DOING BUSINES

1. “DOING BUSINES” WB REPORT
AND IMPACT ON FDI IN KOSOVO
Lecturer: Mustafë Hasani
UBT - Higher Education Institution
Prishtina
mustafe.hasani@ubt-uni.net

2. INTRODUCTION
• Kosova has a potential to become a regional competitor in providing a
suitable environment and a favorable investment climate for FDI
• Significant progress has been made in the BEE, 75th position “DB 2015”
WB report.
• Despite of these and other achievements, some statistics are less
encouraging, such as:
• increase of the gross domestic product is insufficient and varies between 2-3%,
• trade deficit is high,
• unemployment is constantly increasing and
• lowest FDI and GDP per capita in the region.
• In order to improve the current situation there is a necessary and urgent a
need for drafting a national economic strategy as well as a proper FDI
policy with impact on economic growth, creation of new jobs, increase of
exports and a better living standard for citizens.
2

3. 3
• The purpose of this paper is to examine the impact of Easy Doing
Business in the FDI inflow in the case of Kosova
PURPOSE and HYPOTHESES
WB “Doing
Business” ranking
FDI Incentives
Other determinants
of FDI
Positive Impact
Combined with DB
Country & sector specific
FDI inflow
H1
H2
H3
FDI inflow

4. METHODOLOGY
• A survey was conducted with 20 foreign companies
• Interviews held with business associations, consulting companies
which represent a high number of domestic and foreign companies
as well as with experts from respective fields.
• The research Hypotheses were tested using qualitative comparative
analysis
• The data were provided in the UN Conference on Trade and Development
(UNCTAD), WB “Doing Business Report” and the Central Bank of Kosova
for the period 2010 – 2015.
4

5. GLOBAL FDI TREND
• According to UNCTAD, global inflows of FDI in 2014 were equal to
US$1.23 trillion which are lower for 8% compared to the previous
year.
• FDI inflows to developed countries fell by 14% and increased in
developing economies for 4%, thus reaching a global share of 56%.
• 4 out of 5 first countries are developing economies (China, Hong
Kong and Singapore except United States).
• High ranking in the DB report has an influence on attracting FDI but
it is not the only determining factor for FDI inflows
5

6. FDI inflow and the WB DB ranking
• Developed countries which have a higher share of attracting FDI are ranked high in the DB
ranking except some developing countries.
• Luxembourg is ranked in an average position in the DB report. The government has
established some measures in order to make the country even more attractive to FDI such as
fiscal benefits, equipment and construction land.
6

7. FDI IN EUROPE AND SEE
• FDI in Europe have declined in all the years after the recession, 288
billion FDI in 2014 is one third of the value of the year 2007 and
12% less than in 2013.
• Oscillations of the FDI trend in Europe during 2010-2015 have been
substantial, mainly followed by a decline of foreign investments.
• In DBR, changes have been very small, because all these countries
have improved their regulations for better business environments
and have been ranked in high positions in DBR.
• The correlation between DBR and FDI in the developed economies
is at a “neutral point”.
7

8. FDI IN EUROPE AND SEE (continued)
• Regarding FDI inflows in the SEE countries (Albania, Bosnia &
Herzegovina, Montenegro, Serbia, FYR Macedonia and Kosova)
from 2011, oscillations with an increasing tendency were observed,
yet FDI flow has an extremely low share in the total FDI from
Europe, with only 1.6%.
8

9. DBR in SEE
• FDI flows have been the highest in Serbia and Albania and the
lowest in the Republic of Kosova.
• All SEE countries, especially in the recent years, have made large
scale reforms which have had an impact on DBR.
• DBR 2009, Macedonia was ranked in the 69th position, in DBR
2015 it was ranked in the 30th
• Montenegro in DBR 2009 was ranked 77th whilst on DBR 2015 was
ranked in the 36th position.
• Significant improvements were made by Albania, Serbia, Bosnia &
Herzegovina and Kosova.
• Some of these countries have also applied FDI incentives (Serbia &
Macedonia)
9

10. UNDERSTANDING DBR
• DBR focuses on regulations and regulatory processes involved in
setting up and operating a business.
• The purpose is to encourage the government and policy makers to
improve regulations, to be more efficient and simplify the
implementation.
• The groups of indicators in the DB database are: starting a
business, dealing with construction permits, ease of getting
electricity, registering property, getting credit, protecting investors,
paying taxes, trading across borders, enforcing contracts and
resolving insolvency.
• Each group consists of several variables, mainly the number of
procedures, time and cost (compared to % of income per capita)
10

11. Distance to Frontier Score ( DTF )
• DTF where 0 represents the lowest performance and 100 the
frontier which represents the best performance observed on each
Doing Business indicator.
11

12. FDI IN Kosovo and DBR
• FDI in Kosova are the lowest in the region.
• Since 2007 it declined every year. In 2014 FDI inflow in an amount
of $166 mil is 50% lower than the previous year.
• Large scale reforms in DB: Kosova moved from the 119th
position in
DB 2010 for 44 positions and in 2015 it was ranked in 75th
position.
• FDI are mainly in the financial sector, immovable properties and
construction whilst in sectors such as energy, mines and minerals,
agriculture and tourism are rather low.
• The share of FDI from the privatization is significant.
• A proper and complete strategy to be prepared after analyzing all
the data, priority sectors, concrete projects and other support
measures for attracting FDI.
12

13. Partial improvements in DBR
Economy
Rank as
published in
Doing
Business
2015 Report
Ease of
Starting
RANK
Ease of
Constructi
on RANK
Ease of
Property
RANK
Ease of
getting
electricity
RANK
Ease of
Credit
RANK
Ease of
Protecting
Minority
Investors
RANK
Ease of
Taxes
RANK
Ease of
Trading
RANK
Ease of
Contracts
RANK
Ease of
Resolving
Insolvency
RANK
Albania 68 41 157 118 152 36 7 131 95 102 44
Bosnia and Herzegovina 107 147 182 88 163 36 83 151 104 95 34
Kosovo 75 42 135 34 112 23 62 63 118 138 189
Macedonia, FYR 30 3 89 74 88 36 21 7 85 87 35
Montenegro 36 56 138 87 63 4 43 98 52 136 33
Serbia 91 66 186 72 84 52 32 165 96 96 48
13

14. The Research Questionnaire and
Interview Feedback
Q: Has the improvement of indicators of DB had an impact, and have
these been noticed in practice.
A: 78% of respondents gave a negative answer and claimed that no
difference was noticed.
According to respondents the main problems for FDI in Kosova are:
• Corruption,
• Informal economy,
• Slow and inefficient administration,
• Lack of law enforcement,
• Negative image of the country and
• Lack of FDI incentives.
14

15. RESERCH LIMITATION
This study is limited and mainly corresponds with the case of Kosova.
However, the same study in combination with statistical comparisons
and the findings may help in expanding the studies and the analysis
for other countries in SEE as well especially when taking into account
the numerous similarities between these countries.
15

16. Conclusion (Kosova)
• It is true that high ranking in the DBR has an influence on FDI
Inflow.
• A positive impact was found between other investment
determinants such as: (natural resources, infrastructure quality, skills of
workforce, or other specifics relevant to the respective country).
• Partial improvement of indicators in doing business is not
necessarily followed by an increase of FDI
• Of immediate importance is to draft a national strategy for
increasing private investments, domestic and foreign.
• A proactive strategy with detailed actions, priority sectors, concrete
projects, similar or even better incentives than those provided in the
regional countries.
16

17. THANK YOU
17