Foreign Investment in Kosovo Stalls

Kosovo is struggling to attract foreign businesses to the country, according to figures released by the Central Bank of Kosovo, CBK.

For the first three quarters of 2010, Europe’s youngest country saw 203 million euro invested from foreign firms, the same figure as in 2009.

If the last quarter of 2010 also mirrored the previous year, Kosovo will have seen 291 million euro of direct foreign investment, well below the 2007 high of 414 million euro.

According to the bank, the largest investments came from Germany, Slovenia and Switzerland, while Austria, Great Britain, Turkey, Holland, Albania, the US and France also spent money in the country.

“The main areas where these countries have invested in Kosovo are in financial services, manufacturing, construction, processing industries and real estate industry,” said Kada.

Mustafe Hasani, from the government-run Investment Promotion Agency in Kosovo, IPAK, said that he was pleased with the investment in Kosovo for 2010, given the global financial crisis.

He said that 563 foreign firms registered with the country’s business agency in 2010.

“These companies have declared that they have 2120 employees,” he explained.

“We have organised conferences in the US, Turkey, Italy, Germany, Austria, Holland, Greece, Croatia and Slovenia to promote investment,” he added.

He complained, however, that funds promised by the World Bank to improve the business sector in Kosovo had been put on hold because of the country’s lack of a government.

The World Bank has told Balkan Insight previously that if Kosovo does not ratify its $20-million [15-million-euro] package soon, it risks losing it. The funds, agreed last year by the Bank’s board, include $12 million to modernize the outdated land registry system and a further $12 million, [nearly 9 million euro], for bringing other areas of the public sector up to date.

The project aims to attract more foreign businesses by improving the business registration, making it easier to obtain building permits and tackling the enforcement of contracts.

Currently, Kosovo is ranked 113 out of 183 countries in the World Bank’s ‘doing business league’ because of its poor performance in those areas.

“For reforms in these areas we will work with the Ministry of Trade and Industry experts in cooperation with the World Bank.

“These reforms will be introduced by the new Government, therefore the delay in the creation of the new government has stopped this work,” said Hasani.

The country has also recently been hit by the failure of the European Union to renew its preferential trade agreement at the beginning of the year, meaning that those importing Kosovo goods to the EU now pay tariffs.

While a solution to the problem is expected soon, the failure will do little to convince investors to put their money into Kosovo.

Kushtrim Puka of the Gap Institute, a leading think-tank, said that it is worrying that Kosovo continues to be ranked so poorly for foreign investors.

“Reforms in the five areas [mentioned by the World Bank] must happen but they will take time, especially now with the delay in establishing the government,” said Puka.

Economist Musa Limani said the country must take a number of measures to attract more investors. “We need to make reforms in the business environment through more favourable tax legislation,” he said.

“Then we have to accelerate and regulate the issue of obtaining building permits and so on.”

Officials of the caretaker Government agree. “After certification of the election, we will establish a government very soon and one of our priorities will be the work of attracting foreign investors,” said Hajredin Kuci, deputy prime minister of the outgoing Government.