The market size of the construction sector in Kosovo can be said to be medium. The industry is termed as one of the most significant sectors that bring much revenue to Kosovo’s economy. The sector is majorly financed via foreign aid and has so far built new homes and developed/rehabilitated the road infrastructure through foreign aid. The main thing that has contributed to the medium market size is the demand for both highway and road construction in the area.
There are many legal requirements of the construction market in Kosovo. The first one is the material certification that entails inspection of materials to be used in construction. The most common material to be certified is concrete. Twenty-eight days are required to complete the tests and receive a certification that the concrete meets all the requirements for the building code. Other products to be certified include asphalt, cement, polystyrene, and sand. The quality of construction materials is essential in the construction sector and EU standards. The certification process is part of the business that cannot be omitted. Another important requirement is distribution and importing of construction materials. Distributors have continued to expand their product offerings and have a greater depth and variety in response to a trend toward higher quality materials being demanded by consumers.
The Kosovo construction market can be said to have various barriers to new entries. The common barriers include internal and external barriers. The internal factors include the management constraints, innovation level and investment on technology. The external factors form a bigger part of the barriers in the construction of Kosovo market. The external factors are the presence of competitions, access to finance, lack of skilled labor, high corruption cases, and low innovation level and investments on technology. However, this does not imply that the government is oblivious to the good economic benefits it can get from new investments. What is happening in Kosovo is that the government is trying its best to make the market free to everyone. In one of the interviews with the Minister for Economic Development of Kosovo, after the pullout of an Austrian company, Austria’s Strabag, from Kosovo’s construction sector, Gashi (2015) found out that the market has the will to attract investors and make provide a free market economy. However, politics and corruption have acted as a curtailer to the government’s growth. For instance, Strabag claims that most government regulations tend to make construction companies to buy goods from the local market, which, by the way, are very expensive. Moreover, Strabag claims that the cost of investing in the sector is very expensive, and he returns are quite low.
Additionally, there is a company, AL Trade, which is owned by a businessman named Bajram Gashani. The company was interested in buying the quarry that Strabag had opted to sell but later reversed their decisions. The main reason for changing their decisions not to enter the market was that the cost of the quarry was too high. “I was interested in buying the quarry in Drenas, but this is not part of our business plan any longer,” said Gashani (Gashi, 2015). In insider information from the report by Gashi, companies that manage to be given large construction tenders in Kosovo are normally instructed on where to get their building materials, such as gravel and much more. In a nutshell, barriers to entry in the construction sector are so high. The other barriers include the lack of skilled labor, globalization, law and regulation, lack of access to finance, competition, and corruption. Lack of electricity has increased over the years. Most of the manufacturing business had setbacks concerning power outages. Struggling with outdated equipment is also another barrier experienced. Other barriers include slow overall business growth that affects the small and medium-sized enterprise (SME’s).
The wages in the construction sector of Kosovo can be said to be below par. According to Int’l Business Publications, USA (2012), when most employees in the construction sector say that their wages have slightly dropped after the execution of a new wage tax in the year 2002. The average monthly salary of a construction worker can be pegged at between 100 and 150 Euros. In the municipal government, the salaries average above 150 Euros and in the overall business enterprise, they average at 300 Euros. This implies that the wages in the construction sector are not very attractive, but people have to live by there is large unemployment is the area.
The best construction sectors in Kosovo are the production and the manufacturing sectors, with the retailing or trading coming closer. The confidence level in the above sectors is high. For anticipated future outcomes, one can say that the construction sector in Kosovo remains confident despite the few issues that it faces. Once a company enters the market, it becomes easier for it to adjust, especially once it is in one of the best-mentioned sectors. This is because the businesses tend to enjoy the fact that new entrants are fewer in the sector. The high level of competition in the area doesn’t count much given the fact that they’re an already set market, which assures them optimal profits and keeps them afloat in the market. On a general note, businesses in the construction sector seem optimistic about their opportunities for success in the coming years.
Some of the anticipated future demands in the sector include electricity, less government control, and new skill development. The increased competition calls for business to develop new products and skills that will make them gain the competitive advantage over the others. This will call for the engagement with other economic pillars, such as the local communities, the finance sector, the government and others. There is also need to push for economic policies that tend to encourage markets and spur growth. Corruption and civil instability need to be weeded out. Moreover, the current tax regulations need reviewing. This is because they are somehow high, and business needs an encouraging environment. Moreover, the barriers to imports and exports need to be reduced and encourage cross-border exchanges within the region and in Europe. This will open opportunities for market expansions. Technologically, there is a need to evaluate building materials that will provide substitutes to the conventional clay block and concrete. The alternatives should be seen to reduce the rising construction costs and improve employment. Besides, cheaper and more efficient building opportunities need to be adapted so as to provide substantial growth in the sector.
Int’l Business Publications, USA. (2012). Business in Kosovo for Everyone: Practical Information and Contacts for Success. Intl Business Pubns USA.
Gashi, I. (2015). Austrian Construction Giant to Quit Kosovo. BalkanInsight.