No one cares what businssmen have to say
NO ONE CARES WHAT BUSINESSMEN HAVE TO SAY
AIM Skopje, October 23, 1999
There is a great dissatisfaction in Macedonia with the economic cooperation with states created after the disintegration of the former SFRY. Despite, as is usually said, great efforts that are invested and the necessary conditions, as their economies are compatible, but also justified bilateral interests, the results achieved have for years been below the possible and desired level. This is best confirmed by the data which change from month to month. The overall balance of this cooperation is, unfortunately, constantly negative for Macedonia. The volume of trade is decreasing, while the deficit is increasing.
The State Statistical Office has recently published information that since early 1999 till late August, the overall volume of Macedonia's trade with foreign countries was worth USD 1.8 billion. Of this amount exports account for 41 percent and imports for 58 percent. Major export item were consumer goods - 49.6 percent, while intermediate goods accounted for the major part of imports - 62.5 percent. The trade deficit amounts to USD 280 million and is by 13 percent lower than in the same period last year. The greatest share of cooperation was realized with countries members of the European Union - 48.8 percent, while only 22 percent was realized with ex-Yugoslav republics which is very little if it is known that as much as 60 percent of Macedonian economic facilities are either linked to or depend on the republics of former SFRY. Export results are also negative which is reflected on the entire Macedonian economy. The state is absorbing only 20 percent of domestic production, while 80 percent has to be sold to the world. New markets are hard to find. That is why only 40 percent of all factories are still operating.
Reasons for the Macedonian negative foreign trade balance with former Yugoslav republics are numerous and more or less specific for each new state. Nevertheless, what could conditionally be considered a common denominator is the unfavourable political and security situation in the region. This is followed by the inconsistent implementation of the existing agreements, their deliberate and intentional violation, frequently for political and not economic reasons. The third, but no less important reason is that after the signing of the mentioned agreements no accompanying documents have been prepared which would create the conditions necessary for the establishment of cooperation and for adequately motivating economic entities. For example, none of the former Yugoslav republics have corresponding legislation on the avoidance of double taxation, mutual protection of investments, promotion of joint ventures, payment operations, recognition of attests and standards, etc. Incidentally, Macedonia has signed Agreements on the Liberalization of Trade with FRY, Slovenia and Croatia in 1997.
This Agreement was signed with B&H in 1992, but was revoked in May this year by the decision of the Macedonian Parliament because it was unilaterally ratified and consequently implemented to Macedonia's detriment. According to the Macedonian Chamber of Commerce, as much as 35 state acts have to be signed in order to make the existing agreements on free trade fully operational and mutually beneficial to all interested parties. Unfortunately, due to the old Balkan habit of mixing politics with the economy, very little has been done till now and the situation is different in respect of each of the mentioned countries. Therefore, the economic entities are forced to wonder around the administrative bureaucratic labyrinths and depend on ad hoc "protection measures" or to do business according to the "make do" principle.
All this is far from all that Governments of these two states have undertaken to do not only verbally, but legally as well. Recently the Macedonian Chamber of Commerce has initiated and organized talks with partner associations from Belgrade, Zagreb and Ljubljana at which experiences to date have been analysed and measures for the overcoming of problems in the way of a more successful mutual cooperation proposed. Such meeting with the B&H Chamber of Commerce has been planned for late November. We have learned that during the meetings held so far, businessmen have expressed their regret for not being consulted in the formulation of the provisions of free trade agreements and warned their respective governments and competent state authorities to stop "playing". The have demanded a more serious treatment of this problem area and urgent measures so that the necessary conditions for cooperation would be created and consistent implementation of the agreements initiated as that would make them more mutually beneficial for all parties.
Figures on the level of results achieved to date show that this cooperation was below possibilities. In eight months of 1999, Macedonia has exchanged USD 150 million worth goods with Yugoslavia. That is 53.4 percent compared to the last year's balance for the same period which is unsatisfactory for everyone. On the contrary. Since the signing of the Free Trade Agreement, which both countries consider exemplary as it exempts 97 percent of all goods from all regimes (only agricultural-food and ferrous metallurgy products are protected) the average annual trade reached USD 500 million. Some ten years earlier it was measured by billions (in 1980 the effected trade was valued at US 2.5 billion). A specific decline in exports has been registered on both sides. Last year, for example, Macedonia sold to Yugoslavia 42,000 tons of vegetables, and this year only 6,500 tons. Such examples are many.
According to Momir Pavlicevic, President of the Serbian Chamber of Commerce, war with NATO is not the only reason for the decreased economic cooperation with Macedonia. He also pointed out that the Yugoslav Government was forced to introduce various restrictions in order to protect its own reserves. Nevertheless, the cooperation did not stop during the war. However, economic facilities have been destroyed and that would continue to be an obstacle to this activity for a long time. His colleague, head of the Macedonian Chamber of Commerce, Dusan Petreski warned of a great discrepancy between verbal promises and the Yugoslav practice. He pointed out that as of September 1, Yugoslavia has introduced new severe restrictions for Macedonian products and that if such policy was pursued further Macedonia would be forced to demand reciprocity. For example, Yugoslavia has introduced changes in its tax legislation, as well as custom duties and foreign trade laws.
According to these changes economic entities are under the obligation to sell 5 percent of their foreign currency earnings from exports or imports to the National Bank at the exchange rate of 8 dinars for one German mark, which is two times lower that the unofficial rate. Custom duties for goods that are not produced in Yugoslavia have been raised from 1 to 5 percent, and to 15 percent for goods available in the country. For milk and milk product custom duties have been raised to 40 percent. Also, restrictions on the wholesale trade in artificial fertilizers and building materials have been introduced. The list is long and the introduced restrictions are contrary to the free trade agreement. This will adversely affect Macedonia, although it should be mentioned that in the last two months after the calming down of the Kosovo crisis, Macedonia has realized a USD 18 million worth surplus in its trade with Yugoslavia, which is rather unusual.
Businessmen of the two countries insist on the establishment of payment transactions in order to facilitate doing business and eliminate smuggling. They are in favour of higher forms of cooperation, joint marketing on third markets, participation in privatization, etc. which has been forgotten for years. It is now up to the two Governments to do something.
On the basis of the 1997 Free Trade Agreement Macedonia maintains a rather balanced economic cooperation with Croatia. However, as of late many domestic producers are having problems, especially those in food-agricultural sector which are on the protection regime. They fear unfair competition because Croatian products have flooded Macedonia while the Macedonian goods hardly ever reach the Croatian market. Numerous administrative restrictions are in the way of more successful business cooperation. Before the disintegration of the common federation, the annual trade between these two countries was USD 650 million. After that it fell and in 1996 amounted to mere USD 88 million.
In the following 1997, it went up to USD 104 million and in 1998 to USD 114 million. This year this cooperation has been more than halved as a result of a severed communications because of the Kosovo war. In seven months of this year the value of trade was only USD 50 million. In this exports accounted for USD 24 million and imports for USD 26 million. The uneven distribution of annual quotas has also contributed to this deficit. There are opinions that the Agreement on Free Trade is most frequently violated in regard to quotas. Allegedly, instead of at the beginning, the quotas are distributed in the middle of the year on purpose and without any reason. By then it is already too late, for example, to market the Macedonian early vegetables. Also, permits are most frequently granted to firms without any interest in that business or those which do not want any competition. There are also firms who have used their quotas and are forced to pay high custom duties and work without any profit in order to maintain stable supply.
During recent talks in Skopje, the economists of Macedonia and Croatia have discussed all this openly. Rather unwillingly they have agreed to start a fully liberalized bilateral economic cooperation as of January 1 next year, and warned their respective Governments that it would be impossible to carry out that cooperation without an urgent meeting of all competent authorities and a solution for the removal of barriers to that cooperation. They also pointed to the newly emerged situation after the sale of the Skopje Refinery OKTA to a Greek partner whereby the Macedonian - Croatian trade in oil and oil derivatives has been disrupted.
Up till now Macedonia mostly cooperated with Slovenia and, naturally, had greatest problems with it. The deficit in this exchange always ranked first and is currently around USD 100 million. In first seven months of this year Macedonia has exported its products to Slovenia in the value of USD 18 million and at the same time imported various goods for USD 76 million. Coverage of imports by exports is only 23.7 percent. According to the present Trade Minister Nikola Gruevski, trade deficit with Slovenia is a consequence of unfavourable structure of the Macedonian economy compared to the Slovenian because at the times when they lived in one state investments in Macedonia were made only in agriculture, while Slovenia heavily invested in industry.
Consequently, today Macedonia is allocating some USD 10 million annually for the Slovenian import of medicines and is maintaining traditional links with the Slovenian managers, albeit to its own detriment. It has hard times in realizing the planned quotas in marketing its vines, tobacco, lamb's meat and other products. As Minister Gruevski has put it - old habits die hard. According to him the solution to the deficit would be to organize production in Macedonia with greater export incentives by the state, instead of importing goods from Slovenia.
All that remains to be done is explained in detail in the Export Strategy prepared and presented to the public this week by the Macedonian Academy of Arts and Sciences (MANU).
Macedonia's economic cooperation with Bosnia and Herzegovina is another story. In the framework of former SFRY these two republics exchanged between 380 and 400 million dollars worth of goods per annum. For example, in 1987 Macedonia imported good in the value of USD 130 million and exported USD 230 million. Despite this deficit, the local economic entities were satisfied with the volume and quality of this cooperation. However, the 1992 war changed everything radically. Trade exchange in both directions was rather symbolic and reached barely one million dollars. After Dayton things improved, mostly at the initiative of businessmen. Governments of the two countries have difficulties in communicating and are not willing to explain the reasons for that. Macedonians point out that they are held on "stand-by" without any reason. The B&H leadership has many times turned a deaf ear to numerous initiatives of the Macedonian Government.
Both Foreign Ministry and the Macedonian Chamber of Commerce have pointed to objective difficulties which the Bosnian state leadership is faced with and have shown great understanding for them, but also emphasize that they are beginning to lose patience. They are convinced that the signing of an agreement on free trade with this former Yugoslav republic would be in mutual interest. They have even submitted a draft document to the Sarajevo Government hoping that it would be accepted and that a long expected high-level meeting of both state officials and economic representatives would finally take place. In other words, the ball is in the Bosnian court.
In the last three to four years Macedonia and B&H exchanged goods worth USD 20 million on average. This predominantly conventional trade was based mostly on the marketing of the Macedonian tobacco, vegetables, yarn, electrical conductors and synthetic fibers in B&H and import of meat, meat products, salt, oil, basic chemicals, hot rolled sheet and wood products. According to Macedonian businessmen the distance and three B&H currencies (the German mark, convertible dinar and kuna) represent a problem. Payment is carried out by transfers and through business banks, mostly those in Zagreb and Vienna. They are hoping that everything will change for the better once the official cooperation is re-established on the basis of the Free Trade Agreement which they are all eagerly awaiting.
BRANKA NANEVSKA (AIM, Skopje)