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3. Applicability of analysis and recommendations for the Republic of

Macedonia


Based on the above analysis, several recommendations will be made that could have a positive impact on unemployment in the country. The recommendations will be explained and prioritized, and their feasibility in Macedonia will be evaluated, based on the current domestic situation.

These recommendations are inspired by other transition economies’ experiences, and constrained by Macedonia’s particular weaknesses. In short, the recommendations are to enhance passive and active labor market policies, and to strengthen the private sector – by attracting domestic and foreign investment, as well as by supporting small and medium-sized businesses.

First, let us examine passive and active labor market policies. Despite the trend in other transition countries – especially the Czech Republic – of cutting expenditures on passive policies and emphasizing active labor market policies, the literature suggests that both are important and should be equally developed. A simultaneous implementation of these policies makes sense. A passive policy of registering the unemployed has little effect if it is not linked to active policies of training, counseling and other services to help the unemployed become more mobile and competitive in the labor market. Temporary unemployment benefits not only satisfy basic needs, but also facilitate an active job search or participation in training programs. Active labor market policies, on the another hand, make passive labor market policies more efficient, limiting the possibilities for abusing or becoming dependent on the benefit system. This argument is inspired by the ILO’s recent critique of calling these policies “active” or “passive”, elaborating different negative and positive connotations related to it (Chernyshev, 1997, p. 64).

Active labor market policies have recently taken root in Macedonia, and currently have achieved only modest success. Thus, the author recommends that passive labor market policies continue, but that they stay closely tied to emerging active policies. The Privatization Agency, which is responsible for implementing active policies under the framework of the World Bank supported Project of Social Reform and Technical Assistance, should increase cooperation with the State Employment Bureau, which is mainly responsible for passive labor policies. In this way, the State Employment Bureau would have an opportunity to implement active policies, which they have not yet done. Bearing in mind that the World Bank project, under which these policies are being implemented, lasts through the end of 1999, both agencies should expand the program and seek to develop it so that it becomes self-sufficient.


One viable way of doing this is to encourage existing non-profit agencies – or establish new ones – to become direct providers of these services. The non-profit sector in Macedonia is just developing, with few agencies involved in unemployment issues, but the need for them is understood and there is a willingness to expand the non-profit sector.

Of the few NGOs dealing with unemployment issues, the Macedonian Center for International Cooperation has already implemented some local projects to promote employment and build civil society. This Center was established in 1993 as a joint venture between local initiatives and Dutch Interchurch Aid (http://www.mcms.org.mk/dodatok1_eng.htm). Because this agency has already undergone international training for its programs and gained experience, it could play an important role in implementing the previously described World Bank project. With financial support from the World Bank, it could expand its employment promotion project by reaching out to more local communities (in 1994 it had four projects in three cities and one village) (Ibid.). Through its project to strengthen civil society and by increasing cooperation with other international NGOs in Macedonia, it could offer technical assistance and professional support to encourage the establishment of new non-profit agencies that would provide passive and active labor market services in the local communities.

Local non-profit agencies would have to work closely with state labor offices and local employers, but as in the Czech Republic, local non-profit agencies would have the advantage of being able to carefully design their programs after assessing the community’s labor market needs. Collaboration with labor offices and local employers would give them the opportunity to develop a local database system, including information on job seekers and vacancies. Depending on the types of jobs available and the existing skills of the unemployed, these agencies could develop activities that would match the requirements of the local labor market. The agencies could also develop evaluation methodology for their programs, for which they could seek training from experienced international organizations.


Evaluation methodology should be outcome based, meaning that it would include not only numerical information about the number of program participants and resulting job placements, but also the impact the program had on participants, their families and the community. This type of evaluation would provide useful information about what works and why, and would improve program creation, the targeting process and implementation. This entire process could be considered an investment for establishing effective active labor market policies in the long run.

Assuming that non-profit agencies would become experienced in this matter, they could then write grant proposals to different donors that would enable them to continue the project.

To increase interest in investment, the government should develop a national strategy to make Macedonia more visible in the international market. The advantages of the country’s natural and human resources, as well as its sound infrastructure, should be emphasized. This kind of information should be disseminated through agencies that specialize in international communication, as well as through diplomatic and consular posts around the world. Since Macedonia is small, with a small market and limited purchasing power, investment should focus on export-oriented businesses. According to a Commission of the European Union (PHARE) study on improving export capabilities, several components have particular export potential. In particular, those include: finished textiles, leather goods, shoes, lamb, fruits and vegetables, processed foods, wines, automotive accessories, vehicle and bus assembly, telecommunications equipment, electric motors, metal fabrications, steel piping, construction, and tobacco and cigarettes (Doing Business in Macedonia: Guide for Investors, 1996, p. 28). This classification shows that there are many investment possibilities, but the fact remains that some foreign investors do not feel comfortable doing business in Macedonia. They have reservations about whether the legislative framework provides a stable business climate, and feel uncomfortable with the region’s political instability.


Parallel with a national strategy to attract foreign investors, the government could strive to increase the general investment level by involving the Macedonian diaspora in the country’s economic development. This recommendation was inspired by Vaknin’s article, Equity, Europe, and Investment – Three Wrong Orientations in the Macedonian Economy (1996), in which he posits that many countries maintain close ties with their expatriate communities. He gives Israel or China as examples, where most foreign investment comes from people of Jewish or Chinese origin who live abroad. Because almost 750,000 Macedonians live outside the country (p. 2), there should be sufficient motivation for the government to increase contact with them. Perhaps a special agency could be established to develop and maintain relationships with potential Macedonian investors living abroad.

The next recommendation is to promote small and medium-sized businesses by improving government stimulation measures. As with active labor market policies, government measures to promote small and medium-sized businesses should take effect at the local level, allowing regional disparities in unemployment to be more effectively addressed.

The final recommendation, which is both long-term and broad, is to involve educational institutions in the country’s general employment policy. It would require major reforms in the educational system to adjust to the labor market dynamics and knowledge and skills that are needed in the present. This could, however, go a long ways in helping to ensure the achievement of the goal of “full employment” for the next generation.



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