After slow start, Albania and Kosovo look to potential as partners

Mon Feb 17, 2014 11:35am EST

* Lofty talk of cooperation after Kosovo's 2008 secession

* Ethnic Albanians a big majority of Kosovo population

* Potential in agriculture, tourism, energy

By Benet Koleka and Fatos Bytyci

TIRANA/PRISTINA, Feb 17 (Reuters) - Shortly after Kosovo declared independence from Serbia six years ago, neighbouring Albania said it would bequeath its Adriatic port of Shengjin to its landlocked ethnic kin.

The port, nestled on a scenic bay, is "the closest to Kosovo," about 125 km (77 miles) away, a poster in the office of Shengjin manager Gjovalin Tusha helpfully points out.

Albania's gesture meant much to majority-Albanian Kosovo as it sought to forge a path independent of Serbia and the Western aid and remittances that had propped it up since a 1998-99 war.

Tirana proposed that Pristina take over the running and enlargement of the port as, in effect, its own outlet to the sea. Little came of it and the trickle of Kosovo-bound goods through the shallow wharf has failed to match the lofty talk.

"In 2013, merchandise processing for Kosovo businesses was at a minimum, about 4,500 tonnes, or a ship and a half out of 126 to 130 ships," Tusha told Reuters in Shengjin.

Now a new drive is under way, spurred by a change of government in Albania and the recession in Europe, which has seen a damaging fall in the amount of money sent home by Albanian migrant workers - a mainstay of both economies.

At stake is Kosovo's economic viability and possibly its stability, with one of the youngest populations in Europe and a labour market woefully unable to support it.

In January, the two governments met in Prizren, an old trading town in Kosovo closely associated with ethnic solidarity as Albanian leaders once pledged there, in late Ottoman times, to protect Albanian lands from covetous Balkan neighbours.

Albanian Prime Minister Edi Rama hailed the "first page in a new chapter with Kosovo", listing energy security, farming, customs and tourism as areas of potential cooperation.

Kosovo and Albania "should live in a joint market," Behgjet Pacolli, Kosovo's deputy prime minister and a Swiss-made millionaire, told Reuters. But ties of blood and language have yet to be matched by legislation and initiatives, he conceded.

"People are trying to connect... But if you look at the law, at the paperwork, nothing has changed. This is just a wish-list," he said.

MEAGRE TRADE

The challenges are huge for the two small, impoverished countries that dream of eventual European Union membership.

For decades, Albania was cut off from ethnic kin elsewhere in the Balkans by its Stalinist ruler Enver Hoxha. Its borders flew open with the chaotic arrival of democracy in the early 1990s, but war in Yugoslavia again stymied cooperation.

Kosovo is one of seven states to emerge from ex-Yugoslavia. Each of those states now faces similar incentives to integrate economically and pool resources, though progress has been slow.

Despite the proximity, less than a third of Kosovo's sea-borne imports arrive via Albania. Most come through Montenegro's port of Bar and from Thessaloniki in Greece to the south.

Kosovo accounts for just 1 percent of Albanian imports and 8 percent of exports. Just 3 percent of Kosovo's imports come from Albania and 11 percent of its exports go the other way.

A costly new four-lane highway, dubbed "The Nation's Road", now links Tirana and Pristina, but there are none of the truck queues usually seen at other Balkan border crossings.

"This road is working at just 10 percent of its full capacity," said Pacolli, one of the most vocal advocates of greater integration. "Something has to change in our economic cooperation to make that road serve the country's economy."

Energy production may show a way forward.

After four years of procrastination by the previous Albanian government, the neighbours inked a deal in December to build a 400-kV transmission line linking their electricity grids.

The 75.4 million euro ($103 million) project, financed by a grant from Germany and a loan from the German KfW development bank, will allow the two countries to exchange electricity to maximise the use of Albania's hydro-generated power in winter and Kosovo's coal-fired electricity in drier weather.

Both suffer power shortages due to insufficient output, out-dated grids and theft. The new line should be completed in just over two years.

ENERGY, TOURISM, AGRICULTURE

Just an exchange of electricity at times of peak consumption "is immensely helpful in integrating both economies much more than we have seen so far," Jan-Peter Olters, the World Bank's representative in Kosovo, told Reuters.

The tourism industry is looking at marketing the two countries together, given easier access to the mountains of northern Albania via Kosovo.

However, trade rows over import duties on potatoes in 2009 and 2011 have highlighted how short-term business needs can sometimes trump long-term strategic cooperation.

When a Chinese delegation visited Shengjin last month, checking out locations to build a port worth some 2.2 billion euros, hackers traced to Kosovo attacked the port website, branding their kin in Albania "traitors".

"They (Albanians and Kosovars) need to look on each other as complementary, not as competitors or just collaborators," said Ardian Civici, a professor of economics in Albania.

"Right now, the economic cooperation of Albania and Kosovo should renounce political ... displays and break down the kind of barriers that today may seem unbreakable."

($1 = 0.7307 euros) (Editing by Matt Robinson and Gareth Jones)

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