The transitional process of the FYR of Macedonia since independence in 1991 has been marked by a severe economic crisis, which has led to a significant increase in the levels of unemployment (31.9 percent in 2002) and poverty (22.7 percent in 2001). The turbulent situation in the Balkan region (war in the countries of the Former Yugoslavia) and finally the internal conflict in 2001 have created a strong tendency for migration. The present study is focused primarily on providing evidence for the migration and outflow of skilled labour. It looks in more depth at the reasons for brain drain, at the current policies of the country to tackle it, and gives some practical recommendations for policy-makers in the area of brain drain. The paper explores the links between unemployment of the highly educated in the FYR of Macedonia and brain drain. Further, the paper discuses the situation within higher education: why has the number of domestic students risen so drastically in recent years and why have more and more students opted to study abroad? What damage will this tendency cause in the short and medium term? Are there some returns from high skilled emigration that offset or even improve source country development prospects?