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Lluka

Kosovo’s minister of economic development, Valdrin Lluka, tells Sebastian Shehadi how he is fighting the informal economy by expanding the energy and mining sector.

Q: What makes Kosovo attractive to FDI?

A: We are in Europe, but have the operational cost of China. We’ve got one of the lowest taxes in the world: fixed corporate profit tax of 10% and zero tax on dividends. We have trade agreements with Europe. Thus, one can produce at a very low cost and then export to the European market of 600 million people. You can reach most parts of Europe within 24 hours’ truck drive.

One study showed that our labour force productivity was 60% to 80% of the German labour force productivity. Our population the youngest in Europe; 70% of the population are below 26 years old, so one of Kosovo’s challenges is to find jobs for all of them.

The industries that are booming are the labour-intensive ones – such as furniture production, wood or metal processing – and information and communications technology (ICT). Many English and German companies outsource ICT work to us because these languages are widely spoken in Kosovo due to the large Kosovan diaspora in Germany and Switzerland. English is taught at all schools.

In terms of connectivity, we have close access to three main ports in Albania, Thessaloniki (Greece), and Bar (Montenegro). There are 25 million people living in the western Balkan countries, reachable within five hours’ drive. Kosovo has had very stable growth at 4.4% on average over the past 10 years, according to the International Monetary Fund. We have a very stable inflation at 1.5% and our GDP per capita is slow, but growing at $7000.

We want promote Kosovo’s booming energy sector and mining industries. We just signed a €1.5bn commercial agreement with a private US company to build a coal power plant - we have the fifth biggest reserves of coal. The World Bank and maybe the European Bank for Reconstruction and Development are supporting the project, which is also open to private bidders this year – we’ve seen interest from GM, Siemens, Alstom, and so on. The project will meet all EU directives on carbon emissions.

We are also working to reach 25% of energy demand from renewable sources by 2025. There are lots of investments in this field. We are investing hundreds of millions of euros to rehabilitate many coal plants. This means changing the turbines and the boilers to make them environmentally friendly.

Q: What are the obstacles to joining the EU?

A: Out of the 90-something conditions, we have almost fulfilled all of them. There is one remaining: fighting corruption. Things are much better compared with five to 10 years ago. To fight corruption we are, first, creating incentives for people to report corruption, and second, having FDI come through the government. It’s also about fighting the informal economy, which is 30% to 40% of the economy. With so much of the labour force unregistered, you have artificial unemployment rates that are inflated, GDP rates that are artificially lower.

Q: How will you fight the informal economy?

A: We’ll create thousands of jobs through the energy and mining sector, which will be hot for 20 years. Kosovo has about 11 mines – never touched, so with huge potential. We are talking about mines for lead, zinc, silver and chrome. Kosovo has one of the biggest mines in Europe for lead and zinc, Trepča. There’s been lots of foreign interest in such mines since I declared them open to investors. We don’t want speculators; I want the Mercedes brand of the mining industries.

Q: Do you think the legacy of the war still deters FDI?

A: The problem with Kosovo is perception. The war ended almost 20 years ago, you don’t even see any signs of it. Kosovo has one of the lowest crime rates in Europe, but people still think it’s unsafe.

This article is sourced from fDi Magazine
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