A major objective of the donor agencies and the Provisional Institutions of Self Government of Kosovo (PISG) is the development of Kosovo’s private sector economy. Accordingly, UNMIK and the PISG have adopted a set of laws to ensure an investor-friendly environment including: regulations on foreign direct investment; repatriation of capital; the purchase of real estate; the registration of businesses and land; and the establishment of 99-year leaseholds for land formerly used by SOEs.

The Kosovo Trust Agency (KTA) – www.kta-kosovo.org – was established in June 2002 and is responsible for the privatisation of SOEs and the management of public utilities under the UNMIK legal framework. SOEs represent 90% of Kosovo’s industrial and mining base.

On May 9, 2003, the ratification of UNMIK Regulation 2003/13 – On the Transformation of the Right of Use to Socially Owned Immovable Property – provided for 99-year leaseholds of land associated with the SOEs. The KTA launched the programme of privatisation on May 15, 2003.

The KTA employs three methods in the privatisation process.

'Spin-off': under this method, the assets and a limited number of liabilities of the SOEs are transferred to newly-established joint-stock companies ('NewCos'),with the shares of the new companies then tendered for sale to private investors. The remaining liabilities and employees remain with the SOEs.

'Special spin-off': the method is similar to a spin-off but allows the KTA to attach conditions (eg, maintaining a minimum level of employment, investment commitments, remaining in the same line of business) to the tender. Special spin-off s are to be used generally for only the largest, most strategic SOEs.

Voluntary liquidation: this method is applied to those SOEs that are not viable, and their assets will generally be liquidated through a public auction.

The proceeds from the tenders and asset liquidations after certain payments to employees (pursuant to the Land Use Regulation) are held in trust by the KTA to be used towards the settlement of ownership and creditor claims against the SOE.