How a Troubled Corner of the Balkans Is Trying to Escape Its Violent Past

Andrea Dudik and Gresa Kraja
·7 min read

(Bloomberg) -- The 20-minute journey from Pristina airport to the heart of the Kosovo capital feels like it gets shorter every time. More and more new offices and apartments fill up once deserted fields.

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Among them is the three-story glass headquarters of Gjirafa. The search engine company has shifted its focus to e-commerce, a sort of mini Google-turned-Amazon.com. It’s grown to employ 300 mostly young tech specialists, and its founders want to list on the Nasdaq one day.

The symbol of dynamism offers hope that Kosovo can escape its troubled past and secure a future as a self-sufficient European state. Yet it also serves to highlight the sclerotic challenges that drag on the tiny nation.

As the European Union lays the groundwork for Ukraine’s eventual membership, Kosovo risks being left behind, reliant on outside aid to keep the economy afloat. The country, which broke away from Serbia after a bloody war in the late 1990s, is still at loggerheads with Belgrade over its recognition. The most violent clashes in almost two decades have threatened the fragile peace.

Yet for a country with the youngest population in Europe, Gjirafa crosses the burgeoning technology and retail industries that epitomize the potential for what a future Kosovo might look like should those hurdles be overcome.

Lauded as a success story by the government, the company was started by Mergim Cahani with $50,000 when he returned home from the US in 2012. First, he noticed that the Albanian language that’s predominant in Kosovo wasn’t supported by Google. Then he saw a potential online shopping market where none of the big names operated.

“Our mission is to build the Internet economy of the Balkans,” Cahani, 43, said in an interview in his sleek, spacious office. “When there is neglect, rightfully so or not, there is an opportunity for other players to grow.”

The next step is to expand into Bulgaria, Montenegro and even Serbia. That would mean tripling staff overall and boosting sales to more than €300 million ($324 million), about 10 times what they are now. He’s in talks with investors over the financing.

The expansion of Gjirafa and other businesses mirrors that of Pristina itself, a city of about 210,000 registered residents in a country where the average age is 30.

Heavily backed by the diaspora in the US, Switzerland and Germany, the number of companies that employ more than 50 people has jumped 57% over the past decade, according to the Kosovo Business Registration Agency.

Downtown, parts of Pristina’s old bazaar are getting a face-lift, with some cafes already showing off new pastel color facades. New stores selling locally made jewelry and Italian shoes have displaced the realtors and cheap dentists.

Thousands of apartments are added every year, mainly financed by the diaspora. A score of new private hospitals and clinics sprang up along the highway as the economy is expanding at about 4%, albeit still too slow to give a major boost to per capita gross domestic product in Europe’s poorest nation.

The influx of money is evident. Take the Salt restaurant, a recently opened high-end downtown eatery that offers a jalapeno-infused guacamole starter for €7.50. That’s the price of a full meal at the nearby Soma restaurant, a hangout for government officials and young entrepreneurs.

“Kosovo might not fit that picture-perfect image, but that's the cool part,” said Toska Sadiku, 27, who works as a consultant. “Pristina’s vibe, the people, and that vibrant nightlife — it all makes me want to be part of something bigger, something resilient that keeps pushing forward despite the challenges and the collective trauma we’ve faced.”

Those challenges are rarely far away. New interactive boards on the main pedestrian zone now inform citizens about the quality of air. On most winter days, a sad red face reminds them it’s among the most polluted in Europe. Last year, the city had rolling blackouts because of a power shortage.

Meanwhile, the political tension with Serbia and ethnic Serbs in the north overshadow the need to address basics like state healthcare and education, said Flora Osmani, a banker in Pristina. Serbia considers Kosovo its own, the cradle of its nationhood.

“Yes, sure, I’m seeing some positive changes, which is good news and encouraging, and it's about time,” said Osmani, 36. “But let’s be real here, we’ve still got serious problems that need urgent attention.”

Despite the emergence of companies like Gjirafa, which is now earning a profit, the euro-based economy is still reliant on remittances from the diaspora. They are expected to surpass €1.3 billion this year, more than 10% of GDP. That’s almost double the €700 million the central bank expects foreign direct investment to add up to this year.

Kosovo’s progress and its perception by its 1.8 million citizens will get a clear report card on Jan. 1, when they will be cleared for visa-free travel to the EU. Leaving Kosovo for Western Europe is the talk among its citizens.

“Our challenge would be to keep people here after the 1st of January,” said Ahmet Ismaili, governor of Kosovo’s central bank. “They have to see that there there’s hope, there’s a chance and you can develop yourself even in your country instead of leaving.”

The outflow is bound to squeeze employers like Gjirafa, whose growth so far was funded with the help of about a dozen of angel investors. Its expansion plan envisages taking headcount to 1,000 people, founder Cahani said.

Even with a jobless rate of 12%, companies are already grappling with labor shortages. The pinch hit the Stone Castle, Kosovo’s biggest winery, located in Rahovec at the foot of snow-covered 1,000 meter-high peaks.

The company employs 230 people on permanent basis and needs to hire as many as 500 seasonal workers. The concern is that Kosovo’s young will exploit the end of the restrictions on movement they’ve grown up under, said Teuta Kurshumlija, the winery’s sales and marketing manager.

Key to unlocking Kosovo’s potential is a deal with Serbia that would cement their path to EU membership. Officials in Brussels and Washington are pressuring the leaders of both nations to sign off on a deal normalizing ties. Expectations are high in Pristina that an agreement may be finalized next year.Once it’s in place, economic growth and foreign investment may double in the next two to three years, according to Ismaili: “From the international point of view, many more investors who might be hesitant today will not be anymore.”

Keeping the fragile peace is complicated. Kosovo Prime Minister Albin Kurti has pressed ahead with local elections and imposing Kosovo license plates and ID cards on the Serbs in the north, sparking violence this year. NATO peacekeepers were forced to intervene.

The region, only an hour away from Pristina, is largely cut off from the bubbling economies of the rest of Kosovo and Serbia. Ismaili described it as a “ghetto” that needs to be integrated into the rest of Kosovo.

Even Gjirafa — named after the animal with a long neck that can reach where others can’t — does little business in the north, said Cahani, while dispatching everything from shampoos to phones and gaming chairs across Kosovo, Albania and North Macedonia.

Like most ethnic Albanian Kosovars, he has never visited the area. When a rare call comes from a Serb-speaking customer, he or his fellow co-founder have to handle it because the younger staffers no longer speak the language, he said.

Cahani’s expansion plan into Serbia will be a key test of popular faith in the ability of the two countries to move on, and put Kosovo more firmly on the map. He’s convinced the past and prejudices won’t deter expansion. Serb shoppers will focus on price and customer service, not the nationality of the company’s founders, he said.

“There might be barriers but that doesn’t stop us,” said Cahani. “An iPhone is an iPhone. If it’s cheaper, if it’s better, they’ll buy it.”

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--With assistance from Slav Okov.

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