Kosovo: Addressing market constraints to create scalable private sector development

Kosovo’s young and educated workforce, competitive wages, active diaspora, and proximity to the EU give it strong potential to grow and compete in regional markets. But this potential is constrained by weaknesses in the Kosovo market system. These stem from a range of sources, including policy and regulatory constraints, underdeveloped firms, limited industry and sector coordination, workforce skills mismatch, and insufficient access to financing and investment capital.

The Kosovo Compete Activity addresses market constraints to enable scalable and systemic change that stimulates job creation and increases the private sector’s ability to engage in local, regional, and international markets. The Activity improves export competitiveness of the private sector in three key export-oriented sectors: wood processing, food processing, and ICT. The Activity delivers its interventions through a systemic approach that seeks to promote resilient, self-sustaining market systems. After conducting a detailed Market Systems and Constraints Analysis, the Compete Activity selected a set of priority market systems functional areas to focus interventions on market access, diversified finance, business sophistication, skills development, and supporting business environment. Starting in year three of the project, Compete will focus particular attention on the prefabricated buildings/modular homes subsector as a vehicle for stimulating growth throughout the range of wood processing firms represented in its value chain.

The goals of the activity are:

1. Strengthen market systems to increase sector competitiveness

2. Ensure actors within those market systems are more productive and competitive

The results achieved to date include:

• Partnered with a local NGO and diaspora business networks to facilitate annual diaspora business conventions convening hundreds of Kosovar producers and diaspora buyers/distributors in target export markets. The 2021 and 2022 events resulted in at least 45 export contracts worth over €4.3 million in contracted sales.
• Facilitated introduction of new financing options for Kosovar businesses, including facilitating business partnerships to provide adapted financial leasing options for industrial machinery/equipment, and supporting the establishment of an Export Financing Facility at the Kosovo Credit Guarantee Fund.
• Opened new sales channels for Kosovar food producers, including linkages to regional chains and franchise businesses, and inaugurating new warehouse facilities and distribution contracts providing 12 Kosovar companies with access to the Swiss market.
• Facilitated innovative partnerships between employers and education providers to better link students to gainful employment opportunities and meet companies’ workforce skills needs. This included providing technical assistance and support to secure third-party financing for newly established private VETs in the wood sector.
• Delivered a demonstration program strengthening corporate governance at a group of pilot firms across all three focus sectors. Participants reported improved internal communications, processes, and decision making as a result, and one firm’s restructuring induced an additional €100,000 investment in the firm.