Can Telekom and Trepca be resurrected from the Sovereign Fund?

Kosovo public companies Telekom and Trepca economy engines can hardly be recovered through the Sovereign Fund, says Berim Ramosaj, the economics legalist at Pristina University.

“I have dilemma, given that public ownership is the main source of corruption and nepotism in Kosovo's economy”, he tells Radio Free Europe.

The Kosovo government has seen the Sovereign Fund take over all of the country's strategic assets, including metallural giant Trepca, Kosovo Telecom, the Kosovo Energy Corporation, the Threell Corporation, and so on.

The Fund will then have the exclusive responsibility to invest in the increase in their value.

Ramosaj says companies that are owned by the state are constantly operating with poor business. According to him, the problem lies with policy interference in selecting boards that oversee them.

The subx0> on public enterprise boards is usually chosen by nonprofessive people, and this causes companies to perform poorly”, Ramosaj says.

According to him, the solution would be privatisation.

“To restore Telekom [for example], major investments can be made only by successful companies, with adequate capital and successful leadership”, Ramosaj tells Radio Free Europe.

Long History of Privatisation

By 2003, thousands of assets and social companies have been privatised in Kosovo. This has happened since most of them after the war, in 1999, have remained without maintenance, with outdated technology and no long-term investment.

The privatisation process has been launched by the Kosovo Trust Agency (AKM), while continuing the Kosovo Privatisation Agency (AKP).

The latter, currently, is creating the asset list, which will be transferred to the Kosovo Government Sovereign Fund.

With the foundation of the Sovereign Fund, The AKP will be extinguished.

Kosovo Telekom operates with losses

Kosovo's telecom is a public company, transformed into action society, which is expected to pass the Sovereign Fund. The Kosovo government is owner of all of Telekom's shares.

By 2015, this was the most profitable company in the country.

In fact, between 2008 and 2015, it has paid the Government of Kosovo over 250m euros in distribution tools divided when the company marks good financial results.

But, in 2022, the National Audition Office, which is the highest institution of economic and financial control in Kosovo, has found that Telekom, in the seven years ahead, has operated on losses.

According to the report, the losses accumulated by December 31, 2021, amount to about 80 million euros.

The report has found that the decline in performance is largely due to mismanagement and misuse.

The Trepca losses: Over 600 thousand euros a month

Like Kosovo Telecom, the metallural giant Trepca has operated at a loss in recent years.

Once the main pillar of Kosovo's economy, Trepca is expected to pass, as well, the Sovereign Fund. Today it is a stock society: 80 percent of the shares are in the Government of Kosovo, and 20 percent are of the company's employees.

In the report released last year, the Auditor's Office has found that this company, during the period 2019-2021, has failed to be effective in exploiting and processing mining resources.

During this period, Trepca has operated on monthly losses of over 600 thousand euros, the report said. According to him, outdated technology and infrastructure have had a key role in the company's poor performance.

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Shala: Sovereign Fund doesn't have enough funding resources

Former Trepca manager Ferat Shala tells Radio Free Europe that Trepca should not join the Sovereign Fund.

“The challenges are great and I do not consider such a fund to affect its development in the short and medium term. Trepca must function as is active society”, says Shala, the opposition MP in the Kosovo Assembly.

To restore Trepca, he says complete revitration of the company, technology and resources should be made so that production capacity can be increased.

With its capacity of Trepca it is impossible to resurgerate without a powerful subvention of hundreds of millions of euros. The Sovereign Fund has the entire foundation capacity of 20m euros which is insufficient”, Shala says.

How far has the creation of the Sovereign Fund reached?

The Sovereign Fund bill is currently in public consultation, and, under the government's legislative programme, is expected to be adopted within this year.

The bill defines the Sovereign Fund as Kosovo's investment and development institution.

The founding capital of the Sovereign Fund is 20m euros and covered by the Government of Kosovo.

To carry an asset owned by the Sovereign Fund, the Government of Kosovo has set the condition that it is commercialised and promises profit within a reasonable period.

Former director of the Kosovo Privatisation Agency, Ekrem Hajdari, has earlier told Radio Free Europe that the Sovereign Fund bill is quality and offers economic development opportunities.

However, the Sovereign Fund's funding sources are few, according to him.

The most important thing in this direction remains the funding needed for the functionality of these assets, in behalf of a constructive financial and developmental interest in the country. Twenty million euros for the start of the fund's work are not enough”, Hajdari has said.

Kosovo has been facing economic problems for years. Annual growth does not exceed an insufficient 4 percent figure to address the problem of unemployment that exceeds 20 percent.

Moreover, last year has been closed at the average inflation rate of nearly 12 per cent.

Economic development, on the other hand, has been one of the priorities that the current government listed, headed by Albin Kurti, when it took office two years ago. Some of its promises in this regard have been realized; others have not even begun.