World Bank supports FYR Macedonia in strengthening its competitiveness

March 13, 2014

WASHINGTON, March 13, 2014 — The World Bank’s Board of Executive Directors today approved the Second Programmatic Competitiveness Development Policy Loan (DPL2) of EUR 36.4 million (US$50 million equivalent) for FYR Macedonia. This operation aims to strengthen the competitiveness of FYR Macedonia’s economy by supporting investment and upgrading technology in the manufacturing, agribusiness, and trade logistics sectors, and creating the conditions to increase labor market flexibility and innovation capacity.

"Improving competitiveness and the conditions for local businesses to thrive is necessary in order to put FYR Macedonia on a sustainable growth path, create more and better jobs, and promote shared prosperity,” says Tatiana Proskuryakova, World Bank Country Manager for FYR Macedonia.

Building on the results of the First Programmatic Competitiveness DPL of 2012, the reforms under DPL2 will stimulate investment and innovation in key export-oriented sectors that have the potential to boost long-term growth and job creation in an increasingly competitive global economy.

The actions taken under the DPL2 will increase the sustainability and impact of the government’s Technological Industrial Development Zones (TIDZ) program – an important tool to attract foreign investment in value-adding and export-oriented manufacturing.

In addition, new exporter support programs are helping to advance the upgrading of industries with high export potential. In the agribusiness sector, the launch of a program for the sale of state-owned agricultural land will lead to a better use of land resources, higher productivity, and market entry by new foreign and domestic firms. In the area of trade logistics, comprehensive improvements in the risk-based approach to customs controls and technical inspections in line with EU best practices will improve the efficiency of the controls on the trade of goods.

In parallel to these sector-specific policies, legal reforms were introduced to facilitate seasonal employment and to allow part-time workers to stay on social assistance registry, which will improve the incentives for formal work and address rigidities in labor market regulations.

And finally, a “Fund for Innovation and Technological Development” is being established to nurture private sector innovation through matching grants and other financial instruments.

Raising long-term economic growth requires that the government tackle binding structural constraints in major economic sectors,” says John Gabriel Goddard, Senior Economistin the World Bank’s Finance and Private Sector Development Department in the Europe and Central Asia (ECA) region and Team Leader of the Project.“Future growth in export-oriented manufacturing will depend on attracting investment in high value-added segments and faster integration into global supply chains.The reforms that have been introduced under the DPL2 will further this objective. The reforms also facilitate restructuring of the agribusiness sector, improve the efficiency of trade logistics, and foster labor market flexibility and innovation capacity.”

Reform implementation under the DPL2 will benefit from technical assistance provided by a three-year “Competitive Industries and Innovation Support Program” in Macedonia, which is supported by a US$1.6 million grant from a Multi-donor Trust Fund funded by the Governments of Austria, Switzerland, and the European Commission.

In view of the upcoming presidential and parliamentary elections in FYR Macedonia, it has been agreed with the Government that the Loan Agreement will be signed and the proceeds of the loan will be disbursed after the completion of the electoral process in the country. 

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