LEADERSHIP MONITORING by xiaohuicaicai

VIEWS: 4 PAGES: 87

									             LEADERSHIP MONITORING


    Report from the performance evaluation of the
Government of the Republic of Macedonia for the period
             September 2006 – May 2007




                    SKOPJE, 2007
2   REPORT N’ 1
                                                    Leadership Monitoring




LEADERSHIP MONITORING

Project financed by
Balkan Trust for Democracy

Project Manager
Veton Ljatifi, PhD

Project implemented by
The OHRID Institute for Economic Strategies and International Affairs

Executive Director
Biljana Janeva, MA

OHRID Institute for Economic Strategies and International Affairs
Dimitrie Tucovic 24
Skopje,
Macedonia
Tel: +389 2 322 44 57
Fax: +389 2 322 44 57
Web: www.oi.org.mk
E-mail: info@oi.org.mk




SEPTEMBER 2006 - MAY 2007                                              3
4   REPORT N’ 1
                                                                              Leadership Monitoring


                                               Content


Project description ................................................................................ 7

Summary ................................................................................................. 12

1. Fiscal and monetary policy ........................................................ 19

2. Trade and industrial policy ........................................................ 26

3. Financial and pension system ................................................... 31

4. Knowledge economy .................................................................... 36

5. Education ......................................................................................... 39

6. Sports ................................................................................................. 43

7. Agriculture ....................................................................................... 46

8. Foreign affairs ................................................................................. 57

9. Justice and Home (Internal) Affairs ....................................... 62

10. Health Sector .................................................................................. 68

11. Transport and communications ............................................... 76

General recommendations ............................................................... 80




SEPTEMBER 2006 - MAY 2007                                                                                   5
6   REPORT N’ 1
                                                                 Leadership Monitoring

                         PROJECT DESCRIPTION
      The purpose of the Leadership Monitoring Project, carried out by the
OHRID Institute is to provide the Macedonian citizens with objective and
expert monitoring of the work of their Government. The Report aims to
provide the general public with an overall picture about the planned and
realized reforms of the new Government, through constructive and
comparison analysis of the Action Plan of the Government 1 .

      The Project has two main effects. The first one is about providing
detailed information to the citizens on the political initiatives and activities
of the Government, and publishes benchmark analysis. This will make the
Government much more accountable. Second, it will provide the
Government with independent expert analysis on the activities of its
Ministries and departments. This will provide the Government with an
instrument for performance analysis, oversight and continuous
improvement.

      This monitoring is consisted of benchmarking of the achievements of
the Macedonian Government against its pre-election promises included in
the “Program for Work of the Government for 2006-2010” as well as the
election Programs of the political parties in power.

      On the basis of this benchmarking, the OHRID Institute will be
developing two-month progress reports regarding implementation of the
programs, along with estimation of the risk due to insufficient or non-
quality implementation in each of the areas covered by the reports.

      This monitoring and control should yield the following long-term
effects:

       - Increased transparency and accountability of the Government;
       - Improved involvement of the citizens in the work of the public
institutions;
1
  The last Parliamentary elections in Macedonia took place in July 2006. The new coalition
Government was established in August 2006. At the beginning of its mandate, the
Government established the Program for its work for the period 2006-2010 and the
activities in this Program are mainly those that were included in the pre-election program of
the VMRO-DPMNE party titled “Rebirth in 100 steps”. After other coalition partners also
added their respective pre-election programs to the Program, it was accepted by the
Government and became the basic document for work of the Macedonian Government.
SEPTEMBER 2006 - MAY 2007                                                                  7
       - Better involvement of the citizens in the public political discourse;
       - Increased capacity for informed and active practicing of the
democratic rights by the citizens;
       - Creation of the tool which could be used by the Government
institutions for continuous improvement of their work;

      The basis for measurement and benchmarking of the Government
performances is the “Program for Work of the Government of the Republic
in Macedonia”, done in September 2006. Most of the content of this
program is related to the activities foreseen in the pre-election program of
the VMRO-DPMNE political party – “Rebirth in 100 Steps” but there are
also additions from the pre-election programs from other coalition partners.
This program is the basic platform for work of the Government in its four-
year mandate.

      The monitoring is carried out by the following 10 independent experts
that covered their respective areas of proven expertise:

      - Tome Nenovski, PhD, Fiscal and monetary policy
      - Marjan Nikolov, MA, Trade and industrial policy
      - Snezhana Mojsoska, MA, Financial and pension system
      - Filip Blazheski, MA, Knowledge economy
      - Ilo Trajkovski, PhD, Education
      - Ljupcho Toshev, MA, Agriculture
      - Vasko Naumovski, MA, Foreign affairs
      - Dushko Stojanovski, PhD, Internal affairs
      - Jaroslav Karandziski, MA, Health
      - Goran Mijoski, MA, Transport and communications + Sports

       Before the performance evaluation started, the experts, assisted by the
administrative staff of the OHRID Institute developed a so called
“Performance Based Monitoring Matrix”. The Government Program was
used as a basis to develop this matrix but also the election program of the
political parties that are now forming the Government. These matrixes are
very powerful tools in evaluating the performance of the public projects.
They are successfully used in many countries in the world. This tool for
efficient monitoring is also used by several international consultancy
companies.

     The expected outcomes and benefits from the “Leadership
Monitoring” Project for the Macedonian society are multiple. The main
8                                                                REPORT N’ 1
                                                     Leadership Monitoring

expectation is that the Government accountability towards the public will be
increased, its measurement and evaluation of presence of the citizens in the
public speech; and also making sure that the Government uses the reports as
a tool for greater development and progress. Overall, the monitoring reports
are expected to contribute for better democratic climate and improvement in
Macedonia.


                             Methodology
      These Reports are focused on the realized activities during the
monitored and evaluated period, as well as on the things that are yet to be
realized. At the end, each of the experts that report about the monitoring
provide their opinion about the work that has been done and what is left to
be realized, by providing appropriate recommendations.

       The ascertainments and evaluations are derived from the information
collected by considering the available written materials and documents, as
well as from interviews with experts and officials in the relevant
institutions.

       The methodology used for development of the “Leadership
Monitoring” Project reports includes the following elements, procedures and
tools:

      - Development of the “Performance Based System Matrix” for
monitoring, as shown on picture 1;
      - Identification of the initiatives planned which, according to the
System Matrix, should be in the implementation phase in the reporting
period;
      - Development of questionnaires for collection of information
regarding the level of implementation of the initiatives planned, as shown
on picture 2;
      - Interviews with public, private and NGO sector stakeholders;
      - Analysis of the information collected;
      - Development of Report regarding the implementation progress of
the planned;
      - Development of Risk Evaluation from Insufficient or Non-quality
implementation, as shown on picture 3.
SEPTEMBER 2006 - MAY 2007                                                 9
Picture 1: Performance Based System Matrix for Monitoring




             Picture 2: The Questionnaire




10                                                          REPORT N’ 1
                                                               Leadership Monitoring




     Picture 3: Form used to evaluate the risk from insufficient or
     non-quality implementation for one of the sectors




    This Report is focused on the following directions which are the main
components of the expert reports:

       The activities implemented during the reporting period;
       Answering the question: What is left to be implemented i.e. what is
not implemented or not yet finished;
       Evaluation of the risk from non-implementation of specific
procedures or insufficient quality of implementation;
       General expert remarks on the reporting period.

      Beside these structural components of the individual expert reports,
the general Report from this Project starts with a Summary and ends with
general and specific recommendations.

SEPTEMBER 2006 - MAY 2007                                                        11
                               SUMMARY

      The Government of the Republic of Macedonia in the period
September 2006 - May 2007 has started the implementation of several tasks
stipulated in the “Program for Work of the Government 2006-2010”.
However, since most of the activities are currently being implemented and
are not yet finalized but only started, the activities results remain to be
evaluated on continuous basis. The activities in other areas such as, for
example, the approximation of the Macedonian legislation to the EU
Acquis, resume as planned.

       The Government pledged for many reforms but it has also stipulated
its determination for their implementation.

      The integration of the Republic of Macedonia into the European
Union means development and reforms in many areas of the public life,
particularly in the economy. With the changes made in the tax policy,
Macedonia became the country in Europe with lowest taxes.

      The key point of the Macedonian Government Working Program is
the economic development of the country. Evaluating that the tax system is
a hurdle of the economic activity and obstacle for realization of its main
program task, the Government of Macedonia made numerous changes and
introduced many novelties in the tax area.

      In the area of fiscal and monetary policy, actions have started
towards introduction of numerous changes so that the taxation system can
be become a real promoter of the economic development of the country.
Also, measures are undertaken for administrative-technical strengthening of
the Public Revenues Office and measures are also undertaken for support of
the monetary policy that is solely a competency of the National Bank of the
Republic of Macedonia. In this period we witnessed results and
improvements of the financial control in the institutions of the State.

       In order to resume its support to the monetary policy, the Government
undertook many activities to reduce the cash economy thus fighting the
shadow economy. In March 2007 the Government adopted a Decision to
pay the salaries of the civil servants not in cash by through debit (payment)
cards.

12                                                               REPORT N’ 1
                                                        Leadership Monitoring

     At the beginning of 2007, the inflation rate is very low, even lower
than what was predicted. Its cumulative increase in the period January-May
2007, measured on annual level, is 0, 8% which will enable to achieve the
planned annual inflation rate of 2, 5% at the end of the year.

      In the area of trade policy, the new CEFTA 2006 entered into force
and it is expected to achieve free zone with Kosovo-UNMIK in December
2007. In the area of industrial policy, development has started of general
and sectoral strategic documents. Some of them are still in early phase
(National Strategy for Sustainable Development, Strategy for Equitable
economic Development, Strategy for Industrial Policy) which are supposed
to be adopted by the end of 2007. Improvements are achieved in the work of
the Central Registry in the area of registration of business entities as well as
in the Ministry of Economy regarding the insolvency procedure. This
contributes towards better business environment through simple entry and
exit of the business entities in and out of the market. In order to improve the
SMEs, information was developed on the establishment of Business Centers
in the local self-government units but their realization is yet to be monitored
and seen.

       The reforms ambient in this sector can be evaluated as positive.
Improvements were made to the work of the Central Registry and the
activities for attracting foreign direct investments are intensified. Greater
attention has been paid to improve the investment climate by making
reforms in the tax area (the plan for 2007 has been met) and appointment of
two Ministers solely in charge for attracting foreign direct investments.

      During the reporting period, the Ministry of Finance has developed
most of the laws in the sector of the financial system, which were planned
with the program for this and previous year. Mainly, it developed the new
Law on Banks which was adopted by the Parliament of Macedonia on the
21st of May 2007. This Law was one of the priority laws since its adoption
has achieved several goals, including liberalization of the market i.e.
penetration of foreign banks including EU banks through branches.
Regarding the securities market, laws were adopted for changes and
amendments to the Laws on Securities and Law on Investment Funds. The
Law on changes and amendments of the Law on Securities was adopted in
March 2007 and it changes the definition of private offer. This was done in
order to avoid the exclusivity that existed since recently that the existing

SEPTEMBER 2006 - MAY 2007                                                    13
shareholders can purchase shares through private offer. This change will
enable the people who are not shareholders in the company that publishes
private offer, to sign and buy shares. The purpose of this change is to attract
foreign investors to invest in the shareholding companies in Macedonia.

      In March 2007 the Law for Changes and Amendments of the Law
Investment Funds was adopted. With this Law it will be possible to establish
new types of investment funds i.e. private funds. It is also expected that the
establishment of private funds will kick-start the economy of Macedonia, its
restructuring and entry of new larger investments so that the model of
private investment funds can become the engine of the economic
development.

      Regarding the pension system, the reform has been finalized by
implementing the Law on Volunteer Capital Pension Insurance (the so
called ‘third pillar’). The planned change in the Law on Compulsory Capital
and Pension Insurance was not included in the Program of the Government
of Macedonia but it emerged as a need for implementation of the reforms of
other laws.

       In the area of knowledge economy, the institution “Minister without
Portfolio for IT Society Development” has been introduced, the budget for
scientific-research projects has been increased although in the future it is
necessary to increase this budget significantly more, activities have started
for introduction of the Lifelong Learning concept, re-qualification and
further-qualification. It is necessary to accelerate these activities. Presently
ongoing are the massive trainings in basic IT skills for the people. Already
introduced, or in the process of introduction of several electronic solutions
that are part of the “E-Government”. The electronic allocation of CEMT
licenses, the unique electronic registry of all regulations, the one-stop-shop
for exports and imports. It is necessary to intensify these activities at all
state institutions. However, in order to achieve success of these steps on a
longer term, it is necessary to accelerate the activities and development of
several programs for scientific-technological development.

      In the area of education, in this period activities were initiated or
implemented in all areas as well as specific educational issues stipulated in
the Program called “Rebirth in 100 Steps”. In the same time activities and
measures are implemented that were pointed as weakness in the latest report

14                                                                 REPORT N’ 1
                                                        Leadership Monitoring

of the European Commission regarding the progress of the Republic of
Macedonia towards its EU integration.
       The main achievements are in the area of legal framework
(compulsory secondary education), investments (computerization of the
schools, refurbishment of the student dormitories, free textbooks),
introduction of some novelties in the education (such as the introduction of
religious education).

      Besides investing in construction of sporting facilities as one of the
key priorities of the Macedonian Government in the area of sports, several
other activities were implemented in the period September 2006-May 2007.
The sports is being promoted more intensively, state schools leagues are
established, the Special Olympics were assisted, activities for fight against
doping have started. “The draft Program for Development of Sports in the
Republic of Macedonia 2007-2012” has been developed. The AMS is
involved in the work of the working group of the Ministry of Local Self-
government, in the area of decentralization of sports i.e. sporting objects that
will be transferred into the competency of the local government. The second
phase is almost at the end and formal decision is expected to be adopted at
the end of July 2007.The proposal changes and amendments to the Law on
Sports have passed through the Government procedure and are in the
Parliament procedure. The procedures make distinction about what is
professional and what is amateur sport, as well as the status of the
sportsmen.

      The Government of Macedonia secured additional funds for
development of the agricultural sector. This means increase in funds
support by around 120%. These funds are mainly dedicated for direct
assistance to the agricultural products, through special programs that need to
contribute to the development.
      In this area activities have started for establishment of companies for
promotion and purchase of agricultural products; mechanism was developed
for creation of agricultural polities and for development of the real estate
markets; the conditions for loans have been also improved. Work is in
progress to improve the system for irrigation and control of floods.

      On one hand, Strategy for Development of Agriculture and the Law
on Agriculture and Rural Development are not-yet-adopted (which has
cleared the Government procedure but not yet adopted by the Parliament)

SEPTEMBER 2006 - MAY 2007                                                    15
but on the other hand an Action Plan of the ministry of Agriculture is
created. Mechanism has been established in the Government for
development of agricultural policies and for development of the real estate
markets.
      In the area of the foreign affairs, the NATO accession process is
continuous and there is significant progress in the relations with the EU and
USA since in the recent period we had very intensive communication and
coordination with Washington and Brussels. Meetings on top leadership
level with state officials from USA, the EU, EU Commissioners, members
from the presidencies from EU were gradually realized.

      With all measures undertaken in this period, Macedonia remains to be
very serious candidate for receiving NATO invitation in 2008 and the
reforms required for start of negotiations for EU membership are
undergoing with the dynamic that is planned. The visa facilitation
agreement with EU has been signed and the conditions required for full visa
abolishment are making very successful progress.

      Beside all the commitments still no new diplomatic and consular
missions were established and the promotion of the economic interests, the
cultural, the artistic, scientific and sport achievements abroad, as well as the
establishment of well trained and highly professional diplomacy, does not
take place quickly.

       There is improvement in the area of emigration with adoption of the
Strategic Plan for Reintegration of the Emigrant, stimulation of their cultural
development, improvement of their rights and their information about the
situation in Macedonia. However, there are no significant and continuous
steps to stimulate the return of the emigrants and regular meetings with
them. Positive step towards support of the return of the expert staff in
Macedonia is the change in the legislation which provided recognition of the
foreign diplomas and certificates.

      In the area of internal (home) affairs and justice during the analyzed
period, the Government of the Republic of Macedonia makes significant
efforts to realize the foreseen program reforms for successful integration in
the European-Atlantic structures. The new Law on Police has entered into
force which is the basis for structural reforms in the Ministry of Interior.
What follows next in the 12 months period is the adoption of the bylaws
from this Law that will put this Law into practice. The adoption of the Law

16                                                                 REPORT N’ 1
                                                        Leadership Monitoring

on Changes and Amendments of the Law on I.D. and the Law on Changes
and Amendments of the Law on Passports enabled the issuing of personal
documents harmonized to the EU, ISO and ICAO standards.
      Many activities were implemented in the fight against organized crime
and corruption which resulted in numerous criminal proceedings to the
Public Prosecution Office and resulted in verdicts in the first degree and
produced overall results in the fight against organized crime and corruption.

       In this time period a horizontal readmission agreement with the EU
has been signed, which was one of the conditions to initiate discussions for
facilitation of the visa regime with the EU. The new legislation aims to raise
the security culture in the traffic, the repression policy for misdemeanors
against public order and peace were made more strict and efforts are made
to alleviate the burden from the courts of too many misdemeanor
procedures. Regarding introduction of special investigative techniques in the
fight against organized crime and corruption, including the Program for
Protection of Witnesses, on 15th November 2006 the Parliament adopted the
Law on Surveillance of Communications and on the next session it adopted
the Law on Changes and Amendments of the Law on Corruption
Prevention. These changes opened the possibility for more efficient fight
against corruption and organized crimes, especially through opening of
opportunities for confiscation of the assets acquired from criminal activity.
Another argument in fight against organized crime is the adoption of the
Law on Financial Police on 23rd April 2007.

       In comparison to the sector for internal affairs, the judiciary reforms
are progressing much slowly. The judiciary system reform in the Republic
of Macedonia is one of the key preconditions for accession to the EU
institutions. The base for further reforms is the changes in the structure and
the election method of the Republic Judicial Council, set in the Law on
Judicial Council of the Republic of Macedonia. The reforms of the
Republic Judicial Council are only partially implemented and more efforts
are needed in this direction since the Judicial Council is the base for further
reforms in the judicial system.

      The developed draft-version of the Law on the Rights of Patients is
very important step towards specifying the responsibilities and obligations
between the medical staff and patients, protecting the rights of the patients
through the principles of humanity and accessibility of the health services.
In the frames of the Ministry of Health a Policy Analysis Department has

SEPTEMBER 2006 - MAY 2007                                                   17
been established with a purpose to monitor the relevant health indicators, to
evaluate the impact of the policies and reforms implementation and make an
overview of the financial status of the system.
      Very important step was the delivered training for leaders and
managers in the health sector in order to have successful and expert
management with the health institutions. Activities were undertaken to
clearly define the health services package that are subject of the health
insurance. In the frames of this reform period in the Macedonian health
system, the primary health care has been privatized and in the meantime we
are working on the decentralization and autonomy of the hospitals, which is
planned to be achieved by 2008. On the other side, the privileged VAT rate
for drugs, as well as reference pricing, are not yet introduced.

      In the area of transport and communications majority of activities
that were planned in the pre-election campaign, have started in order to
enable the Macedonian citizens with more affordable and more quality
services. The following activities were undertaken: Construction works for
refurbishment of the bridges on the main roads in Macedonia; third mobile
operator concession was awarded, introduced is the transparent allocation
(awarding) of CEMT licenses, assisted by USAID. Activities have also
started for improvement of the work of the Public Enterprise for Airport
Services.

      Beside the reforms achieved by the Government, and the laws adopted
for these sectors, it is still early to speak about specific feedback from the
implementation of the laws, although the positive effects from adoption of
some of the laws can be already felt.




18                                                               REPORT N’ 1
                                                         Leadership Monitoring

                     1. Fiscal and monetary policy

      The key point of the Macedonian Government Working Program is
the economic development of the country. Evaluating that the tax system is
a hurdle of the economic activity and obstacle for realization of its main
program task, the Government of Macedonia made numerous changes and
introduced many novelties in the tax area.

      By changing the tax policies, Macedonia became the European
country with lowest taxes. The purpose of this structure of the tax system is
to make him promoter of the economic development of the country. The key
role in this modernization is played by the Public Revenues Office so this
Office is undergoing institutional strengthening.

      Although it does not have direct competencies, the Government of the
Republic of Macedonia adopted parallel measures to increase the efficiency
and security of the local banking system, by improving the supervision over
the banks, reduce the cash flows, maintain the prices stability and strengthen
the crediting for dwelling in the country.

     In order to maintain and increase the overall financial transparency,
responsibility and discipline in the country, the Macedonian Government
undertook measures to improve the financial control of the legal entities.

       1.1. Fiscal policy
       The Government of Macedonia is the body that is entirely responsible
for the fiscal policy. Its goal is to increase and maintain the fiscal discipline
and secure permanent harmonization of the fiscal policy with the Maastricht
criteria: public debt no greater than 60% of the GDP and budget deficit no
greater than 3% of the GDP.

      With such attitude and greater relaxation regarding capital
investments, it was expected that the Macedonian Budget would play
developmental role in the Macedonian economy. Also serving to this
purpose should have also been the radical tax reform consisted of the
following main points:

     a) Reduction of the VAT from 18% to 5% for the agricultural
materials and mechanisms by the end of 2006;

SEPTEMBER 2006 - MAY 2007                                                     19
       b) Introduction of flat tax rate where personal income tax is at the flat
rate of 12% in 2007 and 10% from 2008 onwards. The same goes for the
profit tax;
       c) The introduction of zero taxation rate for profit that is reinvested in
2007;
       d) Harmonization of the base for payment of the personal income tax
and social contributions in 2006/2007;
       e) Improvement of the technical and administrative capacity of the
Public Revenues Office during 2006/2007.

     The period September 2006-May 2007 noticed the following
developments in the monetary policy:

      a) The intention for establishment of environment for development of
Macedonia is strongly manifested by the Government in the field of taxation
policy. Realizing that the tax system that existed before was a big hurdle of
the economic development of the country, the Macedonian Government
made many changes and introduced many novelties in this area, aiming to
transform the tax system into an engine of economic development of the
country;

      1. On its first session (September 2006), the Government of
Macedonia proposed and the National Parliament adopted a Law (which
entered into force on 1st October 2006) on reduction of VAT rate for
agricultural raw materials (fertilizers, seeds and seedling materials, plant
protection products, plastic mass foils, drainage of urban waste waters) and
for agricultural machines, from 18 to 5%. Such measure will reduce the
production costs, increase productivity and competitiveness of the
agricultural products;

       2. The greatest relaxation of the fiscal policy has been made in the
field of profit tax and personal income tax. The so called “zero rate tax” has
been introduced for all profit reinvested starting from 1st January 2007. This
means that the companies are relieved from paying profit tax if they reinvest
the profit into their reproduction. This is insignificant loss of revenues for
the sate in the first year of implementation of this measure. Later, the
reinvested profit will increase the scope of investments that will, in turn,
also increase the demand and offer of goods and services in the country, this
increasing the overall GDP. The employment rate in the country will also

20                                                                  REPORT N’ 1
                                                        Leadership Monitoring

increase thanks to this measure. It will also increase the revenues in the
National Budget from taxes and other contributions that the companies will
pay (due to the increased production volume) and newly hired people (due
to personal income tax and other duties they will pay to the State). To
certain extent this measure will also reduce the costs of the country for
social transfers that are not paid to social beneficiaries, redundancy workers,
etc.

      Similar effects can be also expected from the introduction (since 1st
January 2007) of the flat rate tax on profit and on personal income. The
companies that will not reinvest their profit will not pay the former rate of
15% anymore but, starting from 2007 they will 12% and from 2008 they
will pay 10% profit tax rate. Also, the progressive tax rates of 15, 18 and
24% (depending on the revenue you make) will be replaced with a flat tax
rate on personal income – 12% in 2007 and 10% in 2008. In both cases this
will mean reduction of the financial burden of the companies that will
release funds for improvement of their production, increase in
competitiveness and sales of their products. This will also increase the
number of staff in their companies;

       b) Realizing that the implementation of radical reforms in the tax
policy is impossible without administrative-technical strengthening of the
Public Revenues Office (PRO), the Government of Macedonia did many
activities in the analyzed period:

      1. Draft Proposal of the Law on Changes and Amendments of the
Law on the Public Revenues Office has been developed and this Law is now
in Parliamentary procedure. This Law will provide strengthen the PRO from
administrative aspect as a tax authority and increase its efficiency in
realization of the tax competencies;

      2. The Large Taxpayers Office (LTO) that has been established
recently, has been vested with greater competencies. The LTO established
and maintains an electronic system of records, is in charge for auditing
procedures, procedures of assessment and collection of taxes, is in charge
for the appeals and does other things related to large taxpayers. The main
focus of its work is towards reduction of the risk of (non) payment of taxes
by the large taxpayers and increased collection of the tax arrears from these
taxpayers. In this respect, agreements for electronic transfer of information
from the tax returns were signed and Identification Codes were allocated
SEPTEMBER 2006 - MAY 2007                                                   21
(awarded) to all 118 large taxpayers. The final effect from the LTO work is
visible in increased rate in collection of taxes from the large taxpayers in the
period 1.01.2007-31.03.2007 by 24,2% regarding collection in the same
period of the previous year;

      3. In order to strengthen and simplify the one-stop-shop system for
registration of legal entities and persons registered in other registers, as well
as for the purpose of information exchange, the PRO established electronic
link with the Central Registry of the Republic of Macedonia. In this system
for registration, the PRO role is to allocate the unique tax identification
number (TIN) to the entity, allocate personal identification number (PIN) to
the entity, designate the code of the organizational structure of the entity and
odes other activities important for registration of the entity in the Central
Registry which is necessary for tax identification purposes;

      4. In the reporting period, the PRO developed and started to
implement the Strategy for Increased Declaration of Taxes and improved
collection of the taxes. This improved the existing procedures and they were
harmonized with the present legislation. The practical application of this
Strategy produced increased collection rate of the public duties from the
citizens and legal entities. For example, the total public duties collected in
2006 were greater by 1,55% compared to those in 2005 while their
collection in the January-May 2007 period was greater by 8,92% compared
to the same period in 2006;

       5. The undertaking of adequate legal measures and by using increased
public campaign, the PTO has managed to drastically increase not only the
percentage of use of cash register machines all over Macedonia, but it also
managed to raise the awareness of the people and the companies on the need
to implement this measure. In the period September 2006 – May 2007 a
total of 5.407 new cash registered were registered as fixed and 443 mobile;

      6. Being aware about the great importance that the VAT refund has on
the liquidity and development of the companies, the PRO established and
maintains a system of high level of refund of the surplus paid VAT within
30 days after it has been assessed.

      1.2. Monetary Policy
      The Government of the republic of Macedonia has no directly planned
goals and tasks regarding monetary policy because it does not have direct
competencies in establishment and realization of the monetary policy. This
22                                                                  REPORT N’ 1
                                                        Leadership Monitoring

policy is entirely vested in the National Bank of the Republic of Macedonia
(NBRM). The Government of Macedonia pledged to fully respect this
independency of the Central Bank in the same time assisting the main goals
of the monetary policy in the analyzed period:

     • Maintenance of the stability of prices; and
     • Increased efficiency of the banking system by increasing the
supervision that is carried out over the banks.

      The Government of the Republic of Macedonia plans to contribute
towards increase in liquidity and efficiency of the banking system of
Macedonia, reduce the total cash used and improve the crediting for
dwelling (apartments) in the country with its own parallel measures. The
purpose of these activities is to increase the efficiency and competitiveness
of the financial system, stimulate the development of the private sector,
reduce the level of shadow economy and increase the total investments.

     The following issues were noticed during reporting period (September
2006-May 2007) in the area of monetary policy:

      a) The stability of prices was maintained. This was the main goal of
the monetary policy. For realization of this goal, the National Bank used the
strategy of “tied” (to the euro) exchange rate of the denar. Such strategy
(which is the intermediary goal of the monetary policy), amended by other
macroeconomic factors, stimulated inflation rate of 3,2% in 2006. The
similar inflation rate (increase by 3,1% on annual level) was present in the
period September-December 2006 which means that in this period the
tendency of retaining the stability of prices has been maintained;

      b) The bank interest rates were reduced as a result of the price stability
and reform changes of the business environment in the country. For
example, the interest rate of the 28-days treasury bills of the National Bank
has been reduced from 6,1% (as it was in 2006) to 5,3% in the first five
months of 2007. The average Lombardy interest rate of the National Bank
has been reduced from 11,% in 2006 to 9,5% in the first five months of
2007 and this rate from 5th of June 2007 has been further reduced to 7,5%.
In the same period, the average active interest rates of the banks (which are
the interest rates on the loans) have been reduced from 11,29% to 10,58%
while the average interest margin has been reduced from 6,63% to 5,90%.
After a long time, the citizens can finally obtain a loan for buying residential
apartment with favorable interest rate of 5,5% per year;
SEPTEMBER 2006 - MAY 2007                                                    23
       c) The National Bank undertook many measures to increase the
efficiency of the banking system – this was increase of the supervision over
the banks. Strong influence in this regard was the preparation of the
Macedonian banks and their adjustments to the supervision standards
included in the Law on Banks that was adopted by the Parliament in May
2007. Besides, this Law harmonizes the domestic banking legislation with
the EU legislation;

       d) The Government of Macedonia undertook measures to increase the
efficiency of registration of the ownership titles over real estate (houses,
apartments, fields, etc.) in order to stimulate the crediting for apartments
(living) buy the commercial banks. This will enable the citizens to have
easier access to credits for buying apartment or other dwelling unit, or
credits for business and economic activity;

      1.3. Other measures with monetary and fiscal implications
      In order to stimulate the support for monetary policy and in relation to
the activities of the Government reduce the amount of cash used thus
reducing the shadow economy, the Government of Macedonia adopted and
implemented a decision for gradual (by March 2007 at latest) payment of
salaries of the employees in the state administration though payment cards.
This measure has direct influence on the reduction of the total volume of
cash. In the same time, in cooperation with the Association of Macedonian
Banks, the Government of Macedonia adopted decision for gradual
replacement of the existing with new citizens cheques that will not be used
as credit instruments, as it was until recently, but they will have their true
and unique role of payment instruments, which will significantly reduce the
level of shadow economy in Macedonia.

      In a situation of significant increase of foreign currency reserves, the
Government of Macedonia decided to use some of these reserves for early
payment of liabilities towards the foreign creditors. There was early
payment in a total of 291 million dollars towards the so call Paris Club of
Creditors (103 million dollars), World Bank and the European Investment
Bank (137 million dollars) as well as to the IMF (51 million dollars). This
early payment of foreign debts resulted in savings of around 40 million
dollars only in interests, has increased the international credibility of
Macedonia, reduced the public debt by around 33% of the GPD and has
reduced the level of debt for the future generations.


24                                                               REPORT N’ 1
                                                     Leadership Monitoring

      Measures are also undertaken to improve the financial control in order
to increase the transparency and accountability for the spending of public
funds by the National Budget beneficiaries. In this respect, the Government
of Macedonia adopted and the National Parliament adopted the Law on
Changes and Amendments of the Law on Internal Audit in the Public Sector
and the Law on Public Internal Financial Control. An addition to this is the
adoption of the Law on Financial Police which expands the financial work
of other legal entities in the country.

      1.4. Overall evaluation by the expert for the reporting period
      In applying the new measures of fiscal policy, caution must be
exercised by the relevant institutions because some of the enterprises could
misuse the benefits they are given. Instead of increasing the production and
the number of staff, the revenue relieved could be hidden or extracted from
the enterprise in various ways. In order to prevent this from eventual
happening increased presence of tax audits are necessary.




SEPTEMBER 2006 - MAY 2007                                                25
                    2. Trade and Industrial Policy

      The trade and industrial policy are not explicitly treated in the
Government Program 2006-2010. Therefore, this part of the report is based
on those measures and activities of the program that can provide greater or
small influence on the results of these policies, considering the commitment
of the Government to create an ambient for running business. In this respect,
the information from the National Program for Adoption of the European
Union Acquis was taken as well as documents from the Ministry of
Economy.

      In the economic part of the program, the Government of Macedonia
has established policies and measures in three main groups:

      а) Increase of competitiveness of the Macedonian companies;
      б) Increased attractiveness of Macedonia for the foreign and domestic
investors;
      в) Improved quality of the public institutions.

      2.1. Trade policy
      The general goals in the trade policy set by the Government are the
following:

     1. Increase trade exchange;
     2. Increase competitiveness of the exports;
     3. Trade surplus with agricultural products.

      In the period September 2006 – May 2007 the following actions were
noticed in the area of trade policy:

         The CEFTA 2006 entered into force;
         Presently efforts are made for establishment of free zone with
Kosovo-UNMIK by December 2007;
         The practice of low priority of the agriculture has continued with
the reallocation of funds from the Ministry of Finance for subsidizing of
agricultural products for reduction of the trade deficit.

     2.2. Industrial and investment policy
     The general goals in the industrial and investment policy set by the
Government are the following:
26                                                               REPORT N’ 1
                                                     Leadership Monitoring

    1. Increase the competitiveness of the Macedonian companies;
    2. Increase the attractiveness of Macedonia for the foreign and
domestic investors;

     In order to achieve these general goals, the Government will
undertake the following measures:

      1. Adoption of strategic documents;
      2. Adoption of sectoral strategic documents;
      3. Reduced corruption and bureaucracy (Act on Accountability of the
Government);
      4. Improvement of the investment climate;
      5. Deregulation process – regulatory guillotine;
      6. Simplified entry and exist on/from the market for the companies;
      7. Realization of the agreements (insolvency procedures) and
simplified exit for the companies from the market;
      8. Strengthening of the SMEs;
      9. Stimulation of innovations.

      The ambient for reforms can be evaluated as positive. The reason for
this optimism is that this Government, for the first time, adopted a program
that is sufficiently integral and integrated per sectors so it provides
platforms for coordinated actions.

     During the transition period, the Governments of Macedonia lost a lot
valuable time until it was realized that capacity is needed for planning and
cooperation of the policies for achievement of the goals for functional
market economy.

       2.3. Activities implemented in the period of reporting
       Regarding sectoral strategic documents, currently in advanced phase
is the implementation of the National Program for Restructuring of the Steel
Industry of the Republic of Macedonia.

      Greater attention has been paid to improve the investment climate by
making reforms in the tax area (the plan for 2007 has been met) ad
appointment of two Ministers solely in charge for attracting foreign direct
investments.

      In the area of improvement of the business environment and reduce of
the transaction costs of the economic agents, the “regulatory guillotine”
SEPTEMBER 2006 - MAY 2007                                                27
process will be realized by establishing unique electronic registry of all
information is supposed to be established by September 2007.

      In the area of simple entry and exit of the business entities on and
from the market, evident are the achievements of the Central Registry in the
area of registration of business entities and of the Ministry of Economy in
the area of bankruptcy procedure.

       In order to strengthen the SMEs, information was development for
establishment of Business Centers in the local self-government units but
their operationalization is yet to follow.

      Regarding innovations, we remain to monitor the results from co-
financing of innovation projects by the Ministry of Education and Science.

      In the period September 2006 – May 2007 the following actions were
noticed in the area of industrial and investment policy:

      a) Development has started of the general strategic documents and of
the sectoral strategic documents. Some of them are still in development
phase (such as the National Strategy for Sustainable Development, the
Strategy for Equal Economic Development, the Strategy for Industrial
Policy) that are supposed to be adopted by the end of 2007. Action plans
and programs must be developed for these strategies that will be monitored
by the OHRID Institute for Economic Strategies and International Relations;
      b) Regarding Sectoral strategic documents, in advanced phase of
implementation is the National Program for restructuring of the steel
industry of the Republic of Macedonia;
      c) Greater attention has been paid to improve the investment climate
by making reforms in the tax area (the plan for 2007 has been met) ad
appointment of two Ministers solely in charge for attracting foreign direct
investments;
      d) The “Regulatory Guillotine” process has started and is ongoing as
planned. This is done in order to improve the business environment and
reduce the transaction costs of the economic agents. By September 2007, as
it was planned, the unique electronic registry of all information is supposed
to be established;
      e) Improvements are achieved in the work of the Central Registry in
the area of registration of business entities as well as in the Ministry of
Economy regarding the insolvency procedure. This contributes towards

28                                                               REPORT N’ 1
                                                        Leadership Monitoring

better business environment through simple entry and exit of the business
entities in and out of the market;
       f) In order to improve the SMEs, information was developed on the
establishment of Business Centers in the local self-government units but
their realization is yet to be monitored and seen;
       g) Regarding innovations, we remain to monitor the results from co-
financing of innovation projects by the Ministry of Education and Science;

      2.4. Risk evaluation; Which activities can be done to avoid the risk:

       • Establishment of formal procedures for adoption of strategic
documents that will involve the business communities, think-tanks and the
citizens;
       • Sectoral cost-benefit analysis for the measures that the Government
undertakes which have the features of interventionism (Computer for every
child, assistance and concessions for the foreign direct investments, etc.);
       • Strengthening of the monitoring and evaluation of the Budget
realization, with outcome performance indicators;
       • Establishment of Governmental working group that will include
experts from the opposition;
       • Strengthening and compliance to the merit system;
       • Possible evaluation of the effects of the Law on Civil Servants;
       • Define the terms “nepotism” and establish clear criteria for hiring
in the state administration (probably in a separate Law on Conflict of
Interests)
       • Testing of the public administration, sacking of civil servants that
show unsatisfactory results. The testing should not be according to their
level of education but according to the skills, working discipline, etc.
(languages, IT skills, management abilities and conflict resolution abilities –
all these things go without saying).

      2.5. Overall evaluation by the expert for the reporting period
      General evaluation for this period is that the Government has
introduced wide front of activities, both horizontally and vertically. By
saying “horizontally” we refer to adoption of the strategies and programs in
various areas that require administrative and technical capacity in all
Ministries and relevant institutions. By saying “vertically” we refer to the
fact that proper hierarchy of the state administration staff is established
regarding planning and implementation of new activities – there is no more

SEPTEMBER 2006 - MAY 2007                                                     29
“putting out the fire” principle but now there is regular monitoring and
reporting. The successful management of this front of activities will greatly
impact the successful implementation of the goals set in the strategic
documents and programs.

      Regarding all these documents, it is a must that they are accessible to
everyone interested (internet), even in draft versions. It should be a problem
to put the latest version at the end of the day on the internet. In this respect,
we must praise and commend the move by the Official Gazette that made it
possible to download their products free of charge from their website.

      In general, the Government has started to create an ambient for
regulation of the markets in Macedonia, which is especially important for
removal of any type of discretion and obstacles in the market work. Here it
is especially important to mention the reduction of the transaction costs for
entry and exit from and on the market (registration and bankruptcy
procedure) and regulatory guillotine. However, here we are still speaking
about ideas or only partially implemented activities or about activities that
we are yet to see how they will be realized in practice. Therefore, this
monitoring is a tool of great importance in order to defend the public
interest for correct and timely information for everyone.




30                                                                  REPORT N’ 1
                                                        Leadership Monitoring

                   3. Financial and pension system

      3.1. Financial system
      The Financial system in the Republic of Macedonia is consisted of the
banking sector, the capital market, the insurance sector, the pension funds,
leasing and foreign currency system.

      In accordance with the Action Plan of the Government of Macedonia,
the Ministry of Finance (Sector for Financial System) developed large
number of the laws that were foreseen by the Program for this and the
previous year.

       The Ministry of Finance drafted the Law on Banks which was adopted
by the Parliament of Macedonia on 21st May 2007. This Law was one of the
priority laws since its adoption harmonized the Macedonian legislation with
the new Directives 32006L0048 and 32001L0024. In other words, the
adoption of this Law enabled the following:

      • Liberalization of the market by providing entry of foreign banks,
including EU banks, in a form of subsidiaries;
      • Increase of the capital census required for establishment and work
of a bank – it was 3,5 and now it is 5 million euros;
      • Introduction of the criteria for abolishment of the license for
establishment and work of a bank in a case of non-realization of banking
work by the bank for more than 6 months, thus replacing the old solution of
12 months;
      • Strengthening the criteria to become shareholder of the bank and
introduction of ability for the National Bank to withdraw the initially issued
endorsement, and sell shares of the shareholder that does not meet the
shareholder criteria anymore, or shareholder who acquired qualified
participation without previous consent/endorsement;
      • Improvement of the corporate government of the banks, by
improving the role and responsibilities of the steering bodies, the systems
for internal control, the roles of the external auditor, increased transparency
in realization of the financial activities, improved accounting standards, etc.;
      • Increased efficiency of the procedure for exit (bankruptcy of
liquidation) of the bank from the banking system;
      • Specification of the types of risks the banks face, improvement of
the market discipline of the banks the management with the risks is related
SEPTEMBER 2006 - MAY 2007                                                    31
to the type and scope of activities of the bank that is used for activities of
approximation of the New Capital Agreement.

      One of the additional priorities set for this year was the development
of the Law on Changes and Amendments of the Law on Supervision over
the Insurance. This draft law was developed in accordance with
recommendations and detailed analysis of the level of harmonization of the
domestic legal framework regarding insurance with the EU Directives and
standards and principles of the International Association of insurance
Supervisors (IAIS). The main priority in the Draft Law on changes and
amendments of the Law on Supervision over the Insurance is that it to
provide legal basis for establishment of independent supervision body in the
area of insurance – Agency for Supervision of the Insurance. This Law will
also improve the prudent standards and standards for supervision in the
insurance sector, it will harmonize the capital requests for establishment and
work of an insurance company with the EU Directive from 2002, will
regulate the agents and mediators in the insurance, will strengthen the fit
and proper requirements for the shareholders and members of the steering
committee of the insurance companies – all with a purpose to provide better
protection of the insurers and improve the insurance market in Macedonia.
This law is currently in Parliamentary procedure and its adoption is
expected on one the next Parliament sessions.

      Regarding the securities market, laws were adopted for changes and
amendments to the Laws on Securities and Law on Investment Funds. The
Law on changes and amendments of the Law on Securities was adopted in
March 2007 and it changes the definition of private offer. This was done in
order to avoid the exclusivity that existed since recently that the existing
shareholders can purchase shares through private offer. This change will
enable the people who are not shareholders in the company that publishes
private offer, to sign and buy shares. The purpose of this change is to attract
foreign investors to invest in the shareholding companies in Macedonia.

      Also adopted in March 2007 was the Law on Changes and
Amendments of the Law on Investment Funds. These changes reduced the
charter capital required for establishment of open and closed investment
fund from 2 million DEM to 500.000 euros. It also reduced the charter
capital required for establishment of company for management with
investment fund, which is now 100.000 euros and for each new investment
fund the charter capital is increased by 50.000 euros. Second important
32                                                                REPORT N’ 1
                                                      Leadership Monitoring

change introduced with this law is the opportunity to establish new type of
investment funds i.e. private equity funds. The collection of money in the
private funds will be done through private offer dedicated for already
targeted investors. The private funds are places where investment is made
by well informed investors such as banks, pension funds, insurance
companies, the State either directly or through state agencies, corporate
investors – companies, etc. In order to establish private fund it is not
necessary to receive approval from the National Commission for Securities
because if some investor is well informed and knows the industry, he
intentionally moves into calculated risk so no protection from the State is
necessary. Contrary to other companies for management with investment
funds, the companies that manage private funds should have charter capital
in the amount of 50.000 euros and for each and every one plus 25.000 more.
The implementation of this Law is also supported by the National Budget of
the Republic of Macedonia with 1.500.000 euros being allocated specially
for that purpose.

       It is also expected that the establishment of private funds will kick-
start the economy of Macedonia, its restructuring and entry of new larger
investments so that the model of private investment funds can become the
engine of the economic development.

      3.2. Pension system
      Regarding pension system, the reform has been finalized with
implementation of the Law on Volunteer Capital Pension Insurance (the
third pillar). After the Government of Macedonia adopted conclusions in
October 2006, a Committee for Volunteer Capital Pension Insurance has
been established with representatives from the relevant state bodies and the
World Bank. The Law is now in the first phase which, if passed quickly,
will implement this pillar by June 2008. This law was developed jointly by
the Ministry of Labor and Social Policy, Fund for Pension and Disability
Insurance and MAPAS.

      The adoption of the Law on Changes and Amendments of the Law on
Pension and Disability Insurance was developed by a working group in
January 2007 and this clean text was forwarded to all other relevant
Ministries for consideration. This Law was also put for consideration on the
Economic and Social Council. The purpose of adoption of this Law is to
redefine what disability is and, in accordance with the EU legislation,
simplification of the procedure and making more strict the control and
SEPTEMBER 2006 - MAY 2007                                                 33
mechanisms in realization of the right on disability pension. The Ministry of
Labor and Social Policy has set the target date of January 2008.

      The planned change in the Law on Compulsory Capital and Pension
Insurance was not included in the Program of the Government of Macedonia
but it emerged as a need for implementation of the reforms of other laws.
The companies collect 8,5% from the 140.000 members for service fee.
MPAS, Fund for Pension and Disability Insurance and the National Bank
have ascertained that this fee is very high. After analysis was made by a
consultant decision was made to reduce this fee by changing this Law which
imposed limitation on the companies regarding the fee they can collect from
their members. The state expressed its readiness to reduce this fee but the
companies were not interested. This Law will be welcomed not only by the
present but also by the future insurers and the State will have an insight in
the memberships and collection rate.

       3.3. Overall evaluation by the expert for the reporting period
       The conclusion from the overall analysis of the financial and pension
system is that the Government is working with “full speed ahead” in order
to meet the program it has set. It is very positive that many of the planned
activities and projects yielded additional new projects and the Government
showed good will to improve and expand the financial institutions.

      The financial and pension system of Macedonia, with the changes in
the laws and implementation of new ones, is approximating to the EU
financial system. The EU membership, the implementation of the Basel II
Agreement and, finally, the strengthening of the regulatory framework, will
stimulate the Government to continue with implementation of the reforms
and adoption of new regulations and bylaws.

      Beside the reforms and all the adoption of new laws, as well as
changes and amendments of the Laws, there is still insufficient
competitiveness in the financial sector. The reason for this is the lack of
financial instruments. The increased presence of the financial instruments on
the market will increase the attractiveness of the market itself.

       The changes in the Law on Banks were very good move since it was a
hurdle for competitiveness in the banking sector. Beside the changes in the
Law on Banks, it is necessary to better adapt to the global liberalization of
the financial services and increase of the competition. There is still low level
34                                                                 REPORT N’ 1
                                                       Leadership Monitoring

of banking intermediation and especially low level of international
competition.

       Beside the reforms achieved by the Government and the laws adopted
in these sectors, it is still early to discuss about any feedback from the
implementation of the Laws. Regarding the Law on Investment Funds, the
results from implementation were felt immediately after the arrival of the
first investment fund which will enable reduction of the risk by diversifying
the portfolio, lower investment costs and, one of the most important things
when speaking about investments is securing information about the market.

      Maybe the improvement of the financial system will expand the
means of investments for the individuals. The problems with the pension
system have surfaced. Now the main battle is fought between the pension
funds and the Government to reduce the commission rate of 8,5%.

      So far, the funds were interested to reduce this rate by 0,6% (now at
7,9%). On this market, there are very few pension funds for volunteer
capital investments (only two) so we can not yet speak abut real
competition. It is necessary to increase the competition in order to have real
market competitiveness and better management of the money of the future
pensioners.

      So far it is impossible to identify the potential problems in the
financial and pension system. The implementation of the reforms is
implemented in accordance with the dynamics planned.




SEPTEMBER 2006 - MAY 2007                                                  35
                       4. Knowledge economy

      The global economy is quickly evolving. The quick economic growth
and the emerging markets, the new technologies and liberalization of the
trade caused integration of the world economy like never before.

      The growth of the world economy in the last five years is greater than
increase achieved in other period from World War II till present. How much
will Macedonia be able to benefit from these trends depends on how it will
adapt to the new knowledge economy.

      The Program for Work of the Government 2006-2010 reads the
following issues regarding support in adaptation of Macedonia to the new
knowledge economy:

      • Increased amount of budget funds for science, research and
development;
      • Improved flow of knowledge between universities and the private
sector;
      • Establishment of Center for Education of Managers;
      • Establishment of the Lifelong Learning concept;
      • Establishment of Ministry for IT Society;
      • Wireless installations for internet on the entire territory;
      • Interim use of internet;
      • Massive basic IT courses;
      • Full computerization of the schools;
      • Promotion of the cashless payments, payment, е-business and е-
Government;

       4.1. Implementation
       In the period September 2006 – May 2007 the Government undertook
activities in the following areas:

       1. The Budget for 2007 foresees increase in the budget funds for
science, development and research. The Budget of the Ministry of Education
has been increased by 7% and 200 scientific-research projects are forecasted
for financing. For the Macedonian Academy of Arts and Science a total 60
scientific-research projects will be financed;

36                                                              REPORT N’ 1
                                                        Leadership Monitoring

       2. At the end of 2006 the Government started consultation regarding
establishment of business incubators and, following the initiative by
MASIT, the so called Centers of Excellence following the example from
Israel;
       3. Activities are initiated for support of the Lifelong Learning process
by developing more programs for re-qualification and further qualification,
especially in the area of IT technology. These activities need to be
intensified;
       4. On 21st December 2006, the Government appointed a Minister
without portfolio for IT Society. Formally, the Government did not establish
a Ministry for IT Society but the function of such Ministry is de facto
realized by the Minister, and his team;
       5. This summer the Government will announce the tender for
concession for WiMax – broadband wireless internet;
       6. The Government organized several times already free of charge
one-day use of internet for all interested persons which faced certain
setbacks due to technical problems;
       7. Massive training in basic IT skills are currently implemented;
       8. The Government announced a tender for procurement of computers
for all the schools in the Republic of Macedonia;
       9. In order to promote the cashless payment, the Government
introduced payment of the salary of the administrative workers on their
payment card accounts and soon the guarantee cheques will be fully
abolished;
       10. Already introduced, or in the process of introduction of several
electronic solutions that are part of the “E-Government”. The electronic
allocation of CEMT licenses, the unique electronic registry of all
regulations, the one-stop-shop for exports and imports. It is necessary to
intensify these activities at all state institutions;

     In order to fully complete the foreseen activities, the following actions
must be implemented in the following several years:

      a) Drastic increase of the budget allocations for science, research
development and better information of the companies on the possibility to
use these opportunities;
      b) Redefine the educational strategy of Macedonia in order to improve
the image which the natural and technical sciences have among Macedonian
students (mathematics, physics, chemistry, biology, genetics, technology,
electro and machine engineering, etc.);
SEPTEMBER 2006 - MAY 2007                                                   37
      c) Maximum use of the know-how from abroad, transferred in a form
of technical assistance through the institutions such as USAID, EAR, GTZ;
      d) More intensive dialogue should be established with the
Macedonian IT industry;
      e) More comprehensive support should be provided to the
introduction of the electronic signature;
      f) Strategy for IT society development and program by the Minister
for IT Society;

      4.2. Overall evaluation by the expert for the reporting period
      In this area, the implementation of the Working Plan of the
Government is in accordance with the dynamics planned and successful.
Recommendation can be made to adhere to the transparency when setting
the conditions that will apply for the new telecommunication
concessionaires, especially the WiMax and good and thorough development
of the projects such as “Lifelong learning” and IT skills training.




38                                                           REPORT N’ 1
                                                        Leadership Monitoring

                              5. Education

      The performance based monitoring system, which has been composed
to monitor the working of the Government, were monitored and will
continued to monitor the realizations of the Government in terms of four
educational areas and many issues within them: investments and novelties in
education (with ten questions), the improvement of the quality of education
(with five questions), the increase in the quality of education (with six
questions), investing in sport and physical culture. Apart from this, there is
also the monitoring of achievements in relation to three specific projects:
academy for managers, virtual library, a school bus, as well as numerous
other activities and realizations that although have not been an explicit part
of the Government’s reformation program in 100 steps, have become a part
of the Government’s work for 2006 and 2007 – be it for their program
compatibility or be it for their continuous state importance.

      Based on this framework, here are shown the initial notices for the
realization in certain areas.

      The main educational goals of the pre-election program of the
Government of the Republic of Macedonia are determined in the eighth
chapter of the Reformation Program in 100 steps of VMRO-DPMNE. It is a
program with which VMRO-DPMNE appeared at the parliamentary
elections in 2006. The program was accepted by all coalition partners with
whom VMRO-DPMNE formed the Government of Macedonia and with
whom it works in the country.

       5.1. Implementation
       In full, until the end of the month of May, the Government has
initiated or executed activities in all areas and in all concrete educational
questions referred in the Government Program and in the Program “Rebirth
in 100 Steps”. Apart from those, the Government and other state bodies,
carried out activities and measures that were pointed out as a weakness in
the last report of the European Commission for the progress of the Republic
of Macedonia in the European integration in relation to education.

      In the Commission report it was established that there is need for
strong political will and appropriate allocation of resources for the execution
of the Law on Vocational Education. Both things are realized with the
SEPTEMBER 2006 - MAY 2007                                                   39
adoption of the Law on amendment of the Law on Vocational Education
with the establishment of Center for Vocational Education. This activity is
directly connected with the realization of the program goal for the
construction of a dual education system. For this purpose there has been a
realization of the primary activities for leasing of the education institutions
with the business sector with a purpose of defining of the specifics in the
teaching plans. Significant movement in relation to the remarks from the
Commission’s report and at the same time with the realization of the
program promises has been made with amendments of the Law on Higher
Education, whose adoption is currently in the pipeline.

       From the law initiatives aspect, it is to be noted the preparation of the
first national Law on Lifelong Learning. Its adoption will provide a base for
the inclusion of the Republic of Macedonia in the programs of the European
Union in this area, which was also one of the weaknesses in 2006. The
initial steps of the Government are also graded on the same level, or more
precisely the Ministry of education for the creation of legal and institutional
bases (the adoption of laws and creation of agencies) in regard to the EU
Youth in action program.

      In the area of investments and novelties in education, the pre-election
program is focused on ten main issues. The deadline for the realization of
seven of them was until the end of 2007, and some even with the beginning
of the new school year. From the interviews conducted and consultation
documents, it can be concluded that for the realization of all these seven
goals there have been taken appropriate activities and that things are going
towards the direction of their realization:

      • Secondary education becomes mandatory;
      • New teaching plans have been prepared where desired educational
novelties have been included such as ethics, English for first grade, IT;
      • A tender has been announced for the purchase of computers for the
project for a full computerization of schools;
      • A criteria is being built by which free schoolbooks will be given
out for primary education and others;
      • Activities have been carried out and there is ongoing work on the
development of the most suitable model for the addition of religious
education in the teaching plans;
40                                                                 REPORT N’ 1
                                                       Leadership Monitoring

      In relation to the other program goals that have a more relaxed
deadlines, there have been initial activities taken:

      • The adoption of a program for the renovation of student dorms;
      • Main projects for the student dorms for planning of internet
connections have been demanded;
      • A cleared location for the construction of a new student dorm has
been designated;
      • There is a lack of data to evaluate the realization of the promise for
an increase of budget funding for education to a 5% level of GDP;

     In relation to the improvement of the quality of education, four issues
have been targeted:

      • Control of the quality of education;
      • The development of a dual education system;
      • Creation of a stimulating and respected educational environment;
      • Modernization of the teaching plans on all levels. The first two
have realization deadlines until the end of 2007;
      • According to the data received (there are ongoing preparations for
the implementation of three degrees of knowledge testing for national
graduation) it can be concluded that they are in a realization phase;

     In the area of the increase of education competitiveness, five goals
have been set:

     • Support for the opening of private secondary schools and
universities;
     • Attracting well-known foreign universities;
     • The opening of a state university in the eastern part of Macedonia;
     • Project financing of higher education and bigger connectivity
between the domestic and foreign universities;

      The data received in terms of these goals is inadequate for the
realization of an appropriate grading. Apart from the opening of a new
university in Stip, which has been realized, there is no adequate data for the
other issues. That could also mean an absence of more noticeable activities
and realizations.

SEPTEMBER 2006 - MAY 2007                                                  41
      In this area of investments in sport and physical culture, two main
goals have been targeted:

         • more sport and physical activity and;
         • an increase in the number and renovation of existing school sport
halls;

      Activities have been started in both areas and so far the achieved
results (a prepared project for the construction of 145 school sport halls and
about fifty additional playgrounds) give the bases for positive grading for
the perspectives in achieving these goals.

      5.2. Overall evaluation by the expert for the reporting period
      During the monitored period, the Government and the educational
authorities have initiated or implemented activities in all areas and for all
specific education questions mentioned in the “Rebirth in 100 Steps”
Program. They the Government also implements activities and measures
that were pin-pointed as weaknesses in the last Report by the European
Commission on the Progress of the Republic of Macedonia towards its
European integration, in the area of education.

      The main achievements are in the area of legal initiative (compulsory
secondary education), investments (computerization of the schools,
refurbishment of the student dormitories, free textbooks) and introduction of
numerous novelties in the education (the introduction of religious
education).

      Potential problems in the area of education are related to complexity
in the implementation, considering the number of stakeholders, procedures
and activities planned. The key to success will be the ability to properly
manage the initiatives undertaken.




42                                                               REPORT N’ 1
                                                       Leadership Monitoring

                                 6. Sports

     One of the key results of the Government of the Republic of
Macedonia in this area is the investment in construction of sports objects by
using funds secured from the National Budget of the Republic of
Macedonia. It is foreseen to realize the Program “100 Steps in the Sports by
Constructing 100 Sports Objects”, as follows:

      • 50 auxiliary football fields (Agency for Sports and Youth – AMS
has been instructed by the Government to build these fields and hand them
over to the Municipalities. So far the public procurement procedure has been
finished and the construction started on 1st of July 2007. Total of 12
auxiliary football fields will be developed by the end of 2007;
      • 35 sporting halls (this Project is continuation of the project by the
previous Government of VMRO-DPOMNE which was on hold for four
years. Now, VMRO-DPMNE is back in power and the realization continues.
So far the public procurement procedure has been finished and the
construction started on 1st of July 2007. Total of 8 sport halls will be built
by the end of 2007);
      • 7 swimming pools (according to the plan, these will be built in
2008 and 2009);
      • 8 sporting centers (tennis, athletics).

        Other activities that took place in the period September 2006 – May
2007:

      • Draft Program for development of sports in Macedonia 2007-2012
was developed. In the first phase Analysis of the situation with sports in
Macedonia will be made and in the second phase the directions, strategic
priorities, goals and tasks for the upcoming period will be determined. It is
expected that the final version of the Draft program will enter the
Government procedure at the end of July.

      • A new press center has been opened for press conferences not only
by the AMS but also by the sporting federations and clubs.

       • The AMS website has been promoted which lists all the AMS
activities as well as all the laws and bylaws related to the youth and sports.

SEPTEMBER 2006 - MAY 2007                                                  43
       • The AMS is involved in the work of the working group of the
Ministry of Local Self-government, in the area of decentralization of sports
i.e. sporting objects that will be transferred into the competency of the local
government. The second phase is almost at the end and formal decision is
expected to be adopted at the end of July 2007.

      • The proposed changes and amendments of the Law on Sports have
passed through the Government procedure and currently are in the
Parliament. The changes are related to making distinction on what is
considered to be professional and what is amateur sports, as well as the
status of the sportsmen.

      • In the past period, the AMS promoted the new system for awarding
of sportsmen and sport federations that have achieved significant success on
international level i.e. are highly ranked and have won medals.

      So far several sportsmen from various sports were awarded: karate,
box, kick-boxing, tennis and handball.

      All these developments were positively welcomed by the domestic
sport public and it will also boost the moral of the sportsmen.

      All these activities were received with positive attitude by the
domestic public and it is also important to note that has contributed to
increase the moral of the sportsman.

      The Agency for Youth and Sports is very serious in the fight against
doping in order to eradicate it entirely. The UNESCO anti-doping
Convention has been ratified which is a document already ratified, or
pending ratification in almost all countries. The Agency for Youth and
Sports, for the first time in Macedonia, did several doping tests (during the
European Kick-Box Championship in Skopje) in accordance with the strict
standards of the World Anti Doping Agency (WADA) which were
forwarded to three reference laboratories (Athens, Vienna and Ankara). One
of these tests was positive and the winner was deprived from his gold
medal, in accordance with the rules. This was followed by additional first
anti doping tests in domestic competitions (national competitions in
basketball and handball). The plan for the future is to realize more than 100
anti doping tests annually. It is also planned to act in a preventive manner,
through seminars and printed materials (fliers) that will inform the
sportsmen about the anti doping rules.

44                                                                REPORT N’ 1
                                                         Leadership Monitoring

     In cooperation between Agency for Youth and Sports, USAID and
delegation of the US State of Vermont, the 15th and 16th of May a happening
took place which promoted the youth baseball teams (in Skopje and
Strumica). The purpose of this event was to connect the young people from
Macedonia and United States and affirm the friendship between the
Macedonian and American nation.

      Considering the great importance of the school sports, as a base for
creation of future champions as well as the importance for correct
development o the young population, the Agency for Youth and Sports, in
cooperation with the Ministry of Education and Science and the School
Sports Federation, established state school sporting leagues in some popular
sports.

      For the next year, it is foreseen that the project will include all schools
and increase the total number of sports.

     The following activities were also realized by the Agency for Youth
and Sports in the past period:

       • Action was carried out to award 100 balls for various sport to the
Institutions taking care for orphan children;
       • The Agency for Youth and Sports, in cooperation with the Ministry
of Local Self-government, awarded 10 football balls for each and every
elementary school in Macedonia;
       • The Agency for Youth and Sports also assisted the Special
Olympics, for the people wit disabilities.




SEPTEMBER 2006 - MAY 2007                                                     45
                              7. Agriculture

      By the end of 2010, the Republic of Macedonia will become part of
the integrated regional market consisted of the EU-27, the countries from
former Yugoslavia, Turkey, Ukraine and Moldova where the total
population will be 600 million people. The strengthening of Macedonian
capacities to be competitive on this regional market will be the focal point
for development of the agricultural sector. This is also the reason for further
reforms of the public institutions in charge for agriculture, by adopting
adequate measures for assistance to the producers, processing entities in the
private sector and the agricultural business in order to improve the
competitiveness of the products. Since the state funds available for support
of these institutions will continue to be limited, it is of core importance to
have access to the present and new donation funds, especially the pre-
accession support instrument of the EU, following the example of the 10
new member states.

      7.1. Development of production and stimulation of the export

      Past situation

       We can say that in the past years, when it comes to stimulation and
development of the agricultural production, the Ministry of Agriculture,
Forestry and Water Economy developed and partially implemented the
Program for stimulation of the agricultural development. However, the
implementation of these programs was always under question because of
frauds, non-transparent work and never for the purpose of development. A
total of 5.453.000 denars were used in this manner. As a comparison, this is
almost the entire amount for financing of the organic production. Because of
the frauds the organic food producers were left without subsidies.

      The stimulations are also part of the Strategy for Agriculture 2007-
2011 (which is not yet officially adopted) which provides the long-term
directions for development of this Sector.

      In order to make available all information related to stimulations and
support to the farmers by the Government of Macedonia, the Ministry of
Agriculture developed its website which did not exist in the past and it is
being constantly updated.

46                                                                REPORT N’ 1
                                                       Leadership Monitoring

      Activities implemented in the period of reporting

       The first step undertaken in this respect is the establishment of two
companies for promotion and purchase of agricultural products. In January a
company was registered, owned by the State, for this purpose. Although it is
supposed to start functioning by June 2007 so far this company has not yet
achieved some significant results. The reason for this is the appointment of
the management team of the company for which second competition has
been announced for Director. Regarding this it is important to mention that
the Government is currently negotiating with Israeli company, by using the
49-51% principle, to establish one more mixed company for purchase,
distribution and promotion of the agricultural products.

       As far as the exports are concerned, according to the information from
the Ministry of Agriculture, Forestry and Water Economy, the exports of
green house products this year has been increased compared to the same
period last year. Only in the region of Strumica the exports of tomatoes
from the 1st of April till today, compared to the same period last year, is
increased more than twice – last year it was 4.214 tons and this year it is
9.342 tons. The export of cabbage has been increased by around 7.000 tons
(last year 14.912 and this year 21.762 tons). According to the information
from the field, the spring cabbage is almost at the end of its vegetative
season when it looses its quality and the demand for it on the market is less.
The export of peppers is also greater compared to the last year. So far 835
tons were exported and last year it was only 623 tons. There is only minor
reduction with cucumbers (only 38 tons less – this year 8.892 and last year
8.892 tons.

      National Action Plan. Deadline: 1st of January 2007. The deadline is
entirely met. This activity has been realized in the foreseen period and the
Action Plan for the Ministry of Agriculture, Forestry and Water Economy
has been adopted. This Plan includes all priorities of the Program in 100
steps. In my personal estimate, in this period of analysis, the activities
foreseen with the Action Plan are implemented with 60% realization. In the
frames of the Program for Stimulation of Agriculture the financial support
has been secured for alternative non-traditional and insufficiently
represented products (per hectar/m2) and the measures are the following:

      • production of asparagus;

SEPTEMBER 2006 - MAY 2007                                                  47
     • for cultivated production of curative, aromatic and spicy herbs;
     • for raising of new fruit plants and olives;
     • for farming of ostrich;
     • for farming of snails;
     • maintenance and increase of the basic flock of goats in farms with
minimum 30 animals (goats);
     • Procurement of breeding stocks, such as the “alpine” species.

     The implementation of these measures will be analyzed in the
upcoming period.

      In December 2006 foundations were set for the milk factory
SwedMilk in the vicinity of Skopje worth around 15 million euros. With a
capacity of 250 tons per day, it will engage around 5.000 farmers in the
region and it will be serious competition for the unique milk factory so far
of that size in Macedonia – Bitola Milk Factory. In this period still there are
no effects because it is too early.

      According to the information, there were no joint ventures (foreign
with Macedonian) in the sector in this period. Beside SwedMilk, there are
not other investments although there are announcements by a large Croatian
company for investments in the region. This will be analyzed in the next
report.

       7.2. Regulation of the title of ownership over the land
       Mechanism has been established in the Government for development
of agricultural policies and for development of the real estate markets. The
priority tasks, obligations and activities in this area are the following:

      - reduction of the time needed to establish a Cadastre of immovable
assets per KO in Macedonia and improvement of the service provided for
registration of the real estate transactions – reduce them from two (three)
weeks (in the regional offices) or several months in the City of Skopje to
one to two days by the end of 2009;
      - Finalization of the mapping of the finalized first basic state survey
of the non-surveyed areas of Macedonia;
      - Re-ambulation of around 607 KOs (from a total of 660) and insight
and survey of buildings, and parts of buildings, as well as development of
48                                                                REPORT N’ 1
                                                        Leadership Monitoring

lists of real estate inventories; digitalization of the analogue cadastre plans
and designs;
       - Development of the basis for/and development of
Strategic/Business Plan and timely Action Plan for transformation of the
State Authority for Geodetic Works into new organizational structure;
establishment of the basis for development of state referral geodetic
networks; introduction of electronic archives;
       - Submission to the Government of the draft strategic plan and the
Budget Plan by the 15th of August for each and every following year,
submission of annual reports on the progress by the March of the next year,
development of the interim report on the Project progress;
       - Cadastre of immovable assets (real estate) and registration by the
30th of September 2007. Since February 2007, the citizens in 13
municipalities in Macedonia have the opportunity to register their
immovable assets free of charge and on the basis of that acquire proof of
ownership for their real estate – land, apartment, house, business premise,
etc., as it was announced by the State Authority for Geodetic Works;
       - In order to better inform the citizens on the procedures on how to
register their real estate, the State Authority started the implementation of
the first phase of the media campaign titled: “Everyone on his/her own”
which is part of the project “Cadastre of real estate and registration”
financed by the World Bank and implemented in the frames of the overall
reform in the Cadastre.

      • The procedure for awarding of agriculture land for use in the cities
of Sveti Nikole and Shtip was accompanied with many gaps in the
realization. The Ministry resolved the gaps and this process ended with
singing of 440 agreements for awarding of land in the Municipality of Sveti
Nikole. The procedure and the deadlines were adhered to.

      • On the 6th of June 2005 in the World Bank office in Skopje the
Agreement for Loan between the Republic of Macedonia (beneficiary) and
the International Bank for Reconstruction and Development for financing of
the Project “Cadastre of real estate and registration”, implemented by the
State Authority for Geodetic Works. The Department for Survey and
Cadastre in the city of Kumanovo started the implementation of the
established cadastre of immovable assets (real estate) in the Cadastre
Municipality (KO) of Tabanovce – Kumanovo Municipality. The Cadastre
of Real Estate for 195 cadastre municipalities with conversion entered into
force on 16th of April 2007, published in the Official Gazette No.48/2007.
SEPTEMBER 2006 - MAY 2007                                                   49
       • In order to meet the needs of the citizens, the State Authority for
Geodetic Works initiated the campaign “Cadastre – services for the
citizens”. In the frames of this campaign, open forums will be organized
with the citizens of several cities from all over Macedonia. This forum has
already been implemented in April 2007 in the city of Veles. The purpose of
these forums is to promote the State Authority for Geodetic Works as
transparent institution, open for communication on all issues related to its
work and its importance for development of the society and economy, to
inform the people about its competencies and the procedures how can they
realize their rights related to registration of real estate quickly and
efficiently, to promote the cadastre reforms and ask for direct assistance for
their successful realization by establishing partnerships with the citizens as
beneficiaries of the these services, especially in the area of fight against
corruption and increased efficiency in the work.

      7.3. Budget support
      With the Rebalancing of the National Budget for 2006, the
Government of Macedonia secured additional funds in the amount which
increased in the support by around 120%. These funds are dedicated to
direct stimulation of the farmers.

      The process of EU accession requires greater competitiveness and
preparation to act in the environment of Joint Market and acceptance of the
standards but also the treatment which the European farmers have by the EU
regarding support towards them and their obligations. In this regard we have
a positive trend that started in the first year of the new Government when
the amount of direct support was increased by entire 60% in comparison to
2005.

      The first Government decision in 2006 was reduction of the VAT for
agricultural raw materials and machines from 18 to 5%. The deadline for
this measure was October 2006.

      The financial assistance is in the frames of the Program for
stimulation of the agriculture as well as in the programs for rural
development, as a model that can be also implemented through the IPARD
program.

     Special Program for Financing of Activities in the primary tobacco
production in 2007 has been developed, on the basis of the Law on Tobacco
50                                                               REPORT N’ 1
                                                         Leadership Monitoring

and Tobacco products. The changes and amendments in the Program for
stimulation of development of the agriculture in 2006 meant that these funds
were used to pay the outstanding liabilities promised by the former
Government for subsidizing of the tobacco production from the yield in
2005, which realized the payment of the premiums for the entire production
tobacco.

      Regarding exports of fruits and vegetables, not much has been done,
although around 80% of the Macedonian apples reached the markets in
Russia, Bulgaria, Serbia, Romania, Bosnia and Herzegovina, Kosovo, and
even the markets in Iraq, with excellent prices.

      The additional funds, beside for the premium for payments of the
wheat production from the 2005 yield, were also used for the premiums for
the produced and sold wheat from the 2006 yield in the total amount of
205.000.000,00 denars, i.e. 1 denar per kilogram wheat. Regarding livestock
production, the Program foresaw 100 million denars and the rebalancing of
the Budget secured additional funds in the total amount of 100 million
denars for full realization of the foreseen measures.

       7.4. Favorable conditions for using loans
       The IFAD credit line is implemented all over Macedonia. It is
accessible to all interested producers, processors and traders working with
agricultural products and equal conditions for all of them apply if they want
to use the credit/loan. The financial institutions bear the credit risk entirely.
Beside the interest rate, agreed between the Government and the banks to be
6% for the first two categories and 7% for the last two categories, the other
conditions for the final beneficiaries are in accordance with the credit policy
of each and every financial institution. The saving houses involved in the
distribution of the IFAD credits use their own policy regarding interest
rates. It is foreseen that the IFAD funds will be also used in the frames of
the Agricultural Credit Discount Fund under same conditions.

     The EU instrument for pre-accession assistance for rural development
(IPARD) is accessible to Macedonia being an EU member candidate
country. There are several activities in this regard:

      • Securing consultants and signing of agreement for sub-sectoral
studies for the selected sectors for IPARD Plan;
      • Four sub-sectoral studies were developed necessary to develop the
IPARD Program for Priority sectors set in the Decision by the Government
SEPTEMBER 2006 - MAY 2007                                                     51
adopted in May 2006 (sector for wine and grapes, fruits and vegetables,
milk and diary products and the meat processing sector), including
numerous researches that were made during the plan development in order
to identify the main problems in each and every sector (agricultural
production, food production and rural activities);
       • On the basis of the results from these studies, multiple-year IPARD
program has been developed for realization of the pre-accession assistance
measures for rural development of the EU. It was agreed that presently
ongoing is the development of the IPARD Program and that the Ministry of
Agriculture can work in accordance with the previously agreed agenda for
its adoption, meaning that the IPARD Program will be formally submitted
to the Committee for its adoption by the end of July 2007 (pursuant to
APEP, the IPARD Plan was supposed to be adopted by the end of 2006),
initial promotion of the IPARD instrument (five regional meetings the
Federation of Farmers and one meeting in the frames of the Chamber of
Commerce of Macedonia), etc.

      7.5. Irrigation and controlling of floods
      After September 2006 two actions were undertaken for this purpose to
clean the channels. The First action cleansed around 110 kilometers in
several regions of Macedonia. The second action is ongoing and covers
around 133 km of channels and river beds. This results in prevention of
floods thus having less damage. This activity will be subject to additional
investments.

      Capital investments:

      The Zletovica project is very important one in a total value of 115
million USD. Unfortunately, in the past period the activities did not take
place due to different reasons. By September 2006 only 14 kms or road to
the dam was built.

      After so much waiting for the Lisiche project, because it was started in
the 90s, it is expected that during June the filling with water will start and
the people of Veles will finally start using the dam for drinking water.

      The South Vardar Valley project is financed by the KfW Bank as well
as from the National Budget in the total amount of 10 million euros. For the
same project in the last period (until September 2006) main feature were the
disagreements between the contractor-supervisory body and the contractor-
subcontractors. Changes were made to the project so the construction is in
52                                                               REPORT N’ 1
                                                       Leadership Monitoring

the final phase. What is left to be done are the pumping stations and system
will start to work by the end of June..

      New Water Economies (enterprises)

      This period intensively continued the reform with establishment of
new water Communities, preparation for establishment of new Water
Economy enterprises, etc. In this context we must point out that the funds
awarded by the World Bank, as well as domestic funds dedicated for this
Project, in the amount of 32 million USD are under question whether were
indeed used for the right purpose. The answer to this question will be given
by the relevant authorities.

      Forests

      The Program for Expanded Reproduction of Forests for 2007 has been
developed, adopted on the 35th session of the Macedonian Government. For
this Program, the Government secured funds from the National budget for
realization of the Action Plan of the Strategy for Sustainable Development
of the Forestry. The implementation of the plan will be subject to analysis in
future reports. The adopted Law on the Reproductive Materials from Trees
of forest species (May 2007), the proposal for adoption of the Law on
changes and amendments of the Law on Forests (adopted in May 2007),
proposal for adoption of the law on changes and amendments of the Law on
Hunting, with proposal for a law (in parliamentary procedure). Also
developed was the Annual Agricultural Report for 2006 in the area of
forestry and hunting;

     7.6. Organic food
     Regarding the organic food area, the Association of organic producers
(Biosan) has been established.

      In accordance with the Instruction on the means on how to use the
funds from the Program for stimulation and development of the organic
agricultural production in 2007, the persons that will apply must provide
copy of Certificate issued for organic production in conversion or organic
with conversion finished and clear. This means that such certificates are
issued in Macedonia. The organizations that do this are Balkan Bio Cert and
Incebo.
SEPTEMBER 2006 - MAY 2007                                                  53
      The program for stimulation of development of the organic
agricultural production, although established in 2005, was abolished in 2006
without any explanation and justification towards the producers, although
the interest for this agricultural sub sector yielded the initial results and
growth in 2006 (increase in the production volume of over 100%).
Considering the potential and opportunities for development of the organic
production in Macedonia, the Government put priority on its development
with specific directions and Budget support.

      Pursuant to the Law on Organic Agricultural Production, a Program
for stimulation of development of the organic agricultural production in
2007 was developed in the total amount of 11.000.000,00 denars, which is
an increase in the amount of funds allocated by 90% (from 6 million denars
in 2005 to 11 million denars in 2007).

      7.7. Overall evaluation by the expert for the reporting period
      From the overall perspective, significant progress has been made in
the analyzed period. The first measure that had direct impact on the
agricultural sector was the VAT reduction from 18% to 5% for the
agricultural raw materials and machines. This measure gave special boost to
the sector. The other one is allocation of Budget funds for stimulation and
development of agriculture and rural development.

      Considering the potential and opportunities for development of
organic agriculture in Macedonia, the Government gave priority to its
development with specific directions and Budget support. On the basis of
the Law on Organic Agricultural product, a Program for Stimulation of
Development of Organic Agricultural Production was developed in 2007.
The EU accession process requires increased competitiveness ability in
order to be able to cope on the Joint Market, considering here also the
treatment that the European farmers have by the EU in terms of their
support and obligation. In this regard we have positive trend that was started
in the first year of the new Government when the amount of direct support
has been increased by 60% in relation to 2005.

      However, the budget allocations only will not mean much if they are
not backed up by strategic documents and finalized legal and legislative
framework, as well as harmonized with the European legislation for
agriculture. In this respect, Government undertook some activities in the
reporting period. Currently in Parliamentary procedure is the Law on

54                                                               REPORT N’ 1
                                                        Leadership Monitoring

Agriculture and Rural Development that will systematically regulate the
relations, the entities and policies of the State regarding agricultural sector.
Additionally in the area of rural development, and in order to finally
establish conditions for use of already approved funds from the EU pre-
accession funds for rural development, the Government is working very
intensively on development of the IPARD plan that will be finalized by
August 2007. This Plan will determine the specific measures and criteria for
support of the rural developed, co-financed by the EU. This, in synergy with
strengthening of the Ministry of Agriculture, Forestry and Water
Management and by establishing the appropriate institutions in the sector
(especially the Payment IPARD Agency), through the new systematization
and secured reforms package support by the project-loan from the World
Bank, will finally create realistic conditions for introduction and
implementation of successful policies in the Sector.
       There are several comments about this process. First, there is no
officially adopted Strategy for Agricultural and Rural Development 2007-
2013, along with operational policies, harmonized with the Common
Agricultural EU policy. This is a very important document – the beginning
of everything. Being late in adopting it means to hurdle the process which is
supported with National Budget funds for agriculture from one side but it is
also hurdle for the process to use the pre-accession funds.

      Secondly, the Law on Agriculture and Rural Development, as a
framework law that arranges this sector for agricultural and rural
development, introduces new provisions that will be legal basis for adoption
of provisions that will derive from the Common Agricultural Policy of the
EU in relation to geographic markings and markings of origin, the
Agricultural Information System, quality of the agricultural products, direct
support for the agriculture, market interventions, associations of farmers/
producers, rural development measures, advisory service, research and
science, Beside the Law, there will be also around 150 bylaws on the basis
of the Law on Agriculture and Rural Development. This Law, although it
passed through the Government Procedure, is still not adopted by the
Parliament and it is an obstacle for realization of reforms in the sector. For
example, we can mention the establishment of the Payment IPARD Agency
which, although existing formally, is still not operational. The Law for this
Agency is not yet adopted.

      One of the key weaknesses of the sector is the institutional and human
resources development – starting from the civil servants, advisors in
SEPTEMBER 2006 - MAY 2007                                                    55
agriculture, enterprises in the sector and ending with the farmers. The
Government should focus itself more on this problem, and use the
preaccession funds that we have available, for capacity and human resources
building.

       Although the Government undertakes specific steps the problem of
distribution and organized access to the markets for our products must be
resolved. This is the weakest point in the chain of the agricultural
production system. An interim solution could be establishment of state-
owned companies for distribution of products because the State, in general,
is a bad entrepreneur, and the support must be focused towards stimulating
companies active in sales, processing and distribution of agricultural
products. In this context, in order to resolve this problem the key words are
market information. The Government should stimulate the intelligence,
collection and processing of this information. The census of agricultural
economies is a real step in this direction, including the establishment of the
Agricultural Information System (ZIS).




56                                                               REPORT N’ 1
                                                       Leadership Monitoring

                            8. Foreign affairs

      The foreign policy of the government is concentrated on the
integration in the European Union and in NATO, goals for whose
completion, fulfillment of certain conditions is required. Foremost, it is
necessary to maintain peace and stability – tasks that are set in the pre-
election campaign of the governing party. In that direction, the maintaining
of peace, respect of democratic principles, human rights and the principles
of international law is generally held on a high level. The intensifying of
communication and coordination with Washington and Brussels in this
period is one important indicator for improvement of relations between
Macedonia and EU i.e. USA and significant step towards approximation to
EU and NATO and membership.

      8.1. Implementation
      The EU integration remains one of the most important priorities of the
foreign policy. Macedonia is expecting the date for start of accession
negotiations for full EU membership. Regarding the abolishment of
Schengen visa, in April 2007 the Visa Facilitation Agreement has been
signed according to which particular groups of citizens (students, scientists,
tourists, businessmen, etc.) will be able to get visas more easily. The new
passports are already being issued, readmission agreement has been signed
with the EU and currently in progress is the integrated borders management
– all these are conditions that must be met in order to abolish the visa
regime.

      In accordance with the EU policy of imposing conditions, Macedonia
received remarks about the political dialogue in the country. The dialogue
was improved at the end of May 2007 when the DUI opposition party has
returned in the Parliament, after agreement has been reached for particular
disputed issues related to inter-ethnic relations. Regarding whether
conditions are met for start of negotiations, progress was made in the
judiciary system and its full realization will depend on improved
cohabitation between the Government and the President of the Republic of
Macedonia, as well as synchronization of the attitudes of the Government,
opposition and parties of the minorities.

      The adoption of the Law on Police in October 2006 is also in the
direction of European integration, as well as the speeding up of the
harmonization process of the Macedonian with the European legislation.
SEPTEMBER 2006 - MAY 2007                                                  57
Corruption and organized crime have been noted as one of the bigger
problems that Macedonia faces on the way to the EU, an area in which the
Government is taking concrete steps.

      The way towards NATO has been continuous, and Macedonia is a
serious candidate to receive a membership invitation at the Bucharest
Summit in 2008. The action plan is continuously implemented, there are
regular readiness exercises being done, and Macedonia has extended the
participation in the NATO mission in Afghanistan. The invitation for NATO
membership is conditioned with progress in the judicial reforms, and the
battle against corruption and organized crime. The candidacy for NATO
membership is popular with the Government, where the support for this goal
is constantly on a high level.

     At the beginning of 2007, the Law on Foreign Affairs came into force,
which executed a reform in the policy handling in this area, as well as
execution of an internal reorganization of the Ministry of Foreign Affairs,
with the aim of better diplomacy functionality. Despite the program
determination, new diplomatic and consular missions have not been opened.

      A significant dimension of the foreign policy, which also has an
influence on the Euro-Atlantic integrations are the relations with its
neighbors. It can be noted that the Government should make more
considerable and continuing steps in the direction of improving the relations
with all neighboring countries. The relations with Serbia have been for
several years in the shadow of the conflict between the Macedonian
Orthodox Church and the Serbian Orthodox Church. Also, unlike the
program determination for the support of the solution that, in collaboration
with the international community, will be reached by representatives from
Kosovo and Serbia, Macedonia supports the solution, proposed by the
western allies which is not supported by Serbia. This policy, as well as the
strengthening of the ties and cooperation with Kosovo, comes to disapproval
from Serbia.

      The improving of relations with Greece is failing, and they are in a
certain degree, disturbed because of the Government’s decision to rename
the Skopje airport to “Alexander the Great”, which came to sharp reactions
from Greece. In comparison, the airport in Thessalonica is called
“Macedonia”, while the one in Tirana – “Mother Teresa”, and Macedonia
did not react to these appointments of names. The Macedonian Minister of

58                                                               REPORT N’ 1
                                                        Leadership Monitoring

foreign affairs, sent an open invitation to the Minister of foreign affairs, but
there is still no reply to that. It is unavoidable to be mentioned that the
rhetoric of the Greek politicians and reactions towards Macedonia are under
strong influence from the parliamentary elections that are due to take place
in that country toward the end of 2007 or the beginning of 2008.

      As far as Bulgaria is concerned, there is certain collaboration in terms
of the euro-Atlanic integrations, and the former Foreign affairs minister of
Bulgaria, Solomon Pasi, has been named an advisor to the Macedonian
Government for the integration into NATO. It is noticeable the absence of
reactions from the Macedonian government about the rejection of the
registration of the political party of the Macedonians in Bulgaria “OMO
Ilinden – Pirin”, despite the program pledge for the respect of the minority
and national rights of the Macedonians who live on the territories of the
neighboring countries. Relations with Albania have been strengthened in
terms of the mutual determination for NATO membership, as well as in
terms of the realization of the mutual oil pipeline “AMBO”, where Bulgaria
also participates. Despite the program determinations, there is no
cooperation agreement signed with any neighboring country. This, to a
certain degree, is probably due to the pre-election rhetoric of Greece, as well
as the election period and long negotiations for the line up of the Serbian
Government at the beginning of 2007.

      The program determinations for the promotion of economic interests
abroad, active aid to exporters, the specialization of the diplomacy in the
representation of cultural, artistic, scientific and sport achievements, as well
as the creation of skilled and highly professional diplomacy are not
happening with a high degree of realization. However, there is not
timeframe for their realization, so they should be realized in the coming
period.

       The concern for Macedonian citizens abroad is going through the
activities of the Agency for emigration, where a Strategic plan has been
given with the goal for reintegration of the emigrants, the encouragement of
their cultural development, the improvement of their rights and the
informing about the situations in the Republic of Macedonia. A positive step
in the direction of the return of skilled staff in Macedonia is the change of
the regulations that recognize foreign diplomas. The Agency for Emigration
is facing insufficient support from particular Ministries and other relevant
State bodies in realization of its tasks.

SEPTEMBER 2006 - MAY 2007                                                    59
       Noticeable is the inadequate realization of the pledge for the respect of
minority and national rights of the Macedonians who live on the neighbors’
territory. Concerning this question, having in mind the sensitivity and
regional characteristics, it is needed to be mentioned that the opening of
issues about the rights of the Macedonians who live in the neighboring
countries would unavoidably lead to certain cooling of relations with Greece
and Bulgaria – member-countries of the EU and NATO, which would go
against the Euro-Atlantic aspirations of Macedonia.

      No major and systematic disruptions of the peace and stability of the
entire territory have been noticed since the election of the government. The
international position of Macedonia is continuously strengthening, for
which, among others, an indication is also the election of the former
Macedonian minister of foreign affairs, Srgan Kerim for president of the
62nd General Assembly of the United Nations on May 2007. Macedonia is a
serious candidate for membership of the NATO, and negotiations for
membership of the EU are expected to begin in 2008. The participation of
Macedonia in the Antiterrorism coalition and the “Freedom for Iraq”
mission is extended, as well as the participation in the NATO mission in
Afghanistan. The USA is the biggest supporter of Macedonia on the way
towards NATO.

      8.2. Overall evaluation by the expert for the reporting period
      Inconsistent implementation in the area of foreign affairs is noticeable
in the following areas:

      • Improved relations with foreign countries;
      • Care for the Macedonians living in the neighboring countries, and
      • Creation of professional and highly-expert diplomacy.

       In this regard, in order to improve the relations with neighboring
countries, political will is needed by the governments of these countries but
also increased cooperation in the areas that are not burdened with disputes,
where accents should be put on the economic and cultural cooperation. The
issue of the final status of Kosovo is an issue in relations with Serbia. The
attitude of the Macedonian Government in this regard is part of the long-
term determined for the European-Atlantic integration processes and
Macedonia is faced with a choice – should it improve its relations with
Serbia ir increase its chances for NATO and European Union membership.
Second issue in relations with the neighbors is the name with Greece that
60                                                                 REPORT N’ 1
                                                        Leadership Monitoring

will most definitely be dominant issue in the election campaign in Greece. It
is expected that the commitments for improved relations with the neighbors
be more dynamic in 2008, after the determination of Kosovo status and after
the end of the parliamentary elections in Greece.

       There is insufficient realization of the commitments for respect for
minority and national rights of Macedonians living on the neighboring
countries. Considering the sensitivity of this issue and the regional
characteristics, it is necessary to mention that the initiation of the issue of
rights for Macedonians living in the neighboring countries will most
definitely cause worse relations with Greece and Bulgaria – both members
of EU and NATO, which will be contrary to the Euro-Atlantic aspirations of
Macedonia. The care for Macedonians living in the neighboring countries
should be intensified by supporting the associations of Macedonians in
Greece and Bulgaria. The respecting the principle of non-interference in the
internal affairs of the neighboring countries, there is a room for wider
activities by the Macedonian Government.

      The creation of professional diplomacy is a process that should be
supported by the ruling parties because the non-professionalism in the
diplomacy is exactly due to the influence by the political parties and inter-
party agreements in the frames of the government coalition. Considering the
principle of appointment of political party officials (present and former) for
diplomatic representatives in the last 15 years, the Government must
undertake more active and more decisive steps for profesionalization of the
diplomacy. This process will most probably take the next several years. It
can be supported with further reforms in the structure and capacities of the
Ministry of Foreign Affairs. The capacities for coordination of the European
Integration process should also be strengthened and reformed towards their
depolitization and full professionalization.

       The external policy results are directly dependent from the progress of
internal reforms and process in the institutions and in the political system.
Therefore, it is necessary pay greater attention to the dialogue between the
political parties and consistency in implementation of the policies that are
important for realization of the state interests. For realization of these goals
it is not sufficient only to have the good will by the Government – will and
dedication is also required by all parties involved.



SEPTEMBER 2006 - MAY 2007                                                    61
               9. Justice and Home (Internal) Affairs

      9.1. Reforms of the police and judiciary system
      In the frames of the plan for accession of the Republic of Macedonia
to the European Union, and harmonization of the Macedonian legislation
with the EU Acquis, the Macedonian Parliament adopted the Law on Police
on 30th October 2006 whose main purpose is to establish the appropriate
basis for public security and precise rules of conduct for the police members
and officers. The Law on Police set the new police structure of the Ministry
of Interior and the new methods of work in order to prevent the crime in all
its manifestations, especially the organized crime that is very present in
international context. The Law on Police is harmonized with the pillar
agreements for human rights of the UN and the European Convention for
Protection of the Human Rights.

      The judiciary system reform in the Republic of Macedonia is one of
the key preconditions for accession to the EU institutions. The base for
further reforms is the changes in the structure and the election method of the
Republic Judicial Council, set in the Law on Judicial Council of the
Republic of Macedonia. According to Article 6 of this Law, the number of
Council members has been increased from seven to fifteen – eight are
elected by the judges through direct and democratic elections, members of
the Council are also the President of the Supreme Court of the Republic of
Macedonia and the Minister of Justice, both on ex officio basis, and the
remaining five members are elected by the National Parliament of
Macedonia, two of which are proposed by the President of the State.

      During November 2006 eight members of the Council were elected on
direct and democratic elections. These members, together with the ex officio
members, have established the new Judicial Council, with incomplete
composition.

      9.2. Ratification and implementation of the Schengen Convention,
harmonization of the Macedonian legislation with the EU Acquis
      Regarding external borders visa policies, external migration and
asylum, measures are undertaken in accordance with the Law on State
Border Surveillance which entered into force on 1st of April 2007 which is
partially harmonized with the Convention for implementation of the
Schengen Agreement. The Parliament of Macedonia on the 18th of May

62                                                               REPORT N’ 1
                                                     Leadership Monitoring

2007 adopted the Law on Changes and Amendments of the Law on
Residency and Movement of Aliens and on 21st of May adopted the Law on
Changes and Amendments of the Law on Aliens.
      The following bylaws were adopted for successful implementation of
the Law on State Border Surveillance:

      - Regulation on the means of realization of securing of the state
border and control of entry/exit of/from the state border;
      - Regulation on the means for issuing of ID to the officers that are
doing economy activities on the border crossing as the form and content of
the request for issuing such ID badge;
      - Regulation on establishment and resolution of border incidents.

      Presently in realization is the installation of the telecommunication
system TETRA related to integrated border management. In the frames of
the regional EU CARDS project the best bidder was selected that will
develop this electronic network in a wireless manner.

      Horizontal readmission agreement with the EU has been signed which
was one of the conditions to start negotiations for facilitation of the visa
regime for the Macedonians towards the EU member countries. This
readmission agreement is a commutative agreement which means that no
special ratifications by each and every EU member country is required – it
enters into force immediately when signed in all EU member countries. This
agreement will finalize the long-term process of singing of bilateral
agreements with the EU member countries and the previously signed
readmission agreements with 16 countries will be replaced with the new
Readmission Agreement.

      The process of accession of Macedonia towards the European Union
includes some other actions as well. The Parliament of Macedonia on 12th
February 2007 adopted the Law on Changes and Amendments of the Law
on Personal ID document and the Law on Changes and Amendments of the
Law on passport which enabled the introduction of the procedure for issuing
of personal documents harmonized with the EU regulations and the ISO and
ICAO standards. On 2nd April 2007, the Ministry of Interior started the
issuing of new passports in accordance with the above mentioned standards
and it is expected the other ID documents will be issued in the same manner
from September 2007 (ID card and driving license).

SEPTEMBER 2006 - MAY 2007                                                63
      9.3. Participation in the Schengen Information System and full
membership in EuroPol through harmonization of the legislation and
realization of the required preparations
      Regarding international police cooperation on the edges of the
Summit for Security that took place in Munich, Germany on 16th of January
2007, Macedonia and European Police Office – Europe signed Strategic
Agreement for Cooperation. This Agreement will facilitate the exchange of
strategic and technical information for prevention of the international
organized crime. On the basis of this Strategic Agreement, the Ministry of
Interior works of realization of the conditions for signing of Operational
Agreement for cooperation. The Ministry will also designate a contact
person for communication with Europol.

      Pursuant to the Law on Foreign Affairs and the Law on Police,
conditions were established for initiation of development of the concept for
Secure Diplomacy in the frames of the bilateral police cooperation.

      In the frames of the international police cooperation, the Interpol
Office in Skopje is still the main carrier of this activity in the Ministry of
Interior. In order to improve its activity, the Ministry plans to meet the
conditions for functioning of the NCB Interpol Skopje during 24 hours, 7
days a week.

      9.4. Codification of the Laws from the area of security and internal
affairs
      Regarding road safety, the Parliament adopted the Law on Changes
and Amendments of the Law on Road Safety on 12th February 2007 and on
19th April 2007 the Parliament adopted the new Law on Road Safety which
introduced several novelties regarding novice drivers (which includes the
younger persons, ages 18-21) and the fresh “drivers” that have passed the
driving exam two years ago. These categories of persons are subject to
special limitations regarding the driving speed, quantity of alcohol in the
blood, the power of the vehicle they drive and driving of the vehicle
between 23.00 and 05.00 hours.

      Changes were also made in the compulsory use of winter gear (only
outside of populated area), it is prohibited to change from one traffic lane
into another, except in the case of overtaking, it is possible to use mobile
phone with hands free equipment, passing of driving exam in special exam

64                                                               REPORT N’ 1
                                                        Leadership Monitoring

centers, etc. The sanctions for misdemeanors in traffic meant introduction
for the first time in the Macedonian legislation of the so called negative
points – if you get 100 negative points in the last three years, you will be
deprived from your driving license. If these changes are consistently
enforced, it will greatly improve the road safety, especially for the novice
drivers and collection of negative points for the misdemeanors made.

      On 18th of May 2007 the Parliament, pursuant to Article 154 from the
Law on Misdemeanors, adopted a new Law on Misdemeanors against the
Public Order and Peace in order to realize one of the main principles of the
European Partnership – timely and entirely implementation of the Strategy
and the Action Plan for reforms in the judiciary system and reduction of the
backlog of court cases which are very often ending as old cases thus with no
verdict. The novelties in the law are the new roles in the Ministry of Interior
in the misdemeanor procedure i.e. there is Committee on Misdemeanors in
the Ministry of Interior which is consisted of President and two members
vested with authorization to impose sanctions on misdemeanors in the
amount of 500 euros, in denars, for individuals and up to 1.000 euros for
legal entity. The consistent enforcement of the law provides the
opportunities to reduce the misdemeanors against the public order and peace
but the legal experts deem that the new Law provides big authorization to
the Ministry of Interior - they will both identify you and punish you.
However, the solution for misdemeanor related to insult of an officer will
remain in the court.

       The Parliament also adopted the Law on Changes and Amendments of
the Law on Arms. These changes incorporate the Directive for control of
procurement and owning of arms 91/477/ЕЕC of the Council of Europe.
The arms are now categorized in to A, B, C and D. The A category includes
arms that are prohibited from purchasing. The B category lists all types of
arms that can be purchased on the basis of approval (regular procedure). The
C category includes arms that can be purchased on the basis of license
issued under facilitated conditions (facilitated procedure) and the D category
is for arms tat should be declared and for which confirmation is used.

      9.5. Zero tolerance for corruption and fight against organized crime
      Regarding introduction of special investigative techniques in the fight
against organized crime and corruption, including the Program for
Protection of Witnesses, on 15th November 2006 the Parliament adopted the

SEPTEMBER 2006 - MAY 2007                                                   65
Law on Surveillance of Communications and on the next session it adopted
the Law on Changes and Amendments of the Law on Corruption
Prevention. These changes opened the possibility for more efficient fight
against corruption and organized crimes, especially through opening of
opportunities for confiscation of the assets acquired from criminal activity.
Another argument in fight against organized crime is the adoption of the
Law on Financial Police on 23rd April 2007.

       Currently in Government Procedure is development of the Law on
changes in the Law on Public Prosecution in order to separate from the
Prosecution Office the Department for Prosecution of perpetrators of
criminal acts related to organized crime and corruption. Regarding this
initiative it is interesting to say that the Ministry of Justice and the Public
Prosecutor of the Republic of Macedonia has both expressed their
completely opposite opinions about this matter.

      Many actions were initiated for resolution of corruptive and organized
criminal activities, where the “highlights” are the following: the mega-
scandal “Bachilo” which ended in a court verdict, the action for prevention
of bribery and corruption of the police and custom officers, the case of
circumvented people in the pyramidal scheme of apartments construction
(the FIKOM case), misuse of the official position in illicit trade of arms
owned by the Ministry of Defense, the “Jug” action for fight against illicit
smuggling of immigrants, the financial frauds, corruptive behavior in the
health institutions, etc.

      Regarding fight against illegal trade with drugs, precursors and arms,
on 22 and 28 March 2007 the Parliament of Macedonia adopted the Law on
Changes and Amendments of the Law on Precursors and the Law on
Changes and Amendments of the Law on Arms. The main role in the fight
against these modern evils is the Sector for Illicit Trade of Arms and Drugs
in the frames of the Department for Organized Crime in the Ministry of
Interior.

      9.6. Overall evaluation by the expert for the reporting period
      The legal provisions that enable introduction of special investigation
techniques in the fight against organized crime corruptions provided
opportunities for more efficient fight against corruption and organized


66                                                                REPORT N’ 1
                                                        Leadership Monitoring

crime, especially by opening the opportunity to seize assets and property
acquired from criminal activities.

      The results from this time period of activities in the fight against
organized crime and corruption are very important on the path of the
Republic of Macedonia towards its Euro-Atlantic integration and
establishment of the rule of law. However, we feel important to emphasize
on some omissions in the implementation of these activities: first of all this
is about disruption of the presumption of innocence principle and this was
manifested several times so far. Much greater effect in the fight against
organized crime and corruption will have the tacit and quiet arrest of the
perpetrators, properly backed up with stable and valid proofs, instead of
spectacular arrest and very loud mass media campaigns, which ends with
cancellation of the criminal prosecution by the Public Prosecutor Office.

      In the initial period of issuing of the new passports, the duration of the
procedure is 15 to 20 days. The first days manifested the first gaps in the
functioning of the new system, long queues in front of the counters for
submission of the documents and the need to give the biometric data. Only
four points in Skopje serve all the needs and only one of them works after
16:30. Insignificant number of citizens was prevented from timely obtaining
their passports due to incomplete migration of the electronic information
and addresses. Maybe this situation will be resolved with adoption of the
provisions in the Law on Changes and Amendments of the Law for
Registration of the Place of Living and Residence of the Citizens that was
adopted on the 44th Session of the National Parliament on 18th of May 2007.

      The key are of potential problems in the judiciary system is the non-
functioning of the Republic Judicial Council in full composition. The
resolution of this issue will enable progress in harmonization of the legal
system of Macedonia with the EU legal system and will also accelerate the
reforms process.




SEPTEMBER 2006 - MAY 2007                                                    67
                            10. Health Sector

       The Program for Work of the Government of Macedonia in the four
years mandate includes general and specific tasks that must be implemented
in the social, economic and political action of the Government in its four
years mandate. Their realization is set in the election program of VMRO-
DPMNE and the coalition partners in the Government. The main goal for
the health sector in the Program is establishment of health system where the
citizens will have equal rights and responsibility, and system that will
realize their needs, by improving the quality, increase of transparency and
efficiency of the health system.

      The part of the Program dealing with Health sector is focused on 8
segments of the health system, defining specific activities, adoption of laws,
implementation of reforms towards modernization of the health system and
the system for health insurance for each of the defined segments.

      The individual segments are analyzed through the presentation of the
goals set in the Government Program and explanation of their realization in
the reporting period.

      10.1. Quality of Services
      The program task for realization of the quality of the services is
improvement of the rights of the patients, special care for health of
particular groups of people, standardized treatments, initiation of the process
of publication of medical mistakes and the reasons for their occurrence and
improvement of the conditions in the waiting rooms and hospitals rooms.

      The developed draft version of the Law on the Patients Rights, whose
adoption should happen by the end of June 2007 is a significant step
towards establishment of responsibilities and obligations between the
medical staff and the patients, protecting the rights of the patients through
the principles of humanity and accessibility of the health services. The
implementation of the Law should provide quality and continuous health
protection in accordance with the modern achievements in the medicine and
in the frames of the available resources that is appropriate to the individual
needs of the ach and every patient, in that regard having full respect to the
dignity of the patient without any physical or psychical abuse.
      There is special care for the health of particular groups of population –
minors, pregnant women, elderly people above the age of 65, persons with
68                                                                REPORT N’ 1
                                                     Leadership Monitoring

special needs and orphan children. The Strategy for Adolescent health is
currently in development by a working group nominated by the Minister of
Health.

       Since 12th June 2007 in force is the Ordinance by the Minister of
Health which enabled 200.000 women that have selected their main
gynecologist, to carry out PAP-test free of charge in the laboratory at the
Gynecological-Delivery Clinic (GAK). In cases where human papiloma
virus tipization is needed, if such virus is identified, which is one of the
main reasons for cancer of the edge of the uterus, it will be done with co-
financing of 150 denars while the remaining costs on the amount of 1.450
denars will be paid by the Fund for health Insurance. This decision is in
accordance with the latest achievements in the modern medicine and the
best practices from other countries show that timely diagnosis significantly
reduces the cases of cancer on the uterus which is presently reason number 2
for death among women in Macedonia. The decision foresees that GAK
should also develop national registry with electronic database of all PAP-
tests and all HPV tipizations, so that the Clinic will become a resources
center for all health institutions in the state regarding the policy of
prevention of the uterus cancer. In the same time, the Fund for Health
Insurance of Macedonia develops National Registry for diseases where they
will be entered electronically and will be accessible to the interested
institutions.

      Regarding modernization of the educational part of the process for
licensing of doctors, pharmaceutical workers and dentists, the PCU for
cooperation of the World Bank loan in the Ministry of Health had successful
cooperation with the Chambers of Doctors, Dentists and Pharmaceutical
Workers of Macedonia, with the Faculties of Medicine, Dentistry and
Pharmacy and the Macedonian Association of Doctors. The consultant, prof.
Juddy McKim was engaged by the Ministry of Health, and her assistance
Anita Underwood developed appropriate educational materials (Module 1
and Module 2) and have trained around 150 trainers, mentors and examiners
nominated by all institutions included in the activities.

      10.2. Modernization, management and prevention
      The second component of the Government program for health policy
foresees establishment of team for modernization and improvement of the
health sector, special management programs, opening of 24 hours center for
information with the National Authority for Health Protection and definition
and financing of prevention programs.
SEPTEMBER 2006 - MAY 2007                                                69
      A Department for Policy Analysis has been established in the Ministry
of Health (obligation foreseen by several documents, including the two-
years Agreement for Cooperation with the WHO) that has a task to monitor
the relevant health indicators, make evaluations of the implementation of the
policies and reforms and make an overview of the financial situation of the
system. The head of the DPA will be responsible for management and
coordination of the formulation of all health policies of the Ministry and
will be responsible directly to the Minister. The Department will benefit
from technical assistance by an international consultant tat is obliged to
focus on the problems on the national level that influence the DPA and
Ministry of Health.

      Starting from the need to increase the capacity and quality of the
management in the public health institutions (as foreseen in the changes of
the Law on Health Protection), the Ministry of Health, in cooperation with
the Faculty of Medicine, organized two trainings for leaders and managers
in the health sector. The delivery of these trainings was made possible with
the funds from the Health Sector Management Project, financed with a
World Bank loan.

       The goal of the courses was additional training and education of the
managers and acquiring of know-how and vocational-medicine,
administrative, financial, ethical skills, required for successful and expert
management with the health institutions. The foreign and domestic experts
in many areas of health management and leadership in managing the health
institutions delivered lectures organized in nine modules. In these frames,
Memorandum was signed on introduction of health management and the
action “100 messages from 100 leaders” was carried out. The two trainings
were successfully attended and finished by 284 candidates (119 economist
and lawyers and 165 doctors and pharmaceutical experts). All the
participants that attended and finished the trainings has the opportunity to
pass final IT skills exam on 13th and 14th June in the Agency for State
Servants. These will be starting basis for selection of management teams in
the health institutions that will be doing the management role in related
signatures.
       In the frames of the grant received by the Dutch Embassy, the
Republic of Macedonia benefited from development of the medical map –
software based on the GIS technology that includes the parameters needed
to identify the functioning of the health system. This is an excellent tool to

70                                                               REPORT N’ 1
                                                       Leadership Monitoring

create analytical database for resources allocation, planning and adoption of
decisions for investments in the health sector as well as contracting of the
health institutions. The State Health Protection Institute which already
played the role of referral center for collection of information about the
health status of the people will undertake the leading role in securing
information on the map in a single framework that enables linking of the
health protection needs and the capacity to provide them, as well as
promotion of proof based decision making.

      State Health Protection Institute updates the information on its website
as a center for information and health prevention that is available 24 hours a
day to the citizens of Macedonia.

       The Ministry of Health approved and adopted the budgets for 13
prevention programs that will be implemented by the carriers of the
activities, depending on the specifics of the issue that is being considered.

       10.3. Health insurance
       The Governmental program on health regarding the health insurance
segment foresees provision of clearly defined package of health services as
well as better information for the citizens on how to realize their health
insurance rights. The analysis done so far by foreign and domestic experts
point out to continuous insufficient functioning of the Health Insurance
Fund for longer period of time – lack of transparency and accountability,
bad practice in the financial management, procurement of health services,
frequent shifting of staff and insufficient attention to the human resources
combined with weak monitoring. This is the focus of the program activities
and initiatives for improvement of the work of the Health Insurance Fund
which should provide better value for the money in accordance with the
compulsory health insurance scheme. This program also supports local and
international technical assistance, upgrade of the health information systems
in relation of IT equipment, software and training on how to use them.

      The health services package is currently in a phase of defining by the
working groups in the Ministry of Health, Health Insurance Fund and
foreign consultants that were engaged for this task. So far consensus has
been achieved for most of the reform issues (unique package for all
beneficiaries, centralized collection of the contributions by the Public
Revenues office and recombining of the financing and monitoring over the
13 national programs). However, still a consensus has not been reached for

SEPTEMBER 2006 - MAY 2007                                                  71
the negative list of medical services that will be excluded from the package,
exclusion of the financial allowances, the co-financing system and
establishment of independence for the hospitals. The recommendations from
foreign experts are that decisions on these issues should be adopted on
governmental level.

      The Health Insurance Fund also published a competition for
international expert that will undertake the role of Executive Director and
manage the reforms in the next four years. The reform processes should
reduce the costs and bureaucracy in all fields of the health system,
realization of agreements between the Health Insurance Fund and the
providers of services, as well as establish conditions for introduction of
competition in the health insurance system.

      10.4. Primary health care
      In this segment, the Government program foresees introduction of a
new concept of work in the primary health care – community oriented
primary health care. The activities include establishment of a new
generation of services for primary health care consisted of multidisciplinary
teams, correction of the capitation models, establishment of conditions that
will be in the benefit of the young doctors, improvement of the status and
role of the nurses as well as special incentives for the doctors in the primary
health care according to the quality of the work done.

       In the frames of this component, starting from 1st January 2007, the
doctors in the primary health care became private signatories of the contract
which designates payment per capitation system through agreements signed
with the Health Insurance Fund. Instead of salary, the doctors will receive
remuneration for particular number of patients that will get registered with
them. The new arrangement includes payment of the rent for the premises as
well as further-equipping of the rooms with the necessary equipment. The
Government proposes that the non-medical activities realized by the health
institutions to be physically delegated to municipal management. This
proposal is still being debated among local communities (the details are
explained in the private health part).
       In order to reduce the unnecessarily expensive referrals of patents
from the primary health care in the hospitals, measures are planned that
should be implemented by the Health Insurance Fund so that the doctors can
do most of the job by themselves (for example, monitoring of patients with
72                                                                REPORT N’ 1
                                                       Leadership Monitoring

diabetes, small surgical interventions, etc.) The recommended mechanism to
achieve these goals are the structural payment (one part capitation, part for
the services delivered for preventive and/or curative activities, which is the
model used in the UK), tax incentives when purchasing new equipment for
the general practitioner office as well as one-time payment for equipping
and refurbishing.

       10.5. Stomatology
       The activities set in the pre-election program regarding stomatology
(drastic reduction of the level of caries in Macedonia, introduction of
fluoridation of the drinking water in selected municipalities with high risk
and financial assistance through loans for development and further-
equipping of the dental offices) are not defined as specific actions in the
program of the Government and there is no information about them for any
activities started in this area.

      10.6. Pharmacy
      The part regarding pharmaceutical sector in the Government Program
includes the following activities:

      - Simplification of the procedure for registration of drugs, auxiliary
drugs and medical devices;
      - Introduction of favorable VAT rate for the drugs;
      - Introduction of the reference prices system and harmonization of
the drug prices (flat rate pricing) in all pharmacies.

       The reforms planned are incorporated in the draft Law on Drugs and
Medical Devices, harmonized with the main provisions of the EU Acquis
(Directive 2001/83/EC; CR 726/04/EC; Directive 2001/20/ЕC; Directive
93/42/EEC; Directive 385/90/EEC; Directive 98/79/EC; Directive
89/105/EEC). The other provisions from these directives will be mirrored
into the bylaws.

      The abovementioned Law determines that the drug prices are
determined freely, except in situations prescribed by a Law; the draft law so
far does not designate introduction of favorable VAT rate. In order to enable
better availability and supply with drugs for the health care in Macedonia,
the Minister of Health regulates the prices of the drugs in one or several
ways: the prices of the drugs that are borne by the Health Insurance Funds
and have approval for sales i.e. approval for import of drugs that are on the
SEPTEMBER 2006 - MAY 2007                                                  73
list of essential drugs but have no approval for retail sales, is established and
controlled in a manner prescribed by the Minister of Health on any level of
the process (production, wholesale or retail sales).

      10.7. New generation of hospitals
      The “New Generation of Hospitals” program has a task to establish
clean and safe hospital through realization of six activities in this regard:

      • Accelerated decentralization process and autonomy by 2008;
      • Management by two directors with bind signatures;
      • Establishment of the rights and obligations of the staff;
      • Increased funds allocated from the Budget for capital investments
in the hospitals;
      • Establishment of criteria for signing of agreements for cooperation
with the existing private hospitals.

      The first step towards change of the leadership style in the hospitals
has been done by training the medical and non-medical staff that is
supposed to undertake the management role and adopt decisions in
accordance with the bind signature of “four-eye” principles. The
decentralization and privatization of the hospitals, especially the Clinical
Center, is still subject to deep analysis and expert debate for identification of
the most appropriate modalities; the experts think that the most appropriate
for of decentralization of the hospitals sector would be to use model used in
the UK in the 90s regarding national health services established in the UK.

      At the present, the Ministry of Health plans to transform the hospitals
into public companies with independent management but will remain under
the umbrella of the Ministry and will notify the relevant bodies in the
Ministry of Health about their work. Another subject of expert debate is
how the hospitals will be paid, by introducing diagnostically related groups
(DRGs). This type of decentralization also means establishment of extensive
administrative decentralization in this segment of the health sector – a
process that requires increased level of regulatory activities by the Ministry
of Health.
      10.8. Private health sector
      The program task for development of the private health sector foresees
not to make distinction between the sate and private institutions, through
gradual increase of the number of citizens that will receive services in the

74                                                                  REPORT N’ 1
                                                        Leadership Monitoring

private sector as well as establishment of conditions for creation of private
non-profit missionary hospitals.

       From 1st of January 2007 the entire primary health protection has been
privatized. In other words, the general practitioner offices were given under
concession to the providers of the private health care services who sign
agreements with the Health Insurance Funds. As it was already mentioned,
the decentralization provided a great opportunity and chance to the Ministry
of Health for restructuring and setting of the future links between the
municipalities and the newly-privatized doctors in the primary health
protection. However, there is still a certain degree of caution by the
municipalities regarding undertaking of responsibilities in the health sector
because they think that they are already facing huge obligations un the
educational sector. They also say that the health protection is extensive and
expensive think thus making it very difficult for management on municipal
level.

       10.9. Overall evaluation by the expert for the reporting period
       By analyzing in details the Government Program and the activities
realized in the reporting period (September 2006 – May 2007), we can
conclude that the Ministry of Health, as a key carrier of the reform processes
in this segment, has undertaken huge steps and is boldly leading the whole
process towards realization of the goals set.

     However, the period under analysis is very short in order to come to
any conclusions and recommendations for future actions because, in order to
measure the results from the activities undertaken, longer period of analysis
and benchmarking is needed. Commendable are the loyalty and
commitments of all structures involved un the realization of all activities
undertaken so far.

      However, there is still a lot of work to be done, to start and/ or finish
the activities set in the program of the health segment and health policy, in
order to be able to achieve the ultimate goal – provision of health system
that will meet the needs of the Macedonian citizens.




SEPTEMBER 2006 - MAY 2007                                                   75
                 11. Transport and communications

     11.1. Construction

     Roads

     The following activities were under implementation in the period
September 2006 – May 2007 regarding roads:

      • Presently ongoing is the project for refurbishment of the bridges on
the Skopje-Veles national highway. It is also important to mention that such
refurbishment has already been finished for the bridges on the main road
from Blace to Skopje as first phase of the large project (to be implemented
in three phases) for refurbishment of the damaged roads and bridges in
Macedonia caused by NATO vehicles in the last period. The financial
realization of this project is a NATO donation. The Republic of Macedonia
by far used two such donations (in 2001 and 2002) from the American
Army and NATO;
      • After anomalies and weaknesses were identified in the present
system for collection of the fees at the pay-toll stations on the national
roads, a process was initiated to improve this collection as well as the
collection services. This process is currently in the phase of development of
the tender documentation and its realization will be assisted by a World
Bank loan;
      • All pay-toll stations in Macedonia have cash registers installed, in
accordance with the legislation;
      • Consultant has been selected that will develop the National
Strategy for Road Transport. The selected consultancy company already
works on development of the national strategy;
      • Activities are ongoing for changes and amendments to the Law on
Public Roads that will introduce the modern standards and needs;
      • Selection was made of the consultant that will develop the program
for transformation of the system for management with the roads. The
selected consultancy company already works on the transformation;
      • International Tender has been announced (22nd May 2007) for
selection of consultant for development of a tender that will give under
concession more than 500 kms of roads. The following roads will be given
under concession, which are supposed to be upgraded to highways:

76                                                               REPORT N’ 1
                                                     Leadership Monitoring

     o Non-constructed sections of the international corridor 8 (from Deve
Bair border crossing with Bulgaria till the border crossing Kjafasan with
Albania);
     o Corridor 10 D (section: Veles – border crossing Medjitlija towards
Greece);
     o Bitola – Ohrid road;
     o The road Shtip-Kochani-Delchevo-Bulgarian border;
     o The road from Skopje to Blace border crossing.

       • Currently in development is the project documentation for the
regional road Skopje-Poreche in order to improve the road connections and
communication of the Poreche region;
       • Construction of the highway between Kumanovo-Tabanovce
border crossing has started, in the length of 7,3km (presently in
expropriation phase);
       • A feasibility study is being developed for the Demir Kapija-
Smokvica section of Corridor 10, in order to change the present (projected)
route of the highway i.e. new section will be introduced;
       • The adoption of the Annual Program of the Fund for National and
Regional Roads, the Funds’ Budget has been reduced in some items in
relation to previous years. We deem that the items from the Annual
Program: “projection and development of studies” and “maintenance of the
main and regional roads” should be allocated more funds, instead of
reducing them;

      The Government and the relevant Ministry should include in the
upcoming change of the Law on Public Roads, change of the present way of
financing of the roads that will secure more finances for their construction
and maintenance.

     Railroads

     The following activities were under implementation in the period
September 2006 – May 2007 regarding railroads:

      • Consultant has been selected for development of the National
Strategy for Development of the Transport, which includes the railways as
well. The selected consultancy company is currently drafting the National
Strategy;

SEPTEMBER 2006 - MAY 2007                                                77
      • Currently work is in progress on transformation of the railroads in
accordance with the election program and their division into railway
transport and railway infrastructure.

      Spatial and urban planning

      Activities are undertaken in the area of spatial and urban planning –
the following laws will be changed and amended by September 2007:

      • Law on Spatial and Urban Planning;
      • Law on Construction;
      • Law on Legalization of the Illegally Constructed Buildings.

     The Ministry of Transport and Communications, in cooperation with
UNDP and UNHABITAT (United Nations Organization for Spatial
Planning) has initiated the digitalization of the urban plans in Macedonia.

      Presently ongoing in the State Authority for Geodetic Works are
several multiple-year projects, as follows:

      • World Bank loan project for reforms in the Cadastre in order to
shift from land cadastre towards real estate cadastre i.e. “floor cadastre”
which was realized less than 50% by the previous government and now has
achieved around 70%;
      • Project in cooperation with the Swedish Government for training of
the Cadastre managers and assistance in equipment.

      Communal activities and water economy

      Construction has started of “Knezhevo” dam – one of the largest water
economy objects in Macedonia worth around 150 million USD. The funds
were secured from Japanese Government credit and funds by the
Macedonian Government. The construction of this reservoir will also
foresee construction of three power plants (each of them producing over 56
million KW/h electricity annually) and connect with the hydro system
“Zletovica” that will supply drinking water for over 100.000 people in the
municipalities of Probishtip, Shtip, Sveti Nikole, Kratovo, Karbinci, Lozovo
and Zletovo as well as provide irrigation for over 3.500 hectares of fertile
land in the region of Probishtip. The deadline for finalization of construction
of the project is by 2010.
78                                                                REPORT N’ 1
                                                        Leadership Monitoring

      Also realized are several actions for cleaning of the draining channels
in the areas of Skopje, Tetovo and Kochani. These channels were neglected
for many years and this caused floods of these regions with the first rains of
spring. Luckily, due to the timely interventions, there were no floods this
year.

      11.2. Transport
      For the first time, the awarding of CEMT licenses has been done in a
maximum transparent manner, assisted by USAID. The awarding was done
through a computer system thus avoiding the gaps identified so far. It is
certain that the present system can be improved and upgraded but it is
important to mention that significant progress has been achieved.

       In the area of air transport we point out that the Public Enterprise for
Airport Services “Makedonija” developed a Business plan for work in 2007.
It includes all segments of their work, starting with transformation of this
enterprise into Joint Stock Company owned by the state, setting of the goals
and priorities for the current year and program developed for construction
and reconstruction of the airport “Alexander the Great” in six phases. This
will increase the quality and level of services provided by this airport.

      11.3. Telecommunications
      In accordance with the election promise, tender was announced for
third mobile operator in Macedonia in order to resolve the situation of
having only two mobile operators in Macedonia thus providing to the
Macedonians better services and more affordable prices in the mobile
telephony.

      The international tender was won by the Austrian company for mobile
phones “Mobilkom”. Currently in the pipeline is preparation for
international tender for fourth mobile operator.

      11.4 Overall evaluation by the expert for the reporting period
      In the area of transport and communication, reforms in the cadastre
and railways should continue, as well as adoption of the changes and
amendments of the Law on Public Roads which will start the transformation
in the road transport. It is also necessary to resume the work in adoption of
the national strategies in the road and railway sector that will define the
goals and objectives for development in these sectors. In the upcoming
period we need to secure and provide greater amount of funds for
maintenance of the roads.
SEPTEMBER 2006 - MAY 2007                                                   79
                  GENERAL RECOMMENDATIONS

      The Government of the Republic of Macedonia should intensively
continue with the drastic changes towards better, in the upcoming months,
in all areas set in the Program for Work of the Macedonian Government
2006-2010. It must not slow down and must not be satisfied with the initial
undertakings and implementation of the reforms started. The changes must
continue so that the people will be able to feel the positive effects as soon as
possible. This is also necessary for the Government so it can strengthen its
reputation, credibility and authority among the people but also, more
importantly, among the civil administration.

       The Macedonian Government should continue the implementation of
the numerous changes and novelties in the tax area in order to avoid
situation where exactly the tax area will be hurdle for the economic activity
and obstacle for realization of its overall program task.

      The new measures in the fiscal policy could cause problems if there is
insufficient/ non-consistent tax auditing. In order to avoid the possibility
that the enterprises will misuse the new benefits of the fiscal policy, it is
necessary to increase the presence of the tax auditors.

       There are also potential problems in the trade, industrial and
investment policy if no stronger capacity is built for implementation of the
rights to react to trademark violations and anti-dumping and compensating
fees, and if the development of the Strategy for Industrial Policy of the
Republic of Macedonia is not implemented seriously with involvement of
all stakeholders. In this area necessary is simplifying of the procedures for
adoption of strategic documents that will involve the business communities,
think-tanks and the citizens.

      The existing pension and financial system has a definite need for
further reforms and development. Beside the reforms and adoption of new
laws, and changes and amendments in the existing ones, there is still
insufficient competition in the financial sector.

      The securities market, being part of the financial sector, beside the
increased interest and volume of trade, is still insufficiently developed and
far from the international capital markets. It is necessary to modernize the
stock exchange. The lack of new electronic trading on the stock exchange
80                                                                 REPORT N’ 1
                                                         Leadership Monitoring

can be felt. For this purpose, assistance and cooperation is necessary with
foreign donors that would help the stock exchange introduce the modern
electronic system i.e. install sophisticated electronic platform for publishing
of information. There is a need for development of the institutional investor.

      Regarding the introduction of the “Third Pillar”, greater information
for the citizens is needed in order to reduce the skepticism and provoke
interest in future investors. In this regard, it is necessary to inform them with
the advantages that the investment brings in this pillar, especially for the
unemployed people providing them with the right on pension and for those
people interested to invest for saving purposes. The key factor for
functioning of this pillar is well developed financial market with many
instruments and good offer, which will provide good functioning also of the
overall financial sector.

      The Republic of Macedonia should make additional efforts and use
the world trends, especially in adopting to the new, so called knowledge
economy. For this purpose, Macedonia needs Strategy for Development of
the IT Society as well as Program adopted by the Minister for IT Society.
However, this is not good enough. The following is also necessary:
significant increase of Budget allocations for science, development and
research; maximum use of the foreign know; provide overall support for
wide introduction of the electronic signature. It is necessary to work
systematically to attract the EU funds for technological development. An
area of potential problems is the transparency when awarding the new
tenders, such as the tender for WiMax and the insufficient planning of the
projects such as “Lifelong learning”.

     The monitoring indicators of the expert for education show that there
could be potential problems in the area of education if the initiatives
undertaken are not properly and quality managed.

      The Government should continue investments in sports, since the
sports and the physical culture are of great importance for Macedonia
because of the several reasons: healthy nation; correction psycho-physical
development of the nation; international presentation of Macedonia; the
sportsmen are the best ambassadors of the country; development of the
business in sports because in the world the sports in amongst the top five
legal businesses.
SEPTEMBER 2006 - MAY 2007                                                     81
      Regarding the activities undertaken, we can say that the Government
program in the area of agriculture is implemented well and within the
foreseen timeframe. Potential problems could occur in the future phases of
implementation considering the number, complexity and extensiveness of
the activities undertaken and planned. The key factors for success will be
the management skills and the appropriate organization, coordination and
control. The Government should adopt the Strategy for Agricultural and
Rural Development, in harmonization with the Common EU Agricultural
Policies because this is an important document, the beginning of everything.
Making it late means obstacle for the process of use of precessions funds.
One of the key weaknesses of the sector is the institutional and human
resources development – starting from the civil servants, advisors in
agriculture, enterprises in the sector and ending with the farmers. The
Government should focus itself more on this problem, and use the
precessions funds that we have available, for capacity and human resources
building.

       In order to achieve more successful results in the area of foreign
policy, Macedonia should be more focused in the upcoming period on
stabilization of the political processes, harmonization of the institutional
relations and relations between the political parties in the system as well as
on improvement of relations with some of the neighboring countries.

      The foreign affairs activities, to some degree, are burdened by the
unsynchronized relations between the Government and the President of the
Republic of Macedonia who, according to the Constitution, does have an
authority in this area. As a consequence to this situation, new ambassadors
of Republic of Macedonia have not been appointed. The relations between
the two institutions are under strong influence from the relations between
the political parties VMRO-DPMNE (the largest party in the government)
and SDSM (whose former leader is the President of the Republic of
Macedonia). The improvement of cohabitation is necessary in order for the
foreign policy to be harmonized, as well as the finalization of the judicial
reforms.

     The intensive communication and coordination with the EU, NATO
and USA should continue as very important step towards approximation to
EU and NATO and partnership in the war against terrorism.



82                                                               REPORT N’ 1
                                                        Leadership Monitoring

      The resolution of the problem of non-functioning of the Republic
Judicial Council in full composition will enable progress in harmonization
of the legal system of the Republic of Macedonia with the EU system and
will accelerate the reforms.

      The Government should resume its work in accordance with the “zero
tolerance” principle towards corruption and fight against organized crime.
Spectacular arrests and loud campaigns in the mass media should be
avoided. In the activities for fight against organized crime and corruption,
the Government must not allow for the political motives to infiltrate as duel
between the political parties.

      The Ministry of Interior should identify mechanisms for expansion of
its capacities for better functioning of the new passports issuing system as
well as make additional efforts in identifying mechanisms to shorten the
procedure during which the Macedonian citizens receive their passport. The
long queues in front of the counters when submitting the required
documents should be resolved.

       If the changes of the Law on Roads Safety are consistently applied,
that would significantly have impact on the safety of the drivers, especially
if there is consisted enforcement of the provisions related to novice drivers
and collection of negative points for misdemeanors perpetrated.

      In the area of transport and communications, sufficient funds
should be secured for the items from Annual Program of the Fund for
National Roads – “designing and development of studies” and “maintenance
of the main and regional roads”. The reforms referring the railway and the
land register, as well as the amended and added Law for public roads, what
will be the start of the road sector transformation must maintain in future
too. Beside that, in the following period a greater sum of facilities should be
planned and secured for servicing the roads. Maintaining with the work for
bringing the National Strategies in the railway and road sector is necessary,
in order the goals and the directions of development to be defined.

     Since the decentralization provides the Ministry of Health with great
opportunity for structuring and establishment of the future links between the
municipalities and the newly privatized doctors, the Government i.e. the
Ministry of Health should exercise maximum precaution and impartially
implement this transfer of responsibilities.

SEPTEMBER 2006 - MAY 2007                                                   83
       Beside the significant results achieved in the health sector and health
policy, there is still a lot of work to be done, to start and/ or finish the
activities set for provision of health system that will be tailor-made to the
needs of Macedonian citizens.


      The success of these reforms will depend on how appropriate they are
in ideological sense. This refers to: market freedom and entrepreneurship,
protection of property rights, good business environment, low taxes, low
administrative and regulatory burden, efficient and expert bureaucracy,
performance based public administration, wide range of public services,
transparency, fight against corruption, security, stability and good
international position. In order to be persistent in implementation of the
policies it promised, the Government would have to maintain these bases
established in the first months of its work and use them as guidelines during
the entire mandate.




84                                                               REPORT N’ 1
                            Leadership Monitoring




SEPTEMBER 2006 - MAY 2007                     85
86   REPORT N’ 1
                                                 Leadership Monitoring




Leadership Monitoring: Report from the performance evaluation of the
Government of the Republic of Macedonia for the period September
2006 – May 2007


Published by: The OHRID Institute for Economic Strategies and
International Affairs

Address:
Dimitrie Tucovic 24
Skopje,
Macedonia
Tel: +389 2 322 44 57
Fax: +389 2 322 44 57
Web: www.oi.org.mk
E-mail: info@oi.org.mk

For the Publisher: Biljana Janeva, MA

Proof –reading and preparation: Ruzica Stojanovska

Publishes: Akademski Pecat, Skopje




SEPTEMBER 2006 - MAY 2007                                          87

								
To top