Transcript 3.1 World Bank and IFC: Doing Business in 2006. Creating jobs, 2006

How Easy It Is to Invest and Do
Business in Macedonia
Verica Hadzi Vasileva-Markovska
AAG – Analysis and Advisory
Group
Macedonia is a tiny country –
but …
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25.713 m2
around USD 5.7 billion worth GDP
Appx. USD 7.5 thousand GDP p.c. PPP
2 million people
Relatively low purchasing power
High unemployment rate: 37%
Relatively stable diversified economy
It started to grow in a more sustainable way
Received EU candidate country status
Focus onto some economic
indicators
Main Economic Indicators
GDP (USD mill)
GDP per capita (USD at PPP)
GDP Growth Rate (in %)
Inflation (annual average; %)
Exports (USD mill)
Imports (USD mill)
Trade Balance (USD mill)
Current Account (USD mill)
Current Account (as % of GDP)
External Debt (as % of GDP)
FDI (USD mill)
2000
2001
2002
2003
2004
2005*
3,588
3,437
4,478
-4.5
5.5
1,163
1,677
-524
-235
-6.8
41.0
441
3,769
4,907
0.9
1.8
1,112
1,916
-804
-358
-9.5
43.1
78
4,631
6,036
2.8
1.2
1,359
2,211
-852
-152
-3.3
44.9
94
5,368
7,014
4.1
-0.4
1,672
2,785
-1,113
-415
-7.7
44.6
150
5,625
7,462
4.0
0.5
2,041
3,097
-1,056
-81
-1.4
40.1
120
4.5
5.8
1,321
2,011
-690
-75
-2.1
39.9
175
* Estimate
Source: Bulletin of the Ministry of Finance, Jan./Feb. 2006
Starting a business is easy
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Until 2005: you needed 48 days and 13 procedures
As of 1 January 2006: you will not need more than 3
days once documents were submitted
Major reform in the registration of businesses
Capital requirement: EUR 5,000 for Ltd Co and EUR
25,000 and EUR 50,000 for AD
Much less procedures: Registry takes care of most of
them
Statistics: 7600 new units registered in 1-8/2006,
compared to 6700 in the same period last year
World Bank and IFC:
Doing Business in 2006.
Creating jobs, 2006
Starting a business –
compare!
Croatia:
49 days
Bosnia: 54
days
Slovenia:
60 days
Serbia:
15 days
World Bank and IFC:
Doing Business in 2006.
Creating jobs, 2006
Greece: 38
days
Buying a business should not
be difficult
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If there is a suitable target:
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Problems:
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Takeover Law, 2002:
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It is applied when:
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Not many
Not very open: fear of loss of corporate control
Buying shares over 25%
in companies with more than 25 shareholders and
with share capital > EUR 2,000,000
Public offer
Make analysis
Information abundance, or?
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Information basis is not very rich:
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Although useful, statistics is poorer than
Slovenian
Sectoral studies are rare
In general, companies are reluctant to
disclose info
Investment analysts are practically nonexistent, unless specially engaged
Accounting standards
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IFRS are nominally obligatory
Accounting and auditing profession is
deficient
All big 4 are present
25 audit companies registered
Poor enforcement of professional
standards: Institute of certified auditors
established in June 2006
Personnel: are they readily
available?
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Sluggish reforms in education and training institutions
old fashioned courses curricula
life-long learning concept – still not alive
knowledge economy concept – still not alive
low R&D expenses
Still many young people studying abroad
General education level is such that allows easy
deepening of knowledge and skills
Working ethics: not lower than regional average
Personnel: are they easy to
hire and fire?
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New Labour Relations Law in 2005
Much more business friendly and less
rigid
Prior to that the difficulty indices were
high (on the scale 0-100):
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Hiring: 61
Firing: 40
Financial sector is rather
sound but shallow
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Banking sector has undergone significant restructuring
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It is a sound but rather shallow financial market
total assets to the GDP equaled 45 percent
19 private banks of universal type,
1 state-owned bank with specific functions
14 savings houses
Still new changes in the Law are expected to:
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strengthen Bank supervision
transition to more risk based supervision
Interest rates have been falling in the last several years:
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in July: 11.3% average in MKD
8.1% in Forex
Financial sector is dominated
by banks
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Further reforms in the insurance sector:
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approximation with the EU directives
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enhancement of the supervision
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strict licensing requirements and risk management rules
establishment of an adequate and independent
supervisory authority
Pension system: second pillar established
Capital market is constantly growing
Non-banking financial institutions not yet
established – lack of legal basis
Getting a loan
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The competition among banks is
increasing
Banks are more open to providing loans
Law on execution has increased their
security for collection
No credit bureaus
Registering and protection of
property
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Still many problems especially in the
real estate – cadastre goes through
deep reforms: slow process, not
connected information bases
By 2009 a new reliable cadastre is to be
set up
To register a property you need 74 days
Registering property in days –
compare!
Croatia:
956
Bosnia:
331
Slovenia:
391
Serbia:
111
World Bank and IFC:
Doing Business in 2006.
Creating jobs, 2006
Greece:
23
Taxes
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Relatively low tax rates and they are
scheduled to ever lower:
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VAT: 18% and 5%
CIT: 15%, scheduled to be 10%
PIT: 15%, 18%, 24%
Flat rate is expected to be introduced
Some tax heavens for foreign investors
Dealing with administration
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Administration used to be very difficult
It is going through reforms
Still much needs to be done
Corruption is an issue and this needs to
be dealt with
E-government project is in the air
Enforcing contracts
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Judiciary reforms is underway
Law on Courts changed, Law on Court
Budget, Law on Enforcement
Laws have been changed to enable
better enforcement
Still problems: days of enforcement:
509!!
Enforcing contracts in days –
compare!
Croatia:
415
Bosnia:
330
Slovenia:
913
Serbia:
635
World Bank and IFC:
Doing Business in 2006.
Creating jobs, 2006
Greece:
151
Closing a business
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A new law on bankruptcy enacted
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streamlining the bankruptcy proceeding,
making it faster,
more efficient,
less costly and
fairer to the creditors and other stakeholders,
building of the professional and ethical capacity of
the bankruptcy proceeding bodies: in progress
Duration of a bankruptcy process: 4 years!
Closing a business (in years) –
compare!
Croatia:
3.1
Bosnia:
3.3
Slovenia:
3.6
Serbia:
2.7
World Bank and IFC:
Doing Business in 2006.
Creating jobs, 2006
Greece:
2.0
Other issues
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Protecting investors: corporate
governance
Able partners
Hospitable people
Unexplored opportunities
Aggregate easiness of doing business
rank (out of 155) – compare!
Slovenia:
63
Macedonia:
81
Source: World Bank and
IFC: Doing Business in
2006. Creating jobs, 2006
Croatia:
116
Serbia:
92
Bosnia:
87
Greece:
80
AAG – Analysis and Advisory
Group
AAG – Analysis and Advisory Group
Bul. Ilinden, 42-4
1000 Skopje
Phone: +389-2-3120-565
Fax: +389-2-3122-565
e-mail: [email protected]
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Verica Hadzi Vasileva-Markovska
Partner