2023 Investment Climate Statements: Kosovo

Policies Towards Foreign Direct Investment

Kosovo welcomes FDI. Kosovo’s laws do not discriminate against foreign investors. The current and prior governments, including the Prime Minister’s Office, the Ministry of Economy, the Ministry of Industry, Entrepreneurship, and Trade, and the Ministry of Finance, Labor, and Transfers, have recognized the importance of FDI to the expansion of the private sector.

The mission of the Kosovo Investment Enterprise and Support Agency (KIESA) is to promote and support foreign investments. The agency is tasked with offering a menu of services, including assistance and advice on starting a business in Kosovo, assistance with applying for a site in a special economic zone or as a business incubator, facilitation of meetings with different state institutions, and participation in business-to-business meetings and conferences. In practice, however, many foreign and local companies have complained that KIESA has limited capacity to provide the services under its mandate and needs to be strengthened. The Kosovan government approved a draft Law on Sustainable Investments in January 2022 which includes the establishment of a new agency that will supplant KIESA in functions related to foreign investment facilitation and assistance. The new agency is envisioned to fall under the Prime Minister’s office rather than Ministry of Industry, Entrepreneurship, and Trade.

Foreign chambers of commerce – including the American, German, and European – participate in dialogue platforms with the government, although the private sector has described their overall communication with the government as insufficient.

Limits on Foreign Control and Right to Private Ownership and Establishment

The laws and regulations on establishing and owning business enterprises and engaging in all forms of remunerative activity apply equally to foreign and domestic private entities. Kosovo legislation does not interfere with the establishment, acquisition, expansion, or sale of interests in enterprises by private entities. Under Kosovan law, foreign firms and local businesses operating in Kosovo are treated equally. There have been no reports from U.S. investors of restrictions on foreign ownership and control. There are no licensing restrictions particular to foreign investors and no requirement for domestic partners for joint ventures. There have not been significant changes since the last ICS.

The U.S. government is actively working with Kosovo on best practices for developing and implementing an investment screening mechanism, envisioned in the draft Law on Sustainable Investments

Other Investment Policy Reviews

Kosovo is not a member of the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD), so there are no Kosovo-specific investment policy reviews from these organizations. However, as part of the OECD’s report on “Competitiveness in Southeast Europe 2021: A Policy Outlook,” Kosovo received an overall score of 2.0 (on a scale of 0-5 with 5 being the highest rating) in the area of investment policy and promotion versus an average score of 3.0 across the six countries in the Western Balkans.

Business Facilitation

The government has taken steps to remove barriers to facilitate business operations and improve related government services. Per the amended Law on Support to Small and Medium Enterprises, KIESA supports both domestic and foreign-owned micro, small, and medium enterprises (MSMEs), without any specific eligibility criteria. Such services include voucher programs for training and advisory services, investment facilitation, assistance to women and young business owners, and the provision of business space with complete infrastructure at industrial parks, at minimal cost.

The Kosovo Business Registration Agency (KBRA), part of the Ministry of Industry, Entrepreneurship, and Trade, registers all new businesses, business closures, and business modifications. The KBRA website is available in English and can be accessed at arbk.rks-gov.net . As of March 2023, some steps in the registration process can be completed online. Successful registrants will receive a business-registration certificate and a VAT number. New businesses must register employees for tax and pension programs with the Tax Administration under the Ministry of Finance, Labor, and Transfers. Business registration generally takes one day for an individual business and up to three days for a limited liability company or a joint stock company. A notary is not required when opening a new business unless the business registration also involves a transfer of real property.

Outward Investment

Kosovo does not promote, incentivize, or restrict outward investment. There are no restrictions on investments abroad.

Transparency of the Regulatory System

The Law on Public Procurement delegates procurement authority to budgetary units (i.e., ministries, municipalities, and independent agencies) except when the government specifically authorizes Central Procurement Agency of the Ministry of Finance, Labor, and Transfers to procure goods and/or services on its behalf. All tenders are advertised in Albanian and Serbian, and for most important projects, also in English.

The Public Procurement Regulatory Commission (PPRC) oversees and supervises all public procurement and ensures that the Law on Public Procurement is fully implemented. An e-procurement platform supported by USAID handles all procurements, which has greatly enhanced transparency. The PPRC publishes contract award information on its website ( https://e-prokurimi.rks-gov.net/Home/ClanakItemNew.aspx?id=327 ). The National Audit Office conducts annual procurement audits of all Kosovo ministries, municipal authorities, and agencies that receive funds from the Kosovo consolidated budget. The Procurement Review Body (PRB), an independent administrative body, is responsible for handling appeals related to government procurement.

The Kosovo Assembly is responsible for rule-making and regulatory actions, while government ministries and agencies draft and authorize secondary legislation (i.e., implementing regulations). Municipal assemblies and mayors have regulatory authority at the local level, which rarely extends to the broader issues of investment climate. The Kosovan government is working to align all legal, regulatory, and accounting systems in Kosovo with EU standards and international best practices. Publicly listed companies are required to comply with international accounting standards. The government requires Environmental and Social Impact Assessment studies for many projects, especially those with a large environmental or social footprint, such as in the energy and mining sectors.

The Assembly publishes draft laws on its website ( http://www.kuvendikosoves.org/shq/projektligjet-dhe-ligjet/ ). The relevant committees also hold public hearings on proposed laws, including investment laws. The 2016 regulation on the Minimum Standards for Public Consultation Process clarifies the standards, principles, and procedures for consultations during the drafting of legislation. Kosovo has developed an online platform for public comments ( http://konsultimet.rks-gov.net/ ) and publishes all laws and most rules and regulations in the Official Kosovo Gazette ( https://gzk.rks-gov.net/ ) and on the Kosovo Assembly’s website. The government is currently working to annul, amend, and update all secondary legislation that is outdated or that might otherwise contradict primary legislation. The Kosovan government is also working on publishing all secondary legislation in the Official Gazette and relevant ministerial websites. The Law on Public Financial Management and Accountability requires a detailed impact assessment of any budgetary implications before new regulations can be implemented. The Ministry of Finance, Labor, and Transfers regularly publishes detailed reports on Kosovo’s public finances and debt obligations. Despite the regulatory requirements, some businesses and business associations complain that regulations are still passed with little substantive discussion or stakeholder input.

The Kosovo Assembly approved the Law on Inspections which aims to reform and modernize inspections based on internationally accepted principles. Inspections conducted under this law aim to protect the public interest, including public health, public safety, and the environment.

International Regulatory Considerations

Kosovo is represented in CEFTA by the United Nations Mission in Kosovo (UNMIK) and is pursuing EU integration. Through its Stabilization and Association Agreement (SAA) with the EU, Kosovo is working to harmonize its laws and regulations with EU standards. Kosovo is not a member of the WTO.

Kosovo is a signatory to the July 2017 Multi-Annual Action Plan for a Regional Economic Area in the Western Balkans Six  and its subsequent Common Regional Market Action Plan . This action plan aims to increase regional integration in the fields of trade, investment policy, labor force mobility, and digitalization.

Legal System and Judicial Independence

In 2016, the Kosovo Assembly amended the constitution to enhance the independence of the judiciary in line with EU requirements. Despite significant reforms, the judiciary lacks sufficient subject-matter expertise to effectively handle complex economic issues and issues remain in court efficiency, backlog, and sentencing procedures. While complainants have the right to challenge court decisions, regulations, and enforcement actions in the regular court system, as well as the Constitutional Court, many analysts view Kosovo’s courts as politically influenced by the executive branch, with special treatment or “selective justice” for high-profile, well-connected individuals. Kosovo court conviction rates generally match regional averages, but the rate falls considerably when filtered for high-profile corruption cases.

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. USAID supported the Kosovo Ministry of Justice in developing the law through an inclusive and participatory process with the judiciary, commercial law experts, practitioners, academics, businesses, and civil society representatives. After a period of internal organization, case transfer, recruitment of key personnel and other logistical and operative procedures, the Commercial Court is now functional, although fully staffing the court remains a challenge.

Significant amendments to the Criminal Code and the Criminal Procedure Code, aligned Kosovo’s criminal justice legislation with EU standards. The Criminal Code contains penalties for tax evasion, bankruptcy, fraud, intellectual property rights offenses, antitrust, pyramid schemes, securities fraud, money laundering, and corruption. The Special Prosecution of the Republic of Kosovo (SPRK) handles high-level cases of corruption, organized crime, terrorism, money laundering, etc. The Pristina Basic Court Special Department adjudicates the cases brought forward by the SPRK, and the Appellate Court Special Department handles the appeals against the decisions of the Pristina Basic Court Special Department.

Kosovo’s civil legal system provides for property and contract enforcement. The Commercial Court has jurisdiction over economic disputes between both legal and natural persons, including reorganization, bankruptcy, and liquidation of economic persons; disputes regarding impingement of competition; and protection of property rights and intellectual property rights across the entire territory of Kosovo. Even with the establishment of a Commercial Court, commercial cases can still take anywhere from six months to several years to resolve.

The Law on Enforcement Procedures permits claimants to use bailiffs licensed by the Ministry of Justice to execute court-ordered judgments. In addition, the Laws on Arbitration and Mediation have helped to address impediments to alternative dispute resolution and to enforcing arbitral awards.

Laws and Regulations on Foreign Direct Investment

Foreign firms operating in Kosovo are entitled to the same privileges and treatment as local businesses. Kosovo’s laws are available to the public in English, as well as Kosovo’s official languages (Albanian and Serbian) on the Kosovo Assembly’s website ( http://www.kuvendikosoves.org/shq/projektligjet-dhe-ligjet/ ) and on the Official Gazette website ( http://gzk.rks-gov.net/default.aspx ).

Laws of particular relevance to foreign investment include:

• The Law on Foreign Investment: provides a set of fundamental rights and guarantees to ensure protection and fair treatment in strict accordance with accepted international standards and practices. Please note that as of March 2023, the Kosovo Assembly is working on a draft Law on Sustainable Investments, which, if approved, will supplant the Law on Foreign Investment.
• The Law on Business Organizations: regulates the registration and closure of a company and the rights and obligations of shareholders, authorized representatives, and others included in the business management structure.
• The Law on Late Payments in Commercial Transactions: discourages late payments and regulates the calculation of interest on late payments.
• The Law on Bankruptcy: regulates all matters related to the insolvency of business organizations; the provisions for the protection, liquidation, and distribution of the assets of a bankrupt debtor to its creditors; and the reorganization and discharge of debt for qualified business organizations.
• The Law on Prevention of Money Laundering and Combating Terrorist Financing: enabled Kosovo to join Egmont Group, an inter-governmental network of 152 Financial Intelligence Units whose members exchange expertise and financial intelligence to combat money laundering and terrorist financing.
• The Credit Guarantee Fund Law: increases access to finance for all MSMEs in Kosovo to grow employment, boost local production, and improve the trade balance.
• The Law on Foreign Trade, and the Law on Anti-Dumping and Countervailing Measures: provides a set of principles and rules on trade, as well as provisions for government interventions in cases of dumping and countervailing measures.

Competition and Antitrust Laws

There are two main laws that regulate transactions for competition-related concerns: The Law on Protection of Competition and the Law on Antidumping and Countervailing Measures. The Competition Authority is responsible for implementing the Law on Protection of Competition, but generally lacks the human resources to conduct thorough investigations. The Trade Department of the Ministry of Industry, Entrepreneurship, and Trade is responsible for the implementation of the Law on Antidumping and Countervailing Measures. In September 2018, Kosovo’s Assembly approved the Law on Safeguard Measures on Imports, which allows the trade minister to impose a provisional safeguard measure for up to 200 days.

Expropriation and Compensation

Articles seven and eight of the Foreign Investment Law limit expropriation to cases with a clear public interest and protect foreign investments from unreasonable expropriation, guaranteeing due process and timely compensation payment based on fair-market prices. The Law on Expropriation of Immovable Property permits government or municipal expropriation of private property when such action is in the public interest; articles five through thirteen of the Law define expropriation procedures. An eminent domain clause limits legal recourse in cases arising from the expropriation and sale of property through the privatization of state-owned enterprises. Expropriations, in part due to competing claims arising from the history of conflict with Serbia, can be highly politicized and controversial.

Dispute Settlement

ICSID Convention and New York Convention

In 2009, Kosovo became a party to the International Centre for Settlement of Investment Disputes (ICSID) Convention and has incorporated the Convention into national law. There is no specific legislation providing for the enforcement of the ICSID Convention, but in accordance with the Law on Foreign Investments, investors may contractually agree to arbitration or other alternative dispute resolution mechanisms. Based on amendments to the Law on Contested Procedure, Kosovo adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which makes the New York Convention applicable in Kosovo

Please note that as of March 2023, the Kosovo Assembly is working on a draft-law on sustainable investments, which, if approved, will supplant the Law on Foreign Investment, and could change provisions related to international arbitration.

Investor-State Dispute Settlement

Kosovo’s courts recognize international arbitration awards. As of March 2022, Kosovo, through the Law on Foreign Investments, grants foreign investors the right to settle investment dispute either in domestic courts or international arbitration. U.S. Embassy Pristina is not aware of any extrajudicial action against foreign investors.

The Commercial Court has jurisdiction over investment disputes involving state-owned enterprises (SOEs). Post is not aware of any records detailing the frequency with which domestic courts have ruled in favor of SOEs.

Over the past 10 years, at least three foreign investors have brought publicly known claims against Kosovo. In 2013, the London Court of International Arbitration (LCIA) determined Post & Telecom Kosovo owed an Israeli company $9.8 million for breach of contract. In July 2016, the International Court of Arbitration in Paris awarded an Austrian printing company $5.6 million for Kosovo’s illegal termination of a contract to manufacture passports. In June 2015, a German company brought a case before ICSID related to the failed privatization of Kosovo’s telecom company; the arbitral tribunal ruled that it had no jurisdiction over the dispute. As of March 2023, foreign investors have sued Kosovo in several new cases, including in the fields of energy, telecommunications, and the financial sector.

International Commercial Arbitration and Foreign Courts

The Foreign Investment Law stipulates that investors may utilize the following alternative dispute resolution mechanisms:

a) The ICSID Convention if both the foreign investor’s country of citizenship and Kosovo are parties to said convention at the time of the request for arbitration;
b) The ICSID Additional Facility Rules if the jurisdictional requirements for personal immunities per Article 25 of the ICSID Convention are not fulfilled at the time of the request for arbitration;
c) The United Nations Commission on International Trade Law (UNCITRAL) Rules. In this case, the appointing authority would be the Secretary General of ICSID; or
d) The International Chamber of Commerce Rules.

Please note that as of March 2023, the Kosovo Assembly is working on a draft Law on Sustainable Investments, which, if approved, will supplant the Law on Foreign Investment and could change provisions related to international arbitration.

Arbitration services are available at arbitral tribunals within the Kosovo Chamber of Commerce and American Chamber of Commerce in Kosovo. Kosovo’s Arbitration Rules are based on model rules derived from the 2010 United Nations Commission on International Trade Law (UNCITRAL) Model Rules for Commercial Arbitration and are consistent with international best practices. The Law on Foreign Investment favors the use of arbitration. To utilize this option, the law requires that the disputed agreement/contract include an arbitration clause.

Foreign arbitral awards and judgments are enforceable in Kosovo. There has been no instance of voluntary compliance by the government of Kosovo or other public entities with arbitral awards; all known cases have involved some form of judicial process.

Additionally, in accordance with the Law on Mediation, Kosovo courts recognize mediation centers, and one is operated by the American Chamber of Commerce in Kosovo. The Ministry of Justice has adopted the rules leading to the creation of mediation services and has trained and certified several mediators.

Bankruptcy Regulations

The Law on Bankruptcy regulates bankruptcy and insolvency procedures and specifies provisions for the protection, liquidation, and distribution of the assets of a bankrupt debtor to its creditors and the reorganization and discharge of debt for qualified business organizations. Under the law, foreign creditors have the same rights as domestic investors and creditors when launching and participating in bankruptcy proceedings.

Investment Incentives

Kosovo has established a flat corporate income tax of 10 percent. To encourage investment, the government can grant certain VAT-related privileges, such as a six-month VAT deferment upon presentation of a bank guarantee for companies importing capital goods. Suppliers may export goods and services without being required to collect VAT from foreign buyers. Suppliers may claim credit for taxes on inputs by offsetting those taxes against gross VAT liabilities or claiming a refund. The government can issue guarantees or jointly finance foreign direct investment projects but has not yet done so. Kosovo does not have legislation that incentivizes businesses owned by underrepresented investors.

Kosovo Customs has enacted an administrative instruction that reduces the number of documents required to export and import. Only two documents are needed to export (a commercial invoice and customs export declaration) and only three are now required to import (a commercial invoice, customs import declaration, and certificate of origin).

Kosovo has previously offered feed-in tariffs for a quota of renewable energy projects, which has been fulfilled. Kosovo has announced the launch of its first solar auction for May12, which will provide prospective bidders a guaranteed purchase price for 100 MW of solar energy. Through its National Energy Strategy, Kosovo has set an ambitious target of increasing energy generation from renewable energy sources to at least 35 percent from current roughly 5 percent; to reach that target, Kosovo is likely to use incentives such as auctions.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Kosovo Customs and Excise Code is compliant with EU and World Customs Organization standards, and addresses topics such as bonded warehouses, inward and outward processing, transit of goods, and free-trade zones. In addition to imported goods, some domestically produced goods from designated industries can be stored in bonded warehouses when these goods meet export criteria. Foreign firms are permitted to import production inputs for the manufacture of export goods without paying taxes or customs duties.

The Customs Code permits the establishment of zones for manufacturing and export purposes, and the Law on Economic Zones regulates their establishment. In 2014, Kosovo established three economic zones in the municipalities of Mitrovica/e, Gjakovë/Djakovica, and Prizren. Currently only the economic zone of Mitrovica/e has completed the legal and administrative procedures for building infrastructure, but the zone remains to be established and operationalized. Three business parks and one business incubator are operational.

Kosovo Assembly is currently working on a new law that will supplant the Law on Economic Zones.

Performance and Data Localization Requirements

Kosovo does not specify performance requirements as a condition for establishing, maintaining, or expanding investments in Kosovo. There are no onerous requirements that would inhibit the mobility of foreign investors or their staff. There are no conditions on permissions to invest, and the government does not mandate local employment. Investment incentives apply uniformly to both domestic and foreign investors, on a case-by-case basis.

Depending on the tender, Kosovo may require foreign IT providers to turn over source code and/or provide access to surveillance. Kosovo does not yet have standard rules on data transmission or storage. The Agency for Information Society is responsible for the storage of data for the central government, and other institutions store their respective data as well.

Real Property

The legal system’s shortcomings and difficulties related to establishing title to real estate, in part due to competing claims arising from the history of conflict with Serbia, can make property right enforcement difficult. Kosovo’s de jure property-related laws are well structured and provide for security and transferability of rights despite a complex legal and regulatory framework. In 2018, Kosovo adopted a new Law on the Treatment of Constructions without Permit under which all buildings constructed without a permit prior to 2018 are subject to legalization and formalization through registration in the Cadaster and Immovable Property Rights Registry, thereby protecting individual property rights, unlocking this capital for circulation in the formal economy and bringing all real property into the property tax system.

The jurisdictions of government ministries, municipal authorities, and independent agencies often overlap, and the court system is backlogged with property-related cases. Mortgages and liens are available, but the range of financial products is limited. Mortgage agreements must be registered in cadastral records by the Kosovo Cadastral Agency, while pledge agreements must be registered with the pledge registry, which is a centralized registry office in the Business Registration Agency.

The Kosovo Property Comparison and Verification Agency (KPCVA) is responsible for receiving, registering, and resolving property claims on private immovable property, including agricultural and commercial property related to the 1998-1999 conflict with Serbia and post-conflict period. Decisions of the Kosovo Property Claims Commission within the KPCVA are subject to a right of appeal to the Supreme Court.

Resolution of residential, agricultural, and commercial property claims remains a serious and contentious issue in Kosovo and limits the development of the formal property market needed for more stable economic growth. Many property records were destroyed or moved to Serbia by the Serbian government during the 1998-1999 conflict, which can make determining rightful ownership difficult. The country is in the process of rebuilding the property registry and an EU-facilitated Kosovo-Serbia dialogue includes a component focused on comparing the cadastral records with the records taken by Serbia and resolving any gaps, predicated on Serbia returning the cadastral records to Kosovo. The KPCVA is charged with carrying out the task of property comparison and verification.

In February 2022, the Kosovo Assembly approved the Law on Property Rights of Foreign Citizens in the Republic of Kosovo, which establishes the principle of reciprocity and restricts ownership rights of a foreign national only in cases where the origin country of those foreign nationals restricts ownership rights to Kosovo nationals. In early 2017, Kosovo began the national strategy on land and property rights reform, which includes a provision to clarify and codify regulations regarding property ownership by foreign and/or non-resident investors. Per Article 40 in the Law on Property and Other Real Rights, a proprietary possessor acquires ownership of immovable property after ten years of uninterrupted and uncontested possession.

Intellectual Property Rights

Kosovo is not included in the U.S. Trade Representative’s (USTR’s) Special 301 Report or Notorious Markets List.
Registration of intellectual property rights (IPR) in Kosovo conforms with regional and international practices. The trademark registration process takes approximately nine months, while patent approval takes about 18 months.

Public awareness of the importance of IPR is low. There is no evidence to suggest significant domestic production of counterfeit goods in Kosovo, but the importation of counterfeit goods, especially apparel, is a concern. The government tracks and reports on seizures of counterfeit goods.

The Ministry of Industry, Entrepreneurship, and Trade established the Industrial Property Rights Office (IPO) in 2007, which is tasked with IPR protection. Kosovo’s IPR laws were amended in 2015 to align with EU standards and strengthen legal remedies for right holders. Kosovo’s Law on Patents, Law on Trademarks, Law on Industrial Design, and Law on Geographical Indices, together with the relevant Criminal Code and Customs provisions, provide for strong protection of IPR and comply with related international conventions, even though Kosovo is not party to the associated international organizations. Examples of these conventions include the Paris Convention, the Budapest Treaty, the Madrid Protocol, and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In 2018, the Assembly approved the Law on Customs Measures for Protection of Intellectual Property Rights to harmonize Kosovo law with EU regulations.

To enhance IPR enforcement and increase interagency coordination, the government has adopted an IPR strategy and established the National Intellectual Property Council and a Task Force Against Piracy. The Council and the Task Force have similar structures and are comprised of the IPO, the Copyright Office, Customs, Kosovo Police Departments for Economic Crime and Corruption and Cyber Crimes, the Market Inspectorate, and the Ministry of Justice. The Council also includes the Kosovo Prosecutorial Council, judicial courts, and other government and non-governmental institutions.

Kosovo is not a member of the World Intellectual Property Organization (WIPO), and there is no WIPO country profile for Kosovo.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

Capital Markets and Portfolio Investment

Kosovo has an open-market economy, and the market determines interest rates. Individual banks conduct risk analysis and determine credit allocation. Foreign and domestic investors can get credit on the local market. Access to credit for the private sector and financial products are limited but improving.

The country generally has a positive attitude towards foreign portfolio investment. Kosovo does not have a stock exchange. The regulatory system conforms with EU directives and international standards. There are no restrictions beyond normal regulatory requirements related to capital sourcing, fit, and suitability of the investors. The Central Bank of Kosovo (CBK) has taken all required measures to improve policies for the free flow of financial resources. Requirements under the SAA with the EU oblige the free flow of capital. The government respects the IMF’s Article VIII conditions on the flow of capital.

In early 2006, Kosovo created a credit registry managed by the Central Bank of Kosovo. It serves as a database for customers’ credit history and aims to help commercial banks and non-banking institutions assess customers’ credit worthiness. Banks and non-banking institutions are required to report to the Credit Registry of Kosovo, but only authorized banking and non-banking institution personnel can access it. In addition to the Credit Registry of Kosovo, the Ministry of Industry, Entrepreneurship, and Trade offers a Pledge Registry Sector, a mechanism that records data for collateral pledges.

Money and Banking System

Kosovo has 12 commercial banks (of which nine are foreign) and 30 micro-finance institutions (of which 13 are foreign). The official currency of Kosovo is the Euro, although the country is not a member of the Eurozone. In the absence of an independent monetary policy, prices are highly responsive to market trends in the larger Eurozone.

Kosovo’s private banking sector remains stable, well capitalized, and profitable despite the COVID-19 pandemic and negative economic shocks to the economy of high inflation. Difficult economic conditions, weak contract enforcement, and a risk-averse posture have traditionally limited banks’ lending activities. However, financial services and bank lending have steadily improved over the years, albeit from a low baseline. In January 2023, the rate of non-performing loans was 2.0 percent, which is lower than the January 2022 rate of 2.3 percent. The concentration of the three largest banks’ assets have decreased slightly to 52.3 percent in January 2023 compared to 53.0 percent in January 2022. The assets of the entire banking sector total 6.7 billion euros – an increase of 14 percent from the same period in 2021; foreign-owned banks hold 85.6 percent of the total market share. Relatively little lending is directed toward long-term investment activities, although this trend has been changing slowly. Interest rates have dropped significantly in the past decade, from an average of about 12.7 percent in 2012 to an average of 6.6 percent in January 2023. Interest rates have increased by an almost full percentage point in 2021.

The Central Bank of Kosovo (CBK) is an independent government body responsible for fostering the development of competitive, sound, and transparent practices in the banking and financial sectors. It supervises and regulates Kosovo’s banking sector, insurance industry, pension funds, and micro-finance institutions. The CBK also performs other standard central bank tasks, including cash management, transfers, clearing, management of funds deposited by the Ministry of Finance, Labor, and Transfers and other public institutions, collection of financial data, and management of a credit register. Although the financial sector remains stable, a prolonged period without leadership and allegations of mismanagement have caused concern over CBK’s institutional development. Since March 30, the position of CBK governor is vacant with the duties assumed by a member of the governing board.

Foreign banks and branches can establish operations in the country. They are subject to the same licensing requirements and regulations as local banks. The country has not lost any correspondent banking relationships in the past three years and no such relationship is currently in jeopardy. There are no restrictions on foreigners opening bank accounts; they can do so upon submission of valid identification documentation.

Kosovo is a signatory country to the United States Foreign Account Tax Compliance Act (FATCA), aimed at addressing tax evasion by U.S. citizens or permanent residents with foreign bank accounts. For more information, visit the FATCA website: https://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA .

Foreign Exchange and Remittances

Foreign Exchange

The Foreign Investment Law guarantees the unrestricted use of income from foreign investment following payment of taxes and other liabilities. This guarantee includes the right to transfer funds to other foreign markets or foreign-currency conversions, which must be processed in accordance with EU banking procedures. Conversions are made at the market rate of exchange. Foreign investors are permitted to open bank accounts in any currency. Kosovo adopted the euro in 2002 but is not a Eurozone member. The CBK administers euro exchange rates on a daily basis as referenced by the European Central Bank.

Remittance Policies

Remittances are a significant source of income for Kosovo’s population, representing approximately 14 percent of GDP (or over $1.32 billion) in 2022. Remittances to Kosovo have been very resilient and grew by 6 percent in 2022. The majority of remittances come from Kosovo’s European-based diaspora, particularly in Germany, Austria, and Switzerland. The Central Bank reports that remittances are mainly used for personal consumption, not for investment purposes.

Kosovo does not apply any type of capital controls or limitations on international capital flows. As such, access to foreign exchange for investment remittances is fully liberalized.

Sovereign Wealth Funds

Kosovo is in the early stages of creating a sovereign fund but currently does not have one.

Privatization Program

The privatization process has essentially slowed to a halt. Kosovo had been progressively privatizing SOE assets since the early 2000s, but there are few assets left to privatize, and the current governing coalition has traditionally opposed the privatization process. The Privatization Agency of Kosovo (PAK), an independent agency, is still responsible for the disposition of Kosovo’s SOE assets. The Kosovan government is currently working on a concept note for the establishment of a Sovereign Fund. As currently written, the Kosovan government plans to transfer some of the most valuable assets currently under PAK authority to the Sovereign Fund. For those assets put on sale, the privatization process is open to foreign investors. PAK provides a live feed of bidding day procedures on its website ( http://www.pak-ks.org/ ). The website also includes bidding information, the results of sales, and other information.

Additional Resources

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/)
• Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/)
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the Treasury

• OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions )

Department of Labor

• Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  )
• List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
• Comply Chain ( https://www.dol.gov/ilab/complychain/ )

Climate Issues

Kosovo, lacking membership in the UN, is not a signatory to the United Nations Framework Convention on Climate Change (UNFCCC) and is not party to the Paris Agreement. Kosovo’s climate and environmental strategies have traditionally been secondary to the energy strategy. Kosovo depends on coal for 95 percent of its electricity production from two power plants that were built in the 1960s and 1980s. The Kosovo Assembly passed the National Energy Strategy on March 8, 2023. The strategy details the government’s vision for the energy sector in the coming decade and commits to increase generation from renewable energy sources to at least 35 percent of the generation mix, reduce greenhouse gas emissions by 32 percent, and phase out at least one lignite-fired generation unit by 2031. The strategy also foresees Kosovo having completed all preparations for the introduction of a carbon pricing system by 2026.

Kosovo does not have any regulatory incentives to achieve policy outcomes that preserve biodiversity, clean air, or other desirable ecological benefits. Its public procurement policy is centered on price and is neutral on environmental and green growth considerations.

Resources to Report Corruption

Yll Buleshkaj Director, Kosovo Anti-Corruption Agency
Nazim Gafurri Street, No. 31, Pristina, Kosovo
+383 38 518 933
Email: yll.buleshkaj@rks-gov.net 

Naim Qelaj
Ombudsman
Rr. “MIGJENI”, nr. 21, Pristina, Kosovo
+383 38 223 782
Email: info.oik@oik-rks.org 

Ismet Kryeziu
Executive Director, Kosovo Democratic Institute/Transparency International
Bajram Kelmendi Street, n/45, Pristina, Kosovo
+381 38 248 038
Email: info@kdi-kosova.org 

Jeta Xharra
Executive Director Balkan Investigative Reporting Network Kosovo, and Editor of Kallxo.com
Menza e studenteve, kati i pare, 10000 Pristina, Kosovo
+383 38 22 44 98
Email: info@kallxo.com