Row heats up over Kosovo EBRD bid

15/05/2010 | Sid Verma and Andrea Armeni

Serbia was heading for a showdown with Kosovo in Zagreb this weekend after its deputy prime minister said it would “never” recognize its bid to join the EBRD as an independent state

Serbia was heading for a showdown with Kosovo in Zagreb this weekend after its deputy prime minister said it would “never” recognize its bid to join the EBRD as an independent state.

Bozidar Djelic told Emerging Markets that his country had written to all shareholders in the multilateral bank asking them to reject Kosovo’s application to become a member.

“Serbia’s state policy is clear that we will never accept the independence of Kosovo and that is why we have launched procedures at the General Assembly of the UN and the International Court of Justice will soon demonstrate that the unilateral independence of Kosovo is illegal,” he said.

“This stance is clear and our rejection of Kosovo’s application to the EBRD has been communicated to all shareholders this weekend.”

His comments are a chilling reminder of the long and bloody 1990s Balkan conflict that led to Kosovo forming a breakaway republic that Serbia has never recognized.

Kosovo’s minister of economy and finance, Ahmet Shala, earlier told Emerging Markets he believed that momentum was building towards Kosovar membership of the EBRD.

Speaking on the eve of the annual meetings, he said: “We had a positive signal from some countries. At this meeting we will have another chance to talk to different stakeholders during this session.”

EBRD President Thomas Mirow confirmed that Kosovo was looking for the necessary quorum of shareholders that it needed to approve its entry. It needs approval from two-thirds of member states, and three-quarters of all votes.

Asked whether Kosovo’s recent membership into the IMF and the World Bank had set a precedent for inclusion membership in the EBRD countries of operation, Mirow told Emerging Markets: “This is something for the shareholders to ultimately decide.”

So far, there has been no official pronouncement by the EBRD as to Kosovo’s current prospects. Analysts believe greater access to assistance from the EBRD would greatly enhance the social and economic prospects of the Balkan country, which has a population of 2 million.

“A vote to support membership in [EBRD] will not preclude or attach recognition, but will help Kosovo overcome economic, social and other problems,” Shala said.

Kosovo’s economy has fared less badly than its neighbours’. Against a sluggish growth rate around 4% in 2009, Shala predicts GDP growth of between 5% to 6% this year, and 6% to 7% in 2011.

Shala said that one factor driving growth would be the start of work on its flagship E1billion motorway project. This is expected to create between 4,000 and 6,000 jobs directly in a country that is battling unemployment of almost 50%.

But forecast growth will do little to bring Kosovo near the levels of its near neighbours. A recent World Bank report calculated that “to reach Montenegro’s current GDP per capita of about E5,700, the economy would have to grow at 12% per annum for an entire decade,” it said.

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