Former Yugoslav Republic of Macedonia

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Development Challenge The USAID Program Other Program Elements Other Donors Program Data Sheets Summary Tables USAID Search: Macedonia Previous Years' Activities 2002, 2001, 2000, 1999, 1998, 1997 Last updated: 31     (text taken from the FY 2003 Congressional Budget Justification) THE DEVELOPMENT CHALLENGE: The primary development challenge for Macedonia is to restore peace and stability so that efforts can be refocused on continuing democratic and economic reforms. In February 2001, conflict broke out between ethnic Albanian guerillas and ethnic Macedonian security forces. At the request of the government, international facilitators brokered a cease-fire. With further facilitation by the United States and the European Union (EU), the ruling ethnic Macedonian and Albanian political party leaders signed a peace agreement, known as the Framework Agreement (FWA) in August 2001. In November, the Parliament passed the constitutional amendments required in the FWA. Macedonia is currently charged in the FWA with implementing several more legal and civil reforms. There is strong international pressure to maintain peace. It is hoped that Macedonia's desire to become a member of the World Trade Organization, the EU, and NATO will help achieve this goal. Macedonia's democratic institutions and practices are weak and highly centralized. Macedonian citizens do not have a high degree of confidence in their democracy. The outbreak of hostilities and the inability of leaders to quickly resolve the conflict only served to further weaken institutions. Macedonia's democratic process is further distorted by the patronage systems used by political parties to win elections, which involve the distribution of key resources under their control (i.e., civil service jobs or jobs in state-owned enterprises). As a result, ordinary citizens, regardless of their ethnicity, feel alienated by the country's elite-dominated party system. Furthermore, civil society has not developed to the point where it can exert significant control over the actions of political players or function in a proactive way to meet the needs of its own citizens. The judiciary remains financially dependent on the executive branch and does not provide adequate checks and balances in the system. Macedonia had one of the most resilient transition economies in the region, recovering quickly from the Kosovo crisis. In 2000, real GDP grew by 4.3% and it initially appeared that 2001 might surpass the prior year in generating investment and job creation. But after conflict broke out, GDP contracted by 5.7% for the first half of 2001. The official unemployment rate is 32% as compared to an estimated 18% in Albania and 12% in Bulgaria. At the end of 2000, 22% of the population lived below the poverty line of $70 per month and this percentage is likely to increase as a result of the worsening economic situation. Average incomes are estimated to be roughly 75% of what they were prior to independence. Public sector employment accounts for 66% of total employment, at a time when the country needs privatization and downsizing of the public sector. Per capita foreign direct investment in the economy is the lowest in the Central and Eastern Europe region. Public confidence in the economy is weakening. Key U.S. national interests in Macedonia include political stability, economic prosperity, and democratization. Ethnic tensions must be addressed because of their potential to cross national border and become a regional problem. Macedonia can serve a critical role in combatting organized crime. With peace and stability, more attention can be focussed on prosecuting organized crime or extremists. THE USAID PROGRAM: FY 2002 Estimate: $49.5 million FY 2003 Request: $50.0 million The Program Data Sheets provided below articulate the objectives for which USAID is requesting funds and which were presented in USAID's new strategic plan. These include: accelerating private sector-led growth; improving the legitimacy of key democratic institutions; mitigating the adverse social impacts of the transition to a market-based economy; and training key leaders and decision makers in areas which support the program. ONGOING PROGRAMS FOR WHICH NO NEW FY 2002 OR FY 2003 FUNDING IS REQUESTED: The USAID program in Macedonia is consolidating previous democracy objectives (shown below) into a new democracy and governance SO. The former programs will not request new funds, but will continue to expend funds already appropriated until remaining activities are completed. Under the new democracy SO, additional funds will be requested as described in the Program Data Sheet. Number: Title: Last Notified: Planned Completion: 165-021 Increased, Better Informed Citizens' Participation in Political and Economic Decision-Making FY2002 CBJ, p. 228 FY 2002 165-023 More Efficient, Responsive, and Accountable Local Government FY2002 CBJ, p. 233 FY 2002 OTHER PROGRAM ELEMENTS: USAID is funding the U.S. Bureau of the Census to provide technical assistance to the Government of Macedonia (GOM) for a census in 2002. Completion of the census by the GOM is required by the terms of the peace agreement. U.S. assistance will strengthen the GOM's ability to complete a census whose results are accepted by all political parties and ethnic groups. In addition, the U.S. Department of Justice's International Criminal Investigative Training Assistance Program (ICITAP) provides assistance to improve the capacity, professionalism, and multi-ethnicity of Macedonia's police force. Overall development assistance to Macedonia totaled roughly $270 million in 2001, according to government statistics. OTHER DONORS: The United States ranks first among bilateral donors to Macedonia. Macedonia receives substantial assistance from international financial institutions such as the World Bank, the European Bank for Reconstruction and Development (EBRD), the International Monetary Fund (IMF), and the World Bank's International Development Association. Several World Bank loan conditionalities are based on USAID activities, primarily in the financial sector. The WB and the EU are funding work to reform the payments system that complements USAID's work in banking and capital markets. The EU's PHARE program contributes to USAID efforts in accounting and banking and in small and medium enterprise development. USAID is also collaborating with the German, Dutch and Norwegian governments as they provide technical assistance for small business, agriculture, NGO, and community development. UNICEF and the World Bank are supporting initiatives in the education sector. Program Data Sheets 165-0130  Accelerated Development and Growth of the Private Sector 165-0200  More Legitimate Democratic Institutions 165-0340  Mitigation of Adverse Social Impacts of the Transition to Market-Based Democracy 165-0410  Special Initiatives 165-0420  Cross-cutting Programs Country Background Information Resources     CIA Factbook National Geographic Country Maps

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