Overseas Business Risk – Macedonia

Information on key security and political risks which UK businesses may face when operating in Macedonia.

Political and Economic

The Republic of Macedonia gained its independence from the former Yugoslavia in 1991. Wider international recognition was held up by Greek claims that the country’s constitutional name implied territorial ambitions on the northern Greek region of Macedonia. In September 1995, following three years of difficult relations including a trade embargo, Greece and Macedonia signed an Interim Accord facilitating the normalisation of relations and Greece recognised Macedonia under the designation ‘former Yugoslav Republic of Macedonia’ (fYROM). However the name issue continuously hinders the bilateral relations between Greece and Macedonia, and impedes NATO and EU membership. Macedonians do not use the acronym ‘fYROM’ and they dislike its use by others. The UK uses ‘Republic of Macedonia’ for bilateral purposes. The temporary designation of the ‘former Yugoslav Republic of Macedonia’ is used in multilateral forums such as the EU or UN.

Following the signature of the 2001 Interim Agreement signed by Macedonia and the EU, both sides committed to the gradual establishment of a free trade area over a ten-year period. As a result from 1 January 2011 trade between Macedonia and EU is almost 100% liberalised. In 2004 Macedonia signed the Stabilisation and Association Agreement (SAA) with the EU. Macedonia is member of the World Trade Organisation (WTO) and Central Europe Free Trade Agreement (CEFTA).

In 2005 Macedonia achieved EU candidate country status under the UK Presidency of the EU. Since 2009, in its annual Progress Report, the EU Commission is recommending opening EU accession negotiations; however the European Council has yet to set a date.

On 30 November 2009 the European Council approved a proposal granting visa free travel to the citizens of Macedonia, Montenegro and Serbia. This does not include the UK, which has its own separate visa regime. It enables the citizens of these three countries to travel without visas to the Schengen countries with biometric passports from 19 December 2009.

The recent elections, including the Parliamentary in 2011 and local in 2013 were deemed by the Office of Democratic Institutions and Human Rights (ODIHR) as

“competitive, transparent and well-administered throughout the country, with certain aspects such as the blurring of the line between state and party require further attention”.

With the conclusion of the internal conflict in 2001, resulting in the signature of the Ohrid Frame Agreement, Macedonia enjoyed a period of stability and security. From 2006-2008, Macedonia witnessed new sources of investment resulting from privatisations within the energy sector and green-field investments in Macedonia’s free economic zones. GDP growth during this period was between 4.0% – 6%. Despite these levels of growth, over the long-term it has not translated into tangible benefits in reducing unemployment figures that have historically remained around 30%. The true figure is considered to be lower in reality due to prominent role of the grey economy in Macedonia.

The global financial crisis impacted upon previous positive levels of economic growth, however, as per IMF, Macedonia weathered the crisis relatively well (decline of only -0.9% in 2009) due to the resilient banking sector which is not much exposed to international banking. After a modest return to growth in 2010 and 2011, the economy saw ashallow recession (-0,4%) in 2012, while the IMF projected growth for 2013 and 2014 is set at 2,2% and 3,2% respectively. In the 4th Article Mission concluding statement of June 2013 IMF directors “commended the authorities for their economic management, which has helped maintain financial and external stability despite difficult circumstances. While the economy is poised for a moderate recovery in 2013, underpinned by acceleration in public investment and FDI projects, it still faces a challenging external environment but with limited policy space. Directors called for continued commitment to sound policies and structural reforms. Efforts should focus on reducing risks to the outlook, preserving macroeconomic stability, generating stronger growth, and boosting income convergence and employment.” The country’s two-year arrangement under the IMF’s Precautionary and Liquidity Line ended on 18 January 2013.

Since 2008, World Bank continuously recognises Macedonia as one of the top world reformers. In the 2013 World Bank ‘Doing Business’ report Macedonia was ranked 23out of 185 countries, ahead of countries such as Switzerland, Netherlands, Belgium and France and well ahead of its neighbouring states.

As per the 2013 Progress report, “in terms of the economic criteria, the country remains well advanced and, in some areas, has made further progress towards becoming a functioning market economy. However, “measures need to be undertaken in order to address the underlying reasons for the high unemployment, in particular tackling the skills mismatch. The sustainability of public finances needs to be strengthened. Fiscal policy needs to be aligned with the country’s structural reform priorities and oriented towards growth enhancing spending. Further efforts are needed to effectively implement public financial management, in order to ensure the most efficient and transparent use of public and EU resources. To secure more private sector investment, further efforts are needed to improve the business environment, which is negatively affected by corruption, as well as lengthy and costly market exit procedures. The informal sector remains an important challenge.”

Additional information is available from the following organisations:

2013 European Union Progress Report

IMF Office Macedonia

World Bank Office Macedonia

Commission for Protection of Competition, Macedonia

Economic Chamber of Macedonia

FCO Travel Advice

Human Rights and Business

As a candidate country of the European Union, Macedonia has certain human rights obligations that it needs to fulfil under Chapter 23 of the EU accession process dealing with the judiciary and fundamental rights. The High Level Accession Dialogue between the European Commission and Macedonia has identified Freedom of Expression, Rule of Law, Fight against Corruption, Elections and Business Environment as priority issues for further work during 2012 and 2013.

In its 2013 annual report, the European Union noted that overall, “progress was made on the rights of the child, the protection of property rights and data protection. However, overall efforts in this area are hampered by a persistent lack of funding and capacity, and all relevant institutions need to become more proactive in promoting and safeguarding fundamental rights in practice. Serious efforts are needed to address concerns in the area of freedom of expression.”.

Media freedom and freedom of expression have been subject to renewed international scrutiny and engagement, with the OSCE Representative of the Freedom of the Media, Dunja Mijatovic, taking a close interest. Overall, the country’s reputation on media freedom has deteriorated. As per EU Commission’s statement on freedom of expression, “the high degree of polarisation of the media, often along political lines, hampers the development of objective reporting, places economic pressure on journalists and media owners (including through the opaque use of government advertising) and fosters poor professional standards. Dialogue between the government and media representatives needs to be re-established and produce concrete results in changing the media culture as well as establishing a climate of confidence building and trust.”

A law was passed by the Macedonian Parliament in April 2010 that prohibited discrimination on a variety of grounds, however it did not include an explicit ban on discrimination based on sexual orientation, drawing criticism from the opposition and human rights groups. As regards protection of the rights of LGBTI community, the situation has worsened. Strengthened efforts, including awareness-raising and promotion of tolerance, are needed from authorities at all levels including the media professionals and owners.

According to the 2013 Freedom House report, Macedonia is a partly free country (freedom rating 3).

Additional information is available on the following websites:

2013 European Union Progress Report

2013 Freedom House Report on Macedonia Report Macedonia

2012 State Department Human Rights Report Macedonia

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

The Bribery Act 2010 came into effect on 1 July 2011. The BIS Trade Policy Unit co-ordinates advice to UK business on foreign bribery law and managing the risks of overseas corruption, including international best practice standards and practical tools.

Transparency International’s 2012 Corruption Perception Index placed Macedonia in 69th place out of 174. Regional neighbours are listed below with Montenegro at 75th and Serbia at 80th position. Macedonia remains ahead of many of other neighbouring countries: Bulgaria (75), Greece (94), Kosovo (105) and Albania (113)

The Macedonian Government has publicly stated its commitment to tackling corruption. However, the corruption remains prevalent in many areas and continues to be a serious problem. Transparency of public expenditure and of the funding of political parties remains insufficient and a track record on handling high-level corruption cases has yet to be established. While the efficiency of the courts has been strengthened over the years, the ‘independence and professionalism’ of judges and prosecutors, as well as an effective implementation of laws remains an issue.

The State Commission for Prevention of Corruption is the public body charged responsible for implementing the Law on Prevention of Corruption and the Law on Prevention of Conflicts of Interest. The State Commission is also responsible for supervising lobbying in accordance with the Law on Lobbying. For more information please read the State Commission for Prevention of Corruption website.

Macedonia’s judicial reform process is guided in part by the EU integration requirements as well as support from other international donors, such as the US Agency for International Development (USAID).

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

The threat from terrorism is low. But you should be aware of the global risk of indiscriminate attacks, which could be against civilian targets, including places frequented by terrorists.

Read the information provided on our Terrorism threat page.

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

Personal attacks against foreigners are extremely rare. Organised criminal groups are active. Shooting incidents, including in Skopje do occur sporadically, but are not targeted at foreigners. Serious crime is rare and people unconnected with these groups have not been specifically targeted, however, there is obviously a risk of accidental injury from such incidents as some people carry firearms. Gunfire can also be a part of celebration. There is always therefore the possibility of foreigners being in the wrong place at the wrong time. You should be vigilant at all times and refer to FCO Travel Advice for Macedonia for updates.

There have been several cases of foreigners being pick-pocketed by gangs of children and bag snatchers in the main shopping and entertainment areas in the centre Skopje late at night. Foreign nationals appear to have been specifically targeted. You should ensure that your personal possessions are secure. Please make sure you do not leave valuables or laptops in clear view in vehicles as there have been reports of increased instances of vehicle break-ins in car parks close to main tourist sites or shopping areas. Usual caution should be exercised when making a purchase using a credit card. ATMs are widespread in Macedonia.

Traffic in Macedonia is unpredictable, road conditions and driving standards vary widely. Driving styles and practices differ significantly from those in UK. Traffic regulations are not well adhered to and accidents are frequent. You are advised to exercise caution at all times whilst driving or on foot.

You can drive in Macedonia with either a UK or International Driving License. By law all vehicles must use side lights/ dipped headlights during the day. It is illegal to use mobile phones whilst driving. It is a legal requirement for drivers and passengers to always wear seatbelts in Macedonia.

Read the information provided on our Protective security advice page.

Intellectual Property

Since 2006 the country has taken a number of positive steps to strengthen its Intellectual Property (IP) protection in line with the EU Acquis, a process that is ongoing.

Macedonia has ratified the Patent Law Treaty, the Vienna Agreement for establishing an international classification of the figurative elements of marks, the Singapore Treaty on the law on trademarks, the Lisbon Agreement for the protection of appellations of origin and their international registration, and the Protocol amending the Agreement on trade-related aspects of intellectual property (TRIPS).

Key institution responsible for industrial property rights is the State Office of Industrial Property (SOIP). The Ministry of Culture is responsible for protection of copyright and related rights and the Coordinative Body on Intellectual Property (CBIP) is a body in charge of providing integrated and efficient management of the administration regime in IPR protection.

The 2013 EU progress report noted that in terms of compliance with EU Acquis Chapter 7 requirements, overall; Macedonia is moderately advanced. “A track record on investigation, prosecution and trial for IPR offences has been established. There are shortcomings in the procedures for prosecuting counterfeiters, with laboratory results on counterfeit medicines excluded as court evidence. There is no legal basis for collective management of phonogram rights. Awareness of IPR among institutions and the public remains low.”.

Read the information provided on our Intellectual Property page.

Organised Crime

Read the information provided on our Organised crime page.

More information is available on overseas business risk in a range of markets.

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Countries: Macedonia
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