Volume 1 Cedric - revised luca Final - RUIG-GIAN

of almost 10 per cent of GDP, yet instead of drawing down foreign debt, funding thepension reform and financing new investment projects, much of the sum was spent onother objects of expenditures, such as security operations. A treasury system wasestablished, key legislation was passed to reform labour regulations and also towards anew banking law. The regime for private enterprise, foreign investment and creditors'rights has been improved. Such a process in economic reform along with maintenance ofmacroeconomic stability allowed the government to secure a 3-year agreement with theInternational Monetary Fund (IMF) and the World Bank Second Financial and EnterpriseSector Adjustment Loan. Yet, a significant agenda of structural reforms remains to beimplemented, with the difficult process of resolution of loss-making SOEs. Moreover,while the overall progress in transition has been steady but slow, the pace of structuralreforms has been influenced by political uncertainty and change.The Government of Macedonia is now committed to a decentralization of its publicadministration, part of the Framework Agreement, and has made clear provisions to thiseffect in the country's Constitution. The Law on Local Government adopted in January2002 has a number of important provisions that will impact local government finance andservice delivery. Significant institutional building will be needed in order formunicipalities to carry out their new functions, such as revenue generation and financialmanagement as well as in public services management. New independent enterprises findit very difficult to access adequate support from commercial banks, and allegations ofcorruption in the banking system abound. Many of the privatized banks’ shareholders arereported to have close links to government officials, while the paucity of Albanians amongthe senior management does little to increase the confidence of some Albanians in banks.Good progress was registered in privatization as the private sector represented 60 per centof GDP in 2003. Price and trade liberalization and banking sector supervision standards arewell advanced, but the regulatory framework for non-bank financial institutions remainsweak. 100100 FYR Macedonia Strategy Overview’, http://www.ebrd.com/about/strategy/country/mace117