The Creation of Economic Zones as Instruments for the Attraction of Fdis and for the Promotion of Exports: Case of Kosovo

Abstract

Various theories and studies suggest that the Economic Zones are actual and very important instruments for the attraction of the FDIs and for the promotion of exports. However, on the other side, there are pro and against economic arguments regarding the opinions for the creation of economic zones, suggesting also that the adoption of such schemes is not always profitable. Economic Zones are a solution for the whole region because it creates demand for a variety of jobs that would encourage technological education and that would promote economic growth for the existing population in the areas that are currently attracting new residents. For the reason that benefits arising from the making of Economic Zones are of unique value and very important for the country in which they are established, therefore on this it is based the decision of many countries to adopt the schemes for the Economic Zones. However, even more important is to know the other side of the coin, i.e. limitations and obstacles to achieve the expected benefits, problems and costs which in many cases are unforeseen or underestimated. In addition to the abovementioned benefits for the country as a whole, the state must also perform an analysis of costs and revenues, so to evaluate the effects that would have on the state budget the establishment and management of these areas and its ability to realize other public investments. This paper also provides details of benefits and problems arising from implementation of Economic Zones, such as: the potential growth of foreign exchange earnings; the effect of income taxes; transfer of technology, knowledge and relationships in the supply chain; employment effects on local and national economy; as well as the benefits from the development of human capital. In the focus of this paper are the policies and the structural and institutional reforms of Kosovo on the creation of appropriate conditions for the attracting of FDIs and for the promotion of exports. This for the fact that Kosovo is among the countries with the lowest indicators of exports regardless of the kind of products or services. Therefore, the establishment of economic zones, except that are very important instruments for the promotion of exports, they will make also possible the generation of new work places that Kosovo needs for the fact that unemployment is very pronounced. Various cases of creating Economic Zones in Kosovo are presented in the final part of the paper. The purpose of this paper is that in both in practice and in theory to treat the economic zones from a critical perspective regarding their main benefits and to find the factors that would minimize the positive impact on the host country.