investment opportunities in macedonia for manufacturing companies vele samak
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Finland – Macedonia Business Seminar, Wednesday, June 6, 2012The Business Seminar was organized on the occasion of the visit to Finland of H.E. Mr. Nikola Gruevski, Prime Minister, President of the Government of the Republic of Macedonia. Presentation by Vele SamakTRANSCRIPT
Republic of MacedoniaMinister for foreign investments
Investment Opportunities in Macedonia for Investment Opportunities in Macedonia for Investment Opportunities in Macedonia for Investment Opportunities in Macedonia for Manufacturing CompaniesManufacturing Companies
Vele SamakMinister for Foreign Investments
+389-2-3121-046
AgendaAgenda
• Introduction
• Challenges
• 3 reasons for Macedonia
• Next steps
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IntroductionIntroduction
• Mission and MO:
„Attract the largest manufacturing and service companies to invest in Macedonia by identifying business and investment opportunities and using deliberate
speed to solve problems.”
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• Team– Vele Samak, Minister for Foreign Investments, [email protected]
– Ivana Nikolik, Analyst, [email protected]
– Riste Mishe, Analyst, [email protected]
– Lejla Mehmedovic, Analyst [email protected]
– Andrea Tevdovski, Analyst [email protected]
– Katerina Stojanovska, Assistant & Chief of Staff [email protected]
From Macedonia Manufacturers can profitably expand into new From Macedonia Manufacturers can profitably expand into new markets, improve supply chain and source new talent and innovationmarkets, improve supply chain and source new talent and innovation
Potential for growth:
Older populations will require new services and increased productivity
Electronics and Software content in vehicles and applications will continue to grow
Incomes in Eastern Europe are less than half of those in West Europe
Infrastructure development still lagging in Emerging Europe
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Challenges:
Economic uncertainty will require production flexibility and better supply chains
Price pressures on suppliers will not abate with lower volume growth
Electronics supply chain and component shortages will remain volatile
Fragmented consumer markets will challenge marketing and service operations
Western and Northern Europe remains the mostWestern and Northern Europe remains the most--productive but also productive but also mostmost--expensive manufacturing location in the worldexpensive manufacturing location in the world
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Source: BLS, US Department of Labor, March 2011, Bloomberg BusinessWeek
BRD
CZE
POL
LTU
LVA
EST
BLR
Eastern Europe is a crowded space for many manufacturersEastern Europe is a crowded space for many manufacturersChoose your next site wisely!Choose your next site wisely!
GM, Gliwice
Fiat, Tychy
GM, Zeran (Warsaw)
VW, Poznan
Daewoo, Uzhgorod
EU Border as of 2007
VW-Skoda, Bratislava
PSA, Trnava (2006)
HMC-Kia, Zilina (2006)
Toyota/PSA, Kolin
VW-Skoda, Mlada Boleslav
LIAZ, Velki Krtis
HMC-Hyundai, Novosice (2008)
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AUS
SER
SVK
CZE
ROM
HUN
UKR
BGR
GRC
MDA
SLO
BIH
MKD
ALB
HRVSuzuki, Estergom
Renault-N, Novo Mesto
VW-Audi, Györ, (Engines)
VW, Sarajevo
Opel/GM
Ford,
FIAT, Zastava, KragujevacFIAT, Zastava, Kragujevac
ZAZ, Zaporozhje
AutoVAZ, Kherson
Source: Government research
Ford, CraiovaFord, Craiova
RenaultRenault--Nissan, PitestiNissan, Pitesti
Ford, Otosan, Gölcük
Fiat – Tofas, Bursa
Oyak-Renault , Beykoz
Toyota, Sakarya
Daimler, KecshemetDaimler, Kecshemet
Three reasons to choose MacedoniaThree reasons to choose Macedonia
People and ingenuity
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Cost benefits
Record of leadership
Young, Dynamic and WellYoung, Dynamic and Well--educated Workforceeducated Workforce
2,9%
1,1%
6%
42% of population under 30 – youngest country in Eastern Europe
High intellectual capital:
– 98.9% of high school graduates enrolled in college in 2010
– 63,000 University students in 2009
– 27% in Engineering and Technical studies
– Multiple technical schools in each city
Engineering graduates recognized a top global universities
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USA Germany Macedonia
Percent of GDP spent on Education
Engineering graduates recognized a top global universities
90% study English, 20%+ study German in schools
Foreign Foreign LanguagesLanguages
Primary School Primary School StudentsStudents
Secondary School Secondary School StudentsStudents
English 91% 94%
French 22% 32%
German 13% 21%
Italian / 2%
Russian 1% 2%
Turkish / 1%
CountryCountry 20062006
Macedonia 1.7
EU (27 countries) 1.4
Slovenia 1.3
Bulgaria 1.3
Croatia 1.2
Czech Republic 1.1
Foreign languages learnt per pupil; ISCED level 2 Secondary education (average)
Macedonia provides companies with unrivalled Macedonia provides companies with unrivalled foreign language skillsforeign language skills
English is mandatory for first-graders in Macedonia
Two foreign languages are mandatory in high school: English, and either German, French, or
Russian
Macedonia maintains strong lead in the CEE region in terms of language skills and ability to
serve both, German and French-speaking markets
Total No. of primary and secondary schools students 310,000Source: State Statistical Office, Macedonia (Education 2008/2009)
Slovakia 1.1
Poland 1.1
Hungary 1.0
Turkey N/A
Source: Eurostat
Solid Industrial Base of Component Manufacturers and Local Solid Industrial Base of Component Manufacturers and Local Suppliers in Many Fields to Support InvestorsSuppliers in Many Fields to Support Investors
ElectronicsElectronics
Machining & MetalMachining & Metal--worksworks
PCBs, electric motors, relays, power PCBs, electric motors, relays, power substations, broadcasting and substations, broadcasting and telecom equipmenttelecom equipment
PlasticsPlastics40+ companies in 40+ companies in injection, extrusion, blow injection, extrusion, blow molding, rubber, cables molding, rubber, cables and tool makersand tool makers
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Learnica
Mining & CommoditiesMining & Commodities
Copper, Lead, Zinc, Nickel and Iron Copper, Lead, Zinc, Nickel and Iron Mines, all in operationMines, all in operation
Oil refinery, chemicals, cement, Oil refinery, chemicals, cement, gypsum and minerals production and gypsum and minerals production and excavationexcavation
Long tradition in castings, Long tradition in castings, forgings, stamping, welding, forgings, stamping, welding, extruding, tube making, extruding, tube making, metallurgy metallurgy
Metal Metal toolworkstoolworks and productionand production
Hot rolled, cold rolled coils & Hot rolled, cold rolled coils & sheets, basic steel plates, sheets, basic steel plates,
Automotive components and Automotive components and railway brakesrailway brakes
Three reasons to choose MacedoniaThree reasons to choose Macedonia
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Cost benefits
Unbeatable Fiscal Benefits in EuropeUnbeatable Fiscal Benefits in Europe
Corporate Income TaxCorporate Income Tax Personal Income TaxPersonal Income Tax
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10% Flat Taxes among lowest in Europe
Tax credit on reinvested profit
Lowest payroll taxes (27% of gross wage)
34+ Double taxation avoidance treaties signed
Real estate VAT taxes at 2% - 4%
VAT at 18%, with 5% on specific itemsSource: PwC (Taxes at a glance 2011), National Investment Promotion Agencies
Macedonia is as competitive as China in Manufacturing, offering savings Macedonia is as competitive as China in Manufacturing, offering savings of 20of 20--50% from comparable countries for the same productivity50% from comparable countries for the same productivity
Slovakia
797 3.5%
Hungary
Czech Rep.
961 2.1%
Poland
875 4.5%
LEGEND:Average gross wage in €/month
Annual wage growth %
Average Monthly Gross Wages
€ 250
€ 400
€ 700
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Macedonia
356 2%
Hungary
792 3.7%
Romania
497 6.4%
Turkey *
1159 11%
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Bulgaria **
450 9.9%
Source: State Statistical Offices, 2Q 2011
* Last statistical data from 2008
* *Estimate based on company information
Sustainable Labor Advantage in Macedonia:
• Young Population
• Large unemployment ~ 30%
• Easy labor mobility
• High degree of loyalty, lower retention costs: 4.4% don’t get paychecks on time
• Captive labor market outside EU pressures over the next 5 years
Unskilled blue-collar
College entry-level
Skilled engineering
Serbia
507 13%
Excellent infrastructure, No trade barriers & Excellent infrastructure, No trade barriers & Competitive transportation costsCompetitive transportation costs
All of Europe in 2-3 days via
Highways
North-South and East-West Highways2 Brand New International Airports
FTAs ensure no trade barriers with EU, CEFTA, EFTA, Turkey and Ukraine
Access to 650 million customers
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3 hours to port of Thessaloniki
35 days or less inbound container ships from China
Large pool of logistic companies provide competitive costs and delivery times
Macedonia Offers Many Free Economic Macedonia Offers Many Free Economic Zones for Production and Supplier NeedsZones for Production and Supplier Needs
All Zones:All Zones:
Highway interchangeHighway interchangeGov’tGov’t owned and managedowned and managedInfrastructure readyInfrastructure readyElectricity, water, telecomElectricity, water, telecomGas (Skopje only)Gas (Skopje only)
Why trust Macedonia? Why trust Macedonia?
A record of leadership in turbulent times
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A record of leadership in turbulent times
Macedonia at a glance Macedonia at a glance ––Emerging Economy with Strong Political StabilityEmerging Economy with Strong Political Stability
• Independent since 1991
• Stable parliamentary democracy:
– Minority representation in every government
– Model country for ethnic integration
• Population: 2.1 million
• Current Government since July 2006, 2 re-elections with a dedication to economic
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elections with a dedication to economic growth, political stability, EU & NATO integration
• Strategic Partnership with US, supported by many EU countries, Germany – largest trade partner
• EU recommended start of Membership Negotiation in 2009, reiterated in 2010 and 2011
• Standing NATO invitation, designated net security exporter in the region
Key Macedonian Economic Indicators Key Macedonian Economic Indicators ––Economic & Financial Stability with High PotentialEconomic & Financial Stability with High Potential
Positive
Steady GDP Growth#2 in Europe in 2009!
Low Inflation
2007 2008 2009 2010 2011*
GDP nominal (€ mil) 5,965 6,720 6,677 6,945* 7,345
Real GDP Growth (%) 6.1 5.0 -0.9 1.8 5.2
GDP per capita, € 2,919 3,283 3,253 3,350 3,565
Inflation (%) 2.3 8.3 -0.8 1.6 3
Unemployment (%) 35.8 33.8 32.2 32 30.8
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Opportunities for Opportunities for ImprovementImprovement
High unemploymentHigh unemploymentNegative trade balanceNegative trade balance
Decade-long Stable Currency
Unemployment (%) 35.8 33.8 32.2 32 30.8
MKD / EUR 61.2 61.2 61.2 61.5 61.5
MKD / USD 46.44 41 44.07 46.4 46.4
Imports (€ mil) 3653 4434 3472 3961 4,760
Exports (€ mil) 2472 2684 1921 2493 3,036
Trade Balance -1181 -1750 -1,551 -1468 -1,724
BB+ Positive Credit Outlook by Fitch
Source: Central Bank, Ministry of Finance, State Statistical Office* Estimated figures
26% Debt/GDP, and2.5% Deficit
Why Macedonia Why Macedonia –– A Sustainable Investment Platform:A Sustainable Investment Platform:Stable, Safe and Leading Reformer in SEEStable, Safe and Leading Reformer in SEE
33rdrd BEST BEST REFORMERREFORMER
3535thth BEST COUNTRY FORBEST COUNTRY FORBUSINESSBUSINESS IN IN THE WORLDTHE WORLD
Forbes MagazineForbes Magazine
55thth IN IN THE EASE OF THE EASE OF PAYINGPAYING
2222ndnd BEST COUNTRY FOR BEST COUNTRY FOR BUSINESS IN THE WORLDBUSINESS IN THE WORLD
World Bank’s Doing Business World Bank’s Doing Business 2012 2012 ReportReport
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33 BEST BEST REFORMERREFORMERIN THE WORLDIN THE WORLD
World Bank’s Doing Business 2010 ReportWorld Bank’s Doing Business 2010 Report
55 IN IN THE EASE OF THE EASE OF PAYINGPAYINGTAXESTAXES
PwC PwC and World Bank Group Study 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
Estonia 24 44 89 48 13 40 65 51 3 29 72
Serbia 92 92 175 79 39 24 79 143 79 104 113
Why Macedonia Why Macedonia –– A Sustainable Investment Platform:A Sustainable Investment Platform:Stability, Safety and BusinessStability, Safety and Business--Friendliness Recognized by Many Foreign CompaniesFriendliness Recognized by Many Foreign Companies
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Foreign Direct Investments, 2011Foreign Direct Investments, 2011--12 update12 update
US Company KEMET Electronics Corporation to invest 25mill USD in TIRZ Skopje 1 for initial 500 new jobs to produce standard D.C. film capacitors
Russian biggest pharmaceutical company 'Prodis‘, part of 'ProtekGroup‘ is investing €5M, employing 300 ppl in TIRZ Skopje 1
German wire & harnessing automotive supplier Kromberg & Schubert is investing €25M in Development Zone in Bitola; to employ up to 3000 ppl
India's SamvardhanaMotherson Group invests €12M; starting with 140ppl in TIRZ Skopje 1, for production of die-casting parts and exterior glass used in rearview mirrors for the automotive industry
German wire & harnessing automotive supplier DräxlmaierGroup is investingl€15-30M in a Development Zone in central Macedonia; to employ up to 4000 ppl
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automotive industry
6pm Group based in Malta, to invest €5M, hiring minimum 50 ICTspecialists to deliver Tele Care and Tele Health web based healthcare solutions
Plant 1, TIRZ Skopje 1:$40M 150-500 employees; manufacturing instrument cluster electronics
Plant 2, TIRZ Stip:Investment of €20M; 1400 ppl for construction of cut & trim plant for car seats
Upwards of €55M ; 300employees; Currently doubling capacity with another €60M. Exhaust catalyst manufacturer supplying all OEM plants in Europe; Today, the biggest exporter fromMacedonia
Belgian private Bus & Coach producer, Van Hool NV, will invest up to €20M in TIRZ Skopje 2 and hire up to 400employees to produce busses and coaches for the USA and EU markets
Why trust Macedonia? Why trust Macedonia?
There’s always one more thing…
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There’s always one more thing…
Excellent Connectivity and Western CultureExcellent Connectivity and Western Culture
Brand New International airports - Skopje and Ohrid, with $150M+ investment from TAV
Macedonia is a place of great hospitality that offers a mix of traditional and modern
Largest wine producer in the region
5 International Schools with large mix of
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5 International Schools with large mix of ex-pats.
"We are satisfied from the support provided by
the Macedonian Government, its institutions, the
Cabinet of Minister Samak and Bitola
Municipality. The decision for investment in
Macedonia represents an important step in our
expansion as part of the strategy for international
output“
Martin Passern,Managing Director, Kromberg & Schubert
“Macedonia has a qualified workforce with
excellent English skills“
Nikolai Beckers,CEO, Makedonski Telekom AD
“Macedonian Government has created an
attractive tax package. On the other side they are
willing to help investors in training their labor
force and they are very dedicated to remove all
the administrative barriers. “
Avram Stojcevski,Plant Manager, Johnson Controls Makedonija
Next Steps in MacedoniaNext Steps in Macedonia
• Develop business case and review needs with Macedonian team
• Setup agenda for assessment of:
– Greenfield site
– HR recruitment, pre-qualification and training
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– HR recruitment, pre-qualification and training
– Local suppliers and logistics providers
– Incentives and other Government support
– Other needs
• Determine dates to visit Macedonia
Macedonia is the most competitive labor Macedonia is the most competitive labor cost country in Eastern Europe today!cost country in Eastern Europe today!
CountryCountry Corporate TaxCorporate Tax Personal Income TaxPersonal Income Tax VATVATSocial ContributionsSocial Contributions
TotalTotal
Macedonia 10% 10% 18% 27%
Serbia 10% 12% 18% 37.2%
Croatia 20% 15-45% 23% 37.2%
Poland 19% 40% 22% 31.2 - 34.1%
Ukraine 25% 15% 20% 39.8 - 49.7%
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Source: CEE-CIS Tax Notes – Price Waterhouse Coopers
Each 1 Euro in Gross Wages includes =
• 27% cents in social charges, health insurance and pension benefits
• 10 cents in personal income tax
• 63 cents in net wages
Romania 16% 16% 19% 44.5 - 55.7%
Slovakia 19% 19% 19% 48.6%
Czech R. 24% 32% 19% 45%
Hungary 16% 36+4% 20% 44%
Turkey 20% 15% 18% 33.5%
Macedonia - Social Security Contribution in Gross Wages
YearYear 20112011 20122012
Pension and disability insurance 18% 17.5%
Health insurance 7.3% 7.3%
Employment insurance 1.2% 1.2%
Reduced payroll taxes and flexible Reduced payroll taxes and flexible laborlabor laws laws enacted in 2008 provide 10% wage cost savings!enacted in 2008 provide 10% wage cost savings!
• Hiring and firing made flexible with ability to hire, retain and dismiss temporary and contract-based employees, in addition to permanent staff
• For large layoffs or reduction-in-force, key regulations are:
• Employer is obligated to provide 30-days notice,
• Offer severance ranging from 1-month up to 6-months of most recent wage, depending on time of employment
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Additional health insurance 0.5% 0.5%
Total 27% 26.5%
Public Holidays and Vacation AllowancesPublic Holidays and Vacation Allowances
11 Public Holidays:• 1st January – New Year’s Day• 7th January – Christmas of Orthodox Christians• 1st May – Labor Day• 24th May - Day of Macedonian educators Ss. Cyril and Methodius• 2nd August – Day of the Republic• 8th September – Independence Day• 11th October – Uprising Day• 23rd October – Day of Macedonian Revolutionary fight
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• 23 October – Day of Macedonian Revolutionary fight• 8th December – Day of St. Kliment of Ohrid• Second day of Easter• First day of Ramadan Bajram
Orthodox Christian Holiday:• January 6th - Day of Christmas Eve• Easter’s Friday
Weekends and holiday shifts areallowed according Labor relations law and Collective agreements, but under certain conditions.
Vacation:• 20 – 26 working days depending on work experience
and conditions, after 6 months• 10 days minimum for part-time employeesSick-leave and Maternity:• 14 calendar days with doctor permission, medical
commission for longer absence• 9 mos Maternity leave, paid by State Health Fund