50500 km150

00100000 km

500 km 10TH GLOBALLYIN EASE OF DOING BUSINESS

#1 DESTINATIONFOR DOING BUSINESS

IN EASTERN EUROPE

World Bank’s Doing Business Report 2017

2200200200000

DELIVERING VALUE ON TARGETERING VALUE ON T

MACEDONIA

CONTENTS

Macedonia Basic Facts 4

Macroeconomic Indicators 6

Labor Market 7

Starting a Business 9

Free Trade Agreements 10

International Rankings 12

Free Zones 15

Major Recent Investors 21

Transportation Costs and Delivery Times 26

Explore Macedonia 27

Dear Investors,

The Macedonian Free Zones Authority, the governmental managing body responsible for developing free zones throughout the country, currently supervises fifteen zones in various stages of development. The Government is committed to providing the most cost and operationally efficient environment for doing business in Eastern Europe. Macedonia is known as the “New Business Heaven of Europe” offering 100% foreign ownership, 0% corporate and income tax, €0.1 per m2/year land lease rates, subsidies of up to €500,000 towards construction costs, training and job creation grants, skilled and available labor, as well as fully developed and available infrastructure which allows a quick start of operations in its free zones. These are only one segment of the value proposition that provides the most competitive operating environment in the region and wider. Companies which compete in an increasingly complex business world seek optimum locations for their organizations. The popularity of the free zones is based on the simplicity and effectiveness for doing business, beneficial and long-lasting tax incentives, and opportunities for additional government grants. This would be the right moment for companies to take advantage of prime locations and inducements.

FOREWORD

9

CORRIDOR 8

CORRIDOR 8

Thessaloniki

Plovdiv

Salzburg

GrazMaribor

Vienna

Burgas

Igoumenitsa

Kozani

Bitola

VelesDurres

CORRIDOR 10

CORRIDOR 10 CORRIDOR 10

CORRIDOR 10sub section C

CORRIDOR 10

MACEDONIA BASIC FACTS LOCATION AND TRANSPORT INFRASTRUCTURE Official Name: Republic of MacedoniaCapital: Skopje (Population of 600,000)

Other Major Cities: Kumanovo, Bitola, Tetovo, Prilep, Ohrid, Veles, Strumica, StipPopulation: 2.05 millionArea: 25,713 km2

Location: Macedonia is located in the central Balkan peninsula in Southeast Europe. It is one of the successor states of the former Yugoslavia, from which it declared independence in 1991.It became a member of the United Nations in 1993. It shares a border with Greece to the south, Bulgaria to the east, Serbia and Kosovo to the north, and Albania to the west.

Time Zone: GMT + 1Political System: Parliamentary democracyCurrency: Macedonian DenarCountry Phone Code: + 389Country Internet Domain: .mk

Two Pan-European Corridors: East-West Corridor 8 North-South Corridor 10

Road Network: 9,200 km

Railway Network: 900 km

Two International Airports: Skopje, Ohrid

International Ports (distance from Skopje): Thessaloniki (Greece): 230 km Durrës (Albania): 300 kmIgoumenitsa (Greece): 530 kmBurgas (Bulgaria): 620 km

3.2*

1.0*

23.0*

-3.0*

61.60*

2017

* Projection Source: Ministry of Finance and the National Bank of the Republic of Macedonia, 2017

EXCHANGE RATE MKD/EUR

MACROECONOMIC INDICATORS LABOR MARKETMacroeconomic Stability

Macedonia’s economic and financial stability is expressed through positive key economic indicators such as a steady GDP growth, low inflation rate, stable currency and excellent fiscal discipline confirmed by international financial institutions. Macedonia’s exports have also had a positive track record. The export growth rate was 8.1% in 2015, 6.9% in 2016, and is expected to be 7.8% in 2017.

Workforce Availability

Macedonia prides itself on its educated, highly-qualified workforce available to foreign investors. Academic standards at technical higher education institutions in Macedonia resemble those of Western countries. Workers welcome continuing education and life-long learning,

successfully completing customized vocational training programs. In the past several years, Macedonia on average spends 6% of its GDP on education, a percentage higher than the OECD countries average. Of the total number of high school students, 60% are enrolled

in technical and vocational schools. In relation to 1991, the total number of university graduates in 2015 was 211% higher. With 40% of the population under 30 years of age, Macedonia offers a young, educated, and skilled workforce.

0

50000

2014/2015 2015/2016

100000Number of Enrolled Students at Universities Number of University Graduates

63,543 63,614

Source: State Statistical Office of the Republic of Macedonia, 2016

0

50000

2014/2015 2015/2016

100000

12,263 11,144

LABOR MARKETAlthough the average gross monthly salary at the national level in 2016 was €530, the average gross monthly salary in the manufacturing sector was €400. These amounts include the net salary, personal income tax and social contributions for pension and disability insurance, health insurance and employment insurance. The national statutory minimum salary in 2017 is €164 net and €240 gross. Since 2008 social contributions have been reduced from 32.5% to 27.0% of the gross salary for pension and disability, health insurance, and the employment fund.

Hourly Labor Costs - Manufacturing Sector, 2015

Source: Eurostat and State Statistical Office of the Republic of Macedonia, 2017

Mac

edon

ia

€2.3

Bulg

aria

€2.8Ro

man

ia €3.5

Hun

gary

€6.1

Pola

nd

€6.2

Cro

atia

€7.0

Slov

akia

€7.5

Slov

enia

€12.8

Cze

ch R

epub

lic

€7.1

STARTING A BUSINESSRegistering a Company

The amendment to the Company Law in 2005 facilitated the commencement of activities of the Central Register at the beginning of 2006, as the body authorized to perform all company registrations and maintain a trade register of all companies.

Macedonia has introduced a one-stop shop system that enables investors to register their business within 2 hours of submitting an application. An entity can register a company in Macedonia by visiting one office, obtaining the information

from a single window, and addressing one employee. This significantly reduces administrative barriers and start-up costs.

Work Permits

Foreign residents can easily establish employment in the Republic of Macedonia. Work and residence permits are subject to approval in a single permit process.

Nationals of EU member-states, as well as nationals of the state-parties to the Schengen agreement may enter the Republic of Macedonia presenting a valid identity card issued by the competent authorities

of the EU member-states or the state-parties to the Schengen agreement.

Kosovo

Kosovo

Signed Investment Protection Treaties

Avoidance of Double Taxation

Free trade agreements provide access to markets in 41 countries with over 650 million consumers.

Macedonia is a signatory of three multilateral Free Trade Agreements:

� SAA (Stabilization and Association Agreement) with the EU member-states (28 countries)

� EFTA (Switzerland, Norway, Iceland and Liechtenstein)

� CEFTA (Macedonia, Albania, Moldova, Serbia, Montenegro, Bosnia and Herzegovina, and Kosovo)

Bilateral Free Trade Agreements are signed with Turkey and Ukraine.

FREE TRADE AGREEMENTS FREE TRADE AGREEMENTS

INTERNATIONAL RANKINGS INTERNATIONAL RANKINGSEuropean Cities and Regions of the FutureEase of Doing Business 2016 - Global Rankings

MacedoniaPolandCzech RepublicSloveniaSlovak RepublicRomaniaBulgariaRussian FederationHungaryCroatiaMexicoSerbiaMoroccoTurkeyUkraineBrazilIndia

102427303336394041434747686980123130

MacedoniaSloveniaCroatiaRussian FederationRomaniaPolandTurkeyMoroccoSlovakiaBulgariaMexicoHungaryUkraineCzech RepublicSerbiaIndiaBrazil

73538475558616273889295107122143157178

Paying Taxes 2016 - Global Rankings

TOP 10 SMALL EUROPEAN REGIONS - COST EFFECTIVENESS TOP 10 SMALL EUROPEAN REGIONS - COST EFFECTIVENESS

Rank Region Country Rank Region Country

1 Ohrid - Struga Macedonia 1 Skopje Region Macedonia

TOP 10 SMALL EUROPEAN CITIES - COST EFFECTIVENESS TOP 10 SMALL EUROPEAN CITIES - COST EFFECTIVENESS

Rank Region Country Rank Region Country

1 Skopje Macedonia 1 Skopje* Macedonia

TOP 10 MICRO EUROPEAN CITIES - COST EFFECTIVENESS TOP 10 MICRO EUROPEAN CITIES - COST EFFECTIVENESS

Rank Region Country Rank Region Country

1 Stip Macedonia 1 Stip** Macedonia

2 Veles Macedonia * Skopje #6 in FDI STRATEGY amongst Small European Cities** Stip #6 in FDI STRATEGY amongst Micro European Cities

2014/15 2016/17

FREE ZONESThe Macedonian Free Zones offer the most competitive business and investment environment in Eastern Europe with world-class

infrastructure, excellent services, and extremely competitive incentives. As a Free Zones Authority, we will guide you throughout

the decision-making process and assist you in choosing Macedonia as your next investment destination.

Our project management approach enables us to understand a company’s objectives and arrange an appropriate itinerary for

visiting Macedonia, VIP investment tours, university and reference company visits, as well as entirely address issues that are important

to the success of the investment project.

By creating linkages with local and central government authorities to expedite approvals, permits, and similar administrative services,

we enable a quick start-up of company operations and business that flows efficiently.

Corr

idor

8

Corridor 8

Corridor 8

Corridor 10

Corridor 10

Corridor 10

Corri

dor 1

0

Corr

idor

10

BEROVO

DELCEVO

VINICA

STRUMICA

GEVGELIJA

RADOVIS

PRILEP

STIP

RANKOVCE

SKOPJE 1

SKOPJE 2

SKOPJE 3

STRUGA

KICEVO

TETOVO

Source: IBM-PLI Global Location Trends database and analysis, 2016

0 500 1,000

2010-2014 2015

1,500 2,000 2,500 3,000

MacedoniaSerbia

UAEIreland

HungarySlovakia

Czech RepublicBahrain

NicaraguaLithuania

Top-ranking destination countries by estimated jobs per million inhabitants

Note: This analysis excludes countries with a population less than one million.

1 (5)

2 (4)

3 (1)

4 (2)

5 (7)

6 (10)

7 (12)

8 (9)

9 (11)

10 (18)

Best Countries for BusinessGlobal Rankings

2007

47 placesImproved

2016 35

82

Macedonia

Index of Economic FreedomGlobal Rankings

2007

40 placesImproved

2017 31

71

Macedonia

INTERNATIONAL RANKINGSIBM Rankings Regarding New Job Openings Forbes

MagazineThe Heritage Foundation

FREE ZONES

Awards

The success and attractiveness of Macedonia’s zones and overall investment climate is confirmed by their ranking in fDi Magazine in the top 50 free zones of the Future 2012/2013. The Free Zone Skopje was also 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 Year 2014 Winners

Global Free Zones of the Future 2012/2013 Winners

FREE ZONES

Taxes, Customs, and other Incentives

�� 10�YEAR�TAX�HOLIDAY�-�Investors�in�the�free�zones�are�entitled�to�profit�tax�exemption�and�personal�income�tax�exemption�for�a�period�of�10�years.�Investors�are�exempt�from�payment�of�value�added�tax�for�goods,�raw�materials,�and�equipment.�

Additionally,�investors�are�exempt�from�payment�of�customs�duties�for�equipment,�machines,�and�spare�parts.

�� The�land�in�the�Macedonian�free�zones�is�available�to�lease�for�€0.1�per�m2/year�for�a�period�of�up�to�99�years.

�� Investors�are�exempt�from�paying�utility�taxes�to�the�local�municipality,�and�fees�for�land�building�permits.

�� Free�connection�to�natural�gas,�water,�and�sewage�network.

�� The�Government�of�the�Republic�of�Macedonia�may�participate�up�to�€500,000�in�the�construction�costs��of�the�investor�in�the�free�zone�depending�on�the�number�of�jobs�created�and�investment�size.

In compliance with EU rules and regulations governing state aid.

UNEMPLOYMENT RATE

Corporate Tax

Personal Income Tax

Value Added Tax

TAX DUTIES

TAX

Equipment, machines, and spare parts 0% 0% – 20%

RATE INTHE ZONE

RATE OUTSIDETHE ZONE

0% for 10 years 10%

0% for 10 years 10%

0% 18%

RATE INTHE ZONE

RATE OUTSIDETHE ZONE

CUSTOMS DUTIES

GOODS

Comparative Advantages

FREE ZONESInfrastructure Benefits

Investors in the free zones are provided the following infrastructure benefits: electrical grid outlet, telecommunications network, lighting, fire safety system, security monitoring system, water and

sewage network, and gas pipeline (only in Skopje 1 and Skopje 2 free zones).

Utility CostsUtility prices for industry in Macedonia are among the lowest in Europe.

Open electricity market Source: Free Zones Authority, January 2017

Electricity

€5.9/100kWh(average price for users

in the free zones in 2016)

Natural gas

€0.26/Nm3

(Skopje 1 andSkopje 2 Free Zones)

Water

€0.78/m3

(Skopje 1 and Skopje 2 Free Zones)

Source: JKP Ilinden, January 2017

FREE ZONES

Identification of project specific location factorsCost analysisIdentification of supplier baseDetailed due dilligence

University linkagesReference company linkages

Organization of meetings with legal advisors and financial partners

Design and infrastructure approvalsIssuing building and operational permitsCustoms outpost in the zonesZone infrastructure maintenance and upgrade

Support with relevant tax and customs issuesAssistance in acquiring visas/work permitsCoordination and support with contacts at

other state and local authorities

OURSERVICES

BUSINESS OPPORTUNITIES

ANALYSIS

CREATINGLINKAGES

ONE-STOP SHOP AFTERCARE

One-stop shop and project management approach

Locations, operational costs, and competitiveness Labor availability, HR companies, and consulting

Ensure success!

MAJOR RECENT INVESTORSThe Free Zones Authority at Your Service…

�� Location�1:�Stip�Free�Zone

�� Location�2:�Strumica�Free�Zone

�� Type�of�production:�Car�seat�covers

�� Location:�Tetovo�Free�Zone

�� Type�of�production:�Car�seat�covers

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Electronic��control�technologies�for�vehicles

�� Location:�Struga�Free�Zone

�� Type�of�production:�Mechatronic�and��electronic�components

FREE ZONES

MAJOR RECENT INVESTORS MAJOR RECENT INVESTORS

�� Location:�Skopje�2�Free�Zone

�� Type�of�production:�Buses�and�coaches

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Automotive��exhaust�catalysts

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Capacitors�for�automotive�components�and�industrial�applications

�� Location:�Kicevo�Free�Zone

�� Type�of�production:�Airbag�cushions��and�modules

�� Location:�Prilep�Free�Zone

�� Type�of�production:�Seat�and�steering�wheel�heaters�and�seat�climate�technologies

�� Location:�Struga�Free�Zone

�� Type�of�production:�Automotive�cables,�solenoids�and�mechatronic�systems

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Inflators�for��vehicle�airbags

�� Location�:�Skopje�1�Free�Zone

�� Type�of�production:�Armored�high-pressure�rubber�hoses

MAJOR RECENT INVESTORS

�� Location:�Prilep�Free�Zone

�� Type�of�production:�Plastic�injection��moulding�for�automotive�application

�� Location:�Stip�Free�Zone

�� Type�of�production:�Wall-hung�boiler�components

R

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Paper�surface��treatments�and�polymeric�films

�� Location:�Stip�Free�Zone

�� Type�of�production:�Insulating�materials

MAJOR RECENT INVESTORS

�� Location�:�Skopje�1�Free�Zone

�� Type�of�production:�Printed�circuit��boards�for�automotive�industry

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Plastic�injection�moulding�and�tools�for�automotive�application

�� Location�:�Skopje�2�Free�Zone

�� Type�of�production:�Wiring�harnesses��and�cables

�� Location:�Skopje�1�Free�Zone

�� Type�of�production:�Shock�absorbers�for�industrial�and�railway�vehicles

2928

Matka is one of the most popular outdoor destinations in Macedonia and is home to several medieval monasteries. There

are dozens of caves and large numbers of endemic plants and animals. Vrelo Cave is the worlds deepest underwater cave and

was listed as one of the top 77 natural sites in the world in the New 7 Wonders

of Nature project.

CANyON MATkA

Destination/Origin Distance (km) Net Hours Borders From Skopje (€/20 ton truck)

Kragujevac, Serbia 320 6 1 670

Pitesti, Romania 580 12 2 1,050

Budapest, Hungary 810 17 2 1,000

Gebze, Turkey 860 18 2 1,100

Vienna, Austria 1,200 23 2 1,250

Ostrava, Czech Republic 1,290 32 2 1,550

Munich, Germany 1,370 33 2 1,350

Milan, Italy 1,470 37 3 1,350

Stuttgart, Germany 1,600 39 2 1,450

Cologne, Germany 2,010 48 2 1,550

TRANSPORTATION COSTS AND DELIVERY TIMES EXPLORE MACEDONIAPLACES TO VISIT

A UNESCO World Heritage site, Lake Ohrid is between 4 and 10 million years

old, making it the oldest lake in Europe. It is 30 km long and 288 m deep with

astonishingly clean and clear waters. The serene stillness of its mountain settings have

captivated visitors since prehistoric times.

The largest bazaar in the Balkans, located in Skopje, dates back to the 12th century. The Ottoman architecture is predominant with

numerous mosques, caravanserais, hans, and monuments. Kale fortress, built around the

6th century A.D., sits atop the highest point in the city. During the summer, concerts

and theater plays are performed here.

LAkE OHRID SkOPJE’S OLD BAZAAR

EXPLORE MACEDONIATHINGS TO DO

There are over 50 wineries in Macedonia, and it’s estimated that 3% of the world’s wine production is Macedonian. With endless prospects for wine tastings, the wine road displays Macedonia in all its splendor with deep forests, untouched lakes and rivers, ecological food, and incredibly clean air that stimulates the senses.

Nearly 80% of Macedonia’s stunning landscape consists of mountains and hills, including many lakes and rivers, offering a myriad of outdoor activities – hiking, mountain biking, rock climbing, caving, paragliding, skiing, snowboarding, kayaking, and scuba diving. The opportunities for adventure are limitless.

Ethno villages, are small, rural tourist destinations that evoke a bygone time, and offer guests a chance to experience Macedonian history firsthand. A trip to one of the many ethno villages around the country is a great way to escape the bustle of Skopje in a cozy country cottage, enjoying traditional food, and long walks across unspoiled meadows.

THE WINE ROAD ADVENTURES ETHNO VILLAGES

REASONS TO INVEST IN MACEDONIA’S FREE ZONESFully Developed Industrial Parks

Lowest Operating Costs in Europe

Free Trade Access to Europe

0% Tax for 10 years

Grants Available forConstruction & Job Training

One-Stop Shop & Quality Aftercare Service

Skilled, Competitive and Dynamic Workforce

#1 Destination for Doing Businessin Eastern Europe Macedonia0%

DIRECTORATE FOR TECHNOLOGICAL INDUSTRIAL

DEVELOPMENT ZONESAddress:

Partizanski odredi 2, P.O Box 3111000 Skopje

Republic of Macedonia

Telephone: +389 2 311 11 66

Fax: +389 2 311 11 77

info@fez.gov.mk

www.fez.gov.mk