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POTENTIAL OPPORTUNITIES FOR PROMOTION OF THE ECONOMIC

COOPERATION BETWEEN THE REPUBLIC OF NORTH MACEDONIA AND THE REPUBLIC OF

TURKEY

Contents Introduction ...................................................................................................................................... 2

BASIC ECONOMIC INDICATORS ..................................................................................................... 3

1. GDP – Gross Domestic Product ......................................................................................... 3

2. Foreign Direct Investments (FDIs) ..................................................................................... 4

3. International Trade ........................................................................................................... 5

HOW TO INCREASE THE ECONOMIC COOPERATION BETWEEN THE TWO COUNTRIES? ............. 8

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Introduction

Following the establishment of diplomatic relations between the Republic of North

Macedonia and the Republic of Turkey on 26 August 1992, the bilateral relations in the past

28 years have been characterized by strong political and economic support from the Republic

of Turkey for the Republic of North Macedonia. Owing to the historical and cultural past, both

countries have very close and friendly relations.

According to the latest annual data of the State Statistical Office, 2019 was a very

positive year for the trade relations between the Republic of Turkey and the Republic of North

Macedonia, showing an increase in value of the total bilateral trade, which reached nearly

USD 540 million or 3.5% more in comparison with 2018.

The value of the Macedonian export amounted to USD 87.2 million, which is a decline

of 9.3% in comparison with 2018. The import from Turkey has reached USD 452.7 million,

growing 6.4% in comparison with 2018.

The Republic of Turkey is constantly on the list of top few countries that our country

has the largest volume of trade with. In 2019, Turkey was the eighth largest trade partner in

terms of international trade of the Republic of North Macedonia.

The flow of Turkish foreign direct investments in the Republic of North Macedonia is

mainly concentrated on construction, banking and service sectors, textile, traffic, medicine

and tourism.

The bilateral relations between the Republic of North Macedonia and the Republic of

Turkey are characterized by intensive political dialogue and significant dynamics regarding

the cooperation in every area, where the numerous high-level visits, as well as the regular

meetings between the two countries, also contribute to the good political relations.

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BASIC ECONOMIC INDICATORS

1. GDP – Gross Domestic Product

Figure 1 depicts the size

of the Gross Domestic Product (GDP) broken down into years. In 1992, the Turkish economy was 62 times larger, and in 2018, almost 111 times larger than the Macedonian economy in the same period.

In 1992, the GDP of

Turkey amounted to USD

389,307 million, and in 2018,

the GPD amounted to USD 1,237,357 million. Accordingly, the Turkish GDP in 2018, in comparison

with 1992, increased by 218%, or by USD 848,050 million nominal value. The Macedonian GDP of USD

11,240 million has increased by 77.7% in relative terms, in comparison with 1992, whereas expressed

in nominal value, the GDP has increased by USD 4,916 million in comparison with 1992, when it

amounted to USD 6,324 million.

Figure 2 depicts the data on GDP per capita, being the first measureable result regarding the competitiveness of the national economies. This information shows that the Turkish GDP per capita has increased by 115.2% in 2018, in comparison with 1992, and the Macedonian counterpart by 69.7%.

Nevertheless, the high increase percentage of our GDP arises from measurements carried out upon a low economic base. Concerning the nominal value, in 2018/1992, Turkey has increased its GDP per capita by USD 8,044 and Macedonia by USD 2,216.

Comparing the nominal value of GDP per capita of both countries in Figure 2, the Turkish GDP per capita, amounting to USD 6,983 in 1992, is somewhat over twice the size of the Macedonian GDP per capita, which amounted to USD 3,180. In 2018, the GDP per capita of Turkey of USD 15,027 is almost three times the Macedonian, which amounted to USD 5,396.

Figure 1: GDP (Gross Domestic Product) (millions USD, at constant 2010 prices, as per UNCTAD)

Period Turkey Macedonia

1992 389.307 6.324

2002 521.371 6.904

2012 898.741 9.583

2018 1.237.357 11.240

Increase/decrease 2018/1992, % 218 77,7 Извор:УНКТАД

Figure 2: GDP (Gross Domestic Product) per capita (USD, at constant 2010 prices, as per UNCTAD)

Period Turkey Macedonia

1992 6.983 3.180

2002 8.003 3.370

2012 12.039 4.620

2018 15.027 5.396

Increase/decrease 2018/1992, % 115,2 69,7 Source: UNCTAD

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2. Foreign Direct Investments (FDIs)

According to the FDI

review of the NBRM, the

Turkish foreign direct

investments (FDIs) in 1997

amounted to EUR 700

thousand. The same year,

their structural share in the

total investments in this

country was 0.5%.

In the period 1997-2018, Turkey has invested EUR 283.9 million in total, with a share in the total foreign

direct investments in the country of 5.3%, up to and including 2018, which amounted to EUR 5,307 million.

Figure 3:

Cumulative sum of Turkish FDIs in Macedonia, millions EUR

Period Turkey Share in the total FDIs in

the RNM, %

1997 0,7 0,5

2000 16,1 2,8

2005 25,1 1,4

2010 48,3 1,5

2015 214,6 4,9

2018 283,9 5,3 Source: NB of the RNM

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3. International Trade

The Republic of Turkey is a significant trade partner of the Republic of North Macedonia and it is constantly on our list of top 10 countries we have the largest volume of trade and business cooperation with.

Figure 4: International Trade of Macedonia

1992 1997 2000 2005 2010 2015 2019

Total international trade of Macedonia

with the world (millions USD) 2.405 3.015 3.416 5.275 8.826 10.957 16.657

International trade of Macedonia with

Turkey (millions USD) 50 73.8 62.7 160.2 312.6 396.4 539.9

Share of the international trade with

Turkey in the total international trade of

Macedonia (%)

2,1 2,4 1,8 3 3,5 3,6 3,2

Source: State Statistical Office

When observed in relative sizes, the share of the international trade with Turkey in the total trade of Macedonia with the world was 2.1% in 1992. Up to an including 2019, this share in the total international trade of this country has risen to 3.2%, or USD 539.9 million absolute amount, which is almost 10 times larger when compared to 1992.

The Republic of Turkey is a very important country to the Macedonian export and it is traditionally considered among the most important markets to Macedonia. In almost every year since the independence, the export to Turkey is constantly increasing. In 2019, it amounted to USD 87.2 million, with a minor share of 1.2% in the total export of this country (Figure 5).

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Figure 5: Macedonian export

1992 1997 2000 2005 2010 2015 2019

Total export from Macedonia

(millions USD)

1.199 1.237 1.323 2.042 3.351 4.530 7.187

Macedonian export to Turkey

(millions USD)

17.5 24.3 10.3 46.3 50.9 73.8 87.2

Share of export to Turkey in the total

export of Macedonia (%)

1,46 1,96 0,7 2,3 1,5 1,6 1,2

Source: SSO

The distinguishing trait of the structural share of our export is the domination of products from the lower-income branches, mostly textile, leather, flat rolled and other intermediate goods from related industries.

The total import of Macedonia in the observed period is characterized by quicker growth dynamics than the export, which points to continuous international trade deficit.

Figure 6: Macedonian import

1992 1997 2000 2005 2010 2015 2019

Total import into Macedonia

(millions USD)

1.206 1.779 2.094 3.233 5.474 6.427 9.470

Import of Macedonia from Turkey

(millions USD)

32.5 49.5 52.4 113.9 261.7 322.6 452.7

Share of the import from Turkey

in the total import into

Macedonia (%)

2,7 2,8 2,5 3,5 4,8 5 4,8

Source: SSO

The international trade of Macedonia with Turkey, as a rule, results in deficit on the Macedonian part every year, which varies in size each year. The highest deficit was observed in 2019, amounting to USD 365.5 million.

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CHARACTERISTICS OF THE TURKISH ECONOMY

The Turkish free market economy is largely driven by its industry and, increasingly, by

its service sectors, although its traditional agricultural sector yet covers 20% of the

employment. The automotive, petrochemical and electronics industries have grown and

surpassed the traditional sectors such as textile and clothing in the export structure of Turkey.

Turkey is dependent on the oil and gas import, but the country is working on building

relationships with a large number of international partners and takes steps to increase the

consumption of energy from domestic production, including from renewable sources, nuclear

energy and coal.

- Agriculture Sector has a share of 7% in the GDP and employs approximately 19% of

the population. Approximately 11% of the Turkish territory is used as agricultural land. The

major crop of the country is wheat. Turkey is the third largest exporter of tobacco in the world

and the largest producer of hazelnuts, covering 70% of the global production.

- Service Sector makes up 60% of the GDP and employs approximately 54% of the

workforce in the country. Tourism is a significant segment of the service sector, which

generates nearly 4% of the GPD and it is an important source of foreign currency to the

country. The most profitable segment of the Turkish hotel sector is Accommodation and Food

Service Activities, which generated income of EUR 4 billion in 2018, representing 91.3% of the

total sector value. The development of a strategy for tourism by 2023, which would assist the

Government devise a multifunctional approach to the segment of leisure tourist centers, with

focus on specific destinations, would help increase the demand in the Turkish hotel sector.

- Automotive Industry, that is, the production of Turkish automobiles grew with an

average annual rate of 6.7% in the

course of 2014-2018, reaching EUR

20.3 billion in 2018. The growth of

automotive production is mainly due

to the rising foreign demand. The

increased demand from the European

markets, especially Italy and France,

help strengthen the automotive

production in Turkey. Approximately

80% of the Turkish automobiles are

exported to Europe. Turkey

significantly invested in the road infrastructure of the country in the past years, which also

increased the automobile demand. The bridge Yavuz Sultan Selim worth EUR 2.1 billion

provided the Istanbul drivers with an additional option when crossing the Bosporus, which

substantially reduced the traffic congestion in Istanbul.

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In the course of the last decade, Turkey invested roughly EUR 80 billion in

infrastructure projects such as bridges, motorways, tunnels, railroads and airports. By 2023,

Turkey is planning to invest approximately EUR 57 billion in infrastructure projects. This will

help consolidate the position of Turkey as an important transport hub in the region.

HOW TO INCREASE THE ECONOMIC COOPERATION BETWEEN THE

TWO COUNTRIES?

The enhancement of the economic cooperation between Macedonia and Turkey is an

excellent opportunity that would benefit both countries, where the excellent mutual political

cooperation could provide a significant support.

We have overall high-level relations, being two friendly and brotherly countries, which

are not burdened by any political issues. The two countries have signed a strategic partnership

agreement and series of bilateral agreements; they enjoy successful cooperation and

meetings on all levels. Ten honorary consulates of the Republic of North Macedonia have

been opened across Turkey and two Turkish consulates were opened in Bitola and Ohrid.

The Republic of Turkey is a country with which we traditionally have excellent

relations, from the aspect of politics, culture and economy, we have great potential for

business cooperation and there are no obstacles on the road to a more intensive cooperation

on every level, to open dialogue, as well as will to realize what was agreed upon.

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The promotion of the economic cooperation between the two countries is of special

importance to the development of the broader South-East Europe region, where we belong,

and which holds great potential for intensification and enhancement of the current

cooperation between the business communities, especially in the area of innovation,

education, new technologies and improvement of the services toward easier access to third

markets. There is cooperation potential in the metal and electronics sector, energy,

construction, chemical industry, pharmacy and tourism. There are multitude of Turkish

companies that are investing in this country, primarily in the banking sector, construction,

traffic, medicine and tourism. The interconnection, exchange of experiences, contacts, joint

investments, with the aim of creating products with higher value added, will ensure greater

growth and development of the two economies.

The Republic of Turkey is a close friend and economic partner of our country, which should

provide opportunities for cooperation enhancement. Macedonia could be the starting

point for development of the Turkish businesses and investments in the entire Western

Balkans region. Turkey, on the other hand, is important to Macedonia as a first destination

that could be used to penetrate the markets in the Middle East and the African countries.

Macedonia is a crossroad, “heart of the Balkans” and therefore, we need to preserve and

develop good relations, which would affect the overall relations in the region at large.

Consequently, Macedonia and Turkey must fully liberalize the trade of agricultural and

food products, open a dialogue on institutional level as soon as possible, with the aim of

greater economic cooperation through investments on both parts, as well as joint

representation on third markets.

Our joint goal is to continue with and increase the successful tourist cooperation between

the Republic of North Macedonia and the Republic of Turkey. The traditional Macedonian-

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Turkish friendship, the mutual values and interests, closeness, firm and established

relations, as well as the great potential to prepare a joint tourist offer, will contribute to

the appeal of larger number of tourists that are into various types of tourism.

Apart from the desired strengthening of the good business relations, we also need to

jointly commit to reducing the discrepancies and the barriers to the trade and encourage

the companies toward concrete partnerships and mutual cooperation. Therefore, we need

to decrease or abolish the non-preferential barriers to the import of Macedonian products

on the Turkish market, which will contribute to a more extensive trade between the two

countries in every sector.

The Republic of North Macedonia has signed a Free Trade Agreement with Turkey, which

should ensure increased cooperation with this country, being a strategic partner in every

area. The exchange of experiences and information between the Macedonian and the

Turkish business community is a key factor to the enhancement of the already excellently

established economic cooperation between the two countries, with special focus on the

sectoral connection between the companies from both sides, with the aim of establishing

new partnerships toward joint presentation on third markets.

Turkey and Macedonia have multidimensional relationship, which draws its power from

the shared history and culture. The present relations with the minorities in both countries

are quite good, where the Turkish community in the Republic of North Macedonia provides

significant contribution to the entire economic, cultural and democratic development of

our country through its active presence in all fields of life. Both sides show serious

preparedness to continue with the excellent cooperation with the Turkish Cooperation and

Coordination Agency, whose support helped complete numerous projects in the area of

culture.

We require modernization of the domestic economy with participation of the Turkish

know-how, primarily when considering industrial and agricultural production, construction

and tourism, employing the Macedonian resources for outsourcing services and taking part

in the global value added chains through relocation of the Turkish exporters in Macedonia,

which is only part of the opportunities for cooperation promotion. Consequently, the

Macedonian companies will become more visible to the Turkish ones, and the potential

Turkish partner could gather information that would be critical for adopting business

decisions regarding cooperation with Macedonia.

In the opinion of the business community, without sincere political will, there will be

neither changes, nor quick bilateral progress. The most important thing is to have political

stability, functional legal state, consistency and foreseeability of the legislation, as well as

an efficient private-public dialogue. In order to increase the economic connection between

Macedonia and Turkey, both governments should determine a strategy for further

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cooperation and define the priorities. Most of all, the can contribute to the joint utilization

of the EU funds, transfer of the Turkish experience in public-private partnerships and

facilitation of the procedures for doing business.

The international economic cooperation is the only opportunity to increase the

competition on a global scale, which contributes to the strengthening of the national

competitiveness of the economy.

The Republic of North Macedonia is a small country, small economy, but with great

opportunities. The openness of our economy gives us the right to hope that we can attract

many businesspersons, and with the maximum efforts on the part of every factor, we can

reach greater economic cooperation between Macedonia and Turkey, resulting in an

opportunity for even closer connection of the best entrepreneurs from the two countries,

concrete joint activities and more substantial progress for everyone.

The private sector and the entrepreneurial spirit represent a driving force in the world, a

force that guarantees economic growth, contributes to the reduction of unemployment and

paves the way to progress, aiming at sustainability and long-term economic growth and

development.