IBDE

A Report from “The Support Project on Economic Diplomacy” - Kosovo 

By Ivan S. Abrams, Chief of the USAID-funded Kosovo Ministry of Foreign Affairs Support (KMFAS) Project. 

Robert McDaniel, Senior Economic Diplomacy Advisor to the KMFAS

Arben Sh. Gashi, Lawyer working with the Economic Diplomacy Project  

EXCHANGE: The Magazine for International Business and Diplomacy     No. 3 March 2011   

HISTORY IS BEING made in Kosovo, the diminutive Balkan nation that broke free from Serbia three years ago. The beneficiary of billions of US and EU aid dollars, Kosovo has been unable to get its economy to break onto the world stage – until now.

With an economic ranking 163 out of 183 nations according to the World Bank, Kosovo had to do something radical, new and productive to get out of the slump.  Years of foreign aid aimed at restoring the war-ravaged economy had produced dozens of finely crafted reports, but very little in the way of tangible results.  Many of the reports observed that various industries were in need of rebuilding capital following the Serbian conflict which ended in 1999, but they stopped there.  No suggestions were offered on how to rebuild, where to obtain capital, or how to attract investment dollars, partnerships, and manufacturing agreements.

Last spring Development Alternatives, Inc., a Washington-based provider to the United States Agency for International Development got fed up with it. They decided to start over.

A new assessment of the country’s economy was commissioned. This time, it would not be done by economists or academics, but by a pair of seasoned American business lawyers with decades of experience in international deal making – Ivan Abrams and Robert McDaniel.  Their report

stunned the Kosovo foreign aid community. Kosovo, it seemed, with its per capita GDP of € 1730, its average monthly salary of € 260, and 45 per cent unemployment, was positioned to become the fastest growing economy on the continent. Unemployment was an asset according to the pair, since the population is the youngest in Europe (average age is 26) it could provide a long-term loyal workforce. Natural resources existed in abundance, especially minerals and stone products. Wood, forest products, food-stuffs and even gourmet mushrooms and quality wines were produced in world market quantities and at a fraction of the cost elsewhere. Kosovo was home to hundreds of billions in potential revenue.

Moreover, its toddler government was moving in a positive direction. It had fashioned a progressive Constitution which Abrams, a civil rights expert, described as “an exemplar for emerging nations.”

Legal reforms are everywhere as their partner, Kosovo lawyer Arben Sh. Gashi can attest.  Gashi is one of many Kosovo professionals who is assisting in nurturing institutional reforms on subjects ranging from municipal government to banking supervision.

Many problems remain, largely the by-product of the Serbian conflict.  Electrical outages are commonplace, needed roads are yet to be completed, the courts move slowly and the bugs are being worked out of government. Even so, McDaniel and Abrams saw potential, not peril, for the world’s investors.

“We often quote the pundits”, McDaniel says, ‘“Poorest country in Europe” they claim, and we chuckle as we walk around the double parked Ferrari on our way to Rings, an always crowded outdoor café.”

The problem was how to get this potential into the global marketplace. When, on Feb. 17, 2008, the Assembly of Kosovo declared Kosovo’s independence, one among the many issues that people raised after the celebrations was: does Kosovo have the skill to build a diplomatic system? Some people would answer that Kosovo never had its own diplomats and had extremely limited access to the former Yugoslav diplomatic corps. On the other hand, many young and bright Kosovars have studied at educational institutions in western countries and worked with international organizations. In addition, the nature of diplomacy has changed since the beginning of Yugoslavia’s breakup.  

Three years after the independence, the Kosovo diplomatic system is functional and productive. Yet Kosovo had almost no international presence in the commercial world.  So the strategy was fashioned to bring diplomats from the nation’s 26 embassies and consulates back to Pristina, the national capital, to be trained as the “equivalent of corporate vice presidents for business development” according to Abrams and McDaniel.  Rather than “attract” foreign investment, they set out to go capture it.

The strategy was delivered to all of the country’s diplomatic missions last June. Some members of its foreign service decided to jump the gun and try their hand at it. The result: a feasibility study for a new solar panel factory, negotiations for clothing manufacture, an OEM contract for automobile parts with German car maker BMW, and negotiations for a series of agreements with GE ranging from alternative energy to medical care.

Abrams and McDaniel are pleased with the results, and with their training courses. “No one has ever taken this approach” they say, “but if you have a failing company the only option is to sell your way out of hard times. We look at Kosovo as a large business that happens to have lousy balance sheet, a flag, 75 diplomatic recognitions and a statue of Bill Clinton.”

“We now have proof of concept.” Abrams says. “The strategy is working, the diplomats are deployed, they know what they are doing. When it works, and success is inevitable for Kosovo, other countries will ask how did they do that?”

McDaniel adds: “And it will be a repeat of the times of Churchill, when so much is owed by so many, to so few.  A handful of young men and women have Kosovo’s future in their determined hands.”

In the days following the introduction of the new strategy, Kosovo’s “economic diplomats” have completed a manufacturing contract with German auto maker BMW and are in discussions with multi-national corporations form the US, China, France, Switzerland and Sweden. They are now negotiating € 70,000,000 in potential business which did not exist a mere two months ago.

In the meanwhile, the international development industry should take note.  The days when report writing posing as foreign aid was sufficient are now gone.  Emerging nations, like Kosovo, are demanding results. Just as businesses do.

They deserve nothing less.