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Export revival remains a dream in Kosovo


Long-term collapse in sale of goods abroad shows no sign of imminent turnaround.

By Arbana Xharra in Prishtina (Balkan Insight, 9 March 06)

As Kosovo enters the final status talks in Vienna that Albanians hope will end in independence for the tiny landlocked territory, concern is focusing increasingly on what the two million or so inhabitants will live on in future.

Though local officials claim Kosovo has the potential to export many items, such as coal and wine, in practice it barely exports anything, placing a question mark over its long term economic viability.

A slump in exports has not slowed since NATO expelled the Serb regime in 1999, and exports now make up a pitiful four per cent of the overall trade figures.

The grim picture is fleshed out in detail by officials in the Kosovo ministry of trade and industry.

"Kosovo's trade relationships with other countries were worth 1.2 billion euro in 2005," Remzi Ahmeti, a ministry official, said.

"Out of this, imports accounted for 1.1 billion euro while exports reached a meagre 43 million euros," he added.

Moreover, the decline in exports has not yet reached its conclusion. According to ministry of trade figures, 2005 saw a further decline of three per cent in exports compared to 2004, with growth only in small, specialised areas, such as mushrooms and leather goods.

Safet Gerxhaliu, head of the office for foreign economic relations in Kosovo, put the situation baldly. "Kosovo exports cash and it imports products from the region," he said.

The looming disaster has economic experts in the United Nations administration in Kosovo, UNMIK, scratching their heads.

Joachim Ruecker, head of the fourth "pillar" of UNMIK, which handles the economy, said, "Given its natural resources, Kosovo could export minerals competitively, such as coal, lead, zinc, nickel and magnesium. It also has the potential for large-scale production and export of electricity."

He added, "With its young and abundant labour force, Kosovo could also potentially produce textiles and footwear."

Ruecker concluded, "Kosovo should adopt policies that encourage investment into new types of activities."

But for the moment these remain dreams rather than reality and even the most optimistic local economists know that any revival will be a long-term project.

"Kosovo could in future produce... vines, electricity and other competitive produce, but not on a wide front," Muhamed Sadiku, an economist in the final status negotiating team told Balkan Insight.

Whether Kosovo could export coal would depend also on the level of private investment in the industry, he added.

"The revival of this sector will take time," concluded Sadiku.

Muhamet Mustafa, head of Riinvest, a non-profit research and policy development institute, agreed that Kosovo's export potential was not a lost cause.

"The goods we exported in the past, such as lead, electricity and wine, are a potential sector for revival after privatisation and technological updates," he said.

Small and medium-sized enterprises could lead the way in kick-starting exports, he added, as they had already proven their expertise in fields such as fruit juice and other foodstuffs.

But other experts warn that there will be no easy revival of the territory's former industries, such as wine production.

Firstly, the vineyards themselves suffered severe damage in the fighting that enveloped Kosovo in the late 1990s.

Even those that were not physically harmed in the conflict suffered years of neglect after 1999, as Belgrade, Pristina and the UN tussled over the question of who owned them.

Moreover, Kosovo's pre-war industries did not have to compete in the European market but lived off sales to Yugoslavia, of which Kosovo was then a part.

Kujtim Dobruna, director of the Vienna-based Economic Initiative for Kosovo, ECIKS, points out that Kosovo has not even reached first base in the business of certification - an essential requirement for any exporter to the European Union.

Without an institute to handle certification, standards and the establishment of qualitative criteria, it does not help much that Kosovo goods "receive preferential treatment in the EU", he added.

Dobruna urged Kosovo producers to concentrate on building up weak production capacity and fill the gap in the domestic market before trying to venture abroad.

That way, he said, businesses could make a start in cutting the perilously high gap between imports and exports and so establish a healthier trade balance.

"As far as western markets are concerned, the main obstacle is the lack of knowledge among local entrepreneurs, while the government offers them only limited support," he added.

Arbana Xharra is a journalist with the Pristina daily Koha Ditore and a Balkan Insight regular contributor. Balkan Insight is BIRN's internet publication.

 
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Background information for foreign investors

Kosovo: General Information
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Why do business in Kosovo?
Legal Framework in Kosovo
KTA and Privatisation in Kosovo



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