Minco Jordanov, Makstil - Skopje
Gligor Cvetanov, Makprogres - Vinica
Aleksandar Gecev, IGM - Kavadarci
Macedonian brands in EU
As a small economy with limited domestic absorption capacity,
Macedonian economic entities must consider the additional foreign
demand when designing their development strategies. In certain
industries the additional foreign demand becomes much more important,
even in terms of domestic consumption. At the end of 2014, Macedonian
companies exported goods and services in the amount of 4.057 million
euros. Out of this total amount, goods imported to be finalized
accounted for 979 million Euro or 24 percent of total exports of
goods and services. Besides this processing of goods, a good portion
in the structure of exports accounted for: chemical products -
catalysts 20.2 percent of total exports, 19.4 percent in metals and
textile with 18 percent of total exports. These products accounted
for 2/3 of the Macedonian exports (Table 1). Agricultural goods and
their products, which are considered as Macedonia’s comparative
advantage, accounted for 13.6 percent of total exports (food products
9.9 percent, and fruit and vegetables 3.7 percent).
As evident from the presented data, three strategies are predominant
while choosing the strategy of exporting: using the advantages of
cheap labor force and other benefits for the rework of imported
products for finalizing (24 percent of exports of goods and
services), exports of products designed and produced in the country
(about 50 percent of exports of goods and services) and the
manufacture and export of goods and services through the affiliation
of domestic companies in global corporate systems and direct
investment abroad. Some of these strategies are presented through the
experiences of three companies: Makstil – Skopje, IGM – Kavadarci
and Makprogres – Vinica.
Empirical analysis of the role and the importance
of industry of base metals as one of the leading industrial branch of
the Macedonian economy
For the first time, the Association of Metallurgy within the Economic
Chamber of Macedonia came up with objective and scientifically based
assessment and quantification of the direct impact on the GDP,
national exports, employment and opportunities for creating new jobs,
salaries, taxes and contributions as revenue accounts of the State
budget and the practices of corporate social responsibility and
behavior, which showed that the relative direct participation of the
base metal industry amounted to 5.7% and 1.4% in 2007 and 2014 in the
country's GDP, while the relative participation in the value of
industrial manufacturing it is significantly higher and amounted to
33.5% and 7.6% in 2007 and 2014. The relative share of the export of
base metals industry in the value of total exports amounted to 31.5%
and 13% in 2007 and 2014, respectively. Companies in the base metals
industry employ around 6500 employees, which would mean 3.5% of total
employment in the industry. The contribution of these companies,
through the amounts of taxes and contributions and their
participation in financing the activities of special public interest
and importance, as performance indicators for measuring the direct
impact, indicates that have disbursed to the state a total of 2.060
million and 730 million denars only in the form of personal income
tax and corporate income tax in 2007 and 2014, respectively.
Additionally, in the form of contributions for social and pension
insurance, contributions for a beneficiary working experience and
other payments to the state institutions and funds have paid 373
million denars and 609 million denars in 2007 and 2014, respectively.
If we also consider the fact that one of the main corporate values of
most of them is implementing practices of socially responsible
business behavior and active participation and support in the
realization of numerous projects of special social interest and
importance, it can be concluded that the impact of this industry for
the national economy is significant and under no circumstances can be
denied or challenged.
The mentioned study titled "Economic impact
analysis and study for studying the development potential of base
metals industry in the Republic of Macedonia", which is based on
the application of scientific methodological approach specific to
this type of analysis, only verifies this conclusion.
In the quantification of the economic impact of base metals industry
to the national economy, the multiplication effects that are
generated through the chain of suppliers and the effects of
consumption were also taken into consideration. The base metals
industry results in additional 20,000 employees in various sectors
and encourages a further round of production (through the chain of
suppliers and stimulation of final consumption in the economy), which
is reflected in increasing its contribution to the GDP for 18.3% and
an additional 4.4 % in 2007 and 2014. The greatest multiplication
effect of the added value, through reproduction links, is the supply
chain of the industry with the basic metallurgical raw materials,
energy resources, electronic parts and services, various consumable
products, wholesale and retail and the service sector understood in
it's widest meaning (finance, insurance, consultancy services,
transport and shipping services).
This is a clear argument that base metals industry
through, primarily its direct involvement, but even more through its
indirect contribution to the GDP creation, is the main pillar and a
principal sector of the Macedonian economy in the most recent period,
which logically imposes the creation of adequate industrial policies
aimed at performing the best operative results. This is yet another
strong reason for the country to follow the example of other
industrially developed countries, including EU member countries, for
this industry structure, as well as for some other influential
industries (primarily construction and agriculture), to apply a
selective approach and support for dealing with the current problems
in their work environment in these times of crisis and thus help to
overcome the key structural problems in the national economy.
MAKPROGRES – Example of successful Macedonian
export oriented company
Makprogres LLC Vinica is a successful family company which exists 25
years and today it is one of the largest food industries in the
country and the largest exporter of food products for several years
now. Makprogres products are placed on the market in 50 countries
worldwide. Two factories and eight production lines produce more than
15,000 tons of food products annually. Vinchinni products and
Vinchinni Finest are sweets confectionery products which are
characterized with a rich taste, high quality packaging, constantly
follow the needs, desires and requirements of consumers worldwide
concerning weight and appearance, the products of salty snacks under
the brand name Armonia complementing the rich portfolio of products
and lastly Sonceva Dolina and Natura which contŠ°in a wide range of
granular and powdered products necessary in every kitchen, as well
breakfast cereals and health food products.
Being a Macedonian exporter is a major challenge and satisfaction,
the country is a region where all the conditions for quality and
healthy food are met, the area where people are gourmands and an area
of clean nature and abundance of sunlight. There are no boundaries
for nicely packaged and properly presented high quality products sold
at a competitive prices. In 2015, 500 Makprogres employees achieved
export of approximately 17 million euro, which is around 75% of the
company’s production. The largest export partner are the EU
countries, which account for 54% of the exports. Apart from the
traditional markets of Central and Southeastern Europe, the company
has distributors in some of the Arab countries and the MAGREB member
states. Initial contacts were established in 2002, on the SIAL food
fair in Paris where Makprogres products were introduced for the first
time at a large world fair. Pretty soon, the company was familiarized
with the mentality and needs of the foreign consumers and traders, so
the products and packaging were adjusted for easier market access.
The company has worked
on the objective to sell Makprogres products regionally and
internationally, so they would be found on the shelves of major
supermarkets in developed countries. The export to numerous states
was also awarded with a prestigious and very valuable recognition
from the Economic Chamber of Macedonia for an exporter that has
exported in biggest number of countries.
In the efforts to
manufacture international products intended for export, it is crucial
to respect systems and quality standards such as: HACCP, ISO9001:
2008, Kosher and Halal, as well as IFS and BRC standards, as the most
important standards for export to EU countries.
Regarding the
conditions of conducting business, the fixed exchange rate against
the euro, low taxes and social contributions, the Republic of
Macedonia is a great place for running any business. The access to
markets without customs of countries that have concluded free trade,
including all the countries of EU, CEFTA, EFTA, are additional
advantages of the country.
Makprogres strives to
ensure the growth of production and revenues through the development
of all current markets and access new markets. To meet this objective
Makprogres tirelessly invests in new production facilities and
production lines. In 2015 the investments exceeded 4 million euros
and with the medium-term plan 2016-2020 there are planned 10-15
million euros in additional investment.
If I were to answer the
question “How to export more?” my answer to that question would
be a combination of:
- First and foremost - to have a competitive offer: quality at reasonable price;
- To apply international design products;
- To have a regular presence in markets;
- To give established marketing support to the distributors;
- To take part in the world's most important food fairs and confectionary.
IGM acquisition of ALPOS – how Macedonian
companies are expanding to EU markets
The economic slowdown of developing countries,
most notably China, as the largest producer and consumer of steel in
the world, has massive influence over the global steel prices.
Decreasing consumption, combined with the excess supply in China,
leads to a saturation of the Chinese domestic market and even greater
focus towards exports as a solution to the crisis. The overload of
the European market which cheap steel imports in the last couple of
years, results in the erosion of the South/North price divide, which
is traditional for the European steel industry. In the past, these
price discrepancies allowed for profitable sale of steel products
from Macedonia to the countries of Western and Northern Europe in
spite of the large transport costs. Even though transport costs are
decreasing, their share in the final sale price increases resulting
in reduced export competitiveness. In such a scenario, the strategy
of IGM is to get closer to its European clients allowing the company
to tap into the huge potential of the European market. Increasing the
market share in EU countries is the main motive behind the
acquisition of a production facility in Slovenia, an EU member-state
since 2004.
The use of a simple SWOT analysis is a short and
elegant way of describing the economic feasibility of investments
abroad: S – Strengths, W – Weaknesses, O – Opportunities, T –
Threats. Primarily the focus is on the positive aspects:
Strengths: The participation of the steel industry
in every economy is characterized by a vast number of direct and
indirect jobs. Because of the strategic role and wide influence of
the industry, the policy makers are inclined to support the industry
when it is threatened. Politically-motivated protectionist measures
despite Europe’s neo-liberal stance and its role in globalization
can be regularly witnessed. In the segment for steel welded pipes,
Macedonia was previously subject to antidumping investigation with
potential catastrophic consequences. Such investigations continue to
be a real threat, but it can be completely eliminated only if
production is moved to an EU Internal Market member country. Apart
from the economic obstacles, there is also a certain degree of
skepticism in EU towards the Balkan countries. Experience shows that
many companies still doubt and perceive the quality of Macedonian
products as inferior in comparison to Slovenian products, whose
brands are based on tradition and quality.
Opportunities: For IGM, the main opportunity comes
from the geographical position of Slovenia, its closeness to Germany
and to the other equally attractive markets of Central and Eastern
Europe. The annual consumption of steel welded pipes and profiles in
Germany is estimated at around 450 million EUR. In comparison, the
export of steel pipes from Macedonia to Germany is a modest 10,4
million USD or around 2% of the total consumption in Germany. As a
comparison of trade relations with Germany, in 2013 the yearly amount
of metal exports from Slovenia to Germany is 877 million USD, while
the total amount for Macedonia is 10 times lower and stands at 87,5
million USD. Apart from the strong export channels, another
opportunity for growth comes from the availability of a developed
infrastructure and transport network used for import of raw
materials. Slovenia offers connections to a number of strategic
ports: Koper (Slovenia), Rijeka (Croatia), Monfalcone (Italy),
Trieste (Italy), which is a totally opposite situation to our region
where Thessaloniki port enjoys huge monopoly power. Equally important
are the following opportunities: long tradition of high-quality,
value-added production, transfer of knowledge, opportunity to climb
the technological ladder to the level of the Italian competitors.
WEAKNESSES: Slovenia is in the group of developed
countries with GDP per capital of 21.308 USD and average net salary
of 1.092 EUR per month. In comparison, the average net salary in
Macedonia is equal to 22.213 denars or 361 EUR per month. The
differences in gross salary are even greater due to the high degree
of welfare in Slovenia, which additionally increases the labour
costs. Furthermore, slow and bureaucratic administration with lots of
red tape, strict building regulations, strict environmental
regulations can also be considered as weaknesses.
THREATS: In order to balance out the effect of the
high wages, it is vital to establish an organizational structure for
increasing labour productivity. It is also significant to achieve
high degree of utilization of production lines. In other words,
through the employment of high-skilled personnel, continuous
investment in human capital and modernization of production lines,
IGM plans to achieve high operational efficiency. If these conditions
are not met, than costs can easily overrun, which is a potential
future threat.
Table 1:
|
1.
|
954
million USD (20.2%) * of which 828 million USD accounted for
catalyst
|
|
|
2.
|
Metals
|
915
million USD (19.4%)
|
|
3.
|
Textiles
|
833
million USD (18%)
|
|
4.
|
538
million USD (11.4%)
|
|
|
5.
|
Food
products
|
466
million USD (9.9%)
|
|
6.
|
Minerals
|
336
million USD (7.1%)
|
|
7.
|
Fruit
and Vegetables
|
174
million USD (3.7%)
|
|
8.
|
Footwear
and hats
|
102
million USD (2.2%)
|
|
9.
|
101
million USD (2.1%)
|
|
|
10.
|
Transport
|
65.7
million USD (1.4%)
|
|
11.
|
Stone
and glass
|
40.4
million USD
|
|
12.
|
Products
of animal origin
|
30,9
million USD
|
|
13.
|
23.2
million USD
|
|
|
14.
|
Fur
industry
|
22.5
million USD
|
|
15.
|
Paper
products
|
19,7
million USD
|
|
16.
|
By-products
of animal and vegetable origin
|
10
million USD
|
|
17.
|
7.43
million USD
|
|
|
18.
|
Precious
metal
|
5.56
million USD
|
|
19.
|
Art
and antiques
|
1.95
million USD
|
|
20.
|
Weapons
|
473,000
USD
|
|
21.
|
Other
|
74
million USD
|
|
4.72
billion USD (2013)
|
||
Table 2. Most significant Macedonian export industries/products
