Update to the contribution to the progress report on the process of accession of the republic of macedonia to the european union

The Memorandum of Understanding on the Future of the South Eastern Europe Health Network in the framework of the South East European Co-operation Process (2008 and beyond) is in ratification procedure. The Health Network of SEE countries is an Initiative of Ministers of Health of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Moldova, Romania, Serbia, Monte Negro and Macedonia, as well as their partners: Council of Europe, World Health Organisation-Regional office for Europe, Development Bank of Council of Europe, Ministries of Health of Republic of Slovenia, Hungary And Greece, which was developed by the Stability Pact.

The Regional Cooperation Council (RCC) hosted the first meeting of six regional initiatives and 20 international organisations active in the field of justice and home affairs in the Southeast Europe, held in Sarajevo on 15-16 September 2008. The First Coordination Conference of the Southeast Europe Initiatives on Justice and Home Affairs  provided a forum for better coordination of the regional initiatives and international organisations working in Southeast Europe on the implementation of justice and home affairs projects and contributing to the reform of justice and law enforcement agencies.

The Programme for the Enhancement of Anti-trafficking Responses in South-Eastern Europe: Data Collection and Information Management Phase II Data Processing, Maintenance and Analysis (DJM Phase II) was launched on 1 September 2008. The 18-month DCIM Phase II Programme is funded by the Royal Norwegian Ministry of Foreign Affairs. The International Centre for Migration Policy Development is implementing the Programme, in partnership with the Migration, Asylum, Refugees Regional Initiative (MARRI), the Office of the Dutch National Rapporteur on Trafficking in Human Beings, Europol, and the Southeast European Cooperative Initiative (SECI Center). The participating countries in this Programme are Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Serbia.

The process of demarcation of the border with Kosovo is proceeding smoothly, and has entered its final stage.

II ECONOMIC CRITERIA

According to the data of the State Statistical Office, the growth rate of the Gross Domestic Product in the second quarter of 2008 is 6.5% in relation with the corresponding period of the previous year. It is result of the increase of the Value Added in all sectors. Final consumption has the biggest share in the expenditure structure of GDP and in the second quarter of 2008 nominally increased by 18.6%, while the nominal value of Gross capital formation is twice bigger then the nominal value realized in second quarter of 2007.

In the second quarter of 2008 compared to the same period of 2007, the nominal increase of 14.1% of the export of goods and services and 38.8% of import of goods and services is realised. In the second quarter of 2008 the Central Budget had a surplus amounted to 1098 million denars due to biggest increase in revenues compared with the expenditures.

According to the State Statistical Office data, the Consumer Price Index, measured by prices of goods and services for personal consumption, in August 2008, in comparison with July 2008, is 99.8, while in comparison with August 2007, it is 108.6. This indicates that Consumer Price Index, by COICOP classification, in August 2008 in comparison with July 2008, decreased by 0.2%.
Analysed by main groups of intended use, in August 2008, in relation with July 2008, a decrease has been registered in the groups: Transport by 2.7%, furnishings, households equipment and maintenance by 1.0%, Food and non-alcoholic beverages by 0.9% and Clothing and footwear by 0.4%. An increase of indices is registered in the following groups: Heating services by 43.4%, Alcoholic beverages and tobacco by 0.5%, Health by 0.3% and Hotels and restaurants by 0.2%.

Business environment reforms

Measures and activities for improvement of the business environment were aimed at eliminating administrative barriers to business by streamlining the regulations, increasing the competitiveness of the Macedonian economy by stimulating the entrepreneurship and development of the SMEs, strengthening of the capacity of institutions and improvement of public infrastructure.

Market entry

The Company Law was amended („Official journal of RM No.87/2008). The Law stipulates the following changes in relation to market entry and exit: further cutting formalities in the registration procedure, namely two personal statements by the founding members were released of the notarisation requirements: statement by founder of the company on claiming that all steps of founding were carried out according to the Company law and that the conditions under the law which prohibit particular individuals to be founders of company do not apply.

Proposal on Amending the Law on stop shop is being prepared and should be enacted by the end of 2008. The proposal enables the electronic submission of documents for registration without an obligation to send the same documents by paper means. In this respect, the Information system for on line submission of documents planned to become operational in second half of 2008 is being in the process of development.

Other more important reform activities in the field of market entry are:

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  Integration into global networks – European Business Centre – by end of May 2007 Central Registry of Macedonia joined and became part of the group of countries distributors of EBR products.
  
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  Online filing of annual accounts – as part of modern trends in the implementation of e-society, with a single central electronic database of all relevant financial data and indicators on the operations, the financial and economic ability of all legal entities and physical persons in the country.
  
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  Electronic distribution system – through which the CRM offer information 24 hours.
  
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  Register of addresses – The Central Registry of the Republic of Macedonia is in charge of keeping “electronic registry” of names of streets, squares, bridges and other infrastructure facilities, as well as numbers of facilities throughout the territory of the country.
  

Market exit
With regards to the implementation of the Bankruptcy Law and its by-laws in September 2008 the Ministry of Economy prepared an update on the detailed analysis (prepared in June) that gives an overview of the bankruptcy procedures. (The detailed analysis prepared by the Ministry of Economy is enclosed)

Through the bankruptcy trustees and the Bankruptcy committee until 15 September 2008, the following data has been collected - for 315 bankruptcy procedures that are still running and for 154 finalised bankruptcy procedures. That means that subject to analysis are 469 bankruptcy procedures.

The given data show that from 203 unsolved bankruptcy procedures on 01.01.2006, in the year 2006, 28 are finalized or 13,79%; from 173 in the year 2007, 27 are finalized or 15,61%; from 148 in the year 2008 until June (half year), 16 are finalized or 10,81%, which will indicate to 21,62% annually. The data indicate that there is continuous increase of settling bankruptcy procedures of average 18,58% annually

Acquiring and application of ownership rights

By 25^th September 2008, decisions according to which the Real Estate Cadastre is established on 80,15% of the territory of the Republic of Macedonia were published in Official Gazette of the RM no. 121.

According to the Law on Real estate cadastre the Agency for Real estate cadastre acts as a successor of the State Authority for Geodetic Works. The Statute of the Agency for Real estate cadastre was approved by the Government on 12.08.2008. The preparation of the by-laws is well advancing. 8 of the bylaws were published in Official Gazette on 19.09.2008.

Privatisation

The privatisation process in the Republic of Macedonia is completed. The table below shows the structure of enterprises in the country.

General summary

Number of enterprises with state ownership or share out of which: number of enterprises with full state ownership (Macedonian post, Macedonian bank for export promotion, ELEM, MEPSO, MIA, Eurokompozit, TEC Negotino) number of enterprises with state share of below 1% of the share capital number of enterprises with state share of between 1% and 10% of the share capital	58 7 22 21
Nominal value of the state capital	738 mill EUR
State capital as a percentage of GDP	13,3%
State capital share of GDP in the 5 companies with the largest share state capital (ELEM, MAK-TEL (34%) MEPSO, ESM (10%) and The Post office)	677 mill EUR
State capital share of GDP in the 5 companies with the largest share state capital (ELEM, MAK-TEL (34%) MEPSO, ESM (10%) and The Post office)	12,4%
State capital share of GDP in the remaining 53 companies	0,9%

Facilitation of foreign trade

The Customs Administration, together with several government institutions that issue approvals and licenses for import, export and transit, works intensively on establishing one-stop-shop system for import and control at single stop. For the needs of the project, information and communication equipment was procured and installed and application was designed. Additional activities will be focused on training of persons to use the application and on network connection of institutions. Implementation of the system will enable the Macedonian companies involved in foreign trade to apply electronically and to obtain licenses for import, export and transit from all 15 institutions. In addition to licenses and quotas, the system would enable electronic adjustment and processing of customs declarations for transit. At the same time, the system facilitates the access to data and information, and their usage, thus accelerating the flow of information and data between the public and private sector. This concept contributes to reduction of non-trade barriers and positively affects the operations of the economic entities. The system can be accesses on the Internet website www.exim.gov.mk. After the trial testing of the system, its full implementation is planned to begin in autumn this year.

Public finance reforms

According to the modifications and amendments to the Budget Law (Official Gazette of the Republic of Macedonia, no. 04/08), changes were introduced in the budget process, in particular in the stages draft budget preparation and harmonisation. New stage – preparation of development programme plans is introduced in the budget preparation process, which are medium-term presentation of the programmes intended for development projects. In line with the above-mentioned, under this Law, changes are introduced in the budget contents, comprising general, special and development part, to include the development projects to be realised by the budget users.

Introduction of development programme plans, as an integral part of the draft budget requests, provides for modern procedure of managing budget funds, providing the budget users, for the first time, with the possibility for the allocations for programmes and sub-programmes in the development part of the core budget not being spent during the fiscal year to be shifted as appropriations for the first half of the next fiscal year, in the amount of 50% of the unused funds. Thus, multi-annual planning and budgeting is introduced through the development part of the Budget.

To the end of improving budget planning, last amendments to the Budget Law provide for limitations in the amounts to be redistributed between certain items and sub-programmes up to 15% of the appropriations at item level and at sub-programme level, and not more than 10% if the redistribution increases the appropriations for salaries and allowances.

In order to adhere to the European Union guidelines and recommendations for strengthening the general business climate, financial independence of regulatory bodies with public authorisations, determined under law, is improved on the basis of the additional amendments to Article 51 of the Budget Law and Article 20 of the 2008 Budget Execution Law in July 2008, pursuant to which independent regulatory bodies are freed from the obligation to request consent by the Ministry of Finance for the financial resources provided for new employments. Thus, regulatory bodies and supervisory bodies increase their level of independence from the executive authority.

Simultaneously with the last amendments, deadline for adoption of amendments to the budget is limited, as of 15 November in the current fiscal year inclusive. This provides for more comprehensive analysis of revenue plan execution and dynamics of spending budget funds, adjustments to more significant deviations from the projected one and leaves room for realising these changes.

In September the Government passed a decision on increase of public administration salaries by 10 percent. The increase refers to 73,778 employees, with an allocated amount of Denar 2,4 billion. The 10-percent increase of salaries starts as of September, encompassing employees in the public sector, civil servants, public workers in the sectors of education, culture, child and social protection, ministries of interior and education, judiciary and health. This salary increase has been planned, it has entered the macroeconomic projection and will not reflect on the inflation and the 1.5 percent budget deficit.

Public finances: Data on Central government spending according to COFOG classification in recent years (annex)

BOP
The measures and the activities for the improvement of the business environment are oriented towards breaking the administrative barriers for running businesses through simplification of the regulations, increasing the competition of Macedonian economy through stimulating entrepreneurship and development of SME, strengthening the institutional capacity and improvement of the public infrastructure.

In the field of attracting foreign direct investments we can highlight the following government activities which helped to boost the investments:

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  Introduction of the flat tax in 2007,
  
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  Introduction of the regulatory guillotine process,
  
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  Improved market entry and exit
  
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  Improved property rights protection,
  
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  Increased labour market flexibilities,
  
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  Reduced obstacles to international trade,
  
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  Reduced time to handle with licenses
  
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  Introduction to a position Economic promoter within the embassies around the world etc,
  

All these reforms and undertaken measures have been recognized by the World bank in the report Doing business 2008 where Macedonia was ranked 75^th place (20 positions better than 2007) and was ranked as 4^th top reformer. The improved better business climate can be seen in the balance of payments with the increased foreign direct investments figures at the beginning of 2008.

Namely, for the first four months of 2008, foreign direct investments amounted 175 millions of Euros which represents 172% increase when compared to the same period of 2008.
Table 1. Direct investments

(in million euros )

Direct investments	Months				Total
Year	I	II	III	IV		Growth 2007-2008
2007	3,83	7,82	8,43	44,49	64,57
2008	40,70	71,87	30,46	32,84	175,87	172,37%

Main realised investments in the first half of 2008 are:

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  Croation “Dukat” acquired the second by size dairy “Ideal Sipka”
  
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  Factory “Johnson Controls” in Bunardzik
  
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  Israeli firm “Gazit-Globe” acquired Alumina for 20 million euros and will invest over €100 million in a commercial centre in the Skopje central area.
  
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  Dairy in Bitola investment of “Sirma” from Bulgaria
  
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  “California Resort” starts building hotels, shopping centres, congress halls, casino etc in our town Gevgelija
  
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  New Mobile phone company - VIP
  
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  The project “Katlanovo spa” –for development of the health-spa tourism. Two phases of the reconstruction of the basin are finished, the basins are completely reconstructed.
  
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  New car factory ISTEF in Kumanovo
  
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  HPP”Boskov Most”-total investment of around 90 million euros
  

Expected investments

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  Factory “Johnson Matty” in Bunardzik , with start in the production in 2009
  
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  French car company Montipe will start production by the end of 2009
  
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  Hotel complex “Aqua pour” in our town Prespa, with start of operation in 2011
  
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  Construction of co-generative thermal power plant Zelezara Skopje, on the location of the former Zelezara. The finances for the construction of this facility in the amount of 120 million EUR will be provided through joint venture of domestic and foreign interested investors, expected to start in 2008, and to end in 2010.
  
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  Opening of the new surface coal mine Brod-Negotino, expected to start in 2009.
  
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  Trans Balkan oil pipeline AMBO, important for the Corridor 8, with investment value of around $1.2 billion. Construction period is 3 years, and the finances will be provided by private foreign investors.
  
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  400 kW interconnection Stip (R.Macedonia)-Nis (R.Serbia). The investment value for the Macedonian part of the project is 13, 55 million EUR. The implementation period of the project is envisaged to be around 3 years.
  
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  What is behind the strong increase in external inflows (BOP -Financial account: net investments of Commercial banks, increasing to 3.3% of GDP in 2008Q1)
  

In the financial account of the BoP, position Currency and deposits, net of which Commercial banks, net, for the first quarter of 2008 has registered an inflow of 47 million EUR. Looking into components, the banks' foreign assets abroad decreased by 69.59 million EUR, while the decline of the foreign liabilities to abroad is smaller (22.35 EUR million). Besides the change in this item, the strong increase in the external inflows within capital and financial account in the first quarter of 2008 is coming from the higher inflows based on FDIs in amount of 143 million EUR (relative to 20 million EUR in the first quarter of 2007), as well as from the lower outflows for debt repayment this year of 16.8 million EUR (relative to 42.3 million EUR in the first quarter of 2007).

SMEs Data on SME's (annex)