Geeting the Economy Going

7/29/2019 Geeting the Economy Going

1/16

EU ASSISTANCE TO KOSOVOGetting the Economy Going


2/16


3/16

GETTING THE ECONOMY GOING | 3

SUPPORTING BUSINESSES IN KOSOVO

In 1999, Bedri Kosumi, a armer rom Vushtri municipality, established a small trading companynamed Pestova. Today Pestova is a modern actory or potato products, an exclusive agent orvarious machinery brands and Agora seeds, and a partner and driving orce or many local armers.

Its just one o many businesses throughout Kosovo to have beneted rom millions o euros invested

by the EU. It all started in 2006, when Mr Kosumi decided he needed help with business planningand research and applied to the EU-unded TAM/BAS project.

That stands or Turn Around Management and Business Advisory Service. Shortly ater, his companynow substantial, he qualied or more intensive support under the TAM. Helped by both, Mr Kosumideveloped strong projects that attracted 1.9 million equity nancing rom the European Bank orReconstruction and Development to invest in better equipment, and develop new products andmarkets.

The EU is investing heavily in building

Kosovos small but highly open economy.

Kosovo has an annual per capita GDP o around 1,500-under hal that o any other country in theregion, according to the World Bank. Imports account or roughly 60% o GDP. Exports are negligiblemainly scrap metal and nickel.

Much o Kosovos income consists o remittances rom Kosovans abroad and donor assistance.Growth o 3% over the last two years-mostly driven by privatisation and small-scale retail businesses-is too slow to allow GDP to catch up with neighbouring countries. Most important, theres 40%unemployment, a severe problem that encourages emigration.

Hence theres an urgent need or economic growth to create more jobs. Thats why Kosovo wants to

develop a private sector dominated by small and medium-sized enterprises (SMEs).

Under UNSCR 1244/1999


4/16

4 | GETTING THE ECONOMY GOING

WHY BUSINESSES NEED SUPPORT

Starting a business is one

of the most challenging

things an entrepreneur

can do. Support helps.

In its Medium Term Expenditure Framework (MTEF) 2008-2010 the Governmentacknowledges that the establishment and growth o new and small enterprises tendsto generate most new employment. So creating conditions or start ups and SMEs tofourish is a priority. The EU is working hard to do just that. Its multi-aceted approachincludes providing:

Easier access to nance Better training and qualications or employees and managers Compliance with international standards, helping rms access markets A tax system avourable to growth Procedures and systems ensuring greater transparency, not least

in public procurement tenders Inrastructure that works, and Support to build central and local governments capacity to establish the

policies and strategies businesses need to make the most o Kosovos mainasset-its young people

A survey in 2006 ound 50% o start-ups working on their own ail in the rst twoyears, while many more survive i they receive technical and nancial support.Established rms need attention too. Surveys and interviews show a majority oexisting companies in Kosovo need support in a range o steps required to make themcompetitive, including:

Market research and business plans Reorganisation and restructuring Establishment o nancial systems Implementation o EU standards Strategic planning

Thats why, over the past decade, the EU has unded a number o projects providing

direct support to businesses. These are o two types.

SMEs GENERATETHE MOST NEWJOBS


5/16


GETTING THEM STARTED

The micro enterprises

alone created 1500

full-time jobs and 1014

seasonal or part-time job

opportunities.

The rst type o project ocused on providing direct grant support-non-returnableunding-to promote growth in poor and marginalised regions. Projects included:

The Community Stabilisation Programme (CSP).Originally targeting 18 villages in 10 municipalities, by 2008 it covered over200 villages in 23 municipalities, ocusing mainly on minority communities.

CSP supported 648 micro-enterprise projects, typically buying equipmentallowing entrepreneurs to set up small businesses-anything rom beekeeping toupholstery workshops or electrical appliance repair shops. CSP also helped und165 community projects in small communities lacking acilities such as a minibusservice or a water network.

Poverty Alleviation or Marginalised Municipalities (PAMM).Though similar to CSP, this 3 million project targeted the most vulnerablecommunities, regardless o ethnic origin. Between 2006 and 2009, PAMM issuedgrants to 211 individuals and 19 communities. Assistance was also oeredthrough Regional Business Centres (RBCs). These oer ree internet services;help develop business proposals and research markets; provide training andmarketing and product-promotion services. PAMM also organised a business airor grant recipients and stakeholders.

The Fund or Agro-Processing & Industrial Revitalisation (FAIR). Starting in 2007, FAIR supported substantial manuacturing, agro-processing or

service rms with growth, export or import-substitution potential in Kosovos venorthern municipalities. New and expanding businesses received business adviceand 50,000-200,000 grants or new investments, as long as they provided 25% ototal value themselves. More than 2.3 million was awarded to 17 beneciaries,with 5.3 million in investments mobilised. Products included sausages, urnitureproduction, egg cartons (rom recycled paper) and prescription lenses. Eight o therms now oer products which were previously imported.and prescription lenses.

The Support to Job Creation ProgrammeLaunched in 2006, this project spent 5 million to create job opportunities inMitrovica and Zvean/Zvean municipalities by establishing new or expanding

existing businesses. Grants were used to reurbish existing acilities and equipmentand provide new inrastructure acilities, mostly or SME scheme development.Projects supported included construction o: small business production sites; acattle market; a multiethnic market and business park in Mitrovica South; a kioskmarket and riverbank development in Mitrovica North; and a business complexand international wholesale market in Zvean/Zvean municipality.


6/16


Helped with every aspect

of the fashion business

The second type o project to support businesses ocused more on providing experthelp than grant nancing and was open to rms in any region. These projects aimedto promote enterprise growth, modernisation and employment by targeting keycompanies, especially those with export potential. Important projects include:

Business Advisory Services (BAS) This allows rms to access local consultancies help, or instance with market

research analysis, brand development, or introducing quality managementsystems. The EU bears 50% o the cost. As o 2010, BAS has already assistedsome 252 companies in Kosovo.

Turn Around Management (TAM)By 2010, Pestova was just one o 45 Kosovo rms that had beneted. Onlyavailable to companies with at least 50 employees, a 1 million annualturnover and viable growth potential, TAM aims to ensure their development-or survival-via improved perormance, expanded markets and enhancedcompetitiveness. Firms can receive long-term ree advice rom internationalconsultants.

Project support usually includes: Developing sales and marketing strategies Exploring export opportunities Restructuring the organisation, and Attracting nance

Krenare Rugova, one o Kosovos top young designers received a grant o over 100 000 worth o sewing machines. But she was particularly enthusiastic about theadvice she received rom the international experts.

I learned so much in particular rom the second one, she admits. He taught her not

only about abrics and sewing techniques and how to train her sewers, but also howto price, how to organize her production lines, how to organize her collections. Hehelped me with simply every aspect o the trade, she said.

Today her collections are a big hit at home, and gradually also abroad. First in Europe,and now also in Canada.

BRINGING IN THE EXPERTS

"We would definitelyrecommend TAM/BAS toother companies... andto everyone who wants tocompete in the regional

market", says ButrintBatalii, general managerof IVOVA.

FEW AREEXPERT INALL AREAS OFBUSINESS


7/16


Access to skilled busi-

ness support agencies and

training is also vital

But to grow a business and compete in a global economy, you need more than directaid. You also need good policies.

Policies at national level that, or example: Enorce a legal ramework that allows businesses to compete and to

modernise their technology Provide better business support services Develop a culture o entrepreneurship Provide assurance o product quality and Ensure access to nance at competitive rates

The government recognises this. And the EU is helping. It has spent 3 million oncapacity building in Kosovos Ministry o Trade and Industry (MTI). That has meantmaking MTI better able to get the right policies, strategies, laws and regulatoryramework in place, thus improving SME competitiveness and aligning Kosovo withthe European Small Business Act. It has also meant talking at every stage to privatesector institutions, sectoral business associations and SMEs, to ensure the real

needs o business are taken into account.

But the regional level is also important or creating a supportive environment orbusiness. Thats why, in 2008, the EU helped set up ve inter-municipal RegionalDevelopment Agencies in Kosovo.

Supported by the EUs Regional Economic Development (RED) project, the RDAs havedeveloped regional growth strategies, analysing local needs and consulting with localpartners. They have also worked with local partners to help design projects. With 7.4million o EU RED unding available in 2010, those approved so ar include projectsto: establish business incubators to support local entrepreneurs; develop tourismpotential; and set up agricultural collection centres allowing armers to store, cooland process produce or sale throughout the year, rather than selling it in season at

rock bottom prices.

The RDAs also help local partners make unding proposals under other EU projects-or instance, the Rural Development project.

GETTING THE BUSINESS ENVIRONMENT RIGHT


8/16

THE


9/16

GETTINGECONOMYGOING


10/16


The World Banks 2009 Enterprise Survey shows 28% o Kosovos large rms see labour skill shortage as aconstraint. To attract investments providing skilled jobs and good incomes, Kosovo needs a well-educated andwell-qualied workorce. The EU is working on that too. It has poured resources into improving the quality oschools and education, including schemes to align qualications and standands with international norms; buildMinistry o Education capacity; modernise curricula and syllabi; and develop teacher-training skills. But it has also

taken initiatives directly addressing the skills needs o business, including development o:

Entrepreneurship training in Vocational Education Training (VET) schools Schools Internships and training programmes to help increase the skills and

attractiveness o unemployed people and In-house training to improve the skills o those already employed

A long-term, but necessary, initiative is KOSVET V, which supports development o a system o quality assurance,accreditation and qualications, particularly in Vocational Education and Training. This will help ensure Kosovonational qualications are compatible with the European Qualications Framework (EQF) and that worker skillsare recognised here and abroad.

A more recent example is KOSVET VI, a project aiming to help unemployed young people. One way is providing

three months on-the job training in rms willing to host them. Trainers were both local and international. Bothtrainees and rms benetted rom trainings tailored to the needs o the company. KOSVET VI also provides a 20-day training programme or unemployed people who want to set up their own businesses, giving them the basics omarketing, sales, nance, and business planning. Thats important: many people start businesses without a plan,while proper planning vastly improves survival chances.

DEVELOPING SKILLS

AGRICULTURE - A SPECIAL CASEA 2 million Food Saety twinning project enhanced the commercial and export potential o the agricultural and agribusiness sectorsby improving controls on animal health, ood saety and quality, in line with EU standards and technical requirements. The projectbrought the previously ragmented ood control institutions under one umbrella and made regulations more coherent and ecient.Previously dierent standards or ood saety were applied that resulted in duplication, inconsistencies and conusion.

In all it is expected that the ood industry will increase local consumption and exports as ood products rom Kosovo satisy health andood saety requirements. The project will also help increase rural employment; reduce the risk o ood borne diseases and improvethe animal health control system. Moreover, thanks to tighter controls there will be less risk o animal diseases spreading and oexpensive compensation claims.


11/16


Investors ask: Will there

be power outages?

Support to Inrastructure includes the right strategies, policies and lawsBut skilled workers and entrepreneurial management arent enough. You need goodinrastructure too. Potential investors will ask: Will there be power outages? Howgood are the roads? Can I access markets across the border? The EU has helped outa lot here as well.

For instance, it has invested 430 million to give Kosovo a reliable power systemin the last decade. This has covered everything rom emergency repairs andreurbishment o power plants, coal mines, and district heating systems, throughmassive transmission system investments and winter imports in 1999 and 2000, toimproving billing and revenue collection, promoting energy eciency and trainingauditors. Result: today, energy supplies can be considered reliable.

The EU has also invested in rebuilding roads and bridges and in improving bordercrossings. Kosovo is a small country, a large portion o which is close to a border.Where good cross border cooperation exists, borders represent opportunities. Whereit doesnt, they tend to mean stagnation. For this reason the EU has established aCross Border Cooperation programme to promote and establish cooperation and

socio-economic integration with neighbouring countries.

BETTER REGULATION AND LESS RED TAPE

Theres inrastructure o a legal and administrative kind, too. And or SMEs tofourish it must work smoothly, airly and cleanly. That means:

A court system that resolves disputes impartially, quickly anddecisively, and then enorces its decisions eectively

An administrative and judicial appeals system that works quickly A public procurement system awarding contracts airly and transparently

Customs and taxation systems that are ecient and run on the basiso clear regulations Administration that doesnt involve too much red tape Legislation that is internally consistent

INFRASTRUCTURAL SUPPORT

A SUPPORT TOINFRASTRUCTUREINCLUDES THERIGHT STRATEGIES,POLICIES ANDLAWS


12/16


REDUCING OBSTACLES TO SUCCESS

Obviously Kosovo has some way to go. The World Banks recent Enterprise Surveyo 270 Kosovo businesses showed only 45% saw the courts as impartial while 73.4%saw corruption as a major constraint, as against 33% in the region as a whole. Buteorts are underway. And the EU is doing its bit. One notable example is the Supportto Kosovo Judicial Council project, which has developed EU-inspired procedures to

establish competence and moral rectitude, then used them to vet all judges andprosecutors.

The successul completion o the Reappointment Process marked a new chapter orthe Kosovo judiciary and prosecution service. The direct involvement o ve Kosovan

judges and prosecutors in the work o the Independent Judicial and ProsecutorialCommission (IJPC) ensures that the selection process or judges and prosecutorsin the uture will be carried out on the basis o established procedures. Other EU-nanced projects concern:

Support to Local Government:This includes training o local government and a systematic examination orconsistency o the 94 laws they have to enorce.

Support to the Customs and Taxation Administrations:One project in this sphere is aimed at bringing these Kosovo institutions into linewith EU standards o eciency, transparency and user-riendliness. Measuresinclude: simpliying import/export procedures and customs ormalities; applyingmodern techniques-intelligence and inormation gathering, risk assessment, etc-tocombat smuggling and organised crime at the borders; helping set up a Tax FraudInvestigation Unit.

Support to Anti-Corruption Institutions:This project has contributed to the drating o key legislation in the National Anti-Corruption Framework. This includes our laws currently in drat-those on the Anti-Corruption Agency, on Declaration o Assets, on Confict o Interest, and on Political

Party Financing. The project also helped with amendments to relevant articles o theKosovo Criminal Code.

Kosovo is a small

country, a large portiono which is close to aborder. Where goodcross border cooperationexists, borders representopportunities.

Where it doesn't, theytend to mean stagnation.For this reason the EUhas established a crossborder cooperationprogramme to promote

and establish cooperationand socioeconomicintegration withneighbouring countries.


13/16


ADOPTING INTERNATIONAL STANDARDS

Meeting EU Standards in Public Procurement:This is a project worth 1.9 million to assist in developing Kosovos public procurement system,ensuring transparency and compliance with current EU standards. Thats not just a moral question.I bribes determine who wins a tender, the resulting contractor isnt necessarily the best candidate-and will oten recoup payments by cutting corners on the project.

Development o A Measuring, Standardisation, Testing And Quality (MSTQ) Framework:This project has supported the Ministry o Trade and Industry in developing the institutions in chargeo checking the quality o the products and their reliability. Kosovo has adopted several Europeanstandards, aligned the Construction Products Regulation with the EU requirements and thanks tothe EU, laboratories are capable o checking the reliability o certain measures (liters, kg etc) oproducts.

Assistance to the Industrial Property Ofce and Copyright Ofce:This project is contributing to the alignment o the current legislation in Intellectual Property Rightswith the requirements o any trading partner or an eective trading agreement. This project issupporting not only the development o the Industrial Property Right Oce within the Ministryo Trade and Industry but also has helped in the establishment o the Copyright Oce within theMinistry o Culture, Youth and Sports.

Support to Investment and Export promotion. Exports make almost no contribution to KosovosGDP. That needs to change: a good balance o trade is vital to any economy. To achieve it, trade,investment and export promotion are all needed. To this end a number o projects have beensupported, including:

Investment Promotion designed to strengthen the institutions promoting domestic and oreigninvestment. The project has included work to build a strong and eective one stop shop Investmentand Export Agency and acilitate direct contacts between Kosovo business and oreign partners. Thisresulted in at least 20 sustainable investments and partnerships between Kosovo and EU memberstate companies.

Further Development o Kosovos Trade Policywhich will help align trade policies with internationalrules and practices.

LOOKING FORWARDThe economic inrastructure has come a long way since 1999. It has a long way to go, but it is a

journey it will not make alone. In the uture as in the past it can count on strong support rom theEuropean Union.


14/16


15/16


16/16

"This publication has been produced with the assistance of the European Union.The contents of this publication are the sole responsibility of European CommissionLiaison Office to Kosovo and can in no way be taken to reflect the views of theEuropean Union."

CONTACT

European Commission Liaison Office to Kosovo

A. Kosovo Street 1 (P.O. Box 331)Pristina, KOSOVO

T. +381 38 51 31 200F. +381 38 51 31 304

E. [email protected]

W. www.delprn.ec.europa.eu

Geeting the Economy Going

Documents

Transcript of Geeting the Economy Going