<strong>KOSOVO</strong>Finance & 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: <strong>The</strong>y 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. <strong>The</strong> financial sector must workwith private business to develop good credible business plansfrom which private investment can be generated.24
<strong>KOSOVO</strong>Finance & Bankingin KosovoET: What is Kosovo doing to achieve EU integration?A. Shala: <strong>The</strong> government’s Medium Term ExpenditureFramework was very well received at a Kosovo donors’conference hosted by the <strong>European</strong> 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 <strong>European</strong> Free TradeAssociation. <strong>European</strong> 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: <strong>The</strong> 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%. <strong>The</strong> 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 <strong>European</strong> investors choose Kosovo asan investment destination?A. Shala: <strong>The</strong> government’s approach is clear: to putKosovo solidly on the path to EU integration. Kosovo isalready within the <strong>European</strong> 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. <strong>The</strong> EUintegration process has worked very well in other smallcountries, such as Ireland, Estonia, Latvia and Lithuania.<strong>The</strong>re 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. <strong>The</strong> 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: <strong>The</strong>re is a simple but powerful paradigm thathas applied to virtually all Central <strong>European</strong> 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
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