Legislative changes must be made to release subsidies and encourage investment, the government said.

North Macedonia aims to significantly reform and build up its defence industry, according to comments made by the country’s Minister of Defence Vlado Misajlovski on 30 June.

Speaking in an interview on national television, Misajlovski said North Macedonia has an opportunity to bolster its national defence industry as the NATO defence spending requirement increases to 5%.

To achieve this, reforms are needed that allow the government to more effectively subsidise, or invest in, the defence industry, Misajlovski said, noting that other alliance members subsidise technology development, fund research through faculties, or directly invest in private companies.

While some governments have funds to engage in “public-private partnership with companies”, Misajlovski said, North Macedonia’s Ministry of Defence cannot invest in private capabilities under the current legal framework.

The government is attempting to change this and is currently talking with private firms to negotiate such investment, including a firm which is looking to build a gunpowder production facility and a drone manufacturer.

There are already the foundations of a defence industry in place, Misajlovski noted, with one North Macedonian firm, ATS Ammunition, “seriously investing” in defence production. For the industry to truly develop, though, more facilities are needed, Misajlovski said.

Investing in defence companies means more jobs and more influence in NATO, Misajlovski added, and the government should look to support startups in the space as well as create more capacity for the defence industry. 

Another initiative being considered is a state programme to support young North Macedonian engineers to help develop defence technologies such as drones.

NATO spending target may prove challenging

While Misajlovski’s plans look optimistic, he noted that reaching the NATO target of 5% defence spending – including 3.5% of core defence spending – may be a strain financially.

North Macedonia cannot reach a budget of 3.5% of core defence spending – equivalent to EUR580 million – in the short term, Misajlovski said, particularly given the price tag attached to the country’s military capability targets.  

"Another segment that will be problematic for us is that our capability goals in the next 10 years are related to air defence, where the contracts that will need to be concluded are in huge amounts”, Misajlovski said.

While the country must focus its investment on land forces and infantry, Misajlovski said, large portions of the budget are tied up in previous contracts, such as a EUR300 million commitment to helicopters.

Nevertheless, Misajlovski said North Macedonia is committed to reaching the 5% defence spending target by 2035, according to reporting by Janes, also adding that the government will sign an agreement with the UK later this month aiming to develop a revised defence strategy for the region.