The Banker: Kosovo President on Economic Growth
PRISTINA, KOSOVO–Kosovo’s president, Atifete Jahjaga, is a hard woman to pin down. The 37-year-old former police officer, who worked her way through the ranks to become second in command of the Kosovan police force, has been shuttling between European capitals to discuss everything from EU integration to holding a meeting with her Serbian counterpart, Tomislav Nikolic. The two held talks in early February – the first time the presidents of the countries have talked since Kosovo declared independence from Serbia five years ago – in an attempt to ease tensions between the two former Yugoslav states.
Just after that historic meeting, Ms Jahjaga spoke with The Banker’s Ginanne Brownell about the politics of investing and the country’s economic potential.
Q: What are Kosovo’s economic hopes for 2013?
A: We are focusing on promoting the growth of the private sector. We will adopt legislation that will simplify procedures and encourage investments. The point is to create an attractive and safe environment for domestic and international investors by improving the business climate, upgrading public infrastructure and preserving labour market flexibility.
We have begun reform processes in different sectors, including health and energy, we are reforming our civil service and [we have commenced] the process of fiscal decentralisation, among other things.
In terms of investment, we have much to offer. We have very rich natural resources, particularly lignite, zinc, ferro-nickel and agricultural land. There are estimates that our mineral resources are worth €13.5bn and we have one of the largest [lignite] coal reserves in the world. So we have great potential.
Q: How does Kosovo fit into south-eastern Europe from a financial standpoint, and why would investors look to invest in Kosovo instead of, say, Albania, Macedonia or Serbia?
A: We have introduced a very attractive tax system, with a simple tax rate, that is lower than that of our regional neighbours. We have also eliminated value-added tax on agriculture, capital and intermediate goods.
To protect foreign investors, we have adopted a law on foreign investment [which means they receive similar treatment to domestic investors]. Foreign investors have the right to own local companies and the freedom to use their profits without restrictions. The law prevents any type of discrimination and offers foreign investors the same rights and obligations as apply to residents of Kosovo. We offer simple and fast procedures for registering businesses – within three days – and the latest World Bank Doing Business report saw a significant improvement [in Kosovo’s performance].
We have a very young population, the youngest in Europe, and they represent a new [opportunity]. They are educated and multi-lingual. As well as this, the geographical position of Kosovo gives us an advantage for investment as we are a bridge for the markets of south-eastern Europe, which hold more than 100 million people. We also have direct access, via a recently built highway, to the Adriatic.
Q: Speaking of young people, 70% of Kosovo’s population is aged under 30. However, unemployment is high. What is being done to encourage young people to stay in the country and help build a better economic future for it?
A: Our most important [asset] is our citizens. Most of the challenges Kosovo faces today are also challenges that face young people, who cannot be absorbed by the job market because the pace of economic development has not been able to respond to this dynamic. In this, we are strengthening partnerships between education and the economy. But we are also co-operating with institutions and non-governmental organisations to create better opportunities for our youth.
Q: Do some of the unresolved political issues between Serbia and Kosovo make potential investors cautious over investing in the country?
A: In the Balkans in general, it is impossible to speak about economic issues without political aspects. It is not just an obstacle for Kosovo, but for the entire region. It is true that North Mitrovica [which has a Serb population majority] politicises Kosovo, while at the same time it discourages foreign investors. Despite this, the Kosovo Trust Agency [the agency charged with privatising Kosovo’s state-owned companies] is doing a good job in this regard. Legislation has been adopted that will move the Trepca Mine [a huge industrial complex that straddles South Mitrovica and the disputed North Mitrovica] in the right direction. Our focus for Trepca is purely economic. We will be able to minimise tensions in this part of Kosovo and [make matters easier for] those living on both sides.
Q: With regards to the financial sector, there are several foreign banks in Kosovo. Is this an area for growth not only with foreign banks but for local ones as well?
A: The banking sector is an important one for Kosovo. Our country has a sound banking system [which reflects our] financial sustainability. The credit risk to the banking system in Kosovo remains very low. The banking system managed to fend off outside threats by continuing to have a high degree of liquidity, mostly due to the sound nature of the financing, through deposits or through the good management of liquid assets.
Kosovo’s banking system continues to be characterised by high-quality capital, which is indicative of a highly stable banking system and our ability to cover potential losses in case of possible shocks. Increases in the amount of deposits in Kosovo reflect the continued trust of our citizens in the banking system, which has witnessed an increasing trend of new branches [opening of late].
The banking payment system is growing every day, [resulting in better services when it comes to] security and efficiency. Almost every year a new foreign bank joins Kosovo’s banking sector. Banking here offers a great potential for growth.
Q: Last year, Kosovo issued its first treasury bill, for €10m. How have things moved on since then?
A: The banking system has been modernised in accordance with European criteria and these standards will be implemented through the new banking products. Therefore such a step, which came from the Central Bank of Kosovo, it is a positive one and will further promote opportunities for expansion of those activities not only in Kosovo, but also beyond.
Q: What is the government doing to support economic growth in Kosovo?
A: This year the government is focusing on economic legislation that will further contribute to creating a favourable environment that will attract business. It has also created the National Council for Economic Development. The aim of this council is to increase public and private dialogue between government and businesses by drafting economic policies and reform.
Kosovo’s government is committed to promoting and attracting foreign investment and continuing the privatisation of publicly owned companies. Major privatisations this year will include the Post and Telecom of Kosovo. [In addition to this,] membership in international organisations will continue to [drive] our development.
Q: Kosovo, along with other countries in the Balkans, has battled with political and economic corruption and organised crime over the past few years. What is being done on these issues and what can you say to ease the concerns of potential investors?
A: Corruption is a disease of countries in transition and a serious regional issue that has a negative impact on the development process. We are determined to do our utmost to root out corruption.
The government of Kosovo, myself and all institutions in Kosovo have zero tolerance on organised crime and corruption. Last year, we took on major reforms of the judiciary system and we have an advanced partnership between the local judiciary and the European Union Rule of Law Mission in Kosovo.
Last year, I created an anti-corruption council, which is the first time in this region that such a body has been organised on a presidential level. [The council will] coordinate with different institutional agencies in the fight against corruption. We have also created other coordinating structures at an executive level, such as an anti-corruption task force, to effectively combat corruption. Recently, our parliament passed an anti-corruption strategy, which is very important in this fight.
***This piece was originally published in The Banker on 2 April 2013