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Trends of Agro-industry
• Economic Development
MACEDONIA, FYR
Macedonia is an upper middle income country with GNI per capita as of US$ 4,400 in 2009. Total number of population is 2
million inhabitants, of which 33 percent live in rural area, and the annual population growth is 0.06 percent. Macedonia
enjoyed economic growth between 2002 and 2008 with average real GDP growth of 3.8 percent. As a result of the global
economic crisis, GDP slightly declined by 0.7 percent in 2009. Macedonia is a small, but rather diversified economy. The
agricultural sector contributed with 11 percent of value added to GDP and employed above 18 percent of the total labour force
in 2009. The nominal and real income in agriculture from production factors per labour unit registered an increase of 7.6% in
nominal income and 15.8% in real income from production factors. Manufacturing industry generated about 23 percent of
GDP with 3.8 percent of an average annual growth, participated with about 12% in the number of active enterprises, engaged
38% of the total labor force and shared 17.8% of investments of the total GFCF. SMEs are representing 99.6% of the total
number of business entities, accounting for 65% of GDP and employing 78% of the total number of employees.
• Food and Beverages Demand
A share of total household expenditure on food and non-alcoholic beverages slightly declined to 33 percent in 2009 with a
difference between rural and urban population as of 37% and 29%. Share of alcoholic beverages accounted 1.1% and tobacco
2.3%. The highest share in food expenditures refers to meat, cereals and dairy products. Fish and seafood consumption is low.
Beer, wine and soft drinks consumption is increasing. Demand for ready-to-eat food, including sweets, cakes and crisps, as
well as high quality meat, is increasing in the capital. Since 2004 organic food production began to be developed and
supported by the national program. The organic land shared 0.14% of total agricultural land in 2009 and it was planned to
increase the area to 2% in 2011.
Food and Agriculture Organization of the United Nations
Regional Office for Europe and Central Asia
Agro-industry Outlook
The food and beverages industry plays an important role in the economy, generating MKD34.9 billion (US$ 0.82 bln), that
represents about 21.5 percent of manufacturing output with -3% of annual decline but +14% to the 2005 level. In 2009 it
employed 15.5 thousand people (or about 14 percent of manufacturing labor force) with increase by 5% to the 2008 level
working at 1’077 enterprises (or 13 percent of total number of manufacturing enterprises), most of which are private small
or medium-scale enterprises. Labour productivity increased by 12% in food production and by 22% in beverages production
compared to the 2005 level. Investments in fixed capital accounted 18.9% of manufacturing investments in 2009. The F&B
industry performance is not stable over time in terms of output and investments but stable in employment share. Important
subsectors include dairy, meat, fruits, vegetables, and wine processing. Around 80 local wineries existed in the country in
2010, with total annual production capacity of around 120 million litres, out of which the majority is intended for export.
Virticulture together with wine production contributes around 17-20% of the agricultural GDP. Generally91% belong to
processing of vegetables while the rest refers to fruit processing. R&D policy is weak with even decreasing public and very
low private funding.
Chart 1: Food and Beverages Industry Performance
Chart 2: Products Output Share, 2007
Key Economic Indicators
2011
2009
Food & Beverages Industry
2009
GDP, US$ billion
9.22
Output, % of manufacturing
21.5
Manufacturing VA, % of GDP
23.0
Value Added, % of manufacturing
22.2
Agriculture VA, % of GDP
11.0
Enterprises, % of manufacturing
13.1
Employment in Agric., % of total
18.2
Employment, % of manufacturing
13.8
Gross Fixed Capital F., % of GDP
20.8
Investments, % of manufacturing
18.9
2.7
FDI inflows, % of total FDI inflow
4.9
n/a
FDI net inflows, % of GDP
R&D, % of GDP
0.21
R&D, % of Output
Merchandise Trade, % of GDP
83.9
Net Trade, US$ billion
Merchandise Exports, US$ billion
2.69
Exports, %of merchandise exp
7.3
Merchandise Imports, US$ billion
5.04
Imports, % of merchandise imp
7.5
Global Merchandise Exports rank
116
Exports annual growth, % (2010)
-0.18
-14.7
Agro-industry National Policy Framework
National Development Programme. The key documents setting out the Government policies for
the country, agriculture, rural and agro-industry development include: (i) the Government’s Preaccession Economic Programme for 2009-2011; (ii) the National Agricultural and Rural Development
Strategy for 2007-2013 with the National Plan (IPARD Programme) and in coherence with the
national strategic objectives for EU Integration; (iii) the Industrial Policy for 2009‐2020; (iv) the
Strategy on Food Safety that strategy is in line with the EU White Paper 2000; (v) the National
Strategy of Viticulture and Winemaking Development for 2010-2015; (vi) the National Strategy with
Action Plan for Organic Agriculture for 2008-2011; (vii) the Fourth Program for Stimulating
Investments for 2011‐2014; (viii) the Public Investment Program 2009–2011.
The Agency for financial support of agriculture and rural development was granted national
accreditation by the National Authorizing Officer in 2009, as a part of the operating structure for
implementing the funds from the fifth component of the Instrument for Pre-Accession assistance from
the European Union (IPARD). For 2009 a total of EUR63.9 million was allocated to direct support
schemes and increased to EUR100 mln for 2010. During the years 2007-2009, the total amount
(EUR17.7 mln) of investments in processing and marketing of agriculture and fish products were split
up according to the priority sectors as follows: meat products – 66%, dairy processing - 20%, fruit &
vegetable processing – 11% and wine production – 3%.
A key foreign policy objective for Macedonia is to become fully integrated in Euro-Atlantic structures
through membership of the EU and NATO. In 2005 Macedonia was granted candidate country status
for EU membership, but no date has yet been set for beginning negotiations on the EU’s acquis
communautaire. Together with the UN organisations the country elaborated UNDAF for 2010-2015.
Legal Framework. Macedonia has adopted a number of laws to encourage agricultural and agro-industry
growth and rural development, among those are: the Law on Agriculture and Rural Development (2010) provides a
legal base for transposition of the relevant CAP acquis; the Law on Sanitary and Health Inspection (2007), the Law
on wine (2010), the Law on Organic Production (2004/2010); the Law on Market Surveillance (2010), the Law on
transformation of the Enterprises and Cooperatives running Agricultural Land, the Law on Industrial Property
(2009/11), the Law on Protection of Competition (2005); the Law on the One Stop Shop system.
Foreign Direct Investments
Tr ad e L i be r al i z at i o n , W TO A c c e ssi o n an d Tr ad e Per fo r m anc e
F o od S afe t y , C e r t i fi c at i o n & Qu al i t y C on t ro l
Regulation. The Law on Company, the Law on
Trade Regulation. Macedonia has a free trade regime. The legal frame of the Macedonia trade is
regulated by the Law on Foreign Trade (2004), the Law on Technological-Industrial Development
Zones (2009), the Custom Code (2011) and the Law on Customs Tariffs, integrated into Tariff
guideline 2010. Tariffs range from 0 to 30 percent with average of 7 percent and reducing and with
some food items facing a higher rate of 60 percent, such as fruit and vegetables, cereals, alcoholic and
non-alcoholic beverages, and tobacco. Excise taxes apply to wine, beer, cigarettes, mineral oils,
tobacco etc. Macedonia introduced “One-Stop-Shop” system for cross border trading.
The country has signed three multilateral FTAs (SAA with the EU since 2001 till 2011 when exchange
in both directions is duty-free, EFTA since 2001, and CEFTA since 2006) and two bilateral
agreements (Turkey and Ukraine). Regarding the market access for EU products, the SAA allows for
the complete elimination of tariffs for the non-sensitive products and the gradual liberalisation till
2011 for the mid-sensitive products.
WTO accession. Macedonia has been a member of WTO since Apr 2003 with 0.029 percent of
contribution to WTO budget in 2011. Simple average of imports duties for agricultural goods applied
in 2009 were 13.4 percent.
Trade Performance. In 2009 Macedonia had the trade balance deficit of 2.3 bln US$ in 2009. Since
2005, exports increased on average by 7.2 percent each year and amounted to US$2.7 bln in 2009
and imports registered a continuous increase marked by a peak of US$6.9 bln in 2008 before
dropping by 26.4 percent in 2009. Trade of food and beverages has been steadily increasing over
time accounting 7.5 percent of total merchandise imports and 7.3 percent of total merchandise
exports in 2009 but dropping down by about 15% in 2010. Macedonia remains a net importer of
agricultural and food products. The largest food import is meat and meat preparations, sugar,
chocolates and other products. The major exported F&B processed products are bulk wine (44%),
preserved vegetables (peppers, gherkins, cucumbers and mushrooms) and meat products (10%).
One of the large export commodities of agro-products is tobacco representing 36%.
Top destinations for F&B products: Serbia (41%), Germany (12%), Croatia (10%) and BiH (10%);
Top origins for F&B products: Serbia (28%), Croatia (8%), Greece (7%) and Germany (6%) in 2009
Chart 3: Food and Beverages Trade Performance over time
Investment Funds (2009) and the Law on
Ownership and Other Real Rights provide the legal
basis for foreign investment. Improving the
country’s investment climate has become a priority
area for the government and the Agency for Foreign
Investments and Export Promotion was establsihed.
The Central Register operates under the principle of
“One Stop Shop system” providing all services in one
place for most of the procedures required to register
the business.
FDI inflows. In 2009 Macedonia’s FDI inflows
accounted US$247 mln or 2.7 percent of GDP
declined in 3.5 times to the pick level in 2007. FDI
into F&B industry generated US$29 mln or 4.9% of
total FDI inflow in 2008. The vast majority of FDI is
directed to telecommunication, energy and retail
sectors and activities of international companies
refer to Greenfield projects, acquisition and
privatization. Among the major foreign investors in
F&B are: Balkanbrew Holdings (Greece) in beer
brewery, and the Hellenci Bottling Company
(Greece) which bottles Coca-Cola, BAT in tobacco,
Migros (Turkey) and Veropoulos (Greece) operate
supermarkets.
Macedonia has signed investment protection
treaties with 28 countries and is in negotiations
with 10 more. According to the WIR 2009
Macedonia was considered as a country having
middle relative importance in manufacturing and
low importance in agriculture that could be
considered as a changing situation according to the
.latest trends and national programmes.
Chart 4: Share of Exported Product Groups of
F&B in total exports, in 2009
Food Safety regulation. Macedonia is a member of the Codex
Alimentarius Commission and of the International Organisation of
Standardization (ISO). Issues of protection of human health in general and
in particular from food-borne risks, which come under the SPS Agreement,
are dealt with the Law on Veterinary Health (2007/11), the Law on byproducts of Animal Origin (007), the Law on Veterinary Public Health
(2007), the Law on Plant Protection Products (2007/09) and the Law on
Product Safety (2007/10) that bring the food industry into compliance
with the WTO and the EU standards and makes the HACCP system as
obligatory. Regulations on standards, technical regulations and conformity
assessment procedures were adopted in 2007. The framework legislation
is still not fully aligned with the acquis.
The Food Directorate under the Ministry of Health gained online access to
the EU rapid alert system for food and feed and the Agency for Food and
Veterinary to is in charge inform about any direct or indirect risk for
people’s health arising from the food. The Macedonian Food Codex
Commission was formed in the end of 2004. According to the Laws on
Standardization (that introduces the voluntary use of the Macedonian
standard), on Accreditation, on Metrology (2002) there were three
institutions established.
Certification. By 2009 a total of 6,011 European and international standards had
been adopted as national standards in Macedonia that restricts export activities to
the EU as it is only about 30% of total number of standards.
Quality Control. Since 2009 Macedonia begins using HACCP system as obligatory.
Yet, firms have not engaged very strongly in adopting ISO standards having only 271
firms with ISO 9001 by 2009. The international organisations (IFC, EC, WB and
USAID) support Quality and Regulatory Infrastructure Development for Food Safety
and Quality in Macedonia.
Business Environment and Competitiveness
Business Environment. According to the Doing Business Report 2011
Macedonia is making their regulatory environment more favorable to business by
implementing reforms over for all categories of doing business, it was ranked (out
of 183 economies) as 38 in 2011 (down by 2 points to 2010). Trading across the
borders is ranked as of 66, paying taxes – 33 (up by 14), protecting investors – 20,
getting credit – 46, and starting business – 5 (up by 2).
Taxation Relieving. Macedonia is in the list of top ten countries of the world
where the lowest total tax rate (10.6% of profit). The tax burden on companies
was eased by introducing e-tax service, by exempting the corporate income tax on
retained profit and by flattening personal income tax to 10%. The country also cut
VAT to 5% on a few goods, such as food, water, seeds, agricultural machinery,
fertilizers, etc. VAT is in accordance with the principles of the 6th EU VAT
Directive. According to the EU-Macedonia Stabilization and Association
Agreement, zero customs rates apply on products for export into the EU that have
Macedonian preferential origin. Companies operating in a Technological and
Industrial Development Zone are exempt from CIT and personal income tax for
employees for a period of up to 10 years from the starting day of operating in the
Zone. Macedonia is also a party to 32 double tax treaties. The VAT for food is 5%.
Competitiveness. According to the Global Competitiveness Report 2010-2011
Macedonia is at 2nd stage of development, it got 79 overall Global Competitiveness
Index among 139 countries, having the most three problematic factors as
inefficient government bureaucracy, access to financing and policy instability.
Agr o- indu str y Br ief