Macedonian economic policies vladimir peshevski

Republic of MacedoniaDeputy Prime Minister

for Economic Affairs

Vladimir Vladimir PeshevskiPeshevski

Deputy Prime MinisterDeputy Prime Ministerfor Economic Affairsfor Economic Affairs

Helsinki Helsinki -- 20122012



• Population – 2.06 million (41.5% under the age of 30)

• Land area – 25,220 sq.km

• GDP (2011) - $9,800 million

• GDP per capita - $4,750

• PPP GDP per capita - $10,400

Basic FactsBasic Facts

• PPP GDP per capita - $10,400

• Main trading partners: Germany, Greece, Serbia, Russia

• Main export industries: metallurgy andmetal processing, automotive, oilindustry, mining, food and foodprocessing

• Political status – Parliamentary democracy

• EU and NATO candidate country



Country Challenges

• Small size and landlocked

• Volatile global economy

• Needs investments and technologies

• Low visibility and region perception

Pillars of the Strategy

Country Potential

• Macroeconomic stability

• Strategic location and infrastructure

• Availability of natural resources

• Availability of intellectual capital

Economic StrategyEconomic Strategy

Pillars of the Strategy

• FTAs and infrastructure

• Create an outstanding climate for investors - Free Economic Zones

• Develop a world class human capital

• Invest in the energy sector

• Rationally use the natural resources

• Attract FDI and promote Macedonia


for Economic AffairsStable Macroeconomic Stable Macroeconomic IndicatorsIndicators

EXPORT BY YEAR (US$ bn)

REAL GDP GROWTH RATE (%)

AVERAGE GROSS SALARY IN 2011AVERAGE GROSS SALARY IN 2011

CURRENCYCURRENCY

Macedonian Denar pegged to the DM/€

for the last 10 years (€1= MKD 61.3)

INFLATIONINFLATION

Average inflation < 2% p.a. over the last 10y

2006: 3,2%; 2007: 2,3%; 2008: 8,3%; 2009: -0,8%; 2010: 1,6%

5,06,1

5,0

-0,9

2,9 3,3

2006 2007 2008 2009 2010 2011

Source: National Bank of the Republic of Macedonia

AVERAGE GROSS SALARY IN 2011AVERAGE GROSS SALARY IN 2011

€ 497 per month

CREDIT RATINGS 2011CREDIT RATINGS 2011--20122012

No downgrading in the last two years

Standard & Poor’s: BB; Fitch: BB+

BUDGET DEFICIT & STATE DEBTBUDGET DEFICIT & STATE DEBT

Budget Deficit: 2,5% of GDP

State Debt: 28,2% of GDP

2,43,4

4,0

2,73,3

4,4

02006 2007 2008 2009 2010 2011

2420,6

23,9 24,628,2

2007 2008 2009 2010 2011

GOVERNMENT DEBT AS % OF GDP



• Sound and stable financial system with no spillover of the debt crisis

• Loans are financed predominantly by local deposits (L/D ratio of 0,90)

• Financial system consists of 17 banks, 9 saving houses, 13 insurance companies and 9 leasing companies

Financial SystemFinancial System

• Interest rates for companies in range of 5,5% up to 12,0% (CB rate of 4%)

• Foreign banks have 73% of the market

• Recently the following international

banks entered Macedonian market:

− French Societe Generale Bank

− Austrian Sparkasse Bank

− Turkish Halkbank



Regulatory Reforms

• 1-Stop-Shop: 4h Company Registration

• Regulatory Guillotine (“Silence is Consent”, “Cutting Red Tape”)

• Electronic One-Stop-Shop for Customs Permits and Licenses

• Simplification and reduction of taxes

Improvements in the Business ClimateImprovements in the Business Climate

9492

75

69

32 34

22

Rank of Macedonia on the Ease of Doing Business Indicator, World Bank "Doing Business"

Reports 2006-2012

• Simplification and reduction of taxes and custom procedures

Cadastre and Real Estate Reforms

• Digital Cadastre accessible on-line covering 99% of the Real Estate

• Foreigners free to purchase real estate and construction land

• Construction permit in just 3 steps

• State land auctioned at 1 €/m2

2006 2007 2008 2009 2010 2011 2012

82

35

2007 2011

Rank of Macedonia among the Best

Countries for Business, Forbes Magazine


for Economic AffairsDoing Business in MacedoniaDoing Business in Macedonia

33rdrd BEST REFORMERBEST REFORMER

3535thth BEST COUNTRY FORBEST COUNTRY FORBUSINESS IN THE WORLDBUSINESS IN THE WORLD

FoForbes Magazinerbes Magazine

55thth IN THE IN THE EASEEASE OF PAYINGOF PAYING

2222ndnd BEST COUNTRY FOR BEST COUNTRY FOR BUSINESS IN THE WORLDBUSINESS IN THE WORLD

World Bank’s Doing Business 2012 ReportWorld Bank’s Doing Business 2012 Report

33rdrd BEST REFORMERBEST REFORMERIN THE WORLDIN THE WORLD

World Bank’s Doing Business 2010 ReportWorld Bank’s Doing Business 2010 Report

55thth IN THE IN THE EASEEASE OF PAYINGOF PAYINGTAXESTAXES

PwC and World Bank Group Study PwC and World Bank Group Study

Ease of

Doing

Business

Rank

Starting a

Business

Dealing with

Construction

Permits

Getting

Electricity

Registering

Property

Getting

Credit

Protecting

Investors

Paying

Taxes

Trading

Across

Borders

Enforcing

Contracts

Resolving

Insolvency

Germany 19 98 15 2 77 24 97 89 12 8 36

Macedonia 22 6 61 121 49 24 17 26 67 60 55

Austria 32 134 76 21 35 24 133 82 25 9 21



Investments in Education

• Education Budget 5-6% of GDP

• Textbooks from top 10 world universities

• 5 state owned and 14 private universities (over 60,000 university students per year)

• English introduced in the 1st grade el.sch.

Education and ICTEducation and ICT

• Opened two new universities, over 50 new R&D laboratories, international scholarships

Information Technology

• One Computer per Child policy

• ICT Development Index – 51st out of 159

• Internet penetration rate - EU average

• Migration of government services on-line (taxes, health, customs, employment, etc.)



Workforce and Infrastructure

• Rising supply of well-educated IT experts

• Among the lowest labor costs in the region

• About 800 IT graduates are produced annually in the Universities.

• A software engineer with 1 to 2 years experience costs €400 to €500 per month

• The best telecommunication

ICT StructureICT Structure

Structure of the workforce

Programming/Software engineers 30%

Technical support - call centers 17%

Database design & development 12%

IT sales & marketing 12%

System analysis & integration 11%

Network design & administration 9%

Digital media specialists 2%• The best telecommunication infrastructure in the region

Digital media specialists 2%

Other fields 6%



Completion of Coridor X and VIII

• Corridor X is to be completed on full motor highway standard by 2016,with financing already secured

• Concession model to be offered for three more sections on Corridor VIII

• Preparations started for completion

Enhancements in InfrastructureEnhancements in Infrastructure

New Airports built in Skopje and Ohrid

• Capacity 4 million passengers

• Terminal building – 40.000 m2 and Cargo hangar with 40.000 t.

• Successfully negotiated as a concession with Turkish concessionaire

• In the first year, traffic is up by 30%

• Preparations started for completion of railway connection to Bulgaria



• Lease of land for agricultural (at the moment 4000 ha available)

• Good climate and soil (280 sunny days)

• Food processing opportunities with 28 locations for purchasing centers

• Abudance of watter and irrigation

• Financial subsidies for enhancing

Agribusiness OpportunitiesAgribusiness Opportunities

• Financial subsidies for enhancing productivity and quality (3 year plan)

• Foreign investors already present



• Construction of national gas transport system (value ≈ €350mn)

• Opening of lignite mines for electricity production (value ≈ €200mn)

• PPP with the National Power Producer “Elem” for the construction of a combined cycle heat and power plant (value ≈ €250mn)

• An ongoing tender – under the auspices of the IFC advisory services for two large HPP “Cebren and Galiste” (value ≈ €600mn)

New Investments in Energy SectorNew Investments in Energy Sector

• Rehabilitation of the existing hydropower plants (value ≈ €100mn)

• HPP “Boskov Most” and “Lukovo Pole” (value ≈ €200mn)

• Privatization of the minority share (up to 49%) of the state owned electricity generation company ELEM (book value ≈ €1.2bln)

• Construction of three new 400 kV overhead lines (value ≈ €60mn)

• New SCADA, (re)construction of more than 200 km of numerous 110 kV overhead lines (value ≈ €45mn)



Overview

• ELEM is a 100 % state owned Joint Stock Company for electricity generation

• It contributes to more than 90% of the entire domestic electricity production

• The Government of Macedonia is preparing the company for a partial privatisation with a strategic investor

• The strategic partner would provide additional capital to ELEM in a form of equity and acquire 25-49% of the ownership in the company

ELEM ELEM –– Macedonian Power PlantsMacedonian Power Plants

Invest Macedonia - Agency for Foreign Investments

Technical specs

• 1.328 MW Installed Capacity

• 6 TWh Annual Production

• 2 TPP- 800 MW / 60 % of total

• 7 HPP- 528 MW / 40 % of total

• 4.000 Employees

Revenues Net Profit Investments

2009 312.3 4.0 48.0

2010 339.7 5.2 71.0

2011 345.3 1.0 79.8

Some Financial Indicators (in US$ million)


for Economic AffairsOpportunities in TourismOpportunities in Tourism

General Policies

• Free Tourist Zones, with opportunities for hotel and resort development

• Subsidies for tour operators of 25 Euros per tourist

• Over 50 projects to improve the offer

• In 2011, increase in overnight stays of • In 2011, increase in overnight stays of tourists from EU of 38%

Summer and Winter Destination

• Over 50 tectonic and glacial lakes and 45 mountain peaks over 2.000m

• Large Ohrid, Dojran and Prespa lakes

• Country is 70% mountainous, many locations with over 100 days of snow

• Wartersports, archeological, wine, eco and rural tourism



Historical and Culture Heritage

• 4,293 archeological sites

• 992 churches and monasteries

• 23,000 icons (2nd most valuable collection in the world)

• 228 mosques, inns, Turkish baths and old bazaars

Opportunities in TourismOpportunities in Tourism

old bazaars

• Birthplace of Cyrillic alphabet

• Home country of Mother Theresa

Spa tourism

• Territory rich with geothermal waters

• More than 60 thermal springs

• Identified locations for construction of new spa centers and hotels



Tourist Development Zones

• Eight new tourist development zones are to be created

• Each zone would have hotels, restaurants, spa center etc., per the design of the investor

• Located nearby the natural lakes with

Opportunities in TourismOpportunities in Tourism

• Located nearby the natural lakes with opportunities for hotel and resort development

• Exemption of personal income tax for a period of 10 years

• Land purchase with at public auctions -starting price of 1 Euro per m2

• Initial investment is a subject of VAT exemption on construction materials

• Infrastructure the border of the property



Location

• Popova Sapka is situated in the north-western part of Macedonia on 1,780 metres above the sea level, just 35 kilometres from the capital Skopje.

Current Situation

• Currently there are 10 lifts

PopovaPopova ShapkaShapka Ski CenterSki Center


• Total piste length of 55km

• Capacity of 2.900 skiers per day

• Hotels – 600 beds

• Private accommodation – 3000 beds

• Parking space for 549 cars

• Relatively dense and unstructured resort village

• Pre-feasibility study is already completed and four phases were identified to complete this project



Key Elements of the Project

• Build six to eight new lifts and remove some of the old ones

• Construct new parking areas, new mountain restaurants/skier services.

• Creation of a new village with over 4.000 new beds

• Capacity of 13.000 skiers per day

• Total investment of around US$ 50-60 million, over four year period

PopovaPopova ShapkaShapka Ski CenterSki Center




Project background

• The current amusement park is owned and operated by the City of Skopje,

• Total area of 25,000 m2 with 20 attractions and other facilities such as restaurant, night club, etc.

Project objectives

• Design completely new and modern amusement

Amusement Park in SkopjeAmusement Park in Skopje


• Design completely new and modern amusement park via PPP structure

• 30 years concession – DBOT Model

• Feasibility Study is available

• The park would include:

− 7 family rides

− 4 teen rides

− 6 rides for children

− A Theatre

• Total investment of US$ 15 million



• Macedonia has deposits of lead, zinc, copper, silver, nickel, marble

• Detailed Geo Research Concession is awarded for up to six years

• Exploitation concession for mineral resources awarded for up to 30 years

• For the metallic minerals, the fee is 2%

Exploitation of MineralsExploitation of Minerals

• For the metallic minerals, the fee is 2% of the market value (London Metals Exchange) of metal in the concentrate

• For decoration stones, the concession fee depends on the type:

- marble €15 per cubic meter;

- granite €9 per cubic meter;

- onyx, travertine €6,5 per cubic meter.

• For minerals for construction industry, the fee is 0,15 EUR per tone



• Free Trade Agreements with European countries with market of 660 mil+

• Strategically located for light manufacturing and logistics companies

• Macroeconomic Stability

• Exceptional track record in reforms

Why Macedonia?Why Macedonia?

• Attractive Tax Policies

• Incentives in Free Economic Zones

• Available and competitive work force (41.5% of the population under 30)

• Commitment to education

• Excellent ICT infrastructure

• Business friendly Government, willing to work hand-in-hand with you



Thank you for your Thank you for your

attention!attention!

Macedonian economic policies vladimir peshevski

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