Macedonia Corruption Report

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Snapshot

Corruption and inefficient bureaucracy are challenges companies may face when doing business in Macedonia. There is a high risk of corruption in most of the country’s sectors. 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 some of the 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. Insufficient implementation of legislation and ineffective law enforcement impede the fight against corruption and public officials continue to act with impunity.

  • Risk key
  • Low
  • MODERATELY LOW
  • MODERATE
  • MODERATELY HIGH
  • HIGH
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Judicial System

There is a high risk of corruption when dealing with Macedonia’s judiciary due to extensive political interference and corruption. Companies perceive bribes and irregular payments to be often exchanged in return for favorable judicial decisions (GCR 2015-2016). Nearly half of citizens consider the judicial system to be corrupt (GCB 2017). Investors complain of political interference in court cases and cite slow and inefficient legal proceedings as constraints to business (ICS 2017). The reforms over the past decade to improve the judiciary continue to be undermined, to the extent of backsliding, by political interference in the work and appointment of members of the judiciary (European Commission 2016). More safeguards are needed to ensure court cases are not allocated to a specific judge based on political or personal grounds (European Commission 2016). There are reports that prosecutors are unable to properly prosecute high-profile or politically sensitive cases (European Commission 2016). The judiciary suffers from a lack of funding and the prosecutor’s office remains understaffed and is lacking in other capacities (BTI 2016). Since July 2015, companies are required to enter into mediation over disputes of up to EUR 15,000 before they may pursue their claim in court (ICS 2017); companies have complained that the measure imposes additional costs and lengthens the time required to enforce contracts (ICS 2017). Enforcing a contract in Macedonia takes significantly longer than the regional average (DB 2018).

About ‘disobedient’ twenty judges were suddenly reassigned from their posts in the Criminal Court system to other position where Macedonia’s Special Prosecution cannot file a case (Balkan Insight, Feb. 2017). The move is seen as a way to interfere with the Special Prosecutor’s ability to hold a number of the country’s elite accountable in an extensive wiretapping case (Balkan Insight, Feb. 2017).

Macedonia has signed the New York Convention of 1958 and is party to the International Center for the Settlement of Investment Disputes (ICSID).

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Police

Corruption presents companies with a moderate to high risk when dealing with Macedonia’s police sector. Few businesses report bribes being needed when interacting with the police (BCaC 2013). Nonetheless, more than three out of five Macedonians regard the police as corrupt (PP 2017). Impunity among the police force is a problem (HRR 2016). Despite the reliability of the police to uphold the law is perceived as high (GCR 2017-2018), over one-third of companies pay for security (ES 2013).

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Public Services

There is a high risk of corruption in Macedonia’s public services sector. The state apparatus in Macedonia suffers from widespread corruption, political patronage, conflicts of interest, and a lack of technical skills (BTI 2016). Companies indicate that bribes and irregular payments when interacting with public services are uncommon (GCR 2015-2016). Half of all bribes offered to public officials were identified as facilitation payments aimed at speeding up services (CAR 2014). Public officials reportedly use their positions to pressure businesses to bribe (CAR 2014); businesses report that paying bribes to public officials can help with speeding up or finalizing administrative procedures, along with receiving better treatment and gaining access to information (BCaC 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 favoritism in the hiring process (NiT 2015). Three out of four surveyed perceive corruption and conflicts of interest as widespread in Macedonia’s public administration (NiT 2015).

Macedonia’s regulatory environment remains complex and lacks transparency (ICS 2017). Frequent changes in legislation and regulations, as well as inconsistent interpretations of rules, create an unpredictable business environment, conducive to corruption and the use of inspections for political purposes (ICS 2017). Starting a business in Macedonia takes less time and fewer steps compared to the regional average (DB 2018). Dealing with construction permits takes fewer steps and requires less time than the regional average (DB 2018).

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Land Administration

There is a high risk of corruption in Macedonia’s land administration. 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). Companies report confidence in the protection of property rights, nevertheless, these are inconsistently implemented (GCR 2017-2018, ICS 2017). In recent years, the cadaster system has significantly improved, leading to improvements in the security and speed of real estate transactions (ICS 2017). All real estate and 91 percent of land deeds are now registered (ICS 2017). However, investor’s potential land utilization remains constrained by a large number of lingering property ownership disputes (ICS 2017). A lack of coordinated local and regional zoning plans and an efficient construction permitting system impedes businesses (ICS 2017). Public land is sometimes sold below market prices, which may indicate corrupt dealing (BTI 2016). The government nationalized arable land in the possessions of private individuals and the Macedonian Orthodox Church in 2014; the sum paid in compensation was below market value (BTI 2016). Registering property in Macedonia is more costly and time-consuming than the regional average (DB 2018).

Former Prime Minister and VRMO DPMNE party leader Nikola Gruevski is being investigated for accepting illegal donations for his party, which was used partly in 78 different contracts to buy real estate (Balkan Insight, May. 2017). The prosecutor indicated they filed twelve different requests, each for at least three properties, for seizure of assets (Balkan Insight, May. 2017).

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Tax Administration

Corruption in Macedonia’s tax administration is a moderately low risk for companies. During direct interaction with tax inspectors, only very few companies report bribes being requested (GCR 2015-2016; ES 2013). Four in every ten surveyed Macedonians believe tax officials are corrupt (GCB 2017). The administrative infrastructure aimed at fighting tax fraud and evasion, and at reducing the size of the informal economy is undergoing a process of reform (European Commission 2016). The average time and cost required to deal with paying taxes are much lower than the regional average (DB 2018).

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Customs Administration

There is a moderate risk of corruption in Macedonia’s customs sector. The Macedonian economy is very dependent on imports, resulting in 80 percent of businesses having direct encounters with the customs administration (BCaC 2013). Bribes and irregular payments during import procedures are fairly rare (GETR 2016). Three out of five Macedonians perceive customs officers as corrupt (PP 2017). Companies are not satisfied with the efficiency of the clearance process and complain about burdensome import procedures, yet rate the time-predictability of import procedures as moderately satisfactory (GETR 2016). The time and costs required to comply with import and export procedures in Macedonia are far below regional averages (DB 2018).

The MCA uses electronic customs clearance solutions, which has simplified and automated import and export procedures for businesses (ICS 2017). The customs administration has adopted an e-government system to manage international cargo licenses for transport and trade, which has reduced opportunities for corruption (ICS 2017). The European Commission found that the administrative and operational capabilities, professional integrity standards, and internal controls are now systematically applied in the customs administration (European Commission 2016). The Macedonian Customs Administration (MCA) website contains more information on regulations.

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Public Procurement

Corruption and mismanagement are widespread in public procurement and present serious risk for companies. Investors report that bribery is common in public procurement and government projects (ICS 2017). Likewise, favoritism often taints the decisions of government officials when awarding public contracts and licenses (GCR 2017-2018). Small companies and investors operating outside the Technological Industrial Development Zones (TIDZs) report that under the rule of the last government led by the VRMO-DPMNE which has been in power since 2006, public procurement fraud was rife (ICS 2017). They allege that government tenders were awarded to parties linked to the ruling party, that they faced pressure to hire party members, faced retaliation when they were perceived to be supportive of opposition political parties, and payment for government contracts was selectively withheld (ICS 2017). Evidence suggests that the situation remains unchanged and that businesses that cooperated the most with the government routinely won government tenders (HRR 2016). Many contracting authorities do not publish their procurement plans (European Commission 2016), leading to concerns about direct tender awards. Detailed requirements also prevent competition in tendering (European Commission 2016). A quarter of all tenders had only a single bidder (European Commission 2016). The implementation of e-government (ESPP) in managing public procurement has decreased opportunities for corruption (ICS 2017). Over ninety percent of companies say they do not appeal tender awards due to high costs and lack trust in institutions (BTI 2016). Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.

Macedonia’s Special Prosecutor has alleged that Vladimir Taleski, the mayor of Bitola, was part of a group of municipal officials, school administrators, and transport company employees that embezzled a total of EUR 365,000 by manipulating tenders designated to fund student transportation (NiT 2017). In another case, public outrage followed the allocation of a EUR 2,6 million contract for rubber transportation lines to Feroinvest, a company owned by Deputy Prime Minister Koco Angjusev (MIA, Sept. 2017). Angjusev denies any wrongdoing (MIA, Sept. 2017).

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Legislation

The Macedonian Law on Prevention of Corruption and the Criminal Code, criminalize 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 offenses committed by their representatives. Facilitation payments are prohibited, and gifts may be considered illegal depending on their value, intent or benefit. Enforcement of anti-corruption laws has been weak and selective (ICS 2017). 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. The Law on Protection of Whistleblowers is regarded as one of the strongest laws in the region (SECWP 2017). The Law provides protections for private and public employees to report misconduct confidentially and protects them from criminal prosecution and other types of liability (SECWP 2017). Macedonia’s track record for fighting corruption is of a high international standard when it comes to investigations, prosecutions, and convictions of corruption by lower-level officials, but in cases involving high-level corruption, results remain very weak (European Commission 2016). Other observers have alleged that the government has not responded with sufficient force to the widespread practice of low-level bribery (NiT 2017). Macedonia has ratified the United Nations Convention against Corruption (UNCAC) and the Council of Europe’s Criminal and Civil Law Conventions against Corruption.

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Civil Society

Despite constitutional protections, freedoms of press and of expression are not always upheld in Macedonia (HRR 2016). There are claims that the government selectively prosecutes opposition and media figures and sometimes interferes in defamation cases initiated by high-ranking government officials (HRR 2016). Attacks and harassment against journalists are increasing; the security forces have perpetrated a number of these violations (FotP 2017). Journalists frequently engage in self-censorship because they face pressure not to publicize information that may harm their employer’s business interests (FotP 2017). Due to market pressures and competition, the quality of journalism is often low (FotP 2017). Investigative reporting in Macedonia is typically only found in online outlets which are under significant financial pressure (FotP 2017). Macedonia’s media environment is considered ‘not free’ (FotP 2017).

The law in Macedonia provides for freedom of assembly and of association, and the government generally respects these rights in practice, but there have been reports of some government interference in public protests (HRR 2016). Civil society organizations (CSOs) have established several initiatives for civic participation, and have strengthened coordination and networking; however, CSOs continue to express concerns about the deteriorating operating climate and limited government commitment to dialogue (European Commission 2016). CSOs are subject to harsh and disproportion criticism by politicians and certain media outlets (European Commission 2016). Many CSOs in Macedonia are politicized and push the agenda of the main political parties (BTI 2016). CSOs have reported targeted investigations and infringement of privacy by law enforcement agencies after they disagreed with the government on sensitive political issues; some members were fined and taken to court on civil disobedience charges (European Commission 2016).

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Sources

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