MILS: News from the FYROM, 97-06-18

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From: "Macedonian Information Liaison Service" <mils@mils.spic.org.mk>

CONTENTS

[01] CLINTON-GLIGOROV MEETING: `FOCUS ON ECONOMIC INTERESTS'

[02] NICHOLAS BURNS: `POSITIVE ROLE OF MACEDONIA IN THE BALKANS'

[03] ONE MORE ROUND OF NAME-NEGOTIATIONS IN NEW YORK

[04] FR YUGOSLAVIA AND MACEDONIA OUTLINING JOINT BORDER IN SKOPJE

[05] NEGOTIATIONS BETWEEN THE `IMF' AND THE MACEDONIAN GOVERNMENT ON THE NEW PACKAGE OF ECONOMIC MEASURES

[06] `SAL 2' NEGOTIATIONS IN PROGRESS

[07] EXCLUDE POLITICS FROM BANK CLIENTS' INITIATIVES

[08] CORRESPONDING MINISTRIES IN CROATIA AND SLOVENIA DENYING STORY AIRED BY RADIO TIRANA

[09] DPM: `FLAG-ISSUE - A CONFLICT SITUATION CREATED ON PURPOSE'

MILS SUPPLEMENT

[10] `The Prime Minister Is Running the Race of His Life' - Part II (`Puls' - 13th June 1997)

MILS NEWS

Skopje, 18 June, 1997

[01] CLINTON-GLIGOROV MEETING: `FOCUS ON ECONOMIC INTERESTS'

At present Macedonia is a safe and stable country with all prerequisites to attract international investments, particularly US capital. As regards admission into NATO, Gligorov emphasised its necessity due to the fact that the South Wing of the Treaty Organisation is its weakest link, whereas the integration of countries of this region are important in terms of stabilizing conditions and developing NATO as well. Talks on regional conditions appear to have focused on the situation in Albania and Bulgaria, in addition to the possible development of events in Bosnia during the planned withdrawal of SFOR. The Macedonian side underlined the need of extending the UNPREDEP mandate, while proposing to extend our hospitality to part of the SFOR deployment during their withdrawing from Bosnia, in order endorse its function in preserving regional stability. Besides this President Gligorov spoke of having discussed cooperation alternatives in the defence sector in view of the already ratified agreement.

In this context the Macedonian side offered the Krivolak training facilities for NATO and `PFP' exercises. Gligorov also told the press that Clinton had received their favourable assessment on current Greek policy employed by Costas Simitis and his Government - especially with respect to Greece's endeavour to increase its role in the Balkans. Information reaching us from Washington further indicates that President Gligorov had been received separately by Secretary of State Madeleine Albright and by Acting Secretary of Defence John White at the Pentagon.

[02] NICHOLAS BURNS: `POSITIVE ROLE OF MACEDONIA IN THE BALKANS'

Yesterday Nicholas Burns also underlined the importance of the Interim Agreement signed between Greece and Macedonia under the auspices of mediator (and fmr. Secretary of State) Cyrus Vance, in order to bring about the normalization of bilateral relations. In this context the State Dept. Spokesman emphasised the significance of maintaining dialogue between both countries at the highest level, in spite of the fact that Greece does not accept the name of Macedonia. With respect to the future of UNPREDEP in Macedonia, Burns stated that it would be difficult to determine when the troops of this deployment will leave Macedonia, adding that this would above all depend on the current situation in the region at the time. Washington supported the motion to extend the UNPREDEP mandate, and the US would like to see their troops remain within this mission rather than on any bilateral basis.

`The US have had a favourable opinion of ongoing economic reforms in Macedonia, which is based on the fact that we consider Macedonia to have chosen the right path to further advance the country. Macedonia also enjoys the substantial support of international financial institutions. The IMF has assessed the progress of Macedonia as quite significant and satisfactory. The expansion of the private sector can be felt in Macedonian economy which has been plunged into a deep recession. International investors are still cautious however, as this region has been close to an armed conflict area', stated Nicholas Burns.

[03] ONE MORE ROUND OF NAME-NEGOTIATIONS IN NEW YORK

[04] FR YUGOSLAVIA AND MACEDONIA OUTLINING JOINT BORDER IN SKOPJE

[05] NEGOTIATIONS BETWEEN THE `IMF' AND THE MACEDONIAN GOVERNMENT ON THE NEW PACKAGE OF ECONOMIC MEASURES

[06] `SAL 2' NEGOTIATIONS IN PROGRESS

[07] EXCLUDE POLITICS FROM BANK CLIENTS' INITIATIVES

`TAT' owner Sonja Nikolovska has been asked to surrender all her property and assets to the judiciary, thus putting it at the disposal of bank clients until the case has been solved. PM Crvenkovski has been requested to meet client representatives once again, in order to determine a final solution. Otherwise deceived bank clients announced the expanding of protests and activities to Skopje. Such a situation - it was said - could easily get out of control and assume unpredictable proportions.

[08] CORRESPONDING MINISTRIES IN CROATIA AND SLOVENIA DENYING STORY AIRED BY RADIO TIRANA

[09] DPM: `FLAG-ISSUE - A CONFLICT SITUATION CREATED ON PURPOSE'

According to the Macedonian Radio Stojanovski also criticized the Government for not responding to the decision passed by local authorities at Tetovo to finance the illegal `University of Tetovo' with app. 1 million DM in budget funds. In the opinion of Stojanovski this imposed the next question regarding the verification of diplomas issued by this `institution.' The DPM leader also stated that it is inappropriate by the DPA to invite the self-proclaimed monarch of all Albanians Lecha Zoglou - who advocates the concept of a Greater Albania - to Macedonia. In the end Stojanovski stressed that it is in the interest of both the state and the people to call early elections - which, should the readiness exist, could be staged by the end of this year.

MILS SUPPLEMENT

[10] `The Prime Minister Is Running the Race of His Life' - Part II

(`Puls' - 13th June 1997)

The `icing on the cake' of this package of economic measures was to be secured through the successful implementation of the four announced concessions whose overall value exceeds 1 billion DM. The first package of concessions will include the two motorway sections from Tetovo to Skopje (the most profitable economic investment in Macedonia according to economic analysts) and the one from Gradsko to the Greek border. Their value varies between 150 and 200 million US dollars. Greek investors are already interested in the section from Gradsko to Evzoni. The hydro-electricity works `Chebren' has been estimated to cost app. 400 million dollars, according to the Ministry of Development. There have been negotiations between `Elektrostopanstvo' (`Electricity Resources Management') and an Austrian company on forming a joint venture to implement this project.

The most recent Government session however resulted in a clear message to `Elektrostopanstvo' Director Pande Lazarov - Reagan (conveyed by the new Civil Engineering Minister) that during the mandate of this Government it will be impossible to conduct such `DIY' deals, as well as that the `Chebren' project will be awarded through a concession. Does this mean that `Elektrostopanstvo' will get a new Head, or has the new `Great Manitou of Electricity' proven himself worthy by setting up that many transformator stations throughout the villages of Macedonia during local elections? Whatever the answer to this may be, the Austrian capital remains the most serious option for the `Chebren' project and since `Stopanska Banka' has been `doped up' with Austrian capital, the option appears more serious still. There are two approaches of estimating the assets of Macedonian Telecom: concordant to the first its value amounts to app. 800 million DM, and according to the second - and more recent - one it varies between 600 and 700 million dollars.

During the first `privatization offensive' around 35% (app. 200 million dollars) of Telecom assets would be transformed, and a certain percentage of shares (between 5 and 10%) would be issued and entered into circulation for domestic stockholders through the Macedonian Stock Exchange. The Government is soon to select and authorize an advisor to `matchmake' the privatization wedlock of Macedonian Telecom. At the moment the best chances for this office are being attributed to `Nat West Markets', the bank which handled all transactions concerning the privatization of British Telecom during the era of Margaret Thatcher and is currently acting as an advisor to the privatization process of Serbian Telecom. The `young pretender' is another English bank whose identity is not being revealed.

This bid consists of four objectives the Government hopes to achieve: the financial establishment of a solid policy on the global level (these so-called political ventures within the world market are usually focusing on infrastructure anyway; the most recent example for this being the deal between the Croatian Government and US contractor `Bectel' to build a motorway section from Zagreb to Split for app. 1 billion dollars); to patch up all fiscal holes by attracting international capital, as the domestic market has been suffering from investment anemia, without increasing our foreign debts; to create more jobs and in the end: to create a solid temporal equilibrium between the influx of a larger amount of international capital and the commencing of a new development cycle.

Sound arithmetic appear to be the foundation of all these planned bids, as one the one hand this is an alternative to secure a more substantial amount of international capital and on the other hand within a deadline of let's say 15 to 20 years the state ceases to accrue these kind of budget increments (e.g. Telecom, pay toll, etc.). The punch line is that these bids are being used to kickstart speedy economic development which would eventually increase the financial backbone of the state, as a foundation to keep the budgetary till well-fed. This June economy package will most likely result in a July sequel, which would coincide with the close of round two of the talks between the IMF and the Macedonian Government as these are to commence in about ten days. Economic analysts have already been speculating as regards possible alterations affecting two key segments of our current economic habitat. The first sector would be the monetary sphere as Macedonia enters these negotiations with a new Governor on top of his pyramid, a helmsman expected to show far greater subtlety upon creating the policy of the Central Bank.

High-ranking Government officials have already stated `off the record' that there is the necessity to stage a meeting between the Central Bank and the Government cabinet sooner rather than later. Currently the Government insists on adhering to the monetary strategy outlined with the IMF, since it has also gained the Central Bank a bonus for increasing solvent funds this year (by app. 10%). This is an approach entirely opposing monetary practice in a zone of negative monetary growth. Thus we are experiencing the withdrawing of monetary funds in two modes: through regular operations of the Central Bank and through the state budget which is to forward app. 2.4 billion dollars to an NBM account for this year, in shape of equal monthly installments.

This strict monetary policy of the Central Bank is clearly manifested through the increasingly severe insolvency throughout the country and the inchoate tendency of the denar exchange rate to rise compared to the DM. In such conditions, without having begun to cool down the monetary ambiance in Macedonia, our economy would be scorched by a classical deflation heat wave. Should this trend continue annual inflation should vary between 0% and 1% which at the moment would embody an artificial monetary chastising of Macedonian economy. The second package of July novelties could manifest themselves in the budgetary domain in two variants. According to the first the re-balancing of budget expenditures may be conducted through downsizing the latter by between 1 and 2 billion denars (though the most gloomy estimates predict that this would have to amount to 4 billions). The budget has been bereft of quite substantial amounts for the Armed Forces, the police and the Retirement Pension Fund. This entailed the necessity to prune other bills as meantime, the influx of funds has not exceeded the 1996 level. Concordant to the second variant a mini-package of tax alterations would be adopted. Rumours on possible tax deduction on alcohol and the latter transfer of this benefit into the brewery branch, have not been confirmed officially yet. It is however clear what the Government would hope to achieve through such a strategy in the aftermath of a good tobacco harvest (official Government data of last Monday's session confirm that tobacco revenues within the budget have increased by 50% once tax had been reduced).

In contrast to this the Government cabinet still awaits the reply to its last memorandum addressed to the IMF three weeks ago, in which it is requesting the IMF's blessing to initiate the pilot-project introducing the VAT system in five Macedonian enterprises. The concept has already been outlined and in compliance to its provisions revenue would be taxed according to two rates: 5% for consumer goods and 22% for all remaining articles. With an average rate of 20% Macedonia would thus find itself in the golden mean, accompanied by countries like Spain and Denmark (with 25%) and Luxembourg and Germany (with 15%). The VAT system would entail the following two occurrences: a slight increase of the inflation rate in the initial implementation stage and the enlarging of the public revenue basis flowing into the budget. The new package of economic measures marks the beginning of the pre-election campaigning by the incumbent Government, as it concentrates its efforts on the economic and social spheres in order to provide an adequate reply to `opposition barrages.'

At present the Government is running out of time, which is why it is attempting to shelve general elections as long as possible. After all, it needs to look its best in front of the electorate when the time comes, and economic things `take time'... Five years ago George Bush and his administration misjudged the timing for entering the era of positive economic results and the price for this was a dear one, entailing the election victory of Clinton. Only two months later US economy embarked on a new economic cycle which has been lasting ever since. The entire matter may be explained in a more plain manner, while using two Government projects as an illustration. The transformation of the 25 largest loss-generating enterprises and the sanation of the banking system - both commence two years ago. At present international investors appear to exhibit the greatest interest in entering these ventures including `Feni' (`Krupp' and `Samsung' in this case), `Stopanska Banka' (the Austrian `Giro Kredit Bank' and several Greek banking houses) and the Skopje `Steel Mill' (Greek, Italian and Japanese investors). In 1995 there lot however was less than certain. In the end, it appears to depend on the Government's `know-how' to squeeze out enough time to implement this new package of economic measures.

(end)

mils news 6 June, 1997

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