BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES

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1 Republic of Macedonia BUSINESS CLIMATE AND INVESTMENT OPPORTUNITIES May, 2016

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 520 per month 379 per month in manufacturing 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 Cadaster reforms Digital Cadaster covering 99% of the real estate in Macedonia Notaries and land surveyors have access to land register through online system 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 Liberalization of Labor Market Modern Labor Law Improved labor force flexibility 5 5

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 st IN TOTAL TAX RATE IN THE WORLD PwC and World Bank Group Study th IN OVERALL PAYING TAXES PwC and World Bank Group Study

7 Ease of Doing Business

8 Index of Economic Freedom World Rankings

9 Overall Paying Taxes Ranking

Best Countries for Business Forbs Magazine Global Rankings 2015 78 83 20 39 41 42 44 46 49 54

10 Best Countries for Business Forbs Magazine Global Rankings Slovenia Macedonia Slovakia Hungary Romania Croatia Montenegro Turkey Bosnia & Herzegovina Serbia 10

11 Corruption perception index Romania Montenegro Turkey Macedonia Bulgaria Serbia Bosnia& Herzegovina 11

Economic Indicators GDP GROWTH(%) 5.5 3.4-0.

5 2008 2009 2010 2011 2012 2013 2014 2015

2008 2009 2010 2011 2012 2013 2014 2015 136.

National Bank of the Republic of Macedonia

12 Economic Indicators GDP GROWTH(%) EXPORT BY YEAR (bn ) INFLATION Low inflation: 2013: 2.8%; 2014: - 0.3%; 2015:-0.3% CURRENCY Macedonian Denar pegged to the DM/ for the last 20 years ( 1= MKD 61.7) AVERAGE GROSS SALARY IN per month 379 per month in manufacturing FDI BY YEAR (million ) Source: National Bank of the Republic of Macedonia CREDIT RATINGS 2015 Standard & Poor s: BB- (Stable) Fitch: BB+ (Stable) BUDGET DEFICIT & STATE DEBT Budget Deficit,Q2 2015: 2.6 % of GDP State Debt, 2015: 69.9 % of GDP 12

Poland Czech Republic Ukraine Hungary Romania* Macedonia* 35% 32% 22% 20% 16% 16% 10% 47% Hungary Croatia Poland

13 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* 35% 32% 22% 20% 16% 16% 10% 47% Hungary Croatia Poland Czech Republic Romania Slovakia Ukraine Turkey Macedonia 27% 25% 23% 21% 20% 20% 20% 18% 18% Source: 13

14 Social Security Contributions Macedonia - Social Security Contributions 21.2% 9.2% 1.6% 0.5% % 7.5% 1.4% 0.5% % Pension Insurance Employment Insurance 7.3% 1.2% 0.5% Health Insurance Additional Health Insurance Macedonia Bulgaria Montenegro Serbia Croatia Poland Czech Hungary Slovakia Ukraine Romania Comparison - Social Security Contributions Source: PricewaterhouseCoopers (Taxes at a glance 2013), National Investment Promotion Agencies 14

15 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 15

Sustainable Work Force Supply Number of enrolled students in Colleges and Universities Number of graduates in Colleges and Universities 63,437 57,894 64,779 58,747 56,906 57,746 59,359 10,839 10,232

% of Total English 99% 96.5% French 0.6% 2.8% German 0.3% 0.5% Russian 0.1% 0.

16 Sustainable Work Force Supply Number of enrolled students in Colleges and Universities Number of graduates in Colleges and Universities 63,437 57,894 64,779 58,747 56,906 57,746 59,359 10,839 10,232 11,197 9,802 10,392 9,480 9, / / / / / / /2015 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 16

17 INVESTMENT OPPORTUNITIES

Pharmaceuticals Agribusiness and Food Processing

18 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 18

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

19 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 19

20 Investment Opportunities ICT Sector 4-hour company registration Electronic fee payments for government services Digital certificates for employers Legislation fully harmonized with the EU Free computer application training 20

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

21 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 21

Investment Opportunities Healthcare Sector, Medical

industry, exports to over 30 countries worldwide

medical and pharmacy graduates Supportive regulatory

of world s leading pharmaceutical companies Available

22 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 22

23 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 23

Investment Opportunities Energy Sector Government strongly committed to developing the energy sector

energy use Focus on completing the strategy for the exploitation of renewable sources of energy

System and Connection of Wind Power Plants Solar potential: the annual solar radiation is 1385 kwh/m 2

24 Investment Opportunities Energy Sector Government strongly committed to developing the energy sector through public and private investments National strategy based on diversifying the sources and types of energy use Focus on completing the strategy for the exploitation of renewable sources of energy (measurement of wind potential; preparation of a feasibility study) Study for Reliability of the Power System and Connection of Wind Power Plants Solar potential: the annual solar radiation is 1385 kwh/m 2 Climate characteristics - continental climate with hot and dry summers, and high intensity of solar radiation 24

Real Estate & Construction City Skopje Real estate project Skyscrapers Hotels (3 hotels in the center of the city; 1 hotel near to the airport) Shopping and business centers, including golf terrain

25 Real Estate & Construction City Skopje Real estate project Skyscrapers Hotels (3 hotels in the center of the city; 1 hotel near to the airport) Shopping and business centers, including golf terrain Sport and recreational center Business center Locations available as a result of land transformation of army barracks (commercial and business centers and residential areas) Ohrid Hotels (along the lake cost) 25

26 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 26

Investment Opportunities Tourism Summer Destinations Numerous tectonic, glacial and man-made lakes, 50 in total Large natural lakes: Ohrid, Dojran and Prespa Water

5 %: the number of domestic tourists decreased by 2.9 %, while that of foreign tourists increased by 11.6 %. Winter Destinations Over 45 mountain peaks exceeding 2.

27 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 In January- June 2015, compared to the same period last year, the number of tourists increased by 6.5 %: the number of domestic tourists decreased by 2.9 %, while that of foreign tourists increased by 11.6 %. 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 27

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

28 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 28

Investment Opportunities Filming industry Macedonia geographically provides various types of landscapes on locations at very short distances from each other.

29 Investment Opportunities Filming industry Macedonia geographically provides various types of landscapes on locations at very short distances from each other. With annual average of 280 sunny days, Macedonia is one of the best locations for exteriors and locations filming. INCENTIVES A film producer interested in investing funds in Republic of Macedonia for making a feature film, documentary, animation, television film or television series, may acquire the right to refund 20% of direct eligible expenditures paid in Republic of Macedonia. Eligible expenditures 1) Production services 2) Postproduction services 3) Animation services 4) Procurement of goods for film sets and the costumes needed for production of the film/television project. 29

30 Technological Industrial Development Zones - TIDZs

31 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 3 fully operational (Skopje 1, Skopje 2 and Stip) 1 is undergoing PPP procedure (Tetovo) 11 others in different development stage 31

32 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

33 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; 33

34 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% Equipment 0% 5% - 20% 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 long-term lease for a period of up to 99 years Training and job creation grants All incentives are in line with EU regulations 34

35 Thank You! 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 Taiwanese Business Delegation April 20th, 2017 Why Macedonia? Competitive Location Excellent Infrastructure Competitive Workforce Investment