Kosovo continues to face problems in attracting foreign direct investments (FDI). Despite the fact that over the years progress has been made on several factors such as tax and macroeconomic policy reforms, and investments in road infrastructure, Kosovo continues to fail to attract large investors.

Empirical studies show that the most important factors for attracting FDI to the economies of the Western Balkans are good governance, infrastructure, fiscal stability and education. Kosovo has weaknesses in terms of governance and education. More specifically, in terms of education, Kosovo ranks third from the bottom in the results of the Program for International Student Assessment, PISA. Behind Kosovo are only the Dominican Republic and the Philippines. Kosovo also has the lowest number of graduates in Science, Technology, Engineering and Mathematics (STEM), which may explain why Kosovo has attracted lower amounts of FDI in the region in recent years.

Another problem continues to be political instability, low level of trust in institutions, fiscal barriers, administrative barriers, corruption, tribute, crime, theft and informal economy, delays in court processing and low level of business digitalization ( IETL, ​​2020).

To discuss this topic, KAS and D4D invited three panelists at the Tuesday salon: Nora Hasani, managing director of the German-Kosovo Chamber of Commerce, Edison Jakurti, PhD in Economics and former Deputy Minister of Economy, and Mr. Besian Mustafa, Member of the Assembly of Kosovo and former director of KIESA,.

During the speeches several points were touched upon and the panelists agreed on most of them. One point on which they agreed is that the Government of Kosovo should focus on specific sectors and promote the selected sectors to attract FDI. The idea is that the selection of productive sectors should be done. The promotion can be done through the Prime Minister of Kosovo during visits to different countries. It is proposed that the Prime Minister have a group of Kosovar businesses who can present their work, accompany him during international visits. Another way is promotion by foreign investors who have already invested in Kosovo.

Another important point is that Kosovo can benefit from the “near-shoring” trend (which occurs when an organization decides to transfer business operations or subcontracted work / service from a company that is further away to a company that is geographically closer). Due to the pandemic, most businesses have had problems in the value chain, especially businesses that manufacture in China. As a result, those businesses have started to move production points closer to them and the Western Balkans due to its geographical position has the potential to take advantage of this trend. Kosovo, as part of the Western Balkans, can also benefit. However, to take advantage of such a trend, Kosovo must take specific steps. One step is to design the incentive package which ensures that we attract foreign investors but also that we manage to keep them in our country for a longer time.

Another point on which the panelists agreed is that the Government of Kosovo should work on improving the image of the country. An important reason for foreign investors not to invest in Kosovo is the aggravated image of the country as a result of the high level of corruption. Therefore, the Government of Kosovo must take concrete steps in improving the image of the country and creating a brand of Kosovo in general but also creating a brand for specific sectors selected for attracting FDI.

Another important aspect is remittances sent by the diaspora. The focus here should be on orienting remittances towards investment. In this regard, bridges should be created between investors from the diaspora, the Government of Kosovo and local businesses. So far, efforts have been made to identify Albanian businesses in the diaspora, but more needs to be done. One proposal was to draft a joint strategy with the diaspora. In this way the diaspora is involved in policy making. Another proposal was the creation of Diaspora Investment Funds.

The concluding recommendation for attracting FDI is that better coordination between local institutions is needed. Foreign investors who have expressed interest in investing in Kosovo have stated that they have encountered inefficient inter-institutional coordination. Therefore, concrete measures should be taken to achieve effective coordination between different local institutions for the investment process in Kosovo to become as easy as possible.