Investing in the Future — A Trade and Investment Guide to Kosovo Third Edition published by Kosovo Business Support funded by the United States Agency for International Development January 2004 Authors: Debra Wahlberg, Bekim Kastrati, Kent Ford, Armend Osaj Chief of Party: Debra Wahlberg Cover Design by Esat Çitaku, Pristina NOTE: The updating of the Kosovo Business Support guide, Investing in the Future - A Trade and Investment Guide to Kosovo, Third Edition, was completed in January, 2004. In- formation contained in this guide is accurate as of this date. Given the rapid pace of change in Kosovo, some of this information may quickly change. This guide was funded by the United States Agency for International Development, as part of the Kosovo Business Sup- port Program. The views expressed in this guide are not necessarily those of the United States Agency for International Development or the United States Government. www.usaidkbs.com INTRODUCTION Investing in the Future – A Trade and Investment Guide to Kosovo, Third Edition presents a comprehensive look at Kosovo’s business environment. In addition to economic and market information, it incorporates legal and regulatory factors, and other information relevant to the local environment. This guide was prepared to serve the international business community seeking business and investment opportunities in Kosovo. Published by the Kosovo Business Support (KBS) project, a United States Agency for International Development (USAID) funded program, this guide is one tool that KBS uses as part of its strategy to be the one-stop shop for all foreign investors seeking to invest in Kosovo. Since the cessation of hostilities in 1999, Kosovo’s legal status is that of a United Nations protectorate under the auspices of the United Nations Mission in Kosovo (UNMIK). UNMIK and the Provisional Institutions of Self Government (PISG) are implementing laws, regulations and structures that are placing Kosovo on a reform oriented path, designed to establish a democratically led, free-market business environment suitable for local business development, foreign direct investment, joint ventures and strategic alliances. Peaceful and fair parliamentary elections took place in November 2001, at which time Kosovo assumed even greater responsibility for its own governance and administration. The objective of the elections was to support the drive to create a tolerant, multi-ethnic Kosovo for all its citizens. The apparent success of the elections bodes well for Kosovo’s future. As a strategic cross-roads within the Balkans, Kosovo’s future lies in its ability to capitalize on its access to markets in neighboring countries. Kosovo citizens returning from the Diaspora bring with them some of the technical skills and relationships with partners in foreign markets to assist in this effort. International donors are investing heavily to support the legal and regulatory framework, upgrade the local skill capability, and improve infrastructure, all of which will assist Kosovo to effectively participate in the international business community. Business opportunities do exist in Kosovo, both to establish new private sector businesses, and to identify existing companies with which to work. KBS can work with investors to facilitate both. For additional information on trade and investment opportunities in Kosovo, please contact KBS at +381 38 243361/2/3. The KBS website, located at: www.usaidkbs.com, can provide you with additional information about business opportunities in Kosovo. Debra Wahlberg Chief of Party Kosovo Business Support January 2004 2 United States Agency for International Development ACKNOWLEDGEMENT Kosovo Business Support (KBS) wishes to acknowledge the following sources of information that were instrumental to complete this guide. These are: Banking and Payments Authority of Kosovo Ministry of Finance and Economy UNMIK Customs Service Ministry of Labor and Social Welfare Ministry of Trade and Industry European Agency for Reconstruction RIINVEST Institute Statistical Office of Kosovo United States Agency for International Development World Bank Kosovo Business Support 3 TABLE OF CONTENTS KOSOVO BUSINESS SUPPORT ................................................................................5 KBS Trade and Investment Department ....................................................6 KOSOVO AT A GLANCE ........................................................................................7 Key Facts ................................................................................................7 Location .................................................................................................8 Geographic Position ................................................................................8 Area .......................................................................................................8 Borders ...................................................................................................8 Climate ...................................................................................................8 Demographics .........................................................................................8 History ...................................................................................................9 Political Profile .....................................................................................10 Infrastructure ........................................................................................10 Transportation .......................................................................................10 Communications ...................................................................................11 Natural Resources .................................................................................12 Energy ..................................................................................................12 Entry Requirements ...............................................................................12 ECONOMIC PROFILE ...........................................................................................13 Macroeconomic Data .............................................................................13 Major Bilateral and Multilateral Trade Agreements ................................13 Business Associations Operating in Kosovo ............................................13 The Diaspora .........................................................................................14 BUSINESS ENVIRONMENT ...................................................................................15 Labor ....................................................................................................15 Taxation ...............................................................................................15 Auditing and Accounting .......................................................................17 Banking Sector ......................................................................................17 Capital Requirements for Commercial Banks ..........................................18 Commercial Banks Operating in Kosovo ................................................18 Micro-Finance & Non-Bank Financial Institutions ...................................19 Other Sources of Finance .......................................................................19 INVESTMENT CLIMATE .......................................................................................20 Legal Framework for Foreign Investment ...............................................20 Rights of Foreign Investors ....................................................................20 Branch Offices ......................................................................................20 Representative Offices ...........................................................................20 Commercial Law ...................................................................................20 Company Formation ..............................................................................21 Export Incentives ..................................................................................21 Investment Opportunities .......................................................................21 Agribusiness Sector .........................................................................21 Wood Processing Sector ..................................................................22 Construction and Building Materials Sector ......................................22 APPENDIX I — ADDITIONAL INFORMATION .........................................................23 Business Assistance Information ............................................................31 APPENDIX II — SELECT BIBLIOGRAPHY ..............................................................34 APPENDIX III — MACROECONOMIC DEFINITIONS ................................................35 4 United States Agency for International Development KOSOVO BUSINESS SUPPORT Staffed by international and local professionals, Kosovo Business Support (KBS) is a USAID funded private sector development initiative. The KBS mission is to revitalize the Kosovo economy by stimulating employment and increasing private investment in the Small and Medium Enterprise (SME) sector. KBS accomplishes this by actively providing assistance to Kosovo businesses in two ways: - KBS offers a range of business support services to private sector companies that wish to improve the performance of their