ECONOMY-YUGOSLAVIA: Troubled Privatisation for Kosovo

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric Zimonjic

BELGRADE, Jul 12 2002 (IPS) - The United Nations Mission in Kosovo is preparing to privatise hundreds of state-owned enterprises in a push towards market economy.

“The privatisation will go step by step, with the proper evaluation of property,” says UN administrator Michael Steiner. “I expect the privatisation to begin in the autumn.”

There are more than 400 state-owned firms in the southern Serbian province of Kosovo, according to United Nations Mission in Kosovo (UNMIK) figures. Privatisation has been entrusted to the Kosovo Trust Agency (KTA).

Few enterprises work well. Unemployment has reached 65 per cent in a population of about 1.5 million. Only 35,000 people hold regular jobs in the province populated almost entirely by ethnic Albanians.

Kosovo was the cradle of the Serbian mediaeval state. But the ethnic composition changed over centuries, with ethnic Albanians becoming the dominant group. Albanians were sacked after former leader Slobodan Milosevic stripped Kosovo of its autonomy in 1989. They were replaced by minority Serbs, who ran the province until 1999.

In June 1999, Serb forces withdrew from Kosovo and at least 200,000 Serb residents fled. The 11 weeks of North Atlantic Treaty Organisation (NATO) airstrikes against Serbia that year damaged many of Kosovo’s larger industrial facilities.

The NATO-led peacekeeping force KFOR occupied many factories, turning them into military bases. UNMIK took charge of local administration under Security Council Resolution 1244. “Most of Kosovo’s state-owned enterprises became dinosaurs,” says Steiner.

Head of the European Union mission in Kosovo Andy Bearpark says factories that employed thousands of people until 1989 are never going to make a profit and will never reopen. “There is no question of turning the clock back, changing the factories from one form of ownership to another,” he says. “It’s a question of moving the economy forward to attract private investors.”

UN authorities expect that new regulation will attract foreign investment. But the task will not be easy given Serbian opposition to the KTA.

Serbia, the big sister of tiny Montenegro in the Federal Republic of Yugoslavia (FRY) still considers Kosovo a part of its territory. Serbia claims ownership of most of the local enterprises and real estate.

“Under UN Resolution 1244, Kosovo remains within the territory of FRY,” says analyst Nebojsa Medojevic. “There’s not a single word on the economy in Resolution 1244, and Serbia has to object.”

Records with the Serbian Chamber of Commerce show that 17 billion dollars were invested in Kosovo from 1955-1985 by republics of the former six-member Yugoslav federation. In all 1.56 per cent of gross national product in that period went to Kosovo, according to these figures.

The records indicate also that of Serbia’s two billion dollars debt to the World Bank, 400 million dollars are owed by Kosovo. “UNMIK will obtain financial means from selling the property to foreign investors, but we’ll be left with Kosovo debts,” says Serbian Finance Minister Bozidar Djelic.

“The idea of privatisation of Kosovo looks like a political rather than an economic decision,” analyst Dragoslav Rancic told IPS. “It looks like a step towards the independence of Kosovo, which is the goal of the ethnic Albanian leadership. Kosovo is slowly departing from Serbia and Yugoslavia under the UN mandate.”

In a further complication, Serbia is due to introduce a law on restoration of private property in October, decades after it was taken away by the communist regime that took over in 1945. The communist regime ended only with the fall of Milosevic in October 2000.

Under the new law enterprises, factories and real estate will be returned to previous owners or their heirs. A part of the property is located in Kosovo.

“It remains to be seen how things will be resolved then,” says Rancic. “For example, the Serbian Orthodox Church owned a third of land in Kosovo befo re the communists took over, and expects the property to be returned. What will the UN do then?”