Kosovo Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU
The EU has an association agreement with Kosovo, which contributes to closer cooperation with this Balkan country and paves the way for Kosovo to become a member of the EU. Trade exchange with EU countries accounts for 45% of Kosovo’s total foreign trade turnover. Kosovo is one of the most underdeveloped European countries, which does not have a sufficiently developed industry, and therefore imports most of its goods. This results in a deep foreign trade deficit. Last year, Kosovo’s exports to the EU were a total of times lower than Kosovo’s imports. Kosovo’s export of goods and services to the EU in 2021 reached EUR 1,59 million, which is EUR 428.4 million more than in 2020. The negative balance of Kosovo’s trade exchange for 2021 reached – 1,340.2 million EUR, compared to the previous year, it increased by – EUR 34 million. Among the least significant export countries (exports to the EU): Among the most important importing countries (imports from the EU) were: Germany (share of total imports 15%), Italy (7%), Greece (5%), followed by Slovenia, Poland and Croatia. Among Kosovo’s most important export items were: iron and steel and products thereof, furniture, mattresses and bedding, plastics and products thereof, non-alcoholic and alcoholic beverages, ores and aluminum and products thereof. Among the most important Kosovo import items were: means of transport, machines and mechanical equipment, iron and steel and their products, electrical devices and electromaterial for industrial production, pharmaceutical products and plastics and their products.

  • Allcountrylist: Overview of major industries in Kosovo, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 900.5 1,036.50 1,284.20 1,163.30 1,591.70
Imports into the EU (million EUR) 88 96.7 129.9 164.8 251.5
Balance with the EU (million EUR) -812.5 -939.8 -1 154.3 -998.5 -1,340.2

Source: European Commission

Trade relations with the Czech Republic
The Czech-Kosovo trade exchange has been developing very positively in our favor for many years, and our trade balance shows a significant surplus, which, just like in the trade balance with the EU, is caused by the underdeveloped Kosovo industry. Despite the complexities related to the pandemic, the growth of trade exchange continued in 2021, when Czech exports increased by 34.6%. Kosovo’s imports to the Czech Republic also developed positively, recording growth of 10.2%. The surplus of the mutual trade balance is higher by 36.0% compared to the previous year. In addition to means of transport, the most important items of Czech exports included office machines and equipment for automatic data processing, paper, cardboard and products made from them, equipment for telecommunications and sound recording, tobacco products, electrical devices and appliances, and fragrances and cleaning products. Among our most important import items were iron and steel, electrical appliances and appliances, raw materials of animal and vegetable origin, coffee, tea, cocoa, spices and their products, vegetables and fruits, fragrances and cleaning products. Despite the low population and low purchasing power, the Kosovo economy offers interesting opportunities for Czech companies. From the point of view of the Czech Republic’s exports, the most promising sectors of the Kosovo economy include, above all, the mining and quarrying industry and related energy, as well as ecology and water management, renewable resources, rail transport, means of transport and machinery for agriculture.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 0.35 0.54 0.58 0.63 0.85
Imports to the Czech Republic (billion CZK) 0.02 0.03 0.03 0.03 0.04
Balance with the Czech Republic (billion CZK) – 0.33 – 0.51 – 0.55 – 0.60 – 0.81

Source: CZSO

Trade relations with countries outside the EU
Kosovo’s trade exchange with countries outside the EU is mainly influenced by the underdeveloped Kosovo industry, which results in a high trade balance deficit. Last year, Kosovo’s exports to countries outside the EU were a total of 11.0 times lower than Kosovo’s imports. Exports of Kosovo’s goods and services to countries outside the EU reached EUR 23million, which is EUR 7million more than in the same period of the previous year. Kosovo’s imports from non-EU countries reached EUR 2,590.6 million, which is EUR 80million more than in the same period of the previous year. The negative balance of Kosovo’s trade exchange for 2021 increased by EUR 730.6 million compared to the previous year. Among the least significant export countries (exports from Kosovo) were: USA (share of total Kosovo exports 25%), Albania (22%), North Macedonia (17%), followed by Switzerland, Serbia and Montenegro. Among the most important import countries (imports to Kosovo) were: Turkey (share of total Kosovo imports 14%), China (11%), Serbia (7%), followed by Albania, North Macedonia and Greece. Among Kosovo’s most important export items were: iron and steel and their products, plastics and their products, non-alcoholic and alcoholic beverages, electrical appliances and electrical materials. Among the most important Kosovo import items were: oil and mineral raw materials, machines and mechanical equipment, electrical devices and electrical material for industrial production and products of the chemical industry. A comparison of Kosovo’s trade exchange with EU countries and non-EU countries shows the growth of imports from non-EU countries. This is mainly reflected in the increased interest in goods from Turkey and China, which is caused by the lower price level of Turkish and Chinese goods.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 1,759.1 1,919.3 1,780.4 1,785.4 2,590.6
Imports to countries outside the EU (million EUR) 295.0 266.5 256.2 163.5 235.1
Balance with non-EU countries (million EUR) – 1,464.1 – 1,652.8 – 1,524.2 – 1,621.9 – 2,355.5

Source: EIU, Eurostat, KAS

Foreign direct investment

The foreign direct investment agenda in Kosovo is regulated by Law No. 04/L-220 on foreign investments. The aim of the law is to support and protect foreign investments and investors primarily by providing basic rights, protective measures and guarantees in the investment field in accordance with applicable international standards, to improve the business environment, to ensure fair treatment of investors and thus to support their interest in investing in Kosovo. The law regulates all aspects of the foreign investment agenda, promotes equal treatment and mechanisms for resolving trade disputes in the said area. The Ministry of Trade and Industry of Kosovo supports the inflow of foreign direct investment and the development of the private sector in Kosovo through the KIESA Investment and Enterprise Support Agency. The Kosovo legal system is in line with the legal environment of the EU countries. Foreign investors enjoy protection against expropriation and nationalization. Kosovo has a simple and straightforward tax system and adheres to international accounting standards. Despite these positive aspects, attention should be drawn to the high level of corruption and “monopolization” of some areas of business, or division of sectors between ancestral clans. The assessment of investment risks by the OECD (6/7) also characterizes the business environment in Kosovo as very risky.

In 2021, foreign companies invested a total of EUR 41million in Kosovo.. Last year, most investments were directed to real estate (77%), the financial and insurance sector (5%) and the field of information and communication technologies (3%). Prospective sectors for foreign direct investment include the energy sector and infrastructure development (roads, railways), reconstruction of lignite power plants and the construction of new alternative sources of electricity (solar, hydro and wind power plants).

From a territorial point of view, the following countries ranked among the least significant investors in 2021: Germany – EUR 12 million, Switzerland – EUR 99.2 million, USA – EUR 6million, Albania – EUR 5million and Austria – EUR 2million.

Below is the contact for the Kosovo Investment and Enterprise Support Agency:
Kosovo Investment and Enterprise Support Agency (KIESA)
Muharrem Fejza str. nn
Lagja Spitalit
10000 Prishtine
Republic of Kosovo
Tel: +383 (0) 38 200 36542,
+383 (0) 38 200 36585
Email: [email protected]
www.kiesa.rks-gov.net

Czech investments in Kosovo
Due to the risks in the field of direct investments in Kosovo (corruption, non-compliance with contracts, unclear ownership relationships, etc.), Czech companies do not show much interest in investing in this territory. So far, the only and very successful direct Czech investment in Kosovo was carried out by the association of Czech investors Rockway Capital, which a few years ago invested EUR 8 million in the ICT segment through the Kosovo company Gjirafa. It is a price comparator, an online store, a media portal and a “mall.cz” type search engine. This internet portal is widely used not only in Kosovo, but also in other Albanian-speaking countries and communities around the world, especially in Albania, Macedonia, Montenegro and Greece. The Czech investment in the Gjirafa portal ranks among the most successful foreign investment projects of recent times in Kosovo.

Source: CBK, KIESA, Embassy of the Czech Republic in Pristina

FTAs and treaties

Agreements with the EU The
EU has an association agreement with Kosovo, which contributes to the bloc’s closer cooperation with this Balkan country and paves the way for Kosovo to become a member of the EU. The agreement envisages harmonization of Kosovo legislation and standards with EU standards. By signing the agreement, Kosovo pledged to open its market to European companies and products in exchange for financial aid from the EU.

Treaties with the Czech Republic
Basic contractual documents between the Czech Republic and the Republic of Kosovo include:
Payment agreement between the government of the Czech and Slovak Federative Republic and the Union Executive Council of the Assembly of the Socialist Federative Republic of Yugoslavia (Belgrade, February 8, 1991);
Minutes of the meeting on the resolution of the balance on the liquidation account held on 23-26 March 1992, approved by an exchange of letters dated 7 and 11 May 1992;
Agreement between the government of the Czech Republic and the federal government of the Federal Republic of Yugoslavia on mutual support and protection of investments (Belgrade, 13 October 1997);
Agreement between the government of the Czech Republic and the federal government of the Federal Republic of Yugoslavia on mutual assistance in customs matters (Belgrade, September 9, 1998).

In 2013, the Agreement between the Czech Republic and the Republic of Kosovo on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes was signed in Pristina. The ratification process on the Kosovo side has been completed and the last steps of the Czech side are awaited. According to the Ministry of Finance of the Czech Republic, it is not yet clear when the Agreement will be ratified on the Czech side.

Source: Ministry of Foreign Affairs of the Czech Republic, Ministry of Finance of the Czech Republic

Developmental cooperation

Kosovo is a recipient of development aid. Its biggest providers are the EU and the USA. The aid is primarily focused on infrastructure and social projects. Energy, the environment and transport infrastructure play a significant role in this area. Since the declaration of Kosovo’s independence, the Czech Republic has also been involved in development aid projects for Kosovo. The Czech Republic’s foreign development cooperation projects were an integral part of bilateral political relations with Kosovo until 2018. They have traditionally focused on social and health (for the blind and partially sighted, handicapped, etc.) and infrastructure (wastewater treatment plants). Among the most significant development projects implemented by the Czech Republic in Kosovo, we can include 6 bilateral projects from 2017 worth CZK 1 million, which were focused on social infrastructure and services, water supply and sanitation. Projects for social infrastructure and services were primarily aimed at supporting the integration of minorities and other vulnerable groups. In the years 2018-2019, funds in the total amount of 13 million CZK were provided for bilateral development aid to Kosovo, which were used for the implementation of three projects – Supply of technological equipment for the production of food for dogs and cats from waste meat, the Badovac Wastewater Treatment Plant and the Wastewater Treatment Plant wastewater Zubin Potok. In accordance with the Concept of Foreign Development Assistance, Kosovo was among the priority, so-called project countries of foreign development assistance. According to the new Foreign Development Assistance Strategy for 2018-2030, Kosovo was included among specific countries with the termination of cooperation. Bilateral projects were thus completed in 2019, however, based on good references from previous years, Czech companies could participate in new projects for the supply of wastewater treatment plants, water supply, etc., financed from other sources. From the point of view of the Czech Republic, Kosovo is not currently included among the priority countries for development cooperation.

Source: Ministry of Foreign Affairs of the Czech Republic, MPO of the Czech Republic

Prospective fields of study (MOP)

Kosovo ranks among the poorest European countries, but it is one of the most interesting trading partners in the Balkans. It’s a market of million people with a GDP per person of $4,990. In 2020, the pandemic hit Kosovo’s economy, causing the economy to decline by 5.3%. In 2021, Kosovo’s economy saw a significant resumption of growth, reaching 7.5%. According to economic predictions, economic growth should continue in the years 2022-2024. In 2022, GDP growth could reach 4.9%, in 2023 growth is expected to be 3.8%, and for the year 2024, GDP growth is estimated at 3.9%. The Kosovo government intends to increase the production of mines, and has included the development of the mining industry among its priorities for the years 2022-2024. It is estimated that brown coal reserves, which are more than 13 billion tons, would last more than 600 years at the current performance of the mining industry.

Mining, extraction and oil industry
The Kosovo government intends to increase the production of mines, and has included the development of the mining industry among its priorities for the years 2022-2024. It is estimated that brown coal reserves, which are more than 13 billion tons, would last more than 600 years at the current performance of the mining industry. However, Kosovo’s mining and quarrying industry is outdated, and Kosovo’s mines need modern equipment for mining, transportation and sorting of material, safety and control systems, industrial explosives, etc. The Kosovo government intends to invest 242 million CZK in the mining industry in 2022.

Energy Industry
The goal of the Energy Strategy of Kosovo for the years 2022-2031 is to ensure the transformation of the energy sector while maintaining affordability. A total of 95% of electricity production provided by thermal power plants. The government intends to increase the share of renewable sources from the current 5% to 25-30% by 2031. The further development of the energy sector will require the construction of new capacities and the modernization of existing ones, as well as the wider introduction of renewable energy sources. The Kosovo government intends to invest CZK 6,892 million in the energy industry in 2022.

Water management and waste industry
The lack of modern waste water treatment plants in Kosovo, the poor condition of water distribution systems and inadequate waste management causes pollution of surface sources of drinking water. Therefore, the Kosovo government has included the water management and waste industry in the program priorities for the years 2022-2024. The EIB and the EU are also participating in the modernization of the water management and waste industry. The plan includes investments in infrastructure and the construction of a wastewater treatment plant for 213,000. persons in the municipality of Mitrovica worth CZK 480 million and the modernization and waste system in Pristina worth CZK 488 million.

Healthcare and pharmaceutical industry
The Government of Kosovo intends to support the overall development of the Kosovo healthcare system. In addition to the construction and renovation of hospitals, Kosovo’s healthcare system will need modern equipment, which will mainly be imported. Funding for the development of the health sector will come from domestic sources as well as from the international community, which has promised financial assistance to Kosovo in the form of favorable loans. The international community intends to provide Kosovo with favorable loans in the amount of 4,500 million CZK in the years 2022-2025.

Railway and rail transport
Kosovo’s priorities in the field of railway and rail transport include, above all, the total reconstruction and modernization of the north-south railway route (Route 10) between the border with Serbia and North Macedonia, with a length of approx. 150 km. This project received a financial pledge from the European Bank for Reconstruction and Development in the amount of CZK 2,334 million. The modernization of the railway transport infrastructure is also related to the need for the overall modernization of the technical background and fleet of carriers.

Source: Embassy of the Czech Republic in Pristina, EU Office in Kosovo

Kosovo Trade