Industrial Policy Recommendations for Kosovo

A practical roadmap for Kosovo’s industrial policy: focus on public inputs, target tradable sectors, and build the institutions needed to support export-led growth.

This paper distils the World Bank’s 2026 industrial policy framework into a set of practical recommendations tailored to Kosovo’s economic structure. It highlights that Kosovo’s small domestic market, constrained fiscal space, and improving but still selective state capacity limit the feasibility of traditional industrial policy tools such as tariffs, subsidies, or exchange rate interventions. Instead, the paper identifies a focused set of “first-choice” interventions –primarily public inputs – that are both feasible and effective in addressing market failures.

Central to the analysis is the role of Kosovo’s EU accession pathway, which both constrains policy options and provides a clear institutional anchor. Alignment with EU standards, rules, and market requirements is presented not just as a legal obligation but as a strategic opportunity to strengthen the enabling environment for growth. Within this context, the paper argues for prioritising investments in industrial parks, demand-driven skills development, export promotion and market access support, and quality infrastructure such as standards, certification, and testing systems.

In terms of sectoral focus, the paper recommends concentrating efforts where Kosovo has either revealed or latent comparative advantage. Tradable services—particularly ICT, business process outsourcing, and tourism—are identified as high-potential, low-risk areas. At the same time, it highlights selective opportunities in downstream processing of minerals and in agriculture, especially where EU certification can unlock export markets. The broader strategy is explicitly export-oriented, rejecting import substitution as unviable for a small economy like Kosovo.

The paper also emphasises that successful industrial policy depends on institutional design. It calls for stronger coordination across government through a central delivery unit, deeper and more structured public-private dialogue, and strict accountability mechanisms. Policy support should be conditional, performance-based, and time-bound, with clear sunset clauses to prevent inefficiency and rent-seeking. Finally, it underscores that industrial policy cannot substitute for core fundamentals such as rule of law, infrastructure, and macroeconomic stability, which remain essential preconditions for success.

Key Recommendations:

• Prioritise public input-based tools: industrial parks, skills development, export support, and quality infrastructure

• Focus on tradable sectors with strong potential: ICT, BPO, tourism, and selected agri-food products with high export potential

• Support medium-potential areas like mining downstream processing through targeted, coordinated interventions

• Strengthen quality infrastructure to enable compliance with EU standards and expand export capacity

• Establish a central coordination unit to align industrial policy across government institutions

• Design all support measures with clear performance criteria and built-in sunset clauses

• Use public-private dialogue to address regulatory and infrastructure constraints, not to allocate subsidies

• Maintain a strong focus on enabling environment fundamentals, including rule of law, infrastructure, and governance