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Thesis Assignment
Kosovo as a post-war region



Date:
November 11, 2013











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TABLE OF CONTENT


1. Executive summery ....................................................................... 3
2. Introduction ............................................................................... 4-5
3. Problem Statement ........................................................................ 5
4. Methodology .................................................................................. 5
3.1 Division of labor between international organizations in peace
building; Overlap .............................................................................. 7
3.2 Business improvement on relation North-South Kosovo;
barriers overcoming ............................................................... 17
3.3 Macro-economic environment in Kosovo; foreign direct
investments, corruption ............................................................ 28
5. Conclusion .............................................................................. 34
6. References and bibliography .................................................. 35









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1. Executive summary


Accumulated knowledge and experience in market research
projects in the North Kosovo encouraged me to reach certain
themes in my work.
First of all, I was encouraged by the number of foreign bodies
which are present here on Kosovo, the time they spend here and
not so encouraging results they have achieved. In the first part I
tried to introduce division of responsibilities among organizations,
their mutual cooperation in an effort to rebuild Kosovo. First I
explained the responsibilities of each institution, the UN, EULES,
OSCE, and KFOR. Throughout the text I'm trying to point out that
there is a considerable amount of overlap between the
responsibilities of each of these organizations.
In the second part I risked and tried to present a brighter future. I
tried to find in the database of any association with better
performance, specifically with overcoming barriers of any kind. I
used fresh facts to destroy the prejudice and I believe that they
are sufficiently convincing and very optimistic. I was searching for
gap in this multiethnic society, which is still struggling to survive,
but cannot see clearly because of the strong impression of
previous events that happened on Kosovo.
In the third part I stated my frustration gathered during market
research in the north. I have presented how wrong, not carefully
determined foreign direct investment can influence on society on
North Kosovo and what it does to their willingness to survive. I did
not avoid the corruption that has here become common situation.
People began to see it as part of the normal functioning of society.
In general, my work deals with Kosovo as a post-war region, and
with all of the characteristics that it brings.

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2. Introduction

Welcome to Kosovo, an inexhaustible subject of the media,
''dearly missed by Serbs''.
Conflict which happened in late 90s, left on this region indelible
mark which is still going on. There will always be some debate
that corresponds to the unresolved issue of Kosovo to take longer.
This region has always been intriguing, mysterious, just
encouraging. We will never be able to verify facts that will be
presented later in the paper concerning Kosovo. All what is in my
power is to evaluate the current situation from my perspective
and on that basis to judge about near future.
I will give all my efforts not to involve any political reasons which
could result this situation on Kosovo, although they are the
strongest factor. I will try to combine aspects of marketing,
sociology with less politics.
I took certain macroeconomic elements and I represented them as
quite normal and acceptable for Kosovo, and that's a fact. People
have simply gotten used to this situation and accept what was
offered.
Who ever visited Kosovo after the conflict, he was able to
preserve that this region has began to isolate, using isolation as a
defense system. We see little multiethnic society, with plenty of
obstacle appearing every day.
Kosovo look like a bustling nation in creation, as a child with a bad
example of parents.
Welcome.



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3. Problem statement
There are few problems we are going to research:
1. Division of labor between international organizations in
peace building; Overlap
2. Business improvement on relation North-South Kosovo;
barriers overcoming
3. Macro-economic environment in Kosovo; foreign direct
investments, corruption


4. Methodology

Methodology of research takes very important role in writing the thesis. It
presents method of getting the information we need in goal to get
informations about subject of our research.
In goal to get as more information is possible, and in further work analyze
them to get specific conclusion, we used questionnaires. Our questionnaire,
which we used to analyze around 330 companies operating in private sector
and stated in North part of Kosovo, has 31 questions which are separated in
5 sections. Classification of dividing questions on 5 sectors is made based on
which informations we would like to receive.
According to that we have 5 sections in questionnaire:
1. Informations related with structure of the company (9 questions)
2. Target markets (9 questions)
3. Business environment of the company (7 questions)
4. The competitiveness of the company (4 questions)
5. Needs (2 questions)
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Questionnaire is conducted in 4 municipalities which are stated on North
Kosovo :
1. Zvecan
2. Zubin Potok
3. Leposavic
4. Kosovska Mitrovica
The whole process was separated in few phases:
Collecting informations about companies stated in target sector (North
Kosovo) main role of this phase was to collect contacts of companies,
addresses, and contact persons. To classify companies by sector they are
operating in and to drawn certain number of companies from every sector, in
goal to cover wider number of sectors.
Second phase was completing the questionnaires and most important, trial
run. Trial run was important because we wanted to see are we getting
informations we targeted with questionnaire and did us formulate questions
in way that they are not making any confuse during the answering.
Third phase was conducting the questionnaires. We succeed to examine 331
companies.
Last phase was analyzing of questionnaire, and analyzing of received results.









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3.1 Division of labor between international organizations in
peace building; Overlap
United Nations (UN), the European Union (EU), the Organization
for Security and Co-operation in Europe (OSCE), and the North
Atlantic Treaty Association (NATO); Do these actors cooperate
with or compete against one another in Kosovo?
This part contributes to the international security and organizations
literature through an examination of international communitys post-
conflict reconstruction activities in Kosovo. Post-conflict
reconstruction in Kosovo has wide-ranging implications on European
and international security.
I will try to conduct a case study y of the division of labor between
UN, NATO, OSCE and EU as well as the effectiveness of cooperation
between them in rebuilding Kosovo and attracts attention to the
importance of effective division of labor between international
institutions in the field.
It finally addresses the following question: What can be done to
improve the effectiveness of comprehensive and multi-dimensional
peace-building activities by international and regional organizations?
Civil wars and humanitarian contingencies are a common fact of life
in many societies. In the post-cold war era, bringing an end to
intrastate conflicts and building a long-lasting peace have become
priority items on the agenda of the international actors.
The strongest issue which imposes frequently is f how international
agencies such as the United Nations (UN), the European Union (EU),
the Organization for Security and Co-operation in Europe (OSCE),
and the North Atlantic Treaty Association (NATO) can tango without
stepping on toes of each other; in other words, how they can best
learn to effectively deal with post-conflict situations and avoid
duplication of efforts and overlapping missions.


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The international organizations shoulder a key responsibility in post-
conflict peace-building. This is also true for the reconstruction
process in Kosovo which started in 1999. In an integrated operation,
the division of labor between international actors becomes a vital
issue. Central aspect of post-conflict rebuilding is the challenge to
develop mechanisms of international governance capable of
promoting sustained and coherent efforts to maintain stability and
security. Despite the fact that integrated operations are becoming
more prevalent in reconstruction processes throughout the world,
there is no sufficient amount of scholarly attention on international
organizations cooperation in peace-building operations.
Consequently, the study of international security must confront the
question of how international organizations such as the UN, EU,
NATO, and OSCE can best learn to effectively deal with post-conflict
reconstruction.

Consequently, the study of international security must confront
the question of how international organizations such as the UN,
EU, NATO, and OSCE can best learn to effectively deal with post-
conflict reconstruction (Doyle and Sambanis, 2000). The complex
nature of challenges in a post-conflict zone requires an effective
cooperation among the institutions involved in building the peace.
Otherwise, the involvement of multiple international institutions
can be disconcerted and dysfunctional; and, reconstruction may
eventually backfire.
Since 1999, Kosovo has been the spotlight of four international/
regional agencies UN, OSCE, NATO and the EU. Security and
stability in Southeastern Europe is vital for all of these institutions.
Accordingly, all four of these organizations conducted or still are
conducting their largest ever field operations in Kosovo. These
international actors all share similar principles and values, as well
as important responsibilities in conflict prevention, crisis
management and post-conflict rehabilitation, the promotion of
democracy and human rights and institution building.
This section conducts an in-depth qualitative analysis of how these
different international/ regional institutions collaborate with or
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compete against one another in helping Kosovo get back on its
feet. It analyzes the official documents of four different missions
that are actively involved in building the peace in post-conflict
Kosovo. It seeks to pursue answers to the following questions: Do
these actors cooperate with or compete against one another in
Kosovo? What can be done to improve the effectiveness of
comprehensive peace-building activities by these important
international/regional actors?
Accordingly, the following section compares and contrasts the
goals of the UN, NATO, EU, and the OSCE missions in Kosovo and
analyzes the organizational learning and evolution of their
respective operations. It examines how these different
organizations fare in recognizing emerging threats, diagnosing
security problems, and responding to these challenges in Kosovo.

UN Mission
Since the end of the military operation in 1999, the United Nations
Interim Administration Mission in Kosovo (UNMIK) has
administered Kosovo. UNMIKs broad mandate included
establishing a transitional civilian administration, promoting the
establishment of substantial autonomy and self-government in
Kosovo, supporting the reconstruction of infrastructure,
maintaining civil law and order, promoting human rights, and
ensuring safe return of refugees and displaced persons to their
homes (Resolution on the Establishment of UNMIK and KFOR, 10
June 1999).
UNMIK was also assigned the authority to coordinate the
humanitarian relief and reconstruction efforts of all international
agencies. In other words, UNMIK was responsible for the division
of labor among the international agencies that operate in Kosovo.
The original second pillar UN operation, which was under the
responsibility of UNHCR, aimed at assisting the successful return
of refugees to Kosovo.
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From the beginning of the operation, OSCE was in charge of the
Democratization and Institution-Building pillar, and the EU was
responsible for the Reconstruction and Economic Development
pillar. Additionally, NATO was responsible for providing military
protection in Kosovo. Starting in April 2002, UNMIK established
the Standards for Kosovo on eight fields that were seen as
priorities for the established Kosovo institutions. The eight fields
were: functioning democratic institutions, rule of law, freedom of
movement, sustainable returns and the rights of communities and
their members, economy, property rights (including cultural
heritage), Pristine-Belgrade dialogue, and Kosovo Protection Corps
(KPC). The purpose of the standards was to create a more tolerant
multi-ethnic society, improve levels of public sector performance,
and promote good governance (UNMIK, Kosovo Standards
Implementation Plan, 2004).
Since its foundation, UNMIK (as one of UN branches) created a
multinational police force and a judicial system. In addition to
setting up a functioning civil administration including police,
creating a democratic political atmosphere respectful human
rights, repatriating over one million refugees and reconstructing
the infrastructure and the economic life of Kosovo, it was UNMIKs
crucial task to facilitate a political process leading to a definite
status of the then Serbian province.

EULEX Mission
Prepare for a possible future EU crisis management operation in
the field of rule of law and other areas such as the fight against
corruption and organized crime, strengthening of multiethnic
institutions in Kosovo.
The European Union Rule of Law Mission in Kosovo (EULEX) was
finally launched by the EU Council on 16 February 2008 after
months of delay. The initial mandate of EULEX is for two years,
but the mission is foreseen to be terminated when the Kosovo
authorities gain enough experience to guarantee that all
members of society benefit from the rule of law.
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Since UNMIKs mandate recognizes its territorial integrity, Serbia
opposed the EULEX mission and insisted on the continued
existence of UNMIK. In response to Serbian anxieties, EULEX
declared itself as status-neutral. Despite the success in
deploying EULEX throughout Kosovo, the Serb-inhabited north
remains outside the control of the Kosovo government.
With EULEX, the EU is signaling its determination to take over
post-crisis management in Kosovo. The performance of EULEX will
have significant implications on the prospects of cooperation or
competition between the EU and NATO.
The central aim of EULEX is to assist and support the Kosovo
authorities in the rule of law area, specifically in the police,
judiciary and customs areas. It also aims to investigate and
prosecute war crimes cases, and trace missing people. It is not
only operational in parts of Kosovo that are heavily populated by
Kosovar Albanians, but also in the Serb-inhabited north. It has a
budget of EUR 250 Million.
The EULEX mission continuously underlines that it respects the
local ownership principle. It declares its goal to be assisting the
Kosovo institutions, judicial authorities, and law enforcement
agencies in developing and strengthening an independent multi-
ethnic justice system, police force and customs service. The key
priorities of the EULEX mission are to address immediate concerns
regarding protection of minority communities, corruption and the
fight against organized crime.
In August 2008, UNMIK and EULEX signed a memorandum
transferring responsibilities from UNMIK to EULEX in the areas of
justice, police and customs. But the Serbs opposed to the
establishment of EULEX. Consequently, EULEX did not completely
replace UNMIK but rather support, mentor, monitor and advise
the local authorities while exercising executive responsibilities in
specific areas of competence.
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The lack of single voice from the EU on Kosovos status is posing a
challenge to the credibility of the EULEX operation in Kosovo in
the eyes of the local population. That adds another complication to
the current situation on the ground.

OSCE Mission
OSCE highlights norms of international behavior and internal
political standards. Like the EU, OSCE too works in the crisis-
management field. It deploys observers or mediators, and
addresses minority rights issues and cross-border ethnic tensions
in Europe.
It has been responsible for institution- and democracy-building
and establishing human rights and rule of law in Kosovo. It helps
in promoting peace, security and stability in the regional context,
in particular by its broad range of activities in the area of conflict
rehabilitation.
Since the adoption of UNSC Resolution 1244, the OSCE Mission in
Kosovo has been responsible for supervising the progress of
democratization, the creation of institutions, and the protection of
human rights.
Since 2001, OSCE has organized and supervised four elections in
Kosovo. Elections are still a reserved responsibility of UNMIK
which have been delegated to the OSCE.
NATO, EU, and OSCE all work in the area of police training. The
OSCE was made responsible for training the new police service
that would uphold human rights and democratic policing
principles. OSCE created the Kosovo Police Service School
institution that over the last two years evolved into the Kosovo
Centre for Public Safety Education and Development. Even though
it gradually handed over responsibility for training and the
Centres management, OSCE still supports the delivery of human
rights and advanced training programs. Additionally, through legal
system and security sector monitoring, OSCE provides a
comprehensive overview of human rights accountability in the
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justice and police sectors. This demonstrates a duplication of
efforts by OSCE Mission in Kosovo and EULEX.
Another area of intersection between KFOR, EULEX, and the OSCE
Mission in Kosovo is that OSCE helps the police develop a
partnership with the public and carry out community-policing
activities. It provides specialized courses and supports public
outreach activities. It also helps create a more secure
environment in municipalities by assisting the development and
work of municipal community safety councils and local public
safety committees, which address public concerns, particularly
those of minority groups.

KFOR Mission
KFOR was created as a product of cooperation between NATO and
EU. Under UNSC Resolution 1244, NATOs Kosovo Force (KFOR)
has been responsible for establishing and maintaining security in
Kosovo since 1999.
The responsibilities and the composition of the KFOR mission have
changed within the past 10 years. The mission of KFOR was to
establish and maintain security in Kosovo, monitor and enforce
compliance with the conditions of the Military Technical Agreement
and the UCK.
At the end of the conflict in 1999, international organizations
other than NATO were not in place in sufficient force. In this
power vacuum, KFOR had no choice but to perform a number of
civilian tasks, from policing duties to running electricity plants.
These were then gradually transferred to either UNMIK or Kosovar
authorities, although KFOR continues to support them as
necessary. KFOR was and still continues to be responsible to
provide a safe environment for the work of the international
community in Kosovo.
It still provides assistance in the field of defense reforms, external
defense, protection of enclaves and religious sites, and assists the
police services in the event that the latter are unable to
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adequately respond to internal security challenges.


There is a considerable amount of overlap between the
responsibilities of EULEX and KFOR. However, EULEX Kosovo also
has some executive powers in the broader field of rule of law, in
particular to investigate and prosecute serious and sensitive
crimes.


After a detailed analysis of each organizations peace-building
operation in Kosovo, we now proceed with an analysis of the
cooperation and competition between these organizations on the
ground.
The UN, EU, NATO, and OSCE in Kosovo all share the same
objective: to support and assist the Kosovo authorities in
developing a stable, viable, peaceful and multi-ethnic society in
Kosovo, cooperating peacefully with its neighbors. Moreover, as
demonstrated in the previous section, there is considerable
overlap between the missions of UN, EU, OSCE and NATO on the
ground, which leads to bureaucratic competition between these
international organizations as well as to incoherent peace-building
efforts.
The international or regional organizations are large international
bureaucracies. Like all bureaucracies, international institutions
fight for resources and increased power.
The EU and NATO are fishing from the same pool of resources in
terms of personnel and capabilities. (Javier Solana, EU High
Representative for the Common Foreign and Security Policy)
All of organizations that are analyzed in this paper agree that
there is an urgent need for the countries in the Western Balkans
region to focus more on strengthening the rule of law and the
judicial system, and combating organized crime, corruption, illegal
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migration and human trafficking, as well as building robust police
force. At the same time, each of these institutions is motivated by
survival instincts. That is to say, all of them are willing to prove
that they are still relevant in a post-cold war world. This creates
further competition and rivalry between these organizations.
Furthermore, UN, NATO, EU and OSCE all learn through their
experiences in the field. They adjust their organizational
structures and their rules of conduct accordingly. They learn how
best to interact with one another. This learning process may take
some time.
However, there is some hope for increased coordination in the
realm of peace-building operations. In December 2005, the UN
Peace building Commission is established to advise and propose
integrated strategies for post-conflict recovery. The Peace
building Commission plays a unique role in bringing together the
relevant actors, including international donors, the international
financial institutions, national governments, troop contributing
countries; marshalling resources and advising on and proposing
integrated strategies for post-conflict peace building and recovery
and where appropriate, highlighting any gaps that threaten to
undermine peace.
To avoid competition, there should be more centralized efforts to
coordinate reconstruction operations. However, so far, we have
only seen bilateral agreements between these institutions for
encouraging collaboration between them. For instance, in August
and September 2005, UN and NATO signed a UN-NATO
Framework Agreement in order to facilitate the cooperation on the
ground in Kosovo.
Despite the fact that EU, NATO, and OSCE all offer a European
future to Kosovo, each international institution has a different
comparative advantage. Each organization should use their
specific comparative advantage in an integrated peace-building
operation. For instance, NATO should only conduct military
operations, without meddling into the domains of more civilian-
oriented organizations. At the same time, EU should constrain its
aspirations to establish an independent ESDP.
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Successful peace-building operations require the continued
commitment from international or regional organizations.
In compliance with the UN, EU, NATO and OSCE each should use
the advantage of regional organizations in providing peace and
stability in Kosovo.
NATO, instead of improving its civilian post-conflict reconstruction
skills, it should engage in more productive relationship with OSCE
and the EU, which are better equipped with civilian tools. NATOs
role should be limited to filling temporary gaps and supporting
other international actors until they are fully able to perform their
tasks.
NATO should not make a broader contribution drawing on
capabilities such as engineering and medical support, as well as
non-military capabilities such as civil emergency planning. These
are sensitive domains, touching on the responsibilities of other
organizations involved in international peace-building. This leads
to turf battles between these different institutions. It is essential
for each institution to make sure that they are not infringing upon
others mandates!

None of the organizations that are analyzed here are
supranational in nature. As such, they still depend on the
willingness of their member states to commit themselves to
support deployment of government and private sector resources.
Accordingly, the subsequent research should focus on the
preferences of key nation-states. The current mandate of EULEX is
not making any references to the economic development in
Kosovo. Successful reconstruction requires continued political will
and flow of financial resources.
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Finally, the international community might have some
unrealistic expectations about peace-building. It is a long
and arduous process. It requires support from the local
population and continued support from the international
community.

3.2 Business improvement on relation North-South Kosovo;
barriers overcoming
If we take in consideration that we, using SME analysis on North
Kosovo, covered more that 80% of enterprises, both registered
and unregistered, we have the right to call on collected date and
confirm out opinions and claims.
There is no need to point out characteristics of this area; I think
we are all informed enough. Fourteen years past since conflict,
and even though progress of recovery is slow, I will try to present
you certain facts and try to introduce you a better future of this
region, and optimistic facts regarding business relationship
between Serbs and Albanians.
Taking into consideration that Kosovo, as the post-war region, is a
multi-ethnic society with still a lot of prejudice and
misunderstanding among societies of different races, we may
conclude that a shift in co-operation can be considered as a
progress going in overcoming barriers.
I would like to start with a fairly convincing fact.
The part of the questionnaire called framework conditions /
business environment had a question: Do you believe that
business (generally) dealing with South Kosovo would experience
disadvantage in their local community?
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If you had asked this same question 10 years ago, the relationship
between opinions would be quite different.
As one of the participants in this project, I worked on the
interviewer's position, therefore, was in direct contact with the
majority of respondents, therefore, I could better judge of the
validity of their responses.
While asking this question, I noticed that prevailed direct and fast
responses. There was no doubt.
As can be seen from the chart, answer NO is prevailing. It
occupies 83% of all answers, i.e. it is 274 answers from all
responses received (331).
Regarding answer YES, we can see that it occupies only 17%, i.e.
57 answers from total 331.
I chose to start this way this section of my work to show the
people's thinking changed, and for the sake of a better future and
success in business, people overcome existing barriers. There are
an increasing number of people who want to work with the South
and a decreasing number of people who condemn those same
people.

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The percentage of people who answered yes to the question, for
the task had to answer the following question:
From your perspective; doing business with South Kosovo
lead to

Acceptance as business partner in the south (n=54)
Risk to your person or personal security of your family (n=53)
Increase in payable tax (n=53)
Loss of earnings (n=52)
Would cause problems or create barriers to doing business in your
local market (n=53)
Benefit in terms of increased revenue and profitability (n=53)
Loss of freight/ goods through robbery or destruction (n=54)
Increase risks to payment of invoices (n=54)
Loss of reputation amongst your community (n=54)

20%
11%
13%
21%
17%
8%
13%
25%
13%
56%
43%
37%
49%
47%
40%
53%
43%
46%
22%
39%
41%
28%
34%
46%
30%
30%
30%
2
7%
9%
2
2
6%
4
2
11%
0% 20% 40% 60% 80% 100%
Loss of reputation amongst your
Increase risks to payment of
Loss of freight/ goods through
Benefit in terms of increased
Would cause problems or create
Loss of earnings(n=52)
Increase in payable tax(n=53)
Risk to your person or personal
Acceptance as business partner in
Strongly Agree
Agree
Disagree
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From this chart we can see that although respondents argue for
disapproval of cooperation, their opinions were not so convincing.
In rare cases, we have a situation where positive answers prevail
convincingly.

In the questionnaire, we asked extensive questions whose
purpose was to discover what the respondents considered the
greatest barrier in doing business with South.
Do you agree that the following are barriers in doing
business in south Kosovo?


This chart shows separately which barriers are seen in the eyes of
Serbs as threats for doing business with Albanians.
Respondents believe that competition is a barrier to business but
in this case the same competition can also be called a healthy
competition that encourages the creation of better products and
creating more developed markets. Roads and Telecommunication
0
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Strongly Agree Agree Disagree Strongly Disagree
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is seen as barrier in just 34% from all received answers. Even
though South Kosovo uses other provider, which does not have its
network facilities in the North, they do not see this as a problem
in their mutual business interaction. Regarding roads, I share their
opinion. Even in delicate situation, after the war, roads have been
blocked in several cases and even that did not stop people to
trade. Electric energy, after the conflict, was not charged, nor
water, nor utilities and people for now do not see this as a
obstacle for business, which can be seen from the fact that they
saw electric energy as a barrier in only 21%. High taxes are seen
as barriers to only 39%. Although Serbs see their competition in
the South as unfair, we cannot say that they also feel that they
are unfair in terms of payment and that view is present as the
pre-conflict and so far. The demand is certainly not lacking in this
market and more than 50% of the respondent believes that the
demand is not a barrier. More than 70% of respondents believe
that raw is not a barrier. Sectors of business that are prevalent
here in the north are construction and catering and for these
branches of the business there is simply no shortage of raw
materials. From the attached chart it can be also seen that
respondents do not consider access to finance, production
capacities and lack of internet as a threat. Also in 65% of answers
they say that managerial skills are not the problem, but from my
perspective, the interviewer, I think that the majority of
respondents were not informed enough regarding the last
question.
All 18 mentioned and analyzed barriers have left not a strong
impression of insurmountable obstacles and even in certain cases,
opinion prevailed that they are not barriers and are on track to
completely disappear.




~ 22 ~


111


Using the data that will appear in the following chart, I'll try to
connect companies that do business with South Kosovo and
enclaves in the southern part of Kosovo, with the changes in their
turnover. There was no direct question, from which we could
receive these fact.


I have to add that from 331 surveyed firms, 88 of them are
dealing with South Kosovo and enclaves on southern Kosovo,
which more than 35%. This figure is not negligible if we take into
a consideration that, few years ago, this scenario would not be
feasible.
I managed to connect information from the questionnaire, where
we ask in which markets are they active, with the figures on the
change of their turnover to reach to the point where it becomes
clear does the cooperation with the South contributed to the
increase or decrease of firms turnover.
Figures are showing us that it is prevailing percentage of firms
that increased turnover while cooperating with the South Kosovo.
60% of entrepreneurs have increased its turnover, compared to
40% where turnover fell.
22%
18%
28%
19%
13%
Decrease 6%
Decrease 0-5%
Increase 0-5%
Increase 6-10%
Increase more then 11%
~ 23 ~


111

In the chart, we can see that out of these, only 22% of cases (19
companies), the company turnover decreased by 6% and more
and in 18% of the total (16 companies), company turnover
decreased from 0 to 5 percent. It is together 40%, which for this
region is a good script.
The largest number of firms is in the group where their turnover
increased for 0-5% (25 companies), 19 % i.e. 17 companies
increased their turnover between 6% and 10% while 13% i.e.
increased their turnover for 11% or above it.
It is more that clear that cooperation with the south in larger
percentage had a good influences and stimulated companies
toward their overall progress.
In order to confirm previous information given, I will present an
analysis done on the issue:
What is the average growth rate of your business outside
the local market?


55%
56%
55%
29%
75%
35%
30%
27%
14%
10%
14%
18%
57%
100%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Serbian
Enclaves
Serbia South
Kosovo
Other
Balkan
countries
EU
countries
Rest of the
world
0-5%
6-15%
16
What is the avarage growth rate of your bussines outside the local market?
n = 62
No. of
companies
Markets
~ 24 ~


111

From total number of 331 companies, 62 of them are working in
some other market, except local.
Here we are interested only in Serbian enclaves and South
Kosovo. Regarding enclaves, 62 of them said that they are
involved in this market, where 34 of them said their growth rate is
in range 0-5%, 22 said that growth rate is 6-15% and 6 said
growth rate equal or above 15%. Only 8 surveyed firms had
negative growth rate!
Regarding South Kosovo, 55 firms is working in this market were
30 of them said their growth rate is 0-5%, 15 said that growth
rate is from 6 to 15%, and 10 said it is above 15%. Again, only 8
said that their growth rate is negative!


Now I will present you the analysis that is also overwhelming and
it is presenting interest which certain percentage of entrepreneurs
is showing for cooperation with South in general.
In which markets is your business active, under
preparation, interested in exploring, and which markets are
not relevant?

18%
3%
31%
48%
South Kosovo
Active
Under Preparation
Interested In
Not Relevant
~ 25 ~


111

From 303 entrepreneurs which have answered this question 48%
of them i.e. 146 agreed that it is not relevant for them (generally
startup businesses, young firms, small-local oriented enterprises).
The rest of them, 157 agreed that they are or active on South
Kosovo market-18% (No55), or in preparation stage-3% (No8), or
interested in extending cooperation to the South Kosovo-31%
(No94).
More and more are the fact that profits and jobs are beyond the
barriers, whether linguistic, or cultural, or religious.
We used the same question for people who are interacting, in
business sense, with enclaves in southern Kosovo. This is what we
have received:

From 300 entrepreneurs which have answered this question 43%
of them i.e. 128 agreed that it is not relevant for them (generally
startup businesses, young firms, small-local oriented enterprises).
Larger percentage of them, answered positively i.e. 20% of
enterprises are active in Serbian enclaves market (No59), 3% is
under preparation (No10) and 34% is interested in entering that
specific market (No103).


20%
3%
34%
43%
Serbian Enclaves

Active
Under Preparation
Interested In
Not Relevant
~ 26 ~


111

I wanted to show one more statistics, which also coincides with
the current topic.
Entrepreneurs were asked what their observations are, i.e. to give
us their point of view of the future of this emerging market.
What is your perception/expectation, how will the
relevance of the market s listed below change over next 5
years?

After excluding respondents who answered this chapter of
questionnaire with do not know, we stayed with 296 interesting
answers.
For Serbian enclaves relevance will strongly increase, 12% of
them share this opinion, while 56% think the importance of that
market will increase. Rather optimistic view of the future, it would
seem.
For South Kosovo we also have quite optimistic thinking.
Together, we have a 74% expectation that it we will have increase
in the importance of the market.
I left in the chart and information on the Serbian market, just for
comparison. As you can see, the Serbs in northern Kosovo are
more optimistic about the market in the South Kosovo than in the
case of the Serbian market.
12%
56%
22%
10%
13%
49%
23%
16%
20%
54%
18%
9%
Relevance will
strongly
increase
Relevance will
increase
Relevance will
not change
Relevance will
decrease
Do not know
Serbian Enclaves Serbia South Kosovo
~ 27 ~


111

Those were all presented figures, percentages and graphs but
stemmed from field work, months of research.
Military conflict has created a specific market, limited and
organized for whose regulation will need time. Meanwhile, multi-
ethnic society uses both legal and illegal ways to survive while
completely forgetting the previous events, their differences and
disagreements.
Business and profit is encouraging people to cooperate without
prejudice and without conflicts. Everyone is searching for his
way-out of this situation in which that same conflict has put them
in. Sense and wide open mind in this strange market brings
cooperation with the environment, whatever it is. Cooperation
brings better performance. Better performance creates healthier
and tempting market.
There are still limited people, who do not want to look into the
distance, which still are holding for certain codes of behavior and
way of thinking. As long as the opinion about cooperation with
South continues to be seen as betrayal, progress will be limited,
as much as previous information indicated that the existing
barriers are slowly fading.
In one of the problems I have dealt with the mission and the
influence of foreign bodies. Nobody trusts them and they should
not. Only we can together solve this certain situation. As soon we
mature, soon it will happen. Time will be the indicator.







~ 28 ~


111

3.3 Macro-economic environment in Kosovo; foreign direct
investments, corruption
No country with postwar society did not manage to recover with
the help of foreign investors, but with its own help and with their
own head.
Before analyzing these indicators, we bring to the surface some of
the very basic elements of the post-war economy in Kosovo,
which also demonstrate the complexity y of the situation. Firstly,
the main sector on which the economic boom was based, that is
reconstruction, has been short-lived. Housing and infrastructure
reconstruction n is now almost over, which means that only a
small part of these businesses are still in operation. Secondly, the
private sector that has emerged has been dominated by small-
scale, low capital-intensive ventures in trade and construction,
without any real local manufacturing. Moreover, the fact that
economic growth has been transfer-driven, especially by transfers
from the international donor community and the Kosovar
Diaspora, means that the withdrawal of those actors and the
reduction of external funding automatically indicate the lack of
capacity of the Kosovar government to contract. Indicative of the
situation is the fact that, the average Kosovar household has
received more cash income from relatives abroad than they did
from working in Kosovo. Furthermore, as the Kosovar budget is
heavily dependent on taxing imports at the border, a potential
decrease in imports, due to the diminishing development of the
post-war reconstruction sector, will automatically lead to the
reduction of those income sources as well.
The capacity to attract foreign direct investment is also an
important macroeconomic factor for assessing economic
development perspectives. In the case of Kosovo we can observe
a series of factors that formulate the overall environment for FDIs,
though, in our opinion the trends seem to be negative. According
to enterprises that are active in Kosovo the main barriers to FDI
are corruption and the lack of investment guarantees (Riinvest).
Secondly, high taxes are also considered to be an important
element that hinders the attraction of FDIs into the province. It is
~ 29 ~


111

characteristic that less than 50% of active enterprises carry out
their tax obligations. Readiness to pay taxes is also very low with
only 8.2% of entrepreneurs being ready to pay. The reasons
behind such attitudes are based on the high tax rates, the lack of
effective control as well as the lack of taxpaying culture. Thirdly,
in Kosovo with a population of around 2 million we have a limited
market. Besides, the limited access of national minorities to the
local markets and services further diminishes the general market,
which makes the overall endeavor even less attractive for foreign
investors.
Likewise, Kosovo is a politically unstable environment which is
very much related to the undefined political status of the province.
The transition authorities of the UN, acting in parallel with the
elected local administration authorities and the government
structures, create a complex political environment, in which
competences are very often confused and contradictory. The
national interests, being represented by the government bodies,
are usually opposed to the will of the international authorities and
the donor community, as well as the minorities representative
bodies, thus resulting in political confusion and a complex decision
making process with a lot of delays and uncertainties, which is not
welcome to potential investors.
Another negative element for the FDI in the area of Kosovo is the
lack of a satisfactory regulatory framework for investments as well
as a properly functioning legal system.
However, there are several factors that make the overall situation
concerning the attraction of FDIs more balanced. It is
characteristic that in Kosovo we can identify certain factors that
give to the province a competitive advantage in relation to other
countries. We can, first of all, notice the combined efforts made by
the international donor community to establish an attractive FDI
environment, as a prerequisite for the development of Kosovo as
well as regional stability and prosperity.
From the above analysis, we can conclude that the FDI
environment of Kosovo has certain specificities. But these
specificities do not only have a negative role for new FDI. The
~ 30 ~


111

above elements create the picture of an environment that has the
means to attract new FDI but it needs to solve a number of issues
in order to be an FDI environment with low risk.
As much this region tried to become attractive to foreign
investors, and as much they accomplished those goals, primarily,
those investments never went to right people and they have never
been distributed properly. Doing market research, working in the
field, I have become aware, more or less, about situation
associated with donations. Donations were received again by the
same people, to who help was not over necessary. Donations were
not used properly. Investor were providing donation in form of
money or in form of equipment. In majority of cases, they did not
control progress of business in which they have invested. It
provided an opportunity for people spend received money by their
desire, without fear of being caught. People were not even using
the equipment they received as donation, in many cases they
chose to sell equipment meant for development.
In the following chart I will try to make the connection between
firms who answered that they have received certain donation from
the following institutions; Local Municipality, Chamber of
Commerce, the Government of Serbia, USAID, Swiss Agency for
Development and Cooperation, the British Embassy, the European
Commission, the Government of Kosovo, G.I.Z., Mercy Corps,
Business Center, and others, with the changes in the number of
workers in past years.

81%
19%
Chart Title
Decrease in No.of
employees
Increase in No. of
employees
~ 31 ~


111

This chart provides fairly clear information; it provides a clear
picture that a minority of entrepreneurs who received the
donation, made certain progress i.e. expanded their operations
and thereby increased the number of employees.
Only 19% i.e. 15 of surveyed firms, who received certain
donation, said that they had increase in number of employees. We
had an option in questionnaire to ask what is number of
employees hired. Those fifteen firms gave us information that was
augmented by only one worker.
The larger percentage of firms, 81% i.e. 66 of total surveyed firms
agreed that after donation they reduced their business operation
which was followed by decrease in number of employees.
No matter how illogical it may be, we have stated the facts.
These 81% of surveyed firms, responded positively to the
question of whether you would again accept a donation, of any
kind!

I need to continue dealing with donations and SME survey done on
the North Kosovo, to show you one more interesting connection.
For the following chart I used information from question did they
accept any donation in previous time with the question; what is
the capacity of your current production?
~ 32 ~


111


From the entire number of firms, 81 answered that they had
received certain help. This chart is presenting us situation in which
a certain company with additional financial injection failed to
increase its production capacity. Were the donations and grants
properly and adequately utilized? Were they the right choice for
receiving help? Who decided they are appropriate?
31% reported that after received help their production capacity
went above 61%, precisely 24 companies.
70% reported that after receiving help their production capacity
went below 61%, precisely 57 companies.

I have to mention that this is a long-term sponsorship of Kosovo
from Serbia and other government has created a non-working
society that does not use their own potentials. People in this
region are used in a variety of grants, donations which eventually
created a seeming secure atmosphere.
In reality that is not the case.



70%
30%
Production capacity
Less than 60% more than 61%
~ 33 ~


111

An additional macro-economic factor is corruption. Public
perception is certainly an important indicator for measuring the
impact of corruption on the Kosovar economy and economic
behavior. Twenty per cent (20%) of the public and 25% of
surveyed managers believe that the lack of institutional
mechanisms of control is a source of corruption. By contrast, the
lack of ethics is for both groups a relatively unimportant factor
compared to other factors affecting the spread of corruption
(Riinvest, 2003). . Corruption has negative effects on business
development. Corruption mostly is regarded as an informal
obligation (tax) that needs to be paid. Moreover, corruption
decreases the efficiency of investments. This takes place because
money is spent to overcome difficulties imposed by public officials,
instead of financing business needs. Corruption also increases
production costs and the enterprises expenditure in general,
decreasing in the meantime the businesses competitiveness in
the market.
Perceptions of the impact of corruption are indicated in next part:
Supports unfair competition 25%
Creates an improper environment for business and new
investments 22.4%
Increases business expenditure due to the requested bribes
20.9%
Imposes obstacles for activities due to the poor quality of public
services 15.9%
Imposes obstacles for activities due to artificial and bureaucratic
delays 15.7%

As we see from this, the surveyed managers believe that the main
consequence of corruption is that it harms fair competition.
Twenty five per cent (25%) share this opinion. Twenty per cent
(20%) consider corruption as a reason for increasing business s
expenditure (because of the payment of bribes). A little more than
~ 34 ~


111

twenty two per cent (22.4%) believe that it creates an
inappropriate environment for business and new investment.
Finally, it sustains a negative correlation between competitiveness
and corruption. Corruption destroys the capacity of the country to
produce and sustain competition.


5. Conclusion
Trying to summarize all of the above we will always encounter a lack of
understanding of the whole of the region and its specific functioning.
I might be repeated in this section, but I think it is worth mentioning.
Military conflict has created a specific market, limited and
organized for whose regulation will need time. Meanwhile, multi-
ethnic society uses both legal and illegal ways to survive while
completely forgetting the previous events, their differences and
disagreements.
Business and profit is encouraging people to cooperate without
prejudice and without conflicts. Everyone is searching for his
way-out of this situation in which that same conflict has put them
in. Sense and wide open mind in this strange market brings
cooperation with the environment, whatever it is. Cooperation
brings better performance. Better performance creates healthier
and tempting market.
There are still limited people, who do not want to look into the
distance, which still are holding for certain codes of behavior and
way of thinking. As long as the opinion about cooperation with
South continues to be seen as betrayal, progress will be limited,
as much as previous information indicated that the existing
barriers are slowly fading.
I will be in this case brave enough and maybe too optimistic to
guess some better tomorrow.

~ 35 ~


111

6. References and bibliography


http://mf.rks-gov.net

http://www.cic.nyu.edu/internationalsecurity/docs/Final2008briefi
ngreport.pdf

http://www.un.org/aboutun/charter/chapter8.shtml

www.unmikonline.org/pub/misc/ksip_eng.pdf

http://www.consilium.europa.eu/showPage.aspx?id=1463&lang=
en

http://www.eulex-
kosovo.eu/home/docs/JointActionEULEX_EN.pdf

www.Euractiv.com.


http://www.unmikonline.org/docs/2008/Fact_Sheet_July_2008.p
df

http://www.osce.org/item/35554.html.

http://www.nato.int/kfor/kfor/objectives.htm.