Delayed privatization in Kosovo: causes, consequences, and implications in the ongoing process

Kosovo is distinguished from other transition countries by being the last country to embark on privatization. The wave of revolutionary political and economic changes spreading like wildfire across the Central and Eastern European countries and in former Soviet Union since 1989 found Kosovo under occupation for a full decade. Privatization as one of the most crucial elements of market-oriented reforms was not extended to socially owned enterprises (SOEs) in Kosovo, despite the fact that it was originally initiated by the last president of the Federal Executive Council of former Yugoslavia, Ante Marković and used in a limited number of enterprises. The overwhelming majority of SOEs in Kosovo came under a series of the so-called emergency measures introduced by Serbia during the 1990s, resulting in the dismissal of the Albanian employees at large, the de facto occupation of Kosovar SOEs, and the forced merger with Serbian companies. For nearly a decade, SOEs in Kosovo became subject to illegal ownership transactions and transformation with serious implications for the post-war legal privatization. With the disappearance of the Serbian state control after the 1999 war, in accordance with United Nations Security Council Resolution 1244, the United Nations Interim Administration Mission in Kosovo (UNMIK) has been in charge of Kosovo’s development. At the beginning of the transition to a market system, the discussion of privatization also resurfaced under the UNMIK. It took nearly one year to come with the first privatization proposal. Other proposals followed, until June 2002 when the final proposal, envisaging privatization via the spin-off approach and reorganisation or liquidation through the bankruptcy process was approved. In this paper we look at the specific features of the delayed privatization in Kosovo, emphasising in particular two stages: i) the events during 1990s, including the consequences of emergency measures, ii) the impact of an autonomous privatization in the early 1990s in a limited number of SOEs in the Gjakova region based on a survey of these enterprises, and iii) the critical assessment of the privatization proposals and the challenges in continuing the ongoing privatization process after the war.