Foreign Investment and Macedonia with Minister Jerry Naumoff

Source: GeniusDen archive transcript checked against the recording. Administrative opening and closing material is omitted; the presentation wording is otherwise preserved with light readability edits.

I know some of you know where Macedonia is, one gentleman here had the pleasure of going this past August with Spiro, and he found out for himself how beautiful Macedonia is. But growing up in the States and telling people your family is from Macedonia, nobody really knows unless you're from Detroit or Cleveland or Chicago or Gary, Indiana, or these areas where a lot of us are in Toronto, actually. But I have to show this to a lot of people so they know where we're at. At least we know where Italy is and we're very close. But the point is that Macedonia historically, we are in the crossroads between Europe and Asia. And from the time of Alexander this was a huge advantage. But now we're turning this strategic location right here as an economic advantage for companies to enter into Europe through Macedonia.

I'm going to talk about the financial advantages of doing business in Macedonia, our quality workforce which I think is our best asset and the location. I already mentioned some of my colleagues in the government that have been educated, have lived in and worked in America and are now in the government at the cabinet level. This is basically my whole presentation on one slide. I'm going to go into each one of these in detail but this is sort of a summary of everything. We have the lowest operating cost in Europe and by the way my biggest problem is that not too many people know about Macedonia. We don't have a big budget. That's why we have extremely low debt which I think is also the reason why we have great economic growth.

We just don't have the budget to get this message out so we have to be very strategic and working with people like Jim and having our local economic promoter, Zoritza so you have someone from our government right here in Dallas so we have someone here from our government. We have 30 like Zoritza. We have five or six in the United States alone, three in Germany in the countries that you can imagine. We have to get this message out and we have to do it in a very smart and strategic way. Our workforce, I'm going to go into detail why our workforce is so talented and so educated because again this is one of our strongest strengths. We did something very unique that I doubt many governments have done. We put the protection of foreign investors in place so if a company from Texas invested in Macedonia, they will set up their company in Macedonia and have their rights protected in our constitution.

We did this so that some crazy political party can't come into power and change the rules of the game for foreign investors. We did that when our prime minister came into power in 2006. I'll explain what those are in a second. We have the most competitive tax-free manufacturing zones in all of Europe and I'm going to talk about that in detail. But we are creating three new ones, a financial headquarters zone. We had that approved by our government. We passed the law to have one zone where companies can set up with no taxes, a financial headquarters. Brussels didn't like that. It doesn't matter. We're going to do it anyway but we're hugging them and making sure they're comfortable with it. Western Europe isn't so keen to pro-business policies. So since we're an EU compliant country, we are trying to be nice with them to get them to understand that this is very good for us and our unemployment and therefore will be good for everyone else.

We're going to have a medical city like in Dubai, a free medical zone and we're going to have about 12 tourism zones that are coming. But I'm going to focus tonight on the manufacturing zone. Commercial buildings. Unfortunately when we got our freedom from Yugoslavia, almost overnight our manufacturing industry collapsed because the markets collapsed and there was a lot of chaos in that transition. We're left with about 400 empty factories and what our government has done is we've identified those factories and we make those available for foreign investors. So if you don't want to build a new factory in one of our tax-free economic zones, we'll provide you with one of these buildings and I would say out of 400, 300 I wouldn't show you but 50 to 75 or so are ready to go.

They might need some lipstick, they might need some support but we're going to provide incentives just as if you would go into one of these free zones, if you want to go into one of these brownfield buildings. Johnson Controls, one of the largest companies in America, and Lear Corporation, also a huge company, they decided on a parallel strategy. To get the best tax advantages, they decided to build new factories in our manufacturing zones but they didn't want to wait so we put them in an empty factory. One was a textile factory, I can't remember what the other one was but they started right away in one of these empty factories. [unclear]. It took 12, 13, 14 months to build the factory; they had already brought their equipment, hired people, trained them and were actually producing. So when the factory was ready a year and a half or 14 months later, they just lost one day over the weekend to move everything.

But that was an excellent strategy. We overcame being a small country, we're a small country, don't think of Macedonia as a great place to come and sell something because there aren't a lot of people, we don't have a lot of money and frankly we're a little bit cheap but we overcame being small because we signed free trade agreements with every single country in Europe, the ones in the EU and also the ones not in the EU and it also included Ukraine and Turkey. So if you make something in Macedonia and you export it, you can export it with free trade to 650 million customers, a market that's almost twice the size of the United States. And that's why Johnson Controls and Lear Corporation and many other famous companies are coming in.

Depending on the size of the investment, we can provide very attractive financial incentives depending on the size, the number of employees, the type of training that they're going to do; we will come up with a very, very attractive incentive program. And I'm going to mention, besides success stories, I'm going to mention our secure macroeconomic policies because every investor needs to know how secure is the situation in Macedonia, and you're going to see for yourself. We are, there's no doubt about it, we are the most competitive, most pro-business country in all of Europe. First of all, I'm going to talk about two sectors tonight for investments. The first one will be manufacturing. Most of the large companies from the United States and Germany and Italy and the UK are building new manufacturing facilities in our tax-free zones. So if you build a factory in this zone, you basically have a 10-year tax holiday.

You have no corporate profit tax, you have no personal income tax, no duties on imported materials, no VAT, no property tax—no taxes for 10 years. And in each zone we have a customs office, a customs building. So when your truck is ready to go and be shipped to this big market outside of Macedonia, it's already cleared in customs inside the zone. So whether it has to get an hour, take an hour to the nearest border or two hours depending where you're at, it's already cleared. So when you get to the border, it's cleared and there's no delays at the border. We will give a construction grant after the building's done of up to 500,000 euros. And most of the buildings are pretty expensive and they're getting the 500,000-euro grant just for building the building. And as I mentioned, depending on the type of investment, how many jobs and the type of training, we give job-creation and training grants as well.

And if you go on one, and we have 12 zones—I think four or five are operational at the moment and we're putting in about two or three every year now, so the next couple years will be done—but you would rent the land for 99 years and here's the price: it's 10 euro cents per square meter. So if you want 20,000 square meters of land, the rent is 2,000 euros, a little more than $2,000 a year for 99 years; 50,000 square meters, maybe we go up to 70,000 square meters, which is huge, that's 7,000, a little over $7,000 a year in rent. We wanted to give them away free; we didn't want to make money on the land, we want to bring good companies and have jobs. But again, Europe didn't like that, and since we're compliant and trying to be approved by Europe, we just made a nominal price. Most American companies like to rent when they go abroad.

But, for example, German auto component manufacturers—and we have a huge amount in Macedonia—we have a trade surplus with Germany, by the way, because a lot of auto component manufacturers are making parts in Macedonia and shipping them to BMW, Volkswagen, and Mercedes in Germany. Those companies want to own the land. So we had a little dilemma, so what did we do? We created municipal zones that kind of mirror these national zones, and in certain municipalities we have these manufacturing zones and in those zones you buy the land, and you buy the land for one euro per square meter. So a plot of 20,000 square meters, you buy for 20,000 euros and it's virtually free. So depending on what your corporate policy is, that's what we'll do for you in Macedonia. And it's not me talking about how great these are.

Financial Times has said we have the most cost-competitive zones in all of Europe and actually in three categories and three sizes: for small cities, which is less than a million, which is Skopje, and then in a couple other micro cities, less than 300,000 and in the region. We were the best for large tenants in Europe, and the one in Skopje is in the top 50 in the world. Our profit tax is a flat—we have the lowest taxes in all of Europe, some of the lowest in all of the world. It's a flat 10% corporate profit tax, and there's no tax on reinvested profits. So unlike here in my company, there was always a tax on retained earnings or even on reinvesting the profits. There's no tax, and what's happening now is over 90% of the investors are reinvesting, and that's exactly what we wanted to do. Okay, so in red here I show some of that.

So a lot of American companies had gone to the Eastern Bloc places at the fall of the Iron Curtain—places like Romania, Poland, the Czech Republic, and others. And then, of course, American companies have built factories in China and India. And so that's why, since people weren't familiar with Macedonia, I show these comparisons. But we're also the most competitive in Southeast Europe. And now personal income tax: we have one tax, one flat tax, and it's a flat tax of 10%. But that's not really true because we have a small exemption, and Ernst & Young's report this year said we have the lowest personal income tax in the world because of the exemption. The true net average tax rate is about 7.5%, so it's pretty amazing. Switzerland has the highest hourly compensation, all-in cost, in the world. You can see where the United States is at—$35, $36—almost $60 in Switzerland.

Poland is getting expensive, Mexico has risen, China has gone up three times, I think, in the last 10, doubled three times in the last 10–15 years. But we are now getting investments from China and from India from companies that want to make a product that's going to go into Europe; they're doing it, they're going to be doing it in Macedonia. And even though our wages are a little bit higher, the cost savings for logistics and the just-in-time delivery has made us more competitive than bringing it from China. Here's a visual of what our average monthly gross salary, so this is an average salary from a CEO to an unskilled factory worker across all types of industries, about $650. Dan, I'm going to break this down in the next slide. The next slide, you'll see a skilled factory worker, around $313 gross. This includes that you as an employer will pay for their health insurance, pension, unemployment, and that 10% personal tax.

That's not the net cost, that's not the net pay to the employee, that's your total cost. Over here, a college graduate's about $500, and again, over here to the right, for a little more than $1,000, you can get a skilled engineer with about four or five, six years of experience. Now I have investors from Milano, Italy, Toronto, and specifically Chicago that tell me this person for $1,000 in Chicago or Toronto would cost between $10,000 and $15,000 a month and $20,000 plus in California, and they're telling me the exact same talent, skill, and experience. So this is going to be another area that we are very competitive. Now what we did was we had a horrible transition when we were one of the only countries that did not have a war with Serbia when we announced our freedom and breakup from Yugoslavia, but it was a financial war.

They took every single asset out of Macedonia, we were blockaded, we had huge unemployment, we lost in the first 15 years, we lost a lot of people, a lot of young people, a lot of young people like Zoritza, and we don't want to lose any more young people like that. And we have a program now for investors that—when you hire someone under the, and we have a lot of, with the youngest country in Europe, we have a lot of young people, and a lot of them are unemployed. If you, when you set up your company and you hire someone under the age of 35, which is pretty much the pool you're going to be looking at, you don't pay the payroll taxes; you don't pay for the social security, pension, medical, unemployment, and that personal income tax—we'll pay that. It's about a 31% savings to the numbers you saw on the earlier slide. So that person that costs $1,000, you're going to just pay $700 for that skilled engineer.

So this is a very important and very popular program. I'm not going to go into the detail because we actually have five—we have five programs to pay for training. But I'll simply say that depending on the size of your investment, even the smallest investment, we're going to cover most of your training costs, because no matter how smart the employee is, you have to train them to your company's needs and how you want to do things. For these large investments, everything is paid for. And we made a decision that we didn't want any more government training programs because the government doesn't know how business works. That's the worst. It doesn't matter if it's the United States or Macedonia. You guys know how to train employees in best practices. So that's why we're paying the companies to train our people. And I think it makes a lot of sense; it's been going very well. Okay.

So in a lot of countries, you have to find a local company to be a partner with. This isn't the case in Macedonia. And matter of fact, in most situations, I think you don't need to and most foreign investors don't. So under the Constitution, if you set up a company in Macedonia as a foreign investor, you're protected, and you can own 100% of that company, you can own the land if you're buying land, the building, the property, and you have 100% repatriation of profits. So in our Constitution, you can take your profit out any time you want. And for example, unlike Russia, where they change the law and there's a limit—you can't take 100% of your profit out, which is crazy. So we didn't want some politician to come in there and do that. That's why we put this in our Constitution. Oh, and as I mentioned before, free trade agreements with that marketplace of almost 650 million people.

All right, I'm supposed to brag about Macedonia and tell you all these great things, but there's a lot better people that can tell you instead of me. This is brand new. So just two or three weeks ago, the World Bank, who is on the ground in every country in the world, does an annual ease of doing business report with a bunch of rankings—about a dozen different rankings about what it's like to do business in that particular country—and ranks you in the whole world. And this is pretty amazing. So my prime minister came into power in 2006 and was only, I think, 35 years old and was responsible for putting in this pro-business government and these policies. And we were off the charts bad in every single category in the '90s and 100s on these charts. Right now, we are the second easiest place to open and start a company in the world. Only Singapore is better. And last year we were third, so we jumped up one notch.

And we've only had a few years. You know, we've had 23 years of freedom or something like this, but I say we've only been free from an economic standpoint, in our minds, in our policies, since 2006. This is all from 2006. Okay, but more important is not just opening a company because you have to run day-to-day. So the ease of doing business ranking is even more important because it's 14 criteria on the day-to-day operations of your company. Last year we were 30th in the world, and in just one year we've jumped up to 12th. We're one of the best in Europe; like you can see here, in 2006 we were ranked 94th. So this is just a few years, and these are the 14 criteria for the day-to-day operations of your business. We have many, many more rankings which I'm overloading Jim on, and there's going to be more to come. I'm just going to show you three because they're pretty powerful.

Going through the World Bank, investor protection ranking, which is three criteria for foreign investors: the banking regulations and the financial regulations for your money in Macedonia. As you can see, we're 19th in the world. Now, secure macroeconomic and political stability. Maybe you hear some things on the news that were sourced by George Soros; they're untrue. These are the facts, these are the facts. We have had, for 13 years, less than 2% average inflation. This is one of the lowest in Europe, and this is because we are very conservative with our state debt. We have one of the lowest state debts and public debt in all of Europe. It's in our tradition; our grandparents have beat it into our heads that borrowing money is evil, don't do it, it's a mistake, and we don't like this. Again, our prime minister has been criticized: "Why did you lower taxes?

You can't run your government." Well, we collected more money than ever every year since 2006. How can you do these things? You need to borrow money. You need to borrow EU funds. We don't want to. The result of these policies is consistent ratings, and we have 4% economic growth. We're one of the number one or two economic machines in all of Europe, and we've been in this range ever since the recession. And since the great recession, Europe especially has seen increased unemployment. Our unemployment is still high, but we've lowered it by about 12 percentage points, which is amazing, and we've maintained this type of economic growth. I'm not an economics guy, I didn't go to an economic school, I was just a businessman. I think it's simple: there's two policies a government can follow.

They either think you business leaders are someone that's evil—you're making too much money, you need to be taxed and regulated so that we can buy votes—or you're our friends; you are the ones that are going to give our people jobs. And I wouldn't have gone to Macedonia, I love Macedonia, but I can go on vacation. And I needed to know from our prime minister what was our view of business, and it's clear that our government wants foreign investors; we won't have a country if we didn't turn this job situation around. We're in a very difficult neighborhood, trust me, we wouldn't be in this position. So everything we're doing is focused on improving the economy by bringing foreign investors to Macedonia. I think that's it, okay?

Now, the workforce: so you can go somewhere cheap, maybe in Africa, maybe in Southeast Asia, and maybe find someone with lower cost than us, but you will not find the type of worker and how educated our young people are especially. And I'm going to tell you why. We're the youngest country in Europe; I'm not counting Turkey because Turkey's kind of in Europe and mostly in Asia. But outside of that we're the youngest country, and 99—actually 100% of our, I'm pretty safe to say, 100% of our people graduate from high school. And when I'm in Europe talking to certain countries, they say, "Why do you put that in there? What's the big deal?" We know what's going on in Chicago, New York—I don't know about Dallas, Atlanta, and LA. America has 20 to 25% dropout rates. So every single kid is going to graduate; it's in our... we also have a culture of education, but also we penalize the parents if that kid doesn't graduate.

So I guarantee you 100% graduate and 90% of them are enrolled in university. Now part of the problem is we don't have enough jobs for young people who may not, maybe shouldn't be in the university, but the point is everyone's getting an education and trying to get a better education from that standpoint. And what happened when my family left, well, my father was around 1940, so a lot of mess when he left, when communism was coming and had some bad experiences, and a lot of people—and I mentioned the diaspora is much larger, in my opinion—a lot of people left that were risk takers, were entrepreneurs, because they went to a new country, they didn't know the language, they came from poor villages, but they worked really hard and became successful. So we are now injecting back into our young people the concept of entrepreneurship and innovation.

So now we're going to—we changed the law so that from sixth grade on, every year kids are going to be taking some type of business class: innovation, entrepreneurship, or some type of business class, because we're re-injecting that back into our society. Oh, also here in yellow, almost every investor, big or small, is doing some type of cooperation with the local university. If you're a small IT company and you're outsourcing IT, then maybe we're going to connect you with the IT faculty. If you need engineering, special engineers in your manufacturing, like Johnson Controls and others, they have internships and curricula and even laboratories. Our universities don't want to see young people leave as well, so they're more than willing to cooperate. Okay, I'm not supposed to put in there that the GDP, and when I go to Italy, I'll show the United States up there, or Germany at 2.2%, but it's an advantage of being small.

We are very committed to education, as you can see here, and every politician in the last 30 years I've been in Chicago, from both parties, I said, "Kids, every child is going to have a computer." We've been doing it in Macedonia. Every single child in every school and even in the villages, from first grade to 12th grade, have a computer in front of them, and so do the teachers, and we just passed a law that in 2016 they're all going to have tablets. So our graduates are completely skilled and have been working with computers for a long time. And finally, language. Not only are they going to be great in computer skills, but excellent in language skills. Why? English is mandatory from kindergarten to 12th grade, so that's 13 straight years of mandatory English. Remember, 90% of them go to university; they have to take two more years.

So that's 15 years of English, and they have to take eight years of a European language—German, French, Italian, whatever, some Russian—to graduate from high school. It's 23 years of language training in school; for me to graduate in Ohio and my sons in Chicago, it's two years. I think it still is two years. And I'm not counting the regional languages, because I'm sure, you know, Serbian and Bulgarian, and we have an Albanian minority, we have a Turkish minority. I'm not even talking about those languages that almost everyone in Macedonia knows one or the other, but the European and especially the English languages. So for all of these reasons, and I've been traveling all over the world for the last two and a half years for our government, and wherever I go, when I sit down, when we sit down and have business meetings, somehow, we end up speaking English. So we've recognized that, and we knew that was important for investors.

The location, as I mentioned, the big free trade countries and marketplace, but by rail or by truck, you're one, two, maybe two and a half days to any major city in that location. So in that whole marketplace, I should say, we have two new airports, we're very close to the seaport in Thessaloniki, Greece. It's less than an hour from the border. It's about 45 minutes from Zoritza's hometown, Gevgelija, and we're building a new highway with the Republic of Albania to the Adriatic Sea. We're building a new highway and railway with the Republic of Bulgaria to the Black Sea. So most overseas shipments go through Greece, which is very close. In addition, people are not just seeing it as an entry point into Europe, but now also into the Middle East or North Africa, but I guess when things settle down a little bit. Right now, companies are coming and seeing Macedonia as the entry or gateway into Europe.

Okay, we have a sunny climate — depending on the part, it's probably over 300 days in Gevgelija; in Bitola it might be a little less, but 280 to 300 sunny days. It's a sunny climate, it's a Mediterranean culture — we like to eat and drink, and we do it all day and all night as well, and socialize. So you're not setting up a factory or an IT company in Mongolia. You're in Europe with a Mediterranean culture and a really beautiful place. The World Economic Council said we're the fourth most friendly place in the world, and what I like here in yellow was in 2014, Lonely Planet said we're in the top 10 most beautiful places in the world, and this year, I think in early January, New York Times Travel did a special, the 52 most interesting places in the world to visit, if you were to go one weekend every week of the year, and we were also in the top 10, or number 10 I think it was, most interesting place.

Okay, we're here to talk about business, and we do a lot of different things, we have agriculture, we have tourism, and I'm not going to talk about those things unless you ask me, because there's basically two things we're doing that's red hot, and it's why we're performing so well, and as mentioned earlier, it was manufacturing for export, and the other one is outsourcing any type of professional service: call centers, BPO, business process outsourcing, IT, CAD/CAM engineering, architectural design, and research and development. All of these things are the new — that's the new sector that's taking off.

We had to build our manufacturing base because that was crushed, and if you don't have a, for me, if you don't have a manufacturing base, you don't have a country, but now we know that the young people don't want to work in a factory, maybe the older guys like me, but the young people don't want to work in a factory, so we're focusing on these sectors, and I think these are great opportunities. We have some huge call centers; I signed a contract for 2,000 jobs from a publicly traded company in Denver — 2,000 English-speaking jobs. I can't mention the name, but I would whisper to you one of the largest internet cable companies here, and one of the largest mobile companies; the call center is going to be in Macedonia, so we're finally getting recognized. Israel is setting up a call center company, two companies from Israel right now, and IT.

So that's, I think — oh, in yellow, if you remember anything, please remember that small and medium-size enterprises are welcome. A lot of companies had gone to India to outsource IT or to do a call center, but you know, if you go to India and you say you're going to have 20 people or 50 people, or even 100 people, that's nothing to them. You're going to get the worst of the worst, you're going to change, you're not going to get support; their Doing Business rank is over 100, one of the worst places in the world. But you come to Macedonia for 10 employees, or 20 employees, or 70 employees, that's an important project to us. We're a small country, and we're shifting to — we want to welcome a lot of high-quality entrepreneurial small- and medium-size projects. Okay, so this is a document from Johnson Controls that they've allowed us to use, and this was the decision sheet.

The final decision, when they decided about five or six years ago to build their first factory in Macedonia — they have two factories now, and they just announced the third factory in Strumica, so they're going to have three factories, and two were built in just the last five or six years. And what's really important here is, I want to show you how they made the decision, because I think whether they use this sophisticated approach or not, this is really how most companies are making the decision. If you see up under labor costs, it says CZ; that's the Czech Republic. So Johnson Controls is all over the world. They had a factory for 15 years in the Czech Republic, and it had gotten too expensive, and too many EU regulations, and so they were deciding to find another place. All of the low-cost countries were listed on the left, so we were competing with a lot of countries, and a lot of countries in Southeast Europe.

Based on three criteria, their decision was going to be on the best balance of labor cost, inflation, and business-friendly government incentives, and the key criterion was also that there can be no red flag. So, for example, if you look at Moldova, Moldova had the lowest labor cost. We were a little bit higher, but the inflation was 12%; at 12%, you're out. Next was, for example, you look at Morocco. Morocco was pretty good on labor costs, very good on inflation, but they were logistically disadvantaged to ship auto components to German car manufacturers. So the point being is that we had the best balance. We weren't number one in every ranking, but we ranked very high, and we did not have any negatives, according to Johnson Controls. And you can see all the different reporting — Ernst & Young, Mercer, and everyone else — and where they got their data.

Okay, I'm just going to mention a couple other examples that I think make a lot of sense. So Van Hool is the largest bus company in Europe; they're out of Belgium, and they're manufacturing buses in Macedonia, 100% for the United States marketplace. The engines are Cummins engines and Detroit Diesel, and what was the transmission Dan told us yesterday? Allison Transmissions, I think it's Allison, is that right? The promoter from Chicago corrected me yesterday, Monday, but they're made in the United States, shipped in a container to Macedonia, assembled onto the bus in Macedonia, and driven to Belgium and shipped 100% of them to the United States. It was cheaper, it was more cost effective to do it in Macedonia than doing that in the United States or in Belgium, because Belgium and Western Europe has gotten insane with their costs and their regulations.

Now what's important to know, and they also are building — in three years they just announced their second factory, we were second on the list. Mexico's overall cost was a little bit lower than ours because of the, not on labor, but in total cost because of logistical savings and just-in-time delivery. In the end, they chose Macedonia because they were convinced the skilled workers were better in Macedonia than in Mexico, and now they're building their second factory. KEMET Electronics is out of South Carolina; they're a multi-billion-dollar company and one of the world's largest manufacturers of electronic capacitors.

In Macedonia, they're building capacitors for BMW and Mercedes, and the interesting thing about KEMET Electronics is they have about 20 factories around the world, in China and other places that you would recognize, but when they went through the interview process to hire 500 workers in the factory, they were so impressed, they were getting MBAs to work in the factory. They were looking at this and they were looking at if they couldn't believe the talent, they immediately decided to do a second project, and the second project was to create a shared services unit, and they closed every factory had a little department that did customer service, data entry, and other accounting functions for that particular factory. They closed them all over the world and put them all into one in Macedonia, and that was just a byproduct of going through the interview process to hire factory workers.

I'm really proud of this one, this is a new one, Barracuda. Barracuda FX is one of the top software companies in the world out of Ireland. With Ireland, of course, you know, it's been a hotbed for software development, and they announced 100 employees in Macedonia in research and development. So this is our first major known company for research and development in Macedonia, and we beat Israel. In the final analysis, we were one in Israel with second. This is really something to be proud of because Israel had, the last 10 or 15 years, been the number one place for research and development in the world, and they've had the most innovation. So Microsoft and Intel and everyone has put research and development in Israel. So I think, I'm hoping this is a shift as we're moving away from not just focusing on manufacturing into these other professional services and technology, and it's exciting to see it happening right now.

We have over 200 American companies in Macedonia investing, and this is just in the last five or so years. These are brand new announcements over here. These are major, major companies in the United States. I mean, Lear Corporation is going to have 1,000 employees, and they're 117th on the Fortune 500 list. So Johnson Controls isn't on here. Johnson Controls has been here. You know, I mentioned that earlier. These are new announcements that we've made just recently. Okay? So the best thing to do is not to believe me. Don't believe the World Bank. Come as my guest. If you come to Macedonia, you'll be my VIP guest. We'll take you to the American Chamber of Commerce. We'll take you to all the American companies you want to talk to. You can ask them, tell me the best and worst things about Macedonia. They'll tell you. We'll take you to whatever government official you need to see, whether it's the Prime Minister or a Deputy Prime Minister.

You'll have the attention of my cabinet. So we'll work out the details in getting you there to our cabinet. Try to take a little extra time to see our wine country or Lake Ohrid, which is so beautiful, and some people back here will be able to tell you about it. But this is the best way. And once investors and companies come, they're really shocked. They can't believe it. I also am lucky enough to handle Italy, and Italy is close, but they were putting most of their investments in the past in Serbia and Romania, and they didn't know much about Macedonia. We're being flooded by Italian companies. Italy is one of the six major manufacturing countries in the world, and we're close, and they come, and they can't believe how good our wine is. They say our tomatoes are better, our salads are better, our fruit is better. I'm telling you that they're telling me this.

I've had three great investments in just the past year: one very, very large manufacturer, one small one, and an IT company from Milan. So it's a great place to visit. Even if you don't decide to invest, you're going to feel welcome, and thank you very much, and I hope we can do some questions and answers. So you've talked about how you're trying to create jobs, and that's one of the most important challenges you have, and although the unemployment has dropped quite a bit, it's still staggering. It's 25–26%. Give us a little bit more background on that, and what type of social net have you really created to ensure political stability?

Okay, so you know when the United States had 29% unemployment in 1930, in the Depression people were jumping out of windows, and they were, and in Macedonia now we're at 26%, and if you can think about it in the last 23 years, this is the lowest unemployment we've had. What's really shocking is when we got our freedom from Yugoslavia, it was an embargo by our southern and northern neighbors, a complete embargo and blockade, and our unemployment was 50 to 70%, depending on what part of Macedonia you lived in. We didn't even have a currency; we were trading, we were bartering the companies. So we've been through 500 years under Sharia law during the Ottoman Empire. Our president Ivanov — his grandmother lived under five flags, so we're pretty tough people. Why isn't there chaos at 26%? There should be, there should be riots in the street. Well, first of all, we have an extremely strong family structure.

We have one of the strongest — there's even rankings on divorce and family structure; we're one of the top in all of the world. So we have a very solid family structure which is security, and we've lowered, although the unemployment is too high, it's our only mission. I mean I have people, relatives, please begging me for jobs, and it can be quite disheartening at times, but it's really what motivates me. I didn't go to Macedonia and sell my company because the salary in the government is something — it doesn't even pay my bills — but something good is finally happening, and from my life as well is that we are so focused on growing this economy because we hope we can cut it in half again, maybe in the next four years. The IMF said we're going to have 30,000 new created jobs, and we actually have a higher goal, and this has been reported for next year. And for a small country, that's a lot.

For our people over there that don't have a job, it's not fast enough, and our people are impatient, but you don't see, we have one of the lowest crimes in the world. So we're in the lower, like we're third or fourth lowest in the world of violent crimes. So I think, this is my personal belief, I think it's because we have such a strong family culture, we have a culture that friends are like family, and we're social people, so everybody, and it's a small country, and everybody knows everyone, and everyone's telling you not to embarrass your family name, right? Right. Not a member of the EU, and that has been full, or a member of the WTO? Yes. Give us the political background of why you are not a member of the EU, why admission to the EU would be so difficult.

Remember I said I wasn't a politician, so I'll give you my answer, my unofficial answer, where EU compliance means that we've been trying to get into the EU, and we've had all of our laws, all of the things we need to be in the EU, approved for how many years now — since 2005 — and several times when it went for a vote, every single country in Europe voted yes, and over 120 countries in the world say it is Macedonia. We have one neighbor that wants us to deny our name, our language, and our culture and history. Of course we're not going to do that, but we still want to be— And that is? Our southern neighbor, Greece. But on a person-to-person, business level, we have no problem with Greece. Greece is one of the largest investors in Macedonia, and we are the largest number of tourists that go into Greece, over 300,000 every year. So it's an insane political issue, but they've done us, I think, an advantage, and let me tell you why.

We want to be in the EU, our laws are compliant, if you invest in Macedonia, our laws are the same as Germany, or France, or Switzerland. But because we're not in the EU, we can give you a 10-year tax holiday, we can give you more financial incentives than if we were in the EU. And if you think about it, if you were an outsider, why would we want to be in the EU if they have a lot of debt and we have almost no debt? They have no economic growth. They have less than 1%. We have 4%. So we're just focused until someone says, after 2,000 years, your name is okay. We're ready to go. We're ready to go. We've even proposed, make the vote unanimous minus one. You can think about it. What parliament or congress or senate, it's 100% vote on anything. So this is what's really crazy about the EU: everyone can love you and one country may love you, but not like your name or the color of your eyes or hair, and you're not in the EU, the club.

So we're compliant. By the way, we're also approved for NATO. We provide soldiers side by side since 2001 with the Vermont National Guard. We have 300 awards from the American military in battle, and we are side by side with the Vermont National Guard to show, even though we're not in NATO, that we're European, we want to be in NATO, and we'll lose blood with you if that's what it takes to prove ourselves. How important are remittances to your economy? I mean from the diaspora? Yes. Very important. So every family, are you sending money back to your mom? Yes. Okay. Good boy. So every family in some way, once they get through the hard struggle, trying to make it here, is sending money back to their family. You know, $100 or $200, you saw by these wages, goes pretty far. So it is very helpful, and we hope that doesn't change. But what we want to happen is that the economy improves, and they don't need to send money to their relatives.

They come on a vacation, or they rebuild their village house, or they invest in Macedonia. You know, you talked about the reports that you said are certainly accurate about ease of doing business. But Macedonia, while certainly not at the bottom tier, is still viewed as a country that has some challenges as far as bureaucracy and even corruption. As minister, what are the top challenges that you're facing or reforms that you're putting in place to improve Macedonia's ranking? Well, I would say that we have scored very well for doing business, and all of these World Bank reports are the field that we have prepared. So it doesn't mean the result of what's happening, because first you have to prepare the field. First you have to prepare the garden, and then you have to plant the seeds, and you have to do these things.

So we have prepared the competitive field to do business, and what I think is going to happen, what's going to come behind that, is an improvement in those areas. I hear this all the time. Transparency International says we're the leading reformer for corruption in all of the Balkan countries. So we are the top reformer in the perception of corruption. If you look at violent crimes, we are near the bottom, and the United States is near the top. We need to make more money. Our people need to make more money, and that's going to come. That's going to come with the improvement in economy. So I said that we have a bureaucracy left over from the socialist mindset. We have this bureaucracy at the lower levels of society, and so even though we're pro-business and we're cutting bureaucracy at the highest level, it hasn't trickled down yet as well as it should.

But let me give you an example of what we do that I don't think you can find anywhere else in the world as an investor. It's now once a month. Once a month we have the 10 or 12 top companies in Macedonia meet in one of our big government rooms, like the big auditorium. The Prime Minister and Deputy Prime Minister Pesevski, who you met, sits here, and all the ministers involved and all the directors involved in the government with investments are on this side. And he has, it's up to like 150 items every month, and you have Johnson Controls and Johnson Matthey from the U.K., and you have Van Hool and all these companies, the local CEO, and they'll say, okay, we have a complaint about customs. Customs is asking for this. Why are you asking for this? Customs Director, the Prime Minister says, stand up. Explain yourself. And she'll say something like, well, that's how we've always done it. It doesn't work that way in the United States?

I don't know. Why do we have to do that? Is there a law if we change it? Break the law. Minister of Justice, stand up. Okay, done. Change the law. So we are changing that fast and we're changing that fast based on what the investors will make them more competitive and more profitable, because they're going to hire more people if we can do this. I saw this language, regulatory guillotine process. Explain what that is. I love it. We're cutting heads. We're cutting heads off. You can probably, on some good days, hear me screaming from Macedonia to here, because it's funny, the first day in Macedonia when I came and said yes, and right before I went before Parliament for the vote, the Prime Minister told me, he said, I'm going to tell you, you're going to get very frustrated with bureaucracy.

And he said, first of all, there's bureaucracy in every government, but I'm trying, we're trying to change the system that for 50 or 60 years under Yugoslavia, under the social communist, socialist, whatever you want to call it, under that system, bureaucracy was a way of life. And it was designed not to let anyone move up, in my opinion, and keep everyone where they're at. And we are with the older people, it's very hard. So with my relatives, my age, it's impossible. They still want Yugoslavia to come back and give them a real easy job. And it's not going to happen, but we have to focus on our young people and the next generation. So we hope that people are patient enough as our young people learn that there's no guarantee of a job, that you have to fight for what you need to get and bring people back from our diaspora, diaspora, and bring foreign investors.

And we think this combination—we're in the process of transforming our country. And essentially the guillotine, you were part of, [unclear] about 50% of these regulations that were there under the communist era. We did the big one that the Prime Minister did was to start a company. I will tell you, again, I knew nothing about the government in 2001. My cousin and I went to Macedonia to try to import mineral water to America. And at that time, you had to have a local partner that had 51%. And we spent about two years of our lives on trying to make it happen. We were so upset that we couldn't do it, that we swore we would never go back to Macedonia. And the guillotine means, and that's why now we're second, because we were cutting, I don't know, several hundred insane steps in the process. We've done it for mining concessions, so now we've opened up the mining opportunities. And we have a few other areas to go.

I'm not going to mention the Ministry of Agriculture, but we have a couple other areas to, the guillotine's coming to them next. Well, you know, it's actually, when you think about other countries, it's actually when you think that you're taking a cadre of not just U.S. trained, but really U.S. culture into a different country and making this transformation for the pros and cons. And you have friends and people who aren't such your friends. On bringing those heavy machinery into Macedonia, you can bring them in through Durrës, Albania. But I would say most of that type of stuff is coming through Thessaloniki, Greece. The seaport is even closer to Macedonia. And that's where most of everything is coming through. But either one. We have free trade agreements with everyone in the Balkans, every country, every former Yugoslav country, everyone in Europe, whether it's Germany in the EU or Switzerland or Serbia. We have free trade with them.

Now, the type of incentives, basically when we give extra incentives other than tax breaks, those are usually going for jobs, for manufacturing, for export, or if you were exporting something out. So we don't want to give incentives to a manufacturer who's going to sell that product in Macedonia to compete against our domestic producers. We don't want to kill our domestic companies. But let's say that you were going to do distribution for exporting out, or light assembly for, and then export out, you would qualify for incentives and then qualification would be based on how big your investment is from a capital expenditure and/or how many employees. So it's not really a science but an art to forming a package based on what you want to do, how big the investment is, how many employees, and usually over a five year time frame, a business plan over five years.

Regardless of that, if you opened up an office with one person, you would qualify for this unemployed incentive that we would pay the payroll taxes for your employee for three years. So if you hired someone under, excuse me, under the age of 35, make sure they're registered unemployed, you will get the waiver of those taxes. I think if you had a business plan that would be mostly as close as possible to 100%, then something would be worked out. Do you need a visa to travel to Macedonia? No, not on an American passport. American passport is no problem. Actually we have a company from Indianapolis, Hoosier Gasket, and they have a factory in Ukraine, of course they're a little bit nervous about that. And so they're going to start out with first warehousing and distribution in Macedonia. And then the second phase of their plan is so very small, maybe 10 employees, and then they're going to go to light assembly.

And then if that works well, they're going to close their Ukraine plant and do manufacturing here. They make gaskets. Yes? You know, I don't want to get myself in trouble once again, but I don't know, for 2000 years, they don't want to identify Macedonia. So what can I say? We have, I grew up in the States in an immigrant neighborhood. And most of my friends were Greek or Serbian or some immigrant. So we've never had a problem. This is a political issue that makes no sense. We do business. I go there and do business all the time and the business people tell me and whisper in my ear when I'm there that they feel terrible for us for what the government has done to us. But I turn this back into, I think they've done us a favor. It's made us better, it's made us more competitive. And now we have a more competitive environment. What Greece has done to Europe, this latest bankruptcy is not the first time.

This is five times in their history since 1821. So I don't want to answer that question other than it makes no sense. We're very similar. We shouldn't have this issue. 300,000 of our people out of 2 million every year are going across to Greece, which was the old part of Macedonia for vacation. And they're one of our top investors. So we're asking Europe, we're asking America, would you please twist their arm or make some sense? Because we should all be part of Europe, We should be part of NATO. And if you don't do this, it's not good. Well, we have some innovation funds. We have Macedonia 2025. We have some diaspora groups who are raising money from our diaspora, specifically for small startups in Macedonia. So one of the things that's difficult and one of the negatives, I'll say, is that it's very difficult to get credit and financing in Macedonia. The banks are very conservative.

So on one hand, it's helped us create this low inflation and good economic growth. But most of the companies that come have been doing their own financing, self-financing. Let me ask you this, Jerry. I don't think probably many of the migrants are heading to Macedonia because of the unemployment. But you're traveling in Europe, you're involved in political discussions. Give us your take—unofficial; I mean, I'm not asking you as Minister of Investments. All of the refugees and migrants — not migrants, they're refugees — all of the refugees are going through Macedonian transit only. So they come to our border, we put them on buses and trains and take them to Serbia. From Serbia, they go through to Hungary or Slovenia and they're trying to get to the wealthy western European countries that have a lot of welfare and social benefits. They're not going to have that in Macedonia. But it is a problem.

It's a serious problem for what happened in France, might happen somewhere else, it might happen here. We've known all along that not every refugee that's come across our border is a poor suffering refugee. We know that mixed in there are some bad guys. We know that there's a lot of young men with a lot of money in their pockets. This doesn't make any sense. So we have been telling Europe about this because we're on the front line, first is Greece, then us. From North Africa, they're going through Italy. Why can't you turn them away? Well, because George Soros in Europe will say we're mean. We're bad guys. Who knows why? Maybe we should. I don't know. Again, I'm not involved in that aspect of our government. I'm all for helping people that need help. But what I know is happening and what we think is happening. I don't think it's good for Europe. It's not good for America. That's just my personal opinion.

Let's take one more question and then we'll give you all time to visit with each other. Yes, ma'am. We can't stop them from leaving. We can't do that. But it's not so easy for a Macedonian to get a visa to go. It's not easy to come to America. It's very hard. Maybe you have to qualify for a work abroad visa or some type of travel visa or student visa. I would assume. That's maybe how you went to Scotland. So it's not so easy for someone just to pick up and leave Macedonia. But they are leaving and they have left. So it's something that really tears us apart because most people don't want to leave Macedonia because they love their family and family is so close. They leave Macedonia because there was no opportunity. And from my father to young people today, or my grandfather who came first before my father because of the wars. When Europe had two world wars, we had four wars.

We had in that same time frame two world wars and two Balkan wars with all of our neighbors. So really tough times. We want to keep our young people by getting them good jobs, jobs that will keep them. And they'll stay with good jobs. And, matter of fact, on some of the large investments, they posted the job applications for this call center from Denver that I have for 2,000 employees. The last 500 or so of the entries were Macedonians from here in Canada. And these are the kind of things on one hand breaks your heart. On the other hand, we need to do. So it's probably our number one problem that we, okay, no one is going to leave my age. But a young person who's ambitious and educated, if that person isn't challenged or doing something professional based on what they've studied, they're not going to stay. So that's what keeps us up at night. Let me add two back to the education.

We have a program that if any Macedonian qualifies for a master's program in the top 100 listed universities in the world. I think in the United States, it's Kellogg, it's the London School of Economics, you know, the top 100. So if you're in Macedonia and you qualify for that, the government will pay for everything. We'll pay for your master's program tuition, room and board, everything. And your commitment back is that for every year you have to give back two years, which means let's say a two year program, you have to work four years in Macedonia, not just the government, could be in the private sector, you know, and that's your commitment back. So your counterpart in Chicago, Dan, is — is that what's the business school in Ann Arbor? Ross, is it Ross? Ross? Ross, which is one of the top MBA programs in the world as well.

And he's going to graduate and he's doing exactly what Zoritza does, but for the Midwest and is just about done with his MBA. So again, that's the commitment to education, but they have to go back to Macedonia.