards and are in line with the ILO. Besides the raising of minimum wage mentioned above, no new labor laws or regulations were enacted in 2017.

Financing and insurance for exports, investment, and development projects are made possible through agencies such as the U.S. Trade and Development Agency (TDA); the U.S. Export-Import Bank (EX-IM); the Overseas Private Investment Corporation (OPIC); the European Bank for Reconstruction and Development (EBRD); the International Bank for Reconstruction and Development (World Bank); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the Southeast Europe Equity Fund (SEEF). Most of the funding for major projects is achieved through co-financing agreements, especially in the transportation and energy infrastructure development fields.

OPIC and MIGA are the country’s chief investment insurance providers. OPIC insurance and project financing have been available to investors in Macedonia since 1996. OPIC’s three main activities are risk insurance, project finance, and investment funding. MIGA provides investment guarantees against certain non-commercial risks (i.e., political risk insurance) to eligible foreign investors who make qualified investments in developing member countries.

Although its primary focus is export assistance, including direct loans and capital guarantees aimed at the export of non-military items, EX-IM also provides insurance policies to protect against both political and commercial risks. TDA, SEEF, the World Bank, and the EBRD focus more directly on financing agreements.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data





Host Country Gross Domestic Product (GDP) (M USD)


USD 11,339


USD 10,900


Foreign Direct Investment

Host Country Statistical Source*

USG or International Statistical Source

USG or international Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country (M USD, stock positions)


USD 93


USD 110

BEA data available at

Host country’s FDI in the United States (M USD, stock positions)





BEA data available at

Total inbound stock of FDI as % host GDP





IMF estimate

* Source: State Statistical Office (estimated data on GDP); National Bank of the Republic of Macedonia (data on FDI). Data is publicly available online, and is published immediately upon processing (usually with a lag of one quarter).

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 4,909 100% Total Outward 81 100%
Austria 598 12.2% Serbia 54 66.7%
United Kingdom 547 11.1% Netherlands 26 32.1%
Greece 488 9.9% Bosnia & Herzegovina 21 25.9%
Netherlands 446 9.1% Slovenia 12 14.8%
Slovenia 395 8.0% Russian Federation 8 9.9%
“0” reflects amounts rounded to +/- USD 500,000.

The results from the International Monetary Fund (IMF) on inward direct investment presented in Table 3 differ from the data provided by the NBRM due to different means of determining the country of origin of investments. For example, the IMF credits investments to countries from where the transactions were made, whereas the NBRM credits investments to the country where the transactions originated, if the bank can determine it. According to the NBRM, as of end-2017, the largest source of inward FDI is Austria with USD 700 million (12.4 percent of total investments), followed by the Netherlands with USD 643 million (11.4 percent), and Germany with USD 612 million (10.8 percent).

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 269 100% All Countries 247 100% All Countries 22 100%
United States 185 68.9% United States 182 73.9% Austria 12 53.0%
Germany 44 16.4% Germany 44 17.8% United States 3 14.1%
Austria 12 4.4% France 8 3.1% Russian Federation 1 6.5%
France 9 3.3% International Organizations 5 2.0% Slovenia 1 6.0%
International Organizations 5 1.8% Switzerland 4 1.5% France 1 4.9%

Arben Gega
Commercial Specialist
U.S. Embassy – Skopje
Samoilova 21
1000 Skopje, Macedonia
Tel: +389 2 310 2403
E-mail: gegaa@state.gov

2018 Investment Climate Statements: Macedonia
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