FYR Macedonia is a candidate for European Union membership since December 15, 2005, when the European Council decided to grant candidate status to the country in recognition of its achievements in the reform process. The decision was taken on the basis of the positive Opinion of the European Commission on the application of fYR Macedonia for EU membership, released on November 9, 2005. Opening of accession negotiations will be subject to the country’s further progress in meeting the membership criteria, as set by the Copenhagen European Council of 1993 (Copenhagen criteria):
stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;
the existence of a functioning market economy, as well as the capacity to cope with competitive pressure and market forces within the Union;
the ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union.
The Union’s capacity to absorb new members, while maintaining the momentum of European integration, is also an important consideration in the general interest of both the Union and the candidate countries.
As part of the Enlargement process and the Stabilization and Association process with the countries of the Western Balkans, the European Commission prepares, and the Council approves, European Partnerships with candidates and prospective candidates for EU membership. The latest European Partnership with fYR Macedonia was proposed by the European Commission on November 9, 2005 and approved by the Council in January 2006. The document identifies priorities which the country needs to address in preparing for the opening of EU membership negotiations.
The European Partnership is meant to help fYR Macedonia’s government to concentrate reform efforts and available resources where they are most needed (in the short to medium-term).
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EC PRIORITIES
(as per COUNCIL DECISION on the Principles, Priorities and Conditions Contained in the European Partnership with fYR Macedonia,
SEC(2005) 1425}, presented by the Commission)
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WORLD BANK AGENDA
To assist FYR Macedonia
in the EU Integration Process
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Medium-Term Priorities (to be accomplished within 3 to 4 years)
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POLITICAL CRITERIA
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DEMOCRACY AND THE RULE OF LAW
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Public administration
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Further develop the capacity of the administration to implement the Stabilization and Association Agreement.
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The overall assistance program of the World Bank, as well as the way Bank projects are developed, involve all interested stakeholders, including the civil society (NGOs, academia, media, etc.) starting from the earliest phases of the project identification all through the supervision of the implementation and closing of the projects. The Bank undertakes consultations in the preparation of strategies and programs, in order to gauge the views of all stakeholders on possible avenues of assistance.
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Further promote the active participation of civil society, including the social partners, in decision-making processes.
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Judicial system
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Complete the implementation of the Strategy and Action Plan on Judicial Reform. Ensure the independence and efficiency of the judiciary.
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Ongoing lending:
In conjunction with the PDPL Program, the Legal and Judicial Implementation and Institutional Support Project (LJIIS), (FY06) will strengthen the capacity of key institutions to implement selected reforms under the Judicial Reform Strategy.
The objective of the LJIIS Project is to contribute to improving judicial efficiency and effectiveness and the business climate in fYR Macedonia by: (i) enhancing ministerial and judicial capacity to systemically implement the Government’s Judicial Reform Strategy and key laws; and (ii) improving judicial infrastructure. By strengthening the capacity of key institutions in the justice system, the Project will support the implementation of the proposed Law on the Judicial Council, the new Bankruptcy Law and the new legal framework for administrative disputes. The Project will support the implementation of the new Law on Courts by supporting the construction and rehabilitation of courthouses in fYR Macedonia. The Project will also help to strengthen the supply and analysis of statistical and other information for the management and functioning of the justice system.
Planned lending:
Given the long term nature of addressing these issues, a follow-on of this project is proposed in FY10. The scope and objectives of this operation will be determined in due course.
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Reach tangible results in improving the functioning of the judiciary, increasing the rate of execution of civil cases.
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Further develop the Training Academy for judges and prosecutors
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Further develop the capacity of the judicial system to deal with organized and economic crime.
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Provide adequate equipment and IT support to courts.
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Anti corruption policy
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Further implement the strategy for the fight against corruption and enhance awareness-raising initiatives in the administration and among the public at large. Ensure the effective implementation of measures and legislation adopted to fight corruption.
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Planned lending:
Through the DPL program and selected sector work (programmatic PERs and poverty assessments, as well as the CFA (FY07)), the Bank will continue to support the efficient and transparent use of public resources. Furthermore specific attention will be given to improve governance aspects in all sector interventions included in the strategy. For the CPS 2007-2010, the WBG will support building of quality institutional capacity to improve the transparency and regulatory capacity of governmental structures in all areas included in the strategy.
The WBG will support fYR Macedonia in its efforts to (i) continue reducing the legal uncertainty and lack of confidence in the judicial system; (ii) apply proper public finance principles and governance standards at the municipal level, including to municipal public enterprises and utility companies; (iii) continue improving the use of public resources and performance monitoring in the provision of affordable and quality health services; and (iv) develop more targeted cash transfer systems and introduce incentives to encourage school enrollment and preventive health.
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Develop a methodology and operate a system for collecting and sharing intelligence and for mutual access to databases.
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Ohrid Framework Agreement
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Complete the decentralization process and further implement the strategy on equitable representation of minorities in the public administration and public enterprises.
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The Bank is not directly involved in the strategy on equitable representation of minorities in the public administration and public enterprises. However, a number of ongoing and planned Bank operations are facilitating the decentralization process:
Ongoing AAA:
The World Bank’s Municipal Development Note (FY07) looks at municipal financial management, provision of communal services, urban planning and management of urban land use.
Ongoing lending:
The decentralization process is assisted through the PDPLs (FY06-09)as well as through the Education Modernization Project (FY04-FY10), which seeks to establish sustainable institutional arrangements and capacities at central and local levels to run the education system effectively and efficiently.
Planned lending:
The proposed Urban Development project (FY09) aims to support fYR Macedonia by addressing needed improvements in the performance of urban economies and the quality of urban governance, through components addressing sustainable municipal financing, municipal service delivery, urban planning and/or land management.
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HUMAN RIGHTS AND THE PROTECTION OF MINORITIES
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Further promote respect for human rights by law enforcement bodies and in detention centers and prisons.
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No immediate World Bank engagement.
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ECONOMIC CRITERIA
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Further improve the business environment. In particular, complete the registration of all land and real estate as well as the related strengthening of the cadastre. Ensure the enforcement of creditors’ rights within a transparent legal framework. Further improve conditions for investors.
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The WBG will support the governments’ ambitious goals on accelerated growth and job creation through an integrated and multi faceted program. This will encompass both the demand for and the supply of labor in fYR Macedonia. Under this pillar, the WBG will aim to
maintain macro economic stability, while ensuring proper integration of EU priorities into the budget - PDPL3, PER;
strengthen the investment climate, including regulatory reform and proper enforcement of contract and creditor rights - PDPL, BERIS, LJIIS, IFC, MIGA);
reduce the costs of capital - FSAP Update, PDPLs, REPARIS, IFC, MIGA);
improve enterprise sector’s competitiveness - PDPLs, Competitiveness/Technological Change/Higher Education project (FY08),
improve agricultural competitiveness - Agricultural and Rural Development Cohesion project (FY07), Transport project (FY09);
establish a functioning land market and institutions - RECRP, Urban Development project (FY09), Land Management 2 project (FY10);
invest selectively in energy and transport infrastructure for growth - Railways Reform project (FY05), ECSEE APL3 (FY06), GEF Sustainable Energy project (FY07), National Energy Strategy (FY08), Energy Project (FY09) TTFSE II (FY07), Transport project (FY09);
remove rigidities in labor market regulations and reduce the labor tax wedge - PDPLs, CEM (FY08);
develop a productive and appropriately skilled labor force Education Modernization Project (FY04), Competitiveness/Technological Change/Tertiary Education project (FY08)
MIGA will be available to provide political risk guarantees and will consider supporting investments in the manufacturing, agribusiness and services sectors and will explore opportunities to use its Small Investment Program (SIP) to help promote small business development.
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Improve the quality of governance while maintaining sound public finances.
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Take steps to integrate the informal sector into the formal economy, particularly in order to fully include employed persons into the social security system and to eliminate unfair competition from unregistered companies.
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Promote structural change and the diversification of economic activities, with a view to better realising the country’s comparative advantages.
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Pursue regional economic integration. Modernise transport and communication infrastructure. Extend the country’s trade integration with the region.
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Decrease the relatively high share of unproductive expenditure while increasing funding for education, infrastructure and research and development.
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Modernize the educational system. Align the quality of the educational system with European standards. Modernize the curricula of secondary and university education. Step up efforts to create a modern vocational education and training system.
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Increase administrative capacity with respect to tax collection and expenditure control. Increase internal control and audit standards.
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ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP
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Free movement of goods
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Speed up efforts to become a full member of CEN and CENELEC and of the European Telecommunications Standards Institute (ETSI). Guarantee an appropriate staffing level at the Institute for Standardisation.
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Ongoing lending:
Business Environment Reform and Institutional Strengthening project (BERIS), (FY05-FY10) will help to modernize the national metrology infrastructure; strengthen the capacity of MSTQ institutions to carry out their mandate in EU oriented environment; increase business sector awareness of the challenges and opportunities of competing in the EU market; and assist in drafting a development strategy, including reviewing the institutional and legislative framework, to bring the country closer to EU requirements.
In conjunction with the PDPL Program (FY06-09), BERIS will assist the country to strengthen its capacity to implement an EU compliant competition policy regime by (i) strengthening the capacity of the CPC and the State Aid unit and its commissioners to implement a competition policy regime in line with acquis communautaire; (ii) strengthening the capacity of the Ministry of economy to design and implement industrial policy measures in line with EU requirements; (iii) increasing the public awareness of competition policy issues, including the functioning of state aid among relevant stakeholders; and (iv) providing training for relevant stakeholders in competition policy, the competition law and state aid regime.
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Strengthen the administrative capacity needed for effective market surveillance.
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Introduce mutual recognition clauses into the legislation.
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Freedom of movement for workers
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Develop sufficient administrative capacity to implement the Community rules on the co-ordination of social security schemes.
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No immediate World Bank engagement.
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Right of establishment and freedom to provide services
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Adopt legislation for the recognition of foreign professional qualifications and create administrative structures and procedures for this purpose.
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No immediate World Bank engagement.
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Adopt a postal policy based on the Postal Directives, including the establishment of an independent national regulatory authority in the field of postal services
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Company law
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Ensure high standards in the audit profession.
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Ongoing TA:
REPARIS aims to train senior civil servants, financial sector regulators and accounting and auditing bodies in emerging issues and new trends in both EU and global requirements impacting on the regulation of accounting and auditing in participating countries.
Ongoing lending:
Within the PDPL Program (FY06-09), the Bank assists the government in the adoption of a modern regulatory and institutional framework for the Audit profession. PDPL 1 (FY06) supported the adoption of the new Audit law, while PDPL 2 will support the establishment of the Institute of Certified Auditors. Further revisions to the Audit Law may be needed to align it with EU requirements.
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Competition
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Further improve the enforcement record in the areas of anti-trust and State aid control.
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Ongoing AAA:
Business Environment Reform and Institutional Strengthening project (BERIS), (FY05-FY10) will assist fYR Macedonia to strengthen its capacity to implement an EU compliant competition policy regime by (i) strengthening the capacity of the CPC and the State Aid unit and its commissioners to implement a competition policy regime in line with acquis communautaire; (ii) strengthening the capacity of the Ministry of economy to design and implement industrial policy measures in line with EU requirements; (iii) increasing the public awareness of competition policy issues, including the functioning of state aid among relevant stakeholders; and (iv) providing training for relevant stakeholders in competition policy, the competition law and state aid regime.
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Information society and media
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Transpose and implement the EU framework for the information society and media.
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No immediate World Bank engagement.
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Adopt legislation on electronic commerce and conditional access services.
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Continue the process of alignment with the European Convention on Transfrontier Television and the Television without Frontiers Directive.
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Further strengthen the administrative capacity of the regulatory authorities.
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Agriculture and rural development
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Develop an overall strategy on rural development.
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Ongoing AAA:
Agriculture and EU Accession: Achieving fYR Macedonia’s Agricultural Potential (FY07)
Ongoing lending:
The ongoing Real Estate Cadastre and Registration Project indirectly helps develop rural real estate markets by improving access to information and reducing transaction times. In coordination with the Agriculture and Rural Development Cohesion Project, an agriculture land management policy will be developed. The ongoing BERIS project strengthens the capacity of the Government to improve selected areas of the business environment in an EU-oriented context.
Planned lending:
The planned Agriculture and Rural Development Cohesion Project (FY07) will aim to improve the delivery of government assistance to the agriculture sector in a manner consistent with the European Union’s pre-accession requirements. Key outcome indicators would be: (a) improved MAFWE ability to disburse and track the use of rural development funds and to evaluate their impact on the agri-food sector; (b) EU IPARD funds are paid to farmers in an EU compliant manner; (c) timely delivery of EU compliant food safety certification to producers and agro-processors; (d) beneficiary participation in irrigation schemes; and (e) physical improvement of the water infrastructure for agriculture in project areas.
Transport (feeder roads) (FY09) project will result in key public infrastructure investments that reduce transportation costs and thus improve the supply chain and farmer and processor competitiveness.
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Upgrade the capacity of the agricultural administration and complete preparations for the enforcement and practical application of the management mechanisms of the Common Agricultural Policy, in particular the Integrated Administration and Control System (IACS) and the Paying Agency. Ensure a functioning Land Parcel Identification System (LPIS).
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Set up the vineyard register and make it operational.
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Further align the legislation with the acquis regarding transmissible spongiform encephalopathies (TSE) and animal by-products, implement and control its enforcement and set up the necessary collection and treatment system.
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Establish a properly staffed plant health authority and provide appropriate laboratory capacity to the phytosanitary services. Further align the phytosanitary legislation with the acquis.
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Transport policy
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Continue work towards complete alignment with the acquis in the area of road transport. Continue alignment with the railway acquis (first and second railway packages and interoperability).
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Planned AAA:
A Transport sector study (FY08) will inform the preparation of a National Transport Strategy. The study and the Strategy will then be seen as foundation for possible future work of the Bank in the sector (Roads Project). Regional Railways Study is currently underway that may inform a regional railway lending program.
Ongoing lending:
Railways Reform Project (FY06-FY10) – aims at improving the financial viability, productivity, and effectiveness of railway operations, through labor rationalization, separation of infrastructure from operations, increasing accountability for performance of the separated entities, licensing independent operators, introducing competition in rail operations, and restructuring and rationalization of passenger services. The project contributes to closing the gap between the current situation and prescriptions under the acquis (first and second railway packages and interoperability).
Planned lending:
The TTFSE II (FY07), which will aim at enhancing regional trade and transport in Southeast Europe through optimizing the use of the Core Regional Transport Network, will be implemented in coordination with the work of the South East Europe Transport Observatory (SEETO), established with the MoU.
Transport sector project (feeder roads), planned for FY09 will focus on providing better access from the farms/local markets to the main transport corridors.
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Further implement the Memorandum of Understanding on the South East Europe Core Regional Transport Network.
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Energy
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Continue the implementation of the requirements of the Energy Community Treaty.
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Planned AAA:
Assistance to the government in designing a comprehensive National Energy Strategy (FY08) that would determine the long-term energy needs of the country and actions necessary to achieve them.
Ongoing lending:
The ECSEE APL3-fYR Macedonia Project (FY06) assists fYR Macedonia in preparing to participate effectively in the Energy Community of South East Europe (ECSEE).
Planned lending:
The Sustainable Energy GEF Project (FY07) seeks to assist fYR Macedonia in developing indigenous (renewable) energy sources and improve energy efficiency by helping create an enabling framework, institutional capacity, and necessary financing mechanisms for increased investment in renewable energy sources and energy efficiency.
A planned Energy Project (FY09) will provide investment support for high-priority energy infrastructure project(s) aimed at improving the efficiency of existing assets and meeting the growth in energy demand. Such energy infrastructure project(s) could include rehabilitating and expanding existing hydro-electric generation plants, development of regionally high-priority electricity transmission interconnections, or investments in gas supply infrastructure.
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Work towards alignment with the acquis concerning nuclear energy and strengthen administrative capacity in the sector.
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Taxation
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Fully align tax legislation with the acquis, including new legislation (for example the Energy Directive).
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IMF is providing a TA for harmonization of the basis for calculating payroll contributions, administration of taxes (setting up of large tax payers office).
No immediate World Bank engagement.
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Continue the reform of the tax administration and ensure its proper functioning.
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Continue preparations to ensure interconnectivity with EU computerised systems.
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Improve transparency and the exchange of information with EU Member States in order to facilitate the enforcement of measures preventing the avoidance or evasion of taxes. In this context, the exchange of information with EU Member States could be based on the OECD model agreement to exchange information.
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Statistics
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Define statistical regions that are compatible with the NUTS and launch the production of regional statistics.
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Under the successive Poverty Assessment reports, the Bank works with the State Statistics Office (SSO) to increase its capacity for policy evaluation, improving its social and living standards statistics reporting practices and satisfy the social indicators reporting requirements of Eurostat.
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Create a farm register on the basis of the agricultural census and address remaining gaps in agricultural statistics.
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Further develop macro-economic statistics and social statistics.
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Develop reliable business statistics based on the statistical business register and the business census.
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Social policy and employment
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Continue alignment with EU legislation in the fields of occupational health and safety, labour law and anti-discrimination, and strengthen the corresponding administrative structures.
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Planned AAA/studies:
The next Poverty Assessment report will focus on Labor Market developments which can provide input to the Employment Strategy.
A Social Inclusion Assessment (FY09), will identify the main challenges fYR Macedonia faces in tackling poverty and social exclusion. The Social Inclusion Assessment will inform the preparation of a Joint Inclusion Memorandum (JIM). (As a candidate for EU membership, fYR Macedonia will be asked to prepare at the next stages of the EU integration process.)
Ongoing lending:
The PDPL Program (FY06-09): forthcoming PDPL operations may consider assisting the government in strengthening the capacity of the labor inspectorate.
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Reinforce the Labour Inspectorate in terms of staff and equipment and enable it to apply effective and dissuasive sanctions.
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Develop and implement a comprehensive employment strategy involving all relevant stakeholders with a view to subsequent participation in the European Employment Strategy, matched by appropriate capacity-building for analysis, implementation and assessment.
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Enterprise and industrial policy
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Define and implement an industrial strategy conducive to growth and innovation.
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Planned AAA:
In FY08, an update of the 2003 Financial Sector Assessment Program (FSAP) will assess progress made towards the completion of the financial sector reform agenda and inform the design of the new series of PDPLs to address remaining constraints to financial sector development.
Planned lending:
PDPLs are expected to continue to support policy measures associated with financial sector development, and strengthening the governance of financial institutions, including the insurance sector.
Ongoing TA:
REPARIS program and a TF funded by the Dutch and Austrian governments, the Bank will continue to support the implementation of the country action plan on corporate financial reporting that will align country’s regulatory with international standards and the relevant portions of the EU acquis communautaire.
Ongoing lending:
The Business Environment Reform and Institutional Strengthening project (BERIS), (FY05-FY10) includes a component (Competition Policy Regime component) aimed at enhancing the competitiveness of the enterprise sector by fostering healthy market competition and thus stimulating the production of better quality products and services at lower prices.
Sustainable Energy GEF Project will include support mechanisms for Macedonian SMEs that will participate in the investment activities within energy efficiency and renewable energy. The support will focus on access to financial services in the form of a credit line and a partial risk guarantee facility.
IFC will support the development of new products in the financial sector such as energy efficiency and support the development of housing, factoring and leasing. IFC will continue to support commercial banks and micro-lending institutions and look for opportunities to facilitate banking sector consolidation through supporting mergers and acquisitions. MIGA will also support projects in the financial sector which are expected to result in improved access to finance.
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Further develop support mechanisms for SMEs and improve access of SMEs to financial services.
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Regional policy and co-ordination of structural instruments
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Ensure a clear distribution of responsibilities and effective inter-ministerial co-ordination in order to develop a comprehensive and coherent regional development strategy.
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The Country Partnership Strategy (FY07-FY10) envisages institutional development components in all projects to increase absorption capacity.
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Set up partnership structures ensuring close co-operation between relevant stakeholders at national and regional levels. Involve socio-economic and other partners.
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Ensure that the designated managing and paying authorities will progressively build up their capacity.
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Design and implement national and regional development plans.
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Enhance financial management and control procedures and set up proper monitoring and evaluation.
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Set up a national agency for regional development.
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Develop capacity for project preparation and management in accordance with the Structural and Cohesion Funds, both at central level and at NUTS III level.
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Justice, freedom and security
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Complete the implementation of the Integrated Border Management Strategy.
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Planned lending:
The TTFSE II will be implemented in line with fYR Macedonia’s Integrated Border Management (IBM) Strategy and IBM Action Plan.
There is no involvement of the Bank in issues related to police and/or asylum policy.
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Complete the implementation of the Action Plan for the reform of the police. Continue to upgrade equipment and enhance training. Further develop the human resources management system.
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Further develop the integrated system for intelligence-led policing. Strengthen the special investigation capabilities to fight organised crime, including trafficking in human beings, arms and drugs.
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Operate asylum procedures which are fully in line with international and European standards, including a reformed appeals system. Strengthen administrative capacity by adopting a strategic plan for the administrative structures as well as guidelines for processing asylum cases. Strengthen procedural management and support. Strengthen reception capacity and develop a central database for all aliens covering asylum, migration and visas.
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Develop and implement a migration policy, including an active return policy, which is in line with EU standards and effective in the fight against illegal migration and secondary migration movements.
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Science and research
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Start designing and applying an integrated research policy.
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Planned lending:
Competitiveness/Technological Change/Higher Education project (FY08) will contribute to sustainable economic growth and job creation by fostering the adoption of new technology for production of higher quality goods, especially for the export market, improve the link between research and development and the private sector, encourage improvement of managerial skills in the private sector and develop skills able to match the business sector’s emerging needs.
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Strengthen research and technological development capacity in order to ensure successful participation in the Community Framework Programmes.
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Environment
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Integrate environmental protection requirements into other sectoral policies, in particular through the development of environmental impact assessments.
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Planned lending:
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Increase investments in environmental infrastructure, with particular emphasis on waste water collection and treatment, drinking water supply, tackling air pollution and waste management.
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Consumer and health protection
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Continue alignment with the acquis on safety-related measures.
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No immediate World Bank engagement.
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Customs union
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Fully align customs legislation and procedures with EU legislation and standards and fully implement these procedures on the whole territory
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Planned lending:
TTFSE II (FY07) will be implemented in line with these priorities, in particular through the introduction of ICT applications.
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Continue to strengthen the Customs Administration and ensure its proper functioning in order to reach EU standards. Complete the implementation of the 2004-2008 Strategic Plan.
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Continue preparations to ensure interconnectivity with the computerised systems of the EU.
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Foreign, security and defence policy
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Ensure that the “EU Guiding Principles Concerning Arrangements between a State Party to the Rome Statute of the International Criminal Court and the United States Regarding the Conditions to Surrender of Persons to the Court”, adopted on 30 September 2002, are fully taken into account.
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No immediate World Bank engagement.
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Financial control
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Develop and implement the principles of decentralized managerial accountability and functionally independent internal audit in accordance with the internationally accepted standards and EU best practice, following the EU’s Public Internal Financial Control (PIFC) model, through coherent legislation and adequate institutional capacity. Ensure that the process towards achieving this is led by the Ministry of Finance in a co-ordinating and harmonising role.
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Planned AAA:
Country Fiduciary Assessment(s) (FY07 and FY10) have an objective to assess the fiduciary risk related to fYR Macedonia’s budget environment, to further continue the Government’s commitment on Public Financial Management (PFM) reforms aimed at securing more efficient and effective use of public sector resources and help government to progress on procurement reforms to achieve alignment of fYR Macedonia’s procurement systems and practices with EU acquis communautaire and other internationally accepted standards.
Ongoing lending:
The PDPL Program (FY06-09) actively supports the government in establishing the necessary mechanisms for financial control in the health sector (strengthening the role of the Ministry of Finance on the Health Insurance Fund (HIF) Board, strengthening the capacity of the HIF Board, introducing independent Budget Officer in Health institutions etc.
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Further strengthen the operational capacity and functional as well as financial independence of the State Audit Office.
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Develop procedures and administrative capacity to ensure effective protection of the EC’s financial interests.
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