JUNE 2013 - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013MACEDONIAN STOCK EXCHANGEgreenfield investment in the country - a EUR 35million plant in the free zone of Kavadarci thatwill manufacture electronic installations andcables for the car industry. A week before, inthe industrial zone in Bitola, construction beganon another significant German investment - aEUR 20 million plant that will also produceautomotive parts. Major reinvestments bycompanies from the United Kingdom andUnited States are also under way in the carelectronics and catalytic convertors industries.9. Restructuring of the railways sector isongoing. The institutional mechanisms forthe introduction of public service obligationcontracts and access charges are underdevelopment. Over the past year thegovernment provided financial guarantees foran IFI-funded loan to the national rail operator,Makedonski Zeleznicki Transport. The funds willbe used to modernize the freight and passengerfleet in order to improve the company’soperational efficiency. Under the umbrella of theproject, technical assistance will be sought forthe development of a Business SegmentationStrategy, which should result in a split of thefreight and passenger service into two separatelegal entities by 2017. In parallel, ambitiousplans for energy efficiency improvements havebeen envisaged with both the national railoperator and the infrastructure managementcompany.10. Overall the financial sector remains lesscompetitive than in neighboring countries, butpension fund assets have increased. The threelargest banks (Komercijalna Banka, StopanskaBanka and NLB Tutunska Banka) still control 64per cent of the market while the top five banksaccount for 77 per cent of the total market. Themarket is dominated by foreign banks, whichaccount for over 90 per cent of total bankingassets. However, banks have relied primarilyon domestic deposits to fund lending, so theywere not as exposed as those in regional peersto deleveraging pressures during the crisis.Non-performing loans have recently started toincrease again, reaching 10 per cent of totalloans in 2012, although they are more than 100per cent provisioned. One of the three largestbanks - Stopanska Banka - is a subsidiary ofa Greek bank while NLB Tutunska Banka isSlovenian owned. Spillover risks are limited,however, because the bank has largely reliedon domestic deposits rather than parent bankcapital to finance lending.11. Pension fund assets have risen sharply.Past reforms in the pension system included thesetting up of a mandatory defined-contributionspillar managed by private pension funds. Alongwith the introduction of two voluntary funds,this has led over the past year to a substantialincrease in pension fund assets, which havereached over 3 per cent of GDP (up from 1.2per cent in 2008).Highlights of the past year and key priorities for2013• Efforts to improve the business environmentand attract foreign investment have beenstepped up. FYR Macedonia’s latest rankingon the 2012 World Bank’s Doing Businessscores is impressive, and some majorinvestors are showing interest, but importantbusiness climate issues such as judicialreform and corruption remain to be fullyaddressed.• Macroeconomic stability has beenpreserved. Growth in 2011 was close to 3per cent and inflation and the governmentdeficit were kept at low levels, but a clearslow-down is evident in 2012.• Reforms should be pushed forward in thecontext of the new high-level dialogue withthe European Commission. This dialogueoffers an opportunity for the country toadvance on an EU-oriented reform path evenwhile formal accession talks cannot proceedbecause of the name dispute.• The provision of financial services should beenhanced. Competition in the banking sectoris less vigorous than in some regional peers,and there is scope to develop a greaterrange of financial services than presentlyavailable.Key Information ContactsCentral Securities Depository www.cdhv.org.mkSecurities & Exchange Commission www.sec.gov.mkNational Bank of the Republic of Macedonia www.nbrm.gov.mkMinistry of Finance www.fin.gov.mkPAGE 64