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faces up to the challenges of the future
Mr. ANDY BEARPARK
DSRSG, Economic Recovery, Reconstruction & Development in Kosovo
May 10th 2002
What is your assessment of the present economical situation in Kosovo? How would you describe it, what is your vision for it and what are your expectations?
The economy of Kosovo is booming at the moment, there is an enormous amount of activity, a lot going on, and success stories everywhere, but that is the good side of it. The fact of the matter is that the current economic activity is essentially based on the reconstruction frenzy. What you have is infrastructure work going on and in addition to that you have got quite a lot of trading activity. What you haven't got yet is sustainable economic development, you don't have sustainable job creation and you don't have stable long term sustainable economy because the money that is coming in is spent on reconstruction, the estimate is roughly 1,3 billion DM or some 650 million Euro's a year, that have been coming in after the war for reconstruction, that is official donor aid money. Aside from the official donations, there is probably twice as much coming in from the foreign Diasporas. But in neither case can we expect that influx of money to last forever. So the trick now is to move from where we are to a sustainable economy based on mainly small and medium enterprises.
The privatization process has begun with the first draft of the privatization law. Do you think that the efforts made by the EU´s Pillar IV will finally provide the legal framework and the necessary basis for investors and entrepreneurs to develop business here?
There is no question what so ever that the EU will ensure that Kosovo has the right legal framework for all investments and all investment necessities. The challenge is, accelerating that process and putting in place a complete legal framework and it is actually a very large undertaking, giving that in Kosovo the way the system works is more discriminatory so we have to replace regulations with some with more investor friendly policies like those of the former Yugoslavia. So there is an enormous amount of work to be done to put in place the legal framework. The essential regulations were adopted last year before we got through the whole package. But the total number required is around I think 50,60,70 or 80 to cover every aspect of business transactions and the challenge is to accelerate that work, so we wouldn't claim for one moment that we have a full legal frame work here. What we would say, is that we ruthlessly prioritized in terms of which are the most important measures accepted at first and we will continue to ruthlessly prioritize, and we are now working with the Prime Minister and the Prime Ministers Office to find a way of making that work more quickly. The EU is also providing technical assistance for his office because some of the laws that are required are within the reserved competencies of UNMIK. That is why we have to transfer these powers and trust them to the assembly but either way we've got a lot of legal work that needs to be done completed.
There is also the establishment of the Kosovo Trust Agency, which will provide the transfer of the socially owned companies into private ones. Do you think that this Agency would be able to provide a smooth transition will this transition be to the satisfaction of everyone, for all the investors, workers and the current managers of these enterprises?
The current managers, the former managers, the creditors, the government of Kosova as well as the government of Serbia and a number of foreign investors all have totally different objectives of what they want to see, so can I please them all at the same time? That is unlikely. The other question is would the transition be smooth? Yes, I think that it would be smooth but it would also be difficult since we are in Kosovo. The KTA gives a mechanism that enables us to move the socially owned enterprises into the private sector without the negative effects or having to answer of the ownership rights, that is in the UN resolution 1244 and we will see how far we will go with that. So, we want to do that in the private sectors so that the assets of these companies can be put into productive use with whatever assets there are left, and there aren't that many left. We want them to use productively their assets without affecting the final issues of the properties and if this is what I heard there could be initial institutions for self-governing. Today what we have got left from Serbia is a model and there are few bits that we are going to tweak, before we introduce the regulations. But that is not going to be a big issue.
So do you think that KTA would be able to retackle the question of ownership of the land, because it seems that this is the number one issue regarding privatization that most concerns the managers and the employees?
It is the issue that mostly concerns people, it is not the job of KTA to determine the policy on that. The policy on that matter is for the UN to determine, and yes the KTA would be involved in the implementation of that policy. Once the policy has been agreed on, there is no reason for the process of implementation to be difficult but there will still be some way to go in terms of months before we have a properly agreed policy on what we are going to do about the ownership .We have never dealt with different models at once, but it is not that we can't decide that which model is the best, the challenge is deciding what is the most appropriate in terms of the existing legal position which is not clear cut by any means. As you know the usual concept of socially owned companies is that the enterprises weren't really owned by everybody or nobody. This is not a concept that is comfortable with current legal practice and we have a similar issue with the land. The land aspect has a lot of problems with the state property and that is also a decision that has to be made by the UN.
With the privatization process the role of investors in the revitalization of the economy is going to be critical. Have you been working on an appropriate package of incentives to offer to the interested investors in the specific sectors?
The Ministry of Trade and Industry is in charge of that and I know that they are working very hard indeed on those schemes, on those conferences. When we say specific measures I very slightly hesitate, if we are talking about fiscal measures then we've got to be careful if the fiscal measures are being used to support the investors all around the world. If you get them right they can attract the investors, but if you get them wrong you spend a lot of money on talking them into investments anyway. But the answer is in the Ministry of Trade is in constant discussion with the Central Fiscal authority on what are those incentives that could be adopted and then of course we have to think on some non financial incentives too. .
Currently there are no plans to privatize the energy sector, nor the telecommunication sector. How do you plan to revive these sectors and what are your visions for enterprises like KEK or PTK for the future?
What happens under the KTA regulations is that there is a division that between socially owned enterprises and publicly owned enterprises. The socially owned enterprises are some small and some large enterprises that will now be privatized under the KTA regulations. The KTA regulation does not go as far as the privatization public enterprises in the field, such as power and telecommunication, but that doesn't mean that they will not be privatized. What this means is that they will not be privatized under the UN system of regulations. If you ask will the economy of Kosova be privatized, the answer is yes, but it will not be privatized under the current regulations. The current regulations will be structured, ready for the privatization and then in a few years of time they will have to be followed under the regulations to actually do the privatization of those publicly owned enterprises. All the restructure work is in some cases already on the way and all will be started as soon as the KTA comes into existence. So, it is a question of timing not a question of philosophy in this case.
What would you highlight as the competitive advantages of investing in Kosovo?
Kosovo has a very highly motivated work force. It has a very young and although not necessarily well educated in the formal sense because of the problems at schools during 1990, nevertheless well educated, being a capable businessman, incentives the population, so it has that advantage. It then has the specific advantage of possessing the largest reserves of lead in Europe, which means that it has the potential force of significant power of export in due course, where there is significant money to take from that. It has reasonably good agriculture, land, but it is not going to be a major agriculture exporter, it is not big enough for that, but it does mean that it can be large in selling sufficient food and it can be in favor of agricultural processing. The mineral wealth is not as great as these people once thought, but nevertheless there is some mineral wealth here. So, putting all these together Kosovo does not have one big composing advantage but what it has got is a number of advantages, which is not such a bad position to be in. This means that it won't become reliant upon one industry, or one means of general public wealth, so the potential is there.
You are a man with extensive political experience; you were personal advisor to Mrs. Thatcher as well as worked in several other UN missions around the world. Could you tell us something about you previous experiences, and in which way did they helped you running Pillar IV; also what has the project of Kosovo been for you, and what would be your most challenging task ahead?
The most challenging task by far, is to produce an economy in Kosovo which means that young children of Kosovo today are able to enjoy the same source or standards of living and the same source of life style as my children now grown up have been able to enjoy. In terms of recomposing the independence, the point is that an organization like UNMIK is in the institution building business and that is a very different business from humanitarian aid, that is a different business from peacekeeping, it is very different from the development faze which in fact combines elements from all those activities. In some senses I have to act as a politician here in Kosovo, not so much now because they have their elected politicians, but still to the extend as I represent Kosovo to the rest of the world I have to act more as a politician than as a bureaucrat. So, yes my years of experience with a great British politician were of great use, likewise working in Africa and Asia. I wouldn't compare Kosovo to Africa or Asia at all, because Kosovo is a part of Europe, but the fact is that a lot of the problems or difficulties that we had to cope with together with the Kosovar people and the problems in the economies of Africa and the Far East are similar to the ones that we face here and the lessons must be learnt from that.
What is your message for the foreign investors, when they come here in Kosovo?
A successful investor has guts to prepare to take risks. Kosovo offers more risk than some other places, but it offers greater rewards as well. If one has a vision, if one is prepared to stick with that vision then he will try that in Kosovo and give the people here a chance to respond, because respond they certainly will.
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