Market size: Kosovo’s small population – officially only 1.8 million people based on the last census, conducted in 2011 – can present a challenge to investment in industries requiring a substantial economy of scale to realize profitability.
Judicial system: In January 2022, the Kosovo Assembly unanimously adopted the Law on the Commercial Court, which establishes a special court for handling business disputes fairly, efficiently, and predictably. The Commercial Court aims to improve the business enabling environment by reducing opportunities for corruption and building investor and private sector trust in the judiciary. Kosovo institutions with the help of USAID are working on an Action Plan to operationalize the court. Kosovo’s judicial system remains weak but is improving; the clearance rate for civil and criminal cases has significantly improved. The number of firms providing high-level, professional legal services is small but increasing. Ongoing challenges remain in hearing postponement, rescheduling of hearings, lack of effective and timely adjudication of high-profile criminal cases, and lack of uniform application of criminal sanctions.
Corruption: The current government was elected in early 2021 on promises of an anti-corruption reform program based on clearing corrupt individuals from public positions and vetting the justice sector. As a result, Kosovo has marked progress as depicted by its improved standing in the Transparency International Corruption Perception Index for 2021. . Still, corruption reflects a “cost-of-doing business” mentality prevalent in many parts of the region. Senior-level public officials have been accused of bribery, racketeering, and other forms of corruption. Anti-corruption efforts suffer from a lack of cohesion, forceful action, and follow-through measures, including prosecution.
Public procurement: While transparency in public procurement has improved, with all procurements now fully electronic and procurement-related information publicly available, accountability in this process lags. Weaknesses in the appeals process and limited understanding of the procurement process by enforcement mechanisms hampers public and private sector trust. The government lacks the capacity to successfully manage large-scale public-sector transactions on its own. The Government of Kosovo contracts international firms as transaction advisors, which has resulted in cases of conflict of interest, delay, and issues with technical specifications in tender documentation. Local and regional distributors often complain about irregularities in the conduct of public tenders at the national and municipal levels. Most large contracts incorporate an alternative dispute resolution clause to mitigate these risks. Due to significant contracting delays, the public procurement grievance process is often seen as an impediment to business rather than as a problem-solving mechanism.
Weak IPR enforcement: Despite having EU-compliant legislation on IPR protection, there is a general lack of awareness and capacity to investigate and enforce provisions. Most local legal professionals lack the necessary expertise to effectively pursue IPR cases. Kosovo’s understaffed Patent and Trademark Office faces a hefty backlog of IPR disputes and therefore recommends alternative dispute resolution methods instead of legal proceedings if possible. This situation is a particular impediment to franchise growth in the Kosovo market.
Workforce: Kosovo’s young, educated, and multi-lingual workforce is eager for opportunities and looking for chances to grow and become like their peers in Western Europe. In general youth are capable and willing to invest in training and capacity building opportunities for the chance of getting a job, but employers will almost certainly be required to provide more training than might be necessary in a more developed country. Large remittance flows from its diaspora create a high reservation wage. Brain drain is a problem and given the opportunity most professionals would likely go abroad for higher-paying opportunities. However, if there were a chance to stay in country and earn a decent living, most people would rather stay near their families. Unrecognized by Five EU Countries: Kosovo is not recognized as an independent state by Serbia and e and five EU member states, which has resulted certain limitations including fewer flight options, longer transport routes and some software not listing the country in standard drop down lists for applications, lack of a national top-level domain, travel restrictions due to stringent visa requirements, and challenges with international bank transfers.