1. DECENTRALIZATION VS. DEMOCRATIZATION: THE CASE OF MACEDONIA

2. Key highlights of the presentation Macedonia as a successful story of the Western Balkans Badly Envisioned and Managed Decentralization Endangers Ethnic Relations and Democratization of Macedonia, USA & EU attention needed?

3. Multiethnic Macedonia: a success story Unlike other republics peacefully disassociates from Federal Yugoslavia in 1991 despite Serbian nationalism Withholds Greek pressure and embargos and reaches an interim agreement normalizing the relations (1991-1995) Tackles interethnic relations through the institutions of the system thus moderating Albanian and Macedonian nationalism; e.g. multiethnic government coalition a feature of the political system Manages well the Kosovo refugee crises in 1999 despite tensions and inadequate international response 2001 crises spilled over from Kosovo results with low intensity conflict ending with the Ohrid Framework Agreement (hereinafter OFA); majority of the population dismisses nationalist rhetoric, remains calm throughout New government coalition harmonizes ethnic relations through the implementation of OFA and works on the EU integration, but problems remain

4. Continuum of difficulties since 1991: socio-economic problems at the fore Bad economic policies in socialist times result in a underdeveloped economy; very low base for independent Macedonia Disintegration of Federal Yugoslavia in the 1990’s results in the loss of the main market for Macedonian products Greek economic embargo UN sanctions against Serbia and Montenegro main trading partner Moderate level of nomenklatura change; unsound economic policies in the 1990’s, slow and ineffective privatization, low level of FDI Burdened by the refugees from the wars in Bosnia and especially Kosovo (appx. 300.000) Domestic crises in 2001

5. Important data for Macedonia Total area: 25,713 square km Total population: 2.0 million Growth rate: 0.4% Rural: 40.2% Urban: 59.8%

6. Ethnic composition Source: Census 2002, Statistical Office of Macedonia

7. GDP per capita in US$ 19941,742  19951,705  19961,709  19971,732  19981,781  19991,848  20001,924  20011,830  20021,835  20032,192 (estimate)

8. Alarming Figures The recovery of the Macedonian economy in 2003 stopped in 2004. After 2001 decline of 4.5%, the real GDP in 2002 was barely positive at 0.9%. In 2003 real GDP grew by 3.2%. GDP per capita = US$ 2,192. GDP in Q1 of 2004 fell by 3.6%. Projected real GDP growth for 2004 was 4.0% - unlikely to be met. The upward trend of the industrial output since 2002 was halted in 2004. In the period January – May 2004 it dropped by 24.6% relative to the same period of previous year. Unemployment rate in 2003: 36.7%; Employment rate in 2003: 34.5% Number of employed persons at the end of Q1 2004: 263,0312, down by 5.2% on annual basis. Number of unemployed persons at the end of May 2004: 395,693 - up by 3.0%. Nominal average net wage per worker in April 2004: Denar 12,551 or 250 US $ but 23 % of employees have not received wage in April 2004 30.2% of the population lived below the poverty line (USD $75/month) in 2002 - an increase from 22.7% in 2001 The “gray economy” is estimated to be between 15 and 42% of GDP

9. Alarming Unemployment Data Source: Employment Fund of Macedonia

10. Crucial Challenges Decentralization Reverse economic downturn Judiciary reform Public administration reforms Continue battle against corruption, improve governance, reduce “gray economy” Improve legislation, attract FDI

11. Decentralization process in Macedonia encompasses: Law on Local Self-Government Law on Fiscal Decentralization Law on Municipal Budgets Law on Territorial Boundaries of Municipalities?

12. What are the problematic issues of the new law on territorial boundaries of the municipalities a broad public debate on the new territorial boundaries of the municipalities; consultations involving local officials organized in the Association of the Units of Local Government (ZELS); taking into consideration concerns by foreign and domestic experts; taking into consideration the will of the people, ignoring in particular the expressed objections of 41 municipalities for redrawing the district boundaries taking into consideration the position of the opposition parties taking into consideration article 3, section 2 of the Ohrid Framework Agreement which stipulates that "the revision of the municipal boundaries will be effectuated by the local and national authorities with international participation" taking into consideration that Macedonia has signed and ratified the European Charter of Local Self-Government which states that "changes in local authority boundaries shall not be made without prior consultation of the local communities possibly by means of referendum where this is permitted by statute" (article 5)

13. The most contentious questions are the proposed new boundaries of the municipalities of Struga, Kicevo and Skopje. MACEDONIAN FEARS- In Tetovo and Gostivar, after the democratization of the country in 1991 local power was taken by Tetovo Albanians and all Macedonians in charge of the public enterprises in the town were replaced by ethnic Albanians. ALBANIAN FEARS- local Albanians are concerned that if the 1996 boundaries are maintained the areas where they live great numbers such as Zajas, or Veleshta will remain underdeveloped and they will not have access to public resources. THE QUESTION OF SKOPJE-Skopje on the other hand, is a capital city and the question of the “bilingualism” concerns both questions about access to public resources and services in the native language, as well as symbolic status of the city. Macedonians fear not only that the city resources will be wasted on providing services in Albanian language, but also that the capital will somehow lose its Macedonian identity. The capital city holds a significant symbolic power to both communities and that although Skopje Albanians do not constitute 20 % access to services and public resources in their native language is an important matter for building new realities in Macedonia based on the Ohrid Framework Agreement.

14. Map of Kichevo Area Kicevo town, Vranestica and Drugovo are Macedonian majority municipalities, while Zajas and Oslomej are predominantly ethnic Albanian. Adjoining these five municipalities into a new one would make Kichevo a majority Albanian municipality. Macedonians from the town of Kichevo fear that many of them will lose the opportunities in the public sector.

15. Statistical Data on the Kichevo Area Municipality19481994Maced. %Alb. %Other % Kicevo8,76127,543 58.55 26.1215.33 Drugovo9,8243,555 87.43 3.688.89 Oslomej7,4019,1701.74 98.16 0.10 Vranestica4,2031,650 79.94 0.4819.57 Zajas5,94910,0552.79 97.12 0.09 Total36,13851,97340.3950.229.39

16. Macedonian majority municipalities are in red. The Albanian majority are in green. The new map of municipality of Struga Old Map(1996). MAP OF STRUGA AREA

17. Municipality2002Macedon. %Albanians % Struga3689217686 48%15324 41.5% Lukovo15021496 99% Labunishta89351149 13%4935 55% Veleshta81568072 99% Vevchani24332419 99% Delogozhdi78847698 99% However, note the statistical data for the native language (mother tongue) in the municipality of Labunishta and Stuga. Labunishta census data according to native language of the residents Macedonian speakersMacedonians 4872 82%371, 16% Struga census data according to native language of the residents Macedonian speakersMacedonians 19939 54%17686, 48% Statistical Data on the Struga Area

18. The Road Ahead-What Should be Done We would like to see a well prepared law on the local government boundaries taking into consideration both local and international perspectives as well as the will and needs of all citizens in the country regardless of their ethnic origin. Decentralization is one of the main instruments of democracy in the practice and protection of human rights and freedoms. Decentralization should begin and end with active participation of citizens through their common will. This law is the most difficult step in implementing the 2001 Ohrid Framework Agreement that pulled Macedonia back from the brink of civil war. The Law on Territorial Organization should have marked a triumph for political sense in a region where politicians have too often been seduced by nationalism The law proposed by the new government is no such triumph. Unfortunately, the international community has largely stood by the government’s position on the new law and on the referendum effectively putting it in an uncomfortable position vis-à-vis the majority opinion in the country supporting bad policy making.