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macedonia  

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MACEDONIA


 

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: 110 - (27/07/06)

Macedonia prime minister concedes defeat
Prime Minister Vlado Buckovski conceded defeat on June 30 to the nationalist opposition in Macedonia's parliamentary elections, a vote considered crucial for the tiny Balkan nation's aspirations to join the European Union and NATO.
Buckovski's multiethnic ruling coalition came under fire for failing to provide jobs and improve living standards. Fifteen years after Macedonia split peacefully from Yugoslavia, the economy remains stagnant and unemployment stands at a crippling 36 per cent.
Sounding like a winner, Nikola Gruevski thanked his VMRO-DPMNE party supporters and said he would begin efforts to put together a coalition.
"The top priority of the government will be integration into the EU. Our government will focus on improving the economic situation, to fight corruption and crime and raise the standard of living," he said.
With 36 per cent of the ballots counted, the VMRO-DPMNE party had 33 per cent of the vote, while Buckovski's ruling Social Democrats had 24 per cent, according to preliminary results released by the State Electoral Commission.
"I called Nikola Gruevski to congratulate him with his election victory," Buckovski told his supporters in a televised speech just after midnight. Gruevski, a former finance minister, was quick to claim victory, with pledges to get to work on repairing the economy.

Marred campaign ends peacefully
The tense electoral campaign was marred by violence - including shoot-outs and a grenade attack - between supporters of rival ethnic Albanian parties that left at least three people wounded.
But June 29's voting passed off peacefully, and the prime minister cheered it as a "victory for Macedonia" despite his apparent loss. "We have said that we will be satisfied if we have a free and peaceful election, if we pass this test. We had an exceptionally good election and this is victory for Macedonia," Buckovski said.
Past polls have been marred by irregularities, and President Branko Crvenkovski had urged a free and fair vote in a country struggling to ease tensions between majority Macedonian Slavs and the ethnic Albanian minority, which makes up about a quarter of the nation's population.
Parliament recently tightened voting rules and imposed severe penalties for ballot-rigging.
After the VMRO-DPMNE declared victory, hundreds of its supporters poured into the central square of the capital, Skopje, waving party flags, singing and playing traditional Macedonian instruments. Celebratory gunfire rang out across the city.
The VMRO-DPMNE, which led Macedonia's government from 1998-2002, has sought to moderate some of its hard-line positions, pledging more cooperation with the nation's ethnic Albanians. Its defeat in the 2002 election threw the party into chaos, resulting in the departure of some of its more radical leaders.
Party spokesman Vlatko Gjorcev said its representatives monitoring the vote at polling stations had tallied 51 per cent for the party, giving it 55 seats in the 120-member parliament.
Without a majority, Gruevski would have to form a governing coalition.
During Buckovski's premiership, the European Union accepted Macedonia as a candidate for membership, but the bloc has not set a date for entry negotiations. Macedonia hopes to join NATO in 2008 and the EU in 2012.

Incoming premier promises economic revival and fight against corruption
Macedonia 's future prime minister has pledged to lead his impoverished country out of the wastelands of economic muddle to the sunny uplands of a boom through a 100-point reform plan.
Ten days after the inaugural session of the new parliament on July 26, President Branko Crvenkovski will grant a mandate to the leader of the rightist VMRO-DPMNE, Nikola Gruevski to establish a government, after his party beat the Social Democrats in the July 5 elections.
Gruevski has said no parties will be invited to join his coalition unless they support his economic manifesto, 'Revival in 100 steps.' "The economy is the number-one priority," said Gruevski - repeatedly.
Economic experts say the appointment of a leader familiar with market logic comes not a moment before time. As we have seen, almost 40 per cent of the adult population is officially unemployed and foreign direct investment is minimal, not least on account of rampant corruption.
The future prime minister has based his renewal plans on a few main pillars.
One is a new, flat, ten per cent income tax, along the lines of the flat taxes established in several former communist countries in Eastern Europe and the former Soviet Union.
At present profit taxes in Macedonia range from 15 to 24 per cent, while VAT is 18 per cent.
Another pillar is to improve the investment climate by changing the country's foreign image through an invigorated fight against corruption.
The government promises that these changes will lead to annual economic growth rates of six to eight per cent within four years. The current one is around four per cent.
Experts say the promises are attainable, as they are mostly based on the experience of other countries in similar economic situations.
However, they note that Gruevski will head a government of more than 18 parties, which could provide an obstacle.
Vanco Uzunov, an economics professor in Skopje, said Gruevski's programme could end the long-term recession that began after independence in the 1990s.
"The measures ... are not a novelty, as they have been implemented in other countries and have given results," he said. "The most important thing is not to retreat before political interests."
This relative optimism is based on Gruevski's record as a successful minister in Ljubco Georgievski's right-wing government from 1998 to 2002.
As trade minister, Gruevski launched a successful campaign to encourage the purchase of Macedonian products, and as finance minister he introduced a new VAT in only three months.
Dimitar Bogov, of the Centre of Economic Analysis, said that as a minister "Gruevski proved himself a liberal economist, committed to a market economy, free of monopolies and state control of the market."
Many maintain it was this business-friendly image that brought Gruevski's party to victory on July 5.
The pillar of the new economic programme, the planned flat tax, aims to make Macedonia a country with one of the lowest tax rates in Europe.
The basic principle is that the application of a single, low rate of tax on profits, as well as exemptions from taxes for profits that are reinvested, will yield a higher income for the government in the long term than high tax rates and complicated and variable tax bands.
This model has already been tried and proved successful in Estonia, Latvia and Lithuania, which experienced booms after low taxes began to draw in massive foreign investment.
The first stage of Macedonia 's plan is expected to begin in January 2007, when a flat tax of 12 per cent will be introduced. This will be cut to 10 per cent a year later.
Vanco Uzunov said the tax reform could be implemented relatively easily, would reduce labour costs and "stimulate businessmen to hire more people", as they would have more profits left over to spend on the workforce.
Bogov agreed that a flat tax would also help solve another key problem - the untaxed "grey" economy, which is estimated to absorb about 40 per cent of the country's economic activity.
"With the reduction of employment costs, businessmen will feel encouraged to register their employees," he said. "The flat tax will be an incentive for many people who run businesses to legalize them."
Bogov added that tax changes would stimulate competitiveness in the economy and thus stimulate exports. "The resistance of the business sector to the [current] taxes is huge, so this measure should release the burden and bring in investments," said Bogov.
The economic programme promises to stimulate foreign investments also through administrative and educational reforms and the involvement of foreign consultants. Gruevski said he intended to hire up to 50 international consultant companies, tasked with bringing in more direct investment
Past governments have failed to lure much investment. Statistics shows only 1.9 billion euro were invested in Macedonia in the past decade.
The only European countries with lower investments were poverty-stricken Albania and Moldova and troubled Bosnia and Herzegovina.
"If they [the consultants] succeed in bringing in an investor they will get a bonus - this will be their motivation to do their job successfully," Gruevski told the economic weekly, Kapital, just before the elections. Two ministers without portfolio will be given responsibility for attracting investments.
Not everyone is optimistic that Macedonia 's long-term failings can be rectified with a few structural adjustments. Dimitar Eftimov, of Skopje 's Economic Institute, said modifying taxes would not change much if the state continued to intervene in business through the National Bank of Macedonia , which has a restrictive monetary policy, setting high interest rates that discourage investment."There will be results only if the existing economic policy of the country changes and the influence of the National Bank is reduced," said Eftimov.
Such experts warn that no simple "magic formula" will succeed in attracting investments without other deep-seated reforms. "The new government will succeed only if it continues to improve the business environment and finishes the reforms started by the previous government in the judiciary and public administration," said Uzunov.
The government says it will tackle Macedonia 's high unemployment by encouraging more young people - who represent the bulk of the jobless - to start businesses and gain further qualifications.
While the official unemployment rate is almost 40 per cent, the real figure is around 25 per cent, once those employed in the "grey" economy are subtracted. But it is still far too high.
"There is a significant number of people who are poorly qualified and the only solution for them is to obtain further qualifications," said Bogov.

Fighting corruption the key
A key part of the Gruevski programme is the fight against corruption, which is rife, and deters many investors. The widely-read corruption perception index of Transparency International lists Macedonia in 103rd position - next to Swaziland - in a survey of 158 countries. Of the Balkan countries, only Albania is seen as more corrupt.
"The fight against corruption will start from the lowest levels," the future premier said in the election campaign, "from those working at the counters up to the level of ministers who must be role models for everyone."
The centrepiece of the new campaign will be the establishment of a new body, the Agency for Combating Corruption and Organized Crime. This will be empowered to seize assets and property and even ban people from pursuing political activity.
Experts agree that the fight against corruption will be a litmus test of the government's seriousness in implementing all the other measures.
But, at this stage, most are very reserved in predicting whether the new premier will be successful against such an endemic feature of Balkan society. "When we speak of the fight against corruption," said Uzunov, "the real issue is whether the institutions truly function, and not declarations about fighting corruption."

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ENERGY

Bankers Petroleum searches for oil reserves 


The Canadian firm Bankers Petroleum, which is currently pumping over 2,900 barrels of oil per day at a site in Albania, is now seeking to expand its operations into neighbouring Macedonia, news agency Southeast European Times reported. 
The firm signed in May a memorandum of cooperation with the government, paving the way for investment in the search for oil reserves in the country, the report said. "Within a month at most, the government will give Bankers Petroleum the concession to explore," Economy Minister, Fatmir Besimi, was quoted as saying. The proposed exploration is due to be carried out in the Ovce Pole area, in Eastern Macedonia. The former Yugoslav Exploration Institute carried out drilling to about 400 metres in depth, and reports suggest that shale indicating the presence of oil and gas was discovered, the news agency said. The next step is for the Canadian firm to sign a consent agreement with the government on obtaining access to existing information on digging opportunities so that thereafter a joint team can be formed to draft a plan for technical procedures.

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FOREIGN INVESTMENT

EBRD to invest 4m Euro TTK Bank 

The European Bank for Reconstruction and Development (EBRD) plans to provide advisory services to TTK Bank AD Skopje, which is a new bank to be formed from the merger between Tetovska Banka AD Tetovo and Teteks-Kreditna Banka AD Skopje, news agency reporter.gr said. 
The EBRD plans to make an equity investment of up to four million Euro in TTK. The merger was approved by the National Bank of Macedonia and it is expected that TTK will start operations as of July 1st 2006. The maximum budget available for the assignment is set at 800,000 Euro, exclusive of VAT. The contract will be financed through the Norway-European Bank Cooperation Fund. The merger will allow the banks to create synergies and gain operational efficiencies facilitating the creation of a stronger institution with a long term future in the market.

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FREE TRADE

Free trade with Serbia in effect 

With a free trade deal which came into effect as of June 1st Macedonia and Serbia have eliminated trade barriers and established what some are calling a single market, SETimes reported.
Under the free trade agreement Macedonia and Serbian businesses are now carrying out trade and cooperation in a fully liberalised market, news agencies reported. The deal provides for eliminating trade barriers such as custom duties and quotas and was originally signed in October 2005 by Macedonia Economy Minister, Fatmir Besimi, and his counterpart from the former state union of Serbia-Montenegro, Predrag Ivanovic. Experts say the deal will help consumers in both countries by providing cheaper products, as well as improving competitiveness and helping to woo foreign investors. Serbia is generally seen as having the advantage when it comes to dairy and wheat production, while Macedonia is more competitive in early vegetables. Consumers in both countries will benefit from cheaper products. Serbian dairies receive state subsidies for exports, amounting to 20 percent of the price. This is complemented by production incentives, which on average amount to up to 10 percent of the production price. Macedonia dairy producers are lobbying for equal conditions.

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