how easy it is to invest and do business in macedonia verica hadzi vasileva-markovska aag –...
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How Easy It Is to Invest and Do Business in Macedonia
Verica Hadzi Vasileva-Markovska
AAG – Analysis and Advisory Group
Macedonia is a tiny country – but … 25.713 m2
around USD 5.7 billion worth GDP Appx. USD 7.5 thousand GDP p.c. PPP 2 million people Relatively low purchasing power High unemployment rate: 37% Relatively stable diversified economy It started to grow in a more sustainable
way Received EU candidate country status
Focus onto some economic indicators
Main Economic Indicators
2000 2001 2002 2003 2004 2005*
GDP (USD mill) 3,588 3,437 3,769 4,631 5,368 5,625GDP per capita (USD at PPP) 4,478 4,907 6,036 7,014 7,462GDP Growth Rate (in %) 4.5 -4.5 0.9 2.8 4.1 4.0Inflation (annual average; %) 5.8 5.5 1.8 1.2 -0.4 0.5Exports (USD mill) 1,321 1,163 1,112 1,359 1,672 2,041Imports (USD mill) 2,011 1,677 1,916 2,211 2,785 3,097Trade Balance (USD mill) -690 -524 -804 -852 -1,113 -1,056Current Account (USD mill) -75 -235 -358 -152 -415 -81Current Account (as % of GDP) -2.1 -6.8 -9.5 -3.3 -7.7 -1.4External Debt (as % of GDP) 39.9 41.0 43.1 44.9 44.6 40.1FDI (USD mill) 175 441 78 94 150 120
* EstimateSource: Bulletin of the Ministry of Finance, Jan./Feb. 2006
Starting a business is easy Until 2005: you needed 48 days and 13
procedures As of 1 January 2006: you will not need more than
3 days once documents were submitted Major reform in the registration of businesses Capital requirement: EUR 5,000 for Ltd Co and
EUR 25,000 and EUR 50,000 for AD Much less procedures: Registry takes care of most
of them Statistics: 7600 new units registered in 1-8/2006,
compared to 6700 in the same period last yearWorld Bank and IFC: Doing Business in 2006. Creating jobs, 2006
Starting a business – compare!
Slovenia: 60 days
Serbia:
15 days Greece: 38 days
Bosnia: 54 daysCroatia:
49 days
World Bank and IFC: Doing Business in 2006. Creating jobs, 2006
Buying a business should not be difficult If there is a suitable target:
Problems: Not many Not very open: fear of loss of corporate control
Takeover Law, 2002: It is applied when:
Buying shares over 25% in companies with more than 25 shareholders and with share capital > EUR 2,000,000
Public offer Make analysis
Information abundance, or?
Information basis is not very rich: Although useful, statistics is poorer
than Slovenian Sectoral studies are rare In general, companies are reluctant to
disclose info Investment analysts are practically
non-existent, unless specially engaged
Accounting standards IFRS are nominally obligatory Accounting and auditing profession
is deficient All big 4 are present 25 audit companies registered Poor enforcement of professional
standards: Institute of certified auditors established in June 2006
Personnel: are they readily available? Sluggish reforms in education and training
institutions old fashioned courses curricula life-long learning concept – still not alive knowledge economy concept – still not alive low R&D expenses Still many young people studying abroad General education level is such that allows
easy deepening of knowledge and skills Working ethics: not lower than regional
average
Personnel: are they easy to hire and fire?
New Labour Relations Law in 2005 Much more business friendly and
less rigid Prior to that the difficulty indices
were high (on the scale 0-100): Hiring: 61 Firing: 40
Financial sector is rather sound but shallow
Banking sector has undergone significant restructuring
It is a sound but rather shallow financial market total assets to the GDP equaled 45 percent 19 private banks of universal type, 1 state-owned bank with specific functions 14 savings houses Still new changes in the Law are expected to:
strengthen Bank supervision transition to more risk based supervision
Interest rates have been falling in the last several years: in July: 11.3% average in MKD 8.1% in Forex
Financial sector is dominated by banks Further reforms in the insurance sector:
approximation with the EU directives strict licensing requirements and risk management
rules enhancement of the supervision
establishment of an adequate and independent supervisory authority
Pension system: second pillar established Capital market is constantly growing Non-banking financial institutions not yet
established – lack of legal basis
Getting a loan
The competition among banks is increasing
Banks are more open to providing loans
Law on execution has increased their security for collection
No credit bureaus
Registering and protection of property
Still many problems especially in the real estate – cadastre goes through deep reforms: slow process, not connected information bases
By 2009 a new reliable cadastre is to be set up
To register a property you need 74 days
Registering property in days – compare!
Slovenia: 391
Serbia: 111
Greece: 23
Bosnia: 331Croatia:
956
World Bank and IFC: Doing Business in 2006. Creating jobs, 2006
Taxes
Relatively low tax rates and they are scheduled to ever lower: VAT: 18% and 5% CIT: 15%, scheduled to be 10% PIT: 15%, 18%, 24% Flat rate is expected to be introduced
Some tax heavens for foreign investors
Dealing with administration
Administration used to be very difficult
It is going through reforms Still much needs to be done Corruption is an issue and this
needs to be dealt with E-government project is in the air
Enforcing contracts
Judiciary reforms is underway Law on Courts changed, Law on
Court Budget, Law on Enforcement Laws have been changed to enable
better enforcement Still problems: days of
enforcement: 509!!
Enforcing contracts in days – compare!
Slovenia: 913
Serbia: 635
Greece: 151
Bosnia: 330Croatia:
415
World Bank and IFC: Doing Business in 2006. Creating jobs, 2006
Closing a business A new law on bankruptcy enacted
streamlining the bankruptcy proceeding, making it faster, more efficient, less costly and fairer to the creditors and other stakeholders, building of the professional and ethical
capacity of the bankruptcy proceeding bodies: in progress
Duration of a bankruptcy process: 4 years!
Closing a business (in years) – compare!
Slovenia: 3.6
Serbia: 2.7
Greece:
2.0
Bosnia: 3.3Croatia:
3.1
World Bank and IFC: Doing Business in 2006. Creating jobs, 2006
Other issues
Protecting investors: corporate governance
Able partners Hospitable people Unexplored opportunities
Aggregate easiness of doing business rank (out of 155) – compare!
Slovenia: 63
Serbia: 92
Greece: 80
Bosnia: 87Croatia:
116
Source: World Bank and IFC: Doing Business in 2006. Creating jobs, 2006
Macedonia: 81
AAG – Analysis and Advisory Group
AAG – Analysis and Advisory GroupBul. Ilinden, 42-4
1000 SkopjePhone: +389-2-3120-565
Fax: +389-2-3122-565e-mail: [email protected] (soon to be released)
Verica Hadzi Vasileva-MarkovskaPartner