Free Trade and FDI in Kosovo: Prospects for Integration into the EU and Turkish Production Networks

Petrit GASHI

Abstract


Abstract. Kosovo has recently signed two major trade agreements, the SAA with the EU, andan FTA with Turkey. However, as the experience from developing countries shows, trade liberalisation is a precondition, but it does not ensure economic growth and prosperity, especially when the supply-side constraints limit country’s ability to reap the benefits of free trade. Violencein the nineties; years of underperforming post-war institutions; the neglect of policy reforms, especially poorly managed privatisation process; reduced greatly Kosovo’s industrial base and its manufacturing capacities. Moreover, these factors, coupled with problems with the rule of law, produced a high-risk environment that is deterring the inflow of foreign capital. Following the signing of the two agreements, one can expect that Kosovo will become more attractive tothe European and Turkish investors. In addition to other benefits, the flow of foreign capital may enable Kosovo’s industries to integrate intothe global value chains. However, as with free trade, the impact of FDI inflow and the integration into global value chains depend largely on domestic market conditions. This paper provides a discussion on the developments regarding trade liberalisation and FDI, and the opportunities the latter create on the integration of Kosovo’s industries into global production networks. In terms of policy directions, the paper argues that, although the trade liberalisation will act as a pull factor, the existingstructural impediments in Kosovo will mostlikely limit the flow of foreign capital and the impact of the existing FDI in Kosovo, specifically, integration into global value chains.

Keywords. Trade liberalisation, FDI, GVC, Kosovo.

JEL. F15, F23, F60.

Keywords


Trade liberalisation; FDI; GVC; Kosovo.

Full Text:


References


Alfaro, L. (2013). Foreign direct investment: effects, complementarities and promotion. In Partners or Creditors: Attracting Foreign Investment and Productive Development to Central America and Dominican Republic. Eds. Auguste, S., Cuevas, M. dhe Manzano, O. Inter-American Development Bank. [Retrieved from].

Alfaro, L., Kalemli-Ozcan, S., & Sayek, S. (2009). FDI, productivity and financial development. World Economy, 32(1): 111-135.

Bhagwati, J. (2004). In Defense of Globalization. Oxford: Oxford University Press.

Dunning, J., & Lundan, S. (2008). Multinational Enterpsises and the Global Economy. 2nd Edition. Cheltenham: Edward Elgar.

EBRD, (2009). Transition Report: Transition in Crisis?. London: EBRD.

Estrin, S., & Uvalic, M. (2013). Foreign direct investment into transition economies: Are the Balkans different?. LEQS Paper, No. 64/2013. London, LSE.

Gashi, P., Hisarciklilar, M., & Pugh, P. (2016). Kosovo - EU trade relations: A dynamic panel poisson approach. Applied Economics, 48(1), 1-13. doi. 10.1080/00036846.2016.1245836

IMF, (2015). The Western Balkans: 15 years of economic transition. Regional Economic Issues Special Report. Washington DC: IMF.

MTI, (2015). 15 Years of transition in Kosovo: Implications for trade. MTI Annual Report, No.1. Prishtina: MTI.

OECD, WTO & World Bank (2014). Global value chains: Challenges, opportunities, and implications for policy. Report prepared for submission to the G20 Trade Ministers Meeting Sydney, Australia.

OECD, WTO, & UNCTAD (2013). Implications of Global Value Chains for Trade, Investment, Development and Jobs. Study prepared for the G-20 Leaders Summit Saint Petersburg (Russian Federation).

Rodrik, D. (2007), One Economics, Many Recipes, New Jersey: Princeton University Press.

World Bank, (2010). Kosovo - Unlocking growth potential: Strategies, policies, actions, Report No.53185-XK, Washington DC: World Bank.




DOI: http://dx.doi.org/10.1453/ter.v4i1.1134

Refbacks

  • There are currently no refbacks.




.......................................................................................................................................................................................................................................................................................................................................

Turkish Economic Review - Turk. Econ. Rev. - TER - www.kspjournals.org

ISSN: 2149-0414. Editor : editor-ter@kspjournals.org   Secretarial: secretarial@kspjournals.com   Istanbul - Turkey.

Copyright © KSP Journals