North Macedonia flag North Macedonia: Investing in North Macedonia

Foreign direct investment (FDI) in North Macedonia

FDI in Figures

In the absence of adequate domestic savings, foreign investments provide an important avenue for the development of North Macedonia’s economy. According to UNCTAD's World Investment Report 2023, net FDI flows to North Macedonia increased to USD 794 million in 2022, up by 42.6% year-on-year. At the end of the same period, the total stock of FDI was estimated at USD 7.47 billion, around 54.7% of the country’s GDP. According to figures by the Central Bank, the main investing countries in terms of stocks are Austria with a total of EUR 1,053 million, followed by Greece with EUR 729 million. The top five foreign investors in the country also comprise the United Kingdom (EUR 634 million), Germany (EUR 572 million), and the Netherlands (EUR 544 million). In terms of investment activities, Manufacturing attracts the highest share, accounting for EUR 2,453 million or 35% of total direct investments, while financial and insurance activities receive EUR 1,520 million or 21.7%. In 2023, the country welcomed total net inflows from direct investments totaling EUR 616.7 million. This sum stemmed from net inflows from equity amounting to EUR 274.8 million, reinvestment of earnings of EUR 172.9 million, and intercompany lending of EUR 169.1 million (data Central Bank).

North Macedonia’s legal and regulatory framework is generally favorable to foreign investors and provides numerous incentives to attract them. Moreover, the country adopted a new law to create more advantageous conditions for strategic investments. Both the Law on Technological Industrial Development Zones (TIDZ) and the Law on Financial Support of Investments offer incentives to investors, including a ten-year tax exemption on personal and corporate income, free access to public services, job creation and capital investment subsidies, and financial support to exporters. Labor costs are low, but on the other hand, there is often a shortage of skilled labor. Foreign investors may directly invest in all industry and business sectors, barring those restricted by law. For instance, investment in the production of weapons and pharmaceuticals requires government approval. Additionally, sectors like banking, financial services, insurance, and energy necessitate compliance with specific licensing requirements, which are applicable to both domestic and foreign investors alike, while the country does not have a national investment screening mechanism in line with international standards. North Macedonia has made significant efforts to harmonize its legal framework with the criteria, standards, and practices of the European Union. The sector of digitalization and green energy have been identified as strategic by the government: according to data by fDi Markets, renewable energy projects contributed most to FDI in North Macedonia between January 2017 and July 2022, totaling USD 739 million, ahead of the real estate sector (USD 409 million) and software and IT (USD 381 million). A number of challenges remain nonetheless, including corruption, lack of transparency, poor customer service, excessive bureaucracy, political interference in the judiciary, lack of government capacity, communication difficulties, and shortcomings in the rule of law and contract enforcement. North Macedonia ranks 54th among the 132 economies on the Global Innovation Index 2023 and 71st out of 184 countries on the latest Index of Economic Freedom.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 230556794
FDI Stock (million USD) 7,1817,1337,479
Number of Greenfield Investments* 31929
Value of Greenfield Investments (million USD) 1361,028618

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors North Macedonia Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 10.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 9.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.8 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in North Macedonia

Strong Points
The country's key advantages in terms of attracting FDI include:

- Low labour costs and high-quality workmanship;
- Stable democracy;
- Fast and uncomplicated procedures to create an enterprise;
- FDI-friendly governement policies;
- the country's integration into the German production chain.
Weak Points
The country's hurdles to investment are :

- High structural unemployment and training deficit;
- Important size of informal economy;
- Inadequate transport infrastructure;
- Significant indebtedness of the private sector (93% of GDP at the end of 2014);
- Conflicting political landscape;
- Tensions between the Slavic majority and the Albanian minority.

Government Measures to Motivate or Restrict FDI
North Macedonia is an open and business friendly country, which ranks on the 11th spot in the 2018 Doing Business Report of the World Bank which evaluates the ease of doing business in 190 countries.

The North Macedonian Constitution stipulates that foreign persons (legal entities, individuals or civil partnerships registered in a foreign country) must enjoy equal rights with local persons when conducting economic activities in North Macedonia except where otherwise provided by the law (“national treatment”). This principle covers the entire range of economic and legal forms used for business activity.

The North Macedonia has a flat tax rate of 10% for corporate and personal income tax purposes. Investors are eligible for reduction in the profit tax base by the amount of prior profit reinvested in tangible assets (such as real estate, facilities and equipment) and intangible assets (such as computer software and patents) used for expanding the business activities of the entity.

The Law on Technological Industrial Development Zones provides for a special tax treatment for any investor who invests in the appointed zones.

The legal framework also includes the One-Stop-Shop system that aims to tackle some of the administrative barriers of entry into the business life in North Macedonia. According to the Law of the One-Stop-Shop system, all types of trade companies are registered within 4 hours of submission. Another important feature of the One-Stop-Shop is the electronic distribution service that allows any potential investor or third party to obtain complete electronic information about the operations of companies in the country.

To learn more about the goverment measures to encourage FDI in North Macedonia, please visit Invest in North Macedonia website.

Bilateral investment conventions signed by North Macedonia
North Macedonia has signed numerous bilateral conventions on FDI. You may see them on the policy investment hub website.

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Latest Update: May 2024