Market size: Kosovo’s small population – officially only 1.8 million people based on the last census, conducted in 2011 – can present a challenge to investment in industries requiring a substantial economy of scale to realize profitability.

Judicial system: Kosovo’s Commercial Court is a special court for handling business disputes fairly, efficiently, and predictably.  The Commercial Court aims to improve the business enabling environment by reducing opportunities for corruption and building investor and private sector trust in the judiciary.

Ongoing challenges for businesses remain in hearing postponement, rescheduling of hearings, lack of effective and timely adjudication of high-profile criminal cases, and lack of uniform application of criminal sanctions. The number of firms providing high-level, professional legal services is small but increasing.

Corruption: While Kosovo’s overall corruption perception index score from Transparency International made a positive jump of three positions to 84 out of 180 countries from 2021 to 2022, institutions continue to work to address corruption. Corruption reflects a “cost-of-doing business” mentality prevalent in many parts of the region. Opinion polls attest to the public perception that corruption is widespread and local and international businesses regularly cite corruption, especially in the form of political interference, as one of Kosovo’s largest obstacles to attracting investment. Capricious economic policies give the appearance of favoritism and further the public’s distrust in the government. Senior-level public officials have been accused of bribery, racketeering, and other forms of corruption. The Anti-Corruption Agency and the Office of Auditor General are the government agencies mandated to fight corruption.  

Public procurement: While transparency in public procurement has improved, with all procurements now fully electronic and procurement-related information publicly available, accountability in this process requires further improvement. Weaknesses in the appeals process and limited understanding of the procurement process by enforcement mechanisms hampers public and private sector trust. The government lacks the capacity to successfully manage large-scale public-sector transactions on its own. The Government of Kosovo contracts international firms as transaction advisors, which has resulted in delays, cases of conflict of interest, and issues with technical specifications in tender documentation. Local and regional distributors often complain about irregularities in the conduct of public tenders at the national and municipal levels. Most large contracts incorporate an alternative dispute resolution clause to mitigate these risks. Due to significant contracting delays, the public procurement grievance process is often seen as an impediment to business rather than as a problem-solving mechanism.

Weak IPR enforcement: Despite having EU-compliant legislation on IPR protection, there is a general lack of awareness and capacity to investigate and enforce provisions. Most local legal professionals lack the necessary expertise to effectively pursue IPR cases. Kosovo’s understaffed Patent and Trademark Office faces a hefty backlog of IPR disputes and therefore recommends alternative dispute resolution methods instead of legal proceedings if possible. Weak IPR protection is a particular impediment to franchise growth in the Kosovo market.

Workforce: Kosovo’s young, educated, and multi-lingual workforce is eager for career opportunities and looking for chances to develop professionally like their peers in Western Europe.  In general, youth are capable and willing to invest in training and capacity building opportunities to overcome skill and capacity gaps for the chance of getting a job. Large remittance flows from the Kosovan diaspora create a high reservation wage. Outward migration of educated and skilled individuals remains a challenge and given an opening, most professionals would likely go abroad for higher-paying opportunities.  However, if there were a chance to stay in country and earn a decent living, most people would rather stay near their families.

Unrecognized by Five EU Countries: Kosovo is not recognized as an independent state by Serbia and five EU member states, a situation which has resulted in certain challenges to businesses, including fewer flight options in and out of the country, longer transport routes, some limitations on international bank transfers, and some travel restrictions due to stringent visa requirements. In April 2023, the European Parliament approved visa-free travel to the EU’s Schengen zone for Kosovan citizens for periods of up to 90 days in any 180-day period.  Visa-free travel for Kosovans is expected to begin January 1, 2024. In addition, some software does not list Kosovo in standard drop down lists for applications nor is there a national top-level domain.