From steady economic growth to exponential expansion: the rise of opportunities in Kosovo

This article was primely published in AmCham Kosovo’s “Horizon Magazine.”

Before arriving in Kosovo two years ago I read a lot about its steady economic growth in the past years, the youth of its population, its resources, etc. As a foreign corporate lawyer, I was aware of the opportunity that represents a growing economy such as Kosovo’s, in the middle of the Balkans, but I was still to comprehend the extent of possibilities for local and foreign economic actors.

When settling in Kosovo, I was immediately impressed by how fast Kosovo adopted and implemented a comprehensive legal framework, enabling and facilitating the rapid development of economic activities in Kosovo. In less than 25 years and in particular since its independence in 2008, Kosovo has implemented a complete set of laws and regulations allowing the impressive economic development witnessed in the past years. As part of its European integration aspirations, an important part of this development was made by aligning with EU directives, but Kosovo went and is going further, by including and implementing the best international practices to position itself as an attractive destination for investors.

Then I began to realize the full scope of the accessibility of this system for foreigners. As a legal consultant in various countries, especially in Asia, I can attest that Kosovo stands out as the country where access to laws and regulations for foreigners is the most straightforward. Lots of laws and regulations are transcription of EU directives and all are translated into English and readily accessible. Recognizing the common challenges faced by foreign economic actors in navigating local corporate and business regulations along with local practices, it is obvious that such accessibility in a familiar legal environment serves as a compelling factor for foreign investors.

In addition to the adoption of a comprehensive legal framework promoting the economy and investments, the Kosovar authorities have also implemented sector-specific measures ensuring legal security and fostering the development of whole segments of the economy, particularly through investment incentives.

Fostering economic growth through comprehensive and accessible regulations

An overview of Kosovo’s regulations related to economic activities also makes it absolutely clear that all regulations were drafted and adopted with the intention of promoting, to the greatest extent possible, the establishment and operation of businesses in Kosovo.

One of the best examples of this is the simplicity associated with opening a business in Kosovo. The process of registration of the business in the Kosovo Business Registration Agency (KBRA) takes an average of 3 days and can be done online. There is no restriction for foreigners to open a business in Kosovo. Having seen firsthand the restrictions and obstacles that foreigners may face when establishing businesses in other countries, it clearly demonstrates Kosovo’s openness to foreign economic actors and investments.

Many other examples can be found, applicable to local and foreign economic actors: the comprehensive labor law regulations, which notably ensure the right to employ foreigners in Kosovo; the streamlined entry process for foreigners in Kosovo; the guaranty of foreigners’ immovable property rights in Kosovo (provided reciprocity in the foreigner’s country), the protection of intangible property rights; etc.

And let’s not forget Kosovo’s tax landscape, which offers particularly low rates in comparison to many other European nations, with a corporate income tax rate standing at a flat 10%, exemption of dividend income from taxation, a VAT rate at 0% on exported goods and services, etc.

The Law on Foreign Investment also ensures the protection of the fundamental rights of foreign investors and of the principles essential to foster a favorable investment climate, such as the principle of fair and equal treatment of investors, the principle of non-discrimination, the right to employ foreign personnel, the principle of compensation of the investors (e.g. in case of a change of investment laws), etc. Kosovo’s legislative bodies are currently in the final stages of approving the Law on Sustainable Investment, which reinforces even more the protection, promotion, support, and enhancement of both foreign and local investments.

Kosovo also aims to ensure a safe legal environment by implementing the best international practice in terms of dispute resolution and in particular regarding arbitration, notably by referring to international procedural rules and promoting access to international and local arbitration institutions such as the AmCham Arbitration Center.

Sector-specific approaches

In addition to this general approach, Kosovo has developed a sector-specific approach to promote the development of economic activities. Without being exhaustive, some sectors can be highlighted where public authorities have been particularly active in creating the legal framework and necessary incentives to further encourage their development.

Energy: With a considerable geographical potential for the development of renewable energy, particularly solar and wind power, Kosovo has developed a favorable investment climate, regulatory support and government incentives to fulfill its commitment to generating 35% of its energy from renewable energy sources by 2031 and aims for carbon neutrality by 2050. Many global investors already invest in and support renewable energy projects in Kosovo. The Ministry of Economy is currently conducting the first solar auction in Kosovo, which is envisioned to be the first of many. The draft Law on the Promotion of Renewable Energy Sources also includes incentives such as feed-in-premiums, feed-in tariffs, and power purchase agreements lasting 15 years. A number of our international clients, some already involved in the current projects, regularly ask our firm for information and updates on the upcoming energy projects in Kosovo, showing the growing interest of foreign investors in the Kosovar Energy sector.

Real Estate: In recent years, Kosovo has witnessed a rapid and steady expansion of its construction sector, driven by the involvement of numerous construction companies, including a significant number of foreign investors engaged in the execution of large-scale projects. While Kosovo already possesses a comprehensive legal framework in this sector, this influx of foreign investment has played a pivotal role in promoting best practices within the industry. Our role, as counsel of our international clients, is to foster the creativity and the best use of these practices, to support even more local and foreign investment in this sector.

Digital Economy: With the highest internet penetration in the Western Balkans and Turkey, Kosovo has experienced significant growth in its e-commerce sector, particularly since the COVID-19 pandemic. The growth of the digital economy in Kosovo has also led to the development of the Information and Communication Technology (ICT) sector, attracting local and international companies and leading to growth and job creation. Kosovo has developed a particularly comprehensive set of laws and regulations, which are EU compliant and cover all issues related to e-commerce (obligation of information, electronic invoicing and payment, electronic identification, etc.), ICT, and all issues related to the digital economy.

Creative industry: Kosovar singers, filmmakers and fashion designers are well-known in the world, and the creative industry in Kosovo has shown a particular upswing in recent years. To support the development of the creative industry, Kosovo has in particular established a strong legal framework for the protection of intellectual property rights, which has been profoundly reformed and amended in 2022.

In all these sectors and much more the number of international clients already investing and/or seeking counsel about current legislation or investment climate in Kosovo is growing every day, and opportunities arise faster and faster. If I was able to see the interest of international investors in Kosovo when I arrived, I could also witness its exponential growth in the past years. As a foreign lawyer, it is for me a privilege to encourage our local and international clients and in general foreign economic actors to seize opportunities and have success in investing in Kosovo.

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