On July 17, 2023, the Minister of Finance, Mr. Fatmir Besimi publicly announced that the European Union has officially approved €100 million of macro-financial assistance to contribute to supporting Macedonia’s economic stabilization and substantive reform agenda. The assistance will be provided in the form of loans to boost the development and green transition of SMEs and will be made available in two equal installments within a two-year period. Adopting the Smart Specialization Strategy of the Republic of North Macedonia is the precondition for withdrawing the first installment.
What is the Smart Specialization Strategy (S3) and what is its expected impact on the national economy?
The concept of S3 was put forward by the Joint Research Centre (JRC) of the European Commission and became an essential part of the EU cohesion policy. This policy-making practice was soon adopted by the Nordic countries, EU accession countries, and other regions in the world. In contrast to the conventional mimicking of good practices to achieve planned, linear development, the uniqueness of the S3 is in its place-based (regional) approach focused on the region’s specific strengths and advantages. The idea is that by deploying additional support in the priority areas with the highest potential (economic, innovative, and research potentials) in a way that is agreed upon by the ecosystem actors, the regions will develop new competitive advantages and will enhance links among various actors to modernize the economy, in exploring new and emerging markets, thus structurally transforming the region’s ecosystem and addressing social challenges.
In North Macedonia, the process of developing the S3 is jointly coordinated by the Ministry of Economy and the Ministry of Education and Science, with a view that S3, as an overarching strategic document, will replace the expired Competitiveness Strategy 2016-2020 and Innovation Strategy 2012-2020, aiming to advance the competitiveness of the national economy. The methodology and the monitoring of the development process are provided by the JRC and consist of several consecutive steps:
- Quantitative and qualitative analysis to define the “priority domains” – economic activities where regions or countries have a competitive advantage (or have the potential to generate knowledge-driven growth and to bring about economic transformation). The quantitative consists of a combination of statistical analysis of economic, innovative, and research capacities, compared to EU averages. The qualitative consists of interviews with key stakeholders to discuss the statistical findings through the prism of global processes, social challenges, specific niche markets, etc.
- “Entrepreneurial Discovery Process” (EDP) – that brings the different actors from the quadruple helix together in an interactive, participatory leadership process to jointly define the specialization areas, define the vision and develop a suitable policy mix to implement them, enabling transformation roadmaps towards new products and markets. Here the involvement of various actors, including firms, incubators, universities, other research institutions, civil society organizations as well as national authorities, and especially the involvement of a critical mass of entrepreneurs is mandatory. The EDP process is continuous throughout the lifetime of the Strategy and is guiding the implementation, revision, and further planning of the S3.
- Refinement of the strategic framework by taking into consideration an objective analysis of the current situation in terms of existing support, its efficiency, gaps in available support, available public and private budgets, etc.
Thus far, the entire process involved over 400 various actors and was supported by the JRC, the GIZ, the World Bank, and the SDC-funded IME project. Currently, the document is being finalized with EC technical assistance.
To find out more on the S3 development process go to konkurentnost.mk.
The elaborative design process resulted in the identification of four priority vertical domains:
- INFORMATION AND COMMUNICATION TECHNOLOGIES
- INDUSTRY 4.0
- SMART & SUSTAINABLE BUILDINGS AND MATERIALS
- SMART AGRICULTURE AND FOOD WITH HIGHER ADDED VALUE
The priority domains will be strengthened as main drivers of the national economy through four main pillars of intervention defined through the EDP:
- SCIENTIFIC EXCELLENCE
- INNOVATION ECOSYSTEM
- COMPETITIVENESS OF THE BUSINESS SECTOR
- HUMAN RESOURCES
and a horizontal principle of GREEN, DIGITAL, AND SUSTAINABLE TRANSITION.
INTERNATIONALIZATION and integration of the national entities in the EU scientific and business networks, multi-beneficiary projects, and RDI programs is also at the core of the Strategy.
The Strategy envisions that enabling an accelerated development in the four priority domains will “foster green and sustainable growth through embedding knowledge, innovation, and technology for creating high value-added products and services competitive on international and domestic markets”.
S3 is already incorporated in the National Economic Reform Program and the IPAII country profile. Adopting the S3 has been noted as a key recommendation in the country reports of the European Commission since 2019. Questions related to the process of development, content, and adoption dynamics were raised during the EU accession preparatory screening meetings on Chapter 20: Enterprise and Industrial Policy and Chapter 25: Science and Research. Thus, it may be expected that the forthcoming EU accession screening reports will set expectations on the S3 implementation in the context of approving further EU financial assistance. From the donors’ involvement in the development process, it may also be assumed that other IFIs are highly interested in complementing this support.
In conclusion, for the national economy to be able to effectively attract and deploy further international funding for economic development on mid- and long-term scales, increasing the absorption capacity of the national entities for implementing the S3 interventions is of utmost importance. This means increased capabilities of the relevant public institutions, the academia, the professional and the business associations, and increased investment readiness of the companies to attract national and foreign capital.
The Modernisation of the Private Sector for Sustainability and Decent Jobs in North Macedonia, a project funded by the Swiss Agency for Development and Cooperation, to be implemented by Swisscontact in cooperation with Impact Foundation will provide support in line with the S3 interventions. By putting a strong focus on human resource development, green and digital transformation in SMEs, the project aims to increase the private sector productivity and competitiveness and bring a wider social impact.
Author: Katarina Krecheva
