Kester Eddy in Budapest
November 20, 2012
Macedonia offers investors the most competitive tax and low-cost business environment in Europe, it needs "several billion euros" in infrastructure investment in the mid-term, and its people are well-educated and hard-working, but very disappointed that the EU and Nato have allowed the dispute with Greece over the name of the former Yugoslav republic to block the road to membership of these organisations. That, in a nutshell, is the message Nikola Gruevski, prime minister of Macedonia, sought to give bne in an interview this week at the end of a two-day visit to Hungary.
But Gruevski, relaxed yet energetic, despite his packed schedule of meetings, is wary of talking to journalists about Macedonia's biggest challenge – the dispute over his country's official name – which exists because Greece says it fears the integrity of its province of Macedonia is threatened by the emergence of a "new" Macedonia on its northern border.
"I've had a negative experience with this – a German paper cut the quote, and I was trying to explain three months later that the second part of the sentence was not presented… this is such a sensitive issue, that anything said can be used or misused," he says.
The relationship between Macedonia and Greece has been regulated by the UN-brokered Interim Accord signed in 1995, by which Greece has agreed not to block Macedonia's integration in international organisations if done under the provisional reference/name of "the Former Yugoslav Republic of Macedonia".
But, Macedonia argues, Greece has broken this pledge by blocking its entry to Nato in 2008 and the opening of EU accession talks for almost five consecutive years. "Macedonia would like to find as soon as possible a solution to this issue; it's in our interests to solve this, improve our relations with our southern neighbour… but in the last one and a half years there have been no discussions, these stopped in June last year," he says.
The prime minister – an economist by education – stressed that he had offered dates to the Greek side, and also invited Athens to propose dates for discussions "at any time, any place," but all offers had been rebuffed. "In 2009, the European Commission for the first time gave a positive report on Macedonia, and made a recommendation to the European Council to open the negotiation process for EU membership. This was repeated in 2010, 2011 and for a fourth time in 2012, and in the last report the Commission recommended that negotiations should be opened without delay – for the first time they stressed this – without delay!"
Given that Macedonia has "fulfilled its obligations," the continued foot-dragging by both the EU and Nato is "unfair" and "very frustrating" for Macedonia and its people, Gruevski says.
Macedonian diplomatic sources, meanwhile, played down an early November move by Greece touted by one news source as "Macedonia warms to Greek name solution initiative", telling bne that such headlines were "problematic".
"There is no such thing as a 'Greek name solution initiative' – they've sent that memorandum to Skopje after almost a year of attempts by our PM and president to meet their Greek counterparts, for which either there was simply no answer on the initiatives, or they were negative," one source told bne.
"With this memo, obviously they want to fix the negative image that they have been avoiding talks with u ... it does not provide any new elements from their already known maximalistic positions. However we still wish to see it as a step forward (compared to the absence of any response from their side in the previous months to our initiatives), hence our MFA's response to the Greek memo that is with a positive tone."
But if progress on political integration is stalled, Gruevski, whose has led a centre-right coalition government since 2006, has overseen rapid headway on the economic front, with sweeping changes to legislation that make the country "the most cost competitive in Europe," he insists. "GDP growth was 6.1% in 2007, and 5.0% in 2008. We then began to feel the negative effects of the crisis. This year growth will be between 0.5-1.0%," he says.
He admits that unemployment, which stood at a staggering 39% in 2006, remains at an unacceptable 31%, but stresses that given the knock-on effects of the European crisis and particularly the turmoil in Greece, merely avoiding a rise in the numbers of jobless is in itself a success.
Underpinning the record since 2006 have been four packages of business-friendly legislation that have stripped out red tape and put both personal income tax and corporate tax at a common flat rate of 10% flat rate.
In addition, a drive to attract foreign companies has resulted in a variety of new entrants in Macedonia. Gruevski is particularly keen to point out companies such as Johnson Controls of the US, which set up a plant to produce printed circuit boards in 2008 and has since established a second unit, and Johnson Matthey of the UK, which likewise is expanding its catalytic convertor production after a positive experience with its initial Macedonian investment.
The increased activity has meant a surge in foreign direct investment (FDI), which jumped from a typical figure of €100m in the first years of the new millennium to €700m in 2007 and €600m in 2008.
While the annual figure has declined with the global downturn – 2011 was "around €200m" Gruevski says – he underlines that ambitious plans to modernise and expand the gas and electricity sectors, as well as build new motorway and rail connections to both Bulgaria and Albania mean he expects "several billion euros" of investment into Macedonia by 2020.