Macedonia buses in investment

By bne IntelliNews July 21, 2014

Kester Eddy in Budapest -

 

In May, Nikola Gruevski, the Macedonian prime minister, snipped the ribbon at the official inauguration of the country's newest (and only) coach-building plant. Located in a so-called “Free Zone” business park a few miles to the east of Skopje, the gleaming new factory represents a €25m investment – and a business lifeline – to Van Hool, a Belgian bus maker.

Van Hool could hold its own when it came to making the more profitable, specialist, bespoke designs of buses. But it saw production shrink from 1,700 vehicles in 2000 to around 1,000 in 2012 as cheaper competitors won orders for standard, off-the-shelf models, causing problems with cash flow, procurement discounts and simply paying for overheads, explains Filip van Hool, the company's chief executive, tells bne in an interview.

“We face a lot of competition. There has been a lot of production transfer from Western Europe to countries like Poland, Czech and Turkey: now 85% of new [bus and coach] registrations in Western Europe are coming from these countries,” van Hool says.

Hence the search began for a cheaper, offshore production location, with Turkey and Serbia topping the provisional list. “At the time, we were not even thinking of Macedonia, it just wasn't known,” says van Hool.

But through the grapevine, the Macedonians heard of the opportunity, and every six months, Vele Samak, then minister for foreign investment, would phone up van Hool and lobby for his country. And van Hool listened. “It meant to us that the government takes [foreign direct investment] very seriously. All the information that we requested we felt they gave answers to. They were very helpful; they made a lot of effort,” he recalls.

Impressed by Skopje's pitch, van Hool made a careful evaluation of the locations, finally opting for Macedonia, which offers a ten-year holiday on corporate and personal income taxes in its Free Zones. “There was a good incentive package, and less bureaucracy. We also had and have direct contact with the government – that's important,” he says.

It also helped that in the very labour-intensive, coach-building business, Macedonian wage costs average a mere €3 per hour, far below the rates at home in Belgium.

First buses

Work began on the site in July 2012, and within 12 months initial production had begun. “We had only just completed the first part of the factory. It was very hectic, and it really was 'just in time' – production was pushing the construction company [to complete space],” van Hool recalls.

In July, the 200th coach will roll out of the Skopje plant, all part of a 300-unit order for the US. And by September, the bus maker will employ 600 at its Skopje plant, who will build 450 vehicles in 2015, and 450-500 each year after that.

So far, van Hool is well-pleased with his choice. The Macedonian government and local suppliers have been “very responsive,” and while there has been a “big effort in training,” there is – bar the odd exception – a definite “will to learn and perform very well,” he says.

There is, however, a hint that more than one management recruit has expected an easy-going white collar job behind a desk. “We are a company with a horizontal structure, so everyone has to work and take responsibility. No one can hide, you know what I mean?” he says, admitting – after a pause – that he's had to part ways with some management appointees.

"Of course, I have this problem in Belgium and our US company,” he adds, “I would just say [here], it's an extra challenge.”

 

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