Foreign Direct Investments as Initiators of Change: The ”Swedmilk” dairy case- Reasons behind the failure

Institutional problems and the corruptive use of social capital give ground for misuse of institutional gaps and cause intentional failures for financial benefits. Based on social capital theory and transaction cost economics (TCE) this paper describes how the institutional environment in the Former Yugoslav Republic of Macedonia (FYROM), affects success or failure of business endeavors, such as the Swedmilk case. Foreign Direct Investments (FDI’s) are expected to be the drivers of positive economic development for economies in transition. Hence, the major question addressed in this paper is: How does a Greenfield foreign direct investment of 25 million Euros, manage to collapse in such a short period? The paper also describes the “official” plans and actual outcomes of the dairy, as well as the situation in the dairy sector before and after the Swedmilk failure. The financial problems occurred in October 2008, so the case of Swedmilk is quite recent and has not been included in any kind of research. Being a recent case the real implications on the dairy farming and sector are yet to be explored.social capital, institutional environment, dairy sector, Swedmilk dairy, foreign direct investments, International Relations/Trade, Livestock Production/Industries,

Restructuring the agri-food value chains in post-socialistic Balkans

Like most of the Western-Balkan countries, the Former Yugoslav Republic (FYR) of Macedonia experienced significant difficulties in adapting and modernizing its agricultural production in accordance to the highly competitive regional and EU markets. By examining the dairy value chain of the FYR Macedonia, this thesis presents the challenges and changes in the organizational and institutional setting of the agri-food value chains in post-socialist Balkan countries. Various theoretical approaches are applied to assess the competitiveness levels on each segment in the industry, as well as to characterize the institutional environment, the governance and the organizational structure, and the overall level of development and competitive prospects. A general conclusion of this thesis is that the dairy industry in FYR Macedonia is still under its competitive potentials. The institutional setting and governance, as well the organization of the chain, and the market structure and level of modernization, indicate that the dairy industry in the country requires further modernization and consolidation in order to reach its competitiveness potentials on both domestic and international markets. The findings of this study are valuable for the actors in the dairy supply chain, since they provide information of each actor’s position in the supply chain, the market structure, and the development of the chain in general. Two main contributions of this study are the analysis of contracts and the social network, both based on primary data collected from farmers in the FYR Macedonia. The analysis of contractual arrangements with dairies shows that transaction costs are main determinants of the choice of contracts. The analysis of the Social Network, in which the patterns of activation of social capital can contribute to finding a solution to the problems with the functioning of the farm associations and cooperatives in countries with similar socialistic background. The conclusions of these studies can be extended to other countries wedged in a long transition, and could easily transfer to the experiences in the countries from the Western Balkan region

INSTITUTIONS AND INSTITUTIONAL CHANGE: WHAT IMPEDES FARMERS’ COOPERATION IN NORTH MACEDONIA?

Small farmers struggle to accomplish their best interests in environments and value chains with large and organized buyers. Farmers in general should be able to recognize their interest in joining some form of cooperative organization such as an association, an agricultural cooperative or a producer organization. However, despite the large number of agricultural operators in North Macedonia, the number and functionality of agricultural cooperatives are still very low. The historical, cultural and socio-economic features largely influenced the way associations, cooperatives and organizations of agricultural producers in the country are formed. These features may also provide answers on the crucial conditions for these association to function. The norms of human behavior in the agricultural sector in North Macedonia are difficult to alter. The multiple changes in the social order and the negative experiences in the association of the rural population in the past have great impact on the cooperative models to this day. In this context, the paper focuses on the historical and current perspectives impeding the formation and functioning of agricultural cooperatives in the Macedonian agriculture.&nbsp

The tobacco sector in the Republic of Macedonia

The tobacco sector is an important part of the Macedonian agriculture and the economy in general. This project is giving an overall prospective of the Macedonian tobacco industry, and it points out its comparative advantages and disadvantages. The core question at the beginning was "Whether Macedonian tobacco industry is competitive or not?" In order to determine the answer to this question, both descriptive and empirical approaches are used. The essential part of this study was the approach developed by Porter or the determinants of national advantage. The description of this sector was developed following the concept of Porter's Diamond model with an overall aim of determining this sector's strengths, weaknesses, threats and opportunities in a so called SWOT analysis. This study also includes some competitiveness index calculations. Tobacco is regarded, as a good of public well being by the Law on tobacco. It is a source of employment and net income for the population. The sector is an important part of the Macedonian agriculture, and it has much strength in the factor conditions it possesses. It is an export-oriented high quality product, which generates important incomes for the Macedonian agriculture and the economy as a whole. This sector's weakest sides are mostly originating from the problem of badly developed relations producer/buyer and the insufficient Law enforcement on the government behalf. The biggest challenge that the tobacco industry faces is the active campaign against smoking that causes an over all decrease in the demand for tobacco. The tobacco is declared to be a hazard for people's health and many pro-health policies are proposed against it. The tobacco is a significant crop for the Macedonian agriculture and economy since it is an essential income sources for many families and essential source for government revenues, and it is foreseen that it will continue to exist on the Macedonian fields for the years to come.Tobak utgör en viktig sektor i det makedonska jordbruket och i ekonomin i stort. Den här uppsatsen ger en övergripande bild av den makedonska tobaksindustrin och pekar ut dess komparativa fördelar och nackdelar. Kärnfrågan som ställs i början av uppsatsen är huruvida Makedoniens tobaksindustri är konkurrenskraftig eller inte. För att besvara den frågan används både beskrivande och empiriska ansatser eller metoder. Den essentiella delen av den här uppsatsen är baserad på den metod som utvecklats av Porter om de avgörande faktorerna bakom nationella fördelar. Beskrivningen av Makedoniens tobakssektor bygger på Porters Diamant modell I syfte att fastställa sektorns styrkor, svagheter, hot och möjligheter I en så kallad SWOT-analys. Uppsatsen innehåller även beräkningar av konkurrenskraftsindex för Makedoniens tobakssektor

Analiza konkurentnosti u duhanskom podsektoru u Republici Makedoniji

Tobacco production has a long tradition in R. Macedonia. It is an industrial crop with over 70% share in the total industrial crops area, and an average share of some 30%, in total agricultural export. As a labor intensive crop, it provides employment for the rural population and presents a social buffer for the economy and the current high unemployment rate in the country. The aggressive policies against smoking propose reduction of tobacco production, thus solution for its replacement ought to be considered for the tobacco producers in the country. The aim of this research is to investigate the competitiveness of the tobacco sector in the country based on the Porter Diamond competitiveness approach, complemented with the Ballasa index of comparative advantage. Based on the prevailing positive aspects in the competitiveness model, and the high values of the index ranging from seven to over nine for the period 2005-2010; much higher compared to selected countries in the region (Greece, Bulgaria, Turkey), our findings confirm that the country has favorable conditions and competitive advantage for producing tobacco.Proizvodnja duhana ima dugu tradiciju u Republici Makedoniji. To je industrijska biljka s preko 70% udjela na ukupnom broju površina pod industrijskim i s prosječnim udjelom od oko 30% u ukupnom izvozu poljoprivrednih proizvoda. Kao zahtjevna biljka, osigurava posao ruralnoj populaciji i daje socijalnu zaštitu ekonomiji i trenutnoj visokoj stopi nezaposlenosti u zemlji. Agresivne kampanje protiv pušenja predlažu smanjenje proizvodnje duhana, stoga bi se trebalo pronaći rješenje čime bi ga proizvođači duhana u zemlji mogli zamijeniti. Cilj ovoga istraživanja bilo je istražiti konkurentnost duhanskog sektora u zemlji analizom konkurentnosti pomoću Porter Diamondovog modela, nadopunjenog Ballasa indeksom komparativnih prednosti. Na temelju prevladavajućih pozitivnih aspekata u modelu konkuretnosti visoke vrijednosti indeksa su u rasponu od sedam do preko devet za razdoblje od 2005.-2010.; puno više, ako se usporedi s nekim zemljana u regiji (Grčka, Bugarska, Turska). Naši rezultati potvrđuju da zemlja ima povoljne uvjete i kompetitivne prednosti za proizvodnju duhana

Disrupted Market Relations in Agriculture in North Macedonia: the COVID-19 Crisis

The Covid19 crisis has stressed the importance of, and need for, a stable and functional food system, able to provide consumers with a continous supply of quality food at affordable prices. The pandemic has also highlightened the role of agricultural producers in the food supply chain, with small farmers being the most vulnerable category. This global crisis has actually deepened the problems faced by farmers, especially those on the verge of sustainability. The purpose of this analysis was to provide an overview of the disrupted links in agriculture, as a result of the Covid19 crisis. A survey was carried out with 91 farmers and in-depth interviews were conducted with selected traders and processors. Farmers assessed that  the crisis negatively affected their economic operations. The critical parts of the supply chain derive from the disrupted link between farmers and traders/processors, lack of field technical support resulting from mobility restrictions, uncertainty in cooperation, lower production quantities, and varying quality of the agricultural products. Availibilty and cost of seasonal workforce was also pronounced as an issue. The dominant family fams small-scale structure and lack of  aggregation in the sector challenged the resilience and effective response to the crisis. From buyers'/processors' perspective, the crisis effect was marked through the disrupted communication with farmers, low awareness of the need for change, and drastic decline in the HORECA channel sales. The agricultural and rural policy is designed to address measures adjusted to the needs of the key actors in the sector. The priority set of measures should support the food supply chain, enhancing farmers' networking and aggregation, and on-farm and off-farm diversification, improved communication, information systems and digitalisation. Improving productivity and competitiveness is still an effective strategy for sustainable operations, greater resilience and risk adaptation in crise

MULTIDIMENSIONAL ANALYSIS OF RURAL POVERTY IN NORTH MACEDONIA

The purpose of this paper is to provide an overview of the various aspects that address and shape poverty in rural areas in the Republic of North Macedonia. Applying the "Multidimensional Tool for Poverty Analysis” approach supports understanding multiple deprivations and how different power relations, structures, conditions, and issues coincide to keep people in poverty. The model identifies four interrelated dimensions of poverty representing the internal factors such as resources, opportunities and choice, power and voice, and human security. In addition, external factors were analyzed representing the development context such as political and institutional, economic and social, environmental, and conflict and peaceful contexts. Primary and secondary data sources are used for the analysis. Field research (survey) is a new approach that complements and upgrades data from secondary sources that have so far been the basis of analyzes of this kind. The survey covered 103 households that predominantly live in rural areas, or around 76% of the total sample, while the remaining part of the sample is a control group, and those are households living in urban areas. The data triangulation aims to give a clearer picture of the problems and challenges posed by poverty in rural and urban areas and identifies the discrepancies in the living conditions between the rural and urban areas, as well as the most vulnerable groups living on the edge of poverty, etc., which should be supported by the future policies with targeted measures

INDICATORS OF RURAL POVERTY IN THE REPUBLIC OF MACEDONIA - MULTIDIMENSIONAL POVERTY ANALYSIS

Rural poverty presents an escalating problem for post-communist countries struggling with perpetual transition towards market economy. As a country deriving from such economic background, Republic of Macedonia is classified as one of the poorest countries in Europe. The rural population in the country is faced with different obstacles such as: limited access to institutions, infrastructure, finances, and other aspects which not only impede these population’s living conditions but also obstruct the development and growth of the rural areas. In order to provide detailed description of the rural poverty situation as well as to identify the vulnerable and depraved group in the rural areas in the Republic of Macedonia, this paper represents an initial record of the poverty conditions in the rural areas. The poverty features are presented through the multidimensional poverty analytical tool and the indicators and dimensions of poverty on micro and macro (country) level in order to describe the socio-economic, environmental, political and institutional context. The comprehensive multi-dimensional analysis of the poverty dimensions in the Republic of Macedonia gives overview of the rural poverty situation and highlights several groups, suffering from multiple deprivations such as rural woman and agriculture households, which are part of an extremely vulnerable group, with the highest risk of going under the poverty base lines

CREDIT RISK IN AGRICULTURE IN NORTH MACEDONIA: MACROECONOMIC PERSPECTIVES

Loans play an important role in agriculture development to maintain the farm liquidity through short-term financing of current assets, and to improve farm investment activities to increase agricultural productivity and profitability. Although the state has established various mechanisms to improve access to commercial credits in agriculture, the absorption of credits by this sector is still very low. The weak credit activity of banks in agriculture, among other things, is owed to the high credit risk of banks in financing this sector. Credit risk management is one of the basic activities of the banks to create and maintain a quality loan portfolio that will enable the smooth functioning of the bank. As a result, banks often tighten credit conditions for agricultural producers. Hence, the main aim of the paper is to investigate the credit risk in agriculture from the banks’ perspective by i) assessing the exposure of banks to credit risk in agriculture, and ii) investigating banks’ behaviour in crediting the agriculture sector. Taking into account the importance of agriculture for the national economy, the results indicate the need to improve lending in agriculture with mechanisms for reducing the bank’s credit risk in financing agriculture, especially for smallholders, but also to understand that both sectors, the banking and agricultural sector, are very important for the national economy. If the state provides conditions for the development of the banking sector, it will also provide foundations for ensuring development in agriculture in general

SUPPLY CHAINS AS NETWORK - THE CASE OF ORGANIC PRODUCTION IN MACEDONIA

The absence of relations between the primary producers and markets has been identified as one of the primary problems in the supply chain for producing organic products in Macedonia. Nevertheless, the organisation and network structure of the supply chains are often responsible for the economic performance, competiveness and information diffusion between the trading firms and their partners-farmers producing organic products. In this regard, analysing supply chains through social network analysis lenses helps to identify the actors and the important factors that contribute in the information diffusion across the supply chains. The aim of this paper is to identify and map the information diffusion channels of the largest distributers of organic products in Macedonia, by mapping the structure of their social networks. The Social Network Analysis includes networks on horizontal level - farmer’s decision to get involved in organic farming, or transfer the conventional production into organic, and vertical level – information provided by the distribution and trading partners in the organic value chain. The results show that information and resources are often embedded in the farmers’ personal network, however farmers producing organic products are a closed group with very few relations among themselves indicating to a low level of trust in sharing or receiving information. Most of the identified relations among the actors in the analysed network are based either on commercial basis (distributors) or friendship (other farmers). The identified absence of relations among farmers on horizontal level can seriously impede the transfer of information and decrease the motivation for entering, maintaining and introducing innovations in the organic production, thus further examination and improvement of the information channels is necessary