Entrepreneurship and Small Business in the Republic of Macedonia

• Published date: 01 November 2013
• DOI: http://doi.org/10.1002/jsc.1953
• Date: 01 November 2013
• Author: Veland Ramadani

Strat. Change 22: 485–501 (2013)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.1953 RESEARCH ARTICLE

Copyright © 2013 John Wiley & Sons, Ltd.

Strategic Change: Brie ngs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.1953

Entrepreneurship and Small Business in the Republic

of Macedonia1

Veland Ramadani

Faculty of Business and Economics, South-East European University, Republic of Macedonia

Introduction

 e purpose of this paper is to provide a picture of entrepreneurship and a pro le

of small business in the Republic of Macedonia.  e Republic of Macedonia is a

small country located in South-East Europe, i.e. the Central Balkan Peninsula,

and is one of the successor states of the former Yugoslavia.  e Republic of Mace-

donia declared its independence on September 8, 1991, while it became a member

of the United Nations on April, 8, 1993. As the result of a dispute with its south-

ern neighbor Greece regarding names, it was admitted under the provisional refer-

ence ‘Former Yugoslav Republic of Macedonia,’ abbreviated as FYROM (United

Nations, 1993; Dana, 1997a, 2010; Ramadani and Dana, 2013). It covers

25,713 km2 (9928 square miles), bordering Albania, Kosovo, Serbia Bulgaria, and

Greece.  e capital is Skopje, the largest city of the Republic of Macedonia,

inhabited by 30% of the total population. According to the State Statistical O ce

of the Republic of Macedonia (2005), based on data from the last Census of

Population, Households, and Dwellings in 2002, the Republic of Macedonia had

2,022,547 inhabitants, which is 3.9% more compared with the Census of 1994

and 43% more compared with the Census of 1948.  e population of the Repub-

lic of Macedonia according to ethnic group, based on the Census of 2002, consists

of: Macedonians, 1,297,981 (64.2%); Albanians, 509,083 (25.2%); Turks, 77,959

(3.9%); Romani, 53,879 (2.7%); Serbs, 35,939 (1.8%); Bosnians/Muslims,

19,571 (0.9%); others 30,688 (1.4%).  e gross domestic product (GDP) in 2011

was 461,730 million denars (the currency of the RM), and in comparison with

2010 it increased by 6.4% in nominal terms.  e real GDP growth rate in com-

parison with 2010 was 2.8% (State Statistical O ce of the Republic of Macedo-

nia, 2012).

Entrepreneurship and small

business represent the spinal cord

of the economy of a country.

According to statistical data in

the Republic of Macedonia, these

enterprises include 99% of the

total number of active enterprises,

although the importance of these

enterprises is not seen only from

their presence in this total.

In order to encourage

entrepreneurial and small business

initiatives, the Republic of

Macedonia should provide a

favorable, friendly business

climate — which means good

protection of property rights,

effective execution of contracts,

rule of law, qualitative and

non-arbitrary regulation, stable

and predictable government

policy,  ght against corruption,

elimination of administrative and

bureaucratic barriers, favorable

tax policy provisions for this type

of investment, and opportunities

for broad absorption power of the

market.

Entrepreneurship and small business play an important role in the development of

the economy of Macedonia.

1 JEL classi cation codes: D23, G38, M13.

486 Veland Ramadani

Copyright © 2013 John Wiley & Sons, Ltd. Strategic Change

DOI: 10.1002/jsc

Businesses in the Republic of Macedonia are classi ed

to conform with European Commission Recommenda-

tions 2003/361/EC, which have been incorporated into

the Law of Trading Companies of 2004. Under the law

in question, section 470, businesses (traders) are classi ed

as micro, small, medium, and large, according to these

criteria: number of employees, annual turnover, and value

of assets (Ramadani and Dana, 2013).

A micro-trader, between two years or in the  rst year

of operation, will have accomplished the  rst criteria or

at least one of the  rst or second criteria from the list

below:

• Average number of employees, according to working

hours, less than 10.

• Gross revenue earned from the dealer not to exceed

50,000 euros counter to denars.2

• At most 80% of the gross revenue realized from a cus-

tomer/consumer or by persons associated with this

client.

• Micro-enterprise owners of more than two people.

A small trader, between two years or in the  rst year

of operation, will have accomplished the  rst criteria or

at least one of the  rst or second criteria from the list

below:

• Average number of employees, according to working

hours, of 50.

• Gross revenue earned from the dealer not to exceed

2,000,000 euros counter to denars.

• Average value of total assets (active) less than 2 million

euros counter to denars.

A medium trader, between two years or in the  rst year

of operation, will have accomplished the  rst criteria and

at least one of the  rst or second criteria from the list

below:

• Average number of employees, according to working

hours, of 250.

• Gross revenue earned from the dealer not to exceed

10,000,000 euros counter to denars.

• Average value of total assets (active) less than 11 million

euros counter to denars.

From the above, we can conclude that the Republic

of Macedonia has accepted the European Union criteria

for enterprise classi cation, usually adjusted according to

economic conditions in the country. Only the number of

employees is the same as those of European countries.

In order to view the status of the development of

entrepreneurship, many authors use one of the popular

indexes of the Global Entrepreneurship Monitor (GEM),

known as Total Entrepreneurship Activity (TEA), which

shows the percentage of adults (18–64) who attempt to

start a small business or are already the owners of a small

business set up earlier than 42 months previously (Bygrave

and Zacharakis, 2008). Data about the entrepreneurial

activity in the Republic of Macedonia and the region

generally is presented in Table 1.

TEA, as one of the most frequently used indicators

for entrepreneurial activity, has identi ed that part of the

early-stage entrepreneurial activity is motivated by neces-

sity and part by recognized opportunity. As shown in

Table 1, the Republic of Macedonia’s indicators are the

highest compared with other countries in the region.  e

nascent entrepreneurship sums to 7.2% and 7.7% for

owners of new businesses, contributing toward the key

GEM TEA index at 14.5%.  is TEA index for the

Republic of Macedonia is the highest compared with

other countries in the region; for Greece the TEA index

is 9.9%, followed by Bosnia and Herzegovina with 9%,

whereas Croatia and Serbia are almost the same at 7.6%.

In addition, the TEA index for the Republic of Macedonia

is higher than the average for European Union (EU) coun-

tries (5.85%) and Organization for Economic Coopera-

tion and Development (OECD) members (7.10%).

Considering the indicator of established business owner-

2 1 = 61.5 denars.