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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




Update No: 117 - (22/02/07)

The Albanian question
Macedonia cannot but be closely concerned about the fate of Kosovo. The overwhelmingly Albanian-populated province of Serbia is intent on secession from it, now more than ever after Montenegro broke away from it last year.
Its own Albanian minority, one quarter of its two million population, is no longer so restive or at any rate violent and is grateful to NATO for what it did in 1999 to save the Albanian Kosovars. But Skopje wants to see a peaceful process in place there.

Kosovo plan of UN Envoy acceptable to Macedonia: Nikola Gruevski
The document presented on February 3rd by UN Special Envoy for Kosovo Martti Ahtisaari to the authorities in Pristina is acceptable to Macedonia, Prime Minister Nikola Gruevski said after meeting Kosovo opposition leader Hashim Tachi, the Macedonian MIA agency reports. The plan for Kosovo may contribute to the stability of the region, and help its countries in their preparation for the European Union, NATO membership, Gruevski said.
The document also resolves the technical problem related to demarcating the Macedonia-Kosovo border, which is particularly important for Macedonia, Gruevski said, giving credit to the international community for its role in this matter.
As stipulated in Ahtisaari's plan, Macedonia and Kosovo should set up a joint committee within 120 days, including one international representative. The border demarcation process should be completed in one year.
Tachi extended gratitude to Gruevski's Cabinet over the correct position on the Kosovo status settlement. 
The settling of Kosovo's status will pose no problem to anyone. Kosovo is opened for cooperation with all countries, Tachi said.

EU urges Macedonia to step up reform
Macedonia is keen to join the EU. This is an understatement as regards its reformers. They know that an outright rejection from Brussels would immediately stall their efforts. Fortunately Brussels knows that too.
EU Enlargement Commissioner Olli Rehn on February 8th urged Macedonia to step up reforms, if the country wanted to realize its hope of joining the European Union, news media from Skopje reported. 
Rehn said Macedonia had slowed down the pace of its economic and political reforms since becoming a candidate for the EU membership in December 2005. "I reiterate that we expect much more because your country is a candidate for the EU now," he said after meeting with Macedonian Prime Minister Gruevski. 
Rehn also called on Macedonia's ruling and oppositional political parties to ease tensions and reach political consensus between them. "The government should take an initiative and create conditions for dialogues, and the opposition should act in a constructive manner," he said. 
Deputies from the Democratic Union for Integration, the largest Albanian political party, have boycotted Macedonian parliamentary sessions since January, accusing the government of ignoring the rights of the Albanian minority. But at least this is a peaceful protest.

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The following caustic article is by someone who really knows what he is talking about, having been, until 2002, the Economic Advisor to the Government of Macedonia.
He is a most interesting man in his own right.
Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. Both of these are marvelous works, living up to their great titles.
He served as a columnist for Global Politician, Central Europe Review, PopMatters, Bellaonline, and eBookWeb. He was a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

Don't Hurry to Invest in Macedonia
by Sam Vaknin
In the near past, Macedonia seemed to have been bent on breaking its own record of surrealism. While politicians in other countries in transition from communism and socialism strive to be noticed for not stealing, their Macedonian counterparts, without a single exception, aim to steal without being noticed.
The previous VMRO-DPMNE government (1999-2002), in which Gruevski served as Minister of Finance, plundered the country shamelessly. The local papers accused then outgoing prime minister, Ljubco Georgievski - a virtual pauper when he attained power - of owning land and a residential building in the capital's most expensive neighbourhood. The erstwhile Minister of Defence, Ljuben Paunovski, was recently sentenced to 42 months in prison for his pecuniary shenanigans during his tenure. Another leading figure, the former Minister of interior, Ljube Boskovski, is in the dock in the Hague on war crime charges.
Inevitably, VMRO-DPMNE lost power to the SDSM in the heated elections of 2002 and then fractured as its new leader, Gruevski, purged the old guard and installed his own cohorts everywhere.
Then prime minister designate, Branko Crvnkovski (the country's current President whose legitimacy is contested by the Gruevski government), vowed to learn from his party's (SDSM) past mistakes when they venally ruled the land until 1998. In a sudden and politically-motivated resurrection, the high court began scrutinizing the "Okta" deal: the opaque sale of the country's loss-making refinery to the Greeks in 1999. Heads will roll, promised both the election victors (the SDSM) and their Western sponsors. Nothing happened.
The country's current Governor of the Central bank and then minister of finance, Petar Goshev, a former socialist high-level functionary known for his integrity, announced that his top priority would be to eradicate corruption by instituting structural and legal reforms. His newfound socialist partners - he headed a centre-right outfit - found this bizarre ardour unpalatable and promptly kicked him out of office.
Four years later, with Georgievski relegated to the political wasteland, Crvnkovski ensconced in the presidential suite, and his successor, Buckovski a resounding failure, Gruevski's ascent in 2006 was all but secure. It was the SDSM's turn to crumble acrimoniously amid a virulent contest for its leadership. It has never recovered and Macedonia has had no viable opposition ever since.
Macedonia's post-electoral euphoria faded, in July 2006, into arduous coalition-building negotiations replete with arm-twisting by the worried representatives of the "international community." 
The country's new VMRO-DPMNE Prime Minister, Nikola Gruevski (36), excluded from his government the party that won the majority of Albanian votes because of its roots in the much-hated Albanian NLA, National Liberation Army, the instigator of the 2001 near-civil-war. Albanian factions clashed in a chilling reminder of the country's inter-ethnic fragility. 
To add to Macedonia's precarious standing, its greenhorn Minister of Foreign Affairs, Antonio Milososki, engaged in intermittent - and utterly avoidable - spats with its neighbour and biggest foreign investor, Greece, virtually guarantee delayed accession to both NATO and the European Union, the much ballyhooed strategic goals of the current administration. Milososki adopted a similarly belligerent and ill-informed stance against Bulgaria, another flanking polity and the newest member of the coveted European club.
Where the government claims great strides is in its uncompromising stance against all forms of malfeasance and delinquency in both the public and the private sectors. From the army to various municipalities, scandals erupt daily in an atmosphere often bordering on a frenzied, media saturated, witch-hunt.
Gruevski is alleged to have rejected a bribe of 3 million euros (US$4 million) offered to him by a Serb firm. His government embarked on highly publicized campaigns against illegal construction (the "urban mafia") and other festering nests of corruption. 
Alas, Gruevski himself appointed members of his family and innumerable political hacks to senior government positions in a series of blatant acts of nepotism and cronyism decried by the European Union and other watchdogs. Consequently, with one exception (Zoran Stavreski, the talented vice-premier), the government in all echelons is largely made up of utterly inexperienced operators. Plus ca change.
Politics, venality, and terrorism are the sole venues of social mobility in this tiny, landlocked, country of 2 million impoverished people. Immediately following their insurgency, the former terrorists of the Albanian National Liberation - courtesy of Western pressure and the Albanian voters - occupied crucial ministries with lucrative opportunities of patronage of which they are rumoured to have availed themselves abundantly.
Comic relief is often provided by bumbling NGOs, such as the International Crisis Group. In 2001, its representative in Macedonia, Edward Joseph, went to Prilep to conduct an impromptu investigation of the thriving cigarette smuggling trade. Posing to the cameras he declared that only the local leaf-rolling plant was not involved in this pernicious line of work.
Macedonia is a hub of expats and consultants in the Balkans. Ante Markovic, an Austria-based former Yugoslav prime minister, who served as an oft-criticized economic advisor to the government until he was dumped, sued Macedonia for $1 million. In 2001-3, the youthful former minister of finance, Nikola Gruevski, was asked by USAID, on behalf of the Serbian-Montenegrin government, to serve as its consultant on matters of reform of the financial system. The author of this article acted as Economic Advisor to Georgievski's government and, later, to Gruevski himself.
But to no avail. The country is a shambles. In the wake of a civil war, the official unemployment rate is 31-35 per cent. Close to 70,000 people work in the bloated central and local administrations. The trade deficit is an unparalleled 17 per cent of GDP. In 2001, the budget deficit climbed to 5 per cent, though it was since halved.
"The Heritage Foundation" has consistently ranked Macedonia 95-97 out of 155 countries in terms of economic freedom. The country is "mostly unfree" it correctly concludes in its reports, though it cites sometimes erroneous data. A moderate level of trade protectionism, low tax rates, moderate inflation, a moderate burden of the government, moderate barriers to capital flows and foreign investment, and moderate interference in the economy are offset by a dysfunctional banking system, intervention in wages and prices, low level of protection of property, a high level of regulation, and a very high level of activity of the black market.
Owing to the IMF's misguided emphasis on exchange rate stability, the currency is inanely overvalued. The manufacturing sector has all but evaporated. Industrial production declined by a vertiginous 20 percent in August 2002 compared to the average the year before - or by 11 percent year on year. The trend has not been reversed since.
Macedonian steel is exempt from the latest bout of American protectionism, but not so its textile industry. Europe is fending off the country's agricultural products. People make their meagre and desultory living catering to the needs of an ever-expanding international presence or dabbling in illicit activities. Piracy of intellectual property, for instance, is thought to yield c. 1 per cent of GDP.
Close to half the population is under the poverty line. The number of welfare cases increased by 70 per cent between 1994 and 2002. Generous and incessant multilateral and bilateral credits sustain the faltering economy (and line politicians' ever-deepening pockets). The country is alternately buffeted by floods and droughts. There has been only one day of rain in all of January 2007.
In a much-touted donor conference after the 2001 skirmishes, the pledges amounted to a whopping 15 per cent of GDP. Then governor of the central bank, Ljube Trpski (currently detained for his role in a murky affair involving the country's foreign exchange reserves), cheerfully predicted that these handouts will cover the gaping hole in the balance of payments. 
Macedonia also received 7.5 per cent of the gold reserves of the former federated Yugoslavia of which it was a component. At between US$700 million and one billion US$ net, foreign exchange reserves are at an all-time high. Macedonia has recently decided to prepay its US$104 million debt to the Paris Club creditors.
Both the IMF and the World Bank, who did their best to obstruct the previous VMRO-DPMNE government in its last few months in power, promised a speedy return to business as usual. An hitherto elusive standby arrangement is likely to be concluded by the end of the year. World Bank funds, frozen in material breach of its written contracts with the state, will flow again. The EU promised development funds if the new government acts in a "European spirit" - i.e., obeys the diktats of Brussels.
The incoming administration is likely to enjoy a period of grace with both the trade unions and international creditors. Strikes and demonstrations by dispossessed miners and underpaid railways workers have waned. But Macedonia joined the WTO in 2002 and will thus be forced to open even more to devastating competition. Labour unrest is likely to re-erupt soon.
Foreign investment in the country mysteriously wanes and waxes - some of it laundered money reinvested in legitimate businesses. The government is doing a great job of building up the image of Macedonia as an FDI (Foreign Direct Investment) destination. But public relations and perceptions management must be followed by palpable actions and the new government is woefully short on concrete steps. It talks the talk but hitherto does not walk the walk.
The government's attempts to attract foreign investors by introducing lower taxes may backfire: studies clearly evince that multinationals worry less about taxation and more about functioning institutions, a commodity that Macedonia is irreparably short of. Moreover, vanishingly lower taxes signal desperation and Macedonia indeed sounds more desperate than confident. No one wants to buy the country's leading bank, long on offer. Only one contender (Mobilkom Austria) entered a bid for Macedonia's third operator cellular network licence.
On a few occasions, domestic firms, using international fronts, have bid for local factories, such as the textile plant "Astibo." The national payment card project has been guzzled by two banks incestuously close to the outgoing ruling party, VMRO-DPMNE.
But there are real investments, too. The capital's central heating utility was purchased by a unidentified French energy outfit, announced the general manager. The utility's shares were listed in the Athens stock exchange. The Macedonian construction firm "Granit" will build a US$59 million highway in Ukraine, with which Macedonia enjoyed an unusually cordial relationship, to American chagrin. Johnson Controls and others are eying a string of free trade zones and infrastructure projects (dams, roads, railways, oil pipeline). A much hyped Vardar Silicone Valley is in the works.
The contentious census in the first two weeks of November 2002, a part of the "Ohrid Framework Agreement" which ended the internecine fighting the year before, was conducted fairly. The count showed that Albanians make c. one quarter of the population rather than one third, as most Albanians spuriously insisted.
But, with Kosovo's independence looming across the border, the restive Albanians are likely to coerce the enfeebled Macedonia into translating this numerical reality into political and economic clout. The Macedonians are likely to resist. The West will intervene. Macedonia is facing a hot spring and a sizzling summer.

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ENERGY

The OKTA crude oil refinery in Skopje


OKTA refinery was built in the 1980s, using Russian technology. Its supply envelope covered a wide range within former Yugoslavia, including areas of present day Macedonia, Kosovo and South Serbia. Today it is the only regional refinery, with nominal capacity 2.5 MMT/a producing liquefied petroleum gas, leaded and unleaded gasoline, jet fuel, automotive and heating diesel oils and heavy fuel oil, covering around 90 per cent of the oil derivatives consumed in Macedonia, 80 per cent of Kosovo demand and exporting quantities to Serbia and Albania. Since 1999 OKTA, has been improving the quality of its products. In 2005 it started production of unleaded gasoline with 98 octane, and eco-diesel. In 2006 OKTA the company was on track to upgrade and expand its tiny retail network by re-branding 20 of the best gas stations available. OKTA's primary objective is, while pursuing its business activities, to ensure health and safety standards for its personnel and to protect the environment in the neighbouring communities. In this context, a new diesel hydro-desulphurisation unit was constructed and put in operation in 2003 and, currently, a project is in progress for the construction of a sulphur recovery unit, which is expected to become operational late 2007, New Europe reported. 
As of July 1999, ELPET Balkaniki SA a 67 per cent subsidiary of Hellenic Petroleum SA acquired the 54.5 per cent of the State owned refinery OKTA AD in Skopje. Today ELPET holds 81.51 per cent, while Privatisation Agency has 8.35 per cent, the employees control 6.13 per cent, their funds 1.4 per cent and the Pension Fund 2.55 per cent. 
The new administration took the helm early in 2004 headed by Dr. Michalis L. Myrianthis, a senior oil executive with 30 years behind him serving in key positions in the state owned oil industry in Greece and Hellenic after 1998. Myrianthis was appointed chairman of the board of both the Strategic Investor ELPET and its affiliate OKTA. He is flanked in ELPET by its CEO, Dinos Panas, a top analyst and experienced Corporate Planning Director of Hellenic. In OKTA Myrianthis assisted by the CEO, Apostolos Rafailides, during 2004 and Yannis Psychogyios since 2005. Psychogyios, a high level Engineer, has served as director of the big and complex refinery in Aspropyrgos. Predictably financial results reflected the top level restructuring of 2004. EBITDA's losses of 7.8m Euros for the FY 2003, reversed to gains of 11.9m for FY 2004, 17.9m for FY 2005 and according to New Europe estimates, analogous figures are expected for FY 2006. 
ELPET Balkaniki SA as majority shareholder in OKTA, faced with an almost seven years bitter and mutually hazardous bilateral dispute with previous governments of Macedonia based on the implementation of certain terms of the Share Purchase and Concession Agreement. In March 2004 ELPET took refuge to the International Arbitration Court in Paris to rule for the alleged damages occurred since then. ELPET Chairman maintaining that "is unthinkable for serious foreign investors to be at odds with the hosting government," targeted in 2005 an amicable dispute resolution between the two parties on a Win-Win basis. This effort was meant to go in parallel with the arbitration proceedings. Myrianthis determined to reach a settlement with Dr. Vlado Buchkovski's government before the verdict. To his disappointment, following 19 rounds of informal negotiations, numerous exchanges of non-papers and 4 coordinating meetings at the highest level, shuttling negotiations didn't pay off. 
Asked by New Europe for the reason he replied: "I believe the other side was willing at its high echelon level to reach an amicable resolution, yet not ready at the level of administration. Our side set - at that time - for considerable concessions in exchange for a safe and sound future of OKTA that would justify additional investments for the upgrade of the refinery. Unfortunately both sides are now certain to pay fat fees to their respective lawyers for the arbitration proceedings. The last resort is inevitably for justice to speak-out." 
Indeed the press in Skopje is reporting 3.5 million Euro fees paid already by the state while New Europe is informed that about two million have been paid by ELPET-Balkaniki. It is expected that the court will reach a decision by the end of 1Q of 2007. Said decision will be binding for both parties according to the international legal practice. 
In response to a New Europe question about how he will react in case of gaining or loosing the legal battle, Myrianthis said: "OKTA contributes approximately 1.5-2 per cent of the GDP and circa 10-11 per cent of the total tax revenues of the state. 2005 has been pronounced the second best company in Macedonia and the first in term of revenues. On top, OKTA is a major FDI in the country and the largest - so far - foreign investment of Hellenic Petroleum. Irrespective of gaining or loosing we have to sit together with the new Nikola Gruevski government and assist implementation of the court's ruling. I do not expect either side to kill the chicken producing eggs, meaning the company, its employees and the state. There is more wisdom in the Balkans than is widely believed" he concluded. 

Tripartite convention inked on Balkan pipeline AMBO

Bulgarian Minister of Regional Development and Public Works, Asen Gagauzov, Macedonian Minister of Economy, Vera Rafajlovska, and Albanian Minister of Economy, Market and Energy, Genc Ruli, signed, on January 31st, a tripartite convention on the construction of the Balkan pipeline AMBO, AENews reported. 
The President of AMBO Corporation, Ted Ferguson, was also present. Gagauzov said the pipeline would push up the development of the whole region and of Corridor 8. According to him, the project will boost the employment rate. Rafajlovska said everybody wanted the oil to start flowing as soon as possible. Ruli added Albania had always supported energy projects. "AMBO is a long-term and successful project. It is a factor for the development and integration of the region," Ruli was quoted as saying. This is the beginning of the project's realisation for the construction of an oil pipeline from Bulgaria's seaside city Burgas and Albania's city Vlora. The pipeline will transport the Caspian oil to West Europe and the US. The pipeline will be 912 kilometres and the year oil transit through it is estimated to reach 35 million tonnes, it was reported. 

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FOREIGN COOPERATION

Cooperation to be strengthened with Albania 

Macedonian Foreign Minister, Antonio Miloshoski, recently visited the Albanian capital, Tirana, where he met with top Albanian officials and discussed stepping up cooperation between the two countries in the areas of mutual interest - particularly the countries' bids for membership in EU and NATO and the current situation in the region, MRTOnline reported. 
In the course of his visit to Tirana, Miloshoski met with Albanian President, Alfred Mojsiu, Parliament Speaker, Xhozefina Topali, and Prime Minister, Sali Berisha. Miloshoski agenda also included meetings with his Albanian counterpart, Besnik Mustafaj, and with representatives of Macedonia's minority in Albania. Macedonia and Albania will step up cooperation in the areas of economy, tourism and energy. "Macedonia vowed to build a 400kW power line that will be of great importance to Albania in terms of electricity imports," Mustafaj was quoted as saying. Miloshoski on his part said that Macedonia will help Albania overcome the energy crisis, and noted, however, that it will by no means include increasing the allowed quantity of water release on the Albanian side of the Ohrid Lake. Moreover, during the meeting with Berisha, Miloshoski discussed details relating to the forthcoming visit of the Macedonian Prime Minister, Nikola Gruevski, to Tirana. Miloshoski's agenda also included talks with the Albanian President, Alfred Mojsiu, at which they expressed content of the current bilateral relations between the two countries. The Macedonia minister held meetings with the representatives of Macedonia's parties and associations in Albania, at which they reiterated calls to the Albanian authorities to respect their rights guaranteed by the international conventions.

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FOREIGN INVESTMENT

Campaign to promote business investment 

Macedonian Prime Minister, Nikola Gruevski, announced on January 24th a new media campaign to attract foreign investments to Macedonia, MRTOnline reported. 
The campaign, running until March 1st, promoted Macedonia as a business destination in 50 newspapers in more than 35 countries, with an overall circulation of more than nine million copies. Macedonia's opportunities was presented on 20 on-line editions of the aforementioned newspapers. "The goal of the campaign is to attract investors. Macedonia, finally, after 16 years will enter the investors' maps in Europe and the world," Gruevski was quoted as saying. 
The main benefits highlighted are low profit taxes of 10 per cent, low income taxes of 10 per cent, zero per cent tax of reinvested profit, prompt registration of companies within three days, 370 Euro gross average salary, free access to a market of 650 million consumers, macroeconomic stability with 3.1 per cent inflation and great infrastructure, along with the future possibility of EU and NATO membership. It is basically a pre-campaign, which is expected to encourage investors to think about investing in Macedonia, but it will have a positive effect on the county's overall image, Gruevski said. The government has no unrealistic expectations, Gruevski said, adding: We don't believe that an investment boom will happen overnight, because the first tangible results will occur after a certain period of time. This is only the beginning of a permanent campaign, which Macedonia has needed for a long time. Gruevski refused to specify the cost of the campaign, but gave the assurance that the money would not exceed one percent of the first foreign investment that would come due to this campaign. 

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