BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES

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1 Republic of Macedonia BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES Taiwanese Business Delegation April 20th, 2017

Investment Incentives Investor friendly Government Higher Profits &

2 Why Macedonia? Competitive Location Excellent Infrastructure Competitive Workforce Investment Incentives Investor friendly Government Higher Profits & Increased Competitiveness All of Europe in 1 to 3 days via truck or rail 2 brand new international airports 1 to 3 hours to international seaports No trade barriers with Europe, Ukraine & Turkey Near to Middle East and North Africa Perfect entry point to Europe 2

3 Location and Transport Infrastructure Two Pan-European corridors: East-West Corridor 8 North-South Corridor 10 Road network: 9,205 km Railway network: 900 km Two international airports: Skopje Ohrid International ports*: Thessalonica (Greece): 250 km Durres (Albania): 300 km * Distance from Skopje 3

4 Your Advantages There has never been a better time to do business in Macedonia! Unbeatable tax benefits Lowest in Europe 10% Corporate & Personal income tax 0% Tax on retained earnings Wages Most competitive in Europe 544 average gross monthly salary (January, 2017) 370 average net monthly salary (January, 2017) Lowest operating costs in Europe - drive industry expansion Your investment is protected Government guarantees Macedonia member of MIGA Tax Free Economic Zones Manufacturing, Financial, Medical, Tourism for Greenfield projects Commercial buildings available Easy to start Brownfield projects 4

5 Continuous implementation of reforms Regulatory reforms One-Stop-Shop: 4 hours company registration Regulatory Guillotine Electronic One-Stop-Shop for customs permits and licenses Single window: Improving interoperability between government institutions Liberalization of real-estate market Foreigners free to purchase real estate and construction land Simplification of procedures for obtaining construction permits from 21 to 3 steps Cadaster reforms Digital Cadaster covering 99% of the real estate in Macedonia Notaries and land surveyors have access to land register through on-line system Liberalization of Labor Market Modern Labor Law Improved labor force flexibility 5 5

12th EASE OF DOING BUSINESS World Bank s Doing

World Bank s Doing Business 2016 Report BEST FOR

World Bank s Doing Business Report 2017 10th EASE

Business 2017 Report 10th EASE Business 2017

6 12th EASE OF DOING BUSINESS World Bank s Doing Business 2016 Report 2 ND in STARTING A BUSINESS World Bank s Doing Business 2016 Report BEST FOR STARTING A BUSINESS IN THE REGION Based on the World Bank s Doing Business Report th EASE OF DOING BUSINESS IN THE WORLD World Bank s Doing Business 2017 Report 10th EASE OF DOING BUSINESS IN THE WORLD World Bank s Doing Business 2017 Report 6

7 Ease of Doing Business Macedonia Poland Czech.Rep. Slovenia Slovakia Romania Bulgaria Hungary Croatia Serbia Montenegro Turkey Bosnia and Herzegovina 7

Index of Economic Freedom World Rankings 2017 127

8 Index of Economic Freedom World Rankings Macedonia Romania Poland Bulgaria Hungary Slovakia Turkey Montenegro Bosnia and Herz. Croatia Slovenia Serbia Greece 8

Economic Indicators GDP GROWTH(%) INFLATION 5.5 3.4 2.9 3.5 3.7 2.

) CURRENCY Macedonian Denar pegged to the DM/ for the last 20 years (

2013 2014 2015 2016 156.9 334.6 FDI BY YEAR (million ) 131.1 229.

9 Economic Indicators GDP GROWTH(%) INFLATION Low inflation: 2013: 2.8%; 2014: - 0.3%; 2015:-0.3% Q4 2016: -0.2% Q4 EXPORT BY YEAR (bn ) CURRENCY Macedonian Denar pegged to the DM/ for the last 20 years ( 1= MKD 61.5) AVERAGE SALARY IN January per month (gross) 400 per month (net) FDI BY YEAR (million ) Source: National Bank of the Republic of Macedonia CREDIT RATINGS 2017 STATE DEBT Standard & Poor s: BB- Fitch: BB State Debt,Q4 2016: 47.8 % of GDP 9

Unbeatable fiscal benefits and utility costs Corporate Income Tax Personal

Ukraine Romania* Macedonia 10% 22% 20% 20% 19% 19% 19% 18% 16% Croatia Turkey

35% 32% 47% Hungary Croatia Poland Czech Republic Romania Slovakia Ukraine

10 Unbeatable fiscal benefits and utility costs Corporate Income Tax Personal Income Tax General VAT Rates Slovakia* Turkey Croatia Hungary Poland Czech Ukraine Romania* Macedonia 10% 22% 20% 20% 19% 19% 19% 18% 16% Croatia Turkey Poland Czech Republic Ukraine Hungary Romania* Macedonia* 22% 20% 16% 16% 10% 35% 32% 47% Hungary Croatia Poland Czech Republic Romania Slovakia Ukraine Turkey Macedonia 27% 25% 23% 21% 20% 20% 20% 18% 18% Source: 10

11 Social Security Contributions Macedonia - Social Security Contributions Comparison - Social Security Contributions Macedonia Bulgaria Montenegro Poland Croatia Serbia Romania Czech Republic Hungary Slovakia Source: PricewaterhouseCoopers (Taxes at a glance 2013), National Investment Promotion Agencies 11

12 Sustainable Work Force Supply 10,000 college graduates each year are ready to bring their talents to area employers 41.5% of population under the age of 30 High intellectual capital 85% of high school graduates enroll in universities Multiple vocational high schools in each city Tailor-made training programs through Vocational Schools or Universities (e.g. JCI Case) 5% of GDP spent on education 60 million investment for 200 new laboratories in technical Universities 12

Sustainable Work Force Supply Number of enrolled students in Colleges and Universities Number of graduates in Colleges and Universities 58,747 56,906 57,746 59,359 59,865 11,197 9,802 10,392 9,480

6% 2.8% German 0.3% 0.5% Russian 0.1% 0.

13 Sustainable Work Force Supply Number of enrolled students in Colleges and Universities Number of graduates in Colleges and Universities 58,747 56,906 57,746 59,359 59,865 11,197 9,802 10,392 9,480 9,863 8, / / / / /2016 Foreign Languages Studied Students in Primary Schools, % of Total Students in Secondary Schools, % of Total English 99% 96.5% French 0.6% 2.8% German 0.3% 0.5% Russian 0.1% 0.2% Excellent Language Skills Every child in Macedonia begins to learn English in the first grade of primary school Two foreign languages are mandatory in high school: English, and either German, French, or Russian English is also taught for two years at University level Regional languages (Serbian, Croatian, Bulgarian, Albanian and Greek) are widely spoken Source: State Statistical Office of the Republic of Macedonia (Education 2012/2013) and Ministry of Education and Science 13

14 INVESTMENT OPPORTUNITIES

Pharmaceuticals Agribusiness and Food Processing

15 Investment Opportunities Target Sectors Machine and Automotive components ICT Medical Devices and Pharmaceuticals Agribusiness and Food Processing Energy sector Real Estate & Construction Textile Tourism Filming 15

Investment Opportunities Machine and Automotive Components Industry Existing

Component production started in the 1960 s to supply Zastava, Serbia Companies

(Free Economic Zones), Kromberg & Schubert, Hi-Tech to supply OEM s, Van Hool Markets

16 Investment Opportunities Machine and Automotive Components Industry Existing engineering and manufacturing tradition Legacy of skills available to new investors Component production started in the 1960 s to supply Zastava, Serbia Companies primarily supply the aftermarket Johnson Controls, Johnson Matthey, Kemet, Teknohose, (Free Economic Zones), Kromberg & Schubert, Hi-Tech to supply OEM s, Van Hool Markets are Europe, Russia, Turkey, Africa, USA Most companies have ISO 9001 / TS quality certification 16

IT skills shortage in Western economies and growing demand for outsourcing services Macedonia can be your solution!

17 Investment Opportunities ICT Sector Best telecommunication networks in the region the system is 100% digital Leading multinational hardware and software suppliers (Microsoft, HP, IBM) have local sales and support services in Macedonia IT skills shortage in Western economies and growing demand for outsourcing services Macedonia can be your solution! Availability of well-educated staff at competitive costs Quality assurance and standardization procedure intitialized 17

Investment Opportunities Healthcare Sector, Medical Devices and

countries worldwide Strong educational system, with an abundance of

Licensing arrangements in place with many of world s leading

18 Investment Opportunities Healthcare Sector, Medical Devices and Pharmaceuticals Existing pharmaceutical industry, exports to over 30 countries worldwide Strong educational system, with an abundance of medical and pharmacy graduates Supportive regulatory environment Licensing arrangements in place with many of world s leading pharmaceutical companies Available sites at industrial and free economic zones Manufacturing tradition 18

19 Investment Opportunities Agribusiness and Food Processing Industry Unique combination of Continental and Sub- Mediterranean climates Environment friendly production practices Technologies for food processing Excellent access to regional markets Strong reputation for quality food products The greatest investment opportunities: fruits and vegetables production, storage distribution and processing industries (logistic centers) wine production sheep and goat cheese production 19

20 Investment Opportunities Textile sector Esteemed reputation of Macedonian textile producers on the European Union market High flexibility and readiness to adapt to the demands of foreign markets Exceptional relation between product quality and costs Modern equipment 1-2 days distance to European Union markets Foreign investment welcomed in the readymade clothing and knit production industries 20

Destinations Over 45 mountain peaks exceeding 2.

21 Investment Opportunities Tourism Summer Destinations Numerous tectonic, glacial and man-made lakes, 50 in total Large natural lakes: Ohrid, Dojran and Prespa Water sports, archeological, wine, eco and rural tourism Winter Destinations Over 45 mountain peaks exceeding m 70% of the territory is mountainous and many locations have more than 100 days of snow Opportunities for development and enhancements of hotels and spa resorts on many locations 21

Turkish baths and old bazaars, 47 towers and fortresses Spa tourism Territory rich with geothermal

22 Investment Opportunities 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, 47 towers and fortresses Spa tourism Territory rich with geothermal waters More than 60 thermal springs Identified locations for construction of new spa centers and hotels 22

23 Technological Industrial Development Zones - TIDZs

24 Free Zones TID Zone A special customs area, part of the territory of Macedonia, in which special customs and tax incentives prescribed by the Law on TIDZ are applied User of TID Zone Any domestic or foreign entity registered in accordance with the Company Law Incentives in the Zones are applied only for the following activities: Production activities IT and R&D activities Services related to the import of the goods 15 TID Zones are planned in the DTIDZ 3-year Program 8 fully operational 7 others in different development stage 24

25 Global Free Zones of the Future 2012/2013 Winners fdi Magazine s Global Ranking of Economic Zones reported Technological Industrial Development Zones Skopje 1 & 2 in the top 50 Free Zones of the Future 2012/

Technological Industrial Development Zones Free Zone Rankovce Area Size: 40 ha; Corridor 8 Free Zone Tetovo (PPP) Area Size: 95

Free Zone Stip Area Size: 208 ha; The largest Free Zone; Excellent logistic support Free Zones: Delcevo: 21 ha; Vinica: 26 ha;

ha; Next to the Int l Airport; 170 km from Durres port Free Zone Gevgelija Area Size: 50 ha; 85 km from the port of Thessaloniki

26 Technological Industrial Development Zones Free Zone Rankovce Area Size: 40 ha; Corridor 8 Free Zone Tetovo (PPP) Area Size: 95 ha; Distance from Skopje - 35 km Free Zones Skopje 1, 2 & 3 Area Size: ha; E-75 Highway; Next to the Int l Airport Free Zone Stip Area Size: 208 ha; The largest Free Zone; Excellent logistic support Free Zones: Delcevo: 21 ha; Vinica: 26 ha; Berovo: 17 ha; Free Zone Radovis Area Size: 10 ha; Main Road M6 Free Zone Kicevo Area Size: 30 ha Free Zone Struga Area Size: 30 ha; Next to the Int l Airport; 170 km from Durres port Free Zone Gevgelija Area Size: 50 ha; 85 km from the port of Thessaloniki Free Zone Prilep Area Size: 68 ha; Between Prilep and Bitola (4 th and 2 nd largest city) Free Zone Strumica Area Size: 23 ha; 26

27 Fiscal Benefits No customs duties & No VAT on imported raw materials, equipment & construction materials TAX Corporate tax Personal income tax TIDZs 0% for the first 10 years 0% for the first 10 years TAX RATES Outside TIDZs 10% 10% Value added tax 0% 18% Property tax 0% 0.1% - 0.2% Excise taxes 0% 5% - 62% PRODUCT TIDZs CUSTOMS DUTY Outside TIDZs Raw materials 0% Up to 15% Connection to utilities, complete infrastructure is available Subsidy of up to 500,000 towards construction costs Green Customs Channel available at border for rapid export from Zone to EU countries Land in the TIDZ is available under longterm lease for a period of up to 99 years Training and job creation grants All incentives are in line with EU regulations Equipment 0% 5% - 20% 27

The team from INVEST IN MACEDONIA at Your Service Identification of project specific location factors Cost analysis Identification of supplier base Detailed due diligence Locations, operational costs

28 The team from INVEST IN MACEDONIA at Your Service Identification of project specific location factors Cost analysis Identification of supplier base Detailed due diligence Locations, operational costs and competitiveness One-stop-shop and project management approach Design and infrastructure approvals Issuing building and operational permits Customs outpost in the Zone Zone infrastructure maintenance and upgrade Business opportunities analysis One-stop-shop Our Services Creating linkages Aftercare University linkages Reference company linkages Recruitment agencies linkages Organization of meetings with legal advisors and financial partners Labor availability, HR companies and consulting Ensure success! Support with relevant tax and customs issues Assistance in acquiring visas/work permits Coordination and support in contacts with other state and local authorities 28

29 EXPORT PROMOTION

30 TARGET SECTORS WITH HIGEST EXPORT POTENTIAL Textile industry Agribusiness / Food Industry Industrial metals and precision mechanics including automotive parts Information and communication technologies - ICT 30

31 SERVICES TO EXPORT-READY DOMESTIC COMPANIES Supporting the participation at international business events (fairs, trade missions and B2B meetings) Free of charge opportunity to create company profile at our matchmaking web portal Free of charge market reports for countries where the Agency has economic promoters 31

32 SERVICES TO FOREIGN COMPANIES Organizing meetings in the premises of the Agency with domestic companies during their visit in Macedonia Generating information and contacts of domestic producers Free of charge registration to the matchmaking web portal at Invest Macedonia website: 32

33 ONLINE MEETINGS Invest Macedonia in cooperation with the three largest domestic Chambers of Commerce on a quarterly basis organizes direct Online video meetings between: representatives of the domestic export-oriented companies and economic promoters, and representatives of the domestic export-oriented companies and foreign buyers 33

34 Thank You! 谢谢 AGENCY FOR FOREIGN INVESTMENTS AND EXPORT PROMOTION OF THE REPUBLIC OF MACEDONIA ul.nikola Vapcarov br , Skopje Republic of Macedonia Tel.: Fax: fdi@investinmacedonia.com

BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES

Republic of Macedonia BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES May, 2016 Why Macedonia? Competitive Location Excellent Infrastructure Competitive Workforce Investment Incentives Investor friendly