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Interview with UNMIK Pillar IV Chief, Joachim Ruecker

Prishtinë, Mar 15, 2006 - The Head of UNMIK Pillar IV, Joachim Ruecker, launched a “speedy” privatization process. Unlike his forerunner, Nicholas Lambsdorff, Ruecker managed to establish a positive image of Pillar IV in few months, gaining the sympathy of Kosovars, hence. This image has, however, started to grow fainter because of the toleration of secret agreements to take place. As a consequence of these agreements, Kosovo has lost around €24 million in the last eight rounds of privatization.

There is an opinion that the privatization is being conducted in a ‘hasty’ way. KTA is selling the SOEs without a close consideration of their real prices.

Asked about the progress made on Standard V, Ruecker indicated that both he and Minister Haki Shatri are content that the fifth standard has been referred to as an area of good progress in the last quarterly report of the UN Secretary General in the Security Council.

Q: Do you consider there were failures in the work of this pillar and on the privatization process, on top of the successes achieved?

A: I do not see any major failure. Human beings make mistakes but I can only talk for the period since I came, and I can speak about that with full confidence.

Q: Do you consider that the blocking of the Trust Fund represents a failure?
A: I consider that there is a misunderstanding in relation to the functioning of the banking system in Kosovo. The problem on taking a loan does not consist in the lack of deposits. Even if the Trust Fund income would be allocated to the Kosovo banks, this would not change the lending situation.

The problem is with the demand side; there are no sound beneficial projects in place, no sound business plans, not sufficient collaterals.

Q: Most of the businesses complain that the interest rates are too high.
A: I agree that they are high. I would recommend more focus on the demand side. We need to develop the collateral instruments, such as mortgages, and develop sound business plans. Another reason for the high interest rates in the Western Balkans compared to Central Europe is the unpredictable risk.

Q: Does this happen because Kosovo has no Central Bank?
A: Certainly not. BPK holds the functions of a central bank, the insurance system and the financial system. The only functions it does not administer are the money emission and the monetary policy. If Kosovo had its currency and its monetary policy, the financial sector would be entirely different.

There would be more disadvantages than advantages in that case. I think it is a big advantage that Kosovo is a passive member of the Euro zone.

Q: Do you think that the Restitution Fund should be created, just as the countries of the region did?

A: No, and I doubt that the model was that with 20% you cannot cover the requests for restitution, but compensation. All this is hypothetical, because we have the Regulation on KTA and it has different rules of game. It cannot be changed as long as UNMIK is here, or to say my opinion, it will not be changed for such essential things.

Q: With this frozen fund, do you think that it is a paradoxical to ask a foreign investor to invest in Kosovo?

A: No, I think there are two completely different things and I would not recommend to confuse these things. Now I am talking about privatization process and not investments. It is another thing when during the privatization, investors pay for the purchase.

Q: Do you think that this sends negative signals to investors, because the money is being kept out of Kosovo and not invested?

A: I do not think that this would give negative signals. I would like to consider this thought if I was sure that Kosovo has a problem with supply by the banking system. I do not think that this is the case.

Q: Will you ask from New York that part of this Fund, 20%, 40%, or 50% be given to Kosovo banks with low interest rate?

A: I think that you are still thinking that the problem is about deposits – you think that if there are more deposits there will be more suitable interest rates. Yes, I agree with you. Theoretically, this thing can happen in the market economy. But I do not think the same in the current situation in Kosovo. I do not think there would be changes in the interest rate even if a part [of the fund] is unblocked.

Q: How do you comment on the recent political changes in Kosovo? Do they hinder economic development?

A: They will have no impact if they were done in a stable way and I am convinced they were done in such a way.

Q: Do you think that the privatization process is close to failing?
A: Why?

Q: Lack of investments, purchasing power?
A: I think this is a very general statement. This does not stand. There are many investors that have invested be it in special or regular spin-off.

Q: But some privatized enterprises have been turned into storehouses.
A: I agree… However, also warehouses can contribute… Privatization is never a restructuring of the old status-quo, privatization does not imply the economic view that existed some years ago. Maybe also you agree that the economic development is not static, but a dynamic development that changes. The fact that somebody produces something that is not necessary anymore. Maybe now a warehouse can be used to store other products. I do not see anything negative in this. Maybe you can offer me some other examples.

Iliria Post, Prishtina
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