57306 SYNOPSIS The World Bank Group has worked closely with a number of development partners to help the Former Yugoslav Republic of Macedonia (FYR Macedonia) travel the road from conflict in 2001 to reaching the threshold of joining the European Union today. The government and the World Bank have seen a wide range of results during the years of collaboration from boosting school enrollment to slashing the red tape for businesses, and from creating a model cadastre system in the region to rehabilitating 200 kilometers of roads. Challenge improving the business environment, and the quality of education. By seeking to transform itself FYR Macedonia is a lower middle-income country, into a "green economy," FYR Macedonia is whose landlocked position, small size, multiethnic pursuing an opportunistic and pragmatic path, given population, and relatively high degree of economic that it is expected to be severely affected by climate openness make it especially vulnerable to internal change, and also because the current energy inten- and external shocks, such as: embargos, economic sity of its economy is very high. Finally, the country fluctuations in the neighboring countries (for faces the challenges to ensure the financial sus- example, the recent crisis in Greece), and to regional tainability of the pension system, to improve the and local armed conflicts since its independence effectiveness of the social safety net, and to improve from Yugoslavia in the early 1990s. the health services delivery. Despite its success in weathering the shocks and Approach transitioning from a conflict-affected country to a candidate for the European Union (EU) Since 1995, the World Bank has played a critical membership, FYR Macedonia is still facing financial and advisory role in five key areas: (i) formidable political, economic, and social chal- strengthening country competitiveness for sustained lenges. On the political side, the resolution of the economic growth; (ii) improving the business long-standing dispute with Greece over its name is environment; (iii) investing in human capital; (iv) blocking the EU negotiations. improving road, rail, and energy infrastructure; and (v) supporting decentralization. The biggest economic challenge is to create more jobs to reduce the very high unemployment rate (32 The World Bank's approach included a combination percent), especially among the country's youth. of investment and development policy lending, Linked to this challenge is the need to maintain underpinned by substantive analytical and advisory macroeconomic stability, and increase the country's work. Through more than 20 country-tailored competitiveness, which is dependent on further reports delivered over the past five years, the World September 2010 2 FYR MACEDONIA: SUPPORTING SUCCESSFUL TRANSITION FYR Macedonia has improved its ranking in the Doing Business survey to 32 out of 185 in 2009 (from 83 out of 125 in 2006), becoming a global top four reformer in the 2008 survey, and the third overall reformer in 2010. The World Bank program has helped cut the time to register a company to four days in 2009 from 48 days in 2006; it helped reduce the cost of registering a business to less than 50 euros; it also helped increase the number of registered companies by six percent during the first half of 2008. The burden of regulation on businesses was also reduced through the introduction of the "Regulatory Guillotine," which reviewed and streamlined more than 2,000 laws and by-laws. Bank Group's strong analytical and knowledge ser- The World Bank-financed reforms in the real vices have helped the country choose the appro- estate cadastre resulted in the coverage of 99 priate mix of policies and interventions to promote percent of the territory; doubled the number of economic growth and improve service delivery. registered transactions (85,786 in 2008, as compared to 42,116 in 2005); nearly tripled the Because of fast moving developments (FYR number of mortgages (8,573 in 2008, as Macedonia transited from post-conflict to an EU compared to 2,920 in 2005); and shortened the candidate country in three years), the World Bank period for transaction registration (70 percent of needed to adapt quickly to the changing environ- all transactions are registered in one day, and 30 ment and the evolving needs of the client. Given the percent are registered between 3-8 days, as EU candidacy and middle-income country status, compared to 90 days in 2005. the demand for the World Bank support focuses on complex policy reforms, institutional capacity buil- The World Bank has supported significant ding, multifaceted implementation issues, and criti- improvements in the judicial and legal frame- cal analytical work. work. These include more effective organization of the court system, which resulted in: The World Bank Group in FYR Macedonia is considered a trusted, unbiased partner and reform reduction of the backlog of cases in 22 of the 27 proponent that, over the years, has been contribu- basic courts; ting substantially and transparently to the policy improvement of judicial infrastructure through dialogue and economic development of the country. the refurbishment of 11 court houses throughout the country, and the construction of Results a new Criminal Court; improved enforcement of court judgments by The World Bank provided crucial policy and supporting legislation that took enforcement investment support to the agriculture sector. "As any other citizen, I have had dealings with the The Bank support has enabled the Ministry of cadastre agency both privately and as a private Agriculture to receive the EU accreditation for utili- entrepreneur for a long time. The difference is zation of the EU Instrument for Pre-Accession obvious, and it can be seen from the shorter time Assistance in the area of rural development. and processes for property registration to the attitude and professionalism of the employees. I The World Bank has provided significant sup- am now able to quickly turn my real estate into a port to FYR Macedonia to improve the capital asset to finance my business, which greatly country's business climate. helps in a dynamic market that we work in." --Maja Dimitrievska, Businesswoman, Skopje IBRD RESULTS 3 The World Bank assisted the authorities in developing a new Railway Law, adopted by the Parliament, to conform to the EU legislation. Through the World Bank assistance, MEPSO (the public electric power transmission company) has increased the capacity of the transmission network through the completion of the power transmission line to Greece, and restored 38 transformer stations throughout the country. The World Bank supported the country's decentralization process. The World Bank helped establish a stable and out of the courts and placed the function in the transparent mechanism for financing local hands of private bailiffs, which, in turn, resulted government by promoting and adopting a in improved enforcement of court cases of 39 transparent formula that transfers a portion of percent in 2009 from 18 percent in 2005; the personal income tax and value added tax improved regulatory and implementation revenues to municipalities. As a result, 60 out of framework for bankruptcy cases through the 83 municipalities in the country were able to adoption of a new Bankruptcy Law, which settle arrears by end-2007, and 70 by end-2008. resulted in an average decrease in duration of Arrears fell from around US$100 million to bankruptcy procedures from 43 to 26 months. around US$40 million in 2007, and US$16 million by the end of 2008. The World Bank has invested in FYR Mace- donia's human capital. Investments in education helped: Bank Contribution Increase secondary school enrollment to 95 Since the start of FYR Macedonia's membership in percent from 85 percent between 2004 and 1995, the World Bank invested US$1,061 billion 2008, and decrease dropout rates to 1.9 percent through 23 IDA credits and 29 IBRD loans. The from 2.1 percent in the same period. World Bank also leveraged around US$180 million in grant funding. The World Bank support also contributed to the introduction of the State Matura (final examination at the end of secondary school) as part of the overall Quality Assurance System, and the introduction of strategic medium- and long-term planning at both the Ministry of Education and school levels. The World Bank is helping boost FYR Macedonia's competitiveness through infras- tructure development. Since 1995, more than 200 kilometers of roads have been rehabilitated and the average border entry and exit time has decreased threefold (from 60 to 20 minutes, and from 20 to 7 minutes respectively). 4 FYR MACEDONIA: SUPPORTING SUCCESSFUL TRANSITION Partners accession, virtually every intervention in the CPS has been identified and will be designed to help All World Bank interventions have been designed prepare for the EU membership. and implemented in close collaboration with other development partners, such as the European Faster growth by improving competitiveness. FYR Macedonia can build on improvements in Commission (EC) and the U.S. Agency for business climate through a continued sound macro- International Development (USAID). The World economic management, further efforts to reduce Bank leveraged more than US$180 million in grant funds from different donors through 43 separate bottlenecks in business environment and infras- tructure, and stepped-up investments in education, trust funds. The main co-financing partners include including higher education. the governments of the Netherlands (education sector, public policy reforms, accounting and More inclusive growth by strengthening em- auditing, agriculture) and Japan (preparation funds ployyability and social protection. The future for projects in the human development, energy and World Bank program will also emphasize continued business environment sectors), as well as the Global improvement of social programs amid growing Environmental Facility. The World Bank also fiscal constraints. maintained a close partnership with the International Monetary Fund in the area of Greener growth through more sustainable re- economic advice and policy-based lending. source use. Key World Bank Group interventions will include "win-win" investments in clean and Partnership with the United States and Sweden took efficient energy. Since this is an emerging area of the form of parallel financing in the education, knowledge and a new subject of dialogue with the agriculture, energy and business environment government, the World Bank will also collaborate sectors, with different teams working together on with selected partners on the analysis on "green the design, implementation, and monitoring of growth" and climate change to support adaptation various interventions. and other climate sensitive policymaking. In close partnership with the EC, the World Bank Interventions will seek to leverage financing and supports the country in introducing and imple- expertise from within the World Bank Group and to menting Program-Based Approaches (PBA) in key increase the impact of external assistance, in particu- development areas: environment, governance, lar, through successful application of Program- agriculture, human development, and business Based approaches. environment. This approach will help the government strengthen its implementation capacity to manage donor and EU pre-accession funds, as well as to improve the effectiveness of external assistance. Moving Forward The World Bank's Country Partnership Strategy (CPS 2010-2013) will continue its support to FYR Macedonia by providing selective and targeted financing and knowledge advisory services in support of faster, more inclusive and greener economic growth. Because FYR Macedonia's future growth and development will depend fundamentally on the pace of the EU IBRD RESULTS 5 LEARN MORE Links to key related web sites: ­ The web site of the World Bank Office in FYR Macedonia: www.worldbank.org.mk offers in-depth information on all projects and programs in the country. Links to partner websites: ­ Government of FYR Macedonia: www.vlada.mk ­ Ministry of Finance: www.finance.gov.mk ­ European Commission: www.delmkd.ec.europa.eu ­ USAID: http://macedonia.usaid.gov/ ­ United Nations: www.un.org.mk ­ Swedish International Development Agency: http://www.swedenabroad.com/ ­ Swiss Embassy: www.eda.admin.ch/skopje Results stories: ­ Improving people's lives: FYR Macedonia Real Estate Cadastre and Registration project ­ ­ Macedonian Railways: Deepening the Reform Agenda ­ Improving the education system in FYR Macedonia