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Corruption and inefficient bureaucracy are challenges companies may face when doing business in Macedonia. Many cumbersome regulatory procedures have been eliminated over the past decade, but bureaucratic red tape remains a problem throughout the public administration. Private businesses frequently complain about burdensome administrative processes that create operational delays and opportunities for corruption. Public procurement, the customs administration, and the building and construction sectors are areas where corruption and bribery are most prevalent. The primary legal framework regulating corruption and bribery in Macedonia is contained in the Law on Prevention of Corruption and the Criminal Code, which make individuals and companies criminally liable for corrupt practices. Facilitation payments are prohibited, and gifts may be considered illegal depending on their value or intent. Progress has been made in law enforcement and corruption-prevention initiatives, yet public officials continue to act with impunity. Insufficient implementation of legislation and ineffective law enforcement continue to impede the fight against corruption.
The Macedonian judicial system suffers from corruption, nepotism and a lack of independence (HRR 2014). The capacity of the courts to deal with corruption cases is weak, especially in relation to high-profile cases (European Commission 2014). Investors complain of political interference in court cases and cite slow and inefficient legal proceedings as constraints to business (ICS 2015). Companies perceive the judiciary's effectiveness in settling commercial disputes to be modest, but when it comes to challenging government regulations, the institution is noted as weak (GCR 2015-2016). While only a small percentage of firms identify the courts as a constraint to doing business in Macedonia (ES 2013), citizens consider the judicial system to be among the most corrupt institutions in the country (GCB 2013). Macedonia has signed the New York Convention of 1958 and is party to the International Center for the Settlement of Investment Disputes (ICSID).
Corruption and government interference remain general problems in Macedonia's police sector (HRR 2014). Few businesses report bribes being needed when interacting with the police (BCaC 2013). Despite the reliability of the police to uphold the law is perceived as moderately high (GCR 2015-2016), over one third of companies pay for security (ES 2013). The government has established effective mechanisms to investigate police abuse and corruption, yet police officials continue to engage in corruption with impunity (HRR 2014). More than half of the surveyed citizens perceive the police as corrupt (GCB 2013).
Corruption, red tape and political patronage are problems throughout Macedonia's public administration (BTI 2014). Private businesses frequently complain of cumbersome processes and an unclear division of responsibilities within and between public institutions which can create operational delays and opportunities for corruption (ICS 2015). Public officials reportedly use their positions to pressure businesses to bribe (CAR 2014). A quarter of companies report that public officials indirectly indicated that they expected bribes, gifts or favours (CAR 2014). Businesses report that paying bribes to public officials can help with speeding up or finalising administrative procedures, along with receiving better treatment and gaining access to information (BCaC 2013). Half of all bribes offered to public officials were identified as facilitation payments aimed at speeding up services (CAR 2014). Obtaining public services such as electrical and water connections may also be followed by demands for bribes or gifts (ES 2013). Approximately half of the bribes paid by businesses to Macedonian public officials are made in non-monetary forms, such as food or drinks (BCaC 2013). The public administration is perceived as mistrusting, with one-third believing that nepotism is widespread and a majority reporting of favouritism in the hiring process (NiT 2015). Every three in four surveyed perceive corruption and conflicts of interest as widespread in Macedonia's public administration (NiT 2015).
Corruption and mismanagement are major problems in municipal land administrations, especially with regards to bribery in the construction sector. Legal protection of property rights are satisfactory but inconsistently implemented (ICS 2015). Private investors are often impeded from a lack of coordinated zoning plans at local and regional levels, a centralised control over government-owned land for construction, and an inefficient system for issuing construction permits (ICS 2015). Companies report paying bribes to land registry officers (BCaC 2013), and almost a third of companies report that bribes or gifts are needed to obtain a construction permit (ES 2013). Registering property in Macedonia is more costly and time-consuming than the regional average (DB 2015).
Corruption in Macedonia's tax administration is not reported to be a significant obstacle for doing business. Corporate income tax, VAT and mandatory social security contributions can be filed online, thereby decreasing the risk of corruption (DB 2015). During direct interaction with tax inspectors, only very few companies report bribes being requested (BCaC 2013; ES 2013). The administrative infrastructure aimed at fighting tax fraud, evasion, and at reducing the size of the informal economy is improving (European Commission 2014). The average time and cost required to deal with paying taxes is much lower than the regional average (DB 2015).
Among the main constrains for importing in Macedonia are corruption, burdensome procedures and high costs (GETR 2014). The Macedonian economy is very dependent on imports, resulting in 80 percent of businesses having direct encounters with the customs administration. Companies report bribes being frequently paid when interacting with customs officials (BCaC 2013), and citizens rank them as the most corrupt office holders (CAR 2014). This makes the Macedonian Customs Administration (MCA) an important contact agency for trading companies. The MCA uses electronic customs clearance solutions, which has simplified and automated import and export procedures for businesses. The customs administration has adopted an e-government systems to manage international cargo licences for transport and trade, which has reduced opportunities of corruption (ICS 2015). The average time and cost required to deal with imports and exports is almost half the regional average (DB 2015). Internal control measures have also been strengthened with MCA staff being given anti-corruption training (European Commission 2014).
Corruption and mismanagement are widespread in public procurement and are of serious concern for companies operating in Macedonia. While investors report that bribery is common in public procurements and government projects (ICS 2015), only a small percentage of companies report having payed bribes or given gifts to secure government contracts (ES 2013). An example of tendering processes being prone to misuse is the frequent rigged favouritism towards selected bidders and unclear bidding criteria. The conditions for bidding may change during the tender process, leading some bidders to withdraw (ICS 2014). The share of procurement spending issued without an open tender has reportedly grown in recent years (NiT 2015). The implementation of e-government (ESPP) in managing public procurement has decreased opportunities for corruption (ICS 2015). The compulsory publishing of tender documents electronically and free of charge, has increased transparency within the sector (MPR, Oct. 2014). The government has also established an oversight body, the Public Procurement Council, which has been operational since 2014. Since public procurement is a high-risk area in Macedonia, it is recommended that companies implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.
In one corruption case, it was revealed that public tenders worth USD 1.3 million were awarded to a company linked to the editor of a pro-government television station (NiT 2015). In the same year, the former mayor of Ohrid, Aleksandar Petreski, was arrested along with 13 others for allegedly embezzling USD 2.7 million from the municipal budget through false procurement contracts between the years 2007 and 2013 (NiT 2015). The legislative framework to address corruption within procurement is flawed and few offences within the sector have been prosecuted in court (BTI 2014).
The Macedonian Law on Prevention of Corruption and the Criminal Code, criminalise active and passive bribery, extortion, bribing of a foreign public official, attempted corruption, trading in influence and money laundering. Anti-corruption provisions apply to all individuals in public or private sectors, and companies can be held criminally liable for corruption offences committed by their representatives. Facilitation payments are prohibited, and gifts may be considered illegal depending on their value, intent or benefit. Other relevant laws include the Law on Prevention of Conflict of Interest, which requires public officials to disclose their income and assets, the Electoral Code, which regulates electoral campaign funding, the Law on Financing Political Parties, the Law on Civil Servants, the Law on Public Servants, and the Law on Free Access to Public Information. The Law on Financial Inspection of the public sector was enacted to fight corruption, fraud and financial mismanagement (CAR 2014). Several codes of conduct have been adopted by the government, including a code of ethics for government members, holders of public office appointed by the government, public servants and civil servants (CAR 2014). Nevertheless, no sanctions are imposed on potential breaches of the codes (CAR 2014).
The Law on Public Procurement contains criminal penalties, including imprisonment for violations of tender procedures, and exclusion from future procurement for abuses including bribery and corruption. While there is no specific whistleblower law, the Law on Prevention of Corruption allows informants who collaborate with law enforcement agencies to be either given immunity from criminal prosecution, to receive lesser sentences, or to be placed in witness protection. Macedonia’s legal framework for fighting corruption is of a high international standard, but its strength remains impeded by insufficient implementation and the lack of inter-organisational coordination (European Commission 2014). Macedonia has ratified the United Nations Convention against Corruption (UNCAC) and the Council of Europe’s Criminal and Civil Law Conventions against Corruption.
Despite constitutional protections, freedoms of press and of expression are not always upheld in Macedonia (HRR 2014). Restrictive media laws, occasional harassment of journalists and court cases against journalists, hinder freedom of expression and encourage self-censorship, especially when reporting on government-sensitive issues. As a result, many private media outlets are tied to political or business interests, which thereby influence their content (FotP 2014). All this is conducive to a media environment that prevents most forms of investigative journalism and thereby reduces the role of the media in uncovering cases of corruption. Macedonia's media environment is considered ‘partly free’ (FotP 2014).
The law in Macedonia provides for freedom of assembly and of association, and the government generally respects these rights in practice (HRR 2014). Civil society organisations have established several initiatives for civil participation, and have strengthened coordination and networking; however, the culture among state bodies for involving civil society in policymaking remains weak (European Commission 2014). Interaction between CSOs and the government is primarily done indirectly by using donor support. An anti-corruption programme launched by USAID aims to support CSOs and help improve the integrity and accountability of state institutions (Regional Anti-Corruption Initiative, Sep. 2013). The government recently provided civil society organisations with grants worth USD 400,000, a tranche of which was allocated to fighting crime and corruption (NiT 2015).
- World Economic Forum: Global Competitiveness Report 2015-2016.
- World Bank & IFC: Doing Business 2015.
- Freedom House: Nations in Transit - Macedonia 2015.
- US Department of State: Investment Climate Statement – Macedonia 2015.
- US Department of State: Country Report on Human Rights Practices for – Macedonia 2014.
- USAID: Corruption Assessment Report for Macedonia 2014.
- European Commission: Macedonia – Progress Report, Oct. 2014.
- Freedom House: Freedom in the World – Macedonia Country Profile 2014.
- Freedom House: Freedom of the Press – Macedonia Country Profile 2014.
- Bertelsmann Foundation: Bertelsmann Transformation Index – Macedonia Country Report 2014.
- World Economic Forum: The Global Enabling Trade Report 2014.
- UNODC: Business Corruption and Crime in the Former Yugoslav Republic of Macedonia: The Impact of Bribery and other Crime on Private Enterprise, 2013.
- World Bank & IFC: Enterprise Surveys, Macedonia FYR 2013.
- Regional Anti-Corruption Initiative: ‘USAID launches Macedonia Anti-Corruption Program’, Sep. 2013.
- Transparency International: EU Anti-Corruption Requirements: Measuring progress in Albania, Kosovo, FYR Macedonia and Turkey’, 2011.