Skopje, the capital of Macedonia, is in the midst of a transformation. The noise of excavators and heavy-duty trucks has become a familiar sound in the city centre as structures, including an eight-storey-high monument of Alexander the Great and a neoclassical building housing the country's national museum – the Museum of Macedonian Struggle – are constructed as part of the government’s revitalisation project 'Skopje 2014', aimed at giving the city a more classical appeal by 2014.

The government has also been taking steps to revitalise the country's economy. When prime minister Nikola Gruevski was elected in 2006, Macedonia's unemployment rate was nearly 40%, its GDP per capita was one of the lowest in Europe and the country ranked 81st in the World Bank's Doing Business ranking. By 2012, the country had accelerated into 23rd place in the ranking, just behind Germany and ahead of Japan.

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Its FDI efforts have also witnessed much improvement. In 2012 alone, Skopje recorded a 900% year-on-year increase in inward FDI projects, one of the highest increases in the world, according to greenfield investment monitor fDi Markets. In the same year, Macedonia witnessed the second largest year-on-year growth in inward FDI globally.

Good connections

Macedonia's appeal is down to a combination of factors, according to the country's minister for foreign investments Vele Samak. ”In manufacturing, Macedonia offers Chinese-level wages with German quality of production. In shared services, the country offers Indian-level wages and European cultural proximity,” he says.

With a population of just 2 million people, the country's domestic market is relatively small but, according to Mr Samak, Macedonia is an attractive option for companies looking to nearshore production for European markets thanks to its position on two of Europe's main transport corridors.

The country also offers duty-free access to about 650 million customers, thanks to its membership in the World Trade Organisation and the Central European Free-Trade Agreement, as well as its free-trade agreements with Turkey and Ukraine. Its adoption of the Stabilisation and Association Agreement also grants products that are manufactured in the country customs-free access to the EU.

Moreover, Macedonia's integration into the EU goes beyond trade agreements. The country is an EU candidate state and, although factors such as the dispute with Greece over Macedonia's name are likely to prevent it from joining in the near future, the country already applies EU standards when it comes to competition, procurement and corporate governance.

”Investing in Macedonia is similar to investing in the EU, but at a fraction of the price,” says Viktor Mizo, CEO of the Directorate for Technological Industrial Development Zones (Dtidz), which manages the country's economic zones.

Tax breaks

Dtidz's network of four economic free zones showcase how far Macedonia goes to attract foreign investments. These free zones offer incentives, including a 10-year tax holiday, exemption from utility taxes, free land building permits and financial help of up to €500,000 to cover construction costs.

The country's tax policies are also highly attractive to investors. A flat personal income tax rate of 10% is one of the lowest in Europe and, since 2009, companies registered in Macedonia do not have to pay tax on retained earnings, while real estate taxes do not exceed 5%.

The country also has the necessary mechanisms in place to assure investors that their capital is safe. Macedonia has signed 30 bilateral investment agreements and the country’s constitution guarantees the free transfer and repatriation of capital, while legislation grants equal treatment to foreign and domestic companies.

"The government supports business and the country’s legal system reflects that,” says Filip Ruben, a junior partner at Mens Legis, a Skopje-based law practice that has worked with international companies such as Siemens, Fiat and McDonald's. Apart from Mens Legis, foreign investors can also access the services of global tax and law practices such as KPMG, PricewaterhouseCoopers, Ernst & Young and Grant Thornton, which all have a presence in the country.

Helping hand

In 2004, the country established Invest Macedonia, a governmental agency charged with promoting exports and investments in Macedonia. The agency's CEO, Visar Fida, says that it provides a wide range of services through its grapevine of 25 economic developers working within Macedonian embassies around the world.

"The agency’s task is to work closely with potential investors to understand their investment projects, arrange an appropriate itinerary for them to visit Macedonia and to work on their behalf with governmental authorities to enable the fast start-up of operations. In this respect, the agency basically functions as a full-scale consulting agency, which offers its services free of charge,” says Mr Fida.

As well as Invest Macedonia, foreign investors can also receive help from the Foreign Investors Council (FIC), a body within the Economic Chamber of Macedonia. "It is important to keep the dialogue going between private sector and government entities and that is what we are doing,” says Ljubica Nuri, FIC’s high counselor of the management board. "But we also want to be a place where businesses get to know each other and find new platforms of co-operation."

Although FIC has just three full-time employees, it has 98 corporate members and aims at being the focal point for the country’s business community.

Community spirit

Eser Cevahir, the general manager of Turkish construction and investment group Cevahir Holding, is one of the newest members of the the country's business community. In June 2012, Cevahir started the construction of a complex comprising four 42-storey-high residential buildings and a shopping mall, in Skopje.

"Getting the project up and running was not difficult and in most cases we could rely on the local supply chain and workers,” says Mr Cevahir. He is bullish that the $365m investment will bring returns, so much so that the company has already acquired another plot of land in Skopje.

It is not just the country's authorities that are welcoming this influx of new investment. Ajdovan Ademoski, one of the most successful businessmen in Macedonia, believes that more businesses are needed if the economy is to reach its full potential. "We need more investments and proof that people can be successful here,” he says.

Mr Ademoski is also in the process of developing a residential complex as well as finalising an agreement with a major international hotel operator. This puts him in direct competition with Cevahir, but this does not worry him. "I am not afraid of the competition," he says. 

According to Mr Ademoski, competition is a sign that the economy is growing and that Macedonia is becoming an increasingly attractive place in which to invest.