The former Yugoslav Republic of Macedonia is a country with a small and open economy. Its trade
represents about 90 per cent of the country’s GDP. Thus, exports play an important role in the country’s
economic development, and the development of a successful export sector which can compete in foreign
markets is critical given the small size of the domestic market (Kathuria, 2008). Consequently, the focus of
government economic policies in recent years has been on improving the business environment, attracting
Foreign Direct Investment (FDI), and promoting exports. Trade ‘openness’ has been extended over the last
decade through the reduction of Most Favoured Nation (MFN) tariffs and preferential liberalization of trade
with regional trading partners and the EU.
A liberal trade environment creates both opportunities and challenges. Openness to trade and FDI alone
are unlikely to create a thriving export sector if they are not accompanied by advancements in several key
areas, including infrastructure, national legislation, institutional structure and capacity, and the availability
of appropriately skilled workers. The latter is of utmost importance along all levels of the value chain, from
small scale producers to factory workers, service providers, machine operators and so on all the way up to
senior management levels of exporting firms. The degree to which the educational and training system is
capable of providing the skills required at all levels of the economy is a key determinant of competitiveness
in today’s knowledge-based global economy, and at the same time, a crucial precondition for the creation of
decent and productive employment.
Achieving success as an export-based economy is a highly dynamic process, which involves regular
adjustment to the realities of the global market and in particular the discovery and development of new export
opportunities. This process of industrial upgrading can mean significant external impacts upon companies.
This often requires a pro-active role for the government to encourage and support the development of new
industries (Lin 2011).
Skills development is among the most important areas where the public and private sectors have to
work together to identify current and future needs of emerging industries and ensure that these will be met
as those industries develop. This idea is the rationale for the ILO’s Skill for Trade and Economic Diversification
(STED) approach, which is applied in this report to two sectors, food production and tourism.
The function of determining just exactly which sectors should assume priority for future economic
development, and analyzing their skills requirements remains a highly challenging task for the relevant
institutions and stakeholders in the former Yugoslav Republic of Macedonia.
The first aim of this study is to support this process by an in-depth analysis of two important sectors
of the economy, and to propose concrete policies for both skills development and other key elements of the
business environment to unlock their potential. The second aim is to demonstrate the relevance of this type
of research in order to encourage stakeholders in these and other sectors to engage more actively in the
preparation of strategic targets for their industries, and how skills development can be incorporated in an
overall strategy to achieve them.
The structure of this report is as follows. In section 2, we outline the main macroeconomic developments
as well as the business climate in the former Yugoslav Republic of Macedonia which set the background for
the development of any export industry. In section 3, we provide an overall sketch of human capital in
the country and explain the institutional setup of the education and skills forecasting systems. Section 4
applies the STED methodology to the food and beverages sector by analyzing the industry’s current domestic
and global market position, analyzing the availability of appropriately skilled labour and sector specific
educational institutions, and highlighting its likely development and key challenges for the future. Section 5
applies the same methodology to the tourism sector. We offer our conclusions in section 6.