SOURCES OF FINANCING FOR ECONOMIC GROWTH:
Is there enough money in Kosovo?
The Role of Remittances
Sokol HAVOLLI
Central Bank of the Republic of Kosovo
Senior Economist
This presentation reflects the views of the author and does not necessarily express the views of
the Central Bank of the Republic of Kosovo.
June, 8, 2010, Prishtina
Table of Contents:
1) Introduction and stylized facts
2) Migrants’ Remittances
3) Migrants’ Investments
4) Conclusions
Introduction and stylized facts
 Migration started in early 1960s.
Figure 1: Emigration Waves from Kosovo (% of total emigrants)
80%
70%
 The surge of migration in 1990s,
due to the repression and war.
60%
50%
40%
30%
 Almost 70% of migrants during
1990-1999.
20%
10%
0%
60-79
 The number of migrants: around 2025% of population (over 500
thousand).
80-89
90-99
00-06
Introduction and stylized facts



More than 75% of Kosovo
emigrants
are
settled
in:
Germany, Switzerland, Italy and
Austria.
The remainder: in Scandinavian
countries, UK, USA, France, etc.
The host country is an important
determinant of migrants’ earning
potential.
Introduction and stylized facts
 Migrants have substantial earning potential.
 Estimates show that the yearly earnings of migrants are over 4bn Euro.
 Savings and remittances compose around 28% and 12% of total earnings,
respectively.
 This shows that there is a substantial potential for investments in home countries
by the migrants.
Migrants’ Remittances
 Remittances represent one of the main
components of BoP.
Figure 2: Remittances and FDI inflows in Kosovo
600
521
467
500
 Remittances are 14% of GDP.
400
535
418
505
414
357
350
291
300
246
200
 During 2009 remittances reached
euro 505 million (a y-o-y decrease of
5.5%).
100
80
19
0
2004
2005
2006
Remittances
 Remittances decreased as a result of
rising unemployment rates developed
countries.
2007
FDI
2008
2009
Migrants’ Remittances
 Remittances mostly used to finance
consumption.
Figure 3: Remittances
600
 Trivial part of remittances used to
finance investments.
535
2007
2008
467
500
400
521
505
418
357
300
200
100
 Small portion of remittances is also
used to finance:
 Home repairs,
 Education,
 Health expenses.
0
2004
2005
2006
Remittances
2009
Migrants’ Remittances
 The main determinants of remittances are:
 Migrants’ income,
 Years since migration,
 Perceived business environment,
 Migrants’ investments in home country.
 This shows that improvements in the business environment could influence
migrants’ remittances.
Migrants’ Investment
 An empirical investigation shows that migrants investments are also highly
dependent on:
 Migrants’ perception about the business environment,
 Age of migrants
 Migrant earnings
 To date, there have been identified several important investments by migrants
(i.e. participation of migrants in privatization around 15% of total).
 However, not at a level that migrants would become an important driver for
economic growth in Kosovo.
Conclusions
 Migrants potential for investment and remittances should addressed.
 Migrants investments would also be a very good signal for Foreign Direct
Investors.
 Many countries adopted policies that would attract migrant investments and
remittances
 The policies specially designed for migrants include:
 Buying land at preferential places or areas for both, investment and
housing
 Business set-up advisory services
 Easing the procedure of doing business
 Tax breaks for longer periods (i.e. up to 10 years) etc.