Obstacles in the way of Commercialization: The Desire of the populace to commercialize


            UNMIK reports that the "general economic trends are upward" in a 2001 report on the economic conditions of Kosovo.  The breadwinners in Kosovo have become the young people in their twenties, who have learned to speak major world languages.  These young people bridge the gap between the Internationals who inhabit this region in a peacekeeping, stabilizing or developmental role, and the Albanians who are learning to live without a dictator.  This new generation of Kosovars works for international organizations earning three times or more the pay that their parents receive.  The jobs these international organizations provide have changed the local job market, giving young Kosovars a glimpse of financial independence. 

After talking with some of these young people, however, it is apparent that some of them are taking a shortsighted approach to their futures by becoming complacent about future employment.  The international organizations have a finite existence and it is clear that after three years of occupation, there is movement by these organizations to leave Kosovo.  Clearly, a stable, long-term economy cannot be based upon a network of international organizations that provide jobs and a quasi-government to this region.  These organizations exist at the discretion of the international community and their sources of funding are not secure.  Now that some form of stability has been achieved, Kosovo must develop its weakened economy in order to achieve economic viability.  First, the Kosovars must accept accountability by recognizing the need to create local, private industry including small and large-scale businesses.  Then these citizens should look to the international market and determine what niche a local industry can fill in the international trade arena.  After this initial assessment, the entrepreneur should locate sources of funding including the Diaspora and local citizens who are willing to contribute to the privatization of the Kosovo economy.  These entrepreneurs will eventually need to compete for foreign investment; the success of a few small businesses will greatly encourage the interest and commitment of this foreign investment.  Local accountability for economic development is crucial to launching Kosovo into the global marketplace and maintaining stability, without the assistance of the world organizations that are currently holding Kosovo in place. 

            Consider a case study: A young, English-speaking Kosovar, Vigan, wants to open the first McDonald’s in Kosovo.  A U.S. attorney, Harry, ascertains that start up costs will amount to $1 million.  Vigan might be a good candidate to run a restaurant.  He may have experience managing a restaurant and he certainly has knowledge about his location and clientele, but without funding he cannot move forward.  He could presumably guarantee $100,000-200,000 of the loan, depending on the wealth of his family, but he requires an additional $800,000-900,000 dollars.  Nonetheless, Kosovo is not currently listed as a location where McDonalds would approve a franchise license, according to Harry.  Perhaps the investment climate of Kosovo is perceived by the international community as too unstable to risk involvement.  Assuming there are other fast food chains that are willing to invest in Kosovo, another obstacle that Vigan faces is finding a suitable location for his restaurant.  This young entrepreneur’s obstacles upfront; funding, insurance, legal obligations and probably importing supplies will be his dominant problems.  Staffing and earning potential will be easily resolved.  Harry and Vigan must inquire into other ways of securing capital to open this franchise.

Entrepreneurs, like Vigan, will have to be more resourceful than the typical American entrepreneur in order to achieve success.  American entrepreneurs typically borrow from banks to fund businesses.  The Banking and Payments Authority (BPK) of the EU Pillar of UNMIK which functions as a central bank, reported in 2001 that there are currently two licensed banks in Kosovo and a number of preliminary licenses issued; the BPK predicts that the banking sector will grow considerably in the near future.  Instead of encouraging investment, however, the current interest rates and loan terms act as a deterrent to entrepreneurs.  Interest rates as high as 18% with a 1-year payoff and the requirement that the entrepreneur offer 25% of the initial capital place an enormous burden on a new business owner’s cash flow during startup, the typical period where businesses are unprofitable.  Applying this scheme to Vigan’s situation reveals that Vigan is only eligible to borrow $750,000 and must produce $250,000 in initial capital.  Furthermore, Vigan would have to pay the entire $750,000 plus interest back within the year, while he is still struggling to pay operational costs; typically new businesses are unprofitable within the first one to three years.  Given this low number of commercial lenders providing unfavorable lending terms the Kosovo entrepreneur must look elsewhere for sources of funding. 

            Aside from capital, legal issues pose another source of problems.  One seemingly pivotal legal issue facing the Kosovar entrepreneur is establishing clear title to the land he has purchased to locate his business.  After years of banishment from society, then a war during which many people’s homes were burnt and displaced individuals moved into the nearest vacant home, there are numerous disputes over land title.  With such uncertainty surrounding real property transactions, many people are reluctant to purchase property. 

In addition to unclean title, it is difficult to find an attorney with experience and knowledge in the area of entrepreneurship.  This new, developing Kosovo market almost requires that an attorney be fluent in a global language such as English or German, and many of the more experienced attorneys lack this skill.  Also, in this new free market system there are few competent attorneys who have experience dealing with these developing economic conditions.   Thus, finding counsel competent to advise an entrepreneur on a prospective business endeavor is a great challenge. 

Contrary to my negative presumptions, Jehona, who recently purchased a plot of land, explained that she believes purchasing private property is safe.  She is confident that she obtained clear title.  She feels comfortable that the courts have maintained their records over the years so attorneys are able to access this information readily.  However, state-owned property is not available for purchase.  When purchasing property owned by Serbs the purchaser must be aware that many of the original title documents were kept in Serbia and now only copies are available.  In addition, Serbian owned land may be inhabited illegally by someone else.  According to Jehona’s experience, Vigan should fare well when he sets out to acquire property as long as he is cognizant of the identity of the most recent landowner and he finds a competent attorney. 

            Unfortunately, there is no Kosovo equivalent to the U.S. federal government’s “Starting Your Own Business” webpage and Office of Small Business Administration.  Therefore, in spite of the obstacles that lay ahead for the entrepreneurial Kosovar, he must determine the necessary first steps on the way to successful business startup.  Essential to every successful business venture is a well-thought business plan.  See the link explaining how to write a business plan for instruction.  In addition, there are a number of organizations in Pristina and websites that provide helpful information on how to get a business started.  It is necessary for Kosovars to become proactive by marketing their region to attract foreign investors who will otherwise invest in other opportunities where information is more readily available. 

While it is clear that Kosovo is just beginning to recover from the events of the past five years and there are no easy ways to move from almost complete economic devastation to a free market, private economy particularly with disincentives to invest in the form of high taxes and unfavorable loan terms.  It is also clear that Kosovo presents the savvy investor with a veritable competition free opportunity to invest at the very beginning of what is sure to be an economically independent state.