Books on Macedonia
% of GDP
Update No: 096 (26/04/05)
Macedonia has both positive and negative things to be said
about it. On balance, fortunately, things are looking up.
OSCE says March elections marred by "gross irregularies"
There is no doubt, to take the negative first, that dubious local elections were
held in two rounds in March, a fact pointed out by international observers. But
then to look on the positive side, their presence at least enabled this verdict
to be given, progress of a sort. No such thing happened in communist times.
The Organisation for Security and Cooperation in Europe (OSCE) mission that
observed March 27th's runoff local elections said that the vote did not meet
OSCE or Council of Europe standards. "Serious violations were again noted
on election day in a number of areas of the country, including some where gross
irregularities were observed" during the first round on March 13th, said
Julian Peel Yates, head of the mission.
During a news conference in Skopje, he criticised the government for failing to
address problems that emerged during round one. Preliminary results show the
ruling coalition won in 35 municipalities, but lost to the opposition in 18,
including Skopje, Bitola and Prilep. Ali Ahmeti's ethnic Albanian Democratic
Union of Integration won control of ten municipalities.
Reforms to promote growth
Despite a number of negative phenomena -- such as high unemployment and
declining industrial production -- Macedonia's economy has the scope for
progress. Positive indicators include a stable currency, a strict monetary
policy and the promise of foreign investment.
If Macedonia should succeed in gaining EU candidate country status, the
resulting availability of pre-accession funds would help spur infrastructure
development, making the country more attractive to potential investors. Moving
forward, however, would require a sustained effort by authorities to enact
necessary reforms and to improve the business climate.
Although Macedonia can point to reforms taken in preparation for future
membership in the EU and NATO, the country's economic indicators have been
lagging. The unemployment rate is 37 per cent, annual GDP growth has been lower
than 1 per cent and industrial production is in decline. Positive indicators
include a stable, inflation-free currency, a strict monetary policy and fiscal
conservatism. The government has regularly negotiated arrangements with the
World Bank and the IMF -- a positive signal for foreign investors, experts say.
On 10 March and 11 March, Skopje hosted the Southeast Europe Summit for
Development of Co-operation. The main outcome of the summit was the declaration
that the countries of the region should not be a burden to Europe, but rather an
integrated part of it if they want to become part of the EU. This is especially
true because EU membership means that enterprises in the West Balkan countries
will find themselves competing with strong businesses in Europe.
"Experience teaches us that the first precondition for accomplishing
economic development is creation of an operational market economy," said
Macedonian President Branko Crvenkovski, who co-sponsored the summit together
with EU Enlargement Commissioner Olli Rehn. "I am free to state that the
countries in our region have already made strides on the way to becoming modern
In general, summit participants agreed that it is necessary to invest in
infrastructure in order to elevate the economies in the region to a higher
level. "For the infrastructure in Macedonia alone, $3.5 billion is
necessary," said Sharik Tara, founder of the North and South Europe
Macedonian Prime Minister Vlado Buckovski has taken a few specific
administrative steps to improve the economy during his first few months in
office. Among these was the appointment of Minco Jordanov as vice-president in
charge of co-ordinating economic spheres of activity. Jordanov is a successful
businessmen who runs the only steel company in Macedonia, Duferco-Maksteel.
Meanwhile, former German Finance Minister Theo Vaigel is a key figure in the
government's team of economic advisers. Buckovski has pledged that his team will
soon come up with a programme for strengthening the economy and attracting
Foreign Direct Investment (FDI).
Most experts see FDI as the best avenue for overcoming the current crisis and
creating new jobs. In this respect, projects intended to streamline the
registration procedure in Macedonia are being prepared. Macedonia's existing
practices in this area are comparable to other countries in Eastern Europe. A
study commissioned by the World Bank found that registering a company in
Macedonia requires 13 procedures and takes 48 days. By comparison, registering a
firm in the Czech Republic, an EU member, requires 10 procedures and 40 days,
while in Croatia, a candidate for EU membership, 12 procedures and 49 days are
The dynamism Buckovski has employed in his approach to economic issues seems to
be bearing fruit. A sizable investment by Turkish commercial chain Koc is under
way, and Slovenia's Merkator is reportedly interested in investing in the
construction of a trade centre. A Turkish investor is constructing a hospital in
Skopje. The two largest investment projects expected in the future are the AMBO
Pipeline and the construction of 40 petrol stations by Russia's Lukoil.
AMBO is a US company which plans to invest around $1 billion in a pipeline
starting in the Bulgarian port of Burgas and continuing through Macedonia to the
Albanian seaport of Vlore. This trajectory overlaps East-West Corridor 8.
"Construction of the AMBO Pipeline will start in 12 months and oil will
start running from Burgas to Vlore three or four years later," the
president of the US AMBO Consortium, Edward Ferguson, said in Sofia in December
2004. In Sofia, Macedonian, Albanian and Bulgarian prime ministers signed a
declaration guaranteeing realisation of the project.
Talks on the second large foreign investment in Macedonia have already begun.
During a visit to Skopje in early March, Lukoil First Vice President Dimitry
Nikolaevich Tarasov confirmed his company's interest in buying the OHIS Chemical
Factory and constructing petrol stations. Lukoil operates in 25 countries
throughout the world and employs 120,000 people. In Europe, it has invested in
oil industries in Austria, Bulgaria, the Czech Republic, Hungary, Romania,
Serbia and Montenegro, Slovakia and Ukraine.
Domestic efforts to transform the economy have, in some cases, met with
resistance. Opposition politicians, as well as many experts, have opposed the
privatisation of Macedonia's largest public power utility, Elektrostopanstvo na
Makedonija, arguing that it would result in price hikes and further strain
already low family budgets. The government, meanwhile, says money from the sale
will return to the Macedonian economy via infrastructure projects and that
demonopolisation of the energy sector is, in any case, a requirement for EU
A more successful story is the rebranding of Mobimak, the country's largest
mobile telephone company. Mobimak will change its name to T-Mobile Makedonija as
a result of its strategic partnership with Deutsche Telecom, owner of the famous
international brand name.
Positive developments have also been seen in the banking sector. "Out of 21
banks in Macedonia, eight are completely in foreign proprietorship, which is
46.6 per cent of the total capital and 47.5 per cent of the total financial
potential of the banking system," reported the Skopje weekly Kapital.
Still, there is room for improvement. According to Kapital, Bank Austria,
Raiffeisen Bank and Bulgaria's DZI Financial Group are among the financial
institutions which are eyeing potential opportunities for investing in
All indicators suggest that if a powerful company such as ERB enters Macedonia,
our goal -- that Deutsche Bank, one of the most powerful financial and banking
institutions enters Macedonia as well -- will be accomplished more easily,"
All in all, Macedonia's economic situation remains difficult, but there are
chances for progress. Experts believe the opening of EU pre-accession assistance
if the country is granted a candidate status in December will be of great
benefit for infrastructure development. The combination of EU pre-accession
funds and an increase in direct foreign investments represents a winning ticket
for Macedonia. In order to ensure both, however, the Macedonian government will
have to exert much effort in transforming the business climate. A healthy
economy is the key to improving the country's situation in general.
Macedonia is a small, remote and very poor country beset by an ethnic
division. This that the majority are Macedonian Slavs, but with a large and
vociferous minority of Albanians, concentrated in the north, adjacent to Kosovo,
with a 90% Albanian population, and Albania itself.
Macedonian Slavs have long feared that the Albanian minority wants to secede and
form a Greater Albania or, at a minimum, unite with their brethren in Kosovo.
Albanians in Macedonia want language rights and more representation in
government, especially in the police.
Macedonia was one of the six republics of Yugoslavia, whose rump it left in
1992. Although many had predicted another explosion, as in Bosnia and Kosovo,
the worst - so far - has not happened.
But Macedonia could yet be another European cockpit for the simple reason that
it has been before. It became the object of partition in the second Balkan War
in 1913, which left Bulgaria at dagger's point with its former allies against
the Ottomans, Greece and Serbia. Even today, most Bulgarians insist that
Macedonia is simply Western Bulgaria.
NLB to buy Postenska Banka
Slovenian banking group, Nova Ljubljanska Banka (NLB) will acquire 66% of
Macedonia's private bank, Postenska Banka, The Reporter said recently.
The price of the deal would be disclosed upon completion of the transaction. NLB
has agreed to buy out the 33% stakes in Postenska held by its two private
shareholders, the printing house, Evropa 92 and the textile firm, Noel, NLB CEO,
Marjan Kramar, said. It may be noted that the Slovenian bank owns Macedonia's
third largest bank, Tutunska Banka.
FOOD & DRINK
Tikves posts strong profits
Tikves, Macedonia's largest wine producer, reported a preliminary net profit for
2004 of 14.53m dinars equal to 237,300 Euro, The Reporter said recently.
Last year also the company showed nearly the same profits of 14.46m dinars. The
company however recorded a slump in sales figures. Tikves is based in Kavadarci
and exports wines to Serbia, Montenegro, Croatia, Bosnia-Herzegovina, Albania,
the European Union, Russia, Ukraine, United States, Canada and Australia.