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Kosovo Television Debate: The Kosovar Economy

RTK, Prishtina

14 12 2005  The fifth episode of ‘Life in Kosovo’ was broadcast on Kosovo National Television (RTK) on 14 December.

This episode discussed the economic situation in Kosovo and focused on foreign investment, corruption and privatisation.

Trade and finance minister Bujar Dugolli, Mabetex owner Bexhet Pacolli and Agim Shahini, head of the Kosovar Business Alliance, took part in the debate.

They began by discussing the obstacles that foreign and local investors encounter in Kosovo.

According to Pacolli, several factors prevent him from investing more in Kosovo, such as a lack of infrastructure, connectivity and customer awareness.

“But I do believe that the government will eventually solve these problems,” he said.

Dugolli said that the government did not lack the will to make Kosovo attractive to investors, but current circumstances made its job difficult.

One problem is the lack of a definite political status for Kosovo and the lack of a legal infrastructure, which has to be built from scratch, according to Dugolli.

Agim Shahini agreed, and said that a group of potential investors from Italy were initially interested, but put off by the lack of infrastructure.

“The current legal infrastructure doesn’t exactly give the green light for foreign investors to invest in Kosovo,” he said.

But Shahini remains certain that the government is working towards the creation of an effective infrastructure, and that foreign investors have a continuing interest in Kosovo.

Pacolli, on the other hand, disagrees, saying that political status is not a major obstacle for investors and that in general politics and business should not mix.

“It is unfair to blame Kosovo’s political status for a lack of investment,” he said. “An investor is interested in his own status in Kosovo, and whether he is secure here.”

According to Pacolli, the ministry has failed to create an agency which would dedicate itself to investors, consisting of experts rather than politicians.

“The agency should focus on statistics,” he said. “Kosovo needs to be able to offer accurate statistics to potential investors.”
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Dugolli, whose ministry founded an investment agency in June 2005, said that despite the good will, the agency lacks funds, stopping from being as effective as it could.

It didn’t have a dedicated budget until January, and has been in operation without one for the past six months.

Hashini, as head of the Business Alliance, pointed to other problems that put off investors. Lack of road and rail infrastructure and an unstable electricity supply are some of the key issues, he said.

According to Hashini, another worrying issue is the physical security of investors, both foreign and local. Benaf, a Kosovar supermarket chain, lost more than five million euros when a car exploded in its parking lot. Many other large companies have received threats.

Pacolli downplayed the significance of these incidents and said that the solution would be to create a non-political structure for business.

“Business has to be separated from politics,” he said. “A stable economy should be based on expertise.”
Dugolli said that some experts in Kosovo refused to come and work for the investment agency, either to avoid being identified as close to the political parties in the coalition government or because the financial gains were too small.

“A local expert would rather work for a foreign institute for 1500 euros, than work for the government for 450 euros,” he said.

A BIRN investigation discovered that the European Agency for Reconstruction (EAR) offered to increase funding for experts, but only if the agency became independent from the Ministry – an offer which was refused.

Dugolli denied this and said that the legal infrastructure did not allow for agencies to be created outside of ministries.

However, examples of them can be found across the region. In Albania for example, a similar agency works independently from the relevant ministry, and remains the same no matter who is in government.
The debate also tackled the issue of privatisation.

According to Pacolli, privatisation in Kosovo has been a total failure. The process, according to him, was badly planned and done without any expert analysis.

“They sold the enterprises, sent the money elsewhere and left people without work,” he said.
The only result of privatisation, according to him, is the number of factories that have turned into warehouses.

Dugolli, who is also a board member of the Kosovo Trust Agency (KTA), the organisation which spearheads the privatisation process, said that although it started badly, things are improving.
He blames UNMIK and the previous government for launching a poorly-regulated programme of privatisation, with poor operational policies.

Shahini agrees. Operational policy, according to him, is flawed and exacerbates unemployment instead of reducing it.

“It is better,” he said, “if the factories are sold for 3 euros, but the buyer is then obliged to invest 20 million dollars within ten years. Thus you insure that the factory will continue working, will keep its workers employed, and will not turn into a warehouse.”

Dugolli explained that although Pacolli and Shahini’s ideas sounded good, the reason why KTA keeps selling enterprises to the highest bidder is because employees, who receive 20 per cent of the sale price, protest and organise road blocks if the sale price is low.

Another worrying issue for Kosovo’s economy is corruption.

Dugolli was recently accused of corruption in the media over the privatisation of a large enterprise, Ferronikel. He refuted the accusations, saying they should not be taken seriously because the Kosovar opposition likes to point the finger.

He admits that corruption exists, but thinks that citizens and businessmen should present their evidence to the government, and not just journalists.

Dugolli is also believed to have close links to another company, Swiss Casino, which was accused of tax evasion in the media.

Pacolli, on the other hand, thinks that the only way to fight corruption is through fully implemented laws. According to him, corruption is a widespread phenomenon in other countries as well, but affects countries like Kosovo the worst. Corruption is most prominent in tender applications, especially those involving public bodies.

Shahini claims that 10 percent of every tender in Kosovo goes to procurement.

“Procurement divisions of these institutions request 10 percent from all companies that apply for tender,” he said. “The company that best fulfils the requirements is successful, but the 10 percent is not returned.”
Pacolli claims that he has never directly made a bid, although his company has had some unpleasant experiences with applications. Nonetheless, he strongly believes that professionals will judge tender offers on the basis of how professional they are, and not how much they can offer in bribes.

Dugolli again pointed out that talk alone does nothing to solve corruption.

“People have to come with proof,” he said. “You can’t collect statistics just by asking people in the street, ‘is there corruption?’”

At the end of the debate, Dugolli returned to the issue of investment and said that he believed Kosovo has enough to offer foreign and local investors, and that anyone who wants to invest and help develop Kosovo was welcome.

For further information, contact BIRN Kosovo Director Jeta Xharra.
This project is generously supported by the Balkan Trust for Democracy.