Former Yugoslav Republic of Macedonia country brief
Montenegro has been making a gradual transformation into a market economy since 1990. However, it is recovering from a low base following significant mismanagement of the Yugoslav economy by the Milosević regime. International sanctions introduced in May 1992 against the regime also exacerbated economic problems. A portion of the country's industrial and economic infrastructure was also damaged or destroyed during NATO military action in 1999.
In recent years, the pace of economic reform has been slow and the rate of economic development has been gradual. The effects of the global financial crisis caused a sharp contraction of 5.7 per cent in 2009, with main industries aluminium and banking significantly affected. After recovering to 2.5 per cent in 2010 and 2011, real GDP contracted again in 2012 to a negligible 0.5 per cent. Tourism continues to be a significant and resilient part of the Montenegrin economy and has enjoyed a considerable amount of foreign direct investment (FDI). The economy’s lack of diversity has been highlighted by its reliance on a few key sectors such as electricity generation, metals and tourism.
Montenegro’s unemployment rate remains problematic, officially listed at approximately 13.24 per cent in 2012 by Montenegrin authorities. However, there are concerns in the Montenegrin press and international financial organisations that unemployment is grossly underreported, and that the real rate could be as much as twice this figure. This is exacerbated by Montenegro’s large shadow economy and its hidden unemployment.
Montenegro’s principal export destinations in 2012 were Serbia, Croatia and Italy. The majority of Montenegro’s exports consisted of refined metals and consumer goods, while the most important imports were machinery and equipment, mineral products, food, beverages and tobacco. Principal import source countries were Serbia, Germany and Italy.
Montenegro’s foreign trade deficit continues to be a problem. In 2012 Montenegro ran a current account deficit of 20 per cent of GDP, although this has improved significantly since 2008. In a mid-to-long term perspective, sustaining an economic recovery will depend on the new Government’s ability to facilitate economic restructuring and industrial diversification, to develop its tourism potential and to invest tourism revenues into knowledge-intensive economic sectors such as the emerging energy sector (base metals and off-shore oil and gas). In the long term, the economy is expected to slowly recover on the back of regional progress on the road to EU integration.
Although not part of the Eurozone, Montenegro uses the euro as legal tender.
Bilateral trade and investment
Australian trade and investment with the former Yugoslav Republic of Macedonia is negligible. In 2011-12 total two-way trade between our countries was valued at A$5.56 million, in favour of the former Yugoslav Republic of Macedonia by more than 6 to 1. Computers, household equipment of base metal, measuring and analysing instruments, and telecom equipment and parts were Australia's largest export commodity. Imports mainly comprised vegetables, clothing, edible products and preparations, and cereal preparations. Though investment levels are minimal, there has been some interest by Australian companies in investing in education services and mining in the former Yugoslav Republic of Macedonia.
High-level visits have reaffirmed our long-standing ties and resulted in lasting outcomes for the benefit of our citizens. Between 26 February and 3 March 2012, a delegation led by Assembly President, Mr Trajko Veljanoski, visited Australia on the invitation of the Australian Parliament. Mr Veljanoski was accompanied by members of the Assembly’s Australia and New Zealand friendship group and Mr Milorad Dodevski, elected representative for the Australian and New Zealand diaspora.
In October 2009, Prime Minister Gruevski accompanied by then Foreign Minister Milososki visited Australia as a Guest of Government. During the visit, Prime Minister Gruevski and then Prime Minister Rudd concluded a social security agreement which entered into force on 1 April 2011.
In January 2013, Mr Luke Simpkins MP visited the former Yugoslav Republic of Macedonia, after the visit by Mr Stephen Jones MP in July/August 2012. In March 2012, Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy visited Ohrid to attend the fifth meeting of the Broadband Commission for Digital Development. Then Speaker of the House of Representatives, Mr Harry Jenkins, visited Skopje in December 2009.
The former Yugoslav Republic of Macedonia is a landlocked and mountainous country with an area of 25,713 square kilometres (less than half the size of Tasmania). Of the population of 2.1 million, approximately two-thirds are ethnic Macedonians, one-quarter Albanians (concentrated in the north-western parts of the country) and there are significant minorities of Turks, Roma and Serbs. Located in the centre of the Balkan Peninsula, the former Yugoslav Republic of Macedonia has borders with Albania in the west, Greece in the south, Bulgaria in the east, Serbia and Kosovo in the north.
The former Yugoslav Republic of Macedonia declared its independence from the former Socialist Federal Republic of Yugoslavia (SFRY) on 17 September 1991.
The former Yugoslav Republic of Macedonia is a parliamentary democracy with an executive government composed of a coalition of parties from the unicameral legislature and an independent judicial branch with a constitutional court. The Assembly ‘Sobranie’ is made up of 123 seats and its members are elected every four years. Each of the country’s six electoral districts elects twenty members to the Parliament. Three additional seats are reserved for representatives of the diaspora from Europe and Africa; North and South America; and Australia and Asia. The current representative for the Australian diaspora is Mr Milorad Dodevski.
The role of the President of the Republic is mostly ceremonial, with the real power resting in the hands of the Prime Minister as President of the Government. The President of the Republic is the Head of State, the Commander-in-Chief of Armed Forces and Chair of the National Security Council. The President is elected by majority vote in direct elections, for a term of five years, and may serve no more than two terms as President. The current President, H.E. Gjorge Ivanov, was elected President of the former Yugoslav Republic of Macedonia on 5 April 2009 in the Republic’s fourth Presidential elections since 1991.
The June 2011 elections saw the centre-right Internal Macedonian Revolutionary Organisation – Democratic Party of Macedonia National Unity (VMRO-DPMNE) led by Prime Minister Nikola Gruevski remained in power with 56 seats. His two-party coalition with the Democratic Union for Integration (DUI), one of the country's two main ethnic Albanian parties, remains in place. The new Ministry was inaugurated on 28 July 2011.
In January 2001, tension between the ethnic Macedonian and ethnic Albanian communities led to a civil conflict between the hitherto unknown Albanian NLA (National Liberation Army) - which had strong ties with the Kosovo KLA/UCK (Kosovo Liberation Army / Ushtria Clirimtare E Kosoves) - and the former Yugoslav Republic of Macedonia security forces. The political crisis led to several outbreaks of armed fighting, particularly in the northwest, and the internal displacement of thousands of citizens.
The 'Ohrid Agreement' settled the issues of minority rights and representation in August 2001. Following the necessary legislative changes, the former Yugoslav Republic of Macedonia government devised an action plan, which has seen a steady increase in the employment of Albanian and other minorities in the public sector.
NATO maintains headquarters in Skopje, and advises the former Yugoslav Republic of Macedonia Government on security sector reform.
Relations with the EU and NATO
A key foreign policy objective for the former Yugoslav Republic of Macedonia is to become fully integrated in Euro-Atlantic structures through membership of the EU and NATO.
Negotiations commenced in March 2000 with the EU to conclude a Stabilisation and Association Agreement (SAA), the first major step towards membership of the EU. The SAA was signed in April the following year and Skopje is working closely with the EU to develop and strengthen the country's institutions and capacity to meet the requirements for accession. The former Yugoslav Republic of Macedonia became an official EU candidate country in late 2005, but has not commenced accession negotiations due to the ongoing dispute with Greece on the name issue.
The former Yugoslav Republic of Macedonia has also sought membership of NATO, signing the Partnership for Peace (PfP) Framework Document in November 1995. Through the PfP, partner countries develop individual programmes of practical cooperation with NATO. The former Yugoslav Republic of Macedonia has contributed military support to allied efforts in Afghanistan and post-conflict Iraq.
Relations with Greece
The former Yugoslav Republic of Macedonia and Greece continue to disagree over the 'name issue'. The former Yugoslav Republic of Macedonia refers to itself by it constitutional name of 'Republic of Macedonia' but Greece considers that this implies territorial aspirations to northern parts of Greece. The former Yugoslav Republic of Macedonia was admitted to the UN in 1993 under the provisional name of the former Yugoslav Republic of Macedonia. This was reluctantly agreed to by both sides pending their final resolution of the name issue. Although UN-mediated negotiations have been ongoing since conclusion of the 1995 interim accord, the dispute is yet to be resolved and has resulted in Greece blocking the former Yugoslav Republic of Macedonia's accession to the EU and NATO. On 5 December 2011 the International Court of Justice ruled that Greece violated the 1995 Interim Accord between the two countries by vetoing the former Yugoslav Republic of Macedonia's NATO membership. The last UN–mediated talks were held in New York in April 2013, where UN Special Envoy Matthew Nimetz put forward a new proposal to resolve the name issue. Follow-up talks are expected to continue.
The former Yugoslav Republic of Macedonia's small, open economy makes it vulnerable to economic developments in Europe and dependent on regional integration and progress toward EU membership for continued economic growth. At independence in September 1991, the former Yugoslav Republic of Macedonia was the least developed of the Yugoslav republics. It remains one of the poorest countries in Europe today.
The collapse of Yugoslavia severely disrupted the economies of its constituent states, ended transfer payments from the central government, and eliminated advantages from inclusion in a de facto free trade area. While it was able to maintain macroeconomic stability with relatively low inflation, the former Yugoslav Republic of Macedonia lagged in attracting foreign investment and creating jobs, despite making extensive fiscal and business sector reforms.
These problems were exacerbated in the first half of the nineties by the impact of other markets in Eastern Europe undergoing restructuring, the difficulties of economic transition, UN sanctions, and a Greek embargo. The end of the Greek embargo in October 1995 and the lifting of UN sanctions created a more normal economic environment. However, the 2001 conflict seriously affected production, foreign investment and the pace of economic reform.
In the wake of the global economic downturn, the former Yugoslav Republic of Macedonia experienced a further decrease in foreign direct investment, lowered credit, and a slowdown of export growth, but the financial system remained sound. As a result, the country’s credit rating improved slightly in 2010 to BB+ and has been kept at that level since (BB by S&P).
GDP growth recovered from -0.9 per cent in 2009 to 2.9 per cent in 2010 and 3.1 per cent in 2011. This was boosted by strong export growth, investment spending and a recovery in household consumption. Zero growth has been forecasted for 2012. Continued negative economic developments in Europe resulted in a marked slump in exports during 2012 which lead to recession in August. Consequently GDP growth decelerated drastically to nil per cent by end 2012 (50 per cent of exports go to the euro area). Unemployment remains high at 31.3 per cent (2012 est,), but this figure may be an overstatement in light of the existence of a large grey market, estimated to be between 20 to 45 per cent of GDP.
Updated June 2013