Kosovo-Investment Incentives for Potential Investors

Bachelor Thesis, 2011

77 Pages, Grade: 1,3



List of Figures

List of Tables

List of Abbreviations

1. Preface
1.2. Goal and Structure of the Thesis

2. Country Overview Kosovo
2.1.Place and People
2.1.1. Historical Background
2.1.2. Georeferenced Data
2.1.3. Climatic Conditions
2.1.4. Population Ethnic Groups Diaspora Religion
2.1.5. Language, Currency and Time Zone
2.2. The Political System and the Legal Framework
2.2.1. Government System General Principles Political Situation
2.2.2. Political Parties
2.2.3. Educational System

3. Main Characteristics of the Kosovar Economy
3.1. Economic Climate
3.2. Economic Sectors
3.2.1. Agriculture
3.2.2. Mining and Energy
3.3. Foreign Trade
3.3.1. Trade Exchange
3.3.2 Trade Agreements and Foreign Relations Central European Free Trade Agreement EU Autonomous Trade Preference Stabilization and Association Process Generalized System of Preferences International Monetary Fund
3.3.3. Foreign Investment Foreign Direct Investment Success Stories Construction Telecommunication Banking Mining

4. Foundation of an Enterprise
4.1. Form of Organization
4.1.1. Sole Proprietorship
4.1.2. Limited Partnership
4.1.3. Corporate Enterprise Limited Liability Company and Joint Stock Company Management and Responsibilities Liability of Partners Establishment
4.2. Start-Up Costs
4.3. Insolvency

5. Location Factors
5.1. Road and Railroad Network
5.2. Air Traffic
5.3. Electrical Power Supply
5.4. Telecommunications Network

6. Taxation Law
6.1. Types of Taxes
6.1.1. Personal Income Tax
6.1.2. Corporate Income Tax Expenses Depreciations Tax Declaration and Payments
6.1.3. Value Added Tax

7. Labour Legislation and Standards
7.1. Labour Market Indicators
7.2. Employment Relations
7.2.1. Labour Contract
7.2.2. Working Hours
7.2.3. Annual Leave
7.2.4. Sick Leave
7.2.5. Legal Holidays
7.3. Costs of Labour

8. Intercultural Management
8.1. Cultural Aspects
8.2. Corruption

9.Concluding Observations and Recommendation

List of Literature

List of Figures

Figure 1: Kosovo map

List of Tables

Table 1: GDP real growth rate, GDP per capita

Table 2: Kosovo’s Trade Balance

Table 3: Kosovo’s Main Foreign Trade Partners

Table 4: Phases of Starting-Up a Business in Kosovo

Table 5: Personal Income Tax Rates

Table 6: Corporate Income Tax Rates

List of Abbreviations

illustration not visible in this excerpt

1. Preface

1.1. Introduction

The Republic of Kosovo as the youngest state of the world can be described as an investment incentive for potential investors due to the fast-changing development process since the end of the war in 1999. The Kosovar market opens up numerous possibilities for entrepreneurial initiative due to required modernization processes in industry, improvement of infrastructure and the installation of buildings and houses in general. As a result there is a high demand for capital and consumption goods as well as business relevant services. In order to succeed in business it is crucial to establish stable business relations for generating new business opportunities.

An investment decision should be involved in the strategic planning and thus necessitates a detailed analysis. This bachelor thesis deals with investment incentives for potential investors in Kosovo aiming to develop business relations, establishing partnerships and business opportunities for achieving market shares. In order to be able to achieve these goals, it is obviously important to deal with the country of interest intensively. In this respect, the country should be analysed in terms of economic structure explaining the available branches, developments, and clarifying the fiscal aspects in detail. But at the same time, besides the economic facts, the cultural characteristics should be dealt with, too.

Culture is a phenomenon that affects every community and as business is carried out by people, one should be aware of the cultural differences when working together or merely doing business together. Driven by the process of globalization that features through changes in technology, trade, transport and especially communication, with information available almost everywhere, with time no longer being a barrier, companies are facing the prospects for prosperity allowing societies to make use of the economic advantages.

Therefore, globalization stands for both, chances and risks, but nobody can elude from this process. Consequently, companies should deal with new markets abroad for gaining comparative advantages. The basic principle for entrepreneurial commitment and success is the attentive preparation.

This thesis contributes to present some important facts about Kosovo and its environment in order to enable companies to think about investing in Kosovo by recognizing the opportunities this young country offers.

Potential investors should not hesitate but start thinking about their driving force;

which definitively is success. Therefore, “For true success ask yourself these four questions: Why? Why not? Why not me? Why not now?” (James Allen, New Zealander Statesman, 1855-1942).

1.2. Goal and Structure of the Thesis

There are numerous factors that have to be taken into account when investing or merely doing business abroad. Therefore, this thesis gives a description of Kosovo as a location of business for potential investors by explaining the economic and regulatory framework. This thesis aims to point out the requirements for investing in Kosovo as well as to present the most important facts about the country in order to contribute to the decision-making process regarding investments. Furthermore, this thesis will deliver insight into the Kosovar market and its economic sectors by underlining the competitive advantages available in Kosovo. Based on this, the following chapters will present the preconditions in addition to the key decision factors aiming to contribute to a facilitation of the decision-making.

This thesis is divided into nine chapters. The first chapter contains a short introduction into the topic, followed by the second chapter that gives an overview of the country. Thereby, the population of Kosovo will be depicted by referring to the historical development, georeferenced data, the political system as well as the educational system.

The third chapter gives attention to the main characteristics of the Kosovar economy. The economic climate in addition to the sectors will be outlined. Moreover, foreign trade taking into account trade exchanges and trade agreements will be dealt with, too. The description of successful investments carried out by foreign investors will illuminate the business opportunities existing in Kosovo.

The fourth chapter continues with the detailed illustration of the foundation of an enterprise in Kosovo. Firstly, the different forms of enterprises will be demonstrated, followed by the start-up costs and insolvency.

In the following, the fifth chapter concentrates on the location factors by describing the road network, air traffic, electrical power supply and finally the telecommunications network.

The sixth chapter is primarily concerned with the taxation law, whereas the several types of taxes are outlined. The seventh chapter is concerned with labour legislation by showing the labour market indicators, followed by the explanation of employment relations based on the description of labour contracts, working hours and thus costs of labour. Finally, the eighth chapter outlines cultural aspects of the Kosovar society by taking into consideration the problem of corruption in Kosovo.

Lastly, the ninth chapter concludes the main aspects dealt with in this thesis. In order to point out the investment incentives Kosovo offers for potential investors, a recommendation will underline the pros and cons connected with an investment in Kosovo.

2. Country Overview Kosovo

Kosovo is the youngest state of the world and has shown a fast development since the end of the war in 1999. The young population as well as the multicultural society are characteristic features of the population in Kosovo. This chapter deals with the most important aspects of this country regarding its history, geographic data, climatic conditions, population and its political structure in order to give a basic overview of Kosovo.

2.1. Place and People

2.1.1. Historical Background

The Kosovo-Albanian people live in an ethnically closed area in the western Balkan. Untill this day, the original historic development is dubious, but however it is assumed that the Albanians are successors of the “Dardanians”, an Illyrian tribe, who have lived in the Balkan area even before the Roman conquest. The settlement area of the Albanians has been the present-day south Serbia, Kosovo and northern Macedonia. In the 13th and 14th century the Albanians fought under the guidance of the Serbian King Lazar in the Battle of Kosovo Polje, also known as Amselfeld, in 1389. This historic Battle since then has been discussed controversly and even today the Serbs and the Kosovo-Albanians derivate their right for Kosovo out of this Battle. The main reason for the continuous conflict of both nations, the Serbs and the Albanians, regarding this area is the fact that Kosovo is an economically advantageous region. Considering this aspect, it becomes clear why different immigration processes have taken place during the centuries. Thus, the composition of the population has changed constantly due to the immigration movements and therefore has resulted in conflicts between the immigrants and the natives.1

Throughout the centuries, the Serbian-Albanian quarrel over the historical primogeniture increased. Both, Serbs and Kosovo-Albanians, have justified their identity and constituted their claim for Kosovo based on historical justifications. The Albanians justified their claim for Kosovo by referring to the fact that the Dardanians had been living in Kosovo in ancient times and that they are their successors. Consequently, the Albanians have been living in Kosovo since Roman times and hence have possessed prior historical rights than the Slaws, who according to the Albanians have immigrated to Kosovo in the 6th century. From the Albanians point of view, there has been an uninterrupted settlement continuity in Kosovo. Taking into consideration that the Albanians have appeared in sources firstly in the 11th century makes this argumentation implausible. Besides the Serbian widespread assumption saying that the Albanians have migrated to Kosovo initially in the 17th - 18th century, also seems to be unsustainable as the Albanians in point of fact have migrated to Kosovo in the 13th century. Furthermore, another unsustainable assumption is the Battle against the Ottoman Empire. Actually, the Albanians have tried hard to resist the expanding Ottoman. However, Georg Kastrioti, known as the Albanian hero Skenderbeu, has been able to unite the several Albanian trials in 1443 to 1468 in order to fight the Ottoman. Until his death Skenderbeu has prevented another expansion of the Ottoman sultan, but after his death the Ottoman have conquered the Albanian region and the Albanians have lived under the rule of the Ottoman for 500 years. Consequently, and as a result of a missing national church, the majority of the Albanians living under Ottoman authority has converted to the Islam particularly due to the fiscal system that has advantaged Muslims. The outcome of this is that the Albanians have dealt frivolously with religious aspects and only converted due to financial reasons.2

Despite of all misunderstandings and conflicts between the Serbian and Albanian people, both nations have confederated consistently in order to fight the Ottoman. Generally, the historical facts underline that the Balkan nations always had to struggle with their regional hegemony or have been ruled by an Empire that repressed internal conflicts without any approach to problems. The Balkan has always only been impacted politically from the outside (Roman, Slaws and Ottoman Empire) and can be considered as a historical area of conflict.3

In 1997 the Serbian-Albanian conflict resulted in a civil war which could not be resolved by international peace efforts, so that the NATO begun war against the Serbian government. Accordingly, the Kosovo war can be divided into two parts; on the one hand, the Kosovo-Albanian people fighting for their rights within Serbia and the Serbian suppression and on the other hand, the war introduced by the NATO fighting the Serbian governance. The conflict already started in the autumn of 1997 and over the intervening years lead to an internationalization of the conflict due to increased escalating violence. The conflicts originate from political and ethnic aspects as well as an overemphasised nationalism.4

The NATO intervention in Kosovo was characterised by a massive application of military force aiming to prevent a humanitarian tragedy, namely displacement of the Albanian population.5

After the fall-back of the Serbian armed forces, the power vacuum had to be refilled, whereas the responsibility was taken over by the UN. UN General Secretary Kofi Anan presented the Resolution 1244, an operative concept describing the transitional status and administration for Kosovo, in June 1999. This concept, also known as UNMIK (UN Interim Administration Mission in Kosovo), has been fitted with expansive authority and has been employing about 11.000 employees in 2003.6

2.1.2. Georeferenced Data

The Republic of Kosovo is the youngest succession state of former Yugoslavia and has declared its independence on February 17th, 2008.7 Kosovo is a country in the centre of the Balkan Peninsula with a size of 10,908 km² and approximately 2,13 million inhabitants.8 Its capital is Prishtina with approximately 500.000 inhabitants. The terrain is surrounded by mountains to the north, west and south and is conterminous with Serbia, Montenegro and Macedonia. The land area is used 53 % agriculturally and 39 % are forests.9

Comparing the territory of Kosovo it becomes clear that it is two times smaller than the German federal state Hesse and four times smaller than Switzerland. Nevertheless, Kosovo is among the densely populated areas in Europe with 200 person per km²10, whereas the EU average is 116 person per km²11. The terrain of Kosovo is surrounded by several mountain ranges. Westward, Kosovo borders on the Republic of Albania. This border has been fixed in 1913, whereas the Serbs followed their strategic interest by setting this border. The borderline is framed by several high mountains and passes into the Sharr Mountains to the south, which illustrates a massif natural dividing wall between Kosovo and the Republic of Macedonia. The border to the Serbian territory is formed by a low mountain range with heights approx. 1180 meters above sea level. To the north Kosovo is surrounded by the Kopaonik Mountains (approx. 1300 meters above sea level) and in the north-west directing to the south-west it is bordered by an increasing mountain range (approx. 1200 - 2400 metres above sea level).12 This area surrounded by low and high mountain ranges internally is divided into two settlement areas. The eastern settlement area is Kosovo, the historic Amselfeld in the narrow sense, merely the area of Prishtina, and the western settlement area is the Dukagjin-Area (alb. Rrafshi i Dukagjinit). These two settlement areas are divided by a low mountain range chain with approx. 1000 - 1200 meters height over sea level. The Dukagjin-Area is also known as Metochija. According to the Serbs, this terminus stands for monastery (gr. metochion = monastery occupancy). Kosovo as a toponym is used by Serbs as well as Albanians. Regarding the western settlement area Albanians do not use the Serbian definition but instead exclusively use the term Rrafshi i Dukagjinit. In the last years the terminus “Dardania” appeared, which derives from the antic Illyrian tribe, the “Dardanians” in order to replace the terminus Kosovo, but could not be put through within the Kosovo-Albanian society. Considering the structure of the settlement areas it becomes clear that they are affected by the formation of the mountain range, but however do not isolate Kosovo from the outside world. In fact lots of passes allow a supraregional traffic circulation. The strategic significance of Kosovo can also be explained by its location as a place of trade and traffic. One of the most important west-east-cross-lines of the Balkans connects the Albanian seaside town Lezha and Shkoder with Prizeren. In the Middle Ages this route has been known as the Zeta-Street, whereas Zeta stands for the current Montenegro and northern Albania, and was used in order to transport salt from the coast to the inner Balkan area and furthermore for transporting silver from the mines in Kosovo to be forwarded to Italy. Presently, a highway is being built closely to this old route that connects Prishtina with the Albanian capital Tirana. Regarding the western side, the pass of Morina (alb. Qafa e Morines) facilitates the connection between north Albania and Gjakova. The northern nearby landscape Rugova then leads to the Montenegrin mountain range and finally to the capital Podgorica. Round the eastern regions, the pass streets are in the Serbian territory in the outer south-east (alb. Gjilan/serb.Gnjilane - Bujanovc) and in the north-east (alb. Podujeva/ serb. Podujevo - Prokuplije). To the north there is only one route via Mitrovica. Regarding the names of cities and villages it is obvious that the majority originates from Slave terms, whereas the Albanian forms only distinguish from the Slave form by another ending and the orthography. Taking into account the streets and rural roads, it can be asserted that they have been in poor conditions untill the last few years and some still are. However the government is investing in infrastructure, some accesses to villages have not been asphalted yet and the mountain area often can only be reached with off-road vehicles.13

Figure 1: Kosovo map

illustration not visible in this excerpt

Source: Taken from: http://republic-kosovo.org/kosoregio.jpg, status: 16.01.2011.

2.1.3. Climatic Conditions

In Kosovo there is temperate continental climate that is comparable to the central European average values. Generally, seasonal affective fluctuations of temperature with heavy snowfalls, mainly in the alpine areas, that tie up traffic in the winter period are typical.14 In contrast to the cold winters, the summers and autumns are hot and dry.15 However Kosovo is a small country, there is no uniform climate due to its geographical structure characterized by flat areas and mountainous sections. The period between December and January presents the coldest phase with temperatures being below -10°C. Within this season, the total annual rainfall reaches its maximum, whereas from November untill March there are also snow flurries causing closed snow layers. As a result of Kosovo’s landscape structure, the climate can be classified into three climate zones. The north area is influenced by continental air masses that have an impact on the daily temperatures. During summer there are very high daily temperatures, whereas the winters are affected by very low temperatures. The amount of rainfall is approx. 600 mm/m² and lower than in the remaining areas. Considering the western area of Kosovo it is obvious that the hot air masses coming from the Adriatic Sea have an influence on the climate. The average daily temperature in winter is 1° C with heavy snowfalls and during the summer period 23° C. The amount of rainfall is 700 mm/m². The mountains are characterized by a rainfall average amount of more than 1.100 mm/m², with rainfalls especially during the winter period. Furthermore, the mountainous areas have short summer phases with mild temperatures. In contrast, the winter periods are marked by low temperatures with snowfalls dragging on untill spring time.16

2.1.4. Population Ethnic Groups

The population of Kosovo can be characterized as a multicultural society that is affected by cultural diversity. Kosovo as if today is distinguished as having an ethnically homogenous society with an Albanian majority, whereas the minority groups such as Serbs, Turks, Boshniaks and others also form an important group of the Kosovar population.

The inhabitants of Kosovo perceive themselves in ethnic categories. The society of Kosovo is complex and cannot be described by just dividing and forming the population in ethnic groups. Kosovo for a long time has been multilingual and from the different language groups with their own cultural traditions, thus the development of ethnic defined nations followed in the last centuries.17

The population of Kosovo in total is estimated to be 2.180.686 inhabitants with a population density of about 200 persons per km².

Based on the findings of the Statistical Office of Kosovo, in 2007 33.312 births were registered and 6.681 deaths. The current statistics show that the natality is about 16 %, whereas the mortality is about 0.32 %.18

This high birth rate in Kosovo is discussed controversly referring to the demographic changes in Europe. The high birth rate, which also can be considered as the inversion of the European demographic problems, illustrates a social challenge. The large number of children in Kosovo is a result from the historic development due to the fact that the state either was absent or an enemy.

Therefore, the traditional, patriarchal family was regarded as the only source offering security and stability.19

Today, the traditional society is still existent in Kosovo. It is said that about 70 % of the households live in singe family households, and about 20 % in multiple households consisting of two, three or more families sharing one household. Ordinary, multiple households have an average size of about six family members regarding urban areas and seven family members in rural areas. The society is affected by tradition that consequently has an impact on the households. In these traditional households the head of the family, the patriarch, makes decisions on his own. Thus, decisions considering labour market participation, especially for women, may be influenced by the head of family.20

The ethnic groups in Kosovo are the Albanians forming 92% of the population, Serbs 5,3 % , Turks 0,4 %, Romans 1,1 % and others (Gorani, Ashkali, Boshniaks and Egyptians) 1,2 %.21

All the given information about the population in Kosovo is based on estimations. Due to the fact that the last population census was carried out in 1981, the given data may be unreliable. According to the Statistic Office of Kosovo, the next population census will be carried out in April 2011.

The problem of the unreliability of data considering the population is reflected when comparing different sources in respect of the population’s age structure. Based on the Central Intelligence Agency of the USA, the age structure is estimated to be as follows.

27,7 % of the population are aged 0-14 years, whereas 260.678 are males and 239.779 are females. Further, 65,7 % are considered to be aged 15-64 years, with 617.890 being male and 567.939 being female. Only 6,6 % of the population are estimated to be 65 years and older with 50.463 males and 68.089 females as estimated in 2010.22

Based on the information available in the Statistical Office of Kosovo the population age structure, however, is estimated as follows.

33 % are estimated to be aged 0-14 years, 61 % aged 15-64 years and 6 % aged 65 and older.23

When comparing Kosovo’s population with an average age of 25, 9 years with other countries, it is obvious that the population in Kosovo is one of the youngest in Europe. The average age of the German population is considered to be 43, 8 years (2009), in France 39, 4 years and the average age of the World’s population in general is estimated at 28, 4 years.24 Diaspora

Another aspect considering the population of Kosovo is its diaspora, merely the emigrants that left Kosovo due to the political and economic circumstances for searching a better life abroad in developed regions. The first wave of emigration considering Kosovo-Albanians going to Western countries has begun in the 1960s, when Kosovo was governed by Yugoslavia. With the beginning of the breakdown of Yugoslavia and the war in Kosovo, further emigration waves were recognized mostly to countries in Western Europe.25

The emigrants, mainly from rural areas and unskilled, experienced a cultural shock in the particular country they immigrated and had problems with integration. Moreover, in their host countries emigrants had a low repute, whereas the respectiveness for their native region was significant as guest workers balanced remarkable amounts to their families in Kosovo and switched products from the Western world to their rural origin and thus contributed to a better living for their families and improved their lifestyles. As a result, the Albanians improved their economic activities and increased their transactions regarding property. A homogenous and idealistic pan-Albanian identity developed increasingly due to their experience of homesickness on the one hand, and bad integration on the other hand. Consequently, parallel societies and communities were established. Especially during the repression under the regime of Milosevic in the 1990s, the diaspora had a main importance for Kosovo as a tax of 3% was raised in order to support the country financially.26 During the 1980s and 1990s, a second emigration wave with better educated Kosovo-Albanians from urban areas left Kosovo. Especially young man, who tried to circumvent the military service in the army of Yugoslavia, left their home country. Many repatriates brought new skills, knowledge and foreign languages as well as business practices and were considered as human capital. But particularly, the repatriates brought investment capital to build new homes and business in Kosovo. During the war in 1998 and 1999, a third wave of emigrants, mainly asylum seekers and refugees, left Kosovo.27 Based on the findings of the Ministry of Finance and Economy in Kosovo, the diaspora in 2002 has contributed to 50% of the income of Kosovo households.28 Thus, the diaspora plays a decisive role in the economy such as in the social development of Kosovo. The remittances balanced by the diaspora enhance the life and also contribute to the survival of many people. It is said that monthly remittances have been between $ 250 - $ 500 and besides donations mainly have contributed to the rebound of the economy after wartime in Kosovo.29

The amount of the remittances in 2004 untill 2009 according to the Central Bank of Kosovo is valued with 2 bn and 798 million € totally, at which the remittances in 2004 had an amount of 357 million €, in 2005 418 million €, in 2006 467 million €, with an increasing amount in 2007 reaching 515, 6 million € and 535, 4 million € in 2008. Taking into account the financial crisis in 2009, it can be asserted that the remittances have decreased by 30 million € having a value of 505, 2 million € and thus have affected the income of households in Kosovo, too.30

Currently, Kosovo’s largest diaspora society is located in Germany with approx. 270.000 persons and the second largest group in Switzerland with approx. 160.000 persons. It is said that every third household in Kosovo has at least one family member living abroad.31 Further destinations for emigrants from Kosovo are Austria, France, USA, Great Britain, Italy, Canada and Australia. Religion

Another characteristic considering the population of Kosovo is religion. The majority of the inhabitants of Kosovo belongs to the Islamic Community, but the Serbian- Orthodox and the Catholic Church are representative in Kosovo, too.32 What is special about the religious aspect is that Kosovo-Albanians, or merely the inhabitants of Kosovo, do not define themselves according to their religious belief, but what is more important to them is their ethnic and national self-concept, instead of being religiously bounded. For Kosovo-Albanian people belonging to the Albanian ethnic group is considerably more important than confession.33 It is said that the Albanian population in Kosovo in the past has not taken stock in religion due to the fact that they had to struggle with daily problems such as dealing with how to survive oppression and war and how to organize life under Serbian pressure. Therefore, there has been no time to think about the basic questions of religion.34 Taking into account the basic law, the Republic of Kosovo is defined as a secular state being neutral in religious manners and protecting its religious and cultural beneficiary (Art. 8 and 9).35

2.1.5. Language, Currency and Time Zone

The official languages in Kosovo are Albanian and Serbian as defined in Article 5 of the Constitution of the Republic of Kosovo. Besides the official languages, Turkish, Bosnian and Roman languages are recognized as official languages in some municipalities, too.36 Due to the international influence of the English language, English is a further official language. Taking into account Kosovo’s diaspora, it becomes clear that the number of multi-lingual persons is high, so that the population generally has one of the highest levels of multilingualism in the Balkan region.37

The functional currency in Kosovo is the EURO. The EURO has been established as a lawful currency by the UN in January 2002 aiming to achieve a sustainable financial and economic stability within the country. By the introduction of the EURO, the country itself has become more attractive to foreign investors by the elimination of the currency exchange rate risk.38

Considering the time zone, Kosovo belongs to the Central European Time Zone and as other European countries also shifts forward the time by an hour in Summer for daylight saving.39

2.2. The Political System and the Legal Framework

For Serbia, Kosovo has always played an important role and has been emphasized as the bassinet of the historical development of Serbia and thus must remain an essential part of the state of Serbia.40 Additionally, Kosovo is understood as Serbia’s Jerusalem.41 But respective of the repression and the resulting war, Kosovo declared its independence on February 17th, 2008.

This chapter deals with the government system of the Republic of Kosovo, the political parties that are involved in politics and finally shows an overview of the educational system.

2.2.1. Government System General Principles

The government system of Kosovo is defined in the Constitution of the Republic of Kosovo, which has become res judicata on June 15th, 2008. Based on Article 1 of the Constitution, the state is defined as an “independent, sovereign, democratic, unique and indivisible state” and accentuates the equal treatment before the law in due consideration to the specificity of its population affected by multiculturalism (Art. 3).

Kosovo is a parliamentary democratic republic with division of powers. The legislation power is assigned to the parliament (Kuvendi i Republikes se Kosoves / Assembly of the Republic of Kosovo) containing 120 seats, whereas 10 seats are kept for Serbian representatives and further 10 seats for representatives of the other minority groups (Art. 64). The representatives of the Assembly are elected directly by the population (Art. 63) for an election period of four years (Art. 66).

The Assembly elects the president of the Republic of Kosovo being designated for five years (Art. 87), who holds a representative function (Art. 83).42 The prime minister, who is proposed by the state president and being elected by the assembly, runs the affairs of state and exercises the political power.43

The executive power is assigned to the government, which consists of the prime minister and other ministers, policymaking on the basis of the constitution (Art. 92). In consideration of Article 102 of the Constitution, the judicial power is allocated to the courts guaranteeing equal access to the courts and being exercised independently, objectively and honestly.44 Political Situation

After the war, Kosovo was administrated by the UN Administration Mission in Kosovo (UNMIK) that has enabled Kosovo to create temporary self-governing institutions. One of the main successes have been the creation of the Kosovo Police Service and the Kosovo Protection Corps. The latter has integrated former Kosovo Liberation Army Members. The aim of this administration role of the UNMIK has been to steadily pass over more leading responsibilities to the authorities. The first president of the Republic of Kosovo, Ibrahim Rugova, died in 2006 and his follower, Fatmir Sejdiu became president.45

Rugova was the role model of the passive resistance during the Kosovo-Serbian conflict and is considered as legendary symbol. The constitutional court has adjudged Fatmir Sejdiu in September 2010 saying that he has offended against the constitution by not giving-up his leadership of his party LDK (Lidhja Demokratike e Kosoves/Democratic Party of Kosovo) as he took office as president in 2006. Consequently, Sejdiu resigned from his position as president and was replaced by Jakup Krasniqi.46 On February 22nd, 2011 the parliament of Kosovo elected the businessman Behgjet Pacolli as their new president. He has been the only candidate and has been elected in the third round with 62 of 120 votes due to the fact that the opposition parties boycotted the election. The reason for this boycotting is Pacolli’s business relationship with Russia, which until now has not recognized the independence of Kosovo.47

The declaration of independence on February 17th, 2008 has been based on the Ahtisaari plan. Ahtisaari, former president of Finland, has been an UN special envoy called up for establishing a plan concerning the future of Kosovo after the war. In particular, Ahtisaari had to push forward the relationship between Kosovo and Serbia and thus involve the conflicting interests of both parties regarding the future status of Kosovo.48 A main principle in the Ahtisaari-Plan schedules the integration of the multiculturalism into desirable good governance as well as the acceptance of an international observation phase in Kosovo. Subsequently, an International Steering Group has been formed for keeping the obligations considered in the Ahtisaari-Plan and the government of Kosovo thus has begun to legislate. Besides, the Kosovo Protection Corps have been replaced by the Kosovo Security Force characterized as a multi-cultural and civilian-controlled force. The supervising function of the UNMIK has also been continuously replaced by the EU Rule of Law Mission (EULEX) in December 2008, while the NATO has started to reduce the number of troops in Kosovo respective of the post-war situation and the recognizable improvements in the region not being classified as a danger zone any longer.49

Although Serbia and some other states such as Russia, China and especially Spain do not recognize the independence of Kosovo, the International Court of Justice in Den Haag has presented its adjudgement in July 2010, emphasizing that the independence of Kosovo is not contrary to international law.50 So far, the independence of Kosovo has been recognized by 75 countries; the USA, Germany and the majority of the European Member States.51

2.2.2. Political Parties

Although Kosovo is only a small country, the number of political parties is relatively high. In December 2010, the parliamentary election has been affected by problems considering voter fraud, so the elections partially had to be repeated. Based on the announcement of the Central Election Commission (Komisioni Qendror i Zgjedhjeve) the dominant party is the Democratic Party of Kosovo (Partia Demokratike e Kosoves PDK) of prime minister Hashim Thaci.

In the following the most important parties in Kosovo will be presented.

- PDK (Partia Democratike e Kosoves / Democratic Party of Kosovo), headed by prime minister Hashim Thaci; current mandates 34,
- LDK (Lidhja Demokratike e Kosoves / Democratic League of Kosovo), headed by Isa Mustafa; current mandates 27,
- Vetevendosje (Self-Determination), headed by Albin Kurti; current mandates 14,
- AAK (Aleanca per Ardhmerine e Kosoves / Alliance for the Future of Kosovo), headed by Ramush Haradinaj; current mandates 12,
- AKR (Aleanca Kosova e Re / New Kosovo Alliance), headed by Behgjet Pacolli; current mandates 8.52

2.2.3. Educational System

Taking into account the historical development of Kosovo and the fact that Kosovo had never been self-governing untill its independence in 2008, it becomes apparent that self-contained educational policies have never existed. An educational system has only been established in the underground or in exile in European countries. Demographically speaking, the population of Kosovo can be considered as the youngest nation in Europe with more than one third younger than 16 years and half of the population younger than 25 years, caused by the high rate of natality exceeding the mortality rate by far. For the educational system this signifies that there are numerous children and adolescent persons searching for education, while being confronted with only few institutions of education and apprenticeship training positions. Furthermore, the educational policy in Kosovo challenges the several languages and religions that need to be integrated into the educational field. The


1 Compare Schmitt, S.-I. (2005), pp.73 ff.

2 Compare Schmitt, S.-I. (2005), p. 75.

3 Compare Schmitt, S.-I. (2005), p. 102 ff.

4 Compare Schmitt, S.-I. (2005), p. 187 ff.

5 Compare Krause, J.(2000), p.7.

6 Compare Kreidl, J. (2006), p. 223 ff.

7 Compare Deutsche Botschaft Prishtina (ed.), (URL: http://www.pristina.diplo.de/Vertretung/pristina/de/05/Wi_20Uebersicht/Wirtschafts_C3_BCbersicht_20Kos ovo.html), status: 08.12.2010.

8 Compare Government of the Republic of Kosovo (ed.), (URL: http://rks-gov.net/sq- AL/Republika/Kosova/Pages/default.aspx), status: 08.12.2010.

9 Compare Economic Initiative for Kosovo (ed.), (URL: http://www.eciks.org/english/publications/investing_in_kosovo/content/media/investorsguide_web.pdf), status 08.12.2010.

10 Compare Statistical Office of Kosovo (ed.), (URL: http://esk.rks-gov.net/eng/), status: 20.02.2011.

11 Compare Statistisches Bundesamt Deutschland (ed.), (URL: http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/DE/Content/Statistiken/Bevoelkerung/Akt uell,templateId=renderPrint.psml), status: 20.02.2011.

12 Compare Schmitt, O.-J. (2008), pp.35 ff.

13 Compare Schmitt, O.-J. (2008), pp.36 ff.

14 Compare Dell, S. (2010), pp.23 ff.

15 Compare Central Intelligence Agency USA (ed.), (URL: https://www.cia.gov/library/publications/the- world-factbook/geos/kv.html), status: 12.02.2011.

16 Compare Europa Reisen (ed.), (URL: http://www.europa-reisen.org/kosovo/wetter-klima/), status: 12.02.2011.

17 Compare Schmitt, O.-J. (2008), pp. 89 ff.

18 Compare Statistical Office of Kosovo (ed.), (URL: http://esk.rks-gov.net/eng/), status: 12.02.2011.

19 Compare Frankfurter Allgemeine Faz.net (ed.), (URL: http://www.faz.net/s/Rub867BF88948594D80AD8AB4E72C5626ED/Doc~E4E2AAC24C41342FAA3AD14 5AC363B3DE~ATpl~Ecommon~Scontent.html), status: 12.02.2011.

20 Compare European Stability Initiative ESI (ed.), (URL: http://www.esiweb.org/pdf/bridges/kosovo/1/11.pdf), status: 13.02.2011.

21 Compare Statistical Office of Kosovo (ed.), (URL: http://esk.rks- gov.net/eng/index.php?option=com_docman&task=doc_download&gid=521&Itemid=8), status: 12.02.2011.

22 Compare Central Intelligence Agency USA (ed.), (URL: https://www.cia.gov/library/publications/the- world-factbook/geos/kv.html), status: 12.02.2011.

23 Compare Statistical Office of Kosovo (ed.), (URL: http://esk.rks- gov.net/eng/index.php?option=com_docman&task=doc_download&gid=521&Itemid=8), status: 12.02.2011.

24 Compare Welt auf einen Blick (ed.), (URL: http://www.welt-auf-einen- blick.de/bevoelkerung/durchschnittsalter.php), status: 13.02.2011.

25 Compare European Stability Initiative ESI (ed.), (URL: http://www.esiweb.org/pdf/bridges/kosovo/1/11.pdf), status: 13.02.2011.

26 Compare Schmitt, O.-J. (2008), pp.284 ff.

27 Compare The World Bank (ed.), (URL: http://www.worldbank.org/html/prddr/trans/nd00jan01/pgs15- 16.htm), status: 13.02.2011.

28 Compare Kramer, H., Dzihic, V. (2005), pp. 125 ff.

29 Compare The World Bank (ed.), (URL: http://www.worldbank.org/html/prddr/trans/nd00jan01/pgs15- 16.htm), status: 13.02.2011.

30 Compare Koha.net (ed.), (URL: http://www.koha.net/index.php?cid=1,5,20727), status: 13.02.2011.

31 Compare Swissinfo (ed.), (URL: http://www.swissinfo.ch/ger/wirtschaft/index/Der_wirtschaftliche_Aspekt_wird_zu_stark_betont.html?cid=5 80850), status: 12.02.2011.

32 Compare Auswärtiges Amt Deutschland (ed.), (URL: http://www.auswaertiges- amt.de/sid_C27997336E58908E722361F5F896945B/DE/Aussenpolitik/Laender/Laenderinfos/01- Nodes_Uebersichtsseiten/Kosovo_node.html), status: 20.02.2011.

33 Compare Kaestli, E. (2001), p.183.

34 Compare Kakanien Revisted, Reber, U. (ed.), (URL: http://www.kakanien.ac.at/beitr/fallstudie/RElsie2.pdf), status: 20.02.2011.

35 Compare Government of the Republic of Kosovo (ed.), (URL: http://kushtetutakosoves.info/repository/docs/Constitution.of.the.Republic.of.Kosovo.pdf), status: 26.02.2011.

36 Compare Government of the Republic of Kosovo (ed.), (URL: http://kushtetutakosoves.info/repository/docs/Constitution.of.the.Republic.of.Kosovo.pdf, p.8), status: 17.02.2011.

37 Compare Investment Promotion Agency of Kosovo - Office in Vienna (ed.), (URL: http://www.ipak- vienna.org/?cid=2,156&PHPSESSID=a164761180d64f3b0976e8c96424fab9), status: 17.02.2011.

38 Compare Investment Promotion Agency of Kosovo - Office in Vienna (ed.), (URL: http://www.ipak- vienna.org/?cid=2,163), status: 17.02.2011.

39 Compare Greenwich Mean Time (ed.), (URL: http://wwp.greenwichmeantime.com/time- zone/europe/kosovo/), status: 17.02.2011.

40 Compare Handelsblatt (ed.), (URL: http://www.handelsblatt.com/politik/international/serbien-wettert- gegen-unabhaengigen-kosovo/3316264.html), status: 18.02.2011.

41 Compare Der Spiegel Online (ed.), (URL: http://www.spiegel.de/spiegel/print/d-70701721.html), status: 18.02.2011.

42 Compare Government of the Republic of Kosovo (ed.), (URL: http://www.kushtetutakosoves.info/repository/docs/Constitution.of.the.Republic.of.Kosovo.pdf), status: 18.02.2011.

43 Compare Auswärtiges Amt Deutschland (ed.), (URL: http://www.auswaertiges- amt.de/DE/Aussenpolitik/Laender/Laenderinfos/Kosovo/Innenpolitik_node.html), status: 18.02.2011.

44 Compare Government of the Republic of Kosovo (ed.), (URL: http://www.kushtetutakosoves.info/repository/docs/Constitution.of.the.Republic.of.Kosovo.pdf), status: 18.02.2011.

45 Compare U.S. Department of State (ed.), (URL: http://www.state.gov/r/pa/ei/bgn/100931.htm), status: 18.02.2011.

46 Compare Zeit Online (ed.), (URL: http://www.zeit.de/politik/ausland/2010-09/kosovo-sejdiu-ruecktritt), status: 18.02.2011.

47 Compare Reuters (ed.), (URL: http://www.reuters.com/article/2011/02/22/kosovo-president- idUSBYT24187220110222), status: 26.02.2011.

48 Compare Europäisches Parlament (ed.), (URL:http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+IM- PRESS+20070209STO02968+0+DOC+XML+V0//DE), status: 18.02.2011.

49 Compare U.S. Department of State (ed.), (URL: http://www.state.gov/r/pa/ei/bgn/100931.htm), status: 18.02.2011.

50 Compare Sueddeutsche.de (ed.), (URL: http://www.sueddeutsche.de/politik/internationaler-gerichtshof- unabhaengigkeit-des-kosovo-ist-rechtens-1.978367), status: 18.02.2011.

51 Compare Bundeszentrale für politische Bildung (ed.), (URL: http://www.bpb.de/themen/HGWTPW,0,Dritter_Jahrestag_der_Unabh%E4ngigkeitserkl%E4rung_der_Rep ublik_Kosovo.html), status: 18.02.2011.

52 Compare Republic of Kosovo-Komisioni Qendror i Zgjedhjeve (ed.), (URL: http://www.kqz-ks.org/SKQZ- WEB/al/zgjedhjetekosoves/materiale/rezultatet2010/1.%20Rezultatet%20e%20pergjithshme.pdf), status: 18.02.2011.

Excerpt out of 77 pages


Kosovo-Investment Incentives for Potential Investors
University of applied sciences Dortmund
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ISBN (eBook)
ISBN (Book)
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Kosovo, Investment, business abroad
Quote paper
Sabina Pajaziti (Author), 2011, Kosovo-Investment Incentives for Potential Investors, Munich, GRIN Verlag, https://www.grin.com/document/335782


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