6. THE DEVELOPMENT STRATEGY OF OPEN ECONOMY IN KOSOVA AND THE DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES (SME)

All societies are preoccupied with their start in the new millennium. They are concerned with the fact as to how will they be able to participate in dramatic changes that post-industrial, information society is challenging.

Therefore, despite the dramatic situation Kosova is in, we must set the question and try to seek for an answer as to where we are and where we will be tomorrow.

In the eve of the new century, the situation in Kosova can be characterized with the following:

1. The state of occupation, but with an expanded front for liberty, inside Kosova and the sensibilization and engagement of today’s world’s most relevant factors for overcoming this situation. Following this, it can be expected that Kosova, if the internal factor consolidates, will enter into new century as a free country.
2. The economy of Kosova starts in the new era, after a long period of a drastic decrease of economic activity (about 60% of GDP per capita and 70% of industrial product), with evident technological neglecting of industrial capacities as a lack of investments, decrease of productive potentials in state and public sector. The need for rehabilitation and restructuring program of economy is very evident. Three important points of industry, however, will have their perspective also under new conditions: Electroenergy, Trepça and Ferronickel, after the consolidation will be main factors of Kosova’s export. Other branches need a complex technological regeneration, which must be realized parallel with privatization and through joint investments. Growth sources are also in agriculture and in the sector of tertiary and service activities.This entire process starts also with a very private economy that now has an important value (creates about 51% of GDP) and represents the basis for the development of a free private initiative and entrepreneurship philosophy as a main factor of future development.

Another important economic factor is diaspora.

Existing energetic and trafic infrastructure make up only an initial basis for development, but it must be expanded and modernized parallelly with the economic development. Infostructure (information structure) must have high priorities in development.

3. The level of development is characteristic for undeveloped countries (about 350 US$ per capita). Social-economic problems that are a consequence of this development level, are expressions of a low level of economic engagement of population. Only about 19% of total population or 38% of labour capable population perform economic activities. This determines strongly the future development strategy, respectively its dynamics and structure.
4. Disposable resources: natural, human resources; existing capacities are a positive condition for development.

1. some capacities of basic industry, energetics, nickel, colored metals in conditions of independent development can overcome the depressive position in pricing policy in interior market and barriers to export, which was one of the most serious obstacles in their development. A further develop-ment of these capacities must be done in the form of joint ventures.
2. natural resources must be oriented especially in the development of agribusiness and tourism
3. the human resource fund – the young population could be a positive factor of development if it qualifies for framing in the flows of information revolution.

Considering actual and expected circumstances, considering the level of development, social-economic problems and expected trends of development in Europe and the world, the main strategic objectives of development of Kosova would be:

• independent economic development within regional, European and world economic integrations;
• maximal economic activating of labour capable population through dynamic development;
• mobilization of natural, human and financial development potentials of the population through the system of open market economy and entrepreneurship as a fundamental philosophy of development;
• incorporation in technological development, information, telecommunication and globalization flows.

1. An economic independence of Kosova is the condition for the solution of Kosova’s issue. It creates conditions for national, regional and wider integrations. Independence and integrations are complementary processes in the spirit of current processes worldwide. Economic independence of Kosova can be relied on human potentials, natural resources, infrastructure and values created before. Analyses and projections of expected development indicate that in terms of an open economy and civil and democratic society, Kosova is able to budget its economic independence.

           

        Growth rates

2. Social problems and especially the need for economic activating of labour capable population seek a high dynamics of GDP growth. Expected rates of growth in the world are 2-3%, in Europe 3-4%, whereas in Kosova, considering present problems and the need for relativizing them might have been at least 5-7% accounted on the basis of the development similar to that of 1989. The sources of this growth might be in consolidation of capacities of basic industry, privatization, restructuring and regeneration of processing industry and particularly dinamic generating and development of SME, and family economies. Such a dynamic development must go beyond the limit that characterizes undeveloped countries.

 

        Mobilization of financial population potentials

3. Mobilization of financial population potentials and cooperation with international financial institutions, strong technical and financial assistance seeks for economic stability, open economic system compatible with market economy rules. Mobilization of these potentials is possible with a clear concept for encouraging entrepreneurship and development partnership, developing of entrepreneurship skills and modern management and business education.

 

        Incorporation in information revolution

4. Kosova cannot wait to reach for a certain stadium of development in order to get incorporated in information revolution, which is being expressed by digitalization of economy and other human activities based on a rapid development of telecommunications. Human resources with which Kosova has a development priority, might have been in the function of modern development only if they are equipped with information education , if they qualify for utilizing information technology and participate in its further developments. In order to achieve this, radical transformations in education system must be made.

Prerequisites for the realization of strategic objectives in Kosova are:

1. The open market economic system
2. Entrepreneurship and SME development
3. Consolidation, restructuring and privatization of existing economy

1. Building – up the system of open market economy is a prerequisite for incorporation in international cooperation flows and in integration and globalization processes. This is an indispensable prerequisite for developing relationships with economic integrations, with developed countries, with international financial institutions and as a prerequisite for the mobilization of financial resources of population and diaspora. This implies an efficient economic system – efficient acting of legal state. Institutional bases of this system are elaborated in the previous chapter.

The establishing of the system of an open market economy of Kosova is indispensability because each autarchy would be fatal for the quality of Kosova’s development. Kosova as a small country and as economically undeveloped has to be oriented toward an open economy. Characteristics of an open economy are:

• liberalization of foreign trade (liberal foreign trade regimes)
• liberalization of financial market (real exchange rate and real interest)
• liberalization of labour market

The essence of this holds on economic stability, which is greatly determined by the balance of payments and which will be a difficult problem for Kosova. Therefore it will be further elaborated in this paper.

1. Development of SME and entrepreneurship must be the main generator of economic growth. This development must be based on advantages that must be developed further as well as in obstacles and weaknesses that have to be overcome and relativized by means of strategies and measures of economic policy. Based on our overall studies within this project and relying on the poll of 300 enterprises in July 1997, identification of advantages and disadvantages or limiting circumstances for development of SME in Kosova.

Analysis of these advantages and disadvantages suggest a policy and strategy of offensive development of SME and entrepreneurship, a higher effectuation of advantages and relativization of disadvantges can be achieved. The system of an open economy and its mechanisms determine the direction of activities that must be undertaken.

The strategy of SME development must create an arsenal of measures and instruments for encouraging SME development that have rapid growth and an offensive concept of development. Different activities and measures can also be undertaken for certain sectors: agribusiness, information services, manufacturing programs, farm business, consulting services and business education services.

1. Consolidation and restructuring of the existing industry must be done within the indispensable process of restoration from the consequences of technological neglect and different abuses and bad management. Priority for investments in reconstruction must have the increasing of possibilities for export and partnership with international partners.

In this aspect, the most important complexes of reconstruction would be as follows;

1. Trepça, which can achieve its former level of production with the "Ferronickel"’s production with the rehabilitation of technological infrastructure, management consolidation and indispensable reorganization,
2. Electroeconomy of Kosova, with the rehabilitation of four power stations units built before three decades,
3. The complex of food industry, which should be privatized,
4. The complex of textile industry, where a technological regeneration, program corrections and clear plan of privatization is needed,
5. Wood processing industry, where a technological regeneration, a reorientation in production program, privatization is also necessary,
6. Metal processing complex (shock absorbers, electromotors, radiators, iron-sheet etc.), where also a technological regeneration and privatization is needed,
7. Batteries (industrial, automobile batteries, nickel-cadmium batteries), where production consolidation and privatization is needed,

The implementation of the program of reconstruction and technological regeneration of enterprises in the mentioned sectors, within a period of 2-3 years (after normalizing of situation), can influence an overall economic consolidation and can help achieve a level of production similar to that in 1989. This can also consolidate export opportunities.

The consolidation of infrastructure is also connected with the necessity for rehabilitation of road network, revitalization of some most important directions. The electrification of railway is also stressed as a necessity. The two hydrosystems (Ibër-Lepenc and Radoniq) must revitalize the problem of water and enable increasing of production rendiments .