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U.S. Department of State

Diplomacy in Action

II. Country Assessment--Kosovo


U.S. Government Assistance to and Cooperative Activities with Central and Eastern Europe
Bureau of European and Eurasian Affairs
January 2007
Report
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FY 2006 Assistance Overview

Overview of U.S. Government Assistance

In FY 2006, the USG provided an estimated $80.72 million in assistance to Kosovo, including:

  • $17.33 million in democratic reform programs; 
  • $15.14 million in economic reform programs; 
  • $1.49 million in humanitarian programs; 
  • $0.42 million in social reform programs; 
  • $32.18 million in security, regional stability, and law enforcement programs; and 
  • $14.17 million in cross-sector and other programs.

U.S. STRATEGIC INTERESTS & FOREIGN POLICY PRIORITIES

After seven years of United Nations (UN) oversight, a political process to determine Kosovo's future status, as called for in UN Security Council Resolution 1244 (June 1999), began in February 2006. FY 2007 is likely to see the resolution of Kosovo's final status and the implementation of a complex settlement that contains new responsibilities for the local authorities as well as the international community. New powers and responsibilities will be transferred to Kosovars, and the executive authority of the UN will give way to a new role for the U.S.-supported international follow-on office responsible for overseeing implementation. Working closely with our allies in the Contact Group and UN Security Council members, the U.S. will help Kosovo make further progress in its democratic, multi-ethnic development.

The USG vision is to help transform Kosovo into a stable, democratic society, at peace with its neighbors and on an irreversible path to Euro-Atlantic integration - regardless of its final status. Managing this transition will be the key challenge for the U.S. and the region, in the coming years.

FOREIGN ASSISTANCE PRIORITIES

In FY 2006, USG assistance was geared towards facilitating a smooth adjustment to post-status governance as Kosovars assume greater leadership in developing and implementing policy. The USG continued to support programs focused on the development of a democratic, diverse, multi-ethnic society with full protection of minority rights and respect for and adherence to the rule of law.

Primary assistance objectives in Kosovo included maintaining peace and security through continued seconding of U.S. police officers to the UN Mission in Kosovo (UNMIK) civilian police force to enhance daily security and strengthen key skills, and building the capacity of the local police through the provision of equipment and training. USG programs promoted democracy by supporting the development of an independent judiciary and legislative branch, competent prosecutors, strong administrative and legislative bodies at the central and municipal levels, transparent electoral processes, a professional media, and civil society institutions. Economic objectives included nurturing a market-based economy through strong economic institutions, a solvent and trusted banking system, a more reliable energy supply, and a vibrant private sector capable of responding to market conditions and generating employment. Efforts related to security, democracy, and economics were supplemented by programs aimed at inculcating respect for a multi-ethnic society by improving personal security for ethnic minorities, creating linkages among ethnic groups, and promoting better living conditions for returnees. All of these objectives were underscored by public diplomacy efforts to ensure that USG assistance priorities are understood by the Kosovar population.

OPERATING ENVIRONMENT

Kosovo's major problems include a struggling economy with high unemployment, corruption, crime, weak adherence to and respect for the rule of law, and the lack of protection of minority rights. After more than seven years of UN administration, Kosovo institutions continue to assume greater responsibility for major governmental functions, although UNMIK maintained its key role in sensitive areas like protection of minority rights and law and order. With little experience in formal governance, the Provisional Institutions of Self-Government (PISG) lack capacity in many sectors, and are severely challenged to deal with these issues. In addition, Kosovo continues to deal with the animosity that still exists between Kosovo's ethnic Albanians and other ethnicities, particularly Kosovo Serbs. In 2006, UN Special Envoy Marti Ahtisaari started final status negotiations between the Kosovo and Serbia. Ahtisaari facilitated intense discussions on issues such as decentralization, cultural heritage, minority rights, and debt obligations. USG assistance continued to help Kosovars fulfill the implementation for the internationally-endorsed Standards of Kosovo. U.S. assistance was critical in helping reach this stage and will be important in preparing Kosovo to assume more responsibilities during and after the resolution of final status.

COUNTRY PERFORMANCE MEASURES

Kosovo Democratic Reform

The "radar" or "spider web" graphs below illustrate Kosovo's democratic performance during FY 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark lines indicate how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and, (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://www.usaid.gov/locations/europe_eurasia/country_progress/index.html

Graph shows Kosovo Democratic Reform:  Average of Romania and Bulgaria-2002, corruption, 1.7; electoral process, 2.5; civil society, 3.0; independent media, 2.0; governance/public admin, 1.9; rule of law, 1.8

The graph above shows Kosovo's democratic reform scores in 2005* (the blue shaded area) as compared to the average of Romania's and Bulgaria's democratic reform scores in 2002 (the bold line) when they were invited to join NATO and receive favorable indications of future EU membership.

*Actual 2006 scores not yet available.

Graph shows Kosovo Democratic Reform: corruption, 1.7; electoral process, 2.5; civil society, 3.0; independent media, 2.0; national governance, 1.8; local governance, 2.0; rule of law, 1.8

The graph above shows Kosovo's democratic reform scores in 2005* (the blue shaded area).

*Actual 2006 scores not yet available.

Kosovo Economic Reform

The "radar" or "spider web" graphs below illustrate Kosovo's first stage economic reforms during 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 reform levels, while the two dark line indicates how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's reforms, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://www.usaid.gov/locations/europe_eurasia/country_progress/index.html.

Graph shows Kosovo Economic Reform: Average of Romania and Bulgaria, large scale privatization, 3.0; small scale privatization, 4.0; trade and foreign exchange, 5.0, price liberalization, 5.0

The graph above shows Kosovo's first stage economic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's first stage economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2006 scores not yet available.

Graph shows Kosovo Economic Reform: 1999, large scale privatization, 3.0; small scale privatization, 4.0; trade and foreign exchange, 5.0, price liberalization, 5.0

The graph above shows Kosovo's first stage economic reform scores in 2005* (the gray shaded area) as compared to its first stage economic reform scores in 1999.

*Actual 2006 scores not yet available.

FY 2006 Country Program Performance

Governing Justly and Democratically

In FY 2006, Kosovo institutions assumed more responsibility for the rule of law with the establishment of the Ministries of Interior and Justice - where the assumption of responsibility is still in its early stages - and professional judicial and prosecutorial organizations. Kosovo institutions were also more active in combating crime, trafficking in persons, and corruption. The PISG, civil society, and media continued to strengthen democratic processes while working to integrate minorities into Kosovo's central and municipal governing institutions. Regardless of its final political status, Kosovo's governing institutions need to continue to work towards effective self-governance as called for in UN Security Council Resolution 1244 (1999). While there has been some progress in developing an independent, professional media and civil society, challenges for Kosovo's nascent democracy include establishing an effective justice sector based on the rule of law, and representative, transparent, and accountable central and local government institutions. With little experience in formal governance, the PISG lacks capacity in many sectors.

U.S. ASSISTANCE PRIORITIES

In FY 2006, USG assistance priorities in democratic reform were twofold: to help Kosovo's civil society, government, and media become more effective institutions in achieving and advocating for good governance; and, to help Kosovo develop democratic institutions critical for its European and regional integration goals. USG assistance was particularly important in developing an independent judiciary and prosecutorial service, including support to draft critical legislation on the future organization of the Kosovo Judicial Council and the Kosovo Prosecutorial Council. USG assistance to the National Assembly and to the primary political parties continued, with the goal of fostering democratic practices within and among parties, as well as developing the capacity of the Assembly's leadership and professional staff.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, USG funding contributed to the continuing development of transparent, accountable and responsive government and an independent, self-sustainable media and civil society. USG-funded training and technical assistance to judges, prosecutors, courts, and other judicial institutions helped create modern legislation and basic administrative and management systems independent of the executive branch. USG training and technical assistance worked to combat organized and economic crimes, trafficking in persons, and corruption.

Technical assistance to the Kosovo Assembly and municipalities was provided to the legislative body to help it pass a number of laws needed to achieve international norms of good governance. USG funding continued to help shape policies for decentralization, municipal finance, and the election of local officials. Technical assistance helped the legislative body strengthen internal management and operation, its capacity to draft substantive legislation, and its ability to conduct executive oversight through the implementation of the Assembly Standards Plan. USG programs helped shape opposition parties into a constructive force for good governance and worked with minority parties to increase their participation in the legislature. The USG expanded efforts to accelerate integration of minority communities into Kosovo institutions and remove barriers to minority participation in civic affairs.

Training of political parties, civic groups, and the media helped these entities better articulate citizens' interests, develop skills in civil participation, and raise public awareness of activities and issues that affect their everyday lives. USG assistance to civil society improved the organizational, advocacy and self-sustainability of NGOs and developed new partnerships with the PISG. USG technical assistance helped strengthen the sustainability and professional skills of the broadcast media.

OUTPUTS

USG funding promoted the modernization of criminal justice laws and regulations and fostered respect for the rule of law. USG funded programs led directly to the establishment of the Kosovo Judicial Council. USG assistance was continued to the Kosovo Chamber of Advocates, Kosovo Judges Association, Kosovo Public Prosecutors Association, and the University of Pristina Law Faculty. USG assistance also supported important legal publications such as the first-ever Kosovo Supreme Court Bulletin and trial skills handbook. The USG provided surveillance equipment that improved local capacity for investigating serious crimes including human trafficking, and assisted the PISG with improving social services for trafficked victims.

USG funding helped shape policies for decentralization, municipal finance, and local elections. The USG continued to strengthen local governance, municipal revenues/finances, transparency/accountability, and local economic development planning. USG assistance enhanced citizen participation by increasing public hearings and improving the public's perceptions of and access to those municipal governments. The USG expanded efforts to accelerate integration of minority communities into Kosovo, working with 42 multi-ethnic communities to enhance their cooperation in municipal affairs through completion of community-designated small scale infrastructure projects.

USG technical assistance strengthened the Kosovo Assembly's internal management and operation, improved legislative drafting, and enhanced executive oversight through the implementation of the Assembly Standards Plan. USG support also provided technical assistance and training to the four major political parties in developing platforms, using constituent research data to form policy positions, and implementing transparent internal elections. The USG provided training and consultations to six Serbian parties and a Turkish, Bosniak and Ashkali party, working to strengthen their participation in Kosovo politics. USG funding contributed to drafting legislation and building the capacity of the Central Election Commission to administer elections.

USG assistance continued supporting the development and sustainability of civil society and media by increasing the capacity of the Advocacy Training and Resource Center (ATRC) to provide better services to NGOs. ATRC conducted 25 public discussions and trained 345 NGO members on effective advocacy, management, and fund-raising. USG assistance also provided 15 grants to NGOs, which enabled them to contribute to different public policy debates on issues such as corruption, inter-ethnic relations, and good governance. USG assistance helped two Kosovo-wide independent television stations and the Kosovo Terrestrial Transmission Network (KTTN) near financial sustainability and supported the establishment of the Independent Media Commission as a permanent regulatory entity.

In FY 2006, the USG awarded 22 small grants for projects in areas of democracy, human rights, and human capacity building including ethnic tolerance, women's and youth issues, media development, handicapped persons, and school capacity development. Among these were programs to help integrate various minority groups into Kosovo society through radio and TV shows, lectures, campaigns, and debates. Lectures and workshops were conducted on domestic violence and trafficking in women, a series of radio shows aired on the issue confronting Serb returnees to Kosovo, and debates between the Serb community and their local institutions were conducted.

USG-funded English teaching courses introduced U.S.-produced materials and teaching methods to marginalized minorities in several communities, including classes that brought ordinarily isolated minority students together with non-minorities on a regular basis. These classes gave the USG regular access to otherwise hostile areas of Kosovo and made interethnic contact a regular occurrence in specific communities. The USG helped identify and fund the core collection of materials (reference, reserve, academic books, databases, and journals) to launch libraries at both of Kosovo's two significant universities, the University of Pristina and the American University of Kosovo. The USG sponsored speakers on such topics as media coverage of economies in transition, media coverage of domestic abuse and trafficking in people, academic and career counseling (as a key to Kosovo's development), lessons from the U.S. civil rights movement, and new technology for information access and libraries. A Kosovar TV crew traveled to the U.S. with a crew from Belgrade to cover U.S. election campaigns and to jointly create documentaries on civic participation and get-out-the-vote programs.

PROGRAM PERFORMANCE/IMPACT

USG funding made important contributions to improving the adherence to and respect for the rule of law in FY 2006. The USG-led establishment of the Kosovo Judicial Council, which is responsible for administering, managing, and governing the independent judiciary, helped the legal system begin to adopt international standards of practice and oversight. USG assistance supported the publication of the first issue of the Kosovo Supreme Court Bulletin, which makes court decisions public and widely available for the first time, and a trial skills handbook, which provides practical guidance to prosecutors. The USG supported the Kosovo Chamber of Advocates, Kosovo Judges Association, and the University of Pristina Faculty of Law in improving the quality and relevance of professional and continuing legal education. In the area of good governance, the Kosovo Assembly became more proactive, launching efforts to review the implementation of laws and performance of the executive branch, which enhanced its capacity as a responsible check on the executive branch.

USG funding helped media organizations eventually become financial independent. USG assistance brought two Kosovo-wide independent television stations, RTV 21 and KohaVision (KTV) to near sustainability, with both stations covering all of their operational costs for the first time. USG assistance also helped the Kosovo Terrestrial Transmission Network become completely independent of the PISG and able to cover 80% of its operational costs.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Governing Justly and Democratically. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: NGO Sustainability Index 2006. Seven different dimensions of the NGO sector are analyzed each year in the NGO Sustainability Index: legal environment, organizational capacity, financial viability, advocacy, service provision, NGO infrastructure and public image. The NGO Sustainability Index uses a seven-point scale, to facilitate comparisons to the Freedom House indices, with 7 indicating a low or poor level of development and 1 indicating a very advanced NGO sector. Source: USAID, The 2004 NGO Sustainability Index for Central and Eastern Europe and Eurasia. Found on line at http://www.usaid.gov/locations/europe_eurasia/dem_gov/ngoindex/2005/.

CY 2003 Rank

CY 2004 Rank

CY 2005 Rank

CY 2006 Target

4.2

3.8

3.8

3.3


Impact of U.S. Assistance on the Above Indicator: The cooperation between NGOs of different ethnic backgrounds, regional cooperation and networks has remained at almost the same level as 2005. However, as donor funding continues to decline, the legal environment in which non-profit organizations operate in Kosovo deteriorated in 2006. One notable failure of the NGO sector in 2006 was its inability to influence a new NGO law, which complicated their operating environment, and indicated that the overall sustainability of the sector has not marked significant improvement. Offsetting these setbacks, active NGOs improved their organizational structure and financial viability, due in part to USG training on these topics.

Performance Indicator: Media Sustainability Index 2005. The MSI assesses five "objectives" in shaping a successful media system: 1) free speech; 2) professional journalism; 3) plurality of news sources; 4) business management; 5) supporting institutions. The MSI uses a four-point scale, with a 0-1 range indicating unsustainable, anti-free press, a 1-2 range indicating an unsustainable mixed system, a 2-3 range indicating near sustainability, and a 3-4 range indicating a sustainable, free media environment. Source: USAID/IREX, Media Sustainability Index 2005. Found on line at
http://www.irex.org/msi/index.asp.

CY 2003 Rank

CY 2004 Rank

CY 2005 Rank

CY 2006 Target

2.32

2.36

2.46

2.60



Impact of U.S. Assistance on the Above Indicator: The 2006 ranking is not yet available, but positive developments over the past year indicate that the score will improve. In particular, electronic media and advertising agencies have formed an industry group to commission higher quality television and improve advertising revenues. Legislation has been passed by the Kosovo Assembly to provide a legal framework for the public broadcaster RTK and the Independent Media Commission. This means that a system of independent media licensing and self-regulation is in place, independent of political control. USG assistance has contributed to both of these efforts.

Economic Growth

Kosovo's economy continues to be adversely affected by political uncertainty, social instability, and growing anticipation and anxiety as final status negotiations conclude. Further constraining Kosovo's economic potential is an incomplete transition from command to free market economic principles. The cumulative effect of these factors has been inhibited private sector growth, leaving the public sector as the predominant force in the economy. While statistics in Kosovo are estimates, pending completion of a census, Kosovo's unemployment is estimated at 44%. Combining to seriously impede economic development, the value of exports continues to comprise only 6% of imports, systemic problems with the electricity utility plague daily electricity supply, and telecommunications services are substandard and vastly overpriced.

Despite these challenges, there were positive gains in 2006. The Ministry of Finance and Economy (MFE) assumed greater responsibility for carrying out its budget and tax administration mandate, privatization led to over 175 socially-owned enterprises completing final sales for nearly �250 million, and MFE projections showed the economy grew by 3.5%. However, the resolution of final status will put enormous pressure on Kosovo's leadership to deliver prosperity. How the PISG reacts to these pressures will have tremendous impact on long-term economic development.

U.S. ASSISTANCE PRIORITIES

The USG considers four economic issues paramount to ensuring a smooth transition for Kosovo over the coming years. First, economic institutions require the capacity, systems, and processes to continue developing and implementing sound and transparent policies as the current international mission transitions more responsibility to local institutions. Second, the private sector must develop the sophistication, flexibility, and innovation needed to capitalize on increasing investor interest and become more competitive in regional and global markets. Third, support for the energy sector, a key foundation for Kosovo's economic growth, is needed to ensure that the necessary administrative, legislative, and regulatory frameworks are in place to help generate reliable power and market conditions conducive to attracting foreign investment and increasing local private sector commercial activities. Finally, the resolution of private agricultural and commercial property disputes provides an important foundation for the development of private enterprise.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

The USG provided training and technical assistance to the Ministry of Finance and Economy (budget, treasury, tax administration, and debt), Ministry of Energy and Mining (MEM), the Central Banking Authority of Kosovo (CBAK), and the Kosovo Assembly. The USG also provided support to UNMIK-led privatization efforts at the Kosovo Trust Agency.

Enterprise development programs offered technical assistance, training, and grant support to businesses and associations working in three industries that have potential for job creation in Kosovo including livestock, fruits and vegetables, and construction materials. USG assistance worked with producers and processors to make Kosovar products more competitive by improving the productive capacity of enterprises, quality control, and marketing. In the last quarter of FY 2006, the USG signed a loan portfolio guarantee agreement with a prominent local bank, which will greatly accelerate the pace of lending to enterprises in the agricultural sector.

In addition to policy advice, the USG began supporting the development of the energy sector by strengthening management capacities at the Kosovo Energy Corporation (KEK). With other donors, the USG funded an international turn-around management team at KEK, and will fund assistance to new Kosovar management as the transition to local management continues.

USG funding supported the activities of the Kosovo Property Agency (KPA), which transitioned from the Housing and Property Directorate. The KPA has completed 99% adjudication of residential property claims, and is focused on developing laws and administrative and judicial mechanisms to resolve outstanding private agricultural and commercial property disputes. USG assistance to the KPA helped develop a rental property scheme to collect rents from occupants who illegally reside in the homes or apartments abandoned by the actual owners or residents as a result of the Kosovo conflict in the 1990's.

OUTPUTS

The provision of resident advisors in key institutions was a cornerstone of the FY 2006 assistance program. Full time advisors worked alongside emerging Kosovar leadership to reach priority objectives, including: formulating fiscal policy and establishing a MFE; establishing the CBAK with an emphasis on financial supervision; formulating tax policy, drafting tax legislation and establishing the Tax Administration of Kosovo (TAK); designing and implementing a pension system; drafting and implementing modern commercial laws; and designing, directing, and implementing a privatization scheme for socially-owned enterprises (SOEs). A USG-supported economic policy advisor provided expertise to the Prime Minister in interpreting and using economic data to set policy, and a team of advisors worked with the Kosovo Assembly to draft, vet, and pass commercial laws. The USG also helped develop strategies for the privatization of publicly-owned enterprises.

USG funding provided a comprehensive training program for counterparts in institutions that receive U.S. technical assistance. Programs which involved more than 360 hours of classroom work strengthened management and governance capabilities of more than 50 senior public officials.

The USG expanded outreach to Kosovo's struggling private sector. By working through business associations and directly with enterprises, training was provided to more than 4,200 business people in technical and management areas. USG-trained and mentored business consultants provided services to more than 800 entrepreneurs. Over $800,000 in grants was provided to local associations and individual businesses, enabling them to train producers, ensure consistency in product quality and production, and expand outreach and trade links to ethnic minorities.

USG assistance expanded efforts to bring minority communities into Kosovo's economy. USG funds established dairy and livestock demonstration farms in minority communities, accelerating technology transfer to these populations, trained Serbian-owned business in Kosovo accounting standards, helped minority-owned construction companies register with PISG authorities and compete for tenders, and encouraged greater trade links among communities.

USG-funded advisors helped the MEM improve outreach to investors, ensure policy compliance with regional energy agreements, and strengthen organizational skills within the ministry. The USG also developed a strategic power sector operational and financial planning tool that will help with analysis of physical and financial flows, historic and forecast data, and scenario analysis. USG funds contributed to an international effort to improve management of the electric utility (KEK). As the international management team departed from KEK in December 2006, USG funds were used for a program of training and technical assistance to the Kosovar leadership in KEK's network and supply divisions. Targeted USG technical support to the Energy Regulatory Office resulted in prompt passage of key pieces of secondary legislation.

PROGRAM PERFORMANCE/IMPACT

USG funding for training and technical assistance helped several Kosovo economic institutions achieve significant progress during FY 2006. USG efforts to strengthen the performance of MFE employees resulted in more substantial involvement of Kosovar staff in the budget process, timely preparation of macro-economic medium-term projections, and a 21% increase in domestic tax collections in 2006. The position of the Director of Treasury Department of the MFE, which was managed by an international expert, was transferred to a Kosovar director. In addition, an intergovernmental transfer system was established and implemented, providing incentives for municipalities to collect more of their self-generated revenues.

USG assistance helped Kosovar leadership at the CBAK implement newly-transferred competencies, particularly with regard to licensing, supervision, and regulation of banks. As a result of USG-funded training and mentoring efforts, Kosovars assumed the top management positions in two of the CBAK's directorates: bank supervision and pension and insurance. CBAK supervision officers were able to detect irregularities and authorized the closure of a local bank that was not performing according to regulations. As a result of this and other USG assistance, the public continued to gain confidence in the financial sector, with deposits and loan portfolios rising. As of September 2006, there were 885 million euros in deposit at Kosovar banks and 594 million euros in outstanding loans.

USG assistance to Kosovo's privatization program continued to yield results. The number of privatized socially-owned enterprises (SOEs) has exceeded 200, which is approximately half of the total number of SOEs, including the most viable companies. The program is on-track to complete privatization of 90% of SOEs (by value), and 50% (by number), by mid-2007.

As a result of USG efforts, Kosovo is laying the groundwork for attracting investment by building a stable economic environment with private-sector-friendly institutions and laws. Private investment in Kosovo, a main gauge of economic growth, exceeded targets, growing from 432 million euros in 2005 to 465 million euros in 2006.

USG enterprise development activities exceeded targets during FY 2006. USG-assisted enterprises created more than 1,800 new jobs, increased sales by more than $44 million, and engaged more fully in regional and international trade. Key business transactions, including sales of engineered wood flooring to Europe, and lamb meat to Bosnia, highlight a growing level of sophistication among local businesses.

USG technical assistance and policy advice was instrumental in building international consensus around a strategy for developing Kosovo's lignite resources. In June 2006, Kosovo's Prime Minister signed the World Bank's Letter of Development Policy, which sets forth policies for developing Kosovo's energy sector. In August 2006, a PISG-led Steering Committee approved an Expression of Interest (EOI) for a lignite mine and new power plant to which ten companies/consortia submitted their EOIs. The project is expected to bring two to three billion euros of private sector investment into Kosovo.

Targeted USG technical support to the Energy Regulatory Office resulted in passage of key pieces of secondary legislation, including Rules on General Conditions of Energy Supply, Disconnection, and Licensing.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers can better understand whether or not assistance programs are having the intended impact.

Please find below two important indicators in the area of Economic Growth. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Value of Private Investment. Source: Kosovo Ministry of Finance and Economy. Found online: http://www.unmikonline.org/press/reports/aide_memoire_may2006.pdf .

CY 2003 Baseline

CY 2004 Actual

CY 2005 Actual

CY 2006 Actual

�390

�392

�432

�465



Impact of U.S. Assistance on the Above Indicator: USG assistance encouraged private investment through: design and implementation of a transparent and trusted privatization program for socially-owned enterprises; strengthening the enabling environment for private investment, including passage of commercial laws consistent with international best-practice; continued support to Kosovo's banking sector through improved supervision by the Central Banking Authority through improved relationships among banks and private enterprise; and development of a cadre of growing businesses capable of meaningful interaction with investors.

Performance Indicator: Export as a percentage of Imports. Source: Statistical Office of Kosovo. Found online: www.ks-gov.net/esk.

FY 2003 Baseline

FY 2004 Actual

FY 2005 Actual

FY 2006 Actual

3.7%

4.9%

5.59%

6.11%



Impact of U.S. Assistance on the Above Indicator: Although levels remain low, exports are rising as Kosovo becomes more competitive in certain sectors, particularly dairy, food processing, and construction materials. More needs to be done to help Kosovar businesses improve compliance with industry standards and reliance on imported production imports decreases exports. Most Kosovar exports are to neighboring countries and the signing of free trade agreements with Albania and Macedonia should increase the quantity of Kosovo goods sold in regional markets.

Investing in People

The cultural, economic, and social reintegration of minorities and internally-displaced persons into Kosovo remains a significant challenge that will continue to require USG and international community leadership and oversight. The resolution of missing-persons cases is a major impediment to solidifying a multi-ethnic society in Kosovo.

In addition to these challenges, serious deficiencies in human and institutional capacity affect all Kosovars, particularly in the health and education sectors. There has been some improvement of local capacity in these sectors, but the low quality of education and technical skills continues to inhibit the proper functioning of new and existing Kosovo institutions as UNMIK transfers more governing competencies to the PISG. While donors and the international community have focused efforts on identifying and addressing these issues, it will take Kosovo many years to overcome the current adverse economic, educational, health and medical, and social conditions.

U.S. ASSISTANCE PRIORITIES

The USG and the international community provide leadership and oversight on the complex issues surrounding the reintegration of internally-displaced persons and minorities. Missing persons cases remain a major humanitarian issue in Kosovo as information concerning the whereabouts of an estimated 2,152 persons is still unknown. Resolution of missing-persons cases is a major impediment to solidifying a multi-ethnic society in Kosovo. In FY 2006, USG assistance was used to accomplish two objectives in human and institutional capacity building: improving the quality of workforce development efforts; and improving the quality of health services to highly targeted populations.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, USG assistance helped the Office of Missing Persons and Forensics (OMPF) fund the employment of skilled medical and technical staff, provision of needed equipment, and activities related to the exhumation of bodies in cemeteries and illegal or unmarked gravesites. The International Commission for Missing Persons (ICMP) continued working with unidentified remains through DNA testing to establish the cause of death whenever possible and confirm their proper identification for families prior to returning their remains. ICMP has worked to increase the role of the PISG in missing persons cases and facilitate dialogue on this issue between Serbia and Kosovo via the Belgrade-Pristina Working Group on the Missing under the Dialogue Group on Kosovo.

In FY 2006, USG funding continued supporting a participant training program to provide U.S.-based, third-country, and in-country study and observation tours to develop a stronger workforce in areas of importance to the U.S. Over the past year, the USG placed a greater emphasis on the capacity of local institutions to self-generate strong local talent for this program. A second program strengthened management and leadership skills among Kosovar women. In 2006, the program placed a greater emphasis on developing a regional network of women leaders in and around Kosovo. The program is implemented with additional support from USG-funded programs in Macedonia, Albania, and Montenegro.

There were also several health-related programs that continued to receive funding and/or concluded in FY2006. A targeted program focusing on maternal and infant health helped improve the quality of care provided to women during pregnancy in target municipalities. A small grant facilitated improved care for Kosovo's mentally disabled population and advocated for policies and conditions that respect the rights of the disabled. The USG provided limited support to the Institute of Public Health STI/HIV/AIDS Surveillance Plan through developing local capacity to design and implement key behavior and HIV prevalence studies. In addition, USG assistance helped a Roma population affected by lead poisoning.

OUTPUTS

In FY 2006, OMPF conducted 58 field operations (exhumations and assessments) yielding 57 sets of human remains. The number of field operations (and recoveries of human remains) has decreased since 2002 due to the difficulty of locating burial sites. OMPF completed inspections of all cases transferred from Serbia in 2006. In total, 425 cases from Serbia have been autopsied. In FY 2006, ICMP collected 1,960 blood samples and resolved 183 cases. Since 2000, ICMP has collected 11,468 blood samples and resolved nearly 2,000 cases.

The USG-funded participant training program successfully completed professional development activities and study tours for over 142 PISG employees from different ministries and government agencies. These activities supported USG-funded technical assistance activities in the rule of law, enterprise development, fiscal policy, and banking. In FY 2006 the program launched a new component, the Human Institutional Capacity Development Activity, which develops in-house training, mentoring, and staff development capacities in local institutions. This component worked with the Ministry of Justice to implement a comprehensive training program for staff, including internships for junior-level staff, short-courses in technical matters for mid-level staff, and supervision training for department heads.

A USG-funded program provided management and leadership training to 40 government and civil society leaders. The program continued to work with alumni of the program, helping to strengthen a network of more than 100 Kosovar women in prominent positions in society.

Maternal and infant care programs continued to make improvements in the quality of available health care. A total of 162 personnel (38 physicians and 124 nurses) completed the hands-on training of the four-visit model for basic antenatal care pilot project for municipal family health medical centers. Towards the end of FY2006, the program expanded to six additional municipalities and instituted a continuous professional development training program through central-government institutions, including the University Medical Center and the Center for Family Medicine Development, to increase the sustainability of the education and practices being transferred.

A USG grant helped create a coalition of six organizations for people with disabilities. Through the coalition disability groups can coordinate actions and advocate for systemic changes for inclusion of the mentally disabled in Kosovo. The Kosovo Government received assistance in preparing a plan to establish community-based support services for people with mental disabilities.

USG funds supported an HIV/AIDS Behavioral and Biological Surveillance (BSS+) study covering high risk groups. In the process, the effort built local capacity to design and implement key behavior surveillance and HIV prevalence studies independently in the future.

USG funding provided lead chelation therapy to 34 Roma persons and bought the appropriate food and nutritional supplements to support their therapy. USG assistance contributed to World Health Organization medical supervision for the chelation therapy and the development of the Roma women's treatment center.

PROGRAM PERFORMANCE/IMPACT

USG-funded participant training programs continued to have a positive impact on local capacity. Local counterparts participating in the program returned to Kosovo and implemented changes in their workplaces. For example, participants designed and implemented changes to university-level courses in law and neonatology. After returning from a study tour to Greece, a group of dairy farmers worked through their association to introduce improved animal care and milk production practices.

The USG maternal and infant care program has gained prominence in the medical community, attracting more than $500,000 in donations of equipment and supplies from U.S.-based pharmaceutical companies. As a result, nine family medicine centers introduced high-quality antenatal care in accordance with international standards, and with fully developed procedures and necessary equipment in place. The program has also established a foothold for USG influence in the health sector, which is becoming a lightning rod for concerns about public-sector corruption.

As a result of modest USG funding to advance the rights of the mentally disabled, the Kosovo Government made a public commitment to de-institutionalize the mentally disabled and support their integration into the community.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Investing in People. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year, or January 1 - December 31.

Performance Indicator: Number of sets of human remains identified by the International Committee for Missing Persons (ICMP) and returned to families by UNMIK Office of Missing Persons and Forensics (OMPF). Source: ICMP/OMPF. This indicator is measured using the returned sets of remains from OMPF with the samples identified by ICMP to resolve missing persons cases. This information is available at www.unmikonline.org/justice/ompf and www.ic-mp.org .

FY 2002 Actual

FY 2004 Actual

FY 2005 Actual

FY 2006 Actual

53

342

560

310



Impact of U.S. Assistance on the Above Indicator: The decline in the number of sets of human remains identified and returned to families is the result of the difficulty in locating gravesites and the return of some the human remains to ICMP that were identified in previous years. In addition some of the sets of human remains were only partial sets, so the number of remains might have exceeded the number of missing persons identified.

Performance Indicator: Number of communities open and for return of minorities from all communities. Source: UNMIK Office of Communities, Returns (OCRM), and Minorities and Mercy Corps.

FY 2003 Actual

FY 2004 Actual

FY 2005 Actual

FY 2006 Actual

9

16

28

30



Impact of U.S. Assistance on the Above Indicator: USG assistance supported the returns of minorities to their communities and was instrumental in persuading the PISG to take more action to create an environment that encouraged ethnic minorities to return to their homes. The PISG demonstrated the political will and provided funding to support minority returns, but progress was constrained due to lack of employment opportunities throughout Kosovo, security concerns on the part of some potential returnees, and delays in dispersing PISG funding for returns programs. More work needs to be done by the PISG to demonstrate a serious, sustained commitment in supporting the return of minorities. OCRM noted that six municipalities - Leposavic, Maliseva, Gjakova, Gjilan, Lipljan and Kacanik - needed to hold more working group meetings and conduct more outreach to assist and facilitate returns.

Peace and Security

While Kosovo's current security situation is relatively stable, the process of status negotiations requires the U.S. to be closely involved in monitoring and maintaining peace and security. The Kosovo Police Service (KPS) - one of the most multi-ethnic of Kosovo's institutions - continued gradually to take on new and more demanding tasks, with the responsibility for all regional and local police stations, with the exception of Mitrovica Regional Headquarters, transferring fully to the KPS. The UNMIK civilian police (CivPol) force, while still taking the lead on sensitive cases such as organized crime and corruption, has taken on more of a monitoring/mentoring role. The work the KPS does in dealing with common offenses within individual ethnic communities is increasingly respected by the population and considered successful by the international community. Crimes of a more severe/sensitive nature or with ethnic or organized crime dimensions remain difficult for the KPS to address because of lack of capacity, family or clan solidarity, intimidation of witnesses, and corruption. For serious inter-ethnic crime, the KPS law enforcement record is uneven and Kosovo institutions must do a better job of enforcing the rule of law throughout all of Kosovo. Organized crime and corruption are two of the biggest threats to Kosovo's stability and the sustainability of its law enforcement institutions.

U.S. ASSISTANCE PRIORITIES

In FY 2006, the USG's primary assistance priorities in peace and security continued to be: the enhancement of day-to-day security through the provision of seconded U.S. police officers to CivPol and of NATO troops to the KFOR mission; and building the capacity of the local police through the provision of equipment and training. USG assistance to the KPS focused on developing local capacities to deal with sensitive criminal investigations such as human trafficking, war crimes, and organized crimes. KPS officers must continue to be trained in a politically-neutral environment to win the confidence and support of all Kosovars, to ensure the multi-ethnic composition of the KPS, and enhance acceptance of the KPS by all communities. USG conflict mitigation programs and infrastructure development assistance to minorities, particularly Kosovo Serbs, addressed those communities' concerns about security by facilitating communication, cooperation, and mutual understanding between these communities and the PISG.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

The U.S. contribution to CivPol remains vital to maintaining Kosovo's security and stability. U.S. police officers provided specific expertise and experience in training, mentoring, and monitoring, but were also able to become quickly operational to respond to breaking events. CivPol helped Kosovar law enforcement institutions develop the capacity to fight organized crime, corruption, and terrorism, and contributed their skills and expertise to UNMIK police and KPS intelligence and investigative units. In FY 2006, the American CivPol contingent was 222 officers, or 11.7% of the total UNMIK CivPol force. In FY 2006USG assistance enabled the Kosovo Police Service School (KPSS) to continue to expand its leadership and specialized training courses.

USG funds provided technical assistance to the KPSS to create forums for police-community communication and interaction through its Community Safety Action Teams (CSAT) Program. CSAT trained KPS officers on community policing, partnership building and problem-solving. The USG continued to support efforts to combat trafficking in persons by helping the PISG develop and implement a strategy for a coordinated response to the problem, increasing public awareness, and improving the quality of services available to victims. In addition, USG funds supported efforts to identify and mitigate potential sources of conflict in order to bring minority communities closer to Kosovo government institutions. USG assistance also commenced work on infrastructure development projects to help reintegrate minority communities back into Kosovar society and give them a sense of future within Kosovo.

OUTPUTS

U.S. CivPol officers provided specific expertise and experience in training and particularly in monitoring. They helped Kosovar law enforcement institutions develop the capacity to fight organized crime, corruption, and terrorism. U.S. CivPol officers also contributed their skills and expertise to UNMIK police and KPS intelligence and investigative units. As responsibility for law enforcement and security in Kosovo continued to be transferred from international to Kosovar authority, U.S. CivPol maintained a flexible, fully operational police force that provided mentoring and training to the KPS, while also able to become quickly operational in order to respond to breaking events such as the March 2004 riots.

In FY 2006USG assistance enabled the Kosovo Police Service School (KPSS) to continue to expand its leadership and specialized training courses. Over 95% of all management and technical posts within the KPSS are now held by local staff. By the end of FY 2006, 550 new officers had been trained and over 8,300 police recruits had successfully completed KPSS basic training (after attrition losses 7,224 KPS officers are still serving). KPS was also successful in recruiting minorities and women. Sixteen percent of the trainees come from minority communities and women make up 15% of the total police force. USG assistance helped hire instructors and purchase equipment to train KPS officers in evidence collection, investigative techniques, intelligence gathering, traffic operations, VIP Security, Emergency Center Management, domestic violence, hate crimes, conflict resolution, and management and leadership.

USG funds provided technical assistance to the KPSS to create forums for police-community communication and interaction through its Community Safety Action Teams (CSAT) Program. CSAT trains KPS officers on community policing, partnership building and problem-solving. At the end of FY 2006, CSAT programs trained over 700 local leaders and KPS officers in 16 municipalities. In addition the CSAT programs established Local Public Safety Committees (required by UNMIK Regulation) in 14 minority and mixed communities. In both programs the CSAT Capacity Building Teams worked with municipal and community leaders to address reducing crime, improving safety, security and wellness and problem solving techniques within the communities.

USG funds were used to identify and mitigate potential sources of conflict by bringing minority municipalities closer to PISG institutions, linking youth across ethnic lines, introducing moderate content in media reporting and elementary school curriculum, and focusing civil society on promoting policies that encourage reconciliation among ethnic groups. As a result of these initiatives, more than 29,000 people in minority areas participated in projects aimed at improving living conditions. In addition, documentaries on issues related to inter-community relations were produced by multi-ethnic teams of journalists and broadcast both in Albanian and Serbian-language television stations. USG assistance also commenced work on 13 quick-impact infrastructure development projects - road construction projects, water projects, and building refurbishment projects - in northern Kosovo, which were designed to help reintegrate minority communities back into Kosovar society.

PROGRAM PERFORMANCE/IMPACT

The confidence in and respect for U.S. CivPol officers throughout Kosovo allowed them to investigate sensitive crimes or communicate effectively with minority communities in a manner that KPS officers would not have been able to accomplish. U.S. CivPol officers are highly regarded throughout Kosovo and are a stabilizing force that can avert potential conflicts or quickly become operational should the threat of violence occur.

USG assistance to the KPS and KPSS has helped Kosovo police officers assume leadership responsibilities beyond daily "beat cop" work, such as investigation of complex crimes, and crisis management. Though UNMIK CivPol officers often took the lead on most sensitive criminal cases and investigations, the likely resolution of Kosovo final status in 2007 necessitated training and technical assistance to facilitate a smooth, prepared transition from international to Kosovar authority.

CSAT programs enhanced communication and cooperation, and built confidence between PISG institutions, minority communities, and the KPS. CSATs provided much needed forums for municipal and community leaders and KPS officers, to address reducing crime, improving safety, security and wellness, and problem solving techniques.

As a result of USG assistance, an Anti-Trafficking Secretariat within the Prime Minister's Advisory Office on Good Governance (AOGG) was established. The secretariat has proven to be beneficial to the AOGG in numerous activities, such as the implementation of a USG-supported Kosovo-wide public information campaign.

USG conflict mitigation programs accelerated communication and cooperation between minority communities and PISG institutions to promote reconciliation among ethnic groups and tolerance. As a result of these initiatives, more than 47,000 people in minority areas were reached in infrastructure and education projects aimed at fostering interethnic relations and improving living conditions. In addition, documentaries on issues concerning inter-community relations were produced by multi-ethnic teams of journalists and broadcast over a network of television stations covering approximately 80% of the Albanian and 70% of the Serbian audiences. Feedback from the targeted community screenings of the USG funded project revealed that 67% of all viewers felt that the documentaries gave them insight into the other community's perspective about Kosovo.

The quick impact infrastructure development projects allowed the USG to expand its outreach to the minority communities to help them with their immediate needs, while encouraging them to reintegrate into Kosovar society and participate in PISG institutions. USG assistance reassured minority communities in northern Kosovo that the U.S. was interested in their well-being, and provided them hope that the U.S. would help ensure that they have a future in Kosovo with support from Kosovo government institutions.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Peace and Security. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Judicial Framework and Independence Rating. This indicator highlights constitutional reform, human rights protections, criminal code reform, judicial independence, the status of ethnic minority rights, guarantees of equality before the law, treatment of suspects and prisoners, and compliance with judicial decisions. (7-point scale: 1 is the highest, 7 is the lowest). Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm .

CY 2004 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

6.00

5.75

5.75

5.5



Impact of U.S. Assistance on the Above Indicator: Modest improvements in the ranking are anticipated due to several key developments in FY 2006: the number of competencies transferred from UNMIK to local institutions has increased; the establishment of the Kosovo Judicial Council and the Ministry of Justice; and progress on the Law on Courts and Law on Prosecutors. However, persistent budgetary problems throughout the judiciary and a mixed record protecting minority rights are remaining constraints. USG assistance to help establish the judiciary and strengthen criminal procedures contributes to the improvement in this indicator.

Performance Indicator: Governance Index. This index measures the stability of the governmental system; the authority of the legislative bodies; decentralization of power; the responsibilities, election and management of local governmental bodies; and legislative and executive transparency. (7-point scale: 1 indicates good governance, 7 indicates poor governance) Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm .

CY 2004 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

6.00

5.75

5.75

5.75


Impact of U.S. Assistance on the Above Indicator: Progress on the indicator is not anticipated. Continued uncertainty with regard to elections, decentralization and other key factors in the index has prohibited meaningful implementation of reforms.

FY 2006 Funds Budgeted for U.S. Government Assistance to Kosovo [PDF format]



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