VZCZCXRO8267
PP RUEHIK
DE RUEHPS #0040/01 0261333
ZNR UUUUU ZZH
P 261333Z JAN 10
FM AMEMBASSY PRISTINA
TO RUEHC/SECSTATE WASHDC PRIORITY 9639
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 09 PRISTINA 000040 
 
SIPDIS 
 
STATE FOR EUR/SCE, EB/IFD/OIA DJAHN 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ELAB ETRD KTDB OPIC USTR KV
 
SUBJECT: KOSOVO: 2010 INVESTMENT CLIMATE STATEMENT 
 
PRISTINA 00000040  001.2 OF 009 
 
 
REFTEL:  09 STATE 124006 
 
 
¶1. KOSOVO: 2010 Investment Climate Statement 
 
¶A. Openness to Foreign Investment 
--------------------------------- 
 
The Government of Kosovo (GOK) and the Ministry of Trade and 
Industry (MTI) actively promote foreign investment in Kosovo.  In 
January 2001, UNMIK adopted Regulation 2001/3 on Foreign Investment 
in Kosovo, and the Kosovo Assembly passed the Foreign Investment Law 
in November 2005, promulgated by UNMIK in April 2006.  Under this 
law, foreign firms operating in Kosovo are granted the same 
privileges as domestic businesses, with the exception that foreign 
investors may not hold more than 49 percent ownership in businesses 
producing or selling military products (Reg. No. 2001/3, Section 
6). 
 
The Law on Weapons passed the Assembly and was promulgated by the 
President in October 2009, allowing local security firms to carry 
weapons in limited circumstances.  These instances are restricted to 
bodyguard services and cash (or equivalent) transporters, but allow 
local security firms to compete with international ones for the 
first time.  New business registration with MTI's official registry 
has steadily increased, indicating some local enterprise 
development. Since 1999, over 95,000 private businesses have been 
registered, although MTI states that over half of these businesses 
are technically inactive.  All business license applications are 
processed by the Agency for Business Registration in Pristina and 
normally issued within three business days, making Kosovo one of the 
easiest places in the region to set-up a business. 
 
While the basic legislation of a market-oriented economy is in 
place, determining property ownership remains a challenge.  These 
legal uncertainties, in addition to weak law implementation and poor 
contract enforcement, continue to hinder economic growth and 
investment.  All commercial laws are available to the public in 
English on the Kosovo Assembly's Website at 
www.assembly-kosova.org/?cid=2,191 and on the UNMIK website at: 
www.unmikonline.org/regulations. 
 
 
¶B. Conversion and Transfer Policies 
----------------------------------- 
 
Section 9 of UNMIK Regulation 1999/24 and Article 9 of the Foreign 
Investment Law guarantees unrestricted use of income from foreign 
investment, after taxes and other liabilities.  This includes 
transfers to other foreign markets or foreign currency conversions. 
All currency conversions and transfers are 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. 
 
 
¶C. Expropriation and Compensation 
--------------------------------- 
 
Section 7 of UNMIK Regulation 1999/24 and Article 8 of the Foreign 
Investment Law protect foreign investments from expropriation, and 
guarantee due process and timely compensation payment for valid 
claims.  In April 2005, UNMIK approved an eminent domain clause in 
order to prevent lawsuits deriving from property expropriations and 
sales occurring as part of the privatization process.  This clause 
only applies to cases of Socially Owned Enterprise (SOE) 
privatization. 
 
 
¶D. Dispute Settlement 
--------------------- 
 
Section 17 of UNMIK Regulation 1999/24 and Chapter 4 of the Foreign 
Investment Law assign jurisdiction for business dispute resolution 
to Kosovo courts.  However, foreign investors are free to agree upon 
arbitration or another, alternative dispute resolution mechanism. 
The results of arbitration are enforceable by local courts.  The 
Foreign Investment Law stipulates investors select from the 
following standards for investment dispute arbitration: 
 
¶1. the International Center for Settlement of Investment Disputes 
(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; 
 
¶2. the ICSID Additional Facility Rules, if the jurisdictional 
 
 
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PRISTINA 00000040  008 OF 009 
 
 
OECD Convention and the FCPA, including translations of the statute 
into several languages, is available at the Department of Commerce 
Office of the Chief Counsel for International Commerce Website: 
www.ogc.doc.gov/trans_anti_bribery.html. 
 
-Transparency International (TI) publishes an annual Corruption 
Perceptions Index (CPI).  The CPI measures the perceived level of 
public-sector corruption in 180 countries and territories around the 
world.  The CPI is available at: 
www.transparency.org/policy_research/.  TI also publishes an annual 
'Global Corruption Report' which provides a systematic evaluation of 
the state of corruption around the world.  It includes an in-depth 
analysis of a focal theme, a series of country reports that document 
major corruption related events and developments from all continents 
and an overview of the latest research findings on anti-corruption 
diagnostics and tools.  See www.transparency.org/publications/gcr. 
 
-The World Bank Institute publishes Worldwide Governance Indicators 
(WGI).   These indicators assess six dimensions of governance in 212 
countries, including Voice and Accountability, Political Stability 
and Absence of Violence, Government Effectiveness, Regulatory 
Quality, Rule of Law and Control of Corruption.  See 
http://info.worldbank.org/governance/wgi/sc_c ountry.asp 
The World Bank Business Environment and Enterprise Performance 
Surveys may also be of interest and are available at: 
http://go.worldbank.org/RQQXYJ6210. 
 
-The World Economic Forum publishes the 'Global Enabling Trade 
Report', which presents the rankings of the Enabling Trade Index, 
and includes an assessment of the transparency of border 
administration (focused on bribe payments and corruption) and a 
separate segment on corruption and the regulatory environment.  See 
www.weforum.org. 
 
Additional country information related to corruption can be found in 
the U.S. State Department's annual 'Human Rights Report' available 
at www.state.gov/g/drl/rls/hrrpt/. 
 
Global Integrity, a nonprofit organization, publishes its annual 
'Global Integrity Report', which provides indicators for 92 
countries with respect to governance and anti-corruption. The report 
highlights the strengths and weaknesses of national level 
anti-corruption systems. The report is available at: 
http://report.globalintegrity.org/. 
 
 
¶L. Bilateral Investment Agreements 
---------------------------------- 
 
Albania was the first country to sign an FTA with Kosovo in 2003, 
followed by Macedonia in 2005.  The Kosovo-Macedonia FTA stipulates 
that Kosovo imports have complete, duty-free access to the 
Macedonian market but in reality, Macedonia still imposes duties at 
the border, particularly on agricultural imports.  In 2006 Kosovo 
signed FTAs with Croatia and Bosnia-Herzegovina, and became a 
signatory to the Central European Free Trade Area (CEFTA) and EU 
Common Aviation Area.  CEFTA came into force in July 2007 and by 
September 2007 all signatories ratified the agreement, including 
Serbia.  However, as with the FTA with Madcedonia, CEFTA signatories 
continue to charge various fees for Kosovar goods.  Kosovo is also a 
member of the Athens Process on Energy for the Southeastern Europe 
Energy Community Treaty.  This is a significant step for Kosovo 
toward achieving increased regional cooperation and securing 
alternate sources of energy. 
 
 
¶M. OPIC and Other Investment Insurance Programs 
--------------------------------------------- -- 
 
The U.S. Overseas Private Investment Corporation (OPIC) has been 
involved in Kosovo since   2000, providing financing, political risk 
insurance and other investment vehicles to American investors.  In 
June 2009, OPIC signed an investment agreement with Kosovo. With 
OPIC assistance, American investors are currently involved with 
projects in the energy and real estate development sectors. 
 
 
¶N. Labor 
-------- 
 
UNMIK-approved Regulation 2001/27, the Essential Labor Law, remains 
in force while Kosovo drafts a new comprehensive labor law.  The 
Ministry of Labor and Social Welfare has announced in their 2010 
legislative strategy their intention to prepare a draft Labor Law 
and send it to the Assembly by late March 2010.  The law requires 
employers to observe all applicable employee protections, including 
 
PRISTINA 00000040  009.2 OF 009 
 
 
a 40-hour full-time work week, payment of overtime, adhering to 
occupational health and safety standards, respecting annual leave 
benefits and ensuring 90 days of maternity leave.  The labor law 
calls for a minimum wage but does not set an amount.  The Ministry 
of Labor and Social Welfare has created a compliance office that has 
the authority to visit places of employment to assess employer 
adherence to labor law requirements.  Labor disputes are adjudicated 
in local courts. 
 
 
¶O. Foreign-Trade Zones / Free Ports 
----------------------------------- 
 
The Kosovo Customs and Excise Code is business-friendly, 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, with the aim of facilitating 
trade and stimulating export growth.  In addition to imported goods, 
some Kosovo-produced goods from designated industries can also be 
stored in bonded warehouses, when applicable legislation dictates 
these goods meet export criteria.  Foreign firms are permitted to 
import production inputs without paying taxes or customs duties for 
the manufacture of export goods. 
 
The Customs Code permits the establishment of free zones for 
manufacturing and export purposes, but none have been established 
yet. 
 
 
¶P. Foreign Direct Investment Statistics 
--------------------------------------- 
 
Kosovo does not currently have a formalized system for collecting 
foreign direct investment data.  However, the Investment Promotion 
Agency of Kosovo estimates over 2,800 foreign companies are 
currently operating in Kosovo.  Top sector investments for foreign 
businesses include trading (51%), service industries (20%), 
manufacturing industries (13%) and construction (12%). 
 
 
¶Q. Web Resources 
---------------- 
 
The Overseas Private Investment Corporation:  www.opic.gov 
U.S. Department of Commerce:  www.commerce.gov 
U.S. Trade and Development Agency:  www.ustda.gov 
U.S. Embassy Pristina:  http://pristina.usembassy.gov 
Investment Promotion Agency of Kosovo: http://www.invest-ks.org 
Economic Initiative for Kosovo:   www.eciks.org/english