Booming ICT industry gives Kosovo hope for the future

Booming ICT industry gives Kosovo hope for the future
The new Pristina Tech Park opened on October 12. / STIKK
By Clare Nuttall in Pristina October 30, 2023

As a small landlocked country, Kosovo is not over-endowed with natural assets, while politically its investment case is overshadowed by its unresolved conflict with Serbia and sporadic unrest in the north of the country. Yet Kosovo is now the location of a booming ICT sector oriented not to the local market of just under 1.9mn people, but to outsourcing services — and increasingly selling products too — to the global market. 

ICT exports are becoming an increasingly important contributor to Kosovo’s economy. The latest Kosovo IT Barometer published by the Kosovo Association of Information and Communication Technology (STIKK) reports that 85% of companies in the sector export services and/or products, and among them 39% are focused exclusively on international markets.

The high salaries ICT companies offer professionals are providing a sound incentive for young people to stay in the country, thus addressing the interconnected problems of unemployment, poverty and high emigration.

This is a dramatic change from the situation as recently as 10 or 15 years ago, when there were only a handful of companies in the sector, mainly focussed on securing government or state-owned enterprise (SOE) contracts. 

“When STIKK was set up in 2008, outsourcing as a concept for exporting services or products was not known; everybody was concentrating on government tenders. The government was the main client of the ICT sector. Our companies were fighting to gain government tenders, while outside Kosovo’s borders everything was flourishing. We said instead of this small pie, let’s go for a bigger one,” says Vjollca Cavolli, STIKK’s executive director, in an interview with bne IntelliNews in Pristina.

Shpend Lila, training, events and PR manager of the Innovation Centre Kosovo (ICK), makes a similar point, saying that when the ICK was set up in 2012, “there was no notion of startups or entrepreneurship” in Kosovo. Companies in the ICT sector were mainly telcos or internet providers. 

“The industry grew rapidly. 10 to 15 years ago, the publicly-owned mobile network operator accounted for the lion’s share of revenues in this sector. Now that has changed. The IT and [business process outsourcing] BPO companies comprise the lion’s share, and account for a strong percentage of GDP,” says Valon Grabanica, COO of Kosbit, one of the first BPO companies set up in Kosovo that now employs over 100 people. “Now new companies are being founded day after day. There is strong potential in the market.”

Abuzz at ICK 

It’s not uncommon to see the lights on at midnight in the city centre building that hosts the ICK, because the companies and freelancers there work with almost all time zones around the world. Founded in 2012, it is now one of the biggest ICT hubs in the region. 

“I’ve been traveling around the world, and you just don’t see this kind of buzz,” Lila says.

The centre offers people support on two paths: learning skills to work for an ICT company or starting their own business. To date the ICK has supported more than 600 startups, trained over 8,000 people in ICT skills and established partnerships with more than 100 international partners. It hosts events such as Startup Weekend Prishtina, and organises trainings in partnership with the private sector, based on an assessment of what its partner companies need.

The co-working space at the ICK in downtown Pristina. Source: ICK. 

When I visited on a Friday morning in early October, there was an atmosphere of quiet focus among the freelancers and startup workers already at their desks. Offices and co-working spaces occupy an area of 3,000 sqm, and there are currently no available seats. This has been the case ever since the ICK became the first co-working space in Pristina back in 2013; within two days of the opening it had more than 2,000 members. Not all of those present are Kosovars; the centre hosts other nationalities working out of Pristina.

Outsourcing and freelance 

Unlike the region’s bigger, more populous states such as Poland or Romania, where major international IT companies have set up their own centres employing hundreds or thousands of people, the Kosovan model is based on outsourcing — whether by a Kosovo-based company or by an individual freelancer providing their services to a foreign company.

According to data from the Kosovo Investment and Enterprise Support Agency (KIESA), ICT sector exports increased by 114% year on year in 2022. “Our ICT companies are becoming more competitive every day, and have increased their capabilities and skills in terms of competing internationally. They are increasing exports on a daily basis,” says Zef Dedaj, acting general director of KIESA, in an interview with bne IntelliNews in Pristina.

Even through the country’s population is small, industry insiders list multiple benefits of working in Pristina. Among them are the city’s pleasant climate, its restaurants, cafes and nightlife, and proximity to ski resorts and the coast, two hours away in neighbouring Albania. Even more importantly, there is very high internet penetration, and large numbers of talented young people. 

Listing Kosovo’s strengths, Grabanica says: “I would start at the demography. Kosovo’s demography is dominated by youth, half the population is below 27 years old, the 2011 census showed. This is unusual in Europe and the world.” 

Other benefits bne IntelliNews' interviewees list are the low taxes, ease of doing business, skills and cultural adaptability of young people, who speak English and other foreign languages such as German. 

Cavolli highlights the creativity in Kosovo. “We are creative as a nation due to our history. We were under different foreign nations for hundreds of years and we had to be creative to survive. Now it’s in our DNA.”

As a result of this, Cavolli says, Kosovars have become known for their creativity, not only in the ICT sector but also in fashion design, woodworking, marketing and many other areas. “We think creativity is the strong point of the ICT sector in Kosovo, not just knowing how to code, but using it in a more effective way,” says Aldo Baxhaku, outreach coordinator and KosICT coordinator at STIKK.

Keeping it in Kosovo 

A benefit of the ICT industry’s sudden rapid growth is that it provides good jobs for young people in Kosovo, a country with a high level of emigration and a huge diaspora. People in the industry are confident that ICT sector employees won’t leave even after January 1, 2024 when Kosovans will be able to travel to the EU without a visa

“Our community is thriving. We are keeping the youngsters here, so they don’t need to leave Kosovo. Young people here work for big companies around the world, but they stay in Pristina with their families,” says Lila. “The ICT sector has a highly qualified workforce. They don’t need to emigrate, they can stay here working here remotely and get paid good salaries, or have their own very good businesses. This is part of the cure for the brain drain all of this part of the world is experiencing.”

€300-400 is the average median salary in Kosovo, but in the ICT sector it’s a minimum of three times more. Senior developers can earn as much as €5,000-7,000. On that, says Cavolli, “you can live like a queen” in Kosovo, with the added benefits of being around family and friends and enjoying the quality of life in the Kosovan capital. While some people do still move abroad, this is not because of higher salaries, but because of benefits like education and healthcare. 

Success stories 

Lila lists a variety of sub-sectors where Kosovo is strong, “from cybersecurity to hardware development, software development, mobile app allocation… there are also a booming number of companies in agritech, and the education sector. Also robotics and hardware, where tangible products are made by the hands of the youngsters in this country.”

Among the success stories in the country are health tech and behavioural artificial intelligence (AI) company Vianova, created at ICK’s second ever startup weekend, which is now working with the health sector in the US. Formon, the first 3D printer in Kosovo, went through ICK’s business incubator. Metdaan is a producer of viral videos for Facebook and Tiktok, with around 55,000 clients including singers, artists and politicians. Cross-lingual plagiarism checker CrossPlag was recently acquired by Norway’s Inspera, one of the biggest ed-tech companies in the world. 

The Barometer report shows companies with annual turnover of over €500,000 now make up 34% of the sector, indicating the emergence of larger companies. 

Kosbit is one of the larger players, having been founded back in 2014. Its core services are in the area of network engineering, including system engineering, systems integration, big data, analytics, and other areas including cyber security. However, it also works on more complex BPO services projects. 

Kosbit started with a group of five engineers, of which four were the company’s founders. “We were small, then there was a snowball effect and we grew to 100 people. We had really rapid growth with global clients. We work a lot with clients we have already onboarded,” says Grabanica. “The common denominator of our service is we provide a quality service at a reasonable price — one reason why we attract international companies.”  

Looking to the future, Grabanica says, “the idea is to broaden our spectrum of services. We try to excel and achieve perfection in these services and to expand as a company … we aim to get into producing products as well.”

Kosbit's recent teambuilding weekend on the Vjosa river. Source: Kosbit. 

Funding gap 

Kosbit is self-funded, but for other companies access to finance is a bottleneck. Cavolli says the current situation with funding is “not so good … Although the government gave a portion of money for startups, our startups heavily depend on families and friends.” 

Lila concurs on the importance of the diaspora to the sector. “Money is coming from the diaspora — there is no family in Kosovo without some relative in Western Europe or the US. Previously they used to send cash remittances mainly for consumption. Now the investment model has started changing. Instead of sending cash, the diaspora are creating companies in Kosovo. The diaspora has huge potential; in 2022 they sent €600mn in remittances.” 

There are also the diaspora Kosovars who set up their own businesses. “Many Kosovars that lived in developed countries worked for large companies, and when they return to Kosovo, knowing the potential and considering the advantages — low taxes, the low price of labour — they saw an opportunity and their companies performed very well,” says Blendi Hasaj, executive director of Pristina-based think-tank GAP Institute. “Others open companies that have a base in another country such as Switzerland and a branch here.”

KIESA’s Dedaj outlined the support given to Kosovan ICT companies including to showcase their offerings at international trade fairs. However, several people in the industry told bne IntelliNews said that the sector would benefit from more help from the government.

“We are raising our voices, but still more needs to be done,” says Lila. He says he has just returned from seven weeks in Japan, exploring how Tokyo is helping the country’s thriving startup system. “I realised they don’t have more talent than we do. The only thing they have is more institutional support and from the private sector as well,” he says. 

However, this is changing. Plug and Play, the biggest accelerator in the world, has set up in Kosovo. Uranik Begu, formerly of ICK, was appointed the new director of the Plug and Play Tech Center for the Western Balkans earlier this year. The government, meanwhile, is working on plans for an innovation fund to support the sector. 

Pristina's tech future

More support will be forthcoming with the opening of the new Pristina Tech Park that was formally inaugurated on October 12. “The tech park will create an opportunity for investors, venture capitalists and angel funds to come here and start working with our startups,” says Cavolli. 

Kosovan Prime Minister Albin Kurti with Vjollca Cavolli, STIKK’s executive director, at the opening of the Pristina Tech Park in October. Source: STIKK. 

The week before the opening, bne IntelliNews visited the site in the outskirts of Pristina. The facility started out as a government building that was never put into use. STIKK took over the building, which it almost completely gutted, except for a large pulley on the ceiling kept as a memento of the original design. The inside has a large and airy co-working space, with kitchens, chillout zones and glass walled offices, while there are bigger offices for startups on the other side. 

The tech park has been many years in the making. Back in 2013, STIKK started talking to the government about the need for a tech park to house growing startups together with investors and professional service providers such as accountants and lawyers. It took a long time to get the project off the ground, not least because of the frequent changes of government in Kosovo.

Now the park has opened, Cavolli says the plans don’t stop there. STIKK is already talking with the Pristina municipality about turning the land surrounding the tech park into an economic zone for ICT companies. She envisages a “whole city for ICT”, with larger companies in their own buildings clustered around the core of the tech park. “Our ambition is to brand Kosovo as a knowledge-based economy,” she adds. 

Competition for people 

The most crucial part of Kosovo’s ICT industry is the people. Availability of labour is what helped the industry to grow; the country has a young population and high unemployment. Both industry bodies like STIKK and the ICK, as well as individual companies, are working with schools and universities to make sure young people have the right skills to find jobs in the sector. 

Still, as the market matures, competition for talent is becoming more intense. According to STIKK’s IT Barometer, an overwhelming majority (74%) of companies reported that they face a shortage of skilled labor. Companies need at least two months to replace departing employees and up to six months for more specialised positions.

“Of course human resources are limited, we can’t grow at this pace indefinitely, the sector will take a maturity curve, but I think it’s a sector Kosovo can pride itself on,” says Grabanica. “Demand for resources in this sector is super high,” he adds. For roles such as software engineers, “there are people in the market but it is difficult to attract them because salary demands are extremely high, our competitors want them too. It's a jungle.” 

Aside from pay, companies are offering other benefits to keep their employees. Well before the pandemic, Grabanica says Kosbit introduced flexible working hours and a "really lenient work from home policy … Kosovo’s labour law is quite modern but we try to go beyond the minimum to really motivate people to work for us.”

There is also a better gender balance than in most EU countries. According to STIKK, 30% of ICT sector professionals are women, compared to the 19% EU average. In Kosovo there are now more female students studying computer science than men. However, there is still a bigger disparity in company ownership; 83% of ICT sector companies are owned by men, while only 17% are owned by women.

Changed perceptions 

Conscious that Kosovo’s conflict with Serbia is what most often makes the international press, all the people in the ICT industry bne IntelliNews spoke to talked of their pride in the sector’s achievement and the hope this will change international perceptions of Kosovo. 

“The stories coming out of this centre [the ICK] make us really proud … There are some of the stories that really change the narrative of Kosovo in the international scene,” says Lila. “You have the problems in Mitrovica that are making headlines, but what Kosovo is proud of is art, sport and startups. There are stories of people thriving, startups doing business, people going abroad to study or winning international competitions.”  

While there are challenges that need to be overcome — not least access to funding and the increasingly tight market for skilled workers — the successes of the ICT sector are already addressing the problems of unemployment and emigration that have plagued the country since independence.