Area: 25,333 sq km, slightly larger than Vermont
U.S. STRATEGIC INTERESTS
A Europe whole, free, and at peace is the overriding U.S. strategic interest in South Central Europe, including in Macedonia. Throughout the region, the U.S. supports continued peace and stability, ethnic reconciliation, good neighborly relations among states, development of market-based economies, and integration into Euro-Atlantic institutions. Macedonia's relatively well-educated population, strategic location in the Balkans, and mineral resources also make it a potential force for economic growth and stability in its region. Macedonia lent its airspace and its voice at the UN in support of Operation Enduring Freedom, sent troops to Iraq and Afghanistan, and continues to provide lines of communication to KFOR for its Kosovo operations. It aspires to membership in the EU and NATO and is working to modernize its military. It is also striving hard to overcome its legacy as a transit route for smugglers, traffickers, and money-launderers, and to make the transition from a command to a market economy. It is in the U.S. interest to promote Macedonia's prosperity and ensure that its limited high-technology capabilities are applied to legitimate, civilian purposes.
OVERVIEW OF U.S. GOVERNMENT ASSISTANCE
In FY 2003, the U.S. Government (USG) provided an estimated $50 million in SEED assistance to Macedonia, including:
Other U.S. assistance in FY 2003 included:
U.S. ASSISTANCE PRIORITIES
Democratic Reform Programs: In FY 2003,USAID's SEED-funded democracy and governance program focused on: 1) expanding citizen participation in political and social decision-making; 2) enhancing adherence to the rule of law; 3) improving the effectiveness and accountability of local government; and 4) increasing confidence in government institutions and political processes. The Department of Justice, Office of Overseas Prosecutorial Development, Assistance and Training (DOJ/OPDAT) program focused on strengthening the independence of the judiciary; enhancing the efficacy of public prosecutors; promoting the reform of the substantive and procedural criminal codes of law, including the adoption of the law on electronic surveillance; and encouraging cooperation between prosecutors and the police.
Economic and Social Sector Reform Programs: USAID's SEED-funded program to accelerate the development and growth of the private sector focuses on strengthening financial sector institutions, increasing the competitiveness of private firms, and improving the investment and business environment. To mitigate the social impacts of the socialist-to-market economy transition, USG assistance concentrates on increasing the demand for labor, addressing the country's unemployment problems through local economic development, and making the education system more relevant to the labor market. This program includes training and technical assistance to improve the quality of schools, decentralize the education system, and increase access to education at all levels for minority groups.
Security, Regional Stability, and Law Enforcement Programs: Several USG programs targeted corruption, organized crime, and the lack of rule of law. The Department of State, Bureau of International Narcotics and Law Enforcement Affairs (INL) administers SEED funding in support of three projects in Macedonia: the Department of Justice, Office of Overseas Prosecutorial Development, Assistance and Training (DOJ/OPDAT) Resident Legal Advisor (RLA); Department of Justice, International Criminal Investigative training Assistance Program (DOJ/ICITAP) Police Reform; and OPDAT/ICITAP collaborative efforts to combat trafficking in persons (TIP). In addition to the work described under Democratic Reform, OPDAT worked on raising the awareness within the law enforcement community of the need to run parallel proceedings in prosecuting financial crimes, while encouraging the courts to use the applicable laws on freezing and seizing assets of the accused. The courts first utilized these laws in 2003. The DOJ/OPDAT program also focused on strengthening Macedonia's institutional capacity to stop the trafficking of women and children across its borders. The DOJ/ ICITAP program works in the areas of professional standards, community policing, organized crime, and trafficking in persons. A Department of State Export Control and Related Border Security (EXBS)program will provide training and materials to deter and interdict the proliferation of materials and technology related to WMD and ballistic missile applications, through an efficient export control regime. U.S. Customs has been working closely with the Macedonian Customs Authority to control smuggling and corruption, while reducing waiting times at the border for legitimate cargo. Foreign Military Financing (FMF) and International Military Education and Training (IMET) funding promote military reform in support of Macedonia's NATO candidacy. This funding has also allowed the Macedonian military to interoperate with NATO-country forces in regional exercises, as well as in Iraq and Afghanistan.
SECTORAL ASSESSMENTS
Democratic Reform
The Framework Agreement (FWA), the peace agreement that ended Macedonia's 2001 internal conflict, prescribes political reforms to guarantee minority civil rights. Its successful and timely implementation, jointly overseen by the U.S. Embassy and an EU Special Representative, is key to maintaining stability.Decentralization of government is a major component of the FWA. Full implementation of the decentralization provisions requires the amendment or adoption of more than 80 relevant laws. The USG provided technical assistance to the Government of Macedonia (GOM) in drafting the Law on Local Finance, a cornerstone for decentralization, as well as the Property Tax Law and other key pieces of legislation. The USG and EU collaborate closely in donor coordination to ensure that decentralization assistance and advice are complementary.
USG assistance facilitated an accurate 2002 census, as mandated by the FWA. The politically sensitive census was a prerequisite for many of the decentralization reforms. The USG provided training, technical assistance, and equipment to strengthen the capacity of the State Statistical Office (SSO) to conduct the census in accordance with international standards. This assistance complemented the EC's Eurostat Monitoring Mission to confirm the census process and results.
Consolidation of the rule of law is essential to the transition to a market-oriented democracy. To promote the development of rule of law in Macedonia, the USG supports training and technical assistance to strengthen the professionalism and independence of the judiciary, police, and public prosecutor's office. To ensure that cases will be adjudicated in a fair, consistent, transparent, and timely manner, the USG provides assistance to reduce the case backlog and improve the effectiveness of the courts. USG technical assistance helped in the drafting and passage of the Independent Court Budget Law in September 2003, to increase the judiciary's control over its budget -- a major step toward judicial independence. The U.S. coordinates its legal reform assistance closely with the EU to ensure harmonization with EU legal standards.
To strengthen citizens' ability to participate effectively in making the decisions that affect their lives, the USG is providing assistance to build a sustainable and vibrant civil society. As a result of USG assistance, civic education is being taught in all public kindergarten and first through sixth grade classes. The USG supported the drafting of a new Broadcast Law to enhance the independence of the public broadcaster and regulatory bodies in this sector. Grants, training, and technical assistance were extended to 30 local NGOs to address organizational and financial sustainability issues, as well as critical social issues, such as conflict prevention, anti-trafficking, youth unemployment, and HIV/AIDS. The Embassy worked with a coalition of five NGOs to advocate increased GOM attention to the HIV/AIDS issue, and to develop activities to reach out to the most at-risk populations. This coalition of NGOs was invited to serve on the Ministry of Health's Multi-Sectoral Committee on HIV/AIDS, the first time that NGO input was sought on a key policy issue. Its contribution was instrumental in Macedonia's successful proposal to the Global Fund for HIV/AIDS.
Citizen confidence in government institutions and the political process is a critical reflection of the level of trust that citizens have in democracy as a system. In addition to its support for the conduct of free and credible elections, the USG provides assistance to help make the Parliament more independent, representative, and accountable, as well as to encourage the members of parliament to reach out to and represent the interests of their constituents. This included the opening of three constituent offices in 2003. Work with the political parties continues to build local branches that are more democratic internally and responsive to party members and citizens, as well as to strengthen youth and women's political organizations.
The 2004 democracy program will continue to emphasize support for decentralization, in the context of encouraging FWAimplementation. The focus of the local government work will shift from the legal framework to capacity building for local government officials, in order to prepare them to assume additional responsibilities. In anticipation of the local and presidential elections in 2004, the USG will provide comprehensive support for the work of the State Election Commission, including voter education and poll worker training.
Macedonia's corrupt and inefficient judicial system requires continued attention. The judiciary benefited from the workshops provided by OPDAT/ICITAP, along with the OSCE Mission.
In 2003, OPDAT and the Drug Enforcement Agency (DEA) Regional Office provided a training workshop for police, prosecutors, judges, and customs officers in investigating, prosecuting, and adjudicating complex narcotics cases. With USG assistance, police seizures of illegal narcotics increased by 40 percent over 2002, and convictions for narcotics-related offenses jumped by 33 percent. Illegal narcotics seized included heroin, hashish, marijuana, cocaine, and ecstasy.
Two issues that will receive increased attention in 2004 are corruption and organized crime, both of which remain serious obstacles to Macedonia's further democratic and economic development. Through continuing dialogue with the Government of Macedonia (GOM), DOJ will continue to press for a stronger role for the government's Anti-Corruption Commission. It will also support establishment of an independent judicial review board.
In 2004, OPDAT will present programs in which a federal prosecutor from an Organized Crime Task Force, and the RLA from Belgrade, will offer workshops on combating organized crime. OPDAT will give workshops for judges, prosecutors, and police on the newly amended Criminal Code, Law on Criminal Procedure, and the revolutionary new Law on Electronic Surveillance.
The Embassy Democracy Commission's small grants program facilitated grass roots-level explication of U.S. policy objectives. The program supported over 20 projects, covering such critical areas as trafficking, multi-culturalism, ethnic diversity and tolerance, the environment, and women's and human rights. Projects related to Macedonia's NATO candidacy also received funding, in anticipation of GOM efforts to hasten reform and build public support for membership.
Economic and Social Sector Reform
Shortly after taking office in November 2002, the new government realized that a spending spree by its predecessor had nearly depleted the GOM's coffers. Subsequently, the Ministry of Finance (MOF) implemented stringent fiscal constraints for the first half of 2003, to comply with IMF targets. Funding FWA-mandated reforms imposed an additional burden. Foreign direct investment in 2003 was well below early expectations. GOM discussion of possibly revisiting earlier privatizations caused some investors concern. Seeking a more vigorous economic team, PM Crvenkovski replaced the Ministers of Finance, Economy, Justice, and Transportation, in November 2003. The GOM signed a Stand-By Agreement with the IMF in February 2003, that was approved by the IMF Board in April. The first review was positive, and the GOM continues to comply with the program.
Despite the stable but stagnant macroeconomic climate, progress in 2003 was significant. The USG played a direct role in the setting up of the National Entrepreneurship and Competitiveness Council, composed of representatives from government, private industry, and the labor unions. The Council has selected and focused on four sectors - tourism, lamb/cheese, wine, and information and communications technology (ICT) - as Macedonia's areas of greatest competitive potential.
Agriculture plays a significant role in the economy. The targeted meat and dairy, retail, and sheepherding agricultural sectors increased sales and market share in domestic and export markets, improved profitability and compliance with industry standards, and introduced new technologies. With USG help, the first International Standards Organization-certified quality control laboratory was created. Private companies from Kosovo have also used the lab's facilities. U.S. assistance activities resulted in investment and job creation.
Many USG assistance programs have components designed to reduce or eliminate corruption. The Financial Police, for example, will focus on the most blatant financial crimes. The first financial police officer training has been completed, and officers now better understand evidence gathering, investigative procedures, and computer forensics. To further prevent corrupt practices, USG assistance has improved GOM budget formulation by establishing a Single Treasury Account and developed new practices for treasury operations in the areas of cash planning, arrears reduction, and commitment accounting.
Although the passage of the comprehensive Company Law was delayed until January 2004, several important interim steps were taken to improve the business and investment climate. With USG support, the GOM passed several key articles to the current law that halted the egregious practice of managers extorting voting rights from workers. A baseline survey on corporate governance was completed, and it will track the effectiveness of the "Good Corporate Governance Makes a Difference" campaign. The campaign includes seminars, radio broadcasts, and town hall meetings with citizens, companies, and journalists.
The U.S. coordinates its financial sector assistance closely with EU, Dutch, and German aid. The USG has focused on a new audit law to create accounting and auditing standards that are consistent with International Financial Reporting Standards. All the major capital market laws (Laws on Securities, Investment Funds, and Takeovers) have been reviewed, and extensive recommendations have been given to the GOM on amendments needed for these laws to conform with international best practices. Legislative action is expected in 2004.
In 2004, USG assistance will remain focused on small and medium-sized enterprise (SME) development and financing, employment generation and training, and expansion of information technology, as well as fiscal transparency and decentralization, competitiveness, and the business environment. At an estimated 37 percent in 2003, unemployment in Macedonia is among the highest levels in the region and could be politically destabilizing, if the GOM cannot find ways to stimulate faster job creation. Investors' rights and management obligations with regard to equity financing will also become more important as Macedonia, with USG and World Bank assistance, moves to a Pillar II pension system on January 2005. Emphasis on the financial sector as a whole will be reduced slightly. Though problems remain, the banking sector continues to mature, with increases in direct foreign ownership, liquidity, competition, reduced lending rates, and the inevitable closure of weak banks. The new ministers of Economy, Finance, Justice, and Transportation have a mandate drastically to improve performance in their respective domains. Initial signs are excellent for assistance and cooperation with USG entities, and U.S. programs will reflect their new priorities.
A Rapid Response Law passed that will require employers to offer training prior to laying workers off. This law is based on methodology the USG used effectively in one of its assistance programs and will enhance the skills of laid-off workers, and expand their employment options.
Increasing access to and the quality of education, particularly for minorities, is a high GOM priority. In FY 2003, the USG was among the largest supporters of the multi-ethnic, multi-lingual private South East European University (SEEU), that offers classes in Albanian, English, and Macedonian. Enrollment exceeded expectations and continues to rise. A new initiative to increase enrollment and retention of the Roma minority in primary schools was also successful. The USG provided assistance to improve teaching methods and furnished schools with computers. Both of these interventions will enhance the quality of education and encourage students to stay in school. The World Bank is designing an education reform project; the USG coordinates with the Bank as it progresses.
In 2004, the USG will continue to provide support to the SEEU. In addition to enrollment, better faculty and facilities will be the focus. To increase Roma minority enrollment at the primary and secondary school levels, the USG will expand assistance designed to reduce the obstacles Roma face. The USG is initiating a new program that will use information technology to boost SME efficiency and give them a technological edge that will allow them to compete in the global arena.
The TV Cooperative Program on economic development and Macedonia's collaboration with IFIs helped to educate viewers. Programs featuring U.S. examples and experiences of small business development and entrepreneurship and their applicability in Macedonia were highlighted. Media training and development programs also continued to be important in promoting U.S. objectives in Macedonia. Issues such as accountability, objectivity, and other basic tenets of journalism were effectively reflected in local reporting.
After a 15-month suspension due to internal unrest, Peace Corps Macedonia was re-established in November 2002. There now are 43 volunteers serving throughout the country in four sectors. Sixteen volunteers work with English language education, 18 assist with municipal governments, six work on environmental education and management programs, and three serve with local NGOs. These volunteers continue to assist and support their counterpart organizations through capacity building, information technology support, cross-cultural understanding, USAID small projects assistance ($50,000), networking, and research. Small projects assistance has included playgrounds, computer centers, libraries, clean-up projects, and city park restoration.
Security Regional Stability and Law Enforcement
Stability improved greatly in Macedonia during FY 2003, with no major outbreaks of ethnic violence and a reduced number of minor, isolated incidents. The emphasis of the USG and international community has shifted to controlling cross-border crimes, strengthening the rule of law, preventing criminal violence, and preparing Macedonia's military for accession to NATO.
Although Macedonia has started reforming its criminal justice system in recent years, the country's institutional infrastructure remains plagued by low salaries, insufficient training and equipment, and widespread corruption. In FY 2003, the USG provided training to law enforcement officials, prosecutors, and judges in the areas of money laundering and financial crimes, corruption, narcotics, and trafficking in persons. The DOJ and the Treasury Department have been working closely with senior GOM officials on improving the money laundering laws and strengthening the ability of the prosecutors to charge parallel crimes and to seize the proceeds of crime in corruption, narcotics, and trafficking-in-persons cases. In FY 2003, Macedonian law enforcement officials initiated a series of cases involving corruption, money laundering, and other financial crimes allegedly committed by former government officials.
The USG funded a variety of seminars on anti-corruption, anti-trafficking in persons, and anti-narcotics; training for prosecutors, police, the judiciary and customs officers; and sessions on judicial and criminal legislation reforms. It also supported a number of regional conferences in Bulgaria, Kosovo, Romania, and Serbia and Montenegro that facilitated cooperation among local judges, prosecutors, police, and legislative drafters from Macedonia and its neighbors. In addition, USG assistance helped to develop a witness protection program, especially for anti-trafficking cases. DOJ, through the Embassy's Public Affairs Office, sent a group of Macedonian prosecutors to the U.S. under its International Visitors Program (IVP). DOJ designed an English language course for judges and prosecutors, financed and administered by the Public Affairs Office, in FY 2003. The course will operate in three regions in Macedonia through FY 2004.
Trafficking in persons (TIP) remains a formidable challenge for Macedonia. SEED funds have helped Macedonia continued its steady progress and improvement regarding TIP. It is both a transit and a destination country for trafficking of women and children, as evidenced by the number of search warrants executed. Over 600 women have been rescued since the transit center, operated by the Interior Ministry with the support of the International Organization for Migration (IOM) and local NGOs, started functioning in early 2001. As the only Tier I country in Southeastern Europe according to the Department of State's latest Trafficking in Persons Report, Macedonia also received SEED support for extensive outreach programs focusing on public education. Other projects included training seminars to enhance reporting and coverage of TIP and computer access to trafficking assistance and support offered by the U.S. and regional NGOs. In FY 2003, the USG also supported IOM and local NGOs financially to operate a shelter for rescued trafficking victims. It provided reintegration assistance, medical care, and counseling.
The FY 2003 ICITAP police development program began a transition from conducting community policing assessments to implementing a pilot project encompassing six sub-components: a comprehensive, self-paced/modular community policing curriculum for certifying police officers; a series of community leadership training courses; a Community Action Team (bicycle unit); a Community Advisory Group; a local presence of the Professional Standards Unit; and a Citizens Police Academy. These components will be tested and improved, incorporating "lessons learned" into future iterations anticipated in other parts of the country. The Professional Standards Unit effort in the Ministry of Interior continues to address issues in staffing, training, policy and procedure, legal reform, case tracking/investigation, and community confidence. Representation on ministry-level bodies related to trafficking in persons is also mandated in this program component.
In FY 2004, ICITAP will continue to expand its grass-roots development of community policing through pilot projects. However, the impetus and responsibility for these initiatives will begin to shift to the Macedonian police, so that sustainability will be a realistic goal. ICITAP's program will retain four full-time advisors to help the GOM at the Ministry level to focus on the specific areas of community policing, organized crime, trafficking in persons, as well as continued commitment to professional standards. In the community policing program, a train-the-trainer emphasis will promote sustainability through increased participation by Macedonian police personnel and community members. The organized crime/trafficking-in-persons advisor will provide professional training, advice, and consultation to the Ministry of Interior, working closely with the OPDAT RLA, to promote a coordinated task force approach. In professional standards, the program will continue to strengthen the Ministry of Interior's internal audit capacity.
The Department of State's Export Control and Related Border Security (EXBS) program funds export control detection equipment and training for border posts and personnel, including the tracker licensing control system, risk report database, and WMD awareness. Other non-proliferation assistance is planned from the Department of Commerce (USDOC) on training for an export control licensing system, possible help from the Department of Energy (DOE) to provide radiation portal monitors, and a Customs border security program to complement these efforts
The Southeast European Cooperative Initiative (SECI) in Macedonia is part of a joint World Bank-U.S. sponsored, regionally linked program that also supports efforts by Albania, Bosnia and Herzegovina, Bulgaria, Croatia, and Romania to facilitate trade. The program seeks to promote more efficient, less costly trade flows across the borders of the participating countries by providing EU-compatible customs standards. The SECI project supports the implementation of ongoing customs reforms, with a focus on integrated solutions at selected pilot sites at main European corridors. These sites are intended to increase the productivity of border agencies and reduce the waiting time and lines at border crossing stations. USG support funds infrastructure upgrades, such as updated IT systems, training, and other essential programs in support of the Trade and Transport Facilitation of Southeast Europe (TTFSE) program. The project, begun in FY 2001, will run to the middle of FY 2005. Measurement results show reductions of 26 to 78 percent in average processing times at the four pilot sites in 2003, compared to 2002.
SECI has overseen the creation and development of a Risk Analysis Unit in the Macedonian Customs Administration (MCA). The team was trained and equipped with the tools needed to analyze and monitor cargo selectivity, based on the automated compliance measurement and risk-assessment/profiling system for cargo. SECI will support the extension of this process across the country. It also assisted MCA to develop a public hotline to report Customs offenses and corruption, and helped set up an Office of Internal Affairs to investigate alleged corruption.
The USG funded anti-terrorism programs to stress its commitment to combating this scourge worldwide. These Public Diplomacy programs also sent a powerful signal that terrorism of any kind will not be tolerated. As an innovative approach, the American Corner in Bitola included a specific section on terrorism. The section, which features the latest, most up-to-date computer access to the USG's policy on terrorism, offers videos and lectures on its various forms. The country programs are funded to underscore that U.S. actions in Iraq and Afghanistan are aimed at combating terrorism, and not at Islam.
Various SEED programs were implemented to combat trafficking in persons. The Embassy's IVP program and several Department of State Educational and Cultural Affairs (ECA) Bureau-sponsored training projects on trafficking produced tangible benefits. Strategies targeting effective enforcing of the law, strengthening the prosecution, and developing community support and awareness, were among the themes highlighted in one multi-ethnic IVP group. The group, comprised of representatives from Macedonian NGOs, journalists, prosecutors, and a public official, met for the first time on the IVP. They interacted with their counterparts from Serbia and Albania, and developed a stronger sense of the need for regional cooperation. The Embassy's English language program for judges and prosecutors has facilitated understanding of U.S. policy and generated goodwill, in addition to achieving its stated objective.
Much of the USG's FMF program has supported the Defense Reform Project, implemented by Booz Allen Hamilton. It provides training in logistics and personnel, planning, and programming budgetary assistance. The project has helped Macedonia to meet its NATO reform targets, specifically in encouraging the transition to a lighter, more flexible force. FMF also financed radios and other equipment to enhance the interoperability of Macedonian forces with NATO-country forces during regional exercises, as well as with Coalition Forces in Iraq. Under the IMET program, 65 officers, from lieutenants to generals, expanded their military education in the U.S.
COUNTRY PERFORMANCE MEASURES
Economic Policy Reforms and Democratic Freedoms in Macedonia, 1991-2002
Ratings based on a 1 to 5 scale, with 5 representing the most advanced.
Sources: EBRD, Transition Report 2003 (November 2003); Freedom House, Freedom in the World 2003 (2003); and (various years).
Economic Structure and Human Development in Macedonia, 1991-2002
The Human Capital Index (HCI) is based on an average rating of four variables, scored on a 1 to 10 scale: per capita income; secondary school enrollment; health, as measured by life expectancy and under-5 mortality; and public policy, as measured by public expenditure on health and education a % of GDP. World Bank, World Development Indicators 2003 (2003); and UNICEF, Social Monitor 2003 (2003). Private sector share of GDP is from EBRD, Transition Report Update (May 2003).
MEASURES OF PROGRAM EFFECTIVENESS IN FY 2003
DEMOCRATIC REFORM
Performance Indicator: Freedom House Nations in Transit Governance Rating (1 = highest; 7 = lowest)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
|
4.25 (based on events in CY 2001) |
4.50 |
4.50 (based on events in CY 2002) |
FY 2003 Results: Macedonian institutions remain at a comparatively low level in Freedom House ratings, due to a slow transition after the election of a new government, in 2002. Decentralization is just getting underway. Local governments have very limited autonomy and have yet to assume increased responsibilities; operating budgets only cover personnel costs. On the positive side, the pace of implementation of the Ohrid Framework Agreement (peace agreement) is on schedule and is expected to accelerate in the next few years.
Performance Indicator: Freedom House Nations in Transit Constitutional, Legislative, and Judicial Framework Rating (1 = highest; 7 = lowest)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
|
4.75 (based on events in CY 2001) |
4.50 |
4.50 (based on events in CY 2002) |
FY 2003 Results: The judiciary remains unable to provide adequate checks and balances on the government. The court system is currently functioning poorly, with limited resources and heavy caseloads. Current programming (initiated in FY 2003) will help improve the situation. The adoption of the Independent Court Budget Law, and the focus on the reduction of delays in the processing of court cases, already represent major achievements toward an efficient, independent judiciary.
ECONOMIC AND SOCIAL REFORM
Performance Indicator: Foreign Direct Investment (Source: National Bank, Bulletin II / 2003)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
|
$103.65 million
Q4 2001 = $40 mil; Q1 2002 = $2.87 mil; Q2 2002 = $16.23 mil; Q3 2002 = $44.55 mil |
$50 million
Assumes large FDI inflow due to ESM (Electric Company) privatization. |
$47 million (estimate)
Q4 2002 = $13.51 mil; Q1 2003 = $4.86 mil; Q2 2003 = $18.05; July 2003 = $3.68; August 2003 = $2.93; September 2003 = ? |
FY 2003 Results: Focusing on Framework Agreement Implementation in FY 2003, the new government was unable to attract significant FDI, promote trade linkages, or create a better enabling environment for businesses. However, there are signs that considerable pent-up foreign and domestic investment will materialize in the 2004-2005 period and drive economic development. This includes the ESM (electric company) privatization, which was postponed. A new, long awaited Investment Promotion Agency will also be formed in the Ministry of Economy. The National Entrepreneurship and Competitiveness Council (NECC), composed of 25 council members from public, private, and civil society sectors, engaged in substantive public/private dialogue around three priority areas of national importance, including increased foreign investment. In FY 2003, the USAID-assisted equity fund sold its share of a Macedonian newspaper publishing company to a foreign investor, WAZ, with a capital gain of $2.8 million (eight times its initial investment). This investor also purchased two other national newspapers, at a total cost of about $7 million, thus accounting for 15 percent of total FDI in the country.
Performance Indicator: Securities Markets and Non-Bank Financial Institutions (Source: EBRD)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
|
1.67 |
1.67 |
1.67 |
FY 2003 Results: With USAID assistance, all the major capital market laws were extensively reviewed (Securities Law, Law on Takeovers, and Law on Investment Funds) and recommendations were given on necessary amendments to bring them up to best international standards. Total market turnover in FY 2003 was 7 billion denars (about $135 million); however, the volume of market turnover continues to grow as the Macedonian Stock Exchange matures. Equity markets were adversely affected by the worker/employee role in privatization, which has effectively blocked trading in many shares. In many companies, workers, presumably under duress, ceded their voting rights to management under long-term agreements, making the shares non-tradable. Such agreements became illegal this year. Traders (again generally current management) traded shares through block transactions, taking advantage of a loophole to avoid the transparency and market pricing of trading over the stock exchange. The loophole, allowing an aggregation of small share purchases to qualify for block sale treatment, will be changed.
Performance Indicator: Unemployment rate. The unemployment rate, or the percentage of the labor force which is unemployed, is determined using the ILO definitions. The basis for these data, reported by the EBRD, is an annual Labor Force Survey done by the Macedonian Statistical Office. However, a recent World Bank Economic Memorandum (9/03) indicates that there is probably considerable underreporting of those employed in the informal sector by about 10 percent, suggesting that the rates of unemployment, though still quite high, are significantly lower than those reported by the EBRD. (Source: EBRD, 2003)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
|
31.9% |
30% |
37% (estimated) |
FY 2003 Results: The key to reducing unemployment in Macedonia lies with enterprise generation and sustained economic growth, particularly with small and medium enterprises. While some progress has been registered, the GOM overall has been slow to improve the business environment, including the development and implementation of regulations to facilitate business growth; undertake improvements in the effectiveness of the court system to protect rights and handle disputes; attack corruption, an important disincentive to business; and create a better legal environment for creditors and shareholders. Local and foreign investors have been reluctant to invest, with the result being sluggish growth and poor employment. Efforts are under way to help the GOM to make necessary adjustments in the business environment. The medium-term prospects are more positive, assuming that reform measures are fully implemented.
SECURITY, REGIONAL STABILITY, AND LAW ENFORCEMENT
Performance Indicator: Peaceful Conflict Resolution (Source: 2005 MPP)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
| No renewal of organized violence; advances in FWA implementation; all but 3,500 of original refugees have returned. | No renewal of organized violence; advances in FWA implementation continue; refugees return home. | No renewal of organized violence; advances in FWA implementation continue; all but 1,660 refugees have returned. |
FY 2003 Results: There was no return to organized violence during FY 2003, and the number of isolated security incidents continued to fall. FWA implementation was well advanced and generally on-track. EUFOR Concordia, the EU's military mission, finished December 15, and the country no longer required an international military presence. The 1,660 remaining refugees represent less than 2 percent of the original number. Given that not all refugees will return home, this number represents substantial progress.
Performance Indicator: Money Laundering Prevention (Source: 2005 MPP)
|
FY 2002 Baseline |
FY 2003 Target |
FY 2003 Actual |
| Macedonia passes Money Laundering Prevention Law; Directorate established to record suspicious transactions. | Macedonia implements Money Laundering Prevention Law and passes and implements Law on Financial Police; both organizations are staffed and trained. | Financial Police Law passed, staff of both organizations trained; lack of will by Minister of Finance results in incomplete and dysfunctional organizations. |
FY 2003 Results: The GOM's first Minister of Finance was not able to appoint a suitable director of the Financial Police, nor was he able fully to staff either organization. His successor took office in November 2003, and has promised to get both programs back on track.
Macedonia (In millions $, as of 12/31/03)
USAID - Democratic Reform $20.26
USAID - Economic Prosperity & Security $4.56
USAID - Private Sector $12.51
USAID - Social Sector Reform $6.72
USAID Total: $44.05
State - Anti-Trafficking $0.28
State - Bureau of Public Affairs $0.05
State - DRL/Int'l Commission Missing Persons $0.20
State - ECA Exchange Programs $2.15
State - EUR Law Enforcement Programs $0.03
State - EUR Public Diplomacy $0.28
State - IIP Public Diplomacy $0.08
State - INL Law Enforcement Activities $1.80
U.S. Department of State Total: $4.85
Broadcasting Board of Governors - Public Diplomacy $0.23
DHS/Customs - Law Enforcement Activities $0.40
U.S. Department of Treasury - Advisors $0.48
Other Agencies Total: $1.10
GRAND TOTAL: $50.00
