Cyclopedia Of Economics 3rd edition
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SV: True, we did explore it in great depth. The dialogue is available (in English) on the internet at: http://samvak.tripod.com/nm059.html and deals not only with foreign investment but also with country marketing, the banking system and the capital markets. I want to make one comment, though: Macedonia is a lesson in the abject failure of its self promotion. It is virtually unknown outside a part of the Balkans. It has so many advantages that the fact that it does not attract foreign investors is amazing. It is macro-economically by far the most stable in CEE (Central and Eastern Europe), the manpower is the cheapest (if the wages are adjusted for the level of education). It is superbly located geographically (better than Slovenia), it is naturally endowed, it has reasonable infrastructure (much better than Russia's). Still, it attracted 30 million USD in FDI (Foreign Direct Investment) last year. This is a shame. It is easily marketable as a tourism country, an industrial hub, a crossroads between all parts of Europe and Asia, an island of macro-economic and geopolitical stability. True, the Kosovo crisis and before it, the Serb Wars and the conflict with Greece marred this outlook considerably and still do. But these conflicts will be over some day and Macedonia has to prepare for this day. The task is so challenging and rewarding that I would gladly promote Macedonia abroad – in international forums, banks, multinationals – for one denar a year. This would be one denar more than I am getting currently for the same work that, anyhow, I am doing voluntarily. I am doing it now not only because I fell in love with Macedonia (and I did). I am doing it because I am a great believer in the future of this country. Having lived in five other countries in CEE I am saying it openly: no place like Macedonia. I prefer it to any other country in this region. And if I do – why not other foreigners? NG: The foundation of the state's Agency for Marketing, as a means for increasing the exports, will also enhance export's ability to increase domestic production. The small domestic market and the strong pressure of foreign competition on the domestic market, in the conditions of the strong liberalization of the Macedonian economy, forces the Macedonian companies to achieve a better competitive performance of their products and to be keen to conquer new markets. The bad economic undercurrents come from the bad situation of a big number of Macedonian firms, which is a product of unutilized capacities, as a result of their inability to place their products on the market. The reasons for this are:
SV: To this I would add the bad image of the Macedonian industry. It is world notorious for its unreliability. Promises are not kept, contracts not honoured, schedules ignored, the quality of the products is shoddy. The managers are ignorant (possess no minimal knowledge of finances or marketing), ill-qualified, selected arbitrarily. There is usually no identifiable center of command and control. The whole structure of a typical Macedonian (big) firm is diffuse, "magla-fied". No foreigner wants to do business under these conditions. The placement of Macedonian products abroad is also influenced by the domestic conditions in Macedonia which prevent foreign investment (political meddling in business, no protection of property rights because of an inefficient court system and so on). The trend today is that most exports are done through multinationals, which open branch offices or factories in the country of export. Thus, for instance, the Japanese carmakers manufacture most of the cars that they sell in the USA inside the USA. Multinational food companies open branches and import food from the host country – and so do big retail chains (like Marks and Spencer, Tasco and others). So, today THERE IS NO DIFFERENCE BETWEEN EXPORTS AND FOREIGN INVESTMENTS. One is the mirror image of the other. If Intel opens a factory in the Czech Republic or a research facility in Israel – the products are then exported to the USA. EXPORTS ARE THE CHRONOLOGICAL END RESULT of the FOREIGN INVESTMENT PROCESS. Most of the exports of the Vysehrad Three (Poland, Hungary, the Czech Republic) are the products of multinationals, not of domestic firms. Most domestic firms tend to concentrate on domestic markets. Like everything else, exporting has become a global specialty, which requires expertise and experience. NG: The first problem of the three that I mentioned can be solved by the employment of managerial techniques involving better organization and the combining of resources and by the state creating a better economic environment (monetary measures, bonuses, etc.). Besides, all these problems come from not implementing marketing methods and concepts by Macedonian firms. Those, which do, are the most successful. The word marketing for many, even today, is synonymous with TV advertising. Today people don't buy shoes simply for their feet to be hot and dry anymore. They buy them because they feel manly, feminine, young, gorgeous, or sophisticated wearing this or that brand. Buying shoes becomes an exciting act. Today the shoe manufacturer's job is to sell excitement not only shoes. Cosmeticians don't sell only cosmetics, but also hope. We drink labels. From the bottle of Coca-Cola we drink the picture of a pretty girl or a boy from the TV screen or from the billboard, we drink the motto "a rest which refreshes", we drink the big American dream, and we drink less with our jaws and more with our brain. Marketing is a philosophy and a knowledge, which influence all senses. SV: "We drink less with our jaws and more with our brain". This is the best summary of what is marketing that I ever heard. I wish Macedonian managers would understand this. Marketing is a branch of mass psychology. Throwing money at advertising is not everything there is to it. NG: Every enterprise has to subject its business policy to His Majesty – the consumer. The time when you could produce a product and sell it through a strong propaganda campaign on the global market has passed a long time ago. Marketing policies, especially international marketing, demands continuous market research, and the dedication of professionals and financial resources. Most Macedonian enterprises don't have the possibilities to engage in these. Knowing that the implementation of a marketing strategy, is a fundamental of management philosophy, and that it is imperative for the success of Macedonian economic subjects - the establishment and financing of the state's marketing agency, which will serve as a service to the economy, by the Macedonian government, is a big necessity. The basic functions of the agency will be:
In the start-up period, besides domestic experts, foreign marketing experts should be made accessible to the Macedonian firms. This is in view of the absence of sufficiently experienced experts in the country. In parallel, the agency should work on the sophistication of its experts in this region. Professionalism is like a candle – from one candle a thousand others are lit, without losing its own flame… I will illustrate the need for this agency by one concrete example. The production of oil for consumption is relatively well protected. But even so, a good part of the Macedonian market is controlled by foreign producers, even though their prices are higher on average by 10%. One study showed that what deters consumers and repulses them and forms their negative position towards the producer is that the bottles are oily. Regarding the quality of the product there are no more serious claims. That is why those consumers with a higher standard decide in favour of the foreign producer. The domestic producer didn't conduct market research because probably he assumed that something like that is not needed because the oil is a basic consumer product which people have to buy and it is the cheapest on the market. By adopting the suggestion of the consumers, the manufacturer may obtain a bigger market share and from this the national economy will derive undoubted benefits. Recently data were published which demonstrated the physical growth of production. Even if we accept these data without any deeper analysis, the question regarding the financial results of the production appears, or about the feasibility of the production and of the employment of the assets. SV: It is customary to say today that the investor has gained an added measure of sophistication and choice. He will no longer be dictated to, coerced, or cajoled. He fiercely objects to brainwashing. Information is freer. In the sixties, the tobacco companies were able to hide results of studies regarding the addictive properties of tobacco. In the eighties this was no longer possible. Information is more widely distributed and through a myriad of channels. Just think what the internet has done to knowledge and the VCR – to motion pictures. It is more pluralistic and relativistic – the consumer is given several options or points of view and the decision is usually his. It is faster – the full text of Kenneth Starr's report regarding President Clinton's conduct was available within 24 hours on the internet. The whole world has been consumerized. Sex, pregnancy (through surrogate motherhood), soft drink, political candidates, books – are all products to be bought and sold. This blurs the traditional distinction between reality and fiction. Spin doctors (political marketing gurus) created the myths of Tony Blair and Boris Yeltsin. Presidents play themselves in movies (as President Clinton has done a few times). Actors become presidents. We consume, as you say, images. The second pertinent point has to do with images. A product evokes in us a host of related images, every time we consider buying it or we consume it. These images determine the objective properties of the product. This is the mistake of managers, which deride marketing and advertising. Products have no OBJECTIVE qualities – only subjective ones formed in the consumer by layer upon layer of data, memories, associations, fears, images, sound bites. The VHS standard in VCRs prevailed over the Beta standard DESPITE the fact that it was technologically inferior. MS-Windows is far inferior to the Macintosh operating system – but who is the market leader? Quality counts to a certain extent, of course. But packaging, labeling, positioning, imaging – are as important, usually more so. Macedonian products suffer both from inherent quality problems – and from a lack of set of associated images. Say Britain and we see the queen, Diana, pompous aristocrats, dry humour, an island, the Tower of London. Say Japan and we conjure up images of small, clever, yellow men toiling at making products better, more reliable and cheaper. Say Macedonia and we draw a blank. It rings no bell. This is bad – but changeable. This is one field of the economy where I welcome government intervention: marketing. Today, all over the world, politicians regard themselves as directors in a huge firm called The State. Presidents conclude export deals. Ambassadors promote trade and joint ventures. Ministers of Finance market their country. This, perhaps, is the main role of the state in the Post Cold War World. NG: Macedonian products have to attain a higher level of quality. Macedonian exporters should be stimulated to obtain a higher quality of the working organization and its products, or ISO 9001/2/3 standards of quality and ISO standard certificates for product quality. The data that only 20 Macedonian companies own this standard (and not for all processes and products, but for one, two or three of all the products which are produced by one company) says that the situation is unsatisfactory and worrying. Many Macedonian companies lose markets because of lack of ISO 9001 or 9002 certificates. In today's world of competition one of the most important things, which separates the leading companies from the rest, is quality. Even companies, which are renowned for their qualitative products or services, must work on getting better in everything they do with an aim to remain on top. This is quality management. Quality means the fulfillment of all the agreed demands, not more nor less, which satisfy the clients. But, to reach work quality it is not enough only for the company to implement an internal system of standards. In the chain of consumers, buyers, partners, distributors, etc. there must be present a certain quality of work. The European Union issued many directives, which made exporting to it extremely hard without having the above-mentioned certificates. For trading within the Union these certificates used to be only a good recommendation, but not a prerequisite for the external traders, more and more they became a condition. The quality standard ISO 9000 is also needed for export destinations in the USA and for many other countries, including even the Arab countries. This means that in the future it will be more difficult to export even to the poorer countries without having this certificate. The quality is not something, which can be guaranteed by controlling the work of others and uncovering their mistakes. The key is in preventing the mistakes, above all by securing the right finish of the work. The systems for quality control should cover everything that we do, or do not do, and which can influence the quality of the product or the service quality, which we forward to our clients. Implementation of the quality standards system represents a documented way of introducing control of the quality. ISO 9001, above all, requests management responsibility and expects it to come up with a policy for quality and to make sure that everyone in the organization understands it. Also, the managers should obtain enough financial resources and trained personnel for doing the job, to appoint a quality coordinator for the system and to check the system in real time for quality to make sure that it is still adequate and efficient. In the other 19 of a total of 20 points of the Agreement it is mentioned that the quality system should be fully documented, to satisfy the requests and expectations of the clients, etc. A review of the Agreement with the confirmation that the order is fully understandable and that we are capable to fulfill it precisely anytime is also a point in it. I will only mention, not analyze, all the other points: the control of the design (projection), control of the documents, ordering, control of the product ordered from the seller, identification of the product, control of the process, inspection and testing, control of the inspection's measurements and testing of the equipment, the situation during the inspection and testing, control of defective products, corrective and preventive measures, operations, warehousing, packing, storing and delivering, control of quality reports, internal quality check-ups, training, service and statistical techniques. To achieve such work and organizational standards, the company needs to employ specialists, whose job it is to prepare the companies to receive a certificate from an independent and juridical body of certification, which, on the other hand, will confirm that the company operates according to the world standard. In the Macedonian Chamber of Commerce there is a register of specialists, which are trained, noted and recommended by the very well known English house Bywater, which has provided the training and comments through the exactly defined standards. This will provide a certain preparation for the time when the representative of the one of the many companies, which issue this kind of licenses, will try to find errors in the system and abstain from granting the license (the money, which is paid in advance, is lost, in such a case). Well known world institutions, which grant ISO 9000 certificates are: BSI – England, Lloyds – England, Bureau Veritas, OQS – Austria, TUF – Germany and others. A big problem is that the preparation and the check-ups needed in order to receive the above mentioned certificate, require an investment of between 8.000 and 25.000 DM (depending on how big the company is) with a validity of three years. Within this price are not included the costs, which the company will, probably, have to commit to for an increase in the level of technical equipment (computers and so on), and are a variable depending on the firm's developmental level. It is important to mention that the company, which issues the certificate, makes regular inspections of the company, which receives the certificate, and if it discovers a breach of the agreement, it has, according to the Agreement, the right immediately to revoke the license without reimbursing the expenses that the company incurred. Besides the quality standards of the working-organization, there are ISO certificates attesting to the quality of certain products, which is also very important for penetrating and surviving in the world's markets. There are even higher standards for quality than ISO 9000, such as TQM (Total Quality Management), which I noticed during my visit to the Toyota factory in Japan. But it seems that RM is in too premature a stage for such type of certificate (TQM).
We discussed earlier the way to stimulate producers in RM - tax stimulation, bonuses and in certain cases tax holidays for limited periods of time, providing advantages for using credit financing (stimulation both of the users and of the banks). For a start, the state can cover the basic costs for obtaining quality certificates to the 20 to 40 most strategic Macedonian companies, elected according to predetermined criteria for qualifying. With this the process of economic reconstruction in the export sector will be much quicker. This represents the state's investment, which will be returned very soon, through increased exports (and production), increased inflows of foreign currency and finally bigger income to the budget from the companies, which will increase their production and their exports. I am convinced that if RM will ask for it, it will receive non-returnable help from some foreign funds for this purpose, with a big part of the financial resources obtained on this basis. If RM plans to become a member of the EU and to increase the trade exchanges with it, it has to achieve higher standards of operations and production. This means that, basically, this should be a concern of the producers and the managers of the national economy have to find the way to speed up this process. SV: Quality plays a dual role in the advanced and developed economies of the West. True, it is intended to guarantee some kind of uniformity and predictability, which make the consumer's life easier. He knows what to expect when he buys a product. Uniform quality standards also facilitate economic activity because the amount of information, which has to be exchanged is reduced dramatically and disputes are more easily solvable. When the two parties agree – through the medium of the quality standard – what should be the minutest and precise characteristics of a product or a service, there is an ever smaller room for misunderstandings and arguments. But there is an uglier side to "quality standards". This is the side of protectionism. Countries use quality, health, environmental and other standards to protect domestic producers from foreign competition. Shielding them from competition is costly because it is economically inefficient. It is always better to buy cheaper imports than to manufacture the same products locally and expensively (the relative advantage theorem). But it is politically popular because it saves jobs and makes some people richer. Crazy health, safety and environmental regulations mix with unearthly and outlandish demands for purity and performance to protect rich countries from their poorer brethren. It is virtually impossible to sell agricultural produce or textiles to the EU or textiles to the USA – unless the exports are regulated in special agreements and treaties. It is totally impossible to export to Japan and very difficult to export to China. But the same produce (wine, meat) or textiles – refused under the quality or health pretext when it emanates from Macedonia - are often sold in the very same markets under Italian or German or South East Asian labels. This only serves to expose the amount of hypocrisy with which quality standards are applied in order to block free trade. To this there is only a political solution and small countries are too insignificant to influence market giants like the EU. But they can and should operate through the mechanism of the WTO and the various international commercial arbitration courts available even to small countries. The advantage of puny trade players like Macedonia is that their nuisance value is higher than the potential damage that their negligible produce can inflict if given free access to the target markets. In most cases, they will be given exemptions and preferred treatment on condition that they do not rock the boat of international trade. Shut up and export as much as you like – is the warning-cum-promise. Macedonia should take advantage of its nuisance value. NG: Every company, which has attention to enter or to invest in another market, has a need for reliable data on which it will base its decisions and plans. It needs to know the potential market's volume, the preferences and principles of the buyers, the characteristics of the distribution channels, the competition. As the more sophisticated companies reach the decision to invest or to act in the markets of undeveloped countries (such as the countries in transition) they need more detailed and reliable data without incurring big expenses. Also, the local investors have such needs, and it is very important for the small and medium enterprises, most of which are oriented towards the domestic market. That's why I think that RM needs a database for each economic field. The data will be detailed, efficiently processed and presented through the internet, in publications, bulletins and at the request of the clients. Similar databases exist in the Chamber of Commerce of RM (an information center) and in the Bureau of Statistics, but I think that they are not sufficiently analytical, and are inadequate for certain types of market research and not sufficiently available to the wider circle of users. Such a database can be managed within the Agency for Marketing and it can be under the same budget. Its data will be on disposal free of charge to every economic entity and to any other interested party. Even though, in the beginning, the interest in using these data will be low, because of the low level of investment activity and the wide rejection of the concept of marketing in the enterprises, it will start very fast to play a big role in the improvement of work of the economic entities and in their development, as in that of the whole economy. Beside the export-oriented policies, great care to secure the substitution of imported goods is needed, in order to prevent the outflow of foreign exchange, through the provision of cheaper credits, tax holidays (especially for higher quality goods), projects from the governmental agencies and eventually through duty protection. According to the Bureau of Statistics the structure of imports in RM, classified by economic use, is as follows: materials for re-processing constituted 57.6% of the total imports in 1995. In 1996 – 55.6% and in 1997 – 61.4%, which still has to increase. Imported machine tools constituted 4.2% of the import structure in 1995. In 1996 – 3.3% and in 1997 – 2.9%. The situation with imported consumer goods is not good: in 1995 – 37%, in 1996 – 47.1% and in 1997 – 44.7%. It is remarkable that consumer goods represented almost one half of the total imports to RM. It is known who drinks and who pays, but can it be known until when? Within the Macedonian imports, the highest part belongs to oil and oil derivatives, because of the absence of gas, as cheaper energy sources and the dependence of RM on energy imports. But it is interesting that in the second place, according to the amount of foreign currency spent, is the import of cars. Car imports comes second in the structure of Macedonian imports and this implies that the state should increase the cost of purchasing cars, which, on the other hand, is against the improvement of the environment and the renewal of the fleet of vehicles in RM, which still is on a very low level. The arguments for and against this measure are strong and they can be a subject for a separate discussion. I think that the policies of the state should also be directed at limiting the imports, but by more sensitive measures and at the same time more useful, for instance, by determining high standards for the quality of the imported products. The quality standards should be determined in advance and be compatible with the EU standards. This policy would be implemented especially regarding the import of agricultural products and consumer goods. Download 5.66 Mb. Share with your friends:
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