Transcript presentation

Challenges of Reindustrialization in
Kosovo
The Adriatic – Balkan Area from
Transition to Integration
MUSTAFA Muhamet, ZOGAJ Alban and ABDIXHIKU Lumir
University AAB- Riinvest , Prishtina
21-22 May 2010 Ancona
Contents
Development specificities of Kosovo :
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in four decades passed through the industrialization and
deindustrialization
it faces the needs for reindustrialization process.
Challenges in building competitiveness capacities in
condition of small developing economy open market
Competitiveness of emerging new industries
An evaluation of industrial policies and
recommendations for appropriate policy instruments
and approaches.
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Methodology
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This paper is part of a wider study, developed by
Riinvest Institute in coordination with MTI, regarding
industrial policies in Kosovo.
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Desk research, consultation of secondary sources
Survey of around 1200 manufacturing enterprises/
businesses with more than 4 employees and less if they
are exporters
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October 2009.
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Industry output composition comparison:
1988 / 2008
SECTOR
Nonferrous metals and metal processing
Textile, leather and rubber
Food
Non metals &Construction materials)
Wood and letter processing
Graphic industry
Chemistry
Other
Total
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Year 1988 (in % )
Year 2008 (in %)
45
16
21
1.4
13
21.4
6
32.3
5
8.1
1
4.4
5
NA
4
16
100
100
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Main industrial sectors in Kosovo (2008)
Sector
Businesses (%)
Sales (%)
Exports (%)
Employment (%)
Food and tobacco
38
21.4
15
28.2
Wood processing
20
8.1
3.5
11.6
Construction materials
14
32.3
13.2
22.1
Metallurgy and metal processing
7
16.4
52
13.0
Plastics and rubber
3
4.7
12
4.8
Paper, graphics and publishing
3
4.4
0.3
3.7
Textile, leather and shoes
2
1.4
1
2.4
Other
13
11.3
3
14.2
Total
100
100
100
100
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Industry/manufacturing
indicators
Indicator
and
other
Industry share in %
GDP
15
Exports
56
Imports
13
Total employment
Investments
macroeconomic
10–12
20
Kosovo’s composition of GDP accounts for, services 60%, agriculture 25% and industry 15% (Riinvest 2006).
Despite this low level of representation, the industry contributes much more to exports (import substitution) and
investments. GDP / capita 1760 Euro( $2500) , trade deficit 30-40% of GDP; Unemployment about 40%;
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Industrial Policy for Kosovo ?
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Dilema over industrial policies
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How and emerging industry could build its
competitiveness capacities
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Washington Consensus
New developments and discussions
Horizontal and vertical policies
Industry role in economic growth
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Industry and other sectors
Which industries
Competitiveness indicators
Productivity
(sales per employee)
100 = average of
industry
New Entries
2000 to 2009
(% increase in
number of
businesses)
Net Profit
Margin[1]
Share of Exports
to total sales
Food processing
76
+ 97.1%
14.7
15
Wood processing
69
+ 75.2%
15.4
3.5
Construction materials
146
+ 86.1%
12.5
13.2
Metallurgy and metal processing
126
+ 104.1%
13.2
52
98
+ 120.8%
17.6
12
120
+ 107.1%
15.9
0.3
Plastics and rubber
Paper, graphics and publishing
[1]
Profitability rate shown in the table is declared rate from businesses surveyed.
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Influence of imports on firms’ products
Sector
Firms reporting medium
or strong influence (%)
Leather and leather products
100
Textiles and textile products
86
Electrical, electronic equipment
86
Wood and wood products
82
Chemicals, chemical products and man-made fibres
80
Rubber and plastic products
79
Basic metals and metal processing
77
Pulp, paper and paper products; publishing and printing
70
Non-metallic mineral products
58
Construction
46
Food products, beverages and tobacco
43
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Barriers in Doing Business
Obstacles faced by industrial enterprises
administrative barriers
lack of demand
taxes
fiscal evasion
delay in payments
competition in the market
corruption
informal economy
unfair competition
lack of energy
0
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10
20
30
40
50
60
70
80
90
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Industrial Policy Constraints and Policy Instruments Evaluation (1)
Iinitial record and evaluation of the intensity of implementation of various policy instruments to tackle
constraints in building Kosovo’s industrial competitive capacities : Evaluation of the presence 0absent; 5 high presence
Constraint
Instrument
Scale of presence
Finance
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Direct loans and grants
0
Restructuring funds
0
Credit line to banks/credit institutions
0
Tax incentives
1
Venture capital funds
0
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Industrial Policy Constraints and Policy Instruments Evaluation (2)
Constraint
Instrument
Scale of presence
Infrastructure
Public investment and infrastructure
3
Mixed finance PPP
1
Tax incentive to invest in communal resources
0
Technology/ Business Park
1
Special economic zones
0
Advisory and business services for domestic firm and potential foreign investors
2
Export/trade promotion and marketing with the aim of improving access to foreign
markets
2
Information
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Industrial Policy Constraints and Policy Instruments Evaluation (4)
Innovation
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Public funding for Research and development
0
Tax incentives for research and development
0
Legal protection intellectual property
1
Raising the level of innovation
0
Venture capital finance on management
0
Presence of business schools
0
Presence of business incubators
1
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Industrial Policy Constraints and Policy Instruments Evaluation (5)
Human Capital
Direct training programmes
2
Subsidies for skills acquisition
0
Investment in education through private initiatives
3
Investment in education for specific sectors
0
Bursaries for foreign studies
1
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Conclusions
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Six manufacturing sectors in Kosovo, that has shown
better performance compared to other sectors
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food processing and construction materials have the biggest
share on the industry output.
Create more
conditions
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developed
policy
environment
and
Environment of fair competition for all sectors, rather than just
focusing on narrow group of sectors.
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Recommendations
Policy instruments that we suggest are:
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In the area of finance, we recommend credit lines for manufacturing and
exporting businesses, as well as support in introducing venture capital funds
and other instructional investors, including also Diaspora participation.
In the area of infrastructure, we recommend facilitation of PPP’s.
In the area of innovation we recommend public funding and tax incentives
for research and development as well as legal protection of intellectual
property.
Last but not least, on the human capital area, we recommend subsidies for
skills acquisition and stimulating investment on private education.
.
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Rcommendations
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Improvements in general policy areas
Specific instruments that address
competitiveness constraints - horizontal
approach
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On the other side, especially due to the weak
institutional capacities
Avoid vertical approach expect b for ICT
sector
muhamet.mustafa @riinvestinstitute.org; ++ 381 38 601 320
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Thank you very much!
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