Kosovo Fights Its Cafe Problem, Offering an Economic Glimmer of Hope | OZY

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Kosovo’s citizens are getting poorer and half its youth are unemployed, which is fueling a startup culture.

Along Mother Teresa Boulevard in Prishtina, Kosovo’s capital, cafes are always packed. Patrons mirror the country’s population: young and educated. But the brimming cafes reflect a demographic curse. With 53 percent of the country’s citizens being under the age of 25, Kosovo boasts one of Europe’s youngest populations — a demographic that is saddled with an unemployment rate over 50 percent.

That’s a tension masked by some of the country’s macroeconomic indicators. Since it declared independence from Serbia in 2008, Europe’s newest — although disputed — nation has witnessed year-on-year economic growth of between 3 and 5 percent, outpacing the rest of the Western Balkans, according to the World Bank, which is projecting 3.9 percent growth for the country in 2019.

We had to start over from scratch.

Visar Vokrri, economist

But because that GDP growth has principally come on the back of big infrastructural projects that serve as short-term booster shots, rather than long-term economic drivers, Kosovo remains one of the poorest nations in Europe. Gross national income per capita experienced a drop of more than $100 between 2014 and 2016. This means that while the country as a whole is developing, its citizens are seeing less in their bank accounts year after year. A decade after Kosovo proclaimed its birth as an independent nation, its growing pains are only intensifying. Its cafes are full, but the wallets of visiting patrons are not. The only glimmer of hope comes from a nascent service sector and a handful of startups.

“GDP growth does not paint an accurate picture of Kosovo’s economy and personal welfare,” says Visar Vokrri, a researcher and lecturer in economics at Prishtina University. “We have to look at where we started — after the [Yugoslav] war, we had to start over from scratch.”

Gains in GDP are easier with a lower development base. Building a power plant or a highway creates possibilities for industries that were inconceivable in war time. Since its declaration of independence, Kosovo has splurged on infrastructure development — revamping power plants, building international highways and constructing the Mother Teresa Boulevard, a walking street named after the Albanian holy woman. But infrastructure sector jobs are usually temporary, says Vokrri.

 

Heavily dependent on imports, Kosovo has a trade deficit of 238 million euros. Each year, it imports goods worth 2 billion euros. Its supermarkets are filled with products from Greece, Macedonia and even Serbia, with which Kosovo enjoys a tense peace.

Kosovo’s economy also depends heavily on remittances from its diaspora and on foreign direct investments. The Kosovo Central Bank estimated that in 2015 alone, Kosovars living abroad sent home 752 million euros — the figure may actually be larger since informal channels aren’t accounted for by the central bank. But most of these remittances go into consumption, experts say, with barely 10 percent invested. That investment too is mostly in real estate, not a sector that can drive an economy in the long term.

The service sector, which contributes more than 60 percent of Kosovo’s economy, offers an opportunity — it boasts a positive trade balance, for starters. But service sector jobs are difficult to create in the absence of developed private enterprise and a market environment that supports it. “The government is still not focusing its efforts to boost this sector,” says Uranik Begu, executive director of the Kosovo Center for Innovation.

These challenges are giving birth to a problem-solving startup culture, led by a group of mentors at the University of Prishtina. With desks cluttered with laptops and coffee cups and surrounded by excited young entrepreneurs, the offices of Venture UP could pass for any Silicon Valley startup. The office is a largely empty room in the basement of the University of Prishtina, but that suits Venture UP just fine. After all, they’re trying to incubate something out of nothing.

“I see Prishtina University as a sleeping giant,” says founder Erblin Hoxha, citing the university’s student strength of 50,000. “People think that the environment is bad for small businesses, but our job is to prove them wrong.”

For the past four months, Venture UP has helped more than 550 students turn ideas for small businesses into reality. This includes working with in-house graphic designers and web developers, as well as with pitch meetings and business plan reviews. At the end of the program, students will pitch their ideas to investors, hoping for the funds to start it.

The incubator is trying to help young men and women think like business people in an environment where securing funding for innovative ideas is hard. “It’s difficult to start a business in Kosovo,” says Getoar Krasniqi, another founding member of the nonprofit. “We’re trying to provide a platform where students can begin thinking like business people.”

The German International Development Fund and the United States Agency of International Development are supporting Venture UP, which sees this funding as startup capital for the future of the Kosovar economy. That future depends on the emergence of a generation that learns to take risks to create opportunities, suggests Hoxha. “You have to do it yourself,” he says.

That change won’t come easily. But organizations like Venture UP and the Kosovo Center for Innovation may be the nation’s best bet if it is to start getting its youth out of cafes and into the workforce.