Kosovo’s independence will affect Albania’s economic development in a couple of ways. First it is expected to add to the stability of the region in a general level and enhance the potential for attracting foreign investment. Second it will create a common Albanian speaking market which is larger than the consumption market of Albania alone. This is also expected to have an effect on investment. And finally trade volumes between the two countries which will apply no restriction on goods and people movement will increase. One of the government’s major projects that will increase traffic between Kosovo and Albania is the Durres-Kukes Highway. After the government voted last year to approve the project, a US-Turkish company, Bechtel-Enka, began construction of the road, which will cost 600m euros and is to be completed by 2009. Once this road is finished the Durres port will become a strategic regional marine corridor site for exports and imports.
As the work goes uninterrupted in the Rreshen-Kalimash segment, business companies are preparing for the new reality on ground, the Albanian market has just increased by a significant 2 million. The independent Kosova has added thousands of potential customers and clients to the target marketing lists of businesses. We are now dealing with an Albanian speaking market which will be soon integrated through better infrastructure and open channels of communication. It will be the start of important trade routes that will go from Durres to the countries in Eastern Europe and further east. It will create new investment and employment opportunities for many Albanians and Kosovars alike. And both the countries need them.
Northern Albania is according to all assessment studies by the administration and civil society the least developed region of the country both economically and socially. New roads and new business as well as more cultural interchange will bring a new spirit and impetus of development to this region as well as a higher collective self esteem fueled by patriotic sentiment.
For independent Kosova economy remains a challenge. Unemployment is rampant at levels around 50 percent. The country remains hooked on remittances and grey economy often including illegal trafficking is a constant problem. Trade balance is tilted way towards imports and education does not fulfill the market outlook. The new government will need to work hard in the education field in order to change the status quo.
Albania needs to live up to the expectations of Kosova which will need clear routes , better infrastructure for ports and roads in order to benefit from the marine link that Albania provides. It also needs a safer entry point for investment companies that have the potential to expand in Kosova. Hence an Albania which is more attractive to foreign investors benefits Kosova almost by definition.
Kosova needs to create its state, give guarantees that it can implement the rule of law, fight organized crime and stop being a stability challenge and hence a drive off for investors.
Bleak indicators but better hope for Kosova
In Kosova the GDP per capita is 1100 euro and inflation is at 10 percent however under the direction of UNMIK it has adopted a modern fiscal system with profit tax at 15 percent and wages up to 960 euro outside taxation. Albania on the other side applies flat tax rate of 20 percent. Upon the retreat of the UN mission the demand for goods and service estimated at 2.6 billion euro will decrease sharply. However the new political guarantees and the new status will attract more investors especially those interested in the mineral wealth that the country has. The main challenge remains supply of energy. The power curse is common for both Albanian speaking lands.
A single market
Albania and Kosova have long ago signed free trade agreements with the aim of creating a common market. 60 percent of all goods exchanged are applied no customs fee and exports from Kosova to Albania have reached 8.1 percent of the total. 3.2 percent of goods have traveled in the other direction. The volume figures remain low and there is potential for more trade. However that will start once the infrastructure to support transportation will be ready and no sooner than the predicted end of the Durres-Kukes road in 2010.
