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U.S. Department of State

Diplomacy in Action

II. Country Assessment--Macedonia


U.S. Government Assistance to and Cooperative Activities with Central and Eastern Europe
Bureau of European and Eurasian Affairs
January 2007
Report
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Country Overview 

Country Facts
  • Map of MacedoniaArea: 9,781 sq mi (25,333 sq km), slightly larger than Vermont 
  • Population: 2,050,554 (July 2006 est.) 
  • Population Growth Rate: 0.26% (2006 est.) 
  • Life Expectancy: Male 71.51 yrs., Female 76.62 yrs. (2006 est.) 
  • Infant Mortality: 9.81 deaths/1,000 live births (2006 est.) 
  • Gross Domestic Product (GDP): $16.03 billion (purchasing power parity, 2005 est.)
  • GDP Per Capita Income: $7,800 (purchasing power parity, 2005 est.) 
  • Real GDP Growth: 3.7% (2005 est.)

Overview of U.S. Government Assistance

In FY 2006, the USG allocated an estimated $45.73 million in assistance to Macedonia:

  • $12.07 million in democratic reform programs; 
  • $10.44 million in economic reform programs; 
  • $0.16 million in humanitarian programs; 
  • $9.24 million in security, regional stability, and law enforcement programs; and 
  • $4.05 million in cross-sector and other programs.

FY 2006 Assistance Overview

U.S. STRATEGIC INTERESTS & FOREIGN POLICY PRIORITIES

Macedonia continues to be a steadfast U.S. security partner. The Government of Macedonia (GOM) lent its airspace and voice at the United Nations in support of Operation Enduring Freedom (OEF), continues to contribute troops to coalition operations in Iraq and Afghanistan, provides lines of communication for the operations of NATO's Kosovo Force (KFOR), and has contributed troops to the international peacekeeping mission in Bosnia and Herzegovina.

Macedonia's strategic location, political and economic stability, and desire to join the North Atlantic Treaty Organization (NATO) and the European Union (EU) make it an important force for regional stability. Macedonia's ongoing implementation of the 2001 Ohrid Framework Agreement (FWA), which improved inter-ethnic relations and decentralized government power, provides an example to other multi-ethnic countries of a peaceful, democratic solution to ensuring minority rights. The GOM has fully supported the international effort to negotiate Kosovo's final status. The GOM is also working, in coordination with its neighbors, to reduce its attractiveness as a transit route for smugglers, traffickers, and money-launderers.

U.S. foreign policy priorities in Macedonia lie in further strengthening the bilateral partnership and Macedonia's integration into Euro-Atlantic institutions by supporting continued democratic, judicial, economic, and military reforms.

FOREIGN ASSISTANCE PRIORITIES

With Macedonia's security and stability consolidated, USG assistance priorities include: accelerating economic reforms; ensuring effective and fair rule of law, particularly through fighting corruption and organized crime; strengthening Macedonia's democratic institutions; improving the educational system; and completing military and security reforms. Assistance in each of these areas enhances Macedonia's ability to be a valuable political, economic, and security partner to the U.S., while also improving Macedonia's prospects for future NATO membership.

The main obstacles to continuing implementation of reform efforts include weak government institutions, a relatively high level of corruption, and the GOM's limited financial and human resources. Therefore, USG assistance in FY 2006 focused on strengthening public and private institutions, improving the GOM's transparency, and providing training to key officials to build capacity. Stronger and more transparent institutions, with better trained officials, will improve the GOM's ability to govern, enforce the rule of law, and sustain a more effective and professional military. In the longer-term, greater economic prosperity and a well educated population will support Macedonia's goals in other sectors.

OPERATING ENVIRONMENT

The major political development in FY 2006 was the conduct of parliamentary elections in July, in which a coalition of opposition parties gained power. The party that received the most seats in parliament ran on a platform of accelerated economic reforms and accompanying growth and development. The process of negotiating the new ruling coalition created tensions between the party of the new prime minister and the largest ethnic Albanian party, which ended up outside of the coalition despite its having won the majority of the ethnic Albanian vote. The EU granted Macedonia candidate country status at the end of 2005, but has not set a date for the beginning of accession negotiations.

The election process slowed the GOM's progress on many of its reform efforts, as the previous administration focused on the election campaign, and the new government focused on negotiating a coalition and getting its team in place. The new administration also replaced or moved a number of mid-level government officials, which led to a loss of institutional knowledge. Macedonians' strong desire for NATO and EU membership has assured continuity in the GOM's reform orientation.

COUNTRY PERFORMANCE MEASURES

Macedonia Democratic Reform

The "radar" or "spider web" graphs below illustrate Macedonia's democratic performance during FY 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark lines indicate how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and, (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://inside.usaid.gov/EE/po/mcp.html.

Graph shows Macedonia Democratic Reform:  Average of Romania and Bulgaria-2002, corruption, 2.3; electoral process, 3.7; civil society, 3.5; independent media, 2.8; governance/public admin, 3.0; rule of law, 3.2

The graph above shows Macedonia's democratic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2006 scores not yet available. 

Graph shows Macedonia Democratic Reform: 1999, corruption, 2.3; electoral process, 3.7; civil society, 3.5; independent media, 2.8; governance/public admin, 3.0; rule of law, 3.2
 

The graph above shows Macedonia's democratic reform scores in 2005* (the gray shaded area) as compared to its democratic reform scores in 1999.

*Actual 2006 scores not yet available.

Macedonia Economic Reform

The "radar" or "spider web" graphs below illustrate Macedonia's economic performance during 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark line indicates how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://inside.usaid.gov/EE/po/mcp.html.

Graph shows Macedonia Economic Reform: Average of Romania and Bulgaria-2002, external debt percent GDP, 3.5; private sector share, 3.5; share of employment in SMEs, 4.5; export share of GDP, 1.5; FDI pc cumulative, 2.5; GDP as percent 1989 GDP, 2.5; 3yr avg inflation, 5.0

The graph above shows Macedonia's economic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2006 scores not yet available.

Graph shows Macedonia Economic Reform: 1999, external debt percent GDP, 3.5; private sector share, 3.5; export share of GDP, 1.5; FDI pc cumulative, 2.5; GDP as percent 1989 GDP, 2.5; 3yr avg inflation, 5.0

The graph above shows Macedonia's economic reform scores in 2005* (the gray shaded area) as compared to its economic reform scores in 1999.

*Actual 2006 scores not yet available.

FY 2006 Country Program Performance

Governing Justly and Democratically

Macedonia made significant progress in several areas in this sector. Successful electoral reforms and the generally free and fair conduct of the 2006 parliamentary elections were major milestones in Macedonia's democratic development. Implementation of a national judicial reform strategy, including constitutional amendments and key legal reforms, had a significant impact on the independence, effectiveness, and transparency of the judiciary. The first year of a decentralization process has been relatively successful (according to more than 75% of municipalities in a recent survey), despite some concerns over the level of central government financial transfers. Successful decentralization will contribute to full implementation of the FWA and, as such, regional stability.

One of the challenges to democratic governance during the year was the difficulty experienced by the new administration and the largest ethnic Albanian political party in establishing a constructive dialogue following the July parliamentary elections. Another challenge was the new administration's removal or shuffling of a number of government officials, often for apparently political reasons. These personnel changes, also practiced by previous administrations, increased the difficulty in establishing a non-partisan, expert civil service with institutional knowledge. In addition, corruption continued to plague Macedonia and stymie development.

U.S. ASSISTANCE PRIORITIES

USG priorities in the area of democratic reform were completing implementation of the FWA and strengthening the democratic practices and institutions necessary for NATO and EU membership. The USG is helping Macedonia to become a stable democracy by supporting a more robust balance between the executive, legislative, and judicial branches of government, and by encouraging the GOM to become more accountable to its citizens.

To achieve this, the USG works to improve transparency and accountability in government by: strengthening democratic institutions, including local governments and parliament; increasing the responsiveness of political parties to voters' interests; empowering civil society to monitor the actions of government; supporting a more effective, transparent and independent judicial sector; and, supporting an independent and responsible media. The USG also provides cross-cutting support to bolster the government's efforts to address corruption in the public sector.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, an ongoing USG-funded court modernization project assisted Macedonia's judiciary to develop into a more independent, accountable, and effective branch of government. The project worked with the Ministry of Justice, Supreme Court, and other key legal institutions to carry out key reforms and to strengthen the administrative capacity of the judiciary. USG prosecutorial and criminal investigative trainingprograms aimed to enhance the efficacy of the public prosecutors, promote the reform of criminal laws, encourage increased cooperation between prosecutors and police, and improve the ability of the police to investigate organized crime and corruption cases.

An ongoing decentralization project supported the FWA and provided technical assistance and training for municipalities to help them absorb new competencies under decentralization, including budget management, tax administration, urban planning, and local economic development. The USG also assisted municipalities to adopt e-government technologies to facilitate citizen participation and transparent municipal administration. The USG worked with local community organizations to develop their organizational and managerial skills to help them develop and implement activities that address local needs.

A parliamentarydevelopment project worked to increase the accountability of elected officials and to increase parliamentary independence and efficiency. Political party support programs provided training and consultations to help strengthen the internal democratic practices of political parties and encourage meaningful dialogue between the leadership of the parties and their constituencies. These programs also supported the creation of an independent, non-partisan public policy institute in Macedonia. Grantssupported a variety of non-governmental organizations (NGOs) engaged in democracy-related projects, with a special emphasis on the parliamentary election. The NGOs performed election education targeting young voters, minorities and women, also organizing media events that allowed coverage of substantive issues.

OUTPUTS

In FY 2006, a court modernization project supported the national judicial reform strategy, including constitutional amendments which increased judicial independence and efficiency, and drafting and passage of new laws on courts, judicial council, enforcement, and civil procedure. The project trained 936 judges on new substantive and procedural reforms and trained 1,183 court executives and administrative staff on case flow management, customer service, ethics, and time management. The project also developed a software application to automate and unify court budget management. In addition, the prosecutorial and criminal investigativeprogramsprovided training to 790 judges, prosecutors, and police in areas such as sentencing practices, asset forfeiture, sex crimes, extradition, witness protection, financial crimes, and the use of task forces.

The decentralization project trained 1,018 mayors, council members, and municipal technical staff in areas including leadership, human resources, financial management, tax administration, urban planning/ permitting, and citizen participation. The project developed integrated financial management and tax administration systems including hardware, software, and direct technical assistance to end users, in 56 of 84 municipalities, covering nearly 75% of the population. The project developed a new national construction permitting system which was approved for dissemination to all Macedonian municipalities. The project completed 31 municipal infrastructure projects and 15 more were underway as of the end of FY 2006. The community development projectassisted 118 local community organizations in areas such as strategic planning, business planning, report writing, computer training, and public outreach.

The parliamentary development project carried out a pre-election voter education campaign, which included organizing regional discussion sessions in six major cities on the importance of Macedonia's Code of Conduct for Free and Fair Elections. The Project trained parliamentary committee chairs and clerks in advanced techniques for organizing public hearings, and assisted with preparations for a public hearing on a proposed law on the rights of the disabled. In addition, the project trained 32 campaign managers from nine major political parties on campaign techniques.

Political party support programs worked with all major political parties on their election campaigns, leading to issue-based, rather than strictly negative, campaigns. The programs also promoted greater gender equality on party lists. The small grantsprogram supported NGOs that organized nine pre-election debates on local television stations and six one-hour radio programs. The NGOs distributed 98,500 leaflets, 7,000 brochures, and 1,200 posters to educate citizens on the election process. They also organized meetings, roundtable discussions, and door-to-door activities. USG small grantshelped toeducate approximately 10,000 individuals regarding the election.

PROGRAM PERFORMANCE/IMPACT

The USG-supported laws on civil procedure and enforcement contributed to increased efficiency of Macedonian courts and growing public confidence in the judiciary. The World Bank's business environment report showed Macedonia making the most significant improvement in contract enforcement in the region, improving its ranking from 99 to 72 since 2005. Data for the first three months after the law took effect showed the enforcement rate at 41%, compared with 23% for 2004. USG assistance efforts to improve efficiency in the courts yielded a 45% reduction in the backlog of civil cases older than three years, a clearance rate of 14%, and a 69% customer satisfaction rating in our pilot courts.

USG assistance to the judicial system led to improved coordination between police and prosecutors. Police increasingly report and consult with prosecutors before embarking on investigations, and in some cases have formed specialized joint task forces. Improved investigative and prosecutorial techniques have led to increased numbers of arrests and convictions.

USG efforts in support of decentralization built municipalities' capacity to successfully assume new responsibilities. Training, technical assistance, hardware, and software created both the capacity and awareness in local governments to manage their finances transparently and to engage better with citizens. As a result of these efforts, most local governments registered faster permit issuance, better financial reporting, and increased local revenue generation. Since the USG-funded project started, there has been a 70% increase in the scores for municipalities' capacity to manage core responsibilities under decentralization. This improvement is reflected in citizen perceptions of the effectiveness of local government, which has grown from 38% to 48% since 2004. The USG-funded community development projectstrengthened local community organizations' ability to meet citizens' needs and improved the long-term sustainability of these organizations.

The USG's work on the Code of Conduct for Free and Fair Elections, signed and supported by all political parties, contributed to the positive conduct of the 2006 parliamentary elections. The Macedonian parliament is more independent and increasingly opening the legislative process through public hearings, constituency offices, and open houses. The parliament also is becoming the author of legislation and reform, rather than simply the enabler of executive branch proposals. As a result of the USG's support for more equitable gender representation in parliament, women represented 37.5% of the candidates in the 2006 parliamentary elections and 37 women were elected to parliament, representing 31% of parliament. Party leaders from across the political spectrum credit USG campaign consultations and training as directly assisting in their preparations for the 2006 elections. Major Macedonian parties developed campaign programs based on citizen priorities. Encouraged by USG assistance, media-disseminated election-related information reached all regions of the country and all ethnic groups, and younger voters, women, and minorities had more information on the election process and campaigns than during any previous election.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Governing Justly and Democratically. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Judicial Framework and Independence Rating. This indicator highlights constitutional reform, human rights protections, criminal code reform, judicial independence, the status of ethnic minority rights, guarantees of equality before the law, treatment of suspects and prisoners, and compliance with judicial decisions. (7-point scale: 1 is the highest, 7 is the lowest). Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at
http://www.freedomhouse.org/research/nattransit.htm

CY 2003 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

4.50

3.75

3.75

3.5



Impact of U.S. Assistance on the Above Indicator: While Macedonia's CY 2006 rank remained unchanged from CY 2005, a greater improvement is expected next year when actual CY 2006 data are reported.

Performance Indicator: Local Democratic Governance. This indicator considers the decentralization of power, the responsibilities, election, and capacity of local governmental bodies, and the transparency and accountability of local authorities. Ratings are measured from 1 to 7, with 1 representing greatest development of local democratic governance. Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at: http://www.freedomhouse.org/research/nattransit.htm.

CY 2005 Baseline*

CY 2006 Rank

CY 2007 Target

4.00

3.75

3.5


*Freedom House Rating begins in 2005 as quoted above.

Impact of U.S. Assistance on the Above Indicator: This indicator shows continued improvement. A controversial law on territorial organization and subsequent referendum of 2004 got decentralization off to a slow start. However, the positive performance of municipalities, supported by USG technical assistance and capital inputs, led to a swift turnaround of public opinion. Most local governments registered faster permit issuance, better financial reporting, and increased local revenue generation. Improved local government capacity led to improved services, reflected in citizen perception of local government effectiveness, which rose from 38% to 48% in FY 2006.

Economic Growth

In FY 2006, the Macedonian Government continued to maintain macroeconomic stability and fiscal discipline, both of which are necessary to sustain long-term economic growth. The GOM also continued to make progress on economic reform programs in coordination with the international community, including the USG, the International Monetary Fund, World Bank, the EU, and the European Bank for Reconstruction and Development. In March, the GOM privatized the energy distribution system, an important step in opening the energy sector to market forces.

Despite these efforts, Macedonia's economic growth rate of 4% in 2005 lagged behind growth in other countries in the region; the official unemployment rate remained stubbornly high at 36% (the real rate, taking into account the grey economy, is likely lower but still high). There has been little progress in reducing the poverty rate and foreign direct investment (FDI) remains low. The business environment is burdened with a rigid labor market, costly social contributions, and unclear and burdensome regulations. However, the new Government has made acceleration of economic reforms its goal, with a promise of higher future growth rates. GOM officials plan to cut taxes, improve regulatory transparency, reduce administrative red tape, and strengthen the enforcement of private contracts in order to boost economic growth.

U.S. ASSISTANCE PRIORITIES

In FY 2006, USG assistance in support of economic growth focused on improving the business environment to increase legitimate economic activity, increase the competitiveness of the private sector, and strengthen the GOM's budgetary process. Programs were directed to improve the legal and regulatory frameworks in key areas, streamline business registration procedures, introduce public private dialogue in formulating government policies, facilitate efficient enforcement of existing laws and regulations, fight corruption and increase transparency of government procedures by introducing information technology solutions.

The USG assisted selected sectors to improve their competitive positions domestically and in foreign markets through improved marketing, increased productivity, infusion of technology, adding more value to products and services, improved access to capital, and workforce development. The development of the agribusiness sector was supported through compliance with international food quality standards, development of new products, and export assistance. USG assistance also promoted dialogue and partnerships in the private sector to advocate for policy changes, jointly approach foreign markets, and implement development initiatives of common benefit to both parties. Another USG priority was assisting the GOM in creating and executing a transparent, effective budgetary process that reduces waste and corruption.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

Activities to create a modern and efficient legal and regulatory framework for registration, operation, and liquidation of companies, to promote greater transparency, financial disclosure, heightened shareholder protection, and improved corporate governance focused on bringing Macedonia into full compliance with World Trade Organization (WTO) requirements and on increasing participation by the private sector in trade policy formulation. A USG-funded technical advisor also assisted the GOM in improving its budget development and execution and supports the development of budget creation and monitoring software.

An "e-government" project introduced information and communications technology (ICT) solutions to improve the efficiency and transparency of government procedures. It also worked to increase the knowledge, understanding and appreciation of this technology among civil servants, the business community, and the general public.

USG private sector support activities focused on developing sector strategies for improving competitiveness, identifying priorities for interventions, and building the capacity and leadership of industry clusters. This included strengthening the National Entrepreneurship and Competitiveness Council (NECC) where business and government representatives engage in public-private dialogue on policy reform. Seven centers were established to enable small- and medium-sized enterprises (SMEs) to use high-impact ICT applications, such as computer aided design/manufacturing systems and web portals. Assistance to the agribusiness sector focused on enhancing quality and production efficiency, pursuing joint marketing activities, and adding increased value to products. A SME Fund was established to fill a critical gap in local financial markets for SMEs. To help start a new "environment-friendly" industry, the USG provided support to businesses that collect and recycle plastic bottles. In the energysector, the USG provided technical assistance to help build a modern legal and regulatory framework, develop electricity market models, strengthen the independent energy regulator, and facilitate the privatization of the system.

OUTPUTS

USG assistance strengthened the economic legal and regulatory framework with several new laws and regulations. A modern bankruptcy law streamlined procedures shifting business decisions away from judges to the bankruptcy trustee and creditors. By-laws for a new electronic communications law enabled its practical implementation. The USG provided legal and regulatory assistance in the process of unbundling the Macedonia Electric Company and established a foundation for the privatization of the distribution company. USG support also led to numerous improvements in the GOM budget process, including training for 135 government employees, a doubling of the number of performance indicators in the budget, and the publication of a readable budget summary accessible to all citizens.

The USG-funded WTO compliance projectorganized, together with the GOM, the Second Conference on Enhancing Exports for Macedonian businessmen. The 2006 Foreign Trade Report provided a comprehensive list of recommendations from participants on how to overcome obstacles to doing business in Macedonia. The e-government project developed and launched two new applications. E-tax application facilitated an online tax filing system, initially used by the 130 largest companies in Macedonia. The e-health application monitored the distribution and consumption of drugs, and helped the Ministry of Health to control expenditures on drugs. Over 200 civil servants participated in ICT Privacy and Security training.

The competitiveness project helped the lamb, cheese, wine, tourism, ICT, digital media, and textile clusters develop sector strategies to improve their competitiveness. Over 180 companies participated in activities for improving productivity, product development, marketing, and promotion in foreign markets. After USG assistance ends, all clusters will continue to operate as self-sustainable, professional trade associations with fee-paying members. Fourteen companies in the digital media industry formed a joint venture company that will offer services to the world entertainment industry. The NECC produced the first Macedonia Competitiveness Report with recommendations to the GOM for improving competitiveness on the national level. In the tourism, machine tool, apparel, and footwear industries, 445 SMEs, which is double what it was in 2005, used the technology services, marketing and promotion opportunities, and management training offered by e-business centers.

Agribusiness assistance resulted in the establishment of 45 strategic partnerships between food producers and retailers. Over 1,880 participants from the meat, dairy, fruit and vegetable industries, and related government institutions received training and consultancies in an integrated farm management approach and implementation of European and international food quality and safety standards. Food processors developed 39 new meat and dairy products, implemented 28 new technologies, and significantly improved business practices. Companies invested over $12.6 million in equipment and facility improvements and employed 180 new workers. The SME Fund made 36 working capital loans to 30 clients totaling $2.5 million. The rural credit savings house offered loans for farmers, students, and employment start ups in the amount of $3.4 million. With USG support, eight plastic bottle recyclers purchased pressing machines, washing lines and shredders for bailing plastic bottles or producing semifinal products. The organizations built individual collection networks, providing additional income to over 200 individuals.

PROGRAM PERFORMANCE/IMPACT

With USG support, the GOM introduced a modern one-stop-shop business registration system. The new system reduced the time needed to register a business from the previous average of 45 to less than 5 days, and cut the cost from over $250 to less than $100 for a business permit. Over 4,000 businesses have registered since January 1, 2006, when the one-stop-shop became operational.

A new law on electronic communications and its by-laws significantly liberalized the telecommunications market, especially in the area of providing internet access and cable television. It resulted in increased competition among the internet service providers, reduced prices for using the Internet, and increased Internet penetration. Improvements in the budgetary process led to greater transparency in the allocation and spending of GOM funds, as well as better alignment between priorities, allocations, and performance indicators.

USG assistance to the energy sector culminated with the sale of Macedonia's electricity distribution company for a price of $280 million, the highest price per meter price obtained in the sale of any power distribution company in the Balkans. The Energy Regulatory Commission acted on a number of requests for both electricity and heat price increases, using an objective tariff methodology the USG helped develop. This reduced charges of political interference in pricing decisions.

USG competitiveness and agribusiness activities were directly responsible for over $30 million in export sales. Assisted apparel and footwear companies are now exhibiting at major international trade fairs, are improving productivity, and are using modern computer aided design/manufacturing technology. This has led to orders from top fashion brands such as H&M, Armani, Prada, and Versace. The Exploring Macedonia tourism portal invited a YAHOO! Adventures team to Macedonia, which led to Macedonia being the prime feature on this web portal for the month of July. Millions of people saw the interactive media presentation of the cultural, natural, and historic beauties Macedonia has to offer. This contributed to the doubling of foreign visitors in Macedonia compared to 2005.

Food producers and processors recognized the need to obtain food safety standards accreditations. Through USG assistance, two food processors retained British Retail Consortium (BRC) accreditations, four fruit and vegetable producers earned European accreditations, and two additional companies are implementing international safety standards. These firms can now export their products throughout Europe.

The SME Fund, established in 2003, became a sustainable non-bank financial institution without the need for further support from the USG. It attracted a long-term, low-interest loan of $1 million from the Norwegian Development Agency, which will allow it to continue to provide loans for at least another 8 years.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Economic Growth. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Second Stage Economic Policy Reforms Average. This average measures five economic indicators, such as enterprise governance, competition policy, banking reform, capital market reform, and infrastructure reform analyzed in the "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #10 March 2006, drawing from EBRD, Transition Report. Ratings are based on a 1 to 5 scale, with 5 being most advanced. Found on line at http://inside.usaid.gov/EE/po/mcp.html.

FY 2003 Baseline

FY 2005 Rank

FY 2006 Rank

FY 2007 Target

2.2

2.2

2.2

2.4


Impact of U.S. Assistance on the Above Indicator: The GOM has had to tackle economic reforms on a number of fronts and with limited resources. During FY 2006, with the support of USG assistance, these efforts had an increasing impact. For example, the one-stop-shop company registration, introduced on January 1, 2006, significantly lowered the time and cost of company registration, the new bankruptcy law streamlined procedures, and the Macedonia Electric Company was unbundled and sold the distribution portion to a foreign investor. It is expected that these achievements will increase this indicator in FY 2007.

Performance Indicator: Private Sector Share of Gross Domestic Product (GDP). This data is analyzed in the "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #10 March 2006, drawing from EBRD, Transition Report. Ratings are based on a 1 to 5 scale, with 5 being most advanced. Found on line at http://inside.usaid.gov/EE/po/mcp.html.

FY 2003 Baseline

FY 2005 Rank

FY 2006 Rank

FY 2007 Target

3.5

3.5

3.5

3.5



Impact of U.S. Assistance on the Above Indicator: A large part of USG economic growth assistance focused on improving the competitiveness of SMEs in industries with export potential, such as agribusiness, ICT, textiles, footwear, and tourism. Many Macedonian companies adopted modern management and marketing practices, significantly improved productivity, invested in new technologies and improved quality standards. Despite these positive trends, overall export growth has been slow. Foreign investors are still avoiding Macedonia, mostly due to lack of government transparency in policy formulation, the inefficient judicial system, unclear property ownerships, and slow movement of goods across the borders.

Investing in People

The Government of Macedonia is taking steps to improve the quality and relevance of education, but has not been as focused on social reforms as it is on economic and political issues. The GOM adopted a national strategy for educational development for 2005-2015 and a law on vocational education and training. However, Macedonia still lags considerably behind many transition countries in educational performance.

The recently-elected Government has proposed a number of reforms within the education sector, including an increase of public funds for education to 5% of GDP, following the EU and Organization for Economic Cooperation and Development (OECD) average. Such reforms, if implemented, will demonstrate the GOM's desire to tackle social issues. Macedonia's long-term development will be determined by the country's ability to provide quality education at all levels.

U.S. ASSISTANCE PRIORITIES

In FY 2006, USG assistance priorities were to increase the quality, access, and relevance of basic and higher education for all Macedonians. Priorities included: building relationships between vocational schools and businesses to make vocational education more relevant to the job market and to better prepare youth for the workforce; comprehensive education support for disadvantaged Roma youth; improving university instructional quality and better preparing university students for employment; integrating information technology into primary and secondary schools; and, improving students' access to high quality English language instruction.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

As Macedonia's continued development requires improved Internet access, USG assistance supported the expansion of affordable, accessible broadband internet to the entire country, including 550 schools and other education institutions. Through an e-schools project, the USG installed new computer labs in every primary and secondary school in Macedonia and provided extensive computer training for teachers that will improve the quality of teaching and prepare students for the labor market.

Other USG education programs worked to introduce critical thinking teaching methods, establish media labs with new computers and internet connectivity, and train teachers in new teaching methods and curriculum design. A Roma education project supported the "Decade of Roma Inclusion", an international effort to close the gap in welfare and living conditions between the Roma and non-Roma. In Macedonia, USG assistance provided support to Roma students to enter and remain in school. A secondary education activity improved the quality of education in vocational schools. Students gained practical knowledge by running a company through their participation in student businesses. This assistance improved school administration through a certification program and support to school boards. A USG-supported higher education project helped the South East European University (SEEU), the first multi-ethnic, multi-lingual private university in Macedonia, improve its quality. USG assistance focused on equipping students with skills necessary for employment, linking companies with SEEU, and training instructors in modern teaching methods, information technology, and English language. An English education development project provided Macedonian teachers, students, parents, and community members with improved capabilities in using English.

OUTPUTS

Through USG assistance, 550 educational institutions gained access to the internet, which allowed primary and secondary students throughout the country to gain access to the internet. In addition, an375 teachers were trained to build school web sites. Through the e-schools project, 2,838 secondary school teachers from all 91 secondary schools in Macedonia successfully completed training in curriculum and technology integration, 414 teachers completed training in the use of "ToolKid" software application, and 6,663 primary teachers were trained in innovative uses of technology in primary schools.

Through other education projects: 45 university teachers received comprehensive training in interactive methodologies; 45 university teachers and administrators were introduced to the EU Bologna Process requirements and trained in the European Credit Transfer System (ECTS); 49 university teachers were trained in curriculum design according to ECTS; three model classrooms and three media labs were set up in teacher training institutions; 65 instructors and teachers were trained in ICT use in the curriculum; 265 students were trained in interactive teaching methodologies; and 115 students were trained in the concept of Education for Social Justice. A project to educate Roma children provided: 152 Roma pre-school children with educational assistance; 593 Roma primary school students benefited from daily support in Roma Education Centers (REC); 247 Roma secondary school students received scholarship and school-based mentorship support; 95 high school mentors received anti-bias training; 48 Roma university students received scholarship and mentorship support; 19 university mentors were trained in effective mentorship; and 200 primary school teachers and 58 REC educators completed a comprehensive training package consisting of child-centered methodologies, anti-discrimination, and school improvement plans development.

A USG supported secondary school programtrained 496 existing or potential secondary and primary school directors as well as 2,910 teachers. A mentoring program began in 15 vocational schools and trained 90 participants, 50 career centers became operational and equipped with computers and audio visual equipment, 44 teams were trained in business plan development and record keeping, 44 real companies and 20 virtual firms were established, 67 local vocational student organizations were created, over 1,100 school board members participated in awareness meetings to understand their legal rights and responsibilities, and over 10,000 secondary students attended a vocational education fair. As a result of a USG higher education project, 62 businesses and 6,500 students attended the Career Fair. In addition, 40 participants attended specialized English courses, IT skills training, and teaching methodology workshops, and 126 SEEU instructors and 2,280 students were trained in the use of Angel e-learning software. An Englishteaching project benefited over 10,500 youths and trained over 230 teachers in new methods to improve their English language instruction methods.

PROGRAM PERFORMANCE/IMPACT

Due to the USG's investment in ICT, Macedonia is now the "first wireless internet country in the world." Hundreds of computer labs are installed in schools, thousands of teachers from every school in the country are trained to use computers and integrate them into the curriculum, and children and youth are learning the skills they need to be prepared for the modern-day workforce. Survey results indicate that 80% of youth are computer users and the most common place for them to use the internet is in school. Thirty-six percent started to use the internet in 2006, indicating that the availability of the internet in schools is making a difference. ICT training has also provided an arena where ethnic Albanian and Macedonian students and teachers in ethnically-mixed schools can collaborate and communicate. Another result of this program was an overall 75% reduction of internet prices due to increased availability and competition.

As a consequence of USG assistance, hundreds of Macedonian youth are equipped with practical business and entrepreneurial skills and have the opportunity to apply them in the management and financial oversight of real firms within their schools. As a result, schools and students are building stronger linkages with the business community. USG-assisted career centers equip youth with job-search skills and helping them to hone their resume writing, interviewing, and public speaking capabilities. Roma youth, who would not have gained a formal education, are integrating into the school system, increasing their future employment options.

The USG is strengthening the quality of higher education at SEEU through its support of the faculties of business administration and communications science and technology. By improving the business management, communications, and computer skills of students, SEEU provides them with employable skills to compete in the job market. Professors learn cutting-edge methods of incorporating ICT into their teaching and are utilizing distance education for the first time. Thousands of Macedonians have increased their English language proficiency, improving their ability to interact with English speakers from other countries, to read and watch English language media, and to compete for jobs that require English language ability.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Investing in People. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Secondary School Enrollment. Source: "Monitoring Country Progress in Eastern Europe and Eurasia" USAID/E&E/PO, #10 March 2006, drawing from UNICEF, Social Monitor 2005, World Bank, World Bank Development Indicators 2005 and EBRD, Transition Report 2005. Ratings are based on a 1 to 5 scale, with 5 representing most advanced. Found on line at: http://inside.usaid.gov/EE/po/mcp.html.

FY 2002 Baseline

FY 2004 Rank

FY 2005 Rank

FY 2006 Target

2.5

3.0

3.0

3.5



Impact of U.S. Assistance on the Above Indicator: This indicator shows no improvement from the FY 2004 rank to that of FY 2005. One possible explanation is that as this performance indicator rank is based on data collected the previous year, it will be another year before the impact of FY 2006 programs is known. It is also possible that this indicator will not improve for a number of years until the primary and middle school students, who are benefiting from assistance provided by the USG and other donors, will be enrolled in secondary school.

Performance Indicator: Unemployment Rate. Source: International Monetary Fund survey. Found online at www.imf.org.

FY 2001 Percentage

FY 2004 Percentage

FY 2005 Percentage

FY 2006 Target

30.5%

37.2

37.3%

36%



Impact of U.S. Assistance on the Above Indicator: The official unemployment rate in Macedonia has remained stubbornly high. Low levels of business investment and the restructuring of existing businesses limit the number of new positions available. As business investment increases, USG programs are working to ensure that students have the practical skills they need to successfully enter the workforce. These programs are also building linkages between students, schools, and businesses in order to foster relationships that may translate into future employment opportunities.

Peace and Security

Macedonia received high marks for its continued military reforms and continued its participation in the Global War on Terror, with military personnel serving in coalition operations in Iraq and Afghanistan. The GOM also continued to strengthen its efforts to combat transnational crime in the areas of drug smuggling, trafficking in persons (TIP), money laundering, and smuggling of weapons of mass destruction (WMD). The GOM cooperated with its neighbors in investigations that led to several drug busts, adopted a national anti-TIP strategy, convicted human traffickers, and opened money laundering investigations.

Despite these advances, however, the legal and law enforcement institutions charged with fighting transnational crime remained relatively weak due to corruption, limited resources, low salaries, and insufficient training and equipment. The new Government's replacement and shuffling of a large number of law enforcement personnel further weakened those institutions.

U.S. ASSISTANCE PRIORITIES

In FY 2006, USG assistance in support of peace and security was designed to help bolster Macedonia's NATO membership candidacy and improve its ability to fight transnational crime and terrorism. Support to the Macedonian military was aimed at bolstering its ability to complete its modernization and personnel reforms, as well as enhance its ability to interoperate with NATO-member forces regionally and internationally. USG assistance also targeted strengthening the institutional capacity of the GOM to stop TIP, interdict smuggled drugs and laundered money, and ensure that borders are secure against the potential transit of WMD materials. In addition, USG assistance supported law enforcement's ability to prevent, counter and investigate terrorist attacks.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

USG military assistance was directed at enhancing the capabilities and employability of Macedonian forces in support of international peacekeeping and coalition missions in Iraq and Afghanistan. USG assistance provided technical expertise to strengthen the army and Ministry of Defense (MOD) in the areas of resource management, human resources, logistics, and training. The USG also provided key equipment necessary for units to function effectively, and funded English language training for officers, non-commissioned officers (NCOs) and MOD officials. Under USG programs, Macedonian officers and NCOs broadened their military education in the U.S.

USG assistance provided training to police officers in anti-terrorism activities and modern methods of investigating terrorist acts; resources and training to thwart proliferation of materials with WMD and ballistic missile applications; and training and technical assistance to police, prosecutors and judges in the areas of combating organized crime and transnational crime.

OUTPUTS

USG military assistance aimed at institutional reforms included: conducting eight workshops on multi-year resource management with both senior leaders and operational level personnel, assisting the MOD in adopting a new systematic resource planning and execution system as well as an education and training strategy, and providing English language training to 325 students. USG assistance provided training in the U.S. for 20 officers and NCOs.

USG anti-terrorism assistance provided training to approximately 125 police officers in the areas of vital installations security, trainer development, post-blast investigations, hostage negotiations, counter-terrorism strategies, and major case investigations in order to increase the GOM's capacity in these areas. Another program donated WMD detection equipment to customs officials, border police and the Radiation Safety Directorate, and conducted nine training courses on detecting and interdicting WMD materials for approximately 200 GOM officials. Rule of law and law enforcement programs provided training to approximately 790 judicial system officials, including training in combating organized crime, trafficking in persons, money laundering, and narcotics smuggling.

PROGRAM PERFORMANCE/IMPACT

USG military assistance was successful in helping Macedonia meet its NATO reform targets, specifically in encouraging the transition to a lighter, more flexible and professional force. USG assistance also financed equipment which facilitated better interoperability between Macedonian forces and NATO forces during regional exercises and coalition forces in Iraq and Afghanistan. English language training improved Macedonians' ability to communicate with NATO counterparts. Macedonian alumni of USG military training helped transform the military mindset, which is necessary to build support for additional institutional changes.

During FY 2006, the GOM adopted a national strategy to fight human trafficking and illegal Migration and a parallel national action plan. Two major successful human trafficking/migrant smuggling investigations resulted in 35 arrests, including the arrest of police and customs officials. In one case, all seven defendants were convicted and sentenced to prison terms of five to eight years. In the other case, all 28 defendants were convicted, receiving sentences up to 13 years. The prosecutor in the first case and the judge in the second case were graduates of USG training programs.

The GOM significantly increased its seizures of heroin, opium and marijuana during FY 2006. The USG supported the GOM and the Government of Greece in a cross-border counter-drug operation that resulted in a significant drug seizure and the conviction in Macedonia of four of those involved.

The GOM also signed an agreement with the USG to install a computerized system to review and track export licenses for potential dual-use technology.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Security, Regional Stability and Law Enforcement. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year, or January 1 - December 31.

Performance Indicator: Judicial Framework and Independence Rating (formerly Constitutional, Legislative, and Judicial Framework Rating). This indicator highlights constitutional reform, human rights protections, criminal code reform, judicial independence, the status of ethnic minority rights, guarantees of equality before the law, treatment of suspects and prisoners, and compliance with judicial decisions. (7-point scale: 1 is the highest, 7 is the lowest). Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at
http://www.freedomhouse.org/research/nattransit.htm

CY 2003 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

4.50

3.75

3.75

3.5



Impact of U.S. Assistance on the Above Indicator: While the CY 2006 score/rank on this indicator did not show any progress from 2004 to 2005, progress has been made since the baseline.

Performance Indicator: Trafficking in Persons Country Ranking. The annual Trafficking in Persons (TIP)
Report includes those countries determined to be countries of origin, transit, or destination for a significant number of victims of severe forms of trafficking. The Report rates countries as Tier 1, Tier 2, Tier 2 Watch List, or Tier 3. Tier 1 reflects countries whose governments fully comply with the Trafficking Victims Protection Act 2000 minimum standards; Tier 2 reflects countries whose governments do not fully comply with the Act's minimum standards but are making significant efforts to achieve compliance with those standards; Tier 2 Special Watch List is the same as Tier 2 but also denotes a deteriorating trafficking environment (i.e. the absolute number of victims of severe forms of trafficking is very significant or is significantly increasing); and Tier 3: Countries whose governments do not fully comply with the minimum standards and are not making significant efforts to do so. Source: State Department TIP Report 2005. Found on line at
http://www.state.gov/j/tip/rls/tiprpt/2005/.

CY 2003 Baseline

CY 2004

CY 2005 Rank

CY 2006 Target

Tier 1

Tier 2

Tier 2

Tier 2



Impact of U.S. Assistance on the Above Indicator: The USG has supported the GOM's efforts to combat TIP through training members of the judicial system in TIP issues, which helped the GOM arrest and convict members of TIP criminal rings, public education, and support for the drafting of the national strategy to fight human trafficking and illegal migration. Still, the GOM has not progressed enough to be determined a Tier 1 country.

FY 2006 Funds Budgeted for U.S. Government Assistance to Macedonia [PDF format]



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