Construction, textile and wood processing industry in the recent years have been successfully merging into the Kosovo's economy, while thorough studies indicate of their potential to expand,grow and compete in the Europe, bringing qualitative and demanding pruducts to the EU market. 

 

During past years the construction industry became one of the most important sectors contributing to Kosovo’s economic growth. Financed mainly through foreign aid, the construction sector in Kosovo has so far utilised several hundred million Euro that were primarily used for the construction of new homes, or for the rehabilitation and development of the road infrastructure respectively.

The construction industry remains a sector with highly promising economic potential for Kosovo. Roughly estimated, in order to meet the existing market demand, in the next few years Kosovo will need some 60,000 new apartments, including the associated infrastructure, such as roads, kindergartens, schools, leisure facilities, restaurants etc.

A further factor which is helping to boost the development of this sector is the demand for road and highway construction. The Government of Kosovo has set itself a goal to connect the country in three main directions with the most important international road corridors in Macedonia, Albania and Serbia.

The construction of a highway, which will connect the northern and central parts of Kosovo with Skopje (FYROM), is a mid-term goal of the Government. A much more important project represents the building of a highway between Merdare-Kukës-Durrës, which will connect Kosovowith the sea port of Durrës, Albania.

This highway will become a part of the Trans European Corridor X that will connect the Adriatic Sea with the Western Europe.

Improvements of the road infrastructure and the construction of the highway to Albania will be financed through foreign investments. In order to legally enable the Private-Public-Partnerships, the Government in Kosovo has drafted the law on concessions which should be adopted during 2008. Additionally, the law on expropriation is expected to
get the green light from parliament in the near future.

With over 200 years of tradition, textiles were the second largest industrial sector in Kosovo, after mining. In the past, products from Kosovar manufacturers targeted the local market, as well as other markets throughout the former Yugoslavia, Western and EasternEurope and the United States.

At its peak around 1990, each of the 15 SOEs engaged in textile production employed more than 1,000 people and sales totalled some 35 million Euro.

Recent developments in the region have frozen the primary trading links of the textile industry, causing lower production rates and resulting in a lack of competitiveness with foreign products. As a result, a major share of former SOE workers has become redundant.
 
A minor part has, however, established private textile companies. Currently there are some 451 private companies engaged in textile production, out of which 90 percent are final product manufacturers. Although the textile industry has experienced a significant recovery during the past years, the majority of businesses are still small and take the form of micro enterprises.

Consequently, they cater solely for the Kosovo market and are primarily geared towards a niche market. Analysis indicates that some 55 to 65 million Euro in exports could be reached, assuming that trading links with former partners can be re-established.

There is considerable scope in this sector for investors to recreate a vertically integrated manufacturing cluster so that Kosovo would once again produce finished clothing from thread and cloth made in the region.

In particular, Kosovo offers three major benefits for investors wishing to revamp one of the existing SOEs or found a new textile manufacturing company. These are:

• A cheap, well skilled and experienced work force
• A solid base of technology that can be acquired through the ongoing privatization process
• Numerous subcontracting and  outsourcing possibilities

With the existing know-how, cheap labour force and other comparative advantages that the country offers, including the friendly business and investment environment, the textile industry in Kosovo has therefore the potential to become highly competitive internationally.


Forests and related surfaces make up around one third of the total territory of Kosovo and represent a resource of special importance for Kosovo’s economy.

With the annual value of wooden products and other benefits arising from forests reaching EUR 50 – 75 million Euro, this sector even assures a livelihood for 10 percent of the Kosovar population.

Due to the sufficient availability of inputs, Kosovo offers great investment possibilities in every single wood processing cycle. The annual allowable amount of felling is currently slightly below 1 million m³ with Beech and Oak being the main species. Potentials for foreign investors range from door and  window to different furniture production. There is currently a large pool of companies in Kosovo that could be your cooperation or outsourcing partners.

A large amount of traditionally gained experience, great knowledge in wood processing, and a cost effective labour force make the Kosovar wood industry particularly well suited for the manufacturing of hand made luxury products. In addition, most sawmills in Kosovo only saw logs into rough, mixed grade lumber, and do not appear to recognize, or have not yet explored, the potential value of waste products from lumber production, i.e. sawdust and wood chips.

Taking into consideration all these benefits, Kosovo’s wood processing industry has experienced significant developments during the past eight years.

Due to better organisation and sufficient service-providing clusters, Kosovar producers have been able to increase the quality and product range, thereby allowing expansion into foreign markets.

Currently, Kosovar wood processors supply furniture both for the domestic and trade markets (for example hotels) to companies in Germany, the Netherlands, Switzerland and other
neighbouring countries.

Through the efforts and engagement of the members of the rich institutional environment of the wood industry, Kosovo is offering various incentives that aim to further promote and facilitate primary and secondary wood production.

The Kosovar Government has recently approved a zero tariff rate for the imports of machinery and capital goods related to this sector, while further negotiations for the exceptionof wood raw material from VAT and Customs policy are currently taking place.

 

This report is part of a series prepared by the Economic Initiative for Kosovo (ECIKS), an organization supporting teconomic development and foreign investments in Kosovo.

    

• Principal industrial and business sectors
• Tourism
• Food farming and vine
• Automotive and high technology