No More Living on Credit

In spite of the security crisis in the country, final preparations for the reform of the payment system in Macedonia which is to take effect on January 1 are being hurriedly brought to a close. Content with what has been done up to now to draw the country closer to Europe, government officials urge upon the business people the need for discipline and courage, while businessmen seem to have a hard time discarding old habits. How is one to become a citizen of Europe with a Balkan salary wonder the ordinary people, fearful of the new regulations governing flows of money they themselves have less and less of

AIM, Skopje, December 26, 2001

After a prolonged standstill, Macedonia has once again embarked on the course of serious reforms of its financial system. As analysts point out, this is not solely due to the dictate of the IMF, but also to the realization that the transition of the local economy in line with the standards of developed western economies is the only hope of Macedonia ever catching up with Euro-Atlantic integration processes.

The past 365 days of year 2001 will forever remain in the collective memory of the business sector in this country not only because of the war and the damages it caused, but also because it has somehow managed to survive the hectic preparations for the start of the ongoing reform of the country's payment system scheduled to take effect on the first day of New Year 2002. The best part of December was marked by the final testing of the new regulations governing money transactions and securities, on trial since June, supposed to speed up the economic progress of the country and bring it yet another step closer to Europe.

Those who survive will live to tell the tale, not without irony judge the independent analysts, weary of the haste with which the reform of the payment system is being carried out, relying more on the media campaign than on the necessary training of the existing banking cadres who are to take upon themselves the better part of the problems arising from the intended reforms. The clinching argument for all those opposed to the "turbo" changes in the country's fiscal policies is the customary reluctance with which people in this particular part of the world part with their long-standing habits. As opposed to this, government officials seem to be unwavering: according to them, what is of crucial importance at the moment is more discipline and a considerable measure of entrepreneurial daring on the part of the business sector.

All summer long, the Ministry of Finance did its best to inform the population through the media as to what lies in store for it starting from day one of 2002. The said media-campaign (nicknamed "Flipper") had little effect until the public was finally confronted with the immediate repercussions of its neglect - the unthinkably long queues in front of bank windows and the rigid measures applied in procedures concerning the issuing of citizens' checks, to be forever banned as a relict of the socialist past starting with January 1, 2002. Instead of them, Macedonians are to soon witness the standard check- endorsement procedures practiced in the West. This goes to say that the benefits enjoyed by the broad public in the preceding socialist era, such as the sanctioned negative balance on an individual's bank account equaling his monthly earnings or the purchase of goods on part payment - practiced in the past decade by the banks under the dictate of politics for the purpose of preserving social peace - are to be forever banned. This is to be the true end of living on credit, claim those entrusted with implementing the reform of the payment system in Macedonia.

All that needed to be done, feasible in the light of the current political and security crisis, was done in a highly professional manner, claims Finance Minister Nikola Gruevski. All firms have transferred their accounts to commercial banks which have gradually taken over the functions of the former ZPP - Bureau of Payment Operations - which has ceased working with the public on December 15, 2001, and is to be officially dissolved on the first day of 2002. The abolition of ZPP has rendered possible the registration of five new legal entities, these institutions being: the Clearing House, Central Securities' Depository, Central Registry, Agency for Blocked Giro-Accounts and the National Payment Card. All of them are technically and staff-wise well-equipped, electronically connected with NBRM (National Bank of the Republic of Macedonia) or mutually, and by means of extensive training qualified to do the job entrusted them, according to the Finance Minister. A number of regulations governing the banking system have been prescribed, to be amended and coordinated along the way if necessary.

The reform of the payment system, involving both the business sector and the population, is to be carried out in stages. Its primary goal is the transfer of all payment operations to commercial banks. As opposed to previous practice, anyone wishing to do so will be allowed to hold as many bank accounts in as many banks as he chooses to or, if the client so decides, open several accounts in a single bank of his choice. The hope is that this will induce the banks to be more anxious over the quality of services rendered, thus paving the way for tougher competition, higher liquidity and greater job demand. Some banks such as the two main ones – the Commercial Bank (Komercijalna Banka) and Stopanska - have already announced that their clients are to enjoy interest rates on deposits made, their immediate transfer to any main or subsidiary account on request and the processing of their money orders not only at bank windows but by Internet as well, even antedated as to the foreign exchange rates, a practice strictly forbidden up to now.

The transfer of payment operations from ZPP to commercial banks which commenced in June lasted longer than expected. Due to the inertness of business managers concerned, the better part of the undertaking was carried out literally at the last possible moment, coinciding with the withdrawal of the Deutche Mark from the money markets. This resulted in scandalously long queues and corresponding nervousness in front of bank windows, leaving the impression of utter incompetence on the part of the banks. It also exerted a heavy toll in terms of time and nerves lost in vain. In short: it seemed as if all previous warnings and threats of rigorous fines had been to no avail. The inert business managers seemed to grasp the message only after the original time limit for the transition was shortened for further two weeks and after ZPP started charging its services some 700 per cent more than previously. Nevertheless, of the 620 legally registered businesses, 98 per cent managed to transfer their accounts from the ZPP to commercial banks in time. The remaining two per cent refer to businesses which have been passive or whose accounts have been blocked for several months now, the likes of which will from now on find themselves monitored by a state agency specialized for such cases. It is claimed that the Agency (for Blocked Giro-Accounts), while keeping well aloof from the business strategies and policies of such firms, is to do all in its power to secure their survival if possible or, if that turns out to be the necessary course of action, start bankruptcy procedures. According to latest predictions, this highly sensitive undertaking is to be resolved in a two years' time period !

Sound firms will be sending their money orders to the banks which will then process the smaller payments through the Clearing House, while the larger ones will be referred to the electronic RTG system of the National Bank.

The newly established Clearing House is owned by 16 commercial banks which were given the opportunity to buy the assets of the dissolved ZPP under an installment plan covering a four to five year period. Those who have opted for taking over not only the premises and the equipment of the ZPP, but entire staffs formerly employed in individual ZPP branches as well, were given considerable discounts. The only trouble being, as the opponents of such a complex reform being implemented "over night" point out, that no public tenders and auctions were held and that the whole thing was carried out in key with particular party interests, meaning largely to the benefit of those in power.

The final stages of the preparations for the start of the reform of the payment system were marked by the much publicized establishment of the Central Securities' Depository (CSD). The assessment of Norwegian experts involved in the creation and operation of this and five accompanying registers is that the transfer of stock books from the bottoms of executive desk-drawers to the CSD - as opposed to the odyssey concerning giro-accounts - was, contrary to expectations, carried out exceptionally well and in record time. In some other countries in the region the process, it is said, took years. The newly established financial institution is expected to finally furnish a reliable image of the Macedonian stock market and the corresponding capital, subjects of much abuse in years following the gaining of independence. All stock books have been electronically deposited, each and every stock exchange transaction and court ruling in relevant litigation cases automatically noted and, if the experts are to be believed, this is to ultimately guarantee absolute legal security to all commercial enterprises depositing their stock books with the SCD. The ultimate hope behind all measures taken being that the newly acquired level of transparency concerning the true state of the stockholding capital in Macedonia is bound to result in the bettering of the country's reputation and the inflow of the desperately needed foreign investments. In the first two years of its existence, the SCD is to operate as an non-profit institution which, at least according to the Finance Ministry, does not go to say that this might not change at some future date. If all goes as planned, in a year's time the SCD is to link up with the existing security stock exchanges in Ljubljana and the Balkans.

Apart from the above mentioned, in the course of 2001 Macedonia witnessed the introduction of a number of other novel registers: such as the Central Registry, devised to deal with issues of mortgaged property, real estate rights and the balancing of annual accounts of legal entities. Experts claim that the founding of a financial institution of the sort - government owned and accompanied by a law governing its takeover - will prove to be a significant step forward to the full realization of interests of the small stockholders.

The introduction of the National Payment Card is the aspect of the reform intriguing the general public most. All meeting the set criteria

• namely, that they be employed and have a solid and steady income - will be issued one. The hope of the financial experts from the Finance Ministry is that, through the introduction of the card, the bulk of everyday payment transactions will be channeled to the banks and conducted without the use of cash, thus finally putting a stop to the gray economy. The card will be accepted in all shops, hotels, restaurants, gas stations etc. throughout the country, as well as by automatic banking machines for cash withdrawal purposes. Due to the comprehensive preparations yet to be carried out, to begin with (and the true beginning is not to be expected before the end of June, at the best) the national payment card will be put to use solely within the domestic payment system. Its integration with the popular Masters and Visa cards systems is envisaged for some latter date. The equipping of the retail network with automatic banking machines and ATM machines (automatic teller machines) is currently in progress.

The purchase of the expensive machine needed for the printing of the cards has been postponed until the holding of the Donors' Conference for Macedonia, due to take place in the span of the first few months of

1. The first users of the newly established form of payment within the country's reformed payment system are to be government employees. For starters, 30 per cent of their salaries are to be paid out in the form of the National Payment Card credits.

The reform of the Macedonian payment system was financed by the governments of Norway, Belgium and Slovenia whose experts were from the very start actively engaged in the highly complex undertaking of financial reforms inciting such great expectations. As for the Finance Minister himself, he claims to be convinced that the newly established control of payment transactions will prove to be in the best interest of the country and its citizenship and that, eventually, all flaws manifested in its implementation, are to be annulled with the help of international and domestic experts. As opposed to this, mere mortals for the most part live in fear of what awaits them, convinced hardly anyone gave their true interest any consideration. First and foremost, they are highly suspicious of the new rules governing the flows of cash they themselves have less and less of. The most frequent question no one seems to have an answer to runs: "How on earth is one supposed to become a citizen of the EU while subsisting on a Balkan salary?"

BRANKA NANEVSKA

(AIM)