The subject of research in this analysis is the impact of NATO on the economy. This analysis uses official data from the National Central Bank, State Statistical Office (SSO), the World Bank and EUROSTAT. The key findings of this analysis are:

  • The direct investments in 2018 and 2019 increased by 4 times (cumulatively) compared to 2017.

  • The impact of signing of Prespa Agreement and NATO accession protocol on the economy and foreign investors is evident.

  • Looking back, the last year with a few % higher parameters is 2011. After a period of 7 years, it is evident that the indicators for 2018 are showing serious progress.

  • All data from relevant international organizations and state institutions show that NATO membership has a positive impact on attracting foreign direct investment into the country. The positive effects can be seen even in the pre-accession phase, when countries are invited to join NATO. For example, according to World Bank data, in Albania [which became a NATO member in 2009] FDI increased by 205% between 2007 and 2009. In 2007 FDI amounted to $ 652.28 million, in 2009 it amounted to $ 1.34 billion, while in 2018 FDI in Albania amounted to $ 1.21 billion. Furthermore, Montenegro became a NATO member in 2017, and in just one year, FDI increased by 247%. In 2016, FDI was $ 226.67 million, while in 2017 it was $ 560.29 million. In addition, Albania’s minimum monthly wage of 75 euros in 2004 rose to 212 euros in 2019, and in Montenegro from 288 euros in 2017 to 331.33 euros in 2019 (EUROSTAT). We can conclude that promoting the NATO effect is legitimate and positive, as it is also noted by relevant international institutions.

 

  ANALYSIS OF THE PROBLEM

 

Let’s start from the beginning. First let’s define what Foreign Direct Investments (FDI) is. According to the World Bank, Foreign Direct Investment (FDI) refers to the flow of capital to direct investment in another country’s economy. It is a sum of equity capital, reinvestment of earnings and other capital. Direct investment is a category of cross-border investment associated with a resident in one economy, with control or a significant degree of influence on  the management of an enterprise that is resident in another economy. Owning 10 percent or more of the ordinaryshares of voting stock  is the criterion for determining the existence of a direct investment relationship. The official data of the National Bank for total direct investments are presented in the following chart, noting that the data for 2019 refer to the first three quarters, while the data for the last quarter are not available yet.

Source: National Bank of North Macedonia

Conclusion: The fact is that FDI in 2018 is the highest in the last 17 years.

Source: National Bank of North Macedonia


Conclusion: 
As can be seen from the previous twocharts , FDI in the Republic of North Macedonia for the period 2018 and 2019 together amounted to EUR 745.37 million, which implies that they have increased by 4 times compared to 2017.

Since the economic indicators are not simple, they must be analyzed by taking into account other parameters, so here are a few more charts just to confirm this conclusion.

What is evident from the statistics in Chart 3 is that, from January 2017 to December 2019, both domestic and foreign investors are increasingly reinvesting their funds in our country. This is a strong indicator that our country is a safe country for investment.

But what does reinvestment in the economy actually mean? According to the National Bank’s methodology, “reinvestment” means:

  • part of the profit distributed in capital;

  • part of the profit distributed in reserves;

  • part of the profit allocated to cover the losses from the previous period;

  • undistributed profit; andundisclosed loss

In other words, it implies that the capital/profit stays in the country where the investment/company is resident.

Source: National Bank in North Macedonia

 

Note: For 2019, data are available only for quarters 1, 2 and 3. Due to the long period for processing data, the same are missing for quarter 4.

 

For the purpose of a detailed fact check on NATO’s impact on FDI in our country, we will compare the following indicators:

  1. a) Acquisitions and mergers (existing investments)

  2. b) Greenfields (new investments)

  3. c) Foreign investments in trade companies

  4. d) Total equity of foreign investments

According to the US Small Business Administration, acquisitions and mergers are similar, but have some major differences. Mergers means when two separate businesses merge into one new legal entity. Real mergers are uncommon, as it is rare for two equal companies to mutually benefit from a combination of resources and staff, including their CEOs. Unlike mergers, acquisitions do not result in the formation of a new company. Instead, the acquired company is fully absorbed by the company/firm that buys it. Sometimes this means that the acquired company is liquidated. Acquiring a business is similar to buying an existing business or franchise. 

As can be seen from Chart 4, from 2006 to 2017, existing investments are dropping in our country. Namely, these investments recorded their worst period in 2009, 2014, 2016 and 2017. Given that the global economic crisis occurred in 2008, the negative trend observed in 2009 would be attributed to the impact of the economic crisis on the world economy, including ours. But in 2018, the existing investments in our country increased by 12.71% points. Data for 2019 are not yet available.

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Source: National Bank of North Macedonia

The European Commission defines greenfield investments as investments in establishing start-ups, or expanding existing production capacities of production by non-resident investors. Greenfield FDI implies an expansion of existing capital into an economy that directly generates additional economic activity.

As can be seen in the Chart 5, the growth of the so-called greenfield investments in the period from 2006 to 2018 is dynamic, with periods of positive and negative investment trends. In 2018 alone, greenfield investments increased by 17.84% compared with 2017. Data for 2019 are not available.

Source: National Bank of North Macedonia


In 2018, foreign investments in companies increased by 14.69%, as well as total equity of foreign investments by 14.5% compared to 2017. Data for 2019 are not available.

Source: National Bank of North Macedonia 

Source: National Bank of North Macedonia  

 

In addition to NATO’s impact on the economy, NATO’s impact on the growth in the number of tourists in the Republic of North Macedonia, including both domestic and foreign tourists, was also analyzed.

Namely, the official statistics of the State Statistical Office show continuous growth of number of tourists in the last 20 years.

Source: SSO

On the positive side, over the years there has been an increase in the number of overnight stays by foreign tourists in our country, which is an additional benefit for our economy.

Source: SSO

 

If we look at the period that is subject to our analysis, from 2017 to 2019, we will see a jump of almost 20% in arrivals and overnights of foreign tourists.

Source: SSO

Conclusion: There is an increase in foreign tourist arrivals of 12.17% in 2018 compared to 2017, and 7.1% in 2019 compared to 2018. Overall, for the period 2018 and 2019, foreign tourist arrivals in the Republic of North Macedonia increased by 19.27% points compared to 2017.

Source: SSO

In the period from 2017 to 2019, there is a jump of over 20% on overnight stays of foreign tourists in the Republic of North Macedonia. In 2018, the number of overnights of foreign tourists increased by 15.2% points compared to 2017, and 5.78% points in 2019 compared to 2018. Overall, for the period 2018 and 2019, the overnights of foreign tourists in the Republic of North Macedonia increased by 20.98% compared to 2017.

What does it mean? On average, almost every foreign tourist visiting the Republic of North Macedonia has stayed for at least one night, which is a good indication that foreign tourists perceive our country as safe, secure and stable.

Finally, whenever the NATO themes are subject of the analysis and formulation of conclusions, the anti-NATO narratives must be taken into account, as all misinterpretation or misrepresentation of the facts may serve the purpose of these anti-NATO narratives.

Elmas Hasanovic, MIS

Program Coordinator
Info-Center for Euro-Atlantic integrations

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This project was funded in part through a U.S. Embassy grant. The opinions, findings, and conclusions or recommendations expressed herein are those of the implementers/authors and do not necessarily reflect those of the U.S. Government.

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