Republic of Macedonia
The Development Challenge
The Republic of Macedonia is faced with the dual development challenge of trying to build a stable, multi-ethnic society, while completing the transition to a democratic, market-oriented economy. Its future depends upon successfully managing these development challenges. Macedonia has made significant progress toward reestablishing peace and building the foundations of a functioning democracy. Since the signing of the Ohrid Framework Agreement, which ended the 2001 ethnic conflict, the government has modified the constitution in 16 areas to comply with the peace accord; passed landmark legislation to begin decentralizing government; and implemented an amnesty law that paved the way for former combatants to reintegrate into society. Free and fair parliamentary elections in 2002 resulted in the election of a moderate government that is committed to implementation of the Framework Agreement. Despite the general improvement in inter-ethnic relationships, ethnic tensions remain high and ethnically motivated acts of violence still occur sporadically. On the economic front, the Prime Minister undertook a major cabinet reshuffle replacing the ministers of Economy, Finance, and Transport and Communications in an effort to deal with the slow pace of economic growth, which was estimated at just less than 3% in 2003. Further, unemployment climbed from 32% to 37% during the past year, according to the Government of Macedonia's Labor Market Survey. On a positive note, Macedonia did successfully negotiate a Stand-By Arrangement with the International Monetary Fund (IMF), which frees up $150 million in donor funding and will give a substantial boost to needed structural reform efforts. The resultant macroeconomic stabilization will generally strengthen the business climate and should improve prospects for next year. But to enable more extensive investment, further action will be needed to reduce corruption and to create a more business-friendly legal environment.
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Macedonia remains the poorest country of the former Yugoslav Republics. According to the National Bank of the Republic of Macedonia, per capita GDP for 2002 was $1,835. In 2002, real GDP grew by 0.7%, and the preliminary estimate for 2003 is 3%. External debt for 2002 was 41.6% of GDP.
Key U.S. national interests in Macedonia include national and regional stability, economic prosperity, and democratization. Macedonia is also in a position to be a helpful partner in combating organized crime and extremists in the region.
The USAID Program: The USAID program is aimed at addressing the principal challenges that Macedonia faces, namely maintaining stability and addressing the root causes of ethnic conflict. USAID's objectives concentrate on the revitalization and accelerated growth of the private sector; strengthening vital components of democracy, including decentralization; and preparing the labor market for the transition to a market economy by reorienting the education system to train for modern job skills. Private sector activities include competitiveness, financial sector reform, and active participation in the World Trade Organization (WTO), energy privatization, small and medium enterprise (SME) financing, corporate governance, and quality improvements for agricultural processors. Democracy assistance includes decentralization, support for the 2004 presidential and local elections, judicial reform, parliamentary development, strengthening political parties, and civil society development. Labor market reform assistance includes support for primary and secondary school reform, expansion of information, communication and technological capability in schools, and assistance to strengthen the quality of instruction at the South East European University (SEEU). USAID also intends to use FY 2004 funds to respond to changing circumstances, such as increasing the integration of minority groups into Macedonian society, combating human trafficking, and developing human resources. USAID will continue to implement assistance in cooperation with a solid network of development partners, including the Government of Macedonia (GoM); a variety of non-governmental actors; the private sector; and the education community.
Other Program Elements: USAID's Bureau for Europe and Eurasia Bureau is funding four regional projects in Macedonia. The Strengthening the Youth Sector Program provides capacity-building services through coaching, workshops, exchange programs, and grants for non-governmental organizations (NGOs) supporting youth in South Eastern Europe countries. In these exchanges, NGOs share information and technical expertise on civil society's role in improving employment, technology, non-formal education, health, civic education, and democracy building. So far, eight out of 48 grants have been given to youth NGOs in Macedonia for projects in non-formal education, health promotion, and technology. Another project is the Joint History and Reconciliation Project being implemented by the Center for Democracy and Reconciliation in South East Europe. This activity is providing alternative teaching kits for history teachers at primary and secondary school levels. The third is the Balkan Trust for Democracy, a program to strengthen democratic institutions in the region. It has made one grant to a local NGO in Macedonia, in order to host a workshop for youth leaders from the Balkans to discuss common community development issues across the region. The final project is the Regional Networking Program for NGOs implemented by Freedom House. This program provided grant support for interchange of ideas between Albanian and Macedonian NGOs to enhance relations between the countries.
Other Donors: USAID and other donors collaborate on issues of particular interest to the U.S. Government, such as decentralization, development of SMEs, and reforms in the judiciary, education, financial and pension systems. The United States and the European Union (EU) are the largest donors in Macedonia. The European Agency for Reconstruction (the EU development arm) focuses on good governance, institution-building, rule of law, market economy development, environment, infrastructure, social development, and civil society strengthening. The Dutch government is the third largest donor, providing balance-of-payments assistance, support to the education, agriculture and public finance reforms; and assistance for development of a civil society and respect for human rights. Macedonia also receives assistance from the German, British, and Swedish governments. Donor coordination is excellent.
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