Bexheti: Macedonia has a political and economic slowdown
23 years after its independence Macedonia has not changed much from the economic aspect. The country had lots of crises. Finally, Macedonia is lagging in the integration process, a situation that reflects the economic life. Online magazine Inbox7 discusses these issues with academic Abdylmenaf Bexheti
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Inbox7: Mr. Bexheti, thank you for accepting the invitation to interview.
Bexheti: It is my pleasure.
Inbox7: I would start with the fact that Macedonia again failed at the last NATO summit, it did not get an invitation to join the alliance. How will this NATO decision affect the economic situation especially to attract foreign investments?
Bexheti: Without doubt, the so-called non-economic factors have an impact on the economic development of the country and political security factor is among the most important factors with a specific separate weight for investors, not only foreign we most commonly refer to, but also domestic. Domestic capital often seeks regional alternatives to retreat from the regions and areas that are not stable. This is normal, this status quo and even regression in some processes makes the state uncertain especially to serious investors and structural investors. However, today, after 23 years, compared to periods after the independence of the country in many aspects and economic indicators, Macedonia has a significant lag, of course, not in absolute values and figures, but relative.
Inbox7: Meanwhile we have a failure at the NATO summit, you say that this will undoubtedly affect both domestic and foreign investments, on the other hand we have announcements from the PM for new investments only a few days after the summit, where once again Macedonia was told NO, was not mentioned at all or was not on the summit agenda. How real are Prime Minister’s announcements of new foreign investments?
Bexheti: I think that few can see it, but if we make a systematic analysis of 2008 to date of all NATO summits where we had been turned down, not to say we received slaps for the poor progress of the processes, an alternative program was always made, a reserve to defocus the attention of the public and then instead of a political account for these permanent structural failures, the public is deceived with announcements for new opportunities that economic paradise is coming, three, four companies will come without naming them, without telling the sector, without emphasizing the specific project, but that they will come from powerful countries like the United States, Turkey or sometimes from the Far East. And this systematically happens when the attention of the public is to be defocused.
Inbox7: You were one of the public figures who signed the Albanian party now in power, the party that received the majority of votes of the Albanians, to be part of government. Is your signature on this petition justified, I mainly think of the economic segment?
Bexheti: No, unfortunately, not only economically, but also politically – I think there are many delays and failures. For further clarification to the public, my signature and the signature of some of my colleagues and intellectuals was principled, not to repeat what happened in 2006, Albanians in Macedonia were denoted by illegitimate, not to say illegal structures because we have a system that is somewhat structured and requires presentation of the majority. So that is why the signature was for the party which negotiates to enter the government or presentation in institutions not to reduce the political market. So, I remind the public that this was exactly our note. Unfortunately, there was no market and we immediately spoke out about it.
Inbox7: Meanwhile, Macedonia constantly borrows credits from abroad to survive economically. How do you rate this economic policy?
Bexheti: If you listen to the accountability of institutions and competent ones, they give qualification that Macedonia belongs to the countries with relatively low debt. Until a few weeks ago when a rating agency put it in the range of middle indebted countries and somehow stopped this maze which consisted of government representatives in their explanations. And now they basically say that we do not belong to countries with large public debt, while public debt goes up around 50% of gross domestic product, including other public agencies that are charged with a guarantee from the government. Certain percentage can not quantify how optimal it is if measured only with indicators as percentage in gross product. The optimal debt should be measured by the effect it causes. We economists say that we have a model of optimal measurement whenever a unit of a loan causes a positive effect on economic growth in a unit larger than the loan, the effect is justified, but here it is the opposite. So the loan intensely increases, and there is no positive economic effect. So red light has for long been on in the sense that Macedonia has no fiscal capacity and even less fiscal sustainability for the needs of the social funds to continue this adventure of public debt for unproductive spending, as happening. On the other hand, some time ago I opened another dilemma for the debt in terms of social and philosophical phenomenon. Why is this loan done long- term as the case with Euro coupons a month ago with repayment period of 10, 15 or more years and so on which is more of a problem in inter-coalitions relations. So, this loan that burdens future generations who will have to sacrifice a lot to pay the obligations for long-term debts is unfair of political aspect, because that generation does not participate in political decisions today, so it is a disenfranchised generation. They are 12-13 year-old who will become 22-23 year-old when they return their debts and are not participants in electoral process for the political structure to manage on their behalf. So this is a problem-both philosophical, and political for us to decide on the legitimacy and the loan.
Inbox7: So it appears that all the circumstances are well designed?
Bexheti: Undoubtedly the actors who realize this scenario take into account these things, but the problem in this dimension is not set in the public. My desire is to ask this question and begin a social as well as philosophical and intergenerational debate about why the next generation is not included, that will carry the burden of a huge debt, and worse of all, of all destinations of infrastructure, Macedonia is the worst in the region. If you look at these ratings made by other institutions, especially a few days ago I saw the ranking of the World Bank, this disproportion is very marked. The more you increase public spending, the less Macedonia is competitive for the infrastructure starting from incompetence of railway infrastructure, and this can be found in the Global Competitiveness Index of the country, where the segments that I stressed are on the lowest level of the state in the region, even compared with Albania, against which we had great advantages.
- Inbox7: Do you think it is likely in this economic situation or there are economic parameters to increase the salaries of public administration, when we know that prices of some goods and services are increased? There was a promise but then they pulled back. Is there any opportunity to meet this or not?
The possibility of realization of this promise, which is usually done two years before building a political terrain for getting political effect, and they receive the votes, which means they justify the promise, and when the time comes for realization, the fiscal situation is narrower and realistically the budget rebalance that just passed, with vulgar outbursts and boxing, had no special effect of that nature. This budget does not create an opportunity to fulfill this promise for a very simple reason, the level of low realization of incomes is much higher than the increasing level of costs. If you look at the period of the first half of 2014, revenues are below the level of realization for 7% while the cost of certain categories is under the growing level of 6%, meaning discrepancy is around minus 13%. When you record the difference and find the funds to meet this growth of 5% in public administration, we ourselves do not know what it is today. From researches of other institutions, in this case the IMF and World Bank on the financial transparency index, Macedonia has a significant decline from the position of over 50 in 2008, in 2012 it was 35, and if you see this report that has been very current, you will see that Macedonia is in company of Zimbabwe and African countries. Albania is about 8 places better ranked than Macedonia.
- Inbox7: Mr. Bexheti, how do you expect the free economic zone in Tetovo and other areas to affect the economic development of Macedonia?
Usually zones were provided as a model that would have an impact on economic development if developed in proportion to the projected plans and models, but unfortunately we do not have proportional approach to the development of these zones. Unlike Skopje Bunardzik, which is the epicenter where not only basic structural subsidies are given but also financial injections, Tetovo area has no basic infrastructure, although determined for 7 years already. Last year the cornerstone was set and if you pass by you will find it is a meadow with no development perspective unlike other zone such as the one in Kavadarci. So, in the triangle Skopje Bitola Kavadarci there are zones that became effective in a year, while in the Tetovo area the zone has been established and announced by the Government, as far as I know, for 6 or 7 years already. Today we still have no infrastructure and imagine, you need to invest 15 million Euros for the pipeline from Skopje to be brought to Tetovo. So the basic infrastructure, which companies will have preferences to find themselves inside the zone, other unmet conditions, let’s say the basic road infrastructure, rail infrastructure, energy infrastructure, which means, nothing concrete is offered, except imagination.
Inbox7: So in the free economic zone in Tetovo we cannot hope for a better future in the near perspective?
Bexheti: Certainly the process will be very faint as to the realization unlike expectations. I think that in 2014 it can stay on one or two locations and if these “mushrooms” grow, it will be good.
Inbox7: Do you think that the debates over the economy have no real place in public, because of the politicization of society?
I think that the priority given to political topics and especially topics that are somehow half-virtual, such as strategic issues for integration, on purpose and intentionally ignore the specific goals, such as economic issues, standard of living, everyday life issues, social level, the situation of education, schools, hospitals and so on and we are now dealing with European integrations. These days we have read how the vice president of the assembly excuses for poor communication in Albanian in the Parliament, because Parliament was focused on issues of European integration. Tell me what topics on European integrations the Parliament has in its agenda, to rule out the use of the Albanian language in places determined by regulation. So every time we get a response of this nature it is an alibi, demagoguery, empty rhetoric, and of course that a significant part of the public awakens very slowly compared to other issues.
Inbox7: So the economy, although it should be first, remains somewhere in the second or third plan?
I think it is under miscellaneous and at the end of the list, although our mouth is full of living standards, employment, investments. These politicians’ mouth is full of these priorities, but when it comes time to account for unrealized, then European integrations appear. So whenever there is an alibi for failures, integrists come out and cannot integrate us at all.
Inbox7: Mr. Bexheti, one more question. Despite the fact that the economy of the country does not grow, the government continues to implement the project Skopje 2014. Where does this fact lead Macedonia?
Unfortunately the adventure of irrational and unproductive spending continues, although 2014 was an announcement that there would be an upturn and I am among those who encouraged it. But it is obvious that this will not stop and that we continue with companies of large public and unproductive expenditures, even preferring alternative financing from some companies, associations, civil sector. What is the capacity of that civil sector to make such grants for setting up 5 bronze monuments in Skopje overnight, and the government to know nothing about this thing. In times when we have damaged floors in schools, we have a situation with hospitals without drugs and even the ceiling falls on your head. The state institutions have offices where people have no chair to sit and do their duty. So the situation is like this, and we continue to spend on these projects. Unfortunately, in the second part capital investment was announced in terms of productive spending, but still not happening and will not even happen and the revised budget showed it. So it was where the thread was thinnest, in capital investment and it is there where it was cut, in the northwestern regions inhabited by Albanians. Here we have Tetovo Theatre, the National Theatre in Skopje, Tetovo Library, the State University of Tetovo and so on. It is cut where you do not need to do that. With this model of economic development, we should expect that 2014 will be a year which will conclude all indicators provided. There is even no debate on reporting why this is happening and how long the phenomenon of redistribution of income in the society will continue. So the whole process is managed solely and exclusively with political motive.
Inbox7: If things are moving with this rhythm, when can we expect better times in the context of economic development?
Bexheti: While we have such an irresponsible government and institutions, we certainly should not expect any change, regardless of the statistics that will continue to show growth of 3.4 or 4.5%. But how are citizens living today, compared with two to five years ago, you will see that the economic growth that in our economic debates I quantify more as declaratory and statistic, it is not seen real, because it is not properly allocated, because it has no capacity to transfer effects in living standards for those living worst. So we have permanent social stratification of society where wealth is concentrated in a smaller percentage of the population at the expense of impoverishment of those who were once middle class. So the middle class is melting, very few are rich and poverty is very expressive. So what melt goes into poverty. These are problems that one way or another are not addressed at all in our society. Social, economic redistribution, the emergence of new business elites, new corporations that are produced in family, relations to the policy, are not sustainable because they cannot survive when this political form changes. I have nothing against this political formation. Each political formation creates its elites, but this artificial elitism will cost a lot to politics on economic development of the country because as long as all other de facto progress in small steps, we are making significant steps back, going backwards. Very realistic indicators, for example real wages, recent statistics show a decline of -1%, so we have a decline in real wages. You pointed out that prices are rising with higher intensity than wages. Statistics measures prices in the consumer basket with one average and the average means that someone will eat meat and some rice or sarma. So, in this sense we should not be bound or to call only on economic statistics that are somehow fabricated according to orders.
Inbox7: Mr. Bexheti, thank you again for accepting the invitation to interview.
Bexheti: I was pleased as usual.