A new state still living on its old wits

KASTRIOT Beqiri was nine when he started selling counterfeit cigarettes in 1993 from a cardboard box on the streets of Kosovo's capital, in the bad old days of then-President Slobodan Milosevic's autocratic regime.

Fifteen years later Kosovo is weeks into newly-declared independence from Serbia, while the province is still run – just – as a UN protectorate as it has been since 1999.

Kastriot, now 24, rubs his hands together as he stands in the dusty wind outside the sliding glass doors of Pristina's Grand Hotel. Clutching mobile phone cards for Kosovo's Alcatel network in his hand and rolls of dollars and euros in the pocket of his Turkish jeans, he cuts a figure as the typical Kosovo Albanian street entrepreneur.

The economy in Europe's newest state can be broadly divided into three – the official one, the "black" one of pirated and criminal goods, and the "grey" one which he inhabits.

Kastriot employs five other vendors of phone cards and cigarettes, aged between 17 and 25; owns a shop run by his brother which sells mobile phones; supports his family; and plans to go to university.

"I dropped out of school when I stopped getting straight As," he says, "and started getting Bs. But I like what I do now. It gives me freedom."

Kastriot's business is not only legitimate, but he also has the best pitch in town. He patrols the concrete forecourt and the tiled lobby of "The Grand", as it is known, the 14-storey monument to grisly old Yugoslav hotel architecture that dominates downtown Pristina.

In the chaotic left-and-right of post-conflict former Yugoslavia, people like Kastriot are known as mucke, which translates as "ducker and diver". Not for nothing is Only Fools and Horses one of the most popular TV shows in the Balkans.

"I've got a permit from the hotel to operate," he says, sipping a macchiato coffee in the lobby café, "and my monthly profit is about 500 euros. I just do phone-cards now, but when I started, aged nine, it was before mobile phones, so I did cigarettes."

Referring to NATO's 78-day bombing campaign in spring 1999 that forced Milosevic's atrocity-prone forces out of the province, he adds: "Before the war, things were much harder. Serb policemen used to chase and beat us every day."

The paranoia of those days still lingers, for Kastriot insists that his real name is not used in print.

Sit in any café in the dusty spring sunshine of central Pristina, and it won't be long before a Kosovo Albanian aged between seven and 25 walks in, cardboard box full of Marlboro Lite, Winston Lite, and local brands such as Memphis and Ronhill under his or her arm, and the familiar cry of "sigara?" preceding them.

A pack of 20 Marlboro Lite sells for 1½ euros, about £1, on the street in Pristina, depending on whether or not it carries the UN-stamped banderol on the pack, which means it is not counterfeited in some factory in Albania or Bulgaria.

Kastriot buys his phone cards from the Alcatel network office, making a mark-up of one euro per ten-euro card. Kosovo does not currently have its own mobile phone dialling code and uses Monaco's, which is where the Alcatel company is based. Kastriot and his fellow street-vendors may be thriving, but in terms of the official economy, the world's youngest state is certainly Europe's poorest.

In 2007, the UN budget for Kosovo was $220 million, and the average monthly income is $220 or £160. An estimated 70 per cent of the official Kosovo budget comes from UN customs revenues.

Kosovo's economy is propped up with an additional $540 million in annual remittances from Kosovars living abroad, according to estimates from the International Monetary Fund.

Meanwhile, the former Serbian province has vast amounts of high-quality lignite coal. It also has deposits of nickel, lead, zinc, bauxite and even small seams of gold that could be tapped. The Kosovo Police Service estimates that 35 per cent of its illicit economy comes from pirated and counterfeit goods.

On the cracked pavements of Kosovo's capital, dusty and splattered with the ubiquitous guano from the thousands of jack- daws that circle in the Pristina sky, pirated CDs, DVDs and counterfeit designer watches are for sale, the tip of the province's "black" economy.

DVDs such as Greatest Hits of Buns 'n' Roses, and CDs of films like The English Patience display their pirate origins. And outside the NATO base above Pristina stands Mini-Max, a "black" economy supermarket.

FIGHT GOES ON OVER KOSOVO'S PLACE IN THE WORLD

FOLLOWING the Kosovo war in 1999, the United Nations Security Council passed Resolution 1244 authorising the United Nations Interim Administration Mission in Kosovo (UNMIK) to begin the long process of building peace, democracy, stability and self-government in the shattered province.

After UN-sponsored negotiations failed to reach a consensus on an acceptable constitutional status, Kosovo's provisional government declared independence from Serbia on 17 February this year.

The US, the UK, France, Germany, Albania, Italy, and Turkey have all declared recognition of Kosovo as a sovereign state. As of last week, 27 states formally recognise the Republic of Kosovo while at least another three have declared their intention to do so.

Kosovo's unilateral declaration of independence is disputed by Serbia, Russia, Spain and 18 other nations.