Privatization in an Adverse Institutional Context: The Case of Kosovo

Regarding the effectiveness of privatization, two schools of thought are distinguished: a school in favor of privatization in general and a school that judges the success of privatization to be dependent on the institutional context. This article discusses the arguments of both schools and presents a case study on the privatization processes that did take place in Kosovo. The Kosovo case is a critical case as Kosovo was a post-conflict country with a deplorable institutional setting at the time it initiated the privatization processes. If privatization was successful anyway, this would make for a strong argument in favor of privatization in general. The outcomes of the case study show, however, many unintended and negative effects of privatization in the Kosovo context. The conclusion, therefore, disputes the claim that privatization is beneficial in general, irrespective of the institutional setting. Instead, the article makes a plea for creating a favorable institutional setting before starting far-reaching transformations through large-scale privatization. The issues arising from this article are important for policy-makers and international missions considering implementing similar programs to other post-conflict countries.