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Navigating Regional Challenges

Kosovo’s* economic growth hinges on the progress of EU-Serbia dialogue, with the lack of a comprehensive agreement and regional cooperation potentially impeding its trajectory and citizenry’s needs

Despite challenges, the economy of Kosovo* has made notable strides in recent years. The country’s young people and educated are its engine and workforce that represent a promising asset for future development. Like many countries that don’t have enormous foreign investments, diversity in the economy has helped develop sectors like information technology, which bodes well for its overall economic outlook.

Kosovo’s economic trajectory is inextricably linked to the ongoing political dynamics, notably in the EU dialogue with Serbia. The pace of economic growth is intricately tied to the outcomes of these negotiations. Without a comprehensive agreement and strengthened regional cooperation, the economy may experience slower growth, potentially falling short of meeting the needs of the citizenry.

When entering the Kosovo Innovation Centre in Pristina, the sight of teenagers engaged in activities that seemed like gaming caught me off guard. To my surprise, it wasn’t a gaming room; my friend, a leader at the institution, explained that these youngsters were part of a NASA programme. The centre exuded a modern, business- like atmosphere reminiscent of the offices at Oerlikon in Zurich, Switzerland, where I used to work. It was a hub that facilitated work, but also provided spaces for relaxation and short breaks, including real game rooms. During my visit, I played ping pong with the young participants of the Innovation Centre and quickly found myself outmatched. It reminded me of the collaborative and dynamic atmosphere of similar business settings.

Kosovo’s* economy faces challenges, including high unemployment and dependence on external trade, necessitating efforts for long-term sustainability

Not long before this, I had visited another centre, “Bonevet”, which aims to guide very young individuals not only in technology, but also in life skills. Founded by Vllaznim Xhiha, a retired engineer from Switzerland who returned to Kosovo, “Bonevet” serves as a platform for young minds to explore their potential. I covered this story for Swiss public broadcaster SRF.

My story at “Bonevet” began with a remarkable innovation—an electric car made in Kosovo. Four young innovators, two girls and two boys, demonstrated their creation with enthusiasm. Despite their youthful appearance, their maturity was evident. When I asked if someone could drive the electric car for video footage, they replied humorously: “we are 14 and have no driving licenses”.

Within “Bonevet”, even younger kids were actively engaged in various projects. They worked diligently on crafting toys and wooden houses, programming, and even 3D printing items like printers, violins and, later, Covid-19 face shields. These young individuals are the future assets of Kosovo’s economy.

It is worth noting that young people from Kosovo* are becoming bilingual, speaking English alongside their mother tongue. Despite concerns about the impact on their native language, the positive aspects are undeniable. The ability to communicate fluently in English accelerates their development. Most children and young people in Kosovo* now speak English proficiently from nursery school onwards. However, in order for these generations to thrive, they will need a more extensive and sustainable economic landscape.

Unfortunately, many individuals in the country still aspire to move abroad. The Kosovo diaspora continues to be a crucial pillar of the country’s economy. The Central Bank of Kosovo has reported that remittances received in Kosovo* have reached a value of 1.22 billion euros, showing a six per cent annual increase, constituting 13.7 per cent of the GDP.

Despite the positive changes in Kosovo’s economy, the heavy reliance on remittances makes the country vulnerable. To achieve stability, Kosovo* must focus on enhancing its domestic production. Kosovo’s major exports predominantly consist of metals (47 per cent of total exports) and mineral products (30 per cent of total exports). Other notable export products include prepared foods, plastics, rubber, machinery, appliances, electric materials and textiles. The country’s key export partners are Italy, Albania, North Macedonia, Switzerland, Montenegro and Germany.

On the import front, Kosovo* covers most of its needs, including essential food products, which are primarily sourced from outside the country. However, it consistently experiences a trade deficit due to the significant reliance on imports to meet consumer demand.

The primary domestic industries include agriculture, mining, the home bedding sector and construction. Notably, Kosovo’s major exports include scrap metal, nickel, lead and mattresses.

Fluent English skills accelerate development for most children and young people in Kosovo*, but a broader and sustainable economic landscape is crucial for their long-term success

While the Kosovo-Albanian diaspora, which has been enriched with experiences from Western countries and capital for investment, contributes actively to the economy, investments from large foreign corporations remain modest. Kosovo* faces challenges in economic competition with other regional countries, some of which, like Serbia, exert dominance over its economy with their products.

Kosovo* boasts excellent wine production and many residents of the city of Rahovec/Orahovac rely on its output. The country’s most renowned product across the region is Peja beer, originating from a Yugoslav-founded factory formerly known as “Pećko pivo”. While this beer is available on markets across Western Europe, especially in Switzerland and Germany, Serbians nostalgic for it cannot buy this beer in their neighbourhoods due to import challenges. Paradoxically, despite campaigns to boycott Serbian products, Kosovo* continues to import hundreds of millions of euros worth of goods from Serbia.

The economic future and accelerated growth of Kosovo* hinge on its political stability, which is tied directly to outcomes and peace agreements in the dialogue with Serbia that is being facilitated by the European Union. No significant investments will flow into a country that’s perceived as being dogged by long-term instability. This predicament is not Kosovo’s fault, but it does underscore the need to shift the focus away from political tension.

Stability is crucial not only for Kosovo-Albanian-owned businesses, but also for local Kosovo-Serb businesses, for fostering notions of regional cooperation espoused in initiatives like Open Balkan, where participation is notably limited to Albania, Serbia and North Macedonia. Attempts to use the economy to alleviate regional issues, such as those made by the administration of former U.S President Donald Trump, have often met with failure. Technical aspects, like aviation and train connections and the building of highways, and the addressing of administrative issues, are deeply political, stalling not only the development of the country, but that of the entire region, which is in desperate need of progress. Economic growth therefore remains closely tied to political considerations. When economic indicators consistently rise, it signals success in politics and a point of no return.

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