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North Macedonia looks for diversification, eyes to connect to Azerbaijan's SGC - minister

15 March 2021 15:58 (UTC+04:00)
North Macedonia looks for diversification, eyes to connect to Azerbaijan's SGC - minister

Trend’s exclusive interview with the Minister of Economy of North Macedonia, Kreshnik Bekteshi

How do you assess the current status of economic relations between North Macedonia and Azerbaijan?

North Macedonia and Azerbaijan established diplomatic relations on June 28, 1995. In respect to diplomacy, both countries approached to create favorable conditions in development of trade and economic cooperation. At the moment, there are ongoing negotiations for concluding a bilateral agreement on trade and economic cooperation to promote and expand relations of friendship.

The Agreement covers various economic developments in order to promote economic cooperation. Identifying potentially exportable products, exploring and developing of new markets, technology transfer, production and treatment of chemical and petrochemical industry and developing projects in environment and waste management, are the main topics that both countries are negotiating to be part of the agreement.

Also, North Macedonia strongly supports Azerbaijan to become full-fledged member of the World Trade Organization (WTO), where both countries can enhance the trading opportunities and trade liberalization in line with General Agreement on Tariff and Trade (GATT 1994) and Agreement establishing WTO, in order to build trade capacity, to implement technical standards, and to permit trade exceptions in goods and services.

The new negotiated development should improve the trade exchange between North Macedonia and Azerbaijan, which in the past several years is characterized by a very small volume, by ranging from $392,000 in 2018, $803,000 in 2019, to $567,000 in 2020. Tobacco is the only product exported from North Macedonia.

Which spheres have untapped potential in terms of development of bilateral relations? What about spheres where joint ventures could be created?

For both countries most important is to promote the participation of small and medium sized enterprises in the development of bilateral relations with a special focus on cooperation in economic sectors, followed by investment opportunities in the free economic zones. As Minister of Economy, according to my competences, I certainly believe that energy and tourism are at most productive sectors to highly develop on bilateral level.

When I speak about tourism, there is an agreement on visa-free travel between the foreign ministries. Contacts between tourism enterprises, as well tour operators is necessary to be promoted, to get acquainted of tourist offers and tourist catalogs of both countries. For example, to initiate selective types of tourism as comparative advantages, by presenting North Macedonia as an attractive destination (combination of wine and catering services), winter tourism and introduction of cultural tourism. This can be reached through direct investments and joint ventures in tourism industry by tour enterprises from both countries. To develop a charter line between the tourist destinations would definitely facilitate the overall exchange in tourism.

Energy is essential sector to follow the trends in investment in large-scale infrastructure projects. Latest development in North Macedonia is the construction of a gas pipeline in the country, which should be connected to interconnections that we are building with neighboring countries. The completion of the geopolitically important Southern Gas Corridor (SGC) between Azerbaijan and Europe opens a gas orientation source for North Macedonia.

Azerbaijan commissioned SGC, which for the first time supplied Caspian energy resources to Europe. Is North Macedonia interested in getting access to Azerbaijani gas via this route?

For the Government of the Republic of North Macedonia, the construction of a national gas pipeline system, its connection with regional gas pipeline systems, as well as the construction of natural gas distribution systems is one of the priorities in the part of construction of energy infrastructure. Natural gas is an extremely useful fuel because its use has a wide range, in households, industry and traffic, including the generation of electricity and heat. Gas supply is crucial for the economy and brings benefits both for citizens and companies, the environment and the society in full.

In order to provide the forecasted quantities of natural gas for the next period, activities are underway for further construction of the existing gas pipeline system in the Republic of North Macedonia, its connection with the regional gas pipeline systems, especially with the SGC, the development of the gas distribution to be done through Public Private Partnership, as well as starting negotiations for providing additional quantities of natural gas.

North Macedonia through the gas Interconnection between The Republic of North Macedonia and Republic of Greece will have access to Azerbaijani gas. This Project at the last Ministerial Meeting of the Energy Community was selected as a Project of Common Interest for 2020. It aims at gas connection of the country with Greece and the Southern Gas Corridor in order to supply the country with natural gas from diversified sources of supply and, inter alia, from the gas fields in Azerbaijan. The activities between NER AD Skopje, a state company of North Macedonia and the DESFA SA which is operator of the natural gas transmission system in Greece are ongoing.

The following activities have been undertaken so far:

- Signing of the Memorandum of Understanding, October 2016 (Annex to the Memorandum, April 2019);

- Environmental Impact Assessment Study has been prepared and all procedures related to it have been completed;

- The basic project is in the final phase. In the first quarter of 2021, we expect the revision of the project to be completed, which will be followed by the submission of a request for obtaining a construction permit;

- Regarding the financing of the construction, we expect the European Investment Bank to make a final decision on financing the project in March 2021, followed by the procedure to obtain loan.

Part (20 percent) of the construction of the project will be financed with funds for co-financing of infrastructure projects approved through the IPA instrument Investment Framework of the Western Balkans.

During 2021, the tender documentation for Construction, Construction Supervision, Inspection Body and Management will be prepared in accordance with the EIB rules. It is planned that the contractors of the construction will be selected by the end of 2021.

In which spheres would North Macedonia like to attract Azerbaijani investments? In which spheres in Azerbaijan are North Macedonian companies would mostly like to participate?

Azerbaijani investors can easily find their interest in operating in North Macedonia. North Macedonia has very favorable business environment. Its legal and regulatory framework for investment activities is also favorable to investment. The 2019 World Bank’s Doing Business Report ranked North Macedonia 10th in the world for doing business, up one spot from the year before. Fitch affirmed North Macedonia’s BB credit rating and S&P affirmed its credit rating of the country at BB- with a stable outlook.

North Macedonia has institutional framework and strategy for investment promotion and facilitation. Two state institutions are responsible for FDI attraction and investor servicing: The Agency for Foreign Investments and Export Promotion (the national IPA -ASIPI/ Invest North Macedonia) and the Directorate for Technological Industrial Development Zones (the national FEZs authority).

In North Macedonia there is law on state aid which provides substantial incentives to domestic and foreign companies. The incentives include a variety of measures including job creation subsidies, capital investment subsidies, and financial support to exporters. Investors in the FEZs are eligible for tax exemptions for a period of up to 10 years of operation in proportion to the size of investment and number of employees. Investors in the TIDZs are exempt from paying duties for equipment and machines as well as municipality tax for construction. All investors are eligible for a 10 percent grant for the cost of construction of a plant and new machinery, as well as a grant for improving competitiveness.

Foreign companies invest in automotive, electrical, pharmaceutical and other industries. One of the fastest growing sectors in our economy is Information and communication technology (ICT) industry and it plays an important role in the economy as a provider of jobs and generator of exports. This industry can be a sector of mutual collaboration with Azerbaijani investors. Furthermore, textile and clothing, agricultural business and food processing, wine industry, electro metal industry and automotive components sector are propulsive industrial sectors to be invested in.

Within the 'Strategic investment law' we do support investments in the fields of energy, transport, telecommunication, tourism, manufacturing, agriculture and food, forestry and water economy, health, industrial and technological parks, water and waste management, sport, science and education. The volume of investment ranges from 30 to 100 million euros depending on the region.

North Macedonia signed Stabilization and Association Agreement with EU in 2005 and became an open market country with 650 million citizens. Nowadays the trade with EU countries is with “0” custom duty.

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