4.1 FDI Inflows

Taking into consideration the favourable business climate, stable macroeconomic environment and the excellent opportunities across different business sectors, Kosovo is increasingly becoming an attractive place for doing business. As a result, the interest of foreign investors has been increasing steadily throughout recent years. Kosovo has attracted over 1 billion Euro of FDIs in the past three years. After a peak in 2007 with 440 million Euro of FDI, a slight decrease has been seen which, it is believed, is mainly due to the impact of the global financial downturn.

Apart from investment pioneers such as the Raiffeisen Bank and Procredit, which entered the Kosovar market at the beginning of the transition phase, there are many other foreign companies engaged in a wide range of business sectors. According to the Business Registry data for 2010, there are 3,523 companies of foreign and mixed ownership that have already used the opportunity to invest in Kosovo. The large amount of foreign companies operating in Kosovo is living proof of the opportunities and benefits that the country offers, and also represents a base of quality products and a successful service-providing community.

4.2 Success stories


Xella International
Xella International Group, part of Haniel Corporation, is the market leader in construction materials with production facilities on all six continents.
Xella Group opened a silicate product factory in Lipjan, near the Kosovar capital Prishtina in 2006. The value of this Greenfield investment has reached 12 million Euro and represents the most important project of the Xella Group in the Balkan region. Xella Kosovo supplies the entire region with silicate products under the brand name "Silka".

Wertheim / Rrota
The Austrian company Wertheim has outsourced the development of a new software package to Kosovo. This investment foresees the development of a sophisticated software package for managing safe deposit boxes produced by Wertheim. The project is also supported by the Austrian Development Cooperation (ADC), which will take over a part of the investment.
Over 400 branches of banks in Austria, Switzerland, Croatia and Slovakia use Wertheim safe deposit boxes, while the software will from now on be developed by Rrota in Kosovo.

Kolm Pfluger / Etlinger
Kolm Pfluger, an Austrian company producing several varieties of salads and tinned vegetables, as well as supplying trade chains in Austria, has outsourced the production and packing of chilli (Pfefferoni) and other vegetables to Kosovo. The investment is situated in central Kosovo in Shtimlje. This investment is worth 500,000 Euro and is supported by the Austrian Development Cooperation (ADC); more than 150 new jobs have been created in Kosovo.

Newco Ferronikeli is a part of Cunico Resources N.V, a multinational mining and metals company. Cunico Resources N.V is the largest manufacturer of ferronickel in Europe with production plants in Kosovo and Macedonia.

The total investment in Kosovo plant exceeds EUR 100 million. NewCo Ferronikeli is the most successful story of the privatization in Kosovo and as a company plays a crucial role in Kosovo's economy employing more than 1000 employees. The products of Newco Ferronikeli are exported to the European Union and Asia and are contributing substantially to Kosovo exports.

Banking and Insurance
Raiffeisen Bank
Raiffeisen Bank entered Kosovo market in 2001 through acquisition of the American Bank of Kosovo. The Raiffeisen Bank Kosovo has grown to be one of the main actors in the financial system of Kosovo, contributing substantially to the increased financial intermediation at all levels.
Actually Raifeisen Bank Kosovo is the second largest bank in Kosovo with total assets amounting over 680 Million. Raiffeisen Bank Kosovo currently employs more than 650 employees.

IPKO / Telekom Slovenia
Telekom Slovenia acquired the local company IPKO Net, which was the first internet service provider in Kosovo, in 2006. Actually IPKO Net offers a wide range of telecom services to its customers. According to the market share for GSM services it is the second largest telecom company in Kosovo after the state owned telecom.

In addition to GSM the company offers also fixed telephony and internet services, and is the market leader in cable TV.

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4.3 Key economic indicators

The real development of the economy measured by the gross domestic product (GDP) has been favourable in the past years, showing a positive and continuously increasing trend. Despite the effects of the international financial crisis, Kosovo was one of the few countries in Europe that experienced positive economic growth in 2009.

As donor support decreases, the private sector consumption and investments are becoming the most important factors behind economic growth. These investments are mainly being driven by the fast expanding financial sector. Moreover, the Kosovo Government runs a stable and forward-looking fiscal policy. The tax revenue base has been widened, thus enabling the Government expenditures to increase and in turn support economic growth.

Apart from the favourable economic performance, Kosovo runs a very stable monetary policy. Kosovo is one of the few counties outside the EU-zone that has introduced the Euro as its official currency. The use of the Euro has provided the grounds for low inflation and a stable macroeconomic environment.
By eliminating the exchange rate risk, transaction costs have been reduced, thus facilitating the promotion of trade and investment. Due to the absence of monetary instruments resulting from the use of the Euro, Kosovo does not run any monetary policy risk either. Prices are expected to remain stable in the future.



4.4 Incentives regime

The existing legal framework in Kosovo allows incentives for foreign and local investors. They are up to date and promote the growth of the SME-Sector. Additional incentives that enable Kosovo to cope with developments in the region are in preparation and will be introduced soon.
Current incentives cover the following issues:

4.4.1 Carrying forward of losses

Based on the Law Nr.03/L- 162 on Corporate Income Tax, tax and capital losses can be carried forward for up to seven successive tax periods and shall be available as a deduction against any income in those years.

4.4.2 Special Allowances of new assets

In accordance with the Corporate Income Tax Law Nr.03/L-16, if a taxpayer purchases new capital goods for the purpose of the taxpayer's economic activity between 1 January 2010 and 31 December 2012, a special deduction of ten percent (10%) of the cost of acquisition of the asset shall be allowed in the year in which the asset has been first placed into service. This deduction is available in addition to the normal allowable depreciation deduction.

4.4.3 Avoiding Double Taxation

Based on the Law Nr.03/L-16 on Corporate Income Tax, a resident taxpayer who receives income from business activities outside of Kosovo through a permanent establishment outside of Kosovo, and who pays tax on that income to any state, shall be allowed a tax credit under this regulation in an amount equal to the amount of tax paid to such state.
Any tax credit under the present section is limited to the amount of tax that would be paid under this regulation on the income made in such state.
Any applicable bilateral agreement on the avoidance of double taxation shall supersede the provisions above.

4.4.4 Customs

In order to promote local production, the new Kosovo customs and excise code No. 03/L-109 applies a reduced rate of zero percent customs duty on certain capital goods, raw materials and agricultural production inputs. For more details visit: A zero tariff rate is also applied to the export of goods and services.

4.4.5 Investment guarantees

1. The Multilateral Investment Guarantee Agency MIGA (a member of the World Bank Group) guarantees investments in Kosovo up to the value of 20 million Euro.
2. The US Overseas Private Investment Corporation (OPIC) also provides political risk insurance for foreign investors in Kosovo.
3. For investment and credit guarantees from Austria please contact the Austrian Kontrollbank (OeKB) and for Germany the Euler Hermes Kreditversicherung.

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