Interview of the EU Ambassador in Kosovo, Aivo Orav, for the February newsletter of the European Investors Council
- The EU has played a critical role in supporting Kosovo’s economic development through financial assistance, policy guidance, and capacity-building programs. From your perspective, what are the EU’s key economic priorities for Kosovo, and how do you see EU engagement evolving to further support long-term economic resilience, private sector growth, and regional economic integration?
The European Union is Kosovo’s largest trading partner, investor, and provider of financial assistance. The EU, both its member states and its institutions, particularly the European Commission, have played and continue to play a prominent role first in Kosovo’s reconstruction and then in its development. While the EU’s assistance initially focused on emergency relief actions and reconstruction, it now concentrates on promoting Kosovo’s institutions, sustainable economic development, and Kosovo’s European future. The main priority for the EU is to bring Kosovo closer to the EU. We want to support an economic development in line with EU principles of a rules-based and transparent economy with sound fiscal policies. In practice, this also means support to Kosovo to implement EU rules and regulations. Regional economic integration and gradual integration into the EU’s single market are key to increased growth.
The EU is by far the single largest donor assisting Kosovo and the Western Balkan region. Through its financial instruments during the period 2007 - 2020, we have invested more than €1.5 billion in reconstruction, public administration reform, rule of law, sustainable economic reform, private sector development, education, agriculture, social development, civil society and media and many other key areas in Kosovo.
The EU is also Kosovo’s main trading partner, with over a third of Kosovo’s exports going to EU markets and with over a third of imports being of EU origin. We are continuously trying to find ways and support authorities to increase this trade in favor of Kosovo. We hope to see the share of exports to EU increasing further.
Kosovo has a large diaspora in the EU, with almost as many Kosovars living, working and contributing in EU countries, as in Kosovo itself. Many of them still keep close ties to their roots in Kosovo and try to help their families and economies. You are unique when it comes to diaspora contribution to the economy, by sending remittances for a very long time but as of recently more and more looking into investing into productive sectors and contributing with their knowledge to local institutions. This is a development we want to support.
The EU is committed to continue this support, as our aspiration for Kosovo and all our Western Balkans partners is for them to join the European Union in the near future. For this to happen, besides political will on both sides, Kosovo needs to make longs strides and implement the necessary reforms, particularly in the sphere of the economy. We are here to help.
- Kosovo continues to face challenges in attracting large-scale foreign investment, including issues related to legal certainty, regulatory frameworks, access to finance, and infrastructure development. What are the EU’s key areas of focus in helping Kosovo enhance its investment climate and improve its attractiveness to international investors? How can the EU’s existing programs and instruments better support Kosovo-based businesses in integrating into European and regional markets?
Indeed, you listed the key challenges that big investors weigh in when they decide whether to invest in an economy. In the case of Kosovo an additional concern are the security issues. This is why the EU stresses the importance of the good neighbourly relations for all our Western Balkans partners, and is facilitating the Dialogue for the normalization of relations between Belgrade and Pristina.
Most of the large-scale foreign investors look at the Western Balkans Six as one market. Therefore, obstructing the flow of goods and people through tariff and non-tariff barriers discourages them from investing in the region. Having said that, I would like to stress that it is positive that in the end of last year, a breakthrough agreement was achieved de-blocking the CEFTA decision making and Kosovo can now represent itself in its committees. This opens the way for progress in implementing the Common Regional Market Action Plan in the framework of the Berlin Process. Both of these platforms, if implemented properly, will ease trade flow between the economies of the Western Balkans Six and provide more opportunities for economies and people. At the same time, this will attract more big-scale investment. The regional economic convergence, which can be achieved through the common regional market, is also a prerequisite for becoming part of the EU Single market.
I would also like to mention that the trends are positive. Foreign direct investment in Kosovo has seen a steady increase over the past couple of years. The key is now to diversify these investments and ensure that they are invested in more productive sectors, to ensure further growth of the economy. Kosovo’s location and young population are clearly seen as an asset by many potential investors. The efforts to fight corruption are also being recognized by international organizations and there was stable growth over the past years. Kosovo needs to capitalize on this by accelerating the necessary reforms to address any structural challenges. Kosovo also needs to further develop strategies on how to become more competitive. We are ready to support any such work.
- A well-structured and inclusive public-private dialogue is essential for fostering a stable and competitive business environment. The EU has consistently advocated for stronger engagement between the private sector and policymakers. How does the EU support institutional collaboration between Kosovo’s government and businesses, and what best practices could Kosovo adopt to ensure that the private sector plays a more active role in shaping economic reforms?
The private sector plays a pivotal role in the development of the economy whereas the job of the authorities is to be the enabler for growth. Indeed, we have strongly advocated for stronger engagement between the private sector and policy makers. In this regard, the National Council for Economy and Investment, established last year, is proving to be a very useful platform for discussions with authorities on business interests and for addressing the challenges they face. We have seen the issues identified by private sector being discussed directly with the highest government representation during the plenary sessions of the National Council. There is always room for improvement, particularly when it comes to the process of the legal framework drafting. The authorities would greatly benefit from including the private sector in their policy-making processes from an early stage.
- Small and medium-sized enterprises (SMEs) are the backbone of Kosovo’s economy, but they often struggle with scaling, financing, and compliance with EU market standards. How do EU-funded initiatives and financial instruments support SMEs, startups, and innovation-driven businesses in Kosovo? Are there opportunities for Kosovo’s businesses to better leverage EU programs such as Horizon Europe, Digital Europe, or other regional funding mechanisms to improve their competitiveness?
Access to finance indeed features as one of the obstacles in many economic outlooks for Kosovo, including our own annual reports. In the case of Kosovo, where around 99% of all businesses are small and medium enterprises, this is particularly important.
In the recent years though, we have seen a positive change. Nowadays, the small businesses benefit from robust support in accessing bank finance through extensive credit guarantee schemes and public credit lines offered by the Kosovo Credit Guarantee Fund. We have supported the Fund since its establishment in 2016, more recently through the EU’s Western Balkans Guarantee Facility, which aims to boost the economy of the Western Balkans and provide support for local small and medium enterprises.
Kosovo businesses are eligible to benefit from a wide range of opportunities provided by the EU programmes you mentioned. Kosovo is already an associated member of Horizon Europe, where we would like to see more successful applications, or even just applications. The programme offers many possibilities, but is also highly competitive as it is open to all businesses from EU and associated members. Together with the Kosovo authorities, we need to raise awareness among the private sector and build capacities for the preparation of applications to see increased involvement and more successful applications.
- Kosovo is striving to align with EU regulations and economic standards, yet businesses still face structural and regulatory hurdles in fully accessing European markets. From an EU perspective, what are the most critical reforms Kosovo should focus on to advance economic integration with the EU? How does the EU plan to support Kosovo’s alignment with EU trade policies, investment frameworks, and financial instruments?
To accelerate the progress of the Western Balkans towards the EU integration, the European Union has put forward the Growth Plan for the Western Balkans. This Plan is based on four pillars, all of which focus on enhancing economic growth and boosting economic integration within the Western Balkans and, ultimately, with the EU single market. To achieve this, our Western Balkans partners are expected to implement the needed reforms. Kosovo was among the first ones to present a very ambitious reform agenda. Implementation of the actions listed in this agenda, which is a precondition to benefit from the financial assistance, would address many of the issues that the private sector has raised in our bilateral meetings. For example, they include the creation of aftercare services for foreign investors, improvement of regulatory environment for businesses, investing in quality assurance bodies, improving access to finance for businesses etc. The implementation of the reform agenda would provide for deep structural reforms that are needed for your economy.
- Looking ahead, what are the EU’s long-term expectations for economic cooperation with Kosovo? How do you see Kosovo’s private sector contributing to broader regional stability and economic development, and what role can platforms like the European Investors Council (EIC) play in supporting EU-Kosovo economic dialogue and policy implementation?
We are working to see Kosovo move towards integration into the EU single market. Full implementation by Kosovo of the reform agenda would facilitate this. Economic convergence with the EU would ultimately result in the growth of Kosovo’s economy and improve the lives of Kosovars. As for the European Investors Council, the EU, as an institution that contributed to its inception and is now an honorary board member, is proud of your achievements. The Council has become a recognised voice and the focal point for current and potential European investors in Kosovo. For us, the EU in Kosovo, European Investors Council remains a close and professional partner.
The best way to contribute to economic growth and regional stability is by continuing to advocate with the authorities for improved legislation and better business practices, supporting your member companies, and maintaining contact with potential investors. So far, you have proven successful in facilitating the dialogue between the Government of Kosovo, the private sector, and international stakeholders. Keep up the good work!
https://eic-kos.eu/publications/monthly-newsletter/focus-february-2025/