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 V.I.P. INTERVIEWS
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Interview with:
Mr. Nikola Gruevski,
Minister of Finance of the Republic of Macedonia
Skopje, Macedonia, 8 February 2001
Contact:
Dame Gruev 14,
1000 Skopje - MACEDONIA
Tel: +389 91/116 012
Fax: +389 91/117 280
E-mail: gruevski@mol.com.mk
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| In 2000, Macedonia showed a very encouraging performance, so I would like to know what is your evaluation of the current economic situation in Macedonia, and what are your prospects for 2001?
Well, after a very difficult 1999 when we had the Kosovo war, it was very clear to Macedonia that our reform plans were postponed. But in 2000, we had the best year over 10 years from an economic standpoint. We had a 5.1% increase in GDP, which is more than the 3 previous years combined, and the highest since Macedonia's independence. Up until 1996, we had negative results. But even with the Kosovo war we had a 2.7 % increase in GDP. In 2000 we had 5.1% increase which is very near to our goal of 6% which we knew was very ambitious. 2000 was very successful. We implemented the VAT, which was very successful. We had a surplus in the budget, which had to be 4.1% from GDP, but we amended the budget in October; we spent all that money, and we reduced the surplus to 2.4% of GDP. In 2000 we made all the reforms, not just the VAT. We prepared a personal income tax law, amendments to the property tax law, new excises, and new laws on banking.
Talking about taxes, we have heard that the taxes you just mentioned were actually lowered…
Yes, not just taxes. Even customs tariffs. About 4,000 customs tariffs, especially tariffs on raw materials, and other things that have high tariffs, and others that motivated smuggling. We reduced the personal income tax from 23% to 15%; this is one of the lowest in Europe. We may have room in the budget in 2001 to review other taxes or tariffs; it will happen in June after we see how things are in the first half of the year. We also made a lot of banking reforms in 2000 using local and international experts, especially from the World Bank. There are new laws for insurance on deposits, new laws on mortgages, for exiting procedures; Central Bank also undertook some measures. We made a lot of reforms that made room for cuts in interest rates. Now we have higher competition. We have attracted two foreign banks to Macedonia: the National Bank of Greece, who will be a strategic investor with Stopanska Bank in Skopje, the biggest and only state bank. We have also attracted investors from Germany and Slovenia to invest money for capitalization of another big Macedonian banks about 30 million Deutschmarks new capitalization, plus about 6-7 million Deutschmarks for buying shares. Another bank, Kreditna Banka - Skopje was privatized and was bought by Alpha Credit from Greece. So we encourage the competition. We dramatically improved the legal situation, so we have prepared for the decreasing of interest rates which were about 20-25%; now they are reduced to 11-12% for good borrowers and about 15-20% for bad borrowers.
So do you think this will increase the interest of foreign banks and foreign investors to come and invest in Macedonia?
We hope. We are open and we are eager for it. We think more competition is necessary. It would be very good for some Western bank to open a branch or to buy some local banks. We have also started a process that is not necessarily of interest to foreigners, but is very important for the people here. It was in 1945, after communism came, the profits of the people were taken by the state. We have very successfully implemented a new rule to pay it back, and have had very good results. We started to repay old repository debts on foreign deposits. When we received independence, we found that 1 billion Deutschmarks had disappeared. The banks during socialism has invested the money in bad things, and wasn't in a position to repay it to the depositors. At that time, the government of Macedonia undertook the debt. We were not in a position to pay it back but we said that we would guarantee its return. Last year we adopted the law on returning this money and we have started to return the money. So I can say that last year was the beginning of paying off big debts - some of them local, some of them international.
As a result of some good steps in our economic policy last year, we made arrangements with the IMF and World Bank, with IMF we have combined PRGF and EFF arrangements - PRGF is for poverty reduction, EFF is for increasing growth. We made arrangements with the World Bank- FESAL - arrangement for enterprises and banking reforms. Both institutions have been very satisfied with Macedonia's results. Recently the deputy president of the Word Bank said that Macedonia is a success case. As well in Davos, they said that if more countries worked like Macedonia they would be very happy.
We are also working on reforms on the state administration - PSAL. We have started official negotiations - we are in the appraisal stage. I think we will finish this successfully. There are some doubts that the minister of finance and the government - with everything we have happening at the same time, with so many reforms, will we have the capacity to finish everything? We have obligations with the IMF, FESAL, - it's a lot, but I am optimistic that we will implement reforms in the state administration. | You also met with Mr. Jean Lemier, President of the EBRD. What is his opinion regarding the economic development here?
He is extremely satisfied with the relations between Macedonia and the European Bank for reconstruction and development. They are the largest investors in Macedonia. In their last report, 3 months ago, there was a chart of 26 countries in transition from Central and Eastern Europe and Macedonia was right on the top, because of the intensity of the reforms in 2000. They have invested in Macedonia significant amounts of money and organized many projects, in pharmaceutical company Alkaloid, Stopanska Banka and many others. They are looking for more projects - looking into the reconstruction of the airport. He was satisfied. There are no problems. We talked only of new projects. He said there was incredible growth in 2000.
The Ministry of Finance is involved in many sectors, in many projects. What is your involvement as far as the Airport is concerned for example?
the Minister of Finance is interested for the tender procedure to be well done, to be according to international rules. Also we considered the conditions under which the airport will be sold or reconstructed: on credit, or that the state will make a guarantee, or will it be on a concessional base. The financial part of the project is interesting for the Ministry of Finance. For the technical side it is the responsibility of the Ministry of Transport. Our idea is that the best solution is to go on a concessional base. We are opening a new tender on a concessional base for the airport in a few weeks.
You also met in Davos with George Soros who suggested the establishment of a customs union of the Balkan countries in order to attract more multinational investors. What is your opinion on this issue?
When I met Mr. Soros, he explained to me his vision of some kind of custom union in the region. As Minister of Finance I can only give you my point of view. Economically, it's a good idea. I think we have to join this idea. As I understood it would include Albania, Macedonia, Bulgaria, Romania, ex-Yugoslavian countries, except Slovenia. From an economic point, it is a good idea. But one day later there was a meeting of the presidents of this region and they were not happy with the idea. There were some political reservations and prejudice. Some said it would slow down the process of integration in EU. I do not think this will slow down the process. I think it will speed up the process. We want foreign investors to see a bigger market. There are 2 million people living in Macedonia. But we have free trade agreements with Bulgaria, Yugoslavia, Croatia, Slovenia, with Turkey, which is a 65 million-person market, Ukraine (a 52 million-person market), and EFTA countries. Everything but wine will be open for trade immediately. If someone wants to put a factory here, they can export the products without custom. And we will open our market in 10 years, step by step, to the EU. So, it is true that we almost have already a customs union if we have free trade agreements with Bulgaria, Yugoslavia, Croatia, Slovenia, with Turkey and Ukraine. Now we are preparing the process of negotiating with Albania, Bosnia and Romania and probably by the end of this year we will have agreements with these countries. So we went from a 2 million-person market to 152 million. Plus EFTA countries. And add to that the countries of the EU. But still, politicians are not economists, and they are worried because this kind of agreement would need common political institutions among the nations. This is the idea, which has not developed yet, and it takes time to get accepted, to be digested. There has been a lot of blood in this region. The people need time to adjust.
Your Government is planning to organize an Investment Forum to expose the Macedonian investment climate to the international community. What do you expect is going to come out of it?
We are preparing the investment forum for autumn with the assistance of the World Bank and IMF - we haven't decided where. They have a lot of experience arranging these. It is very good, after implementation of a big group of reforms, to present ourselves to investors, not before. In June we will present new reforms in the payment system, and some other reforms, so it is good. We have many things to say. We have macroeconomic and price stability, cutting of interest rates, doubled foreign exchange reserves for two years, a successful budget year, reforms in the banking sector, one of the lowest income taxes, many free trade agreements etc.
So what will be your message at the investment forum? What will you say to potential investors?
My main message is come and see. Definitely we don't have good promotion. People on the outside don't know much about us. It is hard to discuss from 2000 km away. I have heard from many people that before they came here they had a very different idea about Macedonia. But they saw something else - not something ideal, but much better than they expected. So they should come and see. |
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© World INvestment NEws, 2001.
This is the electronic edition of the special country report on Macedonia published in Forbes Global Magazine.
August 20th, 2001 Issue
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