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Abstract
The economic trajectory of post-war Kosovo has seen the industrial economy of this newly independent country stagnate or contract. This negative trend has not spared the once-thriving mining and metals (MM) sector, in which even the few successful projects have developed as isolated and poorly integrated production “enclaves”. Drawing on a neo-statist political economy framework of industrial development, this paper argues that the unsatisfactory performance of Kosovo's MM sector is largely the consequence of the dominance of the neoliberal policy paradigm, which powerful external actors have contributed to ingraining in the domestic regulatory institutions. Furthermore, the article documents that, in spite of these neoliberal regulatory structures, there have been some cases of interventionist industrial policy; and these cases account for the few industrial success stories of the last decade. However, state intervention in the economy has not been a deliberate plan; rather, it has occurred covertly or even unwittingly.
Acknowledgements
This article was written during a research period at the American University in Kosovo/Rochester Institute of Technology (Pristina, Kosovo). I would like to thank James Korovilas, Nicolas Lemay-Hebert, Venera Demukaj, Anneliese Dodds, Andy Halterman, Jill Irvine and two anonymous referees for helpful comments on earlier versions of this paper, as well as Will Bartlett for comments on a verbal presentation of this paper.
Funding
The research for this paper was supported by the Rockefeller Brothers Fund, USAID-BEEP and the Balkan Trust for Democracy.
Notes on contributor
Luca J. Uberti is a PhD candidate in the Department of Politics at the University of Otago (New Zealand). His research interests cover the political economy of development and political theory, with a particular focus on corruption studies, industrial development and the role of external actors in shaping economic governance in developing and transition countries. During 2011–2013, Luca was a Research Fellow at the American University in Kosovo/Rochester Institute of Technology, based in Pristina, Kosovo.
Notes
1. Bieber (Citation2011) uses the term “minimalist state” to suggest that externally driven state-building projects in the Western Balkans have sought to create states that are limited in both scope and strength. The presumption is that minimalist states could better accommodate competing ethno-nationalist claims.
2. See Wade (Citation2012, 226) for a discussion of this point.
3. For a critique of these two arguments, which led to the emergence of the “get prices right” and “get institutions right” prescriptions, see Chang (Citation2003a, 46–52). In what follows, I focus on the argument that state intervention is necessary for industrial development. I wish to remain neutral as to whether it is also sufficient.
4. I would like to thank an anonymous referee for pointing this out to me.
5. As the “resource curse” literature has powerfully demonstrated, these “fiscal linkages” between mining industries and the state carry their own anti-developmental consequences.
6. On the ills of luxury consumption, see Chang (Citation2003b, 262).
7. As opposed to a “developmental state”.
8. Some commentators go as far as describing the Kosovo economy in the first half of the 2000s as a “rentier economy”, and arguably rightly so (Lemay-Hebert Citation2012).
9. However, official statistics are blighted by a lack of reliable data to evaluate the level of economic activity on the ground. Tellingly, the official estimate of Kosovo's GDP was continually revised downwards in the early 2000s, from €1.85 b in 2001 to €1.34 b in 2003 (ESPIG Citation2004, 7).
10. Although inefficiencies were not missing, under socialist Yugoslavia, Kosovo was an intensely industrialised region, mostly occupied by mining and heavy industries (for an interesting case-study, see Palairet Citation1992). Given the capital intensity of these industries, unemployment was rife, and subsistence (non-state) agriculture was a common economic activity.
11. Denoted “Trepça” hereafter.
12. This suggests that the bulk of the “fiscal linkage” is due to aid transfers and remittance payments, rather than resource revenues.
13. The World Bank's CPIA country ratings for these two indexes can be found at http://data.worldbank.org/indicator/IQ.CPA.TRAD.XQ/countries?display=default and http://data.worldbank.org/indicator/IQ.CPA.BREG.XQ/countries?display=default, respectively.
14. On the commercial viability of Kosovo's state-owned enterprises, and their potential for successful reactivation and privatisation, see Korovilas (Citation2006).
15. It is customary for mining firms to even purchase private security when operating in volatile political environments.
16. Iliria Resources Ltd., Powerpoint presentation obtained from representative of foreign mining investor, April 2010.
17. A related point is made by Khan (Citation1996).
19. Here I assume, methodologically, that the theory explains the evidence, while the (same) evidence confirms the theory.
20. Needless to say, the PISGs operated under UNMIK's aegis.
21. UNMIK/PISG, Law No. 2004/10, “Law on Electricity”, especially art. 22–24.
22. The contractor was the Irish firm ESB International (see http://www.esbi.ie/our-businesses/strategic-consultancy/consultancy-experience.asp).
23. Although the Ferronikeli subsidy is, loosely speaking, a (state-created) rent, it should be more appropriately qualified as a quasi-rent, because the subsidy is not entirely “unearned”, just like the income that patent-holders earn from license fees. Ferronikeli did not receive the subsidy by virtue of its political connections or dominant market position, but rather in exchange for offering full security of payment, which reduced commercial losses and reduced the costs that KEK incurs in dealing with payment delinquency.
24. A similar strategy was successfully adopted in 1970s Korea to promote the (politically sensitive) iron-and-steel and non-ferrous metals sectors (Chang Citation1993, 143).
25. See also Chang (Citation1993, 153) for the importance of maintaining utility companies under state ownership.
26. Law No. 03/L-185, “On the Energy Regulator”, art. 40(2).
27. These figures are inferred from KPMM (Citation2011, 42).
28. Personal communication with former Ferronikeli General Manager, February 2012.
29. Personal communication with Ferronikeli General Manager, September 2012.
30. Personal communication with former Ferronikeli General Manager, February 2012.
31. Law No. 03/L-163, “On Mines and Minerals”, art. 33 (2).
32. As Di John remarks, “what matters for growth, in practice, is not simply the security of property rights per se but the security of the property rights of those actors undertaking growth-enhancing [ … ] investments” (Citation2009, 146). Enforcing the property rights of inefficient capitalists (including infant industries that fail to grow up) may hinder growth.
33. UNMIK Regulation 2005/3, “On Mines and Minerals in Kosovo”, section 11 (d). Interestingly, the CEFTA-2006 agreement, which binds Kosovo's domestic trade and investment policy, does not incorporate an explicit ban on performance requirements (including local content rules). See CEFTA-2006, art. 32 on “Treatment of Investments”. Admittedly, however, CEFTA-2006 does state that trade in the CEFTA region should be conducted in accordance with WTO rules, and the investment component of the WTO agreement (that is, TRIMS) does outlaw the use of performance requirements. Kosovo is not a WTO member state at the time of writing.
34. Law No. 03/L-163, art. 12 (1.5) and 12 (1.2).
35. See also World Bank (Citation2010, 40) on the perception of poor infrastructure being an obstacle to businesses in Kosovo.
36. The capacity of domestic firms to decrease prices is crucial in other sector more sensitive to scale economies. See Di Maio (Citation2009, 111).
37. See Nazmi Mikullovci, “Qeveria po e shkatërron Trepçën”, interview with Koha Ditore, 23 July 2012.
38. Personal communication with General Manager, Llamkos GalvaSteel (Core Group), October 2012.
39. Personal communication with Kosovo Manager, Esan Kosova Shpk (Eczacibasi), March 2012.
40. See note 37.
41. Under the new 2011 law (Law No. 04/L-035, “On the Reorganization of Certain Enterprises and their Assets”), PAK acts as the Administrator of the enterprises under its authority, rather than appointing an Administrator by public tender.
42. Some even claim, and justifiably so, that since the bulk of Trepça's debt was incurred after 1995 – and as a result of the murky manoeuvrings of Milosevic's party associates – Trepça's debt is really a case of “odious debt” which, as such, such be simply written off by the sovereign.
43. Or, rather, their votes in the Creditors' Committee.
44. UNMIK Regulation No. 2005/48, section 27.3 (c).
45. The legal status of Kosovo's socially owned enterprises is disputed (see Grasten et al. Citation2013).
46. The 2006 Moratorium Decision was renewed in November 2011, a few days after the passing of the new law.
47. Law No. 03/L-067, “On the Privatization Agency of Kosovo”, art. 9.
48. See note 37.
49. Personal communication with PAK official, September 2012.
50. I would like to thank an anonymous referee for making this point.