Wednesday, July 18, 2007

Invest in Macedonia or Not

This week's The Economist features full page color ad (probably
expensive) "Invest in Macedonia - New Business Heaven in Europe",
all with the graph of (growing, of course) MBI-10 Macedonian Stock
Exchange Index.

All post-communist countries today proudly flout their stock
exchanges, trading dozen or so stocks, like some sort of tropheys. I
found myself chuckling at claims about "excellent infrastructure",
because I travelled through Macedonia a couple of times during 1980-
s, and I think it is slightly preposterous to advertise free access
to large market of 650 million customers, that includes 27 EU an
d 13 other European countries with which Macedonia has Free Trade
Agreements: you can open a business in Austria and be closer to that
market, with advantages of even more excellent infrastructure.

Also, with probably a decade before it is accepted in the EU,
Macedonia is presented as EU & NATO candidate country (the official
name of FYROM is mentioned nowhere in the ad): but Europe is full of
countries that already are NATO and EU countries, so being a candidate
can obviously not be sold as an advantage. But there are things about
Macedonia that can: 10% flat tax, lure of laissez fair corporate
pundits, both corporate and personal income flat tax, and 10 years
FREE of corporate tax if your business is in one of the two designated
Free Economic Zones & Technology Parks (Skopje and Stip).

Besides liberal approach to taxation, the other advantage, shamelessly
advetised both in The Economist and on the website, is CHEAP LABOR:
"abundant and competitive labour with 370 euros a month average gross
salary." That's $480/month - average, so politicians, lawyers and
doctors included - real laborers salary is perhaps much lower. That
sure is an incentive for multi-national corporations to move in. But
this is the first time I see a country so openly advertising that
its primary advantage is having tons of people willing to work for

The "abundance of labour" is clearly defined by
the highest unemployment rate in CEE (over 40% -,
and this could be the last ditch effort to draw some foreign
investment to the place among former Yugoslavs best remembered for
failed factories (Femi).

Worldbank's country brief on Macedonia in 2006 puts the unemployment
rate at 37.2%, and foreign direct investment at 1.7% - this initiative
surely aims to lower the first by raising the later percentage rate.
More importantly, the ad promises "fast company registration - 2
days"; Worldbank assessed the time required to start a business at -
48 days.. (cutting red tape follows the Croatian example -
Good luck, Macedonia.

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