Over the last 20 years, assistance from the World Bank Group has helped the country transition to a market economy while simultaneously building effective institutions, improving education, increasing social protection, and building and rehabilitating transport and energy infrastructure. In addition to lending, FYR Macedonia has also benefited from the World Bank Group’s Analytical Advisory Activities (AAA) - which have, inter alia, included a Green Growth assessment to help the government mainstream sustainable development and climate change issues into its planning and design, and a review of public expenditure in agriculture and labor markets.
Some areas of World Bank engagement in FYR Macedonia include:
Social Protection and Labor: The connection between the poverty and education level has a long history. While FYR Macedonia has demonstrated solid economic growth, poverty has not decreased significantly since 2002, and remains to be a major development challenge for the country. Different studies have shown that poverty is driven by unemployment, and directly related to low education. The Government recognized the need to act fast and carefully target the root of the problem, by increasing the access to education and breaking the poverty cycle. With the World Bank assistance, the Conditional Cash Transfer Project was designed and is being implemented since 2009. The Program provides EUR 200 annually to families that receive social financial assistance and have children who regularly attend secondary schools. Through this project, in the school year 2014–15, approximately 7,200 children from poor families regularly attended secondary schools due to the CCT benefit.
Improving the country’s labor market performance and economic competitiveness requires a more skilled and better educated labor force, as well as increased technology absorption and diffusion of knowledge and innovation.
The Skills Development and Innovation Support Project ($24 million), whose objective is to improve higher education resource allocation transparency, as well as promote accountability, enhance the relevance of secondary technical vocational education, and support innovation capacity in FYR Macedonia is being implemented since 2014.
Trade and Competitiveness: In the past several years FYR Macedonia has made significant progress in improving the business climate beyond the "first generation” of reforms often related to the scope of measurement of the Doing Business (DB) Report. Going beyond this type of reforms and aiming to help improve FYR Macedonia’s competitiveness, a series of two World Bank-financed Programmatic Competitiveness Development Policy Operations (DPOs) during 2012-14 and totaling USD 100 million in Bank funding supported the country’s competitiveness agenda by strengthening policies and institutions aimed at: (1) attracting FDI and developing high value-added manufacturing; (2) facilitating restructuring of the agribusiness sector; (3) improving trade logistics and (4) fostering a more dynamic labor market and strengthening skills and innovation capacity.
For instance, the DPO series supported the adoption of the Export Promotion Strategy and exporter support programs with high potential impact, and the management and governance of the special economic zones, the centerpiece of the government’s FDI promotion efforts. As a result of the FDI attraction strategy and export promotion efforts, merchandize exports increased by 11% from 2011 to 2014 [UNCOMTRADE]. This achievement is remarkable when taken against the background of decline in global prices for FYR Macedonia’s traditional exports – metals and minerals, which comprised 31% of Macedonia’s export basket in 20115, as well as weak economic recovery in Europe.
The reforms supported under the DPO series included enactment of the Law on Innovation Activity and establishment of the Fund for Innovation and Technological Development (FITD which has launched financing instruments in support of entrepreneurship, innovation commercialization and in-house business innovation at the pre-commercial and growth stages.
Complementing the Programmatic Competitiveness DPO series, the FYR Macedonia Competitive Industries and Innovation Support Program (MCIISP), a three-year US $1.6 million grant from the Competitive Industries and Innovation Program Multi-Donor Trust Fund, provides technical assistance in developing supplier capabilities among domestic small and medium size enterprises for their integration in the supply chains with large foreign companies operating in FYR Macedonia. MCIISP provided knowledge and technical assistance which improved the capacity of the national authorities and the regulatory and operating environment for administration of state owned agricultural land and for introduction of a risk-based approach to the technical inspections involved in trade of goods across borders.
MCIISP provides analytical services and technical assistance in the tourism sector, addressing the the binding constraints and opportunities to improve sector competitiveness. This engagement has resulted in the identification of a new four-year investment operation (the Local and Regional Competitiveness Project) with a focus on tourism, which will be funded with a EUR 18 million grant from the EU. The project aims to increase the contribution of tourism to local economic development and shared prosperity by improving the enabling environment and critical infrastructure for tourism development at the destination, cluster, and circuit levels.
Transport: .Investments in transport infrastructure are crucial for FYR Macedonia’s competitiveness and growth The landlocked country needs investment in transport infrastructure to ensure connection to regional markets, and to become a more attractive destination for investors. Better roads are also crucial for local competitiveness and development of tourism.” Since its independence, the main challenges facing the government have been to reduce the economic distance to markets and costs of transportation arising from the poor condition of the transport network and lessen delays at key border crossing points. The World Bank Group is helping FYR Macedonia address these challenges by focusing on improvements of road and rail facilities and simplify the movement of traffic through key border crossings. Part of these efforts have been through the Regional and Local Roads Program Support Project, which has helped rehabilitate and upgrade 284km of regional roads and over 400 km of local roads, including rehabilitation of landslide –prone sections of selected roads, , improve design of future roads to be more resilient to the expected impacts of climate change, and boost road safety throughout the country.