Macedonia claims unrest “an isolated incident”

Emerging Markets, May 1 2015

One of Macedonia’s most senior investment representatives has dismissed the country’s recent unrest as “an isolated incident” that will not impede the steady improvement in foreign direct investment it has received.

Over the last week, 14 ethnic Albanians and eight police officers have died in fighting following a police raid on an ethnic Albanian neighbourhood in the north of Macedonia, protestors have taken to the streets in anti-government movements that have been reported worldwide, and two ministers – plus the country’s intelligence chief – have resigned amid a surveillance scandal.

But Viktor Mizo, the CEO of the Macedonian Free Zone Authority, told Emerging Markets: “The terrorist incident on Saturday and Sunday is certainly a one-off isolated incident.” He said foreign investor visits to the country were going ahead. “We do not foresee, and don’t expect, any influence on normal activity in the Macedonian economy, nor on the plans of foreign investors in our country.”

He added that a meeting was due to take place between the country’s four political parties, the EU and the US ambassador “to resolve the political stalemate. But no potential investors have mentioned this as something that would influence their decisions.”

The unrest – which has revived memories of ethnic tensions in the region – has come at a bad time for Macedonia, which has worked hard to build a raft of best practice initiatives that have started to bear fruit. One of the highest-ranking emerging markets in ease of doing business surveys or rankings of investor-friendly tax – as there is zero tax on reinvested profit, the country has an effective rate of corporate tax of just 7.4%, according to PricewaterhouseCoopers – it saw 15.1% export growth in 2014, and expects FDI as a percentage of GDP to climb from 3.1% last year to 4.5% in 2016. By then, GDP growth itself is expected to hit 4.2%.

But Macedonia has also faced challenges in an uneasy relationship with Greece that has been exacerbated by that country’s financial problems, and by the EU’s decision to halt the acceptance of new countries into its full membership. Greece was, until recently, among the top three trading partners and investors in Macedonia. “When Greece solves its financial problems, certainly the potential for joint activities and more Greek investment into Macedonia will grow,” Mizo said.

Today, though, Greece has adopted an adversarial stance that has not helped with EU negotiations. Macedonia had been recommended for EU membership in 2009, “but the issue with Greece has been an impediment for us starting negotiations,” he said. “We are engaged in direct discussions with Greece and the UN in terms of finding a solution, but in any case EU membership is on hold for all parties,” not just Macedonia.

He said that Macedonia had sought to implement as many EU laws and regulations as possible in advance – he said 95% of them were in place – so that, if the EU re-opens itself to membership expansion, Macedonia will be ready. “The moment we start, it will be a relatively shorter period of time than the usual five or six year period that has been the case with Eastern European nations,” he said, suggesting four to five years would be more realistic. “But certainly, full membership is the final goal.”