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U.S. Department of State

Diplomacy in Action

FY 2007 SEED Act Implementation Report


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

U.S. FOREIGN POLICY AND FOREIGN ASSISTANCE OBJECTIVES & PRIORITIES

The primary strategic goal for the U.S. Government (USG) in Macedonia is to help Macedonia prepare for NATO membership in anticipation of invitations being issued at the 2008 NATO summit, while it continues on the path towards EU membership, thus deepening its contributions to regional stability, security, and economic development. The work of the Government of Macedonia (GOM) to prepare for NATO membership also strengthens Macedonia’s preparedness as an EU candidate-country, helping it toward full EU membership in the future. Macedonia’s success with domestic reforms and its full integration into Euro-Atlantic institutions will be an important signal for regional neighbors also aspiring to EU and NATO membership.

Macedonia‘s strategic location, political and economic stability, and desire to join NATO and the EU (in opinion polls over 90% of Macedonians support NATO and EU membership) make it an important force for regional stability. Macedonia currently provides and manages lines of communication for the operations of NATO’s Kosovo Force (KFOR) and contributes troops to the international peacekeeping mission in Bosnia and Herzegovina. Macedonia has also fully supported the international effort to reach a final settlement on Kosovo’s status.

Macedonia continues to be a steadfast U.S. security partner globally, with increasing numbers of troops participating in coalition operations in Iraq and Afghanistan. Its government recently approved a doubling of the number of Macedonian troops operating in Iraq. It also has personnel with the UN mission in Lebanon. If Macedonia were to be invited to join NATO, it would be better positioned to increase its role as a security contributor in NATO missions in the region and beyond. To be considered an attractive candidate for NATO and EU membership, Macedonia must demonstrate progress on strengthening the judiciary, on fighting corruption, on continuing implementation of the 2001 Ohrid Framework Agreement which brought an end to the 2001 conflict between ethnic Albanian insurgents and government security forces, and on improving political dialogue between the government and the opposition and building consensus on overarching national priorities.

The USG is also supporting GOM efforts, in coordination with its neighbors, to reduce its attractiveness as a transit route for smugglers, traffickers, and money-launderers. Strengthened border controls, coupled with improved law enforcement investigations and prosecutions, will ensure that Macedonia’s domestic criminals face legal sanctions and that Macedonia can not become a safe haven for organized crime, while they also contribute to regional enforcement efforts.

A strong Macedonian economy, based on sustainable and broad-based factors, is another key USG priority. Macedonia has maintained commendable macroeconomic stability and fiscal discipline over the past few years and the current government has taken bold steps on the macroeconomic front; however, growth, investment and employment remain much weaker than necessary to increase growth rates. An economy that generates more economic security through jobs and higher incomes will enhance social stability and reduce the attractiveness of Macedonia’s gray economy, while also contributing to a deeper economic cooperation and integration with other countries in the region, making it a stronger prospective EU member.

USG foreign assistance priorities include helping the Government of Macedonia and its citizens continue the democratic, economic, and military reforms needed to strengthen public and civic institutions and increase economic and educational opportunities. Continuing these reforms will ensure Macedonia has the capacity to meet NATO commitments (if accepted as a member) and advance on the path to EU membership. The challenges to continuing implementation of these reforms include corruption, still weak government institutions, and the GOM’s limited financial and human resources.

OPERATING ENVIRONMENT

FY 2007 roughly corresponded to the current Macedonian government’s first year in office. During the year the GOM continued reforms begun in previous years and initiated new reforms, especially in the economic sphere. The reforms were hampered in some areas by turnover in the administration, as the GOM continued in the tradition replacing, moving or demoting mid-level officials, leading to loss or inefficient use of institutional knowledge and resources.

Political tensions between the largest party in the GOM, the VMRO-DPMNE, and the opposition, particularly the ethnic Albanian party DUI, inhibited the political consensus needed for the effective functioning of parliament and a more accelerated reform pace. DUI left parliament for several weeks in the spring to protest the government’s actions. Lengthy negotiations between VMRO-DPMNE and DUI representatives led to a political agreement in May, and DUI returned to parliament. At the end of FY 2007 efforts to implement the May agreement continued, with some notable progress in the final weeks of the year.

Economically, the environment improved somewhat. The pace of economic growth ratcheted up during the first six months of 2007, increasing to 5.4% from a rate of 3% to 4% in previous years. Employment also increased slightly from previous periods, but the official unemployment rate remained high at 35%. The GOM’s steps to address corruption began to pay of in the form of much-improved Transparency International ratings for the year.

FY 2007 Country Program Performance

PEACE AND SECURITY

In FY 2007 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.

Military Reform - Support to the Macedonian military was aimed at helping it complete its modernization and personnel reforms, enhance its ability to interoperate with NATO-member forces regionally and internationally, and improve the capabilities and the deployability of Macedonian forces in support of international peacekeeping and coalition missions in Iraq and Afghanistan.

USG military assistance aimed at institutional reforms included: continued workshops on multi-year resource management with both senior leaders and operational level personnel, assisting the Ministry of Defense (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 25 officers and NCOs; in-country training for 27 officials in "Civil-Military Responses to Terrorism;” the Macedonian military attended 19 Marshall Center conferences; and 14 members attended Marshall Center courses. Over 20 military to military and military to civilian events were conducted via the Joint Contact Team Program and the State Partnership Program to continue to familiarize the Macedonian military, the MOD and other civilian agencies with Western methods of operations and to meet NATO Partnership Goals. This program also included a large scale Unit Level Event for the Military Police Battalion.

USG assistance provided technical expertise to strengthen the army and MOD in the areas of resource management, human resources, logistics, training, and support to civilian authorities. 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. The English Language training program has been successfully turned over to the MOD to run. Under USG programs, Macedonian officers and NCOs broadened their military education in the U.S.

USG military assistance was successful in helping Macedonia meet significant NATO reform targets, specifically in its transition to a lighter, more flexible and professional force. USG assistance also financed equipment to improve interoperability between Macedonian and NATO forces during regional exercises and with 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.

Border Security and Transnational Crime - The objectives of USG law enforcement assistance during FY 2007 were to further the integration of GOM law enforcement bodies into European and international institutions. To this end the USG assistance has focused on improving the capacity of the Macedonian Border Police to strengthen border control in accordance with international standards to prevent illegal cross-border operations. At the same time, the USG has assisted the Macedonian Ministry of Interior (MOI) and other law enforcement bodies build capacity to combat organized crime, corruption, and drug trafficking. In the area of border security, the USG has provided training, consultations, and material assistance following the Macedonian decision to establish a new Border Police Service patterned after existing European models. This assistance was particularly needed following the GOM decision to transfer personnel and responsibility for border security from theMinistry of Defense to the Ministry of the Interior, in keeping with European norms. Throughout FY 2007 the USG provided eleven training courses for 180 border police and customs officers on topics such as narcotics identification and interviewing techniques. In the area of material support, the USG made two donations of computers and other specialized equipment. In addition to improving the GOM’s ability to interdict the flow of trafficked narcotics, people, and weapons at the borders, these activities and donations have also facilitated cooperation between the Border Police, Customs, and Organized Crime Police, especially in the area of suppression of organized crime activities and smuggling.

In the area of combating organized crime, during FY 2007 the USG developed the capacity of the MOI’s Organized Crime Department to conduct comprehensive, proactive investigations using special investigative techniques. This included four trainings on organized crime investigations for 45 police officers and six prosecutors, as well as three regional training courses on trafficking in persons. Additional computer skills training was provided to 220 police officers and 16 officials received media relations training. Forty-six police officials received training in counter terrorism and case management. These trainings improved the MOI Organized Crime Department’s ability to conduct proactive operations and to utilize special investigative measures has improved; and prosecutors are now in the early phases of putting their investigative training into practice.

The impact of USG assistance on the Macedonian law enforcement structures has been significant. The GOM has improved the quality, targeting, and number of investigations against organized criminal groups at both the national and regional level, resulting in the successful conclusion of several cases during 2007. For instance, in January GOM officials seized a half-ton of cocaine and during the last few months of the year disrupted a significant regional migrant smuggling operation. The number of drug related criminal charges brought by Macedonian authorities increased from 217 in 2006 to 331 in 2007, and there was an increase in weapon seizures between 2006 and 2007. The GOM’s anti-trafficking program saw sustained efforts in 2007, as well. Finally, action against a significant regional migrant smuggling operation involving eight neighboring countries was completed in May 2007, resulting in the arrest, prosecution, and conviction of nineteen Macedonian suspects.

The USG worked with Macedonian law enforcement agencies and the radiation detection agency in combating WMD proliferation across borders through the donation of equipment and provision of specialized training. Experts conducted seven training courses for 160 officials, including customs officials, police, health officials, and members of the Radiation Safety Directorate. The USG also donated customs’ inspection and safety tools, radiation detection equipment, and a computer system for the efficient and transparent export licensing of dual-use items.

The training and equipment contributed to an impressive increase in the detection and seizure of illegal items. The Customs Administration’ s mobile enforcement teams registered a 100% increase in customs violations seizures in both quantity and value compared to FY 2006, an increase of over 400% for illegal drugs seizures compared to FY 2006, and 54 intellectual property violations seizures compared to none in FY 2006. Customs officers, using USG donated equipment, detected high levels of radiation in three separate shipments at border crossings, though none were WMD-related, and blocked the further transport of those shipments through Macedonian territory.

GOVERNING JUSTLY AND DEMOCRATICALLY

USG priorities in the area of democratic reform are completing implementation of the Ohrid Framework Agreement (FWA) and strengthening the democratic institutions necessary for NATO and EU membership. The USG is helping to strengthen Macedonian democracy by supporting moves toward a more equal balance of power 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 supported improvements in transparency and accountability of government by programs aimed at: developing a more effective, transparent and independent judicial sector; increasing the capacity of police investigators to conduct complex investigations and cooperate regionally; strengthening democratic institutions, including local governments and parliament; increasing the responsiveness of political parties to voters' interests; and, empowering civil society to increase democratic participation and monitor the actions of government. The USG also provided comprehensive, cross-cutting support to bolster the government’s efforts to address corruption in the public sector.


Rule of Law and Human Rights - In FY 2007 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 important reforms and to strengthen the administrative capacity of the judiciary. The USG also focused its assistance on helping the GOM prepare remaining laws and sub-regulations required by “Macedonia’s National Strategy for Reform of the Justice System.” This included comprehensive revisions to the Court Book of Procedures, a key sub-regulation required to implement the 2006 Law on Courts, and the drafting of a new Law on Court Services. The USG also provided assistance to the Administrative Office to develop and implement a fully automated and unified budget management system for all 32 court budget users. This contributed to increased financial transparency and accountability of the judiciary. The implementation of the Law on Civil Procedure and Law on Enforcement developed with USG support continued to produce positive effects in the creation of a favorable business environment. As indicated in the World Bank’s annual Doing Business Report for 2007, the average time required to enforce commercial contracts in Macedonia is 385 days, while in the other countries in the region and OECD the process takes 443 days. In part due to reforms accomplished with the help of USG assistance, the World Bank named Macedonia a top ten reformer globally in 2007. USG assistance efforts to improve efficiency in the pilot courts yielded a 58% reduction in the backlog of civil cases older than three years, a clearance rate of 9%, and a 78% customer satisfaction rating in pilot courts.

USG prosecutorial and criminal investigative trainingprograms aimed to enhance the efficacy of the public prosecutors, promote the reform of criminal laws, and encourage increased cooperation between prosecutors and police. USG assistance to the judicial system was designed to increase its capacity to combat terrorism, trafficking in persons (TIP) and narcotics, corruption and organized crime, money laundering, war crimes, and terrorist financing. Complementary goals included improving the technical skills, cooperation, and coordination of prosecutors, and spearheading specialized legislative reform, particularly with respect to criminal procedure and complex crimes. The USG worked to improve the overall relationship between the prosecutors and police in the criminal justice process, particularly since the new reforms envision the transfer of investigative power from the investigative judge to the prosecutor. U.S. assistance also developed the task force concept, as well as best practices for allowing the use of special investigative methods. Finally, the USG provided technical and other support to the recently established Academy for Initial and Continuous Education of Judges and Prosecutors, as it works to become fully operational.

The USG organized, presented and sponsored 17 workshops and conferences; sponsored and provided technical assistance at eight legislative drafting round tables on draft laws; conducted two study visits for law enforcement personnel, one to the U.S. and one to the International Crimes Tribunal for the Former Yugoslavia; and trained more than 690 criminal justice sector officials. During FY 2007 Macedonia’s justice system made significant progress. It adopted a new Strategy on Criminal Legislation Reform that provides the basis for drafting a new Criminal Code and Code of Criminal Procedure that will transform the Macedonian criminal justice system. It developed the 2007-2008 National Strategy for Prevention and Suppression of TIP and the corresponding TIP Action Plan for its implementation. It started implementing the 2006 Law on Courts and Law on Judicial Council by introducing organized crime departments, allowing for specialization of judges, and improving review and disciplinary procedures. It started to observe international fair trial standards and to admit new types of evidence into trials collected through special investigative methods. Finally it began the use of video-conferencing equipment and other witness protection mechanisms for taking the testimony of protected witnesses and witnesses who reside abroad. The justice system also improved its prosecution of corruption cases. More than ten judges were discharged from the bench for unethical or unprofessional conduct, four of which were prosecuted and sentenced to prison terms. Thirty police and customs officers were convicted in a corruption case. In another case involving former government officials, 23 defendants were convicted on charges including embezzlement, misappropriation of public funds, corruption and money laundering, resulting in serious prison sentences and asset forfeiture.


Good Governance - The overall goal of the USG-supported Mission Decentralization Program is to build municipalities’ core managerial capacity, facilitating the decentralization process and making this governance reform irreversible. USG assistance provided modern finance and tax administration systems and technical assistance to 60 of Macedonia’s largest municipalities, representing more than 95% of municipal budgets and local tax revenues. The USG also provided systems support and training in the area of urban planning to all 84 municipalities, and established modern, digital urban planning centers in 25 municipalities. This has reduced waiting periods for building permits by as much as 80% (from 26 to five days) and added transparency to this process. The USG’s Municipal Capacity Index, which measures municipalities’ capacity in five core municipal functions, showed a 90% increase in municipal capacity from 2006 to 2007 (from 12.50 to 23.06 on a scale of 100) with USG partner municipalities scoring even higher (29.53) on average. The greatest progress was seen in the financial management and tax administration categories. The democracy small grants program supported training for five municipalities designed to help them with their new responsibilities to protect and promote local culture, with a focus on drawing tourism and creating economic opportunities. Furthermore, with significant USG assistance, 42 municipalities qualified to move to Phase 2 of decentralization on July 1, 2007, and 20 more were expected to qualify by the end of the year. This far exceeds the original expectations of most observers. With the qualification for Phase 2, municipalities also become eligible to borrow from private credit markets for the first time in their history. This represents a major milestone for the future fiscal independence of Macedonia’s municipalities.

Despite poor relationships and lack of constructive dialogue between governing and opposition parties for most of the year, which, at times, impeded USG ability to work with the new parliament, progress was made in re-launching the Constituency Office Assistant project, which will provide increased opportunities for Macedonian citizens to communicate directly with their elected representatives and voice their opinions on issues of concern. To date, ten of 65 planned Constituency Offices for parliamentarians have been opened, 38 office assistants have been hired, and a Memorandum of Understanding was signed with the President of the Assembly detailing the strategy for parliament to assume full financial and management responsibility for the Constituency Offices by April 2009. With women holding over 28% of the seats in the new parliament, Macedonia is now leading the region in women’s participation in in the legislature. USG experts worked with the newly reconstituted multi-party Women’s Parliamentary Club, including helping it formulate a legislative agenda to further improve gender balance and the position of women in Macedonian government. As one of its first initiatives, the Club succeeded in passing amendments requiring that two percent of the national lottery income be set aside to support victims of domestic violence.

Political Competition and Consensus-Building - Political party support programs provided training and consultations to help strengthen the internal democratic practices of political parties and to encourage meaningful dialogue between the parties and their constituencies. Progress was made in enhancing local chapter organization with parties across the political spectrum and in building the research and communications capacities of the parties, with two parties establishing new press offices in Skopje this year. Three parties also adopted articles to their party statutes which will advance the development of internal democracy, increase membership involvement in the development of party policy and internal decision-making, and improve the position of women in the party.

Civil Society - The USG is a primary donor for civil society development in Macedonia and one of the few that provides institutional development assistance for non-governmental organizations (NGOs). USG assistance is focused on strengthening the capacity of civil society organizations to represent citizens’ interests in the reform process through advocacy and policy development, oversight of government, local partnership initiatives, and pressing for good governance. In order to help build the sustainability of civil society, assistance also focused on introducing different models for generating resources and increasing philanthropic support for the sector, on developing volunteerism within the civil sector, and improving the NGO legal framework. The financial viability of civil society in Macedonia remains a crucial issue. In light of declining donor support to civil society, USG assistance focuses on improving the climate for local philanthropic giving, including piloting several models of domestic philanthropy, facilitating NGO-business partnerships, and raising awareness of philanthropic practices among businesses and NGOs. USG civil society support efforts produced significant results. Nine of the 17 Leader NGOs assisted by the USG succeeded this year in mobilizing local resources in the form of in-kind, volunteer, or financial support for their activities. With strong NGO participation, a new Law on Volunteerism was passed that provides clear guidance to NGOs using volunteer labor and addresses obstacles that prevented NGOs from using volunteers previously.

A USG-supported small grants program also provided assistance to NGOs. The NGOs provided training in human rights and democracy building, increasing the capacity of young people to be active citizens in civil society. The programs reached young people of all ethnicities through a number of trainings, roundtables, seminars, multi-ethnic radio programs and internship projects in human rights with the Macedonian Helsinki Committee. Several projects focused on the plight of the disabled in Macedonia and there was also a public awareness campaign on sexual harassment. The results of the projects include the creation of 58 radio programs broadcast to over 30,000 individuals both on a local and national level, the organization of 30 workshops/ seminars, one international conference that directly reached about 10,000 students, training 120 interns, and printing and distribution of more than 30,000 educational brochures and leaflets focused on human rights and strengthening civil society.

ECONOMIC GROWTH

USG assistance focused on improving the business environment and stimulating foreign and domestic investment to ensure a steady and stable economic growth and job creation. Assistance was targeted at improving the efficiency of government processes and increasing the competitiveness of the private sector, especially the capacity of small-medium enterprises (SMEs). USG assistance was also aimed at improving the legal and regulatory frameworks in key areas, introducing public-private dialogue in formulating government policies, facilitating efficient enforcement of existing laws and regulations, fighting corruption and increasing transparency of government procedures by introducing information technology solutions, and improving the transparency and efficiency of the government budgeting process. The USG addressed constraints in business development by working closely with firms to enhance operational efficiency, expand exports, establish market linkages and develop its workforce. Assistance in the agribusiness sector focused on improving food production and processing, which hold the greatest potential for growth. Energy reform is a top priority for the USG in Macedonia and, therefore, technical support was provided to the GOM to review further liberalization of the electricity market.

Business Environment - USG assistance strengthened the business environment through improved transparency, legal structures and trade practices, allowing Macedonia to deepen its engagement in the global economy and improve its competitiveness. USG assistance built the capacity of governmental economic institutions to be more efficient and transparent in government-to-business interactions. USG support facilitated a more modern and efficient legal and regulatory framework for trade and investment, including an emphasis on streamlining company registration procedures and custom procedures. This resulted in 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 five days, and cut the cost from over $250 to less than $100 for a business permit. Over 4,000 businesses have registered since the one-stop-shop became operational. USG assistance also strengthened the legal and regulatory framework with a number of new laws and regulations and worked actively with the GOM on implementation, such as the Bankruptcy Law. As a follow-on step to ensure the bankruptcy law was sustainable, USG assistance helped establish a Chamber of Bankruptcy Trustees and provided training in bankruptcy law and procedures. New laws on Public Procurement, Financial Companies, Credit Unions and Investment Funds were also drafted with USG support.

To assist with the GOM’s strategic planning, a blueprint for developing an integrated economic policy was developed, along with macro-economic models for the Ministry of Finance’s utilization. In support of labor reforms, an action plan was developed for the government’s Employment Service Agency and a third pillar pension system was introduced. The 2007 Foreign Trade Report was also developed, which provided a comprehensive list of recommendations from participants on how to overcome obstacles to doing business in Macedonia. USG assistance increased capacity and financial transparency at the local government level.

An “e-government” project helped reduce the administrative burdens on companies by introducing information and communications technology (ICT) solutions to improve the efficiency and transparency of government procedures. Through outreach, the project increased the knowledge and understanding of ICT among civil servants, the business community, and the general public. New applications were developed and launched to assist the GOM in preparing its national budget electronically, to facilitate the application and selection process for international transport licenses, and to enhance transparency in civil service hiring through an on-line testing and hiring process. The USG also assisted in drafting the tender for WiMAX licenses, which resulted in new Internet service providers entering the market. Through USG assistance, a new law on electronic communications was passed. The law led to the liberalization of the telecommunications market, especially in the area of providing internet access and cable television, resulting in increased competition among the internet service providers, reduced prices for using the internet, and increased internet penetration.

Budget Preparation - USG experts assisted the Ministry of Finance in efficient and transparent budget preparation, linked to specific outputs. The Ministry of Finance completed the development of budget preparation and monitoring software, and also started phasing in output indicators for the first time in the 2007 budget programs. As a result, 100% of budget users successfully planned and submitted 2008 budget requests using the new system, while 10% of the budget users, with 22% of the budget programs, developed output indicators in the 2007 budget.

Private Sector Competitiveness - USG private sector support activities developed and introduced corporate governance standards to businesses, addressing employment and other labor related issues like social/health plans, and furthering public-private dialogue. Seven “e-biz” centers are now self-sustaining and are assisting small- and medium-sized enterprises (SMEs) to use high-impact ICT applications, such as computer aided design/manufacturing systems and web portals. The centers have increased productivity and workforce skills in their respective industries, resulting in more sales and jobs. To accelerate economic growth, a new USG Competitiveness Project was started to help Macedonia improve its market position in the global economy. The project has identified high-growth opportunity areas and industrial sectors. With assistance to improve their productivity and technologies, secure investment and market linkages, these sectors have the potential for business expansion and job creation. Two industries receiving direct USG assistance, digital media and plastic recycling, witnessed substantial growth in 2007. In September 2007, a $10 million Development Credit Authority Loan Portfolio Guarantee Facility for SMEs was initiated. This facility will mobilize much needed private capital for SMEs, who did not have access to sufficient affordable credit. 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 eight years.

Agriculture - Assistance to the agribusiness sector enhanced quality and production efficiency, pursued joint marketing activities, built market linkages, and added increased value to products. This assistance resulted in the establishment of the first independent quality control laboratory, which meets international standards and is now able to meet export-oriented food-processing companies’ requirements. The National Meat and Dairy Association, which helps enhance growth of the sector through institutional development, information and resource sharing, is now fully self sustainable. Another legacy of USG assistance, the Integrated Quality System, has emerged to provide assistance in implementation of food safety standards. USG assistance resulted in higher sales, more exports, and new jobs, including $8.4 million in exports and 124 new jobs in fruits and vegetables alone. Meat and dairy processors developed 31 new products and introduced 17 technologies. In working with the retail sector, 124 strategic partnerships were established resulting in total sales of $148,507. Over 770 participants received training in food standards, inventory management, retail behavior and food handling improvement. At the end of FY 2007, a new agriculture program was started to expand environmentally sustainable production and sales of value-added agricultural products. The program evaluated more than 45 product lines for potential export opportunities in competitive markets and selected target areas to concentrate on. The program started quickly with positive efforts to expand export sales of Macedonian watermelons, retail packs of dried mushrooms, muesli cereal and e-sales of bottled wine.

Energy Infrastructure - In the energy sector USG assistance identified obstacles for implementation of the Electricity Market Model, and revised the model to reflect industry needs and to provide for further market liberalization, as well as strengthen the independent energy regulator. In September 2007, a Development Credit Authority Loan Portfolio Guarantee Facility was initiated to provide financing to municipalities and energy service companies for energy efficiency projects in public buildings.

INVESTING IN PEOPLE

USG assistance priorities included increasing the quality, access, and relevance of basic and higher education for all Macedonians. The biggest challenge facing Macedonia’s education sector is the need to improve quality. International surveys which measure math, science, and functional literacy show Macedonia’s antiquated school system performs far below Organization for Economic Co-operation and Development (OECD) standards and is often the lowest within the region. As a result, students are not prepared with the knowledge and skills needed to succeed in the job market of the global economy, reinforcing the very high youth unemployment rate of 60%.

As the largest education donor in Macedonia, the USG provided crucial assistance to improve the quality and relevance of basic and higher education. It played a key role in preparing municipalities to manage a newly decentralized education system. The USG’s education projects equipped youth with practical job skills through the creation of student-run businesses; established career centers in all vocational schools; provided access to information and communication technology (ICT) through the creation of wireless computer labs in every primary and secondary school; trained nearly 14,000 teachers in the use of computers and modern teaching methods in their classrooms; provided valuable educational support to disadvantaged Roma students; prepared universities to equip their students with the skills needed for the modern economy; reformed math and science instruction; developed assessment standards; strengthened local school management, and renovated crumbling, socialist-era classrooms.

Basic Education - During FY 2007 100% of primary school students and teachers were beneficiaries of USG basic education support. USG assistance supported policy-level reforms: math and science curricula revisions were initiated; assessment standards put in place. Teachers nationwide received professional training in interactive teaching techniques and effective use of educational technology. The impact of USG assistance has been strong. Support to Roma disadvantaged students has resulted in retention rates of 98% for assisted primary school students versus just 42% for unassisted Roma students; 82% of student-run businesses generated income this year; and the national internet penetration rate has increased from 6% to 32% due in large part to USG activities.

Higher Education - Higher education assistance developed the capacity of university administrators and professors. Sixty-one higher education professionals received training in the use of educational technologies in the classroom; 68 in interactive teaching methodologies; 71 in the basic principles and philosophy of the European Credit Transfer System (ECTS); 41 in curriculum design; and 106, plus 137 senior year students, in education for social justice. Renovations were completed in classrooms and lecture halls and five media labs and student resource centers were established. Free access to online peer reviewed academic content was made available to teachers and students. Improved understanding of the ECTS concept has had positive results in initiating change in the departments’ curricula, and instructors are realizing the benefits from increased student interaction and critical thinking skills.

As state universities are pressed by competition from increasing numbers of private universities, they are relying on USG technical support to assist them to undertake curricula redesign processes, identify best practices for improvement in their study programs, and to enhance their quality assurance and control. This year the USG closed out its highly successful activity to create and support the first multi-lingual, multi-ethnic university in the region. South East European University (SEEU) has grown from 600 students in 2001 to over 7,000 today. SEEU is perceived as a model in the region and plays a critical role in preparing the next generation of leaders from all ethnic groups to pursue peace and stability while contributing to economic and democratic reforms. SEEU recently signed an agreement to maintain its relationship with the USG’s implementing partner, Indiana University, for an additional five years and has established a $1 million endowment to fund faculty exchanges.

FY 2007 Measures of Country Performance

The following data are based on the Monitoring Country Progress in Europe and Eurasia system developed by the United States Agency for International Development (USAID) to measure and track progress in the region. The system uses four different indices to monitor progress, drawing on readily available standardized country-level data on economic reform, economic structure and performance, democratic reform, and human capital. The primary data sources are the European Bank for Reconstruction and Development (EBRD), the World Bank, the United Nations Children’s Fund (UNICEF), and Freedom House. The data for each of the four indices are converted and standardized to a 1-to-5 scale, with a “5” representing the best performance of the Eastern Europe and Eurasia region, and a “1 the least advancement of the region.

Macedonia’s Democratic Reform* Scores in 2006 compared to Romania and Bulgaria in 2002

Date: 01/01/2008 Description: The graph to the left shows Macedonias democratic reform scores in 2006* (the grey shaded area) as compared to the average of Romanias and Bulgarias democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Macedonia’s democratic reform scores in 2006* (the grey 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 2007 scores not yet available


Macedonia’s Democratic Reform Scores in 2006 compared to its Reform Scores in 1999

Date: 01/01/2008 Description: The graph to the left Macedonias democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left Macedonia’s democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

*Actual 2007 scores not yet available

* Democratic reforms include the electoral process (the extent to which elections are free, fair and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform) and the scope of corruption as well as anti-corruption income.

Macedonia’s 1st Stage Economic Reform* Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Macedonias stage one economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Macedonia’s stage one economic reform scores in 2007* (the grey 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.


Macedonia’s 1st Stage Economic Reform Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Macedonias stage one economic reform scores in 2007* (the grey shaded area) as compared to its economic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Macedonia’s stage one economic reform scores in 2007* (the grey shaded area) as compared to its economic reform scores in 1999 (the bold line).


Macedonia’s 2nd Stage Economic Reform Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Macedonias stage two economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Macedonia’s stage two economic reform scores in 2007* (the grey 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.

Macedonia’s 2nd Stage Economic Reform Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Macedonias stage two economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Macedonia’s stage two economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

 

* Economic reforms include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and “second stage” reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.

Macedonia’s Progress on the USAID Country Progress Indices between 1998 and 2007

Date: 01/01/2008 Description: Macedonias Progress on the USAID Country Progress Indices between 1998 and 2007. State Dept Photo


(1) Economic reforms index include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and second stage reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.

(2) The economic structure and performance index tracks indicators such as the size of the private sector as % of GDP, export share of GDP, and the size of the small and medium enterprise sector as % of GDP, economic growth, inflation, debt, and foreign direct investment.

(3) The Democratic reforms index include the electoral process (the extent to which elections are free, fair, and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform), and the scope of corruption as well as anti-corruption efforts.

(4) USAID tracks progress on the Human capital index by analyzing trends in health (life expectancy, under five mortality rates, and public expenditures on health), education (secondary school enrollment rates and public expenditures on education) and per capita income. 



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