Com’on Europe – is this the best we can do?

On March 18, the European Central Bank inaugurated its new office building in Frankfurt, Germany. The total construction cost of this skyscraper of glass and steel was a whooping €1.1 billion. In comparison, the new Chancellery building in Berlin, completed in 2001, cost a mere €230 million to build. No wonder 20.000 Europeans gathered in the streets of Frankfurt to protest against the construction of this latest temple of the aspiring EU Empire.

To spend such a huge amount of money on a construction, which in practice fills no other function than a space for technocrats to sit, write, meet and eat lunch, raises several questions about our collective grasp of reality in Europe year 2015. Most importantly, (at least for me) when such non-productive investments (or expenditures rather) are approved and executed during a time when Europe is experiencing the worst economic and social crisis since the Great Depression, it puts into question the functionality and future of democracy itself in the EU.

In 2014, the Government of Norway voted no to support Oslo’s bid for the 2022 Winter Olympics. The estimated cost for hosting the Olympic event was approximately €5 billion. A small amount of money for a country with a budget surplus of €40 billion in 2013 and another €800 billion tucked away in a special fund for the day when the oil runs out. Yet, despite their individual and collective richness, a large majority of Oslo’s citizens could think of something better to do for €5 billion (education, environment, health, social, etc.), and the government responded to the opinion polls and redrew its support. That is democracy, transparency and responsible government in action!

Allowing for the construction of a public building that cost €1.1 billion hints of disrespect for democracy, public opinion and public money. Nobody in Europe was asked to reflect, comment, and let alone vote in a referendum to support such excessive expenditures on a project which would generate close to zero positive impact on the local, regional and EU economy. The question about what else we could do for the money was never raised. If the ECB management and staff had settled for a more modest building along the lines of the German Chancellery, €800 million could have been put to good use elsewhere.

I will mention only one simple example to put these large sums of money into a more human perspective. Once upon a time there was a project to reduce unemployment titled “JOBS”. It was funded by the Bulgarian government and had a budget of €22 million. During its 10 years of operation the project created or sustained over 37.700 full-time jobs, according to official Ministry of Labour statistics, and trained 60.900 persons in new work related skills. If given a choice between one shiny ECB building or 40 JOBS projects, there can be no question how the unemployed masses of Greece, Spain, Italy and any other European countries for that matter would vote. But the peoples of Europe are never asked this type of questions, in that simple way.

And that is why I cannot feel pride looking at the architecturally fancy ECB building. On the other hand, I feel great pride when I, and thousands of my fellow citizens, use the 16 kilometers long bridge-tunnel linking Denmark with Sweden. This is a €2 billion infrastructure investment project that has led to a fundamental economic and social transformation of the entire region, increasing integration and improving the well-being for hundreds of thousands of people living, commuting and working in Southern Sweden and Denmark.

No, looking at the new ECB building makes me sad. Its excess does not symbolize economic progress, our collective strength as Europeans or social stability, something we so badly need today. Rather, the ECB building’s dark reflective glass symbolizes the faceless, cold greed of modern capitalism, the deliberate distortion of a market system that was ones free but is now rigged by and to the advantage of central bankers, politicians, stock market speculators and big business.

Only a person and a system incapable of caring about other peoples’ wellbeing can celebrate such money wasting.

Com’on fellow Europeans, we are better than that!

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Where is our sense of solidarity, equality and justice now?

The dream of a federal Europe is crumbling. Most contemporary politicians in Europe, EU technocrats and main street media link the crumbling European dream entirely to the poorly performing economy. Undeniably, when an economy shrinks it affects people’s lives through unemployment. According to the EU statistical office, Europe has lost 3,5 million industrial jobs since the global financial crisis of 2008.

In the face of the deepest financial and economic crisis since the Great Depression the response of most national government and international institutions have been reform and austerity, mixed with endless stimulus programmes, zero interest rates and bail-outs. As a direct outcome, consumption is down, the overall tax base is shrinking and debt levels among citizens, corporations and governments are growing even higher. Despite billions of newly pressed money injected by central banks around the world into the financial system, the famous ‘trickle-down’ effect appears not to be reaching further than the stock market.

However, in these tough times, the tough have not got going. Contrary to the song, our approach to the crisis has been selfish, shortsighted and universally uninspiring. Rather than facing up to the truth that our financial system, bent on speculation, deceit, even fraud, has brought misery and poverty to millions of Europeans, our politicians, technocrats and financial elite have given the anecdotal can another massive kick into the future.

Rather than making people’s well-being the policy priority, our plutonomy leadership sided with the banks and financial institutions in 2008 and ever since, the very same institutions that through their recklessness caused the crisis. Our political elite showed solidarity, but not with the majority of the population but with the financial and corporate elite, with the plutonomies of the World. Consecutive bailouts and stimulus packages were designed and launched with the financial and corporate elite in mind. Not much thought was given to the dire situation of the middle-class, let alone the working classes, who have seen their income fall for over 30 years.

As a result of these political decisions and priorities, income and wealth inequalities continue to grow throughout Europe and the US. Quantitative easing boosted the Wall Street speculators and Trans-National Corporations, rather than job creating SMEs, entrepreneurs and employees. Economic growth remains sluggish. But this is the story of cold economic data and graphs.

The other story is about human beings. As such it is a far more important story. Or at least it should be. Since 2008, millions of Europeans have seen their incomes and purchasing power fall sharply, while others have lost their jobs and seen their benefits reduced. Poverty has returned to Europe on a massive scale. According to inequalitywatch.eu, 16.4% of all Europeans now live in poverty. In Greece alone, this means that over 2 million people live below the threshold of relative poverty (60% of the average household income). In the footsteps of poverty we find falling health (mental and physical), crumbling education and social services, and a general sense of hopelessness. Another generation of young people is left idle and deemed lost.

The European dream-building project clearly works only when the wind is in our back. In a slowing economy and growing national debts, nationalism flourishes rather than solidarity, equality and justice within Europe. Why is that? Well, I think many people feel disappointed and let down by the political national and Bruxelles based elite that when the going got tough they sided with the super rich, in which of course they included themselves. The same leaders ignored the plea of the poor and vulnerable in society, and since we still live in some kind of democracy, this deceit is now coming back to bite them, and hard.

Without solidarity, equality and justice among European countries and people there can be no European citizen, and no federal Europe. We must learn to speak openly and truthfully about why Europe and the World crashed in 2008. This means there is no more black and white, but all shades of gray, in which Greece as reckless borrowers are as guilty as the reckless German lenders for Greece’s financial situation today. We must learn to forgive and move on. If we can all start to assume some guilt for our common European mess, we may be more open to listen to others’ potential solutions.

As it stands, the main threat to a federal Europe comes from our inability to deliver solidarity, equality and justice at a time of great financial, economic, political and foremost social and human crisis. And maybe that’s a good thing. Maybe this crisis has shown us that we are not ready for a federal Europe, but again, let’s then be honest about it. Let national democracy run its cause, even if this means letting Syriza try to satisfy the will of the Greek people. To talk about federalism without adequate public support (democracy is still the favored political system of the EU, right?) is to advocate running before we can even walk.

Europe today is in need of a popular movement of humanism, which puts today’s economic fundamentalism in perspective and allows for other areas in society (health, education, housing, employment, etc) that contribute to our individual and collective well-being some air. And if this means addressing national inequalities through the tax system, well so be it. It has been done before. Rather than the current endless borrowing and money printing, the super rich of this world should be asked to, as Roosevelt once did, finance a comprehensive drive for solidarity, equality and justice in Europe. In the end, it would be in its own best interest, for sure.

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“Leaving Kosovo – When all the ‘good people’ have left, then what?”

The last week was full of media reports on the massive exodus of people from Kosovo. The Telegraph, a British newspaper, reported that up to 20.000 are leaving the Balkan country of 1.8 million every month. The Associated Press reported that since September 2014, a total of 25.000 Kosovars have crossed illegally into Hungary and the EU. According to the media the drive to leave Kosovo is caused by unemployment, corruption and political instability. The Usual Suspects in order words.

Yes, the fact that people are leaving Kosovo cannot come as a surprise to anybody. People have been leaving for quite some time. Highly educated Kosovars are closing shop and moving out finding useful employment in their professions in far away countries like Sweden and Canada. Others are making full use of their double citizenships and moving ‘home’. Others are waiting in line for Schengen visas. Others, as we have seen in recent months, are walking through wintery woods into the EU, illegally crossing the border into Hungary.

The hope of a better future in Kosovo appears to be fading for a large portion of the Kosovo population, and when everything else fails, people are now voting with their feet. Who can blame them?

Kosovo, in the winter months of 2015 seems to be suffering from a societal multiple sclerosis caused by widespread corruption, democratic deficit, no real private sector and donor agency fatigue.

Corruption is not only about the unlawful distribution of public money to a small but powerful elite. More importantly it is the selfish practices of people that destroys the system from within through dishonesty and favoritism. This process of gutting out and distorting the essential components of a functioning societal system capable of delivering well-being to people (transparency, dignity, commitment, hard work) is made even worse in Kosovo’s case where the destruction is taking place at the same time as the system is supposedly being built anew.

Corruption is everywhere in people’s daily lives in Kosovo, as it is in most other Balkan countries. But this is not the cultural oil that makes the machines of society run smoothly, rather corruption is a million little wooden sticks pushed into ordinary citizens’ wheels of aspirations for a better life. For example, corruption is about bending the rules for entering university education creating an excessive pool of hopeful university graduates, and pushing them into markets that do not exist. Or as the cynical joke goes: “Why the coffee in Pristina is the best in the world? Because it’s made by Master’s degree graduates!”.

So, why the chronically high unemployment rates in Kosovo? Well, it’s rather quite simple. The quick fix solution, when state institutions and administration (the public sector) employ more people is not financially sustainable. There is simply not enough money in the public budget to further expand the public administration, let alone increase their salaries. As in the rest of the world, Kosovo must instead rely on the private sector, on its own entrepreneurs and companies, to generate the jobs. Unfortunately, the private sector in Kosovo today is very small (According to Kosovo Tax Administration there are only 46,000 active companies, out of which 95% have less than 10 employees), fragile and incapable of generating the necessary number of jobs to make even the smallest dent in the unemployment data. Why not?

Again it is quite simple. In order to employ more people Kosovo companies must first sell more products/services and generate more income. In other words, we need growing companies to reduce unemployment. Most Kosovo companies are trading companies (mom and pap shops) operating on a saturated, small local market, and as a result they don’t sell very much. They survive at best. So in line with other small countries around the world, for companies to grow they must pursue international markets. That’s the simple market logic, and there is no way around it. Sell more, expand production to satisfy growing demand, and employ more people. However, export is not an option for trading companies but for the manufacturing industries, which at the moment make up a mere 10% of all companies in Kosovo. Also, export means higher volumes. In many cases, Kosovo manufacturers are simply too small to be of interest to international buyers.

At the moment, Kosovo companies are not producing goods and services that the Kosovo population is willing to pay for, let alone customers on international markets. Kosovo made products cannot compete with international products on price, quality, design, packaging, quantities, terms of payment – you name it. If they could, the shelves at Viva Fresh, Albi, Meridian, ETC, and other supermarkets would be full of Kosovo made products, not imported goods, and Kosovo would not suffer a 2 billion plus annual trade deficit. Crystal clear and for everybody to see every time we go shopping!

So how to change course and defeat unemployment in Kosovo? Easy! Think jobs first and only! Think in which international supply chains a large number of jobs can be generated relatively quickly. One example – Think apparel (the sewing of clothing)! Currently it is estimated that the textile industry in Kosovo employs a mere 3.000 persons. This is not in line with other countries in the region. The apparel sector in Macedonia employs more than 50.000 persons, while in Albania and Bulgaria as many as 100.000 people are employed in the textile sector. Can you think of any other sector with that kind of real employment potential? I can not.

Yet, the donor agencies in Kosovo continue to beat around the bush. Rounds upon rounds of institution-building and capacity-building projects have been implemented, yet there appear to be no real traction for change and no real socio-economic improvements. People can sense this lack of progress, and that’s another reason they are leaving. The old development models and methods are simply not delivering the expected development impact in Kosovo. Donor funded projects are winning the battles, according to their own reporting at least, yet Kosovo appears to be losing the war against unemployment and poverty. Unemployment remains very high, over 30% and even higher among youth and people living in rural areas. The number of people living in poverty and even extreme poverty is not declining. After 15 years of almost unlimited financial and technical support to Kosovo and its infant institutions, donor fatigue appears to be kicking in. At the same time, the competition on the international donor funded development market is intensifying, pulling the geopolitical priorities of the EU and the USA towards Ukraine, the Eastern Neighbourhood and the Middle East/North Africa, and away from the Balkans.

Finally, and perhaps as a consequence of the three other factors contributing to the exodus of Kosovo citizens, Kosovo is now experiencing a period of political instability, characterized by a polarization of society, extreme inequality, a sense of uncertainty and public demonstrations. People are clearly losing hope. The inability of the political elite to deliver on their election promises of more jobs and a better life in Kosovo, will only confirm the citizens’ decision to leave the country as the only viable option. And when all the good people are gone, what kind of society will they leave behind?

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The Rugove Company case study – “Putting People First”

(This case study was produced on the request of the Enhancing Youth Employment project in Kosovo (eye-kosovo.org) and is re-published here with the permission of the project and Rugove)

Background

In April 2014, the Agency of Statistics of Kosovo reported that the country’s trade deficit is still growing. Export in March 2014 amounted to €23,1 million (0.1% increase), while import amounted to €202,4 million (3,7% increase). As such, Kosovar products cover only 11% of the domestic market.

The World Bank calls Kosovo’s current growth model unsustainable over the longer period. Growing private sector activities and investments will become increasingly critical as engines to generate growth and, in turn, improve job and income perspectives.

For the most part, companies are not yet in a position to compete successfully in local and international markets. Reflecting binding public infrastructure and business climate constraints, domestically produced goods, including in the agriculture sector, have not yet been supplied at the quantity and quality required to compete successfully in either domestic or foreign markets, despite some improvements. (World Bank in Kosovo, Country Snapshot, April 2014)

On the question why he chose the bottled water business, Mr Visar Kelmedi, the CEO of Rugove, plainly explained that the demand for water was strong and growing on the local market, which was dominated by international companies. “I wanted to show that it is possible to manufacture a product in Kosovo and sell it to Kosovo consumers, and with time substitute imports”. In 2012, the import of foodstuff, including bottled water, was approximately €300 million, second only to mineral products (gasoline, oil).

Bottles

The Rugove tale is about understanding the customers, keeping a watchful eye on the competition and the importance of being open to a continuous process of change in management, human resource and production. But foremost, it is a tale about people and how a company can succeed in the market by investing in its human capital.

The Challenge

The Rugove was established in 2006, as a joint venture with a Slovenian partner. Within two years the company had become the market leader in bottled water in Kosovo selling over 5 million liters per year. At this point in time, Rugove was very much a family managed company. “We were acting more like firemen, trying to satisfy new orders as they popped up”, Mr Kelmendi explains. By 2010, competition on the market was becoming stronger. In a situation of growing demand and competition, there was a decision to be made for the company. According to Mr. Kelmendi, “we could go on as a family operation with an uncertain future, or we could accept the market situation and become a more professional, structured and efficient company”. The second option would require significant investments and a fundamental re-organization of the company. Yet, this was the path chosen.

About the same time, Rugove made the decision to diversify its business and enter into the market of production and sales of white cheese. Such a venture would require additional investments and the strengthening on the internal management and organisation to cope with a completely new line of business.

cheese

The proposed solutions and interventions

The first intervention of the company management involved restructuring its financial system, replacing it with a more modern model, and most importantly building the capacity of internal staff to manage the new financial system. For this very important and sensitive task Rugove acquired the services of Arizona Partners (AzP) a local tax, accounting consultancy company. “I am not Superman to know everything, and I am the first to admit that we are were we are today thanks to the support we have received from consultants”, Mr Kelmendi explained his decision to bring in external experts to facilitate the change process at Rugove.

In 2014, Rugove’s working relationship with AP became more strategic. Rugove then entered a triparti agreement with AP and the EYE project, in which AP would supply a full range of strategic consultancy services to Rugove. The aim of the intervention was to produce a business plan that would be used for the company’s future business development, strategic direction, operational planning, and external financing.

Special focus was on HC development, where AP supported Rugove in recruiting a HR manager and in establishing an HR Department. The newly appointed HR manager participated in the HCDI formal training and AP followed up with the development of internal HR policies and procedures as well as a software based HR system for Rugove, and trained the HR manager to operate the new HR system with confidence.

CSR Network

Rugove highly appreciates the way AP transfers new ideas, skills and knowledge to staff members through coaching and on-the-job training. “To me all change is about the people who work at Rugove. Yes, I admit, we push our employees to perform their best, but we can do that because every employee knows that we support them, both on and off work – they are all covered by insurances, we have a generous bonus system in place, we support them in learning new ways of working and building their confidence in implementing their work tasks”, Mr Kelmendi explains how Rugove’s continuous focus HC development has received renewed momentum from the cooperation with AP and EYE.

Over the years Rugove has engaged the expertise of a number of local consultancy companies for specific tasks, such as ‘Paper Communication’ on marketing linked to target sales and strengthening the internal capacity of the company to manage its marketing work. The consultancy ‘ATARE’ was brought in to work on structured sales, branding and development of key accounts, while the IT company ‘CACTTUS’ was assigned to design software solutions linking the company’s Enterprise Resource Planning (ERP) system to its sales processes. Another local consultancy company, ‘RECURA’ produced a feasibility and investment project.

Mr Kelmendi speaks very positively about the Rugove’s experiences working with local consulting companies. “They understand the local context, market and culture, and they offer practical and sustainable solutions. Most important, they understand that their task is to build up the capacity of our managers and staff in order for them to implement the activities themselves, manage change and move the company forward.”

Beyond investing in consultancy services, Rugove has recently invested in a new fully automated water supply and bottling unit. Mr Kelmendi is quick to point out however that this €2 million investment in fully automated machinery will not lead to staff reduction. Rather, staff will be moved into new work opportunities linked to the manufacturing of new 10 liter bottles and the new range of glass premium bottles.

In a final push, in line with the overall re-organisation of the company and in response to a more competitive market, Rugove has also invested in the construction of a brand new distribution centre and corporate head office in the outskirts of Pristina. As well, the company has purchased a new fleet of 20 distribution trucks, capable of delivering water and cheese products simultaneously, which will reduce transportation costs dramatically.

The outcome and lessons learned

“These investments are already starting to pay off”, observes Mr Kelmendi proudly. In 2014, the total sale of bottled water is expected to reach 15 million liters, representing a 20% increase compared to 2013. The sales growth of the cheese production is even more phenomenal, expected to jump 70% this year. In the words of Mr Kelmendi, Rugove will employ approximately 35 new staff in 2015, increasing the company’s total pay-roll to 140 or more persons, mainly located in the villages around its production units in Western Kosovo.

When asked to reflect on the very rapid growth of Rugove, Mr Kelmendi highlights his personal approach to business development and management. “I had the vision of where the company should go, but I realised that I needed external experts with specific subject skills to help us get there”. For Mr Kelmendi, a company that is too conservative in its management style and blocks new learning will sooner or later be overwhelmed by a market it does no longer understand. “Too many company owners in Kosovo have not yet realised that they must open up to new ideas, new ways of organising and managing the company, and external advise in order for their companies to change and grow.”

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The BARUTI case study – How a Young and Hard-working Diaspora can benefit Kosovo

(This case study was produced on the request of the Enhancing Youth Employment project in Kosovo (eye-kosovo.org) and is re-published here with the permission of the project and Baruti)

It is widely accepted that Kosovo pins its future economic development on two key assets – its young population and Diaspora. With an average age of 25, Kosovo boasts of having the youngest population in Europe. Beyond its obvious demographic advantages, youth also influences society with hope, openness and new thinking (creativity).

The Kosovo Diaspora is now well established in mature economies such as Switzerland, Germany, US and Scandinavia, offering a human linkage between market opportunities abroad and production opportunities in Kosovo. Kosovo is a small market, both in size and purchasing power, hence any policy to boost business growth and to reduce the country’s very high unemployment rate (35% in total and 60% among youth) must include a strong export component.

Again, this is where the active input of the Diapora is crucial. For the owners of Baruti, brought up and educated in Switzerland, the German–speaking markets of Germany, Austria and Switzerland feels like and are actually ‘home’ markets. The Diaspora brings language skills and understanding of the local context and culture in foreign markets to the new, export-oriented business growth model. In such, the Diaspora effectively converts internationalization and export activities into sales and marketing on another domestic market.

Three years of Baruti

The growth of Baruti has been absolutely breathtaking. The subsidiary company was registered in Kosovo in 2011. The three owners invested € 65,000 to start the Kosovo branch, reaching 24 full time employees in 2012 and a first year turnover of € 228,000. Today, three years later Baruti employs more than 150 staff, and is in the process of hiring and training another 150 staff in order to cope with new international contracts.

Baruti

We decided early on to very quickly build up a ‘local management’ within the company, who would be capable of leading and shaping the company’s activities in Kosovo”, explains Mrs Drenusha Shala, co-owner and Managing Director of Baruti.

The Baruti board members realized at a very early stage in the development of the company that identifying adequate numbers of qualified staff would be a core challenge, which had to be overcome in order for the company to take on new clients and grow. “At this point, we decided that one of the company owners would physically stay in Kosovo, to build a solid organisational and management base from which sustainable and successful growth would be achieved”, Mrs Shala highlights one of the company’s watershed decisions.

Another key decision made early on by the Baruti board was to diversify its portfolio of services to include ‘over the phone research’. Until this point the focus had been entirely on supplying Inbound Services, in line with a classic Call Center. “It turned out that as a Start-up company winning clients for the Call Center business was difficult, while we were more quickly successful in acquiring our first client for the market research business”, admits Mrs Shala and continues, “Staying flexible and open minded about new market opportunities is one key to our success”. With the first real ‘revenue’, Baruti seized the opportunity to further invest in its Inbound Services and Market Research Services and this investment quickly paid off as well. In 2014, Baruti won a very extensive public tender in Germany for its Inbound Service Department, against tough international competition.

Putting Customers first

The Baruti board members illustrate a fundamental understanding of the market in which they operate, and they are quick to point out that for them the customer always comes first! In order to enter the market and have the opportunity to satisfy the needs of the customers, Baruti knew it first had to fulfill all the formal requirements. In its drive to enter the security and surveillance industry market, offering 24/7 surveillance monitoring services, Baruti discovered that possessing Quality Management Systems certification is a requirement.

At this point in time, Baruti was already in a mode of fast growth, which put strain on the company’s cash flow. Baruti turned to the EYE project for support in order to speed up the implementation of ISO standards 9001 and 27001 certifications. The entire certification project was successfully finalized in June 2014 with five months delay, mainly caused by the need for further investments in IT and physical infrastructure, and the heavy workload of Baruti.

Baruti office

ADAPTIV IT, a local consulting company, completed the certification process, while TÜV Nord executed the audit. Thanks to the ISO standards 9001 and 27001 certifications, Baruti is now formally eligible to compete in a much larger number of public tenders on its key international markets – Germany, Switzerland and Austria.

Being Young does not mean being Reckless in Business

Another key to our success was the fact that we actively sought out experts with information we did not possess ourselves, at an early stage of our development”, explains Mrs Shala. Experts from the call center market in Switzerland assisted Baruti in drafting the ‘right’ customer acquisition strategy. “The experts also highlighted the timeline required to acquire different clients. While the hard work of implementation was left to us, the experts still installed in us an understanding that proper planning, patience and perseverance are essential skills that we must possess in order to succeed in this business”, admits Mrs Shala proudly.

Mrs Shala is quick to pass on similar advise to other fast-growing young companies in Kosovo. “The key to a successful business is customer satisfaction and sustainable growth with a sound and solid cash flow management”, proclaims Mrs Shala. “Stay close to your customers, be constructive, put yourself in their shoes and try to improve your product or service every day, as it was the very first time you served this particular client. This will generate customer loyalty, and that is something that is generally missing in Kosovo”, explains Mrs Shala.

According to Mrs Shala, the general business practice in Kosovo is too short-term in its thinking and too one-off in its practice. This means that companies invest little or nothing in ‘after-sales and cross-sales’ activities, and as a result of poor quality services they constantly loose their clients. When the companies’ focus is not long-term, there are very few returning customers. The company is then forced to always look for new customers, which is the most costly marketing activity.

Young entrepreneurs should work hard and remain close and constructive to their customers. In turn, this business approach will empower the young entrepreneurs to further develop their business models and product/service lines, and even expand their business growth”, Mrs Shala wraps up her advise to other upcoming young entrepreneurs in Kosovo.

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The Consultancy Market in Kosovo – “A tale of Moving between Markets”

(This case study was produced on the request of the Enhancing Youth Employment project in Kosovo (eye-kosovo.org) and is re-published here with the permission of the project)

Background

The consultancy market in Kosovo is essentially the creation of international donor agencies operating in the country after the war of 1999. The post-conflict challenges were multi-faceted, including re-building public and private infrastructure and constructing new institutions and the rule of law from scratch. The early years of privatization and entrepreneurship saw the emergence of a private sector dominated by micro-enterprises involved in trade, retail and small-scale service provision. Within this development context, there was a strong demand by donor-funded projects for permanent staff and freelance consultants.

However, very little consultancy was supplied directly to local companies by local consultants. The reasons for this were multiple. Newly established companies were too busy working to stay alive in the market. Few companies were aware of the internal constraints holding back their growth, and even fewer companies were taking actions to overcome constraints. Also, few Kosovo companies had the financial resources to invest in engaging external experts.

To overcome this market failure, donor projects subsidized the supply of consultancy and production assets to private companies as a means of boosting their competitiveness. Donor project also invested in strengthening the capacities of local consultants to supply consultancy services.

The existence of two markets

Today, after 15 years of economic transition, the consultancy market in Kosovo can best be described as two very different markets. In search of income, the consultants float between these markets.

Consultant markets

Market One is the heavily subsidized donor project market, which creates numerous job opportunities in diverse skills areas. The business model of the individual consultant is to cover as many as these areas as possible, as a means of increasing the chances of employment. As a result, the consultancy market is now comprised of generalists rather than specialists. This means that there is a large pool of consultants capable of offering services to Start-ups and companies of very low maturity, but very few consultants who have what it takes to serve the needs of the lead firms. “There are clearly two groups of consultants today in Kosovo. One group continue to chase the next donor funded opportunity, while the other group, albeit much smaller, includes consultants who really want to work and develop within this profession. They invest in themselves, are customer-oriented and conscious about their ‘name’ in the market.” (Diell Grazdani, Director of BCC, October 27, 2014)

In Market Two, there are a very small group of Kosovo consultants who are supplying private clients with services that they in turn are willing to pay for, which in most cases include auditing, tax advice and accounting services. “It was our accounting skills that got us in the door at Rugova. Having supplied initial services to the satisfaction of our client, we started identifying other consultancy needs in the company and cross-selling other services, such as coaching and marketing.” (Arban Avdiu, Arizona Partners, October 24, 2014)

As companies grow their needs become more specific and more technical. Suddenly, there are very few qualified local consultants on the market to do the job, causing a supply deficiency, which acts as a direct constraint on company growth. On a positive note, the growing demand for consultancy services by more mature companies in Kosovo, and their willingness to pay for the ‘right’ services, creates a substantial market opportunity for those consultants who have the ‘right’ skills, knowledge and experience.

This means that in the future the focus should be on supporting the formation of a new generation of local ‘specialists’, with adequate functional skills, sector expertise and relevant practical experience to serve the expanding needs of growing companies in Kosovo.

Moving towards the private market

However, moving from the 100% subsidized donor market to the free market with zero subsidies will require local consultants to adjust their business models to satisfy the demands of corporate clients rather than donors. This is a formidable challenge because the requirements of donors and private companies are very different from each other.

According to the companies, the large majority of consultants do not fulfill the requirements and they are deemed not to have the capacities to supply the services with adequate quality. The local consultants fall short for a variety of reasons, such as low technical skills, weak selling points, low confidence and lack of corporate references. There is also a general lack of trust for local consultants among the lead firms (CEED report, 2013). All of which highlight the need for consultants to improve their capacities in order to better match companies’ needs.

Consultant market change 2

The formal training module of HCDI (an EYE project initiative on human capital development) represents an opportunity for local consultants to strengthen their internal capacities, such as technical skills in HC development and Consultancy-as-a-Business skills, including a module on how to sell in your consultancy services. The Business Consultants Council (BCC) offers a range of business and skills development opportunities for their member consultants. Recent training topics include CMC certification, Business Diagnostics and Marketing and Sales of consultancy services.

BCC is also advocating for consultancy, as a profession, to be registered as an economic activity in the Business Registry. An official recognition of the profession will open up for relevant public and private bodies to design and manage an official accreditation system for consultants, which in turn will act as a guarantee for the quality of services that companies can expect from individual consultants. A more structured and transparent supply of consultancy services will contribute to reducing the general mistrust held by some companies about local consultants.

Also, consultants must take every opportunity to ‘get in the door’ of the companies, to accumulate practical consultancy experience. I was pro-active in selling in my services to Hospital American during the HCDI’s ‘Speed-dating’ event. I invested my time in completing the company diagnostics and together with my colleague from Macedonia we prepared a business proposal for HC consultancy services, which we presented to the company.” (Myesere Hoxha, Consultant, October 24, 2014)

As a result of the consultants taking a more pro-active approach to learning new HC and business skills, and spending more consultancy time in the companies (even free of charge), they will strengthen their capacity to present companies with an improved offer for consultancy services. In better matching supply of consultancy services with companies’ needs, and supporting the offer with references from other companies, the consultants will certainly be more successful in generating new work among the lead firms and other growing companies in Kosovo.

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Time to stop beating around the bush

According to the urban dictionary, to beat around the bush means “to talk about something without mentioning it directly or avoid getting to the core of the subject. Often motivated from a desire not to speak frankly about the subject, either because the subject is taboo, it’s impolite to bring it up directly, or the conversation is perceived likely to be painful.”

In talking about the private sector in Kosovo, it is is now time to ‘speak frankly’, although the content of the conversation is ‘painful’, because without an open and honest dialogue the situation is bound to get even worse. Until now, we tend to drift away from the core subject when discussing private sector development in Kosovo.

The core subject is the necessity for Kosovo enterprises to sell more products and/or services. Selling more most often means producing more, and that is the only viable and sustainable way to generate economic growth and employment.

The core subject is about improving the product offer of the Kosovo enterprises in front of new and existing customers, making the offer more appealing than the competitors’. The consumer’s decision to buy is based on a number of criteria and specific requirements, such as design, price, quality, guarantees, packaging, volume, customer-service, delivery-time, terms of payment, etcetera.

A company’s inability to satisfy the customer’s requirements in any of these areas is in most cases the result of internal company constraints. The product design may be old-fashioned because the company employs no designer. Price should be set to reflect the market demand and cost of production. Non-competitive pricing may be a result of poor cost-calculations, too high profit expectations and/or weak management.

Furthermore, the majority of manufacturing companies in Kosovo are currently too small in production capacity to fulfill the volume requirements of even a middle-sized EU based retailer. This means that even if the price is right and the design is fine, there will be no deal.

For other companies, terms of payment become a hinder in international trade. While a Kosovo company used to trading on the domestic market with cash payments upon delivery, or even beforehand, the international buyers expect to pay 30 or even 60 days after delivery. This change in terms of payments directly affects the producer’s cash flow, potentially throwing the deal off-track.

The potential internal hurdles, constraints and challenges holding back Kosovo enterprises from taking full advantage of existing and potential market opportunities on the domestic and international markets are plentiful, and must to be addressed with the highest priority. Only then will we find out if there is a market place at all for these Kosovo companies. Only then will we find out which company owners and managers are willing and capable of generating company growth and expansion.

Yet, rather than putting companies first, and supporting them to overcome their internal constraints, we tend to drift off the mark and spend much time and resources on preparing indirect support measures, such as policies and strategies, as well as on reducing external constraints to private sector growth in Kosovo.

It is an odd choice of focus, and one that is clearly not delivering the goods. By now, Kosovo has enough strategies to fill a TIR truck, but there is hardly any enterprise growth and unemployment remains very high. These guiding documents were all written with good intentions, for sure, but with limited financial means allocated to actual implementation the strategies remain ‘paper-tigers’ doing close to zero to, for example, improve the product offer among private enterprises of Kosovo.

In 2011, Riinvest research of 800 SMEs showed that the main external constraints to doing business in Kosovo were the overall economic situation in the country, unreliable supply of electricity and non-loyal competition. In 2014, the external constraints for SMEs in Kosovo remained much the same – poverty of people, corruption and informal economy (KOSME, 2014). For companies active on the domestic market, there appear to be no progress in over-coming the external constraints.

A low GDP per capita and high level of poverty reduces the overall purchasing power of the population and consequently the size of the domestic market. To build a business model that involves expanding into regional, EU and international markets is a key option for Kosovo companies to avert dependency on a small and over-crowded domestic market. However, to make this step towards internationalisation, again, the company must be first fulfil ALL the requirements of foreign buyers, which brings us back to the focus on the internal constraints.

Another reason we tend to spend our time and resources on trying to reduce the external constraints to private sector growth is a prevailing belief, very similar to the theoretical base of a state-planned economy, that the demand for products and services are somehow constant. We tend to believe that if we can only reduce the burden of doing business, i.e. reduce the external constraints, then automatically the private enterprises will produce more and customers will buy more. It’s a very naïve and robotic view of how the market functions, which completely ignores the fact that the free market involves fierce competition among private enterprises, and consumers who can choose freely among a large number of products, be it cereal or cars.

There is nothing automatic about the market process. On the opposite, it is very individual. It is the individual enterprise owners, managers and workforce that must do the job professionally in order to grow. They must sell-in their products to the consumers in a pro-active way, convincing them, over and over again, to buy their products/services. It is about knowing and exploring markets and consumer needs.

Reducing the external constraints to business is important, but first we must ensure that we have private businesses at all active in Kosovo, and one that is actually growing and employing more people. At the moment, there are less than 50.000 active enterprises in Kosovo, 95% of which employ less than 10 persons. (Kosovo Tax Administration in KOSME, 2014)

To finally achieve economic growth and employment in Kosovo, we must re-focus our attention to those very few companies that have the internal willingness and capabilities (human, technological, financial) to change and become more competitive, to produce and sell more, and expand their operations.

We must design and implement tailored support programmes around these companies. With time they will come to statute a positive example for other enterprises in Kosovo. Also, as market leaders these companies will be capable of ‘pulling’ with them smaller Kosovo companies within structured value- or supply-chains, generating even higher economic growth and employment.

In turn, this approach is bound to anchor the Kosovo economy to the global economy, and uphold a virtuous cycle of company investments, industrialisation, economic growth, export and employment.

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