3. BACKGROUND INFORMATION ON THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 3.1 Basic data on fYRoM General topographic map1 Total area: 25,713 sq km Albania 151 km, Bulgaria 148 km, Greece 246 km, Kosovo 159 km, Serbia Border countries: 62 km (total: 766 km) Population: 2,077,328 Capital: Skopje (480,000) Kumanovo 103,200 Bitola 86,400 Main towns: Prilep 73,400 Tetovo 70,800 Veles 57,600 Ethnic groups: Macedonian 64.2%, Albanian 25.2%, Turkish 3.9%, Roma2.7%, Serb 1.8% Main languages: Macedonian (official), Albanian (official), Turkish, Roma, Serbian Religions: Eastern Orthodox 65%, Muslim 29%, Catholic 4% Macedonian Denar (MKD) Currency: Approximate rate: 1 Euro = 61,1 denars The denar was introduced on May 10th 1993 low-grade iron ore, copper, lead, zinc, manganese, nickel, tungsten, gold, Natural resources: silver, asbestos, gypsum, timber, arable land 1 http://www.state.gov/r/pa/ei/bgn/26759.htm; Macedonia- Country Report, Economist Intelligence Unit, May 2011; http://www.mfa.gov.mk/default1.aspx?ItemID=288; 3.2 Political structure - overview2 The former Yugoslav Republic of Macedonia (provisional, Official name: internationally recognized, pending resolution of name dispute with Greece) Form of state: Democratic parliamentary republic Legal system: Based on the constitution of November 17th 1991 National legislature: Unicameral Assembly (Sobranie) of 120 members Electoral system: universal suffrage over the age of 18 years Last parliamentary election: June 1st 2008; next election due on June 5th 2011 National elections: Last presidential election: March 22nd and April 5th 2009; next election due in 2014 Head of state: President; currently Gjorge Ivanov (inaugurated on May 12th 2009) Council of Ministers, headed by the prime minister. A coalition government led by the Internal Macedonian Revolutionary National government: Organization-Democratic Party of Macedonian National Unity was approved by parliament in July 2008 Governing parties: Internal Macedonian Revolutionary Organization- Democratic Party of Macedonian National Unity (VMRO-DPMNE), Democratic Union for Integration (DUI), Socialist Party (SP), Party of United Macedonian Democrats (PODEM). Main political parties: Opposition parties: Social Democratic Alliance of Macedonia (SDSM), Democratic Party of Albanians (DPA), Party for a European Future (PEI), New Democracy (ND), New Social Democratic Party (NSDP) Prime Minister: Nikola Gruevski (VMRO-DPMNE) Speaker of the Assembly: Trajko Veljanoski (VMRO-DPMNE) Agriculture, forestry & water supply Ljupco Dimovski (SP) Defence Zoran Konjanovski (VMRO-DPMNE) Education & science Nikola Todorov (VMRO-DPMNE) Economy Fatmir Besimi (DUI) Environment & physical planning Nexhat Jakupi (DUI) Foreign affairs Antonio Milososki (VMRO-DPMNE) Key ministers: Health Bujar Osmani (DUI) Internal affairs Gordana Jankulovska (VMRO-DPMNE) Justice Mihajlo Manevski (VMRO-DPMNE) Labour & social policy Xhelal Bajrami (DUI) Local self-government Musa Xhaferi (DUI) Transport & communications Mile Janakieski (VMRO-DPMNE) Central bank governor : Dimitar Bogov Administrative divisions: 84 municipalities 2 Macedonia- Country Report, Economist Intelligence Unit, May 2011; http://www.vlada.mk/?q=frontpage; http://news.bbc.co.uk/2/hi/europe/country_profiles/1067125.stm; http://www.state.gov/r/pa/ei/bgn/26759.htm; http://www.mfa.gov.mk/default1.aspx?ItemID=288; http://www.sobranie.mk/en/default- en.asp?ItemID=9B4480A1C962224CBE177A3E5B3710E0 3.3. Economy overview3 The former Yugoslav Republic of Macedonia is a small economy with a GDP of about EUR 6.86 billion in 2010. Agriculture and industry had been the two most important sectors of the economy in the past, but the services sector has gained the lead in the last few years. Macedonia undertakes structural reforms to finish the transition to a market- oriented economy. Modernization of the largely obsolete infrastructure is happening slowly, and foreign investment has not kept pace with neighbouring economies. Labour force education and skills are competitive in some technical areas and industries but significantly lacking in others. Without adequate job opportunities, many with the best skills seek employment abroad. A relatively low standard of living, high unemployment rate, and modest economic growth rate are the central economic problems. 2006 2007 2008 2009 2010 2011 2012 Real GDP growth 4.3 5.9 7.1 -0.9 0.8 2.4 3.4 (ann. % ch) Origin of GDP (%): Agriculture 0.6 0.6 1.5 3.5 1.0 2.5 3.5 Industry 3.6 1.7 4.0 -0.1 1.3 1.8 2.1 Services 6.9 6.4 5.9 -2.2 0.5 2.7 4.1 Unemployment (%) 36.0 34.9 33.8 32.2 32.3 31.9 31.4 Inflation (ann. % ) 2.9 6.1 4.1 -1.6 3.0 3.3 3.3 Government balance (% of GDP) -0.5 0.3 -1.0 -2.8 -2.5 -2.4 -2.0 Current account balance (% of GDP) -0.4 -7.1 -12.7 -7.2 -3.3 - - Direct investment (% of GDP) 6.8 8.8 6.3 3.7 - - - Export of goods and services (% of GDP) 46.9 52.4 50.9 38.8 - - - Import of goods and services (% of GDP) 66.5 70.8 76.2 60.2 - - - Labour force by services-58%; industry and commerce-22.1%; agriculture-19.9% occupation: Agriculture products: grapes, tobacco, vegetables, fruits; milk, eggs food processing, beverages, textiles, chemicals, iron, steel, cement, Industry: energy, pharmaceuticals food, beverages, tobacco; textiles, miscellaneous manufactures, iron Exports products: and steel Export partners Germany 20.31%, Greece 13.09%, Italy 11.08%, Bulgaria 10.61%, (2009): Croatia 7.74% machinery and equipment, automobiles, chemicals, fuels, food Imports products: products Import partners Germany 15.11%, Greece 14.88%, Bulgaria 9.08%, Italy 7.68%, (2009): Turkey 7.59%, Slovenia 6.26%, Hungary 4.31% 3 Macedonia- Country Report, Economist Intelligence Unit, May 2011; Progress towards meeting the economic criteria for accession: the assessment of the 2010 Progress Report and the Opinion, DG for Economic and Financial Affairs, December 2010; http://www.state.gov/r/pa/ei/bgn/26759.htm; http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsieb020; Main economic trends:4 4 Macedonia- Country Report, Economist Intelligence Unit, May 2011; 3.4 The EU financial assistance to fYRoM The pre-accession assistance strategy for the period 2007-2009 was concentrated on four areas of activity: Support Institution Building, Improve cross-border cooperation, Prepare the beneficiary for participation in the Community's cohesion policy and rural development instruments 4. Prepare for decentralised management of EU funds.5 IPA 2007:6 Due to the urgent need to continue the support the police reform which began under the CARDS programme, it was decided to split the IPA 2007 national programme for the former Yugoslav Republic of Macedonia into two parts. The first part (for EUR 12 million) included projects linked to the police reform and a project preparation facility. The second part (EUR 22.94 million) was adopted by the Commission on 16 November 2007. This second part aims at supporting the implementation of the public administration reform strategy, the judicial reform as well as capacity building for the decentralised management of EU funds. Under socio-economic requirements the programme will assist municipalities with building the essential infrastructure to support both social and economic development. As regards the EU acquis related activities, substantial support will be given to tax administration, the statistical office and customs. Additionally, the programme supports the participation of the country in certain Community programmes. The following table provides the 2007 IPA allocations to FYROM in million EUR by component:7 2007 I. Transition Assistance and Institution Building 41.6 Of which: National Programme I 12.0 National Programme II 22.9 Nuclear Safety Programme 0.5 Customs Programme 0.5 Tempus and Erasmus Mundus Programme 5.7 II. Cross-Border Cooperation 4.2 Of which: CBC former Yugoslav Republic of Macedonia and Bulgaria 0.7 CBC former Yugoslav Republic of Macedonia and Greece 0.8 CBC former Yugoslav Republic of Macedonia and Albania 2.2 CBC participation in ERDF SE Europe programme 0.5 III Regional Development 7.4 Of which: Transport Priority 5.6 Environment Priority 1.4 Technical Assistance Priority 0.4 IV Human Resources Development 3.2 V Rural Development 2.1 5 http://www.delmkd.ec.europa.eu/en/bilateral-relations/eu-assistance/IPA.htm; http://www.ipard.gov.mk/en/programa; http://ec.europa.eu/enlargement/candidate-countries/the_former_yugoslav_republic_of_macedonia/index_en.htm; 6 2007 Annual IPA Report, Report From The Commission To The Council, The European Parliament And The European Economic And Social Committee, Brussels, 15.12.2008, Com(2008) 850 Final; 7 2007 Annual IPA Report, Commission Staff Working Document, Technical Annexes To The Report From The Commission To The Council, The European Parliament And The European Economic And Social Committee, Brussels, 15.12.2008, Com(2008) 850 Final The IPA 2007 Annual Programme Part II contained the following projects:8 Budget Priority Projects (EUR Axis million) Priority axis 1:Good governance and the rule of law 5.1 Public Administration Reform - PAR 2.0 Support to the Judicial Reform 1.1 Capacity Building for the Management of EU funds 2.0 Priority axis 2:Economic development and social cohesion 7.0 Local infrastructure for social and economic cohesion 7.0 Priority axis 3:Implementation of the Acquis 9.0 Energy Regulatory Commission and Insurance Supervisory Agency 2.0 Tax Reform 2.0 The State Statistical Office 2.0 Customs Reform 3.0 Priority Axis 4:Programming Support and Community Programmes 1.84 Community Programmes and Agencies 0.94 Preparatory measures for the Lifelong Learning and Youth in Action 0.9 programmes Total 22.9 With the support of IPA component II, "Cross Border Cooperation" in 2007 the former Yugoslav Republic of Macedonia participated in a bilateral programme with Albania and in two bilateral programmes with neighbouring Member States Bulgaria and Greece.