Macedonia planning to create more Technological Industrial Development Zones

Up to seven more Technological Industrial Development Zones (TIDZs) are being planned by the Directorate for Technologi¬cal Industrial Development Zones or DTIDZ in the Republic of Macedonia following the success of the first four in attracting investment from the automotive and other industries.

Macedonia believes it is in an ideal position to attract FDI. The country is already an official candidate of the European Union, and is an aspiring member of NATO. It has a large pool of educated young workers and is one of the youngest countries in Eastern Europe with over 40% of the population under 30 years old. Nearly 85% of high school graduates go to university in the country.

American firm Johnson Controls was first off the grid, building a US$40-million plant to assemble electronic dashboard components – in the TIDZ’s Skopje 1 industrial park in 2006. The DTIDZ’s current four industrial zones are situated in the south-eastern European nation of Macedonia. Subsequent automotive investments include an 80-million Euro Johnson Matthey catalyst plant, and Indian passenger car review manufacturer Samvardhana Motherson Reflectec (SMR), which is has two investment projects in the TIDZ Skopje 1.

TIDZ incentives include a 500,000 Euro grant to cover construction costs, tax and customs incentives, and supplementary incentives for TIDZs development in addition to those normally associated with free economic zones. TIDZs are exterritorial and free of most national customs, trade and financial regulations. Customs formalities and other paperwork are kept to a minimum. Other perks of setting up in the Zones include the fact that 100% foreign ownership is allowed, and there is a 10 year tax holiday. Administrative departments and customs offices provide commodity administrative services as well as convenient and fast customs clearance. The DTIDZ provides out a one-stop service, and closely follows international practice so as to ensure investors benefit.

Automotive Industries (AI) asked Viktor Mizo, Chief Executive Officer, Directorate for Technological Industrial Development Zones, what opportunities Macedonia offers automotive manufacturers.

Mizo: Macedonia is strategically located close to OEM plants in Central Europe and Turkey. Its proximity to the rapidly growing automotive manufacturing market and its excellent infrastructure allows low logistic costs and “just-in-time” product delivery. In addition, Macedonia has developed an automotive supplier base with proven quality and long-standing engineering and manufacturing traditions.

AI: What unique opportunities does your country offer automotive OEMs?
Mizo: Macedonia’s advantage is its professional and technically skilled labor force that has undergone rigorous training and has gained quality education in the country’s strong university system. While some of the automotive locations in Central and Eastern Europe are increasingly struggling with rising costs and acute labor shortages, Macedonia can competitively meet the needs of companies seeking to enhance profitability due to low labor costs and an abundant supply of skilled workers. The average gross monthly salary for 2011 was approximately €490, or $610, which is among the most competitive rates in Europe. Another important indicator to consider is that the annual salary increase over the last few years in Macedonia has been relatively low, whereas in new EU Member States costs have been drastically increasing.
Over the past several years the Macedonian Government has created one of the most favorable business climates in Europe. It has implemented many reforms to reduce the regulatory burden on companies including single-window registration for new companies, ease of handling property transactions, low and simple tax regime, and modern, efficient customs to facilitate trade. According to the World Bank Doing Business Report 2012, Macedonia was ranked as the third most improved economy in the world this year. The country was ranked 22nd on the global scale on the ease of doing business. Macedonia is ranked higher than 19 EU countries, and is the leader in Eastern Europe. Based on the World Bank Doing Business Reports over the last five years, Macedonia has consecutively been voted as the best reformer in Southeast Europe.

AI: Tell us a little about the work DTIDZ has done in attracting FDI into Macedonia.
Mizo: The Macedonian Government has given a top priority in its economic policy to attracting Greenfield investments. The satisfaction of local investors is evidenced by the decision of Johnson Controls and Johnson Matthey to reinvest in new projects in 2012. One of the main goals of DTIDZ in attracting FDI into the country has been centered on promoting Macedonia’s exceptional conditions for investment through the government supported road shows and presence in international automotive industry events. We have hosted multiple delegations and international automotive companies, including the national automotive components associations from Turkey and India.

AI: How keen are you to attract automotive OEMs and why?
Mizo: Macedonia is consistently taking measures and steps in the right direction when it comes to strengthening the supply base and opening the door for automotive industries. A considerable amount of FDI in Macedonia over the last several years comes from the automotive components sector, and with the improvement of the global economic environment we expect this trend to continue in the future. The latest big Greenfield investment projects in Macedonia are in the field of automotive components: reinvestments from Johnson Controls and Johnson Matthey, Motherson Group, Kromberg and Schubert, and Dräxlmaier.

We are aware that OEMs are looking for new competitive locations in Europe and many companies, such as the Chinese “Great Wall” coming to Bulgaria, have recognized the potential of this region. The premium European bus producer Van Hool has launched their investment project in TIDZ Skopje 2. We hope that this successful cooperation will set an example for other OEMs to take advantage of the favorable business environment and consider Macedonia as their next investment destination.

AI: What are some of the reasons for companies like Johnson Controls choosing to set up production facilities in your industrial zones?
Mizo: Johnson Controls considered numerous locations in EE and Africa before they chose Macedonia. In the other locations Johnson Controls was having difficulty obtaining qualified engineers. They were the first in the industry to establish a plant in Macedonia and this decision gave them the advantage of having skilled workers and experienced engineers joining the company and staying with them over a long period of time. Macedonian technical schools and universities have demonstrated great interest for cooperation with incoming investors. Simultaneously while implementing their investment project, Johnson Controls initiated a tailor-made training program at the major university in the country for 165 students in Java and C++ to fulfill the needs of their first phase production.

As a result of their positive experience, Johnson Controls made the decision to invest in a new cut & trim plant for car seats in TIDZ Stip which will open 1,400 new job positions. According to Steven Meylemans, Project Manager of Johnson Controls “Macedonia was chosen because of its international competitiveness, because of our positive existing corporate experience here, and above all, because of the support and professionalism that we have received from all Government institutions during the analysis process.”

AI: Tell us a little about Johnson Matthey’s facility in Skopje 1.
Mizo: Since they started producing in Macedonia in 2010, Johnson Matthey has manufactured six million catalysts, and is the country’s number one exporter. In response to the rapidly increasing demand for more sophisticated and complex catalysts and as a result of the Government’s support to the initial investment, Johnson Matthey has launched their second project in TIDZ Skopje 1 worth 60 million Euro in order to double the current production.

AI: What the strategies are you planning to attract further automotive investments into Macedonia?
Mizo: To directly target enterprises looking for competitive location and low operating costs. Macedonia’s TV Campaign on international networks such as CNN and BBC has improved the country’s image managing to position the nation on the world investor’s map. Alongside the global road shows, this strategic marketing campaign has increased the number of companies considering investment in Macedonia.
My expectations for the future are based on the continuous efforts by the government to introduce reforms that will enable easier foreign investors’ access in the country. Some of the major reforms already introduced include, four-hour company registration, a significant social contributions cut, a modernized electronic Real Estate Cadastre, “One-Stop-Shop” for cross border trading, electronic payment of taxes, a liberalized visa regime, and simplification of a number of administrative procedures.