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innovative solutions. innovative on constructively continuingtocollaborate will thatcontinuedsuccess comeonlyfrom remember heorshehasadded.Eachmust success thepieceoflarger for partner istobecongratulated ontotheworldstage.Each thatcanbringtheeconomy aseriesofinnovations for the way paved on. Macedonia andlives inMacedoniabelongsto EconomicDevelopment for iscoming toanend,thePartnership funding activities todate.Although American changedbecauseoftheproject thathave stories oflives theirowneconomicfutures. for theirownresponsibility partners nowrecognize The forms. inmany initiative learnediscollaborative they have approach solving. Themostcritical tojointproblem approaches tolearnandadopteffective together atthenationalandlocallevel worked enterpriseandlaborsectors.Theyhave private thepublic, socialpartners from of key theproject. to fund agreed (USAID) Development International StatesAgencyfor The MacedoniamissionoftheUnited jobs. tonewjobs,andhelpsave jobs,assisttransition tocreate initiative community ofstimulatingindividualand ways ofdoingbusiness.Theseare ofnewways introduction intensive an butrather jobsorquickfixes, short-term afew countries. TheUSDOLmodeldidnotpromise inotherEastEuropean goodresults adjustmentthathadgiven workforce toaddress strategy USDOLtohelpthe countryimplementacomprehensive datamanagement.Itasked to computerized converting like Bureauanditslocaloffices, making somebasicupdatestotheNationalEmployment the upcomingeconomicchanges. toadjust measures labormarket andtouseactive ineconomic development role active a more totake neededtobemobilized Theworkforce themonster. athowtoconfront baffled it was strategy plannedeconomic themethodsofacentrally onitshands.Equippedonlywith unemployment PRiSMa has built capacity that endures in Macedonia at local, regional and national levels. Ithas andnationallevels. inMacedoniaatlocal,regional thatendures capacity PRiSMa hasbuilt thousandsof are tell thebasicsofstory ofPRiSMa.Underneath,there The pagesthatfollow with thecooperation organized inMacedonia(PRiSMa)was EconomicDevelopment for Partners years many with theUnited StatesDepartmentofLabor(USDOL)for Macedonia hadworked of hadanexplodingproblem ofMacedoniacouldseethatit 1999theGovernment In INTRODUCTION 5 Partners fo r Ec onom ic D ev el opm ent in Mac ed onia PRiSMaProject Design and Funding . .. .. .. .. .. Macedonia: an Emerging Economy NeedingBetter Labor Flexibility . .. Sustainability .. .. .. .. .. .. .. .. .. PRiSMaResults . .. Partnersand Structure . .. .. .. .. .. .. .. Appendix 5Appendix 4 Summary Executive MSIEvaluation Appendix 3 Sector Analysis Force Task EasternEurope Appendix 2 Monitoring Data Performance Appendix 1 Component by Rounds PRiSMaCommunity ofCooperation Agreement Integrated Institutionalization Integrated Force LegislationTask Response The Rapid All ModelComponents Institutionalize Teams Regional Evaluation Interim ofMacedonia(2001-2004) Policy PRiSMa IincludedintheMacroeconomic Materials andReference Training Start inEnterpriseCompetitiveness/Quick Results Adjustment Response/Worker inRapid Results inLocalEconomicDevelopment Results Results General PRiSMa Staff The NationalTeam Steering Committee Local Partners Examples Sees USA Steering Committee Component Enterprise Competitiveness AdjustmentComponent(RR/WA) Response/Worker Rapid Component(LED) Local EconomicDevelopment CONTENTS 7 26 13 16 10 8 Partners fo r Ec onom ic D ev el opm ent in Mac ed onia 8 Macedonia: an Emerging Economy Needing Better Labor Flexibility Macedonia is a land-locked country, sharing borders with Albania, Serbia and Montenegro, Bulgaria, and Greece. In 1994, ethnic Macedonians (67%) dominated Macedonia's 2,050,000 population; the other nationalities represented: Albanians (23%), Turks (4%), Roma (2%), Serbs (2%) and others (2%). A revised census, in compliance with international standards, has been reported, which may or may not show different proportions. Macedonia's national population growth rate is estimated at 0.43 % per annum (2001), with a net migration of -1.54 migrants per 1,000 people. Life expectancy, at birth, for the total population is 74 years, although lower among some minority groups. Macedonia's GDP is primarily based on trade and services (63%), followed by industry (25%) and agriculture (12%). In general, industries are concentrated on raw material production (coal, metallic chromium, lead, zinc, and ferro-nickel), textiles, wood products, food processing and tobacco. Macedonia, one of Yugoslavia's poorest republic, produced only 5% of the total output of goods and services. The 1990 breakup of former Yugoslavia had serious economic consequences in both political and economic terms. There was a sharp drop in GDP accompanied by extremely high inflation rates in the early 1990's. Exports stagnated. Imports have grown steadily, leading to an increasingly widening foreign trade deficit. The 1999 deficit was approximately $400 million. By 2002, the country had a trade deficit of $600 million. Macedonia's economy stabilized in 1996, following a serious economic downturn in the preceding five years. There was accelerated real growth (1.2% in 1996 to 4.3% in 2000) and a corresponding drop in inflation from (600% in 1992-94 to only 0.6 percent in 1997-99). This ended with Kosovo crisis in 1999 and the economy was further impacted by the 2001 conflict within the country. The resulting growth rate was negative, at -4.6% (2001). The Kosovo crisis bringing an influx of almost 400,000 refugees in 1999, and then an insurgency launched by ethnic Albanians in 2001, significantly damaged the macro-economic prospects of the country. Reforms stagnated; foreign direct investment fled. The Gross domestic product averaged 1.05% during the 1997 to 2001 period and dropped to -4.60% during the crisis year 2001. It was up to 3.00% in 2002. Doors Open in Gostivar In the first half of 2001 the Local PRiSMa Team in Gostivar selected the LED project "Wood Doors and Windows Production Line". Because of the civil unrest at that time, the project was delayed. However the team and the investor, Mazraca Enterprise, did later implement the project idea successfully. In September 2003 work began in the production line. The machine park was gradually completed and the job openings estimated for the project began to be filled. Mazraca Enterprise went on to help found an association established for the support of the Construction and Construction Materials Production organized by the PRiSMa Regional Team in Western Macedonia. Through this association business leakage will be strengthened and more jobs created Adjustment Model. Worker Integrated USDOL's MOLembraced thinking thatperpetuated highunemployment, of wouldbeneededtodislodgethedependentways approach comprehensive thatamore Realizing Guidanceservicesoffered. theVocational assistanceimproved Technical Additional data processing. system's Bureau.Materialandtechnicalassistanceledtoautomationoftheenrollment Employment National assistanceinmodernizing its with theUnitedStatesDepartmentofLabor(USDOL)for income. of similarlevels higherthaninneighboringcountrieswith remain etc.) hiring/firing restrictions, aswell wages/GDP laborcosts(gross declinesin wages, real in1996. Anddespite percent 20 ofthepopulationin1991toapproximately 4percent from increased poverty Not surprisingly, increased. declined; unemployment wages real soared; rates Inflation supports hadbeengutted. within Yugoslavia. orinternalcommerce Belgrade, from remittances been supportedby All ofthishad andlessskilled workers. outyounger hiringandterminationpractices, restrict wages, powerstopushup (orinsiders)extensive theemployed management systemgave socialist worker The tothelaborforce. amongnewentrants concentrated norms, andwas with regional compared high was unemployment However, andpensionsuponretirement. care, education and health free childallowances, employment, risks:guaranteed againstincomelossandotherlifetime protection Republics. Yugoslav hadaweakentryintostatehood,andasoneofthepoorest launched, ashaving benefit period was reduced from 18 to 14 months in March 2003. 18to14monthsinMarch from reduced benefit periodwas countries,althoughthemaximum islongincomparisontomostEuropean ofunemployment duration The tothelaborforce. thannewentrants workers redundant is becomingonecontainingmore population theunemployed 40%during2001.Gradually, above asurge 30%since1998,with above hasbeen Unemployment rolls. oftheunemployment share up alarger make election, olderworker the2002 actionfollowing government aggressive finally comesaboutwithmore As privatization duetoslowprivatizations. comprisedasmall portionoftheunemployed have layoffs in theregion, countries many Unlike tothelaborforce. newentrants young are oftheunemployed The majority In this context Macedonia's Ministry of Labor and Social Policy (MOL) established arelationship (MOL)established Policy this contextMacedonia'sMinistryofLaborandSocial In thattraditional thesame despitethefact expectationsremained Upon dissolutionofYugoslavia, full individualswith systemthatprovided socialprotection acradle-to-grave by burdened It was was Analysisof1999describesMacedonia,atthetimePRiSMaProject Bank Poverty A World Nearly half the population lives in households with at least one unemployed labor force member. laborforce atleastoneunemployed inhouseholdswith Nearly halfthepopulationlives oriented companies. theexport- for andadoptsupportmeasures labor market, ofthe flexibility stimulategreater employment, increase to: are objectives operational key years, past several