INVESTING IN KOSOVO 2010 This conference is supported by FOREWORD Foreword HASHIM THAÇI PRIME MINISTER OF THE REPUBLIC OF KOSOVO riends, allow me to share with you my personal Atlantic and regional integrations, through implementing conviction, that in these uncertain times, investing in the highest standards and criteria of good governance, Fa young country such as Kosovo, with a functioning responsibility and transparency. democratic system bolstered by healthy economic indicators presents a positive alternative for your business. Kosovo is a fledgling democracy with a wide spectrum of developmental requirements, which has perhaps been The declaration of independence from the Parliament of reflected in recent events. It will continue to transit through Kosovo on 17 February 2008 was a historical date and the growing pains common to many young nations but created a new stage for the people of Kosovo. will not be detracted from its core aims, central to which is to develop its economy through encouraging private The recognition of the independence of Kosovo from sector growth. 70 nations, among them the most powerful economies in the world, reflects the support the new country has Our government has identified its top priorities to within the international community and the legitimate accelerate the economic and social development right of the people of Kosovo for self-governance. of Kosovo on the way to economic growth and prosperity and I warmly invite you to become a part of We call upon the remaining members of the international this development. community to follow the lead set by the United States and the UK, amongst many others, by embracing our country and recognising our independence. Our vision for the further development of Kosovo is for a nation developed in accordance with democratic principles, a sustainable economy, a multi-ethnic Sincerely environment, and a full commitment towards Euro- Hashim Thaçi 2010 | INVESTING IN KOSOVO 1 INTRODUCTION Introduction H.E. AvNI SPAHIU, AMBASSADOR OF THE REPUBLIC OF KOSovo to THE UNITED STATES OF AMERICA t was October, two years ago, when the government of fifth largest proven reserves of lignite, where mining is the the newly independent Republic of Kosovo established country’s largest industry, followed by textiles, agriculture, Iits first Embassy in Washington DC. Today, we are here whilst there is also huge potential in tourism. Allow me to together in our third year of independence launching the assure you that Kosovo ought to be your next destination. First US-Kosovo Trade and Investment Forum. I believe this first US-Kosovo Trade and Investment Forum Kosovo will never forget the support it received from will provide first hand information on the investment the United States in the days when it was fighting for climate in Kosovo. It will also provide evidence of our freedom and during the difficult road to independence. commitment to supporting your business interests. We are now working closely in building a new democratic country sharing common values and ideals which lay the Investing in Kosovo will add to the recipe for building a foundations of present and future relations. brighter future for the youngest Europeans. Hoping to see you all in Kosovo! Apart from international recognition of its independence, Kosovo is eager to force a pace for economic development. We are dedicated to further deepening and strengthening US-Kosovo trade and commercial connections. Therefore, welcoming the American business community will remain a priority commitment. Kosovo has the youngest population in Europe; an excellent geographic position; a favourable investment HE Avni Spahiu, environment; low taxes; and a sound banking system. Ambassador of the Republic We are a land rich in minerals, possessing the world’s of Kosovo to the United States of America 2 INVESTING IN KOSOVO | 2010 CONTENTS Contents ECONOMIC OVERVIEW 4 POLITICAL HISTORY 12 NATURAL RESOURCES 15 INFRASTRUCTURE 18 TOURISM 20 ENERGY 22 VENUE 25 SPONSORS 26 PROGRAMME 29 Publisher: Chris Gerrard Contributors: Jonathan Capal, Justine Doody, Sarah Hugo, Robyn Kingston and Moin Siddiqi Art Director: Steven Jones Conference team: Deanne Lintorn, Jennie Wengrovius Joint CEOs: Leon Isaacs, Atam Sandhu Correspondence Developing Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TU email: [email protected] | web: www.developingmarkets.com | www.moneymove.org | www.sendmoneypacific.org DMA acknowledge the assistance of all the individuals and organisations who have contributed to his publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Embassy of Kosovo, the Government of Kosovo or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher. Published by Developing Markets Associates Ltd (DMA) Printed by Gap Printing Picture credits: istockphoto.com © Developing Markets Associates Ltd 2010 | INVESTING IN KOSOVO 3 ECONOMIC OvERview Economic Overview TRANSFORMING THE REcovERY INto LONG-TERM PROSPERITY BY MOIN SIDDIQI, ECONOMIST decade into its post-conflict transition, Kosovo, From the mid-2000s, Kosovo has staged an impressive a fledgling democracy in the heart of the Balkan recovery, helped by official aid and remittances. Europe’s A Peninsula, finds itself at a crucial juncture; moving youngest nation received EUR2.7bn from the international steadily from its reconstruction process to one of donor community over 1999-2007 and with an estimated sustainable economic development. While there are 700,000 Kosovans living abroad, remittance flows are positive trends, notably progress in nation building (from crucial to sustain growth in consumption. Resource scratch) and improving macroeconomic fundamentals, inflows were managed prudently, reflecting investments significant challenges remain. With the active support in public infrastructure and services – both hards (roads, from international partners, this decade should witness housing and utilities) and softs (education, healthcare and the rise of Kosovo as a small but dynamic marketplace in markets) as well as improving the investment climate. southeast Europe. Over 50,000 houses have been rebuilt and 1,600km of roads rehabilitated. Agricultural production now exceeds The government of Kosovo has made great strides pre-conflict levels. towards integration into the global and European communities after decades of isolation as a province Consequently, real GDP growth has averaged a highly of the former Yugoslavia. Significantly, the country has respectable 6% during the past decade. In fact, since embarked on an ambitious programme to improve the 2002, gross national output has surged by nearly five-fold; business climate by undertaking fiscal and legislative representing a compounded annual growth rate (CAGR) of reforms and by improving basic infrastructure. Promoting over 21%. Ahmet Shala, Kosovo’s Minister of Economy and inward investment is a top priority, as foreign aid will start Finance, explains “if you look at the GDP, in 2002 it was just to decline in coming years. EUR800mn and now it’s EUR3.9bn, so Kosovo is moving 4 INVESTING IN KOSOVO | 2010 ECONOMIC OvERview Public investment spending is rising, mainly due to the start If you look at the GDP, in 2002 it of the mega project ‘Route 7 corridor’ – the construction of Kosovo’s first highway. The World Bank estimates was just EUR800mn and now it’s its cost at EUR987mn (24% of GDP) over a four-year period. Given the country’s infrastructure needs, capital EUR3.9bn, so Kosovo is moving ahead expenditure accounts for about one-third of government spending. The IMF projects economic growth at 4.6% this year, edging up to 5.9% in 2011. ahead quite quickly. Of course, there are big challenges, but The largely foreign-owned banking sector was relatively we are taking measures on key areas such as privatisation, unscathed by the credit crunch and remained both electricity, education, infrastructure and legislation. I believe healthy and well capitalised, although financial strength the energy we have put into making a business-friendly varies across individual banks. The three biggest lenders environment here will move the country ahead.” (ProCredit, Raiffeisen Bank and Nova Ljubljanska Banka) held about 90% of total deposits as of March 2010. The International Monetary Fund (IMF), which in July 2010 approved EUR108.9mn 18-month Stand-By Arrangement The Central Bank of Kosovo (CBK) strengthened its for its 186th member, issued the following statement: supervisory capacity and instructed banks to lower the “Kosovo’s economic performance has strengthened ratio of loan to deposits to a prudent level in order to considerably over the past decade, but large imbalances prevent sudden liquidity shortages. The IMF stressed persist. The external imbalances reflect infrastructure the importance of strong risk and liquidity management, bottlenecks, especially in the transport system and effective supervision, and an appropriate bank resolution energy sector, that continue to stifle productivity and framework to mitigate future risks. In March 2010, non- competitiveness.” Against this background, the authorities performing loans at 4.6% of total lending, plus a loan-to- are taking concrete steps to reduce the budget deficit, deposit ratio of 78% compared favourably with other improve public financial management, and enhance tax Southeast European countries. administration, thereby