Regional Development Strategy FOR THE ECONOMIC REGION EAST REGION EAST. Implemented by

Transcription

1 FOR THE ECONOMIC REGION EAST An EU funded project managed by the European Commission Liaison Office REGION EAST Implemented by Regional Development Strategy

2 Regional DEVELOPMENT STRATEGY FOR the ECONOMIC REGION EAST On behalf of the RDA-East, I would like to express our appreciation to all involved actors in the design of the Regional Economic Development Strategy for economic region East. This strategy is finalised as a result of strong cooperation of a large number of individuals and institutions involved. My special appreciation goes to the dedicated RDA-East staff members in facilitating and coordinating the strategy development process. The RDA-East would like to thank the following institutions, businesses and other organisations for their valuable contribution in the strategy design process: 2 Mayors and municipal officials from Economic Region East Business community from all municipalities of Economic Region East Alliance for Kosovo Businesses Kosovo Chamber of Commerce Association of Kosovo municipalities Office of the Prime Minister (through its former Agency for European Integration) Ministry of Local Government Administration Ministry of Trade and Industry Ministry of Environment and Spatial Planning Ministry of Labour and Social Welfare Ministry of Economic Development Ministry of European Integration Regional and Municipal Employment Centres Vocational Training Centres from ERE University of Prishtina Bank institutions operating in economic region East Local and national media representatives Local non-governmental organisations and associations International Governmental and non-governmental organisations Regional and municipal Public Utility companies Almir Hyseni Executive Director RDA East The English version of this document is the version of reference. The document has been produced with the assistance of the European Commission Liaison Office to Kosovo. The content reflects the views of the Regional Partnership comprising the Core Partnership Working Group, the Thematic Working Groups and other Stakeholders, and does not represent the official views of European Commission Liaison Office to Kosovo. An EU funded project managed by the European Commission Liaison Office Implemented by

3 table of contents Table of Contents Foreword 4 Introduction Introduction Kosovo East Economic Region Geography and Topography Natural Resources Infrastructure Transport Solid waste management Electricity Heating Energy Telecommunications Business Infrastructure 1.3 Education Primary & Lower Secondary Education Higher Secondary Education University Education Vocational Education and Training 1.4 Health Care 1.5 The regional economy Business Agriculture Tourism The Financial Sector 1.6 Human resources and labour market SWOT Analysis Development Strategy The Vision 3.2 Priorities for the Development of the Eastern Region PRIORITY 1: Economic Development of the Region PRIORITY 2: Development of economic infrastructure PRIORITY 3: Human Resources Development PRIORITY4: Institutional strengthnening and international and interregional integration and cooperation Socio-economic profile of the region 3

4 foreword Foreword BAJRUSH XH I Chairman of the RDA-East Governing Board O 4 n behalf of the RDA-East Governing Board, I am delighted, to introduce the Regional Economic Strategy for the Economic Region East The large participatory involvement of regional stakeholders and experts is the defining attribute of this strategy. Such broad participation and contribution encourages myself and the honoured members of the RDA-East Governing Board to give intense support to the Strategy s implementation and put into practice the Regional Development concept. Our aspiration is reflected in our vision for the region - that Economic Region East will become a sustainable region based on production economy together with sustainable use of natural resources, attractive for investment and for living, with fully developed touristic and human resources potential and a regional cultural and economic bridge integrated into the EU. To that end, and on behalf of the RDA-East Governing Board, I m delighted to welcome this strategy for Economic Region East. I look forward to working closely with the business community, partners, stakeholders and individuals over the coming years to ensure that the Economic Region East becomes a truly prosperous. Qemajl MUSTAFA Former chairman of the RDA-East Governing Board T his strategy has been completed after lengthy study and joint effort. The socio-economic analysis of the Economic Region East as well as the identification of priorities will facilitate sound regional development. The launch of this strategy occurs at a crucial moment. It is the first ever regional strategy for our region. It is result of the hard and productive work facilitated by RDA-East in partnership with the stakeholders of the Economic Region East. We appreciate the EU support given to RDAEast, through the EC Liaison Office (ECLO), EURED Technical Assistance, Regional stakeholders (municipal officials, the core partnership working group, the thematic working groups, civil society representatives, etc). We are grateful for the hard work done in designing this strategy, for reaching consensus amongst municipalities in the region and for providing important input for future development. The strategy building process provided a new experience in cooperation and partnership between the municipalities of the Economic Region East and, I would like to express my best wishes for the future of the strategy.

5 Introduction T he design of the Regional Economic Development Strategy for the Economic Region East is an activity that was foreseen in the Grant Agreement between the European Commission Liaison Office to Kosovo and RDA-East Governing Board, signed on 24 June In order to establish partnerships for developing the strategy, the RDA-East has established contacts with municipalities and other interested parties, including civil society organizations, business community and central institutions. Prior to starting the strategy design process, RDA-East conducted a series of meetings with a significant number of institutions. Consequently, it has created a regional partnership Core Partnership Working Group (CPWG), consisting of more than 45 representatives from the business community, individual businesses, civil society, government and nongovernment organizations, including local and central institutions. The regional economic development strategy is reflection of work and the view of the partnership. introduction 5

6 1 Socio-economic profile of the region 1.1 introduction 1. Socio-economic profile of the region 1.1 Introduction This socio-economic analysis is based on data collected from the Municipalities and data from different sources at municipal and Kosovo central level institutions. It is considered to be the most reliable data available. There is still much room for improvement, however, and the baseline data produced herein will need to be further developed in the coming years. Kosovo 6 Kosovo is situated in the Western Balkans. To the north and east it is bordered by Serbia (352 km), to the south by FYROM (159 km), to the west by Albania (112 km) and to the northwest by Montenegro (79 km).1 It has no access to seas. Kosovo covers a surface area of 10,887 square km. According to the last census in 1981 there was a population of 1,584,000 while in 1991 it was estimated that the population had increased to 1,956,000. No census has been performed since the The population density is inhabitants per square km.2 The estimate of 1991 describes the presence of several ethnic groups. The most numerous registered ethnic groups were Albanians (1.6 million) and Serbs (195,600) with Turks, Roma, Ashkali, Egyptian, Bosniak and Gorani accounting for 156,400. The demographic structure has undergone slight changes after the 1999 war. Based on the birth rate of 12.7 per 0 inhabitants the estimate of population in 2007 is 2,126,708, but the 1999 war and migration of kosovars since then, have precluded the expected growth of population.3 Figure 1. Map of Kosovo with its five economic regions divided North Economic Region West Economic Region Central Economic Region South Economic Region East Economic Region With its relief mainly in the form of river draw, Kosovo is geographically divided into two primary planes, that of Kosovo in the east and the Dukagjini in the west. Altitude in the flat fluvial basins is between 400 to 700 metres, while the lowest point of 297 metres is in Vermica4 at the border with Albania. The two basins are divided and surrounded 1) 2) 3) 4)

7 Socio-economic profile of the region 1 introduction 1.1 East Economic Region The East Region consists of eleven municipalities three of which were recently established (during 2009 elections and within the territory of the region). But the information which is presented below was available only for the eight municipalities which primarily established the Regional Development Agency East. The original municipalities of the region are Ferizaj/Uroševac, Gjilan/Gnjilane, Hani i Ele- Figure 2. Map of the economic region east Novobërdë/ Novobrdo Kamenicë/ Kamenica Ranillug/ Ranilug Gjilan/Gnjilane Kllokot/ Klokot Ferizaj/ Uroševac Shtërpcë/ Štrpce Partesh/ Parteš Vitia/ Vitina Kaçanik/ Kačanik Hani i Elezit/ Đeneral Jankovi zit/đeneral Jankovi, Kacanik/Kačanik, Kamenice/Kamenica, Novoberda/Novobrdo, Shterpce/Štrpce and Vitia/Vitina. The three new municipalities are Kllokot/Klokot, Ranillug/ Ranilug and Partesh/Parteš. The Region covers 2,407 square km or % of Kosovo territory, while the number of inhabitants has been estimated at 456,292, i.e % of the total Kosovo population (Chart 1). The biggest economic centres in the region are Ferizaj/Uroševac, (with 144,351 inhabitants)7 and Gjilan/Gnjilane, (with 133,724 inhabitants)8. 5) 6) Unemployment registration rate Source MLSW / DLE Annual Report ) Plani i Zhvillimit Urban te Ferizajt, page 19. 8) Local Development Strategy, Gjilan, page 25. with higher mountains at the altitude of 2,000 to 2,500 metres, highest point, Gjeravica, is 2,656 metre.5 Kosovo is known for its mineral resources like coal, nickel, led, zinc, magnesium, kaolin, chrome, aluminium, gold, silver, cooper etc. Before the war economic development of the Kosovo was determined by the planned method of the former political system. In that system Kosovo had the number one exporting mine Trepça, which unfortunately after the war has never restarted its function. However, Kosovo was the least developed area in former Yugoslavia. Nevertheless, its industry was very highly export-orientated to highlydeveloped European countries. After the war economic development is troubled by numerous internal and external difficulties. Although International Community assistance was absolutely and relatively high, and is still ongoing, unemployment is higher than 50%.6 In addition to this, the social needs of the population greatly exceed the tax revenue capacities. One of the biggest challenges in this situation is still the revitalisation of the economy. 7

8 1 Socio-economic profile of the region 1.1 introduction Chart 1: Area and population indicators of the East region in relation to Kosovo Chart 2: Comparative sizes of municipalities in the East Economic Region Area Kllokot/ Klokot Partesh/ Parteš Ranillug/ Ranilug Hani i Elezit/ Đeneral Janković Novobërdë/ Novobrdo Shtërpcë/ Štrpce Vitia/ Vitina Kaçanik/ Kačanik Chart 3: Comparative population numbers in municipalities of the East Economic Region Population Ferizaj/ Uroševac Gjilan/ Gnjilane Kamenicë GjilanFerizaj Kacanik VitiShterpce Novoberde Hani i Elezit Ranillug Partesh Kllokot Kamenicë/ Kamenica The region east has basic economic infrastructure which was inherited from socially owned enterprises and some small and medium private enterprises. Based on its geographical position the closest airports are the International Airport of Prishtina/Priština and Shkup/Skopje Airport. The region east is quite densely populated, with inhabitants per square km. This region offers the opportunity for planning and developing other services as well as tourism. It is not the intention of this part of the analysis to deal in detail with other development potentials and possibilities, as these will be analyzed in detail in the later part of this socio-economic analysis of the region. The sizes of the municipalities as well as their population is given in the two charts above. Kllokot/ Klokot Partesh Ranillug/ Ranilug Partesh/ Parteš Hani i Elezit Kllokot Geography and Topography The economic region east (ERE) covers about 2,704 square km and today it is inhabited by approximately 456,000 people. It borders with Economic Region Centre at the north, with Serbia on the east, with Economic Region South on the west, and with FYROM on the south. The economic centres of the region are Ferizaj/Uroševac, and Gjilan/Gnjilane. Ferizaj/ Uroševac is located at a distance of 37 km from Prishtinë/ Priština, 50 km from Prizren, 48 km from Shkup/Skopje9, while Gjilan/Gnjilane, is located at a distance of 46 km from Prishtinë/ Priština, 87 km from Prizren and 85 km from Shkup/Skopje. 9) Strategjia Afatmesme e Zhvillimit Ekonomik Lokal të Komunës së Ferizajt Novobërdë/ Novobrdo Kacanik Shtërpcë/ Štrpce Kaçanik/ Kačanik Vitia/ Vitina Kamenicë/ Kamenica Kamenicë Hani i Elezit/ Đeneral Janković Ferizaj Gjilan/ Gnjilane Ferizaj/ Uroševac 0

9 Socio-economic profile of the region 1 introduction 1.1 Natural Resources This region is characterized by rivers of small capacity. The largest rivers in the ERE are Lepenci (53 km long), Nerodime and Morava e Binqes (60 km). There are also several streams with small capacity. There are few glacial lakes in the Sharr Mountains, the most beautiful, with magnificent surrounding landscape, are the lakes Livadica and Jazhinca.10 In Sharr area there are about 25 small glacial lakes, mainly in the borderline between Kosovo and FYROM.11 The land, although hilly and mountainous, is arable, with good natural nutrients and rich soils, suitable for agricultural farming or animal pasture, and for timber and related wood industries. A lot of land is currently unused, under-utilized, or not used to its best advantage, particularly with regard to agricultural planning, light or medium industry, or even as developed housing communities. Better usage would contribute to a diverse and more stable economic region. Agricultural land covers about 116,028 ha of the area in the East region. There is approximately 72,868 ha (or 26.2% of total surface) covered by cultivatable land, 30,075 ha (or 10.5%) of pasture-ground and 13,085 ha (4.7%) of other agricultural surfaces.12 Forests cover about 102,415 ha of the region, another 7,937 ha are pastures and 4,843 ha are bare-land.13 There is no reliable data about total wood mass, annual growth and wood cutting. What is important for forestry and wood processing is the fact that wood cutting must not exceed annual wood growth. Wood cutting since the war exceeds annual growth which tends to degrade the woods. Use of wood as main source of heating is one of the main risks toward wood overexploiting. Fauna is also very rich in economic region east. The wild animals living in this region include foxes, wolfs, bears, rabbits, chamois, roes and grouse. There has been intensive mineral exploitation at several locations in the region, mostly in the south and north, but minerals can be found throughout the region. In general the entire economic region east is rich with different minerals and ores such as lead, zinc, silver, gold, copper, chrome, iron, magnesium, lignite, mineral water, decorative stone, marble, andesine, kaolin, granite, quartz sand, argil sand, leucite, limestone, feldspar, tufite, etc. The mine in Novobërdë/Novobrdo is known from middle ages, but production started only in Its ore is known for very high percentage of minerals at the rate of 25%, and it contains zinc, lead, silver, gold and copper. According to an American group of experts that visited this mine in 2003, the Novobërdë/ Novobrdo mine has reserves of ores for another 25 years of exploitation.14 10) Plani Hapesinor, Shterpce 11) Hydrological heritage in the system of natural values and its protection in Kosova, page 4 12) Local Development Strategies of the municipalities of the region 13) Same as above 14) Local Development Strategy of Novoberda municipality Landscape in Brezovica Minerals found in East Kosovo The economic region east covers two customs points with Serbia and FYROM, while the average distance to the customs point with Albania is 60 km, linking ERE with the seaport of Durres, 170 km from the border. A new highway is under construction on Kosovo side, which is going to be very important for international trade activities. This region is made of hills, mountains, valleys, and rather limited continuous levels of flat land. The climate is suitable for vegetation and these all add to the features in the area. Streams and rivers with beautiful, clean, clear water flow all year long. There are snow-capped hills and mountains; forests with a wide variety of vegetation and various trees (mostly high quality hardwoods), and some flat areas, all providing great potential for economic development. 9

10 1 Socio-economic profile of the region 1.2 Infrastructure 1.2 Infrastructure Transport 10 The road M-25-2 linking Gjilan/ Gnjilane with Prishtinë/ Priština The existing roads in the region stretch alongside the communication lines Albania-KosovoSerbia-FYROM. However, roads in ERE are not even close to European or any other modern standards; they were insufficiently engineered at the outset, poorly maintained, lacking hard shoulders, undergo frequent temporary repairs and numerous potholes remain untended and generally not wide enough for normal two way traffic, etc. The extremely bad technical characteristics of the roads lead to high transport costs. This data implies the need to improve the road network by the construction of modern roads and by modernizing the existing ones. The most important road, the M-2, goes from Han i Elezit/Đeneral Janković, (border crossing point with FYROM) through Ferizaj/ Uroševac, (the crossing point with the M-23.3 road leading through Gjilan/Gnjilane to state border with Serbia) and Prishtinë/Priština to northern part of Kosovo (Mitrovica). Another important road is the M-25.2, linking Gjilan/ Gnjilane with Prishtinë/Priština. Although maintenance work is done regularly and roadsigns are fairly good, the road is not adequate for the frequent traffic and driving capabilities of modern cars. Due to this, the road is slow taking into consideration that the maximum allowed speed is 80 km/h. This applies for Kosovo wide at this point of time. For example, approximately 2.5 hours of driving is needed to travel the 125 km (Gjilan/GnjilanePejë/Peć), because of the heavy loaded traffic and poor road conditions. The average driving speed cannot be higher than 50 km/h. Chart 4. Paved asphalted roads in the region east km km Asphalted roads Not asphalted roads Another road to the border crossing point with FYROM in Glloboqica, is poorly maintained causing frequent closures during winter season. This border crossing point is not a customs point, and due to this the only customs approved crossing point in Hani i Elezit/ Đeneral Janković is often overloaded. A new border crossing point is planned to be established between Gjilan/Gnjilane and Kumanovo (in FYROM). There is no single kilometre of highway in the Region. Most of the roads of the region are asphalted, out of 1,234.8 km of roads, km are asphalted or in percentage 58.6 % and the rest are paved with gravel.15 The main railway line from Mitrovica to Shkup/Skopje goes through three municipalities of the region east, which represents an additional advantage especially for transport of goods and international connections and trade. With expansion of population in the towns the railway goes through, everyday more and more it is becoming additional factor in overloading the anyway loaded traffic, this has a higher impact especially in the town of Ferizaj/Uroševac. An additional disadvantage of the railway network is the average speed of the trains (below 50 km/h) which disqualifies it as a traffic alternative. The railway is also far from fulfilling European standards. Possible solutions to this problem by special regulation at state level need to be considered. There is no airport in economic region east, but the International Airport of Prishtina/ Pristina is only 46 km from Ferizaj and 54 km from Gjilan/Gnjilane. Furthermore the Airport in Shkup/Skopje is 50 km+ from Ferizaj/ Uroševac along the main road M-2, and with the planned opening of the new border crossing point it is going to be around 80 km away from Gjilan/Gnjilane.

11 Socio-economic profile of the region 1 Infrastructure 1.2 Water Supply and Waste Water Treatment 15) Local Development Strategies of the municipalities of the region 16) Analiza Hapësinore, Kaçanik, page 45 17) Analiza Hapësinore, Kamenica, page 51 number of surrounding villages or described in percentage it exists in less than 15% of settlements. Even in towns there are parts with no network or where it is very old and needs repairing or increase of capacities of the existing pipes. With the usage of the sewage system expansion, there is a need for a more comprehensive water management system. An essential element of a modern water management system is separation of rain water from sewage (black water), which should be treated to enable it to be reused for the needs of irrigation of agricultural land, and to protect the living environment from permanent pollution. Separation and filtering of rain water and its usage for irrigation reduces release of sewage (black) water during their time of their outpour and helps reduce the costs necessary for treatment of the sewage water Two options have been identified for addressing this situation: Option 1 Decentralised treatment of sewage water in each town/village, by having its own treatment plant and Option 2 Centralised treatment of sewage in only one treatment plant, which later would treat also the sewage water from rural areas. Based on this version, in the economic region east it is preferred to be built two plants for treatment of sewage water, one in Ferizaj/ Uroševac, and one in Gjilan/Gnjilane.17 However as yet, no commitment has been made to fund either of them. As a result of industrial capacities being reduced after the war, pollution from these sources is less than in the pre-war situation. Maintenance works on the sewage system are minimal due to a constant lack of funds. During heavy Perlepnica lake This region is characterized by rivers of small capacity of water meaning that the region is lacking water resources and especially municipalities of Novobërdë/Novobrdo, Kamenicë/ Kamenica and Gjilan/Gnjilane (north-eastern part of the region), which are supplied with water through rainfall collection points and underground drillings, which capacities are very limited for fulfilling of needs of the citizens with drinking water. Generally taken in the region there are three types of drinking water supplying systems: Gravitational artificial lakes, Water pumps underground drillings, and Wells private especially in rural areas.16 Based on data collected from the abovementioned municipalities of the region, only 25% of the localities have water supply systems in place. A little better situation is in the other municipalities, where the reserves of water are higher, and percentage of population being supplied with drinking water is over 35%. Solving the problem of the water supply system in the whole East region is the priority of most of the regions municipalities. There is a plan for co-funding by Swiss government including two municipalities from the region (Gjilan/Gnjilane and Viti/Vitina) in building a new dam in the river Morava e Binqes in order to supply both municipalities with drinking water and also for irrigation system. Water is in equal demand by the settlements, agriculture, and industry, but not only in the region east. There is a common system for disposal of waste and rain waters which is very close to total failure due to the age of the network. Sewage systems exist only in central zones of bigger settlements in the East region municipalities. The population in other settlements use alternative solutions which endanger the environment (tanks, septic pits or direct connections to water streams). Treatment of the sewage water is done through cesspools, which in many occasions represent potential sources for spreading of diseases. In other cases sewage flows into streams and rivers without any prior treatment, polluting the environment and rivers passing through these towns. The sewage network exists only in main towns of the municipalities and in a small 11

12 1 Socio-economic profile of the region 1.2 Infrastructure rain, the local roads in settlements are flooded and water causes traffic jams and damage to the roads. The level of awareness about the significance of this issue for the overall community needs to be raised. Waste water treatment is an issue that requires implementation of the the polluter pays principle. Solid waste management In the region there are two public companies engaged in the collection, transport and disposal of solid waste. These companies have operations in each municipality. The waste collected from all over the region is transported to the main regional storage area in Gjilan /Gnjilane, where it is stored without any further treatment. The depot was funded by the European Agency for Reconstruction and it started functioning as a modern waste depot in May Due to lack of maintenance and the fact that so much waste from the entire region (plus from the municipality of Shtime/ Štimlje) is being brought to this single depot, it is in a very bad state at this point of time. In actual fact while waste is being collected from towns and bigger settlements, rural areas are almost ignored by this service. The main problem for the region in regard to waste disposal is the illegal depots, especially in rural areas, where as a consequence we have pollution of rivers and streams, and subsequently pollution of soil and air. In the future, this issue needs to be addressed according to EU regulations, and waste should be burned and only the ashes should be stored. Throughout Kosovo only a few such depots will be needed for burning of waste, which should be built in combination 0.4 Chart 5. Daily average of waste generation in the regions of Prishtinë/Priština, Prizren and Gjilan/Gnjilane in Prishtinë/ Prishtina Priština Prizren Gjilan/ Gjilan Gnjilane Average with the existing regional depots. Priority for the region remains waste collection from every settlement of the region, and its management, by building treatment plants for solid waste and the possibility to develop certain companies which will use recycled material. Protection of the environment would be improved and the environmental balance preserved. Electricity The electrical network exists in all settlements of the east economic region and there is no housing without electrical supply. There is no plant of any kind, located in region for electricity production. The region is supplied from the only electrical power supplying company Korporata Energjetike e Kosoves. The company is in the phase of transitional change, and privatisation. Street lights are also managed by this company. As with other public utilities, the pricing system is controlled by the government and has different tariffs, set depending on the status of the customer (domestic or business). High-voltage and low-voltage transmission lines and transformer stations are being used for the distribution of electrical power. The high-voltage transmission line is an important part of the Balkan network, so further modernisation and development are expected. The low-voltage (users) network in the region is satisfactory. The distribution system is not satisfactory as it has voltage drops very often causing problems mainly to production businesses. Due to tremendous use of electrical power, problems with electric power supply are present and as a result of this power restrictions and reductions are used in all parts of the region. Heating Energy The population in economic region east mainly uses wood or electric power rather than coal for heating. A small number of households have organised their own central heating systems with oil or mazout or alternative sources such as gas are used. Smaller households use private heating which as a source of energy uses mainly wood, and coal. Some households use electricity as an additional source of energy. In most cases, according to the low level of income per capita, the cheapest source of energy, wood, is used. 18) The state of Waste in Kosovo , page 43, publication of Ministry of Environment and Spatial Planning. 19) The state of Waste situation in Kosovo, page 35, publication of Ministry of Environment and Spatial Planning. 12

13 Socio-economic profile of the region 1 Infrastructure 1.2 losses, including the number of subscribers. Availability to global information is satisfactory. Because economic development is halting behind, the development of modern communications is slow. There is a lack of service providers and there is still a lack of local awareness on trends, standards and possibilities in the development of communications in Europe and the rest of the world. Government has a developed a strategy for egoverning Also there are plans for developing networks for all the schools of Kosovo. Business incubator in Gjilan/ Gnjilane Commercial buildings, schools, hospitals and other similar institutions usually have their own heating systems, using mainly mazout and wood as a source of energy. Telecommunications The telecommunication system in economic region east is divided into two systems of fixed (land-line) and mobile communication. There is one public company and one private engaged in telecommunications (PTK20 and IPKO21). In the field of mobile communication, part of the region is also covered by FYROM and Serbian mobile operators, operating illegally within the territory of Kosovo. The transition process in the public company is in progress. Land-line communication capacities are well developed, but do not cover the rural areas, while mobile communication has good signal coverage in most of the region. Each of the telecommunication systems provides also Internet. The private company IPKO additionally provides cable TV, which service is provided also by another private company named KUJTESA22, too. The land-line and mobile telecommunications service market in ERE are characterized by the following: lack of competition of landline and mobile communications providers expensive cost of landline and mobile communications services unsatisfactory quality of the services offered. Rapid development of telecommunications after the war has already surpassed the war The only functioning industrial zone in the east region is located in the vicinity of Ferizaj / Uroševac, (village Babush), where fourteen businesses operate. There is another one which is under construction also in the municipality of Ferizaj/Uroševac, (village Komogllava). There are locations with invested resources (assets), production and employment, established by and used by private businesses. In the town of Gjilan/Gnjilane there is a Business Incubator, which was funded by EU through European Agency for Reconstruction, having 0 square m for business with 18 working premises. But the condition it is now is not satisfying, because it is a cheap rent premise for offices and business rather than proper business incubator offering foreseen services. There is a lack of investment and growing concern related to the development of new economic premises.24 There has been noneconomic use of space and more expensive building of industrial capacities due to the new demands for infrastructure. Spatial planning of the region and the organisation of land use need to be done in order to prove to be a convenience for investors, including interested concessionaires. It is worth mentioning that identification and categorization of entrepreneurial (industrial) zones have been discussed in some municipal assemblies aiming in resolving the issue of lack of business parks and industrial zones. The problem lies in the unbalanced private and public interest, the insufficient interest of local and regional authorities to balance the situation and the lack of incentives for the rational use of sites and premises. 20) 21) 22) 23) Electronic governance strategy ) Business Incubator Gjilan, ( Business Infrastructure 13

14 1 Socio-economic profile of the region 1.3 Education 1.3 Education T REGIONAL ECONOMIC DEVELOPMENT STRATEGY FOR THE ECONOMIC REGION EAST he present education system in Kosovo consists of the obligatory primary and low secondary education and non-obligatory secondary high and university education. Since 2002 MEST established a new structure of education. This structure indicates the organisational system of education that is as in the following: preschool education, from 9 months until 6 years, compulsory education that is organized in 5 academic years primary education and 4 academic years Low Secondary education, as well Upper Secondary education that last 3 respectively 4 academic years.25 25) Review on Statistics of Education in Kosovo , Prishtina, January ) Plani zhvillimor i drejtorise se Arsimit , Gjilan A general modernisation of the educational system in line with EU standards is required. This is an ongoing process which is taking a long time. Among the main problems in education are lack of sufficient school premises especially in towns, where the education process is held in 3 to 4 shifts26, lack of professional cabinets and labs, basic means for teaching, practical education in cabinets and labs, lack of school libraries, sports halls, lack of professional books, lack of planning for preparation of specific profiles for the labour market, etc.

15 Socio-economic profile of the region 1 Education 1.3 Municipality Schools Classes Teachers Students Students per classroom report Students per teacher report Ferizaj/Uroševac ,143 21, Gjilan/Gnjilane ,073 18, , Kacanik/Kačanik , Hani i Elezit/ Đeneral Janković Kamenice/Kamenica , Novoberde/Novobrdo Shtërpcë/Štrpce Vitia/Vitina , Total region 196 2,697 3,799 63, Kosovo ,476 17, , Primary & Lower Secondary Education The primary and lower secondary education is obligatory for all children from the age of 6 to 15, based on law on primary and secondary education in Kosovo No. 2002/2. According to the table above describing the educational system, primary and lower secondary education lasts 9 years, and is based on the learning of the basic subjects needed for acquiring an elementary general knowledge. Beside the regular education system there are two music schools and no special schools (for children with special needs) but some attached classes in some schools in most of the municipalities. Attached classes are classes organised within regular schools with a primary intention to incorporate or gradually transfer children with special needs (based on their achievement and performance) to regular classes. Graph 1. Number of children per year in the region in the primary and lower secondary education.30 The number of schools for primary and secondary low (usually same building) education in the ERE is 196 this number relates to the number of primary schools, and not the buildings since one school can have more than one building - area schools), while the number of children is 63,944 and the number of teachers is 3, The number of pre-school education institutions in the region is 7, representing a very small absorbing capacity, and these institutions are located in the biggest urban centres. However in three municipalities of the region, Hani i Elezit/Đeneral Jankovi, Shtërpcë/Štrpce and Novobërdë/Novobrdo there are no such institutions at all. As can be seen in the below diagram, the number of children in school year 2008/9 has slightly decreased in comparison with school year 2004/ /5 2005/ /7 2007/8 2008/ ) Review on Statistics of Education in Kosovo , Prishtina, January ) Ministry of Education and Science, Education Statistics in Kosovo ) Ministry of Education and Science, Education Statistics in Kosovo Table 1: Primary & lower secondary education (according to the MEST for the school year 2008/09) 15

16 1 Socio-economic profile of the region 1.3 Education Higher Secondary Education 16 Higher secondary education is not obligatory thus the number of students attending secondary schools is smaller than those finishing primary education. Beside academic subjects, the children in secondary high education also have practical training, which is more or less only theoretical. Laboratories are rare and usually badly equipped. There are regular secondary schools (with different courses) lasting 3 or 4 years as well as religious schools. Schools are divided on an ethnic basis, with only few common schools. The reforms are aimed at education of young people with emphasis on practical knowledge. The selection of professions should be based on the needs of companies that exist in the region with a clear strategy setting out the professions that increase employment opportunities for the young population on the labour market of this region. From the above tables we can see that the economic region east takes part with approximately 20% of the total number of students in all levels of pre-university education. University Education Higher education is provided at University level. The number of universities has increased after the war in the economic region east with the introduction of the private universities (colleges). There are no age limits for this type of education. The public University of Prishtina has its branches in Gjilan/Gnjilane (Faculty of Education) and Ferizaj/Uroševac (Faculty of Applicable Sciences). There are also branches of two private universities-colleges in Gjilan/Gnjilane (Fama and Iliria) offering economic and law faculties with different programs. Table 2. Higher secondary education in 2008/9 (according to the MEST for the school year 2008/09).31 Municipality Schools Classes Teachers Students Students per classroom report Students per teacher report Ferizaj/Uroševac , Gjilan/Gnjilane , Hani i Elezit/ Đeneral Janković Kaçanik/Kačanik , Kamenicë/Kamenica , Novobërdë/Novobrdo Shtërpcë/Štrpce Vitia/Vitina , Total region ,103 21, ,039 4,789 96, Kosovo 30) Ministry of Education and Science, Education Statistics in Kosovo ) Ministry of Education and Science, Education Statistics in Kosovo ) A Review of Private High Education in Kosovo, page 2 33) University of Prishtina, , Prishtina 2005, page 37 34) A Review of Private High Education in Kosovo, page 3

17 Socio-economic profile of the region 1 Education 1.3 Vocational Education and Training The informal education sector is not so well developed in this region. However, there are certain signs of this sector s development, primarily led by the Ministry of Labour and Social Welfare through their Regional Vocational Training Centres plus some NGOs initiatives. Several educational centres provide informal education in the East Region, most of them in the towns of Gjilan/Gnjilane and Ferizaj/Uroševac. People usually attend informal education courses during their free time. The most popular courses are computer literacy and English and to some extent German language courses. Some professional commercial organizations provide this type of informal education at reasonable prices for students. The vocational training courses offered by the VTCs are free of charge and include:35 IT Business administration/entrepreneurship Graphic design Carpentry Metal works (welding) Domestic electrical installations Building and Construction Plumbing and pipe fitting Building (house) maintenance Self-employment The quality of the courses offered by the VETs (VTCs) is satisfactory, but they have very limited capacities. The number of university students is 92% in the academic year 2004/2005 higher than in the academic year 1998/1999. Every year approximately 24,000 students finish secondary high education and are potential for registration in the different private and public Universities.32 Another consequence that ought to be pointed out about the University of Prishtina/ Priština is the University reform, the efforts of the last period for necessary changes and introducing innovations at the University level and special faculties in the direction of improvement and raising of teaching quality and scientific research work in the spirit of the Bologna Declaration, its implementation in our specific conditions.33 The University of Prishtina/Priština has struggled with the Bologna reforms, although it still has the capacity to absorb 6,300 students.34 The possibility for improvement lies with the implementation of the Bologna declaration, and in the harmonization of the spectrum of education on offer in line with the current and future needs of the economy in the community. This can only happen if there is a willingness to change. 35) Ministry of Labour and Social Welfare, Strengthening of Vocational Training in Kosovo 17

18 1 Socio-economic profile of the region 1.4 Health Care 1.4 Health Care A 18 Regional Hospital in Gjilan/ Gnjilane Reformed health system in Kosovo is projected based on family practise, with access to doctors, nurses and other medical experts that work in group. Primary medical care: Primary facilities for medical care are clinics and smaller points included in this model of health care. Secondary medical care: Like general hospitals correspond to secondary level of medical care, including Regional Hospital in Gjilan/ Gnjilane and the University Hospital of Prishtina/Priština. Tertiary medical care: University Hospital of Prishtina/Priština is the only hospital, providing tertiary medical care.36 Institutional organisation of medical services in the region east of Kosovo consists of Clinical Centres of Family Medics, Ambulances, Hospitals, Mental Health Centres and National Institute of Public Health. In all the municipalities of the region primary medical care is provided, while secondary care also is provided in Gjilan/Gnjilane and Ferizaj/ Uroševac. Primary medical care is also provided in health houses and clinics which are located throughout towns and villages. There are also 3 centres for mental treatment: in Gjilan/Gnjilane (two) and Ferizaj/Uroševac. As far as the secondary medical care is concerned, in Gjilan/Gnjilane there is the regional hospital with units of gynaecology, intern, dialysis, paediatrics, surgery, anaesthesiology, orthopaedic, urology, infective, pulmonary, 36) Urban Development Plan of Ferizaj 37) Local Economic Development Strategy of Gjilan ) Urban Development Plan of Ferizaj 39) Health Sector Strategy , Prishtina, May 2009 emergency, ORL, ophthalmology, blood transfusion and maternity.37 Meanwhile in Ferizaj/ Uroševac there is the hospital with the units of surgery, gynaecology, emergency, paediatrics and intern.38 In Gjilan/Gnjilane and Ferizaj/Uroševac there are units of the National Institute of Public Health.An exact review of the health profile of Kosovo is disputable for the reason of limitations to the stretch and accuracy of the data. Also the Health Information System (HIS) is still not completed and as a consequence all the conclusions that can be drawn from the analysis of the data should be treated carefully. Despite these limitations it is very clear that the Kosovo health profile is among the worst in the South-eastern Europe. High levels of newborn mortality, TB and problems with feeding are ongoing concerns, while the disabilities and mental health are issues of high priority. A similarity can be noticed in the availability of medical professionals. In Kosovo, for 0 inhabitants there are 0.94 medics, 2.61 nurses and 0.06 dentists. Compared with neighbouring countries these proportions are low and especially in the number of medical doctors. In Primary Medical Care (PMC), the proportion superior panel/ medium panel is only 1:3. The average number of beds for 0 inhabitants is 1.43, a very low number compared to the other countries of the region.39 A similar situation is in the economic region east, but because of lack of information we have presented the figures for Kosovo wide.

19 Socio-economic profile of the region 1 The Regional Economy The Regional Economy The presence of a grey economy in the whole Kosovo is a fact so the calculation of GDP does not include an estimate which is not officially shown. Since, for reasons already mentioned, these issues cannot be dealt directly with at regional level the indicators given are those for entity and state levels. Since the average figures for other indicators at the ERE level are more or less ±10% of the Kosovo average, analysis based on entity figures can be taken to be mostly representative of the east economic region within the same range of errors. U ntil the 1990s the main industrial sectors of economic development in the region were textile, tobacco, batteries, radiators and equipment for heating, electrical tools and apparatus, steel tubes, cement, wood processing, food processing industry, metal construction and screws. Tourism has started to develop in the region lately due to the favourable location, numerous natural attractions, etc. As a consequence of the destruction of the Kosovar economy during the 1990s, and also destruction caused by the 1999 war, most if not all of the factories have stopped operating. At the present time the economic structure of the region is based on services, trade, accommodation, small production companies and transport of goods and people. In addition, the banking sector is developing quickly in the latest years. Statistical Office of Kosovo (SOK) has published casting of the Gross Domestic Product (GDP) with actual prices for the years Used methodology for casting of the GDP is based on concepts and determinations of the System of National Accounts 1993 (SNA1993). GDP in Kosovo during the period of has increased from 2,974.6 million Euros in 3,841.3 million Euros. GDP per inhabitant has increased from 1,457 Euros in 2004, to 1,784 Euros in There are no such data for the east region. The main component of the GDP is final consumption of the household budget economies, which has increased from 2,483.0 million Euros in 2004 to 3,640.9 million Euros in The gross capital has contributed with 28.5 percent in the 2008 GDP. Governmental expenses in the period have represented percent of the GDP for Based on provisional data of GDP, real growth for 2008 was 6.1% (inflation scale in 2008 was 9.4%).41 40) Statistical Office of Kosovo, GDP for ) Statistical Office of Kosovo, GDP for

20 1 Socio-economic profile of the region 1.5 The Regional Economy 20 East Region Kosovo East Region 94,906 15, ,643 1, , , , ,441 E 12, ,580 18,283 14, , ,580 18,238 14, , O P Q 3, ,031 3, I J K 7,076 3,243 2,790 4,438 1,002 1, ,681 20,615 5,259 7,751 3,345 3,055 1,321 1,289 1, ,353 1,152 1, ,681 20,615 5,259 7,751 3,345 3,055 1,321 1,269 1,757 4,114 1,000 1, ,009 42) Statistical Office of Kosovo, Statistical Repertoire of Enterprises in Kosovo Q ) Statistical Office of Kosovo, Enterprises in Kosovo ) Statistical Office of Kosovo, Enterprises in Kosovo ) Local Development Strategies of the municipalities of the region 563 Activities of extra territorial organizations and bodies N 1,650 Health M 1,094 H 5,189 5,169 21,253 L Education Public administration and denfence compulsory social secuirity Real estate activities, renting and bussines activities Financial and insurance activities G Transport, storage & telecommunication F Accomodation and food service activities Whole sale and retail trade, repair of motor vehicles and motorcycles D Construction Manufacturing C 1,039 16,849 The medium continental climate and heterogenic relief of the region offers good preconditions for development of livestock and crops. East region has about 105,600 ha of arable land, around 125,700 ha of forests and pastures.45 Agro-environmental conditions in Kosovo as well as in the region are favourable for agricultural production. However, agriculture also faces the necessity for transition from a centrally planned to a market economy. Beside with potatoes and some vegetables during specific seasons Kosovo has not achieved self-sufficiency in any of the major agricultural products. The Medium Term Development Strategy places the main emphasis on the economic development of the Households as employees, undifferentiated goods and services, producing activities of households for own use 66 Mining and quarrying Fishing 1,376 Agriculture Arts, entertainement and recreation Kosovo B 2005 East Region A 84, Total Kosovo Agriculture, forestry Section of economic activity Table 3. Number of employees in the declaring firms in KTA per section of activity for years 2005, 2006 and Eceltricity, gas, steam and air conditioning The number of registered businesses in the region up to the end of 2009 is 15,188. Most of active businesses are trade and service based while production takes place with only 10 14%.42 According to data published by the Statistical Office of Kosovo, up to the end of 2007 there were 12,679 registered businesses of all categories. But out of this number only 7,616 of them have paid taxes in the Kosovo Tax Authority, bringing to attention that these are the actually active businesses. According to the same source these businesses have in total 13,926 employees.43 The average number of employees per company/firm is 1.8 employees. However this figure is suspect, because according to unofficial information, a lot of businesses operate with unregistered employees (for whom neither taxes nor contributions are paid). Local authorities in the municipalities of the region have undertaken a lot of activities in helping development of genuine businesses, starting from easement of access to premises, working permits, reduction of municipal taxes, agreement for use of agricultural land, improvement of infrastructure etc. In the region east there are business support networks like Regional Office of Kosovo Chamber of Commerce and different business associations. In general, limited access to funds and bank loans represents a hurdle for development of SMEs in the region. Bank loans are not attractive mostly because of the collateral and high interest Business 2,932-4,031 3,

21 Socio-economic profile of the region 1 The Regional Economy 1.5 Table 4: Forest, arable and non-arable land in ERE.46 Land (ha) Forests Other Arable land ,664 1,544 16,084 2, Gjilan/Gnjilane 2,324 24,236-14,200 5,746 4,994 Kaçanik/Kačanik (+ Hani i Elezit/ Đeneral Janković) 1,604 17,300-6,375 4, Kamenicë/Kamenica 1,254 21,742-16,221 9,246 3,837 Municipality Ferizaj/Uroševac Non-arable land Agriculture land Pastures Other Novobërdë/Novobrdo 191 3,286 2, , Shtërpcë/Štrpce ,831 1,000 5,119 4, Vitia/Vitina 1,525 9,356-14,064 2,103 2,652 Total: 7, ,415 4,843 72,868 30,075 13,085 sector, implying activation of natural and human resources, thus opening possibilities for reducing rural poverty. Agricultural policy must be based on strengthening the competitiveness of the sector. Agriculture in the private sector was never statistically measured in the same way as other market activities so there is no reliable data on agriculture, its domestic product or number of employees. The number of persons actually employed is normally overestimated, but it is not possible to determine what the exact percentage is. Agricultural production levels in ERE are far below potential or capacity. This is primarily due to migration resulting from the recent war, but also due to the loss of markets. The agricultural businesses, which were profitable in the past, are now non-profitable and cannot be maintained by the sale of domestic products at open markets. Before the war most of the agricultural business activities in the ERE were small private properties, while most of former socialist type of cooperatives have started disintegration after the regime imposing interim measures and dismissing of Albanian employees. Currently, the amount of agricultural land being actively farmed is very low. From all this data we can conclude that our biggest agricultural potential is in the manufacturing and processing of milk, meat and meat products, then eggs, vegetables, and we have very limited resources for the production of wheat or crop farming in general. From the table above it can be seen that in east region there are some medium large areas of land suitable for agriculture and the development of cattle breeding. But big portions Chart.6: Relation in percentages of the forest, arable and non-arable land in ERE.47 Natural parts Non-arable land Natural parts Forests Natural parts 0ther Agriculture land Arable land Agriculture land Pastures Agriculture land Other 3% 6% 13% 44% 32% 2% of land that could be used for agricultural production is being sold for the construction of houses or buildings for commercial purposes; this directly reduces the available potential for development of this industrial branch. Improper use of high quality agricultural land (i.e. for building) is extensive and in some areas the small agricultural producers have no, or only limited, knowledge or support from existing Cooperatives and agricultural producer associations. Another limiting factor is the weak food processing industry which has just started to develop. The areas around the urban centres are once again populated but the arable land available in semiurban or sub-urban areas is not good for extensive agricultural production. Livestock is one of the most important traditional sectors for rural economy, taking into the consideration that majority of this population lives in rural areas and the biggest parts of their incomes are generated through their livestock fund presented in the table below: Natural parts 46) Local Development Strategies of the municipalities of the region 47) Local Development Strategies of the municipalities of the region. 21

22 1 Socio-economic profile of the region 1.5 The Regional Economy Table 5: Description of livestock found in the region.48 Regional livestock fund Cows 37, Calves 17, Sheep 43, Goats 7, Chicken & Broilers 271, Pigs 10, Bee hives 12, , Horses The need for linking, and thereby enlarging and strengthening, agricultural producers is one of the most important challenges for all strategic plans for this area. Specialized, commercially organized, market oriented, and with strengthened technology and other know-how skills, agricultural cooperatives, cooperative organizations, clusters or some other type of organizing of agricultural producers oriented towards production and interests would be a solution for the first two problems mentioned. The current situation in this context is more focused on the organization of agricultural producers in municipal associations of agricultural producers, whose main function is more for political lobbying, and less partnership production. It is true that Kosovo, especially in this region, has suitable conditions for the production of organic food because of the fact that the country has unpolluted land, air and water, but there is very little experience in this specific and demanding production. There are weak formal and legal conditions (getting certification for products) and last, but not least, there is no profile for this production and without a profile it would be impossible to place organic food on the shelves of the markets in rich western countries. Tourism Tourism and winter sports potentials are good considering the fact that the biggest ski resort in Kosovo for downhill and cross-country skiing, ski jumping, snow boarding, general winter and summer hiking and climbing, is located in the economic region east. Unfortunately the infrastructure, facilities and equipment of SKI Resort Brezovica are not maintained properly decreasing at this stage of time number of tourists actually visiting the site. Obviously, big capital injections would be necessary to bring them up to ac48) Agriculture departments in municipalities of the region 22 per inhabitant ceptable standards. There are limited overnight capabilities, restaurants, and other facilities required for this type of resort. Due to the delay in privatization of the resort, and also due to illegal management and control, the prospect for these facilities is not good. Different investors, local and foreign, have been willing to get involved in the recovery, restoration, designing and development of these potentially lucrative resorts, but due to political reasons this has proved impossible. Major touristic potentials in the region are Brezovica ski resort, the thermo-mineral spa in Kllokot/Klokot and to some extent Novobërdë/Novobrdo castle. The proximity of these sites to Prishtinë/Priština, provides an added advantage for the development of winter tourism, but these fabulous mountains remain as yet in an indeterminate state. This region has great potential for the development of winter tourism (ski centres), because: There is tradition to some extent in this type of tourism There are topographic and climactic conditions suitable for this type of tourism. Large mountains covered in snow up to 280 days per year Proximity to the road communication with other regions and central Europe. There is an interesting historical castle and historical sites in the region, so historical tourism could be developed. Another aspect of tourism that is developing in the region is health/medical tourism based on the numerous springs of thermal mineral water. There are several places in the region which should be developed into real tourist centres. The wild forests and mountain areas during the summer impress visitors. Rich flora and fauna can contribute to the development of protected areas and national park tourism, especially in Sharr Mountain National Park. Road communication to this place exists but it needs to be better maintained and renovated in some parts. Mountain tourism could also be developed. There are several small lakes in the Sharr Mountain at very high altitudes with very picturesque landscapes. Development of complete and modern touristic infrastructure, will surely take a lot of time, effort and money. Therefore it is not considered that tourism is the sector which in the short-term can contribute to more significant revenues of this region, or play a more important role in the region s development,

23 Ski Resort Brezovica but taking into consideration all the available resources such as thermo-mineral water and mountains, it remains as one of the priority sectors for the region. This does not mean that a general interest in protecting the natural and ecologically clean environment will be jeopardized but, on the contrary, that interest generally penetrates other strategic resources, and as mentioned in the earlier context of other segments of the economic framework: organic food, bottled water etc, so it will play very important role in defining the vision of development of ERE and in determining its strategic objectives and priorities. The Financial Sector The Financial sector in Kosovo continued to expand its activities during 2008, despite negative developments in the financial markets worldwide. In the end of 2008, the value of financial sector assets reached euro 2.3 billion, an increase of 20.2 percent compared to This was mainly driven by the growth of the banking sector assets which compose around 80 percent of total financial sector assets. Pension funds compose 11.4 percent of total financial sector assets, followed by microfinance institutions with five percent, insurance companies with 3.4 percent and financial auxiliaries with 0.2 percent. The activity of financial institutions operating in Kosovo is not complex and is based mainly on the traditional financial activities such as lending and collection of deposits from citizens. The main activity of insurance industry is the Third Par- ty Liability (TPL) insurance and life insurance was introduced during Because of the nature of the financial sector activities in Kosovo, the sector was to a large extent intact from the developments in the global financial markets, apart from the Kosovo Pension Savings Trust (KPST) whose assets marked a considerable decline because of the fall in share prices in international stock markets. The value of financial sector Net Foreign Assets (NFA) reached euro 1.6 billion in the end of During the third quarter of 2008, NFA recorded a decline in their volume for the first time. The value of NFA in this period was 9.5 percent lower than in the previous quarter. This is mainly attributed to the decline of the CBK and pension funds NFA. Given that the CBK manages government deposits, the decline of CBK NFA is related to a considerable growth of government expenditures during the third quarter 2008, whereas the decline of pension funds NFA is mainly attributed to the decline of KPST assets invested in the international financial markets. The entry of new banks enhanced competition in the banking sector. This, to some extent, can be shown through the decline in the degree of concentration. For example, Herfindahl-Hirschman Index (an indicator that shows the degree of concentration in one industry) dropped to 2,747 in 2008 compared to 2,862 in Improved competition in the Kosovo banking sector can be also noticed from the narrower interest rate spread (the gap between interest rates on loans and deposits) during 2008 and the supply of new banking products and services in the market. Moreover, an expansion of the distribution network which improved citizens access to banking services was noticed in For example, the number of commercial bank branches in 2008 reached at 46 (38 in 2007), while the number of sub-branches reached at 233 (189 in 2007). Year 2008 marked a significant increase in the provision of banking services such as Automated Teller Machines (ATMs), points of sale, electronic banking accounts, etc., thus, facilitating clients access to banking services. During 2008, the banking sector expanded its activity by increasing loans and deposits considerably. The growth of financial intermediation was reflected in higher profits for banks, while the system continues to be stable, liquid and solvent.50 Socio-economic profile of the region 1 The Regional Economy ) In this context, financial sector consists of CBK and all financial institutions operating in Kosovo 50) CBK Annual Report

24 1 Socio-economic profile of the region 1.6 Human Resources and Labour Market 1.6 Human Resources and Labour Market D ata on human resources and labour market are very unreliable due to the fact that there has been no census since The labour market in the region, similar to the whole country, is unfavourably placed. Basic economic capacities in the region were damaged in the war and post-war revitalization did not happen in most of the area. Mostly by private and donated capital injection after the war, the two main municipalities of Ferizaj/ Uroševac and Gjilan/Gnjilane have been developed to some extent, which in comparison with other parts of the region is higher. Nevertheless, this development could not make up the pre-war employment level even in these towns nor could it significantly influence the general employment and unemployment situation in the region. The unemployment rate in the region can varying from 35-52% as presented in the table 6. Based on information from the Regional Labour and Employment Centres in Gjilan/Gnjilane and Ferizaj, we are presenting a table with data about job-seekers as per their qualification structure, age, gender and national structure. These data do not precisely present the actual unemployed, because a lot of unemployed never register with these centres for different reasons (Table 7). Table 6. Unemployment per municipality.51 Ferizaj/Uroševac 41.90% Gjilan/Gnjilane 47.69% Kaçanik/Kačanik (+ Hani i Elezit/Đeneral Janković) 45.21% Kamenicë/Kamenica 46.31% Novobërdë/Novobrdo 43.70% Shtërpcë/Štrpce 35.59% Vitia/Vitina (+ Kllokot/Klokot) 52.39% Average - Region 44.68% 51) UNDP 2004 report. 24 As can be seen from the table 7, that the total number of registered unemployed is around 70,000, representing 15% of the population of the region. This figure together with the number of employed of around 14,000, represent only 18% of population of the region, a figure which does not correspond with the 61% of work active population of Kosovo or with the unemployment figures presented in the table 7. Double unfavourable movements are occurring in Kosovo: employment shows a reducing trend as the result of privatisation while unemployment constantly grows as consequence of the lack of a development strategy. Total labour supply largely surpasses total demand and balance could be only achieved by influencing labour demand. The situation is difficult for almost all age groups and qualifications and the average period of job seeking is about three years. This trend is present in the region too. The labour market in the region is burdened by numerous problems. In such conditions the informal market the so-

25 Socio-economic profile of the region 1 Human Resources and Labour Market 1.6 Table 7. Registered unemployed in the Regional Centres of Labour and Employment No % Gjilan/ Gnjilane Number % Vitia/ Vitina Number Kamenicë/ Kamenica % Number % Novobërdë/ Novobrdo Number % Ferizaj/ Uroševac Number % Kaçanik/ Kačanik Number Shtërpcë/ Štrpce % Number % Total number of jobseekers up to the 69,536 end of November ,991 6,114 7, ,960 7,991 4,072 Unqualified 38, , , , , , Semi-qualified 3, , Qualified 6, , , , Secondary education 10,479 19, , , , , , , High school University degree Total number of jobseekers based on their age 69,536 22,991 6,114 7, ,960 7,991 4, , , , , , , , , , , , , , , , Total number of jobseekers based on ethnical structure 69,536 22,991 6,114 7, Albanian 60, , , , , , , ,960 7,991 4, , , , , , ,975 Serbian 6, , , Other 2, , Total number of female jobseekers 31, , , , , , , Total number of jobseekers with dissabilities called grey economy is rather developed. It is evident that many employees are not registered. There are many reasons for that but some of them include: Autocratic behaviour of many employers High taxes and contributions per employee Poor functioning of state administration that does not penalise work in the black market Absence of unions for employees Wrong interpretation of the term entrepreneurship Legislation regulations which are not adequate and stimulating, etc. A black market exists, but there are no upto-date records and the need for the proper treatment of this issue is emphasized. The status of some categories of workers is not correctly defined; e.g. local employees of international organisations, employees who work in foreign countries, representative branches of foreign companies, employees who work in unregistered companies, employees on waiting lists. Total Region 25

26 2 Swot Analysis 2. SWOT Analysis T he SWOT analyses for the economic region east were undertaken in order to sharpen the socio-economic diagnosis of the region, to identify priorities and to develop transparency and ownership in the strategy building process. The exercise of SWOT analysis was divided into several steps. It started with a general SWOT analysis of the region, which was made by the core working group. Further to the analysis of the results of this workshop, it appeared that some SWOT thematic groups should be formed. The thematic SWOT took place in the following fields: Agriculture; Human resources and labour market;tourism and environment; Production SMEs and natural resources industries. 26 The composition of each SWOT working group was carefully defined in terms of number, specialty/expertise, institutions and institutional level (municipal, regional, national), representation of the whole economic region east, with a special attention for guaranteeing the involvement of minority municipalities in the process. The results of thematic SWOTs were analysed and allowed refinement of the general SWOT analysis. This is summarised in the table below.

27 Swot Analysis 2 Strengths weaknesses General General Favourable geographical position Existence of natural resources thermal water resources findings of minerals and ores (gold, silver, lead, zinc, lime, kaolin, magnesium ) forests medical herbs, wild fruits etc Proximity to Prishtina and Skopje (airport and infrastructure) Strong links with Europe (Diaspora, people from region east working and studding in EU countries) Multi-ethnicity allowing different know-how and contacts Diaspora bringing know-how, contacts, investments Human resources (young population) Mixed cultural and religious in heritage (monumental and social) Cross border zone with two countries (FYROM and Serbia) High potentials for medical and recreation tourism (spa and mountains) Insufficient exploitation of natural resources (fertile arable land, pastures, minerals etc) Village-town migration (resulting with empting of rural areas and overpopulation of urban areas) Deficiency of spatial planning and its enforcement (illegal construction) Existence of natural and cultural touristic sites (Brezovica, Kllokot Spa, Bifurcation, religious monuments, etc) Tradition in agriculture production (cereals, fruits, vegetables and livestock) Experience and tradition in some branches of the economy (timber industry, tobacco, metal, food, etc) At present cheap labour force Sufficient resources for development of agriculture sectors of vegetables, medical herbs, wild fruits, soft fruits-berries, etc. High number of small private businesses Human resources & Labour market Existence of qualified human resources in the region Young population (knowledge of foreign languages) Two vocational training centres in the region Two regional centres and municipal employment offices Good relations and exchange information between employment offices and enterprises Infrastructure clean environment in the greatest part of the region relatively good road network infrastructure including direct routes toward FYROM and Serbia Misbalance in the economic base of the region (only 10 % production businesses) Lack of processing capacities Lack of capital in and for the region Lack of SME support environment (business centres, incubators, certification centres etc) Lack of tradition and capacities for planning of businesses (there are no internal planning capacities and business support institutions) Lack of information and coordination centres for potential investors (no investment promotion institution at regional and local level) Lack of cooperation and communication among the regional municipalities No business friendly environment Few businesses have modern technology and international certification for products and management Human resources & Labour market High unemployment rate Lack of education structures reflecting regional needs/potentials (tourism, mines etc) Week interaction between education system and businesses Non proper function and interface between labour market and firms Professional education (secondary and high) and VET aren t providing based on market needs Non-adequate qualification of labour force not matching the actual market needs Lack of trust of unemployed in the employment offices that results with small number of officially registered unemployed in region Lack of workshops in professional schools No available data for present and future market demands Infrastructure Uncontrolled use of naturals resources (forests, sand, stones, use of agric land for construction etc) Insufficient and low quality of regional infrastructure (road, electricity, water, sewages etc) Lack of adequate infrastructure (roads, water, electricity, good environment, treatment of industrial waste waters etc) affecting local production Lack of investments in tourism and touristic infrastructure Economy & Business Economy & Business 27

28 2 Swot Analysis 28 Opportunities Threats General General Easy access to main transport corridors (highway and railway) Exploitation of unused natural resources (arable land, minerals, mineral water, natural touristic sites) Non recognition by all EU countries and other non EU countries (barriers for access to international markets and opportunities, freedom of movement and network capacities highly reduced) Economy & Business Economy & Business Potential of exploitation of mining resources Tourism development (Rural/Cultural and religious/ Sports/recreation (winter and mountain)/health) Use of Diaspora and donor funds for economic development Brining in foreign investments The Euro as a national currency makes export easier Developing agro-processing in order to boost agricultural production Involvement of Diaspora in economic development More efficient use of natural potentials Lack of foreign capital investment High interest rates for investments and consumers Unfriendly legislation for business development Lack of specific financial institutions to stimulate business activities i.e. bank for supporting agriculture sector High energy price (oil, electricity-no special prices for agriculture and other production purposes) Informal economy provoking unfair competition due to lack of legislation and its enforcement Problems with electricity Human resources & Labour market Human resources & Labour market Improving relations between VET, employment centres and business community Opportunity for training and requalification Emigration of qualified labour Infrastructure Infrastructure Creation of business incubators Existence of internet (access to information, e-learning, networking etc) Environment pollution can threaten businesses in tourism and agriculture Degradation of landscape due to illegal constructions and non-controlled use of natural resources Internal migration Natural risks (force majeure such us: earthquakes, hail, global worming etc) Deficient legal infrastructure and non-enforcement in environmental and cadastral issues, land property rights, labour market, etc No development strategy at country level No reliable statistics at any level Loss and degradation of natural resources

29 Swot Analysis 2 will be implemented in order to support the development of institutions or mechanisms assuring coordination and economic development between the municipalities and at the regional level. Moreover, due to its location in order to boost its own economic growth the economic region east must intensively cooperate with its neighbour regions in order to benefit from economies of scale and the growth provided by trans-border activities. This will take place mainly by developing initiatives promoting international and interregional integration. Moreover, contacts, cooperation and initiatives should be nurtured at international level as regional competition and competitiveness is played at global levels. Based on our description and analysis of the regional situation outlined above, the regional Partnership went on to define the development strategy that is described in the following section. M oving from the descriptive SWOT to defining strategic Priorities entailed reflection on defining the most important aspects of the regional economy. The economy is the fundamental driving force of regional development because a flourishing economy is a precondition for the efficient development of other factors. The main objectives of the present strategy is to build a diverse economic and employment base, as at present the economic base is mainly made of small retail businesses and a few production businesses. In order to achieve that it was decided not just to support the development of some promising sectors but also to create conditions for development of business. Enhancing regional competitiveness through modernizing and diversifying the productive structure can only take place if there is a sufficient endowment of physical infrastructure and human capital. The notion of infrastructure goes far beyond the usual understanding of infrastructure (transport and communication). Indeed, it includes concepts such as territorial infrastructure, social infrastructure, knowledge infrastructure, etc., which are all determinants of regional competitiveness. Nevertheless, it was decided that this strategy should focus on actions which are directly linked to the business development of the region. The qualification of the people of a region affects the type of industry which will establish itself in the region and the type of product which will be produced. The economic region East is characterized by a high level of unemployment, not only due to an incapacity of the local economy to create employment but also to the fact that there is a discrepancy between the demand and the supply of the labour force: the structure of human resources is inappropriate and not suitable to the needs of the regional labour market. Moreover, the information related to the labour market still needs improvement. Finally, the RDA-East is at present the sole institution which coordinates development at the level of the economic region. Indeed, there are no other mechanisms or tools for inter-municipal cooperation, cooperation at the level of the economic region or information sharing and capacity building mechanism beyond the municipal level. Therefore, actions 29