KOSOVO - The European Times

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KOSOVO - The European Times

ContentKosovo: World’s Newest CountryINTRODUCTION• Institutions of the Republic of Kosovo 4• President Welcomes Investors to High PotentialEconomy 5• A Melting Pot of Cultures: Kosovo’s Rich PastPoints to a Bright Future 6• Kosovo’s Fact File 8BUSINESS & INVESTMENTS OPPORTUNITIES• Increasing Competition and Efficiency, thePrivatisation Process Is Going into Overdrive 12• Forward-Thinking Chamber Promoting Kosovoas Gateway 14• Central Bank of the Republic of Kosovo 16• On the Road to the Union, Kosovo has AlreadyMade Big Strides 18• Improved Stability and Measured Growth Pointto a Maturing Economy 20FINANCE & BANKING• Ministry of Economy and Finance 24• NLB Prishtina 26• Raiffeissen Bank 27• ProCredit Bank Kosovo 28• Dukagjini Group 29TRADE & INDUSTRY• Ministry of Trade and Industry 31• Sharrcem 33• Xella Group 34TRANSPORT & COMMUNICATIONS• Ministry of Transport and Telecommunication 36• All Roads Lead to Kosovo: the Government’sMain Target Is Upgrading the Road and RailInfrastructure 38• Kosovo Railways 40• Kosova Airlines 41• Calling the Shots: Competition Is BringingIncreased Quality to the Sector 42• IPKO 44AGRICULTURE & FOOD INDUSTRY• Ministry of Agriculture, Forestry and RuralDevelopment 46• Lay of the Land: The Government IsOverseeing the Commercialisation of theCountry’s Farms 48• Peja Brewery 49• Meridian Corporation 50ENERGY & MINING• Ministry of Energy and Mining 52• A New Power Plant and Untapped CoalReserves Are Set to Electrify the Industry 55• Mine Games: A Growth in Exploration andMining Licenses Should Usher in ExplosiveGrowth 56• Lydian International 59ENVIRONMENT & SPATIAL PLANNING• Regional Water Company-Prishtina 61• Ministry of Environment and Spatial Planning 62• Infrastructure and Housing RequirementsAre Driving the Sector Forward 64• Dukagjini Group 66TOURISM• The Industry Has Several Strings to Its BowPointing the Way to an Effervescent Future 68• Eurokoha Reisen 70Regional Manager:Tudor StamatianCountry Director:Rutger de GrootEditorial:Patrick WrigleyProduction Coordinator:Katrien DelamotteDesign:Martine Vandervoort, CarineThaens, Johny Verstegen,Walter Vranken, Dirk Van BunThe European Times90 Vasall Road, London SW9 6JAUnited KingdomPhone: +44 (0)208 371 2356Fax: +44 (0)208 371 2410info@european-times.comwww.european-times.comThe European Times is a trading name of United InternationalPress LtdThis guide is protected by copyright. All rights reserved. Thispublication, or any part thereof, may not be reproduced,stored electronically or transmitted in any form, without theprior written permission of European Times.Every effort has been made to ensure informationcontained in this publication is correct and up-to-date.The authors and publisher accept no responsibilityfor any errors it may contain, or for any loss, financialor otherwise, sustained by any person using thispublication.3

KOSOVOIntroductionInstitutions of the Republic of KosovoOffice of the PresidentTel.: +381 38 213 222/333Fax: +381 38 211 651www.president-ksgov.netAssembly of the Republic of KosovoOffice for Media and PublicationsTel.: +381 38 211 186/189/949Fax: +381 38 211 188www.kuvendikosoves.orgOffice of the Prime MinisterFax: +381 38 211 202info_pmo@ks-gov.netwww.ks-gov.net/pmMinistry of Education, Science and TechnologyTel.: +381 38 542 715Fax: +381 38 542 757www.masht-gov.netMinistry of Justicewww.md-ks.orgMinistry of Energy and MiningTel.: +381 38 200 213 05mem.informimi@gmail.comwww.ks-gov.net/memMinistry of Finance and EconomyTel.: +381 38 200 34 101Fax: +381 38 213 113abeiqi@mfe-ks.orgwww.mfe-ks.orgMinistry of Environment and Spatial PlanningTel.: +381 38 517 800Fax: +381 38 517 845webmaster.mmph@ks-gov.netwww.ks-gov.net/mmphMinistry of Local Government AdministrationTel: +381 38 544 377www.ks-gov.net/mapMinistry of Internal AffairsTel.: +381 38 213 307merita.vidishiqi@ks-gov.netwww.mpb-ks.orgMinistry of Foreign AffairsTel: +381 38 213 963Fax: +381 38 213 985mfa@ks-gov.netwww.ks-gov.net/mpjMinistry of HealthTel.: +381 38 211 192www.mshgov-ks.orgMinistry of Labour and Social WelfareTel.: +381 38 213 814Fax: +381 38 213 022info_mpms@yahoo.comwww.mpms-ks.orgMinistry of Community and ReturnTel.: +381 38 212 754Tel./Fax: +381 38 212 755sasa.rasic@ks-gov.netwww.ks-gov.net/mkkMinistry of Public ServicesTel.: +381 38 200 30 020/942/660Info-mshp@ks-gov.netwww.ks-gov.net/mshpMinistry of Culture, Youth and SportsTel.: +381 38 211 064, +381 38 211 557Fax: +381 38 211 440info@mkrs-ks.orgwww.mkrs-ks.orgMinistry of Transport and Telecommunicationinfo.mtpt@ks-gov.netwww.mtpt.orgMinistry of Agriculture, Forestry and RuralDevelopmentTel.: +381 38 211 375Fax: +381 38 212 598www.mbpzhr-ks.orgMinistry of Trade and IndustryTel.: +381 38 200 36010Fax: +381 38 212 807www.mti-ks.org4

KOSOVOIntroductionPresident Welcomes Investors toHigh Potential EconomyFatmir Sejdiu, President of Kosovo, says that thecountry’s declaration of independence in February 2008is “the beginning of a new chapter for Kosovo, and areassuring guarantee of a prosperous future.” Around45 (1) countries have already recognised Kosovo as anindependent nation, and the country is swiftly movingaway from its war torn past to become a productivecontributor to the European and global economy.The President welcomes foreign investors, andpoints out that Kosovo has focused on providingstability and security for foreign investment throughimplementing European and international laws andregulations. Kosovo is particularly well placed toattract European investment. “Almost three-quartersof all the countries that have recognised Kosovo arefrom the European Union, including seven of theworld’s biggest countries. As of today, over 60% of thenations that lead the global economy have recognisedKosovo as well as around 80% of the members of theUnited Nations. This demonstrates the world’s faithin Kosovo’s future,” he says.Energy sector offers strong potentialAs it rebuilds its economy, Kosovo offers significantgrowth potential, particularly in the energy sector,according to the President. He adds that thegovernment has proven its commitment to transparencyand that it has targeted energy, agriculture,industry, education, health and security as prioritiesfor development.The ongoing privatisation campaign is creating newopportunities for investment, and substantial financialassistance totalling some €1.2 billion (pledged atJuly’s Donor’s Conference) has provided a strongfoundation for future growth. The EU’s CommunityAssistance for Reconstruction, Development andStabilisation (CARDS) programme, for example,provided over €1 billion in aid to Kosovo between 1999Fatmir Sejdiu, President of Kosovo© Bashkim Hasaniand 2005 alone, and is continuing to support projectsthat offer outstanding investment potential. “We arecommitted to an open market with equal opportunitiesfor foreign investors. We want high quality companiesto succeed here, which will make others confident tocome,” President Fatmir Sejdiu says.As for the future, Kosovo will move beyond reconstructionto be more creative in developing its economy,the President says, noting that the government stillneeds to come to a decision about the possible privatisationof the Trepca mines. Boosting GDP from thecurrent 4% on average and reducing unemploymentand corruption are key challenges for Kosovo today.“There will be zero tolerance of corruption,” thePresident vows. He concludes, “Kosovo aims to becomefully integrated with Europe, it has excellent humanresources, and it offers great growth potential.”(1)The number has reached 51 as of today5

KOSOVOIntroductionA Melting Pot of Cultures:to a Bright FutureFor a landlocked country, Kosovo has awonderfully cosmopolitan feel. From thesquares and markets where cafés spill ontothe street as prime vantage points for peoplewatching to the rich array of architectureproducing a historical timeline datingperiods and cultures like the seams in a tree,Kosovo feels open to the world. While it isa new country, with independence declaredon February 17, 2008, Kosovo has a longand distinguished history.PrizrenHowever, as much as it is defined by its past, at this moment in time,the country is equally defined by its future, with a young, dynamicand hopeful population looking to cement its place at the heart ofnew Europe. Indeed, with a strong reform agenda and a rapid paceof development, the fledgling country has its eyes firmly set on EU6

KOSOVOIntroductionKosovo’s Rich Past Pointsaccession and the economic and political dividendsthat this will bring.While the country looks to re-establish itself on theinternational stage, it should not be forgotten thatKosovo has long played a crucial role in the Balkansand the wider region. The land was a crucial part ofthe Roman and Byzantine Empires as well as changinghands between the Bulgarians and Byzantines inthe 11th, 12th and 13th centuries. The province wasabsorbed into the Ottoman Empire in 1455 where itstayed until 1912. Kosovo was designated as a Vilayet,an Ottoman territorial entity serving as a distinctadministrative unit.The area was vital for the Sultan bloating his coffersin Istanbul with revenues from the country’s mineralwealth. The silver mines of Novo Brdo and Trepcawere particularly profitable. Beyond this, the country’smain exports were wool and leather while WesternKosovo was famous for its silk worms, fruit and Saffron.The area not only exported goods but also humancapital in the form of intellectuals and canny politicaloperators. A staggering 42 Albanians made it to thehighest imperial post of Grand Vizier, no mean feat fora small province in an Empire containing 29 provincesand stretching from the Atlantic coast in the West tothe Persian Gulf and the Caspian Sea in the East.Several towns flourished under Ottoman rule not leastPrizren in the south of the territory nestled against theimposing Sharr Mountains. The town became a significanttrading post in the 15th and 16th centuries drawing inmany artisans including silversmiths, leather workers andsilk weavers. As with ports and cities on trading routesthe world over, the merchants and artisans who passedthrough Prizren left an indelible mark of diversity andrichness of culture on the town. Indeed, it has been hometo peoples of different faiths and ethnicities. Mosquesstill sit next to churches while different tongues jostle forattention on the town’s main square.In the 19th century when the country began to feel theaffects of modernisation and industrialisation, Mitrovicaand Prishtina began to eclipse Prizren as centres ofeconomic activity. Even before the first stirrings of theindustrial revolution emanated from Kosovo however,Mitrovica had established itself as an important centre.The town became a prominent trading post and militarygarrison largely because of its significance as the railheadfor the line to Salonica on the Aegean coast.However, Prizren was never completely outshone andwould play a vital role in the Albanian national awakeningwhich stirred throughout Albania and Kosovo. It washere in 1878 that the League of Prizren was formed. Thiscalled for a degree of autonomy within the OttomanEmpire as a means of protecting Albanian rights againstthe machinations of both local and international powers.The 300 delegates to this meeting reiterated their loyaltyto the Sultan but called for a defensive league and thecreation of a single Albanian Vilayet, administered byAlbanian officials, using Albanian customary law andintroducing Albanian language education.While the League’s goals only flickered briefly beforebeing extinguished by the Sultan and his forces, thecommitments made served as the equivalent of a Kosovarand Albanian Magna Carta which still resonate today. The20th century served up a chequered history for Kosovo butthe industriousness of its people and openness to trade hassurvived to the present day. Moreover, the commitmentsmade in the League of Prizren have been revived in a newmodern spirit which has bestowed independence uponthe land. Indeed, although much has passed, in manyways, the history of Kosovo is only just beginning.Prishtina by night7

KOSOVOIntroductionKosovo’s Fact FileDiversity and Ambition: The Twin Pillars ofKosovo’s AppealKosovo has hit the international headlines in recentmonths as the country has shed the skin of its troubledpast and declared a new beginning with independence.However, despite wide press coverage, most internationalreaders know very little about this diverse andambitious country nestled in the south western cornerof the Balkans. With a rich cultural legacy, enchantingnatural beauty, and abundant natural and humanresources, it is unlikely that Kosovo will remain a secretto Europe and the wider world for too much longer.PopulationPerhaps what is best about Prishtina, and indeedthe country as a whole, is the young, fun-lovingand ambitious people. Kosovo has a population ofapproximately 2.2 million with 42% of them livingin the country’s cities and towns. However, whatmakes Kosovo so appealing is that the country hasthe youngest population in Europe with 70% ofthe population under the age of 35. This gives animpressive sense of urgency, ambition and positivity toKosovar encounters. Ninety per cent of the populationis Albanian, 5% is Serb, 2% is Muslim Slav (Bosniaksand Goranis) while the remainder is Roma and Turks.LanguagesThis diversity of origin brings a multi-lingualenvironment to Kosovo with a number of languagesoverheard on the nation’s streets. The most prominentlanguages are Albanian and Serbian; however,Turkish and a number of other Balkan languages canbe heard. Moreover, with such an exposure to donororganisations, multinationals and NGOs, English hasalmost become a semi-official language. It certainlyhas become the preferred language of business in thecountry and in the urban areas, at the very least, it iseasily understood.GeographyThe land of Kosovo, which reclines upon almost11,000 sq km, lies in a horse shoe shaped bowl, withmountains enclosing the country in the north, westand south. The most impressive of these are thesomnolent Sharr in the South and the famous andrugged ‘Accursed Mountains’ in the west forminga border with both Albania and Montenegro.Central Kosovo lies on a low flood plain stretchingout unbounded and allowing unhindered views ofmountain ranges in three directions. Fifty three percent of the country is fertile agricultural land while39% is forest which plays a vital role in Kosovo’sburgeoning wood processing industry.The most prominent cities in terms of size, strategicimportance, economic clout and historical resonanceform a skewed diamond with Mitrovica in the north,Prizren in the south, Peja in the west and Prishtina,the capital, in the east. Prishtina has truly grown intoits own skin emerging as a modern, vibrant capitalcity which manages to retain a distinct local flavour.Indeed, the old and the modern, the foreign and thelocal all jostle for attention in an easy unaffected way.8

The EU and the FlagKosovo’s commitment to a future in the EU was writ large on the country’s new flag. Although there was somedebate, and even a design competition, over the future look of the newly independent country’s flag, a decisivebody of opinion fell behind six yellow stars on a blue background embossed by the outline of the country stencilledbelow. The international design competition organised by the UN backed provisional government received justunder 1,000 entries but the blue flag with yellow stars won out in vote in the National Assembly requiring atwo-thirds majority. The six stars are meant to represent the six ethnicities of Kosovo, Albanian, Serbian, Bosniak,Gorani, Turk and Roma. However, the overwhelming symbolism of the new flag will not be lost on anyone, echoingas it does the EU’s very own standard, a blue flag with a circle of yellow stars. Indeed, Kosovo hopes that soonerrather than later the two flags will be flying next to each other over the parliament building in Prishtina.9

CurrencyKosovo’s close relationship with the European Unionis also borne out by their currency which is the Euro.The country switched to this from the German markafter that country also adopted the Euro. Beyond thesymbolism of the country and the government usingthe Euro as their main currency, the adoption hasadded practical benefits. Indeed, the use of the Euro,gives Kosovo’s infant economy a sense of stability anda strong currency.EducationThe poly-lingualismof Kosovo is not onlytestament to a diversityof cultures but alsoto the educationstandards of thecountry. With sucha young population,the government hasrecognised that thisis a crucial pillar fordevelopment. Thereform process is well under way and Kosovo’s twopublic universities have over 30,000 students with afurther 10,000 at the various private universities andcolleges dotted around the country. At the primaryand secondary level, Kosovo has almost 1,200 schoolsserving approximately 420,000 students.Business EnvironmentThis may well help the country to attract more investors; however,it is certainly not the only incentive. The country has low taxesand a transparent tax system. Kosovo has also been working hardto harmonise and bring into line its laws with those of Europeancountries and the European Union. The country has a transparentand open investment climate with the Investment Promotion Agencyof Kosovo (IPAK) working hard to attract more foreign directinvestment (FDI). IPAK offers a number of free services includinginformation on investment opportunities in Kosovo, information onthe business and legal environment, market analysis, assistance withlocal authorities and after-care-services.The country’s VAT stands at 15% with a reduced rate of 0% for agriculturalinputs. Exporters also receive a full VAT rebate. For import taxes, the tariff stands at 10% with an exemptionfor certain capital and intermediary goods. Income tax is in the range of 0-20%. These figures compare extremelywell with the region and mark Kosovo out as the least taxed country in South Eastern Europe.Business procedures and the investment regime are also simple. On average, business registration is completedwithin 3 days. Moreover, the investment regime is the same for both Kosovo’s citizens and foreign investorsincluding national treatment, guarantees for unrestricted use of income, protection against expropriations andthe outlawing of discrimination. However, the country is not resting on its laurels with the government and UNMIKconstantly refining and monitoring investment procedures.The practical business environment is comparable to that of the rest of the Western world. Working hours forbusinesses and shops tend to be from 9am to 5 or 6pm. For business meetings and offices, a suit is usually worn.Combined with its strategic position and youthful population, Kosovo’s business environment provides an attractiveproposition for foreign investors. Indeed, beyond the economy, the country has a lot to offer visitors and long termguests. From its rich historical and cultural legacy to the country’s natural beauty, Kosovo is a unique proposition.While independence was gained less than a year ago, the country has been working a lot longer to take its place asa key player in Europe’s future. While many Europeans may still have a hazy knowledge of the country, it is clearthat this will change sooner rather than later.10

• Increasing Competition and Efficiency, the Privatisation Process Is Going into Overdrive• On the Road to the Union, Kosovo Has Already Made Big Strides• Improved Stability and Measured Growth Point to a Maturing EconomyBusiness & InvestmentOpportunities11

KOSOVOBusiness & Investment OpportunitiesWhen the UN Mission in Kosovo(UNMIK) first arrived in Kosovo,the legacies of the Yugoslavianlegal system and governance modelpersisted. However, since the turnof the century, the government andUNMIK have come a long way inbringing the country into line witheconomic best practice. Perhapsthe best illustration of this is theambitious privatisation drive, whichhas created thousands of jobs andboosted company revenues.Increasing CompetitionProcess Is Going intoIn 2002, when the Kosovo TrustAgency was founded there were500 Socially Owned Enterprises(SOEs) awaiting privatisation.However, the level of productivitywas low with only 30% of thesecompanies operational. Theturnaround in these fortunes hasbeen dramatic. As of December2007, 310 SOEs had beenprivatised accounting for morethan 90% by value of all thesecompanies. This swift transferof social assets to the privatesector has been the catalyst fora significant increase in Kosovarexports and a swelling investorconfidence.12

KOSOVOBusiness & Investment Opportunitiesand Efficiency, the PrivatisationOverdriveHowever, the process is by no meansover. Obstacles remain includingthe need to pay creditors of someof the SOEs and the need to sellthe remaining non core assets ofthese businesses. Furthermore,the privatisation process hasenshrined the notion of distributingproceeds from the programmeto the workers of these SOEs.Indeed, under this scheme, 20%of the proceeds from tenders areto be paid to the workers. This distributionis still being carried out.Yet it is clear that the privatisationprocess has already had a dramaticimpact upon the economy ofKosovo. Under the thirty waves ofprivatisation, 545 new companieshave been tendered with 343 salescontracts signed. This has raisedsignificant capital with total privatisationproceeds exceeding €353.5million of which €70.7million hasbeen earmarked for employeeentitlements. Most privatisationswill be in the agriculture and tradesectors which account for almost34% of all SOEs. In addition tothis the Kosovo Trust Agencyboard has sanctioned 106 liquidationswith consequent proceeds of€8.3 million.While the privatisations have notbeen breathtaking in number, theyhave been critical for the futurestrategic growth of the country.Some estimates suggest that theSOEs account for 90% of Kosovo’sindustrial assets and as much as20% of its prime agricultural realestate and 60% of its forests. Itwas therefore crucial that thesecompanies were overhauled toalign themselves with efficient andcompetitive international businesspractices.The privatisation programmehas been two-pronged withregular and special spin-offs.The latter, which account for 20of the sales contracts hithertosigned, are designed to protectthe character and value of thetendered company. Under thisscheme, the bidder has to makecertain assurances to the KosovoTrust Agency that the originalcharacter of the business will bemaintained, that a certain levelof investment will be injectedinto the company and that acertain number of people will beemployed. The biggest specialspin-offs thus far have been theHotel Grand in Prishtina andthe Ferronikeli Nickel Mine.Under the latter tender, it wasstipulated that there must be aminimum investment size of €20million and that 1,000 workersbe hired within a year of the salefinalisation. Other significantsell-offs include the Peja Brewery,Kosovo’s only major beerproducer, the Rahoveci Winery,the country’s largest winery, andIDGJ Tobacco.Under the regular spin-offs, thepurchasing company has nofurther obligations to the KosovoTrust Agency upon signing a salescontract. However, the spin-offitself is a two- stepped process withthe assets initially being transferredto a joint stock company 100%owned by the SOE. Therefore,a new company is formed forprivatisation.The privatisation process hadalready generated 4,200 investorcontacts in the Kosovo TrustAgency by June 2006. Moreover,further high profile privatisationsare expected over the comingyears. While the government hasthus far held on to its utility andinfrastructure providers, they maywell be lined up for privatisationin the future. Hitherto, thesepublicly owned enterprises (POEs)have been incorporated, whichhas allowed for the review andvaluation of all assets and liabilitiesas well as an overview of operatingprocedures and efficiencies. Thishas paved the way for moderncompetitive service providers,which could be handed over tothe private sector. Indeed, perhapsthe most attractive company beinglined up for a potential sell-off isthe incumbent mobile operator,Vala.While much has already beenachieved, the future, therefore,looks extremely positive forKosovo’s former SOEs and POEs.This will not only create instantrevenue but will help to grow thecountry’s economy in a number ofways from increasing freight trafficto boosting exports. The privatesector is therefore becomingan equal partner in the futureeconomic success story of Kosovo.13

KOSOVOBusiness & Investment OpportunitiesForward-Thinking ChamberPromoting Kosovo as GatewayThe Kosovo Chamber of Commerceis an international, non-profit,independent organisation whichunites foreign and domesticcompanies and is focused onenhancing business opportunities inKosovo. It has formed links with otherchambers of commerce throughout theworld and welcomes new members.Besim Beqaj, President, discusses thechamber’s activities and the servicesit can provide to foreign investors.ET: Kosovo officially becameindependent earlier this year. Whathas been the impact on the businesssector and how has the chamberbeen involved in new initiatives?B. Beqaj: Many internationalcompanies were waiting for Kosovo’sofficial status as an independentcountry. From a business point ofview, independence has increasedinternational interest in Kosovo anda number of fact finding missionshave been launched to helppotential investors better understandthe country. The Chamber ofCommerce has hosted these missionsand organised visits with manycompanies here in Kosovo. Anotherrecent achievement since independencehas been Kosovo’s significantreform of its fiscal policy, somethingfor which the Chamber has beenlobbying strongly for the past fewyears. With the new government, wehave achieved the new fiscal policyBesim Beqaj, President Kosovo Chamber ofCommerceand have lowered taxes, which willmake Kosovo more business-friendlyand competitive.ET: Many Europeans have mistakenideas about current conditions inKosovo, associating the country withthe war years. How is the Chamber ofCommerce working to better informpotential investors about Kosovo?B. Beqaj: It’s very important to dispelmisunderstandings about Kosovo inEurope and around the world. Wewelcome the opportunity to showpeople the real Kosovo. This countryis already well on the way to catchingup with the rest of Europe. We arewitnessing increasing interest inKosovo and our experience is thatonce people come here and seewhat the country is really like, theydiscover that it is a very open, business-friendlyenvironment. This is thetime and place to take advantage of adeveloping economy’s potential.ET: What makes Kosovo businessfriendly?B. Beqaj: In addition to its soundfiscal policy and tax advantages,Kosovo has a very clear and stronglegal system, especially comparedto other countries in the region,and this has reassured and helpedmany companies. The Chamberrecognises that a country’s regulatoryenvironment and legal system arecrucial factors for business, so weare strongly promoting the fact thatKosovo’s legal system was startedfrom scratch to achieve compliancewith EU standards. The chamberis working to show the world whatKosovo has accomplished concerningits regulatory environment and howadvantageous this is for the businesssector. Other advantages includeKosovo’s membership in CEFTA andits attractive customs agreement withthe EU, which make Kosovo an idealbase for trade.ET: What is the Chamber ofCommerce doing to promoteKosovo as a better choice thancompeting countries, for exampleCroatia?B. Beqaj: The Chamber is activelyinvolved in correcting misconceptionsabout Kosovo. Three years ago I readan article in an Austrian publicationthat contained many errors aboutKosovo and presented the countryin a very negative light. I contactedthe editor of the publication and theAustrian Embassy in Belgrade and14

KOSOVOBusiness & Investment Opportunitiesinvited Austrian media representativesto visit Kosovo and see it withtheir own eyes. This one initiativeresulted in very positive articlesabout Kosovo in 14 different publications.Our goal is to show peoplethat any negative ideas they mighthave about Kosovo are not justified.We also want to show people thatKosovo offers definite advantagesover its neighbours, including acentral location and the legal systemI have already mentioned. We alsohave a youthful population and askilled and low-cost labour force. Inaddition, new highways being builtwill link Kosovo even more closelywith Albania, Serbia and other destinations.Enhancing connectivity withthe rest of the region is a high priorityin the government’s developmentplans. Both the government andinternational organisations,including the World Bankand the EIB, willbe makingmajor investments in Kosovo’s infrastructurenext year and beyond. Thiswill include road networks, telecominfrastructure and such projects asthe new Drenas business park, whichis set to open in 2015.ET: What are some of the chamber’scurrent initiatives?B. Beqaj: We plan to invest evenmore in communications efforts, tostrengthen our partnership with thegovernment, to work more closely withother chambers of commercethroughout the region,and in generalto boost ournetworkingactivities.As thepresident of the Kosovo Chamber ofCommerce, I have worked very hardto improve the image of the chamberwithin Kosovo’s business communityand government, and now we aregoing into the next phase, which isto increase our regional and internationalpresence. We would like tohave strong partners in the EuropeanUnion. We aim to show internationalcompanies that Kosovo can betheir best gateway to South-EasternEurope.15

KOSOVOBusiness & Investment OpportunitiesCentral Bank of the Republic of KosovoCentral Bank Committed to BestKosovo built its financial sector from scratch beginningin 1999, employing the highest international standardsto build a strong foundation for future growth. Withthe support of the International Monetary Fund andother international organisations, the governmenthas succeeded in establishing a world-class regulatoryenvironment and a strong Central Bank of the Republicof Kosovo (the CBK).Hashim Rexhepi, the CBK’s Governor, says, “Wehave implemented international best practices withregards to regulation and supervision of all financialinstitutions in Kosovo. In only a short time, theCBK has built a strong management team, a solidlegal framework and excellent cooperation with theregional and international financial community, theabove will continue to constitute an important part ofthe CBK’s activities.The CBK’s main goals are to foster a sound, solvent,efficiently functioning, stable, market-based financialsystem; to encourage the emergence of safe financialinstruments on the Kosovo market; to provide servicesto the financial community by fostering an efficientand safe payment system; and to contribute toKosovo’s economic development through its analysisrelated to general policies in Kosovo.Adoption of euro boosted investors’confidenceAlong with applying international standards, Kosovoadopted the euro as its currency beginning in 2002,which has enhanced the financial sector performanceand created more confidence in the Kosovar economy.“Having the euro also means no exchange risks, andour monetary policy is built on that of the EuropeanCentral Bank. All this reassures foreign investors,”Hashim Rexhepi explains.Hashim Rexhepi, GovernorIn fact, the CBK has played a major role in attractingmore foreign investors to Kosovo’s financial servicessector. “Over 90% of financial sector assets areunder foreign ownership, around 67% of insurancesector assets are with foreign ownership, whereasthe banking sector now includes strong banks fromKosovo, elsewhere in the region and from the EU.This foreign presence has brought investments incapital, experience, good corporate governanceand stability to Kosovo’s financial sector,” HashimRexhepi points out.Increasing transparencyThe CBK has performed its tasks step by step. First, itfocused on simply establishing a new payments and16

KOSOVOBusiness & Investment OpportunitiesPracticesfinancial system for Kosovo. Then,it concentrated on opening upKosovo’s financial sector to foreignparticipation, on strengthening thesector overall, and on establishingstrong regulatory systems for both thebanking and the insurance sectors.Next, the CBK fine-tuned the sectorby finding solutions for any problemsthat had appeared. “Today, now thatwe have a very strong, sound andstable financial sector, our objectivefor the future is to increase transparencyand advance market conduct,”Hashim Rexhepi says.The CBK is currently focusingon implementing Basel II criteriaconcerning disclosure and transparency.“We have continuouslyreceived technical assistance fromthe EU, the United States Agencyfor International Development(USAID), the IMF and the WorldBank concerning revising our legalframework and capacity buildingof our staff. We can confidently saythat our legal framework is verymuch in line with all EU directives.Moreover, our procedures arecompetitive with procedures inother EU countries concerninglicensing and supervision,” HashimRexhepi explains.Hashim Rexhepi adds that the CBKnot only consults EU directiveswhen devising new policies, butalso adopts best practices bothregionally and internationallyrecognised and accepted. “We tryto harmonise and balance the twoelements: EU directives and theenvironment in which we operate,”he says.Boosting financial sector’sGDP contributionThe CBK serves not only to bringstability and transparency to thefinancial sector and foster efficientpayment systems, but also toadvise the government concerningKosovo’s economic development.A guiding principle for the CBK isto enhance Kosovo’s economy, andthanks to the financial institution’sefforts the financial sector hasbecome a significant contributor toKosovo’s GDP.The CBK is also working toalleviate unemployment in Kosovo,which Hashim Rexhepi singles outas one of the main problems thecountry currently faces. “Certainlythe financial sector has played akey role in the reduction of unemployment,since all financial institutionsin Kosovo hire local staff,”he says.Three new banking licenseslast yearKosovo’s financial sector had newentries last year. Hashim Rexhepipoints out that two local banks wereacquired by NLB Bank (SlovenianBank) in order to increasecompetition in the banking sector,and the CBK issued three morebanking licenses. “More foreigninvestors are looking for ways toinvest in Kosovo’s financial sectorbecause confidence in the sector isincreasing,” he says.Foreign investors in Kosovo shouldknow that the local financial sectoris sound and can fulfil their needs.As Hashim Rexhepi points out,“The return on assets is very highin Kosovo; in fact, it is the highestin South East Europe. In addition,our legal framework ensures equalopportunities for foreign investors,efficient payment systems and theuse of euro provides an addedvalue, and our laws on terrorismfunding and money launderingare based on EU directives. Atthe CBK, we are committed tobest practices and have ensureda very transparent and profitablefinancial sector. The sector’ssteady growth over the past eightyears shows the inherent strengthof Kosovo’s financial system.”Throughout, CBK will devote allefforts to carrying out its tasks inthe most independent and professionalmanner, and assist furtherin the integration of Kosovo’sfinancial sector in regional andEuropean initiatives.Central Bankof the Republic of KosovoGaribaldi str. 3310000 Prishtina - KosovoTel.: +381 38 243 766Fax: +381 38 243 763www.cbak-kos.org17

KOSOVOBusiness & Investment OpportunitiesOn the Road to the Union, KosovoHas Already Made Big StridesWith the seminal step of independenceachieved relatively smoothly,Kosovo now has its sights firmly seton European integration and EUsuccession. The country already hasan established history of workingwith European institutions to aideconomic development and institutionbuilding. It is now moving on fromthis solid base to meet the criterianecessary for entry to the top table ofEU membership.This is no distant ambition but adriving force in the first post-independentsteps of Europe’s newestcountry. It is also writ large in thecountry’s founding document, theKosovar constitution. Accordingto Agim Ceku, Prime Minister ofKosovo, “The government of Kosovoembraces the values of the EuropeanUnion: peace, economic developmentand freedom of movement for all.EU membership is not a dream. Ourexperience in accomplishing thegoals established in the Standardsprocess will help us in achieving ouraccession obligations.”The EU has played a crucial role insupporting these ambitions. Indeed,Europe has been the biggest donor toKosovo over the past decade providing€1.6 billion in financial supportsince 1999. The main EU vehiclefor helping Kosovar development isthe European Commission LiaisonOffice (ECLO) which implementsassistance under the Instrument of18

Improved Stability and MeasuredGrowth Point to a Maturing EconomyWhile independence was only achieved in February 2008,Kosovo has been pursuing a stable and fruitful economicpolicy for some time now. This has been borne out bythe increasingly impressive figures for both GDP growthand the budget. Indeed, the country is creeping towardsSoutheast European (SEE) levels of growth while stillmanaging to balance the books. Under the stewardshipof the European Union, the country has been able toresist the temptation to overreach itself while ensuringthat many sectors have been liberalised and export-orientatedindustries have been unshackled. However, thisis still a work in progress and the government has setambitious targets to further stimulate the economy overthe coming five years.In 2007, the country recorded GDP growth of 3.5%slightly below the SEE average of 5.9% but a clearincrease on growth in 2005 which stood at 0.3%. Thistranslated into a GDP figure of €2.4 billion and anever improving GDP per capita of €1,400. This wasachieved despite a decline in the donor sector. Moreimportantly, this growth was not boosted by publicexpenditure but by the expanding role of the privatesector in economic life. In 2006, non-housing privateinvestment increased by 61% while banks loans tothe private sector also increased markedly.Indeed, the economy has become less reliant ongovernment and donor sector expenditure. Donorsector expenditures, in terms of consumption andinvestments fell 1.7% in 2007 amounting to €355million or 14.4% of GDP. Government spending ongoods and services fell 8.3% in 2007 although after a20

KOSOVOBusiness & Investment Opportunitiestwo year decrease of 11.6%, total government expendituresactually increased by 6.2% in 2007 to €426million or 17.3% of GDP.Moreover, the country bucked the regional trendand recorded a budgetary surplus of €233.7million which represents approximately 9.8% ofGDP. This was largely the result of an increase innon-tax revenues. While the country has a currentaccount deficit of 22.5% of GDP driven by a tradedeficit of 9%, exports have been increasing steadily.Indeed, Kosovo’s exports grew by a staggering 54%in 2006. In 2007, exports reached €146.6 millionmainly consisting of minerals, base metals, vegetableproducts and foodstuffs. Government estimatessuggest that exports could climb as high as €350than €1 billion invested since the year 2000. Thisimpressive growth is expected to increase rapidlywith the government estimating that the FDI levelwill touch €700 million in 2008.Kosovo’s liberal trade regime has also stimulatedimports into the country. Kosovo is a member of theCentral European Free Trade Agreement (CEFTA)which allows for free trade between the members ofthe bloc and enables producers to access a regionalmarket of 28 million consumers free of customsduties. Indeed, the largest number of exports camefrom CEFTA countries in 2007. Overall imports havebeen increasing steadily since 2002 and had touchedalmost €1.6 billion in 2007. This is a significantincrease in a two year period for imports were belowKosovo real GDP by sector, in million euroPrivate SectorGovernment SectorDonor Sector3.53.02.5---2.33Net Exports (right axis)2.45Real GDP Growth (right axis)2.653.12.043.5---542.0-2.0- 0.430.450.380.40 0.360.430.35---210.0-0.5-1.0-1.5-----0.95-1.0-0.98-1.01-1.11- 0--1-- -22004 2005 2006 2007Source: 2007 annual report of the Central Banking Authority of Kosovomillion in 2008 as the country’s productive capabilitiesincrease dramatically. The largest exportmarket for Kosovo is the EU closely followed by theCentral European Free Trade Agreement (CEFTA)countries.Likewise, the country has had considerable successin attracting foreign direct investment (FDI). Highprofile European banks, Raiffeisen and Pro-Creditmoved into the market during the transition phase.However, they are just the most visible tip of theiceberg. According to Business Registry data for2007, Kosovo has 2,012 companies of foreign ormixed ownership. Such investment has translatedinto an FDI figure of €300 million for 2007 with more€1 billion in 2005. These imports have not only beenstimulated by CEFTA but also by Kosovo’s non-reciprocalcustoms free access to the EU market throughthe EU Autonomous Trade Preference (ATP) regime.The main imports of commodity goods are centredon minerals and prepared foodstuffs.The economy is therefore becoming increasinglyrobust with trade, construction and the financialservices sector being the mainstay of growth.Indeed, driven by the banking industry, the financialsector has been expanding rapidly. According tothe Central Bank of Kosovo, financial sector assetsreached 58.5% of GDP in 2007 up from 49% in 2006.The banking sector makes up the lion’s share of this21

KOSOVOBusiness & Investment Opportunitiesaccounting for 90% of financial sector assets in 2007.The sector is undoubtedly buoyant with significantinvestment in 2007 leading to the establishment ofnew operators and increased foreign ownership.The real economy is also progressing well. Overallconsumption in 2007 rose by 3.8% to €2.8 billion.This represents 114.3% of GDP and has beengrowing steadily over the last 4 years from a figureof €2.57 billion in 2004. Much of this was fuelledby the private sector which was responsible for €2.2billion of consumption in 2007, an increase of 5.2%on 2006. Investments as a share of GDP have alsobeen increasing significantly rising by 15.2% in 2007to reach 33% of GDP. This is a marked increase on2006 when they stood at 29.9% of GDP. The privateparticularly from non-tax sources which increased asa share of total revenues to 17.3% in 2007 from 8%in 2006.The budget surplus has given the country some leewayand goes against the grain of the region where mostregional countries, with the exception of Montenegrohaving a deficit in 2007 and a four year average wellbelow the Kosovar surplus of 1.2% of GDP. Giventhis surplus, the Central Bank of Kosovo predicts thatexpenditure in the country will rise substantially in2008. Indeed, it predicts that expenditure will reach€1.1 billion in 2008 which is a 68.9% increase on2007. The three areas of particular spending focuswill be capital expenditure, subsidies and transfersand the purchase of goods and services.Imports and Exports by commodity groups as share to total, as of 2007Live animals,3.9%Stone, Plaster,Ceramic,4.4%Textiles,3.3%ImportsOther,9.8%Mineral products,20.2%Prep.foodstuffs,5.1%Plastics andarticles,4.1%ExportsOther,10.9%Plastics andarticles,4.6%Transportmeans,5.2%Vegetableproducts,5.3%Prod. ofchemicalindustry,7.5%Base metals,9.2%Machinery,12.5%Prep.foodstuffs,14.1%Vegetableproducts,5.7%Machinery,13.1%Mineralproducts,15.4%Base metals,45.7%Source: 2007 annual report of the Central Banking Authority of Kosovosector once again plays a vital role here reaching€647 million or 26.3% of GDP in 2007. Indeed,private sector investment growth stood at 14.6% in2007.Consumer Price Index (CPI) inflation rose to 4.5%in 2007 from 0.62% the previous year. However, thisis largely attributable to the global increase in oiland food prices. Indeed, despite this, the country’sfiscal planning is on a sure footing. Kosovo’s consolidatedbudget revenues showed an annual increaseof 25.9% in 2007 hitting €896.4 million for the year.This accounts for 37.7% of GDP and is an impressive31.3% higher than the government’s planned targets.This was a result of higher than expected revenuesThe country is therefore well placed to consolidateand build on its recent economic successes. Withboth domestic production and the trade regimebecoming ever more healthy, the prospects forfuture growth look rosy. This is confirmed by thecountry’s attractive tax regime and impressiveinvestment climate that should see FDI exceed thealready upward trends that have been set. Indeed,Kosovo’s economy is taking on an increasinglydiversified hue with productive sectors such asindustry and agriculture sitting alongside financialservices and other service sectors in recording goodgrowth. This should ensure that the improvingeconomic outlook can be sustained for the longterm.22

• Now Is the Time to Invest in KosovoFinance & Banking“Kosovo’s market is open andready for investment. If youlook at other Baltic countriesthat are now EU members, youcan see the potential.”Ahmet Shala, Minister of Economy and Finance

KOSOVOFinance & BankingMinistry of Economy and FinanceNow Is the Time to InvestAhmet Shala, Kosovo’s Minister of Economy andFinance, discusses recent developments in Kosovo’sfinancial sector and the country’s investmentpotential.Ahmet Shala, Minister of Economy and FinanceET: How important are the banking and insurance sectorsfor Kosovo’s economic development?A. Shala: They are extremely important. Over the past eightyears, for post-conflict structural reasons, the government hasemphasized public sector institutional development, but nowwe must shift towards the private sector since this is where bothgrowth and new jobs will be generated. A credible financialsector is essential for Kosovo’s economic development, and ourfinancial sector, although young and emerging, has performedwell and demonstrated a capacity for stability.ET: What are your priorities for the financial sector?A. Shala: A key task is to ensure that the financial sector canfulfill the needs of the private sector. So far, the availability ofliquidity and loans has been adequate, but for a relatively lowlevel of economic development. The financial sector must workwith private business to develop good credible business plansfrom which private investment can be generated.24

KOSOVOFinance & Bankingin KosovoET: What is Kosovo doing to achieve EU integration?A. Shala: The government’s Medium Term ExpenditureFramework was very well received at a Kosovo donors’conference hosted by the European Commission inBrussels in July, and Kosovo has been accepted intothe pre-accession process and is receiving EU supportthrough Instrument of Pre-Accession funding. Kosovohas also joined the Central European Free TradeAssociation. European investors should know thatthe EU integration process is now in place, and thatthere is considerable scope for helping local institutionsestablish well-backed credit lines, develop leasingactivities, and so on.ET: What incentives does Kosovo offer foreign investors?A. Shala: The fundamental approach to economicdevelopment in Kosovo has been to put in place an institutionalstructure that encourages development withina liberal market framework. Tax rates are relativelylow and the corporate tax rate was recently reduced to10%. The tax base is wide and the structure is simple,the labour market is liberal as is the environment forforeign trade, it is relatively easy to set up a business,and the public sector has an excellent good-practicefinancial management process. In other words, Kosovois fundamentally investor friendly.ET: For many people, Kosovo is associated with its wartorn past. How are you countering this international image?A. Shala: People should be aware that internationalfinancial institutions are very active in Kosovo andsupport our efforts, which is an excellent reflection ofKosovo’s stability and growth potential. Kosovo recentlyapplied to join the International Monetary Fund andthe World Bank, a further guarantee of stability. Inaddition, Kosovo has adopted the euro, which has hada highly beneficial effect on controlling inflation andpromoting financial stability. Deposit insurance is nowunder discussion and we are working to ensure creditand liquidity for small and medium sized enterprises.All this gives the country credibility.ET: Why should European investors choose Kosovo asan investment destination?A. Shala: The government’s approach is clear: to putKosovo solidly on the path to EU integration. Kosovo isalready within the European Stability Pact framework, itis receiving official financial support from the EU, andit is making sure it is EU compliant in every area. Ourlaws respect the EU Acquis Communautaire. The EUintegration process has worked very well in other smallcountries, such as Ireland, Estonia, Latvia and Lithuania.There is no reason why it should not succeed equally wellhere in Kosovo.Kosovo’s specific advantages include its young population,massive reserves of lignite and other minerals, andenormous potential for tourism, such as skiing and hikingin the mountains. Our privatisation programme hasproved to be a success and we are now focusing on ourinvestment and export promotion. The important thing isto create the right market environment, and Kosovo is wellon the way to achieving this.ET: What is your personal message to potential investors?A. Shala: There is a simple but powerful paradigm thathas applied to virtually all Central European and Balkancountries: in the immediate post-Soviet and post-Yugoslaviatransition, the sequence in very simple terms has been toliberalise markets, privatise the financial sector and publicutilities (which attracts foreign direct investment andcreates new jobs), and stimulate the growth of smaller andmedium sized enterprises to create more jobs. This processtakes time, but a lot of this has already been put into placein Kosovo.My message to investors, therefore, is that Kosovo’smarket is open and ready for investment. If you look atother Baltic countries that are now EU members, youcan see the potential. Who would have expected this 20years ago? Come and visit Kosovo and discover all themany unexplored investment opportunities the countryoffers. Just make sure you come here ahead of yourcompetitors!25

KOSOVOFinance & BankingNLB PrishtinaLeading Commercial Bank Positionedto Partner Foreign InvestorsNLB Prishtina, with a 16%share of the local market, is one ofKosovo’s top commercial banks. Itoffers highly trained professionals,flexibility, innovation, efficiency,and a wide range of services to itslocal and international clientele,and has the largest network of anybank in Kosovo.Albert Lumezi, General Manager,explains that NLB Prishtina isthe product of a merger of twolocal banks, NBK and KasaBank.The new bank began operatingon January 1, 2008 with some€200 million in assets, making itKosovo’s third largest bank. NLBPrishtina has positioned itself asthe partner of choice for internationalinvestors. “We are absolutelyready to support businesses comingto Kosovo by providing them withsound financial services,” AlbertLumezi says.Albert Lumezi, General ManagerNLB’s competitive edge is thatit provides diverse products andservices, it has the backing of regionalleader the NLB Group, and it hasdeveloped a strategy of sustainablegrowth. “We aim to make NLB oneof the best banks in Kosovo. Weare focused on both the retail andcorporate segments. Our primaryintention is to serve the businesscommunity by fulfilling companies’objectives and development goals,”Albert Lumezi says. The bank’s localreputation is so strong that 95% ofits clientele is from Kosovo.supporting the country’s continuedeconomic development.” He addsthat Kosovo’s investment appeal alsoincludes low taxes, an EU compatibleregulatory framework, politicalstability, a young and multilingualpopulation, competitive labourprices, and strong growth potential.Banking dominates the local financialsector, accounting for 85% of totalassets. The banking sector has beengrowing by 15% per year on averagefor the past three years, Albert Lumeziexplains. He adds, “It is also worthmentioning that the average returnon investments in Kosovo’s bankingsector is higher than the regionalaverage. In addition, financial sectorregulations meet EU standards, andthe use of the euro has contributedto controlling inflation. Kosovo’sfinancial sector is far ahead of thoseof its neighbours.”Urging international investors toinvestigate opportunities in Kosovo,Albert Lumezi concludes, “Now isthe right time to invest here, and youwill have a strong partner in NLBPrishtina.”Financial sector a successstoryKosovo offers significant investmentopportunities, and the progress thecountry has made in upgradingits financial sector reflects its longterm potential. As Albert Lumezisays, “Kosovo’s financial sector hasachieved real progress in providingsound services and therebyNLB Bank PrishtinaRr. Rexhep Luci Nr.5Tel. +381 38234 111Fax: +381 38246 189info@nlbprishtina-kos.comwww.nlbprishtina-kos.com26

KOSOVOFinance & BankingRaiffeisen BankRaiffeisen Bank Kosovo NamedBank of the Year 2007Raiffeisen Bank, with the strongestcapitalisation of any bank inKosovo, had a record year in 2007.The bank’s assets grew by more than27% over the year to reach €477million and its profits totalled€14.9 million. “Raiffeisen Bankhas recorded a significant growthevery year since it started to operatein Kosovo,” says CEO BogdanMerfea. The Banker, a magazine ofthe Financial Times Group, namedRaiffeisen Bank Kosovo ‘Bank ofthe Year’ in 2007.The bank was acquired by theRaiffeisen International group in2003 and now offers internationalreach and expertise as well as in-depthlocal knowledge. Raiffeisen International,its parent company, is knownfor its success in emerging marketsand has activities in 17 Central andEastern European countries withbanking and leasing subsidiaries, aswell as a number of other financialservice providers.Bogdan Merfea, CEORaiffeisen Bank Kosovo is acommercial bank serving both retailand corporate customers. “Currentlywe are in the sustainable growth stagewith our individual and corporateclients contributing equally to ourgrowth in Kosovo. In the future,however, I believe the retail sectorwill offer the biggest opportunities,”Bogdan Merfea says.Ideal partner for foreigninvestorsRaiffeisen Bank is the ideal localpartner for foreign investors in Kosovo.Bogdan Merfea points out, “Our professionalskills, expertise, and traditionhelp us to be a very attractive bankfor foreign investors, as does our welldevelopednetwork in more advancedeconomies. We have very good peoplein Kosovo and we can also tap into theknowledge of the group.” RaiffeisenBank is particularly well known inKosovo for its involvement in privatisationprojects.Since it started to operate, RaiffeisenBank Kosovo has recorded sustainablecontinuous growth in Kosovo’semerging financial services sectorin all three segments: assets, loansand deposits. “We are a universalbank offering banking products andservices to all customers. We continueto be focused on offering comprehensivefinancial solutions to both localand international customers,” BogdanMerfea says.Raiffeisen Bank Kosovo’s growthstrategy focuses on distributiondevelopment and product innovation.Bogdan Merfea says, “There is a lot ofroom to create innovative productstailored to the local market. Ourslogan is ‘Live better!’ Our brand isclosely linked to the aspirations ofthe Kosovar people. Our slogan alsomeans that Raiffeisen Bank is not herejust to make money in the short term.We are in Kosovo for the long haul.”Raiffeisen Bank Kosovo J.S.CUCK Street 51, Prishtina 10000,KosovoTel: +381 38 222 222www.raiffeisen-kosovo.com27

KOSOVOFinance & BankingProCredit Bank KosovoKosovo’s First Bank SupportingEconomic GrowthProCredit Bank Kosovo achievedvery strong results last year, boostingits profits by an impressive 107%.Philip Sigwart, CEO, explains thatthe bank also increased its assets by27% to reach €549 million, and thatcustomer deposits also grew, totallingsome €550 million at present.The bank’s return on equity isaround 50%, and 2008 should beanother good year. “Our resultsshow that business can be donesuccessfully in Kosovo. It’s allabout commitment. Of course ourbusiness is about making a profit,but most importantly it is aboutcontributing to Kosovo’s economicdevelopment,” Philip Sigwart says.ProCredit has a 40% share of thelocal banking market.ProCredit was established in 2000as Micro Enterprise Bank to financeKosovo’s expanding economy. Itwas re-branded to ProCredit Bankin 2003 and is now majority ownedby ProCredit Holding based inFrankfurt, Germany. “Many peopletold us we were crazy to set up abank immediately after the war, butwe worked hard to make the bank asuccess and now we are reaping thefruits,” Philip Sigwart says. He addsthat Kosovo’s banking sector shouldfare well in the current globalfinancial crisis since local banks arefinanced fully by local deposits, anddeposits exceed loans.ProCredit is ready to serve internationalcompanies and investorsseeking opportunities in Kosovo.The bank offers financing as wellas Kosovo’s most extensive branchnetwork (60 branches by the endof 2008), and the country’s biggestATM network. “Our infrastructure istop notch, especially for the Balkanregion,” Philip Sigwart says.The bank, which already serves some300,000 retail customers, anticipatescontinued strong growth driven byKosovo’s expanding private sector.ProCredit’s competitive edge is that,as the country’s first bank, it is knownfor its commitment to the localeconomy. “That is the reason whyour main focus is on retail customersand on small and medium sizedenterprises, which are the driversof economic growth. We focus verymuch on responsible banking, whichis one of our core principles,” PhilipSigwart explains.Philip Sigwart urges foreign investorsto look into opportunities in Kosovo.He says, “Doing business here ismore straightforward than in manyother countries in the region becauseKosovo’s regulatory environment wascreated with the help of Europeanand international advisors. Secondly,many Kosovars worked abroad duringthe war years and learned skills theyhave brought home. Finally, Kosovois in the heart of Europe. Hop on aplane and come have a look!”ProCredit Bank, KosovoNena Tereze str. 1610000 Prishtina, KosovoTel.: +381 38 555777Fax: +381 38 248777www.procreditbank-kos.com28

KOSOVOFinance & BankingDukagjini GroupInsurance Leader ExpandingProduct PortfolioThe Dukagjini Group demonstrates the growth potentialof Kosovo’s private sector. Ever since it was founded byMr. Ekrem Lluka in 1987 as a printing house and tradeenterprise, the group has evolved along with the Kosovareconomy and is now active in a wide range of sectors.It has won a number of awards, including the InternationalAward for Quality and Business Prestige 2004.Dukagjini Insurance, the group’s insurance division, waslicensed in February 2002 to provide compulsory thirdparty liability (TPL) coverage for motor vehicles andhas steadily expanded its offerings. It now has around30 non TPL insurance products in its portfolio and hasearned a 19% share of the local market becoming themarket leader.In 2006, Slovenian based reinsurance firm Sava Reinsurance,which has an A- rating from Standard and Poor’s, acquireda 51% stake in Dukagjini, which demonstrates the Kosovocompany’s growth potential. “Our long term strategy is tofurther develop non TPL products like health, property,engineering, liability and other forms of insurance,” saysFatmir Gashi, General Director of Dukagjini Insurance. Headds, “We already have a private pension fund operatingand are waiting for the government to pass laws openingthe market for investment funds.”Dukagjini Insurance achieved profits of €418,000 in2007 and anticipates that these profits will more thandouble to around €1 million this year. The companywelcomes partnerships with EU insurance firms. As Mr.Fatmir Gashi explains, “Through our association withSava Re, we have already shown our strategy of co-operatingand working with EU companies. We can provide EUcompanies with world class insurance services for theirinvestments in Kosovo, and the Dukagjini Group canalso provide logistics support, advice for new investorsin Kosovo and in the same time we are open to possiblepartnership opportunities as well. Dukagjini Insurancehas established branches throughout Kosovo and hasearned a very strong reputation in the market.DukagjiniSquare Nëna Terezë 3310000 Prishtina, KosovoTel: +381 38 225 385Fax: +381 38 225 384info@insurancedukagjini.comwww.insurancedukagjini.comDukagjini Insurance and other companies in theDukagjini Group are also known for their exemplarycorporate citizenship. In July this year, DukagjiniGroup made a commitment to provide €160,000 overtwo years to the American Councils for InternationalEducation’s program in Kosovo, the Kosovo AmericanEducation Fund (KAEF), which will offer scholarships topromising Kosovars to get a master’s level education atselect American universities. Projects like these illustrateDukagjini’s commitment to Kosovo’s future.29

• Ideal Base for Trade-Oriented ActivitiesTrade & Industry“We are very proud of the factthat although we achieved ourindependence just this year, Kosovohas already been recognised by othercountries worldwide.”Lutfi Zharku, Minister of Trade and Industry

KOSOVOTrade & IndustryMinistry of Trade and IndustryIdeal Base for Trade-OrientedActivitiesLutfi Zharku, Minister of Trade and IndustryThanks to its outstanding development potential, Kosovohas already attracted more than €1 billion in foreigndirect investment and is home to more than 2,000 foreignor partially foreign owned companies, many of which areengaged in trade. Kosovo offers a number of attractionsfor trade-oriented companies, including a liberal traderegime, a supportive government, stable relations withneighbouring countries, and a central location.31

KOSOVOTrade & IndustryFree trade agreements enhance Kosovo’s investmentappeal. The country is a member of the CentralEuropean Free Trade Agreement (CEFTA), giving itcustoms-free access to a regional market of around 28million consumers. In addition, Kosovo benefits fromnonreciprocal, customs-free access to the EU marketbased on the EU Autonomous Trade Preference (ATP)Regime. Quantitative and qualitative restrictions remainin force for only a very limited number of goods.Kosovo is still an import-based economy, with totalimports reaching around €1.6 billion in 2007. The mainimports were minerals, prepared foods, machineryand base metals. Kosovo is in the process of boostingits exports significantly, however, and achieved €146.6million in exports last year, mainly in minerals andbase metals, vegetables and food products. This year,the country should reach €350 million in exports.Its main trade partners are other CEFTA countries,followed by the EU. There is enormous potential asthe local and regional market continues to grow andas Kosovo strengthens its EU ties.Kosovo’s Minister of Trade, Lutfi Zharku, discusses thecountry’s key advantages as a base for trade-orientedactivities.ET: What are some recent developments in Kosovo’strade sector?L. Zharku: We are very proud of the fact that althoughwe achieved our independence just this year, Kosovo hasalready been recognised by other countries worldwide.A major event this year was the Kosovo Donors’Conference held in Brussels in July, during whichKosovo received €1.2 billion in financial support. Thisreassures investors that Kosovo has a bright future.ET: What are some of the government’s currentinitiatives to attract foreign direct investment?L. Zharku: The Investment Promotion Office withinthe Ministry of Trade and Industy has been mandatedto attract investors and support them by providingwhatever they need, for example by obtaining licenses,business registrations and so on. FDI will be the keyto Kosovo’s successful economic development and willcreate needed new jobs.ET: Privatisation is creating new investment opportunities.What is the status of the process?L. Zharku: The privatisation effort is now being handledby the Kosovo Privatisation Agency, a transformedversion of the Kosovo Trust Agency. Around 500companies have already been privatised and around200 more are set for privatisation. I am not very happywith the speed of the process so far. I hope that thenew agency will make things happen more quickly.On the positive side, we now have a new law on publicenterprises, which will be monitored by the governmentbut not directly run by the government. We hope tooffer private investors more access to publicly ownedcompanies.ET: Why should foreign investors choose Kosovo?L. Zharku: There are many reasons. We have anabundance of resources, a young population, acentral location in the Balkans, modern telecommunications,a competitive and flexible labour force,up-to-date policies and laws, and a tax system that isvery competitive for the region. In addition, Kosovo isa member of CEFTA and has direct access to the EU,and there are few barriers for future EU accession.ET: What are the main challenges Kosovo facesconcerning the development of its trade and industry?L. Zharku: We need to improve Kosovo’s internationalimage. We need to make more potential investorsaware that our legal framework is EU-compliantand that we provide the same level of protection toforeign investors as we do to domestic investors.Everybody should know that the war era is over. Eventhe problems with recognition by Serbia have not ledto an economic embargo. This is just one example ofthe fact that Kosovo has achieved stability and is a safeplace to invest in.ET: Can you single out some especially promisingsectors?L. Zharku: Energy and mining are the key sectorsfor Kosovo’s economic growth. We still have a lotof problems with energy, but there are a number ofprogrammes and projects that will stabilise and developthe energy supply. For mining, the development of theTrepca mining complex, which will soon be privatised,will have a huge impact on Kosovo’s economy. Othersectors with excellent potential for the coming yearsinclude wood and metal processing, informationtechnology, banking, tourism, and infrastructuredevelopment. These sectors taken together provideenormous opportunities for European investors. I invitepotential investors to visit Kosovo to see for themselvesits EU standards of doing business, its stability, itsattractive quality of life, and its great potential.32

KOSOVOTrade & IndustrySharrcemBuilding Kosovo’s futureSharrcem, Kosovo’s only cementproducer, is helping to build theKosovo of the future. The companyis operated by the Holcim Group,which is listed on the Swiss StockExchange and has operations in70 countries. Holcim signed a10 year lease, manage, operatecontract for Kosovo’s SharrCement Plant in 2000.Mario Grassl, CEO, explains thatSharrcem is Kosovo’s top supplierof cement and that the companyhas been growing steadily since itsinception eight years ago, keepingpace with the 3% to 5% annualgrowth of Kosovo’s constructionsector over that period. “TheKosovo construction market willcontinue to grow at these ratesin the future. Up to now, it hasbeen driven by demand for privatehousing and for new constructionfor private businesses. If public sectorconstruction spending increases,this will mean a tremendous boostfor Sharrcem’s sales in Kosovo,” heexplains. He adds that high unemploymentand the need for foreigndirect investment are hamperingthe government’s ability to invest ininfrastructure projects.Long-term commitmentSharrcem’s strategy is to aim forlong-term growth in Kosovo, and thecompany welcomes partnerships withEuropean companies and investors.“We would like to work with seriousbusiness partners who do not cometo Kosovo for a quick buck but whoare, like us, committed to Kosovoover the long term. Pivotal in ourlong-term focus is of course theextension of our 10 year agreement,”Mario Grassl explains.Challenges the company facesinclude the plant’s need for around€50-60 million in investments tocontinue improvement of theproduction facilities in order toexpand, and Kosovo’s need for areliable and adequate supply ofelectrical power. Mario Grassl notesthat he has seen improvements inthe electricity network over the pastthree years.Sharrcem aims to expand beyondKosovo to bring its products toregional markets. “We are lookingto widen our scope,” Mario GrasslMario Grassl, CEOsays. He adds that being part of theHolcim Group gives Sharrcem acompetitive edge.Mario Grassl urges Europeaninvestors to target Kosovo. He says,“The negative media image ofKosovo is inaccurate. Kosovo has alarge educated workforce of youngpeople who are eager to find jobs,and costs are low compared to otherEastern European countries, particularlyconcerning manufacturingof products for export. I would alsosay that creativity is quite high. I havehad only positive experiences withthe people here in Kosovo.”Sharr Beteiligungs GmbHLagja e punëtorëve p.n.71510 Hani i Elezit -KosovoTel.: +381 290 385 511Fax: +381 290 385 510www.sharrcem.com33

KOSOVOTrade & IndustryXella GroupBrick Producer Combines GermanTechnology and Local Raw MaterialsWorld-renowned construction materialCompany Xella Internationalinvested 11.5 million in Kosovo andplans to continue with investments.“Our objective is to expeditiouslyenter the regional market and becomea leader in the field in which weoperate,” stated its General Director,Samir Krasniqi.Xella International, with headquartersin Duisburg of Germany is aworld market leading enterprisein the production of constructionmaterials and raw materials of constructionmaterials. This enterpriseactively operates in more than 30world countries and has a total ofover 7,600 employees. The salesplan accomplished by Xella in 2007stands at €1.3 billion.Samir Krasniqi stated that XellaInternational took the decision toinvest in Kosovo in 2003, whereasin 2007 the factory had startedits production with the sale oftwo categories of constructionmaterials that meet the higheststandards: blocks for constructionand decorative bricks. The initialcapacity of the factory is 30,000m³ per year, with sales of €1.8million.SILKA, high quality productsXella produces blocks and brickswith an entirely natural compositionof calcium-silicates, meaninggravel, lime and water; this is whySamir Krasniqi, General Directorthe products obtained the name ofSILKA.“SILKA products are very strongand have a long life, are healthy andecological to the indoor and externalenvironment as they regulate thewater humidity within the livingenvironment and do not allow thecreation of various mosses. Moreoverit is an inflammable material and incontact with fire, it does not dischargetoxic gases. It is resistant againstchanges in climatic conditions,etc. In particular, it provides verygood isolation and precise size ofblock moulds – up to ± 2mm, theirdenticulate shaping allows for verystable block to block connectionwithout additional materials. Thesecharacteristics make this product distinguishablefrom all other constructionmaterials in the region,” statedSamir Krasniqi.Samir Krasniqi also presented theplans of Xella enterprise in Kosovo.In the medium term, it plans toproduce other construction productsthat Xella Enterprises can produceeverywhere. This will be conductedby means of an investment suchas the one of the Xella factory inLipjan in the “Green Field” or bymeans of acquisition of a factory inthe region.“Our name is synonymous withquality, whereas our cooperation withlocal and foreign companies is basedon trust, honesty and dedicationtoward clients and the developmentof our society in general,” addedSamir Krasniqi.Xella Kosova also welcomes partnersand investors of foreign companies,by offering blocks and bricks of ahigh quality for modern constructionin the country and in the region.Xella Kosova L.L.C.Rr. e Martirëve, p.n.14000 LipjanTel.: +381 38 580161Fax: +381 38 580164info.kosova@xella.comwww.kosova.xella.com34

• It’s Good to Talk: Discussing the Challenges for Telecommunication and Transport• All Roads Lead to Kosovo: the Government’s Main Target Is Upgrading the Road andRail Infrastructure• Calling the Shots: Competition Is Bringing Increased Quality to the SectorTransport & Communications“Kosovo’s geographical location isvery important but thisimportance can only play a role ifthe infrastructure is in place.”Fatmir Limaj, Minister of Transport and Telecommunication

KOSOVOTransport & CommunicationsMinistry of Transport and TelecommunicationDiscussing the Challenges forTransportInfrastructure will set the foundation for Kosovo’seconomic growth with the Ministry of Transport andTelecommunication leading the charge. Fatmir Limaj,Minister of Transport and Telecommunications, knowsthis only too well and here he talks to ET about thechallenges of rolling out infrastructure that will connectKosovo to the wider world. From PPPs to lobbying fora country telephone code, the Ministry is meeting thesechallenges head on.Fatmir Limaj, Minister of Transport and TelecommunicationET: How important are the transport and telecommunicationsectors for the development of Kosovo’seconomy?F. Limaj: They are very important fields. As youknow, in the field of transport, we have inheritedpoor infrastructure which has been compounded bythe destruction caused during the war. Therefore,Kosovo’s government has given a high priority to36

KOSOVOTransport & CommunicationsTelecommunication andinvesting in and developing theroad infrastructure because webelieve that stable and sustainableinfrastructure will be a preconditionfor development andintegration. Kosovo’s geographicallocation is very important but thisimportance can only play a role ifthe infrastructure is in place.Within the country, we haveplaced an emphasis on paving theroads whether they be rural orurban. Looking abroad, Kosovo isa member of CETO through whichwe are involved in route 6, whichwill link Prishtina to Skopje inMacedonia and then Montenegroand route 7, which will linkPrishtina with Tirana in Albaniaand Belgrade in Serbia. For route7, one month ago, we publishedan expression of interest for constructionfrom our western borderto Prishtina. For route 6, ten daysago we selected a French companyto execute the project. Within thenext year, we believe that bothprojects will be ready and constructionon the roads will begin.In telecommunications, it is adifferent situation. Until recently,Kosovo was not recognised as acountry so we could not get ourown country code and internetdomain. Currently our two mobileoperators work through a Monacocountry code and a Sloveniancode. Now we are independent,we believe it is time for us to getour own code. However, to obtaina code, we have to be an InternationalTelecommunications Union(ITU) member which needs theapproval of two thirds of members.We have not received this yet.ET: When will this process becompleted?F. Limaj: We don’t have a lotof influence on this but we arecertainly working in this direction.In November 2008, the ITU willhave its annual conference and wehope that we can then achieve thenecessary result. It is importantto say that without this countrycode, Kosovo will not be able todevelop.ET: What incentives have been putin place in order to attract foreigninvestors?F. Limaj: In transport, therailroads connecting Prishtinaand Seranik provide some opportunitiesfor foreign investors. Weare also ready through PPPs to gointo concessions for the roads andthe aviation sector. In the region,Prishtina Airport is quite anattractive investment opportunityand interest is high. Unfortunately,when it comes to telecommunications,it still is sort of untouchablebecause of the ITU membershipissue.ET: What are the main challengesahead for the transport and telecommunicationssectors?F. Limaj: The main challenge for usis our limited budget. We have toovercome this by finding partnersto co-finance projects particularlyfor the transportation sector. Forthe telecommunications sector, Iwould still say obtaining a countrycode. I believe that the EU canhelp a lot with this. Beyond thesechallenges, it is important toknow that we are creating a legalframework that is EU compliant.ET: Given the negative connotationsassociated with conflict inthe region, why should Europeaninvestors choose Kosovo as aninvestment destination?F. Limaj: Firstly, I believe that wewill serve their interests betterthan other countries. Europeaninvestors do not need to checkthe local laws because the lawshere are already up to Europeanstandards. Kosovo also has its goodlocation, human resources and ayoung population.ET: What is your personal messageabout the transport and telecommunicationssectors?F. Limaj: Kosovo has entered thesecond chapter of its development.Until now, we have seen manyinvestments in Kosovo and a lotof help and aid but if you want tohelp the economy of Kosovo, itis needed in infrastructure. Thisis the link between Kosovo, theregion and the EU. Kosovo canbe very successful, and can be anexample to many countries thatare still in the transitional phaseto becoming a democratic andfree society.37

KOSOVOTransport & CommunicationsAll Roads Lead to Kosovo:Upgrading the Road and RailSince the end of the war in 1999, thetransport sector has become one of themost critical areas for the rehabilitationof the Kosovar economy. As thearteries of the country, the roads andrail networks have been earmarkedfor significant investment by thegovernment. However, the country isnot simply taking a short term viewand is proactively following a policyof aligning itself with EU transportpolicy and integrating itself into thewider European transport network.Indeed,infrastructuraldevelopment is key to connectingKosovo to the Europeancommunity. To this end, thegovernment has settled uponthe Public Private Partnership(PPP) model to develop thetransport sector. Over the comingyears, the government will beoffering concessions for theroads and aviation sectors. Onesuch project is Prishtina Airportwhich has already received€15.2 million in completed andongoing investments. The airportis running well and recordedestimated operating revenuesof €15.6 million in 2007 againstoperating costs of €10.9 million.These figures are projected to risefor 2008 with estimated revenuesof €21.9 million against expensesof €13.6 million.Beyond the aviation sector, thecountry has also received interestfrom the European Bank forReconstruction and Development(EBRD) for investment in thecountry’s road network. Speakingto the local press in May 2008,Ahmet Shala, Minister of Economyand Finance said that the EBRDhad expressed their interest. “Ofinterest for them are two highways,one that leads towards Albania(Merdare-Morinë) and the otherone toward Macedonia (Prishtina-Skopje). Very soon, a delegationfrom the EBRD will arrive in Kosovoand conduct a feasibility report forthese two projects,” he added.Kosovo has a significant geographicalposition for Europeantransport routes lying on two SouthEast Europe Transport Observatory(SEETO) core road network routesand one SEETO core rail network38

KOSOVOTransport & Communicationsthe Government’s Main Target IsInfrastructureroute. For roads the routes inquestion span 310 km and areroute 6 (Ribarevina in Montenegroto Skopje in Macedonia) and route7 (Lezhe in Albania to Doljevacin Serbia) while for rail it lies onroute 10 (from Kraljevo in Serbiato Gorce Petrov in Macedonia).Consequently, the government hasmade the development of route 6and 7 a high priority as significanttransport arteries for the countryand the region connecting withneighbouring capital cities.While a recent Department of RoadInfrastructure (DRI) survey foundthat 88% of primary roads and 74%of the regional roads are in goodcondition, there is still a significantamount of investment needed toupgrade the 8,000 km road networkin Kosovo. This includes the urbantransport network and infrastructurewhich needs to meet the needs of agrowing population. In the period2000-2005, €136 million was spenton road infrastructure investmentsand this looks set to increase in thecoming years. Indeed, in 2006 alone,the government estimated that therewas a need for €70 million investmentin the road network. As the economygrows, this is likely to become evermore necessary with the motorisationlevels in the country rising fromtheir current levels of 105 passengercars per 1,000 persons towards theEU average of 418 passenger cars per1,000 persons.However, the government is alsokeen to ensure that the rail networkcan meet the country’s passengerand freight requirements. Kosovocurrently has a 333 km singletrack non-electrified rail systemwith standard gauge, which is ingood condition. The country willbe looking to expand its rollingstock, however, which currentlyconsists of nine locomotives, fourDiesel Multiple Units (DMUs), tenpassenger carriages and 70 freightwagons. As GDP continues to takean upward turn, freight traffic in thecountry has increased. Indeed, freightcarried by rail rose from 345,000tonnes in 2006 to 588,000 tonnesin 2007. Passenger numbers havealso risen in recent years climbingby 4.25% between 2006 and 2007 to417,000 passengers. Kosovo Railways(KR) is also looking to expand theirservices with a line opened betweenPrishtina and Skopje and anotherin the pipeline for commercialpassenger services to Peja. KR is alsoconsidering an express train serviceto Prishtina Airport.Beyond investment and networkexpansions, the government hastried to bind itself to the Europeanregulatory environment. In June2006, the UN Mission in Kosovo(UNMIK) on behalf of Kosovo signedthe European Common AviationArea (ECAA) Agreement. The ECAAprovides the framework for a singlemarket for aviation covering 35countries and 500 million people.The agreement will graduallyextend complete European aviationlegislation to all its members. InJune 2004, UNMIK also signed anMOU on the Development of theSouth East Europe Core RegionalTransport Network (SEECRTN)which will provide a unified strategyfor regional transport policy in SouthEast Europe.The future of Kosovo is thereforefirmly embedded within regionalpolicies on transport. To achievethis, however, the country will needto upgrade its transport networkthrough a series of PPP investments.Indeed, future growth in the sectorwill be fuelled by the private sector.39

KOSOVOTransport & CommunicationsKosovo RailwaysRailway Network OffersSignificant Investment PotentialKosovo Railways, which administersthe country’s rail network, has beenachieving improved financial resultsbut requires significant additionalinvestment. Xhevat Ramosaj,Managing Director since 2006,explains that Kosovo Railways has beena joint stock company since 2005 andthat it has developed a new strategy ofputting clients first, in both passengerservice and freight transport.The company achieved profits of€500,000 in 2006 and €1.6 millionin 2007. It transported 401,487passengers and 345,287 net tonnesof goods in 2006, and 417,193passengers and 588,680 net tonnesof goods last year. Kosovo Railwaysis also developing more ties withthe private sector and earlier thisyear signed a concession agreementwith Konet to install commercialoptical fibre cables throughout therailway network.Xhevat Ramosaj, Managing DirectorKosovo’s rail system, heavily damagedduring the war years, needs significantinvestment in order to meet thecountry’s growing needs. XhevatRamosaj points out that investmentis required in railway infrastructure,railway operations, and rolling stock.“There is still a lot of work to be done,but we are surviving as a transportcompany,” he says.Significant growth predictedXhevat Ramosaj is very positiveabout the future of Kosovo Railways.He says, “The privatisation processis ongoing and is resulting in newcompanies that will most likely useour transport services. One exampleis the Trepca mining complex.Kosovo Railways has already signeda transport contract with Newco Ferronickeli,a nickle plant. Anotherissue with regards to our futuregrowth is the political issue withSerbia. We expect this to be solved inthe near future.”Because of political problems withSerbia, all Kosovo’s EU-boundfreight rail traffic must pass throughMacedonia. Resolving problemswith Serbia would lead to greatgrowth opportunities for KosovoRailways. The company has placeda high priority on developing itsnorth-south line connecting Serbiaand Macedonia via Kosovo, and isalso developing its passenger traffic.Kosovo Railways welcomes foreigninvestment. Xhevat Ramosaj citesfreight transport, a potential raillink with Prishtina’s internationalairport, additional connections inSouth Eastern Kosovo, and rail linksbetween private companies and mainrail lines as projects with significantpotential for foreign investors.Kosovo’s new transport policy willbe launched at the end of 2008,which is expected to spur on thedevelopment of Kosovo Railways.The new policy will set developmenttargets, create new incentives forinvestors, and focus on linkingKosovo’s rail network with the EU.Kosovo Railways J.S.CStr. Sheshi i Lirise,12000 Fushe KosoveRepublic of KosovoTel.: +381 38 536 307Fax: +381 38 536 355www.kosovorailway.com40

KOSOVOTransport & CommunicationsKosova AirlinesKosova Airlines Seeking Partners toAchieve Ambitious Growth PlansKosova Airlines, established in 2003and headquartered in Prishtina,is seeing steady growth in turnoverand has ambitious plans to expandits route network and services,according to Remzi Ejupi, CEO,who founded the airline to provideservices in Kosovo.The airline, which works throughpartner airlines and also servesas Kosovo’s top travel agency, hasboosted its turnover by an average3% to 5% per year since 2006 andanticipates around €60 million inturnover this year. Kosova Airlinesowns a 20% share of HamburgInternational via its German DistributionPartner Eurokoha ReisenGmbH. Most flights go to Germanyand Switzerland and the airline hasestablished hubs in Dusseldorf,Stuttgart, Munich and Zurich forconnections throughout the regionand beyond. This year it launched anew direct flight between Prishtinaand Basel, Switzerland.Remzi Ejupi, PresidentIn its role as an airline, KosovaAirlines offers flights via partnercarriers between Prishtina and NewYork; Zurich, Basel and Geneva(Hello and Edelweiss Air); Stuttgart(Germanwings and Air Berlin);Dusseldorf (Air Berlin); Cologne/Bonn and Hamburg (Germanwings);Munich (Hamburg International);Frankfurt and Hanover (Air Berlin);and Antalya (Atlasjet and SunExpress).Expanding route networkAlbania, Italy, Vienna, London andBrussels are all destinations RemziEjupi would like to add to KosovaAirlines’ route network. Remzi Ejupisays, “There is significant potentialfor routes between Kosovo andneighbouring countries, includingAlbania. Currently we offer flightsto Turkey only during the summerseason so we see growth there as well,particularly for year-round flights forbusiness customers.” Kosova Airlinesoffers flights between Germany andMacedonia during the high touristseason and would like to extend itsMacedonia service by offering flightsbetween Macedonia and Switzerland.It would also like to increase thenumber of flights to its establisheddestinations.The airline welcomes partnershipswith international companiesand investors to help it achieve itsgrowth plans. “We are experiencedenough to know that we cannot doeverything on our own, so we arelooking for partnerships, and I havealready made some contacts. We havea great deal to offer, including morelong-haul passengers for a partnercompany,” Remzi Ejupi says.Kosova Airlines also aims to helpjump-start Kosovo’s tourism industryby providing more flights betweenKosovo and key European destinationsand by forming partnershipswith major European tour operators,including in Albania, which RemziEjupi sees as a growth market. Heconcludes, “We aim to focus onour core activities and to becomea leading airline in Kosovo andthroughout the region.”Kosova AirlinesVellusha e Poshtme 1710000 PrishtinaKosovoTel.: +381 38 24 44 44Fax: +381 38 24 91 86www.kosovaairlines.comwww.flyksa.com41

Calling the Shots: Competition IsBringing Increased Quality to the SectorAs a crucial component of Kosovo’sinfrastructure roll out, the telecommunicationsand IT sectorhas already seen unprecedentedinvestment which is set to increaseyet further. Internet and mobilepenetration are growing rapidlyin the nascent country with ahighly qualified and youthfuldemographic providing both areceptive consumer base and apotential high skilled workforcefor outsourcing operations.The telecommunications sectoris home to the country’s largestcompany by capital and to some ofthe most prominent investments.The incumbent operator inKosovo is the Post and TelecommunicationKosovo (PTK) which isresponsible for Post of Kosovo, thefixed line operator, Telecoms ofKosovo, and the mobile operator,Vala. PTK, which is a publicenterprise under the aegis of theKosovo Trust Agency has 107,000landline users and, through itssubsidiary Vala, 830,000 mobileusers. Furthermore, the companyis Kosovo’s most profitable with anestimated value of approximately€1.3 billion.If more evidence were needed forthe great strides forward that thecountry has made, one only need tolook at the penetration levels in thetelecommunications sector. Internetpenetration in Kosovo had hit 15%by the final quarter of 2005 puttingit on a par with Turkey and abovemore established regional playerssuch as Romania and Albania. In2007, this was given a further boostwith the launch of PTK’s broadbandpackage, ‘PTK ADSL’. The servicehad approximately 10,000 customersor a 25-30% market share by 2008with Ipko Net and Kujtesa being theother market players. The countryalso had a mobile penetration rateof 35% in June 2007, a significant42

KOSOVOTransport & Communicationsfigure considering the brevity of theindustry in Kosovo. Nevertheless, thisprovides extremely good potentialfor rapid growth.From a network point of view, PTKis already well placed to absorb thisgrowth. Vala’s mobile network hasbeen rolled out over approximately90% of the country. The companyalso has 127 roaming agreementsfor post-paid customers showingits intent to expand its internationalnetwork. On the fixed linesegment, Ipko Net, the country’slargest internet provider has rolledout an extensive broadband networkwhich has far-reaching populationcoverage.However, the country is not restingon its laurels. 2007 saw PTK’smonopoly of the mobile segmentcome to an end when IpkonetTelekom Slovijne/Mobitel won thesecond operator mobile licensefor €75 million. The consortiumannounced their intentionimmediately with investment inits network which is expected toreach €120 million by the timeroll out is complete. One of thefirst contracts for the GSM networkwent to Ericsson Nikola Teslawhich won a €37 million contractfor the supply, implementationand operation of the GSM communicationsand transmission system.While Ipkonet Telekom Slovijne/Mobitel will initially concentrateon achieving coverage in Kosovo’sdense urban areas, labelled theKosovo city ring, it expects toachieve full network coveragewithin three years. Indeed, theconsortium has ambitious planshoping to capture a 50% marketshare by 2012 and approximately 1million GSM customers by 2015.However, competition is likely tobe stiff with the state planning toprivatise the incumbent operatorVala in the near future. Indeed,with a young, educated, technologicallysavvy population, penetrationrates on both voice and data shouldshoot up over the coming years.This young work force, which hasa competitive cost advantage overmany neighbouring countries, willalso allow Kosovo to position itselfas an outsourcing hub followinga model similar to the one so successfullyemployed by Bulgaria.Currently, public and private institutionsin the field of informationtechnology, supported by leadingmultinational firms such as CISCOand Microsoft, are being rolledout across the country supportingthe development of a knowledgeand high-tech economy. Initially,Kosovo is certainly well placedto develop the full spectrum ofoutsourcing operations includingsoftware development, datamanagement, call and supportcentres and other consultingservices.The government realises that toachieve these aims the regulatoryand legal framework has to be inplace. To this end, the TelecommunicationRegulatory Authority(TRA) has been working onlicensing, encouraging privatesector participation and ensuringfair competition. While the countryis still in the process of receivingrecognition from the InternationalTelecommunications Union (ITU)which will allow the country toregister a telephone country codeand internet domain name, muchof the ground work has been doneto provide fertile soil for furtherinvestment.Indeed, the telecommunicationssector should provide unboundedopportunities for investment inthe coming years. Indeed, once thecountry reaches market saturationon voice and data, the countryshould be in a good position tooffer fixed-mobile convergenceand bring the next generation ofservices to a hungry market.43

KOSOVOTransport & CommunicationsIPKODynamic Telecom Provider Aims toOffer One-Stop Integrated ServicesIPKO won the €75 million tenderfor the second mobile telecom serviceslicense in Kosovo last year, one moresuccess story for this dynamic telecomenterprise. IPKO offers a full rangeof integrated services and contentfor mobile communications, fixedtelephony and the Internet.After only eight years ofoperations, it already servesaround one million customersin Kosovo and is the country’stop telecom investor. IPKO hasalready invested over €200 millionto date in building a cutting-edgeGSM network covering 80% of thecountry, with financial supportfrom the European InvestmentBank. Telekom Slovenia has a63.75% share in the company.CEO Akan Ismaili explains thatIPKO earned a 35% share of themobile services market and wasproviding mobile telecom servicesto over 300,000 customers in lessthan nine months after its launch ofmobile services last year. IPKO is notonly the biggest foreign investmentin Kosovo to date but also Slovenia’sbiggest investment abroad. “Thisshows not only Telekom Slovenia’scommitment to Kosovo but also itsfaith in the potential of the Kosovarmarket,” he says.Mobile telecom penetration inKosovo is currently around 50%and IPKO aims to boost thatpercentage.Akan Ismaili, CEOPrior to mobile, IPKO has heavilyinvested in the fixed network. Nowit operates a fixed network in themain cities and towns of Kosovo,reaching over 150,000 residences.The company also has 52,000broadband subscribers.IPKO’s competitive edge is itswinning combination of state-ofthe-artsolutions, the latest technologies,a wide range of packages,added value services, quality,reliability, security, and solid usersupport 24/7.Reliable telecom service inKosovo and beyondMobile services will be the maindriver of IPKO’s continued growthin Kosovo, but that is not the wholestory. “We want IPKO to become aone-stop shop for integrated telecommunicationsservices,” AkanIsmaili explains, adding that IPKOalso plans to invest in the fibreoptic connections with very highcapacities to regional and internationalhubs. He points out thatthrough Telekom Slovenia, IPKOalready offers reliable telecomconnections throughout Europe.As for the future, Akan Ismailiexplains, “We are here to provideservices, but at the same time weare open minded about any newpartnerships.”He adds, “IPKO is an initiatorof development within Kosovo’stelecom sector. We see ourselvesas setting the standard for doingbusiness successfully in thismarket.”Mother Theresa StreetRTK Building, 5th floorPrishtinaKOSOVOTel.: +381 38 700 010Fax: +381 38 700 001www.ipko.com44

KOSOVOAgriculture & Food IndustryMinistry of Agriculture, Forestry and Rural DevelopmentTalking Shop: The MinistryMore Goods for MarketThe Ministry of Agriculture, Forestry and RuralDevelopment is charged with overseeing the crucialtransition from largely subsistence rural farming to amodern industrialised agricultural sector. The Ministryhas long been working with UNMIK to achieve thesegoals and since independence has stepped up its effortsto attract foreign investment to the potentially lucrativesector. In parallel to such incentives, the Ministry is coordinatingits efforts with the European Union to ensurethat legislation and regulations governing the sector areharmonised with the EU’s standards.Idriz Vehapi, Minister of Agriculture, Forestry and Rural DevelopmentHere, ET talks to Idriz Vehapi, the Minister ofAgriculture, Forestry and Rural Development, aboutthe future of agriculture in newly independentKosovo. From wine-making to land consolidationand employment generation, Mr. Vehapi believesthat agriculture will play a vital and prominent rolein the future economic success of his country.ET: How important is the agricultural sector for theeconomy of Kosovo?I. Vehapi: The agriculture sector is a very importantpart of Kosovo’s economic development, not leastbecause of the fact that more than 50% of thepopulation of Kosovo lives in rural areas. Moreover,the majority of this population is young, so thismeans that agriculture can provide a firm basis foreconomic growth. However, we recognise that in thefuture other sectors will develop and that less people46

KOSOVOAgriculture & Food IndustryTalks About Producingwill be involved in agriculture. For example, in theUK, a small percentage of the population is involvedin agriculture now and a similar trend will also takeplace here in Kosovo.ET: Tell me a little bit about the development thathas taken place in the sector since the declarationof independence in 2008?I. Vehapi: Before the declaration of independencethere was the new election, in which the future PrimeMinister made agriculture one of his campaignpriorities. Subsequently, after the declaration ofindependence, we laid out our agricultural prioritiesfor our donors. Within this program, the new primeminister has made agriculture an absolute prioritywhich was stressed at the Donors Conference inBrussels. Of course, there are also private investorsfrom Switzerland, The Netherlands, Germany, Italy,and other European countries interested in Kosovo’sagricultural sector.ET: What is the most important role that Europeaninvestors can play in Kosovo’s agriculture sector?I. Vehapi: We need them to bring technology andknow-how but also the finance for new initiatives. Ontop of this, we are looking to develop commercialfarms endowed with modern technology, higheryields and higher efficiency so that labour can be putto work in other sectors. Most importantly, Kosovowants to make it as easy as possible for outsideprivate investors to invest in the agriculture sector.We already have some commitments to invest in theagriculture sector, primarily from private investors,because agriculture is one of the top five sectors ofKosovo’s economy.ET: What challenges do you see ahead for theagriculture sector?I. Vehapi: Firstly, the most important challenge is thatthe farms are very small and thus less competitiveand profitable than those in neighbouring countries.Therefore, the main challenge is land consolidationwhich will create larger farms in the future. Beyondthis, Kosovo needs more capacity in processing agriculturalproducts. Also, food storage is an issue ascurrently farming is determined by the seasons. Thisis certainly one area where investors can get a highreturn on investment.ET: How do you plan to confront these challenges?I. Vehapi: First of all, these challenges are certainlya priority. Bigger farms are necessary to competeand achieve the necessary productivity. To this end,we always advise our farmers to unite in associationsand cooperatives to be stronger.ET: How do European investors look at theinvestment opportunities with regard to thisconsolidation?I. Vehapi: For land consolidation, one of the maininvestors was the World Bank and EU which is alsoinvesting in the irrigation system. Since the consolidationand irrigation are our priorities, weincreased our budget regarding these two areas.The investments in these sectors will create opportunitiesfor farms to be more competitive which willattract foreign investors. We have a target of 70,000hectares and so far 12,000 have been recovered.ET: Why should Europeans invest in Kosovo ratherthan neighbouring countries?I. Vehapi: My opinion is that investors should look atKosovo because we have a young population that wantsto work and for less money than in other EU countries.So it is a low-wage country compared to neighbouringcountries. However, at the same time, we have aneducated workforce, a significant percentage of whichhas studied and lived abroad. Most of them would liketo work here, which is a great opportunity for foreigncompanies wanting to set up business here.47

KOSOVOAgriculture & Food IndustryLay of the Land: The Government IsOverseeing the Commercialisation ofthe Country’s FarmsAgriculture has always played aprominent role in Kosovo’s economy.With more than half a millionhectares of cultivable land and 60%of the population living in ruralareas, the country is well set up forfurther investment in this crucialsector. With the ongoing privatisationprocess, Kosovo’s larger farms,under the stewardship of the KosovoTrust Agency, present particularlygood opportunities for investment.The government has laid outa detailed strategy to furtherstimulate agricultural developmentin the country. After assessingthe topographical and climateconditions in the country, theMinistry of Agriculture, Forestry andRural Development will be targetinghigh value crops such as fruit andvegetables. The government isalso keen to make the transitionfrom a largely subsistence baseto a commercial base with thedevelopment of the land marketto increase the size of farms.Moreover, the ministry hopesto develop knowledge transferthat will raise the productivity ofthe land. In parallel with thesepractical measures, the country willbe looking to bring its legal andregulatory framework in line withthe highest EU standards.With over 250,000 hectares ofmeadow and grassland, Kosovo iswell placed to expand its agriculturalbase. Currently, grains suchas wheat and maize account for thelargest share of the sector in terms ofland use. However, the governmentis keen to re-align the focus to fruitand vegetables which presentlyaccount for just over 38,000 hectaresof arable land.Kosovo’s viticulture industry is wellestablished. The public sector hasa wine processing capacity of 112million litres while the private sectorprocesses approximately 30,000litres. The government is also lookingto revitalise its livestock productionindustry so that the country canbecome increasingly self-sufficientin meat and dairy production.For all segments of the agriculturalsector, the government has providedincentives to bring further investmentto the country. Most agriculturalinputs and capital goods are tariff freewhich is supported by VAT exemptionfor a wide range of agriculturalinputs. The government hopes thatthis will increase production dramaticallyallowing the country to becomea significant agricultural exporter.This is no pipe dream. Kosovo hasa series of competitive advantagesin the agricultural field includinghigh yields and cheap labour. Withlocal production currently onlycovering 30% of domestic demand,the potential for growth is sizable.The stimulation of the sector shouldallow the government to both bringdown its reliance on imports as wellas create a liberal environment tobecome a major agricultural exporterto the EU.48

KOSOVOAgriculture & Food IndustryPeja BreweryMarket-Leading Local BreweryExpanding RegionallyPeja Brewery has carved out a 70%share of the local beer market thanksto its high quality beers made withcutting edge techniques.As Sebastjan Gergeta, actingGeneral Manager, explains, thebrewery was founded in 1971and acquired in 2006 by leadingSlovenian Pivovarna Laško Groupand local Kosovar investors,mainly Dukagjini Group’s ownerEkrem Lluka. “After the €11million privatisation tender, weinvested around €12-13 millionin upgrading the brewery’sfacilities, equipment, technologiesand marketing. Now we area very well known brewery with avery well known brand. Any newproduct we introduce will mostlikely be a success,” he says.Thanks to its upgrades, thebrewery has increased the shelflife of its beer from three weeks tosix months. It has been reinvestingrevenues but hopes to make aprofit next year and anticipatesan average 10% growth over thecoming five years.Peja aims to expand to marketsbeyond Kosovo, since it has not yetreached full production capacityand believes that the Kosovarmarket will not be able to keep upwith the brewery’s growth. Pejaalready has agreements with distributorsin Montenegro, Serbiaand Macedonia but its main focusnext year will be Albania, where itaims to boost sales by 5% to 6%.“We are welcome everywhere andpresent in every market in theregion,” Sebastjan Gergeta saysproudly.Signficant investmentpotentialPeja Brewery offers very attractiveinvestment potential. “Europeanportfolio investors, includingsmaller investors, and fundingorganisations are very welcome.We are a very transparent companyand we would repay the faith thatany European institution has inus,” Sebastjan Gergeta says. Headds that new investments will gotoward expanding the brewery’sproduct lines and continuing toupgrade its technologies. Around€15 million over the next fiveyears will be needed to bring thebrewery fully up to EU standards.Peja would also like to partnerwith distributors, suppliers andconsultants in Western Europe.The brewery’s successfulpartnership with Slovenia’s topbreweries, Pivovarna Laško andPivovarna Union, gives it an edge.“We have the necessary know-how,financing and guarantees, as wellas people who know the business.Our 70% market share, which weaim to boost to 80%, gives us avirtual monopoly in Kosovo and weSebastjan Gergeta, acting General Managerhave basically taken over the distributionsystem,” Sebastjan Gergetaexplains. He adds, “Investorsinterested in Kosovo should workwith a strong local partner.”Peja Brewery30000 Peje, KosovoTel.: +381 39 432 661Fax: +381 39 433 98949

KOSOVOAgriculture & Food IndustryMeridian CorporationDynamic Group Welcomes JointVenture PartnersThe Meridian Corporation offersoutstanding potential for foreigninvestors. The family-owned groupwith 170 employees was relaunchedafter the war in 1999 and hassince achieved significant growth.Meridian has operations in 12locations and is one of Kosovo’sbiggest distributors of beverages andfoods, including fresh and frozenfoods as well as organic products andinternational brands of beverages.Meridian works with over 4,000vendors in Kosovo, including retailchains, supermarkets, drug storesand the HoReCa (hotel, restaurantand catering) sector.The Meridian group includes foodsand beverages divisions, Montazhi(construction), and Energoinvest(energy activities). “Montazhiis known for its construction ofboth residential and commercialbuildings as well as electrical installations,heating and cooling systems,and water and waste treatmentfacilities. Energoinvest produceselectrical equipment, transformerHakif Gashi, CEOstations and more. We acquired bothcompanies a couple of years ago andnow we are looking for partners andjoint ventures,” explains CEO HakifGashi.Meridian is especially interested in ajoint venture in the fast growing foodand beverages sector since the groupalready has the necessary facilities,resources and building land. “We arelooking for a partner who can start upfood and beverage production withus,” Hakif Gashi explains. Meridianeventually plans to expand itsthriving food and beverage distributionbeyond Kosovo, to Macedonia,Montenegro, Albania and Serbia.Significant potential in energysectorBoth Montazhi and Energoinvestoffer strong growth potential aswell. Hakif Gashi points out, “Energoinvesthas the most potentialbecause Kosovo’s energy sector isvery undeveloped. We anticipatesignificant growth in the near future.We are looking for joint venturesand partners that can help us takeEnergoinvest and Montazhi to thenext level concerning technology,know-how, experience, access tonew markets, and financing.” Energoinvesthas already served KosovoElectrical Corporation (KEK),private companies, power plants andseveral mines.Kosovo has outstanding prospects,Hakif Gashi believes, and Meridianis the ideal local partner forinvestors. He says, “Meridian offersfuture partners a creative andcapable management, dedicatedand motivated employees, efficientbusiness processes and structure, awell-established local presence withexpeditious and qualitative services,17 hectares of building land, andconstruction capacity. In addition,doing business is not a problem inKosovo. We have the same standardsand values as in the EU and we hopeour ties with the EU will grow evenstronger in the future.”Meridian Corporation LL.CBul. ‘ Bill Clinton’, p.nZona industriale10000 Prishtina, KosovoTel.: + 381 38 541 521Fax: + 381 38 541 524meridian@meridian-ks.comwww.meridian-ks.com50

• Infrastructure Development: The Minister Has Ambitious Plans to Improve theCountry’s Infrastructure• A New Power Plant and Untapped Coal Reserves Are Set to Electrify the Industry• Mine Games: A Growth in Exploration and Mining Licenses Should Usher inExplosive GrowthEnergy & Mining“Looking at the mining sectorspecifically, there is great potentialto mine gold, copper and nickelamongst other nitrate deposits. Ontop of this, ongoing explorationcontinues to unearth new deposits.”Justina Shiroka-Pula, Minister of Energy and Mining

Justina Shiroka-Pula, Minister of Energy and MiningThe Ministry of Energy and Mining in Kosovo has been dealt a mixed hand.On the one hand, the country has almost unlimited potential in this sector withrich deposits especially in lignite and in variety of metal minerals such as Leadand Zinc, Ferronickel, Bauxite, Magnesite, Chrome, Copper, Gold and Silver tothe rather rare and high value halloysite clay. On the other, much work needs tobe done to upgrade the country’s energy infrastructure. However, the Ministryremains undaunted by this task and has ambitious plans to transform the countryfrom a net electricity importer to a net electricity exporter over the coming decade.52

KOSOVOEnergy & MiningMinistry of Energy and MiningInfrastructure Development: TheMinister Has Ambitious Plans toImprove the Country’s InfrastructureIndeed, whether you look at the country’s mineral depositsand mining capabilities or the requirements for power plantroll out and an increase in capacity of many hundreds ofMega Watt (MW), it is abundantly clear that the prospectsfor investment in the country are strong. The government iskeen not to squander these opportunities and is offering avariety of methods to get the most efficient, cost effective andvalue added use out of these deposits and infrastructure.In the mining sector, mines can either be acquired throughthe ongoing privatisation process or re-energised andre-modelled by entering joint ventures with private owners.In the energy sector, Kosovo has embarked upon the pathto a new power plant called Power Plant New Kosovo, andan associated lignite mine which when completed will bethe largest ever private investment in Kosovo’s history.The government has set the ambitious target of startingoperations in the first unit of the new plant in the periodstarting from 2013 to 2014. It becomes clear why this is sucha pressing concern when one contemplates that Kosovowould increase its GDP by an estimated 17% or 220 millionwith the addition of a further 1,000 MW to its capacity in thisshort period.The prospective growth for the country through this sectoris therefore clear. Here, ET, talks to Minister of Energyand Mining, Justina Pula-Shiroka, about the opportunitiesand challenges facing the sector. From the relativevalues of established mines to untapped mineral depositsand exploration, Justina Pula-Shiroka sees a central rolefor mining in Kosovo’s future. The Minister also talksabout what makes Kosovo such an attractive propositionwhich goes beyond resources beneath the earth to thoseabove it, namely human resources and the young dynamicpopulation.ET: How important is the mining sector for Kosovo’seconomic development in general?J. Pula-Shiroka: The mining sector is a key sector for thedevelopment of Kosovo. Kosovo is very rich in minerals andhas a long experience in the mining industry which helpsto attract many investors. Moreover, we are offering to theinterested companies several incentives to enter the Kosovomarket. We have several old, pre-existing, functioningmines with over a numerous qualified mine workers andemployees. One of these has already been privatised. Themining sector has attracted considerable British and USinvestors and is open to foreign investment.ET: What are the major challenges facing the miningindustry?J. Pula-Shiroka: Well, we had a problem with the oldermines where the licenses had passed their expiration date.Some of these mines were also in need of restoration.However, having said that, with regard to the older mines,we expect the levels of interest to be higher because they aremore attractive for investment given that they are alreadyestablished and have an operating history. We believe thetime will come when these mines receive the necessaryinvestment. Some of them are very promising for investorsas they have higher returns.ET: What are the planned investments for the nextfive years?J. Pula-Shiroka: The government is planningdevelopment of several interest zones of metallic mines.Actually, there are ongoing activities in preparingfeasibility studies for these interest zones, in order tofollow-up with respective bidding procedures.ET: What would be your personal message to ourEuropean investors?J. Pula-Shiroka: The European investors are definitelyvery welcomed in Kosovo. I am certain that theywill encounter here friendly social and businessenvironment. I am sure too that they will find heremore competitive prices than elsewhere in region,and transparent procedures of bidding. I am glad toremind the interested parties that we have here welleducated young population, skilled in communicationskills, particularly with English speaking people.Looking at the mining sector specifically, there isgreat potential to mine lead and zinc, gold, copperand nickel amongst other nitrate deposits. On top ofthis, ongoing exploration continues to unearth newdeposits.53

KOSOVOEnergy & MiningA New Power Plant and UntappedCoal Reserves Are Set to Electrifythe IndustryAs the country looks to move forward following the boonof independence in February 2008, energy has beenearmarked as a key piece of Kosovo’s development jigsaw.Indeed, since the turn of the century, the internationalcommunity through the UN Mission in Kosovo (UNMIK)has been working with the Kosovo Energy Corporation(KEK) to help the country meet its energy needs andrebuild its utilities infrastructure. The state now wantsto build on this to exploit its abundant resources oflignite to power the country’s future development.As part of this process, the Ministry of Energy hasdrafted a 10 year energy strategy that lays out thesupply and demand dynamics of the sector up until2015. With estimated lignite reserves of between 11.5billion and 14 billion tonnes, representing the fifthlargest reserves in the world, the government is wellplaced to meet the residential and industrial energyrequirements over the coming decade.Currently, KEK runs two power plants Kosovo A andKosovo B. The plants are not currently running at fulldesign capacity but provide approximately 7,000MW tothe country. This falls short of peak demand requirementswith the government importing up to 400MW ofelectricity during the winter months. Kosovo, however,is working hard to bridge this deficit. The governmentis in the planning stage for Kosovo C and an associatedlignite mine, which will bring the phased introductionof 2,000MW to both the local market and also to theelectricity grid of South East Europe. The ambitiousplan to move from being a net importer of electricityto becoming a net exporter is expected to be launchedbetween 2012 and 2014.With a projected GDP growth of 9% between 2009 and2015 and investments worth €14.488 billion, the countrywill desperately need this capacity expansion to fuelthis economic growth especially in the manufacturingsector. Moreover, the extra capacity will give the countryan export capability of between 300-500MW helping toease current deficits. Indeed, this surplus energy maytranslate into as much as €150 million worth of exportsafter 2012. Indeed, even with the Ministry of Energy’shigh growth scenario of an annual increase in demandof 5.5%, the country would still have surplus energyupon the completion of Kosovo C.Therefore, although much work needs to be done tobuild on the pre-independence infrastructure, thegovernment is well placed to roll out extra capacity whichwill position Kosovo as a major player in the South EastEuropean energy market. As such, and with voluminouslignite reserves, the future looks bright both metaphoricallyand literally.55

Mine Games: An Increase inExploration and Mining LicensesShould Usher in Explosive GrowthKosovo has rich potential in themining sector which has been themainstay of the country’s economy forcenturies. With bountiful untappedreserves, the sector is positioned for adramatic increase in production andrevenues. Indeed, recognising thepotential, the government is activelyworking to privatise the miningsector and present opportunities forforeign investment in explorationand production.56

KOSOVOEnergy & MiningKosovo’s mineral reserves speak for themselves. Withestimated lignite reserves of 14.7 billion tonnes, thecountry has the second largest discovered coal depositson the European continent and the fifth largestlignite reserves in the world. The quality of this coalis also impressive with an exploitation cost of €1.1/Gj. This marks it out as the most price competitivein the region. Beyond coal, the country also benefitsfrom rich mineral and base metal deposits. Kosovo isestimated to have lead and zinc reserves amountingto 48 million tonnes as well as nickel deposits of16 million tonnes. Chrome reserves are estimatedto number 89 million tonnes while known Bauxitereserves are in the region of 13.2 million tonnes.The country can also count on significant reserves ofgold, silver, copper and magnesium. The governmentestimates that the last of these is found in enoughquantities to last 100 years.This all bodes well for Kosovo’s future economicsuccess given the current price trends for thesemetals and minerals. Although lead prices have fallenin 2008, they had still maintained a price of well over€800 in the second half of 2008. Likewise, Nickelprices were still reasonably strong remaining abovethe €8,400 mark in November 2008. This suggeststhat Kosovo can garner significant revenue from thesebase metals alone. On top of this, the governmentrecently discovered 3mt of high-grade halloysite atFarbani Potok. The importance of this should not beunderestimated given the fact that this is only one offive exploitable sites globally where such high gradeclay, with a value of €112-360 per tonne, has beendiscovered. Moreover, current world production onlystands at 150,000 tonnes per year. This suggests thatKosovo is well placed to exploit its mineral reserves.However, the country is at the beginning of the processof taking advantage of this latent wealth. In 2005, theEU pillar established the Independent Commission forMines and Minerals (ICMM), a regulatory body whichis charged with monitoring and attracting investmentto the sector. ICMM has a broad remit which includesthe issuing and relocation of exploration and mininglicenses and special operation permits. It also issuespermits for commercial exploitation in the miningindustry as well as taking responsibility for theexpansion of the mining packages, the collection ofinformation, distributing information to investors,and monitoring reserves through GIS surveys.According to Azem Rexhaj, Director of the ICMM, “Wethink that the mining sector is the key to Kosovo’s futuredevelopment. Kosovo is very rich with minerals. Also ifyou look at it from an investment point of view, everyweek we have three or four private investors cominghere to evaluate the possibilities to invest here. Kosovoalso has a long experience in the mining industry. TheTrepca Mining Complex has been here since Romantimes. What’s more, in 2006 we did a new geologicalsurvey and the results showed that Kosovo has muchmore to offer than the Trepca mines.”Indeed, although the Trepca mines are Kosovo’s mostfamous, the country has abundant reserves spreadthroughout the country. However, the Trepca mines,whose lead and zinc deposits are mainly located in theeast of the country, are among the initial prioritiesof the government in the mining sector. The Trepcametallurgical complexes, with significant depositsof lead, zinc and silver, were the largest miningoperation in the former Yugoslavia and the Kosovogovernment wants to re-establish their prominence.It is believed that an investment of approximately€200 million will be required to revitalise the mines.Currently, production operations are only running ata test level.The Trepca management currently has plans, in thefirst phase, to attract private investors to create newinvestment opportunities for public private jointventures (JV). At a second stage, it is envisaged thatfull scale privatisation will take place to provideefficient company management and the market powerto pursue investment in value-added zinc products.The ICMM is working hard to attract foreigninvestment in this respect and in the mining industry57

KOSOVOEnergy & Miningmore generally. During 2007, a total of 70 exploration andmining licenses were issued with the country’s explosivesecurity system (ESS) fully up to NATO standards andunder the control of the ICMM’s mining inspectorate.The revenue generated from these licenses is crucialto the country’s budget. In 2007, mining royalties andother fees amounted to an estimated €2 million.However, this is not a short-term revenue stream.“According to the law a company gets an explorationlicense for the first 2 years, and then they can applyfor an extension for another two years. However, thenthe licensed area will be reduced by 50%. They [thecompany] have the possibility to extend the licensethree times,” explains Azem Rexhaj. “Within these sixyears they will have to get the mining license and startmining or they will lose the license. This is so nobodyloses their money because exploration costs are veryhigh. Because of these rules we think that in the nextfive years we will have a minimum of three new mines inthe beginning stages of operation and this will for surecontinue,” he adds.There has already been a significant level of interestin licenses. A series of international companies haveentered the Kosovo market on an exploratory basis.For example, Lydian Resources of the UK has threeexploration licenses for projects in Drazne amongstother places. North American companies have alsoreceived exploration licenses with the initial explorationbeing so promising that many international companieshave applied for the full mining licenses.Beyond this, the government has worked on a numberof privatisations. The mining sector has seven SociallyOwned Enterprises (SOEs) that will be presented forprivatisation. The Ferronikel Company, which stoppedmining as a consequence of conflict in the area,provides a highly profitable opportunity for investment.The ferronickel reserves are significant and the mine isconnected to the railway giving good access to importadditional ore concentrates through Thessaloniki portand Albania. It also provides good opportunities forexport and employment generation.The country is therefore well placed to position itself asa leading producer and exporter of minerals and metalsfor the whole region. Beyond lignite, which will play avital role in powering the local energy market, Kosovo candraw on its substantial reserves of base metals which arecontinuing to command significant prices on the internationalmarket. Therefore, the government is confident ofbuilding effective synergies with the private sector whichwill benefit the country and investors alike.58

KOSOVOEnergy & MiningLydian InternationalMineral Exploration and DevelopmentGroup Confident About KosovoLydian International is a BritishExploration and DevelopmentCompany listed on the Toronto StockExchange. Lydian is confident aboutprospects in Kosovo, where it’s whollyowned subsidiary Kosovo ResourceCompany (KRC) has an advancedzinc, lead, silver exploration projectin Drazhnje, as well as explorationprojects in Crepulje and Rahovec.Tim Coughlin, CEO, says thatKRC now accounts for around35% of Lydian’s project budget,with the remainder devoted toLydian’s exploration initiativein Armenia. KRC’s operation inDrazhnje should begin commercialproduction in 2011. “Once youadvance a project like this to thepoint at which it is feasible andbankable, which requires a lot ofexploration work, you then moveto debt financing and constructioncan begin. All our projects inKosovo are relatively early stage yetTim Coughlin, CEOWorkers from Lydian’s local mining contractorStone International underground at Drazhnje.interesting for our investors sincethey show real potential for growth,”he says.Coughlin adds that while global metalprices are always a major concern forany mining company, Lydian has noworries about operating in Kosovo.“Kosovo’s mining laws are alreadyinternational standard and there issignificant regulatory emphasis onprotecting the environment andengaging local communities. In thissense our operations benefit fromconstant review by specialists from theInternational Finance Corporationwhich is part of the World BankGroup and one of Lydian’s largestshareholders,” he explains.“First mover” advantageAs a potential investment target,Lydian offers a number of competitiveadvantages. “Lydian is the only internationalexploration companycurrently developing resources inKosovo. We are benefitting fromour “early bird” exploration strategyin developing the best projects andsecuring the best people. We aremost proud of our team in Kosovo,”Coughlin points out.Branding Kosovo is an importantgoal for Lydian, which has quicklybuilt up its own reputation as a“first mover” in emerging and transitionalmarkets. “We try to sellKosovo everywhere we go in orderto attract investors and make clearthat this country is on the path toEuropean Union accession, thatit is a good place to live and work,and that its mining laws are some ofthe best investors can hope to workunder,” Coughlin says.Urging European investors to exploreopportunities in Kosovo, Coughlinconcludes, “When we came here in2006 there was some risk, but nowthe government is very committed tosupporting foreign direct investment,and the local workforce is well trained,enthusiastic and committed. We took abet that in Kosovo everything would beokay, and it has been. Now we are in agreat position. Lydian is here to stay.”Lydian International Ltd.Bajram Kelmendi 15 Prishtina,10000 KosovoTel.: +381 38 249 990Fax: +381 38 248 518www.lydianinternational.co.uk59

• Going Green: The Ministry Talks About How the Environment Can Help Business• Infrastructure and Housing Requirements Are Driving the Sector ForwardEnvironment & Spatial Planning“All our companies do good workregardless of their size. Eachcompany in every segment helpsto increase the development of thesector because all companies workin a timely manner striving forquality, efficiency and excellence.”Mahir Yagcilar, Minister of Environment and Spatial Planning

KOSOVOEnvironment & Spatial PlanningRegional Water Company-PrishtinaWater Company OffersOutstanding Investment PotentialThe Regional Water Company-Prishtina(KUR-Prishtina) is one of Kosovo’spost war success stories. As CEOSkender Bublaku explains, Kosovohad around 30 water companies beforethe war which served around 40%of the population. Today, thanks toa consolidation campaign between2002 and 2007, seven regionalwater companies handle distributionof water throughout the country. Inaddition, these water companies havebeen upgraded to meet EU standards.KUR-Prishtina is now valued at some€80 million and covers its expenseswith its own revenues. It has doubledthe number of its customers since 1999and now serves 550,000.Kosovo’s successful model forwater distribution is now beingimplemented by neighbouringcountries. “Even though we need alot of investments in the water distributionfield, what we have alreadyachieved is quite an impressiveresult. We now serve around 75% ofthe population,” Skender Bublakupoints out. Individual wells andother private water resources supplythe remainder of the population,but KUR-Prishtina aims to servethe entire population in the nearfuture.Privatisation of water distributionis now allowed by law but thegovernment has not yet announcedSkender Bublaku, CEOits plans for the sector. “Getting thelegislation to allow for privatisationwas the initial step in the process,”Skender Bublaku says, noting thatthe government is likely to retain amajority share in the water distributionsector but will allow for increasedparticipation by the private sector.The waste treatment sector, onthe other hand, is likely to be fullyprivatised. Foreign companies andinvestors will find significant opportunitiesin both sectors as Kosovo’seconomy expands. Skender Bublakuexplains that private investmentwill be needed to build a new wastetreatment facility, and anotheropportunity for foreign investors isto provide drinking water throughoperating the existing network andcollecting fees, following the systemcurrently employed in electricitydistribution.Providing outsourced servicesconcerning water distribution andwaste treatment is another avenue forforeign investors. Skender Bublakusays, “Here at KUR-Prishtina, wesupport the entry of the privatesector in all activities, and Kosovo’snew law on public-private partnershipscreates an ideal opportunityfor foreign investors.”KUR-Prishtina offers outstandinginvestment potential not onlybecause of the opportunities inKosovo’s water sector but alsobecause of the company’s successfulreconstruction, sound financialstatus and strong track record. Topotential investors, Skender Bublakusays, “Do not hesitate to contact us!Kosovo is a country where you canmake a profit!”Regional Water Company J.S.C.rr Tahir Zajmi p.n.PrishtinaKOSOVOTel.: +381 38 541 211/129Fax: +381 38 541 437www.kur-prishtina.com61

KOSOVOEnvironment & Spatial PlanningMinistry of Environment and Spatial PlanningGoing Green: The Ministry TalksHelp BusinessThe Ministry of Environment and SpatialPlanning is at the forefront of Kosovo’s ambitionto encourage sympathetic and sustainabledevelopment. The work of the ministry touches onseveral sectors such as energy and constructionensuring modern transparent regulations. TheMinister of Environment and Spatial Planning,Mahir Yagcilar, took time to speak to ET aboutthe synergies between environmental policy andeconomic development.Mahir Yagcilar, Minister of Environment and Spatial PlanningET: How important is the development of the constructionsector for Kosovo’s economy?M. Yagcilar: In every country it is importantespecially in a post-conflict situation. In recoveringfrom the conflict, we need to be efficient in everyarea. Therefore, quality in construction safety andefficiency in terms of energy and proper insulationis what helps economic development. Good infrastructurecan also assist economic development inother aspects.ET: Which particular developments have beensignificant since the declaration of independence?M. Yagcilar: Firstly, the legal infrastructure was put inplace and transparent competition in the tenderingprocess for foreign companies was established. Inthe construction sector, government licenses wereissued more easily.62

KOSOVOEnvironment & Spatial PlanningAbout How the Environment CanET: What role specifically can foreign investorsplay in the development of Kosovo’s constructionsector?M. Yagcilar: They can play an important role becausewe have not remained up to date with other Europeanconstruction developments especially in the energysector. Even now there is a need for experience,technology and large projects such as power plantconstruction and highways.ET: Does the Ministry of Environment and SpatialPlanning issue tenders?M. Yagcilar: We are not involved with any specificproject as much as we are involved with environmentalissues. For example, we are involved in issuingenvironmental permits for construction. We do,however, specifically invest in projects for socialhousing but these are not large projects.ET: So to what extent do environmental policiesinfluence the development of Kosovo’s constructionsector?M. Yagcilar: It is similar to other countries. Forexample, in terms of constructing a power plant, wemust do everything possible to keep pollution belowthe allowed level. We must also look at how constructioncan impact wildlife habitats. So rather thanjust invest in construction and development, we tryto make things balanced, not to inhibit economicdevelopment, but to keep both air and waterpollution in check. Of course, development must beeconomic and cost effective. The environment canhelp in this regard with energy savings for example.ET: How can European investors help you achieve yourgoals of being cost efficient while working within theseguidelines?M. Yagcilar: Well, they have the technology whichwe need here and which would provide opportunitiesfor Kosovar subcontractors. At the same time,we know we have a very young population which iscapable and which should learn to develop and usethis technology.ET: People may still have a negative image of Kosovowith regard to corruption and instability. From theperspective of your ministry, why should Europeanschoose Kosovo as a business destination?M. Yagcilar: Well, corruption and associatedproblems are not specific to Kosovo. They happenin all post-conflict countries but our duty is to makethe government functional and attractive for theinvestors. If we achieve this, it promises a goodfuture. There will be growth opportunities forcompanies and sectors and we will see larger projectsand more competition. This will add quality to thesector and will create the general impression thatcorruption has dissipated. Obviously we are a smallcountry but we have our natural resources and alsoour human resources. At the same time, it is also astrategic place next to Montenegro and Albania andwe have easy access to all the surrounding countries.If you combine these aspects, Kosovo could becomean attractive proposition.ET: Who would you see as the most successful businessambassadors within the construction sector?M. Yagcilar: All our companies do good workregardless of their size. Each company in everysegment helps to increase the development of thesector because all companies work in a timely mannerstriving for quality, efficiency and excellence..ET: What is your personal message to our readers?M. Yagcilar: I think that Kosovo, because of its naturaland human resources, can offer a lot to investors.The establishment of stability also helps in thisregard. Kosovo is at the centre of the Balkans andthe surrounding countries need to have a balance ofeconomic, social and political development. So weinvite investors to come to Kosovo.63

KOSOVOEnvironment & Spatial PlanningInfrastructure and Housingthe Sector ForwardThe construction sector has been a crucial componentof Kosovo’s rehabilitation with millions of Euros beingfunnelled into this sector. According to the KosovoChamber of Commerce and Industry, the sector accountedfor approximately 7% of the country’s economic outputin 2006. However, much remains to be done. TheMinistry of Trade and Industry predicts that 60,000new apartments will be needed over the coming years.This in itself will create extra investment opportunitiesin the construction of infrastructure and associatedsocial, retail and commercial units.Beyond this contractors and developers alike will beable to benefit from Kosovo’s wider infrastructuralrequirements. Indeed, the government has particularlyearmarked the country’s road and highway network fora major upgrade. The Ministry of Transport and Telecommunicationspredicted in 2006 that the countrywould need an annual investment of €48 million forthe rehabilitation and maintenance of roads andbridges which will provide significant opportunitiesfor private investors. The priorities lie in the transportcorridors that plug into the wider European networkwith the most prominent being the Merdare – Kukes –Durres highway that will become part of the Europeantransport corridor X connecting Western Europe tothe Adriatic. With the government also earmarkingthe energy sector for investment, with power plantconstruction and the associated infrastructure being aparticular focus, there will be plenty of opportunitiesfor contractors.These projects will be financed through foreigninvestment on a public private partnership (PPP) basis.The government has been laying the legal foundationsfor these agreements with a law on concessions beingdrafted in 2008. The government is also working hardto create the framework to professionalize the constructionindustry in other respects. According to theDirector of Kosovo’s Construction Department, NaimMahmutaj, “From the beginning, the Department ofConstruction which was established in June 2004, hasmade efforts to begin with a legal base in conformitywith the European Union’s requests.” One aspect of thisis the plan to establish a conformity assessment bodythat will make sure Kosovar construction materials andproducts meet the guidelines set out by the EU.However, the industry has already come along way. Thecountry already has a burgeoning building materialsindustry. It is estimated that Kosovo has approximately70 ready mix concrete plants ranging in size and productdelivery. The cement industry has also established anumbrella organisation for cement related industriescalled the Kosovo Association of Concrete Producers(KACP). The Association will help raise the quality ofconcrete-related materials and bring them into line withEU standards as well as playing a role in overseeing thedesign and building of bridges and buildings toensure internationalstandards.The country alsohas a significantnumber ofwood and plasticproducers thatcover domesticdemand with anascent exportbusiness startingin the fields ofwood productsand thermo-insulationproducts.With Kosovo’ssignificant wealthin forests, thewood processingindustry inparticular isset to becomevaluable for the constructionindustry. The country currently allows64

KOSOVOEnvironment & Spatial PlanningRequirements Are Drivingalmost 1 million m3 of felling and the annual value ofKosovar wood products touches €50-75 million. Theindustry is thus capable of providing employment for10% of the population.The government is also working in conjunction with theprivate sector and non-governmental bodies through itsplans for a Construction Institute that will deal with certification,testing and inspection of materials. “The testinglaboratories as well as the inspection and certificationbodies will be accredited.The producers willobey the requestsfor conformityassessment and alarge portion ofconstructionproducts will enter the market with the conformity seal(KC- Kosovo Conformity, identical to the EC- EuropeanConformity),” asserts Mahmutaj. It is estimated thatsuch a facility would cost approximately €2.1million toestablish.The steel industry in the country is also being rebuilt.In 2005, Kremikovtsi, Bulgaria’s largest steel mill paid€4.15 million for Kosovo’s Llamkos steel galvanisingplant with plans to invest €15 million to upgrade theplant. Llamkos, which has an annual capacity of 150,000tonnes, had lain dormant since 2001. The Kosovo TrustAgency also lined up the €2.3 million sale of the localsteel manufacturer, Fan, which has a production capacityof 20,000 tonnes annually.The construction industry is therefore well placed.As the government concentrates on both theresidential demands of the country and theinfrastructural requirements running fromenergy to roads, the investment opportunitiesfor the private sector are substantial.Indeed, with a cheap labour force anda burgeoning building materialsindustry, the prospects for futuregrowth in the sector are strong.65

KOSOVOEnvironment & Spatial PlanningDukagjini GroupBuilding Tomorrow’s KosovoDukagjini Construction, a division of the dynamicDukagjini Group, is a recognized leader in Kosovo’s fastgrowing construction sector. The company has alreadycompleted major projects, including residential developments,and it has been chosen to build Kosovo’s WorldTrade Centre, which will cover 80,000 square meters andis set to be completed over the next two to three years.Mr. Gëzim Gjikolli, WTC Manager, says that the majorWorld Trade Centre project welcomes Europeanpartners and investors. “Slovenian companies arealready involved in the project, but we are open toother European investors. This is a unique project forthe Balkan region and will earn very significant profitsfor investors,” he says.Dukagjini seeks partners which can help the groupachieve its long term goals. Mr. Agron Sallova, Chief ofConstruction Division in Dukagjini Group, explains, “Weare looking for partners that can complement our servicesand products in every area of our operations with regardsto technology and know-how, and more importantlypartners who can provide access to new markets.”Exceptional investment potentialDukagjini Construction adheres to the highestEuropean and international standards in all its projectsand employs highly skilled engineers and other professionalsas well as an ambitious management team. Thecompany also benefits from its membership in the fastgrowing Dukagjini Group, which is known for its highquality services as well as for its corporate citizenship.For example, Dukagjini is sponsoring a scholarshipprogramme with American Councils to allow promisingKosovars to study for master’s diplomas in US universities.“Dukagjini’s commitment to Kosovo’s future isstrong, and its generosity in supporting our scholarshipprogramme is a model of philanthropic leadership,both in the US and in Kosovo,” says Dan E. Davidson,president of American Councils.Kosovo’s construction sector in general has outstandinggrowth potential, according to Mr. Agron Sallova, whosays, “There will be significant construction of residentialbuildings and highways during the next year and beyond.In fact, the construction sector will be the target of moreinvestment than any other sector in Kosovo.” DukagjiniConstruction has positioned itself to grow rapidly alongwith the country’s construction industry.Mr. Gëzim Gjikolli points out that now is the time forinternational investors to target Kosovo. He says, “Thebusiness environment is favourable for foreign companiesand Kosovo is regulated properly. Foreign companiesshould partner with a local company to best benefit fromthe opportunities here. I say to potential investors, Kosovois developing very rapidly. Do you want to be part of it?”Agron Sallova – architectCEO / DesignConstruction & Engineering Division Dukagjini Group“Ismajl Qemajli”Str., No.2 – Pejë / Republic of KosovaTel: +381 39 432 025, mob.: + 386 49 750 302Fax: +381 39 432 025agron.sallova@dukagjinigroup.comwww.dukagjinigroup.com66

The Industry Has Several Strings to Its Bow Pointing the Way to an Effervescent FutureTourism

KOSOVOTourismThe Industry Has Several StringsEffervescent FutureKosovo might not be the first name on the lips oftourists and those with the travel bug but that mightall be about to change as the rewards of stabilitybrought about by the country’s declaration of independencehas given the authorities the chance to putthis impressive corner of the continent firmly on theEuropean tourist map. Indeed, with a diverse rangeof sights of natural beauty and interesting activities,Kosovo has much to recommend it.Kosovo has inherited both a rich diversity of naturalbeauty and a physical residue built up over time asdifferent cultures and traditions have come to settlein this area. The cultural legacy of the land is indeedimpressive. From the Christian heritage of frescoedmonasteries which have been home to the Serbianorthodox patriarchy to the imposing mosques ofPrizren, the country has something to sate theappetite of even the most voracious cultural tourist.The Republic of Kosovo also has a rich naturalheritage. The country can count on the Rugovacanyons near Peja in the west of the country, theMirusha waterfalls also in the west, the Gadime cavesin the central plateau, the White River spring, thermalsprings, and abundant flora and fauna to attractcasual nature lovers. Such a verdant landscape alsoprovides a fertile habitat for a wide range of wildlife.Tourists in the country regularly come across boars,deer, quails, pheasants, the fulvous (brown) bear,wolves and foxes.Newly independent Kosovo also sits in a bowl ringedby a series of dramatic mountain ranges from thesombre and melancholy Sharr in the South to the68

KOSOVOTourismto Its Bow Pointing the Way to anforbidding ‘Accursed Mountains’in the west. This dramatic landscapehas also presented the opportunityfor the Kosovar authorities tofurther develop its activity-basedtourism. The country is a havenfor hikers and is working hard tobuild up its nascent ski industry.The centre of skiing in Kosovois currently situated at Brezovicain the South of the country nearPrizren. The Department ofTourism is not only planning toexpand the quality and infrastructureof the Brezovica resort butalso roll out other winter resorts inother parts of the country. WhileBrezovica may need €50 million toturn it into a thriving resort it cantake heart from the experienceof Bansko in Bulgaria which wentthrough a rapid transformationand now attracts 150,000 Britishtourists annually.However, according to Bujar Kuqi,the Director of the Department ofTourism, the immediate concernof the government is to improvethe general infrastructure fortourists in the country. “We arefocused on repairing the infrastructureneeded for tourism,which will allow the full utilisationof our tourism potential whichuntil now has not been realisedbecause of the service level oftourism development,” says Kuqi.With three Balkan countriesranking in the top ten countriesin the world for projected 10 yeartourist growth according to theWorld Travel and Tourism Council,Kosovo can take heart. Initial stepshave already been taken to improvethe country’s tourism infrastructure.The ease of visiting Kosovo isimmediately apparent with shorttravel times from Western Europeand no visa requirements. Thegovernment has also already beenworking on improving the qualityand quantity of accommodation tomeet the expected increase in thenumber of tourists. This will alsoallow for niche tourist sectors suchas Meetings Incentives Conferenceand Exhibition (MICE) tourists.However, in order to achievethis goal, the authorities haverecognised the need to implementa set of standards and benchmarksto maintain the quality of thesector. This will require a rigorouslicensing system that assures thehighest standards of accommodation,infrastructure and service.The authorities are alsoworking hard to put togethera promotional strategy for thecountry. According to Kuqi, “Weare in close cooperation with otherinstitutions in Kosovo in order tocreate a greater image of Kosovo,presenting it as a secure place fortourism, as a new country, as aplace that has enough capacity forvisitors and to finally eliminate theimage that Kosovo has had untilnow as a conflict area.”The country is therefore movingin the right direction and withsuch latent potential the countrycould soon be mentioned in thesame breath as more prominentBalkan tourism destinationssuch as Croatia, Montenegroand Bulgaria. With clear andtransparent planning, thegovernment is well placed to luremany more European touristslooking for a change of scene anda diverse range of activities andsights over the coming years.69

KOSOVOTourismEurokoha ReisenTop Quality Travel ServicesEurokoha Reisen, founded in Prishtina in 1995, hasgrown to become one of Kosovo’s leading companies anda driving force behind the country’s efforts to build athriving tourism sector.A shareholder of Hamburg International, Eurokohahas opened two offices in Prishtina and branches inStuttgart, Munich, Dusseldorf, Hamburg, Hanover,Zurich and Geneva in addition to its main office inFrankfurt. Eurokoha has 41 highly trained employeesin Kosovo.Eurokoha operates according to the highest internationalstandards and is a member of the InternationalAir Transport Association. Its certified travel agentsemploy the Amadeus system and the Go Global Travelinternational system to make travel arrangements,including hotel and auto hire reservations, for its clientsall over the globe. Eurokoha’s on-line booking systemis used by more than 300 contracted travel agencies,which enables Eurokoha to provide the best possibletravel options for its clients.Prishtina Airport now welcomes around one millionpassengers per year, and 30% of these travellers areEurokoha’s clients. The company is known for offeringtailored solutions and for finding the least expensiveand most convenient travel routes. Eurokoha regularlyprovides travel arrangements for Kosovo’s President,Prime Minister, members of parliament, cabinetmembers and their staffs and other prominent organisations.Eurokoha is also Kosovo’s leading companyin providing holiday packages to Turkey, Albania andEgypt.After many years of hard work and continuousexploration of Kosovo’s travel market, Eurokohacreated Kosovo’s first national airline, Kosova Airlines,in 2003. The airline, working in partnership with leadingairlines in the US and Europe, now flies to destinationsthroughout Europe and beyond, and has been seeing asteady rise in passenger numbers from 172,700 in 2003to 317,711 last year.Its partners include ATA Airlines (New York), Hello (Zurich,Geneva), Edelweiss (Zurich,Geneva), LTU International(Düsseldorf, Stuttgart), Germanwings (Cologne/Bonn,Hamburg, Stuttgart), Hamburg International (Munich), AirBerlin (Munich, Stuttgart, Düsseldorf, Hamburg, Frankfurt,Hanover, EuroAirport Basel-Mulhouse-Freiburg), Atlasjet(Antalya, Istanbul-Atatürk), and SunExpress (Antalya).It also has co-operative agreements with Austrian Airlines,Air Berlin, Lufthansa, Adria Airways, British Airways,Malev, Turkish Airlines, Macedonian Airlines, MNG, SwissAir, United Airlines, American Airlines, Delta Airlines,Continental Airlines, Al Italia and many more.Eurokoha’s flights provide quick links to and fromPristina and destinations throughout Europe, includingHamburg, Hanover, Frankfurt, Stuttgart, Munich, Köln,Düsseldorf, Zurich and Geneva. For EU investors andtravellers who wish to visit Kosovo, Eurokoha and KosovaAirlines are the right choice.Eurokoha ReisenVellusha e Poshtme 17 - 10 000 Prishtina, KosovoTel.: +381 38 245 998 - +381 38 243 482Fax.: +381 38 249186 - www.eurokoha.net70

With specialthanks to:

Taking Mineral Explorationand Developmentto New FrontiersLydian International through its local subsidiary, Kosovo ResourceCompany, is a proud partner in the economic redevelopment of Kosovo.Lydian International is a diversified British based mineral exploration company with expertise employing “first mover”strategies in emerging environments. The company is currently focused on Eastern Europe with 3 projects in Kosovoincluding a flagship Lead-Zinc project, plus a flagship Gold project in Armenia.For more information go to www.lydianinternational.co.uk.72Lydian International is listed on the Toronto Stock Exchange (TSX) under the symbol LYD.

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