Economic Editorial
By Andy Bearpark
Koha Ditore, 2 July 2001
As we stand at this important crossroads --
the celebratory banners read "The UN in partnership with the EU
- Two Years On" -- it is a time to take stock of past achievements
in rebuilding Kosovo and the future challenges facing the economy. These
are challenges that will affect the daily lives of all Kosovo's citizens.
The creation of jobs is our priority.
With much of the major reconstruction largely complete,
Kosovo is venturing on an ambitious new course of economic growth. General
economic trends are upwards, businesses are attracting investment, more
banks are opening - all of which is helping to support employment in
Kosovo. The Banking and Payments Authority (BPK) has licensed four commercial
banks - the Micro Enterprise Bank (MEB) in January 2000, New Bank of
Kosovo in February 2001, Bank of Private Business in March 2001 and
Bank Ekonomike in May 2001. This growing banking sector is a very positive
sign for Kosovo's economy. BPK expects more banks to be licensed in
the next six months.
All this means new lines of credit are becoming available,
not only for large businesses, but for small and medium enterprises
(SMEs) too. In the European Union around 75% of employment is generated
by SMEs. Similarly, in Kosovo, SMEs have a key role to play in generating
jobs. MEB alone has already made a total of 1,300 loans to small businesses.
Another very positive influence on economic development
is the DM 2bn that flows in annually from the Kosovar Albanian Diaspora,
which provides working capital for small businesses and capital for
the construction sector. Investment into businesses means more development
and a greater demand for workers.
Increasingly workers are recognising that centralised
state industries, in their role as near-universal employers, are relics
of the past, and that the future depends on the development of a modern
market economy. In this regard commercialisation, or the long-term leasing
of companies' assets, is being successfully implemented to bring much
needed, immediate investment. This is helping to replace both outdated
equipment and methods. So far nearly 10 companies have been commercialised,
which will around nearly 2,000 jobs over the next five years. With more
deals in the pipeline it is hoped that more Socially-Owned Enterprises
will undergo commercialisation in the near future.
However, it is privatisation which is the real goal of our economic
policy. The first elements of privatisation are expected to be in place
by the end of this year. With privatisation building on the achievements
already made by commercialisation, thousands more jobs will be secured,
and the foundations put in place for future, sustainable job creation.
There are many legal questions that still have to be tackled to make
privatisation a reality but this is a major focus of our efforts. The
Eastern European experience of privatisation shows that the process
of creating a genuine market economy takes time, but once in place leads
to rapid economic expansion, as was the case with Poland and Czechoslovakia.
In laying the foundations of a market economy our main focus is on ensuring
that the economic environment, the regulatory and legislative frameworks
are established so the progress achieved to date in bringing the Kosovar
economy closer to that of Europe can continue, as we move towards and
beyond the November elections. Such a framework brings an order and
accountability that is essential for long-term prosperity.
We expect the proper regulatory environment to be
in place in the coming year at which point foreign investors, secure
in the knowledge that domestic laws safeguard their capital, will be
ready to invest millions in newly-privatised factories and plants, in
new technologies and equipment, which in the case of Trepca alone could
have the capacity to create thousands of skilled jobs - replacing the
unskilled workplaces of the past. This means workers will receive higher
pay and increased benefits.
Bringing Kosovo closer to Europe means introducing
European standards in all areas of economic life. The introduction of
important legislation such as the new Value Added Tax, in line with
all current EU requirements, is a strong indicator of where Kosovo's
future lies: firmly within Europe.
VAT matters to ordinary people because it will help
finance major public services, such as education, health and social
security so that everyone can have the benefits that a modern efficient
government should offer. In fact, VAT is structured to be a friendly
tax towards businesses: again helping to create an environment in which
businesses can grow and jobs can be created.
In early 2002 the Euro will replace the Deutsche Mark
as the currency of choice in Kosovo. This is yet another strong symbol
of Kosovo's ever increasing relationship with Europe. The changeover
to the Euro couldn't be any easier. The exchange rate is simple: 2 DMs
to 1 Euro. And for those people with their money in the banks DMs are
converted into Euros automatically. Having the Euro in Kosovo will simplify
business co-operation with Eurozone countries and will ensure a stable
fiscal environment.
* * *
Two years since our arrival in Kosovo the EU, in partnership
with the UN, has much to be proud of. We can safely say that we are
moving in the right direction. That direction is towards Europe. All
the steps taken so far are steadily working towards long-term prosperity
and sustainable economic growth. The vision of integrating Kosovo within
the European Union is very real. It won't be easy. It will take time
and it will take a great deal more change but through building a modern
market economy and institutions that can support a modern market economy,
it will happen. But for the immediate future, the European Union, as
part of UNMIK, has one ultimate aim. It is an aim shared by the EU in
Brussels and the governments of all member states. It is the creation
of jobs.