B-REDI_Macedonia_PSE_Assessment_(Final).pdf

MAY 2017

This publication was produced for review by the United States Agency for International Development. It was prepared by SEGURA Consulting LLC under contract AID-OAA-C-13- 00139 with the United States Agency for International Development (USAID). The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

PRIVATE SECTOR

ENGAGEMENT ASSESSMENT

FOR MACEDONIA

B-REDI BUY-IN

REGIONAL ECONOMIC GROWTH PROJECT

B-REDI Buy-In Regional Economic Growth Project

PRIVATE SECTOR

ENGAGEMENT ASSESSMENT

FOR MACEDONIA

DISCLAIMER

This report was produced by Bill Mays and Vasko Karangeleski on behalf of SEGURA Consulting LLC under contract AID-OAA-C-13-00139 with the United States Agency for International Development (USAID). Its authors would like to express their gratitude to the USAID Missions in Macedonia and Albania for their support and input to these assessments. In particular, we would like to acknowledge the critical contributions of Tanja Markovska and Edward González of USAID/Macedonia and Dennis Wesner of USAID/Albania without whom these assessment reports would not be possible. The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

TABLE OF CONTENTS

ACRONYMS, ABBREVIATIONS & TERMS

EXECUTIVE SUMMARY

Recommendations

Other Alliance-Oriented Recommendations

INTRODUCTION

CONTEXT / PURPOSE

Possibilities for USAID

METHODOLOGY

Assessment Questions

Three Key Questions

FINDINGS

KEY INTERVIEWS - PRIVATE SECTOR

INTERVIEWS - BSO (ASSOCIATIONS, PUBLIC SECTOR AND DONOR

PROGRAMS)

CONCLUSION

ANNEX I - DESK STUDY FOR PRIVATE SECTOR ENGAGEMENT ASSESSMENT

IN MACEDONIA

Economic overview in Macedonia

Key National Legislation and Strategies

Strategies and Plans

Donor Activities in Private Sector (focus areas)

Key Ongoing and Future Projects/Programs

Key Past Donor Projects/Programs

Existing support to Access to Finance

ANNEX II – FINDINGS CONTINUED – COMPANIES

ANNEX III – BSO INTERVIEWS

ANNEX IV – OTHER STAKEHOLDER INTERVIEWS

ANNEX V - LIST OF STAKEHOLDERS TO INTERVIEW

ACRONYMS, ABBREVIATIONS & TERMS

BSO: Business Service Organizations - This term used here encompasses all for-profit, non-profit, donor or government business service associations and training providers.

CDCS: Country Development Cooperation Strategy

COP: Chief of Party

CSR: Corporate Social Responsibility

DA: Development Alliance - A DA is a specific type of public-private partnership whereby USAID works with private sector partners to advance mutual interests and increase the impact of development investments. The public-private partnerships referred to this report are all DAs.

EU: European Union

FDI: Foreign Direct Investment

Impact: The term "impact" refers to significant change or progress that occurs over time as a result of or following a series of activities, outputs and intermediate outcomes.

Indicator: A measure of progress, typically numeric or otherwise quantifiable. In this report, "indicator" and "metric" are used interchangeably.

Investment: The term "investment" is used broadly in this report and refers to contribution of both financial and non-financial resources with an expected return – financial or otherwise.

KPI: Key Performance Indicators

Market-based: The term "market-based" is used to refer to programs and approaches that incorporate markets, commercial products and services, business models and other forms of commercial activity - formal or informal - as means of achieving development progress.

MK: Macedonia

Mission: USAID/Macedonia

MOU: Memorandum of understanding

Outcome: The term "outcome" is used specifically to reflect near-term changes in status, condition or behavior. Outcomes follow execution of activities and production of outputs; outcomes are predicates to longer-term development progress or impact.

Output: The term "output" refers to the tangible product of a process or activity.

Private Sector: The term private sector generally refers to for-profit entities as well as nonprofit and nongovernmental organizations and academic institutions.

However, in this report, only alliances that included for-profit entities (companies or businesses) were assessed and, as such, “private sector partners” is used to refer only to for-profit entities. These entities may be of any size and were both local and multi-national.

PSE: Private Sector Engagement

QC: Quality Control

Sustainability: In this paper, the terms "sustainability," "sustained" and "sustaining" refer not to environmental issues but rather to the likelihood and ability that a development outcome will prevail or continue beyond the scope of a donor or aid-sponsored project.

TA: Technical Assistance

TIDZ: Trade Industrial Development Zone

TVET: Technical and Vocational Education and Training

USAID: United States Agency for International Development

USG: United States Government

Value: This report focuses on value from the USAID perspective: benefit derived from using the alliance approach that enhances development outcomes.

VET: Vocational Education and Training: By law in Macedonia, all students need to have a practical internship in a company before graduation. However, by law no internships are allowed to post graduates, as all must be hired employees.

There are 74 VET schools primarily referring to technical and specialized secondary schools, providing practical skills to secondary school students.

Post-secondary vocational schools are usually related to skills prequalification of adults. For more information see: http://csoo.edu.mk/eng/index.php

EXECUTIVE SUMMARY

The main goal of the Private Sector Engagement (PSE) Assessment is to locate companies (or groups of companies or Business Service Organizations (BSO)) that are active or thinking about private sector engagement in Macedonia. Additionally, our aim is identifying their planned budget (if any) for upstream and downstream PSE along with the topics and sector(s) of these companies.

Our team began this rapid assessment work in early November 2016 and completed the field visits by late January 2017 based on an originally desired completion date of mid-February for a final draft and the final assessment report on/about the end of February 2017. The team integrated additional USAID input obtained in April and then finalized the report in May 2017. Our team consisted of a local Macedonian firm and a regionally based team leader who made two visits to Macedonia.

A total of 50 interviews were conducted with 30 private sector companies, 8 BSOs, and 12 donor programs and local government offices. The results from these interviews with the highest potential for alliances with USAID are listed in the chart below and ranked from High, Medium, Low and None.

We ranked the companies and BSOs with the best probability due to their combined solid business operations, whether they are already conducting some organized training or service to the employees or suppliers within their sector(s), and whether they reported a desire to forge a strategic alliance with USAID. The entities with the lowest rankings only reported normal business functions with little to no PSE outside of normal operations.

RECOMMENDATIONS

Firms and BSOs with the highest potential are listed below with details in the report body (in Section IV – Findings) and all other interviews listed in the annex sections. Companies like Knauf and Maganmak are good examples of sector alliances for firms through workforce development or supply chain development, though they are low in terms of direct USAID partnership potential.

Company Partnership Potential

Feydom High

Van Hool Medium - High

Feroinvest High

Seavus High

Vitaminka High

Alkaloid Medium

Titan Usje Medium

Knauf Low

Ecolog Medium

Additional recommended Partnership Potential

Konekt - BSO High

MAMEI - BSO High

Maganmak Low

OTHER ALLIANCE-ORIENTED RECOMMENDATIONS

We feel that USAID / Macedonia should consider a program that is flexible enough to engage in alliances with Macedonian BSO firms who are experienced in contracting and implementing USAID or USG contracts and BSOs who can demonstrate firm-level assistance within the industry sectors. We do not believe any such “team” exists, though interviewed BSOs indicated they would be amenable to this type of hybrid approach described earlier.

Additionally, leveraging up to 50% matching grants for strategic equipment, training or other TA through a GDA approach combined with formal credit guarantees would greatly improve the speed of implementation and success of a new program.

Observed Opportunity constraints stated by most interviewees:

• Most interviewed companies described the discrepancies in business needs and skills provided by educational institutions. Despite the government VET programs, a majority of young adults do not possess the skills needed by employers.

• A key challenges stressed is compliance with quality standards required for exports, which are highly dependent on availability of technology and access to finance for modernization of equipment.

• Larger companies have better defined CSR policies, which are mainly located within their marketing department and budget (exemption in Titan Usje and Alkaloid where CSR is located within HR department). Most CSR-related funds are provided to sports and related team funding along with classical charitable donations.

Three Key Questions

The assessment team conducted research and interviews based around the three key questions below to help identify ways for USAID to form potential alliances for PSE:

1. What is the private sector already doing in these sectors that might align with USAID/Macedonia’s priority objectives?

2. What roles could USAID/Macedonia play in working with the private sector to unlock the potential within these opportunity areas?

3. How can USAID/Macedonia position itself in order to best leverage private sector engagement to increase impact within target sectors and opportunity areas?

Most companies had little idea or vision on how best to form an alliance with USAID for PSE as only those with prior USAID-related experiences understood the historical ways to fit into new or existing programs. All of the companies interviewed had generally favorable opinions of USAID and/or donor assistance in development and were open-minded on their involvement in potential alliances with USAID at some time in the future should a new program come into fruition. Finally, it was clearly noted to all interviewees that our team was contracted by USAID and we were not representatives of USAID or the USG and this was simply an assessment without any expectation that a program will evolve from the results.

INTRODUCTION

CONTEXT / PURPOSE

This assessment report aims to assist new program design guidance and underscores the need for active engagement of the private sector alongside the host country government. Private Sector Engagement is a particularly critical element within USAID’s development model as it seeks to increase the number of partnerships with U.S., foreign, and local private corporations and in the process, contributes to the sustainability of USAID initiatives.

During our interview introductions and discussions, PSE was described as a concept that means different things to different audiences. The assessment team used examples that USAID maintains alliances with multinationals such as Cargill or Starbucks, who have aligned business interests in several countries where USAID also works. Some view PSE as engaging with corporations like Coca Cola or Exxon, or their foundations that have CSR objectives that are not directly related to their country business activities. Still others see it as an opportunity to empower local businesses by integrating them into the development projects.

Possibilities for USAID

Strategic Alliances

The strongest strategic alliances are those that are flexible enough to permit engagement with Macedonian BSO firms who are experienced in contracting and implementing USAID or USG contracts as well as BSOs who can demonstrate firm-level assistance within their respective industry sectors. In this case, BSOs are any public or even private sector organization willing to provide support services to MSMEs in Macedonia. BSOs can provide direct technical assistance, trade facilitation, and training to SMEs through tailored packages. BSOs also serve as a market and new technology information channel to industry associations, chambers or clusters and private companies, prepare business plans for loans/grants, and even assist in their participation at trade shows.

Through interviews with BSOs, the team learned that many would consider a quasi-“hybrid” teaming approach with various types of BSOs under one umbrella. Under this collaborative model, BSOs would serve in a loose consortium administered by one BSO grantee who could provide central administrative support – coordinating meetings, disseminating a weekly briefing to all BSOs highlighting opportunities or relevant news, maintaining a database of BSOs and assisted firms, and/or helping with required quarterly and annual reporting by BSOs and beneficiaries, etc. This arrangement would lead to better knowledge sharing between the BSOs to encourage joint efforts while reducing the risk of duplicative assistance. For example, one BSO may have expertise in preparing business plans for new equipment loans or grants while another BSO could then provide follow-up expertise in equipment integration training. The consortium could also be attractive in that there would be diminished administrative burden for technical assistance providers, those who are also implementing their own contracts and grants, etc.

Another way to strengthen such an alliance would be the provision of American Volunteer Experts (USVEs) in situations where BSOs in the consortium lacked the necessary skills or experience for targeted expertise in a sector. These experts could be engaged from 3-4 weeks with a private sector firm or even assist multiple firms at a time. They could also provide “train the trainer” support to BSOs so that the consortium would be up to the challenge of providing that same support the next time the need arose.

Communications Support

USAID should also consider strategic outreach and communications support -- including web development assistance -- to further enhance USAID’s reputation amongst private sector firms and

BSO communities. The assessment team gathered from both formal interviews and informal conversations a possible perception that USAID does not promote and communicate the program successes to the public enough. There is strong ongoing work and success stories that could be publicized in news segments, radio spots, or on billboards to help the public to better understand the impact that USAID has had over the years and continues to have in-country. USAID might consider contracting an independent Macedonian advertising agency to promote these successes. The same organization could also provide technical assistance to BSOs to enhance their web presence in parallel, providing extra benefit.

Matching Grants

One other important venue could be leveraging up to 50% matching grants for strategic equipment, training or other TA through a GDA approach combined with formal credit guarantees.

USAID/Macedonia could look to continue or borrow elements from the Agricultural, SME, and Micro guarantee DCA programs already in operation.

Indicator Examples for Consideration

Examples of Development Impact:

• Improved economic livelihoods

• Improved local governance

• Increases in new long-term jobs (e.g. more than temporary or seasonal employment)

Examples of Business Value:

• Improved supply chain

• Access to new markets

• More productive workforce

• Addressing business environment

• Improved public relations

• Fulfillment of CSR objectives

Assumptions and Limitations

The following assumptions and limitations should be noted:

The overall time to perform this assessment was limited given the desire to canvass the country and interview many more companies and BSOs with locations outside of the capital, Skopje. The inopportune timing of the start was further complicated by the practice in Macedonia of celebrating extended holidays each season. Furthermore, there was a government parliamentary election on December 11, 2016 that halted businesses’ desire for interviews for another week.

Our team worked to reduce some anxieties and reluctance to provide specific financial and company information by assuring the interviewees that the assessment would be used largely for USAID internal purposes. Additionally, we only asked for total sales information within a range to determine the company’s overall size. Although this helped quell the anxiety of certain interviewees, others remained cautious and preferred not to contribute.

METHODOLOGY

In addition to reviewing relevant documentation provided by the Mission, the Assessment Team used stakeholder (group and individual) meetings as a means of gathering data. The assessment was conducted consistent with current USAID assessment guidelines. Rapid appraisal techniques (e.g. key informant interviews with site observations) were used as appropriate for conducting the assessment.

The Assessment Team developed an appropriate methodology and work plan/schedule to address the scope of work. Prior to the Field visits, the Mission provided the assessment team with pertinent background information on expectations. On arrival in country, an initial briefing was held with USAID staff, so that a work plan could then be presented for the information collection, assessment analysis, report, briefings, and follow-up. The Assessment Team worked closely with and received direction from the relevant USAID/MK teams and Filip Stoyanovich, the REG Project Chief of Party.

Key Activities:

The team was tasked to conduct a review of the relevant documentation on all sectors (less tourism) and opportunity areas in Macedonia. This ranged from publically available documents to materials sourced from the Mission and other development partners.

A review of documentation and knowledge products from across the Agency and other development partners on PSE models and approaches worldwide that may applicable to the Macedonian sector context.

Limited interviews with USAID/Macedonia, USAID/Washington Bureaus and Offices, and selected implementing partners, in close coordination with the USAID/Macedonia Program Office and technical teams.

Assessment Questions

The Assessment Team discussed the following questions with the Mission and looked to address the following issues when designing the one-on-one interview questionnaire:

Internal (Private Sector) Questions:

• What are the major business sectors that show potential for growth and investment in the next 3-5 years?

• Do any of these sectors face barriers or challenges? If so, what are they?

• What are the particular business challenges/concerns that the private sector would like help in addressing, particularly with regard to scale and sustainability? What CSR issues are important to companies and can USAID help companies address those issues?

• What resources (investment, technology, expertise, etc.) might the private sector bring to bear in addressing these development challenges/concerns? What resources could USAID bring to bear?

• What are major potential private sector partners for USAID going forward in building alliances and why?

• Within the private sector, what are the major Macedonian potential partners?

• Within the private sector, what are the major multinational potential partners?

• What are the major constraints currently inhibiting engagements with identified potential partners if any, and why?

• What is the experience of identified businesses in addressing development issues or engaging in corporate social responsibility, particularly in regard to those development objectives already identified by USAID?

• What types of strategies, interventions, and approaches might the Mission wish to consider deploying within its CDCS and subsequent programs to de-risk, incentivize, and facilitate private sector investment and action in these areas?

• Potential Areas for USAID/Macedonia Engagement?

• Potential PSE Engagement Models and Strategies?

External (Private Sector) Questions:

Three Key Questions

Within the suggested opportunity areas, and based on available information, the desk study will answer the following questions:

1. What is the private sector already doing in these sectors that might align with USAID/Macedonia’s priority objectives?

2. What roles could USAID/Macedonia play in working with the private sector to unlock the potential within these opportunity areas?

3. How can USAID/Macedonia position itself in order to best leverage private sector engagement to increase impact within target sectors and opportunity areas?

Other Questions used at the discretion of the interviewer that were designed to facilitate conversation in the interviews

• Have you ever received Government subsidies for your production, technology upgrade, innovation, training, etc.? Rate their availability. Define problems, problem causes, and suggestions for improvement.

• Have you ever received donor support? If yes, for what? Did you get financing guaranteed or supported by USAID (including bank credits)?

• Have you ever participated on your own or by co-funding in any training, specialization, and certification processes?

• Have you ever organized trainings, specializations or workshops for your employees? Your clients? Your suppliers?

• When you have re-invested in your company, what has it been for office, technology / machinery, staff, suppliers, etc.?

• If you could provide assistance to your suppliers that would be mutually beneficial, how would you do it? Elaborate on the needs. Get them to describe the entire process, costs, timeline to implement, expected results - quantified, barriers and/or challenges (Problems, problem causes, suggestions for improvement).

• What is your budget for this year activities for suppliers, workforce development?

• How would you describe the level of technology use in your sector? Have advanced technology practices been introduced to the sector? Discuss current levels of innovation in the value chain, transfer of technology, gaps, compare to region and get them to discuss Problems, problem causes, and suggestions for improvement.

• What is their level of integration and position of local companies in the regional (or global) Value Chain? Do you consider yourself a leader, in the middle or below?

• Do they outsource a significant portion of their work? Would it be more efficient to outsource any of the work? Alternatively, would it be better to cease outsourcing and perform that work in house?

• How efficiently is your workforce in use of special technology? What other technologies are available that you are not using? Which technologies could be used with your suppliers or buyers, to improve your work with them?

• Rate the level of satisfaction of skilled workers provided by educational institutions? How could you work together with educational institutions to improve skills and knowledge your sector requires?

• What are the companies doing with regards to PSE including CSR?

• Can you share with us your thoughts about how you might see a working alliance with

USAID?

• What would be the roles and responsibilities of each party in the alliance?

FINDINGS

Observed Opportunity Constraints

Productive workforce is the key challenge for all sectors, expressed by all interviewed companies and BSO stakeholders. A key limitation for growth of the ICT sector is the quantity of qualified workforce individuals. Manufacturing and construction companies stated their need for qualified vocational profiles, with practical skills and knowledge. The formal education system has not been able to provide practical technical knowledge and qualifications, although a number of companies have provided internships, supported formal education curriculum development and shared recourse for its delivery. Project management and soft skills of employees have been stressed to be lacking across all sectors.

Improved supply chain has been present for companies from manufacturing sectors like food processing, metal and electronics and automotive industry. A key challenges stressed is the need for better compliance with quality standards required for exports, which are highly dependable on the availability of technology and access tof finance for modernization of equipment.

Addressing the business enabling environment was raised by BSOs and most companies, primarily from companies from food processing and the textile sectors. Regarding labor legislation and practices, the ICT sector has raised concerns due to rigid legislation that does not properly reflect the needs of the industry.

KEY INTERVIEWS - PRIVATE SECTOR

The highest ranked companies are listed below with the BSOs to follow. The remaining interview notes are located in the appendix for further review.

FEYDOM

Filimena and Zoran Radonjanin, owners

November 16, 2016

Feydom system1 started as a domestic furniture producer operating for ten years in the design, manufacturing and distribution of furniture. Known for its modular design, Feydom has received a number of awards for their furniture designs, twice an Interior Innovation award and twice the German Design award. They own twelve stores and are represented in 20 countries with their products. The revenues from their production factory were 1.3 million Euros in 2015 and they expect

1.7 million Euros for 2016. Feydom owners stated they have introduced a system of total transparency to all employees, suppliers, and buyers including their costs and prices. They openly report that 5% of the manufacturing cost of each furniture piece sold is paid to the designer(s). Their manufacturing process enables fast skills adaptation by employees and they are open for internships and on demand projects by the Vocational Education Training (VET) students and University students each year.

Feydom has invested 150,000 Euros in their project H1000D – House of 1000 designers, platform they believe will encourage designers in product development for the furniture sector through development of new innovative furniture products. The H1000D is intended to support and lead the design process from idea to design through manufacturing and end sales for international markets, thus providing added value of furniture designers and producers in Macedonia.

Partnership Potential: High

The H1000D project has the complete infrastructure as a modern open design studio including workstations for ten persons, meeting rooms and classroom, prototype workshop with tools, 1 System is used to represent their way of a group holding of subsidiary or either wholly owned or partner companies for each of their local profit center firms along with their foreign registered and operating companies. Each are stand-alone companies though directly owned or partnered with the Feydom owners.

machinery with experienced mentors and a photo and video production studio (story telling studio).

Feydom owners have a project concept prepared where they see future directions by forming alliances with other strategic organizations, involving local and regional manufacturers in the platform thus joining and combining production capacity and capabilities to become vendors for even the largest international buyers or sell their branded products directly. A potential alliance could be the hiring or joining of experienced trainers to work with the designers and production teams in the design studio and production facility. USAID support for the top local designers to attend international design and furniture fairs will be helpful. Additional short-term financial support (loan guarantees) may be needed if new designs attract very large orders from international buyers while participating in design fairs.

Potential Drawbacks

The Feydom owners have limited capacity to manage H1000D platform along with their other companies and businesses. The Feydom business model works for them, while introduction and building relations with other organizations in H1000D platform and establishing the relations among designers, students, manufacturers, distributors would require additional management, knowledge and support.

VAN HOOL

Avram Stojcevski, Plant Manager

November 18, 2016

Van Hool is a family owned company from Belgium established in 1947 and entered the Macedonian market in 2012 as green field investment in the Technological Industrial Development Zone (TIDZ).

The company manufactures Bus, Coach, and Commercial vehicles and was operational in 2013. The company currently works at 120% of their designed capacity and is in the process of doubling their capacity due to growth from 50 manufactured buses in 2013 to 1,000 expected in 2017 all for export with a significant number going to the USA. This will result in an increase from current 830 employees to 1,000 in 2017.

The lack of skilled labor with adequate vocational skills has initiated their practical internships of VET school students combined with internal factory trainings certified by the government Adult Training Center. Their internal academy provides practical skills trainings to welders, electricians, mechanics, carpenters, painters, auto lacquers, hydraulic workers and others as needed.

Mr. Stojcevski stated that the “Presence of FDI’s in Macedonia cause problems to local companies for various reasons, but in general is increasing the business culture and organizational behavior as all employees would like to work in decent working environment which meets their minimum salary expectations.”

This was in response to the assessment team’s question if they received negative feedback from the business community after we observed several other companies’ comments to that effect.

In the second phase of their operations Van Hool started procuring bulk components from Macedonian and Serbian suppliers, with parallel support to local producers with audits of their work that positively influence their performance. Once suppliers reach the desired quality standards, they become eligible for additional global sales and access to new markets in the EU. Van Hool provided support to Aktiva Stip, which grew to a 200-person company and started to manufacture and supply their bus chassis; and Uniplast Struga, for polyethylene parts, which grew from 10 to 50 employees. In addition to improved production standards, Van Hool supports their suppliers for acquiring funding from financial institutions.

The third operational phase of Van Hool is expected to introduce local suppliers for smaller parts and components, even if small percentage of a bus is outsourced locally, each bus has around 12,000 components, of which 8,000 are unique parts.

Partnership Potential: Medium - High

Partnership potential is medium in relation to supply chain integration of local enterprises as suppliers.

Mr. Stojcevski sees a potential alliance with USAID who could help with improvements in MK Government business environment policies and procedures towards their suppliers, along with the development of a certification body to improve the standards for future component suppliers. Their vocations skills training academy is also a potential place to expand vocational skills training.

Potential Drawbacks

Located in the TIDZ, they do receive state-aid and are liberated from some taxes for their operations.

Another drawback is the centralized procurement of Van Hool in Belgium, which delays the process of outsourcing manufacturing of parts and components to local suppliers in Macedonia.

FEROINVEST, Brako, EDS, Small Hydro Plants

Kocho Angjushev, PhD, owner – University Professor, Mechanical Faculty, University of Sts. Cyril and Methodius in Skopje

November 2016

Feroinvest is a type of holding management entity for other owned enterprises EDS (energy trade), Brako (wires, sheet metal, medical equipment and energy equipment) and Small Hydro plants (consulting, maintenance, construction). By revenue ranking, the combined revenue of the four companies would rank the holding 8th in Macedonia. The majority of staff range in ages from 25 to 30 years old and the employees are encouraged to attend conferences, seminars and learning trips. The company supports the local community by sponsorships in sport (football team in Veles and Handball association) and through their education and learning donations. Companies provide 3–month paid internships for all 120 graduating VET school students in Veles with some employed afterward.

Angjushev Foundation is a vehicle through which the owner provides scholarships for young university associates for attending international conferences and academic research (Angiushev donates his university salary to the foundation and matches with company funds for this purpose). Companies are highly supportive of youth and practical education, with personal mission to enhance the entrepreneurship spirit. Supported trainings and sponsorships account to between 200,000 and 300,000 Euros of the annual budget.

Partnership Potential: High

There is a potential alliance where USAID might join forces with the foundation for support of education. The Foundation was established in 2016 with funding of $ 10,000, for supporting engineering students for academic research and attending conferences, while additional funds, promotions and support would attract more students.

An additional area of cooperation is in supporting local suppliers to reach quality standards. Brako recently designed and produced a specialized truck made in Macedonia with the aim to source all future parts entirely from Macedonian producers. They try to involve more local Macedonian companies as local suppliers, though more need assistance to reach the required quality standards.

Potential intervention would work with local suppliers in reaching of industry standards to become suppliers for vehicle and medical equipment manufacturers.

Potential Drawbacks

In the case of supplier development, challenges might require inclusion of additional implementing partner for wider scope and impact, to reach more companies in the sector. Since this is demand-driven, an additional assessment should be made to more accurately determine the demand.

SEAVUS

Mr. Kocha Boshku. Executive Director

Ms. Vesna Ivanovska, General Manager, SEDC; Ms. Sofija Spirovska, Manager, Incubator

November 17, 2016

Seavus is the largest ICT Company in Macedonia with 700 staff and offices in Skopje, Bitola, Belgrade, Novi Sad and Nis. Their activities for support of the ICT sector are focused through the Seavus Education and Development Center (SEDC) and their Seavus Incubator. The annual budget for SEDC and the Incubator is between $200,000 and $300,000 -- wholly provided by Seavus. In addition, Seavus employees are delivering and providing training for specialized skills.

SEDC is focused on training of youth, students and early graduates in required competencies, both skill and vendor certified in the ICT sector. Through the training center, Seavus is trying to counteract the largest limitation of the ICT sector -- the shortage of skilled labor. The results of the training center over the past 6 years are that 75% of graduates find immediate employment and more than 1000 students passed the training since they started. More than 30 companies are reported to be recruiting directly from SEDC students.

Since all students are encouraged to work on real case studies provided by Macedonian companies (free of charge for the companies) and they can further enroll in the Incubator and to help create start-ups. In this way, the Incubator has organically emerged with 10% of income generated from new business ideas. The Incubator is focused primarily on creative industries, subsidizing the expenses of startups. It currently hosts 15, with a target to reach 30. As testing towards their intended stage of development, the pre-acceleration program attracted 21 startups, 47 team members, and 14 teams that pitched business ideas.

Partnership Potential: High

Their direction is in developing an IThink Kids Academy for children aged 8-14 years to cover the basics of IT, design, programming, robotics, and social entrepreneurship. At the moment, they seek partners to increase numbers of enrolled children. The incubator is in its starting phase of its development, as an acceleration program for startups, and it needs more time to become profitable.

USAID-envisioned assistance would be to support the outreach of the IThink Kids Academy programs throughout the country for early age building of IT skills. The Budget for the intervention would require additional meetings and discussions after more clearly defining the scale and scope.

None recognized.

VITAMINKA AD Skopje

Ivan Strezoski, Financial Director

December 16, 2016

Vitaminka is a joint stock company with 28.3 million Euros in revenues, 840,000 Euros in profit, and a range of 630-660 employees. Vitaminka’s mission is to develop the food processing industry, contribute to the overall economic growth, and to increase the employment in the Republic of Macedonia. The company has reinvested in new technology and production facilities to comply with foreign market required standards.

Vitaminka has an existing social responsibility policy, a program for donations and sponsorships, including scholarships for students at the Technological faculty and educational institutions, but also supports sport, cultural events and hospitals. Annual budgets for education and training of employees average $40,000.

Key stated continuous activities are related to constant investment in standards for accessing foreign markets, including intensive communication with suppliers for improving operational aspects of supplies, including their laboratory for testing inputs by suppliers.

Partnership Potential: High

An alliance with USAID could assist in linking business sector demand with educational programs in secondary schools.

USAID can further help Vitaminka assist their suppliers to access technology in order to increase productivity, access supplier credit, and to facilitate implementation of standards required by foreign markets (such as ISO14000, HACCP, ISO9001, IFC, Kosher).

They would also like to outsource manufacturing of some products (salty sticks, marmalades) in order to expand their production of more profitable lines as some local manufacturers are not able to meet quality assurance standards.

Potential Drawbacks

Expectations on the length of time needed by smaller firms to invest (or co-invest) into new productions might be outside the implementation timeline by USAID.

ALKALOID AD Skopje

Zoran Kostovski, COO, Nikola Eftimov, HR Manager

November 30, 2016

Alkaloid is the largest Macedonian company in the value-added manufacturing of drugs, cosmetic and chemical products and processing botanical raw materials. Alkaloid shares are owned by more than 5000 shareholders, of which roughly 8% are foreign investors. The company employs 1250 people in the country and around 350 in their subsidiary and representative offices. The joint stock company consists of two profit centers: Pharmaceuticals & Chemicals, Cosmetics & Botanicals. It has two subsidiaries in the country along with 14 subsidiaries and 4 representative offices abroad. The company has diversified CSR activities, from energy efficiency in buildings, supporting sport clubs and associations, enhancing employee relations, donating to the needy, and providing monthly scholarships to medical and pharmaceutical students by the Foundation “Trajce Mukaetov” in their last semesters (with no legal obligation). Alkaloid owns their own training center and cooperates with the Pharmaceutical Faculty in their joint R&D center, while collaborating with most Universities in MK.

Specific ongoing projects involve restructuring CSR activities with introduction of KPI (Key Performance Indicators) for CSR.

Partnership Potential: Medium

There is a clear stated interest in knowledge management and knowledge-sharing platforms to be developed for the needs of the company and its suppliers. The company is investing in modern laboratories for organic production and expressed an interest in establishing connections with local suppliers and farmers, especially in the herbs and chemicals divisions of the company.

A USAID alliance is envisioned for collective support to farmers for production of organic products, especially herbs. Alkaloid expressed interest in guaranteed buy-out and potential cost-sharing for the activities at later date, after the mechanism would be put in place.

Potential Drawbacks

The sector and size of the company might require further articulation regarding long-term cost-benefit in supporting local producers and farmers as suppliers. Their previous attempts to support farmers in organic and cultivated production resulted in too much labor and costs expended without commensurate benefits.

TITAN, Cementarnica USJE Skopje

Magdalena Slavejkova, HR manager; Olja Sekulovska, CSR coordinator

November 15, 2016

This company is a producer of cement and other related building materials as a member of the Titan Group, a multi-regional producer of cement. Titan’s annual CSR budget is 250,000 Euros (excluding environmental protection). Titan is a member of a number of CSR initiatives (UN Global Compact, UN Sustainability Development Goals, European Pact 4 Youth) with a dedicated goal to be the first externally audited CSR Company in MK.

Titan is primarily targeting youth and education: school renovation in the Kisela Voda municipality, introducing energy efficiency and better school environment (over 200,000 Euro in the last seven years through their “Adopt a School project”); recurring scholarships for employees’ children, open competition scholarships for master of sciences, and annual internships for VET and University students.

To support the focus of human and working rights, Titan evaluates all suppliers for human rights, and conducts a social audit for each supplier and their employees. They committed to training all 200 contractors and smaller companies in health and safety measures as well.

Partnership Potential: Medium or Low

Managing expectations and clear timelines for cooperation with donors as joint activity is vital, as their prior experience with donors included renovation of schools in parallel with UNDP. There is medium potential for joint investment in youth oriented activities. The HR manager worked with USAID many years ago, so she is open for more discussion. They stated that they are comfortable in their current level of CSR activities.

Potential Drawbacks

They seemed unsure of how exactly USAID could support them and which mechanisms would be appropriate for cooperation.

KNAUF Skopje

Blazen Zotovski, Dry wall advisor

November 11, 2016

This is a dry construction company with a global presence, and two companies in Macedonia:

production of gypsum in KNAUF Debar and sales through Knauf Skopje. Mr. Zotovski states that since 1994 they have trained 9% of the dry wall installers operating in the country without obligation to use Knauf products. The training budget is integrated within the marketing and sales budget, amounting to 40,000 Euros in 2015, with a trend of annual increase by 20%. Knauf delivers training in their central administration building in Skopje. Between 1000 and 1200 installers are trained annually in different specializations using their products (dry wall, tiles, plastering, façade, floor, ceiling), also including engineering profiles. Knauf supports Construction VET secondary schools (Skopje and Tetovo) with materials and two-year training provision within the schools. They do cooperate with engineering faculties at the Universities.

Partnership Potential: Medium to Low

Partnership potential could exist in the area of support of new and established VET schools and centers for adult education (example: Master Craft). Knauf already assists with teaching materials, mentors and curriculum, while USAID could provide capacity building activities for the newly established training centers. They seemed well organized and the type of firm that would make a solid partner if their training services could be linked with other companies or BSOs.

Potential Drawbacks

Knauf regularly provides training as a marketing tool, so a cooperation mechanism with USAID seemed hard to grasp at this stage. Further limitations are that Knauf uses their own staff as trainers and their time is already limited by existing work.

ECOLOG

Evzal Rakipi, Head of Training & Development; Mislim Hasipi, Recruitment Director;

Pranvera Kasami, Assisstant to Chairman of Supervisory board

November 15, 2016

Ecolog dooel Tetovo is a daughter company of Ecolog International – Dubai. Started in 2000, it is now working on four continents as an integrated solutions provider in engineering and construction, environmental services, supply chain management and logistics and camp support. The Macedonian company is a recruitment center from the Balkans for their international needs as they bid and hopefully win more business. They already include more than 50 nationalities within the company.

Philanthropy activities have been focused on supporting children needs (coverage of 200 families), encouraging youth and women entrepreneurship (donations through a local foundation) and sponsorship of sports. Their budget for workforce development is on an as-needed basis, while their CSR and philanthropy annual budget is $1 million.

Ecolog Tetovo has established cooperation with Universities in Tetovo, with whom they developed master studies in project management. In 2014, they established an Ecolog internal academy for development of skilled workers, with 3-9 month programs, with 50 graduates. Average cost in the academy is $10,000 per person. They are currently developing the overarching strategy for the Academy, to better answer the increased demand of technical profiles required.

Partnership Potential: Medium

The stated area for potential cooperation was in supporting people that develop their local business through the Ecolog Academy. Practical skills gained will hopefully enable starting a business or getting employment outside of the company. The potential USAID alliance could help establish support for students to start new business through a regional business incubator.

They work with Universities in the design and delivery of educational programs for managers (supply chain management training and international project management), to be potentially joined by USAID who would support the Universities for sustainable provision of these programs outside of the needs of Ecolog.

Potential Drawbacks

The strategy for their Academy is still essentially in development, and is primarily for the purposes of benefitting their own employees and on as-needed basis. Their CSR is largely an arm of the company owner who is from Tetovo, and who provides personal direction of its funds and activities.

MAGANMAK

Ivan Postolovski, Manager

November 10, 2016

Maganmak is a domestically-owned trade company providing agricultural material, pesticides, fertilizers, seeds, equipment and know-how for using it. They claim 15 percent market share, with annual revenues of $3 million in 2015 and 36 employees. Maganmak has previous experience in working with a USAID project as a supplier of equipment for drip irrigation. Practical skills of farmers and advisory services stated as key challenge for dispersion of know-how. They provide internships to students, but wider attempts to include practical training with students from VET and University had been unsuccessful. They provide pest control related advisory and extension services to farmers, which are seen as sales services and provided by employees and contracted personnel.

Partnership Potential: Low

They see a USAID alliance for capacity building and technical assistance to extension services, experts, and farmers for use of pesticides to try to reduce usage. Maganmak was formerly a supplier of agricultural equipment to USAID programs and maintains a readiness to continue to assist future programs with supplies, equipment, and outreach.

Potential Drawbacks

There may be low company capacity for direct cooperation and the overall sector might require a syndicated company approach through business associations or chambers (though none has been identified so far).

[Note that additional input from companies has been provided in Annex II.]

INTERVIEWS - BSO (ASSOCIATIONS, PUBLIC SECTOR AND DONOR

PROGRAMS)

KONEKT

Nikica Kusinikova, Executive Manager

January 17, 2017

Konekt is a civil organization established in 2008, working to encourage and promote social responsibility and private giving for long-term development of Macedonia. The organization is a member of the UNDP Global Compact in Macedonia, the National Coordination Body on CSR, cooperating with UNIDO, AmCham and USAID in CSR, philanthropy and strengthening civil society activities. Konekt is organizing the Social Entrepreneurship Competition together with AmCham. In addition, they are part of the EU-funded “Corporate social responsibility in the Republic of Macedonia” project, presenting the Awards for Best Corporate Social Responsibility Practices in Macedonia, together with the GoM’s Ministry of Economy, Macedonian Enterprise Development Foundation, and the Association of Chambers of Commerce of Macedonia.

Being already an active organization in CSR and philanthropy, Konect promotes donations and supports individuals and organizations on issues such as operationalization of tax deductions, inclusion and dialogue of civil society with business, and social inclusion.

As a platform for future activities, Konect has initiated the establishment of a Club of Responsible Businesses.