MACEDONIAN ECONOMIC GUIDE (ECONOMIC DIPLOMACY) This publication was produced for review by the United States Agency for Inter- national Development. It was prepared by the Ministry of Foreign Affairs of the Republic of Macedonia in conjunction with the Ministry of Economy, the Ministry of Culture and the Agency for Foreign Investments of the Republic of Macedonia. The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. Courtesy by MIC. Photo on the cover page: Rumen Kamilov; Nace Popov 2 CIP- Каталогијација во публикација Национална и универзитетска библиотека “Св. Климент Охридски“, Скопје 338(497,7) (036) MACEDONIAN Economic Guide (economic diplomacy). - Skopje USAID Business Environment Activity, 2010. - 51 стр. ; илустр. ; 21 см фусноти кон текстот ISBN 978-9989-2881-8-0 а) Стопанство - Македонија - Деловни водичи COBISS. MK-ID 81506570 REPUBLIC OF MACEDONIA GENERAL INFORMATION Geography The Republic of Macedonia is situated in the central part of the Balkan Peninsula (Southeastern Europe) covering an area of 25.713 square kilometers. Its relief is characterized by large and high mountain massifs giving way to extensive, flat valleys and plains. Almost the entire territory of Macedonia lies between latitudes 40 and 42 and is a transitional region between the Mediterranean and Continental climates. The climate is classified as being transitory from a Continental climate to a Mediterranean climate. The country is bordered by Serbia and Kosovo to the North, Bulgaria to the East, Greece to the South and Albania to the West. The capital is Skopje. Other major cities are Bitola, Kumanovo, 3 Ohrid, Tetovo, Veles, Gostivar, Stip and Strumica. Climate Macedonia has a moderate continental climate with four distinct seasons. Along the Varadar and Strumica river valleys, the climate is temperate Mediterranean. Inland, the climate is generally continental with hot-dry summers and cold-wet winters. Population The population of Macedonia is approximately 2.05 million of which over 600,000 people live in Skopje, the political, administrative and commercial centre of Macedonia. After Skopje, the largest cities are Bitola, Kumanovo, Prilep and Tetovo, with populations ranging between 50,000 to 100,000 people. Ethnic groups: Macedonian- 64.2% Albanian– 25.2%, Turks – 3.9% Rhomas – 2.7%, Serbs – 1.8%, Bosniaks – 0.8%, Vlachs – 0.5% Others- 1% Ethnic Macedonians are generally Christian Orthodox and ethnic Albanians are generally Muslim. Catholics comprise the next largest religious group. The official language is Macedonian. Additional languages spoken in Macedonia include Albanian, Turkish, Rhomas, Serbian, Vlach and other languages. Transport Although a landlocked country, Macedonia benefits from a strategic geographical position at the crossroads of two major pan-European transportations corridors (corridors VIII and X) linking Central Europe to the Adriatic, Aegean and Black Seas. The railway network extends over 900 km. The principal North-South 4 rail connection from Belgrade to the port of Thessalonica (Aegean sea) passes through Skopje. Macedonia has two international airports, in Skopje and Ohrid. History The name “Macedonia” comes from the territory encompassing the ancient kingdom of Macedon, which included, along with current day Macedonia, some parts of present day Greece, south-western Bulgaria and Albania. The ancient kingdom of Macedon reached its pinnacle during the reign of Alexander III, also known as “Alexander the Great” (356-323 BC), who increased Macedon’s influence through Asia Minor, the Levant, Egypt, Mesopotamia, Persia and some parts of India. Macedon gradually declined after the death of Alexander the Great in 323 BC and was conquered by the Romans in 168 BC and was annexed to the Roman Empire in 148 BC. After the fall of the Western Roman Empire, the territory of Macedonia came under control of the Byzantine Empire in the 6th and 7th centuries. During this time period, large numbers of Slavic people came to and settled in the Balkan region. By the end of the 14th century, the Ottoman Empire gained control over Macedonia and continued to rule Macedonia for more than 500 years. During this period, political and cultural customs were heavily influenced by the Ottoman Turks. In the late 19th century, as Greece, Bulgaria and Serbia began to compete for control over the territory of Macedonia, a number of nationalist movements emerged and challenged the Ottoman Empire. In the most well known uprising in August 1903, Macedonian revolutionaries liberated the town of Krushevo from the Ottomans and briefly established the Krushevo Republic. The uprising was quickly put down by Ottoman forces. In 1912, a combined force of Bulgaria, Serbia and Greece defeated the Ottoman Empire in the First Balkan War and forced the Ottomans to leave Macedonia and surrounding regions. Shortly thereafter, Bulgaria, Serbia and Greece fought against each other in the Second Balkan War in an attempt to divide Macedonia. The Treaty of Bucharest officially ended this conflict in 1913 and the territory of Macedonia was partitioned among these countries. Following the First World War, present day Macedonia was incorporated into the newly formed Kingdom of Serbs, Croats and Slovenes (later known as the Kingdom of Yugoslavia) as part of the Province of Vardar. During World War II, Macedonia was occupied by Bulgaria and Italy. Harsh rule by the occupying forces encouraged many Macedonians to support 5 the resistance movement led by the partisans and Marshall Tito, who became Yugoslavia’s president when the war ended. Following World War II, Macedonia became a constituent republic (federal unit) of the Socialist Federal Republic of Yugoslavia and remained a republic with the name “Republic of Macedonia” until the dissolution of the federation. After the collapse of the Former Yugoslavia, like other republics that constituted Yugoslavia, Macedonia declared its independence in November 1991. Political and Legal System Macedonia held a national referendum in September 1991 to establish a sovereign state based on a parliamentary democracy. Executive authority rests with the government, which is headed by the Prime Minister. The Prime Minister and cabinet ministers are elected by the National Assembly. Ministers are elected by a majority vote of deputies in the National Assembly. The National Assembly (the Parliament) of Macedonia, the legislative body of the country, consists of 123 representatives who are elected every four years. The President of the Republic of Macedonia represents the Republic, and acts as Commander-in-Chief of the Armed Forces. The President is elected on general and direct elections, with a mandate of five years, and a maximum of two terms. The Macedonian legal system is based on a civil law system. According to the Constitution and laws, judicial power is independent and exercised by courts, with the court system headed by the Judicial Supreme Court, the Constitutional Court and the State Judicial Council. The latest legal changes in 2007, introduced the Administrative Court, to act upon appeals on decisions made by the state administration. Economic overview The Government of Macedonia is committed to implementing an economic programme that will continue and intensify the existing reforms in all segments of the economy with the goal of accelerating the economic growth and development of the country, job creation and improvement of the living standards of the population General economic indicators Indicators 2006 2007 2008 2009 2010 6 GDP, USD bin 6,373 7,911 9,522 9,282 9,162 GDP per capita, USD 3,124 3,870 4,649 4,525 4,458 Real GDP growth rate, % 4.0 4.1 4.0 5.9 5.0 Inflation, average % 3.2 5.9 5.0 -0.9 2.0 Annual unemployment 36.0 34.3 33.8 32.2 32.0 rate, % Index of industrial production % (compared 103,6 103,7 105,5 92,3 95,7 to the previous year) General Government -0.6 0.6 -1.0 -2.7 -2.5 balance (% of GDP) Current account, net (% of 0.8 7.7 13.3 13.3 GDP) Trade balance (% of GDP) -20.1 -20.3 -26.7 -23.2 -19.8 External debt, (% of GDP) 36.05 27.4 28.2 Foreign currency reserves, EUR mil 1,416.7 1,524.4 1,494.9 1597.5 1714.5 Exchange rate, DEN/1EUR 61.3 61.3 61.3 61.3 61.3 Source: National Bank, Ministry of Finance and State Statistical Office The World Bank 2010 Doing Business Report ranked Macedonia on the top of the world reformers. According to the Report, Macedonia is the third top reformer in the world, and is the easiest place to do business in Southeast Europe. Macedonia has implemented reforms in seven out of ten areas covered in the report, and is on 32nd place in this year’s global rankings, going up 37 places from last year. According to the World Economic Forum’s Global Competitiveness Index 2009-2010, Macedonia is on 84th place, improving its ranking by 5 places, compared to the last year. In addition, in 2009 the Credit Rating Agency “Standard and Poor’s” upgraded Macedonia’s credit rating from BB-negative to BB-stable. FOREIGN TRADE REGIME AND MAJOR REGULATIONS 1.Macedonia joined the World Trade Organisation (WTO) on 4 April, 2003: 1.1 Following the WTO principle to eliminate quantitative restrictions on trade, an extensive liberalization of trade regimes has been implemented. 7 1.2 In the process of harmonization of the WTO sectoral agreements at the level of the highest tariff rate and following the bilateral and multilateral negotiations with the WTO members, the average tariff rate after the transitional period of WTO accession will be about 8% by the end of 2011. 2. Trade liberalization and facilitation 2.1 Macedonia at the time of its independence, achieved a high level of trade liberalization due to the conclusion of: 1.