Rebuilding business in Kosovo

Starting again: A reopened shop stands next door to a gutted building in Kosovo

	By Horst Köhler Special to CNN Interactive
Köhler is president of the London-based European Bank for Reconstruction and Development (EBRD), established in 1991 to promote the transition of Eastern Europe and the former Soviet Union to a free enterprise economy.

(CNN) -- To get an idea of how difficult even the simple task of making a bank deposit can be in Kosovo, consider the case of Enver Gashi. Every month Mr. Gashi used to get in a car and haul the cash receipts from his small fashion store several hundred miles to a bank branch in Albania. Because of bad roads, snow and bandits, it was a dangerous way to do business.

After the conflict in 1999, Kosovo had no banks of its own. Then, in late January 2000, the EBRD and a host of international financial institutions, ranging from Commerzbank to the FMO in the Netherlands, launched the Micro Enterprise Bank (MEB). Now people such as Mr. Gashi can make deposits, take out loans, pay bills -- without having to navigate mountainous dirt roads.

Opening a bank is only one of the first steps in what will be a long process of rebuilding Kosovo. After 10 years of misrule by Belgrade, made worse by the recent conflict, the Kosovar economy has been reduced to little more than a barter system.

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State-owned industrial plants remain at a near standstill, the banking system is a shell, and unemployment is widespread. Infrastructure, such as telecommunications, urgently needs upgrading.

The international community is committed to provide aid money. In the end, however, a sustainable reconstruction depends on the contributions of the private sector. The U.N. Mission in Kosovo (UNMIK) does its best to work on the necessary legal and administrative structures. But a host of unsolved problems makes life difficult for private investors.

Ownership issues and the need to establish a fair and transparent privatization process are holding up privatization of the province's large conglomerates. This means small businesses in the services and trading sectors are the only ones able to lead the recovery.

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Until now Mr. Gashi -- one of the Micro Enterprise Bank's first customers -- drove to Albania every month because he was determined to keep his business running. He is not alone. Thousands of fellow Kosovar businesspeople face similar challenges.

In all its operations, the EBRD gets as close as possible to these issues -- the "real economy." In Kosovo it requires a bit of creative financing on our part, because the province is not a member of the EBRD.

The province's financial infrastructure was an obvious target for improvement. You cannot have economic recovery without basic banking services.

In 1999, the UNMIK ratified the establishment of a payments system and a system of bank supervision -- a first basic step that allowed Micro Enterprise Bank to be born.

MEB will play a crucial role. It gives ordinary people the means to provide for their own livelihoods without resorting to handouts. It will also be a dependable source of credit for small businesses such as Mr. Gashi's.

Small businesses play an important role in nurturing a grass-roots economic recovery. They foster entrepreneurship, new jobs, flexibility and social stability. They lead the way to a more democratic society.

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MEB will also demonstrate the basics of a corporate culture. Western consultants have provided intensive training to young and highly motivated Kosovar trainees -- who in most cases lack any banking experience. They received on the-job-training with similar micro-credit banks in Albania and Bosnia. They may well turn out to be Kosovo's managers of the future.

Experience in Bosnia and Herzegovina demonstrates that foreign aid and non-commercial financing, while important in addressing short-term needs, will not alone create sustained economic recovery. Long-term investment is what counts.

Only investment and new business can create the permanent tax base that will allow the government to be self-financing, rather than a perennial charity case.

The financial needs of Kosovo and, beyond that, of southeast Europe, go far beyond the resources of the international financial institutions. Significant additional resources will have to be committed by governments and by farsighted investors.

Of course, there is still great uncertainty. But there is also the potential for sustained peace and economic development. What the people need and ask for -- and what the international institutions stand ready to provide -- is help for self-help.