Project description

Title: Investment and export promotion
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Macedonia
Lead executing agency: Macedonian Ministry of Economy
Overall term: 2008 to 2012

Context

After Macedonia gained independence, it quickly became clear that the industrial sector it inherited from the Yugoslav era was not competitive. This contributed to low growth and a high rate of unemployment. It was not until 2007 that higher growth rates gave rise to the justified hope that the situation was changing significantly for the better. However, the international economic crisis put a considerable damper on economic activity, especially foreign trade and industrial production. Exports dropped, industrial production collapsed. The situation has since improved, but one third of Macedonia’s population is still unemployed.

Industrial sector jobs are at risk on account of low added value and productivity; competitiveness is based solely on the comparatively low wage level. Foreign investments are strengthening the automotive supply industry, although it still has some catching up to do to find its place on regional and international markets. A small but promising IT/software sector offers jobs with prospects that are likewise dependent on opening up regional and international markets. The textile sector needs comprehensive modernisation to be able to tap once more into its dormant potentials.

Objective

The competitiveness of Macedonian enterprises is increasing in the textiles, clothing, automotive supply and IT/software industries. Better competitiveness and increasing investments safeguard existing jobs and create new ones. Incomes are rising to European levels.

Approach

The project links promotion of investments and exports. Firstly, it concentrates on enlisting cross-industry investors from Germany and the rest of Europe. Secondly, it qualifies its partners, the Ministry of Economy and the investment agency and local authorities, to plan and implement location marketing in the context of international competition for investments.

Industries with employment development potential that are attractive for investors and are the focus of Macedonia's development strategy were selected for export promotion: the clothing, automotive components and IT/software industries. Self-help organisations in these industries as well as trade associations and clusters are being enabled to offer needs-based advisory and support services that focus on developing and expanding the export business. Participation in trade fairs and other measures to promote business contacts are also planned. German consultancy firms playing a substantial role in providing services in these three sectors are Weis Consulting Assoc. GmbH in the textile/clothing industry, ARGE PEM GmbH/CARS in the automotive components industry, and GOPA GmbH in the IT/software sector.

The project supports the Macedonian Ministry of Economy in translating its investment and export promotion policy into concrete funding instruments and in cooperating with other governmental and private sector institutions.

Results achieved so far

Directly approaching German producers at trade fairs resulted in more than 10 new export orders for the clothing industry with an annual volume of some EUR 1.2 million. Targeted restructuring measures in selected firms in the clothing industry have improved labour productivity and thus competitiveness significantly.

In the automotive supply industry a working group of suppliers in the Macedonian Chamber of Commerce was able to form a formal cluster comprising 22 companies, three university faculties, and a research and development centre.

The Chamber in the IT/software sector is already being successfully supported in developing and implementing a national export strategy for the ICT sector.

As regards generating foreign direct investments, the project contributed to realising investments totalling EUR 400,000 through Macedonia's participation in the international commercial real estate fair Expo Real 2008 in Munich.