FDI in North Macedonia

Abstract

In 1991, North Macedonia became an independent state and began its political and economic transformation. The country has set forth the goal of European Union (EU) accession as a symbolic achievement marking the completion of its transition. Among the Copenhagen criteria that remain to be met is macroeconomic stability. Given its small market of just over two million and limited domestic savings opportunities, foreign direct investment (FDI) is viewed as a means to achieving economic growth. The first decade after the independence was marked by symbolic levels of FDI inflows, mainly due to the privatization process of state-owned enterprises. These came mostly in the form of mergers and acquisitions (M&As) in the services sector, by companies in a position to exploit their monopoly positions in the domestic market. During the second decade, the government drafted a new model for attracting greenfield FDI through Technological Industrial Development Zones (TIDZs). In TIDZs, foreign investors enjoy a range of tax holidays and other forms of financial concessions. This program is also intended to increase exports and stimulate reindustrialization. Despite these efforts, the level of FDI remains modest. After nearly two decades, a solution to the name dispute with Greece brings new optimism to North Macedonia regarding membership in Euro-Atlantic organizations and growth through accelerated attraction of FDI.