Regional Growth Facility - driver for reform in North Macedonia

The EU has announced a huge package of 6 bill. € support for the Western Balkans - about 750 million € for North Macedonia. 1/3rd of it are grants, the rest loans. But: there are conditions. The countries have to implement a series of reforms, and for each reform there is a price tag and a timeline. If missed, the money is lost.

Some insights into the reforms to which the Macedonian government committed. The author admits to have made some comments...

The full document can be retrieved here, MEA.gov.mk has also other language versions.

Policy area public administration

• In subarea 1, public finance management is to be reformed. This starts with the adoption of a public financing law, but in addition also to implement it: at least 80 % of the planned auditor positions are to be filled till Dec. 2027 and 70 % of the auditors should also have a certification - with a 8,6 mio € price tag if missed. Other reforms stipulate reportings, risk management, improvements of public procurement and else. Notable: The Most economically advantageous tender criteria should be applied at least in 25 % of the cases till end of 2027: Not just buying a cheap bus, but one that also saves on energy, spare parts and service cost and does spend the time on the road transporting passengers, not sitting in the depot waiting for rare components for a special-built order.
• For at least 20 % of the budget, the ministry should make a review of the efficiency of the spending. In a "single project pipeline", all projects should be managed in a similar structure, not the Ministry of Transport dealing with energy projects in a different way than the Ministry of Energy. Consolation: the IT tool to monitor financial implementations of projects can still be Excel so no bureaucrat in EU or else has to understand database-based project management till end of 2025.
• Other provisions deal with state administrative bodies up to a completed reorganization reform till 2027. The administrative staff should become more motivated (sic!), with progression by merit, improved working conditions, a new salary system and at least 80 % of vacant managerial positions are to be filled in a 'competitive and transparent procedure'! And this till end of 2025. Also, but till 2027, point 1.2.2 iii: No public service employee shall receive a salary without having to show up to work.
• The whole public administration package is worth 111 322 216,14 €, and not one cent less.

Policy area Green energy

• This sector requests to transpose EU laws and regulations.
• It clearly requires to reduce subsidies for electricity by reducing the interventions to 70 % till June 2025, 50 % till June 2026 and 30 % till June 2027, vulnerable customers should be protected with special measures till Dec. 2025.
• Employees in Bitola, Oslomej and Kicevo coal regions are to be retrained and reemployed.
• Other reforms concern trading, the timespan for permit issuance is to be reduced by 18 months from currently 42 for large installations, from 12 to 6 months for small installations, both till June 2026. These two measures have a price tag of 17 million € together.
• 0,8 GW of solar and wind has to be installed in 2027, and this does not include capacities built with EU, WBIF or IFI support, means should come from private investors (or non-EU countries, comment by the author)
• There should be monitoring, energy performance certificates, a renovation plan for government buildings, consumption based metering installed (baseline 0 in 2018, this seems true for district heating) and 81 (instead of 27 in 2023) municipalities should have refurbished street lighting (means LED) in June 2027.
• The whole energy package is worth 145 575 205,72 €

Policy area Digitalization

• Cybersecurity, from law to actually staff working is required.
• A secure network for the government, including a centralized digital infrastructure and a secure data center with disaster recovery is to be set up. So the public service should not rely on WhatsApp and GMail for important messages any more.
• The 5G security bylaw should be implemented and an independent authority should run the auction for the 5G frequencies. This might be interesting in the current discussion about awarding a new mobile phone license, but there is time till Dec. 2027.
• Electronic signatures should become more usable by complying with the eIDAS regulation, some requirements till June 2025 and other till Dec. 2025 - so we might have the right not to use paper and stamp any more.
• The digital identity wallet, so if you have a digital drivers license or similar this is to be recognized also in our country.
• There is time till June 2026 to install the infrastructure to store records digitally and till Dec. 2026 to have a single document management system in place, the legislation is due till June 2025 already. Means that every administration should have access to all documents of other administrations and no more need to queue in one to get a paper stamped that is to be brought to another administration.
• All this goes together with an increase of e-services by the government, but there is no indicator how those services are used. (Note: many exist already, but currently there are more registered users than service requests, because this has to do with the ease of use).
• The Digitalization package has a value of 67 435 573,24 € attached.

Policy area Human Capital

• This sector deals with matching education with labor market demand. Four Vocational training centers are to be refurbished, equipped and fully functional till end of 2027 in addition to the three existing ones.
• More companies should participate in dual education, more students be educated, more adults be qualified, more programs and new financing.
• Accredited education should get a quality system and 95 % of the teachers (re)trained with focus on digital and green skills.
• Curriculas to be revised, schools connected to the internet, ..
• The Human Capital area will be compensated with a support of 83 491 662,10 €

Policy area Business environment incl. Transport

• The first measure - also the EU is a bureaucratic instance - the number of inspections is to be increased, as well labor as well market inspections. Focus on construction, tourism and agriculture. (Sic!) Careful when you buy ajvar at the farm that you get a fiscal receipt and do not be surprised when the neighbor helps you painting the barn that the labor inspector asks questions.
• Interesting is measure 4.1.1: Till December 2025, 100 administrative measures are to analyzed and for SMEs, 50 % should have their steps, times of procedure and required documentation reduced by half!
• Legislation is to be installed to have an early warning system for companies in distress.
• A guarantee system for outstanding employee claims is to be set up till Dec. 2026. Such fonds pay the salaries when the employer goes bankrupt, the cost is to be carried by the employer as part of total salary cost.
• Several measures deal with the reduction of the informal economy, the number of the concerned persons is to be reduced from 12,2 % of all employed in 2022 by 20 % end of 2025 and by 40 % till 2027, the percentage of informal economy to be reduced from 33,3 % in 2019 to 26 % in December 2027.
• State aid is to be brought in line with EU standards, extensive training by a trainer with significant experience and expertise to be given to judges. Ex-officio investigations are prescribed.
• The commission of Competition Protection will get their own income via a charge to the recipients of services that shall cover 100 % of their cost.
• SMEs are a special focus. 28 of the 377 charges are to be optimized till June 2025 and a digital information provided, including that the fees correspond to the cost of the service. This concerns of course only officially paid amounts.
• Lending to SMEs shall be facilitated, eg. by state credit guarantee schemes or leasing for which legislation is to be adapted and an asset register established. Co-funding from FITR is part of reform 4.1.4 so this institution or some replacement shall not be abolished. The smart specialization policy is base for some agreed reforms.
• 50 companies shall benefit from two newly established Innovation Centers who have to publish their provided services.
• State companies shall be better governed, from appointing independent board members, linking their compensation to financial performance and naming them on merit. There should be a strategy and a public register.
• Post office and state owned railway shall reduce their losses till December 2027. For those who wonder: most state railways are profitable because they state pays subsidies for them to establish infrastructure and to run, not because the passengers cover the cost of the tracks or the service. This can be a base for partial or full privatization: different companies apply and the one who needs the least subsidy runs the train. Maybe not in France, but in Germany or UK. The reform plan for the state owned railway is due in January 2025 - expect some people working over Christmas if they did not know exactly what to do the last several years. EU even prescribes how many tons per km of goods and how many passengers are to be transported in December 2027!
• The e-Customs system should be used more, North Macedonia is here leading in the Western Balkan region. The reform plan shows interesting numbers: 1 h takes a transaction in procedure in 2022, 58 minutes an export declaration. It takes nearly 7 hours for an import procedure. The promised time reductions are 2 - 4 %, the goal is more to improve the risk assessment (ie. detect smuggling).
• Highways - the road to Greece is in focus - shall get an intelligent traffic system. (Note: already in planning). This shall decrease the travel time to cross the country by 17 % and the accidents by 16,6 % till 2027. The idea is to better manage the flows and avoid traffic jams, but remember that such system can also do "section control" (read your license plate at two points, calculate your average speed and serve you the speeding ticket before leaving the country). 108 minutes instead of 130 is the target number to go from Tabanovce to Gevgelija, hoping that the border crossing there will not take more time because of the new border identification and control systems, but this is not part of the RGF package.
• Also freight should be handled better, the CMR document should become an eCMR.
• The Business Environment including transport has a value of 193 743 472,32 €

Fundamental Rights and Rule of Law

This is a key area where the EU requests reforms. Recommendations concerning the electoral code should (finally) be implemented. Vacant positions of judges are to be filled, and this till December 2024! Laws, amendments, financing for the justice system, preventing corruption, resolving complaints against judges, guarantees for fair trials, the Juridical council, digitalization of justice, adequate staffing, experts and training where needed and the fight against corruption - the list is long and detailed but without any surprise.

• For all these issues, an amount of 148 786 423,49 € was agreed between the government and the EU.

The full Annex 1 which is the basis of this report can be accessed here.

Annex 2 is a list of investments, which go from renewing the railway on corridor X for 200 mio € to the improvement of the psychiatric hospital in in Demir Hisar for 3 million €.

All details can be seen here.