Implementation of SAA of vital importance to Kosovo’s economic development

Written by Ambassador of the Kingdom of the Netherlands to Kosovo, Ms. Gerrie Willems

The Netherlands currently holds the Presidency of the Council of the European Union. As the Presidency holder, the Netherlands supports the new Stabilisation and Association Agreement (SAA) between Kosovo and the EU. This is in line with the Netherlands’ priority of supporting the development of Rule of Law in Kosovo, with the aim to foster democratic stability and sustainable economic growth.

Priorities of the Netherlands EU Presidency

Each Presidency holder drafts a 6-month agenda with achievements the country would like to accomplish during its tenure. The Netherlands during its EU Presidency focuses on four priority areas:

1. Migration and International Security;
2. Forward-looking climate & energy policy;
3. Sound finances and a robust Eurozone;
4. Europe as an innovator and job creator.

For the Western Balkans, including Kosovo, the Netherlands works towards regional security and stability, along with the promotion of social, economic and political reforms. All of these are central to resilient and open societies, well-functioning institutions, heathy public finances, the creation of new jobs and innovation in the economy.

Rule of Law for economic development

In January 2016 the European Parliament ratified the Stabilisation and Association Agreement (SAA) between the EU and Kosovo. The SAA forms the first contractual relationship between the EU and Kosovo, in which mutual rights and obligations will help Kosovo to adopt European standards. This deal offers a unique opportunity for Kosovo to strengthen its Rule of Law system in order to foster sustainable economic development.

Among scientists and policy makers there is consensus that economic development needs strong institutions, a well-functioning Rule of Law and a supporting business climate. It’s a fact that legal frameworks provide the foundation for all economic activities; money, property rights, contracts, transactions, access to justice and investment opportunities, but also welfare and protection for employees against exploitation and unfair competition. Investments and trade are impossible without legal certainties.

Progress in Kosovo

Looking at Kosovo’s economy today, we can conclude that Kosovo has made some progress in tackling those deficiencies in the Rule of Law that impede economic development. The IMF recently stated that access to credit is expected to improve thanks to the removal of obstacles to bank lending, such as weaknesses in contract enforcement. The European Commission declared in its most recent country report that Kosovo has properly aligned copyrights, neighbouring rights and the laws on patents and trademarks to the EU acquis.

Trust in the Rule of Law

Yet, a lot remains to be done. While in several areas the legal framework is in place, implementation is of the essence and these laws and regulations need to be fully applied. This is where strong and well-functioning government institutions come into play. For law enforcement is dependent on the decisions a government takes and how effective and efficient public institutions carry these out. Currently, companies – local and international – and regular citizens are uncertain on their investments and private spending, losing trust in the Rule of Law system. And low trust in the Rule of Law means fewer perspectives for economic growth.

Government priorities

So, for the Rule of Law to function and to boost economic development, a government must set priorities; on what it considers essential and desired developments for its citizens in these two fields, and it must implement these priorities.

For Kosovo it means that in the field of Rule of Law the government will need to continue to work towards taking away weaknesses in contract enforcement and performance of the judiciary, so that the local market becomes more attractive to international investors. It means transparency and accountability in public procurement processes should be guaranteed, which is a major step forward in combatting corruption. It also means that the government should not only ensure that the legal provisions on equal inheritance rights are in place, but that the government should also continue to publicly address remaining challenges to the position of women in society.

Simultaneously, the Kosovo authorities also need to tackle remaining challenges to the functioning of public administration. For economic development, the proper application of rules and regulations on economic support and competition by state actors is a key factor. Again, this means that transparency and accountability in public tendering processes should be guaranteed. It also entails the carrying out of policy changes that ensure improvement of the link between the education system and the labour market, and a better discipline to adhere to fiscal rule and the Law on Public Finance instead of ad hoc fiscal decision making.

In short, strengthening the Rule of Law for economic development is a necessity, but part of this are decisions on how to bring this all about, along with actual implementation of those decisions. For without a demonstrable commitment, citizens’ and companies’ trust in the functioning of the state and the Rule of Law will remain lacking. As stated before: low trust in the Rule of Law means sub-optimal economic growth.

Dutch support

This is why the Netherlands supports the new Stabilisation and Association Agreement between Kosovo and the EU. The SAA is an important instrument for Kosovo that can help the government to focus on those core elements that need to further improve the area of Rule of Law, which in turn will support a sustainable economic growth in Kosovo. The Embassy of the Kingdom of the Netherlands in Kosovo will continue to actively assist the Kosovar authorities and civil society in improving the Rule of law bilaterally, through the EU and through international organisations. This support covers policy development, training, deployment of experts and implementation of concrete activities.

In January 2016, the Kosovo government adopted its new National Development Strategy 2016-2021. Together with the SAA and the Economic Reform Programme these constitute the tools the government needs to start working on addressing the key challenges in the areas Rule of Law and public administration. To stress it once more, demonstrable commitment visible to society to the choices made and priorities set is crucial. Success will depend on the discipline to make it all work for the benefit of the citizens of Kosovo.