The Third Assessment of the Business Environment in Macedonia · 1 Executive Summary The Third...

The Third Assessment of the Business Environment in Macedonia 2018

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Table of contents 1 Executive Summary ................................................................................................................. 5

2 Introduction ............................................................................................................................ 9

3 Methodology ......................................................................................................................... 10

4 Data Review .......................................................................................................................... 11

4.1 Sample description ........................................................................................................... 11

4.2 Number of respondent companies ................................................................................... 11

4.3 The Age of companies participating in the survey ............................................................. 11

4.4 Size of companies represented in the sample ................................................................... 12

4.5 Participation of companies by planning regions ................................................................ 12

4.6 Participation of companies by sectors .............................................................................. 13

4.7 Ownership of the participating companies ....................................................................... 14

4.8 Number of employees ...................................................................................................... 14

4.9 Change in the number of employees in the last 5 years .................................................... 15

5 Inspections ............................................................................................................................ 16

5.1 Number of inspections in the last 5 years ......................................................................... 16

5.2 The most frequent inspections in the last 5 years ............................................................. 18

5.3 Issued fines ...................................................................................................................... 20

5.4 Deadline for solving irregularities ..................................................................................... 23

5.5 Most important issues with inspections ........................................................................... 23

6 Information about legislation................................................................................................. 24

6.1 Availability of information for compliance with the regulation ......................................... 24

6.2 How the companies check the compliance ....................................................................... 25

6.3 Awareness of the portal www.biznisregulativa.mk ........................................................... 26

6.4 Awareness of the tool “Checklist for compliance with the business legislation” as part of

the portabiznisregulativa.mk ....................................................................................................... 27

6.5 Involvement of companies in preparation of the legal regulation in the past 5 years ........ 28

6.6 External advisors used ...................................................................................................... 28

6.7 Level of satisfaction from external advisors’ services ........................................................ 29

7 Chambers’ operations............................................................................................................ 30

7.1 The chambers’ capacity to support companies ................................................................. 30

7.2 Use of chambers’ services ................................................................................................ 32

7.3 Involvement of the chambers in the process of adopting the legislation ........................... 32

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7.4 Commission for PP Dialog ................................................................................................. 33

8 Legislation assessment .......................................................................................................... 33

8.1 Business climate ............................................................................................................... 33

8.2 Labor legislation satisfaction ............................................................................................ 35

8.3 Construction operations regulation satisfaction ............................................................... 36

8.4 Customs regulations satisfaction ...................................................................................... 36

8.5 Tax regulation satisfaction................................................................................................ 37

8.6 Public procurement satisfaction ....................................................................................... 38

8.7 Environmental legislation satisfaction .............................................................................. 39

8.8 Agricultural legislation satisfaction ................................................................................... 40

8.9 Tourism and hospitality regulation satisfaction ................................................................ 41

8.10 Grey economy fighting satisfaction .................................................................................. 42

8.11 Business state support satisfaction ................................................................................... 43

8.12 Cooperation with the new companies from the free economic zones ............................... 45

9 Improvement of the business climate .................................................................................... 47

9.1 Measures for the improvement of the business operations .............................................. 47

9.2 Priority reforms needed for improvement of the business environment for SMEs ............ 49

9.3 Improvement of chambers’ operations ............................................................................ 51

10 Recommendations ................................................................................................................. 52

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Abbreviations

ECM Economic Chamber of Macedonia

ECNWM Economic Chamber of North-West Macedonia

ES-PAI Electronic System for Collection and Analysis of Information

ICT Information and Communication Technology

MASIT Macedonian Chamber of Information and Communication Technologies

MCC Macedonian Chambers of Commerce

MSME Micro Small and Medium Enterprises

PRO Public Revenue Office

SME Small and Medium Enterprises

USAID United States Agency for International Development

WB Western Balkans

1 Executive Summary

The Third Assessment of the Business Environment in Macedonia was carried out in the period October 24 – November 19, 2018. The overall goal of the assessment was to monitor the perception of the business sector regarding the business legislation in the Republic of Macedonia. The analysis, conclusion and recommendations should provide the authorities and business support organizations with information about the situation and satisfaction of the business sector with the current business regulation based on which the authorities can make informative decision for further improvement of the business legislation.

The survey was created in partnership with the Chambers of Commerce: Economic Chamber of Macedonia, Economic Chamber of North-West Macedonia, ICT Chamber of Commerce – MASIT, and Macedonian Chambers of Commerce.

Now, after three years, there is enough material to make a comparison with most of the questions of the survey and this analysis indicates both positive and negative trends. Below is given the summary of findings from the analysis where more elaborated analysis of the survey can be found in the chapters of this document. The questions in separate chapters are analyzed in their generic form and many of them cross checked with other criteria such as size of the company, ownership structure, type of business, regional spread and other.

1. Inspections

From the responses of the survey participants can be seen that 81% of all have been inspected in the last 5 years with different frequency. The number of inspections was analyzed by cross tabulation with company size, type of business, region, and ownership. From the data provided can be concluded that there are no protected sectors, regions, type of business or ownership and all have been inspected with different number of inspections. The highest percentage of no inspection is identified with the micro companies which also experienced the least number of inspections.

The top 3 institutions with the highest volume of inspections are the Public Revenue Office regarding tax issues, State Labor Inspectorate regarding labor issues and Market inspectorate. This is quite expected since these types of inspections are compulsory for any business operation in the country, no matter of the type of industry or type of business. The practice of warning instead of fining the companies for irregularities is increasing during the years and in 2018 almost half of the respondents (49%) stated that they had been first warned about the irregularities and left time for corrections. The perception about the period left for correction is mainly that an appropriate period is left to the companies to correct the irregularities. The mostly used fine was the financial fine while other types of fines were less utilized.

The respondents have prioritized issues with inspections and they found “insufficiently prepared inspectors” as the main issue with inspections together with “insisting to find irregularities”. Also, the “unprofessional behavior” was highly ranked in this priority list. “Corruption”, as one of the offered choices, was ranked low compared to the other choices. From the data analysis can be concluded that inspections are well and fairly spread out, without a significant focus on specific type of companies. Compared to the last year survey, the main issues are improved showing a good trend.

2. Information about legislation

The respondent opinion about the availability of information for compliance with the regulation is not very high but indicates improvement during the survey years. The negative perception was provided by 52% of respondents in the base year and the same perception fell to 44% in 2018 which is 8% improvement. The positive perception is also increasing and together with the decline of the negative perception provides a positive trend about the information for the regulation compliance information. It should be noted that the larger companies have better access to information and they are more satisfied with information availability than the smaller companies that are not sufficiently informed.

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There is public information available through the web portals, especially the portal called www.biznisregulativa.mk . Having in mind that this portal is very new, the awareness about this information offer is high 46%. The same portal www.biznisregulativa.mk offers a specialized tool called regulation compliance checklist and 36% of the respondents are aware of this opportunity.

As for the involvement of respondents in the legislation process, the answers show that involvement is increasing from 28% in base year to 43% in 2018. This trend is good and shows a more active approach of the companies in the process of legislation. Again, the larger companies are much more involved in this process, even 72%, while the micro companies only with 38%.

Regarding the compliance checking, there are different ways used by the companies and the first most used is using outsourced experts and the second option is the use of internal capacities – employees. Third on the list are the chambers as providers of services for checking the regulation compliance. Only a small number of respondents replied to have direct consultations with the relevant institutions. There is also only a small percentage (6-8%) of companies that do not do any checking and most of them are micro and small companies. Regarding the companies’ size, it is identified that the larger companies have more communications with the chambers and use their services for this purpose than the smaller companies.

When analyzing the use of external advisors, the largest group of respondents stated that they mainly use accountants and consultants while the chambers are their third option. The percentage of lawyers as providers of services is smaller compared to the previous practice and decreasing over the years, when the use of the chambers, accountants and consultants has an increasing trend. There is a significant, more than double increase of chambers use; namely, from 9% to 20% in 2018.

When rating the satisfaction level from the services of external support regarding the regulation, 50% of the respondents are somewhat satisfied and 28% very satisfied. The most satisfied are from consultants. The chambers are rated with lowest level of dissatisfaction.

The general conclusion is that the information about business regulations is publicly available, especially online, but the business sector is not sufficiently informed about these possibilities. But it should be emphasized that the situation is improving and has a positive general trend.

3. Chambers’ operations

Respondents’ opinion about the capacities of chambers to support the companies is generally positive and during all three years of the survey they find the chambers’ capacities satisfactory with 50% and 17-21% as excellent. Unfortunately the excellence level is decreasing from 21% in the base year to 17% in 2017 and 2018. From the size of the companies’ point of view, the larger companies have better opinion about the chambers’ capacities. The use of the chambers ‘services by time frequency (is very different and all the possibilities offered are represented with more or less similar participation.

The respondents’ perception about the involvement of the chambers in the legislation process is positive and in 2017 more than 70% of the respondents believed that the chambers are active in the legislation process. Unfortunately, the trend shows a small decrease in the perception to 67% in 2018.

Awareness about the Platform for public-private dialog created as a result of Government-chambers cooperation is 49%. The awareness is much higher with the companies which are members of any chamber than the companies which are not members of chambers.

The conclusion is that the chambers offer services for improvement of the legislation, represent the business sector in the legislation process but information and awareness of the companies about their activities is not satisfactory and there is a need of activities to improve the situation.

http://www.biznisregulativa.mk/


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4. Legislation assessment

This part is important for creators of legislation to understand the companies’ perception of the current regulations. The business environment cannot be seen only as isolated national precondition for successful business development and needs to be compared to other similar countries in order to see how we can create a more successful business climate. For this reason, the questions were asked and most of the companies’ responses were that the Macedonian business climate is worse than that in the other Western Balkan countries. The data from the base year (2016) show the worst ranking of 53% but the perception improved in the following two years to 31% in 2017 and 35% in 2018, which shows a good trend for improvement. The perception is very different when looking from the companies’ size. The larger companies have better opinion about the business climate while the smaller companies have lower perception of the business climate in the country compared to the other WB countries.

The survey contains a range of regulations satisfaction rankings:

Labour regulation satisfaction is in general not well perceived but the negative perception of 61% in the base year improved to 56% in 2018 which is improvement of 5%. It is good that the satisfaction trend is increasing but unfortunately, the dissatisfaction is also increasing during the three year comparison. The “Not enough satisfied” category is decreasing during the years while the “very satisfied” category is stable with a very low 2%.

Construction regulation satisfaction is also not well perceived. The initial positive perception although low, has decreased from 33% in the base year to 31% in 2018 which is improvement of 2%.

Custom regulation satisfaction was positive in only 37% of the companies in 2017, increasing to 44% in 2018 which reflects positive changes made in this field. This is still a way under the desired high level of satisfaction from this regulation.

Tax regulation satisfaction is positively ranked by 42% in the base year, 38% in 2017 and 44% in 2018, showing no significant improvement. Larger companies are much more satisfied with the tax regulations than smaller companies.

Public procurement satisfaction is recording a low level of satisfaction which has a trend to decrease. The level of negative perception from 71% in the base year was improved to 65% in 2017 and 67% in 2018. The larger companies are much more satisfied with the public procurement regulations than the smaller companies.

Environmental regulation satisfaction shows a high level of negative attitude, even 75% in 2017, with an improvement trend to 71% in 2018. But still the negative perception is very high.

Agricultural legislation satisfaction shows a low level of positive perception with only 30% in 2017 with an improvement trend to 37, 6% in 2018. But in total this is quite a negative perception. The larger companies are more satisfied than the smaller companies.

Tourism and hospitality regulation satisfaction has a negative trend, from 36% positive answers in 2017 to 34% in 2018.

Grey economy fighting satisfaction is the worst ranked regulation where negative answers are stable above 80% in all three survey years. This shows that an extremely large portion of respondent companies is unhappy with the regulation for fighting grey economy, corruption and regardless of the size of the company the perception is the same.

Business state support through legislation satisfaction in 2018 is perceived as insufficient in 62% of the respondents and 14% as “not at all” satisfactory with the state support. Only 21% of respondents are satisfied with the state support through the legislation and a very low 3% are very much satisfied.

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Cooperation with the new companies from the free economic zones shows that most of the companies have no cooperation with the zone companies and only 4% of the respondents stated to be part of their value chains. Another 6% provide some logistics and 13% have some other kind of cooperation.

To summarize, the conclusion from all the satisfaction assessments mentioned is that the respondent companies are not satisfied with the current legislation and in some areas show a very high level of dissatisfaction. This certainly affects their business operations and is a burden and barrier for faster economic development. There were many initiatives for regulatory reforms but still the perception about the quality of the current legislation is low.

5. Improvement of the business climate

The companies were asked to select from the offered range of measures the ones they think should be priorities and if properly implemented, will contribute mostly to improve the business climate in the country. The analysis showed that the top three measures selected by the companies were better information for changes in the regulation; simplified and clearer legislation and less frequent legislation changes. These three top measures have been selected by all companies regardless of the size. It is absolute priority that policy makers look at these priorities and find the way to satisfy the needs of the business sector.

Priority reforms needed for improvement of the business environment for SMEs

Comparison was possible for this issue through the three survey years and the data obtained show the same results in all three years. The main priorities selected by the respondents are reduction of grey economy and corruption and establishment of efficient judiciary and contract enforcement. The reforms should never end and they always need improvement whatever the current situation is, but having in mind the companies’ dissatisfaction, some urgent measures and reforms are needed.

For There was a question referring to the improvement of the chambers’ operations which was intended to provide answers that would help chambers to identify fields for improvement. The respondents created a list of priorities for this issue and the answers were ranked accordingly. The first one was about improving the lobbing for better legislation then the second one was the provision of market information and then the others ranked by priorities: in time information about changes in legislation, networking and trainings.

It was evident from the previous chapters that the chambers have made improvement in their operations, but still there is a room for building their capacities in order to meet the needs of the business sector. It is evident that new online tools are well adopted and their use appeared quite operational in the first year.

2 Introduction

The regulatory environment is the set of taxes, rules, and laws or regulations that businesses must adhere to. The process of legislation is complex and participatory where all stakeholders need to contribute and adopt business friendly regulations in order to allow growth of the country economy. Each piece of legislation needs to have defined clear goals and expected outcomes and impact to the general society, stakeholders and business sector. The process never stops by adopting some regulation but is followed by monitoring of the results achieved and regular evaluation of the legislation quality and adequacy for the national business society.

Good regulation is clear, simple, easy to implement and monitor. The regulation should not be a subject of frequent changes because they create uncertainty and make the process of planning difficult, make distortion in the business operations, create uncertainty about costs, permits, licenses, employment and other business elements.

Everywhere in the World the business legislation is complex and tends to control business operations in order the business to respect human rights, workers’ rights, the environment and society in general. In order to ensure that businesses comply with regulations imposed to them, there are a number of control and inspection mechanisms that regularly monitor business compliance to regulation.

How these control mechanisms are structured and practically implemented should be the subject of regular monitoring and evaluation. For sure economic progress of the country, statistical data are the main indicator of successful legislation but for its improvement it is crucial to ask for feedback from the businesses directly using qualitative data collection. Performing surveys where the business sector is asked to provide its own perception and recommendations about the business regulation quality, way of practicing the control mechanisms and inspections and ways for the state support of the companies is highly recommended.

Using international rankings and analyses of statistical data are great tools for understanding the quality of legislation. But this information is often used to compare with other countries neglecting the opinion of the real sector, the sort of administrative burden, barriers, and costs they need to face in order to comply with the regulations. More often the implementation is more important than the regulation itself and this is the moment when most of complains comes.

In these terms, the survey that was done there years in a row proved to be a very useful tool for policy makers to deeply understand the representatives’ perception of the business sector, what bothers them the most. Based on initial surveys such as this one, further in-depth researches need to be implemented to identify the exact reasons for dissatisfaction of the business sector regarding certain regulations and their practical implementation.

In Macedonia, in the last 2 decades, many reforms of the business regulations have been implemented aiming to reduce the administration burden for the companies, many administrative or business services are now available online, one-stop-shops are created, many procedures simplified such as custom procedures, licensing, permits, taxes and others. This is very good but still there is a need to see what the level of satisfaction of the business sector is.

On the other hand, the business itself is organized and lobby for better regulation and better conditions for business operations. There are numerous chambers and business associations that are supposed to support the business sector and be its voice in front of the Government and other regulatory bodies. Is the members’ satisfaction on a reasonable level? Do they know if the members are happy with their services? The chambers and other business associations need to have systems (those that already have, need to continue this activity) for regular measurement of the satisfaction with their services and act according the surveys and recommendations provided by the members.

The level of satisfaction from the regulations is in direct connection with the chambers’ activities satisfaction. If the business is dissatisfied with the regulations it means that their voice is not

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adequately conveyed to the creators of policies, measures and regulations and that their interests are not represented in the right way.

Since this survey is implemented for the third time, there are opportunities to identify some trends, positive or negative and see if the corrections in the regulations make any impact on the business operations or not. But this survey can provide only raw qualitative data but not the real reasons for the opinion provided in the questionnaires. For each part of the legislation analyzed in this study, follow up activities will be needed. The first quick reaction should be the implementation of focus group meetings, to present the survey results to stakeholders, ministries and chambers and initiate a discussion about the reason for the results obtained.

3 Methodology

The First assessment was performed in 2016 and it is a reference baseline year for comparison with data received in the next years. The survey is done using the on-line statistical survey software tool called ES-PAI. The software ensures complete anonymity which contributes for increased objectivity of the respondents’ replies. The list of companies invited to fill the questionnaire is continuously increasing but also the response rate is increasing each year. In 2016, when the first survey was conducted, the list of companies used for conducting the survey included 1100 companies provided by the Chamber partners. Each year, new contacts with companies obtained mostly at Project events was being added to this list, which in 2017 had 1300 and in 2018 a total number of 2267 contacts.

The basic structure of the questionnaire is the same through all three years but some questions are added, omitted or amended according to the needs. This 2018 year survey was composed of 46 questions offering the respondents different options to answer the questions. The respondents were offered options to answer closed questions with yes/no answers, insert comments to open questions or answer using multiple choices. The questionnaire was sent to companies in three different languages Macedonian, Albanian and English.

Out of the pool of 2267 identified companies contacted during the 2018 survey, 518 completed the questionnaire and their responses are the basis for the analysis provided in this paper. This is the third survey and each year the number of companies giving answers was growing, so in the 2016 as base year it was 177, in 2017 the total of 387 responses and in 2018 year 518 filled questionnaires. A larger sample indicates appreciation of the survey by the companies and underlying the importance of objective measurement of the perception of the business environment. It can also be the result of improved cooperation between the chambers and companies which results in increased willingness of the companies to be part of the survey.

The questions have been improved and changed during the period and some responses are available only for 2018, some for two years and others for all three years.

The paper is divided in the following chapters:

Introduction

Data Review

Inspections

Information about legislation

Chambers’ operations

Legislation assessment

Improvement of the business climate

Conclusion and recommendations

4 Data Review

4.1 Sample description

The Third Assessment of the Business Environment in Macedonia was carried out in the period October 24 – November 19 2018. This is a continuation of a monitoring of opinions and perception of the business sector about the business environment in the Republic of Macedonia. The results and recommendations from this survey should be seen as a material and contribution that can be used for improvement of the policy making process and be reflected in new improved measures and regulations adopted by the Government and line ministries for enhancement of the business environment but also in the operations of the chambers.

4.2 Number of respondent companies

Figure 1: Survey sample growth

As it is obvious from the table, the survey statistical sample is improving year by year and as the sample grows, brings to the surface more relevant information. The base survey year in 2016 provided a 177 answers. The 2017 year survey provided 387 answers which is a growth of 210 new companies or growth of 219%. In 2018 year, the survey provided 518 qualified answers which is a growth of 134 new answers or 131% compared to the previous year.

4.3 The Age of companies participating in the survey

In 2018 the most represented group of respondents was the group that operated 6-10 years. Second most represented group was 11-15 years old and then followed those of 21-29 years and 2-5 years. Companies with 16-20 years of operation are represented with 15% while companies with more than 30 years of operation with 6%. New companies which exist less than one year are represented with 2%.

Figure 2: Company age 2018

518387

177

2018 2017 2016

Survey sample growth - all years

25%

18%

17%

17%

15%

6%2%

Companies age 2018

6-10 year

11-15 year

21-29 year

2-5 year

16-20 year

30 +

-1

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4.4 Size of companies represented in the sample

The most useful cross tabulation element for an economic development analysis is certainly the size of the companies. Official statistic states that MSMS companies are more than 90% of the total number of companies in the Republic of Macedonia that is very similar to the structure of the survey sample, which makes the sample very relevant for analysis.

The micro companies’ participation in the sample is growing from 26% the base year to 47% in the next year and 33% in 2018. Small companies are represented mainly in the base year and 2018 while in 2017 the most represented companies were the micro companies. The medium companies’ representation is decreasing from 25% to 18% and 20% in 2018. The participation of the large companies is also decreasing but the percentage is not very significant through all three years of the survey, i.e. from 8% to 7% and 6% in 2018.This drives to conclusion that answers and data gathered represent opinions mostly from SMEs in the country with a small portion of the large companies..

Figure 3: Company Size 2016-2018

For the reference, below are presented the numbers of active business entities in 2017 by number of persons employed.

No. of employees 0 1-9 10-19 20-49 50-249 250 + Total

No. of companies 7 888 56 658 3 188 2 067 1 382 236 71419

Percentage 11,0% 79,3% 4,5% 2,9% 1,9% 0,3% 100% Table 1 Number of active business entities by number of persons employed, 2017

Source: State Statistical Office

4.5 Participation of companies by planning regions

Figure 4: Skopje region participation 2016-2018

The Skopje region is the largest contributor to the survey with 52%. The structure of regions out of Skopje is spread all over the other regions and taking into account all three years, the Polog and Southwest regions are most represented regions in the sample. This indicates that the Skopje region will influence the results of the survey compared to the other regions since more than half of the

33%47%

26%

42%28%

41%

20% 18%25%

6% 7% 8%

2018 2017 2016

Size of the companies 2016-2018

Large

Medium

Small

Micro

2018 2017 2016

52% 45% 44%

48% 55% 56%

Geographic distribution 2016-2018

Out of Skopje

Skopje Region

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companies are from the Skopje region and the other regions are represented with a much smaller percentage. After the Skopje region, the most represented are the Polog and Southwest regions.

Figure 5: Sample regional structure 2016-2018

For reference, the distribution of active legal entities in 2017 by planning regions is presented below.

Regions Active companies %

Vardar Region 5383 7,5%

East Region 5615 7,9%

Sothwest Region 7238 10,1%

Southeast Region 5970 8,4%

Pelagonia Region 8064 11,3%

Polog Region 8118 11,4%

Northeast Region 4084 5,7%

Skopje Region 26947 37,7%

Total 71419 100,0% Table 2 Number of active business entities by planning regions in RM, 2017

Source: State Statistical Office

4.6 Participation of companies by sectors

Figure 6: Sectors participation in the sample 2016-2018

In all three years of the survey, there is a consistent sector division applied, but each year the sector participation is different and this should be considered when results of the survey are used.

2018 2017 2016

7% 9% 6%7% 8% 10%9%

14%6%

3%4%

7%6%5%

6%15%

9% 18%1% 5% 5%

52% 45% 44%

Sample regional structure 2016-2018

Skopje Region

Northeast Region

Polog Region

Pelagonija Region

Southeast Region

Southwest Region

East Region

Vardar Region

2018 2017 2016

49% 51%30%

20% 19%

12%

11% 6%

11%

10% 10%

18%

6% 8%20%

4% 7% 8%

Sector`s participation in surveys 2016-2018

Textile

Agricuture

ICT

Tourism

Construction

Other

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The “other” sectors defined by the survey as “the other” have a significant impact on the survey with 49% of the respondents in the last year but also significant in the previous years with 51% in 2017 and 30% in the base year. Second most covered sector is construction with 20% while the others are less represented, such as the important agriculture sector with only 6%. Compared with the previous years, there is a similarity to 2017. The structures of the companies need to be carefully considered when the results of the survey are analyzed.

4.7 Ownership of the participating companies

The survey sample is dominantly composed of domestic companies 85-86%, but foreign owned and mixed companies are also represented. During the years, the structure regarding the ownership has not been changed significantly which leads to the conclusion that the sample is steady in relative terms but it is growing proportionally as the whole sample grows. Regarding the data analysis, this means that the results of the survey will dominantly rely on answers provide by domestic companies.

Figure 7: Ownership structure of the sample 2016-2018

4.8 Number of employees

The average number of employees by company size varied during the three years of the survey.

Figure 8: Number of employees in companies 2016-2018

Large companies’ average was 500 in the base year and increased to 530 in 2017 while in the 2018 year survey it decreased considerably to 392. There is also a difference in the average number of employees in the medium-sized companies starting with 111 in the base year increasing to 141 in 2017 and decreasing considerably to 88 in the2018 year survey. As for small and micro companies, there is also a decrease in the average number of employees but not so expressive as with medium and large companies.

2018 2017 2016

86% 86% 85%

8% 8% 6%7% 7% 8%

Ownership of companies 2016-2018

Foreign

Mixed

Domestic

5 5 723 26 2888

141 111

392

530 500

2018 2017 2016

Average number of employees 2016-2018

Micro

Small

Medium

Large

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4.9 Change in the number of employees in the last 5 years

The change in the number of employees in the last 5 years according to the survey conducted in 2018, shows that the increase of the number of employees is proportional to the company size. Even 69% of the large companies reported increased number of employees in the last 5 years. In addition, 67% of the medium-sized companies reported increase of the staff. High 54% of the small companies reported increased number of staff and 31% of the micro companies also reported increase in the number of employees.

On the other hand, the decrease in staff is not so significant. The large companies reported 10% decrease, the medium-sized 21%, while the small companies and the micro companies reported 18% and 11% reduction of their staff respectively.

Figure 9: Number of employees change in last 5 years 2013-2018

The situation is similar to the 2017 year survey. Most of the companies reported increase of the number of employees, with the lowest percentage (38%) in the micro companies 52% in the small companies, and 62% in the medium-sized and large companies. Decrease is reported on a lower scale, i.e. Micro companies 15%, small companies 20%, medium-sized 12% and large companies23%.

Figure 10: Number of employees change in the last 5 years 2012-2017

The increase of the number of employees could be a sign of economic development and good business development policy, but only these numbers are not sufficient to indicate effective measures for business development and further elaboration will be needed.

31%

54%

67% 69%58%

27%

13%21%

11%18% 21%

10%

0%

20%

40%

60%

80%

Micro Small Medium Large

Change in the number of employees by company size 2013 - 2018

Increased

Not changed

Decreased

38%

52%

62% 62%

47%

28% 26%

15%15%20%

12%

23%

0%

10%

20%

30%

40%

50%

60%

70%


Change in the number of employees by company size 2012 - 2017

Increased

Not changed

Decreased

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5 Inspections

5.1 Number of inspections in the last 5 years

The graph below shows the respondents’ answers about the number of inspections they had in the last 5 years. Nineteen percent of the respondents answered that in the last 5 years had not been inspected; 43% declared to have had 1 to 3 inspections in the last 5 years; 21% responded to have had 4 to 6 inspections; 6% answered to have had 7 to 10 inspections and 11% answered to have had more than 10 inspections in the last 5 years.

Figure 11: Number of inspections in the last 5 years 2013-2018

In order to better understand the inspections, they were analyzed by regions and the analysis showed that no inspection is most common in the Skopje and East regions, while the Vardar and Southeast regions had the lowest percentage of no inspections. The 1-3 inspections are most common in all regions. The Southeast region declared 58% answers with 1-3 inspections, while the East region declared only 26% with 1-3 inspections. According to the respondents, the most inspected companies that had 10+ inspections in last 5 years are in the Southeast with 23% and Vardar region with 22%, followed by the East and Pelagonia regions with 18%.

Figure 12: Number of inspections by regions in the last 5 years - 2018

According to the respondents from different business sectors, there is a different experience with the number of inspections. In the textile industry, there was no answer - no inspection, meaning that all textile companies have been visited by inspectors. These companies also have the highest percentage of +10 inspections in the last 5 years. Tourism 25% and ICT 24% have the highest percentage of no inspection answers, allowed by constructions with 22%, other 18% and agriculture with 12%.

No inspection

19%

1 to 343%

4 to 621%

7 to 106% 10 +

11%

Number of inspections in last 5 years

23% 15% 17% 8%24%

9% 8% 14%

44%46%

58%

41%26%

36% 31%

43%

20%20%

17%

19% 24% 33%31%

29%

4% 8%6%

11% 9% 3%8%

14%9% 11%2%

22% 18% 18% 23%

Number of inspections in last 5 years by regions

10 +

7 to 10

4 to 6

1 to 3

No inspection

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Figure 13: Number of inspections by the type of business in the last 5 years - 2018

In order to see if the ownership has any influence on the number of inspections, the responses from companies have been matched and from the data obtained it can be concluded that foreign companies have more visits than domestic companies. Foreign companies’ answers with “no inspection was 9% while those from the domestic companies were 20%. Domestic companies had more 1-3 inspections while foreign companies had much more - 4-6 and 10+ inspections in the last 5 years. The reason for this could be that most of the foreign companies are large or medium-sized and as such they are subject to numerous compulsory inspections. The percentage of inspections of the mixed ownership companies was between the domestic and foreign companies.

Figure 14: Number of inspections by ownership in the last 5 years - 2018

Analyzing the inspections by company size, it is evident that micro companies are less inspected (31% - no inspection) than the others and if inspected, it was with a minimal number of inspections; 52% declared to be inspected 1-3 times in the last five years. The company size is proportional with r the number of inspection; so, the bigger the company, the more frequent the inspections. Large companies with more than 10 inspections in the last 5 years are represented by 45% of the total number.

Other Construction Tourism ICT Agriculture Textile

18% 22% 25% 24%12%

45%43% 41% 46%

42%

29%

18%23% 18%

16%36%

57%

5%

6% 9% 4%6%14%

7% 7% 10%3%

14%

Number of inspections in last 5 years by business

10 +

7 to 10

4 to 6

1 to 3

No inspection

Domestic Mixed Foreign

20% 15% 9%

45%

35%32%

20%30%

32%

6%3%

3%

9%18% 24%

Number of inspections in last 5 years by ownership

10 +

7 to 10

4 to 6

1 to 3

No inspection

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Figure 15: Number of inspections by company size in the last 5 years - 2018

5.2 The most frequent inspections in the last 5 years

There are many inspections businesses are subject to and companies need to comply with many regulations. Inspections are tools which ensure that the obligations of the companies toward the society, workers, customers, state administration and others are fulfilled enabling proper environment for economic development. On the other side, the inspections need to be controlled and not a burden to the companies inducing fear from inspections. Inspections need to be quick, efficient and fair to companies, transparent and qualified making evidence based decisions. Inspections need to be more preventive than factionary and allow the companies to correct errors not intended to violate regulations.

According to the answers from respondents, the most frequent inspection is the PRO inspection that increased in the last year survey from 21% to 26% from the total number of inspections. The second on the list most frequent inspectors is SLI that controls regularities of the labor law and this inspection has a minimum decreased from 23% in 2017 to 22% in 2018. Other important and frequent inspections by the respondents are the Market inspectorate, SLI, food and veterinary inspection, customs inspection and many others shown in the figure below.

Figure 16: The most frequent inspections in the last 5 years 2017-2018


31%16%

4% 14%

52%

44%

38%7%

9%

25%

33%

24%

2% 8%4%

10%

5% 7%21%

45%

Number of inspections in last 5 years by company size

10 +

7 to 10

4 to 6

1 to 3

No inspection

0% 10% 20% 30%

Public Revenue Office (PRO)

State Labor Inspectorate (SLI)

Market Inspectorate

SLI - Sector for safety and health of work conditions

Agency for Food and Veterinary

Customs Administration

State Inspectorate for Environment

State Inspectorate for technical inspections

Agricultural Inspectorate

Directorate for Protection of Personal Data

Ministry of Economy (Concessions)

Directorate for Protection and Rescue

Financial Police Administration

State Inspectorate for Construction and Urbanism

Other

State Archive (archive content and archive work)

Most frequent inspections 2017-2018

2018 2017

19 | P a g e

Figure 17: Most frequent inspections by company size in the last 5 years

For the reason of clarity and visual presentation of the most significant inspections 6 most frequent inspections out of the total of 16 inspections mentioned in the questionnaire are presented here It is evident that regardless of the company size, the first most frequent inspection is PRO, followed by SLI and market inspectorate. As the company grows, it becomes subject to an increased number of inspections related to safety and health conditions as well as customs inspections.

Figure 18: Most frequent inspections by company size in the last 5 years

When comparing the 2017 results with those of the two other years, the difference is evident. In the group of micro companies number of PRO inspections was increased for almost 5% similar to the case with SLI – increase of 3%. The market inspectorate is on the same level and the other 3 inspections are close to those in the previous year.

In the group of small companies, the number of PRO inspections in 2018 was increased by 6%, SLI was on the same level, same as the market inspectorate and safety and health work conditions inspections. There is a reduction of 3% in the Agency for food and veterinary inspections.

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%


Most frequent inspections by company size 2018

Public Revenue Office

State Labor Inspectorate

Market Inspectorate

SLI - Sector for safety andhealth of work conditionsAgency for Food andVeterinaryCustoms Administration

0%

5%

10%

15%

20%

25%

30%


Most frequent inspections by company size 2017

Public Revenue Office

State Labor Inspectorate

Market Inspectorate

SLI - Sector for safety andhealth of work conditions

Agency for Food andVeterinary

Customs Administration

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In the group of medium-sized companies the PRO inspections in 2018 were increased by 5%, SLI remained on the same level, the market inspectorate increased by 2% and the rest have minor changes.

As for the large companies, PRO increased by 2% but significant reduction of 7% was recorded in SLI compared to 2017. The other inspections record no significant changes.

What is common for both years regarding the company size is that the smaller the company the bigger the percentage of the two main inspections in the whole inspection structure. As the size of the company is growing the structure is changed. Even the two most common inspections, PRO and SLI are represented mainly in all companies regardless of the size but it is most emphasized in the inspection structure regarding the smaller companies.

5.3 Issued fines

Respondents stated that in large number of cases had not been fined but warned by inspections and this trend shows that warning becomes a more frequently used instrument by inspections than fining. In the base year, warning was represented with 39%, growing to 43% in the second survey and in the third it reached 49%. On the other hand, the financial fine was decreasing from 53% in the base year to 33% in the second survey and 30% in the third survey. This is an obvious shift in the fining policy providing opportunities for companies to correct the irregularities found by inspections.

The other types of non-financial fines have been used as well but all of them are below 10% in the fine structure in all three years. The third highest percentage of fines is for “other” type of fines, not defined by the survey. Temporary ban of professional activities was represented with 5% to 4% in all years. It is worth mentioning that confiscation of assets was used extremely rarely and only in 2018.

Figure 19: Issued fines 2016-2018

49%

43%39%

30%33%

53%

9% 9%

5%

0%

10%

20%

30%

40%

50%

60%

2018 2017 2016

Issued fines - surveys 2016-2018Warning

Financial fine

Other

Temporary ban ofprofessional activity

Mandate procedure withmandate payment order

Misdemeanor payment orderprocedure

Confiscation of assets andmaterial benefits

21 | P a g e

Figure 20: Issued fines by company size in the last five years 2013-2018

Analyzing the structure of fines by size of the respondent companies, the warning as a type of fine is dominant in all sizes of companies and it is between 39% for the large companies to 52% for the small companies. The second type of fine is the financial fine which is in the range of 30% for the small and medium-sized companies to 39% for the large companies. The other type of fine is spread over all companies regardless of size in the range of 6% for medium to 14% for micro companies. Other types of fines are minor and represented by a low percentages in the structure.

Figure 21: Issued fines by sectors in 2018

Analyzing the structure of respondents’ answers in the survey, it is obvious that ownership of the companies does not play a significant role and that all have a similar treatment by the inspection. While domestic and mixed companies stated that they had been warned mainly instead of paying a financial fine, foreign companies had a more broad range of fines. Confiscation of assets was reported only by mixed and foreign owned companies – 4%, while this fine type was not reported by domestic companies.


47% 52% 49%39%

31%30% 30%

39%

14% 9%6% 9%

2% 5% 9%

Issued fines by company size 2013-2018

Misdemeanor payment orderprocedureConfiscation of assets andmaterial benefitsTemporary ban of professionalactivityMandate procedure withmandate payment orderOther

Financial fine

Warning


48% 49% 44%55% 60%

53%

32% 35%

26%

25% 16% 29%

9% 5%18%

10% 20%

3% 1% 10% 4%12%

Issued fines by sectors - 2018

Confiscation of assetsand material benefitsMandate procedure withmandate payment orderMisdemeanor paymentorder procedureTemporary ban ofprofessional activityOther

Financial fine

Warning

22 | P a g e

Figure 22: Issued fines by ownership structure

Issued fines by region shows a colorful situation indicating a different use of fines in the regions. The warning fine is most used in almost all regions except the Southeast where the dominant percentage is the financial fine. The warning is used mostly in the Polog region, reaching 65% and the least in the Southeast region with 30%. The financial fine is used in all regions except in the Northeast where no financial fine was reported. The financial fine was used mainly in the Southeast region with 40% and the least the in the Polog region with 24% of total fines. The other types of fines depend on the region and range from 25% in the Northeast to the 5% in the Polog region. The structure of the Northeast region can be explained by a small number of participant companies in the survey, only 5% in the base and second years and 1% in the 2018 survey.

Figure 23: Issued fines by regions

50%

63%

22%

32%29%

17%

10% 9%

3%

17%

2%

9%

2%4%

22%

4% 4%

Domestic Mixed Foreign

Issued fines by ownership 2018

Warning

Financial fine

Other

Temporary ban ofprofessional activityMisdemeanor paymentorder procedureMandate procedure withmandate payment orderConfiscation of assets andmaterial benefits

48%65%

52%37% 41% 48%

30%

50%

31%

24%

28%

37% 33%

38%

40%

6%5%

16% 22% 11%10%

20%

25%

4%4%

4% 25%

Issued fines by regions 2018 Confiscation of assetsand material benefits

Misdemeanorpayment orderprocedureMandate procedurewith mandatepayment orderOther

Temporary ban ofprofessional activity

Financial fine

Warning

23 | P a g e

5.4 Deadline for solving irregularities

Inspectors issued sanctions to companies with no right to appeal in 2% of the cases, same in both analyzed years. After the inspection, 50% of the companies in 2017 and 41% in 2018 were left appropriate deadline for solving irregularities. The percentage is dropping down indicating that the companies are not satisfied with the deadlines. Some companies (7% in 2017 and 10% in 2018) are left deadlines which, according to their opinion, are not sufficient to address the irregularities, immediate sanctions without allowing time for correction were issued in 15% of the cases in 2017 but increased to 17% in 2018. There were also inspections without finding any irregularities and their percentage was significant - 25% in 2017 and increased to 30% in 2018.

Figure 24: Deadline for solving irregularities 2017-2018

5.5 Most important issues with inspections

This question allowed respondents to provide more than one answer and most answers created the priority list of issues with inspections according to the companies’ opinion.

Figure 25: Most important issues with inspections 2017-2018

41%

30%

17%10%

2%

50%

25%

15%

7%2%

0%

10%

20%

30%

40%

50%

60%

Appropriatedeadline to

addressirregularities was

provided withcontrol audit

scheduled

No irregularityhas been

establishedduring the audit

Sentencedimmediately

A deadline wasprovided, but in

our view, notsufficient toaddress theirregularity

Sanction with noright to appeal

was issued

Deadline for solving irregularities 2017-2018

2018

2017

0% 5% 10% 15% 20% 25%

Insufficiently prepared inspectors

Insisting to find irregularities

Unprofessional behaviour

Long inspections

lack of information with companies

no transparent inspections

Lack of coordination of inspections

Lack of capacities of inspectors

Corruption

Companies do not cooperate

Most important issues with inspections 2017-2018

2018

2017

24 | P a g e

The most important issues identified are insufficiently trained inspectors with 15 and 16% for 2018 and 2017 years, followed by insisting to find irregularities – 14% and 22% respectively for both years. Other issues identified are unprofessional behavior – 14% and 16% respectively, long inspections 13 and 14% respectively, lack of information s 12 and 6%, non-transparent inspections 10 and 11%, lack of coordination of the inspections 9 and 8%, corruption 6 and 5% and finally, non-cooperative companies 2 and 1% respectively.

Comparing the surveys of both years, the conclusion is that the biggest difference in both surveys refer to the issues of insisting to find irregularities i.e. 22% in 2017 reduced to 14% in 2018; lack of information 12 and 6% respectively, increase of 6% in 2018; lack of inspectors’ capacities, 7% in 2018; this question was not asked in the previous surveys.

6 Information about legislation

6.1 Availability of information for compliance with the

regulation

Easy access to relevant information about regulation compliance is crucial for successful compliance. From the respondents’ answers it is obvious that a larger group of answers belonged to insufficiently available but there is an improvement in the group because dissatisfaction decreased from 52% in 2016 to 44% in 2018. The second largest group of answers is mainly available. Again there is improvement of the satisfaction with this question from 34% in 2016 to 38% in 2018. The group of answers fully available shows a big and consistent improvement, more than double, from 4% in 2016 to 9% in 2018. The group of answers not available is mainly stable but still there is a small improvement in reducing dissatisfaction from 10% in 2016 to 9% in 2018. So, in general, we can say that improvement is recognized in all groups and has a positive trend.

Figure 26: Availability of information for compliance with the regulation 2016-2018

From the perspective of different company size, the situation is different since the large companies believe that information is mainly available (66%) and as the company size decreases, the awareness lowers. So, the medium-sized companies stated that information is mainly available in 47%, small companies in 37% and micro in 29%. The situation is opposite with the category insufficiently available

44%

38%

9% 9%

46%

37%

7%10%

52%

34%

4%

10%

0%

10%

20%

30%

40%

50%

60%

Insufficientlyavailable

Mainly available Fully available Not available

Availability of information for compliance with regulations 2016-2018

2018

2017

2016

25 | P a g e

where the micro companies have highest percent - 49%, the small companies 46%, the medium-sized 36% and the large companies 24%.

Figure 27: Availability of information for compliance with the regulation by the company size

6.2 How the companies check the compliance

It is important that companies have a system in place for checking the compliance with new, frequently changed regulations. In order to ensure a high compliance level, companies use different approaches. The most used approach is outsourced experts - 42-43% in 2018 and 2017. The second most used approach is the use of internal capacities, employees and this differs in both years, i.e. 22% in 2018 and 31% in 2017 which is a reduction of 9% and the use of other sources for updated regulation compliance. Using chambers for this issue has increased significantly, more than double, from 9% in 2017 to 21% in 2018 and this makes the chambers an important player in this field since many companies use their services for this issue. One way for checking the compliance is with state institutions and this is stable with 9% in both years. There are companies that answered that they do not check the compliance and luckily, their percentage is reducing from 8% in 2017 to 6% in 2018.

Figure 28: How the companies check the compliance 2017-2018

When this issue is analyzed from the company size point of view, the situation is quite different. There are no large companies that do not check the compliance with regulations. As the company size decreases, the “do not check” rate increases, so the percentage of the medium-sized companies is 2% that of the small companies 5% and of the micro companies even 10%. The use of outsourced experts

49%46%

36%

24%29%

37%

47%

66%

0%

10%

20%

30%

40%

50%

60%

70%


Availability of information for complience with regulations - by company size

InsufficientlyavailableMainly available

Fully available

Not available

42%

22% 21%

9%6%

43%

31%

9% 9% 8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Using outsorcedexperts

Internaly viaemployee

Troughtchambers

Consultationwith state

institutions

Do not check

How the companies check the compliance 2017-2018

2018

2017

26 | P a g e

is the highest in the medium-sized companies - 47%, followed by 42% in the micro companies, 41% in the small companies and only 24% in large companies. The use of the chambers’ services in this field is opposite of the company size. So, the bigger the company, the more frequent the use of the chambers’ services. Large companies use them in 31%, medium-sized in 21%, small and micro companies in 20%.

Using internal capacities is proportional to the company size, meaning that the bigger companies have more internal capacities to check the regulation compliance. Large companies rely on internal capacities in 34%, medium-sized in 25%, small in 26% and micro companies in only 15%.

Figure 29: How the companies check the compliance by company size

6.3 Awareness of the portal www.biznisregulativa.mk

The portal www.biznisregulativa.mk was created to provide information for the business sector in order to make the regulation compliance easier for the companies. It is a new portal and there are no answers for the questions asked in the previous surveys. The portal is known to 46% of the respondents and this can be seen as a great achievement since this portal had been operational only for 3 months before the survey took place.

Figure 30: Awareness of the portal www.biznisregulativa.mk

The data show that the portal is most known in the Skopje region with 50%.

42%

41%

47%

24%

15%

26%

25%

34%

20%

20%

21%

31%

13%

8%

6%

10%

10%

5%

2%

0% 10% 20% 30% 40% 50%

Micro

Small

Medium

Large

How companies check the compliance by company size

Do not check

Consultation withstate institutions

Trough chambers

Internally viaemployee

Using outsourcedexperts

No54%

Yes46%

Awarеness of portal www.biznisregulativa.mk


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It is less known in the Northeast region with 29% awareness of the portal.

Figure 31: Awareness of the portal www.biznisregulativa.mk by regions

6.4 Awareness of the tool “Checklist for compliance with the

business legislation” as part of the

portabiznisregulativa.mk

This is connected to the previous question about the awareness of the possibility to access the checklist and check the compliance with the business legislation. The lack of awareness is higher and 64% are not aware of this portal tool portal.

The online check list tool is available at www.biznisregulativa.mk and it is anonymous and free of charge. After selecting the suitable area, the user answers a questionnaire about different legal issues related to his/her working, which at the end measures his/her compliance with the current legislation. The educative Pdf. report can be used by companies to check their incompliance and the type of fine for each type of incompliance, which provides them with the opportunity to anticipate possible irregularities that can be subjected to fines during an inspection.

Figure 32: Awareness of the tool for regulation compliance on the web portal

50%

56%

65%

54%

56%

67%

62%

71%

50%

44%

35%

46%

44%

33%

38%

29%

0% 20% 40% 60% 80% 100%

Skopje

Polog

Southwest

Vardar

East

Pelagonia

Southeast

Northeast

Awаrеness of portal www.biznisregulativa.mk

by regions

No

Yes

No64%

Yes36%

Awarеness of the tool on web portal for regulation complaince



28 | P a g e

6.5 Involvement of companies in preparation of the legal

regulation in the past 5 years

Quality regulation can be prepared only if the relevant sector is actively involved in the preparation and monitoring of the effects of the legislation. To enable this, it is necessary to have a system in place that will allow for active participation of stakeholders but will also ensure that stakeholders are capable to provide relevant suggestions and be equal partners in discussions. From the respondents’ answers it can be concluded that the level of involvement has improved significantly from 28% in the base year to 43% in 2018.This means that from 2016 to 2018 there was a significant improvement of the companies’ involvement in the legal regulation preparation for 53,57% , which should result in better legislative environment for business operations.

Figure 33: Involvement of companies in the legislation process 2016-2018

Considering this question from the perspective of the company size, the situation is different for each size group. Namely, the larger the company the higher the involvement. The most involved companies are the large companies with 72% followed by medium-sized companies with 50%, small companies with 37% and finally micro companies with 38%.

Figure 34: Involvement of companies in the legislation process by company size 2018

6.6 External advisors used

There is a range of possibilities for the use of advice concerning the legislation and companies are aware of their services. Traditionally, this role was reserved for lawyers but recently consultants, chambers, information providers, portals and other electronic media are taking over this role. In 2018, the structure of external advice used was as follows: accountant 29%, consultants 25%, and chambers 20%, lawyers with 18% and finally 8% companies that do not use external advisors for legislation purposes.

2018 2017 2016

57,3%73,9% 71,8%

42,7%26,1% 28,3%

Involvement of companies in legislation process 2016-2018

Yes

No


62% 63%50%

28%

38% 37%50%

72%

Involvement of companies in the legislation process by company size

Yes

No

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Figure 35: External advisors use 2018

Table 35 shows that in the last three years there is a drastic increase of chambers advisory services, more than 130%; also, on one side the consultant advisory has increased considerably (25%) and on the other hand the use of accountants has decrease for 6% although they still remain the most frequently used advisors Formby the companies. In addition, a significant decrease of the use of lawyer’s advisory (50%) is noticed.

Figure 36: External advisors use 2016-2018

6.7 Level of satisfaction from external advisors ’ services

From the previous elaboration it is obvious that external advisors are important for companies without proper capacities to manage the large number of regulations which are frequently changed. Their role is increasing and the level of the companies’ satisfaction with the use of their services will help providers to adjust and improve their services according to the needs of the companies.

The general analysis shows that a considerable number of companies (50%) selected the answer somewhat satisfied, followed by very satisfied with 28%, then not enough satisfied with 13%, do not use advice 8% and only 1% dissatisfied.

29%

25%20%

18%8%

External advisors use

Accountants

Consultants

Chambers

Lawyers

No advisors

29%25%

20%18%

8%

42%

23%

7%

20%

9%

31%

20%

8%

36%

6%

Accountants Consultants Chambers Lawyers No advisors

External advisors use 2016-2018

2018 2017 2016

30 | P a g e

Figure 37: Satisfaction level of external advisors

Examining separately each of the advice providers , it can be concluded that that the answer somewhat satisfied is reserved for consultants’ services (63%), then lawyers 57%, accountant 48% and chambers 47%. . Very satisfied is for chambers with the highest 42% and then other with 28% and 23%. On the other hand, there are also companies (3%) which are dissatisfied with the chambers’ and accountants’ services where other two do not have this level of satisfaction (не значи ништо). So, companies are mostly satisfied with the chambers’ services but they still need to adapt to the real needs of the companies in order to improve their rating.

Figure 38: Satisfaction level from specific external advisors

7 Chambers’ operations

7.1 The chambers’ capacity to support companies

The chambers are important institutions in each country and they can initiate economy growth of the country if managed in the right direction. Most clients of the chambers are satisfied or somewhat satisfied with their services, but there is still room for improvement in order to enhance the percentage of satisfied members through improvement of their services. One reason for dissatisfaction can be a lack of capacity or resources to support the companies and so they need to intervene in this direction and try to improve their own capacities.

50%

28%

13%8% 1%

Level of satisfaction from external advisors Somewhat

satisfied

Very satisfied

Not enoughsatisfied

Do not useany

Dissatisfied

Accountants Consultants Chambers Lawyers

48%63%

47% 57%

28%

28%42% 23%

20%9% 7% 18%

3% 3%

Companies' satisfaction from specific external advisors

Dissatisfied

Not enoughsatisfiedVery satisfied

Somewhatsatisfied

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Figure 39: Chambers’ capacity to support companies 2016-2018

The figure above shows a decrease in the category excellent from 21% in 2016 to 17% in both the 2017 and 2018 surveys. On the other hand, the category insufficient capacity is growing from 21% to 25%. The category satisfactory is 50% in 2016 with a small increase of 3% in 2017 and again back to 50% in 2018. This is good of course but chambers should incline towards excellent. The very stable 8% not satisfactory shows that a small group of companies is not satisfied with the chambers’ services and the chambers should analyze this seriously.

From the perspective of the company size, the analysis show different results. . Satisfaction with the chambers is decreasing with the decrease of the company size as well. . Large companies found chambers’ capacities satisfactory in 72%, decreasing to 54% for the medium sized companies, 49% for the small ones and 44% to the micro companies. In general, it is evident from the graph below that larger companies are more satisfied with the chambers’ servicers’ capacity to support their business than smaller companies. Insufficient capacity is in the range from 21% to 29%. Excellent capacity is ranked by a small percent of the large companies (7%) but much better ranked by the SMEs - up to 20%. The category not satisfactory is ranked opposite to the company size. The smaller the company the higher the ranking of non-satisfactory. In this case large companies have 0% non-satisfactory, medium 5%, small 8% and micro 12%.

Figure 40: Chambers’ capacity to support companies by company size

2018 2017 2016

50% 53% 50%

25% 21% 21%

17% 17% 21%

8% 8% 8%

Chambers capacity to support companies 2016-2018

Non satisfactory

Excelent

Insuficient

Satisfactory

44% 49% 54%

72%

24%29% 22%

21%20%

13% 20%

7%12% 8% 5%


Chambers capacity to support companiesby company size

Non satisfactory

Excelent

Insuficient

Satisfactory

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7.2 Use of chambers’ services

The needs of the chambers’ clients can be understood partly from their level of communication with the chambers. From the figure below it can be concluded that almost all of the studied categories are represented and there is no significant difference in values. The most common answers are quarterly or more than monthly which indicates the level of interest for their services. Every day is quite unusual and very rare communication.

Figure 41: Frequency of the use of the chambers’ services 2016-2018

7.3 Involvement of the chambers in the process of adopting

the legislation

The chambers or other forms of business associations are the best and only way of how the business sector can be represented in the process of adopting the legislation. Thus, chambers need to be a bridge between the legislators and business sector and lobby for business interests. The respondents have different opinions about the chambers’ involvement in the process of adaptation of the legislation. The baseline study had the option I do not know and last year and this year survey has only two options, yes or no. Comparing the 2017 year survey to the 2018 year survey, the conclusion is that this category rates worse since 39% No answers in the 2017 year survey increased to 33% No answers in the 2018 year survey (нема логика – да се поправи).

Figure 42: Involvement of the chambers in the legislation process 2016-2018

From the company size perspective, а tendency that indicates that larger companies are in favor of the chambers unlike the smaller companies which are not informed about the activities of the chambers in the field of legislation adoption can be identified. The range of yes answers is decreasing from 79% for the large companies in downscaling trend (15%) to 64% for the micro companies. Large

2018 2017 2016

23% 17% 18%

17%12% 16%

15%18%

20%

13%10%

11%

10%14%

8%4% 6% 3%

Frequency of use of chamber`s services 2016-2018

Everyday

Less than once a year

Once a year

More than monthly

Monthly

Quarterly

67% 70%

45%

34%

33% 30% 21%

2018 2017 2016

Involvement of chambers in legislation process 2016-2018

No

Do not know

Yes

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companies are usually better equipped with staff familiar with the legislation process and usually they communicate well with the chambers in this regard. Smaller companies, especially micro and small ones, often have poor resources for a relevant discussion regarding legislation and this is why their interests are represented by the chambers, associations and other organization they are member of.

Figure 43: Involvement of the chambers in the legislation process by company size

7.4 Commission for PP Dialog

The four chambers, organized together through a Platform for PPD, have signed a memorandum with the Government about the foundation and operation of the Commission for public-private dialog. General awareness of this platform is 49% while the rest 51% is not aware of the Platform operations.

Figure 44: Awareness of the Commission for PP dialog

8 Legislation assessment

8.1 Business climate

Business climate is the key element of economic prosperity of a country and all countries make efforts to improve it. It is both important for the local economy but also for attracting foreign investors. For this reason, it is good to know your direct competitors and understand the conditions for the business operations in those countries. There are many institutions that use composite indicators measurement of the business climate and they should be added to this survey and combine findings from both (koi?) in order to make relevant conclusions about it.

The perception of the respondent is that only a small portion is of the opinion that Macedonia compared with the other countries from the Western Balkan is better. The baseline survey found that only 7% of the respondents found Macedonia a better place for investment than the other Balkan courtiers. This opinion was significantly improved in the 2017 survey to 19% while in 2018 it dropped again to 12%. That Macedonia is a worse destination for investors was the opinion of a dominant respondents’ group in 2016, even 53% found Macedonia as a worse place for doing business and

64% 65% 75% 79%

36% 35% 25% 21%


Involvement of chambers in legislation process by company size

No

YES

No51%

Yes49%

Awareness about the Comission for PP dialog

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investing. This opinion has been amortized during the last two surveys so the 2017 year survey the rating was 31% and 35% in the 2018 year survey. These percentages are not in favor of the country but show a significant improvement of 18% but still there is a need for additional investigation addressing the reason for such unsatisfactory opinion.

Similar to the other category answers, there is a trend of improvement from 29% in the base year to 40% in 2017 and 39% in 2018. In general, the trend shows good improvement in the companies’ perception of the business climate but still there is a room for improvement.

Figure 45: Opinion about the business climate in Macedonia 2016-2018

When making a deeper analysis, the perception based on the company size shows a different situation. It is obvious that the large companies have a better perception and their answers provide 17% of better than the other Western Balkans countries. The smaller the company, the lower the satisfaction. Namely, the smaller the company, the higher the percentage of the “worse” category, meaning that the small companies’ perception is that the Macedonian business climate is worse than on the other countries; but the large companies are relatively satisfied with the country position.

Figure 46: Opinion about the business climate by company size in Macedonia 2018

The situation is similar in the category “equal” where the large companies mostly perceive the Macedonian economy equal to the other WB countries, while the t smaller companies’ perception is not very high. So, 59% of the large companies see it equal to the other WB countries, 39% medium-sized, 42% small and only 33% micro companies

2018 2017 2016

39% 40%29%

35% 31% 53%

14%11%

11%12% 19%

7%

Opinion about business climate in Macedonia2016-2018

better

do not know

worse

equal


33% 42% 39%59%

41% 33% 34%17%

9% 13% 14% 17%17% 12% 13% 7%

Opinion about business climate in Macedonia by company size 2018

Do not know

Better

Worse

Equal

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8.2 Labor legislation satisfaction

The labor legislation is one of the most important elements to protect the workers’ human and labor rights but it is also very important for enabling businesses to manage the human resources in an effective way. Examining the data of the three surveys, it is clear that a very minor group of respondents is satisfied with this regulation, about 2-3% in all three years. Not very satisfied is the largest group and it is decreasing through the years, from 47% in 2016, to 45% and 36% in the other two years, respectively. The category satisfied has a growing trend from 24% in the base year to 32% in 2018. It is very good that this category is improving but on the other hand. The category dissatisfaction is also growing from 14% in the base year to 20% in 2028. Clearly, there is a polarization of the respondents’ opinion, and it will be useful to find out the reasons for these changes in satisfaction.

Figure 47: Labor regulation satisfaction

According to the analyses by sectors, the survey provides data that are quite different. Not enough satisfied and satisfied groups are quite equalized in all sectors, with a small percentage of very satisfied. The agriculture and textile are sectors which are most satisfied with this regulation without any “dissatisfied” companies, but we should bear in mind that these sectors are less represented in the survey sample. Dissatisfaction is represented in all other sectors, mostly in “other” sectors.

Figure 48: Labor regulation satisfaction by sectors 2018

2018 2017 2016

36%

45%47%

32%

23% 24%20%

17%14%

2% 3% 2%

Labor regulation satisfaction

Not enoughsatisfiedSatisfied

Dissatisfied

Very satisfied

43% 38% 38%45% 44% 44%

32% 44% 42%36%

56% 50%

23% 13% 18% 17%

2% 5% 2% 2% 6%

Labour regulations satisfaction by sectors 2018

Very satisfied

Dissatisfied

Satisfied

Not enoughsatisfied

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8.3 Construction operations regulation satisfaction

The structure of the given satisfaction levels is quite even in all three years of the survey without drastic changes. The category level very satisfied, although low 95%) in 2016, is getting even lower in 2018 (2%). In all three year, 28%-29% of the companies are satisfied. Most of the changes are in the category unsatisfied where dissatisfaction is growing from 20% in the base year to 30% in 2018, which indicates changes not in favor of the construction industry. The same trend is noticed in the category “not enough satisfied.” which confirms the previous statement.

Figure 49: Construction regulations satisfaction 2016-2018

If the answers “very satisfied” and “satisfied” are taken as positive and ”dissatisfied” and “not enough satisfied” as negative, we can say that the negative perception of the regulation is prevailing in all three years of the survey. Analyzing both the positive and negative responses we can see that they are quite stable in all three years, i.e. 31-33% positive and 67-69% negative responses. This means that more than 2/3 of the respondents are not happy with the current legislation and it needs urgent improvement.

8.4 Customs regulations satisfaction

Regarding the customs regulations, there is no significant difference from the other types of regulations. Most answers are in the range of “satisfied”- 33% in 2017 and 42% in 2018, which is a significant improvement of 9%. On the other hand, the category “not enough satisfied” is ranked 42% to 44% for the same years. The level of very satisfied is very low, only 4% in 2017 reduced to 2% in 2018. Improvement is noted in the category “dissatisfied”, from 21% in 2017 to 12% in 2018.

Figure 50: Customs regulation satisfaction 2017-2018

2018 2017 2016

39% 40% 47%

30% 28% 20%

29% 28% 28%

2% 4% 5%

Level of satisfaction re. legislation related to construction operations 2016-2018

Very satisfied

Satisfied

Dissatisfied

Not enough satisfied

2018 2017

44

%

42%

42%

33%

12%21%

2% 4%

Level of satisfaction reg. custom legislation

Very satisfied

Dissatisfied

Satisfied


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8.5 Tax regulation satisfaction

The satisfaction level regarding tax regulation is not very high. It is indicative that the number of companies that are very satisfied is decreasing during the observed three year period and reducing from 11% in the base year to 6% in 2017 and only 35% in 2018. Dissatisfaction is increasing from 19% to 20% and 21% in the following two years, respectively But there is a positive trend in the category “satisfied” whose level is increasing from 31% in the base year to 41% in 2018, which is a significant improvement of 10%. The category “not enough satisfied’ is 34% in the base year rising to 42% in 2017 and declining again to 35%i n 2018.

Figure 51: Tax regulation satisfaction 2016-2018

Analyzing the same regulation form the companies’ size point of view, the situation is as follows: most satisfied are the large companies with 64% but without “very satisfied” replies. The smaller the companies the lower the level of satisfaction; so 51% of the medium-sized companies are satisfied, 43% of the small ones and only 29% of the micro companies

Ranking together both the”satisfied” and “very satisfied” responses, the situation is as follows: 64% of the large companies, 55% of the medium-sized, 46% of the small ones and only 32% of the micro companies. When we analyze the negative satisfaction as a sum of “dissatisfied” and “not enough satisfied”, the micro companies lead with 69%, followed by 54% small companies, 49% medium-sized and 36% large companies. This indicates that regarding tax regulations, there are large differences in the opinion regarding this category; so, again, the larger the company the more satisfied it is.

Figure 52: Tax regulation satisfaction by company size

2018 2017 2016

41%

32%

31%

35%

42%

34%

21%

20%

19%

3% 6% 11%

Level of satisfaction reg. tax regulations 2016-2018

Very satisfied

Dissatisfied


Satisfied

29%43% 51%

64%

38%

35%31%

25%31%

19% 14%11%

3% 3% 4%


Level of satisfaction reg. tax regulations- by company size

Very satisfied

Dissatisfied


Satisfied

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8.6 Public procurement satisfaction

From the respondent`s answers related to this element of the legislation, the general conclusion is that the business sector is not satisfied with the public sector regulations. This comes from fact that during all three years the positive attitude is expressed by 29% in the base year (25% satisfied and 4% very satisfied), 36% in 2017 (30% satisfied and 6% very satisfied) and 33% in 2018 (32% satisfied and only 1% very satisfied). The trend in all years shows unstable improvement from 29% to 32% with a rise in 2017 to 36%, which is generally good but with insufficient improvement having in mind the low level of satisfaction. The trend of dissatisfaction is decreasing from 35% in the base year to 24% in 2018 but on the other hand the category “not enough satisfied shows an increasing level of perception that the public procurement is not well regulated i.e. increase from 36% to 43% in 2018.

Figure 53: Tax regulation satisfaction 2016-2018

The analysis of the responses by the company’s size shows clearly that larger companies are more satisfied than smaller companies. The large companies express a high level of satisfaction (64%) and this level is lower for the medium-sized (36%), 30% for the small ones and only 27% for the micro companies. On the other hand, the level of dissatisfaction is increasing in the smaller companies.The level od dissatisfaction is lower with the large companies with 12%, 16% for the medium-sized and 24% and 31% for the small and micro companies respectively. This shows clearly that the larger companies are generally more satisfied with the public procurement system than the smaller companies.

This can be a sign of preferential treatment of the larger companies and unfriendly regulations and possibilities to win public procurement tenders when the smaller companies are in question. For this reason, it will be necessary to analyze the regulation in more details and see the reasons for such treatment of the smaller companies.

43% 37% 36%

32%30% 25%

24%28% 35%

1% 6% 4%

2018 2017 2016

Level of satisfaction reg. public procurement legislation 2016-2018

Very satisfied

Dissatisfied

Satisfied


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Figure 54: Tax regulation satisfaction by company size

8.7 Environmental legislation satisfaction

The positive attitude (very satisfied and satisfied) versus the negative (not enough satisfied and dissatisfied) shows that only 25% of the respondents in 2017 and 29% in 2018 had a positive attitude about the environmental legislation. Negative attitude was expressed by 75% of the respondents in 2017 and it increased to 81% in 2018. The level of dissatisfaction also increased from 33% in 2017 to 37% in 2018. In general, there is no significant trend of change even though the category “satisfied” has increased from 21% to 28%.

Figure 55: Environmental regulation satisfaction 2017-2018

Examining the environmental legislation from the type of business point of view, the situation is quite mixed and different types of business have different perception about this regulation. The ICT companies are most dissatisfied s with 52% dissatisfaction and the category “other” with 45%. The category “mot enough satisfied” varies from 30% in the textile industry to 48% in tourism. There are also considerable differences in the category “satisfied” and they vary from very high 60% in the textile sector to only 15% in the ICT sector. As for the category “very satisfied”, even 3 groups gave no replies and the percentage of the other groups was very low – ICT 4% and “other” and the construction sector 1%.

Why such an unsatisfactory perception is expressed by the companies should be a subject of further investigation and elaboration.

41% 45% 48%

24%

27%30%

36%64%

31% 24%16% 12%

1% 1%


Level of satisfaction reg. public procurement legislation - by company size

Very satisfied

Dissatisfied

Satisfied


2018 2017

37%

33%

34%

42%

28% 21%

1% 4%

Level of satisfaction reg. environmental legislation 2017-2018

Very satisfied

Satisfied


Dissatisfied

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Figure 56: Environmental regulation satisfaction by business sectors

8.8 Agricultural legislation satisfaction

Regarding the positive attitude (sum of satisfied and very satisfied) concerning the agriculture legislation satisfaction, it can be noted that it is improving from 29.9% in 2017 to 37.6% due to increase of 10% in the level of satisfied respondents. The “not enough satisfied” also shows improvement from 42.4% to 37.6% in the subject years.

Figure 57: Agriculture regulation satisfaction 2017-2018

Analyzing the agriculture legislation satisfaction from the aspect of the size of the respondent companies, the conclusion is that the large companies are most satisfied with 60% satisfaction followed by the medium sized companies with 45% satisfaction. The large companies showed no dissatisfaction with this legislation. Opposite to this, the smaller companies, such as the micro and small companies showed a high level of dissatisfaction (33%) and 36% of “not enough satisfied”. It appears that the larger companies are more protected than the smaller companies and this should be taken into consideration since most of the companies in the country are micro and small companies. The data show only the satisfaction level but detailed reasons for this situation should be identified and fairer regulations adopted.

45%29% 25%

52%

20%10%

31%

33%48%

30%

44%

30%

23%37%

27% 15%36%

60%

1% 1% 4%

Other construction Tourism ICT Agriculture Textile

Level of satisfaction reg. environmental legislation by business sectors

Very satisfied

Satisfied

Not enoughsatisfied

Dissatisfied

2018 2017

37,6% 42,4%

36,2% 26,2%

24,8% 27,5%

1,4% 3,7%

Level of satisfaction reg. agricultural legislation2017-2018

Very satisfied

Dissatisfied

Satisfied


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Figure 58: Agriculture regulation satisfaction by company size

8.9 Tourism and hospitality regulation satisfaction

Regarding the tourism and hospitality sector, there is a similar satisfaction level in both years regarding the positive and negative perceptions of the legislation. The positive perception in 2017 was 36% and 38% in 2018, which is a small improvement. Still there is a general lack of satisfaction from this regulation. All the levels of satisfactions are different in the analyzed period of two years.

Figure 59: Tourism and hospitality regulation satisfaction 2017-2018

From the respondents’ size point of view, the large companies have much more positive perception than the companies with smaller sizes. So, the satisfaction of the large companies is 67% with 7% very satisfied companies which makes them happy in very high 74%. On the other hand, the micro companies showed half of this satisfaction level with 33% for the micro and 32% for the small companies. It is interesting that the medium-sized companies are the least satisfied, with only 28%.

The large companies showed no dissatisfaction concerning this regulation and the other companies rank as follows: 31% for the micro companies, 23% for small ones and 31% for the medium-sized companies.


36% 44%

24%40%

31%34%

45%

60%

33%20%

27%

2% 3%

Level of satisfaction reg. agricultural legislation by size of the companies

Very satisfied

Dissatisfied

Satisfied


2018 2017

40% 45%

32% 30%

26% 19%

2% 6%

General level of satisfaction reg. tourism and hospitality 2017-2018

Very satisfied

Dissatisfied

Satisfied


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Figure 60: Tourism and hospitality regulation satisfaction by company size

8.10 Grey economy fighting satisfaction

From the companies’ answers obtained in the survey, it seems that this is the worst ranked category and this negative perception is very stable through all three years of monitoring the situation. The level of negative perception is dominant with 81% in 2016, slightly decreased to 79% in 2017 and again increased to 82% in 2018. This means that on n average, the negative perception is about 80% in all three years.

This is a very important piece of legislation for the development of healthy economy and this should be considered as priority with the ministries when creating the policy and regulations in this field.

Figure 61: Grey economy fighting legislation satisfaction 2016-2018

If we consider the situation from the companies’ size level of satisfaction, the situation is very similar to the general perception. Regardless of the companies’ size, their responses are negative; i.e. Large companies -79%, medium-sized - 76%, small companies - 79% and the highest percentage (89%) received from the micro companies.


37%45% 42%

27%

30%30%

28%67%

31%23% 31%

3% 2% 0% 7%

Level of satisfaction reg. tourism and hospitality by zise of the companies

Very satisfied

Dissatisfied

Satisfied


2018 2017 2016

50% 43%51%

32%36%

30%

16% 17% 18%

2% 4% 1%

Level of satisfaction reg. legislation against grey economy fighting 2016-2018

Very satisfied

Satisfied

Dissatisfied


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Figure 62: Grey economy fighting legislation satisfaction by company size

8.11 Business state support satisfaction

Fair, reasonable and effective business regulation is important for business operations for the local as well for foreign investors. It is important that the regulations protect the employees’ rights and ecological environment and provide stable business conditions that allow the businesses to plan their operations in a reliable environment. The priority for any investor is a stable business climate, without frequent changes and implementation of the rule of law.

The respondents are not very satisfied with the current regulations and 62% stated that the legislation supports “insufficiently” their operations while 14% found it “not at all” supportive. This means that 76% have a negative perception about the state support through the business legislation. Only 2 to 3% are very satisfied with the state support of their businesses and 9-22% are just satisfied. Certainly, there is a need for identification of the reasons for this perception.

Figure 63: State support to business through legislation satisfaction 2018

When elaborating the same issue from the perspective of companies’ size, the results correspond to the general picture. Micro companies have the most negative perception with 85% (63% “insufficiently” and 22% “not at all”), followed by the small companies with 75% (65% “insufficiently” and 10% “not at all”), medium-sized companies 71% (58% “insufficiently” and 13% “not at all”) and large companies 62% (55% “insufficiently” and 7% “not at all”). It is disappointing that there are no “very much” responses by the large companies but still, from the general picture, it seems that the large companies are more satisfied with the state support than the other companies. They find the state support through the legislation satisfactory in 38% which is the highest ranking in this matter. With the decrease of the company size, the satisfaction gradually falls down; so, the percentage of the


49% 48% 51%68%

40%31% 25%

11%

9%19% 22% 21%

2% 3% 2%

Level of satisfaction reg. legislation against grey economy fighting by size of the companies

Very satisfied

Satisfied

Dissatisfied


62%21%

14%

3%

Level of satisfaction of the state support to business trough legislation

Insufficiently

Satisfactory

Not at all

Very much

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medium-sized companies is 24%, that of the small companies 22% and of the micro companies only 14%.

Figure 64: State support to business through legislation satisfaction 2018

A new point of view of the same issue is provided by the analysis of the opinion of different business sectors. Again, the negative perception is dominant but with some variations depending on the type of sector. The most negative perception is from the tourism sector 84% (“insufficiently” 75% and “not at all 9%), followed by the ICT sector with 82% (60 % plus 22%), then other with 78 %, construction 75%, textile 67% and the agriculture with the most negative perception - 61%.

The state support was found satisfactory mainly by the agriculture sector with 33%, then textile with 29%, and the category “other” with a lower level of satisfaction. The answer “very much” or “excellent” was stated by the construction sector with 8%, agriculture with 6%, textile with 5% and ICT 2%.

Figure 65: State support to business through legislation satisfaction

The general conclusion is that the state support of the business sectors through the legislation is not found satisfactory from whichever point of view it was analyzed so that the policy makers and legislation authorities should make their own researches and find out what is behind these statistical results.

63%

65%

58%

55%

14%

22% 24%

38%

22%

10% 13%7%

1% 3% 6%0%

0%

15%

30%

45%

60%

75%


Level of satisfaction from the state support to businesses trough legislation - by company size

Insufficiently

Satisfactory

Not at all

Very much


61% 64%75%

60% 55% 57%

17% 11%

9%22%

6%10%

21%18%

16% 16%

33%29%

8% 2% 6% 5%

Level of satisfaction of the state support to business trough legislation by business sector

Very much

Satisfactory

Not at all

Insufficiently

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8.12 Cooperation with the new companies from the free

economic zones

The intention of all Western Balkans countries is to attract foreign or local investors to invest, create workplaces, pay taxes, influence the whole economy development through the cooperation with the local companies, to transfer knowledge, technology, management skills to the local companies. If the companies from the economic zones remain as isolated islands in the ocean the use for the national economy will be very limited. This is the reason why the cooperation with the companies from the free economic zones should be supported and measured.

It is obvious from the responses obtained that only 4% declared to be part of their value chains as a model of a high level cooperation. The logistic providers for these companies are represented by 6% meaning that they provide some services to the companies from the zones. The answer “other type of cooperation” was given by 13% of respondents, followed 18% of the companies looking for or considering opportunities for cooperation and very high 59% with no cooperation. The sum of the last two responses is 77%.

Figure 66: Cooperation with the new companies from the free economic zones

Examining the survey from the point of view of the sectors in regard to cooperation with the companies from the zones, the situation is slightly different from the general picture. As part of the zone companies value chains, the construction sector participates with 6%, other sectors with 5% and the agriculture sector with 3%. All types of business provide logistics in the range from the lowest 3% in the agriculture to the highest 9% in the tourism. The textile sector is different by providing another kind of cooperation with high 32%. This “another” kind of cooperation is the most represented actual form of cooperation. The answers “No cooperation” and “considering the opportunities for cooperation” rank highest and they vary from sector to sector, from 87% in agriculture, 83% in ICT, 79% in the category “other”, 76% in construction, 76% in tourism, to 63% in textile.

59%18%

13%

6%4%

Cooperation with new companies from free economic zones

No cooperation

Looking for options forthe futureHave other sort ofcooperationProvide logistics

Part of their value chain

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Figure 67: Cooperation with the new companies from the free economic zones by business sectors

From the aspect of the companies’ size, 58% of the large companies stated to have no cooperation or looking for opportunities for cooperation with the zone companies. All the other companies have no cooperation or looking for opportunities in the range of 78-80%. The large companies have the highest percent of being part of their value chains with 10%, while the small companies have the lowest 5%. The large companies also have the highest percentage of providing logistics for the zone companies with 10%.

From the statistic point of view, it can be concluded that the large companies have the best cooperation with the companies from the zones and that these companies are looking for reliable partners who can ensure the delivery of goods or services in time and guarantee quality as agreed. There are many initiatives and activities that support the local companies to reach the standards of quality required to cooperate with the zone companies and the situation is expected to improve in near future.

Figure 68: Cooperation with the new companies from the free economic zones by business sectors

61%

54%

63%

73%

42%45%

18% 20%

13%10%

45%

18%

12% 12%16%

14%

6%

32%

5%8% 9%

4% 3% 5%5% 6%3%

0%

20%

40%

60%

80%


Cooperation with new companies from free economic zones by business sectors

No cooperation Looking for options for the future

Have other sort of cooperation Provide logistics

Part of their value chain

63%

56%

63%

45%

15%

23%

17%

13%

14%

12%

12%

19%

7%

5%

5%

13%

1%

5%

4%

10%

0% 10% 20% 30% 40% 50% 60% 70%

Micro

Small

Medium

Large

Cooperation with new companies from free economic zones by company size

Part of their valuechain

Provide logistics

Have other sort ofcooperation

Looking for optionsfor the future

No cooperation

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The companies that stated to have cooperation were asked to provide estimation of the percentage of activities they perform for the zone companies and according to the results, 70% of them use less than 10% of their capacities for the zone companies. Utilization between 11-20% is reported by 6, 3% companies. Various activities for the new capacities ranging between 21-30% was reported by 9, 6%. The results show that almost 70% have dedicated their activities for this cooperation in less than 10%. Higher than 10% of activities for the new capacities was reported by 30% of companies, distributed between different activity groups.

The general conclusion is that the respondents’ companies allocate quite a small part of their activities in the cooperation with the zone companies.

Figure 69: Percentage of activities for new capacities

9 Improvement of the business climate

9.1 Measures for the improvement of the business operations

From the choices offered to the respondents, they had to select 3 and prioritize them according to their personal opinion/experience. The responses showed that most of the companies were of the opinion that better information about the current changes in the legislation is most important. Examining the three consecutive years, the trend shows a growing need for better information from 10% in 2016 to 21% in 2018. It is obvious that the frequent changes in the regulations are a burden to all companies to follow and comply with the numerous regulations which are frequently changing and which are difficult to manage even for professionals.

For the same reason, the second priority is simplification and clarification of the legislation that should be straightforward and understandable for all and without many possibilities for different interpretation. Different interpretation possibilities make room for abuse by the inspections or other controlling institutions or courts. For this reason, simple and clear regulation is the best solution for the business. It is alarming that the trend in the three year survey shows a decrease in the improvement in this field from 25% in 2016 to 19% in 2018.

The third priority is fewer changes in the legislation. This is very reasonable since companies are forced to spend a lot of time and efforts for adjustment to changes which are not always easy to comply with. The frequent changes also create uncertainty in the business sectors leaving them without

70,0%

6,3%9,6%

5,1% 5,4% 3,0%

0,0%

20,0%

40,0%

60,0%

80,0%

from 0 to10%

from 11 to20 %

from 21 to30%

from 31 до 40%

from 41 to50%

from 51 to60%

Percentage of activities for new capacities

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possibilities to make long term plans since in case of a change, all their estimates a given plan was based on can be distorted. This affects companies very much and is the reason why this issue is so high in the priority list. The trend shows small changes from 20% in 2016 to 18% in 2018.

Support given to the companies in the process of adjustment to the legislation is next on the priority list. This is a clear call for support in a situation where companies cannot find solution to cope with all the regulations in time. Legal advisors are expensive and for companies without their own capacities, it is difficult to find the right way to cope with the legislation. There is a considerable change in the ranking from 6% in 2016 to 14% in 2018.

Setting advisory info points as part of the chambers’ activities is a logical requirement that can make it easier for the companies to find solutions for the new and ambiguous regulations. The question was asked in 2016 but the trend shows a small change from 7% in 2017 to 8% in 2018.

Very close to the previous priority is the provision of operational web portals, specialized in legislation issues and easily accessible by companies. There are many different business portals and pages in the country but it would probably be easier to have one covering both the regulations and legislation which will be regularly updated by a relevant and specialized staff. The question was not asked in 2016 and the trend shows a decrease from 11% in 2017 to 8% in 2018.

The voucher services to be cofounded with the companies show the same value in the priority list. This measure implementation would facilitate the burden of the high cost for specialized consulting services and make them more affordable for the companies. The trend shows a decrease from 11% in 2016 to 7% in 2018.

The last on the list of priorities is improved communication with the chambers. This can be interpreted as currently a good communication that needs no priority actions to be improved. The question was not asked in 2016 and the trend decreased from 7% in 2017 to 5% in 2018.

Figure 70: Priority measures to enhance business operations 2016-2018

0% 5% 10% 15% 20% 25% 30%

Better information for current changes inlegislation

Simplified and clarified legislation

Less frequent changes in legislation

Support of companies in the process ofadjustment to legislation

Setting of advisory info points as part ofchambers

Operational web portals, specialised inlegislation

Voucher consulting services (co-fundedconsulting services)

Improved communication with chambers

Priority measures to enhance business operations 2016- 2018

2018

2017

2016

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Looking from the aspect of the companies’ size point of view, the situation is very similar to the general picture. The top four priorities are still the same priorities previously mentioned but with small insignificant variations. This indicate that regardless of the companies’ size, they all face the same difficulties with the regulations. It is good that the small companies have been exempt of the obligation to comply with some administrative regulations, which is a big relief for them.

Support measures as info points, voucher, and web portals are also considered as useful but ranked differently according to the company’s size. The cooperation with chamber is again on a very low level of priorities, leading to the conclusion that currently the cooperation is perceived satisfactory.

Figure 71: Priority measures to enhance business operations by companies’ size 2018

9.2 Priority reforms needed for improvement of the business

environment for SMEs

The respondents were asked to select three items from the list of reforms offered to them and rank them by priority. Survey data for priority reforms are available for all three years.

The first ranked priority for all three years, which is common for all respondent companies, is the reduction of the grey economy, corruption, establishment of the level of the playing field. Through all three years the companies complain about a high level of grey economy that interferes with their legal businesses. Corruption is also ranked high on the priority list which necessitates the need for reforms since a high level of corruption is very bad for economy development and one of the main reasons for a slow economic progress. By reducing these two issues, the grey economy and corruption, the playing

17%

19%

19%

21%

23%

19%

20%

21%

19%

18%

20%

22%

11%

15%

16%

22%

0% 5% 10% 15% 20% 25%

Micro

Small

Medium

Large

Priority measures to enhance business operations by company size 2018

Less frequent changes inlegislation

Better information for currentchanges in legislation

Simplified and clarifiedlegislation

Support of companies in theprocess of adjustment tolegislationOperational web portals,specialised in legislation

Setting of advisory info pointsas part of chambers

Voucher consulting services(co-funded consulting services)

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field will be much clearer and more suitable for business development. Although the percentage was reduced from 38% in the base year to 22% in the 2018 survey, this is still a priority number one.

The second priority on the reforms list is inefficient judiciary and contract enforcement and this is again consistent through all three compared years. Legal basis, contracting, efficient courts, effective justice and enforcement of the law are a basic precondition for the development of modern and resilient economy. There are many initiatives to solve these issues which are not new or unknown so the business sector believes that urgent reforms are needed in this field.

The third and fourth reform priorities are similar in content issues and they refer to stabilization of the macroeconomic system and transparent and predictable tax system and efficient tax administration. Although taxes in Macedonia are low compared to those in other countries, the need for reforms is not in this direction but to stabilize tax regulation, speed up the VAT refund, lower the number of tax regulation changes, make the system more transparent and easy to operate. The tax system is becoming very complex and requires special skills to operate such a system. Persons specialized to operate this system are expensive and this will be an additional burden for the business sector. In this regard, the reforms should be in the direction of simplifying the procedure and making the system more transparent and informative.

Tax reforms and the public procurement system are discussed on a daily basis for many years but obviously, companies are not satisfied with the current situation and demand reforms.

Next on the priority list is the reform which will make custom procedures more efficient. In the last decade, there were several attempts to simplify and reduce paperwork, make simpler and less corrupted custom procedures, but the situation is still unsatisfactory and this reform is high on the reform priorities list.

Last e on the list is the labor regulation. The perception of the companies is that this regulation is not as urgent as the others.

Figure 72: Priority reforms needed for improvement of the business environment for SMEs

22,0%

17,8%

13,4%

12,9%

10,0%

9,2%

7,9%

6,7%

24,6%

19,9%

10,2%

13,2%

8,5%

10,0%

7,9%

5,6%

38,1%

21,1%

11,3%

10,3%

0,0%

0,0%

10,4%

8,8%

0,0% 20,0% 40,0%

Reduce grey economy, corruption, establishlevel playing field

Efficient judiciary and contract enforcement

Stabilisation of macroeconomic system

Transparent and predictable tax system andefficient tax administration

Efficient implementation of customprocedures

Tax regulation

Transparent and efficient publicprocurement system

Improved flexibility of labour regulations

Priority reforms needed for improvement of business environment for SMEs

2018

2017

2016

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9.3 Improvement of chambers ’ operations

From the answers received concerning the chambers’ operations, it is obvious that the respondents are improving their trust in the chambers and he the services offered and implemented by the chambers. From the provided list of chambers’ services, the respondents selected and ranked three by priority. The figure below shows much unified replies, all in the range from 22, 5% for the first priority and 18, 1% for the last priority. The first priority is given for lobbying for better regulation and having in mind the previous ranking of priorities, regulations are the key for success and should be addressed by the chambers.

The second priority is the provision of market information as an important element of any business operation. The other there – giving in time information about legislation, - networking with companies locally and abroad and - organization of a larger number of trainings, have similar ranking and are perceived as equally important for the improvement of the chambers’ range and quality of services.

Figure 73: Need for improvement of the chambers’ operations

The figure below shows the priorities by the size of the companies. As it is obvious from the graph, there is no significant difference between the responses regarding the companies’ size. The first priority is networking while the second is providing market information. The least interest is for training, even though there is not a large difference from the other priorities.

Figure 74: Need for improvement of the chambers’ operations - by size of the companies

22,5

%

20,3

%

20,2

%

18,9

%

18,1

%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

Lobbing forbetter

legislation

Providingmarket

information

In timeinforming

aboutlegislation

Networkingwith

companieslocally and

abroad

Organisationof larger

number oftrainings

Needs for improvement of chambers operations

23% 22% 24% 21%

21% 21% 19% 20%

18% 20% 15% 17%

20% 19% 24% 18%

19% 19% 18% 24%


Needs for improvement of chambers operations - by size of the companies

Networking withcompanies locally andabroadProviding marketinformation

Organisation of largernumber of trainings

In time informing aboutlegislation

10 Recommendations

The general intention of the business regulation survey is to inform stakeholders about the results received from the survey sample about the business regulation with the ultimate aim to help stakeholders use the information for improvement of the business climate in the country and allow for faster development of the business community.

Beside natural resources, management capacity, technological and know-how development, the business environment is considered as one of the most important factors for the country’s competitiveness and possibility for sustainable economic development.

The business environment is largely dependent on regulations that affect business operations but also influence the performance of other institutions that make impact on businesses, such as judiciary, education, health and so on.

This survey, which is third in line, provides information that can inform law makers and other regulation creators about the quality and implement ability of the regulations in place but also direct the implementing agencies, ministries and other implementers of regulations in their future performances.

The results from the survey also target other stakeholders, such as business representatives who should be voice of the business community and fight their battles in front of regulators and implementers of the legislation.

The results presented in this study are in line with two previous studies and in order to maintain the continuity, the results are presented in a similar order and manner of presentation. The survey provides opportunities for more in depth analyses but for the purpose of this study only the most relevant issues have been analyzed and presented. The stakeholders are encouraged to ask for more details from the survey analyses and will be provided with additional data that the interested parties can further analyze and use for their own purposes.

So, the first and important recommendation is that all institutions, agencies, law makers, business agents and the business community read the relevant questions and answers of the survey study carefully and use the information for their further analysis (? –their own purposes). The study provides only the results gathered by analyzing the answers of the survey but cannot answer the question “why”. To answer the “why” question, each institution should make its own research and evaluation in order to understand why the opinion of the business sector is as it is and what measures and changes ought to be implemented in order to improve the situation and business perception of the regulation and its implementation. The reading of the survey should be in the light of the survey sample which has some limitations which are described in the data sample part at the very beginning of the study.

In general, when talking about business regulations, there are two main stakeholders, one is the administration sector that makes and implements regulations and the other is the business community that is supposed to comply with them. The dialog between both is facilitated by the business representatives in a form of different business associations, chambers or other types of lobbying and advocacy. It is quite important that a permanent dialog between these stakeholders is maintained and that the administration is providing effective regulations preserving the state and citizens interests but it is also important that the business sector is represented by persons who are well equipped, have a very deep understanding of the problems, barriers the businesses are faced with during their operations in order to be able to lobby for improvement of the business environment and provide good conditions for economic growth.

The analysis shows that there is consistency in the findings of this year survey compared to the two previous years. This makes the study more relevant and useful for the readers since it shows some

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positive and some negative changes in the perception of the situation that should be addressed by institutions and organizations.

Below you can find specific recommendations for each institution relevant to this survey. The recommendations are based of the findings and conclusions from the analyzed respondents’ answers.

Inspections

The recommendations are mainly in two directions:

First, to review the regulation that defines this field. From the responses it can be concluded that no significant changes or improvement are needed in that part of the regulation and that the respondents are mainly satisfied with the practice of warning before fining and they are generally satisfied with period of time left for adjusting to regulations. The more important issue is the level of information about frequently changed regulations and transparency of the process. The companies need to know how the inspection works, what procedures are implemented, what the consequences of noncompliance are and other information and it should be publicly announced information in a very transparent way and it is also very important that the information to be regularly and timely updated.

The second issue about inspection is more critical and is about its implementation. The respondents have objections related to the organization, implementation of inspections, capacity and professionalization of the inspectors, inspector’s unprofessional behavior and with the general policy of “must find something”. This perception should be analyzed in details by the inspection authorities and in case the objections are found justified, improve the situation as soon as possible. For an in-depth analysis, the inspection authorities should perform a specialized and more detailed survey in order to find the reasons that are hiding behind this perception.t. In case the findings of the in-depth analysis show the same results, a set of measures should be implemented by the inspection authorities in order to improve the situation. Some of the recommendations in this regard are strengthening the internal control, training and capacity building of inspectors, better work organization and implementation of permanent monitoring by the inspected companies.

Information about legislation

Regarding the part for availability of information about the legislation, the general conclusion is that information about business regulations is publicly available, especially online, but from the survey responses it is obvious that the business sector is not sufficiently informed about these possibilities. In order to overcome this situation, an intense campaign ought to be implemented to inform the interested parties about the existing offer. There are several active business portals and each institution publishes its own regulation and procedures on the web page. The question is how updated these pages and documents are and whether they provide a complete picture about the regulation requirements and compliance.

There are several actors active in providing information about the legislation and they all have some part in the pie. The largest part of the pie is for external, outsource expertise. The role of chambers in this regard is growing but nevertheless, one question should be asked her -“What is the chambers’ main focus?” Is it the lobbying and advocacy for the business sector interests or providing services that are already available on the market? If chambers and their members agree that chambers should provide services for the business sector, then the growing trend is a good sign and should continue in this direction. The responses indicate that the larger companies have more capacities and a much better system of checking compliance with the regulations. The smaller companies have no resources for effective monitoring of frequent changes in the legislation and need be supported. The recommendation is that the authorities ought to find ways to ensure that all companies regardless of size have equal access to information and by this, equal chances to comply with the legislation having in mind their level of capacities.

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The responses show that the participation of companies in the preparation of the legislation is improving over the years but it is also a fact that the larger companies are the most represented in this process. If we have in mind that the micro, small and medium-sized companies’ are more than 99% of the total number of companies, their adequate representation should be ensured. If this is not the case, their needs and interests will not be met and their satisfaction level will be low.

Chambers’ operations

In general, the companies are satisfied with the chambers’ capacities to represent their interests. But still there is a group of respondents that shows dissatisfaction and the chambers should examine the reason for this by performing regular surveys and investigation to find out if the dissatisfaction is based on real facts or it is just a lack of information about the chambers’ activities.

Waiting for the administration to solve the problem with ineffectiveness, corruption, gray economy and other burdens will take too long if the business sector does not push harder for solving this issues. The overemployment, slow procedures, expensive administrative services, incompetent staff are the arguments to be used when demanding the administration to improve their services. The business sector represented by associations or chambers is the voice to be heard and its representatives should be more energetic in the legislation preparation process and enhance the communication with the business sector in this regard. There is a need for improved consultation process with all businesses regardless of the companies’ size. The business representatives together with companies should find most effective ways to ensure equal participation of companies and their particular needs in this process and raise the level of satisfaction of smaller companies regarding this issue.

Business climate assessment

One of the key preconditions for economic prosperity of the country is a favorable business climate. To improvement the business climate, defined priority measures and reforms are defined and demanded by the respondents. The measures and reforms cannot be implemented unitarily by the Government without the participation of the business sector and to realize this, the representatives of the business sector should have proper capacities in order to be equal partners in this process. It is obvious from the responses that the larger companies are more satisfied with the current business legislation and that the whole system is better fitted for the larger companies than for the smaller companies even though they represent a huge majority of the companies.

Analyses are made for a number of areas for assessment of the business climate and the respondents show different levels of satisfaction or dissatisfaction for each area or regulation, such as the public procurement regulations, environment regulations, taxes and other regulations. This leads to the conclusion that more detailed surveys are needed on a regular basis in order to better understand the business needs and suggestions for improvement. Special attention should be payed to the grey economy, corruption level and other fields that respondents highlighted as main obstacles for doing business.

Improvement of the business climate

The analysis or the answers indicates that the biggest problem is the lack of information for the current changes in the legislation and this issue should be addressed by the authorities. How this process should be best organized, is subject to further research that will propose most comprehensive measures for transparent information about the legislation.

Clarity of the legislation is another issues which is ranked very high by respondents who make complains and this should also be addressed by law makers to make clear laws without possibilities for ambiguous interpretation. Making laws is a highly specialized task and demands experts in this

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field. Therefore, the business representatives should engage experts to work on the legislation and insist on clarity and facilitate implementation of the legislation.

Frequent changes in the legislation are pointed out as another obstacle for the business operations. The recommendation is that law makers and their partners, when preparing the legislation, consider a long term impact of the laws and create legislation that will not need frequent changes as is the case with the current practice.

Provision of operational web portals, specialized in the legislation and easily accessible by companies is a priority need. There are many different business portals and pages in the country which need to be adequately promoted to all companies, especially find ways to address the small and micro companies without sufficient resources.

Final remarks

Although an overall improvement of the Macedonian business environment is notable, there is still a long way to go on the country’s path to achieve a thriving economic development. As a general overview, the answers of three year surveys indicate a progress in the perception of the analyzed legislation and its practical implementation, role of intermediaries, business representatives, and outsource experts.

The regular annual study of the business regulation assessment points to a clear need of reforms and it contributes to a better understanding of the business sector perception concerning different stakeholders and their role in the process.

In order to achieve the goal of this survey and make an impact on the improvement of the business regulation, it should be adequately promoted to the stakeholders so that each of them recognizes their own share of responsibility. The first step should be to make personal analysis of the data provided and see what further activities are needed in order to confirm these findings.

The further researches should bring the actual reasons for these perceptions to the surface and indicate what concrete changes in the regulation, organization, implementation, behavior or other changes are necessary to satisfy the business community.

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