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Lack of Trust and Exceeded Expectations in North Macedonia: A Buzz Interview with Kristijan Polenak of Polenak

Lack of Trust and Exceeded Expectations in North Macedonia: A Buzz Interview with Kristijan Polenak of Polenak

North Macedonia
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Lack of public trust in the legal system together with factors beyond the country's control are adding to the complexity of the challenges in North Macedonia, yet things are going better than expected, according to Polenak Law Firm Managing Partner Kristijan Polenak.

"We are struggling with the lack of public confidence in the legal system," Polenak begins. "The polls show that the overall estimate of public trust in the judicial system is rather low – it was 8% last year and is not expected to improve this year either." According to him, this uncertainty has an effect on business activity and transactions. "Interestingly enough, it doesn’t affect the volume of transactions," he notes. "We still have investors coming but, overall, we’re losing pace compared to the neighboring countries."

According to Polenak, there were some negative developments in the legal sector. "The chair of the state Judicial Council has recently resigned complaining about the pressures," he points out. "There were a few scandals related to the academy of judges and prosecutors, which adds to the disappointment. The position of private legal practitioners has not changed. The bar could put more effort into assisting lawyers."

"We are also affected by matters that are rather outside of our control, such as imported inflation and the residuals from the COVID-19 pandemic," Polenak says. "Among those, we are most affected by the energy price crisis. Our companies are likely paying the highest electricity prices in Europe." However, he highlights that "the pipeline between Thessaloniki and Skopje has been unlocked, hopefully enabling the transportation of oil derivatives in the imminent future. There is also huge interest to invest in renewables." According to him, the new projects should have positive outcomes in terms of reducing energy prices.

Relatively positive news, on the other hand, is the government’s decision to postpone the tax increase, according to Polenak. "The law was adopted three years ago but, as a result of serious resistance from the business community, the government postponed its enactment several times," he says, adding that it is good news for companies doing or planning to do business in North Macedonia.

Polenak adds that some sectors may see a larger number of transactions next year. "Banks are still doing well but the risk factors have increased. In the context of the overall interest rate increases, this sector will be affected, most likely, next year," he notes. According to him, overall, the regulator is of an opinion that there are too many banks in North Macedonia, leading to triggering a drive for consolidation. "The health industry is another active area, with many regional players interested to invest," he says. "Industrial technology development zones are still attracting investors and a couple of those that are already present are looking at opening second plants. Obviously, they are happy with the results, and that’s why they come back."

Still, Polenak highlights that "the inflation itself is moderate – around 16 to 17% on an annual basis. This leads to a record-high budget driven by inflation as well." Overall, he believes that it was a relatively smooth ride, considering the rough year.