The brighter side

Kosovo’s Minister for Economic Development, Besim Beqaj, stopped by last week to talk at SAIS.  I was too busy with Yom Kippur and a wife’s illness to write him up quickly, but I doubt any of what he said is yet out of date.  So here is my summary, with apologies for anything I’ve gotten wrong (the numbers are particularly difficult to keep track of–I’ll print corrections if you send them to me):  

Kosovo found itself at the end of the NATO/Yugoslavia war in 1999 with a devastated economy and two big challenges:  post-war reconstruction and transition from badly broken socialism to a free economy.  Beqaj himself started his career as a teacher in the parallel education sytem, which undertook the schooling of Kosovo’s Albanians during the 1990s outside the official Belgrade-sponsored system.  At the end of the war, 120,000 houses were damaged out of a housing stock of 400,000.  Ninety-five per cent of the refugees and displaced people returned quickly, within two months.

Kosovo needed a state.  Today it has one that declared independence in 2008 and substantially completed the implementation of Ahtisaari’s Comprehensive Peace Settlement proposal this year.  Governance is decentralized, minority protection is enshrined in law, and 91 other states have recognized Kosovo, which is already a member of the International Monetary Fund and the World Bank and will soon be a member of the European Bank for Reconstruction and Development. Kosovo’s breach last year of its IMF agreement has proven temporary.  Within eight months it was back under an IMF program and will stay there.

The state-building process is not yet complete.   The long pole in the tent is rule of law.  Kosovo has asked for the EU rule of law mission (EULEX) to stay for two more years.  Education needs a major upgrade.  Unemployment is high, especially among the young.

Still, Kosovo has enjoyed high growth rates (estimated at 4.4% in 2012), 40% of its budget is devoted to capital investments in infrastructure, GDP has grown to 2700 euros/year, debt is under 7% of GDP and foreign direct investment last year amounted to 400 million euros.  The road to Durres in Albania is a major improvement.  The next infrastructure priority is the road to Skopje, which will start construction soon (I was relieved to hear that!).The Central European Free Trade Agreement provides access to a market of 25 million, in addition to trade agreements with both Europe and the United States.

The National Council for Economic Development has set five goals:

1. Maintaining fiscal stability (legislation limits government debt to 40% of GDP);

2. Improving the environment for investment by reducing red tape and empowering the private sector;

3.  Privatizing state enterprises, with priority going to telecommunications (a competition is now in process), the energy sector and mining (much improved airport operations are already in private hands);

4.  Revitalizing agriculture and food processing;

5.  Developing human capital, including civic education.

All legislation implementing these and other priorities must be aligned with European Union requirements. Ninety per cent of Kosovo citizens would approve a referendum in favor of EU membership.

Kosovo still faces serious difficulties.  The Serbian campaign against diplomatic recognition has hurt the state’s prospects and its ability to provide for practical things like “green card” insurance coverage for people who want to travel outside Kosovo by car.  Smuggling into Kosovo and back into Serbia) on small roads in the north is costly to both Pristina and Belgrade.  As much as $200 million euros in electric bills remain unpaid by Serbs living in the north, which remains a major issue.

It was left to me to ask the obvious question:  what about corruption?  The Minister replied that the perception is worse than the reality.  He pointed to UNDP/USAID polling that suggests only 8% of the population has personal experience of corruption.  Eighty-two per cent of the population knows of corruption only through the media or through talking with friends and relatives.

Alas, that same polling shows low levels of satisfaction (among both Serbs and Albanians) with the government, which gets most of the blame for the still difficult economic situation.  Besim Beqaj and his colleagues still have a tough road ahead.