05 July 2007

Visions of paradise face up to reality

By Eric Jansson
Published by Financial Times, 5 July 2007

Leopards and bulls rest in the shade of fruit trees. Peacocks strut down the aisles of ancient churches. Deer lap water from an ornate urn, from which springs the "tree of life".

To archaeologists, the vivid mosaics at Heraclea Lyncestis suggest visions of paradise both figurative and practical figurative because the animals and geometrical patterns portrayed pointed to paradise for the early Christians who once worshipped at the site, practical because there is so much more promising work left to be done there.

Since the 19th century, when an Ottoman sultan authorised the first excavations of the city, archaeologists have uncovered 1300 sq m of mosaic flooring, much of it exquisitely preserved.

Yet their efforts to date have scratched just the surface of what Heraclea may ultimately offer up. Engin Nasuh of the Bitola Institute and Museum, chief archaeologist at the site, says test digs in surrounding vineyards indicate that only "about one tenth" of the ancient city has been excavated so far.

The existing finds are remarkable for the views they afford of Greco-Roman convergence, from Heraclea's founding in the 4th century BC through the Roman conquest two centuries later and eventually the westward spread of Christianity.

At such sites in the Republic of Macedonia, a look backwards in time reminds citizens that their claims to European identity are not merely aspirational but foundational.

As the country inches closer diplomatically to the European Union, EU diplomats frequently proclaim an emerging "European perspective" for the western Balkans. But standing amid the ruins of Heraclea, Mr Nasuh notes with some satisfaction that this place's European heritage actually predates the EU by millennia.

"There is a kind of mysticism here, a magic, what you might call a European feng shui," he says.

Heraclea blatantly no longer stands at the centre of the continent's development, as it did when it was an important city on the Via Egnatia, the Roman road linking Jerusalem and Rome. Today its ruins lie on the dusty outskirts of Bitola, a city little known outside the region.

Yet the stones there continue to afford glimpses into Europe's cultural heritage that resonate today.

A startling example is the site's "small basilica", the ruins of a church that Mr Nasuh says may have been built before 300 AD. Its eastern walls are rectangular on the outside but curved behind the altar space within evidence, the chief archaeologist says, that the Christians who built it may have been compelled to disguise the building's true purpose, worshipping secretly in the shadow of official Roman persecution.

The small basilica, a much bigger basilica, episcopal residence and other buildings now lie beneath the periphery of a Hellenic amphitheatre adapted in Roman times for gladiatorial games.

But the site is less glorious than it could be. This summer, visitors will be disappointed to find sand covering the expansive mosaic floors of the big basilica. The archaeologists dumped it there to protect the ancient tiles from Macedonia's changeable weather. They have yet to devise a better method of preservation.

Chronic underfunding impedes progress at the site, along with "a general lack of long-term strategy and planning for preservation of cultural heritage in Macedonia," says Mr Nasuh.

Heraclea's total budget for 2007 is €40,000, most of which is earmarked for construction of a museum shop. Sales at the new shop may ultimately yield the local cash flow that the site currently lacks, enabling workers to operate with greater independence from the state budget drawn up in Skopje.

Meanwhile some EU countries, most notably Italy, have started stepping into the void. Interested in part because of its own ancient ties to Heraclea, Rome has offered funds to improve site security and night-time illumination.

But international co-operation could be better. Unresolved rivalries stemming from the break-up of Yugoslavia almost two decades ago still pose a problem. Serbia, where centralised Yugoslav state institutions were based, has so far refused to relinquish archaeological records from Heraclea.

Mr Nasuh blames academic rivalry.

The records, to which, he says, his counterparts in Belgrade refuse him access include studies from the Yugoslav era on key archaeological questions, such as what lies beneath some of the mosaic floors.

"There is almost certainly enough material for 20new doctorates in there," he says.

Yet if it is true that only a tenth of the site has been excavated, the very ground under Mr Nasuh's feet may yet yield enough archaeological material for hundreds of doctorates.

Ski resort entrepreneurs have mountain to climb

By Eric Jansson
Published by Financial Times, 5 July 2007

Just past the hamlet of Smrdliva Voda - translated roughly as "Stinkwater" - the paved road up Mount Kozuf breaks into a heavily rutted dirt path. Angel Nakov's 4x4 keeps roaring uphill.

Mr Nakov and his business partners are building the road. Higher up, once it runs out, he turns his vehicle on to an even more primitive path, bouncing all the way. When that too disappears, he turns straight uphill toward Kozuf's peak and steps on the accelerator. The car bounds over the wildflowers and blueberries that grow densely on the slope.

Finally it becomes too steep, and Mr Nakov jumps out to climb the last few hundred metres. At the top, only a small pillar marks the border between "SFSJ" the extinct Socialist Federal Republic of Yugoslavia and "E", Greece.

From the peak 2,160 metres above sea level, almost the entire Republic of Macedonia can be seen to the north. Looking south, there is the Aegean sea, the Greek port of Thessaloniki and Mount Olympus on the far horizon. Along the east-west ridge, one can still spot gun placements from the First World War when the Salonika Front ran through.

Such is the spectacular view from the summit of what is surely one of the most audacious entrepreneurial schemes underway in the Republic of Macedonia.

It started as "a joke" that is now 15 years old, Mr Nakov says. In the early 1990s, as the manager of a duty-free shop at a border crossing, he developed a taste for business. But he longed to mix business with pleasure. Pleasure on weekends lured him up the mountain with family and friends.

At the time, horses were the only way up. A large slice of wilderness in the southern Republic of Macedonia, including Kozuf, opened up to the general public only in 1991, after four decades spent as a closed military zone following the Greek civil war.

When Mr Nakov and his riding friends "discovered" the mountain, they immediately thought of a year-round resort, he says. But it took years to squeeze their giant dream into an actionable business plan. Now, as executive director of the private company Ski Centre Kozuf, he says they have it.

Together they have spent €4.2m to date, for which there is no ski resort to show. However they do have 55 hectares of land with detailed planning permission for a village in the valley below, initial buildings, machinery to tend the slopes, a first ski lift, passable access roads, links arranged with public utilities and a slick advertising campaign.

A deal with the state foresees swapping a share of lift-ticket income in exchange for use of the mountain.

"We can say we have a very rare situation among new projects in south-east Europe. Our paperwork is all in order. Now our work is practical," Mr Nakov says.

Work at the site is accelerating with the help of an €8m loan from Stopanska Bank, a local lender owned by the National Bank of Greece, he says. With an additional €4m under negotiation, plans call for €12m in spending in 2007, bringing in plumbing, sewage systems, power lines, snowmaking machines, a six-seat chairlift and at a stretch possibly, the construction of the first 60 chalets.

Further cash inflows are expected from property sales, with parcels going for €49 per sq m. Ski Centre Kozuf aims to capitalise on soaring UK demand for holiday homes. "We expect to sell 60 per cent to Brits, 20 per cent to Greeks and the rest local," he says.

But the company also aims to share burdens with a strategic investor. Some €80m will be needed up to 2009 to complete the whole village and mountain to a high standard, according to the plan.

But will the project work in the end? "It's a good idea, but I have some doubts," says Mirko Tripunoski, a tourism expert who to local acclaim launched the mountain resort Popova Shapka, or "Priest's Cap", in 1982. Kozuf may struggle to flourish year-round, in case of weak summer demand or warm winters, he warns.

But Mr Tripunoski's Popova Shapka today is a post-Yugoslav wreck. If the broken chairlifts and sorry scenes on its towering slopes near the Kosovo border are a sign that mountain tourism can go wrong here, they also point to unmet demand.

Hopes pinned on foreign investors

By Eric Jansson
Published by Financial Times, 5 July 2007

Facing a global attention deficit, many a small country at some stage plumps for a 30-second spot on CNN or BBC World, hoping that a flicker of local scenery and music might yield a bounce in tourism revenue or charm the odd potential investor.

Not the Republic of Macedonia. When the southernmost former Yugoslav republic launched its own promotional blitz last year, its target was global finance.

Arriving at the World Economic Forum annual meeting in Davos, Switzerland, in January, invitees received complimentary copies of The Economist magazine tucked into glossy wrappers describing Macedonia as "a new business heaven in Europe".

Months later, the country's advertising bonanza carries on, scoring repeated hits in 59 top-flight business publications in 39 countries.

Questioned by taxpayers, government officials refuse to disclose how much the state-funded campaign costs. Yet, even without a figure, the effort by its nature reveals how sure officials in Skopje are that any significant economic breakthrough to be expected in the coming years will be powered by foreign investment.

No one disputes the need for a breakthrough. Real economic growth was steady through 2006 with a 3.2 per cent rise in gross domestic product. The government reports a GDP growth spike of 7 per cent in the first quarter of 2007, year on year. But the country's potential remains woefully underexploited. Rising growth, low inflation and shrinking external debts leave almost untouched a staggering official unemployment figure of 36 per cent.

Two questions arise. First, is it true that foreign investment will provide the fundamental boost needed to speed growth and create jobs? The answer depends on the nature of investment. If the majority of companies pulled in build factories as a growing number are doing jobs will come.

Second, is the government's promise of a "heavenly" business climate to be believed? Foreign investors on the ground give positive answers, with contextual reservations.

Since entering office less than 11 months ago, ministers have launched "really positive" reform efforts, says Aristides Vlachos, president of the International Council of Investors in Skopje. He heaps praise on Skopje's "regulatory guillotine" project to cut red tape, but adds that "it is too early to see results".

Reformist ministers find it difficult to make good on promises, dependent as they are on the post-socialist country's anaemic civil service. "We have the impression that the government is trying hard to bring change, but state administration does not follow. They have to get rid of the old bureaucrats," Mr Vlachos says.

Examples abound. A prime achievement is the creation of a "one-stop shop", a system designed to simplify the process by which new companies are registered, cutting the time needed from five days 12 months ago to three days now.

By September, this should be reduced to just 24 hours, says Vera Rafajlovska, the economy minister.

In fact, says Mr Vlachos, the one-stop shop is "a positive idea but still not real". The time for registering new companies remains "variable" and still requires visits to multiple state offices.

The "Invest in Macedonia" campaign also promises exceptionally low tax rates 12 per cent on corporate and personal income and zero on reinvested profit lowered further still for investors in free economic zones.

The rates described are technically accurate. But critics note that other important taxes go unmentioned. With certain wage-related contributions counted separately from income tax, aggregate wage taxes actually exceed 75 per cent, says Sam Vaknin, an economic adviser to past governments.

"Yes, corporate profit tax is the lowest in Europe although Albania is now matching it but if you calculate the total tax burden on businesses it is either the second or the first, competing with Sweden," Mr Vaknin says.

By launching its campaign before pro-business reforms really work, the government risks fostering "disillusionment and disenchantment" among new arrivals conducting due diligence, he adds.

But the critique may be too sharp. Even sceptics such as Mr Vaknin say they believe that government ministers are trying sincerely to liberate economic potential by cutting taxes, opening the economy and attacking corruption.

According to Trajko Slaveski, finance minister, critics were proved wrong when they predicted that lower personal income and profit tax rates would threaten the state budget already the region's smallest as a proportion of overall economic activity. "Lower taxes did not just yield higher revenue, they yielded 20 per cent more than we projected," he says.

Partly this reflects the immense amount of business done off the books in an country where many people's flair for entrepreneurial profit-making far exceeds their respect for the tax authority. Some economists estimate that the "grey economy" accounts for 50 per cent of GDP.

Many workers take jobs secretly while keeping their unemployed status the only way to qualify for free state health insurance, says Burt van Selm, resident representative for the International Monetary Fund. "Funny quirks like this need to be worked out," he says.

Mrs Rafajlovska, head of a private consultancy before becoming a minister, says the practical opportunities for meaningful reform have exceeded her expectations. When she first entered her government office, she found "a huge pile of papers on the desk". She was told they were companies' requests for ministerial approval "on all sorts of issues".

"I told them to tell companies they do not need a minister's approval to work legally. Now, look, there is no pile," says Mrs Rafajlovska.

It is a start.

Refinery rift nears its end

By Eric Jansson
Published by Financial Times, 5 July 2007

The OKTA oil refinery has always stood a bit apart from the centre of power in the Republic of Macedonia. Though just 10km from downtown Skopje, the complex is situated in a desolate valley below barren slopes east of the city.

Yet the distance from the refinery's executive offices to the centre of government has sometimes seemed even greater during a long-running rift between the refinery's owner and the Macedonian state.

Later this month, that sense of estrangement is due to end. A Paris-based arbitration court is expected to settle, once and for all, the dispute between Skopje and Hellenic Petroleum, the Greek state-controlled energy group that purchased OKTA in 1999.

Both sides say they expect the court to settle all outstanding issues regarding the state's controversial sale of the refinery to Hellenic's subsidiary ELPET Balkaniki.

Relations between the state and the company, acrimonious for years after the sale, have "normalised" since 2004, Macedonian government ministers and Hellenic executives say. But both sides would also welcome a formal end to the dispute.

With Skopje striving to show a more welcoming face to incoming investors, Nikola Gruevski, the prime minister, already refers to Hellenic's problems as "a case from the past".

Michael L Myrianthis, OKTA's chairman and Hellenic's director-general for international activities, likewise says he believes Mr Gruevski's government is "making a genuine best effort" to improve relations with present and future investors.

Such comments are indicative of a gradual but dramatic reconciliation observed over the past three years.

On buying the refinery in May 1999, as the regionally destabilising Kosovo war raged next door, Hellenic had absorbed steep risks to secure a commanding position in the market. The company even moved ahead with large-scale refurbishment and infrastructure investments despite Macedonia's brief descent into inter-ethnic conflict in 2001.

Quick cash from the refinery sale had arguably helped to limit the post-Kosovo fallout for Skopje.

But as the dust settled after Macedonia's late-2001 Ohrid inter-ethnic peace agreement, opposition critics held the OKTA sale up to continued public scrutiny. They claimed the sale price of $32m had been too low and that Hellenic had gained monopolistic advantages in a non-transparent deal.

Added criticism from the World Bank and European Union, especially over the Greek company's extraordinary rights to import oil at a reduced tariff, ultimately yielded a turn in state policy.

By 2004, Hellenic officials complained of daily trouble from the state authorities, including blockages of OKTA's bank accounts in 2003 and claims by state officials that Hellenic had not acquired title to the land upon which the oil refinery stood. Repeated interventions slowed planned investments, Hellenic said.

The result, after eight years, is a complex dispute characterised by multiple grievances on both sides, with the state and Hellenic Petroleum each claiming to have suffered material losses through unfair treatment since the time of the sale.

In advance of this month's ruling, Mr Myrianthis plays down the refinery's importance to Hellenic Petroleum. "We can live without it. We can replace [its output] from Thessaloniki if needed, though that is not our intention."

A ruling in the state's favour could force payouts from the company although even then Hellenic would not withdraw from the country now, Mr Myrianthis says.

A ruling in Paris in Hellenic's favour would vindicate the company's strategy of "long-term thinking".

Instead, he says he hopes the court will chastise the state, but only mildly. A ruling that is "too one-sided" might serve to reignite political controversy over the refinery an outcome neither side wants.

Rebuilding a sector, piece by piece

By Eric Jansson
Published by Financial Times, 5 July 2007

When Johnson Controls, a big manufacturer of car interior systems, went looking for its newest production site for high-end electronic components, the Republic of Macedonia was not the obvious answer.

The former Yugoslav automotive industry crashed decades ago, and with it the southern republic's role as a components supplier.

Moreover, the US manufacturer bases its European operations almost 2,000km away, in the industrial heartland of Germany's Rhine-Ruhr region.

But Europe's car industry is rapidly shifting east, where producers benefit from cheaper labour costs and spare industrial capacity. Johnson Controls, whose European turnover reached $8.8bn last year, is no exception.

Slovakia midway bet-ween Germany and Macedonia has become the prime beneficiary of this shift. Volkwagen opened production there in 1991, and Kia Motors and PSA Peugeot followed last year.

Yet increasingly, capacity in Slovakia is sapped. As component makers rush to supply the new production lines, their operations spill over into other eastern European countries and also beyond the manufacturing centres of Poland, Hungary and the Czech Republic.

For two years, Johnson Controls struggled to identify a new site where production could be linked to a research and development centre it recently opened in Bulgaria. "It was not easy to find a location where such high-end products can be produced, offering the right infrastructures, as well as availability from skilled engineers, within reasonable distance of our engineering centre in Sofia," says Philippe Simon, vice-president of operations for Johnson Controls' electronics division.

But Skopje, 200km away from the R&D centre, offered tax breaks in a free economic zone and ready access to skilled engineers through a Johnson Controls-sponsored programme at the University of Skopje.

The result is a big construction site near Skopje's international airport, the first in the previously empty Bunardzik free economic zone. Steel girders rise high above the foundation of what will be a 6,000 sq m workspace for the assembly of printed circuit boards, to be shipped to a Johnson Controls plant in Namestovo, Slovakia.

The $20m total investment is minute, measured against other auto industry investments in eastern Europe. The new operation will start by employing just 150 workers. But after watching the Republic of Macedonia's previous automotive components industry wither in the wake of Yugoslavia's collapse, local companies hope it will spur regeneration.

Indeed, Johnson Controls is counting on a degree of local renewal. Mr Simon says the company, which expects to be importing components at first, intends to cut costs by buying locally supplied plastics by 2010.

The excess capacity is available. Production by the country's existing manufacturers accounts for 16 per cent of gross domestic product, and on average they operate at just 63 per cent of capacity.

Viktor Mizo, head of the Republic of Macedonia's investment promotion agency, says excess capacity and low average wages put the country in an excellent position to capitalise on leading manufacturers' search for new, reliable markets in eastern Europe. Central European economies already suffer from over-investment and outbound labour migration, he argues, while economies further east lack the stability which, in the wake of the Balkan wars, Skopje now claims.

"Some would look to Ukraine, but given the political situation there, you cannot today see a €1.5bn investment going there. If you cannot go east, go south-east," he says.

The automotive industry's next test of Mr Mizo's sales pitch comes later this month, when London-based Johnson Matthey, the speciality chemicals company, takes a decision on a potential €75m investment in the Bunardzik free economic zone.

In March it signed a memorandum of understanding in Skopje for construction of a plant for catalytic converters. Its board will decide on the deal this month.

Mobile debate is tender matter

By Eric Jansson
Published by Financial Times, 5 July 2007

Less than a year into the Macedonian government's campaign to liberalise the country's telecom-munications sector, public debate about the issue is heating up.

"Everyone is for telecoms liberalisation, but there are differences of opinion about how to do it," says Mile Janakieski, the 28-year-old transport and communications minister.

His choice has been to let the market work in the fast-growing mobile sector. Keen to challenge the dominance of the country's two existing mobile operators - Deutsche Telekom-controlled T-Mobile Macedonia and Greek OTE's local operator, Cosmofon - the government in February sold a third mobile licence to Mobilkom Austria, the mobile subsidiary of Telekom Austria.

Boris Nemsic, chief executive of Telekom Austria, calls the €10m purchase of a 10-year renewable licence "an excellent extension of our footprint" in the Balkans. The company, aiming to launch local service in September, is likewise launching operations in Serbia, bolstering its Balkan portfolio.

But announcement of Mobilkom's purchase spurred additional market interest. "Many companies came forward saying they were interested in being the fourth," Mr Janakieski says.

The minister soon signalled that a fourth licence might be issued as well. Six companies have since expressed formal interest in a tender, among them Russian and Israeli operators.

Mobilkom Austria was given no warning about a fourth licence. "We did not promise not to publish a fourth tender, and they did not ask. They are strong enough to play on the market," the minister says.

But the move has vexed the new licence-holder. Mr Nemsic says he understands the government's "legitimate political wish to break up the duopoly" but adds: "We have to distinguish political wishes from [investment] logic."

Debate now rages about potential overcrowding in a telecoms market where mobile penetration has already reached 72 per cent, accounting for 60 per cent of the overall telecoms market. T-Mobile Macedonia and Cosmofon, which reject the "duopoly" name, say they have doubts. So do opposition politicians.

Rubin Zareski, chief executive of T-Mobile Macedonia, the leading operator, says he is "OK with a third mobile operator" but asserts that "the market is already full".

Mr Zareski also attacks the analysis on which the government justifies its drive to boost competition. This holds that insufficient competition has let the two existing operators keep prices artificially high.

"If you have a duopoly, that means you agree on prices and prices do not change. But look at two years ago, one year ago, six months ago, and you see there is competition. Prices are dropping - in our case by 30-35 per cent per year," he says. T-Mobile's high profitability, he says, results not from overpricing but from "extremely high efficiency".

Irony runs deeply through this tiff. The government aims to make straight the way for new foreign investors, yet already it risks offending companies that are relative newcomers.

T-Mobile Macedonia's history began just six years ago with the €342m privatisation of the country's state telecoms utility, MakTel. The buyer was Matav, a Hungarian company controlled by Deutsche Telekom and later renamed Magyar Telekom.

Mr Zareski says the government is not acting in a "highly professional" manner - hardly the signal that Skopje intends to send out.

04 July 2007

Macedonia must seize chance to depoliticise business

Macedonia is pledging to curb corruption and depoliticise business; it absolutely must follow through.

By Eric Jansson in Skopje
Published by BIRN's Balkan Insight
, 3 July 2007

Governments change and investors’ fortunes follow. It is the iron rule of banana republics: when new ministers take office they get a slice of the action, and companies scramble to redirect “contributions” from the old to the new.


A redeeming feature of the Macedonian government sworn in eleven months ago is that its ministers publicly insist this must not happen here.

Moreover, privately they seem to mean it. The outward evidence of their sincerity is a growing docket of corruption cases in the courts and a startling crackdown on illegal construction, in which authorities are literally dynamiting unpermitted buildings.

One finds inward evidence as well. For example, Vera Rafajlovska, the economy minister, has halted a practice by which she says private companies sometimes sought ministerial “approval” for commercial decisions. It invited corruption, wasted time and created “a huge pile of papers on my desk”, she says – so it is gone.

For companies in Macedonia – and therefore for the future prosperity of the country as a whole – these are important developments. Businesses seeking long-term profits want a predictable investment climate and a fair playing field, so curbing corruption and depoliticising business is essential.

No one claims that the scene is squeaky clean in the southernmost former Yugoslav republic, nor is it likely to be any time soon. Some economists reckon that, if they could measure off-the-books trade and add it to registered economic activity, the country’s gross domestic product would double.

However, through the efforts of two successive governments over the past five years, Macedonians who previously despaired of a day when official corruption would end are starting to believe that, at least, it can be challenged.

This summer, three cases of major investments – two foreign and one domestic – suggest that Macedonia has also reached a turning point in the overall depoliticisation of business. This is a matter of equal importance to the anti-corruption fight, to which it is closely related.

OKTA

The prime case is OKTA, the oil refinery purchased in 1999 by Hellenic Petroleum.

Debates over whether the 32 million dollar privatisation eight years ago was conducted properly, and whether Hellenic has since enjoyed unfair oil importing privileges, have proved inexhaustible. The seesaw of perspectives on the deal, from one government to the next, has always been awkward – a sign that Hellenic has friends in some political parties, none in others, and that its fortunes change when governments come and go.

Meanwhile what has mattered, ultimately, to the economy? Hellenic has not plundered the refinery but upgraded it, preserving jobs and investing more than 200 million dollars – all in the quest for profits and a future share in the wider Balkan market for oil products, in which Macedonia is only a bit player.

Later this month, an arbitration tribunal in Paris is expected to hand down a decision on OKTA’s relationship with the Macedonian state, which should end grumbling about the 1999 sales contract, once and for all.

OKTA has already “normalised” its relationship with the government well in advance of the decision, say Michael Myrianthis, the OKTA chief, and Nikola Gruevski, the prime minister.

Nonetheless, with both sides promising to honour the tribunal’s decision, it should provide a tabula rasa for future dealings. Hellenic’s position, at last, will no longer be influenced substantially by party politics. This promises to place one of the country’s biggest foreign investors on a more stable footing – a very important development.

Ski Centre Kozuf

A seesaw effect similar to the one experienced by Hellenic Petroleum has also dogged the domestic investors behind Ski Centre Kozuf, a new mountain resort being built in the highlands bordering Greece, near Gevgelija.

Their fortunes rose under the VMRO-DPMNE-led government in office until 2002, but they then faced debilitating delays under the Social Democrat-led government that followed.

Angel Nakov, Ski Centre Kozuf’s executive director, says problems began due to local disagreements with a Social Democrat MP. After “two lost years” that included “135 days of full-time inspections by financial and ecological authorities and police” a court decision stopped it. The company succeeded in making peace with the Social Democrats.

Now, with VMRO-DPMNE back in power, the project is really roaring to life. Ski Centre Kozuf has secured an 8 million euro loan from Stopanska Bank, enabling work on the mountain to accelerate.

As with Hellenic, troubles began when the Social Democrats entered government, then subsided midway. The key, however, is that peace has proved durable through last year’s change in government.

The result? More investment and more jobs – precisely what Macedonia needs.

Mobile Telecoms

OKTA and Kozuf are examples of good news. By contrast, the mobile telecoms market is the next big test case.

Since re-entering government, VMRO-DPMNE has followed through on a campaign promise to introduce more competition to a “duopolistic” mobile telecoms market, heretofore shared between just two operators – T-Mobile and Cosmofon.

Whether the companies actually constitute a duopoly is not the point here. What matters is the method by which competition is being introduced.

Without controversy, the government earlier this year published a tender inviting offers on a new operating license. It was won by Mobilkom Austria, the mobile subsidiary of Telekom Austria.

However, controversy began immediately after the sale, when ministers let it slip that a fourth license would also be offered. This profoundly irritated not only Mobilkom Austria but also T-Mobile and Cosmofon, both of which are local subsidiaries of foreign investors – in T-Mobile’s case Magyar Telekom, the Hungarian operator owned by Deutsche Telekom, and in Cosmofon’s case OTE of Greece.

Divisions between political parties are now emerging, with the Social Democrats favouring a more predictable environment for investors in the telecom sector and VMRO-DPMNE actively shaking things up.

This could prove to be nothing more than a disagreement over best policy. But Mile Janakieski, the transport and communications minister, dismisses Mobilkom Austria’s interests with a casual disinterest that could alarm other investors, too. “They are strong enough to play on the market,” he says.

If the government were to continue pushing this line aggressively and opposition parties saw potential traction in challenging it on grounds of fair play, this dispute could easily politicise the telecoms sector – a major source of investment in the country.

However, if they can avoid this outcome even while pursuing their competing policy goals, then Macedonia will have passed an important test.