One of the EU Pillars top priorities is to invigorate the privatisation process and to focus on the priority economic reforms in which the EU Pillar plays the leading role. The privatisation process is now running on schedule and together with the Kosovo Trust Agency and our counterparts in the Provisional Institutions of Self-Government, the EU Pillar is confident that we will be able to privatise some 90% of the value of the socially owned companies by mid 2006.
Privatisation is creating numerous investment opportunities in production, trade and services. It is also a signal of our strong will to build a strong private sector in Kosovo as the basis for future economic development.
Furthermore, the EU Pillar has been working hard alongside its counterparts in the Government to include Kosovo in a number of important regional initiatives, whose aim is to support economic growth and stability in the region through cooperation.
Our vision is that of Kosovo fully integrated in the regional cooperation initiatives and ultimately into the European Union. Despite all the difficulties, Kosovo has made astonishing progress. The business environment in Kosovo is in many respects becoming the most competitive in the region. For instance, Kosovo’s tax system is excellent in both the simplicity of compliance and the low level of burden on enterprises. Few countries in the region can outperform Kosovo’s ability to register new businesses in only a couple of days. Another advantage is a high degree of macroeconomic stability: inflation is close to zero, budgets legally must be balanced, the financial sector is strong, and there are no monetary policy uncertainties, as the Euro is the official currency in Kosovo.
The time is right to invest in Kosovo. Whether through privatisation or new Greenfield investment, there are numerous investment opportunities in Kosovo. The business friendly environment and a very entrepreneurial people will highly contribute to any of your endeavours.
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Why invest in Kosovo
Kosovo offers many benefits to potential foreign and domestic investors: particularly low taxes, abundant resources, and a supportive business environment.
The lowest taxes in the region
Taxes in Kosovo are very low compared to those of any of its neighbours. The tax system has been kept extremely simple. There are few taxes and compliance is straightforward. Furthermore, the Government is introducing tax incentives to support domestic production.
||The value added tax (VAT) rate is 15%; a reduced rate of 0% applies to agricultural production inputs. Exporters receive a full VAT rebate.
||Tariff rates are 10% on imports; a reduced rate of 0% applies to imports of certain capital and intermediary goods. The new Customs Code provides a number of business friendly trade-facilitating instruments.
||Personal income tax rates vary from 0-20%.
Kosovo has an enviable endowment of human and natural resources:
||abundant natural resources: lignite, zinc, lead, ferronickel and fertile agricultural land; and
||a young and motivated labour force with a strong entrepreneurial spirit and skills as well as a widespread knowledge of all major European languages.
A stimulating investment environment
Kosovo’s institutional environment supports business:
||free access to the market of the European Union and the markets of its direct neighbours;
||modern business-support institutions;
||simple and quick business registration procedure (within 3 days);
||modern and EU compatible legal framework; and
||the Euro is the official currency in Kosovo, eliminating Euro zone currency risk.
In particular, Kosovo has a modern foreign investment legislation (UNMIK Regulation 3/2001), providing for the same investment regime for Kosovo’s citizens and foreign investors. It includes measures such as national treatment, guarantees for unrestricted use of income, prohibition of favouritism and discrimination as well as protection against expropriations.
There is a notable rise in foreign investors’ interest. According to Business Registry data for 2004, there are 593 companies in foreign and mixed ownership in Kosovo. These investments originate from FYROM, Serbia and Montenegro, Turkey, Albania, China, Germany, Slovenia and Italy. More than 90% of foreign investment goes to enterprises with less than 10 employees.
In many respects, Kosovo is already the most attractive business environment in the region. The vast potentials in mining, energy, agriculture and food processing sectors present opportunities for very attractive private investments. The Government and UNMIK are working to improve the investment climate even more. Kosovo is now enjoying sustained economic growth.
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Central location in the region
Kosovo is located amidst a potential market in South-East Europe of 100 million people. It is well connected to regional centres via road, rail, and air communications, and linked to the regional centres via 16 roads that pass through Kosovo.
Major transport connections have been rebuilt and will be upgraded in the near future. After completion of planned road constructions, Kosovo will have access to the ports of Durres in Albania and Thessaloniki in Greece.
||Travelling Distance from Pristina (km)
|Thessaloniki (port city)
|Durres (port city)
|Bar (port city)
Pristina Airport is Kosovo’s air bridge to Europe and the rest of the world. It has a capacity of one million passengers per year. The airport connects Kosovo via direct flights to London, Vienna, Istanbul, Budapest, Zurich, Tirana, Frankfurt, Düsseldorf, Stuttgart, Hannover, Copenhagen, Stockholm and Gothenburg. Railway transport has an 80-year old tradition in Kosovo. The railway lines cover the entire territory, both north to south and east to west. The main network is 236km long, and in addition there are 97km of industrial railways. Railway upgrades are planned to divert more heavy transport from roads to rail.
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A stable political system and a young, multilingual population
Kosovo has an estimated population of 2 million, of which approximately 90% is
Albanian, 8% Serb, and 2% others. The age and gender breakdown is as follows:
|0 – 14
|15 – 64
The Albanian majority and the non-Serbian minorities are mostly Moslems. Few of them are Catholic. The Serbian Minority is largely Christian Orthodox.
The official languages in Kosovo are Albanian and Serbian. The majority of the population speaks Albanian. Serbian, Bosnian and Croatian are spoken by minorities. A very large number of people also speak English, German and other European languages. English is the official language of UNMIK. The texts of legislation created in Kosovo since the beginning of the UNMIK administration exist in English, Albanian and Serbian.
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An inviting business environment
UNMIK has successfully built a stable macroeconomic environment. Kosovo has adopted the Euro as its currency and as a consequence does not run currency management or exchange rate risks. Moreover, the Kosovo Government runs a stable and forward-looking fiscal policy. The tax revenue base has been widened. The improvement in revenue collection, overall fiscal stability and the growth of the GDP can be seen in the graph and table below.
|GDP (MILLION EURO)
|GDP PER CAPITA (EURO)
|GDP GROWTH (%)
|GNDI PER CAPITA (EURO)
|INVESTMENT (MILLION EURO)
|FOREIGN AID (MILLION EURO)
|CONSUMER PRICE INDEX (% CHANGE)
A very large number of private businesses have opened up in Kosovo since 1999. That is in itself proof of a supportive business environment. Approximately 43,000 private businesses have been registered. The majority of them are active in trade, but as shown in the table below, nearly half of them are distributed across many other, quite diverse business sectors.
Registered private businesses classified by economic activity
A modern legal framework
The legal system is continental (Austro-Hungarian tradition), with recent amendments through Regulations and Laws. Since the beginning of the UNMIK administration in Kosovo in 1999, a number of regulations/laws have been adopted to support the development of a modern and competitive market economy. With assistance from experts from the EU and other countries, Kosovo has created a modern legal framework.
Regulations and administrative directions are available on UNMIK’s website (www.unmikonline.org). In the following table we singled out some of the essential economic laws and regulations
A sound banking system
Over the past four years Kosovo’s financial sector has been built on completely new foundations. The Banking and Payments Authority of Kosovo (BPK), established in November 1999, is an independent body which successfully regulates the banking and insurance sectors.
All of Kosovo’s banks are now private, some of them foreign-owned. There are seven registered banks, ten Savings and Credit Associations, twelve micro-finance institutions, four other non-banking financial institutions and eight insurance companies. The Pro Credit Bank(www.procreditbank-kos.com), established upon the initiative of several leading International Financial Institutions, and the Raiffeisen Bank of Austria have the largest market share in Kosovo. Local banks licensed by the BPK include the New Bank of Kosovo, the Bank for Private Business, the Economic Bank, the Credit Bank of Pristina and the Kasabank, which all offer similar banking services (see page 47 for the contact details of these banks).
The banking sector is growing quickly. According to the World Bank, there has been a rapid increase in loans and deposits as a percentage of GDP in the past few years. The number of inter-bank operations was multiplied by ten between 2001 and 2002, and doubled in 2003. The ratio of bank operations to assets was multiplied by eight, from 0.33 in 2001 to 2.67 at the end of 2003.
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A business-friendly tax regime, trade policy and labour force
The overall tax level in Kosovo is low. The tax system, created from scratch in recent years, has introduced modern European taxation standards and practices and is the least burdensome and simplest system in the region.
Most of the budget revenue comes from value added tax (VAT), excise tax and custom duties. The largest revenue source is VAT, which is collected at the border on imported goods and internally on locally produced goods and services. VAT applies to all imports and to domestic transactions made by enterprises with a turnover larger than 50,000 Euro. Exporters can use the VAT rebate. Businesses can defer payment of VAT on import of capital goods up to 6 months. Excise taxes are levied on alcohol, tobacco, coffee, soft drinks, motor vehicles and certain other products.
The Kosovo Tax System
Trade policy promoting local production and exports
Kosovo is an independent customs entity with a liberal trade regime. The general tariff rate is currently at 10% for imports and 0% for exports. Tariff rates for capital goods and a wide range of intermediary goods are also 0%. With these policies, Kosovo is certainly the most advantageous tax environment in the wider region.
Currently, Kosovo has a Free Trade Agreement (FTA) with Albania. Negotiations are ongoing with Bosnia and FYROM to sign Free Trade Agreements. Trade with Serbia and Montenegro is at present equally free, and the 1996 FTA between Yugoslavia and FYROM is applied on an interim basis. Kosovo has committed itself to sign FTAs with all Western Balkan countries under the Stability Pact framework. Following that process, Kosovo will become part of a regional free trade area of over a hundred million people.
You can find the full texts of the agreements on Free Trade, Investment Protection, Avoidance of Double Taxation as well as other policy and legal documents, reports and analyses in the Documentation section of this website.
Kosovo enjoys non-reciprocal, customs-free access to the EU market, as stipulated by the EU Autonomous Trade Preference (ATP) Regime (Council Resolution (EU) 2007/2000). Quantitative and qualitative restrictions remain in force only for a very limited number of goods. Investors thus enjoy unlimited access to the EU market and the benefits of Kosovo’s low-tax environment, low labour costs and payroll taxes, and they have access to a pool of young and motivated workers.
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A flexible labour market and a competitive labour force
The labour market in Kosovo is highly flexible and regulated by a modern Labour Law (Regulation No. 2001/27 on the Essential Labour Law in Kosovo), created in line with EU standards. The average monthly wage in Kosovo in 2004 was estimated at _ 218.
Kosovo’s labour force is also among the most competitive in the region, given that income taxes are very low –only 5% on the average gross salary. Furthermore, wages in Kosovo are unburdened by costly social contributions, unlike the salaries in most neighbouring countries. The only mandatory contributions are those for individual pension savings accounts, financed by employer (5%) and employee_(5%) contributions on total gross wages paid. Individual pension accounts are direct and tax-free personal savings for employees.
The Kosovo Government and the international community in Kosovo have established vocational training programmes, which benefit workers and employers. These programmes continue with generous donor support. Kosovo’s education system is undergoing substantial reforms to make its labour force more productive and competitive in an open economy, which Kosovo is increasingly becoming.
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Excellent potential in the agriculture sector
Kosovo is well endowed with agricultural land suitable for high-value crops, such as fruits and vegetables. Because of their size, land plots are less appropriate for the cultivation of high-volume low value crops. Therefore the agricultural sector strategy aims, among other things, at providing adequate incentives for the growth of the fruit and vegetable sub-sector. The supplemental agro-products processing industries also present excellent investment opportunities in Kosovo.
Agriculture is seen as one of the engines of economic growth for Kosovo. Kosovo has an area of 1.1million hectares and as much as 53% of it is cultivable land. More than 60% of the population lives in rural areas and the majority of them work in agriculture. The bulk of agriculture consists of subsistence farming in family farms of less than 3 hectares on average. Less than 1% of the farms have more than 10 hectares of land. However, a few large farms, ranging from 500 to 1500 hectares, are currently under the trusteeship of the Kosovo Trust Agency, and will present good investment opportunities through the ongoing privatisation process.
The Ministry of Agriculture, Forestry and Rural Development, assisted by international experts, has developed a set of strategic documents and policy advice on how to improve the competitiveness of the sector. The Government has introduced fiscal policy measures to stimulate local agricultural and industrial production.
The introduction of a 0% tariff rate for most agricultural inputs and capital goods, together with the recently introduced VAT exemption for a wide range of agricultural production inputs, will enable Kosovo’s agricultural producers to be more competitive and will consequently stimulate domestic production. The implementation of the sector development policies and sufficient investor interest can turn around this segment of Kosovo’s economy and lead to the creation of a large export business.
Government Policy in the Agriculture Sector
The structure of crops grown in Kosovo
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A long winemaking tradition
Vineyards and wine production have a long tradition in Kosovo. Kosovo possesses a huge area of vineyards covering the zones of Anadrinit/Podrimlje and Dukagjin/Dukadjin. Previously 9000 ha, the vineyard area has been reduced to 4991 ha after the 1999 conflict. Wine and brandy production capacities support the vineyard business.
Vineyards and Wine Production
Wine Processing Capacity in the Public Sector
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Opportunities in reviving livestock production
At present, Kosovo is experiencing a livestock recovery process. The climate favours livestock investments using modern technologies. With supportive government policies and adequate private investments, Kosovo will be able to rely increasingly on domestic meat and dairy production. Recent fiscal incentives provided by the Government make this business even more profitable. This sector provides very attractive opportunities for those investors who have the required business know-how and capital.
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Immense energy and mining potential
The energy and mining industries certainly have the potential to turn around Kosovo’s economy. With the construction of an additional 1000MW of power generating capacity (this is certainly not the upper limit), Kosovo would increase its GDP by 220 million Euro or 17% of its current estimated GDP. The revival of these two sectors is one of the economic policy priorities in the short and medium run.
The energy sector development potential is based on Kosovo’s enviable reserves of lignite, which are estimated at around 12 billion tonnes. The lignite reserves can be exploited in surface mines, thus providing a very cheap source of energy for thermo-electric power plants. At an exploitation cost of 1,1 Euro/GJ of energy, Kosovo’s coal is definitely the most economical in the region. Investments in energy and mining sectors are highly profitable and will make Kosovo a significant regional energy supplier. Kosovo now has two thermal power-producing blocks, “Kosovo A” and “Kosovo B”, built between 1960 and 1984, with respective capacities of 800 MW and 678 MW. Currently their combined output cannot exceed 640 MW, due to physical deterioration.
The existing reserves of coal would enable the expansion of the generating capacity by up to an additional 2000 MW. This would require investments in opening new coalmines. Lignite is currently mined at two locations in the vicinity of the power plants (Mirash and Bardh mines). These two mines have largely been exploited and new mines will have to be opened to provide adequate coal supply for the existing and possible new power plants. With adequate investments, lignite mining will again become a large and profitable business in Kosovo.
Furthermore, Kosovo is well endowed with deposits of lead and zinc. Located in the eastern part of the territory, these deposits are sufficient to make Kosovo a significant supplier of zinc in the regional markets. International market prices for zinc are expected to remain high. Kosovo could therefore not only develop markets for raw zinc, but also for more value-added zinc products. Currently, the Trepca mining company owns the deposits of these two ores. The company management has produced a sound development strategy for the mine. The primary goal is to resume the mining operations and zinc exports.
Trepca management has plans to attract private investment to develop this business. This will create new investment opportunities for joint private-public projects. Finally, private investment will be sought at a later stage through the planned privatisation to secure better company management and investment in value-added zinc products.
The ferronickel and magnesium reserves are also significant. The Ferronikel company was a producer and exporter of high value ferronickel for the needs of steel and manufacturing industries in Central and Eastern Europe. Due to war and transition related problems, the company stopped operating in 1999. The privatisation of Ferronikel provides a highly profitable opportunity. The mine is connected to a railway, which enables the importation of additional ore concentrates through the Thessaloniki port and from Albania. The enterprise has a significant export and employment potential. Regional users of magnesium have already expressed an interest in purchasing from Kosovo, should production resume. There are two publicly owned enterprises in Kosovo which used to exploit magnesium reserves: Stolezc and Golash. However production stopped in 1999 and has never been restarted since. The resumption of production will require an investment into new technology rather than the rehabilitation of the old equipment.
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The privatisation programme is run by the Kosovo Trust Agency (KTA), established in June 2002. The KTA is responsible for executing UNMIK’s responsibility to administer Publicly and Socially Owned Enterprises in Kosovo. The KTA has the mandate to grant concessions or leases, establish corporate subsidiaries, initiate bankruptcy proceedings and privatise Socially Owned Enterprises (SOEs).
There are nearly 500 SOEs in Kosovo. Some of them are large industrial complexes, such as the Trepca and Ferronickel conglomerates, which together employed more than 12,000 people. Most SOEs are in the agricultural and trade sectors, but they can also be found in other business sectors.
SOEs are privatised through spin-offs and voluntary liquidation. This is a very attractive method, under which only minor liabilities are transferred to the buyer. The ‘Spin-Off’ is a two-step procedure whereby the assets of the Socially Owned Enterprise are transferred to a joint stock company, which initially will be 100% owned by the SOE. Thus, a new company is created for privatisation purposes. Most spin-offs are expected in the best performing sectors; these are agro processing, which includes wineries and food processing entities, the construction materials sector, mining, and metal processing. Liquidations allow an inexpensive exit from the market for those enterprises which clearly have no survival prospects. Proceedings would be out of court following the procedures outlined in the Regulation on Business Organisations (UNMIK Reg. 2001/6).
In both cases, privatisation offers excellent opportunities to both domestic and foreign investors to obtain access to valuable natural resources, production facilities with infrastructure, land, equipment and entire enterprises with trained and skilled employees.
Distribution of SOEs across Different Economic Sectors
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Easy business registration
Kosovo has a modern, EU compatible Registry of Business Organisations and Trade Names, founded in 2002. The following types of business entities can be registered in Kosovo: a single person enterprise, a general partnership, a limited liability company, a limited partnership and a joint stock company. All businesses and trade names are listed with the Registry.
||The Registry of Business Organisations and Trade Names
Tel. +381 504 604 (ext. 664)
Registering a business in Kosovo is both simple and inexpensive. A personal business enterprise can be registered in 1 day, while it only takes up to 3 days to register all other types of business enterprises. The cost of registration is a mere 5 Euro for a personal business and 20 Euro for all others. Registered businesses are required to register with the Ministry of Finance’s Tax Authority to obtain a VAT number. Obtaining the VAT number takes 8 days. For import-export activities, businesses need to register with the Customs Office to obtain a customs number. This procedure can be completed within a day upon the presentation of the VAT number to the UNMIK Customs Service. Work permits are obtained from the municipality where the business will be located.
The Investment Promotion Office of the Ministry of Trade and Industry can be used as the first-stop-shop for potential investors. Free of charge, the office will provide the assistance investors need to enable them to make informed investment decisions.
The Office for Investment Promotion of the Ministry of Trade and Industry
Contact Person: Mr. Izer Arifi, Head of Office, tel. +381 38 504 604 ext. 6893
Mob. + 377 44 313 114, Email: email@example.com or firstname.lastname@example.org
Other organisations can also provide relevant information and business support services. Their contact details are provided in the table below.