NEWSLETTER, JUNE 2008

Macedonia entered the Reformers’ Club

The Prime Minister Nikola Gruevski and the Deputy Prime Minister Zoran Stavreski, on June 4th, in New York on behalf of the Macedonian Government, have received the annual acknowledgement from the World Bank for the acquired fourth place on the ranging list of top 10 reformer countries in the world according to the Doing Business 2008 report.

The highest recognition that Macedonia got from the World Bank in the sphere of implemented reforms for improvement of the business climate refer to the progress in terms of the tax reforms, business registration, the regulatory guillotine, the customs reforms and the accelerating of the procedures for issuing construction licenses.

At the festive promotion for awarding prices to the ten top reformers, the Prime Minister has presented the economic politics and the successful reforms that the Government implements, and he also mentioned the new ideas for reducing the salary contributions for 1/3 from the current imposts. Otherwise, the Prime Minister has also spoken about the measures that the Government is working on in the remaining segments for doing business such as: reforms for improving the efficiency of the Cadastre and property registration, judicial reforms and accelerating the procedures for executing contracts, resolving receivership procedures and simplifying the procedures for starting a company.

The event took place at the New York Stock Exchange where attended Government representatives from the remaining 9 countries proclaimed for top reformers. Among the attendees were also representatives of well-known American companies – members of the Fortune 500 list, among them General Electric, Cisco, Pfiyer, 3M, Citi Bank, Merill Lznch, Deutsche Bank, UniCredit Group, Credit Suisse, as well as representatives of American business associations, international financial institutions, NGO-s, universities, media, as well as political and lobby circles from the USA.

The awarding of this prize meant entering the Reformers’ Club for Macedonia, jointly with the top world reformer leaders. The International Finance Corporation (IFC), member of the World Bank, leads the Club.

According to the new Doing Business 2008 report of IFC, organization that is a part of the World Bank, top reformer country is Egypt. Egypt has the biggest progress on the list because of the far-reaching reforms last year. Following Egypt, leader in the region is Croatia. This year Macedonia is on the 75-th place, which is a progress for 21 places on the list. Singapore again holds the first place, as a country where doing business is very simple.

The Doing Business 2008 report is fifth in the row annual report of the World Bank which is dedicated to the research of the regulations that promote and restrict the business.

Improvement of the business climate for domestic investments

Reducing the employment contributions that are extremely expensive and tax exemption of the unallocated profit are one of the key segments in which the Government should intervene in order to create conditions for an improved business climate in the country. The Macedonian businessmen – participants in the workshop “Business planning” that took place in Bitola, on June 5th, pointed out this conclusion.

“A period of several years is required for an investment. That is why it is urgent to intervene in certain segments of the economy. In that context, I would mention the more efficient judiciary in terms of resolving the economic proceedings, such as payment, meeting the contract requirements etc. Another hurdle is the Cadastre”, warns Vladimir Matevski, coordinator of the Macedonian chambers of commerce. The Macedonian chambers of commerce already educate the domestic businessmen in terms of optimal use of the EU pre-accession funds.    

“The idea is jointly with the local self-government to animate the businessmen and to enable access to the European funds”, stated Ljupcho Gruevski, president of the Business Club. The workshop was initiated by the Business Club from Bitola and was financially supported by the British embassy.   

 
“Lukoil” plans to enlarge in Macedonia

At the meeting that took place in the margins of the Economic Forum in Saint Petersburg, the president of the company Vagit Alekperov has informed the Macedonian president Branko Crvenkovski that “Lukoil” plans to widen its activities in Macedonia. The president of “Lukoil” has informed the president Crvenkovski for the investment activities of the company, especially in the Balkan countries, including Macedonia. The president Crvenkovski has apologized for the administrative hurdles that “Lukoil” had to face in the beginning which have caused slowing of the planned investment realization. The Macedonian president has supported the development plans for “Lukoil” in our country and expressed expectation that the investments will be completed at an accelerated pace. He underlined the fact that our country needs investments, especially from well-known investors who have the potential to make a contribution to the economic development of the country.

 

The third group of economic promoters departs

At the end of June from Macedonia departed the third group of economic promoters. Their destinations are Germany, France, Norway, Denmark, Sweden, Finland and the Baltic countries, then Russia, Ukraine and Kazakhstan, Bulgaria and Romania, Israel, Jordan and Egypt, China, Hong Kong, Korea, Japan, India, Malaysia, Singapore and Australia. Including this group, Macedonia will have overall 18 promoters abroad who should help in the process of attracting foreign investments.   

The first two groups have already made several visits in different companies, but the director of the Foreign Investments Agency, Viktor Mizo, says that there is still no final decision from the companies, due to the short period of time. But according to Mizo there is an interest and jointly with the activity of the two Ministers of foreign investments, now, there is an enhanced possibility for contacting the companies and representing the advantages of investing in Macedonia.   

The promoters had a six-week training. Among the instructors were EU-consultants and a consultant from the English Government. The electoral procedure of the candidates is transparent, emphasizes Mizo.


High Level Group to boost competitiveness of the agro-food industry

The first meeting of the High Level Group (HLG) on the Competitiveness of the Agro-Food Industry in Brussels on June 12th has helped to pave the way to boosting the performance of this important sector in Europe. The group, chaired by European Commission Vice President Gunter Verheugen, includes Commissioner for Agriculture and Rural Development Mariann Fischer Boel, Commissioner for Consumer Protection Meglena Kuneva, Commissioner for Health Androulla Vassiliou and senior policy makers from the public and private sector. Their task is to identify and address issues that determine the competitiveness of the Agro-Food industry and to formulate a set of recommendations to achieve predictable and stable framework conditions for years to come.
European Commission Vice President, Gunter Verheugen, responsible for enterprise and industry policy, said: "The European agro-food industry is an important sector, driven by thousands of highly innovative and dynamic small companies. High quality food at affordable prices is of key importance for consumers and the agro-food industry in Europe. Together we will identify and discuss the fields which need extra attention to increase the competitiveness of the industry and meet the expectations of citizens.”

The European food industry is an important sector which spans a wide range of economic activities. This industry is characterised by a complex value chain, which links the procurement of agricultural raw materials, through their processing, up to final presentation to consumers.

This initiative is a follow-up of the Conference “Promoting the leadership of the Agro-Food Industry'' in November 2007, organised by the Directorate General Enterprise of the European Commission.

Priority topics for the HLG are, amongst others: competitiveness issues, needs for innovation and research & development, sustained support for small and medium sized enterprises (SMEs), simplifying food legislation while ensuring a high level of food safety, new means of sustainable production, multilateral and bilateral trade agreements and ways to overcome the food price crisis and its effects on the food chain.

The food and drink industry is one of Europe’s most important and dynamic industrial sectors. It is made up of about 280 000 companies, over 90% of which are SMEs, and provides jobs for 4 million people. The European food industry is number one industry in terms of turnover (around 800 € billion).

 

Memorandum of the Macedonian business community

“Work hard” – was the recommendation of the EU-ambassador Erwan Fuere for the Government. In his address at the presentation of the Memorandum of the Macedonian business community that took place on June 24th in the hotel “Aleksandar Palace”, under the slogan “What the economy needs for a better future”, Fuere emphasized that the new Government composition should demonstrate stronger political will and capacity to pursue the reforms. He also underlined that the Government should be open for the recommendations of the business community and should accept its criticisms.

According to the EU-ambassador, Macedonia should yet work on the judicial reforms, the combat against corruption, the improvement of the efficiency of the public administration and its liberation from political influences, acceleration of the cadastral procedures for property rights and in this regard strengthening of the capacity of the municipalities. All of that is a benefit for the improvement of the business community who is an important critic for the work of the Government. “It is in the interest of the Government, but also it is its responsibility to pay attention to the proposals and suggestions of the businessmen” – stated Fuere. 

The Macedonian businessmen should take the matters in their own hands, considers Bernard Valero, ambassador of France in Macedonia. He emphasized that an open dialog and cooperation between the business community and the Government in terms of higher economic growth is essential. Valero qualified the Memorandum as an outstanding initiative which demonstrates that the things are heading in the right direction.    

“The interest of the French companies to invest in Macedonia has enhanced. Thereby, they want to know the answer of three key questions, before reaching a decision: what kind of legal protection is guaranteed for their investments, how does the administration function and what kind of taxes, imposts and social transfers exist. I am an optimist, because there already has been an interest for investments. I would refer to the French Societe Generale in Ohrid Bank and the announced investment of “Montipe” in “Bunargik”, that is 150 million euros worth, as examples.” 

He highlighted that as soon as France takes over the EU presidency on July 1st, it will set out 3 priorities for the economies of the Member States of the Union, as well as for the membership candidates such as saving energy and seeking renewable energy resources, environmental and climate protection, as well as measures in the agricultural policy in terms of enhanced food supplies.

According to Gunter Offner, president of EBA, nine chambers of commerce and business associations have prepared the Memorandum. 90 % from the domestic companies are members in these chambers and associations which confirms the fact that the business community is interested in enhanced cooperation and support from the Government.   

Although the Prime Minister Nikola Gruevski was invited at the presentation of the Memorandum in order to hear the recommendations, he did not show up at the event. The minister of economic affairs, Vera Rafajlovska, was representative of the Government and she spoke on the achieved reforms and measures.

The Memorandum aimed at achieving a higher rate of employment, additional economic growth, enhancement of the companies’ competitiveness, support of the EU integration process etc. In this regard the businessmen seek: increased communication with the Government, joint consulting in terms of the laws from the business sector, professional public administration, introducing one-stop-system where everything is possible, more efficient use of the foreign subsidies, modernization of the Employment Law, protection of copyrights, reducing of the bureaucratic hurdles that impede the business, as well as the completion of the Corridors 8 and 10.  

Major boost for trade in goods between EU Member States

The internal market for goods in the European Union got a major boost after the final approval by Member States on June 23rd of a broad package of measures which removed the remaining obstacles in this field. It brought particular benefits for small and medium sized enterprises (SMEs) and they will no longer be discouraged from doing business outside their domestic markets. Existing market surveillance systems for industrial products will be strengthened and aligned with import controls. These measures will reinforce the role and credibility of CE marking. In addition, trade in goods which do not fall under EU- legislation will be improved. From now on a Member State that intends to refuse market access will have the duty to talk to the enterprise and to give detailed objective reasons for any possible refusal, making life for companies easier. The package of measures will have an impact on a large number of industrial sectors, representing a market volume of around € 1500 billion a year.

Commission Vice-President Gunter Verheugen, responsible for Enterprise and Industry, including the internal market for goods, said: "Today’s approval represents a major step forward in the completion of the single market, as these measures will give the biggest boost to the internal market since the so-called Delors package of the early 1990s. The package will make it easier for companies, particularly small enterprises, to sell products in other Member States, whilst maintaining high levels of safety. The internal market for goods is a cornerstone of Europe’s competitiveness. I therefore welcome the agreement by the Member States.''

The package assures a smoothening of the internal market for goods and strengthens and modernises the conditions for placing a wide range of industrial products on the EU market, as it:

Introduces better rules on market surveillance to protect both consumers and professionals from unsafe products, including imports from third countries. This particularly applies to procedures for products which can be a hazard for, health or the environment for instance, which in such a case will be withdrawn from the market;
Enhances the confidence in the assessments of products through reinforced and clearer rules on the requirements for notification of conformity assessment bodies (testing, certification and inspection laboratories) including the increased use of accreditation; a reinforced system to ensure that these bodies provide the high quality services that manufacturers, consumers and public authorities need;
Enhances the credibility and clarifies the meaning of CE marking. In addition the CE marking will be protected as a community collective trade mark, which will give authorities and competitors additional means to take legal action against manufacturers who abuse it;
Establishes a common legal framework for industrial products in the form of a toolbox of measures for use in future legislation. This sets out simple common definitions (of terms which are sometimes used differently) and procedures which will allow future sectoral legislation to become more consistent and easier to implement.

The package also strengthens the internal market of a wide range of other products, which are not subject to EU harmonisation, such as various types of foodstuffs (for example bread and pasta), furniture, bicycles, ladders and precious metals, etc. Together they represent more than 15% of intra EU trade in goods. These products are very often subject to many different national rules laying down the requirements that these products should meet. Until now, the differences between these rules in many Member States discouraged companies, in particular small and medium enterprises, from venturing outside their domestic market because they had to prove that their products comply with the technical rules in other Member States. Other companies were obliged to make expensive and often unnecessary adjustments to their products so that they became also more expensive for the consumers.

The package adopted on June 23rd should eliminate many technical obstacles and should make the marketing of goods in other Member States easier. A national technical rule should no longer prevent that a product already lawfully marketed in one Member State could be sold on the market of another Member State. When a Member State intends to refuse market access, it will have to give precise and detailed objective reasons for doing so and it will have to give the importing company the opportunity to react before a final decision can be taken. This shifting of the burden of proof will save companies high unnecessary costs. Another new innovation is that Product Contact Points will be established in all Member States. They will provide information on national technical rules, so that enterprises, in particular SMEs, can obtain reliable and precise information about the law in force in the Member State where they intend to sell their products.

 
"Think Small First": A Small Business Act for Europe

Most jobs in the EU are provided by Small and Medium Sized Enterprises (SMEs), companies of 250 employees or less. They have a crucial importance for the future development, but very often face enormous bureaucratic hurdles and obstacles. European SMEs deserve to be better assisted to fully unlock their potential of long-term sustainable growth and of more job creation. To achieve this goal, the European Commission has unveiled the Small Business Act for Europe (SBA) on June 25th, based on ten guiding principles and proposes policy actions to be undertaken by both the Commission and Member States.

Commission President Jose Manuel Barroso said: "Today's Small Business Act is a step towards a Europe of entrepreneurs, with less red tape and more red carpet for Europe's 23 million SMEs. It aims to help small businesses to thrive and to give the best ones a launch pad to grow into world-beaters. The Small Business Act is a crucial milestone in the implementation of the Lisbon Strategy for Growth and Jobs. It will mean more responsive public administrations, less late payment of invoices, access to more help with finance, innovation and training, lower VAT for services supplied locally and better access to public procurement contracts. The package will also give SMEs access to a European Private Company Statute to cut bureaucracy and increase clarity"

Commission Vice-President Gunter Verheugen, responsible for enterprise and industry policy, said: “Entrepreneurs and entrepreneurship are of enormous importance for our societies. Today and even more so tomorrow small and medium sized enterprises will provide for professional education and employment opportunities. Caring about SMEs means therefore caring about present and future jobs in the EU. Therefore it is high time that an SME friendly policy becomes mainstream policy in the EU. The Small Business Act is driven by the "Think Small First principle" and brings the full weight of EU and its Member States behind small companies. Together we can deliver."

European Investment Bank (EIB) President Philippe Maystadt, added: "The analysis of the Commission confirms the conclusions of the EIB's own consultation exercise: small and medium-sized enterprises well-being and growth will be key to Europe's future competitiveness. The market alone is unable to provide sufficient and appropriately priced finance for SMEs, in particular for high growth, innovative businesses. The EIB Group will therefore seek to address gaps in the market by broadening the scope of its financing."

The Commission is proposing a genuine political partnership between the EU and the Member States reflecting the political willingness to recognise the central role of SMEs in the EU economy and to put in place for the first time a comprehensive policy framework for the EU and its Member States. The SBA proposal goes hand in hand with the recently announced plans of the European Investment Bank Group to simplify, modernise and diversify the range of its instruments to support SMEs.

At the heart of the SBA is the conviction that achieving the best possible framework conditions for SMEs depends first and foremost on society’s recognition of entrepreneurs, including crafts, micro-enterprises, family owned or social economy enterprises, and making the option of starting one’s own business attractive. This means that the rather negative perception of the role of entrepreneurs and risk-taking in the EU must change.

The European Small Business Act sets out 10 principles that should be adopted at the highest political level and concrete measures that will make life easier for small businesses. After consulting with businesses and their representatives, the European Commission has also resolved to propose new legislation in four areas that particularly affect SMEs:

First, a new General Block Exemption Regulation on state aids will simplify procedures and reduce costs. It will increase the aid intensity for SMEs and make it easier for SMEs to benefit from aid for training, research and development, environmental protection and other types of aid.

Secondly, a new statute for a European Private Company will allow a "Societe privee europeenne" (SPE) to be created and operate according to the same uniform principles in all Member States. It has been designed to address the current onerous obligations on SMEs operating across borders, which need to set up subsidiaries in different company forms in every Member State in which they want to do business. In practical terms, the SPE would mean that SMEs can set up their company in the same form, no matter if they do business in their own Member State or in another. Opting for the SPE will save entrepreneurs time and money on legal advice, management and administration.

Thirdly, a new proposal on VAT will offer Member States the option to apply reduced VAT rates for locally supplied services, including labour intensive services, which are mainly provided by small and medium enterprises.

Lastly, an amendment to the directive on late payments is foreseen in 2009 to help to ensure that SMEs are paid within the 30 day time limit stipulated.
10 principles shall guide the conception and implementation of policies at EU and Member State level, such as granting a second chance for business failures, facilitating access to finance and enabling SMEs to turn environmental challenges into opportunities.

In addition to the standing commitment to cut administrative burden by 25% by 2012, the time needed to start a new company should be no more than one week, the maximum time to obtain business licenses and permits should not surpass one month and one-stop-shops should assist to facilitate start-ups and recruitment procedures.

Where practical, the Commission plans to use concrete dates in a year for the entry into force of regulations/decisions affecting business. Member States are invited to consider similar measures.

The SBA includes an ambitious set of measures to allow SMEs to fully benefit from the Single Market and expand into international markets by orienting more resources to small companies' access to finance, Research & Development and innovation. They will also make it easier for them to participate in the standard-setting process, win public procurement contracts and turn environmental challenges into business opportunities.

Finally, the SBA seeks new ways to stimulate interest in entrepreneurship and cultivate a more entrepreneurial mindset, especially among young people. Young people, who want to start up a business, can now gain experience by spending time in an SME abroad via the just launched “Erasmus for young entrepreneurs” programme. This will help upgrade their skills and contribute to the networking among SMEs in Europe. Similar mobility programmes are also underway for apprentices.

The SBA is fully embedded in the Growth and Jobs strategy. Member States are invited to take advantage of the update of the Lisbon cycle 2008 to reflect the SBA in their National Reform Programmes.

Background

Although 99% of companies in the EU are SMEs (companies with a maximum of 250 employees and a maximal turnover of € 50 million), most legislation and administrative procedures don’t distinguish on the basis of company size. As a result, 23 million SMEs often have the same administrative requirements as Europe’s 41,000 large companies. During past years SMEs have created 80 % of the new jobs in the EU.