The development trap at the heart of the Balkans A socio-economic portrait of Gjilan, Kumanovo and Presevo 5 July 2005 Supported by the Danish Foreign Ministry ~ Contents ~ I. INTRODUCTION.......................................................................................................... 1 II. PROFILE OF A PERIPHERAL REGION .................................................................... 3 1. Where people live… ................................................................................................... 3 2. …and what they do..................................................................................................... 5 III. BACK TO SUBSISTENCE FARMING........................................................................ 6 IV. DEINDUSTRIALISATION AND ITS SURVIVORS ................................................ 10 1. Stories of transition .................................................................................................. 10 2. Manufacturing in the new private sector ................................................................. 13 V. A PRIMITIVE SERVICE SECTOR............................................................................ 16 VI. THE STATE OF DEVELOPMENT PLANNING....................................................... 18 1. Local government initiatives .................................................................................... 19 2. Central government policies .................................................................................... 20 3. The need for regional development planning........................................................... 23 VII. ANNEXES ................................................................................................................... 25 Annex A: SOE employment by municipality (detailed lists)................................................. 25 Annex B: Private sector employment ................................................................................... 28 Annex C: Public sector employment .................................................................................... 29 1 I. INTRODUCTION The area at the intersection of Macedonia, Serbia and Kosovo lies at the very heart of the Western Balkans, both geographically and politically. Like much of the region, it is a predominantly rural area, spanning the Skopska Crna Gora (or Karadag) mountain range. Around half of its 278,000 inhabitants live in villages, and the other half in three towns: Presevo in Serbia, Gjilan in Kosovo and Kumanovo in Macedonia. Over the past two decades, the economic history of this area has been one of relentless decline. The manufacturing base built up during the socialist period has all but disappeared, leaving behind the rusted remains of socially owned companies which nobody wants to buy. A significant proportion of the region’s inhabitants have been forced back into subsistence agriculture, working small plots of land in conditions that have hardly changed in two generations. For the young people now pushing onto the labour market, the prospects of finding work are extremely slim. It is therefore not surprising to find that the region has also been a source of political instability. Presevo is a majority Albanian municipality at the southernmost point of Serbia, which flared briefly into conflict in 2001. The Kumanovo area is ethnically mixed, and its predominantly Albanian Lipkovo municipality witnessed some of the most intense fighting during Macedonia’s 2001 conflict. By Kosovo’s standards, Gjilan has relatively good ethnic relations, with a patchwork of Serbian and Albanian villages in close proximity. Nonetheless, there was violence against Serbs during the riots of March 2004. All three areas have been the subject of international mediation efforts and reconstruction programmes. Ethnic relations appear calm for the moment, and there is no reason to believe that conflict is inevitable. Yet it is also hard to imagine the area remaining stable without improvements on the economic front. Young people without hope of a better future are easy prey to extremists on all sides. In this part of the Balkans, inter-ethnic tensions and poverty go hand in hand. ESI has spent the past year studying economic trends in the region and looking for development potential. Most of the news is bad. Only a handful of the old socially owned enterprises have made a successful transition to private ownership. The new private sector is small in scale, dominated by shops, cafés and basic services, and can absorb only a fraction of the labour shed by industry. Commercial agriculture is on the decline, and family farms do not produce the revenues for reinvesting in machinery. We estimate that no more than 33 percent of the working-age population are employed, compared to the EU average of 63 percent. This is the development trap at the heart of the Western Balkans. Regions with this economic profile are not attractive to private investors. Nor do they generate significant revenues of their own to support public investments in development. Unless there is a concerted effort by central governments and their international partners to invest in overcoming the barriers to economic growth, the region will continue to fall further behind. However, there are a few, isolated success stories which reveal important lessons about what is required to initiate development. A small number of private manufacturing ventures in the Kumanovo area have risen out of the ashes of socialist industries, taking advantage of the technological knowledge, skilled workforces and commercial contacts built up under the previous system. Their success is linked to Macedonia’s transition programmes – www.esiweb.org 2 privatisation and liquidation of socially owned enterprises – which have enabled the new private sector to build on past efforts, rather than begin from scratch. Each of the governments has a range of development policies and strategies in place. However, they are fragmented across different sectors, poorly coordinated between different agencies, and not linked to budgetary resources. There is an urgent need for integrated development planning, which recognises that the problems of agriculture, SOEs and the private sector are interrelated, and need to be addressed within a common development framework. Credible development strategies in the region must be based on solid analysis of existing obstacles and opportunities, building on trends which are already visible in particular places. Moreover, they must convert objectives into operational programmes matched with financial resources. The problems facing this area are severe, but they are not qualitatively different from those which have been successfully tackled in new EU members and accession countries. The governments of the region, together with their international partners, would be well advised to begin applying EU development planning methodology as soon as possible, before social pressures once again build up to a dangerous level. Source: insar Berlin www.esiweb.org 3 II. PROFILE OF A PERIPHERAL REGION 1. Where people live… Though Presevo, Kumanovo and Gjilan are border regions, they are not geographically remote. The towns of Kumanovo and Gjilan lie only 35 and 50 km from their respective capitals, and both Presevo and Kumanovo lie on the highway connecting Belgrade with Thessaloniki. Yet there is a remarkable shortage of hard information about where people are, and how they live – a symptom of a lack of serious engagement with the economic and social problems of the region. We have compiled a picture through estimates based on the best available sources. While Macedonia and Serbia conducted a census in 2002, the last reliable population data for Kosovo are from the 1981 census.1 We estimate the region to have a population of some 278,000 people – roughly equivalent to a medium-sized Balkan city such as Ljubljana or Novi Sad. Table 1: Population of the region2 Municipality 1981 2002 Index Total Albanian Serb Maced. Other 2002/1981 Gjilan 84,085 ~105,972 ~94,299 ~11,623 -- ~50 126.03 Presevo 33,948 34,904 31,098 2,984 21 801 102.82 Kumanovo area 125,502 137,382 53,651 10,358 67,821 5,552 109.47 Kumanovo 87,659 103,205 27,290 9,035 61,495 5,385 117.73 Lipkovo 21,586 27,058 26,360 370 169 159 125.34 Staro Nagoricane 8,713 4,258 1 920 3,331 6 48.87 Klecevce 4,614 1,609 -- 24 1,583 2 34.87 Orasac 2,930 1,252 -- 9 1,243 -- 42,73 Total 243,535 ~278,258 179,048 24,965 67,842 6,403 114.26 In % 100.00 64.35 8.97 24.38 2.30 The area is marked by its ethnic diversity, despite the conflicts of recent years. Around two- thirds of the population (180,000) are ethnic Albanians, making up a majority in the Kosovo and Southern Serbia areas, as well as in the Macedonian municipality of Lipkovo. There are 68,000 ethnic Macedonians, predominating in Kumanovo town and the three rural municipalities of Staro Nagoricane, Klecevce and Orasac. The 25,000 Serbs are present on all sides of the border as a minority. The remaining 6,400 people belong to other minorities, mostly Roma. 1 Another census was conducted in 1991, but was largely boycotted by the Albanian population in Kosovo. 2 Sources: Statistical Office (Macedonia), release 2.1.3.30, 2002 Census of population, households and dwellings, final data; Republic Statistical Office (Serbia), Communication No. 295, Issue LII, 24 December 2002: “Final Results of the Census 2002, Population by national or ethnic groups, gender and age groups in the Republic of Serbia, by municipalities”.