5 Concluding observations

Davina Jacobs, and Johannes Herderschee
Dimitri Demekas
Published Date:
April 2002
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Kosovo is a successful case study in economic institution building. The province’s economy emerged from a decade of neglect and a short but destructive conflict with its human capital and physical capital severely diminished. Economic institutions were virtually nonexistent, and the vacuum was in some cases filled by parallel structures of dubious legality. The financial system was obliterated, and the economy had reverted to cash-based transactions. Against this background, the work of reconstruction and institution building undertaken by the international community since the end of the conflict is impressive. Today, Kosovo’s economy has a recognizable face: private business is thriving, financial intermediation is restarting in a supervised manner, and there is a government providing public services partly financed through taxation. There are, of course, severe shortcomings and distortions in almost every part of this economy, but the nuts-and-bolts are there.

Nevertheless, the economic challenges ahead remain daunting. The economy needs prodigious amounts of investment in physical capital and human resources. Poverty is widespread. With the possible exception of mining, the natural resources of Kosovo’s small, landlocked territory are relatively limited, and communications with neighboring regions are hampered by geography and inadequate infrastructure. The existing institutions are yet to develop deep roots and, as a result, Kosovo is vulnerable to criminality, both domestic and international. More importantly, ethnic and political tensions still run high, and the risk of a lapse into violence and anarchy, though greatly diminished, has not entirely disappeared.

In this context, the international community continues to have a key responsibility in Kosovo. Continued engagement is necessary at all levels. First and foremost, under the current arrangements the initiative to resolve Kosovo’s constitutional status cannot be taken by anyone but the international community which, through the United Nations, is collectively responsible for the administration of the province. Moreover, regardless of the shape of the final political settlement, Kosovo’s political and economic institutions cannot continue to develop without significant assistance from the rest of the world. Last, but not least, considerable resources and technical expertise are required for the significant capital investment needed to lift Kosovo’s economy from poverty and place it onto a sustainable growth path. These resources cannot materialize without donor support. The international community’s “exit strategy” from Kosovo should be a very gradual process.

However, the presence of the international community in Kosovo, while crucial, will not by itself be enough to achieve any of these goals. The ubiquitous presence of expatriates in Kosovo today, occupying virtually every position of authority, conveys a misleading impression. The fate of Kosovo is ultimately in the hands of the Kosovars themselves. The new democratic institutions of self-government, however provisional, have already given Kosovars considerable influence in shaping events in Kosovo, and this influence is bound to increase with time. They now have to make the choice to build a peaceful, well-governed society and a strong market economy.

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