'Real' FDI Plummets in Macedonia

Whilst headline Foreign Direct Investment was largely unchanged in the first half of 2010, once re-invested profits and funds repatriated from overseas are removed from the data, the figures shows a steep decline. In the first six months of this year foreign companies and individuals spent just  €31 million on acquisitions and 'greenfield' investments. The figure from the same period in 2009 was €132 million, data from the State Statistical Office shows. Economic analysts comment that investors are deterred by the country’s political issues, which some believe affect the economy.

“Investors don’t want to risk their money in a country that has unresolved issues with its neighbours, particularly the name dispute [with Greece],” Miroljub Sukarov, an economics professor at the Tetovo-based University of South-East Europe, says. Sukarov adds that the country also needs to continue to work on easing the ethnic tension between the Macedonian majority and the Albanian minority that led to a short lived armed conflict in 2001. The tension has since lessened, but it is still evident and affects investors' calculations of the risks of entering the Macedonian market, Sukarov explained.

The Macedonian National Bank, NBM, recently revealed data showing that the total amount of FDI in the first six months of this year was  unchanged on the same period last year- some €120 million. However, experts say this figure masks the true status as a large element of the inflows this year come from local companies reinvesting profits from overseas operations or returning cash to the country after previously withdrawing funds amid last year’s crisis.

Macedonia has invested much effort in the past few years to promote itself as a desireable business destination, cutting taxes and simplifying procedures to attract investors and offering special benefits for newly opened facilities. However, despite some encouranging early signs, many companies continue to steer clear of the country, leaving Macedonia's biggest free economic zone- Binardzik near Skopje- with only two operational factories. After celebrating record FDI of some half a billion Euros in 2008, the country ended 2009 with no more than half that figure.

News source: BalkanInsight link: article