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Balkan Baby Steps

Progress is slow, but it’s not hard to imagine Kosovo as a business and logistical hub.

by Martin Ehl 5 November 2013

Kosovo is essentially a giant undulating landscape surrounded by high mountains. If the Kosovans decided to wager on tourism as a source of income, the whole region could feature an interweaving network of bike paths for the summer and skiing in the mountains in the winter – if, that is, someone chose to invest in the construction of mountain resorts and the roads leading up to them.


But Kosovo, where 90 percent of the 2 million inhabitants are Albanians, is only five years into its existence as a country, which must place its economic bets on a cheap, young, and poorly educated work force and mineral reserves.


Serbia is actually also a young state, which after a series of military conflicts is still getting used to life without Yugoslavia. Its economy is doing only slightly better than Kosovo’s. In terms of purchasing power parity, Kosovo's GDP per capita was 6,000 euros ($8,000) in 2012, while Serbia’s was 9,000. An influx of money from the diaspora prevents Kosovo from going bankrupt; Serbia recently negotiated a loan from the United Arab Emirates.


The future of both countries cannot be found in the constant poking about in their painful history, which I want to deliberately avoid in this column. The local elections in Kosovo on 3 November – particularly in the north, where roughly one-third of the 120,000 members of the Kosovo Serb minority live – should have indicated whether both states and nations are able to look toward the future together. Under great pressure from the European Union, their politicians are attempting to help them: in April, the prime ministers signed an agreement that provides some autonomy for Kosovo’s Serbs and allows Belgrade to further disengage from Kosovo.


For the Serbs, the elections – whose second round should take place in 25 of the 36 municipalities on 1 December – were an important test: whether Brussels would start accession negotiations with the EU after the new year or not depended in part on the conduct of the elections, especially in the north.


Official Belgrade, including the nationalist parties, is pro-European. Serbs in Serbia are troubled by the poor economic situation rather than history. But as several attacks on candidates and polling stations in northern Kosovo before and during the election showed, playing the Kosovo card hasn’t completely disappeared from Serbian politics.


The most popular Serbian politician is now Aleksandar Vucic, who at least talks as if he is a pro-European nationalist. He is technically deputy prime minister, but de facto the most powerful man in Serbian politics. Vucic endorsed the agreement on Kosovo in April signed by Prime Minister Ivica Dacic. But it’s not certain that the issue couldn’t resurface, if, for instance, Vucic and his Serbian Progressive Party decided next year to call for new parliamentary elections.


Interested outsiders must tread carefully around Kosovo-Serbia relations. The Czech Foreign Ministry canceled a recent conference on the enlargement of the European Union in which the foreign ministers of both countries were meant to participate. The Kosovo government and the European Council on Foreign Relations also postponed a major international conference, already something of a tradition, to early next year because of the local elections. The event was originally to be held in Pristina in mid-November.


But unlike conferences, politicians from neither country can avoid looking to the future, if only because of the state of the economy. The official unemployment rate in Kosovo moves around 40 percent and remains around 24 percent in Serbia. Unofficially, in both cases, the figures are much higher.


So far, local politicians have failed to pursue policies that would create jobs other than through the assistance of one-off, big investments from abroad. Five years ago, Fiat’s investment into the Zastava car company saved the Serbs; this year, it was the surprising deal with the United Arab Emirates.


The Kosovans are missing such injections. They are only now building their state and its place in the world. For example, an agreement on avoidance of double taxation with the Czech Republic should be signed in the coming weeks.


Two weeks before the elections in Kosovo, a French-Turkish consortium opened a new terminal at the local airport, which is the main gateway to the large Kosovan diaspora and has a capacity of 4 million passengers a year. Last year, 1.5 million passengers used the airport, making it one of the busiest in the Balkans. It might take time to reach the levels of the Belgrade airport, which annually serves more than 3 million passengers. But the Kosovo airport could soon become direct competition for the one in Skopje, which last year served just 828,000 travelers.


Once the Kosovans finally build a highway to Serbia, Albania, and Macedonia, Pristina could become an interesting center of Balkan business.


That’s in terms of logistics. Otherwise Kosovo has something to improve upon, with its reputation for instability, links to organized crime, and inefficient and corrupt government. But in the freshly released rankings of Doing Business – the World Bank's measurement of business regulations – Kosovo leapt 10 places, up to 86th place and became one of the top 10 global reformers. Serbia fell by six points to 93rd.

Martin Ehr
Martin Ehl
 is the foreign editor of the Czech daily Hospodarske noviny, where this column originally appeared. He tweets at @MartinCZV4EU.
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