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WORLD BANK DISCUSSES NEW STRATEGY OF ASSISTANCE FOR MACEDONIA
Contacts: Denis Boskovski 389 2 31 17 159 dboskovski@worldbank.org
WASHINGTON, September 9, 2003 -- The World Bank's Board of Executive Directors today discussed a new Country Assistance Strategy (CAS) for Macedonia. The CAS is a document that details the Bank's work plan to assist client countries in achieving their development goals. It describes all of the Bank's planned operations in the country--lending, analytical work, and technical assistance. The new CAS for Macedonia covers the period 2003-2006 and envisages a lending program of up to $165 million.
Despite the recent crises, which included the 1999 Kosovo crisis, and the 2001 conflict that hindered development, some progress has been made on the economic reform agenda. This includes improvements in the health of the financial sector, and, to some extent, the management of
public resources. Key economic challenges will be to further improve public sector management, particularly to improve the transparency andefficiency of public expenditure and to professionalize the civil service. Efforts to improve the investment climate to attract increased foreign and domestic investment will also be critical to long-term growth.
The objectives for Bank assistance in the new CAS are:
- To promote the efficient management of public resources, tackle corruption, and support the decentralization process. Although the fiscal deficit has been kept more or less under control, even during the conflict of 2001, the quality of fiscal adjustment has been low. Further civil service reform is needed to improve incentives and control the wage bill. Planning and implementing decentralization on a schedule that can meet political expectations will provide further challenges.
- To promote the creation of jobs through private sector driven growth. Modest growth since independence and relatively low levels of foreign direct investment suggest that the business environment needs significant improvement. Key to investors' assessment of the Macedonian market consists of the probability of ongoing political stability; the impact of corruption (and government intervention more broadly) on private ventures; and the ability of the judicial system to enforce property rights. Also important are a flexible labor market, sufficient provision of infrastructure services, a functioning land market, and appropriate tax and regulation policies. Since Small and Medium Enterprises (SME) have proven to be the main source of new jobs in transition economies, disincentives to their growth and formalization in Macedonia are particularly handicapping to future growth. Improvements to the performance of agriculture and the rural economy, in particular, will also be key to reduce poverty and accelerate export growth.
- To build human capital and protect the most vulnerable. Long-term poverty reduction requires improvements in human capital, particularly for the poorest households, so that they can earn a wage sufficient to pull themselves above the poverty line. High quality education, especially at primary levels, and especially for the poorest children, must be a main goal of social policy. At the same time, an affordable and targeted safety net needs to be in place. The balance between work incentive and protection of the vulnerable in the design of the safety net must be carefully assessed.
The previous CAS for Macedonia covered the period 1998-2001. In the framework of this strategy, the Bank assisted the Government to implement reforms in education, private sector development and health sector restructuring, as well as improvements in agriculture, transport and energy sector, to mention just a few. These projects have already yielded some positive results. One of the best examples is the decrease in mortality among newborns by 36 percent for 25,000 infants born annually. This means that 108 babies are saved each year. A 28 percent decrease in stillbirths saved another 168 babies in 2000-2001. The statistics are based on careful data collection from 16 hospitals where more than 93 percent of births in Macedonia occur.
CAS strategy has been formulated in line with the priorities of the Government of Macedonia. These priorities have been defined in consultation with the Government of Macedonia as well as through consultations with broader segments of society in Macedonia. Civil society consultations, led by the Institute for Sociological, Political and Juridical Research sought feedback of civil society participants, representatives of various organizations and unions, think tanks, academia and ordinary citizens towards the proposed Bank assessment of the country's economic problems, and the ways they should be addressed, including the role of the World Bank. Such discussions helped compare the Bank's position to the vision of the population in Macedonia, determine the accuracy of the Bank's views, and adjust the Strategy in line with the needs of the people.
"Macedonia now has the opportunity to embark on a path of more rapid economic growth and poverty alleviation that will improve the quality of life of its people," says Orsalia Kalantzopoulos, World Bank Country Director for Macedonia. "This new strategy is a significant expression of the World Bank's confidence in the country's economic progress and we are very pleased to be able to offer this support at such a crucial time."
More information on the Country Assistance Strategy and the consultation process can be found on the web site of the Word Bank Country Office in Skopje: www.worldbank.org.mk