Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
FORMER YUGOSLAV REPUBLIC OF MACEDONIA
FY 1997 FY 1998 FY 1999 Actuals Estimate Request Support for Eastern European Democracy $16,100,000 $16,000,000 $16,000,000
Introduction
The Former Yugoslav Republic of Macedonia (FYROM), the poorest country of the former Yugoslavia, was the only former republic to gain independence peacefully. The maintenance of stability in FYROM is a key element of U.S. Government efforts to reduce instability in former Yugoslavia and the Balkans. The U.S. assistance program to FYROM supports U.S. interests in national security, economic prosperity, and democracy. Since declaring its independence in 1991, the FYR Macedonians have consistently pursued policies aimed at reforming the economy and strengthening democratic institutions. The United States established full diplomatic relations in September 13, 1995. Despite the hardships imposed by external forces (United Nations (UN) sanctions against Serbia and the Greek embargo), FYROM persisted in implementing the key reforms urged by the World Bank and the International Monetary Fund (IMF) in their proposed economic stabilization program.
The Development Challenge
FYROM is suffering from many of the same ills as other East European countries going through the transition from a centralized to a market economy and from a socialist to a democratic society. However, the country also has had to manage the negative effects of compliance with the UN-mandated sanctions against Serbia, which accounted for 60% of its markets prior to the disintegration of Yugoslavia, and which also served as a conduit to other East, Central and West European markets. Further, the country had to deal with the effects of the trade embargo imposed by Greece from February 1994 to October 1995, in response to the declared constitutional name (Republic of Macedonia), the use of national symbols, and alleged territorial ambitions. Current Government estimates put the cumulative price of the sanctions and Greek embargo at over $2 billion. The FYROM government faces the additional challenge of having to create institutions to perform national functions previously performed by the federal government in Belgrade. Lastly, ethnic tensions remain a critical factor in the ability of the Government to maintain its integrity and stability.
The key objectives of the U.S. assistance program are: (a) economic restructuring and sustainable growth, with accompanying employment generation; and (b) the development of democratic practices and institutions, and a viable civil society. U.S. assistance will address these problems through targeted efforts in development of the private sector economy, with a particular focus on agriculture and agribusiness, and through assistance to non-governmental organizations, local governments, independent media and other democratic and representative civic intermediaries.
Other Donors
FYROM receives assistance from international financial institutions such as the World Bank, European Bank for Reconstruction and Development (EBRD), the International Monetary Fund (IMF) and the World Bank's International Development Association. As a result of the signing of the Greek/FYROM Accord on September 13, 1995, FYR Macedonian participation in the European Union (EU) program has been formalized. An EU Resident Representative has been assigned to Skopje and has established the Macedonia office. Germany has been the largest provider of assistance to FYR Macedonia (primarily in humanitarian assistance and commodities). The United States ranks second among bilateral donors to FYROM.
FY 1999 Program
USAID is in the process of conducting in-depth analyses of current assistance needs, opportunities and priorities in FYROM, which will result in a new Strategic Plan for the period FY 1999-2002. USAID expects the core FY 1999 program will build on earlier commitments to economic growth and democracy objectives.
Under the economic restructuring goal, USAID is requesting funding for the strategic objective: accelerated development and growth of private enterprises. Under this objective, direct assistance is provided to enterprises to improve their efficiency and productivity. USAID assistance indirectly promotes enterprise growth by promoting legal and regulatory frameworks that improve the competitive environment within which businesses operate. Special emphasis is placed on small and medium enterprises, especially in the agricultural area. The private sector now accounts for 70% of employment.
While the legal underpinnings for a market economy are nearing completion, the new private sector is far from viable. Many of the socially-owned enterprises were bought by their former managers or by groups of their employees, most of whom have little knowledge of how to manage a business to increase profit rather than production. The USAID strategy focusses on providing managers with the basic skills essential to their firms' financial soundness and ultimate profitability. New, as opposed to privatized, businesses are mostly geared toward effective use of capital to improve revenue/cost ratios; thus, offering little opportunity for job creation. This is an issue for consideration as the FY 1999-2000 Strategic Plan is prepared.
The competitive environment for business has improved, but much remains to be done particularly implementing basic laws, resolving enterprise debts, and developing specific regulations. Current labor laws restrict managers' ability to restructure (and pare down) the staff of privatized firms. Banks are still very conservative in their lending practices and lack critical risk assessment skills, and the banking system as a whole does not adequately serve the needs of the growing private sector. Accounting standards are very weak. The courts are still not trained and organized well enough to provide adequate protection to the business community. This environment discourages both domestic and foreign investment. USAID's intent is to provide technical assistance in overcoming the most critical of these obstacles to an efficiently-functioning competitive market.
Under the democratic transition goal, USAID is requesting funding for the strategic objective, increased better-informed citizens' participation in political and economic decision-making. Despite the enactment of a new constitution in 1991 and a subsequent series of laws to implement the Constitution, citizens continue to be distrustful and/or apathetic toward government systems. Citizens, government and the media need to shift their mind-set from rule by government to rule by the people. The USAID assistance program is targeting the development of mechanisms, especially non-governmental organizations (NGOs), to increase citizen participation in democratic systems, and the willingness of government officials, at both local and national levels, to actively involve citizens in the policies of government. The media, as the watchdog of democracy, performs a special role in this process. An important aspect of USAID'S strategy is also to address potential ethnic conflict by bringing citizens together to discuss and resolve common problems.
As a complement to these two strategic objectives USAID is requesting funds for a number of cross-cutting activities, including participant training, evaluation and project support, rule of law and rural finance.
FORMER YUGOSLAV REPUBLIC OF MACEDONIA
FY 1999 PROGRAM SUMMARY*
( in thousands of dollars)
Strategic ObjectivesEconomic Restructuring Democratic
TransitionSocial Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform -- -- -- -- -- Private Enterprise 9,090 -- -- -- 9,090 Financial Reform -- -- -- -- -- Energy -- -- -- -- -- Environmental Management -- -- -- -- -- Citizens' Participation -- 3,860 -- -- 3,860 Legal Systems -- -- -- -- -- Local Government -- -- -- -- -- Crises -- -- -- -- -- Social Benefits -- -- -- -- -- Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 3,050 3,050 TOTAL 9,090 3,860 -- 3,050 16,000
* Support for East European Democracy (SEED) Act funds
USAID Representative: Stephen Haynes
ACTIVITY DATA SHEET
PROGRAM: FYR Macedonia
TITLE: Private Enterprise
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $9,090,000 SEED Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2002
Purpose: Accelerated development and growth of private enterprises.
USAID Role and Achievements to Date: USAID has contributed to the development and growth of the private sector in a number of ways. A business resource center has worked with over two hundred new, or newly-privatized, companies to improve financial management, business planning, and product development, in order to improve their profitability. A micro-lending program has provided credits to about 275 micro-enterprises, providing employment opportunities and serving as an example to others interested in self-employment. A farmer-to-farmer program has provided direct assistance to several hundred Macedonian farmers in improving their production, reducing demands for pesticides and fertilizer, implementing quality control measures for agricultural products, increasing the number of producer associations, and expanding to new markets. A dairy marketing program has brought improved sheep-breeding techniques to several thousand farmers; helped producers comply with sanitation standards, and control livestock diseases; and helped improve the quantity and quality of dairy products. USAID-funded legal advisors have provided assistance in the development and implementation of tax and banking laws, and are assisting in the development of new laws in such business-related areas as collateral, bankruptcy, and commercial law. USAID-funded advisors have developed training programs and operating manuals for bank supervisory functions of the central bank and is providing direct support to privatized banks in operations procedures.
Description: USAID is implementing a number of activities aimed at providing businesses with the technical and managerial skills to succeed in a market economy. A business resource center is responding to individual requests for assistance from the new private sector; performing a "diagnostic" assessment of a company and then targeting assistance to areas which will have the greatest impact on profitability. Technical assistance is being provided to commercial banks which will be coping with sizable lines of credit targeted to small and medium enterprises. Another USAID activity provides micro-loans to very small entrepreneurs, while yet another is working to create member-owned financial institutions in rural areas, to provide access to credit for farmers and others not fully supported by the commercial banking system. The farmer-to-farmer program provides grassroots-level assistance to farmers on a one-to-one basis. A new agricultural marketing activity will focus on improving domestic and export marketing of livestock products. A new activity to bring accounting practices up to international standards will help the private sector become more competitive in the global economy. Additional efforts in support of our economic growth objectives may be identified as a result of the Spring 1998 Strategic Plan process.
Host Country and Other Donors: USAID programs are intermeshed with donor activities throughout the portfolio. On the business resource centers, USAID coordinates closely with the United Kingdom (UK) Know How Fund, which is financing two small centers in regional cities, as well as with the World Bank, which is using the USAID center for advice to potential borrowers for new credit lines coming on line. USAID has also negotiated agreements with both British and Dutch retired executive programs, to provide more effective collaboration between these programs and the business resource centers. In the area of commercial banking, USAID activities are being coordinated with EBRD and UK training programs. Lines of credit for small and medium enterprises (SMEs) are being established by EBRD, the World Bank, and Germany. In the agricultural area, USAID activities are coordinated closely with the World Bank's Private Farmer Support Project and with EU and the Soros Foundation has provided Volunteers in Oversees Cooperative Assistance (VOCA) with funds to provide credit to farmers.
Beneficiaries: Although USAID programs will specifically benefit new private sector companies, banks and farmers, the benefits will accrue to all FYR Macedonians in the long-term through development of an improved economic climate, and increased employment and productivity.
Principal Contractors, Grantees, or Agencies: USAID programs currently are being implemented by Crimson Capital, KPMG/Barents, Opportunity International, the World Council of Credit Unions (WOCCU), VOCA, Land O'Lakes, Financial Services Volunteer Corps (FSVC), CARANA, International Business and Technical Consultants (IBTCI), the Center for Financial Engineering in Development (CFED) and the U.S. Information Agency (USIA).
Major Results Indicators: Baseline Targets Private sector share of GDP (%) 35% (1994) 50% (2000) Exports/GDP (%) 41% (1995) 50% (2000) Increase in foreign investment (cumulative) $36M (1995) $72M (2000)
ACTIVITY DATA SHEET
PROGRAM: FYR Macedonia
TITLE: Citizens' Participation
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $3,860,000 SEED Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2002
Purpose: Increased, better-informed citizens' participation in political and economic decision making.
USAID Role and Achievements to Date: USAID has played an important role in enhancing citizen participation in FYR Macedonia. USAID-funded advisors have provided extensive capacity-building assistance to Macedonian non-governmental organizations (NGOs) in areas such as financial management, organizational skills, grantsmanship, strategy development, and member recruitment. Assistance has included small grants to support project activities like newsletters, networking, community-building, and environmental awareness. Advisors have also worked closely with three local governments to develop their capacity for management of public services and infrastructure, economic development, revenue generation, and public involvement in decision-making. Three mayors have visited several U.S. cities to learn about different approaches to local government as practiced in the United States. In addition, USAID advisors have worked with the Government to address changes needed in election laws and procedures; many of the recommendations made have been incorporated in revised laws. USAID funding has been used to provide direct support to new media outlets through purchase of equipment, training, and funding of operating costs. Several dozen journalists have obtained training in investigative reporting, basic writing skills, and management of media operations. American journalists have provided in-country assistance in reporting techniques, use of new technologies, and curriculum development.
Description: USAID activities are working to increase the number, membership, capacity, and activities of indigenous NGOs. Activities also include working with political parties to increase their capacity to address economic and social issues, and to improve their internal management practices. USAID-funded activities also focus on getting people together to peacefully resolve their problems, across ethnic, gender, and social lines. This has involved organizing round table discussions between NGOs and government officials, encouraging the establishment of parent councils in ethnically diverse schools, and assisting in the conduct of town meetings that bring citizens together with their elected officials to discuss common concerns. USAID is working at the national and, increasingly, the local level to establish mechanisms for such public participation; to ensure that regulatory procedures include solicitation of, and responsiveness to, public opinion; and to enact laws which protect the right of citizens to express their opinions on government decisions and activities.
Host Country and Other Donors: Donor assistance in this area has been rather limited. Dutch Interchurch Aid assisted in the creation of an indigenous civic organization (the FYR Macedonian Center for International Cooperation), which has been active in local community-level issues such as income generation, basic health, nutrition, food for the poor, and sanitation. The European Community Humanitarian Office (ECHO) has provided funding for humanitarian activities by indigenous NGOs, as has the International Federation of the Red Cross (IFRC). A number of donor humanitarian activities have used indigenous NGOs as a conduit for distribution of food and other relief supplies, which has had a secondary benefit of building capacity within those organizations.
Beneficiaries: USAID activities seek to benefit all citizens by encouraging greater citizen participation in all aspects of political and social life, whether through professional associations, civic organizations, special interest groups, or political parties. Activities also benefit the Government by assisting in the development of appropriate mechanisms for public participation and of awareness of the importance of such participation to a modern democracy.
Principal Contractors, Grantees, or Agencies: USAID activities have been implemented through a number of contractors and grantees: Catholic Relief Services (CRS), Delphi Star, the International Republican Institute (IRI), the National Democratic Institute (NDI), Development Associates Inc. (DAI), the Institute for Sustainable Communities (ISC), the National Forum Foundation (NFF), and the International Center for Not-For-Profit Law (ICNL). Media programs have been implemented through the U.S. Information Agency (USIA). Training programs have been designed by World Learning and Project HOPE.
Major Results Indicators: Baseline Targets Change in percentage of citizens who report 5% (1995) 25% (2000) having actively participated in citizen-based organizations and groups Ratio of open to closed sessions of municipal 0% (1995) 20% (2000) councils Number of laws enacted with public participation 0 (1995) 8 (2000) Law on administrative procedures (citizen No (1995) Yes (1999) participation) enacted
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