Promoting the competitiveness of the private sector in rural areas

Project description

Title: Competitiveness of the private sector in rural areas (COSiRA)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ) 
Country: Kosovo
Lead executing agency: Ministry of Economic Development (MED); Ministry of Agriculture, Forestry and Rural Development (MAFRD)
Overall term: 2014 to 2017

© GIZ
© GIZ

Context

Kosovo’s economy has made significant progress in recent years. Nevertheless, unemployment remains high and the level of skills is for the most part low. Many people continue to live at subsistence level. Poverty and migration are particularly prevalent in rural areas and among disadvantaged population groups. Business start-ups are primarily in the service sector, creating little added value. Many workers find employment with state institutions such as ministries, agencies and local authorities, which are characterised by poor administrative and institutional efficiency. Laws and regulations as well as the capacity to implement them are still lacking. Corruption and activities in the shadow economy are widespread.

Farms are small and operated using outdated methods. Progress with the implementation of land reforms and clarification of land ownership issues is sluggish. As a result, agriculture makes only a minor contribution to economic growth. The insufficient competitiveness of enterprises in rural areas means they have only limited capacity to generate profits and create income and jobs.
Kosovo’s medium to long-term political goal is to firmly establish itself economically in the region through accession to the European Union. If the country is to fulfil the convergence criteria, it will have to launch major economic and restructuring measures over the next few years.

Objective

Private and public institutions that promote economic development are in a position to implement measures to boost the competitiveness of the private sector in rural areas.

Approach

The project focuses on sectors with development potential in rural areas. By promoting wine production and non-wood forest products, it helps to boost rural income and employment opportunities. It also improves competitiveness in project regions through capacity-building activities for local economic development institutions and the provision of advisory services to the relevant ministries.

The project supports the restructuring and modernisation of Kosovo’s economic set-up in the IT and metal processing sectors. The trade associations and the Chamber of Commerce are being strengthened to enable them to provide services and assume their roles as competent negotiating partners at the political table. The Dortmund Chamber of Crafts has been commissioned to support Kosovo’s Chamber of Commerce in establishing and managing an academy for entrepreneurs and with providing training. In the metal processing sector, enterprises receive assistance with pursuing new business opportunities in the fields of renewable energy and energy efficiency. In so doing they develop new value chains which are able to compete at the regional level. The IT sector is increasingly developing exportable services and offering the needs-based IT solutions necessary for modernising other sectors, such as agriculture.

The project advises the partner ministries, thereby helping to improve the political framework for EU convergence with regard to economic development and access to EU markets for Kosovar products. The project also specifically promotes the dialogue and cooperation on strategy development and implementation between public institutions, the private sector and the academic and research community.

Results

The needs of the private sector and development potential determined on the basis of reliable data are taken into account in policy development. International quality standards have been introduced. The Ministry of Agriculture, Forestry and Rural Development is using national funding for the LEADER programme, an initiative of the European Union for the development of rural areas, in compliance with EU regulations and is also making more resources available.

In 2016 private entrepreneurs in Kosovo stepped up exports of non-wood forest products, increasing sales revenue to over 10 million euros, and invested more than 5 million euros in production and quality infrastructure. The wine sector recorded an increase in exports of quality wines of more than 50 per cent. The Metal Industry and Renewable Energy Cluster of Kosovo (MIRECK) is being set up to serve as a sector network. The IT sector is supported by an IT strategy devised jointly by all key stakeholder groups. Better results are now achieved in the export of IT services.

The Kosovo Investment and Enterprise Support Agency (KIESA) and Kosovo’s Chamber of Commerce have introduced demand-driven services for their members. The Chamber of Commerce is networked better at regional and international level. KIESA has sufficient experience and know-how to support organisational and economic development, particularly in the private sector.

November