Mr. Minister, how would you describe the current state of finances in Kosovo?
There are two main challenges that Kosovo faces now. The first one is our past and the situation that we inherited as a result of it, we went through ten years of basically apartheid policy conducted by Belgrade. The central Yugoslav government used at that time all our natural resources and as well the financial funds and the deposits of the citizens as if it was theirs. At that time everything was state property, just as it was in other socialist or communist country and the state was directing everything. By using the fusion of companies between Serbia and Kosovo, they stole all that they could. As a result, most of the population of Kosovo, above 90% started a peaceful resistance movement. We organized and established a parallel government and moral in the everyday life. Belgrade also tried to apply its plans and programs in the education and to teach our children to speak Serbian instead of their mother tongue. Their plans and programs were discriminating and offending, Albanians started boycotting the system of education, the Serbian reaction to that was the exclusion of all students and teachers of Albanian nationality out from the public schools. As the international community already knows this all led to an armed conflict with Serbia. In this case Serbia again uses the argument that no one in the world should use, that it was NATO that bombed and destroyed the factories. You have to know, that the Serbs had moved their weapon arsenals into those factories and during the bombing of course these sites were affected. I am speaking to you as a witness who was in Kosovo during the war, and I have gone through many bad things. As a result we inherited a destroyed economy, and this was the first challenge. The second challenge, which is very difficult also, is the transitional phase. We came out from a communist system where everything is a state property. Our aim is to be a part of Europe, with an open, free economy where the private property dominates. We also have to establish our institutions out of nothing, from zero, administration for the institutions and the challenges waiting for them, creation of a legal framework, regulations, laws and others that we did not establish in these two years of a transitional period, since we had an international co governing body, UNMIK. The government of Kosovo, during that time was represented by 20 departments, and each of them had 1 Kosovar and 1 International representative and I worked with my colleague in one office also.
Now that there are more and more responsibilities transferred to the local government, what is the fiscal strategy, fiscal policy of the new government?
During the period of co administration we were forced to use the fiscal methods that were the easiest to operate with. We applied customs-duty taxes in border points, We also applied presumptive tax, and we are now working on the introduction of three new taxes We are expecting to apply them in approximately two months period. The profit tax will replace the presumptive tax. We also work on import taxes since at the moment goods that come from Serbia pay no customs at all, those that come from Macedonia pay only 1% and goods entering from other countries pay 10% customs. Our aim is to have only one import tax scheme for all. At the moment we are facing the falsification of documents stating false origins of goods. In addition to applying the profit tax, we are going to apply the income tax from the beginning of June, and we will also introduce the property tax, a tax that will be dedicated to the municipality budgets. Whereas, the other taxes are dedicated to the central government budget. Among the priorities of the recently formed government is to create a healthy ambiance of business, where the private sector will dominate. I had a meeting with the representatives of economic development sector of the international community, and I got very good news, we got the green light from New York for the process of privatization. As you know all our regulations have to be signed in New York by the Security Council of the UN. During the year 2001 we worked in this direction, because in order to be able to introduce the business tax we had to create an accountancy strategy, to apply the international standards for accountancy, which are used in 120 countries, a system which will allow us to produce better, more reliable reports, that will help the tax administration, the investors and business in general, to have a more realistic approach to the process.
What are the governments plans to encourage the private business and bring back companies from the grey economy and what are the main results achieved so far?
We will start the privatization of the social sector of small and medium enterprises, because Kosovo went through a 10 year long apartheid, and lots of young people emigrated to foreign countries, to Europe, America, Australia, but they had and still have their families here. During these 10 years they worked and they accumulated money there. After the war was over, the people dedicated this accumulated wealth to Kosovo, to their country and this is what enables us to develop faster. The last two years and a half, Kosovo had almost 100% increased its budget thanks to the remittances of our diasporas. In year 1999 it was completely financed by donor money. In the year 2000 it was projected to be financed 50%, but our domestic incomes were 10% higher than the donations, so we self-financed us with 60% of the budget. In 2001, it was estimated that the domestic incomes will achieve the amount of 338 million, but we realized 592 million DEM. I mention this, to let you know what was the impact of the peoples accumulated wealth during these years.
| We have some kind of a development in incomes during these 2 years, but we are not satisfied because 80% of these incomes come from the border points, from the tax on the imported goods. We will start with the creation of a safe ambiance, in order to establish local businesses and production. We will open the doors to the foreign capital, but we know that the Kosovars must be the ones to invest first. As a government we are fully dedicated to crate the necessary legal infrastructure. The small and medium size enterprises and agro businesses are the ones that will engage the majority of workers in the short future.
Now, regarding foreign investments, we are aware of the fact that we need the help of foreign investors but we also need to insure the investors that they will find their interest here, but we until then we have to create many things, like the monetary system, the mortgage system, etc. Kosovo is known as a country with the lowest taxes in the region, and we will continue that way, we plan to apply general, all-inclusive taxes, but not ones that will get in the way of business developing. To be followed by the monetary part, in order to have development loans with a longer pay back period than we have now, and with lower interest rate. We are in talks with the International Monetary Fund, the World Bank in order to make it possible to create such an ambiance. We have a Central Bank and 7 commercial banks, one of them is an American Bank, the others are established by local capital and they are ready for business initiatives, because they've spent 10 years in western countries, they have enough experience, they just need a little push to be helped by someone in order to start a reliable business.
What are the biggest challenges that lie ahead of the newly established government in the near future, perhaps the revitalization of the big state owned companies?
I have a mixed feeling regarding those companies, because they have been unfortunately destroyed, there is nothing left from them, they were robbed and bombed and then destroyed, and there is no reason to call them state property. It is too early to start with their privatization, at first we have to settle the our interior disputes with the Serbs living in Kosova and to include them in the state hierarchy and of course to ensure them that they will be treated as ordinary citizens. In the past 2 years they were not involved in the military or government but now, we're in the phase when they understood and recognized the reality ad the importance of being part of a new Kosovo. They are coming back and already started to integrate in the society and they have the same treatment as every other citizen. The biggest challenge in the short run is the very fast decrease of donations, we had 100% of donators contribution in 1999, 50% in 2000, 30% in 2001, for the year 2002- 7%, so we have to increase the domestic incomes, but those are incomes coming from imports mostly, on the other side there are urgent needs that we have to reply to, like the large number of unemployed. As I said earlier, one of the first things that we have to do is to employ the young people, there is a large number of people living on social help, we are in the phase of establishing the pension system, that of course also have to be established from scratches, since it was also affected by the war. We have to face the old people and this is something that has to be done by the budget.
Mr. Sadriu, on the personal level, what are your impressions regarding the future possibilities of Kosovo?
I am optimistic about the future of Kosovo. I am aware of the current level of the economy and of the development possibilities, of all the problems that Kosovo will face in the future also. But there are many things that make me feel optimistic, first of all the population of Kosov has already surprised the international community, the second surprise will be the initiative and soul of Kosovar businessmen, we are not a nation that want to get fed with a fish, we want to learn how the fish is caught and to have the possibility to catch it (fish) by ourselves. Kosovo is very rich with natural resources, Kosovo has a young population, I would say the youngest in Europe. Therefore I am convinced that this trend of increase will continue. Imagine, in other places people get no pensions at all for years, when we come with a symbolic amount they have understanding because we are a new, young government, a government that has to move forward, these are the responsibilities that push us forward. The other countries that are in the region and didn't have to go through war, but had only a transitional phase, have better conditions and treatment from the international community than Kosovo has now, for this reason Kosovars are not expecting for the others to help us, they want to work, and they recognize it should be done on a European business level, we have to adjust ourselves to Europe in everything and we already started with the implementation of the Euro, I think we are on the right path.
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V.I.P. INTERVIEWS 
