North Macedonia 2019

Gordana Siljanovska-Davkova from the Internal Macedonian Revolutionary Organization – Democratic Party for Macedonian National Unity (VMRO-DPMNE). With 53,6% of votes, he became President of North Macedonia. OSCE over-sighted the electoral process, concluding that elections were “well administered” and “respected fundamental freedoms”. Hence, electoral fairness was improved as compared to previous elections, which abounded with abuse of power by politicians, politicization of the State Electoral Commission (SEC), non-transparent campaign financing and vote frauds and irregularities on the election-day. Problem of party financing in the campaigns remained unaddressed, however voter intimidation, abuse of power and voting-day violations were minor.

societal trenches at - the state level. Corruption is widespread in all branches and tiers of power in North Macedonia, making the system of checks and balances weak and prone to undermining. Strong ties between political and economic elites enable their interference into decision-making processes.

the media sector as a part of the accession process, in its latest report on North Macedonia, especially emphasizing that “Amendments to the Law on Audio and Audio-visual Media Services which have been adopted will require strong political commitment to guarantee professionalism, respect for the principles of transparency, merit-based appointments and equitable representation”. North Macedonia is ranked as 95th on the Reporters without Borders 2019 World Press Freedom Index, improving its position by 14 places.

and trade-offs thereby concluded, so as to get enough support by the opposition for constitutional changes and ratification of the „name-deal“ with Greece. Not least independence but also efficiency of the judiciary is a problem. Discrepancy between reforms adopted in parliament and those implemented on the ground is another one. EU has put the progress in judiciary as one of the main demands prior to even opening accession negotiations, while poor condition thereof, coupled with corruption, have been welcome excuses for all those in the EU who for political reasons wanted to delay such opening. On the brighter side, the situation in prisons in North Macedonia, notably in the by-far the biggest and most notorious one in Idrizovo, started improving, especially in terms of living conditions and more humane treatment of inmates, although much more is to be done regarding their medical care and in fighting inner-prison violence and drug-trafficking. 

risks. Many monitors pointed out at patronage networks (especially at the local level), including not least public but also private sector companies and their employees, as a political factor, e.g. in illicit deeds such as vote buying or voter intimidation. 

when ethnic minorities are concerned, much more has to be done for the inclusion and mainstreaming of Roma. As for same-sex unions, their legalization and regulation are still not in sight. Last decade`s conservative backslide in the field of women rights and family regulation has mostly been revoked, yet more has to be done to fight domestic violence, human trafficking, or under-representation of women in politics or management. In academia, corruption and nepotism have been seriously damaging the otherwise favorable intellectual climate amid lack of political influence on the contents of the academic work. 

almost 1.7 years, which is a slight improvement as compared to the previous year. These problems lead to an overall low public trust in judiciary. Administrative courts often fail to deliver verdicts in accordance to judicial precedents, urging concerned parties in the process to appeal to appellation courts, increasing their workload substantially and prolonging legal processes. There are special courts that cover commercial and contract disputes between business entities. Insolvency procedures are also slow, taking on average 1.5 years, and they deliver very low recovery rates of less than 50% of initial claim. Recent changes in voting procedures for the reorganization plans and greater participation of creditors in insolvency proceedings have not significantly improved the situation in this area. Private property registration is a long process, lasting almost a month on average, due to inefficient local tax office procedures which determine the level of transfer tax, which can be substantial. The cadastre system has been improved in recent years. Majority of real estate records have been digitalized. Not all land has a clear title, but urban areas are mostly covered. But, local and regional zoning plans are not coordinated, which could have a negative impact on business certainty in land development. The 2016 legislation - which requires obligatory mediation between companies in all disputes up to 15 000 euro of value as a precondition for going to court - imposes additional costs to businesses and further prolongs contract enforcement, even though its initial intention was to promote mediation and decrease pressures on the judiciary. Foreign investors can be active in almost all industries, but in certain ones (such as banking, insurance, energy and transport, etc.) they have to meet licensing requirements. Foreign residents cannot acquire agricultural land in Macedonia, but this is easily avoided though establishment of a local, foreign-owned, company.

to slowly decrease. However, since the early parliamentary elections were called for April 2020, fiscal slippage could be attested. Government pension system is unsustainable, with huge deficits, which are covered from state coffers. As in other countries in the region, demographic changes will further create stress to public finances, with high emigration rate being more important on the short run. After the full scale privatization programs during the previous two decades, the number of SOEs in the country is estimated to stand at 120, most of which are public utility companies owned by the central government. But SOEs are also present in energy, transportation, media and banking. Corporate governance in SOEs is weak and prone to political influences through politically appointed management boards. The SOEs mostly have weak business performance, and their operations are tied to alleviating social pressures through lower prices, at the expense of investments in capital. Two biggest public-owned companies, operating in road infrastructure (PESR) and electricity (ELEM) could pose a significant financial challenge for the public finance if their efficiency is not assured. Low government spending results in a relatively lower tax burden than in other European countries, with VAT rates of 18% (standard) and 5% (preferential rate). Social security contributions put the overall labour tax wedge slightly below the OECD and regional average. There is a significant exemption from social contributions for employment of young workers, decreasing their relative costs, but this has contributed only slightly to the decrease in their unemployment rate. The recent tax reform, as of January 2019, made significant changes in the tax system: the tax system with the 10% personal income tax rate was made progressive by establishing a new tax bracket with the rate of 18%, albeit upon a very high threshold, effectively covering only 1% of (the highest) earners. Income from property rights, capital gains, capital, insurance etc. is now taxed by 15%, instead of 10%.

due to the compulsory electronic online registration. Tax procedures are also not overly burdensome, due to widespread electronic filing system - although they still require significant workload - but the VAT refunds take more than six months on average. Obtaining a construction permit and getting electricity is simplified - with only 3 procedures, taking on average three months - but incurring significant costs due to high fees of public utilities in charge. On the other hand, labour regulation is mostly flexible - due to flexible working hours and hiring procedures: fixed term contracts are not prohibited for permanent tasks and their duration is limited to a very long period of 60 months. Collective bargaining is mostly concentrated in the public sector, so it does not incur high costs to private entities. The already high minimum wage (when compared to the average one) was further increased in July 2018, and again in April 2019, reaching almost two thirds of the average wage, with government commitment to increase it further, almost doubling its initial level in 2020. This might have significant impact on the labour market, through increase of shadow economy and unemployment. Firing workers could be costly due to the prescribed levels of severance pay, which rises with the years in tenure, protecting more seasoned workers, but notice periods remain flat. Recent changes to the labour regulations have increased worker protection at the expense of employment flexibility. The probationary period was lessened from 6 to 4 months; the deadline for submitting applications for new employees was decreased to 3 days; in poor performance cases, the employer must warn the employee in writing and provide a 15 day deadline for performance improvement prior to contract termination; contract termination must be based on criteria from the collective agreement; and, the reemployment rule was prolonged to two full years. New Labour Law has been announced by the government, with promises to have specifically tackled new types of working contracts. Macedonia levied the obligation of paying social contribution for natural persons on professional contracts, if they are not employed in the entity, which boosted freelancer and professional activities.

Bureaucracy procedures at the Customs Office also impede free movement of goods, with long procedures and allegations of misconduct and partial dealing with different companies. The poor state of the transportation infrastructure - most notably the quality of the roads and railways - is another obstacle, since it increases freight costs. Macedonia ratified the WTO Trade Facilitation Agreement (TFA) in July 2015, which is expected to further liberalize trade flows after its implementation, that is pending; and, in late 2017, the government established a National Trade Facilitation Committee in order to identify areas that needed harmonization with the TFA. Macedonia is also an observing member to the Government Procurement Agreement (GPA); and in February 2018 the government sent its bid to the WTO to upgrade its status from observer to a fully-fledged member. This process is ongoing. Macedonian main trade partners are the EU countries Germany, Italy, Greece and Bulgaria, followed by neighbors from the region, such as Serbia and Kosovo. Therefore, bulk of its trade is conducted through Stability and Accession Agreement (SAA) with the European Union, signed in 2001, and Central European Free Trade Area (CEFTA) agreement as of 2006. However, there have been repetitive problems in trade in the CEFTA region since the dispute resolution mechanism is not fully functional. The current Kosovo 100% tariffs on goods from Serbia or Bosnia and Herzegovina had a significant impact on the growth of Macedonian exports to Kosovo. There are also trade agreements with EFTA, Turkey and Ukraine. In March 2018, the government passed its “Plan for Economic Growth”, which provided substantial incentives to foreign companies operating in the 15 free economic zones (Technological Industrial Development Zones - TIDZ). These incentives have included a variety of measures, e.g. job creation subsidies, capital investment subsidies, or financial support to exporters. The central bank of North Macedonia pegged the national currency, the denar, to euro, and has kept it at practically the same level consistently since 1997. Full liberalization of the capital accounts is yet to be carried out, since there are capital controls on movements of short-term capital.