Advancing Kosovo Together

ADVANCING KOSOVO TOGETHER

BUSINESS ATTITUDE AND LINKAGES SURVEY Potential for improvements of inter-ethnic businesses relations

MARCH 2015

This report was produced for review by the United States Agency for International Development. It was prepared by USAID Advancing Kosovo Together implemented by prime contractor Chemonics International with input from the Berman Group.

Table of contents:

I. INTRODUCTION 3 II. METHODOLOGY 4 III. POTENTIAL FOR IMPROVEMENTS OF INTER-ETHNIC BUSINESS RELATIONS 5 IV. SURVEY OF NON-MAJORITY BUSINESSES 7 1. Status of business 7 2. Barriers to growth 8 3. Customers and business linkages 9 4. Labor and employment 10 5. Business facility information 11 6. Public sector services 12 7. Overall impression 14 V. OVERVIEW OF KEY FINDINGS 15 VI. INTERVIEWS OF MAJORITY OWNED BUSINESSES 16 VII. ANNEXES: . Overview of presented investment project ideas . Business Attitude Survey form

I. INTRODUCTION

In the course of December 2014 and January 2015 the Advancing Kosovo Together (AKT) Program completed a Business Attitude Survey in ten Kosovo municipalities with Kosovo Serb non-majority population. The structured interviews of owners and/or managers of (mostly) micro and small family owned businesses took place in Gračanica/Graçanicë, Novo Brdo/Novobërdë, Parteš/Partesh, Ranilug/Ranillug, Štrpce/Shtërpcë; Vushtrri/Vučitrn, North Mitrovica/Mitrovica e Veriut, Zubin Potok/Zubin Potok, and Zvečan/Zveçan. . The objective of the survey was to provide the team of the Advancing Kosovo Together (AKT) Program with analytical information on the status, performance and future plans of target businesses. Survey items included the history and current status of the company, the nature of its business, labor and employee relations, business facility information, government services, and overall impressions of the individual municipalities as a place to do business. The aggregated results report includes answers of forty-eight owners and/or mangers of businesses that provide earning opportunities to almost two hundred people. Although a survey of forty-eight firms located in ten municipalities cannot definitively reflect the attitudes of the entire Kosovo Serb business community, these firms provided valuable information on current business environment, key trends and challenges. Additional interviews were conducted in February 2015 with several larger Kosovo Albanian- owned businesses focused on market linkages. The purpose of these surveys was to complement the findings from the Business Attitude Survey and identify the opportunities for linkages between Kosovo Serb and Kosovo Albanian enterprises. This Business Attitude and Linkages Survey is one of a number of the Kosovo business environment and SME sector analyses completed over the past several years. We have taken into account the focus, methodologies and contents of four similar studies when designing our survey and processing its results to benefit from already existent knowledge / analysis while still keeping the specific focus of the AKT Program: An inquiry into economic situation of north Kosovo businesses / AKTIV (British Embassy in Pristina, German International Development Cooperation (GIZ), 2013). The study maps up the specific environment and situation of businesses located in four north Kosovo municipalities. It is based on interviews in 331 businesses and it does include larger companies. Report on SME in Kosovo 2014 / KOSME (Austrian Development Agency, Swiss Agency for Development and Cooperation and Ministry of Trade and Industry). The report is based on analysis of micro-data provided by Kosovo tax authorities and interviews in 743 businesses. The study covers all regions of Kosovo and provides analysis of 7 (sub) sectors of the national economy. Business Climate in Kosovo 2014 / EU Office in Kosovo and Association of Regional Development Agencies (ARDA). Comprehensive analysis of country’s overall business climate. The study is based on analysis of statistical data, survey of businesses (1000) and inputs from five focus groups. It provides thorough description of main barriers to doing business for each of the regions including legal & regulatory and infrastructure issues. Kosovo Sector Assessment & Selection Report / USAID EMPOWER, 2014. Sector selection study based on the macro-level analysis, site visits to selected businesses with standardized interviews and a dialogue with the key stakeholders. The report provides the

assessment of six high potential sectors of Kosovo economy and of the particular territorial environment of the four north Kosovo municipalities. Additionally, the Empower Private Sector Program focuses on supporting the following sectors: Wood processing, apparel and leather, ICT, Tourism, and Renewable Energy.

The AKT Program’s Business Attitude Survey has focused on very small businesses in municipalities / communities with Kosovo Serb non-majority population to understand the specifics of business practice, performance and environment of (mainly) Kosovo Serb owned micro-enterprise. The knowledge built through this survey is to help identify possible interventions / assistance programs to the target group of very small businesses in municipalities / communities with Kosovo Serb non-majority population with a special ambition to encourage and facilitate the inter-ethnic business linkages. Larger-scale majority businesses were interviewed as identified by non-majority businesses or as potential businesses to create business linkages with non-majority businesses.

II. METHODOLOGY

The firms invited to participate in the survey were selected from the list of businesses located in AKT partner municipalities provided by the Project. The survey’s primary focus were Kosovo Serb owned micro and small businesses and a special attention has been paid to firms in northern part of the country. This is reflected in the geographic distribution of interviewed firms: Zvečan/Zveçan.– 11, North Mitrovica/Mitrovica e Veriut – 9, Gračanica/Graçanicë – 8, Štrpce/Shtërpcë – 7, Parteš/Partesh – 4, Ranilug/Ranillug – 3, Mitrovicë/a – 2, Novo Brdo/Novobërdë – 2, Vushtrri/Vučitrn – 1 and Zubin Potok/Zubin Potok – 1. The survey also included several Kosovo Albanian owned businesses as the inter-ethnic cooperation is critical for the dynamics of SME development in Kosovo. The owners or managers of surveyed businesses (those who make decisions) were asked to answer a set of 23 questions. The interviews were conducted by trained consultants of AKT subcontractor Berman Group, who used the same guidelines and surveys forms in all businesses. To encourage complete and frank responses from businesses, those interviewed were assured that the BAS report would not include references to specific firms and the survey forms would remain confidential. The completed survey forms were processed and data analyzed by AKT consultants. The forty-eight businesses interviewed have a combined total of 189 employees. Only two businesses have more than 10 employees and the remaining 46 fall into the category of micro- enterprises. Remarkable differences were found among responses of businesses in different sectors of the economy: primary (farming), secondary (food processing, wood processing, construction materials) and tertiary (variety of trade and services). We have analyzed much of our data using those sectoral distinctions. A group of 21 businesses with 67 employees located in northern part of Kosovo was also studied separately to see whether there are significant differences compared to the entire sample. In addition to the survey of the Kosovo Serb owned micro and small businesses mentioned above, we have completed interviews in owners or managers of 8 Kosovo Albanian owned companies that either had functioning business relations with their Kosovo Serb counterparts

or were mentioned as desired to do business with. The additional interviews were focused specifically on the existing and potential inter-ethnic business linkages of the firms surveyed to complement the Business Attitude Survey. Key findings of these interviews are incorporated in this analysis while the detailed results are available in a separate chapter of this report.

III. POTENTIAL FOR IMPROVEMENTS OF INTER-ETHNIC BUSINESS RELATIONS (CONCLUSIONS AND RECOMMENDATIONS)

 Micro-businesses play very important role providing employment opportunities to non- majority communities in Kosovo. Significant part of the surveyed businesses represents in fact self-employment and/or agricultural family households with very limited output traded on the market.  In the harsh daily life reality, the basic function of these very small businesses is more social rather than economic and this fact is reflected in their strategy (if at all any), business practice and growth aspirations.  Consequently, the segment of very small businesses can’t be realistically seen as a driver of the economic development and we do not expect these businesses to be active in creating and/or expanding inter-ethnic linkages beyond the existing, ad-hoc transactions.  The very small businesses still deserve attention for their social function as well as a level of assistance designed to (1) help them perform the (self) employment role and (2) identify and support start-ups with potential and aspiration to grow.  The Business Attitude Survey has also identified a group of “larger SMEs”. These businesses usually have five and more employees and supply significant part of their produce to the entire Kosovo markets (outside their municipalities).  Most of the “larger businesses” expected further growth of sales and increased number of employees in 2015 and on. These businesses can typically be found in food processing and their annual sales exceeded EUR 100 thousands. The group of “larger businesses” has a good potential to expand existing, establish new and sustain feasible inter-ethnic business linkages.  Encouraging and facilitating the inter-ethnic business linkages must follow primarily the business logic. The task is to assist establishing mutually beneficial trade relations that are (coincidentally) inter-ethnic.  Businesses are obviously more willing to engage in new business linkages on the output side of their operations. Expanding sales, access to new markets and use of new distribution channels belong to basic business strategies and instincts of real entrepreneurs. We believe that facilitation of inter-ethnic business linkages on the output side will be appreciated by most of the non-majority businesses.  On the other hand, businesses are more conservative in handling the input supply side of their operations and they usually change existing partners once they fail delivering contracted supplies or services. The facilitation of inter-ethnic business linkages on the supply side is suggested as the second stage of the intervention.  Most of the surveyed businesses revealed their expansion / investment plans and a majority of them do expect financial support (grants, credits) designed to co-fund those investments. While the investment in new premises, technology and equipment is commonly seen as the way to expand, only a few firms expressed the need to improve their market competence and practical skills.

 Majority businesses are interested in outsourcing production to non-majority businesses and be present in non-majority areas by opening shops or placing products.  Majority businesses are interested in involving non-majority farmers to expand their product portfolio.  Non-majority businesses need to meet certain criteria such as standards, quality, and price to enter larger majority retailers.

 We suggest designing the AKT Program’s assistance around the expansion / investment plans of “larger businesses” and combine (condition) the investment grants with the business planning assistance that will include market assessment and evaluation of the business linkages on both, input and output side and further assistance in marketing & promotion and work with distributors and suppliers.  Provide small grants to very small businesses (like agricultural family households) that can become parts of larger (inter-ethnic) business networks supplying primary produce to processors and further along the value chain.  Provide small grants to very small businesses and startups that show signs of high growth potential (youth, women, returnees, etc.).  Identify more advanced “larger businesses” with ambition and potential for further growth including expansion of their business linkages – “future champions”.  Design and provide an intense assistance to the target group of more advanced businesses in order to improve their performance in key business processes (market analysis, business planning, managerial training …).  Evaluate business linkages of every business in the target group on both input and output side and set a simple strategy for their management and development  Look at potentials for creation of business networks that would include the very small primary producers, the target group of more advanced businesses and larger companies with good access to markets in Kosovo and/or abroad.  Facilitate deepening and expanding of the business networks identified. Design special support to feasible business networks in cooperation with other donor programs.  Combine consulting support with investment grants to improve performance (growth of sales, job creation) of selected business networks.

IV. SURVEY OF NON-MAJORITY BUSINESSES

1. Status of business Of the 48 respondent businesses, 33 firms representing 68.7% of the total were founded in or after 2010. The oldest enterprise dates back to 1980 while three firms launched their operations in 2015. Vast majority of firms (41) are operated as Individual Businesses / physical persons and 4 having legal form of Limited Liability Company. Two entities have legal form of NGO (business associations) and one Individual Business claimed to be in process of registration. None of the businesses reported a share of foreign ownership on its equity and one of the surveyed firms runs a subsidiary outside Kosovo.

2. Barriers to growth The surveyed businesses were analyzed within three basic sectors of economy (primary, secondary and tertiary) as we did not have sufficient number of firms to look at individual industries.

Chart 1 – Barriers to further business development Factors that have a negative impact on the current and future development of businesses are typical for transitional economies and very small firms: the Access to finance is the most important negative factor as it was mentioned by almost two thirds of firms (64,6%). An insufficient Access to finance is the central issue mainly for newly established firms (66,7%) in the tertiary sector (72%) while primary sector sees Inadequate facilities as their main handicap (50%). The Inadequate facilities (43,8%), Obsolete technology (39,6%) and overall Economic situation in Kosovo (31,3%) belong to the major barriers for the entire sample. The Economic situation in Kosovo is perceived more dramatically in the northern municipalities (47,6%) and scores the second after the Access to finance. Costs of inputs and Shortage of skilled labor represent major problem for businesses in the secondary sector (both 33,3%). On the other hand, neither Domestic nor Foreign competition causes local business people a serious headache. None of the interviewed businesses mentioned Attitude of local administration as an issue, which is very positive, although one respondent stated Corruption as a negative feature of the location.

3. Customers and business linkages Almost all firms provided information about the geographic distribution of their sales. As expected, surveyed businesses are oriented dominantly on domestic markets. Customers in municipalities where firms are located (32,3%) and in other regions of Kosovo (42,7%) account for three quarters of total sales in 2014. 23,2% of goods and services was exported to countries of former Yugoslavia and remaining 1,7% to the European Union’s single market. The primary sector with 69, 7% sales to former Yugoslavia and 7, 7% to European Union is the best exporter, although this is given by rather strong export performance of one business combined with very weak sales reported by majority of small farmers.

Primary Secondary Tertiary

Chart 2 – Sales by regions The total sales reported by surveyed businesses amounted to EUR 1.863 thousand in 2014 compared to EUR 1.580 thousand in 2013 and almost all respondents predicted further sales growth in 2015. The average annual sales per employee in 2014 reached EUR 9.857. This number indicates the low productivity and overall weakness of SME sector in Kosovo. However, there were significant differences between individual sectors of economy: sales per employee in the secondary sector amounted to EUR 17.344, while in the tertiary sector reached EUR 4.528. For the purpose of this analysis we have grouped businesses, which reported a share of sales outside their municipalities of residence (called “exporters” for the purpose of this survey) to find out above average sales per employee of EUR 15.577.

Chart 3 – Sales per employee and Average monthly salary (EUR) With respect to site location, the presence of customers / markets for their produce was listed by 70, 8% of respondents as a significant factor. The important suppliers of row materials (64,6%) and important suppliers of components (62,5%) score second and third most important location factors while the availability of skilled work force remains the fourth according to 52,1% of received responses. On the other hand, research and development opportunities represent an important factor for location only for 6, 3% of the responding businesses.

Chart 4 – Business embedment Majority of respondents were willing to share basic information on their business linkages: about two-thirds of firms are selling directly to end consumers. Fourteen surveyed firms reported businesses as their key customers, out of which five are retailers (and distributors). Vast majority of firms sees good possibilities to increase their sales within both, their existing markets as well as reaching out to new customers. When asked what needs to be done to increase sales and find new customers, a vast majority of businesses believe they need to expand and upgrade their production capacity and only a few stated they would need to improve their marketing.

About 80% of firms source raw materials, components and other input supplies in their municipality / region. Most of business (66%) stated there are also alternative suppliers in nearby region. Six businesses reported they import their supplies (mostly from Serbia). None of the surveyed business complained about possible discriminatory attitude of any specific group of potential customers or suppliers. Several examples of the inter-ethnic business cooperation were mentioned by respondents. Typical business patterns can be found in supply of farmers’ primary produce to processors or in cooperation of food processors with providers of packaging and distributors and these also show the best potential to be further developed. All interviewed firms use the business logic in selecting their suppliers as well as the target groups of potential customers and those interested in further growth understand it is only possible through expansion of their outreach to the entire Kosovo market including Kosovo Albanian communities. Many food producers seek opportunities to supply large retail chains like Elkos Trading Center (also known in the market as ETC) and VITA. However, most of them cannot comply with the technical conditions of the supply to large supermarkets and do not accept the financial terms. 4. Labor and employment The total number of employees (including self-employed entrepreneurs and employed family members in agricultural households) in 48 surveyed businesses is 189 compared to 114 last year. This robust increase (65,8%) indicates good dynamics of the SME sector, particularly because businesses predicted another increase of employment by 25,9%, when asked about future plans. New job-creation (relative to the number of employees) is forecasted mostly in secondary and tertiary sectors (28,6-28,9%) with a strong role of “exporting” companies (33,3%). Businesses founded in and after 2010 and firms located in northern municipalities plan to increase the number of jobs by about 9%. None of the businesses anticipate downsizing, which is one of the positive outcomes of the survey.

Chart 5 – Employment The owners and managers of surveyed businesses are greatly satisfied with the quality of labor force: respondents rate 47% of their employees as Excellent and another 36% as Good. Only 15% of the labor is rated Fair, respective Poor (2%). Businesses in primary sector rate

unbelievable two-thirds of their labor as Excellent and the remaining one third as Good. This is the best result in the history of BAS surveys and it probably expresses the strong sense of family coherence rather than evaluation of labor quality.

Chart 6 – Quality of labor

The average monthly salaries (EUR 197 in 2014) have been mostly stagnating in last three years and a moderate increase in forecasted for 2015. The lowest salaries (EUR 190) are paid in the tertiary sector while the highest pay receive employees of firms that operate outside local (municipal) markets. Despite the high unemployment and an extraordinary level of satisfaction with their labor, 13 businesses already miss specialized work force and another 6 expect to miss in near future (technologist, economist, psychologist, mechanic and sales / marketing specialist). About 30% of businesses foresee cooperation with schools on workforce development in the future; however most of them rely on the in-house training.

5. Business facility information The total of 71% of business owns sites and buildings needed for their operations while 29% leases the workspace. 74% of firms reported the need for additional premises to expend their business at location of residence. Typical expansion will require from 40 to 150 square meters of new workspace (workshops, storage rooms, showrooms, sheds, restaurants, etc.). Besides the business premises, firms plan new investments in the technology and equipment to upgrade their operations. The total amount of investment businesses consider in upcoming three years is EUR 1.752 thousand. The individual investment plans range from 5 to 380 thousand EUR and businesses estimate creation of about 160 new jobs related to those investment. All businesses that prepare the plans to expand their premises and upgrade technology will appreciate an opportunity to apply for co-funding from public funds. Many of the planned investments (expansions of production capacity and/or upgrades of equipment and technology) represent in fact pre-conditions for future involvement of firms in (inter-ethnic) business linkages. Access to the main distribution networks requires applying common quality standards and maintaining a minimum level of productivity throughout the entire value chain. Prospects of better access to customers (processors) or increased demand for supplies of primary produce if technology is upgraded has been mentioned by significant number of respondents.

Chart 7 – Investments per employee (EUR) & New jobs Fourteen businesses (30%) are planning expansions elsewhere in Kosovo and another four (9%) are considering doing so. Municipalities in northern Kosovo are most often mentioned as target for intended expansions. At the same time, there is no substantial thinking about closing operations in respective municipalities.

6. Public sector services The surveyed businesses were asked to evaluate eleven different features of the local business environment and public sector services on a scale of 1 (excellent) to 4 (poor). On average, these services were rated 2,26, which is a surprisingly good valuation. The highest satisfaction expressed was the Availability of labor force (1,82) and with Public transportation (1,9), followed by the Cost of labor (2.07) and Local suppliers (2,09). Research and development potential (2,87), Cooperation with schools (2,68), Quality of life (2,60) and the Quality of (business) infrastructure (2,51) belong among less favorably rated services. Chart 8 – Perception of local business environment and public services to business

While the positive ratings prevail mainly among recently established firms in the tertiary sector, the primary sector farmers were the least satisfied with the Cooperation with schools (3,7), which was also rated low by exporting businesses (3,17). The processing businesses from secondary sector lack better potential for Research and development in their municipalities (3,2). Initiatives recommended by businesses, which might be taken by local governments and public sector in general, start with the provision of business premises at preferential costs followed by the support to business associations and collaborative alliances of firms. Opinion about which features of local business environments need to be improved the most does not differ much from preferences of SMEs in other transitional economies of Central and Eastern Europe. Chart 9 shows that businesses are supporting all but three interventions – Assistance in negotiation with authorities, Support to education and training of work force and Student internships in companies. The latter two however somewhat contradict the low ratings of Research and Development potential and the Cooperation with schools in the Chart 8, or these results indicate business community’s skepticism about capacities of local schools.

Chart 9 – Business assistance / recommended interventions The top three supported issues (Preferential business premises, Support to business collaboration and joined Promotion) to a great extent coincide with the most common problems that business confront – lack of space, need for better collaboration and more efficient promotion.

7. Overall impression The owners and managers were asked what problems and issues they consider the most critical for the development of local economies as well as for improvement of local factor conditions regarding their firms’ own operations. The answers were again consistent with other issues reported in this Business Attitude Survey: problems with maintenance and capital improvements of communal infrastructure, systematic support to SME sector and introduction of financial instruments to support high-growth potential businesses. The firms were finally asked to give their overall impressions of the quality of local business environments and their municipalities as places to do business.

Chart 10 – Municipality as a place to do business

Examples of positive elements of the local business environments:  Good production conditions: clean environment, natural resources, access to land, climate  Geographic location, access to markets  The community, young and growing population The most negative factors identified in the municipalities were concerned with obsolete infrastructure and overall business climate. Businesses expect the public sector to adopt a more pro-active approach in creating a better business environment. The majority of complaints related to:  Lacking or weak technical infrastructure  Poor economic situation / lack of finance in municipalities  Inadequate business infrastructure, especially (financial) tools to support SME development

V. OVERVIEW OF KEY FINDINGS

 The majority of the micro and small businesses in AKT Program partner municipalities were established within the past five years. The average age of surveyed businesses is about five years and six months.  Access to finance is perceived as the main obstacle to further development by almost two thirds of business owners and managers who participated in the survey. Inadequate facilities, obsolete technology and the current economic situation in Kosovo complete the top barriers to growth of businesses.  Domestic markets are of key importance for small businesses and 27 out of 48 respondent businesses serve exclusively local markets in municipalities of their residence. 18 firms operate on the domestic markets of Kosovo and only three reported exports to markets of former Yugoslavia and European Union.  With some exceptions, surveyed businesses operate under very basic business models (grow and sell, grow, pre-process and sell, buy and sell) and serve mostly the end consumers – individuals, households and local firms. The productivity of their operations is rather low and many of the businesses will be facing increasing competition from larger companies expanding their market shares.  However, the businesses are currently proving good dynamics in terms of job creation. The firms quadrupled the number of employees compared to 2009 and forecast further increase in 2015. Level of satisfaction with the quality of labor force is very high.  None of the surveyed business complained about possible discriminatory attitude of any specific group of potential customers or suppliers. Firms reported substantial inter-ethnic trade in agricultural products (particularly dairy).  Majority of businesses own their premises. These are often inadequate and firms massively plan expansions at locations. Upgrade of equipment and technology is included in those expansions. Firms indicate to spend the total of EUR 1.752 thousand (EUR 9.269 per worker) on investments and create additional 160 job opportunities.  Many of planned investment will only be possible with an external financial help and all companies expressed their intention to seek available (public) funding.  Kosovo Serb and Kosovo Albanian business people are unusually loyal to their communities and the business environment at their locations. The positive ratings of municipalities where located by firms are exceptional.  As for public interventions to improve conditions for business and support SME development, businesses requested better maintenance of the hard / communal infrastructure and financial instruments to support development of firms.  The most desired assistance to businesses is financial support (grants, subsidies, credits). Majority of business would use possible financial support to upgrade and / or expand their production capacity, although several respondents realize the need for improved marketing skills and implementation of more advanced business processes.

VI. SURVEY OF MAJORITY OWNED BUSINESSES

Introduction:

With the goal of identifying and analyzing market linkages between majority-owned and non- majority-owned businesses, additional interviews were conducted as part of this Business Attitude and Linkages Survey. During the course of discussion with Kosovo Serb businesses, Kosovo Albanian companies were identified who had previously or had the potential to work with Kosovo Serb companies, eight of which were chosen for these interviews. These companies were chosen based on the fact that they were more established businesses and were more likely to grow and create new jobs in the communities in which they work.

The industries in which these businesses operate include: water bottling, sweets manufacturing, internet service provider, wood processing, agriculture, and food processing. The methodology that was chosen for this research on business linkages opportunities was qualitative interviews. Although this methodology differs from the Business Attitudes Survey portion of this analysis, it was chosen because it could provide better insights into the daily practices, environment, resources, and ethnic barriers of interviewed companies. By applying this methodology we believe that this will allow us to identify opportunities to further enhance business linkages between communities. The interviews, which were arranged over the phone and conducted in public locations, lasted between one and three hours. The discussions were not recorded in order to allow for more open dialogue, but detailed notes were taken.

This report does not include the names of the businesses due to privacy concerns on their part.

Business No. 1

Business No. 1, is leader in cake production in Kosovo and has been operating since 1999 with current revenues of approximately EUR 500.000 a year. Business No. 1 has three points of sale in Prishtina, where customers can have coffee and food however, their main business is cakes for weddings and other celebrations. In the early years of its operations, Business No. 1 was the undisputed market leader in cake production but as competition increased and sales levels dropped down. In 2002, Business No. 1 was approached by an international organization asking whether they would work with Serbian businesses and, although they were willing to do so this was seen as detrimental in the company’s customer base community. The company currently works with Serbian businesses including as suppliers for raspberries, strawberries and blueberries. They also buy cheese and milk from Serbian businesses in Štrpce. Kosovo Serbs are also customers of their wedding cakes and Business No. 1 has a good relationship with RTK2 (Serbian TV in Kosovo) where the company occasionally advertises.

In response to the direct question of “Would they consider outsourcing production to Serbian business in Gračanica?” the owner replied: “With my recipes guaranteed and if the quality and price would be acceptable, I would seriously consider it”. He would also consider opening a store location in Serbian Municipalities and would employ Serbian workers in the factory. Based on these responses, there may be opportunities for business linkages between Business No. 1 and Kosovo Serb businesses.

Business No. 2

Internet, mobile, FIX and TV provider. One of the biggest Kosovar Companies.

This interview was held with two senior managers, the Product Development Manager and the Chief Strategy Officer. They are responsible for the direction of the business, especially for the internet side of the business involved in corporation with Internet service providers (ISPs) in Štrpce, which is a very stable business for the company. They regularly supply ISPs in Štrpce with internet connectivity and they have service level agreements for maintenance of wireless Base Transceiver Station / Antenna in Štrpce Business No. 2 is in the process of expansion by buying small ISPs throughout Kosovo and they are considering buying an ISP in Štrpce but they are encountering some serious legal constrains. Additionally, Telecom of Serbia is operating in northern Kosovo, which has political implications. Culturally, telecom and TV packages are seen a very “national” and offering Serbs TV package technically is not possible for Business No. 2.

For the moment the company sees opportunity for cooperation but due to specific constraints they have not moved forward in engaging fully with Kosovo Serb communities. They looked forward to future possibilities should the political and business environment allow.

Business No. 3

The company sells fruit in various forms including preserved, in drinks, and jams. The company is very well established, has its own distribution channels and has effectively branded its fruit drinks. In the interview, the ownder clearly sees possibilities to work with the Kosovo Serb community, especially with farmers. The company is already working with farmers in Gjilani. Business No. 3 is in the process of expanding their operations and will be looking to increase supplies of fresh fruits in the near future. According to the owner, the company would need around 5,000 hectares to fulfill the demand that he is expecting of strawberry, raspberry, blueberry, chokeberry (aranoia), goji berry, sour cherry, and stevia. Right now the company sources its fruit from Ranilug and Partesh but they will need to increase supply. To the direct question “would they consider supplies of ajvar from Kosovo Serb businesses?”, he replied that ”As long as it is single branded, passes quality inspection, and of course is cost-effective / is at market price, I would definitely add ajvar to my product portfolio”. Regarding cheese products, he is not currently interested in entering that business. In the near future, Business No. 3 will introduce up to three other brands. The company would need around EUR 150 thousand of investment per category in order to be able to process and

sort these fruit. The owner would be open to collaborating with the Kosovo Serb community at each stage of the process (fresh fruit, local processing, and/or storage). With the possibility of engaging many framers in the company’s activities, Business No. 3 is definitely a company where cooperation and market linkages may be possible.

Business No. 4

Business No. 4 was referenced during several of the surveys conducted with Kosovo Serb Businesses, particularly by those working in cakes and pastries, in the context of having provided packaging supplies and distribution services. Based on existing business, there are clear opportunities in market linkages through product distribution and leading to increased overall productivity that can serve as model for further replication. During a 3-hour interview with the Managing Partner, discussions focused on the company’s activities within the broader context of Kosovo’s economy and possibilities of business networks which can lead to new production methods and innovation. Business No. 4 currently supplies its paper and cardboard from Serbia, a factory called UMKA, which is one of the biggest companies within this sector in the region. This partnerships demonstrates clear inter-ethnical communication and that market-driving business activities can supersede ethnic barriers. Business No. 4 revenue totals approximately EUR 1 million and much of their profits have been reinvested in the company. The owner continuously attends business courses and invests in workers. His business partner is also well educated and they are planning to further their business knowledge by pursuing MBA degrees. The printing and packaging sector in Kosovo is very difficult but the owner has managed to position his company as the industry leader. In response to the question; “how do you see the possibilities for further development of your company in general and in particular with inter-ethnic community linkages?” he answered that, “by helping others (offering my distribution network), I am helping myself as well, since I am part of that network. The network is strong as the weakest link, and I try to help everybody in the network, especially the weakest link.” On the other hand, the owner sees the potential of the packing industry in relation to products such as food, sweets, fast-moving consumer goods, etc. Since Kosovo lacks services in this area, Business No. 4 will focus on filling this market gap in the future. He believes that if Business No. 4 could offer better packaging for his customers they could also develop new and better products. The owner thinks that the market is large enough to merit increased investment but faces challenges to meet demand while continuing to self-fund his business. In his opinion, Business No. 4 is one of the few if not the only company in his industry that is not burdened with debt.

During the interview, he proposed two additional companies (Business No. 5 and Business No. 6) who also work with the Kosovo Serb community and are major players in their respective industries.

Business No. 5

Business No. 5 has been operating 2008 and its primary business areas are in wholesale trading and in the production of confectionary biscuits and low-priced candy. The company’s

total annual revenue is approximately EUR 1 million and it has relatively strong distribution channels. Business No. 5 is currently working with Business No. 4, which is helping the company connect with Kosovo Serb suppliers and with distribution. Business No. 5 currently uses 8 small trucks used to distribute their products and are focused on both small and large markets. Although they are not currently present in the larger retail chain Business No. 8 (below), the company is satisfied with their currently distribution coverage and noted the challenges faced when selling to large markets like Viva, Business No. 8, Maxi etc. related to their disadvantageous payment demands and the fact that they carry products with their own brand name Business No. 5 current has good distribution channels in all majority Kosovo Serb municipalities although not with all products. Business No. 5 is ready to start distribution to Gračanica and is in the process of purchasing new machinery to replace the company’s aging assets in order to fulfill market demand. The company employs around 30 workers. Based on interview responses, it looks like Business No. 5 is relatively strong in small markets but not well represented in larger retailers. As a result, the will need to develop other business capabilities in order to grow and increase productivity. However, their current revenue levels are impressive considering their current business model and production capacity.

Business No. 6

Business No. 6 was established in the late 1990s with two core business activities: production and packaging. They produce chocolate spread (similar to Nutella), chocolate, peanuts, potato puree, and cooking starch. Business No. 6 packaging activities are mainly focused pudding, cream, and bakery products. They manage their own distribution to small and large shops. Business No. 6 revenue total approximately EUR 2,5 million per year with a minimum of 40 employees at any point in time and up to 80 in high production season. The minimum wage of employees is 400 euro, which is above average in Kosovo for Business No. 6’s industries. The company currently supplies Kosovo Serb businesses selling to the sweets and meat industries with whom they have worked for many years and developed strong business ties. Their operations are at capacity and they would need new investment to optimize their production. In response to the question: “How do you see possibilities for further development of your company in general and in particular of inter-ethnic business linkages?”, Business No. 6’s managing partner answered: “First the company would need to improve our production capabilities and deliver better offerings to existing clients. Second, we are planning to enter into the business of pumpkin seed packaging and to do so we would need more farmers to produce pumpkins. I think here is great opportunity in this area but we would of course we need a substantial investment here, but the market is relatively big and we are very optimistic that it could work. If Serbian farmers could supply us with pumpkins that would be good”. Pumpkins can be used for two kinds of products, the seeds themselves and the rest of pumpkins for animal food processing. The managing partner has good knowledge of the market and in particular about production in Kosovo. This knowledge coupled with the company’s experience in Kosovo cooking practices have made Business No. 6 an industry leader. He is also looking into the potential of Black Seed processing but would need more professional assistance to develop this idea. He is convinced that he has the potential of growing his staff by an additional 20 workers to provide a larger and more regular product supply.

Business No. 6 is financially strong and currently holds very little debt.

The company utilizes a low price-point strategy although some of their products are also of greater quality than other available products. The managing partner thinks that increasing the price points is not feasible due to dominant industry players that are driving down prices. Business No. 6, apart from usual investment in machinery, would need business development capabilities, such as business administration and marketing (branding, retail pricing, etc.) in order to optimize their current market knowledge. Based on the quality of their products, there are definitely opportunities for them to enter higher price segments and other markets. The company has already entered the Albanian market through a partner that produces and distributes soft drinks (Jaffa juice, RC cola, Red Rain etc.).

Business No. 7

Business No. 7 operates mainly in the area of wood pellet production but they are also looking into the possibilities of pellet oven production. They source around 10% of their wood from Kosovo Serb businesses and they could increase this number based on their production capacity. According to the owner of Business No. 7, the market is currently destabilized due to the entry of low quality pellets and low quality ovens and he struggles to maintain his strategy of offering higher quality products. The owner sees possibilities to work with Kosovo Serb community for the supply of wood through new fast-growing wood that can be dedicated for pellets. Although very promising markets, Business No. 7 would need to rethink their business model to see how it would fit with their current market strategy given their current price-quality difficulties.

Business No. 8

Business No. 8 is the biggest distributor of the fast-moving consumer goods in Kosovo and owns the country’s largest retail/supermarket chain. It is one of the largest corporations in Kosovo with over EUR 250 million in annual revenues and around 1800 employees.

Business No. 8 is one of the most frequently mentioned companies/retailers by the Kosovo Serb businesses that were surveyed as a great opportunity for advancing their businesses. A common theme expressed was that if they could offer their product to Business No. 8 their businesses would become successful. This is the primary reason for contacting the business for this interview. The interview was conducted at the the headquarters office with the vice president in charge of operations.

Apart from one sweets producer who delivers products to Business No. 8 in Gracanica, no other products from Kosovo Serb owned business are carried by this supermarket chain. During the interview, the vice president was very interested in the fact that they had not been approached by more Kosovo Serb businesses. Although mentioned that Kosovo Serb businesses may have approached the company at lower levels without his knowledge but he did not think this was the case. The vice president was very open to any cooperation with Kosovo Serb suppliers but they would of course need to meet safety standards, considering the possibility for negative media attention should product safety be questioned. Business No. 8 carries approximately 3,000 different products which they categorize and have managers that track each of the product categories. The vice president suggested that a good way to create linkages would be to organize events where Business No. 8 product managers

could meet local producers from mixed Kosovo Albanian and Kosovo Serb communities. He suggested that an event facilitated by USAID could result in larger impact. Business No. 8 works with larger multinational companies across the globe such as with Philip Morris and Pepsico and the vice president stressed the fact that standards and safety of products are key to being considered for sale in Business No. 8 and small producers should keep this in mind. In response to our question about “How about something like “special corner / shelf” treatment of these local producers?” he answered that this approach would neither help producers nor Business No. 8 and that product standardization quality is more than enough to enter Business No. 8 and increase sales.

SUMMARY AND SUGGESTIONS:

The additional eight interviews that were conducted with Kosovo Albanian companies provided some insight into opportunities to create business linkages and ultimately improve sales for target Kosovo Serb business communities. The interviews framed in the context of “What could you do better in order for you and your business linkages to improve the overall performance?” which allowed for more candid conversation. Additional points that were made to provide context was that (1) the USAID program is here to support business in Kosovo, (2) your company was mentioned by Kosovo Serb and Kosovo Albanian businesses, and (3) your profile and business activity could be a good case for further development of the business networks between communities. Overall, the range of knowledge of the culture, social, and economic environment of the companies interviewed combined with personal contacts resulted in valuable information. We strongly believe that the information received serves as a clear indication for further development in market linkages and inter-ethnic business networks which can contribute not only in value creation for all participants but also the overall business and political climate. Reflecting on both the surveys and the interviews, working with both the Kosovo Albanian and Kosovo Serb business communities is important to achieving results that will improve the entire network. The growth potential of Kosovo Serb businesses is conditioned by the access to markets in all of Kosovo and, consequently, should be done by creating linkages with Kosovo Albanian businesses. As positive interaction increases at various points along the value chain and business networks, the possibility for mutual gains and access to larger markets increases, not just for a single company but for entire business networks. It is evident that economic interests are at the forefront of these company’s business decisions and calculations. However, in most cases the businesses with better linkages between communities already had greater knowledge and awareness of various cultural and social practices. There are clear cases that came out of the interviews such as the sweets producer in Gračanica, Business No. 1, Business No. 4, and others. Their attitudes focused on product quality while simultaneously demonstrating an understanding of the cultural context and the associated challenges which leads to improved business linkages. For example, Business No. 4, who was willing to offer his distribution networks to Kosovo Serb partners. Although still in the negotiation phase, it is an example of how business linkages can be further developed.

Almost all of businesses interviewed are need of investments in their production facilities and tangible assets such as machinery or production facilities, and in rare cases they recognize that they also lack soft resources like business capabilities, strategy, HR, operations, marketing, information technology, and finance. The readiness of Business No. 3 and Business No. 6 to engage with Kosovo Serb suppliers for raw material is an opportunity for integration with a number of smaller farmers. This will also require investment on the part of Business No. 3 and Business No. 6 who will need customize packaging, hire qualified employees, and use better and more efficient distributors and brokers for entering especially bigger retail chains but which will also result in employment opportunities. The product of sweets and bottled water could be opportunities. The status of the internet service provider market reflects the influence of the political environment on industries like telecommunications. Wood processing is also an opportunity but with perhaps less potential than some of the other industries mentioned above. And finally, working with Business No. 8 may lead to positive outcomes as proposed by their vice president. We believe that the AKT Program’s objective should be to create strategic frameworks for co- creation of value between many parties in order to not just improve the business networks but also to foster innovation, which will benefit non-majority and majority communities in Kosovo and, as a result, will create a better overall business and social climate.

Business Linkages of Kosovo Albanian to Kosovo Serb owned businesses / Overview Company Suppliers Customers Potential Business No. Suppliers of berries, Sells to Serb individuals Outsourcing cake production to a 1 milk and cheese, - end consumers non-majority business (like Fratelli Commercials on in Gračanica); RTK2 Opening shops in non-majority communities Business No. Providing internet Expanding cooperation with ISP to 2 connection to Kosovo other non-majority communities; Serb internet provider Very regulated and complicated (ISP) in Štrpce market with political sensitivity Providing services to Serb individuals - end consumers Business No. Supplier of fruits Company indicates the need for 3 and berries significant increase of fruits and berries supplies; Company plans an expansion of its product portfolio that would include non-majority farmers Business No. Importing paper and Supplying packaging to Creation of business networks 4 cardboard from Kosovo Serb owned around specific value chains, Serbia businesses (sweets) specifically foods, sweets and Helping its clients with other FMCG where quality the distribution of their packaging plays important role produce Business No. Distribution in all non- Company offers its network and 5 majority communities capacity for distribution of sweets produced in Gračanica Business No. Supplying Serbian Plans expansion in packaging and 6 businesses in sweets distribution of white seeds and production and meat indicates need for supplies of processing pumpkins from farmers Business No. Sourcing about 10% Sourcing more fast-growing wood 7 of raw material from non-majority communities (wood) from Kosovo Serb suppliers Business No. Importing variety of Company sells to Serb Kosovo Serb owned business 8 consumer goods individuals - end needs to meet business’ common from Serbia consumers standards to become a supplier; Standardization, quality, price, value for money ratio

VII.

VII. ANNEXES

Annex 1 - Overview of presented investment project ideas: Primary sector / farmers Sales Cost 2014 estimate # Field of business Markets / Customers Investment / expansion EUR, project idea EUR, thousand thousand 1 Growing and Kosovo; Individuals, Packaging equipment processing medicinal households herbs, herbal tea, 7 20 rural tourism 2 Goat farm; goat milk, Local municipality, Modern goat farm cheese and other Kosovo; Individuals, 36 premises (shed) and 23 related products households equipment 3 Bee keeping, Local municipality, Beehives, equipment for production of honey Kosovo; Individuals, 4.5 honey processing, pickup 5 (600 kg in 2013) households car 4 Goat breeding, Local municipality, The shed for goats, no production of goat Kosovo; Individuals, 10 budget estimate yet meat households 5 Growing ornamental Former Yugoslavia, New freezer plants and trees, European Union; 300 200 collecting forest fruits Businesses 6 Farming, production Local municipality, New stable, opening a of food Kosovo; Individuals, 12 small restaurant 12 households 7 Farming, production Local municipality, New barn (150 m2) of food Kosovo; Individuals, households and 10 20 some restaurants and shops 8 Horticulture, Local municipality, Production space, production of seeds Kosovo; Individuals, equipment for vegetable and vegetables households and 15 processing, freezer 30 businesses Secondary sector Sales Cost 2014 estimate # Field of business Markets / Customers Investment / expansion EUR, project idea EUR, thousand thousand 9 Food / meat Local municipality, Meet processing plant and processing and retail Individuals, 36 relocation of the shop 110 households 10 Production and Local municipality, New showroom and office restoration of Kosovo; Individuals, 12 (100 m2); no budget furniture households estimate yet

Sales Cost 2014 estimate # Field of business Markets / Customers Investment / expansion EUR, project idea EUR, thousand thousand 11 Production of sweets, Local municipality, Extension of production pastry and bakery Kosovo; local shops space (80-150 m2), products and one big retail 350 equipment 30 chain 12 Production of fruit Kosovo, Former Shed (40 m2) drinks Yugoslavia; Individuals, 7 10 households 13 Production of Local municipality, Showroom, sawdust dryer, Furniture and wood Kosovo; businesses - pellet maker machine for heating shops 20 125 (briquettes ) 14 Production of Local municipality, Extension of production concrete tiles, curbs, Kosovo; businesses 9,5 space (50 m2), equipment 15 gutters 15 Production of Local municipality, Extension of production confectionary Kosovo, former space, warehouse and Yugoslavia; 150 showroom (400 m2), 50 businesses 16 Production of Local municipality, Extension of production confectionary Kosovo; Individuals, space (100 m2), freezer households and 350 and equipment 20 businesses 17 Wood processing, Local municipality; Equipment and tools for production of Individuals, 6 processing 5 furniture households 18 Production of sweets Local municipality, Extension of production Kosovo; shops 5 space (36 m2) 2 19 Processing of fruits Local municipality; Renovation of production and vegetables Individuals, 0,9 space and new equipment 2 households, shops 20 Production of Local municipality; Relocation of the souvenirs and Individuals, tourists 0,3 workshop to more 4 handicrafts frequent place 21 Construction works Local municipality; Equipment and machines Individuals, 0 40 households 22 Production of dairy Local municipality; Extension of dairy factory products Individuals, 26 (200 m2) and equipment 40 households 23 Filling Water and Local municipality, New water-filling refreshments Kosovo; retail chains 120 equipment to increase 50 capacity

Tertiary sector Sales Cost 2014 estimate # Field of business Markets / Customers Investment / expansion EUR, project idea EUR, thousand thousand 24 Cable TV and Radio for Local municipality, Hardware, Digital TV Serbian community in Kosovo; Individuals, Kosovo; internet households, 240 100 provider businesses 25 Catering, Trading Local municipality; New plant for production medical equipment Individuals, 7 of wooden briquettes 130 households 26 Interior flowers, Local municipality; New greenhouse flower arrangements Individuals, 6 5 households 27 Design studio, photo, Local municipality; Extension of work space printing Individuals, 0 (40-60 m2) and equipment 18 households 28 Car repair shop Local municipality, Renovation and extension Kosovo; Individuals, 6 of work space 30 households, 29 Fish restaurant Local municipality, Expansion of kitchen (40 Kosovo; Individuals, 18 m2) and new fish pond 30 households, 30 Restaurant Local municipality, Expansion of kitchen and Kosovo; Individuals, 20 cooking equipment 12 households, 31 Restaurant and meat Local municipality; New butcher shop (70 m2) processing 8 and equipment 27 32 Hairdresser-Cosmetics Local municipality; Renovation of work space Individuals, 4 and new equipment 5 households, 33 Electro service Local municipality; Upgrade of the work space Individuals, 1,8 3 households, 34 Business association Local municipality; Shop extension and Businesses 0,9 equipment 8 35 Cleaning services Local municipality; Vehicle and cleaning Individuals, machines households, 2,6 10 businesses 36 Organizing birthdays, Local municipality; New hall for ceremonies decoration and Individuals, 3,5 5 catering households, 37 Repair and Local municipality; Upgrade of existing facility. maintenance of Individuals, 2,5 No budget estimate yet household devices households,

Sales Cost 2014 estimate # Field of business Markets / Customers Investment / expansion EUR, project idea EUR, thousand thousand 38 Trading of goods Local municipality; Renovation of existing Individuals, 19,6 facility 25 households, 39 Psychologist Local municipality; Extension of work space (psychological Individuals, (30-35 m2) consulting ) and sale 5,6 5 of flower essentials 40 Trading (wholesaler Local municipality; Extension of existing and retailer) Individuals, 18,4 premises (15 m2) 20 households, 41 Repair and Local municipality; Equipment for car repair maintenance of Individuals, 5 5 vehicles households 42 Children playground Local municipality; Expansion of premises (80 Individuals, 0 m2) and new equipment 10 households, 43 Dentist Local municipality; Renovation of premises Individuals, 0 6 households, 44 Beauty saloon Local municipality; Solarium and pedicure Individuals, 4 equipment 12 households, 45 Printing services Local municipality; New digital equipment for Individuals, 4 small and large 12 households, frameworks 46 Car repair shop Local municipality; New equipment : Individuals, diagnostics (vehicle), households, 4 equipment for filling tires, 8 machine for key coding 47 Marketing Service Local municipality; Renovation and expansion (billboard and agency businesses n/a of services 70 services) 48 Hotel, motel, village Local municipality; Construction of Aqua-Park tourism Individuals, n/a 380 households,

I. BASIC INFORMATION

YEAR 1. In what year was your company (or its predecessor) established?

LEGAL FORM 2. What is the legal form of your company? (Joint stock company, limited liability company, physical person, etc.)

YES NO

3. Is your company a subsidiary of another company? If YES If NO continue No. 4 continue No. 5

4. If YES, where is the corporate headquarters of your company

Elsewhere in Kosovo

Elsewhere in former Yugoslavia

Elsewhere in Europe Elsewhere (please indicate

where):

5. What is the equity structure of your company (in %)? Shar Owner e

State Municipality Physical entities Legal entities Foreign entities Other Please specify: TOTAL 100 %

6. What is the nature / field of your business? (Please describe major products and/or services ):

7. Which of the following factors are having the greatest negative impact on the current/future performance of your company (Please indicate  up to four).

1 9 Foreign competition Interest rates

2 10 Domestic competition Economic situation in Kosovo

3 11 Legislative barriers Political instability former Yugoslavia 4 Costs of inputs (materials, components, 12 Shortage of skilled labor energy, etc.) 5 13 Labor costs Access to finance

6 14 Obsolete technology Distance to markets

7 15 Inadequate facilities Attitude of the local administration 8 16 Please specify: Exchange rates Other Comments:

8. Please indicate the percentage of your sales, which are made to Sale customers in following geographic Geographic area areas: s

Municipality of ………..…

Kosovo

Former Yugoslavia (outside Kosovo)

European Union

In the rest of Europe

Overseas TOTAL 100 %

Sales (EUR Sales (EUR thousand) thousand) in 2013 2014 forecast

a. Please indicate your total sales in 2013 (could you provide the forecast of sales in 2014)?

b. What change in sale do you expect in 2015 (increase, stagnation, decrease)?

II. EMPLOYEES AND LABOR FORCE

9. Please estimate the number of full-time employees for the following periods: Number of

employees 1 Currently (2014): 2 Year ago (2013): 3 5 years ago (2009): 4 Year from now (2015):

10. Please evaluate the quality of your labor force (in %): Rating %

1 Excellent

Good

1 Excellent = irreplaceable 32

Fair 2 Poor TOTAL 100 %

2014 (EUR) 2013 (EUR) 2012 (EUR) 11. What is the average monthly salary in your company and what is its trend?

What trend of the average monthly salary do you expect?

12. Do you miss (or expect to miss in the future) any specific professions, skills and qualifications that are of key importance for performance and future development of your company?

1 2 3 Yes Not now, but we expect in near future No

If “yes” or “expect” please specify which:

13. Do you cooperate with school (vocational, professional, universities) in order to prepare qualified labor force for your company?

1 2 3 Yes Not now, but we expect in near future No

What is the subject of the cooperation?

III. INVESTMENT AND INVESTMENT PLANS

14. Do you own or lease the premises you use for your business? 1 2 3 Own Lease Both

15. Do you need additional premises to expend your business activities in the city? 1 2 Yes No

If you will need additional premises, please indicate what type, size and when:

2 Poor = expendable 33

16. Are you planning investment to expand your company - new technologies / production facilities?

1 2 3 Yes We are considering this No

16a) If yes, what is the estimated volume of investment? 4 EUR thousand 16b) If yes, what will the investment focused on? 5

16c) Will new jobs created by this investment? How many? 6

17. Do you have plans to expand your company elsewhere in the Kosovo?

1 2 3 Yes We are considering this No

4 5 17a) If yes, when (year)? 17b) If yes, where (city)?

17c) If yes, why you do not expand here / at current location? 6

18. Do you consider applying for co-financing for your company’s expansion from public funds (regional, national, donor funding)?

1 2 3 Yes We are considering this No

18a) If yes, which projects and what’s the total volume of planned 4 EUR investment? thousand

5 Could you please provide brief info of those projects?

19. Do you intend to relocate your company out of town (close your operations in ….)?

1 2 3 Yes We are considering this No

19a) If yes, why do you plan to leave (Please tick  ?

1 7 Competition at the location Low productivity of labor

2 8 Transport accessibility Energy costs

3 9 No space for expansion Environmental constraints

4 10 Poor local business environment Poor public services at the location

5 11 Crime / vandalism Attitude of municipal administration

6 12 Labor cost Other

19b) If yes, where do you plan to relocate your company 13 (municipality)? 19c) If yes, when do you plan to relocate (year)? 14

19d) If you consider leaving the city, what could persuade you to stay?

IV. PUBLIC SERVICES AND RELATIONS WITH LOCAL ADMINISTRATION

20. Role of public sector in economic development and assistance to business. For each of the following statements please tick  that best describes your position:

Service Strongly No Strongly Somewha Somewha t t agree agree disagree disagree opinion 1 Preferential lease of business premises

2 Support student internships in companies Assistance in interactions / negotiations with 3 authorities Sharing information about city’s 4 development plans and activities 5 Joint promotion of the city and companies

6 Development of industrial zones

7 Business incubator for startups

8 Support to education and training of labor Participation of business in creation and 9 implementation of development strategies Support to cooperation of companies and in 10 business associations 11 Export promotion

20a) What other services should local administration provide to improve local business environment as well as local conditions for your business?

V. OVERALL IMPRESSION

21. Please rate following factors / features of the city from the point view of a company that runs business operation in ….:…….

Factor / feature (1 = excellent / 5 = poor)

1 AVAILABILITY OF LABOR FORCE 1 2 3 4 5 2 Cost of labor 1 2 3 4 5 3 QUALIFICATION AND SKILLS 1 2 3 4 5 4 COOPERATION WITH SCHOOLS 1 2 3 4 5 5 Transportation 1 2 3 4 5 6 Local / regional suppliers 1 2 3 4 5 7 Quality of life 1 2 3 4 5 8 R&D potential in your field of business 1 2 3 4 5 9 Availability and quality of business services 1 2 3 4 5 10 Quality of business infrastructure 1 2 3 4 5 11 Image of the city as location for business 1 2 3 4 5

22. How do you rate your municipality as a location for business?

No 1 excellent 2 good 3 fair 4 poor 5 opinion

22a) What do you find positive (strengths of the municipality)?

22b) What do you find negative (weaknesses of the municipality)?

VI. BUSINESS LINKAGES

23. Do you have in the municipality / region (please indicate all relevant statements):

Important suppliers of raw materials

Important suppliers of components and services

Important markets – buyers of your produce

Cluster of industries relative to your enterprise by the production profile

Skilled labor force required by your business

Base for research and development required by your company

23a) Are you satisfied with quality and cost of the supplies to your business?

23b) Are there alternative suppliers of raw materials, components and services in the municipality / region?

23c) Can you indicate your main customers (intermediaries / traders, processors, end markets)?

23d) Do you see a possibility to increase your sales within your existing customers?

23e) Do you see a possibility to find new customers?

23f) What needs to be done to help increase your sales and find new customers?

VII. FINAL COMMENTS AND RECOMMENDATIONS

______

Thank you for your time!

Company name:______

Address:______

Tel. ______E-mail ______www ______

Interviewed:______

Position in company:______

Date:______Interviewer:______