"European Housing Market" (CC BY 2.0) by Images_of_Money

A silver bullet for Kosovo’s investment woes?

Kosovo’s government is putting its faith in a new Law on Strategic Investments to turn around years of sluggish foreign investment, but many obstacles will remain.

Selatin Balkan has faith in a bright future for Kosovo, quite literally.

Three years ago, the Turkish businessman and his German investors were poised to invest 55 million euros in solar power production in Kosovo.

But they pulled out in the face of bribes of hundreds of thousands of euros demanded by “a few people” in the Peja region for the project to proceed, he told BIRN.

Balkan reported the case to the police and an indictment was issued against one individual. Now, a scaled-down version of the solar power project is expected to get underway in 2018.

“Now that we’ve overcome the problems and the environment to do business in Kosovo has improved, we plan to restart the project,” Balkan told BIRN.

But not all would-be investors have been so determined.

Between 2004 and 2015, Kosovo attracted a meagre 3.2 billion euros in foreign direct investment, the lure of the country blighted by horror stories of extortion, power shortages, red tape and political uncertainty.

Now, the government is putting its faith in a new Law on Strategic Investment designed to streamline and speed up procedures. But some officials and investors say it is no silver bullet for the kind of challenges faced by investors such as Balkan.

The law passed a first reading in the Kosovo parliament on February 19, but a political crisis since has disrupted the work of the assembly and held up the bill’s full adoption.

Confident that the law will pass, Trade and Industry Minister Hykmete Bajrami said it would help turn around Kosovo’s investment climate.

“This law will clear the way for many big investors because it will shorten the procedures and the bureaucratic aspects that are seen as obstacles for huge international companies to come,” Bajrami told BIRN.

Bajrami specified that the law would simplify the paperwork and cut the time needed to secure permits and licences. The minister said the government was also working on special industrial zones to attract investors and had asked Kosovo’s highest judicial oversight body, the Judicial Council, to step up court capacity to deal with business cases.

Bajrami declined to comment on specific cases of extortion involving foreign investors, saying only that her ministry encouraged the victims to seek help from the judiciary.

Arian Zeka, the director of the American Chamber of Commerce in Kosovo, welcomed the fact the new law will provide for direct negotiation between the government and the investor.

“In this case we expect a new situation, in which investors can gain from special measures provided by the state in accordance with the law.”

But, he stressed, the new legislation will not address problems in the rule of law in Kosovo that have allowed extortion to flourish.

“Of course, the law won’t solve other problems related to weak rule of law; that’s why we ask for mechanisms to be put in place to implement the law,” Zeka said.

Naim Huruglica of the business consultancy firm Iron Consulting agreed, and stressed the shortcomings of the judicial system.

“There are too many negative reports about Kosovo that talk about the high level of corruption and organised crime,” Huruglica told BIRN.

“Investors so far aren’t pleased with the bureaucratic procedures and often the incompetence of central and local institutions in resolving procedural issues, as well as the inefficiency of the judicial system.”

Another issue remains Kosovo’s unstable electricity supply, particularly during the winter months. Plans, long in the making, to upgrade and expand Kosovo’s coal power production have yet to be put into action, meaning foreign investors must take into account the likelihood of regular electricity cuts.

Some are undeterred, seeing the benefit of investing in Europe’s youngest population.

“The young age of the population, low taxes, cheap labour force, are a few of the elements that left us impressed,” said Israeli businessman Amir Rabinovich, who visited Kosovo in May on behalf of the Israeli M.BAR-NEZ company to look at the possibility of investing in agriculture and construction.

“We will conduct an analysis and evaluation of information and then decide on the future steps,” he said.

In many ways, the slow passage of the Law on Strategic Investments – among a host of other laws held hostage by the political crisis – speaks volumes.

Robert Erzin, the executive director of telecommunications provider IPKO, said the slow pace of legislation and its implementation had made doing business more difficult. Majority owned by Slovenian Telekom, IPKO has grown into one of Kosovo’s largest companies, but it has not always been easy, said Erzin.

“Technology moves faster than the laws in power and their implementation,” he told BIRN, “and this fact is slowing the rhythm of the market development.”

This article was produced as part of the Kosovo Fellowship for Quality Reporting, as part of the Media for All project implemented by Balkan Investigative Reporting Network and supported by the EU Office in Kosovo.

*Featured photo: “European Housing Market” (CC BY 2.0) by  Images_of_Money 

24/08/2016 - 11:22

24 August 2016 - 11:22

Prishtina Insight is a digital and print magazine published by BIRN Kosovo, an independent, non-governmental organisation. To find out more about the organization please visit the official website. Copyright © 2016 BIRN Kosovo.