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Macedonia

Capital Skopje
Time Zone CET (GMT+1)
Country Code 389
Mobile Codes 70,71,72,75,76,78
ccTLD .mk
Currency Denar (1EUR = 61.5MKD)
Land Area 25,713 sq km
Population 2.1 million
Language Macedonian
Major Religions Orthodox Christianity, Islam

EU, EBRD Announce Major New Round of Funding for Local Consulting Sector and SMEs in Macedonia

By Chris Deliso in Skopje

On April 19, the Delegation of the European Union in Macedonia hosted a public event for business figures and the media to mark the official launch of the EU-funded Business Advisory Services (BAS) Programme, at the EU InfoCentre in Skopje.

Run by the European Bank for Reconstruction and Development (EBRD), this technical assistance program will provide funding for the local consulting and advisory sector, for at least 96 local business projects, to be overseen by the EBRD Skopje office.

The BAS Programme, which has operated for over 15 years in 31 countries, including Macedonia, gives local SMEs access to external advisory services on a cost-sharing basis, while also providing “direct assistance at the enterprise level with systemic market development interventions to develop a sustainable local infrastructure of SME support,” according to the organization. The EBRD Shareholders’ Special Fund is now funding a portion of BAS’ projects, whereas these were formerly completely donor-funded.

At the event, participants were provided with a solid overview of the EBRD’s mission and planned continuation of activities with the BAS in Macedonia. The Bank’s projects will have a significant impact for the consulting/business advisory sector in Macedonia, while promoting the potential for economically- and strategically-important business developments in areas such as renewable energy, as will be seen below.

The Proceedings

The morning event began with an opening speech by Dieter Thiel, Head of Operations for the EU Delegation in Macedonia, and was followed by an address by Minister for Economy Fatmir Besimi. Overviews of EBRD activity in the country were also provided by Elena Urumovska, head of the EBRD’s Resident Office in Skopje and BAS National Programme Manager Jovan Gavrilovski, who gave a detailed recap of the BAS’ efforts in the country since 2002.

These totals so far amount to 487 projects with individual projects, involving over 4.3 million euros of donor financing, matched by over 2 million euros from client contributions. The largest share (35 percent) of total BAS consulting projects in Macedonia have been in the sector of environment, while 33 percent have been in the areas of quality management and certification.

Finally, an overview of the BAS Programme and its potential effects for Macedonia were provided by Valeria Della Rosa, the BAS Programme Manager, who came from the Bank’s London headquarters for the occasion.

The BAS Programme- Who Benefits?

An intrinsic goal of the BAS Programme is to stimulate interest and demand for qualified business advisory services, first of all by raising awareness among firms regarding the benefits of having such input; concomitantly, this also ideally leads to an increase in the supply of qualified and experienced local advisory services.

So, who will benefit from the EBRD’s new initiative? Speaking for Balkanalysis.com, BAS Programme Manager Della Rosa stated that in Macedonia “the primary beneficiaries are going to be the local small- and medium-sized businesses, and local consultants.” While EU-funded projects often involve considerable involvement from foreign consultants, for the current initiative in Macedonia “99 percent of consultants engaged with these projects are local.”

Conditions and Supported Consulting Sectors

For BAS projects, local consultants are typically hired for short-term (4-6 months) assignments. The relevant SME is provided with a grant covering up to 75% of advisory costs (with costs capped at 10,000 euros). The grant is only paid, however, following the successful completion of the project, with a mandatory project evaluation one year after, according to the Bank.

The types of advisory services supported consist of specialized areas within five categories: market performance; management effectiveness; cost reduction; quality management and environmental management. The specific opportunities available to local consultants across these categories include analysis, development planning, feasibility studies, restructuring, impact assessments, computerization and ISO certification advisory.

To apply, SMEs must have less than 250 employees, be majority private- and locally-owned, and have little or no experience with having used external consultancy previously. Companies must be willing to pay 25-75% of the net project costs, and must have a debt structure acceptable to the Bank, a demonstrated potential for growth, and a “genuine need” for business advice and ability to absorb and implement it.

Macedonia: Existing Capacity?

One question that comes up with respect to the BAS’ ambitious plans is to what extent Macedonia at present has the domestic consulting capacity required for executing almost 100 to-be-determined projects. However, Programme Manager Della Rosa is not concerned.

“Considerable progress in advisory development has been made since the EBRD started in 2002, and a base has been built,” she noted, pointing to the success of the MCA2000 (Macedonian Consultant’s Association). The larger projects have helped entrepreneurs conform with EU directives, while providing a chance for the local advisory sector to be involved with more work resulting in higher levels of professionalism.

“I’m very optimistic,” Della Rosa stated, noting that Macedonian has been “quite far ahead in some areas, such as energy efficiency and environment in recent years, for example with projects such as the Integrated Project on Pollution Control (IPPC).”

Targeted Industries?

Considering the large number of projects for which the ERBD has planned to devote funds, another question that emerges is whether there is a specific foreseen breakdown of number of projects per industry.

This is not the case, according to the programme manager. “Projects are demand-driven,” she stated. “We don’t target particular industries or businesses, and we don’t exclude any applicants, except for [those outside the EBRD mandate].”

Such industries specifically not funded are the defense industry, gambling, tobacco, banking and financial services. In Macedonia, which is largely agricultural, it is expected that the foods and food-processing industries will be well-represented among applicants, though there is plenty of opportunity for other sectors. Energy and environment projects seem to be of special interest to the EU in the period ahead.

Future Funding: EBRD Development of Green Energy Sector

For investors and European governments today, the alternative energy sector in the Western Balkans stands out, for both geo-strategic and strictly business reasons.

Since 2002, projects related to energy efficiency have comprised only 1 percent of BAS projects in Macedonia, so it is clear that more efforts will be given to this sector in the near future.

Indeed, according to the most recent official EBRD data sheet on Macedonia, the Bank’s overarching strategic plans for the next year in Macedonia include providing long-term funding to local banks under the EU/EBRD Sustainable Energy Credit Line Facility (WeBSECLEF).

According to the Bank, this investment facility has been set up “to provide debt financing for energy efficiency projects and small renewable energy projects implemented by private entities (in industry or in buildings used for commercial services in the Western Balkans.” It is expected to “act as a catalyst to unlock the great potential in the region to reduce energy intensity and promote diverse sources of green energy.”

What’s Next- 2011 and Beyond

The currently planned phase of BAS activity in Macedonia, running through 2013, will include a minimum of 96 projects and involve a budgeted financing of 1.63 million euros, the vast majority of this coming directly from the European Union.

As part of the overall plan, 4 Market Development Activities will be implemented towards developing the needed sustainable local consulting infrastructure. It is expected that the first 60 BAS projects will be achieved during 2011.

Also during this year, at least 2 trainings will be conducted for local consultants or industry sector in specifically the wines sector, energy auditors in the building sector, and the Macedonian Consultants Association (MCA2000), with a view towards accrediting this entity for full membership in the International Council of Management Consulting Institutes (ICMCI). The 2011 plan also includes some promotional and local media visibility efforts.

Fast Facts: EBRD Activity in Macedonia

According to the most recent Bank-published information (cumulative, as of January 2011), the EBRD has completed in Macedonia 68 projects, with a net business volume of 715.9 million euros. The total project value is equivalent to 1.4 billion euros, while gross disbursements equal 458.3 million euros.

The EBRD’s current portfolio in Macedonia amounts to 300.9 million euros, equaling a portfolio share in the private sector of 55 percent. A major recent investment that the Bank is keen to point out is the 5 million euro credit line extended to Ohridska Banka, Macedonia’s fourth-largest bank (since 2007, a subsidiary of the French Societe Generale Group). The credit line is meant to boost Ohridska Banka’s lending portfolio to local SMEs and make it more competitive with the larger banks operating in the country.

The Bank’s report provides an overview of the country’s economy, interestingly pointing out the perceived need for adhering to the “tight fiscal and prudent monetary policies that have delivered stability to the economy throughout the past decade.” It also notes that the 2009 global financial crisis had “very moderate” impact on the Macedonian economy and caused “no delay in the signing or implementation of projects.”

Indeed, it appears that domestic rather than global factors have shaped EBRD activity in Macedonia. A quick look at the EBRD’s in-country project numbers over time indicates a predictable sharp dip during times of uncertainty, such as the 2001 war and again in 2005.

However, since 2006 project totals have consistently risen, with a sharp spike in activity noted from 2008-2010. Provided that outside donors, investors and key governments continue to predict general stability on the domestic and regional level, this trend should continue to increase.

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