Kosova as a small Balkan country should be oriented towards the building of an economic system according to the demands of an open economy towards the European and world market, a moderate regulatory policy and economic liberalization. This must be an economic system developed on a fitting environment for the integration of the economy of Kosova in the region and wider, inciting economic cooperation and attracting joint ventures with foreign partners.
In regard to this, a clearly defined strategy of transforming state (social) ownership to a private one is needed, as well as acquiring entrepreneurship as a developing philosophy with all its necessary infrastructure. This enables the creation of a fitful environment for developing competition and an autonomy of enterprises including the category of risk-taking.
This requires the erection of an integral market (market of goods and services, labour market and financial market) with all its institutions.
The role of the state should concentrate on a contemporary macro-economic regulation which ensures economic stability and an implementation of a developing policy. This includes the stabilization of the national currency, hard currency exchange rate, regulation of economic relations with the foreign world, an implementation of the regional policy, and the implementation of an agrarian, ecological, and public finances policy. The state should attain the necessary social functions for an easy passage of negative trends during the transition phase towards a market economy. The economic system should function based on democratic institutions, a liberal democracy and an open society, as well as on an internationalization of the economy and the Kosovarian society.
Transition is a transforming process of large proportions of a social system, through which this process passes on a new structure thus ensuring higher efficiency and effectiveness. In order to reach these performances simultaneous changes in all the sub-systems of the social system should be done, first of all on the political system, economic system and the educational system.
Transition cannot be a process governed from case to case, less so loosely. This means that building up a transition strategy is necessary carrying in itself clear-cut aims and hindrances which may be met on the road to realizing those aims, and resources and mechanisms with which these hindrances may be surpassed. This means to find an optimum considering political, economic and social opportunities. The developing experience of transition in former socialist countries prove that lacking such a strategy and optimum strengthens resistance towards changes, and creates an even more powerful inertia of the old system elements.
The result of transition in Kosova should be a complex change of situation which underlies the solution of Kosova's status.
5.1.1. SPECIFICS OF TRANSITION IN KOSOVA
Specific conditions in which transition is carried out in Kosova deal mostly with the following:
(1) The political situation: the occupying installed authorities and a thorough and massive movement for freedom;
(2) An inadequate economic infrastructure with occupied state-owned enterprises, ruining and technological backwardness, and damaged economic structure comprised in a typically colonial position;
(3) Level of development and emphasized social problems;
(4) A relatively well developed private initiative but under pressure from the environment in which it functions, experiencing a conceptual crisis and development stagnation;
(5) A very large diaspora with an economic and social-demographic significance;
(6) An emphasized need for technical assistance.
These issues have been dealt with in more detail in the preceding parts of the study.
Transition in Kosova began with the movement for freedom and democracy, and a relatively well developed private initiative, certain reform processes on the educational process, a few changes in media, and activation of a number of governmental and non-governmental organisms. Thus, within the current internal "impossible" circumstances in Kosova, certain segments of an open society are born and developed and this is a segment of the active resistance, endeavors for freedom. Understandably, this is not a complex process of the kind it would have been in normal conditions. Kosova's endeavors for freedom will be meaningful and successful if they were crowned with a construction of independent democratic institutions of an open society. Thus, transition in Kosova is a component of the active resistance, an active performance and part of liberation activities in current conditions being completed following the solution of the question of Kosova. This is the most important specific featuring transition in Kosova.
An Inadequate Economic Structure apart from the aspect of activity (basic industry and energy) is expressed also on a small participation of small and middle-sized enterprises. Another feature is a technological backwardness as a consequence of an interruption of investing cycle, of a long process of disinvestment (depreciation surpasses investments in fixed assets of the state sector since 1990 and on). Technological and physical damage and destruction of the fixed state capital will slow down the process of restructuring revitalization.
Level of development and social problems expressed through a small economy activation of the population give a special dimension to transition and press for making choices of alternatives which enable a creation of more jobs. A part of the work force to be hit by technological surplus and necessary restructuring is already jobless or partially active in the private economy. However, instead of the dismissed workers because of their national belonging others have been hired, with no regard to economic criteria, so that compared to the economic performance there are already technological surpluses. On the other hand, the workers thrown out of work arbitrarily enjoy their right to the jobs they occupied before. Therefore, the process of restructuring will be followed by the need for social assistance and efforts to open new jobs in other sectors of private economy, first of all SME. However, the specifics of Kosova are such that social problems make more pressure towards accelerating transition processes than its slow-down as it happens in other countries.
In Kosova a private business community has taken shape representing a positive factor for further transition support. This economy and an organization of institutions and non-governmental organizations and their work can be a supporting point for the development of transition activities especially under current circumstances, but also under the normal ones. The organization of the business community should be completed also through an increase of other professional bodies such as a network of governmental and non-governmental organisms for the support and promotion of SME (guaranteeing and investing local funds, centers of promotion, technological incubating centers-parks and so on, network of educational business institutions). The vitality of the private economy in Kosova, tested by survival in a quite unsuitable environment, shows that the spirit of entrepreneurship may be successfully developed becoming a strong support for the democratic-civic society in Kosova.
5.1.2. MANAGING TRANSITION PROJECTS
Transition projects contain activities, time (phases) and other necessary resources for passing from the old to the new economic system. However, managing with those projects makes it possible to reach their objectives. Since by transition one understands a realization of multidimensional aims, on various planes, project management deals with harmonizing the development timing of various projects, economizing transition expenditure so that this process give expected results.
Regarding transition projects the suggesting and approving party should be the Government and other legal institutions of the Republic of Kosova. They would also ensure project monitoring. Compilers of studies would be Kosovarian experts (foreign and domestic) with a technical assistance involvement.
Carriers of projects would be project teams established by the Government within respective ministries. The project staff should undergo a period of training through a technical assistance program following which a number of personnel should be sent to further training at governmental and non-governmental institutions and international foundations in developed countries and countries in transition, such as Hungary, Poland, Slovenia, Czechia, etc. This program of technical assistance should began its implementation at once, so that the teams should be ready for project realization as soon as they are ready and ripe conditions have been created.
Transition projects should be conceived as an interconnected entirety bearing an interactive activity and able to create necessary synergy. This complex first of all should include the following:
(1) The Project of the New Economic System
The Project of the New Economic System
The project of the new economic system must offer institutional solutions to an independent economic system of Kosova based on an open market economy. It should create mechanisms which would help macro-economic regulation under the conditions of an integral market. The property, pluralism of property, through a domination of the private property, protected of property and its protection are also an important segment brought about by the new system. The market is the main regulator of economic activity, planning is more of an indicator and platform of macro-economic policy measures which stimulates internal and world market competition based on an open market and foreign trade liberalization, which makes the necessary market regulations, corrects its deformations and realizes a concept and strategy of development. The economic system ensures equality of economic subjects in the market. By consistent institutional solutions, excluding too much norms and regulations, despite realistic specific, it should be in consistence with the economic systems of the European countries, and the USA. The most important sub-systems of the new economic system are: the integral market, Monetary Credit and Banking International System, Budgetary System, Fiscal System, system of liberalization of economic relations with the outside world.
(2) Project of privatization
Privatization of enterprises on social-state ownership should begin from a verified fact of western economies that the state revenues are greater from taxation paid by privatized enterprises than the profit realized from state enterprises (Robert Devlin -1996). In order to successfully carry out the process of privatization the following should be ensured: its public development (transparency), which enables avoiding misuse, selling of property under market price, corruption which may neutralize positive effects; ex post evaluation of effects which enables a critical examination of realizing determined aims and criteria, and extracting further experiences of managing with the process; information which creates conditions for a massive participation of subjects in the privatization process and reduces the possibility of double standards; price maximizing is a very important principle as it means eliminating privileges by buyers from bureaucratic structures, enables public sales and provocation of interests to as many buyers as possible. This means choosing the best offer. The privatization project must also include privatization phases, strategy of privatization of particular sectors, methods and models of privatization, and methods of property evaluation.
(3) Project of social engineering
The aim of social engineering is to ensure material and institutional support of the reform which must ensure a displacement of the social function from an enterprise to a state duty and obligation. This means creating a labour market, reform of social and health security system, and pension and other social assistance system. This project should precede a deeper process of structural changes, liberalization of economy and getting rid of excessive work power. Without a social equilibrium there can be no efficient transition and without big social turmoil.
(4) Project of recovery of economic activity
The process of economic recovery includes recovery from damages caused following the year 1990, the process of restructuring and economic recuperation of the existing economy, and intensification of the development of the private initiative, or the SME respectively.
The essence of the development strategy and macro-economic policy deals with structural adaptation of the economy towards system changes and demands of the foreign market. The macro-economic policy stimulates the economic activity of propulsive sectors and of those sectors that meet the demands of the foreign market as a necessary precondition for an export increase and for surpassing potential problems in foreign payment balance.
(5) Project of the inclusion of Kosova's economy into economic integrations
The economic system based on the model of the open market economy, which must be implemented from the very beginning of the transition period creates realistic possibilities for the development of economic relations with other countries and access to various associations of regional, European and wider economic integrations. The inclusion in the SECI initiative, other regional initiatives, and the European Union is a strategic aim. This integration is a condition for coping with difficult problems of this period.
(6) Project of technical assistance
The project of technical assistance should identify the needs and sectors in which one can benefit from technical-financial assistance of international organizations, institutions and foundations, first of all for staff training and institutional infrastructure in order to cope with transition problems, implementation of the system of open market economy and for the promotion of a substantial economic development. Technical assistance may cover many sectors, but from the aspect of transition priority should be given to the following:
5.1.3. MACRO-ECONOMIC REGULATION DURING THE TRANSITION PHASE
The macro-economic regulation in the Kosova economy will be based on strengthening of factors and market economy institutions, and first of all competition, efficiency, liberalization and regulation of certain economic processes.
The basic aims of macro-economic regulation in Kosova:
Competition to the internal market in Kosova should be encouraged through a regulation of natural monopolies, public property, bankruptcy phenomenon, budget and financial limitations. The foreign competition, and its effect on the Kosova economy respectively, will be ensured mainly through a liberalization of the system and policy of relations with the outside world. Special importance is given to state activities in reducing normalization and administration in the field of cooperation with the foreign world. This opening will enable setting up new partnership with international financial institutions, and will create institutional preconditions for identifying new sources in financing economic development, especially of transition reforms.
(2) A policy of inner liberalization creates at the first phase of transition frameworks of establishing economic obligations which will be positively expressed in creating a competing position of economic subjects through market factors. Establishing inner competition and a new managerial environment would also be supported by applying monetary, fiscal, budget, financial and customary mechanisms.
During liberalization of certain economic categories, especially of prices and payments first of all a material support of the society should be ensured for reducing dissatisfaction of workers and lower strata.
(3) The monetary and credit policy makes the main axe for establishing macro-economic stability and reaching convertibility in conditions of transformation and integration activity in the Kosova economy. Through monetary aggregates and other mechanisms the monetary stability will be preserved and an implementation of a policy for a protective development of Kosova will be ensured. This policy will be based and implemented on conditions of consolidation of foreign trade balance, balance of payments and servicing of foreign debts.
The Central Bank will exercise a strong influence especially in the segment of the amount of money in circulation. During the implementation of the monetary policy the equilibrium in the money market should be preserved, as any disorder in this segment will be negatively expressed on the overall courses of prices.
A rigorous financial discipline and competition from outside ensure monetary stability. This system should be compatible with the fiscal system, as only thus preconditions are created for the function of market economy laws and settlement of the rules of the game for all the actors of development. The implementation of a policy of realistic exchange rate, hard currency reserves should be expressed by the assuring of currency convertibilty.
(4) Budget and fiscal policies represent important mechanisms as they help determine the pyramid of responsibilities and competencies in managing financial flows in the economy of Kosova, considering strategic demands and needs of the economy, population and state. During the implementation of budgetary management of Kosova particular attention should be devoted to eliminating inflatory sources such as: deficiency financing and the problem of budget deficits.
The budget policy should be harmonized with the fiscal police as only then equal preconditions are met for the realization of the economic activity of economic subjects.
(5) The system of international economic relations must be an expression of a high degree of the system of liberalization. Kosova's economy should sanction its continuous orientation for an opening towards the effects of the world market. It is only by opening towards technological and economic influences that the economy of Kosova will be able to valorize its comparative potentials and advantages, and get included in integration processes. Because of this the new economic system too, institutions and macro-economic policy should see to it that future development be based on setting a partnership of an integrating structure in the region and world. With a new legal infrastructure technological transfers may be encouraged as well as capitals of various form in the Kosova economy. This legislation should be free of normation and excessive administration.
(6) The price policy is of a great importance in setting an economic balance in conditions of implementing transition reforms. The price policy should be dealt with on a much larger aspect.
The first phase should eliminate the arbitrary role by the state in regulating prices, and eliminate existing disparities. An elimination of disparities should happen gradually and in accordance to the dynamics of liberalizations in other economic categories. The scale of price liberalization should be treated in the context of liberalization of payments, foreign trade, and exchange rate.
In principle a free formation of prices should function, except for the natural monopolies and public activities. Because of this, these activities should be accompanied by subvention mechanisms, especially in agriculture, and regression of strategic products. With the intention of strengthening the market component during the free price policy it is necessary to respect and implement an anti-monopolistic regulative policy in both fighting disloyal competition and market speculations.
(7) The social policy has a great importance in implementing the development concept and maintenance of macro-economic stability in the transition conditions. Social and economic reforms in some countries have taken unwanted courses as they did not analyze and project the influence of social-psychological, historical and traditional factors. By a network of social protection during the implementation of the first phase of transition the protection of the entire population should be included, especially that part of population which remained out of jobs. For implementing such a policy the following activities should be undertaken:
| AREA | PHASE i | PHASE II |
| Macroeconomic Policy | Economic recovery, stability, monetary and budget balance | Long-term stabilization, effectiveness and economic growth |
| Monetary and credit policy | Central Bank independence, aggregate control, real interest rate | Aggregate control and stabilization; convertibility and real exchange rate; partnership with International Financial Institutions |
| Budget Policy | Budget deficit control; anti-inflation influence | Budget management efficiency, adjustment to fiscal policy; liquidity and budget discipline |
| Fiscal Policy | Fiscal reform; efficiency of fiscal instruments, expanding of fiscal base, decrease of fiscal obligations; | Implementation of VAT and harmonization with fiscal structure of OECD countries |
| Export stimulation and promotion | Reducing of limitations in foreign trade regimes; export stimulation with in fiscal area | Liberalization of foreign trade regime; Foreign Trade and Foreign Payment Balance balancing |
| Investment Policy and Reconstruction | Efficiency, management and financial reconstruction | Efficiency ; world market competency |
| Price Policy | Disparity reduction, liberalization and antimonopoly policy | Harmonization with foreign trade policy and exchange rate policy |
| Social Policy | Emergency Programs | Transformation from the emergency programs into job creation programs |
From the presentation of these policies under the conditions of the activity of the market economy and transition in Kosova, it may be concluded that reaching a stability and macro-economic regulation will depend first of all on preparations by the society for initiating reform implementation. Kosova will be compelled to undergo the implementation of the model of social market economy, macro-economic regulation and in the same time to undergo the transformation of social structures. Based on such conditions, we may conclude that Kosova will have to pay great expenses during the reform transformations. These expenses first of all include setting market economy institutions, expenses of restructuring and social expenses. At these restructure part of costs it will be possible to ensure a cooperation with international financial institutions and organizations such as the European Union (structural funds), European Bank (PHARE program) and other agencies of technical and financial assistance.