International finance corporation country partnership strategy

AAA	Analytic and Advisory Activities
ADR	Alternative Dispute Resolution
ALMP	Active Labor Market Programs
APE	Agency for Entrepreneurship Promotion
APL	Adaptable Program Loan
AS	Advisory Services
BEEPS	Business Environment and Enterprise Performance Survey
BERIS	Business Environment Reform and Institutional Strengthening
CARDS	Community Assistance for Reconstruction, Development and Stabilization
CAS	Country Assistance Strategy
CEFTA	Central European Free Trade Agreement
CEM	Country Economic Memorandum
CFA CFAA	Country Fiduciary Assessment Country Financial Accountability Assessment
CFPs	Country Financing Parameters
CPAR	Country Procurement Assessment Report
CPC	Commission for Prevention of Corruption
CPPR	Country Portfolio Performance Review
CPS	Country Partnership Strategy
CPSPR	Country Partnership Strategy Progress Report
CSW	Center for Social Work
DIF	Deposit Insurance Fund
DPL	Development Policy Lending
EBF	Extra Budgetary Fund
EBRD	European Bank for Reconstruction and Development
EC	European Commission
ECA	Europe and Central Asia
ECAA	European Common Aviation Area
ECSEE	Energy Community of South East Europe
EDI	Electronic Data Interchange
EIB	European Investment Bank
EIOP	European Investor Outreach Program
ELEM	Electric Power Generation Company
ESM	Electric Power Company of Macedonia /Electric Power Distribution Company
ESW	Economic and Sector Work
EU	European Union
FDI	Foreign Direct Investment
FESAL	Financial and Enterprise Sector Adjustment Loan
FSAP	Financial Sector Assessment Program
FY	Fiscal Year
fYR	Former Yugoslav Republic
GDLN	Global Distance Learning Network
GDP	Gross Domestic Product
GEF	Global Environmental Facility
HACCP	Hazard Analysis of Critical Control Points
HBS	Household Budget Survey
HCI	Health Care Institution
HIF	Health Insurance Fund
IBRD	International Bank for Reconstruction and Development
ICR	Implementation Completion Report
IDA	International Development Association
IDF	Institutional Development Fund
IEG	Implementation Evaluation Group
IFC	International Finance Corporation
IFC AS	IFC Advisory Services
IMF	International Monetary Fund
IRRP	Irrigation Rehabilitation and Restructuring Project
IT	Information Technology
JPPR	Joint Portfolio Performance Review
LDP	Liberal Democratic Party
LJIIS	Legal and Judicial Implementation and Institutional Support Project
MAFWE	Ministry of Agriculture, Forestry and Water Economy
MAPAS	Pension Supervisory Agency
MDGs	Millennium Development Goals
MEPSO	Electric Power Transmission Company
MIGA	Multilateral Investment Guarantee Agency
MILES	Macroeconomy, Investment, Labor, Education and Safety framework
MIPD	Multi-Annual Indicative Planning Document
MK	fYR Macedonia, Macedonian
MKD	Macedonian Denar
MLSP	Ministry of Labor and Social Policy
MOH	Ministry of Health
MSE	Micro and Small Enterprises
NATO	North Atlantic Treaty Organization
NBRM	National Bank of the Republic of Macedonia
NGO	Non-Governmental Organization
OECD	Organization for Economic Cooperation and Development
OED	Operations Evaluation Department
PDF	Pension and Disability Insurance Fund
PDPL	Programmatic Development Policy Loan
PEP SE	Private Enterprise Partnership Southeast Europe
PER	Public Expenditure Review
PHC	Primary Health Care
PIT	Personal Income Tax
PIU	Project Implementation Unit
PPP	Public-Private Partnership
PSMAC	Public Sector Management Adjustment Credit
PSMAL	Public Sector Management Adjustment Loan
RECRP	Real Estate Cadastre and Registration Project
REPARIS	Road to Europe –Program of Accounting Reform and Institutional Strengthening
RIA	Regulatory Impact Assessment
ROSC	Report on Observance of Standards and Codes
SAA	Stabilization and Association Agreement
SAO	State Audit Office
SAP	Stabilization and Association Program
SBA	Stand-by Arrangement
SDSM	Social Democratic Union of Macedonia Party
SEE	South East Europe
SEED	Southern Europe Enterprise Development
SFRY	Socialist Federal Republic of Yugoslavia
SME	Small and Medium Enterprise
SOE	State Owned Enterprise
SSO	State Statistics Office
TA	Technical Assistance
TF	Trust Fund
TTFSE	Trade and Transport Facilitation in South East Europe
UF	Unemployment Fund
UN	United Nations
UNDP	United Nations Development Programme
USAID	United States Agency for International Development
USD	United States Dollar
VAT	Value Added Tax
VMRO-DPMNE	Internal Macedonian Revolutionary Organization – Democratic Party for Macedonian National Unity
WB	World Bank
WBG	World Bank Group
WHO	World Health Organization
WMO	Water Management Organization

	World Bank	IFC
Vice President	Shigeo Katsu	Edward A. Nassim
Country Director	Orsalia Kalantzopoulos	Shahbaz Mavaddat
Task Team Leader	Sandra Bloemenkamp	Gjergj Konda

Executive Summary vii

I. Introduction 1

II. Country Context 1

A. Regional Context and Political Developments 1

B. Economic Developments Since the Last CAS 3

C. FYR Macedonia’s Poverty Profile 4

III. FYR Macedonia’s Long-Term Vision, Medium-Term Plans, and Outlook 6

A. FYR Macedonia’s Long-Term Vision and European Integration 6

B. The Medium-Term Economic Outlook 8

IV. FYR Macedonia’s Development Challenges 10

A. Accelerating Economic Growth and Job Creation 10

B. Improving Governance in fYR Macedonia 15

C. Improving Public Service Delivery 23

V. World Bank Group’s Current Portfolio 26

A. Past Bank Assistance and Quality and Management of the Existing Portfolio 26

B. Lessons Learned from the CAS Completion Report (CASCR) 28

C. FYR Macedonia’s Country Financing Parameters (CFPs) 29

VI. The World Bank Group Partnership Strategy 29

A. Key Features and Pillars of the Results Based Partnership Strategy 29

Pillar 1: Foster Growth and Job Creation, Increase Living Standards for All 30

Pillar 2: Public Service Delivery and Supporting Good Governance. 35

B. The Framework for Bank Assistance and Financing Scenarios 37

C. The Programmatic Development Policy Lending Program (PDPL) 40

D. Partnerships and Participation 40

VII. Results-Based Monitoring and Evaluation 42

VIII. Risks and Mitigation Remedies 43

IX. Concluding Remarks 44

Annex 1: FYR Macedonia CPS FY07-FY10 Results Matrix 45

Annex 2: FYR Macedonia’s CAS Completion Report, FY04-FY06 56

Annex 3: IFC in fYR Macedonia 85

Annex 4: MIGA Assistance Program and Guarantee Outstanding Exposure 92

Annex 5: CPS Consultations and Outreach 94

Annex 6: Donor Assistance to fYR Macedonia by Program 96

Annex 7: FYR Macedonia Country Financing Parameters 97

Annex 8: FYR Macedonia’s Relations with the EU 98

Annex 9: Governance Activities in World Bank Program 102

Annex 10: EU Partnership Priorities and World Bank Assistance 104

Annex 11: Standard CPS Annexes 121

Annex 12: Fund Relations Note 131

Table 1: FYR Macedonia –Key Economic Indicators 8

Table 2: Indicators of World Bank Lending Portfolio (FY03 - FY06) 27

Table 3: Proposed ESW Program FY 2007-2010 37

Table 4: Proposed Lending Program FY 2007-2010 38

Table 5: Triggers for Lending 39

Figure 1: Labor market developments are critical to poverty alleviation in FYR Macedonia. 5

Figure 2: Major Obstacles to Firm Activity in fYR Macedonia, 2005 11

Figure 3: Customs Clearance Times Have Fallen in Kumanovo 17

Figure 4: Bribes at Customs Have Fallen Dramatically 17

Figure 5: Bribes for Business Licensing Have Fallen Dramatically 18

Figure 6: Bribes Related to Courts Have Fallen, Process of Enforcing Contracts Has Improved 19

Figure 7. Bribes Related to Procurement Have Not Fallen 22

Box 1: Improving Governance in the Health Sector in fYRMacedonia 21

Box 2: Client Survey 41

Box 3: Anticipated Development Challenges which the CPS is Designed to Influence 43