And what the EU can do to help.
Kosovo is in the midst of an important national debate about the future of the Republic. A debate mainly prompted by the country’s stubborn lack of economic development, which is stifling job creation, and the Brussels dialogue with Serbia, which is constantly calling Kosovo’s statehood into question.
Kosovo is poor. Only 30 per cent of its working age population (20 to 65 year olds) have jobs. This percentage drops drastically when including those 15 to 20 years old. As a result, in 2014, the EU experienced an influx of migrants from Kosovo looking for jobs.
Kosovo’s economy is mainly based on consumption and imports. In 2014, Kosovo imported 2.4 billion euros worth of goods and exported only 340 million. Most exports are in crude metals and minerals, meaning in the mining sector, which has a low potential of growing and creating new jobs. Foreign Direct Investment in 2014 was 300 million euros, mainly in construction and real estate – once again in sectors which are generally saturated and cannot create jobs.
In order to assist with this dire economic situation, after some negotiation, the EU offered Kosovo a Stabilization and Association Agreement (SAA), which was signed in October 2015 and entered into force in April 2016. In the words of Commissioner Hahn “This agreement…will help Kosovo make much needed reforms and will create trade and investment opportunities. It will put Kosovo on the path of sustainable economic growth and can lead to much needed jobs for its citizens, especially the young.”
However, this will not be the case. The SAA is mainly a free trade agreement, which aims at full trade liberalisation with the EU by 2024. This will mean removal of customs duties from nearly all EU products coming into Kosovo. In 2015 Kosovo imported one billion euros worth of goods from the EU, a number foreseen to increase with the SAA. As for the Kosovo products entering the EU, the agreement will not affect them much, considering that Kosovo benefits from Autonomous Trade Measures and was already able export to the EU duty free. However, due to the low production base, even with duty free access to the EU market, in 2015 Kosovo’s exports to the EU were a meagre 100 million euros.
Local producers are terrified that cheaper products from the EU will challenge them domestically, while knowing that exporting into the EU is already difficult for them due to standardisation and quality criteria that the EU demands for its market. Moreover, the SAA will burden the public budget a lot. Considering that Kosovo collects most of its budget from customs duties, the Ministry of Finance assessed that with the entry into force of the SAA, Kosovo will collect close to 500 million Euro less by 2024. It is also estimated that the SAA reforms Kosovo has to implement will cost upwards of 300 million Euro.
The Government claims, however, that at least politically the SAA is of much significance to Kosovo. It is the first step in the long road toward EU integration, they say. This is the first contractual agreement with the EU and “I signed it as a prime minister of the Republic of Kosovo,” said Kosovo’s prime minister at a recent event. Which is not true. The SAA was signed with the designation “Kosovo*” since not all EU member states recognise the Republic. Furthermore, the SAA clearly states that the EU does not treat Kosovo as a state. This means that Kosovo cannot apply for membership, since only European states can apply. The SAA for Kosovo is less the ‘first step’ toward EU integration and more ‘the end of the road’ for Kosovo on its EU track.
The Brussels Dialogue had also contained big promises which it did not – could not – deliver. It was prompted by Serbia, who through the UN and the EU, convinced Kosovo to sit and discuss issues pertaining to its independence, even after the International Court of Justice ruled that Kosovo’s declaration of independence was not in breach of international law. The Dialogue promised to bring both Kosovo and Serbia closer to the EU (which we later learned meant only the SAA for Kosovo) and to integrate Kosovo Serbs into Kosovo’s society. In the local debate in Prishtina, the dialogue also promised to ensure Serbia’s recognition of Kosovo. It soon became clear that neither would happen.
The most contentious agreement between Serbia and Kosovo, on the Association/Community of Serb Majority Municipalities, seeks to build a joint governing/administrative structure for these municipalities, which would represent Serbs in Kosovo. The Association would cover everything from education and healthcare to economic planning. Financed by Serbia and other donors, it would be a governing institution for Serbs only. Such a governing structure is not supported by the Kosovo Constitution that defines Kosovo as a multi-ethnic state, with only two tiers of governance, central and municipal. The most worrying part of this agreement however, is that it solidifies the current disintegration of the Kosovo Serbs from the rest of Kosovo. It makes direct communication between Serbs and Albanians even less necessary.
In 2015, the relationship between Kosovo and the EU was fully exposed and citizens were not happy with what they saw. A trade agreement with no direct benefit to Kosovo’s economy. No possibility to apply for membership due to the “non-state entity” status. A Brussels dialogue that produces agreements challenging the very core of how the state was built. This sparked a national debate about how to address the future, with the opposition convinced that the choices which the government has made in the last five years are not the way forward. While the debate is not taking place in an elegant way (with protests and teargas in the parliament), it is an important and genuine debate, which absolutely must take place.
There are things that the EU can do to help steer this debate in the right direction.
One, in order to help Kosovo make better use of the SAA, the EU should put its financial assistance toward economic development and growth. Helping producers meet expensive EU quality and standardization criteria, as well as expand production capabilities, would be the best way to ensure increase in exports, a healthy competition with EU products domestically and job creation. The EU should use the remaining Instrument for Pre-Accession Assistance (IPA) funding, which have not been programmed yet, to establish an Investment Fund, which would help Kosovo producers compete both domestically and in the EU market.
Second, the EU must revise the Brussels Dialogue between Kosovo and Serbia, in order for it to reflect more the issues that pertain to a real normalization between the two countries, such as missing persons, war reparations and other pending issues, including Serbia’s recognition of Kosovo’s statehood. In the meantime, the EU must create the environment for an internal local dialogue between Serbs and Albanians in Kosovo to address Serb integration in a way that will actually result in integration and not full disintegration of the two communities.
This text is adapted from a speech given at a European Parliament seminar organized by the Group of the Progressive Alliance of Socialists and Democrats.