Kosovo: A Population of Talented Young Entrepreneurs Waits at Europe’s Door

Kosovo
Fact box

Population: 1.83 million

GDP, real change in 2015: 4.0%

GDP, real change forecast for 2016 and 2017: 3.9% and 4.3% respectively

GDP per capita (PPP): €7,400

Unemployment rate - LFS: 34%

Average net monthly wages: €446

FDI inflow in 2015: €324 million

The Republic of Kosovo declared independence on February 17, 2008.

The country has been recognised by 111 out of 193 United Nations (UN) members and by 23 European Union member states.

The European Union has been an integral part of the international effort to build a new future for Kosovo since 1999. The country has received more than €2 billion in EU assistance since 1999.

On 27 October 2015, the EU signed a Stabilisation and Association Agreement (SAA) with Kosovo. The Agreement entered into force on April 1,2016.

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.
source: WIIW / EC

Unlikely and unusual as it may seem, in a national general multi-subject primary school test, taken last May, final grade pupils in Kosovo achieved higher results in English than in their mother tongue. The subject with the second highest score was computer studies. 

“Frankly speaking, I am not surprised with the results, as Albanians from Kosovo have always been quick adopters. There is also this bubble building up right now: new start-ups, young people coming and trying to do something,” says Uranik Begu, Executive Director of the Kosovo Innovation Centre, which was founded to support entrepreneurship, innovation and commercially based business development, with a focus on information and communication technology.

“However, what is especially remarkable is that these people are starting up a business at a very young age. If you go to an incubator, let’s say in London or Malmö, or even Berlin, a typical entrepreneur would be in their 30s or even their 40s. Here they are between 18 to maybe 25,” he adds.

(courtesy Innovation Centre Kosovo)
(courtesy Innovation Centre Kosovo)

Bright young things

At the end of the 2000s, the Kosovan government ran the ‘Young Europeans’ campaign to communicate the message that the country was ‘a fountain of youth’ and that the Kosovar people have something special to bring to the European continent by taking a younger, fresher, perspective to everything they do’. Not only is Kosovo the youngest country in Europe, after having declared its independence in February 2008, but it also has the youngest population in the Old Continent.

“53 per cent of our [1.8 million] people are under the age of 25 and most of them are multi-lingual,” Hykmete N. Bajrami, Minister of Trade and Industry, told Emerging Europe.

“The young population is definitely a positive element for Kosovo and their intellect, technical skills, and ambition are key factors in the success of our bank,” says Robert Wright, CEO of Raiffeisen Kosovo, which has been operating in the country since 2003. “Their areas of particular strength are IT skills and using the abilities of the young population. Raiffeisen Bank Kosovo provides IT and operations support for many other parts of Raiffeisen Bank’s international network, in countries such as Russia, Bulgaria and Albania,” he adds.

Not only is the IT expertise excellent, it is also considerably cheaper than other European countries, given the low average salary in Kosovo, which is less than €500 per month.

“Basically, you can get more for less: a very attractive and cheap labour force, the Euro, low taxes, a business-friendly environment, a cultural affinity with Western Europe, an EU-compatible legislation, the highest internet penetration in the region and, what’s more, an increasing number of IT graduates. It’s often been said that when it comes to outsourcing, Kosovo is the next little India in the heart of Europe,” says Hajrë Hyseni, CEO of Kosbit, a Kosovan IT outsourcing company.

He believes both business processes and IT outsourcing have seen a huge increase in the last few years and it is very likely that the sector will continue to grow further.

Making IT their goal

“There’s going to be quite a lot of activity in that sector. I think there’s a lot of room for growth, especially on the outsourcing services side,” says Besian Mustafa, general director of Kosovo Investment and Enterprise Support Agency (KIESA) and he adds that the government has identified six priority sectors: ICT, wood and metal processing, agriculture, mining and the power generation infrastructure and is aiming to encourage foreign investors to locate to their capital and further help develop the industries.

Prime Minister, Isa Mustafa, said during the EBRD Western Balkan Forum (© EBRD/Andy Lane)
Prime Minister, Isa Mustafa, during the EBRD Western Balkan Forum (© EBRD/Andy Lane)

“We have adopted a reform package that includes structural and economic reforms with the key objective of promoting national productivity and production to increase the quality of our products. We also want to attract foreign direct investment and to improve our trade balance with other countries so that we can increase the number of jobs and economic stability,” Kosovo’s Prime Minister, Isa Mustafa, said during the Western Balkans Investment Summit organised by the European Bank for Reconstruction and Development (EBRD) in London, in February 2016.

In the World Bank’s Doing Business 2016 report, Kosovo ranked 66th, 53 notches higher than five years earlier. According to the study The Opportunities for Foreign Investments in the Economy of Kosovo, published in May 2016, the country has attracted €1.5 billion of FDI so far. According to the business registry, there are about 4,000 companies with foreign and mixed ownership that have already used the opportunity to invest in Kosovo. Soon, the country may see even more foreign investors due to economic growth and the new law on strategic investment that Parliament is working on at the moment.

Minister Bajrami told Emerging Europe that the economy did very well last year compared to the previous years.

“In 2015 we had an economic growth of 3.6 per cent. We more than doubled incoming foreign direct investment and attracted €340 million, which is actually the best achievement since 2012, and we have tripled the number of foreign companies which registered in our country.” adds Ms Bajrami.

The Vienna Institute for International Economic Studies (WIIW) expects the country’s GDP to increase by 3.9 per cent and 4.3 per cent in 2016 and 2017 respectively.

Attracting more FDI

“What we want to do now is to create a legal basis that will allow us to be competitive with our neighbouring countries. When we have a potential investor, we talk to them directly and we don’t have to go through procurement procedures which are very long. Of course, there are conditions; for example, a company has to prove that they have 60 per cent of the financial backup for a project in order to go into direct negotiations with the government,” Minister Bajrami explains.

“After the law is passed, there will be a greater focus on large scale investment projects, mainly in power generation, infrastructure, agriculture and mining. These large scale projects will use existing natural resources,” says KIESA’s Mr Mustafa.

Bekim Çollaku, Minister of European Integration, tells Emerging Europe that the most important aspect of the new law is that it will simplify the investment process. “Once it is adopted it will definitely attract foreign investors as well as successful businessmen from all over our diaspora to come to Kosovo,” the Minister adds.

It is estimated that there are about 800,000 Kosovars living abroad, which makes them relevant and major players in Kosovo, especially when compared to the size of population living inside the country. There are now many ex-diaspora representatives coming back to Kosovo in order to help develop the country.

The law was supposed to be introduced earlier this year, but Minister Bajrami explains that now “it is a matter of one or two more months, maximum.”

More improvements in demand

“We are a small country so we don’t expect medium-sized European companies to invest in Kosovo because of local consumption. We’re trying to position the country as a production destination for other markets. What we have is quality, good strategic geo-positioning within the Western Balkans and we’re also a bridge between Asia and Europe. Kosovo could play a key role in becoming a production/export hub for European companies who are faced with suddenly increased production costs in China and here they could produce locally within Europe, without having to pay all the business costs of European countries,” says KIESA’s Mr Mustafa.

“Kosovo has a solid background when it comes to its legal framework, but more often than not, the implementation of laws is far from satisfactory,” says Robert Erzin, CEO of IPKO, which was founded in 1999 and has grown from a small internet service provider to become the country’s leading telecom in all the major business segments, and is now owned by Telekom Slovenije.

(courtesy of IPKO)
(courtesy of IPKO)

“The country continues to have challenges when it comes to the implementation of laws, regulations and fair standards in regards to digital cable services, copyrights, public procurement law and other sub-legislations. Oftentimes, we are not satisfied with the pace with which court decisions are taken, the lack of implementation of a certain regulation or the partial implementation of the laws and the double standards that the regulator applies to various operators. I can sum up by saying that technology always moves faster than laws and their implementation and this fact slows the pace of market development, in general,” he adds.

“FDI is a high priority for the government but it struggles to meet its objectives in this area for a number of reasons, some of which are perceptions and some of which are realities for foreign investors, for example the application of the rule of law, the recovery of debts, trust in the legal system and an unreliable infrastructure for the supply of basic utilities such as electricity and water,” says Raiffeisen’s Mr Wright.

“FDI investment is essential to drive the country’s economy as well to improve the brand image of the country,” says Kosbit’s Mr Hyseni.

As a foreigner working in Kosovo, Mr Wright sees that the country has come a long way in a relatively short time.

“During the recent past time there has been a lot of catching up to do and a considerable latent demand for a wide range of products and services. Overall this has been positive for Kosovo, but it has created a business environment of significant concentration, and even saturation, as many players try to take advantage of the short term opportunities,” he adds.

He believes there is now a significant oversupply of petrol stations, supermarkets, property developers, coffee bars, restaurants and hotels. Kosovo also imports far too many goods and services and has the potential, now, to be self-sufficient in areas such as agriculture, meat and dairy products.

(courtesy of Innovation Centre Kosovo)
(courtesy of Innovation Centre Kosovo)

Integrating with the Old Continent

“Now that Kosovo is officially on the path to European integration, with the signing of the Stabilisation and Association Agreement earlier this year, the industrial profile of this country needs serious attention and restructuring to take advantage of the newer opportunities that exist, using the skills and abilities of the young population, the benefits of its geographic location and the significant export potential,” says Raiffeisen’s Mr Wright.

“This integration has meant that many of the aspirations of the countries in the [Western Balkan] region have become real. Some of those aspirations are the intensification of security and stability in the region, intensification of corporation among the countries in the region in addressing their joint challenges,” Prime Minister Mustafa said in London.

He believes EU integration will provide an opportunity to increase the skills of the country’s citizens, so that they can be more competitive in the region and in Europe. It will also enable the promotion of similar values to those being promoted by the European Union, enabling diversity and mobility.

In early May, the European Commission proposed visa-free travel to the EU for the people of Kosovo who have biometric passports, thus facilitating person-to-person contact and strengthening business, social and cultural ties between the EU and Kosovo.

“I know how important visa-free travel is to the people of Kosovo and I am very satisfied with the progress we have achieved,” Dimitris Avramopoulos, Commissioner for Migration, Home Affairs and Citizenship, said at a press conference, adding that he hoped national governments and the European Parliament would approve the proposal quickly.

(courtesy of Innovation Centre Kosovo)
(courtesy of Innovation Centre Kosovo)

The Innovation Centre’s Mr Begu told Emerging Europe that mobility is a real challenge for young Kosovars, and its lack translates into lesser development and drive for innovation in the country.

“At the moment young people don’t have the necessary freedom of movement. They need a visa if they want to go to the EU and when it comes to the application process, the number of required documents is enormous. They need to wait for a couple of months for an appointment. On top of that, all of them are regarded as potential asylum seekers. All this prevents them from going abroad, experiencing new things and bringing those innovative experiences back to Kosovo,” says Mr Begu.

“[Visa liberalisation] will completely open up new perspectives for the younger generation and will give them entirely new opportunities. Our biggest asset, which is our youth, will have an open window to unleash their potential,” Minister Çollaku concludes.

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