Good news
It wasn’t just excess wonkiness that made me tweet about the World Bank’s “Doing Business” report website. It was this tidbit I found there: Kosovo jumped up 28 places in the rankings (from 126 to 98). Big improvements were in protecting investors, starting a business and dealing with construction permits. Serbia also saw a jump of 9 places in the rankings (from 95 to 86), with most of the improvement in starting a business and resolving insolvency.
I did my own unscientific survey last summer of a few entrepreneurs I met at a barbecue in Pristina. They all reported that it was easy to open a business and to operate one without serious problems. That’s better than I can say for my experience in DC.
This, to me, is very good news. It takes concerted effort to jump ahead the way Kosovo and Serbia have done. It also gets harder as you move up the rankings, for obvious reasons. I won’t be surprised if progress is uneven. The important thing is that both continue in the right direction.
Why is this important? Above all because it is the opening and growth of small businesses that will create stronger economies throughout the Balkans and raise the standard of living. Both Serbia and Kosovo have seen strong growth in recent years, but both appear to be slowing now due to the financial crisis plaguing all of Europe. Kosovo uses the euro as its currency, which in my way of thinking is a big plus since it eliminates monetary policy issues that are difficult to manage. But as a result, it cannot devalue to improve its trade position, as Serbia can.
The improvement in business climate is also an important indication that governance is improving. I’ll hope to see those improvements reflected in Transparency International’s Corruption Perceptions Index in the future. Neither Kosovo nor Serbia can be proud of their most recent (2010/11) scores there. In the long run, it is the willingness, or not, of Serbia and Kosovo to adopt the needed reforms to improve business conditions and governance that will determine whether and when they are ready to enter the European Union.
Of course there are other factors, not least the willingness of Belgrade and Pristina to normalize their relations and resolve the many outstanding issues between them. The meeting last week of the two prime ministers was a step in the right direction. Later, Serbian Prime Minister Dačić said that the issues to be discussed with Pristina
include missing persons, rights of the Serbs in northern and southern Kosovo, protection of the cultural and church heritage and property and privatization
This looks to me a good deal like former President Tadić’s four points. from early this year, which represented an effort to greatly reduce Serbia’s “asks” of Kosovo.
The big missing item is partition, which Dačić will more than likely raise again in due course. He is deeply invested in the idea. Neither Dačić nor Tadić has been prepared to put recognition of Kosovo’s sovereignty and territorial integrity as well as establishment of diplomatic relations on the table. Those things will come at the end of the process, not at the beginning, but come they must. The EU and U.S. will need to provide the leverage required to make Serbia swallow pills Belgrade has made much more bitter by its diehard resistance.
In the meanwhile, let’s celebrate what there is to celebrate: two countries that are moving, however haltingly, in the right direction. I wish I could say as much for my other friends in the Balkans, in particular Bosnia.
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Yessss! (It’s like the kid at last brought home a decent report card, after swearing all semester he’d being doing his homework, really, but to no obvious avail.)
The news report I saw claimed “only” an improvement of 19, from 117 to 98, which is impressive enough. (Also at RFE http://www.evropaelire.org/content/article/24748156.html). The Minister of Trade and Industry said the WB apparently had not included some reports showing additional improvements, and hoped they would be included in next year’s figure. (The local take on it was not particularly celebratory – stories pointed out that in the region, only BiH is worse.)
Macedonia BTW is working its little heart out to do the right things – it stands at 23, heads and shoulders above its neighbors (for example, Greece, at 78, although that’s up from 89 last year), but it doesn’t seem to be doing the country much good. In economics, virtue is not supposed to be its own reward. How about some carrots for these guys, finally?
Serbia (86, just behind Albania at 85) uses the Euro along with the dinar, giving it the worst of all possible worlds: it can’t devalue enough to do it any real good, because that would wipe out all those borrowers with loans (mortgages) denominated in euros and paychecks in dinars, and make life difficult for manufacturers and others who import from Europe. So the Central Bank uses its reserves to moderate the decline in the dinar and prevent an outright crash, hoping for the situation to improve. Like the everybody else these days.