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MACEDONIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 4,705 3,712 3,400 118
         
GNI per capita
 US $ 1,980 1,700 1,690 111
Ranking is given out of 208 nations - (data from the World Bank)

Books on Macedonia

REPUBLICAN REFERENCE

Area (sq.km) 
25,333

Population 
2,071,210

Capital 
Skopje 

Currency
Dinar 

President
Branko Crvenkovski

Private sector 
% of GDP 
45%




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 market economies." 
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 Economic Forum. 
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 necessary. 
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 membership. 
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 Macedonia."
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," Buckovski says. 
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.

Ethnic divide
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.

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BANKING

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.

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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.

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