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macedonia

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MACEDONIA


 

REPUBLICAN REFERENCE

Area (sq.km) 
24,900

Population 
2,046,209 

Capital 
Skopje 

Currency
Dinar 

President
Boris Trajkovski

Private sector 
% of GDP 
45%

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Background:
International recognition of The Former Yugoslav Republic of Macedonia's (FYROM) independence from Yugoslavia in 1991 was delayed by Greece's objection to the new state's use of what it considered a Hellenic name and symbols. Greece finally lifted its trade blockade in 1995, and the two countries agreed to normalize relations, despite continued disagreement over FYROM's use of "Macedonia." FYROM's large Albanian minority and the de facto independence of neighbouring Kosovo continue to be sources of ethnic tension.

Update No: 068 (01/01/03)

A new multiethnic coalition government was formed in Macedonia on November 1st after elections in September. The US was in full support of the Western-brokered peace deal agreed in August 2001, which ended fighting and established greater rights for ethnic Albanians.

The profile of the new government
The new premier is Branko Crvenkovski, who heads the Social Democratic Alliance of Macedonia. His former Communist party dominates the 18-member government, while members of the main ethnic Albanian party, led by Ali Ahmeti, the former rebel leader, were named to head the ministries of justice, health, education, transport and communications.
Although constitutional and other changes have taken place to honour the peace accord, the republic remains tense. There is violence in the northeast where Albanians predominate. But elsewhere the accord is holding.

Romania comes to town
Romania and Macedonia have agreed to come to terms to improve trade relations, the presidents of the two Balkan states said on November 6th. Ion Ilescu and Boris Trajkovski signed a deal expecting to lead to a free trade agreement.
The presidents discussed the common goal of joining the EU and NATO. Romania is likely to be invited at November's Prague NATO meeting. Macedonia is a member of NATO's Partnership for Peace programme for aspiring members.

Albanian and Macedonian presidents to meet late November
An even more important meeting is that of the Albanian president, Alfred Moisiu, and Trajkovski billed for late November. They are to discuss NATO membership in common, unlikely to be soon and not until further economic and military reforms are in place.
The better relations are between the two countries, the better for inter-ethnic harmony in Macedonia. There is real hope now with a moderate premier in government in which the former rebel leader's Albanian party is very well represented in key posts. Macedonia can enter a new era.

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ENERGY

Macedonian commentary notes need for regional cooperation in energy sector


According to good old "tradition," the energy sector will be the pillar on which the Macedonian state will lean over the next couple of years, trying to find a solution for its national economy. The changes in the energy sector will mostly be felt in the oil sector and in electric power. This means that the changes will not apply only to the forthcoming privatisation of the major Macedonian company, Macedonian Electro Industry [ESM], but also to the end of the monopoly - of the Skopje OKTA refinery - in the oil sector, which has been expected for a long time. The workers in the energy sector are looking forward to the already-announced and crucial connection of Macedonian energy systems with neighbouring ones, and even beyond, 'Makedonija Denes' has reported. 
The signing of the memorandum of understanding on 22nd November, with which the regional market of electric energy will become integrated into the wider EU market, serves the same purpose. According to this agreement, the electrical markets of the contracting sides will be fully opened by 2005, which, in Macedonia's case, would mean completion of the ESM's privatisation by this time. The memorandum envisages that transmitting operators will be formed by June and distributors will be established by January 2005. Experts in energy systems have been trying for a long time to provide a so-called "ring" in which Macedonia would be only a link in the wider regional electrical supply system. This ring does not only mean a free flow of electricity, but also secure local electrical systems when they are needed most, that is, in case they break down - due to a major disaster or similar - because the neighbouring systems will be crucial then. 
The connection with neighbouring electrical grids is a must for Macedonia now. The ESM recently admitted that after years of irresponsible behaviour of the former political leadership in the company, that is, the VMRO-DPMNE's [Internal Macedonian Revolutionary Organization-Democratic Party for Macedonian National Unity] leadership, it was forced to import electricity. The problem has become even greater because they slept over the period when the power systems in the country were to be prepared for winter. Although ESM officials try to downplay the situation, most likely to prevent panic among consumers, it is easy to see that the employees in the company also feel uncertain about what would happen if the system were overburdened when temperatures drop. The ESM could be forced to find long-term solutions to everyday problems, such as to complete the interconnection projects with the neighbouring power supply systems. In any case, the Macedonian power system is at a crossroads. Because the regional ring has not been built yet, it needs to think about connecting itself with the EU power systems. Not to mention that it will spend a lot of time and effort to privatise the company. 
The situation in the oil sector is similar. The Thessaloniki-Skopje oil pipeline - which the former government called the product pipeline - is yet to be extended towards Serbia and Kosovo. Macedonia will also have to deal with OKTA's monopoly, which is why the international community has been criticizing the country recently. 
The gasification project is currently experiencing major problems. This project has yet not reached the appropriate level. Therefore, it seems that, as things are progressing, Europe will try to find another alternative, unless the Russians decide to fully support the aforementioned project, despite the existing problems, for purely political reasons - because of their interest in being present in Macedonia as well. 
Bearing in mind these obstacles, pessimists doubt that Macedonia is capable of making a contribution to the connection of the regional power systems with the EU market, especially within the deadline defined in the memorandum. However, from a local viewpoint, we have nothing to lose even if we fail to do what is expected of us. 
In practice whatever is done to improve and develop the Macedonian power system, it is immediately felt through the overall increase in the national economy - similar to, for example, Nokia, which represents the moving force of the entire Finnish economy. This is a usual phenomenon for a country for which the rest of its economy is - as people say - "not worth a thing."

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FINANCIAL NEWS

Macedonia, IMF complete first round of talks on new stand-by agreement


Macedonia and the IMF completed on 26th November the first round of negotiations on a new stand-by arrangement. The arrangement is to be signed at the next IMF visit to Macedonia after 20th January 2003, MIA News Agency has reported. 
This round of negotiations focused on economic and monetary policy. Macedonian Finance Minister, Petar Gosev, and the head of the IMF mission, Franek Rozwadowski, told the press conference that the budget's gap in 2002 was 3.5bn-4bn denars. 
Gosev noted that the budget's deficit was a result of unplanned expenditures of the former government, adding that there was huge disparity between the planned and realized public expenditures. According to Gosev, it was agreed to cover the deficit by increasing savings in the ministries and the government. 
The Finance Ministry estimates the GDP growth in 2002 to be 0.5 per cent, while the IMF thinks it will be around zero. Gosev announced GDP growth of around three per cent in 2003, while the inflation rate would not be higher than 3 per cent. 
The IMF thinks that the overall budget expenses should not exceed 8.5bn denars. Gosev said that budget income would be further reduced with the cancellation of the tax on financial transactions. So far, the income realized on account of this tax has amounted to around 6.3bn denars. 
"The government will not increase taxes and there will be less burden on the economy next year," Gosev said, adding that the ministries of defence, interior as well as labour and social policy should save most of their funds. 
Rozwadowski said they have agreed on macroeconomic policy for 2002 and 2003 and defined policy objectives and measures for signing the arrangement. According to him, the funds from the donors' conference were not lost and it was expected some of these funds would be obtained next year.

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FOREIGN ECONOMIC RELATIONS

Macedonian premier, Greek business leader discuss expanding investments

Greek businessmen are interested in continuing to invest in projects in Macedonia. The newly-established International Business Council will help in the overcoming of the barriers that the interested investors currently face with and will encourage them to continue investing in the country, states the announcement issued after the meeting between Prime Minister Branko Crvenkovski and the president of the Industrial Federation of North Greece, Dhimitrios Simeonidhis, MIA News Agency has reported. 
At the meeting, Crvenkovski and Simeonidhis assessed that the Greek investors in Macedonia would achieve positive results in their business. 
They also agreed to focus their efforts on intensifying cooperation between the business structures of the two countries, in order to provide a favourable economic climate in Macedonia.

Macedonia to receive further technical aid from Germany

Following their negotiations on financial and technical aid, the Macedonian and German governments have signed a protocol for 2002, Macedonian Radio has reported. 
Finance Minister Petar Gosev and Leo Kreutz from the German Ministry of Overseas Development signed the protocol at the Macedonian Finance Ministry. Under the protocol, the German government will grant the Macedonian government technical aid to the value of 2,530,000 Euros to carry out projects...

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