The phrases 'south Balkan nation' and 'ease of doing business' are mutually exclusive in the minds of many western business leaders. But in case you hadn't noticed, Macedonia, the most southerly of the former Yugoslavia successor states, came in at number 23 in the latest World Bank Doing Business rankings, reads the Financial Times article: Macedonia: doing business? - published on blogs.ft.com.
Unsurprisingly, it was something Nikola Gruevski, Macedonia's prime minister, was keen to emphasise during an official visit Budapest.
"Macedonia in 2006 was in the 96th position in the world, according to the World Bank’s annual 'ease of doing business' rankings. Now Macedonia is in 23rd position, in front of 20 European Union members, and all countries in central and eastern Europe," he told the audience of EuCham – European Chamber members in the Hungarian capital on November 13.
In truth, that ignores Estonia's achievement – ranked 21st by the World Bank – and Georgia – an astonishing 9th place – but it does put Macedonia a comfortable 12 rungs ahead of Slovenia, which typically assumes pole position among the former Yugoslav states in terms of business friendliness, the article reads.
Gruevski's centre-right coalition governments since 2006 had achieved this by ensuring the country had "the lowest costs for doing business in Europe, I mean the lowest taxes," he said.
Measures include cutting both personal and corporate income taxes to a flat rate of 10 per cent, trimming social security contributions to 27 per cent, and enabling companies to be set up at a one-stop shop inside four hours.
These minimal taxes are further reduced if investors opt to set up in a so-called "technological industrial development zone," several of which are either up and running or in the pipeline.
Given that Macedonia has a well-educated workforce, many of whom speak English and often one other major European language, with a gross average salary of around €430 a month, it is little wonder that foreign investors have begun to take notice.
Gruevski is particularly proud of examples such as Johnson Controls of the US, which began producing printed circuit boards in 2008 and has since built a second factory. This year has seen a score of new arrivals, most notably Kromberg & Schubert and Lisa Dräxlmaier – both German-owned suppliers to the auto industry – and Van Hool, a Belgian bus maker. These three projects, involving investments of €75m, are expected to employ nearly 7,000 people.
Macedonia, with a population of just 2.1m, desperately needs the jobs. A surge in incoming investment in 2007-2008, when FDI was a combined $1.3bn, helped bring heavy unemployment down a bit, from 39 per cent to 31 per cent. But Gruevski admits further reductions have proved difficult to achieve.
Gruevski, an economist, has ambitious plans for Macedonia's infrastructure, with new motorway and rail links designed to improve links with neighbouring Bulgaria and Albania, helping to reduce dependence on the Greek port of Thessaloniki, Macedonia's primary ocean outlet, frequently bedevilled by worker unrest.
He is also eager to promote investment into the power sector – the World Bank has Macedonia at 101 out of 180 countries in its 'getting electricity' ranking – and the country's total installed generating capacity of 1,380MW was stretched in the boom years of 2007-2008, leading to imports making up around 25 per cent of total demand.
"We are focusing on building new capacity, mainly hydro. We have a lot of potential that is not used," he says. The plan is to attract an investor to take a 49 per cent stake bringing management rights in ELEM, the state-owned generator, in exchange for investment in new capacity.
The government is also eager to attract investment in agriculture, tourism and even textiles, where Macedonia's low cost, closeness to Europe and flexibility has led to re-opening textile factories, Gruevski says.
Failing that, there are opportunities in the building and sculpting trades after the government launched a controversial plan to beautify the capital along classical, patriotic lines. Dubbed Skopje 2014, opponents have fiercely criticised state spending on new buildings, monuments, fountains and statues – the most striking of which is a 22 metre-high bronze equestrian statue of Alexander the Great – at a time of such high unemployment.
Gruevski, however, is unrepentant, telling the FT market blog 'beyondbrics' in an interview: "We have only had independence for 21 years. Before that, we were under some other authority, under some other countries. Now we have our independence, it's normal to build some statues and symbols of statehood. This was done in all countries. Secondly, it's very attractive for tourists. Every year since we began these constructions we have seen an increase in tourism of about 20 per cent, so I believe all these investments will see a return in some way."
