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Kosovo Needs Strong Judiciary to Attract Foreign Investors

Our Managing Partner Mr. Dastid Pallaska talks to SeeNews magazine. The full article is below.

Kosovo needs to enhance the rule of law in order to attract foreign investments that are essential in ensuring a sustainable economic growth for the newly independent state, Dastid Pallaska from the Pristina- based Pallaska & Associates law firm told SeeNews.

“The key to making Kosovo a success story is an effective judiciary, which is presently underperforming due to a decade of institutional neglect,” Pallaska said.

Major steps in this direction have already been made, he said, giving as an example the ongoing screening of all judges and prosecutors in Kosovo seeking appointment or re-appointment. The process requires all applicants for these positions to undergo an unprecedented vetting process that includes full financial disclosure, a comprehensive professional assessment and a background check.

“The imperative for Kosovo is to become not just an internationally recognised state but a functional democracy with strong rule of law institutions that can guarantee foreign investments. Therefore, building an independent and energetic judiciary is essential if Kosovo wants to avoid the risk of becoming, or being perceived as, a failed state,” Pallaska said.

“In order to achieve this objective Kosovo must utilise its most precious resource, its young and vibrant population, which in the past ten years has benefited from ample opportunities to access prominent universities in the U.S. and Europe and has acquired important professional skills while working for major international organizations in Kosovo,” he added.

According to Pallaska, one of the few positive collateral effects of the large-scale international presence in Kosovo during the past 10 years is the creation of a cadre of young professionals and business people that have been exposed to an international working and business culture. This, in addition to the recent halving of corporate tax to 10%, makes Kosovo an attractive place for hosting the regional headquarters of major international companies operating in SEE.

In December, the EU deployed in Kosovo a civilian rule of law mission, EULEX, which includes a 2,200-strong force of international judges and prosecutors, as well as police and customs officers. Its primary task is to assist and support Kosovo’s law and justice institutions in developing their capacities.

Kosovo, where 90% of the population is ethnic Albanian, declared its independence from Serbia on February 17, 2008, after being for almost nine years in an international protectorate, administered by the United Nations. Serbia, backed by its historical ally, says it will never recognize its former southern province as an independent state. So far Kosovo has been recognized by 62 states worldwide.

A government initiative to privatise Kosovo’s strategic assets ensued the declaration of independence. The government is seeking a concessionaire for Kosovo’s sole international airport, located just outside of the capital Pristina. Pallaska noted that “judging by the current pace of this process, the 20-year concession on the Pristina International Airport (PIA) will likely be awarded by the end of 2009.” The Kosovo government, which is expected to invite investors to express interest in the concession by the end of September, believes that the airport has a regional capacity, which is why it will limit the applicant pool to airport operators that have no substantial interest in airports located in a 200-kilometre radius around Pristina.

Pallaska also said the PIA concession and the impending privatisation of the publicly- owned Post and Telecom of Kosova (PTK) and the electricity distribution network of power utility KEK will have a tremendous impact on the country’s economic growth. In spite of the surprising cancellation of the tender for transactional services for the privatisation of PTK, Pallaska believes that this privatisation will go ahead and will be concluded in the next two years.

Kosovo is also working on expanding the road linking the airport with the capital Pristina. This section is part of the existing two-lane road linking Kosovo with Montenegro, which the government in Pristina hopes to transform into a motorway by the end of 2010. Furthermore, the cabinet is seeking transactional advisors for the construction of the Morine-Merdare motorway linking Albania with Serbia. Poor transport infrastructure is one of the obstacles Kosovo has to overcome in order to become a viable option for foreign investors. Most of the roads were destroyed in the 1999 war and, while Kosovo has already rebuilt most of them, no new motorways have been built so far. In this respect, Pallaska said that without a modern transport infrastructure, Kosovo cannot utilize its strategic market position of being located in the centre of the Balkans.

Notwithstanding the above, the construction of a 2,000 megawatt (MW) coal-fired power plant, a project worth some 3.5 billion euro ($4.99 billion), remains the top priority for the Kosovo government.

A consortium of Czech CEZ and U.S. AES Corp, as well as a tie-in comprising Greece’s Public Power Corporation (PPC), U.S.-based ContourGlobal and Italy’s Enel are the only two bidders remaining in the race for this project after the recent withdrawal of Germany’s RWE and a consortium of EnBW and U.S.-based WGI.

Kosovo possesses the world’s fifth-largest proven coal reserves, estimated at 12 billion tonnes, but suffers a lack of funds for extraction and prospecting. Kosovo’s two open-pit mines Mirash/Bardh are nearing depletion, which means that the new Sibovc mine will have to fully meet domestic lignite demand from 2012 onwards. The two Mirash/Bardh mines are expected to become repositories for coal ashes from Kosovo’s power plants.

This project is of immense importance because by 2015 Kosovo will be left only with its 700 MW Kosova B power plant, while the 800-MW Kosova A plant, built in 1960s, will be decommissioned for failing to meet environmental protection standards

Besides these major projects a number of public utility companies can also be attractive for foreign investors if the appropriate Public-Private-Partnership scheme is put in place, Pallaska said.

Pallaska & Associates (www.pallaska- is Kosovo’s leading law firm specialising in commercial law, intellectual property law and regulatory public law. Its client base includes prominent international companies that operate in Kosovo and the region, as well as top international law firms representing the interests of their clients in Kosovo.

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