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AUTOMOTIVE COMPONENTS AUTOMOTIVE COMPONENTS SECTOR IN MACEDONIASECTOR IN MACEDONIA
October, 2009October, 2009
MACEDONIA MACEDONIA –– THE PROPOSITIONTHE PROPOSITION
From Macedonia you can more cost effectively serve Western and Central European customers while
capitalizing on the surge in vehicle production in Turkey, Romania and Serbia.
Moreover, your growth in Macedonia will not be constrained by skilled labor shortages.
The recent decisions by Johnson Controls, Johnson Matthey, Montupet, Iskra, V.Orlandi and Borteknik
Otomotiv substantiate this proposition.
Why Macedonia?Why Macedonia?
Investment Investment IncentivesIncentives
CompetitiveCompetitiveWorkforceWorkforce
Excellent Excellent InfrastructureInfrastructure
Investor Investor --friendlyfriendly
GovernmentGovernment
CompetitiveCompetitiveLocationLocation
Higher Profits & Increased Competitiveness
LOCATION LOCATION
Location and Transport InfrastructureLocation and Transport Infrastructure
• Two Pan-European corridors:- East-West Corridor 8, and- North-South Corridor 10
• Road network: 9,205 km
• Railway network: 900 km
• Two international airports: - Skopje - Ohrid
• International ports*:- Thessalonica (Greece) : 250 km- Durres (Albania) : 300 km
* Distance from Skopje
Macedonia’s closeness to the rapidly growing automotive manufacturing base in Central and Eastern Europe and Turkey, makes it an ideal location .The geographical proximity to these markets allows low distribution costs and “just-in-time” product delivery from Macedonia.
POLITICAL ANDPOLITICAL ANDECONOMIC OUTLOOK ECONOMIC OUTLOOK
Political and Economic OutlookPolitical and Economic Outlook
• Political, monetary and macroeconomic stability
• Strategically located for future expansion
• First country in SEE to sign a SAA with the EU in 2001
• EU and NATO candidate country
• FTAs with numerous countries
• Business oriented Government
(re-elected in June 2008 with a 4 year term)
• Welcoming and decisive government ready to serve investors
Improved Business ClimateImproved Business Climate
• Regulatory Guillotine – Flagship project for improving the country’s business environment
• “Silence is consent”, “Cutting red tape”
• Reduced administration fees, time limits, documentation
• "One-Stop-Shop" system for company registration
• "One-Stop-Shop" for cross border trading
• Modernized electronic real estate cadastre
• Foreign companies and foreign citizens can directly own construction land in Macedonia
• Electronic payment of taxes
• A cut in social contributions
• Liberalization of visa regime
Foreign Investment RegimeForeign Investment Regime
• Macedonian Constitution guarantees fair treatment of foreign investors
• Complete protection of the ownership rights of foreign investors
• Republic of Macedonia is member of MIGA(Multilateral Investment Guarantee Agency)
• Investment protection treaties with numerous countries
• 100% foreign ownership of a company allowed
• No restrictions for repatriation of profits
Economic IndicatorsEconomic Indicators
CURRENCY CURRENCY
AVERAGE GROSS SALARY IN 2008 AVERAGE GROSS SALARY IN 2008
€ 430 per month
Macedonian Denar pegged to the DM/€for the last 10 years (€1= MKD 61.3)
Low inflation: avg <2% annually over the last 10 years
(2003: 1.2%, 2004: -0.4%, 2005: 0.5%, 2006: 3.2%, 2007: 2.3%, 2008: 8.3%)
INFLATION INFLATION
2003 2004 2005 2006 2007 2008
FDI BY YEAR (US$ m)
Year
EXPORT BY YEAR (US$ bn)
Year 2008
REAL GDP GROWTH RATE (%)
2003 2004 2005 2006 2007Year 2008
1.41.7
2.02.4
3.43.9
117.8
323.0
97.0
424.2
699.1598.5
2.84.1 4.1 4.0
5.05.9
2007
AccoladesAccolades
4th BEST REFORMERIN THE WORLD
World Bank’s Doing Business 2008 Report
BEST EUROPEAN ECONOMICDEVELOPMENT REGION 2008
Institute of Transport Management, UK
BEST CONSECUTIVE REFORMER OVER THE LAST THREE YEARS IN SOUTH EASTERN EUROPE
Based on the World Bank’s Doing Business Report 2008 , 2009 and 2010
3rd BEST REFORMERIN THE WORLD
World Bank’s Doing Business 2010 Report
Ease of Doing Business Global Rank
OPERATING COSTSOPERATING COSTSand TAXESand TAXES
Average Monthly Gross SalaryAverage Monthly Gross Salary
Source: The Vienna Institute for International Economic Studies (wiiw), Calculations
* Average gross monthly salary in manufacturing industry
Average gross monthly salary
€ change y-o-y in %
Average monthly gross salary in selected countries Average monthly gross salary in selected countries of Central and Eastern Europe in 2008 of Central and Eastern Europe in 2008
Average Monthly Gross SalaryAverage Monthly Gross Salary
Utility and Construction CostsUtility and Construction Costs
Utility prices Utility prices for industry are among the lowest in Europe:
• Electricity: €3.85/100 kWh • Natural gas: €0.385/Nm3
• Water: €1.07/m3 (Skopje area)
Construction CostsConstruction Costs
• The average cost of constructing a factory building shell is around €170-225 per m2
• the sale price of state owned construction land for industrial and production facilities varies depending on the location, from €5 to €40 per m2.
Source: Kuehne-Nagel
Transportation CostsTransportation Costsand Delivery Times from Skopjeand Delivery Times from Skopje
Unbeatable Fiscal BenefitsUnbeatable Fiscal Benefits
Corporate Income TaxCorporate Income TaxMACEDONIA*
POLAND
SLOVAKIA
10%
19%
19%
20%CROATIA
20%CZECH R.
ROMANIA 16%
Personal Income Tax Personal Income Tax ( ( highest rate )highest rate )
MACEDONIA*
CZECH R.*
10%
15%
35%
ROMANIA* 16%
32%
TURKEY
SLOVAKIA 19%
45%CROATIA
POLAND
General VAT RatesGeneral VAT RatesCZECH R.MACEDONIA
CZECH R.
ROMANIA
POLAND
18%
19%
19%
22%
CROATIA 22%
SLOVAKIA 19%
*Flat rateSource: PriceWaterhouseCoopers (Taxes at a glance 2009), National Investment Promotion Agencies
20%TURKEY
TURKEY 18%HUNGARY 16% + 4%
36%HUNGARY
HUNGARY 20%
25%UKRAINE
30%UKRAINE
UKRAINE 20%
• 10% Corporate & Personal income tax (among lowest in Europe)• 0% Tax on retained earnings• Double taxation treaties with many European countries• 0% tax for operation in a Technological Industrial DevelopmentZone• Real estate taxes at 2% - 5%• VAT at 18%, with 5% on specific items• FTAs with EU, EFTA, CEFTA countries; Turkey and the Ukraine; providing access to over 650m customers
Social Security ContributionsSocial Security Contributions
Macedonia Macedonia -- Social Security ContributionsSocial Security Contributions
Comparison Comparison -- Social Security ContributionsSocial Security ContributionsMacedonia 27.9%27.9%
Poland 31.2% 31.2% -- 34.1%34.1%
Slovakia 48.6%48.6%
37.2%37.2%Croatia
Romania 41.2% 41.2% -- 52.4%52.4%
Czech R. 45%45%
16.5%
15%
19% 7.5%
7%
6%
1.4%
1,2%
1%
27.9%27.9%
24.7%24.7%
22%22%
Current
2010
2011
Pension insurance Health insurance Employment insurance
21.2% 9.2% 1.6% 32%32%2008
Turkey 33.5%33.5%
49%49%Hungary
Ukraine 40.4% 40.4% -- 53.3%53.3%
Source: PriceWaterhouseCoopers (Taxes at a glance 2009), National Investment Promotion Agencies
LABOUR LABOUR AVAILABILITYAVAILABILITY
Sustainable Work Force SupplySustainable Work Force Supply
•• 45% of population under 3045% of population under 30•• High intellectual capitalHigh intellectual capital
> 35% increase in total number of undergraduate degrees in 2007 compared to 2006> 85% of high school graduates enrolled in universities in 2008> Multiple vocational high schools in each city
•• TailorTailor--made training programsmade training programs through Vocational Schools or Universities• 6% of GDP spent on education6% of GDP spent on education
Number of Graduates Number of Graduates in High Schools in Technical Fieldsin High Schools in Technical Fields
Number of Graduates in Colleges Number of Graduates in Colleges and Universities in Technical Fieldsand Universities in Technical Fields
Expert Automotive Academic BaseExpert Automotive Academic Base
• specialised engineering vocational secondary schools, currentlyenrolling over 22,000 students
• over 9,000 students studying automotive-related engineering branches on university level
Source: Ministry of Education and Science of the Republic of Macedonia
Labour AvailabilityLabour Availability
Technical Education CentersTechnical Education Centers
Readily Available Labour Force Readily Available Labour Force
Unemployed Persons with Technical SkillsUnemployed Persons with Technical Skills
Source: Employment Service Agency of the Republic of Macedonia (data for 2008)
Excellent Language SkillsExcellent Language Skills
• Every child in Macedonia begins to learn English in the first grade of primary school• Two foreign languages are mandatory in high school: English, and either German, French, or Russian• English is also taught for two years at University level• Regional languages (Serbian, Croatian, Bulgarian, Albanian and Greek) are widely spoken
Foreign Languages Foreign Languages StudiedStudied
Students in Primary Students in Primary Schools, % of TotalSchools, % of Total
Students in Secondary Students in Secondary Schools, % of TotalSchools, % of Total
English 91% 94%
French 22% 32%
German 13% 21%
Italian - 2%
Russian 1% 2%
Turkish - 1%
Source: State Statistical Office of the Republic of Macedonia (Education 2008/2009)
AUTOMOTIVEAUTOMOTIVECOMPONENTS SECTORCOMPONENTS SECTOR
IN MACEDONIAIN MACEDONIA
• Existing engineering and manufacturing tradition
• Legacy of skills available to new investors
• Component production started 1960’s to supply Zastava, Serbia
• State-sponsored customized training programs
• Companies primarily supplying aftermarket
• Most companies have ISO 9001/TS 16949 quality certification
• Markets are Europe, Russia, Turkey, Africa, etc.
• Strategic location to serve automotive plants in Central Europe and Turkey
MACEDONIA MACEDONIA –– The Emerging Hub for The Emerging Hub for Automotive Components ProductionAutomotive Components Production
Automotive Components Production Automotive Components Production
Developed Automotive Supplier BaseDeveloped Automotive Supplier Base
Automotive Components ExportAutomotive Components Export
Growth Index of Automotive Components Export from Macedonia (2002=100)
0
50
100
150
200
250
2003 2004 2005 2006 2007
Export of Automotive Components by Type Export of Automotive Components by Country
Source: ITC UNCTAD / WTO, data for period 2007
PROJECT SCOPEPROJECT SCOPE• $40m automotive components plant;$40m automotive components plant;•• 150 employees initially 150 employees initially –– increasing to 500;increasing to 500;•• First phase production First phase production –– mainly integrated mainly integrated
circuits for German and French markets.circuits for German and French markets.
CONSIDERED COUNTRIESCONSIDERED COUNTRIES•• Macedonia, Poland, Romania andMacedonia, Poland, Romania and SlovakiaSlovakia
WHY MACEDONIAWHY MACEDONIA
• The availability of skilled engineers;• “The increase in costs over the next couple of
years will be significantly lower in Macedonia than in other CEE countries.”;
• Macedonia offers the company just-in-time delivery and minimal freight costs.
Philippe SimonJohnson Controls' VPof global electronics
“The Macedonian government has been extremely committed and I would like to thank its officials for their work in supporting this effort.”
John BarthChairman and CEO
Johnson Controls
“It’s one of the best experiences we have had in Europe”Richard G. Klaver
JCI Project Manager
Cornerstone laying Cornerstone laying ceremony, 05.10.2006ceremony, 05.10.2006
Official openingOfficial opening12.12.200712.12.2007
Johnson Controls Johnson Controls -- SkopjeSkopje12.12.200712.12.2007
PROJECT SCOPEPROJECT SCOPE• Up to €55m automotive components plant (in phase 1);• 150 employees in phase 1.
CONSIDERED COUNTRIESCONSIDERED COUNTRIES• Reviewed: Bulgaria, Croatia, Estonia, Latvia, Lithuania,
Slovenia, Romania, Ukraine, Czech, Poland, Hungary, Slovakia;
• Initial choice: Czech Republic.
Macedonia a “Late entrant”
WHY MACEDONIAWHY MACEDONIA• Macedonia scores best for labour,
slightly lower on logistics;• Labour availability looking very good
for Skopje;• Our experience has been positive,
Invest Macedonia, Ministry and others superb;
Colin Jaffray, Director, Strategic Planning, Johnson Matthey PLC,Presentation Skopje June, 2007
Signing of the Memorandum of Cooperation Signing of the Memorandum of Cooperation between Mr.Jaffray, Director, Strategic Planningbetween Mr.Jaffray, Director, Strategic Planning
and Prime Minister Gruevskiand Prime Minister GruevskiMarch 2007March 2007
• This will be JM’s ‘mega-European plant’ and the largestever single investment project.
Johnson MattheyJohnson Matthey
SIZE OF INVESTMENTSIZE OF INVESTMENT– Upwards of €60M– 10Ha parcel in TIDZ ”Skopje 1”– 500 employees – Aluminum cylinder heads – Supplier to: Ford, PSA, Renault
CONSIDERED COUNTRIESCONSIDERED COUNTRIES– Reviewed:
Bulgaria, Romania, Czech Republic– Initial choice: Bulgaria
WHY MACEDONIAWHY MACEDONIA– Available, qualified labour and stable competitive wages– Tax benefits in TIDZ “Skopje 1” and Government incentives– Faster decision-making, less bureaucratic hassles– Decisive Government willing to win!
Signing of the Memorandum of Understanding betweenSigning of the Memorandum of Understanding betweenMr. Majus, CFO and Prime Minister GruevskiMr. Majus, CFO and Prime Minister Gruevski
May 2008May 2008
SIZE OF INVESTMENTSIZE OF INVESTMENT- €25M - 4.7he parcel in TIDZ ”Skopje 1”- 500 employees- Signed MoU with the Macedonian Government in the sphere of electronic automotive applications
WHY MACEDONIAWHY MACEDONIA- The measures the Macedonian Government took to improve the business climate
- Excellent experience with the current administration
Signing of the Memorandum of Understanding betweenSigning of the Memorandum of Understanding betweenPrime Minister Gruevski and Mr.Sesok, CEOPrime Minister Gruevski and Mr.Sesok, CEO
May 2008May 2008
Signing of the Memorandum of UnderstandingSigning of the Memorandum of Understandingbetween Mr.between Mr.MachelinMachelin and Prime Minister Gruevskiand Prime Minister Gruevski
September 2008September 2008
SIZE OF INVESTMENTSIZE OF INVESTMENT
- €10M- 120 employees in initial phase - world leader in production of coupling systems for trucks- Supplier to: Iveco, Mercedes, MAN, Volvo
WHY MACEDONIAWHY MACEDONIA- attractive business environment, labour quality and low tax rates
SIZE OF INVESTMENTSIZE OF INVESTMENT
- €20M- 100 employees in initial phase - production of aluminium profiles for the automotive and construction industries
WHY MACEDONIAWHY MACEDONIA- benefits in the TIDZ “Skopje 1”- competitive labour
Signing of the Memorandum of UnderstandingSigning of the Memorandum of Understandingbetween Mr.between Mr.AtikAtik and Prime Minister Gruevskiand Prime Minister Gruevski
September 2008September 2008
TECHNOLOGICAL INDUSTRIAL TECHNOLOGICAL INDUSTRIAL DEVELOPMENT ZONESDEVELOPMENT ZONES
(TIDZs)(TIDZs)
Investment OpportunitiesTechnological Industrial Development Zones Technological Industrial Development Zones -- TIDZs TIDZs
• Electrical grid outlet, new power substation in construction
• Telecommunications network
• Central heating
• Lighting
• Fire safety system - Airport Fire Department minutes away
• Security monitoring system
• Water, sewage and water treatment plant
• Gas pipeline, etc.
Infrastructure BenefitsInfrastructure Benefits
Investment OpportunitiesTechnological Industrial Development Zones Technological Industrial Development Zones -- TIDZs TIDZs
• Free connection to utilities• Subsidy of up to €500,000 towards building costs
• Green Customs Channel available at border for rapid export from Zone to EU countries
• Land in a TIDZ in Macedonia is available under long-term lease for a period of up to 99 years
TAXTAXTAX RATESTAX RATES
TIDZsTIDZs Outside TIDZsOutside TIDZs
Corporate tax 0%for the first 10 years
10%
Personal income tax 0%for the first 10 years
10%
Value added tax 0% 18%
Property tax 0%for 10 years
Up to 1%
Excise taxes 0% 5% - 62%
PRODUCTPRODUCTCUSTOMS DUTYCUSTOMS DUTY
TIDZsTIDZs Outside TIDZsOutside TIDZs
Raw materials 0% Up to 15%
Equipment 0% 5% - 20%
Fiscal BenefitsFiscal Benefits
Investment OpportunitiesTechnological Industrial Development Zones Technological Industrial Development Zones -- TIDZs TIDZs
Already in the TIDZ Already in the TIDZ ““Skopje 1Skopje 1””
INVESTINVESTMACEDONIA MACEDONIA
Invest Macedonia at Your ServiceInvest Macedonia at Your Service……
• One-stop shop and project management approach
• VIP Investment tour
• Locations
• HR Companies, construction, real estate, tax advisory and consulting
• Universities and Reference Company visits
• Creating linkages with local and central Governments
• Navigate the legal requirements
• Ensure success!
Thank YouThank You
AGENCY FOR FOREIGN INVESTMENTS AGENCY FOR FOREIGN INVESTMENTS OF THE REPUBLIC OF MACEDONIAOF THE REPUBLIC OF MACEDONIA
Tel: Tel: ++ 389 2 31++ 389 2 3117 56417 564Fax: ++ 389 2 3122 098Fax: ++ 389 2 3122 098
ee--mail: mail: fdi@investinmacedonia.comfdi@investinmacedonia.comweb: web: www.investinmacedonia.comwww.investinmacedonia.com
Nikola Vapcarov 7Nikola Vapcarov 7
1000 Skopje1000 Skopje
Republic of MacedoniaRepublic of Macedonia
APPENDIXAPPENDIX
Developed Automotive Supplier BaseDeveloped Automotive Supplier Base
COMPANYCOMPANY CITYCITY PRODUCTSPRODUCTS
Foundries
Aluminium and Zinc Foundry Resen Resen Aluminium pressure-die castings for the needs of automobile industry
MZT Learnica Skopje Clutch parts
TCG LEARNICA Ohrid Brake components and anti-vibration products for OEM
Seat Belts and Seat Belt Parts
AMAK SP Ohrid Seat belts and restraint systems, door latches and retention components, rear view mirrors, window regulators
SIPO Ohrid Seat belts and seat belts parts
VELMAKS Ohrid Seat belt parts
EUROTEHNIKA Ohrid Seat belt parts
PRUTEX Demir Hisar Textile for seat belts, aluminium and zinc parts used for seat belts, all kind of springs with diameter of wire up to 5 mm
Buses and Minibuses
and Vehicle Bodies
Upgrade
BRAKO Veles Cargo trailers
MLAZ Prikolki Bogdanci Trailers, agricultural machines and freight vehicles
VIZABUS Skopje Minibuses, bus seats and accessories
SANOS Skopje Buses and coaches
BUSKAR Skopje Buses and coaches
KGL Systems Skopje Vehicle body upgrade
Developed Automotive Supplier BaseDeveloped Automotive Supplier Base
COMPANYCOMPANY CITYCITY PRODUCTSPRODUCTS
Other Automotive
Parts
Johnson Controls Skopje Printed circuit board components
HI-TECH Corporation Skopje Multi-layer printed circuit boards for automotive, communication and electronics
EIN-SOF Skopje Automotive diagnostic software
Elko Elektromehanika Skopje Auto electrics
STD Nov Dojran Shock absorbers for trucks and buses
MZT “Oprema za vozila” Skopje Springs
RUEN International Technologies Kocani Clutches (clutch cover, clutch disk and release bearing), gears and gear elements for three types of vehicles: passenger cars, heavy duty (trucks and buses) and tractors
SIGURNOSNO STAKLO (IZOSTAKLO) Prilep Bent tempered and laminated glass for needs of automotive industry (all kinds of windscreens)
TE-TE PLAST Skopje Moulds and plastic parts
VESNA SAP Probistip Starter batteries
Machine Parts
RDV Faber Skopje Different kinds of tools and rear lights
Alatnica "SVEMEK" Skopje Pneumatic and hydraulic parts by design: cylinders, valves, screws, implants, and other machine parts
Railway Vehicles and Components
Factory for railway vehicles "Veles" Veles Freight and passenger cars
MZT HEPOS Skopje Pneumatic and brake systems for locomotives, freight and passenger cars
MZT EKA Skopje Rail vehicle brake digital testing equipment, pressure and speed sensors
Netcetera Skopje Software for railway traffic management
AUS
SER
BRD
SVK
CZE
ROM
POL
HUN
UKR
BGR
GRC
MDA
LTU
LVA
EST
BLR
SLO
BIH
MKD
ALB
HRV
Automotive OEMs are 1 day away from Macedonia, presenting profitAutomotive OEMs are 1 day away from Macedonia, presenting profitable able opportunities for Automotive suppliersopportunities for Automotive suppliers
GM, Gliwice
Fiat, Tychy
GM, Zeran (Warsaw)
VW, Poznan
Daewoo, Uzhgorod
EU Border as of 2007
750 kmSuzuki, Estergom
VW-Skoda, Bratislava
PSA, Trnava (2006)
HMC-Kia, Zilina (2006)
Toyota/PSA, Kolin
VW-Skoda, Mlada Boleslav
Renault-N, Novo Mesto
VW-Audi, Györ, (Engines)
VW, Sarajevo
Opel/GM
Ford,
LIAZ, Velki Krtis
HMC-Hyundai, Novosice (2008)
Zastava, Kragujevac
1250 km
ZAZ, Zaporozhje
AutoVAZ, Kherson
Source: Government research
Macedonian FEZ Locations
Ford, Craiova
Renault-Nissan, Pitesti
Ford, Otosan, Gölcük
Fiat – Tofas, Bursa
Oyak-Renault , Beykoz
Toyota, Sakarya
Macedonia is a competitive destination for automotive suppliers serving today’s OEMs
AUS
SER
BRD
SVK
CZE
ROM
POL
HUN
UKR
BGR
GRC
MDA
LTU
LVA
EST
BLR
SLO
BIH
MKD
ALB
HRV
Automotive Tier 1 suppliers are moving southAutomotive Tier 1 suppliers are moving south--east east in search of competitive locations in EEUin search of competitive locations in EEU
EU Border as of 2007
1250 km
750 km
Tier 1 Automotive suppliers are setting up operations in Macedonia: Johnson Controls and Johnson Matthey, with many others adding Macedonia to their country lists
Electrical componentsMechanical components
Electronic components
Source: Mc Kinsey "Motorfactbook" and Gov’t research
Macedonia is viable and competitive alternative to typical EE countries for automotive manufacturers and suppliers offering respite from fiscal, labor and logistical pain points