Becoming Kosovo: The economic struggles of an emerging nation

Perhaps the most telling symbol of the fragility of Kosovo is the family home. Upon arriving in Kosovo, one’s immediate impression is that the entire region appears to be under construction. Cranes dot the skyline and construction materials line the sidewalks and streets. The vast majority of homes lie in mid-construction and the few buildings that appear complete were built in the last eight years. When Serbia drove the Albanians out in 1998 and 1999, Serbs looted homes, burning them to the ground in an effort to ensure that Albanians would not return. When the Albanians returned in 1999, they retaliated in kind. Little was left standing when peace finally came at the end of 1999. As the conflict ended, however, a great hope emerged among the Albanian population. International aid poured in and created good jobs for many, especially those who could speak English. The foreign aid, combined with millions of dollars worth of remittances coming from Kosovar relatives who remained overseas, sparked a great reconstruction in Kosovo that provided more jobs and furthered the economic recovery.

Today, however, nearly all of those homes remain unfinished. Upon closer examination, one finds no signs of active construction on most of them. The largest hindrance to economic prosperity in Kosovo has been the question of its international status. Since the end of the conflict, Kosovo has been a pawn in a game of global politics, and the new nation has not fared well in that role. After the conflict, Kosovo was governed by the United Nations Mission in Kosovo, though officially Kosovo remained part of Serbia. During that time, the Serbian government rejected any settlement that included independence for Kosovo. Serbia was backed by Russia, which is concerned about the influence of the United States on the region and the precedent Kosovo’s independence could set for Russia’s own renegade province of Chechnya. The United States and the countries of the European Union (with a few exceptions), by contrast, have made it no secret that independence for Kosovo was their ultimate goal.


The Consequences of Political Stalemate

The impasse lasted for almost nine years until Kosovo declared independence on Feb. 17, 2008. Kosovo’s economy suffered greatly during the standstill. In recent years, the international aid that boosted Kosovo’s economy just after the conflict has tapered off in anticipation of international corporate investment. But corporations were wary of investing until the matter of independence was resolved. That left many Kosovars out of work or settling for work that pays a fraction of their former U.N. or nongovernmental organization salaries and well below the poverty line. In 2006, 37 percent of Kosovars lived on less than $2 a day.

A national bank was set up just after the conflict in an effort to stimulate the economy by providing loans to businesses and individuals. Initially, the bank served this purpose well, but as the political stalemate dragged on and the economy began to stall, the bank also tightened its pockets. Today, mortgages to finish those half-started homes are nearly impossible to get, and there are no small business loans for entrepreneurs. When loans are granted, they come saddled with high fees and interest rates to mitigate the bank’s risk.

While work stoppages and decreased salaries have prevented many homes from being finished, they have not prevented them from being occupied. A typical Kosovar home has a basic frame of clay brick, but most lack any sort of insulation or finishing to protect their inhabitants from the elements. Many families cannot afford the luxury of windows. In such cases, owners fill empty window frames with loose bricks to keep the weather out.

An ineffective power grid causes daily blackouts throughout the country. Local businesses cope with the outages by using gas-powered generators. Families have adapted by keeping a propane stove and a supply of water on hand for those times when the electric stove and water pump are not usable. It is said that Kosovo has enough coal in its hills to provide power to Kosovo and some of its neighbors for another 80 years. Supply is not the problem. Rather, the power station and the grid itself need vital upgrades if the country is to develop. International aid has been targeted to construct a modern power plant, but even that will not help unless the power companies can find a way to get people to pay their utility bills. The first step is to install meters and educate the people throughout this former Communist country, where utilities were centrally funded in the past. But even after a proper billing system is in place, many families simply will not be able to pay.

A vacuum left by reductions in international aid and the reluctance of corporations to invest has been filled recently by a rise in emigrant remittances. While remittance aid has gone a long way to help feed, clothe and shelter the average Kosovar family, it is not the best form of income for the long term. Increasingly remittances are being used for daily subsistence rather than economic growth. The shift appears to be a response to rising unemployment, which has reached astounding proportions recently. Survival in the short term is more important than sustainability in the long term.

Battling Unemployment, Poverty and Crime

Kosovo has Europe’s youngest population (more than half are under 26), with a much larger percentage of Kosovars still of school age than in the rest of Europe. Its high unemployment is compounded by a relatively uneducated workforce. Many of those who have “completed” school did so during the tumultuous 1990s. In the late 1980s, Serbian authorities converted Albanian-language schools into Serbian. The Albanian population protested by removing their children from schools and establishing a private Albanian-language system in homes and mosques. These schools severely lacked resources and funding, so the education suffered. Today, the highest rate of unemployment is among the young; since jobs are at a premium, employers favor those with education and experience.

The increasing poverty and lack of education have made Kosovo a breeding ground for organized crime. As the political impasse has dragged on, crime has become more entrenched. A large percentage of businesses in Kosovo are believed to have links to organized crime. While Kosovo’s new government has an entire ministry dedicated to good governance and anticorruption efforts, implementation will not be easy. One of the largest battles the government faces is wiping out the now rampant trade in human trafficking—one of the most tragic consequences of western involvement in Kosovo. Human trafficking did not exist before the conflict; now it thrives. The poverty cycle in Kosovo has increased the trade, as individuals seeking to get themselves out of poverty fall victim to traffickers’ false promises of well-paying jobs.

Kosovo’s declaration of independence will certainly have a positive effect on the psyche of Albanian Kosovars and may provide much-needed stability. Ideally, it will allow financial institutions the stability to provide loans at a reasonable rate, which will help to stimulate entrepreneurship, the growth of small businesses and construction. Furthermore, stability should encourage greater foreign investment in Kosovo and alleviate the effect of drops in foreign aid and the unemployment crisis. On the other hand, the tenuous nature of Kosovo’s independence leaves plenty of room for doubt about a rosy future. Serbia continues to claim sovereignty over Kosovo, and other nations have refused to accept Kosovo’s autonomy. Trade may prove difficult without universal recognition of Kosovo. The threat of another conflict with Serbia may still keep investors away. Moreover, the simple declaration of independence cannot immediately cure the new nation’s economic woes. Poor education, decrepit infrastructure and organized crime combine to make Kosovo’s path to economic security a steep uphill climb.

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