Top ten reasons to invest in Kosovo?
The Economic Initiative for Kosovo (ECIKS) promotes foreign investment into the country. One of the tools the organization uses is the popular top ten list, in this case the top ten reasons to invest in Kosovo. While I support the work of ECIKS, which is the arm of the Pristina based Investment Promotion Agency for Kosovo (IPAK) I have to say that their list this year has some analytical flaws.
1 Central location in the region
Being located in the heart of the Balkans, Kosovo's capital Pristina is in one-hour driving distance to any neighbouring country. Ongoing infrastructure projects include modern highway connections to Albania, Serbia and Macedonia. By 2009 the driving distance to the Albanian Port of Durres will be reduced to 3 hours. In addition, Pristina International Airport offers air connections to main European capitals.
While it is true that Kosovo is a central Balkan country we are also a landlocked country, there are projections that the driving time between Kosovo and the Albanian ports will be 3 hours once all the planned road works are complete. However, we have a long way to go on the development of proper road infrastructure.
The hope that the highway system will be revitalized by 2009 is overly optimistic, the roads will be built but it may take a bit longer than projected.
2 Young, educated, multilingual and dynamic population
Kosovo has the youngest population in Europe. Due to the long international presence, English is just short of an official language. Over 40.000 students at two state and numerous private universities and many Kosovars who have lived and studied abroad are currently guarantying a sufficient stream of highly educated labour.
The data that this statement is based on was collected in 1981 and so it may well be out of date. It is true that 70% of the population is under the age of 35 but to say that they are highly educated is a bit of a stretch. Kosovo has a relatively new education system that was re established in 2000, and while we have two state universities and many private universities, only the American University in Kosovo is fully accredited.
3 Competitive, flexible and well skilled labour force
Average gross wage in Kosovo is less than 240 EUR. Wages in Kosovo are unburdened by costly social contributions, unlike those in the countries of the region. Through engaging in smaller workshops and private businesses during the 1990s and through vocational training programs established in the last 9 years, Kosovars have gained skills, which are highly appreciated by foreign investors.
I'm critical of this point. The marketable work skills that are needed to attract the new investors are in the technology and financial sectors. All of them employ young people and they used to have their own original training centers, but now they accept people immediately, often hiring an under qualified staff.
4 Modern Telecommunications
Kosovo offers modern telecommunication systems. There are 3 fixed telephony operators and 2 mobile telephony operators, offering the latest and most modern technologies,
including VoIP, GPRS, etc. Three main internet service providers offer stable and broadband Internet, including DSL, Wireless, and Cable, with lower prices than in any other European country.
Kosovo does have a quickly developing telecommunications system, but the industry has expanded because of past foreign investments and there may not be much room for more growth.
5 Modern, EU-compatible legislation
Since 1999 Kosovo's legal system has been re-built and is now completely compatible with the EU legislation. Kosovo has also installed the International Standards for financial reporting. In addition, Kosovo's legislation offers "national treatment" for foreign investors.
This not entirely true, Kosovo's legislation is based on the old Yugoslavian legislation, as well as the updated UNMIK legislation and just recently with President Ahtisari package derivates and brand new Kosovo Constitution. This means it is far from being modern and also far from being EU-compatible. EU legislation has high standards and our standards are very different. Having said that, we do intend to have similar legislation to minimize obstacles for private investors and production facilities. Kosovo has established a national standard but it is not up to the international standard of financial reporting. We are in the initial stage of adapting all international standards needed for investors.
6 Sound banking system
Kosovo's financial sector has been built on completely new foundations. The Banking and Payments Authority of Kosovo (BPK) is an independent body, which acts as a Central Bank of Kosovo. There are eight licensed banks, two pension funds, 16 other financial intermediaries, 27 financial auxiliaries and nine insurance companies in Kosovo. Six out of eight banks in Kosovo are foreign-owned.
While it is true that there are well-established banks in Kosovo, we are lacking a real financial sector or any markets. After the war we started from scratch. We have a banking system, but it's not competitive enough for business development.
7 Currency: EURO
Euro is the official currency in Kosovo, eliminating this way the currency and exchange rate risk. The Euro gave Kosovo a considerable advantage over its competitors in the region by making it more attractive to foreign investment and by bringing financial and macroeconomic stability. It also enabled Kosovo to offer the lowest transaction costs in the region.
Any downside to using the euro is inconsequential when compared to the benefits - no argument.
8 Free access to EU-market and CEFTA members market
Kosovo derives three major benefits from the trade liberalization, namely improved export possibilities, a better investment environment and stable relations with its neighbours. Kosovo is a member of CEFTA and it also benefits from non-reciprocal, customs free access to the EU market based on the EU Autonomous Trade Preference (ATP) Regime.
Although the CEFTA agreement opens up many Balkan countries for free trade with Kosovo, the inability to establish reciprocally equal trade regime with Serbia is a negative selling point for international investors. Because the Kosovo economy gets much of its income from Kosovars living abroad, Government relies on VAT and customs tariffs to fund the country as opposed to straight income tax, like most countries. But the 10% tariff on imported goods might not be enough to protect Kosovo products.
9 Great investment opportunities
Kosovo is well endowed with natural resources and agricultural land. Sectors of agriculture, food processing, construction, textile, IT, automotive components and
energy and mining offer the most opportunities for foreign investors. An interesting opportunity, having in mind the young, multilingual and educated population, is also IT-outsourcing.
This is a valid point. There is a great deal of room to grow for this country.
10 Low tax burden and modern business support institutions
Kosovo has a simple and straightforward tax system. The tax burden is very low:
• Personal Income Tax 0-20 %
• VAT 15 %
• Corporate Income Tax 20%
• Mandatory contributions for
employees only 5% of gross
salaries
No other country of the SEE can outperform Kosovo in its ability to allow the businesses to enter the market. The Investment Promotion Agency of Kosovo (IPAK) and its office in Vienna offer a whole range of free of charge services for foreign investors.
Although these institutions to promote investments are present, they still need to be developed. The Investment Promotion Agency of Kosovo-IPAK, is established but not yet functioning as it must.
1 Central location in the region
Being located in the heart of the Balkans, Kosovo's capital Pristina is in one-hour driving distance to any neighbouring country. Ongoing infrastructure projects include modern highway connections to Albania, Serbia and Macedonia. By 2009 the driving distance to the Albanian Port of Durres will be reduced to 3 hours. In addition, Pristina International Airport offers air connections to main European capitals.
While it is true that Kosovo is a central Balkan country we are also a landlocked country, there are projections that the driving time between Kosovo and the Albanian ports will be 3 hours once all the planned road works are complete. However, we have a long way to go on the development of proper road infrastructure.
The hope that the highway system will be revitalized by 2009 is overly optimistic, the roads will be built but it may take a bit longer than projected.
2 Young, educated, multilingual and dynamic population
Kosovo has the youngest population in Europe. Due to the long international presence, English is just short of an official language. Over 40.000 students at two state and numerous private universities and many Kosovars who have lived and studied abroad are currently guarantying a sufficient stream of highly educated labour.
The data that this statement is based on was collected in 1981 and so it may well be out of date. It is true that 70% of the population is under the age of 35 but to say that they are highly educated is a bit of a stretch. Kosovo has a relatively new education system that was re established in 2000, and while we have two state universities and many private universities, only the American University in Kosovo is fully accredited.
3 Competitive, flexible and well skilled labour force
Average gross wage in Kosovo is less than 240 EUR. Wages in Kosovo are unburdened by costly social contributions, unlike those in the countries of the region. Through engaging in smaller workshops and private businesses during the 1990s and through vocational training programs established in the last 9 years, Kosovars have gained skills, which are highly appreciated by foreign investors.
I'm critical of this point. The marketable work skills that are needed to attract the new investors are in the technology and financial sectors. All of them employ young people and they used to have their own original training centers, but now they accept people immediately, often hiring an under qualified staff.
4 Modern Telecommunications
Kosovo offers modern telecommunication systems. There are 3 fixed telephony operators and 2 mobile telephony operators, offering the latest and most modern technologies,
including VoIP, GPRS, etc. Three main internet service providers offer stable and broadband Internet, including DSL, Wireless, and Cable, with lower prices than in any other European country.
Kosovo does have a quickly developing telecommunications system, but the industry has expanded because of past foreign investments and there may not be much room for more growth.
5 Modern, EU-compatible legislation
Since 1999 Kosovo's legal system has been re-built and is now completely compatible with the EU legislation. Kosovo has also installed the International Standards for financial reporting. In addition, Kosovo's legislation offers "national treatment" for foreign investors.
This not entirely true, Kosovo's legislation is based on the old Yugoslavian legislation, as well as the updated UNMIK legislation and just recently with President Ahtisari package derivates and brand new Kosovo Constitution. This means it is far from being modern and also far from being EU-compatible. EU legislation has high standards and our standards are very different. Having said that, we do intend to have similar legislation to minimize obstacles for private investors and production facilities. Kosovo has established a national standard but it is not up to the international standard of financial reporting. We are in the initial stage of adapting all international standards needed for investors.
6 Sound banking system
Kosovo's financial sector has been built on completely new foundations. The Banking and Payments Authority of Kosovo (BPK) is an independent body, which acts as a Central Bank of Kosovo. There are eight licensed banks, two pension funds, 16 other financial intermediaries, 27 financial auxiliaries and nine insurance companies in Kosovo. Six out of eight banks in Kosovo are foreign-owned.
While it is true that there are well-established banks in Kosovo, we are lacking a real financial sector or any markets. After the war we started from scratch. We have a banking system, but it's not competitive enough for business development.
7 Currency: EURO
Euro is the official currency in Kosovo, eliminating this way the currency and exchange rate risk. The Euro gave Kosovo a considerable advantage over its competitors in the region by making it more attractive to foreign investment and by bringing financial and macroeconomic stability. It also enabled Kosovo to offer the lowest transaction costs in the region.
Any downside to using the euro is inconsequential when compared to the benefits - no argument.
8 Free access to EU-market and CEFTA members market
Kosovo derives three major benefits from the trade liberalization, namely improved export possibilities, a better investment environment and stable relations with its neighbours. Kosovo is a member of CEFTA and it also benefits from non-reciprocal, customs free access to the EU market based on the EU Autonomous Trade Preference (ATP) Regime.
Although the CEFTA agreement opens up many Balkan countries for free trade with Kosovo, the inability to establish reciprocally equal trade regime with Serbia is a negative selling point for international investors. Because the Kosovo economy gets much of its income from Kosovars living abroad, Government relies on VAT and customs tariffs to fund the country as opposed to straight income tax, like most countries. But the 10% tariff on imported goods might not be enough to protect Kosovo products.
9 Great investment opportunities
Kosovo is well endowed with natural resources and agricultural land. Sectors of agriculture, food processing, construction, textile, IT, automotive components and
energy and mining offer the most opportunities for foreign investors. An interesting opportunity, having in mind the young, multilingual and educated population, is also IT-outsourcing.
This is a valid point. There is a great deal of room to grow for this country.
10 Low tax burden and modern business support institutions
Kosovo has a simple and straightforward tax system. The tax burden is very low:
• Personal Income Tax 0-20 %
• VAT 15 %
• Corporate Income Tax 20%
• Mandatory contributions for
employees only 5% of gross
salaries
No other country of the SEE can outperform Kosovo in its ability to allow the businesses to enter the market. The Investment Promotion Agency of Kosovo (IPAK) and its office in Vienna offer a whole range of free of charge services for foreign investors.
Although these institutions to promote investments are present, they still need to be developed. The Investment Promotion Agency of Kosovo-IPAK, is established but not yet functioning as it must.
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