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Outsourcing in Kosovo: an Analysis of Kosovo's Comparative Advantage and the Potential for Growth Yllza Hoti [email protected]

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Outsourcing in Kosovo: an Analysis of Kosovo's Comparative Advantage and the Potential for Growth Yllza Hoti Yxh5858@Rit.Edu Rochester Institute of Technology RIT Scholar Works Theses Thesis/Dissertation Collections 7-2018 Outsourcing in Kosovo: An analysis of Kosovo's comparative advantage and the potential for growth Yllza Hoti [email protected] Follow this and additional works at: http://scholarworks.rit.edu/theses Recommended Citation Hoti, Yllza, "Outsourcing in Kosovo: An analysis of Kosovo's comparative advantage and the potential for growth" (2018). Thesis. Rochester Institute of Technology. Accessed from This Senior Project is brought to you for free and open access by the Thesis/Dissertation Collections at RIT Scholar Works. It has been accepted for inclusion in Theses by an authorized administrator of RIT Scholar Works. For more information, please contact [email protected]. Outsourcing in Kosovo: An analysis of Kosovo’s comparative advantage and the potential for growth An Honors Society Project Yllza Hoti Advisor: Venera Demukaj, Ph.D. July, 2018 Yllza Hoti Page 1 of 54 www.kosovo.rit.edu Table of Contents List of Figures ................................................................................................................................. 3 List of Acronyms ............................................................................................................................ 3 Abstract ........................................................................................................................................... 5 Statement of the Problem ................................................................................................................ 6 Introduction ..................................................................................................................................... 7 Literature Review............................................................................................................................ 8 An Overview of Outsourcing ...................................................................................................... 8 Globalization and Outsourcing.................................................................................................. 10 Implications for Developing Countries ..................................................................................... 11 The Case of Philippines............................................................................................................. 12 The Role of the Government ................................................................................................. 13 The Role of the Private Sector ............................................................................................... 13 Outsourcing in the Balkans ....................................................................................................... 14 Outsourcing in Kosovo.............................................................................................................. 15 Methodology ................................................................................................................................. 16 Secondary Data Collection ........................................................................................................ 17 Primary Data Collection ............................................................................................................ 17 Part 1: Semi-structured interviews ........................................................................................ 17 Part 2: Survey ........................................................................................................................ 19 Limitations ................................................................................................................................ 20 Results and Analysis ..................................................................................................................... 20 Secondary Data Research Results ............................................................................................. 20 The Role of Education ........................................................................................................... 23 Semi-structured Interviews ....................................................................................................... 24 Kosovo as an outsourcing-friendly destination ..................................................................... 25 Kosovo’s Comparative Advantage in Outsourcing ............................................................... 26 Barriers for the Outsourcing Sector Development ................................................................ 27 Government’s Role in the Sector........................................................................................... 29 The Role of the Kosovar Diaspora ........................................................................................ 32 Yllza Hoti Page 2 of 54 www.kosovo.rit.edu Kosovo’s Potential for the Development of the Outsourcing Sector .................................... 33 Discussion: Semi-structured Interviews Results ....................................................................... 34 Survey: Inside a Service Exporting Kosovar Company ............................................................ 35 1. Level of Education ............................................................................................................. 36 2. Field of Study .................................................................................................................... 37 3. Employees’ Work Experience ........................................................................................... 38 4. Length of Employment ...................................................................................................... 38 5. Employee Salaries ............................................................................................................. 39 6. Work Conditions................................................................................................................ 40 Conclusion and Recommendations ............................................................................................... 41 References ..................................................................................................................................... 45 Appendices .................................................................................................................................... 48 Appendix 1: Informed Consent Form ....................................................................................... 48 Appendix 2: Interview Questions .............................................................................................. 49 Appendix 3: Survey ................................................................................................................... 50 Appendix 4: Socio Economic Impact of Tax Holidays for ICT Exports .................................. 53 List of Figures Figure 1: India's Share in World Trade in Percent .......................................................................... 7 Figure 2: Outsourcing and Offshoring ............................................................................................ 9 Figure 3: Categories of Offshore Outsourcing Activities ............................................................. 10 Figure 4 IBPAP Timeline ............................................................................................................. 14 Figure 5: Trade Balance - ICT Sector (in thousands) ................................................................... 21 Figure 6: External Barriers to Export in the ICT Sector ............................................................... 22 Figure 7: Internal Barriers to Export in the ICT Sector ................................................................ 22 Figure 8: Export of ICT Services .................................................................................................. 23 Figure 9: Education Structure of the ICT Sector .......................................................................... 24 Figure 10: Ease of Doing Business in Kosovo ............................................................................. 26 Yllza Hoti Page 3 of 54 www.kosovo.rit.edu List of Acronyms BPO – Business Process Outsourcing ICT – Information and Communication Technology FDI – Foreign Direct Investment MTI – Ministry of Trade and Industry KIESA – Kosovo Investment and Enterprise Support Agency STIKK – Shoqata e Teknologjisë së Infomacionit dhe të Komunikimit të Kosovës SWOT – Strength, Weaknesses, Opportunities, and Threats UNCTAD – United Nations Conference on Trade and Development GDP – Gross Domestic Product IPP – Investment Priorities Plan PEZA – Philippine Economic Zone Authority IBPAP – IT and Business Process Association of the Philippines BPM – Business Process Management CEO – Chief Executive Officer COO – Chief Operating Officer SEO – Search Engine Optimization AI – Artificial Intelligence VR – Virtual Reality DACH – Deutschland, Austria & Switzerland ITO – Information Technology Outsourcing Yllza Hoti Page 4 of 54 www.kosovo.rit.edu Abstract The main focus of this research project is to explore the implications of outsourcing on the service provider countries, specifically for the case of Kosovo. With the emergence of globalization, international markets are more interconnected than ever. Technology has facilitated businesses with different ways of reducing costs, one of them being outsourcing part
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