COMMENT: Disputes over property stymie investment in Kosovo

COMMENT: Disputes over property stymie investment in Kosovo
The sprawling Trepca mining complex in the north of Kosovo.
By Alex Young in Pristina March 23, 2016

During the time of Yugoslavia, the sprawling Trepca mining complex in the north of Kosovo employed roughly 23,000 people and contributed some 70% to the province of Kosovo’s annual GDP. Today, its decaying infrastructure and mountains of lignite serve as a daily reminder of the damage caused by the ownership dispute between Serbia and Kosovo. Similarly, the potential of the Brezovica mountains, much-vaunted by ski and lifestyle magazines, remain largely unexploited despite a €400mn investment deal with a French consortium last year. Unresolved property disputes such as these remain an additional hindrance to an economy already struggling to rid itself of corruption and the legacies of war.

Despite boasting some of the largest mineral reserves in Europe, years of underinvestment and mismanagement since the 1999 Kosovo War have decimated Trepca. Both Serbia and Kosovo continue to claim ownership. The plant, which possesses minerals such as indium that are used in electronic goods, is divided between Albanians in the south of Mitrovica and Serbs in the north. Despite the collapse in global commodities prices, however, many still believe that the mine can operate profitably if only the ownership dilemma is resolved.

The nationalisation of Trepca by Kosovo has long been muted. Whilst Belgrade argues that Trepca should be resolved through EU-facilitated dialogue in Brussels, Pristina would prefer a domestic resolution to the issue. To this end, the Kosovo government has established a commission to propose a law dealing with the ownership and functioning of Trepca. Kosovo’s Serbs vehemently oppose its establishment, with the Serbian government once again reaffirming its ownership of the complex. Whilst they have two members on the 16-person commission, they know they will be outvoted. 

The issue has aroused considerable controversy within Kosovo. In early 2015, the increasingly nationalistic Vetevendosje (the main opposition party) mobilized protests against the government’s decision to exclude Trepca from a draft law on public enterprises, through which Kosovo would have claimed 100% ownership. In the current political environment, with Vetevendosje opposed to striking deals with Serbia, Trepca promises to fuel similar tensions.   

In the interim, the Serbian government has continued to finalize investment and sales deals. A multi-million-euro investment contract was signed in 2013 with the US firm New Generation Power (NGP), without consulting the Kosovo government. The US Embassy in Pristina advised that “the Government of Serbia has no jurisdiction over the Trepca mine complex”, whilst the Kosovo Privatisation Agency described the contract as “invalid” and “unenforceable”. More recently, some €24m of annual sales contracts were signed with London-based Mineco International and Poland’s Beloslava.

Downhill

Similar property disputes continue to stymie investment in the Brezovica Ski Resort. Last Spring it was announced that a French consortium, which includes Compagnie des Alpes, one of the leading ski resort operators in Europe, had signed a €409m deal to invest in the resort. The investors’ goal is to make Brezovica one of the largest resorts in the region; the project is expected to create 4,000 new jobs. On signing the deal, Kosovo’s trade minister, Hikmete Bajrami, remarked that the deal would prove “that Kosovo is safe for foreign investments”.

Delays in the implementation of the contract, however, have proved that it is anything but. The Serbian government has described the attempted privatization as an act of expropriation. Ski Resorts of Serbia is to initiate international arbitration proceedings, whilst Fond Inex Intereksport, a Serbian socially-owned enterprise which used to manage the resort, has launched several legal cases in Kosovo. Whilst the Serbian government is understood to be preparing an alternative solution for the resort, Pristina has been forced to extend the deadline by which the consortium should provide funding. 

EU-facilitated dialogue between Belgrade and Pristina has brought some progress towards resolving outstanding telecommunications and energy issues. Under the terms of an August 2015 agreement, Telekom Srbija will receive a licence to operate in Kosovo, whilst Serbia’s state-owned Electric Power Industry (EPS) will establish companies (Elektrodristribucija Sever and EPS Trgovina Kosovska Mitrovica) to supply and sell electric energy there.

Securing agreement on more contentious property-related matters is a painstaking task. This includes management of Gazivoda Lake in the north of Kosovo, which produces hydroelectric power and provides water to cool the power station in Obilic. As a precursor to property-related discussions, Pristina has regularly called for war reparations to be a subject of dialogue in Brussels, arguing that Belgrade committed genocide in the late nineties – a move which only serves to further poison already fragile relations.  

The slow pace of dialogue means that Belgrade and Pristina are little closer to being able to resolve such property-related issues, despite more than two years of dialogue following the historic Brussels Agreement between the two foes.

With an unemployment rate of over 35% (60% amongst young people), Kosovo is in desperate need of investment. Its key assets, such as Trepca, Brezovica and Gazivoda, must not remain hostage to disputes between Belgrade and Pristina, in order that international investors not be further deterred from coming. The outlook though is far from optimistic.  

 

Opinion

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