Written by Economics, Uncategorized

Kosovo – Albania Relations: Special, Natural and Troubled

ALFONC RAKAJ

At first glance, bilateral relations between Kosovo and Albania resemble a swiss watch that fails to fulfill its most basic function: that of telling the time. To outsiders, bilateral relations between Pristina and Tirana are exemplary, but those familiar with the topic, these ties suffer as a result of overreaching patronage systems built by both. Narrow political interests resulting from this system are hampering bilateral trade, development and obstructing competition. As trade tensions become politicized, the risk of protectionism increases. Unrepresentative political elites would be wise to avoid an escalation which could amount to self-destruction. 

Political Relations

On the surface, intergovernmental relations between Pristina and Tirana are excellent. Yet, as the prolonged trade tensions indicate, political elites on either side of the border exploit the relationship for political reasons. As a result, the implementation of bilateral agreements is a poor match for the accompanying rich rhetoric. 

There are more than 50 agreements signed between both countries. Indicative of this unparalleled level of engagement are the frequent meetings, exchanges and continued participation at respective ceremonies by high ranking officials, both in their official and personal capacity.

Notable agreements signed in the last year alone include; the agreement to run a joint foreign policy, which stipulates the coordination of foreign policies and unification of diplomatic missions between them; the agreement to give Kosovo access to sea by opening its customs office at the seaport of Durres; the agreement for the integration of customs which the eliminates dual border checks and controls; and the agreement for the reduction of roaming fees by 90% earlier this year. 

This at this unprecedented level does not reflect the visionary approach of either government, but rather their ability of political forces to leverage it for political gain. Notably, ethnic Albanians on either side of the border attach significant importance to relations between Kosovo and Albania as independent countries due to the shared identity, language, history and future vision for integration in Euro-Atlantic structures. As a result, both governments share a commitment to enhance cooperation at all levels.

Kosovo’s 2017-2021 government plan seeks to “deepen the strategic partnership with Albania” and build closer political, economic and cultural ties. Similarly, Albania’s Socialist-led government stipulates a similar intent in their 2017-2021 government plan. According to its plan, the Kosovo-Albania strategy is “natural and brotherly.” Their shared aim is to boost cooperation at all levels as is reflected in the joint ambitious agenda spanning from diaspora, to security and trade. Yet, as it’s often the case with relationships, they tend to get complicated when money is involved.

Current Accounts

If the past decade tells us anything about the future, then trade between Kosovo and Albania offers much cause for celebration. Official government data shows trade, investment and exchanges have grown significantly since Pristina declared its independence from Belgrade in 2008. 

Albania’s imports to Kosovo accounted for a mere 60.2 million euros in 2008. Fast forward one decade, and that number has reached a swooping 221.5 million euros. Although smaller in numbers, Albania’s imports from Kosovo have also increased from 21.3 million euros in 2008, to 72.8 million euros in 2018. In addition to improved trade accounts, cross-border investments and exchanges have also expanded. 

According to official data, an estimated 900 Albanian businesses operate in Kosovo. Among them are some of Albania’s largest corporates such as Balfin Group, which recently took control of the ferronickel complex in Drenas; Sigal Uniqua, Albania’s largest insurance company; and Credins Bank, the country’s third-largest bank.

In turn, an estimated 649 Kosovar businesses operate in Albania. But while Albania’s top businesses expanded into Kosovo, Kosovar businesses operating in Albania are primarily centered around tourism. These businesses provide a key link for people to people exchanges which has reach unprecedented levels. In 2017 alone, an estimated 1.7 million Kosovar citizens visited Albania. These indicators may appease the patriotic sentiment, but they are not equally celebrated by government officials or business owners across the border who are faced with extensive bureaucratic procedures, trade barriers and even tariffs.   

The imbalance in trade accounts underpins the ongoing trade tensions between Kosovo and Albania. In recent months, high-ranking officials in Pristina have actively denounced Tirana’s approach to bilateral trade and deemed unfair its treatment of Kosovar exports who face restrictions. Although the claims are not new, Haradinaj’s government has been more direct and outspoken toward Tirana’s treatment of Kosovar products such as beer, flour, medicine and potatoes than its predecessors. 

Contributing to this, is the decision of Rama’s government to impose a toll on the highway connecting Albania with Kosovo. Businesses on border towns as well as the government of Kosovo have strongly opposed the measure and considered it a burden on local business and trade. The unwillingness of the Albanian government to facilitate Pristina’s requests for its elimination has concerned analysts on both countries as risks for further escalation looms large until disagreements are mended.  

Ongoing Trade Frictions

Despite the ongoing trade frictions, high ranking officials have refrained from publicly expressing their views on the matter. However, in the last year, the number of instances where Kosovar politicians denounced Albania’s highway toll and its treatment of Kosovar exporters are unprecedented. Indicative of this rise in tensions is a speech by Haradinaj, in which he spells out his administrations frustrations.

In May, Kosovo’s Minister of Trade and Industry threatened to impose a 100% tax on Albanian exports if the country failed to take concreate measures to eliminate current barriers on Kosovo products. In a twist of irony, a “Pan-Albanian Economic Forum” organized in the same month with the intent of easing access to cross-border trade became a venue where frustrations with tariffs were on full display.

Among attendings at the forum was Berat Rukiqi, the head of the Kosovo Chamber of Commerce, whose speech encapsulates the ever-growing irritation with barriers. According to him, the forum marked the twentieth time such meetings have been held and discussions on barriers have taken place, “yet we still do not have an explanation why Peja Beer [Kosovo’s most popular beer] remains discriminated in the Albanian market.” Alban Zusi, Director of Center for Albanian Exports shared his frustration with the high rate of custom fees.

Indeed, Kosovo entrepreneurs have to pay a disproportionate number of fees to Albania custom officials. Exporters from Kosovo pay an average of 202 euros in fees to Albanian customs, while their counterparts pay only 138 euros. The fees Kosovo’s exporters pay include: 23 EUR for the customs agency; 10 EUR for terminal use; 15 EUR for the Sanitary Certificate; 22 EUR for customs scanner and 72 EUR customs fee. In comparison, Albanian entrepreneurs exporting to Kosovo pay the following fees: 30 EUR for the customs agency; 40 EUR for terminal use; and 68 EUR for the Sanitary Certificate. The highway toll serves as an added financial burden for entrepreneurs from both countries.

In response to media accusations that Kosovar businesses were the reason for the maulfunction of trade between two countries by media, the  Kosovo Chamber of Commerce (KCC) issued a declaration last year detailing the unfair treatment by Albanian customs. In its reaction, KCC highlights the rising trade deficit; barriers imposed on Kosovo’s exports; the disproportionate tax rate on flour, beer, potatoes and medicine; in addition to cases when their products have been denied entry. Notably, it blames “specific individuals” within Albanian institutions who are obstructing trade in the free joint market. Fast forward one year, and the same issues continue to overcast trade relations between the two countries, highlighting the lack of political will to resolve remain obstacles with sound policies. 

Sylë Ukshini, Kosovo’s ambassador to Albania confirmed the ongoing tensions during a recent TV appearance. In the interview, he noted that Kosovo entrepreneurs are frustrated with Tirana’s impeding, time consuming and costly bureaucratic procedures imposed on them. Among them, Mr. Ukshini mentioned the requirement to scan all Kosovo products at Kosovo’s designated customs office at the Port of Durres, a burden local business is excluded from, extensive bureaucratic fees at the border, and the 

The sentiment expressed by Mr. Ukshini that prospects for a full trade war are remote is shared by analysts on either side of the border. However, Tirana must remain vigilant and recognize the legitimacy of the concerns expressed by Kosovo’s entrepreneurs. Otherwise, as Mr. Ukshini noted during his interview, these businesses will seek more profitable alternatives routes, such as the port of Thessaloniki, which with the construction of highway connecting Kosovo and North Macedonia could become a viable alternative. 

That would be bad for trade and politics alike. At stake is not only trade but also the fate of the political elite and the monopolistic businesses they protect from competition. Politicians on both countries have a vested interest in avoiding such a scenario, considering that unlike Pristina’s ongoing trade escalation with Belgrade, a similar rift between Kosovo and Albania would not bode well with voters.  

Far from optimal

Albania – Kosovo bilateral relations have reached an irreversible course. Achievements of the last decade are illustrative of the remaining untapped potential that exists between them. While it is true that the economies of both countries are poorly developed and Kosovo’s remains aligned with former Yugoslavia, more must be done to leverage the untapped potential. For that to be achieved, more political will is required. 

Both Pristina and Tirana must do more to overcome the prolonged frictions and build a robust bilateral economic cooperation strategy that is pro-market and not merely pro-business. Currently, the pro-business strategy is a poor match for a necessary long-term approach which favors fair competition. Only then will businesses not favored by respective governments be able to compete and flourish. Citizens of both countries would be better positioned to reap the benefits of such a trade, which until now has had a limited impact on their lives.

This becomes ever more important for two reasons. First, as enlargement perspective with the EU becomes less clear, the region, including Albania and Kosovo, must seek to bolster economic integration with each other. Second, this level of cooperation is directly linked to the welfare of their citizens. While the former helps integrate the region within itself and prepares it for possible future enlargement, the latter pays direct political dividends. For a political establishment rich in rhetoric and poor in results, such tangible outcomes would go a long way.

In the case of Kosovo and Albania this is electorally more important as good relations, enhance ties, and improved living conditions of Albanians on either side of the border provides a sound basis for electoral soundbites. Ultimately, forging better relations, delivering concrete results and overcoming the ongoing impasse on bilateral trade acquires enhanced political importance for governments in Pristina and Tirana. Anything short of that will be duly punished by their respective electorates which treat Kosovo-Albania relations with an existential importance. 

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