Prishtina, 15 April 2008
Ladies and Gentlemen,
The Government of Kosovo has drafted its declaration on the Government’s policy priorities. They comprise of four pillars:
The implementation of these policies has already started.
It is clear that Kosovo is facing many challenges. The full implementation of the status agreement is one of the main priorities.
Meanwhile, the state needs a reliable financial system and a functioning market economy. For this reason, it is important to find effective methods to prevent the informal economy.
The effective development and implementation of any strategy that promotes moving ahead from the informal to formal activities is the main challenge. This should not be underestimated. This requires an active participation of and strong support from all the stakeholders in the society, employers, workers’ unions, local administrations and also some ministries and various branches of the public administration.
The Government of Kosovo is committed. It will identify the instruments and will implement the necessary measures to reduce the informal economy and to eradicate corruption. For this reason, the Government of Kosovo will welcome any support that can be provided by the EAR and other international partners.
Prevention of informal economy is an international challenge we should all tackle together. Therefore, the Government of Kosovo is interested in listening attentively to the recommendations prepared by the team of a joint project between the EAR and the local authorities.
Ladies and Gentlemen,
Kosovo is facing many economic challenges. It has the highest unemployment and poverty rate in the region. Its average GDP growth has been below the regional level.
The main issue is the high unemployment rate, which is considered to be about 30-40 %, with about 40 % of unqualified working force. The labor cost is very high because of the low productivity by the workers. The income generation per capita is considered to be the lowest in the region and as a consequence, this is associated with a high poverty rate.
Many authors and publications have assessed that the informal economy of Kosovo is about 39% - 50% using indicators like: the number of employees in the formal and informal economy, the number of enterprises working in the formal and informal sectors and similarities with other states.
Assessing the level of informal economy in Kosovo is not easy. The problem is not the lack of relevant data, but the harmonization of the data from various sources, like the Kosovo Statistical Office, the International Monetary Fund, the World Bank, UNMIK, the European Agency for Reconstruction and the Central Banking Authority of Kosovo.
Anyhow, the informal economy and its consequences, like tax evasions, disruption of the labor market and unfair competition, is the main issue in Kosovo, like in any other transition economies.
The informal economy weakens the society structures, and for this reason the society in general should be aware of the extent and the impact of this phenomenon. Without this, it is difficult to change the attitudes and to apply the necessary instruments to approach this social problem. Because of this, raising awareness of the stakeholders about this social problem is the main important issue in the fight against the grey and black economy.
The Government of Kosovo has drafted its statement on the priority policies of the Government. They consist of four pillars – economic growth, implementation of status agreement, good governance and the alleviation of poverty and social sustainability.
Prevention of informal economy, corruption and other forms of black economy comprises the bulk of the Government’s priority policies. This means that the Government will undertake decisive measures to reduce the impact of this social problem in order to:
improve the climate for businesses and investments;
attract and encourage private, national and international investment;
ensure participation of private sector in the reform process;
reduce labor market disruption and unfair competition;
develop a strong entrepreneurship sector and build a well functioning market economy;
ensure development and sustainability of basic society structures like education, health, public order, security, transport network and social insurance; and
fight corruption and other serious and organized crimes.
In an effort to meet this requirement, the Government of Kosovo will establish a Governmental Program which will focus on Prevention of Informal Economy, as it was recommended by the EAR project team. This is a necessity because prevention of the informal economy is linked to a wide range of various social fields and to the activities of several ministries. The activities should be coordinated. This program should compose of:
assessment of level and impact of informal economy in Kosovo;
Government’s commitment to tackle informal economy;
short-term, mid-term and long-term objectives of the program;
determining of respective ministries and authorities to undertake various activities;
timeframe of implementation; and
a method to measure concrete results of the program.
The Government will also establish a Permanent Governmental Working Group on Preventing Informal Economy that will be tasked with drafting and coordinating activities outlined in the Governmental Program on Prevention of Informal Economy.
This working group will be coordinated by the Office of the Prime Minister and Mr. Driton Qehaja will be appointed chair of this group. The members of this group will come from, but not be limited to, the Ministry of Justice, Ministry of Finance and Economy, Ministry of Internal Affairs, Central Banking Authority of Kosovo, Office of the Chief Prosecutor, KPS and UNMIK Customs.
It is also important that the operational authorities increase cooperation and coordination of their activities. For this reason, the KPS, Customs Service, Office of the Chief Prosecutor, Kosovo’s Anti-Corruption Agency and the Tax Administration will establish a working group covering various agencies in order to implement the recommendations in terms of prevention of financial crime the way it has been presented by the EAR team project. It is necessary that the working group at Governmental level be reflected in the implementation of the recommendations about the operational authorities.
Ladies and Gentlemen,
Prevention of informal economy is a necessity in Kosovo. For this reason, the Government of Kosovo will strongly support the recommendations presented by the EAR project team. The Government will send out a clear message that it is committed to preventing corruption and other forms of informal economy.
Again, I want to thank the EAR for the work done as part of the project. I also ask you to organize a follow up meeting some time about the end of August 2008 to assess the results of the working groups.
Thank you!