Republic of Kosovo President’s Address at the 2009 Euro-Asia Economic Forum

Istanbul, 6 May 2009 Honourable President of the Parliament of Turkey, Your Excellency Mr. Köksal Toptan, I salute you on behalf of the people and institutions of Republic of Kosovo. I thank You and the government and the people of Turkey for the support that you have and are still providing to our country.

My regards to all presidents, ministers and other statesmen participating in this forum. I want to express my gratitude for giving me the honour to address you on economic developments in Kosovo.

The Republic of Kosovo joined the free nations of the globe on 17 February 2008. It was a historic decision that followed many years of work, sacrifice and commitment by many generations of ours. This date closed a grievous and difficult chapter in our history and opened a new chapter of an overall development in Kosovo. The long and difficult process of Kosovo’s independence was followed by international recognitions by the most powerful countries of the world, which number now totals 58 countries from all around the world. Accordingly, more than a year has passed since the institutions and the citizens of the Republic of Kosovo assumed responsibilities and obligations that pertain to all the peoples and the states of a free and democratic world.

The specific situations in Kosovo until 1999 and after the war, made Kosovo undergo three important processes simultaneously: overcoming the war consequences; building a new and democratic state; and undergoing an economic transition that aimed at a free trade economy. The economic transition in Kosovo commenced ten years after it had spread out all across East Europe and Balkan countries, amidst different economic and political circumstances and a reduced interest of democratic countries to deal with such problems.

The international presence in Kosovo deployed immediately after the war contributed to an immediate overcoming of consequences of war and to the outset of institution building, though UNMIK’s focus on economic development issues failed to meet the expectations of Kosovo’s citizens during 9 years of international administration.

After the war, we faced a very difficult economic situation. As a consequence of a ten-year occupation and war’s aftermath, the economy was destroyed and looted. For over ten years, nothing was invested and no debts to international financial institutions were paid off. We inherited a very high rate of unemployment (over 50%) and a situation when 50% of our people were poor and 15% were living in extreme poverty. 

The declaration of independence of Kosovo and the recognition of Kosovo by many European and world countries brought about opportunities for a better development perspective. More than three-fourths of countries that have recognised Kosovo are EU member countries. They also involve the most developed countries of the world. Countries that have recognised Kosovo produce around 80% of the global GDP.

Kosovo is engaging in providing conditions for the development of a sustainable and competitive economy and a new legal infrastructure for a free trade economy involving a very liberal approach. We are developing a very dynamic private sector, especially when it comes to services.

We consider Kosovo’s opening to the world trade an opportunity for our economy to position itself with its competitive advantages and high level export of its products and services and to become attractive for direct foreign investment, based on its available resources.

Our government priorities involve economic growth, good governance, reduction of poverty and social stability. These priorities also involve the Mid-Term Expenditure Framework. Kosovo has managed to cover all its needs from its own budgetary income, but we consider that the budgetary sustainability depends on economic growth and development.

A higher GDP and poverty reduction remain major challenges for the new state of Kosovo. We have declared a zero tolerance to corruption, because integration into Euro-Atlantic community is our overriding aim. We possess human resources that constitute an important potential for economic growth, with 52% of our population under 27 years of age.
With the aim of providing conditions for an economic growth, we have focused on energy and mines, transport, rule of law, education and agriculture. Building new capacities for supply with electricity is one of our priority projects in terms of cooperation with international partners. Kosovo possesses inexhaustible resources of lignite and many other minerals worthy of investment. 

Despite expectations and forecasts for a decline in economic growth – due to the withdrawal of UNMIK and reduction of donations – Kosovo has achieved an economic growth and has increased its GDP per capita over the past two years. There was a 5.4% of Real GDP Increase in 2008. We have a liberal economy, which adheres to the rules of trade economy and is open to foreign investment. Kosovo has more than 2000 businesses, owned by foreigners and joint ventures alike. 

Our primary objective is to create a functional democratic, financially sustainable and multiethnic state. We are establishing new municipalities and decentralising the responsibilities, in order to bring our government closer to the citizens. We want to strengthen the regional integration with all our neighbours and to set the pace in acceding to the European Union.

Last years’ Donor’s Conference resulted in a pledge of 1.2 billion dollars that lays a solid foundation to Kosovo’s development in the future. On the other hand, donations by international community in 1999 amounting to 2.2 billion dollars were crucial for overcoming the aftermath of war and for achieving a recovery in economy, infrastructure and other fields.

We will create conditions conducive to an intensified cooperation with all the countries in ensuring the most efficient implementation of donations pledged at the Donor’s Conference, the Instrument of Pre-Accession Assistance programs, and the EU CARDS program for democratic stabilisation, social and economic development, institution building and good governance.

The privatisation has so far covered more than the three-fourths of the socially-owned enterprises. Some of privatised enterprises are showing good results and some others are consolidating themselves. Now we have started to implement the cooperative governance in corporatized publicly-owned enterprises at both central and local levels.

The legal infrastructure in our country is in full compliance with EU standards and we consider it to be one of the crucial development factors. Kosovo became a member of CEFTA last year and we are benefiting from non-reciprocal preferential access to the EU market, based on the Autonomous Trade Preference Regime.

These agreements have rendered Kosovo an attractive country for trade and investment. However, following the declaration of independence, we are still facing the prejudiced behaviour by Serbia who is breaking CEFTA rules and refusing to accept goods that originate from Kosovo.

We have implemented the best international practices in regulating and monitoring Kosovo’s financial institutions and we have established an entirely new banking system prevailed by international stockholders. I can say that, because of its security and growth, many foreign investors are showing their interest in investing in the financial sector. Through Euro, Kosovo is managing to control inflation and promote a financial stability. 

In terms of trade balance, Kosovo is importing 1.8 billion € products from other countries, but we are interested to increase the participation of our products and services and to improve the exchange, especially with the EU countries and Turkey.

We have a very dynamic economic cooperation with Turkey. There are 300 registered Turkish companies in Kosovo with around 2,300 employees. Like with Turkey, we expect a better economic cooperation with other countries as well. Therefore, I call on all the countries that have sent their representatives to the Forum to boost their cooperation and to invest in Kosovo.

Kosovo offers to foreign investors a very liberal market, a simplified taxation system in terms of tax rates and types, low taxes on corporate income and personal income and VAT and opportunities for business expansion. Kosovo has a young, competitive and flexible labour force, a liberal labour market, a central location in the Balkan and a modern telecommunication network. Our country provides a full security for investment.

Kosovo has applied for accession to International Monetary Fund and World Bank. Accession to these institutions, which we believe will happen soon, will serve as a guarantee for stability in the future. We need to create better sources for funding, especially when it comes to long-term funding and competitive interest rates. There is also a need for a diversity of funding sources for economic development, based not only on the banking system, but in the capital market as well. As we consider accession to these two institutions very important, we highly praise your countries’ support to Kosovo in this regard. 

Structural changes in economy in this period of transition and the situation inherited from the war have had an adverse effect that has contributed to a high rate of unemployment. The reduction of unemployment rate, which currently averages between 35%, depends a lot on an annual economic growth rate of 7%, which can only be achieved in terms of large investments in Kosovo, direct ones in particular, for what we need a stronger support.

Infrastructure represents an important field for investment in Kosovo. In the course of last years, we have invested a lot in improving the road infrastructure, aiming to create better connections between the regions within our state. There are two highways that represent priorities: the Merdare-Morina Highway, which connects Kosova to the port of Durres and the Adriatic Sea, and Pristina-Skopje Highway, which connects Kosovo to Bulgaria, Turkey and the Black Sea.

We are aware of problems and consequences of the financial crisis, which has taken the dimensions of a global economic crisis. The consequences of this crisis can be seen in Kosovo’s funds deposited in the world capital market, in the reduction of remittances and in the overall decrease of trade volume and investments. We will be able to overcome the consequences of this crisis more easily if we provide conditions for an unimpeded movement of resources, with a special emphasis in capital and labour resources. Movement restrictions that are being applied for some Balkan countries, including Kosovo, are proving detrimental not only to my country, but they may have also entail consequences for other European countries when it comes to social issues and stability. Accordingly, I consider that the liberalisation of the movement of people should be dealt with as a priority and as a precondition to a higher level of security – in terms of a better control – and economic development alike.

Dear friends,

The policy of our country is a policy of peace and integration. On daily basis, we engage in making Kosovo a part of processes of integration into Euro-Atlantic community, which represents a strong commitment on our part. Our integration into EU and NATO remains the major objective for the future. Kosovo will be a country with an open trade economy. We aim at developing a competitive economy in relation to other countries of the region and other European and world countries, in the fields where Kosovo has comparative advantages. We will pay a special attention to the education of youth, so that they can become competitive in both local and international markets. With regard to economic legislation and property rights, we will follow a sustainable governmental policy. We welcome your investment in our country.