Foreign direct investment in North Macedonia has surged in recent years, with 2024 marking a particularly strong period for inflows, despite global uncertainties such as supply-chain disruptions and regional economic slowdowns, according to Law Office Lazarov Managing Partner Dragan Lazarov and Cakmakova Advocates Junior Partner Vladimir Bocevski.
Robust Growth Amid Global Headwinds
“North Macedonia has been focusing on attracting foreign investors for the past 20 years, and since then it has succeeded in positioning itself as an attractive destination, especially for the automotive industry,” explains Lazarov. “The current levels of investments are showing good results amid the challenging times.” He highlights that, according to the National Bank, “during 2023, the direct investments equaled EUR 7.53 billion, of which EUR 5.25 billion are investments in equity, while EUR 2.27 billion are investments in debt instruments.”
Chiming in, Bocevski adds that “in the first nine months of 2024, North Macedonia experienced record growth in foreign investment, signaling strong economic progress.” He also points to additional growth sectors, stressing that “the country’s ongoing efforts to attract FDI, particularly in renewable energy and digital sectors, underscore its commitment to sustainable economic growth.” He notes that between 2017 and 2022, “renewable energy projects attracted USD 739 million in FDI, surpassing investments in real estate and software and IT services.”
Crucially, Bocevski stresses that “North Macedonia offers a favorable environment for FDI with its competitive tax rates, labor costs, and proactive government incentives. Additionally, the country’s integration with the EU, trade agreements, and strategic location make it a competitive choice for foreign investors looking to expand their presence in Southeast Europe.”
High-Value Targets: Money Meets Momentum
Several sectors continue to dominate the FDI landscape in North Macedonia, drawing both capital and interest due to targeted reforms, global market trends, and a commitment to sustainability and innovation. Moreover, it would appear that strategic government policies and EU integration drives have amplified investor confidence in high-value industries.
“According to the relevant statistics of the National Bank of the Republic of North Macedonia, analyzed by investment activities, direct investments during 2023 dominated in the manufacturing industry and in the financial and insurance activities,” says Lazarov. “Other attractive investments and types of projects are information and communication technology, automotive components, renewable energy, textile and clothing, pharmaceuticals and medical devices, and the electro-mechanical industry. These sectors are attracting investment due to a combination of strategic government policies, EU integration efforts, and a commitment to sustainability and innovation.”
Bocevski agrees, outlining specific investment formats and sectors. “Key industries attracting FDI are: renewable energy, automotive components, information and communication technology, agribusiness and food processing, textile and clothing, energy, and pharmaceuticals and medical devices.” Moreover, Bocevski explains that the types of FDI projects in North Macedonia range from “greenfield investments, expansion investments, public-private partnerships, and infrastructure projects.” Specifically, he adds that “the majority of FDI projects in North Macedonia are new ventures established from the ground up, particularly in sectors like renewable energy and automotive components.” Additionally, he stresses that “some existing foreign-owned companies have undertaken expansion projects to increase their production capacities and market reach within the country. Furthermore, investments in infrastructure, including the construction of motorways and enhancement of transport networks, have been pivotal in improving connectivity and supporting economic growth.”
A Favorable Position for a Competitive Edge
Investors from both within and outside the region continue to funnel capital into North Macedonia, drawn by its strategic advantages and improving economic fundamentals. Beyond headline inflows, the quality of investor partnerships has been shaped by longstanding bilateral relations.
“The top 50% of total direct investments in 2023 come from five countries: Austria, Greece, Turkiye, Germany, and the Netherlands,” notes Lazarov. “These countries are present in key sectors, such as banking, energy, infrastructure, manufacturing, but also agriculture, pharmaceuticals, construction, and trade.” Many of these are EU members with traditionally good business relations – thanks to proximity, established transport routes, and cultural understanding.”
Bocevski expands the roster of key partners further, adding that “North Macedonia has attracted significant FDI from various international investors across multiple sectors, namely from Austria, then Germany, Greece, the United Kingdom, the Netherlands, and Serbia.” He also points to the country’s recent milestone: “In 2024, North Macedonia surpassed EUR 1 billion in FDI, reflecting a growing appeal as a destination for high-tech manufacturing and sustainable energy solutions.”
Regulatory Incentives and Future Outlook
Government policy and market conditions have played a significant role in shaping North Macedonia’s FDI growth. A package of pro-business reforms, free economic zones, and investment regulations has been bolstered by targeted incentives and strong market fundamentals.
“Government reforms, attractive tax and legal frameworks, and improving market fundamentals have combined to make North Macedonia an increasingly appealing destination for FDI,” says Lazarov. According to him, these efforts are aligned with EU integration goals, and many investors see the country as a gateway to the wider European market.
“North Macedonia is especially aggressive with its tax and financial incentives, particularly in the country’s Technological Industrial Development Zones. In these zones, companies benefit from a corporate tax rate of just 10% – among the lowest in Europe, up to ten years of tax exemption, zero duties on imported equipment and raw materials, and long-term land leases at symbolic prices,” Lazarov explains.
Bocevski further states that “the Government of North Macedonia, as its policy, introduced pro-business reforms, free economic zones, investment regulations, and laws. It also made economic incentives for FDI, comprising tax incentives, investment grants, and subsidies, and subsidized financing for small and medium enterprises.” Underlying market strengths, such as the country’s strategic location, a growing economy, a skilled workforce in manufacturing, ICT, and automotive, and ongoing EU accession progress supported by trade agreements, have created powerful tailwinds for investors. “FDI plays a pivotal role in North Macedonia’s economic development, offering benefits such as capital inflows, technology transfer, and job creation,” Bocevski stresses.
Looking ahead, Lazarov acknowledges the need to remain adaptable. “Addressing structural challenges and aligning with EU standards will be crucial in attracting sustained foreign investment and ensuring long-term economic growth,” he says. “Focusing on more added value investments will ensure more quality investors, which could have multiple impacts on the economy.”
Bocevski agrees, outlining the obstacles on the road. “Challenges impeding FDI in North Macedonia, amongst others, are regulatory quality, corruption and transparency, and regional disputes. Addressing these challenges requires comprehensive reforms aimed at enhancing governance, transparency, and regional cooperation,” he concludes. Moreover, the broader benefits of FDI, such as capital inflows, technology transfer, and job creation, will only materialize fully if paired with stronger regulatory frameworks and the resolution of bilateral and regional disputes.
This article was originally published in Issue 12.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.