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Kosovo - Unlocking Growth Potential : Strategies, Policies, Actions - 
 A Country Economic MemorandumKosovo's economic growth in the
 past decade has been solid, yet, with a gross domestic
 product (GDP) per capita of 1,760, the country remains one
 of the poorest in Europe. The end of the conflict, output
 was growing at double-digit rates, driven by the
 donor-funded reconstruction efforts. Since 2005, annual
 growth has decelerated to below 5 percent. However, the
 other countries in Southeast Europe have been growing
 faster, so the income gap has widened. Kosovo's economy
 would need to more than double its growth rate to 10 percent
 per annum over the next decade to reach Albania's
 income level (assuming Albania's economy continues to
 grow at 5.5 percent annually over this period). To reach
 Montenegro's current GDP per capita level of about
 5,700, the economy would have to grow at 12 percent per
 annum for an entire decade. At the same time, Kosovo has the
 weakest employment track record in Europe: the unemployment
 rate has reached 48 percent and the employment rate is
 extremely low (26 percent). Consequently, poverty remains
 persistent and widespread (though shallow) with 45 percent
 of the population estimated to consume less than the
 national poverty line, while 17 percent are extremely poor.
 Much of the economic progress in the recent period has been
 based on donor aid and remittances, which cannot be the
 foundation of a sustainable economic strategy. Kosovo has
 the potential to shift toward faster, private sector led
 growth. Kosovo's products have free market access to
 the European Union (EU) and Central European Free Trade
 Agreement (CEFTA) countries, so exports could become an
 important pillar of growth. Unleashing that potential will
 involve bringing on line three production factors that are
 now sitting partially idle: labor, land, and energy and
 minerals. The encouraging news is that unleashing this
 potential is within the country's own grasp, because
 most of the current obstacles are of a policy nature.
 However, simultaneous action will be required on several
 policy fronts.
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New Voices in Investment : A Survey of Investors from Emerging CountriesOne out of every three dollars invested
 abroad in 2012 was originated in multinationals from
 developing countries. This study sheds light on the
 characteristics, motivations, strategies, and needs of
 emerging market investors. By including information on
 investors, potential investors, and non-investors, the study
 identifies differentiating factors among them that are
 associated with investment decisions. Results show that
 emerging market investors are active players in
 international trade markets; they operate predominantly in
 manufacturing, and are publicly listed and larger than
 non-investors. They exhibit a strong regional bias: they
 invest more heavily in neighbors and in other countries in
 their own regions. Outward FDI from emerging markets is
 primarily market-seeking. Expanding regional and host
 markets emerged as the most important factor influencing the
 location of investments. However, emerging markets'
 firms face binding costs of investing in distant, culturally
 dissimilar markets, resulting, in practice in a trade-off
 between market size and market familiarity. Transaction
 costs associated with geographical and cultural differences
 have a greater impact on services sector firms that exhibit
 a stronger regional bias. Bilateral investment treaties
 (BITs) partly offset these costs associated with investing
 in faraway and/or unfamiliar markets. In addition,
 international trade agreements increase the perceived
 attractiveness of a host country to potential investors.
 Political factors constitute binding constraints that deter
 emerging markets' firms from investing in developing
 markets. Yet, investors value political stability and
 transparency more than corruption control, fair and regular
 elections, and risk of expropriation in the host country.
 IPAs play only a marginal role in raising awareness of
 investment opportunities in developing countries, and may be
 particularly ineffective in many African countries.
 Nevertheless, IPAs appear to be a widely used and useful
 resource for investors once they have made the decision to
 enter a specific market. IPA services tend to be more
 valuable for smaller and less productive firms. Overall, the
 new TNCs from emerging economies do not appear to differ
 dramatically from their predecessors from developed and
 developing countries in previous waves of OFDI. Results
 suggest that to attract FDI from emerging economies,
 countries need to maintain market-friendly, liberal trade
 and investment policies. In addition, joining international
 trade and investment agreements can be benefitial to reduce
 transaction costs associated with cross border investment.
 Countries also need to provide a stable and predictable
 political and institutional environment. Last and not least,
 it is important to revamp IPAs and increase their
 effectiveness in raising awareness of investment
 opportunities and meeting investors' needs.
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World Investment and Political Risk 2010Political risk remains the top preoccupation for foreign investors operating in developing countries over the next three years, in spite of persistent concerns over the global downturn in the short term. The global economic recession triggered by the financial crisis that has unfolded over the past two years has not spared the developing world. Yet, the fragile and modest recovery now under way is being led by developing countries, which are expected to remain attractive destinations for Foreign Direct Investment (FDI). In light of overt political risk perceptions, the revival of FDI to these destinations calls for continued risk mitigation, including Political Risk Insurance (PRI). In the short term, concerns over the fallout from the financial crisis appear to dominate investors' preoccupations. Yet, FDI projections and surveys conducted for this report suggest that investors are cautiously optimistic about prospects for a global economic recovery led by the developing world. As a result, FDI to developing countries is expected to recover over the medium term. Investors from the primary industries, as well as those based in developing countries, appear particularly bullish in their investment intentions. As concerns over the health of the global economy recede, political risk considerations will return to pre-eminence for investors from both developed and developing countries.