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This paper is about basic development trends in Kosovoand Metohija during the period 2003-2017. Thefocus is on the missed opportunities for increasingeconomic and social well-being in the KiM area. Besidesthis, an important aspect of the analysis carriedout in this paper relates to the quality of the state governanceand building institutional capacities. In theempirical analysis, three scenarios were used to showthe backlog of the KiM area, i.e. the lost GDP percapita of Kosovo* caused by the inability to take advantageof the wider space of our country. The resultsof the research show that special attention has to bepaid to the rule of law, the efficiency of governanceand the control over corruption in Kosovo*. The integrationof Kosovo* with the educational, researchand economic space of Serbia and the EU could leadto the overall progress of our country as a whole.

DEVELOPMENT TRENDS AND INSTITUTIONAL CAPACITIES IN KOSOVO AND METOHIJA IN THE FIRST FIFTH OF THE 21st CENTURY