M6 and Macedonia after UN Sanctions: A Few Days in Skopje

Dear Friends and Family,

Greetings from Skopje. I am sitting in the bar of the Holiday Inn eating once more at 11pm, trying to relax after days and days of late nights and early mornings (at least early for me.)

It has taken me more than a week here to figure out how I felt about Skopje. It has been very unreal. Last week the hotel was full of Lieutenant-Colonels from the armies of the NATO of 2004—from Poland, Germany, Uzbekistan and many places in between. This week I see placards for a crisis planning meeting on WMD, which presumably refers weapons of mass destruction.

Macedonia presents itself as central European. The staff behind the front desk, the taxi drivers, the government ministers, they all look like central Europeans. Yet the city feels empty, not empty of people but empty of soul. Even the museums look like 1970s high schools built on three floors designed by a low-budget architect and built by a low-bidder construction company. The most interesting part of the city has Turkish influence. The most beautiful church is a mosque, down the street from the Turkish Embassy, where one of the men let me go in and watch the prayers. The interesting part of the old city is the Albanian section, which is also the place where there are few stores open. Yet the Ottoman Empire has not extended as far as Macedonia for the last four hundred years.

In the bars and the cafes, I listen to the conversations of foreigners—Americans, Swedish, Germans. Those not with the military seem to be working for NGOs. Some have escaped from Kosovo for a week-end of shopping, although to me the shops seem to be over-priced.

I am here with a large group of about 18 staff-members. My role is to identify ways in which we could assist the government in dealing with corporate governance issues. Unfortunately my key government counterpart, the head of the securities commission, has not yet found time to meet with me. She is very busy. Her job is part-time. She is also professor at the university. The seven commissioners represent 41 percent of the entire staff of the commission and they have trouble identifying priorities.

But then, they don't have too much to do. There is a stock exchange but it is not very active. If you offer to buy shares and you have not been pre-approved by company management, no one will sell you their shares. It's not part of the law. It is just part of the local business culture. Owning shares in a company is rather like becoming a member of a club. The existing members have to decide that you are ok before they will let you in. So much for liquid capital markets.

My local counterparts tell me that about 80 percent of the Macedonian economy is controlled by six men, known collectively as “M6.” There are some women in the next category, that I call the M20 but none among the key M6.

I met one of the M6 last week. His company is the second largest in the country. Yet no one could give me the street address.

The secretary to the bank manager who set up the meeting didn’t have the address. Our local office didn’t have it. The front desk of the Holiday Inn said that they didn’t have it and when I insisted they find it, they gave me the address of the company’s customs office on the outskirts of town. The taxi driver wasn’t certain where it was. Finally I insisted that the taxi driver help me.

He told me that I should walk on the street and ask for the “Lotteria,” the lottery, which is one of the company’s subsidiaries. I tried this but still had no success. Finally I gave up asking for the company name and started asking for the name of the big guy. (The names of all MG are well-known.) Everyone I asked knew where to find Mr. Lottery, even the construction workers fixing the gutters on the street.

I told Mr. Lottery this story. “Everyone thinks I own Macedonia,” he said and then complained that it wasn’t true, or maybe just partially. I then asked Mr. Lottery my standard question of who owned and controlled his company. He gave me an approximate answer, which I assumed covered only some of his businesses. I asked if the Macedonian business community would likely be willing to publicly provide the names of the "real owners" of their companies. "Yes, but not right away," was the answer from Mr. Lottery.

I sat in the meeting, wondering why so many local people were reluctant to tell me where to find the company. It was like asking where to find the Trump Tower and finding no New Yorker able to give you the address.

Macedonia has suffered from two blockades—the UN sanctions that closed the borders with Bosnia and Serbia during the Balkan War and the blockade from Greece. The UN sanctions were not Macedonia’s fault. The blockade with Greece was a different story. Greece complained that one its provinces is also called Macedonia and foreigners would be confused by the two Macedonia's. Officially Skopje is the capital of the Former Yugoslav Republic of Macedonia (described as FYR of Macedonia and pronounced as "FROM", rhyming with prom) and the Greek province kept its name. Perhaps no one explained that Moldova and Romania have the same problem and it doesn’t seem to be an issue.

However the impact on Macedonia was disastrous. Just after becoming a separate country, Macedonia found all of its border officially blocked. The businesses that survived were often “black”, criminal activities involved in smuggling of tobacco and oil derivatives.

The blockades ended by 1998 but by then, the Communist left-over party had been turned out and the new party wanted its share of the spoils. The major corporate governance abuses that I have discovered occurred between 1998-2002 when politicians established their personal fortunes for life. The former Communist party was reelected in 2002 and is still trying to find a workable economic development strategy. They know they have to include the 24 percent of the population classified as Albanian, but they have no strategies to achieve ethnic integration. Walking on the street, what I feel is the violence of a youth that has been abused.

My recommendations on corporate governance are likely to receive a polite but cool reception: require that owners of companies disclose their ownership positions, apply international standards to preparation of financial reports, make boards of directors effective supervisors of company management and provide some teeth for the securities regulator. It would be hard to believe that M6 wouldn’t oppose such recommendations and undermine their implementation, but I am convinced that such ideas that will one day find their way into Macedonia's business culture.

It’s now midnight and I am surrounded by locals—a table of eight men, several of which could be bodyguards of the old school (heavy-set and smoking) and two couples ignoring the bartender who seems determined to close on time.

Am off next to Romania, wondering if I will come back to Skopje and if it will be a very different place the next time.

Sue