Political Risk and Foreign Direct Investments in Kosovo

Abstract

The purpose of this paper is to present the importance of political risk and its impact on attracting investments, also to analyse policies made by the Kosovo institutions to reduce political risk and increase the FDIs. Attracting of the FDIs is complex because they depend on many factors, and one of the methods that measure political risk is the model used by the PRS Group that includes the flow of the economy through 12 components.Measuring political risk plays an important role in transitional countries, because these are countries that have problems in various fields and also the trust on by the investors is low. As a finding of this study is that Kosovo is estimated to have moderate political risk, and is close to joining the group of countries with low political risk. Challenges faced by Kosovo in reducing political risk are concentrated in several components, which are: socioeconomic, corruption and rule of law components. Kosovo has taken significant steps in improving the conditions for investment, government stability and positioning of the country facing internal and external conflicts.