USAID/KOSOVO ECONOMIC GOVERNANCE ACTIVITY 2nd QUARTERLY PERFORMANCE REPORT (YEAR I) JULY - SEPTEMBER 2019
October 15, 2019 This report was produced for review by the United States Agency for International Development. It was prepared by the USAID/Kosovo Economic Governance Activity implemented by Chemonics International, Prime Contractor, and Crimson Capital Corp. and Overseas Strategic Consulting, Ltd., Subcontractors.
USAID/KOSOVO ECONOMIC GOVERNANCE ACTIVITY 2nd QUARTERLY PERFORMANCE REPORT (YEAR 1) JULY - SEPTEMBER 2019
Contract No.: 72016719C00002
COR/USAID: Dardane Peja CHIEF OF PARTY: Terence Slywka
DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.
CONTENTS
EXECUTIVE SUMMARY ...... 1 KEY HIGHLIGHTS ...... 2 INTRODUCTION ...... 3 ACTIVITY CONTRIBUTION TO THE USAID CDCS ...... 3 SUMMARY OF QUARTERLY ACTIVITIES ...... 5 OBJECTIVE ONE: IMPROVED BUSINESS ENABLING ENVIRONMENT ...... 5 BACKGROUND ...... 5 CURRENT ACTIVITIES ...... 5 OBJECTIVE TWO: PUBLIC FINANCIAL MANAGEMENT STRENGTHENED ...... 14 BACKGROUND ...... 14 CURRENT ACTIVITIES ...... 14 OBJECTIVE THREE: CROSS-CUTTING: ENHANCED STRATEGIC COMMUNICATION ...... 21 BACKGROUND ...... 21 CURRENT ACTIVITIES ...... 21 NEXT QUARTER ACTIVITIES ...... 24 CHALLENGES AND ADAPTATION ...... 25 COORDINATION WITH OTHER DONORS AND PROJECTS ...... 26 ANNEX 1: MELP REPORTING ...... 28 ANNEX 1I: SUPPLEMENTAL REPORTING ...... 31 ANNEX III. REPORTS AND DELIVERABLES ...... 37
ACRONYMS
AI Administrative Instruction ASYCUDA Automated System for Customs data BEI Business Environment Improvement BPA Business Process Analyses CDCS USAID Kosovo Country Development Cooperation Strategy 2014 - 2020 COR USAID Contracting Officer’s Representative DB Doing Business DBTF Doing Business Task Force DO Development Objective DSPHC MESP Department for Spatial Planning, Housing, and Construction GDP Gross Domestic Product GoK Government of Kosovo IFC International Finance Corporation IMF International Monetary Fund IPRR Immovable Property Right Register IR Intermediate Result KCA Kosovo Cadaster Agency KBRA MTI Kosovo Business Registration Agency KFMIS Kosovo Financial Management Information System LOBO Law on Business Organizations EU European Union FTA Free Trade Agreement FVA Food and Veterinary Agency MEL Monitoring, Evaluation, and Learning MELP Monitoring, Evaluation, and Learning Plan MESP Minister of Environment and Spatial Planning MoF Ministry of Finance MTEF Medium-Term Expenditure Framework MTI Ministry of Trade and Industry NCED National Council for Economic Development PFM Public Financial Management PPRC Public Procurement Regulatory Commission RTFSP World Bank Regional Trade Facilitation Support Program OECD Organization for Economic Co-operation and Development SAA Stabilization and Association Agreement TAK Tax Administration of Kosovo TEAM Transparent, Effective and Accountable Municipalities USAID United States Agency for International Development USG United States Government VAT Value Added Tax WBDB World Bank Doing Business WTO World Trade Organization
EXECUTIVE SUMMARY
The USAID/Kosovo Economic Governance Activity is a five-year initiative to support Kosovo to implement significant reforms that will improve the efficiency of government operations, strengthen public financial management and ensure self-reliant, inclusive governance capacities and systems are in place for future reforms. The Activity has the following three objectives: (1) Business Environment Improvement, (2) Strengthened Public Financial Management (PFM), and (3) Enhanced Strategic Communications.
This report covers the period from July through September 2019, and is the second quarterly report of the Activity. During this period, several reform-support activities were initiated with the main partners of the Activity, most of which will continue in the coming months. In addition to working with government institutions, during this reporting period, the Activity engaged in consultations with the private sector to receive inputs on relevant activities, as an important aspect towards transparency, inclusion and accountability.
The Activity engaged with the Ministry of Environment and Spatial Planning (MESP) to identify a plan and take action on several obstacles to ensure smooth implementation of the legalization program, including supporting strategic communications outreach and MESP leadership in technical workshops for municipalities. The Activity selected two partner municipalities that will receive direct support on legalization of unpermitted construction. The Activity also supported the Ministry of Trade and Industry (MTI) to begin drafting two Administrative Instructions (AI) deriving from the Law on Business Organizations (LOBO). Further, the Activity continued supporting the Kosovo Business Registration Agency (KBRA) to analyze its internal data on business registration across Kosovo, and publish the data to the general public. Also, the Activity coordinated with MTI on activities linked with the World Bank Doing Business (WBDB) reforms by providing reporting updates to the World Bank for the WBDB Report 2020.
In Public Financial Management (PFM), the Activity completed a baseline mapping of the macro-fiscal analysis and forecasting functions of the Ministry of Finance (MoF), as a foundation to developing options for institutional retention and replication of knowledge for economic and budget forecasting in light of inevitable staff turnover. To enhance the Government of Kosovo’s (GoK’s) Monitoring, Evaluation, and Learning (MEL) capacities for various policies, the Activity supported the MoF and MTI to conduct a draft assessment of the budget impact from the Free Trade Agreement (FTA) with Turkey. Further, in coordination with USAID Transparent, Effective and Accountable Municipalities (TEAM), the Activity provided support to the MoF Treasury and Public Procurement Regulatory Commission (PPRC) to initiate discussions for automating the linking of steps in the GoK’s procurement process by introducing technical options for communication and data exchange between the e-procurement and financial management systems.
On tax administration, the Activity supported the Tax Administration of Kosovo (TAK) on a number of reform activities, including exploring options with private sector input for further digitalization of taxpayer services, introducing weighted risk-based criteria for tax returns, and drafting a concept note on a plan to improve the integrity of TAK and its overall approach to such initiatives.
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KEY HIGHLIGHTS
Drafting and publication of the Report on Basic Performance Indicators for Services provided by KBRA for the first quarter of 2019; Supported KBRA to produce early drafts of two AIs needed by LOBO for implementation; Supported MTI to provide reform updates to the World Bank for the WBDB Report 2020; Reviewed memo sent by the WBDB team to the GoK indicating that a number of reforms in six indicator sets are likely to be recognized by the WBDB Report 2020; Kosovo was listed by the World Bank among the pre-publication Top 20 improvers worldwide on the ease of doing business, based on the data collected for the WBDB Report 2020 which is anticipated to be published on October 24, 2019; Helped MESP develop and launch an information campaign for citizens on the program for legalization of unpermitted construction; Conducted a review of the legal framework governing the activities of the Kosovo Cadaster Agency (KCA) to clarify that relevant information, such as orthophotos managed by KCA, need to be offered to municipalities and MESP for free; Facilitated effective implementation of legalization law through KCA agreement to provide free orthophotos and other relevant cadastral information to MESP and municipalities, following the review conducted by the Activity (previous point); Developed a set of process maps outlining the legalization process for the different categories of unpermitted constructions in graphical format; Successfully supported a series of six MESP-municipal regional workshops on legal and practical procedures on legalization, which were attended by 235 municipal officers from the urbanism, cadastral, and inspections directorates; Selected two partner municipalities – Prishtinë/Priština and Graçanicë/Graćanica – for direct legalization support; Completed a baseline mapping of the macro-fiscal analysis and forecasting functions at MoF; Conducted an draft budget impact analysis of the FTA with Turkey; Conducted preliminary analysis of the EU-drafted Law on Foreign Trade; Initiated the process for enhancing accountability and financial discipline through the interoperability of the e-procurement and the financial management system; Established effective implementation and coordination mechanisms with TAK management; Developed a concept note on the TAK Integrity Enhancement Plan; Prepared an internal draft memo with recommendations for TAK to digitalize further services for taxpayers; and, Reviewed and summarized the main changes introduced with the recently approved Corporate Income Tax.
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INTRODUCTION
On March 26, 2019, the United States Agency for International Development (USAID) awarded the Kosovo Economic Governance Activity (“Activity”) to Chemonics International Inc. and its subcontractors Crimson Capital Corp. and Overseas Strategic Consulting, Ltd.
The Activity is a five-year initiative to improve self-reliant, inclusive, governance of the business environment and strengthen public financial management to facilitate economic growth, reducing public perception of and opportunities for economic corruption, thereby encouraging investment in Kosovo’s economy. This result will be achieved through three main objectives:
1. Business Environment Improvement;
2. Strengthened Public Financial Management; and,
3. Enhanced Strategic Communications.
The main areas of reform focus and interventions planned to be supported through all three objectives are provided below.
ACTIVITY CONTRIBUTION TO THE USAID CDCS
While specific links between Activity Results and the Country Development Cooperation Strategy (CDCS) are provided in more detail in the Activity’s Monitoring, Evaluation, and Learning Plan (MELP), a summary is provided here to articulate the technical connections between Work Plan tasks and overall USAID goals in Kosovo.
The USAID CDCS for Kosovo for 2014-2020 formulates an ambitious agenda. The United States Government (USG) seeks a strong and effective partnership with the GoK that builds on their close relationship in order to address regional and global challenges. The strategic goal of the CDCS is:
Kosovo Becomes an Increasingly Prosperous Country, Progressively Integrating into the Euro-Atlantic Community, with More Effective and Accountable Governance.
The CDCS is based on the implementation of three development objectives (DOs):
• Development Objective 1: Improved Rule of Law and Governance that Meet Citizens’ Needs
• Development Objective 2: Increased Investment and Private Sector Employment
• Development Objective 3: Enhanced Human Capital
The Activity directly and explicitly contributes to DO2: Increased Investment and Private Sector Employment. Three indicators are provided to capture this DO:
1. Growth in Foreign Direct Investment
2. Private sector as a share of Gross Domestic Product (GDP)
3. Ratio of public-to-private sector employment
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The Activity’s outcomes also directly contribute to the Intermediate Results (IR) 2.1: Improved Economic Governance and Business Environment, Sub-IR2.1.1: Improved Fiscal Framework and Public Financial Management and Sub-IR2.1.2: Key Economic Reforms Implemented at the Central and Local Levels.
IR2.1: Improved Economic Governance and Business Environment
1. Progress on the World Bank Doing Business Index
2. Formal sector employment as a % of total employment
3. Number of businesses registered that submit tax declarations Sub-IR2.1.1: Improved Fiscal Framework and Public Financial Management
1. Government revenue (tax and non-tax), excluding foreign grants, as a % of GDP
2. Person-hours of training completed in fiscal policy and fiscal administration as a result of USG assistance
Sub-IR2.1.2: Key Economic Reforms Implemented at the Central and Local Levels
1. Number of municipal regulations and administrative procedures that have been simplified as a result of USG assistance
2. Key policy, legislation, and structural reforms implemented at the central level
3. Person-hours of training completed in business enabling environment supported by USG assistance
The specific use of DO and IR indicators is covered in detail in the MELP. However, in addition to those metrics, activities may also contribute to mission objectives in other DOs and IRs, and potential linkages will be tracked and coordinated with USAID accordingly (see figure 1).
Figure 1. Activity Contribution to DO2: Increased Investment and Private Sector Employment
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SUMMARY OF QUARTERLY ACTIVITIES
This section provides a detailed description of support provided by the Activity during the reporting period and progress towards implementing the Work Plan of the Activity.
The most notable event during the reporting period which introduced the possibility of broad potential impact was the resignation of the Government, followed by the scheduling of elections for October 6, 2019. While in the short-run there has been limited impact on planned activities, the outcomes of the election could result in a new Government which would necessitate realignment or refocusing of activities, which would be done in close coordination with USAID. Some implications are indicated below, but other factors will only be known following coalition decisions and Government priority determinations.
As noted in the Activity Work Plan and MELP, revisions are expected to both documents in the near future. Based on continuously improving information, the outcomes of the elections, and the Doing Business (DB)1 results, the Activity anticipates draft revisions in the future, depending on the external timing of events indicated.
OBJECTIVE ONE: IMPROVED BUSINESS ENABLING ENVIRONMENT
BACKGROUND Interventions addressing this Objective will expand the advances Kosovo has already made to improve its business environment and reduce avenues for corruptive influence. In addition, the Activity will help GoK counterparts, with the involvement of the private sector and civil society, to strengthen institutional policy development and intergovernmental coordination, and further strengthen the transparency, efficiency, accountability, and implementation of the regulatory requirements applied to businesses at both national and sub-national levels.
In terms of specific reform-interventions, the Activity will assist selected municipalities and MESP to implement the program for legalization of unpermitted construction, based on new legislation recently completed for this purpose, as well as support the implementation of reforms in construction permitting (primarily at the municipal level) to reduce uncertainty and opportunities for corruption in interactions between government officials and businesses/citizens seeking to obtain construction permits. Further, the Activity will support MTI to finalize specific secondary regulations for business registration anticipated in the new LOBO and implement the reform of Kosovo’s inspections system by focusing on the area of market surveillance (consumer protection) for goods in trade, as well as support pilot implementation of inspections reforms with the Construction Inspectorate at MESP and municipal bodies.
CURRENT ACTIVITIES In the reporting quarter, the Activity supported MTI with the initial drafting of two AIs derived from the new LOBO, as part of its objective to support MTI to complete the secondary legislation needed
1 As of Doing Business 2019, the World Bank annually publishes data for 190 economics on 120 indicators organized into 11 indicator sets, 10 ranked, 1 unranked. https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB19- Chapters/DB2019-Data-Notes.pdf
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for the implementation of the law, which entered into force in 2018. The Activity also supported KBRA to make use of its internal process data to measure its performance and improve the efficiency of its business operations by developing the Report on Basic Performance Indicators for Services Provided by KBRA for the first quarter of 2019.
Although Trade is a multi-faceted technical area, involving many issues, partners and donors, the Activity has summarized (see Box 1) its trade-related support for the quarter. These activities cross all 3 Activity Objectives and further depth and breadth of activities will be considered based on opportunities, the priorities of the new Government, activities of other donors, and resources available.
Following the official start of the Box 1: Crosscutting Support to trade-related legalization program based on the Law Activities on Treatment of Constructions without During the reporting quarter, the Activity supported a Permit, as well as the approval of the number of specific trade-related initiatives, including: sub-legal acts for the implementation of Conducted a draft budget impact analysis of the FTA this law, the Activity coordinated with with Turkey: Supported the MoF and MTI to conduct an and supported MESP to identify and initial budget impact analysis of the FTA with Turkey, which remove several obstacles for the will help improve the skills of those institutions for realistic implementation of the legalization budgeting. program at both levels of government Reviewed the draft Law on Foreign Trade: The Activity and simultaneously worked on criteria reviewed this draft law and discussed with the MTI Trade and collected the needed information Department in anticipation of further review and finalization which enabled the Activity to determine by a formal working group by led by MTI. and select two partner municipalities WTO TFA Alignment: The Activity and World Bank with which the Activity plans to provide Regional Trade Facilitation Support Program (RTFSP) agreed direct support to the process of to collaborate on monitoring Kosovo’s alignment with the WTO Trade Facilitation Agreement (TFA) and identify joint legalization of unpermitted opportunities for supporting the adoption of WTO TFA construction. provisions, On tasks related to the WBDB reforms, WBDB 2020 Reforms (anticipated): As a result of the Activity supported MTI in previous USAID support, and the support of the Economic communicating and coordinating with Governance Activity, the preliminary information from the World Bank confirms potential time improvement in the the World Bank, including on Trading across Borders indicator set, including decreased preliminary feedback provided by the time required to complete border export procedures. World Bank to the GoK on reforms Expanding public outreach: Engaged with the MTI Trade related to Doing Business indicators. Department on expanding public outreach to foster a more In anticipation of the publication of the informed and inclusive approach to policy making and implementation of reforms. WBDB Report 2020 in October 2019, at the end of September 2019, the World Bank published a list of Top 20 Improvers2 worldwide. The list includes Kosovo and recognizes reforms supported directly by USAID and those for which World Bank recognition was facilitated by the USAID-supported Doing Business Task Force (DBTF) through its relationship with the World Bank Doing Business Team in Washington DC as supported by USAID. The main areas where progress is noted include dealing with construction permits, protecting minority investors, enforcing contracts, and getting electricity.
2 https://www.doingbusiness.org/en/reforms/top-20-reformers-in-db2020
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O1-1: COMPLETED LEGAL FRAMEWORK ON BUSINESS ORGANIZATIONS AND INSTITUTIONALIZATION OF PERFORMANCE MEASUREMENT FRAMEWORK Following consultations with MTI on the activities needed to complete the legal framework for the registration of business organizations and corporate governance based on the requirements of the LOBO3, which was drafted with previous USAID support and entered into force in 2018 the Activity worked with the MTI Legal Department and KBRA to begin preparing and producing the early drafts of two AIs:
AI on Procedure for Processing Data Collected by KBRA
AI on Procedures for Setting Official Name and Trade Name of Business Organizations
The Minister of MTI established two working groups comprised of officers from the Legal Department of MTI and KBRA that will be responsible for drafting these two AIs.
Following initial research on the content of similar legal instruments in regional and EU countries including Estonia, Slovenia, North Macedonia, and Albania, the Activity helped MTI to complete the preliminary outlines for both AIs. The outlines developed by the Activity will be discussed at a joint workshop with both working groups scheduled for October 2019, after which the drafting of the two AIs will begin.
Building on previous USAID support to KBRA to develop a performance measurement framework that can help improve the quality of reporting and develop a performance-based approach to services provided to citizens and entrepreneurs, the Activity worked with KBRA officers to develop the Report on Basic Performance Indicators for Services Provided by KBRA for the first quarter (January – March) of 2019. The Report was developed with support from Objective 3 of the Activity. During development of the report, the Activity identified several data quality issues which resulted from changes made to the KBRA electronic database during 2018-2019. These data quality problems are being carefully recorded and will be addressed in a comprehensive report which will be submitted to KBRA by the end of Year 1 of the Activity, which will include recommendations on how KBRA can address these issues.
O1-2: SUPPORT EFFECTIVE, TRANSPARENT AND CREDIBILE LEGALIZATION PROGRAM IN PILOT MUNICIPALITIES THROUGH SUSTAINED COOORDINATION BETWEEN MESP, MUNICIPALITIES AND PRIVATE SECTOR PARTNERS Following discussions with MESP and a review completed by the Activity in the previous quarter, the five AIs needed for the implementation of the program for the treatment of constructions without permit (legalization) were signed by the Minister of MESP and entered into force on July 15, 2019, opening the way for the implementation of the legalization program at the central and municipal levels.4
The AIs, which lay out the procedures and contain the forms necessary for municipalities reviewing legalization applications, were drafted with support from the previous USAID Partnerships for Development Project, and their adoption was one of the key conditions precedent for beginning the legalization program.5
3 https://gzk.rks-gov.net/ActDetail.aspx?ActID=16426 4 https://mmph.rks-gov.net/single_page/1008/lajmet 5 https://gzk.rks-gov.net/ActDetail.aspx?ActID=17767
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Working with the Department of Spatial Planning, Construction, and Housing (DSPCH) at MESP, the Activity also identified four key prior-actions that need to be addressed before the legalization program can be implemented. These actions included:
Launch an information campaign for citizens on the legalization program jointly with the MESP Communication Office, with the support of a subcontractor engaged by MESP to assist with the design and implementation of the campaign;
Provide municipalities with the information needed to determine when unpermitted constructions were built (orthophotos) and other relevant cadastral information free of charge, and ensure Municipal Cadastral Offices do not charge any additional fees for registering unpermitted constructions in the Cadastral and Immovable Property Right Registers;
Provide urbanism, cadaster, and inspections officers at the municipal level with basic guidelines and training for the implementation of the law on legalization and recently adopted AIs; and
Provide municipalities with a basic tracking tool for recording legalization applications.
After the identification of these four key areas for support and consistent with its current Work Plan, the Activity supported MESP to implement these actions.
Regarding the launch of the information campaign on the legalization program, the Activity supported MESP to review and develop communications materials, including a promotional video about the importance of a legalization program and what it means for citizens. The first Photo 1: Agreement facilitated between MESP/DSPCH and the Chief Executive Officer of KCA to issue orthophotos to municipalities and drafts of the materials were otherwise support implementation of the GoK legalization program developed by a MESP-contracted company specialized in marketing and promotion, whereas the Activity supported the MESP Communication Office and DSPCH during the initial conceptual discussions and during the review of the drafts developed by the MESP contractor.6 (For further details on this assistance, see the section on Objective 3 below).
A second obstacle identified was the need for municipalities to have free access to orthophotos (aerial photos) for their regions. Immediate and free access to such information would enable municipalities to have accurate information on individual constructions and the surrounding area, , which would make the review and approval process of legalization applications much easier. Currently, orthophotos are maintained by the KCA, which regularly conducts aerial surveys of the territory of Kosovo.
The existing legislation governing the activities of the KCA (the Law on Cadastre and its associated sub-legal acts) requires that all public institutions pay the KCA to obtain this information. However,
6 https://mmph.rks-gov.net/al/single_page/1502/lajmet
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in the case of legalization, the Law on Treatment of Constructions without Permit specifically requires that KCA provide this information to MESP and municipalities free of charge. During discussions with the DSPCH and municipality of Prishtinë/Priština Urbanism Department, the Activity learned that KCA was requiring municipalities which had requested access to this information to compensate KCA for it, causing uncertainty, confusion, and delays in beginning the legalization program. Furthermore, the DSPCH and municipality of Prishtinë/Priština raised concerns on whether Municipal Cadastral Offices would charge their regular fees during the final stage of the legalization process, which is registration in the Cadaster and Immovable Property Rights Registries.
At the request of MESP, the Activity conducted a review of the legal framework on this issue, which was summarized in a memorandum submitted to MESP. The memorandum argues that, due to its scope and the timing of its adoption, the Law on Treatment of Constructions without Permits takes precedence over the Law on Cadaster and sub-legal acts, and that the orthophotos should be provided to MESP and municipalities free of charge. Furthermore, the memorandum argues that the only fee that can be charged of citizens in the legalization process is the legalization fee (1 Euro per m2 for Category 1 and 2 Euro per m2 for Category 2 buildings). Following submission of the memorandum to MESP, a meeting was scheduled between representatives from DSPCH and the Activity with the Chief Executive Officer and Legal Department of KCA, where these issues were discussed in detail. In this meeting, KCA agreed to provide the orthophotos free of charge to DSPCH, along with other relevant cadastral information. DSPCH will then distribute this information to all municipalities, and work with KCA to draft simple guidelines for Municipal Cadastral Officers on the details of the legalization process.
Finally, an agreement was reached that KCA will Figure 2: An example of process-chart facilitate future discussions and training for geodets for legislation of unpermitted on the legalization process with support from MESP construction and the Activity. The orthophotos were obtained by DSPCH and distributed to all municipalities during September 2019 with support from the Activity.
Furthermore, to support an improved understanding of the legalization process by the responsible officers at the central and municipal levels, the Activity supported MESP to develop a set of process maps outlining the legalization process for different categories of unpermitted constructions in graphical format (see figure 2).
The process maps were developed for different categories of unpermitted constructions and as a precursor to more comprehensive legalization guidelines to be developed in following months by MESP, with support from the Activity.
The process maps, along with several presentations developed by MESP with support from the Activity, were presented during a series of six regional workshops attended by 235 municipal officers
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from the urbanism, cadastral, and inspections directorates.
During these workshops, the participants were briefed on the current status of the legalization process and detailed administrative processes outlined in the law on legalization and administrative instructions adopted by MESP in July 2019. The presentations were led by the MESP DSPCH director, and Photo 2: Workshop with Municipal Urbanism, Cadaster, and Inspections officers from DSPCH and the Officers in North Mitrovica Activity presented the preliminary process maps to explain the legalization process for different categories of unpermitted constructions.
The status update and detailed presentations were followed by a questions and answers session, where officers from DSPCH answered questions posed by municipal officers on the legalization process. The Activity supported DSPCH to record these questions and ensure they are fully reviewed and considered during the development of the legalization guidelines which will be drafted by DSPCH and the Activity together.
Regarding the basic tracking tool for legalization applications, the Activity obtained a sample of the MS. EXCEL tool currently used by the municipality of Prishtinë/Priština and engaged a short-term expert to assist DSPCH in developing a similar standardized tool, either in MS. EXCEL or another format which will then be distributed for use by all municipalities. The development of this simplified tracking tool has become necessary due to delays by MESP to develop and launch the Legalization Database. Once the Legalization Database is completed by MESP, the information from the simplified tracking tool will be migrated to the database.
During this quarter, the Activity also completed a document outlining weighted criteria for selecting two partner municipalities for direct legalization support and, based on this, pre- selected eight municipalities for further consideration. The Activity then proceeded to arrange meetings with the technical staff in the eight shortlisted municipalities to obtain additional information.
After a comprehensive analysis of information collected from the pre-selected municipalities, the Activity proposed two-partner municipalities (Prishtinë/Priština and Graçanicë/Graćanica) for support and, with USAID consent, began preparations for formalizing working relations with them. As a first step, the Activity will draft two Memorandums of Understanding, which will be discussed with the senior levels of the two municipalities before they are formalized, and local-level assistance can begin with clear criteria for municipal actions / resources and Activity supplemental support.
O1-3 IMPROVED CONSTRUCTION PERMITTING PROCESS IMPLEMENTED AT THE CENTRAL AND LOCAL LEVEL As reported above, based on the World Bank’s recently published information on the Top 20 Improvers for the WBDB Report 2020, as well as other information shared with the GoK as relating to the Dealing with Construction Permits Indicator Set of the Report, it is expected that the
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WBDB Report 2020 will recognize several improvements made to the construction permitting process by the GoK and municipality of Prishtinë/Priština with support from USAID.
Following the anticipated publication of the WBDB Report 2020 on October 24, 2019, the Activity will conduct a comprehensive review of the results and consider opportunities for further improvements based on the WBDB Reform Methodology, including by encouraging the reduction of post-construction fees for registration in the cadaster and Immovable Property Right Register (IPRR), as well as inspection reforms under O1-5.
The Activity, in consultation with MESP, collected additional information for conducting a comprehensive analysis of the process of construction permitting at the central and local levels, including the current situation as presented in the legal framework, applied by the municipalities and MESP, and experienced by citizens and the private sector.
As part of the legalization workshops with municipalities in September 2019, the Activity has been collecting additional valuable information from municipal urbanism officials on practical challenges in the area of construction permitting, including most notably on delays citizens face with inspections during construction. This is possibly a result of an incomplete understanding of the existing legislation on construction permitting on the extent and scope of such inspections and the abolition of technical acceptance in the 2012 Law on Construction.7 The challenges with municipal construction inspection execution have contributed to improper delays in obtaining the occupancy permit from the municipalities, which is the last step before a building which has been permitted can be registered in the cadaster and IPRR.
Once the WBDB Report 2020 is released and priorities of the new Government are known, the Activity anticipates revisiting the links between O1-3 and O1-5.
O1-4 IMPLEMENTATION BY GOK OF CITIZEN VALIDATED IMPROVEMENTS CAPTURED IN THE WORLD BANK DOING BUSINESS REPORT On reforms guided by the World Bank Doing Business methodology, the Activity coordinated with MTI and held preliminary discussions with the recently appointed Secretariat of the National Council for Economic Development (NCED) aimed at ensuring that WBDB reforms take a prominent role in the agenda of NCED.
Building on the extensive support provided by USAID in previous years to the GoK with its WBDB reform agenda, the Activity supported MTI to report to the WBDB team in Washington, D.C. on reforms which can potentially be captured in the WBDB Report 2020.
In response to the reports submitted by MTI, in late August 2019, the WBDB Team sent a memorandum to the Government analyzing the reported reforms and indicating which reforms are likely to be recognized in the WBDB Report 2020. According to this memorandum, improvements are likely to be recognized in the following indicator sets:
Dealing with Construction Permits: due to the elimination by the municipality of Prishtinë/Priština of the requirement to notify of the start of construction and receive a location inspection;
Protecting Minority Investors: due to the entry into force of the new LOBO in 2018 which, among other things, strengthened disclosure requirements for directors in corporations,
7 http://gzk.rks-gov.net/ActDetail.aspx?ActID=2833
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improved procedures for preventing or mitigating conflict of interest situations, and allowed broader access of minority investors to corporation documents before filing a lawsuit;
Enforcing Contracts: due to the adoption of a consolidated law on voluntary mediation that encompasses all aspects of mediation, including the enforceability of mediated settlement agreements.
Getting Electricity: due to the improved reliability of power supply through investments in grid infrastructure and implementation of an automatic energy management system for outage monitoring and restoration of service;
Starting a Business: due to improvements in the time necessary for company incorporation at KBRA;
Trading Across Borders: due to decreased time required to complete export border procedures.
Furthermore, on September 27, 2019, the World Bank published a list of Top 20 Box 2: World Bank Pre-publication Website Includes Kosovo in the List of Top 20 Improvers worldwide (see Box 2),8 which Improvers in WBDB Report 2020 includes Kosovo and recognizes progress in several areas supported by USAID and as Based on the World Bank announcement, Kosovo was listed among the Top 20 improvers by making facilitated by the USAID-supported Doing it easier to do business in the areas of dealing with Business Task Force. The significant construction permits, getting electricity, protecting improvements, amongst others, outlined in the minority investors, and enforcing contracts. Top 20 list published by the World Bank are • To streamline its construction permitting expected to be reflected in the WBDB Report process, Prishtinë/Priština municipality 2020. The main areas of progress noted in the eliminated the requirement to notify the start of Top 20 Improvers list for Kosovo are in dealing construction and receive a location inspection. with construction permits, protecting minority • Kosovo improved the reliability of power supply investors, enforcing contracts and getting by investing heavily in grid infrastructure and electricity. implementing an automatic energy management system for outage monitoring and restoration of Due to the resignation of the Prime Minister of service. Kosovo and Government cabinet in July 2019, • Kosovo passed a consolidated law on voluntary further support to MTI on coordination of mediation that encompasses all aspects of WBDB activities and support to the WBDB mediation, including the enforceability of working groups for technical implementation of mediated settlement agreements. future reforms has been postponed, which may • Kosovo adopted a new Law on Business have an impact on potential reforms and timing Organizations that gives shareholders broader implementation for capture in WBDB Report access to company documents before filing a 2021. lawsuit.
To build on the progress made so far using the WBDB Reform Methodology, and especially since Kosovo has experienced significant DB improvement over the years, the Activity will aim to engage on WBDB reforms with the new Government constituted following early elections scheduled for October 6, 2019. The Activity will also seek to go beyond the measurement limitations of the methodology and encourage the GoK to build on the time and motion and process measurement concepts underlying DB and incorporate using internal operational metrics and objective domestic
8 https://www.doingbusiness.org/en/reforms/top-20-reformers-in-db2020
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data to evaluate performance as a broader approach to transparent, accountable, and efficient government as a counterbalance to perceptions of government power misuse and corruption.
O1-5 IMPROVED EFFECTIVENESS AND EFFICIENCY OF MARKET INSPECTIONS OF GOODS IN TRADE AND CONSTRUCTION INSPECTIONS With the resignation of the Prime Minister of Kosovo and Government cabinet in July 2019, approval by the GoK of the Draft Law on Inspections, scheduled for the second half of 2019, was postponed until the formation of a new Government following early elections scheduled for October 6, 2019.
Nevertheless, the Activity continued coordinating closely with MTI and the World Bank / International Finance Corporation (IFC) on the inspections reform program, including by continuing preparations to conduct two Business Process Analyses (BPAs) at the Market Inspectorate within MTI and Construction Inspectorate within MESP, which are expected to begin in the third quarter of Year 1 of the Activity.
In conducting the BPAs, the Activity, together with partner bodies, will seek to identify legal and operational changes needed to achieve compliance with the new Law on Inspections after it is approved, and specifically with international best standards and practices on business inspections, including as specified by the Organization for Economic Co-operation and Development (OECD). (For more information, see OECD Best Practice Principles for Regulatory Enforcement and Inspections.)9
Furthermore, the Activity will review the current organizational structure and management duties within the partner inspectorates, review linkages with the municipal market and construction inspectors, and identify opportunities within the business / administrative processes of the two partner inspectorates to streamline operations, institutionalize best practices, and employ operational metrics to measure effectiveness of inspections operations.
Finally, as noted in O1-3, the legalization workshops helped inform specific gaps in the construction inspection area. The Activity will review current gaps in the technical foundation upon which inspections are conducted, such as the issue of the construction code which provide the scientific, engineering, and policy bases for conducting construction inspections and, to the extent possible, identify gaps and opportunities for the involvement of private sector actors in the field of conformity compliance under the authority of the inspectorates. Further, in addition to providing support to inspection reform efforts, the Activity will consider, based on the dynamic of the new Government, proposing the GoK seek EU Instrument for Pre-accession Assistance10 funding for dedicated construction code support to underpin all aspects of construction regulation, including planning, oversight and inspections.
9 https://www.oecd.org/gov/regulatory-enforcement-and-inspections-9789264208117-en.htm 10 https://ec.europa.eu/neighbourhood-enlargement/instruments/overview_en
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OBJECTIVE TWO: PUBLIC FINANCIAL MANAGEMENT STRENGTHENED
BACKGROUND With previous USAID support, Kosovo has made considerable progress in improving its systems and practices in the areas of taxation, budget planning, execution, and monitoring. However, further improvements – such as increased transparency of tax policy and administration, strengthened control systems for more efficient spending of public money, and enhanced predictability and private sector engagement in fiscal policymaking – will increase citizen trust in government and in turn increase incentives to pay taxes and reduce informality. A more transparent, participatory, predictable, and accountable PFM system will reduce opportunities for, and thus the perception of, corruption.
Through targeted assistance to the MoF and other public institutions, and with the involvement of civil society and the public, the Activity will seek to support further improvements in budgeting and PFM practices by strengthening the government’s ability to self-reliantly manage the country’s domestic public resources and ensure macro-fiscal stability is maintained. To achieve this, the Activity will support the MoF Macroeconomic Policy Division (MPD) to improve the skills and capacities of recently hired staff for economic and budget forecasts, explore options for more efficient structures, and propose solutions to the issue of high staff turnover and maintaining knowledge continuity. To strengthen the MoF and TAK’s capacities and systems for domestic revenue mobilization, the Activity will assist both institutions to enhance tax legislation and improve the efficiency of TAK by focusing on improving its taxpayers services by further streamlining, introducing more automation in operations, increasing transparency and communication with the public, using risk-based criteria to address tax compliance, and introducing outcome-based performance management.
CURRENT ACTIVITIES During this quarter, the Activity established effective implementation and coordination mechanisms with TAK management and assisted the MoF to identify solutions for self-reliance capacities through the standardization of macro-fiscal functions and organizational arrangements.
To ensure that in coming years the MoF has self-reliant capacities for economic and budget forecast, the Activity completed a baseline mapping of macro-fiscal analysis and forecasting functions at MoF and is reviewing effective international organizational practices relevant to the Kosovo context. This mapping is the first step to a broader review of such functions, including the organizational arrangement and options for sustainable solution to frequent staff turnover and retention of skills for economic and budget forecasting. Further, the Activity supported the MoF and MTI to conduct a draft budget impact analysis of the recently-decreed FTA with Turkey: this work will be finalized after some legal questions are clarified in coming weeks.
On tax administration, the Activity and TAK management agreed on specific activities and tasks that will be supported by the Activity. Broadly speaking, those supporting activities are aimed at improving operational efficiency, transparency, and accountability of the institution by introducing performance management indicators, increasing the quantity and quality of data accessible by the public, improving internal processes and services for taxpayers, and use of risk-based criteria for tax compliance. The work to support TAK’s implementation of these reforms has already started, with a
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focus on automating its services further, introducing risk-based criteria for tax returns by weights, and drafting a general outline of a plan to improve the integrity of TAK.
The Activity coordinated with USAID TEAM to support the MoF Treasury and PPRC to initiate discussions for automating a few steps in the GoK’s procurement process by introducing technical options for communication and data exchange between the e-procurement and financial management systems.
O2-1: INSTITUTIONALIZED SELF-RELIANT CAPACITIES FOR EVIDENCE-BASED BUDGETING Figure 3: A summary of the mapping of To strengthen the capacities for economic and macro-fiscal functions budget forecasts, the Activity completed a Year ‘t’ baseline mapping of the macro-fiscal analysis and forecasting functions at MoF and is 31 January February/March Submission of Data collection and analysis for reviewing effective international organizational ERP t MTEF t+1 projections practices relevant to the Kosovo context (see Figure 3). This mapping and analysis will serve as a good 30 April May basis for the overall review of the functions of the Submission of Budget t+1 circular to BOs current unit in charge of budget forecasting, as well MTEF t+1 as inform the design of resources to enhance and replicate skills relating to those functions, proposed June July improvements to the unit’s current organizational Budget t revision (optional) Budget t+1 hearings arrangement and management, and potential ways to improve staff retention. Support in this area will be 30 September August Budget t+1 projections assisted by an international short-term expert, for Budget t+1 hearings (Revision of MTEF t+1) which the Activity has initiated procedures for recruitment. 31 October To strengthen MEL capacities within the MoF and Submission of November Budget t+1 to ERP t+1 projections other targeted government bodies, the Activity Assembly developed a draft budget impact analysis of the recently-decreed FTA with Turkey. Using the tariff reduction rates from the original 2013 31 December End of Year ‘t’ agreement, this draft-assessment indicates budget Assembly passes Budget t+1 revenue losses from this agreement could reach 10.8 million Euros per year. However, the 2013 agreement was only decreed by the President of Kosovo in June 2019. As a result, the tariff reduction schedule will change because the FTA with Turkey stipulates that any treatment which is more preferential under the Stabilization and Association Agreement (SAA) with the EU applies to the Turkey FTA as well. This suggests that, pending resolution of the tariff question, revenue losses will be higher than the estimates of the draft impact analysis. As details are finalized by the Government, the Activity will finalize the assessment methodology with MTI and MoF as a template for future use to estimate the impact of trade-related policy changes on budget revenue. This analysis, and consideration of alternative outcomes, will serve as an important element for 2020 budget, which is currently being developed (see Box 3).
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In collaboration with USAID TEAM, Box 3: 2020 Budget Preparation Update the Activity facilitated discussions Following the resignation of the GoK Prime Minister and the between the MoF and PPRC to organization of early elections, the outgoing government and enhance accountability and administrative GoK staff continued preparations for drafting financial discipline through the the 2020 Budget in line with the schedule outlined in the first interoperability of the e- budget circular. procurement and the financial The key challenge with the first budget circular remains the management system. As part of absence of budget ceilings for wages and salaries, as the MoF this initiative, the Activity and USAID was not able to determine such ceilings before the adoption TEAM undertook a number of of secondary legislation that would clarify the cost of the activities: recently approved Law on Public Salaries. First, USAID TEAM and the The MoF issued additional guidance for municipalities, Activity prepared a concept including indicative ceilings for wages and salaries. This note on the benefits of the enabled municipalities to proceed with the budget preparation interoperability between the and Municipal Assembly approval process in line with the legal deadline (September 30). e-procurement and the Kosovo Financial For the central level, the MoF – based on the first budget Management Information circular – issued invitations and organized technical level System (KFMIS); budget hearings which enabled central budget organizations to register final budget proposals in the Budget Development Second, the Activity Management System (BDMS). organized detailed It is still unclear if the outgoing government will consolidate a discussions with the MoF budget proposal and approve it in line with the legal deadline Treasury to ensure the of October 31, 2019. Nevertheless, full registration of budget commitment of Treasury requests and a comprehensive technical discussion with management for this task, representatives of budget organizations provides a good basis while USAID TEAM for the new government to proceed further with the process. followed the same approach with PPRC; and
USAID TEAM and the Activity supported a workshop on this topic, with the participation of representatives from PPRC, MoF Treasury, and Budget Departments, to discuss the need to advance the communication of the e-procurement and financial management systems, which would lead to further improvements in efficiency and accountability of these institutions in the context of managing public finances of the country.
During the workshop, participants confirmed that many cases of misuse involve initiation of procurement producers with an invalid proof of the availability of funds, which would not be possible had the two systems been automatically linked. At the same time, misuse also springs from lack of information on procurement procedures in the financial management systems. Participants confirmed that there are many cases where commitments are canceled, when in fact a procurement procedure for such a commitment is already open and in process. Again, this misuse would not be possible had the two systems been automatically exchanging data. Following the end of this forum, both USAID activities summarized the outcome of discussions and will coordinate on next steps, so that this initiative can move forward in the coming months.
At the request of the MoF MPD and in line with Work Plan tasks, the Activity began preparations to organize a roundtable discussion with key institutions producing economic data and
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forecasts to improve the quality of evidence-based policy analysis in Kosovo. The roundtable discussion will focus on the challenges and opportunities to improve statistics and forecasts, which would result in improved economic governance of the country. For this purpose, the Activity coordinated with the MoF MPD and Treasury Department, Central Bank of Kosovo, Kosovo Statistics Agency, and TAK. The roundtable is schedule to occur in October 2019, with a long-term objective to meet on a regular basis and explore opportunities for improvements in areas where data quality is questioned.
O2-2: GOK FISCAL TRANSPARENCY AND BUDGET RESPONSIVENESS ENHANCED WITH PRIVATE SECTOR ENGAGEMENT AND INPUT In August, the Activity reviewed the publication of the MoF transparency improvements introduced with previous USAID support and validated the successful and self-reliant publication of monthly financial time series by the MoF Treasury Department in open data format. In addition, the Activity agreed with the MoF Treasury to provide support on the following transparency improvements:
Expand existing monthly time series with additional disaggregated data on revenues and expenditures;
Initiate review of employment data collected in the MoF payroll system and identify opportunities for publication in open data format;
Support the MoF Treasury and MoF Public Communications Departments to increase efficiency in managing publications, including through direct access for MoF Treasury to publish data on the MoF website; and
Support MoF Treasury to identify strategic communication approaches to proactively pursue transparency, including by using infographics.
On all the above points, the Activity is coordinating with the Treasury for designing the templates for future publication of such data.
The Activity also agreed with the GIZ Public Finance Project to explore opportunities for integration of Activity-supported improvements into the GIZ-supported MoF Budget Transparency Portal. As a result, in September, a link to the MoF Treasury data – published with previous USAID support – was established in the MoF Budget Transparency Portal.11
O2-3: REDUCED COST OF TAX COMPLIANCE AND ENHANCED TAX ADMINISTRATION CREDIBILITY During the quarter, the Activity established effective work- plan implementation and coordination mechanisms with the TAK management and, in agreement with USAID, adapted the Activity Work Plan to align with new TAK priorities. In August, the Activity discussed the main reform-activities with Photo 3: Meeting with TAK Administration Management Leading to Expanded Discussions on Use of Performance Metrics and Public Outreach
11 https://ptmf.rks-gov.net/page.aspx?id=2,1
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the General Director of TAK, focusing on voluntary compliance, public engagement, and enhanced tax administration credibility. The TAK Director expressed his gratitude for past USAID support and welcomed the opportunity for future support through the Activity. The Activity and TAK management agreed to align all support tasks with the TAK Medium Term Performance Improvement Plan (MTPIP), developed by TAK with previous International Monetary Fund (IMF) technical assistance support.
In September, the Activity organized a video conference with the Washington-based IMF Fiscal Affairs Department representative, Mr. Enriko Aav, who led the technical assistance teams supporting the development of the TAK MTPIP, and the local IMF Economist, Mr. Selim Thaci. The IMF representatives agreed to provide the Activity with detailed background information on the recommendations integrated as part of the TAK MTPIP and welcomed the implementation support provided by the Activity.
To agree on technical aspects of support, the Activity had discussions with TAK management and individual TAK Departments detailing the implementation of support tasks. As a result, the Activity decided – in coordination with TAK – to prioritize support to:
developing a new TAK Integrity Enhancement Plan (strategy) to detail TAK’s approach to improving its internal systems, improve the quality of services to citizens, and enhance transparency and accountability, thus reducing the opportunity for corruption;
managing change to centralize regional enforced collection offices into a single integrated process and office in order to facilitate risk-based compliance management and reduce tax arrears;
developing reporting and analytical capacity to track and measure performance in reducing tax debt;
identifying institutional risks in order to inform the next update of the TAK medium-term strategy and facilitate outcome-oriented administration;
in partnership with private sector stakeholders, supporting further digitalization of tax services;
further integrating risk-based compliance management principles to increase the efficiency of the tax refund procedures, in line with international best practices reflected under the WBDB methodology; and
as needed, aligning secondary tax legislation with international best practices.
Following the establishment of the work-plan implementation mechanisms, the Activity consulted with the Head of TAK’s Professional Standards Department, and developed a concept note on the TAK Integrity Enhancement Plan. As a follow up, TAK will establish a working group which, with Activity support, will draft the plan and present it to TAK management for approval. The Activity will monitor the implementation of this plan, providing targeted support while also ensuring the self-reliance of TAK in fulfilling it.
The Activity also conducted follow-up consultations with the Acting Director of the Enforced Collection Department at TAK and Manager of the Enforced Collection Centralization Project, and identified key needs for support in this area. With the support of a short-term expert expected to be engaged in coming months, the Activity will support TAK working group on enforced debt
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collection centralization by identifying best solutions for managing change during and after centralization is implemented. The Activity also reviewed current reports on the stock of debt that TAK provides to the MoF, and is working to prepare a proposal for a more comprehensive and informative reporting in coming periods.
While in the past, USAID support has enabled TAK to make great progress in integrating technology in its services towards taxpayers by introducing e-solutions, there are still a number of services which require taxpayers and citizens to physically visit a TAK office. TAK confirmed its readiness and commitment to continue to automate such services so citizens can access them online. In response, the Activity initiated discussion and consultations with the private sector, mainly accounting and audit sector representatives, on the need for further digitalization of taxpayer services.
During discussions with the private sector, the Activity asked to identify specific services which should be digitalized, ranked by priority of digitalization. Following those discussions, the Activity conducted consultations with the TAK IT Department, briefed them on the results of discussions with the private sector, and asked for their views on which specific services should be digitalized first.
Following the discussions with partners, the Activity prepared an internal draft memorandum with recommendations for further digitalization of services. A comprehensive draft memorandum will be prepared in the coming weeks and, following discussion and feedback involving the partners, finalized and sent to TAK for their consideration. The involvement of policy-makers, civil society, and the private sector in consultations for digitalizing prioritized services not only serves to offset perceptions of and opportunities for corruption, but is also important to ensure the buy-in of those involved, guarantee the most pressing issues are resolved, and that TAK has the capacity to implement the activities.
To inform the Activity’s planned support in taxation issues and provide USAID with information on key changes in taxation policy, in August, the Activity drafted and submitted to USAID a memorandum on the main changes introduced with the recently approved Corporate Income Tax (CIT) Law and status of other tax administration laws. In addition to identifying several points of uncertainty for the private sector introduced with the CIT Law, the memorandum concluded that all other tax legislation under revision by the past legislature will need to be reviewed by the new Government.
In this context, and in expectation of the Value Added Tax (VAT) law to be returned back to Government for review and resubmission to the Assembly, the Activity initiated a memorandum which will be presented to the new government with recommendations on improving the VAT Law provisions and administration to enable more efficient tax refund procedures, in line with international best practices. The first focus of the memo is the current 90-day waiting period for submitting a VAT refund claim for non-exporting taxpayers, which is one of the key legal barriers inhibiting further ranking improvement in the WBDB Paying Taxes indicator Set for Kosovo. The memorandum compares the requirements of the refund process with international best practices, discusses the impact of the waiting period on the WBDB Paying Taxes ranking, and identifies necessary changes in relevant legislation for consideration in upcoming revisions of the VAT legislation. The second focus of the memorandum is on the application of risk-based criteria and initiation of audits to verify a refund request. The Activity will review current practices and
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provide both TAK and the new MoF management recommendations to further streamline this dimension of the process in line with international best practice.
With previous USAID support, TAK published quarterly performance metrics on the tax refund process. The Activity reviewed the publication of reports for the first two quarters of 2019 and concluded that TAK continued to successfully report these metrics without Box 4: Tax Refund Process Refund Metrics additional donor support (see Box 4). Once an annual set of metrics is gathered, According to the April-June 2019 performance report (the third report in row), average time to TAK will be able to analyze seasonal complete a VAT refund in the second quarter (Q2) effects on performance and determine if of 2019 was 21 days. performance is improving or deteriorating.
O2-4: FACILITATED TRADE AND EXPORT GROWTH THROUGH WTO TFA ALIGNMENT The Activity coordinated closely with the World Bank Regional Trade Facilitation Support Program (RTFSP) and agreed to collaborate on monitoring alignment with the WTO Trade Facilitation Agreement (TFA). The World Bank RTFSP informed the Activity that it has provided Kosovo Customs and the MTI Trade Department with access to an online portal which enables them to periodically assess progress in the adoption of WTO TFA provisions. Going forward, the Activity will work with Kosovo Customs and MTI to utilize their assessment to identify joint opportunities for supporting the adoption of WTO TFA provisions, as well as aligning activities and avoiding duplication between the Activity and World Bank RTFSP.
At the same time, the Activity initiated a review of the Single-Window Gap Assessment prepared by Kosovo Customs with support from World Bank RTFSP. The World Bank informed the Activity that it is planning to launch a designated project to support the establishment of a single-window in the near future. The Activity will utilize this review to target its support for the integration of the Kosovo Customs Automated System for Customs data (ASYCUDA) border management system with the Kosovo Police and the Kosovo Food and Veterinary Agency (FVA) digital systems and ensure they are complementary to any anticipated future World Bank support in this area.
The Activity also initiated a review of Kosovo Customs publication practices for key tax compliance information on its website. Based on this review, the Activity will support Customs to improve publication of tax compliance requirements, including through reference to TFA provision requirements on transparency. Initial findings of this review indicated that there are significant opportunities for improving access to information from the Kosovo Customs website, including consolidated and user-friendly information on excise rate changes. The latter rates are changed through individual government decisions, and hence information is scattered across different government sources and not available through the Official Gazette Database.
Preliminary information from the World Bank, through the memorandum sent to the Government and other sources of information, confirm that trading procedures have been streamlined. Specifically, it is expected that the World Bank, through the WBDB Report 2020, will recognize reforms which have made it easier to trade with Kosovo, with export processing times having improved. More information and details will be known in a near future, following the publication of the WBDB Report 2020 in October 2019.
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OBJECTIVE THREE: CROSS-CUTTING: ENHANCED STRATEGIC COMMUNICATION
BACKGROUND The reforms Kosovo will need to undertake to reduce the space for corruption may be politically difficult to develop and implement, and may cause a reaction by some actors with competing adverse incentives. In this context, one key element to gaining traction and support for the necessary reforms is honest and trusted communication between government institutions and the public.
Through this cross-cutting Objective, the Activity will ensure that the private sector and public are fully engaged and involved throughout the policy-reform cycle in Kosovo, starting from the identification of reforms to the design and implementation of such reforms, to the ultimate recognition of successful outcomes. Integrating strategic communications developed in the process of policymaking and implementation of reforms further ensures that the Government’s reform agenda is done in a coordinated, transparent, and accountable manner, with other national and local public institutions, and with broad support and monitoring from the public. Such an approach will strengthen broad support for the successful implementation of citizen-responsive Government action and realization of its associated outcomes, with notable impact on the quality of lives of citizens and increased trust in public institutions.
The Activity will support partners to identify and use objective performance data to identify problems, set commonly understood goals, and track performance and overall improvement both in management and dialogue. Further, the Activity will help GoK partners develop more informed, effective, and transparent dialogue with the private sector and civil society, using existing systems and platforms of public-private sector dialogue, such as the National Council for Economic Development (NCED), with proposals to enhance their current way of coordinating with other supporting parties.
CURRENT ACTIVITIES As noted in the annual work plan, Objective 3 activities are cross-cutting and supportive of initiatives in Objective 1 and Objective 2. Supportive activities include identifying and improving the process of information usage and flow within and by partners, assisting partners to improve available information and increase its usability by external entities, and fostering communications between public and private sector actors using improved objective information as a foundation.
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O3-1: INCREASED PRIVATE SECTOR ACCESS TO AND USE OF INFORMATION THROUGH IMPROVED COMMUNICATION PROCESSES OF PUBLIC SECTOR PARTNERS IN SUPPORT OF ACTIVITY INITIATIVES During this quarter, the Activity Objective Three team, in close cooperation with Objective One and Two teams, participated actively in all discussions internally with Activity staff as well as with partners – including MTI, MESP, MoF, and the private sector – to fully integrate and align strategic communication support with planned technical activities. In discussions with partners, the Activity sought to better understand their ongoing activities and future plans – beyond those supported by Objective One and Two – to increase transparency of “Regarding the legal infrastructure presented today, the presentations of the MESP are to be commended […] because public institutions and improve legalization procedures are complicated and require detailed communication internally, as analysis for the officials involved in the process […] [We are] well as externally with the always thankful to USAID and the Kosovo Economic Governance private sector and citizens. Activity” Egzon Jashari, Director of Geodesy, cadaster and Property Municipality of In terms of technical activities, Mitrovicë/Mitrovica at Legalization Workshop, July 19, 2019 discussions focused on the need to compile an inventory of institutional communication processes and products to identify areas of possible support for a more structured and all-inclusive communication and dialogue with the private sector and general public.
In line with the support to government institutions to provide timely and reliable data on its operations, the Activity also provided support to MESP to analyze the legalization process at the central and local levels and fully understand the current process as presented in the legal framework. Since the understanding of this process by both citizens and the public officials that will be involved in implementing the legalization program is very important and a pre-condition for successful implementation, the Activity supported MESP to design and implement the outreach campaign consisting of promotional/educational packages dedicated for citizens and the private sector. The Activity’s support was focused on the content of these materials, ensuring that the message is simple and clear so that everyone can understand the benefits of the legislation. These materials, in part, were also used to present to municipal officials in six regional workshops with municipalities organized in partnership with MESP (as discussed above under Objective One), which enabled public officials to better understand the legalization process and how it will be implemented in practice.
O3-2: IMPROVED PARTNER USE OF QUALITY OBJECTIVE INTERNAL AND EXTERNAL PERFORMANCE DATA FOR MANAGEMENT, COMMUNICATIONS, GOVERNANCE, AND REFORM As part of its support to MTI to improve data and information quality (see Box 5), the Activity provided support to KBRA to complete the performance report for 2018 and quarterly reports for 2019. In addition to helping MTI/KBRA prepare such reports (as elaborated under Objective One above), through Objective Three the Activity advised KBRA on how these publications should better inform and contribute to enhanced communication between the public and private sectors. In addition, the Activity advised KBRA on ways to improve the quality of the performance reports and need to improve the quality of data as well as expand on the publication of such data, currently offered to the public through performance reports.
USAID/Kosovo Economic Governance Activity 2nd Quarterly Performance Report (Year 1) 22 Preliminary discussions with TAK have Box 5: Improved Governance through enhanced also been undertaken to identify areas of Transparency and Accountability improvement that directly or indirectly With Activity support, public sector partners enhanced contribute to the management ambitions transparency and accountability, explored options for using for improving TAK in efficiency and internal data for improving processes and management integrity, such as use of objective data supervision, and took steps to introduce further online for internal management performance services for citizens: (internal management) and • TAK is using internal data to automate and improve communication with the public (external the management process of tax returns communication), as well as improving • KBRA is using its system’s data to analyze the TAK transparency and increasing its performance of its units and improve efficiency of its communication with taxpayers. regional offices in business registrations, thus providing better services for its citizens Among others, the next step for TAK is • Further digitalization of taxpayer services as per the to compile an inventory of all current taxpayer inputs, are being considered by TA processes executed by TAK personnel, • TAK Initiated work to improve its integrity and, based including process mapping/flow charting on Activity recommendations, it is expected to and use of actual data and statistics for introduce objective data-based performance each process/service, and begin management of its functions measuring outcomes against targets on a • Increased utilization and expansion of fiscal time series regular basis. data to promote budget transparency • MESP launched the legalization campaign to help Moreover, TAK maintains significant data citizens and municipal officers to better understand in several areas, such as active the process of legalization businesses, by region and activities, • The Activity initiated with MESP and municipalities the sales/turnover, and employment. The development of a tool for tracking the legalization Activity, together with TAK and the process and performance management private sector, will seek to institutionalize publication in a user-friendly format and more frequently than annual. The data would inform all parties, including other state institutions, NGOs, citizens, and the private sector to better understand governance and economic performance, as well as enable the use of such data for analysis, monitoring, and accountability.
O3-3: ESTABLISHMENT OF SUSTAINED PUBLIC-PRIVATE ENGAGEMENT OPPORTUNITIES, FRAMEWORKS AND TOOLS FOR SELF-RELIANT COORDINATION, COMMUNICATION AND COOPERATION As part of the support to TAK to further digitalize its taxpayers’ services, the Activity conducted interviews with private sector representatives to identify their views and needs as related to this initiative. As per data published by TAK, the number of taxpayers registered in its EDI electronic system to-date is 98,408, while the number of downloaded statements to date is 10.8 million. Therefore, undergoing a significant digital transformation will allow TAK to effectively analyze all information they handle, and as a result provide better services and become more efficient. The Activity, in coordination with the private sector representatives, identified and discussed the prioritization of TAK services based on their usage by the private sector. Following interviews with three Kosovo companies offering accounting and tax compliance services, as well as a registered NGO, the Activity prepared an internal draft memorandum with recommendations for further digitalization of services, which will be shared with TAK after it’s finalized. Digitalization of the recommended services will help TAK better allocate its human resources, improve the quality of
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services for taxpayers, and further reduce physical contacts between officials of TAK and taxpayers, reducing the opportunity for corruption.
Preparation for other activities in support of dialogue between public and private sectors were also undertaken, such as planning inclusive dialogue with the private sector in collaboration with MTI for the next cycle of DB reforms, as well as reviewing the draft Law on Foreign Trade. Moreover, to support self-reliance and effective donor cooperation, the Activity will discuss with the MTI Trade Department – as part of the broad Activity-MTI relationship and consistent with EU leadership on the issue – any potential supplemental support in line with ministry ownership and self-reliance, as well as pursue opportunities for public-private dialogue and transparency during the process.
NEXT QUARTER ACTIVITIES
During the next quarter, the Activity anticipates the following:12 • Based on political outcomes and the policies of the new Government and partner leadership, review and refine activities to adapt to new opportunities or challenges with new partnerships; • Support MTI and KBRA to complete drafts of two AIs deriving from the LOBO and initiate the review of existing business registration forms and models of incorporation documents; (AR1) • Complete KBRA Data Quality Assessment on issues within the registration system that require redress to empower and allow automation of performance data in the future; (AR1, AR12) • Support MESP to complete the guidelines on legalization of unpermitted constructions for distribution to municipalities; (AR1, AR2, AR 5, AR 6) • Support MESP and KCA to develop clear guidance for Municipal Cadastral Offices and licensed geodesy professionals and geodesy companies regarding the legalization process; (AR1, AR2, AR 5, AR 6) • Support MESP to complete a tracking tool for legalization applications for distribution to municipalities; (AR1, AR2, AR 5, AR 6) • Execute Memorandums of Understanding with two partner municipalities for legalization support and develop draft action plans for Activity support to these municipalities; (AR 5, AR 6, AR13) • As necessary, support WBDB reform efforts, including outreach initiatives with the private sector and civil society in relation to the WBDB Report 2020; (AR1, AR12) • Start conduct of Business Process Analyses at the Market Inspectorate within MTI and the Construction Inspectorate within MESP; (AR1)
12 As relevant, planned activities are referenced at the end in brackets with the indicator(s) to which they will directly or indirectly contribute. For details on respective indicator description and targets, refer to the USAID/Kosovo Economic Governance Activity Monitoring, Evaluation, and Learning Plan.
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• Conduct a comprehensive review of MoF MPU functions to identify solutions for strengthening self-reliance and finalize draft of the work-plan for the adoption of solutions; (AR8) • Design and standardize induction courses for MoF MPU existing and future staff to enhance self-reliance; (AR8) • Support the GoK to enhance capacity for assessing the impact of trade-related policy changes on budget revenues by finalizing the fiscal impact assessment of the FTA with Turkey; (AR1, AR8) • Finalize guide on the standardization of summary budget tables and provide MoF MPU training and mentorship on using the guide; (AR8, AR10, AR12) • Support TAK to standardize reporting and formulate performance metrics on the stock of tax debt and integrate it as part of the annual TAK report; (AR3, AR11, AR12) • Support TAK to draft Integrity Enhancement Plan incorporating operational metrics to improvement management, internal accountability and provide objective data for TAK to publicize its operational performance to the public to increase trust; (AR3, AR11, AR12) • Support TAK efforts to implement a new organizational structure on the centralization of enforced collection; (AR11, AR12) • Finalize memorandum on TAK Digitalization reforms and submit to both TAK and MoF for consideration; (AR1, AR11, AR12) • Undertake discussion with private sector over TAK integrity and credibility measures; (AR3, AR12) • Provide MoF facilitation support to utilize private sector input on tax policy planning; (AR1, AR12) • Organize a roundtable with the private sector for tax training regarding export of services; (AR1, AR11, AR12) • Improve internal and external communication of partner Ministries (MTI, MESP, and MoF) for a more structured and all-inclusive communication and dialogue with the private sector and general public; (AR1, AR10, AR12) and • Organize workshop with statistics compliers and users, and facilitate information cross- institutional information sharing to better utilize statistics and forecasts for improving economic governance. (AR8, AR12)
CHALLENGES AND ADAPTATION
The resignation of the Prime Minister of Kosovo and Government cabinet in July 2019 caused some delays in the execution of planned activities across all three Objectives, such as activities linked with the WBDB reforms and inspection reforms; approval of VAT law and accompanying AI; initiating support for the integration of the Customs ASYCUDA with Kosovo FVA and the Kosovo Policy systems; and the establishment of a single window for border clearance.
This also had impact on the willingness and commitment of civil servants to push reforms forward, partly because such reforms require political leadership and guidance, and partly because of the
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institutional vacuum created by political developments, resulting in lack of clear political leadership and heightened attention to the election.
Additional challenges and implementation issues noted in all three Objectives, which affect commitment to and pursuit of reform, continue to be the considerable effort required to coordinate activities between different institutions – and often between departments within the same institution; the effort needed to address knowledge and ability gaps; lacking required investment of budgetary and human resources by the GoK; and efforts to ensure commitment exists going forward.
One additional important element which did have some impact is the lack of adequate GoK and municipal financial and human resources to implement reforms. While these phenomena are present in many areas, they are more evident with the legalization program and reforms within the tax administration. Moreover, disparate treatment of public servants is a constant obstacle for change. In many cases, government personnel argue that the pay differences between various groups within government is an example of unfair treatment that negatively impacts their willingness and commitment to work hard.
However, issues remain regarding the level of effort provided by public employees and intersections of time or attention given to outside matters versus official duties.
The policy direction and priorities of the potential new Government are unknown, as well as its specific agendas, priority issues, and individuals who will be selected to lead counterpart institutions. The Activity is preparing for all eventualities and will be prepared to adapt as needed and appropriate to changing circumstances.
COORDINATION WITH OTHER DONORS AND PROJECTS
As in the previous period, the Activity continued to coordinate its activities with relevant government partners, USAID projects, and other donor programs involved in the areas covered by the Activity.
During this quarter, the Activity Objective One team collaborated with several bodies within MTI (the Cabinet of the Minister, Legal Department, KBRA, and Department of Trade), as well as worked extensively with MESP (DSPCH, Communication Office, General Secretary, Cabinet of the Minister, Institute for Spatial Planning, and Legal Department) on the implementation of activities related to the legalization of unpermitted construction and construction permitting. At the local level, the Activity coordinated closely with all municipalities during preparations for the legalization workshops held in September 2019.
The Activity also worked closely with other donor-funded projects, including the World Bank Office in Kosovo, EU office in Kosovo, IMF office in Kosovo, GiZ, OSCE, and UN-Habitat. Furthermore, the Activity organized and participated in several coordination activities specifically related to Objective Two tasks, for which a detailed account is provided below.
The Activity participated in the regular PFM dialogue meeting held between the EU Office in Kosovo and GoK. This dialogue summarized the January-June 2019 achievements in the PFM
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Reform Strategy and, while some progress was noted, authorities recognized that they still have more work to do to ensure full implementation of the Strategy.
Following the GoK-organized PFM dialogue meeting, the Activity coordinated directly with the EU Office PAR/PFM Team to discuss general PFM developments, the needs of authorities in achieving PFM targets, and ensuring complementarity of work advanced by the USAID/Kosovo Economic Governance Activity and EU PAR/PFM program.
To coordinate with other donors involved in supporting TAK, the Activity discussed with the IMF and GIZ their role and specific support they are providing TAK to avoid possible duplication of tasks and identifying opportunities for leveraging resources.
The Activity also coordinated with Mr. Peter Griffin from the EU Support to Kosovo’s Policy and Strategic Planning Project, supporting the Prime Minister’s Strategic Planning Office and the Ministry of Finance. Mr. Griffin is supporting the MoF MPD to develop models which will enable the staff to conduct economic impact analysis of the structural reforms that the GoK commits to under the Economic Reform Program.
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ANNEX 1: MELP REPORTING
This section provides information on the progress made towards achieving the annual targets for indicators requiring quarterly and/or semi-annual reporting, as referenced in the approved MELP. As Table 1 below shows, there are in total four indicators that require semi-annual and quarterly reporting and for which there are targets to be achieved for Year 1. As a result of work supported by the Activity, the initial preliminary targets developed prior to project staff-up and reform initiation have already been met or exceeded for three indicators, as shown below. This increased level of performance, as well as greater specificity of joint targets with partners, will be captured in the updated Work Plan and MELP revision anticipated for the coming month based on partner expectations:
Table 1: MELP Indicators – targets and actuals for reporting period Performance Indicator Targets Y1 actuals (Progress Y1 Y2 Y3 Y4 Y5 LOP through end Sep 2019)
MELP Ref.
Number Indicator Mar 20 Mar 21 Mar 22 Mar 23 Mar 24 Mar 24 Mar Baseline Total Apr 19 – Apr 20 – Apr 21 – Apr 22 – Apr 23 – Apr 19 – Apr Target vs. Actual Target vs. Cross-Cutting Performance Indicators Number of policy, legislation, and AR 1 organizational reforms implemented at 0 2 6 9 9 4 30 2 100% the central level (DR.2.2-4) Number of policy, legislation, and AR 2 organizational reforms implemented at 0 1 2 2 2 1 8 0 0% the municipal level (DR.2.2-4) Number of people trained in support of AR 3 0 80 220 220 220 220 960 117 146% economic anti-corruption reforms Objective One Specific Performance Indicators Percentage of buildings in pilot AR 5 municipalities that complete legalization 0% 0% 10% 30% 60% 70% 70% 0% 0% review Percentage of eligible buildings in pilot AR 6 municipalities that complete the full 0% 0% 10% 30% 60% 90% 90% 0% 0% legalization process Objective Two Specific Performance Indicators Number of WTO Trade Facilitation AR 9 0 0 1 1 2 1 5 0 0% Agreement provision reforms (E.G. 2.1) Number of improvements in the PEFA AR 10 0 0 0 0 3 0 3 0 0% assessment Number of improvements in the TADAT AR 11 0 0 0 0 3 0 3 0 0% assessment Objective Three Specific Performance Indicators Number of strategic communications AR 12 0 1 2 3 3 1 10 1 100% reforms implemented at the central level Number of strategic communications AR 13 reforms implemented at the municipal 0 0 1 1 2 1 5 0 0% level Additional information on the actual results for the respective indicators from the table above are provided below:
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AR 1 Number of Policy, Legislation, and Organizational Reforms Implemented at The Central Level (Dr.2.2-4) Actual results: 2
Description 1. Adoption and entry into force of a group of five inter-related AIs, developed in parallel and considered the full package necessary for implementation of the Law on legalization of unpermitted construction: • AI on basic health and safety requirements, procedures and documentation for treatment of illegal constructions for category I and II (https://gzk.rks-gov.net/ActDocumentDetail.aspx?ActID=20715) • AI on basic health and safety requirements, procedures and documentation for treatment of illegal constructions for category III (https://gzk.rks-gov.net/ActDetail.aspx?ActID=20674) • AI on appeals procedures against decisions on treatment of constructions without permit (https://gzk.rks- gov.net/ActDocumentDetail.aspx?ActID=20714) • AI on procedures and demands for the demolition of illegal constructions (https://gzk.rks- gov.net/ActDocumentDetail.aspx?ActID=20671) • AI concerning the content and requirements for the legalization database (https://gzk.rks- gov.net/ActDocumentDetail.aspx?ActID=20670)
2. Prior to Activity intervention, the Kosovo Cadaster Agency was insisting that municipalities pay for orthophotos necessary for legalization according to the general Law on Cadaster. However, the legalization law and program called for issuing the photos to municipalities without charge. With Activity support to MESP and KCA, parties were convinced to fully implement the provision of the law on legalization for free access to orthophotos for municipalities. The orthophotos will enable municipalities to have accurate information on individual constructions and the surrounding area, making the review and approval process of legalization application much easier.
AR 3 Number of people trained in support of economic anti-corruption reforms Actual results: 235 individual persons trained, 117 full-time equivalence person-days
Description: Training of municipal officers from the urbanism, cadastral, and inspections directorates of municipalities, through a series of six workshops where participants were trained on the legal and operational aspects of the process for legalization of unpermitted construction. As the training consisted of half-day sessions, the participant hours have been converted to full-time equivalence person days. The level of interest and participation exceeded expectations, increasing each session, and this outcome will be reflected in updates to annual and future projections as part of Work Plan and MELP revisions.
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AR 12 Number of strategic communications reforms implemented at the central level Actual results: 1 Description: Preparation of an outreach campaign on legalization of unpermitted construction, which was launched by MESP, consisting of promotional/educational packages dedicated for citizens and the private sector, including a promotional video discussing the need and importance of the legalization program and what it means for citizens.
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ANNEX 1I: SUPPLEMENTAL REPORTING
To align with Mission fiscal year reporting timelines, the Activity provides data on supplementing indicators, as listed in the Activity’s MELP. Most of the data presented below is produced from various Kosovo public institutions. Where possible, reporting is done per US fiscal year (October – September), but in some specific indicators, due to data availability, reporting is done per calendar year. One should note that for a number of indicators, historical data is often revised by the respective institutions; therefore, one may find differences between the reported data below on a specific indicator set, and data provided in previous years for the same indicator set.
A. World Bank Doing Business for Kosovo Overall ranking and ranking per individual indicator set for Kosovo are presented in the tables below as published and revised annually with the most recent publication of the WBDB report.
According to the World Bank,13 the WBDB Report 2020 will be published on October 24, 2019, along with any retroactive changes to the WBDB Report 2019.
Table 2: Historical ranking of Kosovo in the WBDB ranking
Description DB 2014 DB 2015 DB 2016 DB 2017 DB 2018 DB 2019
Country Rank 81 64 64 60 40 44
Ease of doing business score 63.83 67.03 66.69 68.51 73.49 74.15
Ranking per individual indicator sets Starting a Business 100 40 27 13 10 13 Dealing with Construction Permits 148 137 125 129 122 100 Getting Electricity 105 118 111 114 106 113 Registering Property 35 31 33 33 34 37 Getting Credit 19 24 19 20 12 12 Protecting Investors / Protecting 61 54 62 63 89 95 Minority Investors Paying Taxes 58 64 77 43 45 44 Trading Across Borders 117 70 59 51 48 51
Enforcing Contracts 143 46 43 44 49 50 Resolving Insolvency 166 163 164 163 49 50 Source: World Bank, http://www.doingbusiness.org
13 https://www.doingbusiness.org/en/reforms/top-20-reformers-in-db2020
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B. Growth in Foreign Direct Investment DO2(1) Due to the time lag in publishing the respective data, the below table presents actual data in two time series. The first time series period is done per the US fiscal year (October – September), whereas the second one is based on the calendar year. Growth rates represent annual change in the value of foreign direct investments.
Table 3: Foreign Direct Investments
Description 2014 2015 2016 2017 2018 2019*
As per US fiscal year Nominal FDI 182 298 224 249 222 157 Growth rate -32.4% 63.2% -24.7% 11.4% -11.1% 28.3% As per calendar year Nominal FDI 151 309 220 255 214 122 Growth rate -46.0% 104.2% -28.8% 16.1% -16.3% 53.2% Source: Central Bank of Kosovo. Note: * For 2019, actual data is available only for the period of January – June, thus, the growth rates provided above for 2019 compares actual data for the periods October – June (for US fiscal year reporting) and January – June (for calendar year reporting).
C. Private Sector Investment and Consumption as Share of GDP DO2(2) Kosovo started publishing provisional quarterly GDP data for the first time in 2014. Nevertheless, official annual data continues to be subject to a nine-month publishing lag. To rely on official data, the most recent statistics available from respective institution are used, including revisions for previous years.
Also, the Government does not officially calculate the private sector share of GDP for consumption or investment. The indicator of the private sector share of investment has been constructed by the Activity for clarity, by deducting public sector capital spending, available through Kosovo Government Accounts, from the total investments (gross capital formation), available through Gross Domestic Product data compiled using the National Accounts expenditure approach. Donor consumption (support) is also excluded from calculating private sector investment, respectively non- government share to GDP.
Table 4: Private sector investments
Description 2014 2015 2016 2017 2018 2019*
Private Sector Investment as % to GDP 18.4% 20.6% 19.9% 21.1% 21.5% 22.1%
Private consumption as % of GDP 102.9% 100.9% 100.0% 97.5% 99.7% 99.8%
Non-Government (and donors) as % to GDP 76.3% 77.7% 78.6% 79.3% 78.1% 76.5% Source: Kosovo Agency of Statistics; Ministry of Finance, Note: * Estimates/Projections from the latest MTEF
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Table 5: GDP composition
Description 2014 2015 2016 2017 2018 2019*
Consumption 5,731 5,859 6,072 6,254 6,704 7,112
Consumption of households & NPISH** 4,821 4,965 5,218 5,392 5,761 6,057
Consumption of Government and 910 894 854 863 943 1,055 Donors
Investments (Gross capital formation) 1,435 1,601 1,650 1,820 1,982 2,195
Government investments 411 404 444 468 533 621
Private sector investments (calculated) 1,024 1,197 1,207 1,352 1,449 1,574
Exports of goods and services 1,253 1,274 1,439 1,709 1,778 1,896
Imports of goods and services 2,852 2,926 3,091 3,369 3,738 4,079
GDP at current prices 5,568 5,807 6,070 6,414 6,726 7,124 Source: Kosovo Agency of Statistics; Ministry of Finance Notes: * Estimates/Projections from the latest MTEF ** NGOs that serve households
D. Ratio of Public-to-Private Sector Employment DO2(3) This indicator data is presented from two different sources. The first source, which is based on actual employment, is received from the Kosovo Pension Saving Trust (KPST), whereas the second calculation is based on the Kosovo Statistical Agency (KSA) Labor Force Survey data and Ministry of Finance. KPST data reports the official number of contributors during the year, thus representing formal employment. KSA data uses surveys and analytical assessments to estimate informal employment.
Table 6: KPST employment data
Employment data as per KPST 2014 2015 2016 2017 2018
Number of active contributors during the year (KPST) 285,914 297,466 312,672 352,849 344,453
Government employment (Min. of Finance) 79,322 78,381 78,823 79,146 80,224
Private sector (calculated) 206,592 219,085 233,849 273,703 264,229
Private sector/total 72.3% 73.7% 74.8% 77.6% 76.7% Source: KPST and Ministry of Finance
Table 7: KSA employment data
Employment data as per KSA 2014 2015 2016 2017 2018
Number of employed 323,500 296,900 331,800 357,100 345,100
Government employment (Min. of Finance) 79,322 78,381 78,823 79,146 80,224
Private sector (calculated) 244,178 218,519 252,977 277,954 264,876
Private sector/total 75.5% 73.6% 76.2% 77.8% 76.8% Source: KPST and Ministry of Finance
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E. TRAINING SUMMARY The following tables present data on the number of persons trained in issues related to fiscal policy and administration and business enabling environment. In addition, the total hours of training in both areas are provided.
1. Total Person Hours of Training Completed in Fiscal Policy and Fiscal Administration Sub-IR2.1.1(2) Training Summary for October 1, 2016 - September 30, 2017
Table 8: Training data Actuals per Fiscal Year 2014 2015 2016 2017 2018 2019
Total # of participants 152 324 124 90 179 0
Total person hours 643 2,268 992 1,016 4,296 0 Source: USAID Partnerships for Development and USAID/Kosovo Economic Governance Activity database
2. Total Person Hours of Training Completed in Business Enabling Environment Sub-IR2.1.2(3)
Table 9: Training data Actuals per Fiscal Year 2014 2015 2016 2017 2018 2019
Total # of participants 404 341 630 472 598 235
Total person hours 2,605 1,962 4,196 4,184 5,036 940 Source: USAID Partnerships for Development and USAID/Kosovo Economic Governance Activity database
F. Government Revenue (Tax and Non-Tax), Excluding Foreign Grants, as a % of GDP Sub-IR2.1.1
As noted, official Kosovo GDP annual data is published with a nine-month lag. Thus, for 2019, we used the MoF estimates as per the latest Medium-Term Expenditure Framework (MTEF). Actual officially reported revenues are included for both reporting periods. As with FDI data (B), two time series are presented.
Table 10: Revenues Description 2014 2015 2016 2017 2018 2019* US fiscal year Government revenues (tax and non-tax) 1,312 1,408 1,602 1,641 1,743 1,828 revenues
Government revenues as % to GDP 23.6% 24.3% 26.4% 25.6% 25.9% 25.7%
Calendar year Government revenues (tax and non-tax) 1,333 1,457 1,596 1,682 1,757 1,938 revenues Government revenues as % to GDP 23.9% 25.1% 26.3% 26.2% 26.1% 27.2% Source: Ministry of Finance
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G. Outcomes of Municipal Audit Reports The following table presents the outcome of municipal audit reports for the period 2014-2018, as measured with the audit opinions, and summarized for all 38 municipalities. For 2018, a more detailed table comparing the audit opinion of all individual municipalities with 2017 opinions is presented after the summary table.
Table 11: Summary of audit outcomes Adverse Opinion Un-Modified Municipality Qualified or No Opinion Opinion Total 2014 4 16 18 Total 2015 4 11 23 Total 2015 0 5 33 Total 2017 0 9 29 Total 2018 0 2 36
Table 12: Audit outcomes by municipality Adverse Un-Modified Comparison to Details by Municipality for 2018 Opinion or Qualified Opinion 2017 outcome No Opinion Deçan/Dečane X Same Dragash/Dragaš X Improved Ferizaj/Uroševac X Same Fushë Kosovë/Kosovo Polje X Same Gjakovë/Ðakovica X Same Gjilan/Gnjilane X Same Gllogoc/Glogovac X Same Graçanicë/Graćanica X Same Hani i Elezit/Elez Han X Same Istog/Istok X Same Juniku/Junik X Same Kaçaniku/Kačanik X Same Kamenicë/Kamenica X Same Klinë/Klina X Improved Kllokot/Klokot X Improved Leposaviq/Leposavić X Improved Lipjan/Lipljane X Same Malishevë/Mališevo X Improved Mamushë/Mamuša X Improved Veriu i Mitrovicës/Severna Mitrovica X Same Mitrovicë/Mitrovica X Same Novobërdë/ Novo Brdo X Worsened Obiliq/Obilić X Same Partesh/ Parteš X Same Peja/Peć X Same Podujevë/Podujevo X Same Prishtinë/Priština X Same
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Prizren/Prizren X Same Rahovec/Orahovac X Improved Ranillug/Ranilug X Same Shtime/Štimlje X Same Skenderaj/Srbica X Same Shtërpce/ Štrpce X Same Suharekë/Suva Reka X Improved Viti/Vitina X Same Vushtrri/Vućitrn X Same Zubin Potok/Zubin Potok X Same Zveqan/ Zvećan X Same Source: Audit Reports from the Office of General Audit
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ANNEX III. REPORTS AND DELIVERABLES
During this reporting period, the Activity completed the following reports and deliverables, which were submitted to USAID:
• Year 1 Work Plan (Revised)
• Monitoring, Evaluation, and Learning Plan (Revised)
• 1st Quarterly Performance Report (Year 1)
• Monthly Financial Reports (June – August 2019)
• 1st Quarterly Financial Report (Year 1)
• Quarterly Accrual Report (Q4 FY2019)
In addition to the above, during the reporting period Activity personnel provided responsive information to USAID regarding the mid-year budget review process, current period tax administration performance, legalization, WBDB forecast, and related material.
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U.S. Agency for International Development Mission in Kosovo Ismail Qemali Street, No. 1 Prishtinë/Priština, Kosovo 10000