Kosovo’s Key-Assets to Address the Challenges of Transition

15 July, 2015

Written by:
  • Daniel Linotte
Kosovo’s Key-Assets to Address the Challenges of Transition

Kosovo is one of the poorest countries in South Eastern Europe and, like other countries in the region, its liberal and democratic transition is de facto confronted with major challenges. However, despite transition problems, Kosovo does possess three key-assets that could be better mobilized to make the country more prosperous, namely its youth, the large Diaspora and abundant minerals.


Successful experiences of economic growth underline the importance of human capital as factor of production. Thus, both labor quantitative and qualitative features do matter for growth. In that respect, schooling and its content are essential to enhance cognitive skills and, as a result, raise labor productivity.

A Strategy Plan for Education

Kosovo adopted a Strategy Plan to develop further education over the period 2011-2016. It is a major tool for bridging gaps and increasing coherence in the field of education, at all levels, from an inclusive perspective. It also aims at promoting the use of IT technologies, creating a life-long learning culture and supporting research. The final outcomes of the strategy remain to be seen and properly assessed. However, such a strategy clearly underlines the importance the Government of Kosovo gives to enhancing human capital, which is essential in a country where more than 40% of the population is below 25 (in the EU, the corresponding ratio is 26%). In such a context, the implementation of the Stabilisation and Association Agreement (SAA) with the EU is expected to strengthen Kosovo’s strategic choices and help integrate with EU educational structures – including students and scholars mobility – and adopt related standards.


There are positive linkages between Diasporas and development. The working members of the Diasporas send money to relatives who stayed in the homeland; this may also help address balance of payments problems and provide funds for creating businesses. In addition, there is a growing international awareness about the need to engage Diasporas in development projects and activities.

The economic importance of the Kosovar Diaspora

Different waves of emigration contributed to the formation of the large Kosovar Diaspora. According to the International Organization for Migration, 800,000 Kosovars live in foreign countries, with the largest communities residing in Germany and Switzerland.

Overall, most Kosovars are well integrated in their host countries and very often they have dual citizenship. Some members of the Diaspora correspond to real success stories. A well-known case is Mr. Pacolli, a self-made man who founded the Mabetex Group - an engineering and construction company that became a global player, with subsidiaries in at least 18 countries. In addition, Mr. Pacolli was President and Deputy Prime Minister of Kosovo. Younger generations are also successful in various fields, including social sciences and high techs, and are willing to maintain roots in Kosovo. In fact, for years, the Kosovar Diaspora has been a strong driving force of economic growth and development in the country, not only for remittances, but also for stimulating businesses and highly needed exports.

Working with the Diaspora

In 2010, the Law on Diaspora of Kosovo was adopted to stimulate linkages with the homeland, bring expertise and invest in productive activities; the same year, the Diaspora invested about 160 million Euros in the country, namely 30% of total FDIs. Moreover, following independence, a Ministry of Diaspora was established. It aims inter alia at promoting commercial relations with Diaspora manufacturers – some of them were invited to apply for participation in “EXPOFORUM 2015″, the most important event for economic development in the country that was organized on 29 June. Innovative actions could also be envisaged – for instance, considering the fact that domestic banks are over-liquid partly because of remittances, very specific loans could support venture capital in innovative fields.


The relationship between development and minerals is a rather complex one. The extraction and transformation of minerals may create thousands of jobs and contribute to exports and much higher incomes in a country. However, there can be negative impacts on the environment and the quality of governance, with corruption. Large exports of minerals could also cause a Dutch disease, namely distortions that impede activities not related to minerals. Moreover, there could also be a risk of Immiserizing growth, with deteriorating terms-of-trade.

Kosovo’s unique minerals endowments

The conflict with Serbia led to the virtual collapse of minerals mining in Kosovo and little is being done to restart it. In fact, Kosovo was the main mining region in former Yugoslavia. Thus, the country benefits from unique minerals endowments, with deposits of aluminum, chrome, magnesium, nickel, lead, zinc, silver, etc. The total value of these dormant minerals reserves could reach hundreds of billions dollars, which means that there is a huge potential for genuine mineral-based development. However, large investments are needed to restart mining and be competitive on world markets. Attracting foreign investors should also help integrate in global value chains. Considering a specific case, during former times, the Trepca mine was one of the largest companies in the country – following poor maintenance; its full recovery requires investments to modernize plants and solving complex property rights and political issues. Whatever will be decided about mining in Kosovo, there should always be impact assessments, taking into account all social, economic and environmental dimensions – with good governance and transparency seen as “musts”. In that respect, it is worth mentioning international initiatives to support best practices in mining.

All in All: Importance of a Strategic Vision and Good Governance

Kosovo benefits from significant assets to address the challenges of transition. However, it is essential to integrate their mobilization in a realistic strategic vision about the future of the country and the best ways to achieve it. Furthermore, there seems to be a growing consensus to move ahead with strongly needed reforms, especially with the adoption of EU norms and ‘best’ practices – as mentioned in the Stabilisation and Association Agreement with the EU.

(Disclaimer: the views of the authors do not represent any official position.)

Written by:
  • Daniel Linotte Daniel Linotte holds a PhD in economics from Oxford University. He worked as adviser with international organizations and governments, and held teaching positions at Boston University, the Catholic University Leuven and the European Institute of Public Administration (Maastricht). Since 2008, he is a Senior Member of St. Antony’s College (Oxford). He is presently leading an EU project in the Balkans. He is the author of “The Eurasian Economic Union – Implications for Governance, Democracy and Human Rights”, The Central Asia Caucasus Analyst, publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with Johns Hopkins University's Nitze School of Advanced International Studies, Washington DC., and the Institute for Security and Development Policy, Stockholm.
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