Caspian Energy (CE): Your Excellency, what difficulties is the economy of North Macedonia facing today? Which countries are the main trade and economic partners?

H.E. Dimitar Kovachevski, Prime Minister of the Republic of North Macedonia: As all countries on world level, North Macedonia is also focused on alleviating the consequences caused by the global energy crisis.

For the past three years the world has been facing serious economic problems. North Macedonia is a country that has trade relations in most part with the countries from the region and Europe, and of course, the consequences spill over. In that regard, the Government is undertaking a series of measures, both individually, but also in cooperation with the region and the European Union, because only united will we be able to overcome this crisis.

Globally the inflation has been the hi­ghest compared to the past few decades. In such conditions the Government had a timely reaction and we promised that no one would be left alone. We saved the economy with two large packages of anti-crisis measures in the value of 760 mil EUR, largest pursuant to the GDP in the region, confirmed by the IMF and the World Bank. We are responsibly mana­ging the people’s money, and in times of great crisis, we succeeded in increasing the salaries, the pensions, and in offering staunch support for the vulnerable citizens and companies.

Uncertainty is also high due to the Russian invasion over Ukraine, as well as the long-term effects of the pandemic caused by Covid-19. For greater part of the economies, growth is slowing down. In 2022 it is expected that the growth of the global economy will slow down double compared to the previous year. However, what concerns us are the expectations that the crisis will continue in the following year (2023 – ed. note), and even with greater intensity, and follo­wing the October projections of the IMF the global growth in 2023 is expected to slow down reaching only 2.7%; the estimates are even more emphasized for the European economy for which it is expected that the growth for next year (2023 – ed. note) will be only 0.7%. The German economy, our most significant trading partner, is expected to experience a decline of 0.3% next year (2023 – ed. note). Our most significant trading partners are Germany, Great Britain, Greece, Bulgaria, Serbia, and Türkiye.

The expectations for the global and economic growth within EU in 2023 are lowest since 2001, except for the period of the global financial crisis and the beginning of the pandemics caused by Covid-19.

I must underline that the economic growth in our country remained stable despite challenges. In the first half of 2022 it reached 2.6%. There are positive accomplishments in the hospitality, industrial and agricultural sector, whereas, pursuant to the expenditures, domestic demand is increased i.e., consumption and gross investments have increased.

Pursuant to the basic macro-economic scenario, the economic growth in 2023 is projected at 2.9%. The growth of economic activity will be further moved by domestic demand. Inflation will reduce in the course of following year (2023 – ed. note), but prices of resources and food on international markets will remain higher, that is why the rate is projected at 7.1%. Mid-term projections are different. According to the basic scenario, the average growth of economic activity in the period 2023-2027 in our country will reach 4.6%. Starting from 2025, the growth will reach a 5% rate.

CE: Does North Macedonia plan to join the EU?

Dimitar Kovachevski: Full-fledged membership in the European Union is one of our strategic objectives that the Macedonian Assembly defined as an objective and confirmed it in 2001 with the adoption of the Law on Ratification of the Stabilization and Association Agreement, thus formally starting the relations with the EU. Today, after 17 years, we are proud to say that we have started negotiations with the EU. We invested many efforts to reach this phase. We faced many challenges; tough decisions were made. But at the same time, we were aware of the objective – NATO and EU, two strategic objectives that we were obliged to fulfill. In the past 5 years we took large steps, and we succeeded in proving ourselves to be a reliable NATO ally and dignified EU partner.

One of these steps was the European proposal that was given to us this last summer, during the French presidency. Aware of all its advantages and weaknesses, we recognized it as an opportunity for deblocking the process and moving forward. The Assembly made conclusions guaranteeing the start of EU negotiations, and immediate start of the screening. These are conclusions that fully and continuously guarantee our language and identity, guarantee that the historical questions are beyond the negotiating framework and that Bulgaria will show that it does not oppose to the use of the Macedonian language in the EU.

On July 19th we had the first intergo­­vernmental session that initiated the negotiations. On September 15th, the scree­ning started. On October 26^th we signed the FRONTEX agreement into Macedonian language without any additions, asterisk, or footnotes.

These are the three dates that will remain written in the Macedonian history as dates when our efforts for European future were recognized and when we all received a confirmation that the Macedonian language is protected and is on equal footing with the remaining languages in Europe. The Frontex Agreements is the first and single agreement approved by all 27 states, agreement that we signed and that contains the names of all EU languages. Bulgaria blocked this agreement due to the Macedonian language, but by starting negotiations, EU, like us, proved to be a dependable partner that fulfills it’s obligations.

CE: How successful do you find the running of the accession negotiations with the European Union?

Dimitar Kovachevski: The report issued by the European Commission, first after the opening of the accession negotiations contains an assessment of the country’s overall readiness for 2022 and this assessment says, “good level of preparation”. In about 90% of the areas, we have moderate level of preparedness or good preparedness. At the same time, the screening process is moving smoothly, and the country shows prominent level of preparedness. This process must be inclusive and transparent, and by involving the civil sector and the experts in the negotiation process, together with the European funds at our disposal, we see a new opportunity for more reforms and faster reforms. Our task is to continue with the reforms, aware of the fact that the full-fledged EU membership is our strategic interest that can be achieved extremely fast if all parties are involved.

Moreover, apart from the last report, we have four consecutive positive reports of the European Commission, as well as 45% harmonization of the national legislation to the Acquis. In some segments we are either preceding or at the same level with countries that have been negotiating with the EU for years.

Our legislation is largely harmonized in areas of internal market, customs union, tax regulation, all in order to approximate our country to the European standards and for acquiring maximum benefits in the work of the companies.

Taking into consideration that your media focuses on economy, I would like to underscore that in line of creating economic policies, we are preparing the Program for Economic Reforms, a strategic document for the economic dialogue with the EU. This document is in fact preparation for the participation in the process of economic and fiscal monitoring of the EU member-states i.e., for involvement in the process of European semester for coordination of the economic policies in the EU. This document is being prepared pursuant to the conclusions of the joint economic-financial dialogue. Within the frames of the mechanism for social-economic dialogue focusing on priorities and reforms in the area of labour market, employment, education and social po­licy, the program for reforms in employment and social policy is underway; this focuses on three priority fields: labour market and employment, human capital and skills, and social inclusion and social protection. Also, the country prepares a Strategy for smart specialization as an overall model for sustainable economic growth, based on the capacities of the industry, science and society that should be related to the existing competitiveness and innovation strategies, as well as with the research and development strategy.

North Macedonia is constantly fulfil­ling its obligations arising from the Ener­gy Community and the Transport Community and is investing significant efforts for deepening of the energy efficiency and use of renewable energy sources in the environment with the purpose of achie­ving the Green Agenda targets, sustainable development, as well as equal regional and local sustainable development.

CE: Which sectors of the economy are the most investment-attractive?

Dimitar Kovachevski: Even in terms of global energy crisis, in North Macedonia we have investments. In these challen­ging times, the best way to fight the crisis is to open here, in North Macedonia, and to provide as many as possible jobs for our citizens. And the best way to fight the high life expenses is to contribute for better paid jobs in the industries of the future, which, due to the good conditions and support, are supported by the Government. This support is the reason global companies are directing their ca­pital into North Macedonia.

The investments in the private sector are moving the economic growth and that is why the Government is investing its efforts into creating environment for new investments. This is a result of our NATO membership and the start of accession negotiations with the EU. This provides assurances to the investors that their investments are safe.

Over 2,300 new jobs were created in the companies in the TIDZs in 2022, whereas the number of employees reached over 16,000 for the first time. This is increase by 16% in just one year. Last year, the investments were in the amount of 430 million euros.

At the moment, the TIDZ has 35 clients. Part of the newest investors already have economic activities. In the past three months we have presented 4 new large foreign investments. 2022 is the best year so far in terms of the results achieved by foreign investors in our country.

Following the new concept of the TIDZ and the Government for attracting investments, only in the past two years we achieved agreements in the value of 620 million EUR which is almost two thirds of the total scope of investments brought in the previous 10 years.

This is how we tackle the crisis, with actions and accountability. Regarding the sectors, most of the investments are focused on the automotive industry, medical equipment, but also in the industry. North Macedonia proves that it knows and can be a reliable partner for the glo­bal players and world companies.

Additionally, I must underline that the Government is strongly committed to investments in energy. I would like to mention the most significant investments happening in North Macedonia. Through the concept of Strategic Investments, we have been talking and negotiating for over one GW in projects for construction of photovoltaic and wind power plants with renowned and large European companies.

I will mention a few: photovoltaic po­wer plant of ten MW owned by the ESM on the former coal mines in REK Oslomej is the first energy transition of a coal power-plant into a clean energy in this region.

The photo-voltaic power-plants, using a public private partnership with the ESM in Oslomej, with an installed capacity of 100 MW should be designed and constructed. In the course of 2023, I expect the start of construction of one more 10 MW solar power plant in Oslomej, also by the ESM.

The wind-park Virovi, by the German company WPD, the largest photovoltaic power-plant in this part of Europe, Stipion, with capacity of about 400 MW from the renowned French company Akuo Energy, are also part of the projects of the Government and should be sent to the Assembly very soon.

Recently, the new 17 MW solar power-plant, an investment secured by the Go­vernment and the facility built by the company from Slovenia, Gen-I, started its operation.

The project of one of the largest Greek companies MYTILINEOS was also proc­laimed for a strategic investment for construction of co-generative power-plant for production of thermal energy and electricity in Skopje, with an installed capacity of 150 MW and should also be sent to the Assembly for approval.

In the next two years, all 130 MW of photovoltaic power-plants should be operatio­nal, using premiums for which agreements have been signed in the past two years. We issued authorizations for construction of three wind power plants with total installed capacity of 110 MW to private investors. The first wind-park Bogoslovec should officially start its operation at the end of next year. Wind turbines are being delivered there.

In the very end, the most significant pro­ject, Chebren, a historic project for which we have an offer from a bidder for the first time, i.e., from an investor, after 13 unsuccessful tenders. If everything is pursuant to the do­cuments and conditions, we will finally have an investor who will start the construction of this large project.

I expect that this year we will start the construction of the gas inter-connector with Greece with which we will join the Trans-Adriatic gas-pipeline and we will receive our gas from Azerbaijan. We are investing together with our friends in Alexandropoulis, the liquid natural gas terminal.

This Government, like no other until now, is investing in energy and in projects which on mid and long-term will bring benefit. We are committed to energy transition of the country only because we know that this is the future for both energy independence and protection of the environment. With a vision for the future, we approach the ener­gy transformation that we need so much, especially in this time of lack of energy. With proper support and proper management, I am confident that we can transform our state into a green energy hub and ensure both energy independence and supply the region with electricity from renewable sources. The Republic of North Macedonia is on its right path towards energy transition and decarbonisation of our economy. Due to the national legislation that is fully harmonized with the EU, as well as our strategy based on the EU Green Deal, the interest of the companies, particularly the European ones, is enormous and this is incredibly significant for the development of our country, because we belong to Europe and the EU.

All new investments are a result of the demanding work of many people. But also, they are a result of the fact that North Macedonia is firmly walking the path towards Europe. The companies throughout the world want to come and invest in a country that has European future, and not in a country isolated and in conflict with the neighbours.

CE: How is the sphere of small and medium-sized businesses developing?

Dimitar Kovachevski: Small and medium enterprises are of key importance for achieving sustainable economic growth. They are a principal factor for achieving competitiveness and achieving economic prosperity, as well as for achieving higher employment rate. However, the small and medium enterprises are most subjected to difficulties, as in the case with the crises caused by the pandemics, and now, with the energy crisis. In that regard, the Government used a set of measures to support small and medium enterprises; first to tackle the consequences of the energy crisis, and in parallel, there are several measures, cheap loans, and government programs available at the companies for their growth and development. We are creating ambience for favourable business environment, and we are removing the regulatory barriers, promoting the entrepreneurship, we enable access to new markets and internationalization, access to funds, increasing the competitiveness, as well as the access to information for key funding. In conditions of crisis, the most important thing is to maintain the liquidity of the companies, so that they can regularly pay salaries and settle their liabilities towards the country and the suppliers. In North Macedonia, 99.7% of the total number of registered companies are SMEs, similar to the EU, where about 99% of the business economic activities come from the SMEs.

CE: Do you have plans to use the Southern Gas Corridor and the Southern Gas Hub?

Dimitar Kovachevski: Of course, we have a plan. At this moment we have only one gas connection with the Republic of Bulgaria and this inter-connector has free capacities. The good news is that the new inter-connector between Bulgaria and Greece is already functioning, and we can use quantities from the south gas corridor. But we have a plan, as I mentioned in the previous questions, to build a new inter-connector with Greece. It should be operational in 2024. In this way, we will have a direct connection with this corridor.

CE: Are you planning to visit Azerbaijan and other countries of the Caspian region? 

Dimitar Kovachevski: In October last year, in Prague, within the first meeting of the EPC, I met President of Azerbaijan, Ilham Aliyev. We focused on discussing how to deal with the consequences of the largest economic and energy crisis because it is the highest priority at this moment. We also spoke of the opportunities for developing the existing gas pipelines, but also for the options for assistance in the supply of resources, as a response to the energy crisis. At the same time, we opened the topic of deepening the bilateral cooperation between North Macedonia and Azerbaijan in various fields. Moreover, at the 77th UNGA in New York, I had a bilateral meeting with the MFA of the Republic of Azerbaijan, Jeyhun Bayramov.

Azerbaijan is contributing to overcoming the energy crisis by developing the existing gas pipelines. The European Union is focusing on safe suppliers of energy, and Azerbaijan is one of them, by expanding the Southern Gas Corridor and by doubling the delivery of gas from Azerbaijan to the EU. With the gas inter-connector with Greece, North Macedonia will be connected to the Trans-Adriatic gas pipeline and in that way, the gas from Azerbaijan will reach our market. For the Government of the Republic of North Macedonia, the construction of the national gas pipeline system and its connection to the regional gas pipeline systems is a priority.

I believe that our countries will deepen the bilateral cooperation in various fields and that very soon, there will be mutual official visits.

CE: What measures are taken locally to reduce the air pollution and mitigate climate change consequences?

Dimitar Kovachevski: The Government supports the European Green Deal for sustainable economy that means transforming the climate and environmental challenges into possibilities and benefits for the country and for the citizens. We are conducting serious energy investment projects throughout the whole country, we are developing projects for construction of photovoltaic power-plants, for wind parks and hydro power-plants in state ownership, in order to reinforce the position of the state production of electricity. The right to clean and healthy environment is our right, but it is an obligation for all of us towards the environment where we live.

Thank you for the interview.