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Macedonia: Economy Near Collapse Due To War, Refugees

Officials in Macedonia, which has suffered one blow after another since independence in 1992, say its economy has been brought near collapse because of the war in Yugoslavia. RFE/RL correspondent Kitty McKinsey, recently in Macedonia, found there are also a few bright spots, but they do not compensate for the losses.

Skopje, 4 June 1999 (RFE/RL) - In the seven years since Macedonia became independent, its economy has suffered one blow after another. The costs of enforcing UN sanctions against Yugoslavia were compounded by a Greek blockade against Macedonia itself, and the regional disruptions caused by wars in Croatia and Bosnia-Herzegovina.

Then, just as Macedonia began to hope for an economic upturn -- and a relief from its 40 percent unemployment rate -- war broke out this spring in Yugoslavia. Macedonia's markets and trade routes to Western Europe were cut, and more than a quarter of a million Kosovar refugees fled onto its territory.

Macedonia is "facing an economic collapse," says Deputy Prime Minister Dosta Dimovska, with damages from the war estimated to cost Macedonia $1.5 billion by the end of this year.

Finance Minister Boris Stojmenov said recently that industrial production in the first quarter of this year declined by 14.3 percent, worsening unemployment.

Macedonian government economists predict a drop in gross domestic product of up to 10 percent, with a decrease in industrial production of 20 percent.

Macedonia is struggling to cope with more than 12 times the number of refugees it had budgeted for before the recent crisis started. Not only do the refugees threaten ethnic stability in Macedonia. Officials also say many poor Macedonians now actually envy the refugees, most of whom are cared for by the UN refugee agency, the UNHCR, and international aid agencies at a better level than Macedonia can provide for its own poor.

Deputy Prime Minister Dimovska, in an recent interview in the Nova Makedonija newspaper, said "The poor Macedonian envies the refugees who, considering all the help that he receives every day, is at least guaranteed two meals a day and health protection, while the poor Macedonian doesn't have any of these guarantees".

In a more direct blow to the Macedonian economy, the war in Yugoslavia has cut off the lucrative Serbian market, and blocked trade routes to important markets in the European Union.

Manufacturing, transport, trade and tourism have all been hard hit, along with agriculture. Economists predict many crops will remain unharvested in Macedonian fields this summer unless export markets are restored.

The Macedonian information ministry said recently that some 300 companies have registered a total of $680 million in direct damages related to the crisis in Kosovo. Those companies that are managing to trade face dramatically higher tranportation costs on alternative routes to Western Europe.

The only bright spots in the Macedonian economy these days come from spending by NATO and international aid agencies. NATO says it had spent some 47 million DM ($25 million) in the country by the end of April, buying food, hiring local staff and renting vehicles and accommodations.

NATO spokesman Major Eric Mongnot pledged recently that NATO will continue to purchase local goods and services when possible, but admitted that NATO's spending will not entirely compensate for the money lost due to the conflict.

The UNHCR was recently criticized by Macedonian journalists for flying in 160,000 blankets for the Kosovar refugees from a warehouse in Kenya when there is a blanket factory in Tetovo near some of the largest refugee camps.

UNHCR spokesman Ron Redmond defended the practice, saying time was short.

"The reason we bring supplies from all of these far-flung places is because we have emergency stockpiles already available. In an emergency like this we don't have time to go shopping in the early stages."

However, he reassured Macedonians that the UN agency is now establishing ties with local manufacturers and retailers and plans to buy as much as possible on the local market.

That is also the policy of the World Food Program, which is importing wheat flour from abroad, but is supporting the Macedonian bakery industry by having some 50,000 loaves of bread a day baked in the country.

Namanga Ngongi (en-GONG-ee, accent on second syllable), deputy director of the World Food Program, told our correspondent in Skopje recently that aid agencies are putting a lot of money into the Macedonian economy.

"But there are benefits also. The transport sector, of course, benefits. The sectors producing the kinds of food commodities which we can buy also benefit. The organization of servicing refugee camps goes beyond just food. It has some sectors of services which are provided by the local community. Especially all sanitation equipment cannot be brought from outside. You have to buy a lot of things from within the economy itself."

Even with NATO bombing of Yugoslavia continuing, the alliance, the EU and others are formulating plans for rebuilding the region. Jose Manuel Pinto Teixeira (tay-SHAY-rah), the EU's resident envoy in Skopje, told our correspondent that the West will take specific measures to help Macedonia recover.

But he said that Macedonia will also eventually reap large benefits from the money invested into the reconstruction of Serbia itself, particularly Kosovo.

"But also the reconstruction effort in Kosovo, I can see that that will have a very positive [effect]. It will work as an engine also for this country. Let's consider the destruction that infrastructure in Yugoslavia has suffered. I would see a lot of the construction materials, for instance, to be used in the reconstruction in Kosovo, coming from this country. We know that the refineries, oil refineries and so on in Yugoslavia have been damaged during the bombing. They have here a big refinery very close to the border. There is a Greek investment in this refinery. So I would see that this supply to Kosovo would substantially come from this refinery."

Teixeira said that in addition to the benefits flowing from reconstruction in Kosovo, Macedonia will also benefit from "specific actions targetted to [Macedonia] that still have to be identified."