Finland – Macedonia Business Seminar, Wednesday, June 6, 2012 The Business Seminar was organized on the occasion of the visit to Finland of H.E. Mr. Nikola Gruevski, Prime Minister, President of the Government of the Republic of Macedonia. Presentation by Vele Samak

1. Republic of Macedonia
Minister for foreign investments
Investment Opportunities in Macedonia for
Manufacturing Companies
Vele Samak
Minister for Foreign Investments
Vele.Samak@msi.gov.mk
+389-2-3121-046

2. Agenda
• Introduction
• Challenges
• 3 reasons for Macedonia
• Next steps
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3. Introduction
• Mission and MO:
„Attract the largest manufacturing and service companies to invest in Macedonia
by identifying business and investment opportunities and using deliberate
speed to solve problems.”
• Team
– Vele Samak, Minister for Foreign Investments, Vele.Samak@msi.gov.mk
– Ivana Nikolik, Analyst, Ivana.Nikolik@msi.gov.mk
– Riste Mishe, Analyst, Riste.Mishe@msi.gov.mk
– Lejla Mehmedovic, Analyst Lejla.Mehmedovic@msi.gov.mk
– Andrea Tevdovski, Analyst Andrea.Tevdovski@msi.gov.mk
– Katerina Stojanovska, Assistant & Chief of Staff Katerina.Stojanovska@msi.gov.mk
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4. From Macedonia Manufacturers can profitably expand into new
markets, improve supply chain and source new talent and innovation
Potential for growth:
Older populations will require new services and increased productivity
Electronics and Software content in vehicles and applications will continue to grow
Incomes in Eastern Europe are less than half of those in West Europe
Infrastructure development still lagging in Emerging Europe
Challenges:
Economic uncertainty will require production flexibility and better supply chains
Price pressures on suppliers will not abate with lower volume growth
Electronics supply chain and component shortages will remain volatile
Fragmented consumer markets will challenge marketing and service operations
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5. Western and Northern Europe remains the most-productive but also
most-
most-
most-expensive manufacturing location in the world
Source: BLS, US Department of Labor, March 2011, Bloomberg BusinessWeek
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6. Eastern Europe is a crowded space for many manufacturers
Choose your next site wisely!
EU Border
EST as of 2007
HMC-Kia, Zilina (2006)
HMC-Hyundai, Novosice (2008) LVA
VW-Skoda, Mlada Boleslav VW, Poznan
LTU
GM, Zeran (Warsaw)
Toyota/PSA, Kolin BLR
GM, Gliwice
PSA, Trnava (2006)
POL
VW-Skoda, Bratislava BRD
Fiat, Tychy
LIAZ, Velki Krtis Daewoo, Uzhgorod
CZE
VW-Audi, Györ, (Engines) SVK UKR ZAZ, Zaporozhje
Opel/GM
AUS HUN MDA AutoVAZ, Kherson
Daimler, Kecshemet
SLO ROM
Suzuki, Estergom HRV Renault-
Renault-Nissan, Pitesti
SER
Renault-N, Novo Mesto BIH Ford, Craiova
BGR
Ford, Ford, Otosan, Gölcük
MKD
VW, Sarajevo Toyota, Sakarya
ALB
FIAT, Zastava, Kragujevac Oyak-Renault , Beykoz
GRC
Fiat – Tofas, Bursa
Source: Government research
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7. Three reasons to choose Macedonia
People and ingenuity
Cost benefits
Record of leadership
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8. Young, Dynamic and Well-educated Workforce
Well-
42% of population under 30 – youngest country in Eastern Europe
6%
High intellectual capital:
– 98.9% of high school graduates enrolled in college in 2010
– 63,000 University students in 2009
2,9%
– 27% in Engineering and Technical studies
– Multiple technical schools in each city 1,1%
Engineering graduates recognized a top global universities
USA Germany Macedonia
Percent of GDP spent on Education
90% study English, 20%+ study German in schools
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9. Macedonia provides companies with unrivalled
foreign language skills
Foreign languages learnt per pupil;
ISCED level 2 Secondary education (average)
Foreign Primary School Secondary School
Languages Students Students Country 2006
English 91% 94% Macedonia 1.7
French 22% 32% EU (27 countries) 1.4
German 13% 21% Slovenia 1.3
Italian / 2% Bulgaria 1.3
Russian 1% 2% Croatia 1.2
Turkish / 1% Czech Republic 1.1
Total No. of primary and secondary schools students 310,000 Slovakia 1.1
Source: State Statistical Office, Macedonia (Education 2008/2009)
Poland 1.1
Hungary 1.0
Turkey N/A
Source: Eurostat
English is mandatory for first-graders in Macedonia
Two foreign languages are mandatory in high school: English, and either German, French, or
Russian
Macedonia maintains strong lead in the CEE region in terms of language skills and ability to
serve both, German and French-speaking markets

10. Solid Industrial Base of Component Manufacturers and Local
Suppliers in Many Fields to Support Investors
40+ companies in
Plastics injection, extrusion, blow Machining & Metal-works
Metal-
molding, rubber, cables
and tool makers
PCBs, electric motors, relays, power
Electronics substations, broadcasting and
telecom equipment
Long tradition in castings,
forgings, stamping, welding,
extruding, tube making,
Mining & Commodities metallurgy
Metal toolworks and production
Copper, Lead, Zinc, Nickel and Iron Hot rolled, cold rolled coils &
Mines, all in operation sheets, basic steel plates,
Oil refinery, chemicals, cement, Automotive components and
gypsum and minerals production and railway brakes Learnica
excavation
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11. Three reasons to choose Macedonia
Cost benefits
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12. Unbeatable Fiscal Benefits in Europe
Corporate Income Tax Personal Income Tax
10% Flat Taxes among lowest in Europe
Tax credit on reinvested profit
Lowest payroll taxes (27% of gross wage)
34+ Double taxation avoidance treaties signed
Real estate VAT taxes at 2% - 4%
VAT at 18%, with 5% on specific items
Source: PwC (Taxes at a glance 2011), National Investment Promotion Agencies
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13. Macedonia is as competitive as China in Manufacturing, offering savings
of 20-50% from comparable countries for the same productivity
20-
LEGEND:
Average Monthly Gross Wages Average gross wage in
€/month
Annual wage growth %
€ 700
Poland
875 4.5%
€ 400
Czech Rep.
€ 250
961 2.1%
Slovakia
797 3.5%
Hungary
Unskilled College Skilled 792 3.7%
blue-collar entry-level engineering
Romania
497 6.4%
Turkey *
1159 11%
Sustainable Labor Advantage in Macedonia:
• Young Population Bulgaria **
450 9.9%
• Large unemployment ~ 30%
• Easy labor mobility Macedonia Serbia
• High degree of loyalty, lower retention 356 2% 507 13%
costs: 4.4% don’t get paychecks on time
• Captive labor market outside EU pressures
over the next 5 years Source: State Statistical Offices, 2Q 2011
* Last statistical data from 2008
* *Estimate based on company information
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Vele Samak, Minister for Foreign Investments

14. Excellent infrastructure, No trade barriers &
Competitive transportation costs
All of Europe in
2-3 days via
Highways
FTAs ensure no trade barriers
with EU, CEFTA, EFTA, Turkey
and Ukraine
Access to 650 million customers North-South and East-West Highways
2 Brand New International Airports
Large pool of logistic companies
provide competitive costs and
delivery times
3 hours to port of
Thessaloniki
35 days or less inbound
container ships from China
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15. Macedonia Offers Many Free Economic
Zones for Production and Supplier Needs
All Zones:
Highway interchange
Gov’t owned and managed
Infrastructure ready
Electricity, water, telecom
Gas (Skopje only)

16. Why trust Macedonia?
A record of leadership in turbulent times
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17. Macedonia at a glance –
Emerging Economy with Strong Political Stability
• Independent since 1991
• Stable parliamentary democracy:
– Minority representation in every government
– Model country for ethnic integration
• Population: 2.1 million
• Current Government since July 2006, 2 re-
elections with a dedication to economic
growth, political stability, EU & NATO
integration
• Strategic Partnership with US, supported by
many EU countries, Germany – largest trade
partner
• EU recommended start of Membership
Negotiation in 2009, reiterated in 2010 and
2011
• Standing NATO invitation, designated net
security exporter in the region
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18. Key Macedonian Economic Indicators –
Economic & Financial Stability with High Potential
2007 2008 2009 2010 2011* Positive
GDP nominal (€ mil) 5,965 6,720 6,677 6,945* 7,345
Steady GDP Growth
Real GDP Growth (%) 6.1 5.0 -0.9 1.8 5.2 #2 in Europe in 2009!
GDP per capita, € 2,919 3,283 3,253 3,350 3,565
Inflation (%) 2.3 8.3 -0.8 1.6 3 Low Inflation
Unemployment (%) 35.8 33.8 32.2 32 30.8
MKD / EUR 61.2 61.2 61.2 61.5 61.5 Decade-long Stable
MKD / USD 46.44 41 44.07 46.4 46.4 Currency
Imports (€ mil) 3653 4434 3472 3961 4,760
26% Debt/GDP, and
Exports (€ mil) 2472 2684 1921 2493 3,036 2.5% Deficit
Trade Balance -1181 -1750 -1,551 -1468 -1,724
Opportunities for
BB+ Positive Credit Outlook by Fitch
Source: Central Bank, Ministry of Finance, State Statistical Office
Improvement
* Estimated figures
High unemployment
Negative trade balance
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19. Why Macedonia – A Sustainable Investment Platform:
Stable, Safe and Leading Reformer in SEE
22nd BEST COUNTRY FOR 35th BEST COUNTRY FOR
BUSINESS IN THE WORLD BUSINESS IN THE WORLD
World Bank’s Doing Business 2012 Report Forbes Magazine
3rd BEST REFORMER 5th IN THE EASE OF PAYING
IN THE WORLD TAXES
World Bank’s Doing Business 2010 Report
PwC and World Bank Group Study
Ease of
Dealing with Trading
Doing Starting a Getting Registering Getting Protecting Paying Enforcing Resolving
Construction Across
Business Business Electricity Property Credit Investors Taxes Contracts Insolvency
Permits Borders
Rank
Germany 19 98 15 2 77 24 97 89 12 8 36
Macedonia 22 6 61 121 49 24 17 26 67 60 55
Estonia 24 44 89 48 13 40 65 51 3 29 72
Serbia 92 92 175 79 39 24 79 143 79 104 113
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20. Why Macedonia – A Sustainable Investment Platform:
Stability, Safety and Business-Friendliness Recognized by Many Foreign Companies
Business-
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21. Foreign Direct Investments, 2011-12 update
2011-
US Company KEMET Russian biggest German wire & India's Samvardhana German wire &
Electronics Corporation pharmaceutical company harnessing automotive Motherson Group invests harnessing automotive
to invest 25mill USD in 'Prodis‘, part of 'Protek supplier Kromberg & €12M; starting with 140 supplier Dräxlmaier
TIRZ Skopje 1 for initial Group‘ is investing €5M, Schubert is investing ppl in TIRZ Skopje 1, Group is investingl€15-
500 new jobs to produce employing 300 ppl in TIRZ €25M in Development for production of die- 30M in a Development
standard D.C. film Skopje 1 Zone in Bitola; to employ casting parts and exterior Zone in central
capacitors up to 3000 ppl glass used in rearview Macedonia; to employ up
mirrors for the to 4000 ppl
automotive industry
6pm Group based in Plant 1, TIRZ Skopje 1: Plant 2, TIRZ Stip: Upwards of €55M ; 300 Belgian private Bus &
Malta, to invest €5M, $40M 150-500 Investment of €20M; employees; Currently Coach producer, Van
hiring minimum 50 ICT employees; 1400 ppl for construction doubling capacity with Hool NV, will invest up to
specialists to deliver Tele manufacturing instrument of cut & trim plant for another €60M. Exhaust €20M in TIRZ Skopje 2
cluster electronics
Care and Tele Health web car seats catalyst manufacturer and hire up to 400
based healthcare supplying all OEM plants employees to produce
solutions in Europe; Today, the busses and coaches for
biggest exporter from the USA and EU markets
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Macedonia 21

22. Why trust Macedonia?
There’s always one more thing…
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23. Excellent Connectivity and Western Culture
Brand New International airports - Skopje
and Ohrid, with $150M+ investment from
TAV
Macedonia is a place of great hospitality
that offers a mix of traditional and
modern
Largest wine producer in the region
5 International Schools with large mix of
ex-pats.
“Macedonia has a qualified workforce with
excellent English skills“
Nikolai Beckers,
CEO, Makedonski Telekom AD
"We are satisfied from the support provided by
“Macedonian Government has created an the Macedonian Government, its institutions, the
attractive tax package. On the other side they are Cabinet of Minister Samak and Bitola
willing to help investors in training their labor Municipality. The decision for investment in
force and they are very dedicated to remove all Macedonia represents an important step in our
the administrative barriers. “ expansion as part of the strategy for international
output“
Avram Stojcevski,
Plant Manager, Johnson Controls Makedonija Martin Passern,
Managing Director, Kromberg & Schubert
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24. Next Steps in Macedonia
• Develop business case and review needs with
Macedonian team
• Setup agenda for assessment of:
– Greenfield site
– HR recruitment, pre-qualification and training
– Local suppliers and logistics providers
– Incentives and other Government support
– Other needs
• Determine dates to visit Macedonia
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25. Thank You
Q&A
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26. Macedonia is the most competitive labor
cost country in Eastern Europe today!
Social Contributions
Country Corporate Tax Personal Income Tax VAT
Total
Macedonia 10% 10% 18% 27%
Serbia 10% 12% 18% 37.2%
Croatia 20% 15-45% 23% 37.2%
Poland 19% 40% 22% 31.2 - 34.1%
Ukraine 25% 15% 20% 39.8 - 49.7%
Romania 16% 16% 19% 44.5 - 55.7%
Slovakia 19% 19% 19% 48.6%
Czech R. 24% 32% 19% 45%
Hungary 16% 36+4% 20% 44%
Turkey 20% 15% 18% 33.5%
Source: CEE-CIS Tax Notes – Price Waterhouse Coopers
Each 1 Euro in Gross Wages includes =
• 27% cents in social charges, health insurance and pension benefits
• 10 cents in personal income tax
• 63 cents in net wages
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27. Reduced payroll taxes and flexible labor laws
enacted in 2008 provide 10% wage cost savings!
Macedonia - Social Security Contribution in Gross Wages
Year 2011 2012
Pension and disability insurance 18% 17.5%
Health insurance 7.3% 7.3%
Employment insurance 1.2% 1.2%
Additional health insurance 0.5% 0.5%
Total 27% 26.5%
• Hiring and firing made flexible with ability to hire, retain and dismiss temporary
and contract-based employees, in addition to permanent staff
• For large layoffs or reduction-in-force, key regulations are:
• Employer is obligated to provide 30-days notice,
• Offer severance ranging from 1-month up to 6-months of most recent wage,
depending on time of employment
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28. Public Holidays and Vacation Allowances
11 Public Holidays:
• 1st January – New Year’s Day
• 7th January – Christmas of Orthodox Christians
• 1st May – Labor Day
• 24th May - Day of Macedonian educators Ss. Cyril and Methodius
• 2nd August – Day of the Republic
• 8th September – Independence Day
• 11th October – Uprising Day
• 23rd October – Day of Macedonian Revolutionary fight
• 8th December – Day of St. Kliment of Ohrid
• Second day of Easter
• First day of Ramadan Bajram
Vacation: Orthodox Christian Holiday:
th
• 20 – 26 working days depending on work experience • January 6 - Day of Christmas Eve
and conditions, after 6 months • Easter’s Friday
• 10 days minimum for part-time employees
Sick-leave and Maternity: Weekends and holiday shifts are
• 14 calendar days with doctor permission, medical allowed according Labor relations law and
commission for longer absence Collective agreements, but under certain
• 9 mos Maternity leave, paid by State Health Fund conditions.
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